As filed with the Securities and Exchange Commission on October 31, 1997
Registration No. 333-33085
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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AMENDMENT
NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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Roller Bearing Company of America, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 3562 13-3426227
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification No.)
or organization) Code Number)
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Industrial Tectonics Bearings Corporation
(Exact name of Registrant as specified in its charter)
Delaware 3562 95-4284623
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification No.)
or organization) Code Number)
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RBC Linear Precision Products, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 3562 06-1465144
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification No.)
or organization) Code Number)
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RBC Nice Bearings, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 3562 06-1472609
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification No.)
or organization) Code Number)
---------------
Bremen Bearings, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 3562 06-1491241
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification No.)
or organization) Code Number)
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60 Round Hill Road
Fairfield, CT. 06430
(203) 255-1511
(Address, including zip code, and telephone number,
including area code, of registrant's executive offices)
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Michael J. Hartnett
Chief Executive Officer
Roller Bearing Company of America, Inc.
60 Round Hill Road
Fairfield, CT. 06430
(203) 255-1511
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Brian Hoffmann, Esq.
McDermott, Will & Emery
50 Rockefeller Plaza
New York, NY 10020
(212) 547-5400
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
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 Securities and Exchange Commission acting pursuant
to said Section 8(a), may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities law of any such state.
Subject to Completion, Dated ____________, 1997
PROSPECTUS
Roller Bearing Company of America, Inc.
Offer to Exchange its
9 5/8% Senior Subordinated Notes Due 2007, Series B
for any and all of its
9 5/8% Senior Subordinated Notes Due 2007
Unconditionally Guaranteed on a Senior Subordinated Basis by
the Subsidiaries of the Company
The Exchange Offer will expire at 5:00 p.m., New York City time,
on _________________, unless extended.
Interest payable June 15 and December 15 Due June 15, 2007
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Roller Bearing Company of America, Inc., a Delaware corporation (the "Company"
or "RBC"), hereby offers upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange an aggregate principal amount of
up to $110,000,000 of 9 5/8% Senior Subordinated Notes Due 2007, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to the registration statement of
which this Prospectus constitutes a part (including any amendments and
supplements thereto, the "Registration Statement") for a like principal amount
of its 9 5/8% Senior Subordinated Notes Due 2007 (the "Outstanding Notes" and,
together with the Exchange Notes, the "Notes") of the Company with the holders
thereof.
The terms of the Exchange Notes are identical in all material respects to the
Outstanding Notes except for certain transfer restrictions and registration
rights relating to the Outstanding Notes and except that, if the Exchange Offer
is not consummated by December 22, 1997, the interest rate on the Outstanding
Notes will increase by 0.5% until the Exchange Offer is consummated. The
Exchange Notes are offered hereunder in order to satisfy certain obligations of
the Company under the Purchase Agreement dated June 17, 1997 among the Company,
the Subsidiary Guarantors (as defined herein) and Credit Suisse First Boston
Corporation, the initial purchaser of the Outstanding Notes (the "Initial
Purchaser"), and the Registration Rights Agreement dated as of June 17, 1997
(the "Registration Rights Agreement") among the Company, the Subsidiary
Guarantors and the Initial Purchaser. The Exchange Notes evidence the same debt
as the Outstanding Notes and are issued under, and are entitled to the same
benefits under, the Indenture (as defined herein) as the Outstanding Notes. In
addition, the Exchange Notes and the Outstanding Notes are treated as one series
of securities under the Indenture. The Exchange Notes will mature on June 15,
2007, unless previously redeemed. Interest on the Exchange Notes is payable
semi-annually on June 15 and December 15 of each year commencing on December 15,
1997.
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The Exchange Notes will not be redeemable prior to June 15, 2002 except that,
until June 15, 2000, the Company may redeem, at its option, up to an aggregate
of $36 million of the principal amount of the Exchange Notes at the redemption
price set forth herein plus accrued and unpaid interest to the date of
redemption with the net proceeds of one or more Public Equity Offerings (as
defined herein) if at least $74 million principal amount of the Notes remains
outstanding after each such redemption. On or after June 15, 2002, the Exchange
Notes are redeemable at the option of the Company, in whole or in part, at the
prices set forth herein plus accrued and unpaid interest to the date of
redemption. Upon a Change of Control (as defined herein), each holder of
Exchange Notes ("Holder") may require the Company to repurchase such Exchange
Notes at 101% of the principal amount thereof plus accrued and unpaid interest
to the date of repurchase. See "Description of the Notes-Change of Control."
The Outstanding Notes have been, and the Exchange Notes are expected to be,
approved for trading in The Private Offerings, Resale and Trading through
Automated Linkages (PORTAL) Market of The Nasdaq Stock Market, Inc. The Exchange
Notes will settle through the book-entry facilities of The Depository Trust
Company.
The Exchange Notes will be senior subordinated unsecured obligations of the
Company. The Exchange Notes will be subordinated in right of payment to all
existing and future Senior Indebtedness (as defined herein) of the Company,
including the Company's obligations under the bank credit facilities (the
"Senior Credit Facilities") with a group of lenders providing for $16 million of
term loans (the "Term Loans") and up to $54 million of revolving credit loans
and letters of credit (the "Revolving Credit Facility"). As of September 27,
1997, the amount of Senior Indebtedness of the Company was approximately $26.5
million, and the Company had the ability to borrow up to an additional $43.1
million under the Revolving Credit Facility. The Exchange Notes will be fully
and unconditionally guaranteed, jointly and severally, on a senior subordinated
basis by Industrial Tectonics Bearings Corporation ("ITB"), RBC Linear Precision
Products, Inc. ("LPP"), RBC Nice Bearings, Inc. ("Nice") and Bremen Bearings,
Inc. ("Bremen" and, together with ITB and LPP, the "Subsidiary Guarantors"). See
"Description of the Notes-Subsidiary Guarantees" and "-Certain Covenants." Each
Subsidiary Guarantee (as defined herein) will be subordinated in right of
payment to all existing and future Senior Indebtedness of the relevant
Subsidiary Guarantor, including guarantees of the Company's obligations under
the Senior Credit Facilities. The Exchange Notes will rank pari passu in right
of payment with all senior subordinated indebtedness of the Company and senior
to any other subordinated indebtedness of the Company issued after consummation
of the Offering. The indebtedness under the Senior Credit Facilities is secured
by substantially all of the assets of the Company and the Subsidiary Guarantors.
Prior to the Exchange Offer, there has been no public market for either the
Outstanding Notes or the Exchange Notes. If a market for the Exchange Notes
should develop, the Exchange Notes could trade at a discount from their face
amount. The Company does not intend to list the Exchange Notes on any national
securities exchange. It is not anticipated that an active public market for the
Exchange Notes will develop. Although the Initial Purchaser has informed the
Company that it currently intends to make a market in the Exchange Notes, it is
not obligated to do so, and any such market-making may be discontinued at any
time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Exchange Notes.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Securities and Exchange Commission (the "Commission") as set forth
in certain no-action letters addressed to other parties in other transactions.
However, the Company has not sought its own no-action letter and there can be no
assurance that the staff of the Commission would make a
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similar determination with respect to the Exchange Offer as in such other
circumstances. Based upon these interpretations by the staff of the Commission,
the Company believes that Exchange Notes issued pursuant to this Exchange Offer
in exchange for Outstanding Notes may be offered for resale, resold and
otherwise transferred by a Holder thereof other than (i) a broker-dealer who
purchased such Outstanding Notes directly from the Company to resell pursuant to
Rule 144A under the Securities Act or any other available exemption under the
Securities Act or (ii) a person that is an "affiliate" (as defined in Rule 405
under the Securities Act) of the Company without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such Holder's
business and that such Holder is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of such
Exchange Notes. Holders of Outstanding Notes accepting the Exchange Offer for
the purpose of participating in a distribution of the Exchange Notes may not
rely on the position of the staff of the Commission as set forth in such
no-action letters and would have to comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any secondary
resale transaction. A secondary resale transaction in the United States by a
Holder who is using the Exchange Offer to participate in the distribution of
Exchange Notes must be covered by a registration statement containing the
selling securityholder information required by Item 507 of Regulation S-K under
the Securities Act. The Letter of Transmittal to be executed by each holder of
Outstanding Notes participating in the Exchange Offer will contain a
representation of such holder, that such holder is not engaged in nor does such
holder intend to engage in a distribution of Exchange Notes.
Each broker-dealer (other than an "affiliate" of the Company) that receives
Exchange Notes for its own account pursuant to the Exchange Offer may be an
"underwriter" within the meaning of the Securities Act and must acknowledge that
it acquired the Outstanding Notes as a result of market-making activities or
other trading activities and will deliver a prospectus in connection with any
resale of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution." Any broker-dealer who is an affiliate of the Company may not rely
on the no-action letters referred to above and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any secondary resale transactions. See "The Exchange Offer."
Any Outstanding Notes not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the rights and preferences and
will be subject to the limitations applicable thereto under the Indenture.
Following consummation of the Exchange Offer, the holders of Outstanding Notes
will continue to be subject to the existing restrictions on transfer thereof and
the Company will have no further obligation to such holders to provide for the
registration under the Securities Act of the Outstanding Notes held by them. To
the extent that Outstanding Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Outstanding Notes could be
adversely affected. It is not expected that an active market for the Outstanding
Notes will develop while they are subject to restrictions on transfer.
The Company will accept for exchange any and all Outstanding Notes that are
validly tendered and not withdrawn on or prior to 5:00 p.m., New York City time,
on the date the Exchange Offer expires, which will be ______________________,
(the "Expiration Date"), unless the Exchange
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Offer is extended by the Company (but in no event to a date later than
____________________), in its sole discretion, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. Tenders of Outstanding Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date, unless
previously accepted for payment by the Company. The Exchange Offer is not
conditioned upon any minimum principal amount of Outstanding Notes being
tendered for exchange. However, the Exchange Offer is subject to certain
conditions which may be waived by the Company and to the terms and provisions of
the Registration Rights Agreement. The Exchange Notes bear interest from the
last interest payment date of the Outstanding Notes to occur prior to the issue
date of the Exchange Notes or, if no such interest has been paid, from June 23,
1997. Holders of the Outstanding Notes whose Outstanding Notes are accepted for
exchange will not receive interest on such Outstanding Notes for any period
subsequent to the last interest payment date to occur prior to the issue date of
the Exchange Notes, if any, and will be deemed to have waived the right to
receive any interest payment on the Outstanding Notes accrued from and after
such interest payment date or, if no such interest has been paid, from June 23,
1997. See "The Exchange Offer." Outstanding Notes may be tendered only in
integral multiples of $1,000.
This Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders of Outstanding Notes as of ____________, 1997.
For a discussion of certain factors that should be considered by holders
of Outstanding Notes, see "Risk Factors" beginning on page __.
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
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the historical financial
statements contained elsewhere in this Prospectus. Unless the context otherwise
requires, all references to "RBC" or the "Company" refer to Roller Bearing
Company of America, Inc., a Delaware corporation, and its predecessors and
subsidiaries and all references to "Holdings" refer to Roller Bearing Holding
Company, Inc., a Delaware corporation and the sole stockholder of the Company.
The Company
The Company is a manufacturer and distributor of highly engineered
precision roller, ball and plain bearings in the United States with, the Company
believes, a leading position in many of the markets in which it competes.
Bearings, which are integral to the manufacture and operation of most machines
and mechanical systems, reduce wear to moving parts, facilitate proper power
transmission and reduce damage and energy loss caused by friction. Many of the
Company's products are custom designed or highly engineered for specific
applications to meet demanding specifications. While the Company manufactures
products in all major bearing categories, the Company focuses primarily on
highly technical or regulated bearing products for niche markets. For the fiscal
year ended March 29, 1997, the Company had pro forma net sales of $111.3 million
and the Company's net sales have grown at a compound annual growth rate of
approximately 20% from fiscal 1993 to fiscal 1997 (pro forma for acquisitions).
The United States market for bearings was estimated by the United States
Department of Commerce (the "Commerce Department") to be approximately $5.3
billion in 1996, and, according to the Commerce Department, the United States
represents approximately 30% of the worldwide market for bearings. The Company
targets the higher end segment of the domestic bearing market where it believes
its value added manufacturing and engineering capabilities enable it to
differentiate itself from its competitors and to enhance profitability. The
Company believes that it is the leading supplier to many of its targeted markets
and maintains secondary positions in other product niches where it believes
market share gains can be achieved. In fiscal 1997, the Company had sales to
more than 1,200 customers, with no single customer amounting to more than 9.7%
of net sales. The Company believes its rapid turnaround on orders, custom
designed engineering and strict adherence to quality and reliability provide it
with significant competitive advantages. The Company's key customers include
Caterpillar, John Deere, Boeing, Pratt & Whitney, General Electric, Bell
Helicopter and Motion Industries.
The Company sells primarily to domestic original equipment manufacturers
("OEMs") and distributors in three markets: industrial, aerospace and
government. Many of the Company's product offerings are in market segments
(market sizes between $30 million and $150 million) which require high service
levels, extensive technical engineering support, short lead times and small
production runs. Generally, such market segments are not as price sensitive as
other segments of the bearing market. In combination with the Company's
efficient production processes, targeting such market segments has allowed the
Company to achieve higher margins. Additionally, in an effort to generate more
stable revenues, the Company has increased sales to the replacement market.
Management estimates that currently over 60% of the Company's products are sold
directly or indirectly for use in the replacement market.
Approximately 61% of the Company's fiscal 1997 net sales were to the
industrial market segment. The Company believes opportunities exist to increase
sales in this market segment as a result of (i) increasing demand for industrial
machinery in both the domestic and international markets, which is expected to
expand existing OEM selling opportunities, (ii) growth in aftermarket demand as
the installed
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base continues to expand and (iii) the increased emphasis being placed on
maintenance and repair of capital goods given the increasing cost of such items.
Approximately 33% of the Company's fiscal 1997 net sales were to the
aerospace market segment for applications in commercial and military aviation.
According to Boeing, worldwide air travel is expected to grow 75% between 1996
and 2006 and the world commercial aircraft fleet is expected to double by 2016.
The Company provides bearings for virtually every model of commercial aircraft
in production, as well as many military applications, and its customers include
all major aerospace manufacturers. Sales to the aerospace market segment have
been increasing as a percentage of total sales, a trend which the Company
expects will continue.
Approximately 6% of the Company's fiscal 1997 net sales were to the
government market segment. The Company expects sales to this market segment to
remain stable in the foreseeable future due to (i) increased emphasis on repair
and maintenance of existing military platforms, (ii) sole source supplier
relationships and replacement part sales for existing programs and (iii) long
product lives of existing programs, which should ensure steady sales relating to
such programs for several years.
The Company believes there will continue to be many consolidation
opportunities within the bearing industry. Since 1992, the Company has acquired
Transport Dynamics Corporation ("TDC"), a manufacturer of plain bearings, Heim
Bearings ("Heim"), a leading producer of rod end and ball bearings, LPP, a
pioneer in grinding techniques for precision ball screws, Nice, the oldest
active brand name in the domestic bearing industry and Bremen, a manufacturer of
needle bearings. Following an acquisition, management typically rationalizes
operations, reduces overhead costs, develops additional cross-selling
opportunities and establishes new customer relationships.
Management believes that the Company is well positioned to achieve
continued growth and market share gains through (i) increasing sales to the
aftermarket, (ii) continuing its focus on high margin niche market segments
where the Company believes it has a sustainable competitive advantage, (iii)
penetrating new markets with innovative products, (iv) expanding international
OEM and distributor sales and (v) acquiring bearing manufacturers which have
complementary products or similar distribution channels or provide significant
potential for margin enhancement.
Competitive Strengths
The Company believes that it has the following competitive strengths:
o Strong Management Team-The Company's management team possesses
extensive managerial experience in the bearing industry, with its
top six operating executives having an average of over 20 years of
bearing industry experience.
o Design and Manufacturing Capabilities-The Company has manufactured
over 20,000 items, many of which have received OEM, military or
Federal Aviation Administration/Parts Manufacturer Approval
("FAA/PMA") product approvals. Additionally, the Company has
demonstrated consistent and timely delivery performance with, it
believes, shorter lead times than its direct competitors,
particularly in the aerospace market.
o Sole Supplier/Long-Term Customer Relationships-Many of the Company's
customers have been doing business with the Company for decades. The
Company believes that its customers continue to seek long-term
partnerships with a small number of core suppliers.
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The Company's customer relationships are strengthened by the fact
that it works jointly with many of its customers at the design stage
in the development of new products.
o Focus on Niche Markets-The Company believes that its reputation and
strategic focus on niche segments of the bearing market, which
require high service levels, extensive technical engineering
support, short lead times and small production runs, provide it with
a competitive advantage over its larger competitors who, the Company
believes, are often less focused on smaller sales volume
opportunities and generally provide lower levels of technical
support to these niche market segments.
o Proprietary Manufacturing Processes-The Company sells products to
the aerospace, industrial and government markets which products
typically require sophisticated engineering and production
techniques. The Company believes that its proprietary manufacturing
processes enable it to attract and retain customers who require its
products.
o Low Cost Operations-The Company believes that its vertically
integrated manufacturing capabilities have allowed it to become a
low cost manufacturer of products within the niche markets it
services. By controlling its manufacturing processes, the Company
has been able to reduce scrap and increase yields of its products.
Furthermore, the Company continually develops proprietary technology
to increase efficiency and enhance economies of scale to further
reduce costs.
o Commitment to Quality and Service-The Company believes that its
commitment to provide consistent, high quality products and service,
flexible manufacturing and custom designed products at competitive
prices form the basis for its strong and diversified customer
relationships.
Business Strategy
The Company has developed a business strategy that focuses on maximizing
profitability while growing, both internally and through acquisitions.
Maximizing Profitability-The Company attempts to maximize profitability
through the implementation of its operating strategy. With respect to higher
volume products, the Company emphasizes production process and related
efficiency programs designed to improve overall profitability and incorporates
its strategy on both a facility and a product basis. Under its operating
strategy, the Company determines achievable market prices and volume levels for
a specific product line. Once these are determined, the Company develops a
manufacturing process that, assuming such volume and price levels, will result
in a targeted gross profit margin. Only product lines where the Company believes
that the developed manufacturing process will yield the targeted margins are
manufactured. Management monitors gross margins of all product lines on a
monthly basis to determine which manufacturing processes should be adjusted.
Additionally, the Company's non-standard custom designed products are typically
not as price sensitive.
Expanding Geographic Presence-The Company seeks to expand into geographic
regions not currently served and to exploit new markets and industries for
existing and new products. Recently, the Company increased its sales efforts in
Seattle, Dallas, Chicago and Detroit and believes that, with this increased
field coverage and further geographic expansion in major domestic industrial
geographic regions, including St. Louis, Houston and Kansas City, there is
potential to substantially increase sales of existing product lines. In
addition, the Company is increasing its focus on international sales.
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Leveraging Customer Relationships-The Company works closely with many of
its OEM customers to jointly develop and design new products and to improve the
performance of existing products. The Company shares product development and
enters into sole source supply contracts and teaming arrangements with many key
customers, which strengthens and broadens its relationships. The Company
believes that this strategy, together with successful performance under existing
contracts, leads to additional long-term business from key customers.
Increasing Focus on the Aftermarket-The Company seeks to continue to
increase its sales to key aerospace and industrial distributors. The Company
believes that this strategy helps to generate more stable revenues. In addition,
the Company is generally able to realize higher margins on aftermarket sales.
Management estimates that currently over 60% of the Company's products are sold
directly or indirectly for use in the replacement market.
Pursuing Selective Acquisitions-The Company has demonstrated expertise in
acquiring niche bearing and precision-engineered component manufacturers which
have complementary products or similar distribution channels or provide
significant potential for margin enhancement. The Company has historically
acquired complementary bearing companies and integrated them effectively into
its existing operations. From fiscal 1992 through fiscal 1997, the Company
consummated four acquisitions. After the end of fiscal 1997, the Company
completed the purchase of Bremen. Such acquisitions, together with internal
growth, have resulted in increased net sales from $53.8 million in fiscal 1993
to $111.3 million on a pro forma basis in fiscal 1997. The Company intends to
pursue selective acquisitions and to add products and capabilities that are
complementary to its existing operations. The Company believes that there will
continue to be consolidation opportunities within the bearing industry.
Introducing New Product Lines-By focusing on niche products within the
highly engineered bearing market, the Company believes that it can compete
profitably and achieve attractive margins. This product focus leads the Company
to the development of proprietary designs, technology and relationships with
customers that in turn create future sales opportunities. A number of these
products require either OEM, military or FAA/PMA approvals, which provide a
barrier to entry to other bearing manufacturers. Furthermore, the Company
believes that as a result of some of its recent acquisitions, significant
cross-selling opportunities exist to expand its existing product offerings to
new customers or to provide new product lines to existing customers.
Additionally, the Company periodically enters into arrangements with other
bearing manufacturers, whereby the Company sells bearings to such manufacturers
for resale under their brand names.
Recent Developments
On June 23, 1997, pursuant to a Redemption and Warrant Purchase Agreement
(the "Recapitalization Agreement") dated May 20, 1997, Holdings effected a
recapitalization of its outstanding capital stock (including the financing and
other transactions consummated by Holdings, the Company and its subsidiaries in
connection therewith, the "Recapitalization"). In connection with the
Recapitalization, all of the outstanding preferred stock of Holdings ("Preferred
Stock") was redeemed by Holdings and substantially all of the outstanding common
stock ("Common Stock") of Holdings and warrants to purchase Common Stock
("Common Stock Purchase Warrants") held by non-management stockholders of
Holdings was redeemed or purchased by Holdings or certain current stockholders
or warrantholders of Holdings (including certain affiliates of the Initial
Purchaser and one of the purchasers of the Discount Debentures (as defined
herein)).
The Recapitalization was financed with the proceeds from the issuance by
the Company of the Outstanding Notes and borrowings made by the Company under
the Senior Credit Facilities, and the
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issuance by Holdings of approximately $74.8 million in Senior Secured Discount
Debentures (the "Discount Debentures") and warrants (the "Discount Warrants") to
purchase 6,731 shares of Class A Common Stock ("Class A Common Stock") for
aggregate gross consideration of $40 million.
Additionally, in connection with the Recapitalization, (i) the Company
paid a dividend to Holdings in the amount of approximately $56.1 million (the
"Dividend") to finance the Recapitalization, (ii) Holdings used the proceeds of
the Dividend and the proceeds from the sale of the Discount Debentures and the
Discount Warrants, to redeem Common Stock and Preferred Stock and purchase
Common Stock Purchase Warrants for aggregate consideration of approximately
$92.2 million, (iii) Holdings assigned its rights to purchase certain shares of
Common Stock and Common Stock Purchase Warrants under the Recapitalization
Agreement to Dr. Michael J. Hartnett, certain affiliates of the Initial
Purchaser, OCM Principal Opportunities Fund, L.P. (the "Oaktree Fund"), Kirk
Morrison, The Sommers Family Trust and Mitchell Quain, (iv) Holdings repurchased
(the "Hartnett Repurchase") 1,250 Common Stock Purchase Warrants from Dr.
Hartnett for an amount per share of Common Stock underlying such Common Stock
Purchase Warrants equal to $514 less the approximately $77 exercise price of
such warrants (an aggregate of approximately $550,000), (v) Holdings issued
Common Stock Purchase Warrants exercisable for 1,250 shares of Common Stock at
an exercise price of $514 per share of Common Stock to Dr. Hartnett, (vi)
Holdings loaned $500,000 to Dr. Hartnett (the "Hartnett Loan") to finance a
portion of his purchase of Common Stock and Common Stock Purchase Warrants
referred to in clause (iii) above, (vii) Holdings paid to Dr. Hartnett a fee of
$1 million (the "Hartnett Fee"), (viii) the Company repaid outstanding
indebtedness (approximately $52.1 million) on its revolving credit facility (the
"Existing Revolving Credit Facility") and its term loan (the "Existing Term
Loan") both with Heller Financial, Inc., and (ix) the Company and Holdings paid
certain other fees and expenses, in the approximate aggregate amount of $10.2
million, payable in connection with the foregoing.
The assignment of rights under the Recapitalization Agreement referred to
in clause (iii) above, was undertaken in order to achieve certain desired
post-Recapitalization equity positions and to satisfy certain contractual
obligations of the Company and Holdings. In exchange for such assignments, the
assignees assumed the obligations of the Company and Holdings under the
Recapitalization Agreement with respect to such shares of Common Stock or Common
Stock Purchase Warrants.
The Hartnett Repurchase and the grant of certain Common Stock Purchase
Warrants to Dr. Hartnett referred to in clause (iv) above were undertaken to
enable Dr. Hartnett to fulfill his obligations with respect to certain shares of
Common Stock assigned to him and referred to in clause (iii) above without Dr.
Hartnett suffering a diminution of his fully-diluted equity position in
Holdings. Upon the Hartnett Repurchase, all obligations of Holdings under the
Common Stock Purchase Warrants repurchased were extinguished.
The Hartnett Fee was paid to Dr. Hartnett in consideration of services
rendered in connection with the preparation, negotiation and consummation of the
Recapitalization.
The Company bears no direct, indirect or contingent liability under the
Discount Debentures. Under the terms of the Indenture, the payment of dividends
to Holdings is restricted. See "Description of the Notes--Certain Covenants."
All operations of Holdings are conducted through the Company and subsidiaries of
the Company. Payments under the Exchange Notes are not subordinated in any way
to payments under the Discount Debentures, and the issuance by Holdings of the
Discount Debentures should in no way affect the ability of the Company to make
payments under the Exchange Notes.
Dr. Hartnett, the Chairman, President and Chief Executive Officer of the
Company, currently owns approximately 43% (approximately 42% on a fully diluted
basis) of the outstanding capital stock of
9
<PAGE>
Holdings, and, through the operation of provisions of Holdings' certificate of
incorporation, he has the power to control a majority of the voting rights of
all capital stock of Holdings. See "Securities Ownership of Certain Beneficial
Owners and Management" and "Certain Relationships and Related Transactions."
-------
On August 8, 1997, Bremen, a wholly-owned subsidiary of the Company,
completed the acquisition of the Bremen Bearings Division of SKF USA, Inc.
("SKF"), a manufacturer of needle bearings with facilities in Bremen, Indiana.
The aggregate purchase price for the acquisition, which was effective as of July
1, 1997, was, subject to certain adjustments and conditions subsequent,
approximately $5.3 million, $3.6 million of which was paid at closing, $473,000
of which is due following the installation of certain equipment and $1.2 million
of which is due on August 8, 1998. According to data provided by SKF, in fiscal
1997 results for their Bremen Bearings Division included gross sales (subject to
adjustment for returns and other allowances) of approximately $14.3 million and
earnings before interest, taxes and depreciation of approximately $2.1 million.
-------
Roller Bearing Company of America, Inc. was incorporated in Delaware in
August 1987. The Company's principal executive offices are located at 60 Round
Hill Road, P.O. Box 430, Fairfield, Connecticut 06430-0430, and its telephone
number is (203) 255-1511.
10
<PAGE>
THE EXCHANGE OFFER
The Offer................... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Outstanding Notes that are
properly tendered and accepted. The terms of the
Exchange Notes are identical in all material
respects to the Outstanding Notes except for
certain transfer restrictions and registration
rights relating to the Outstanding Notes and that,
if the Exchange Offer is not consummated by
December 22, 1997, the interest rate on the
Outstanding Notes shall increase by 0.5% until the
Exchange Offer is consummated. The issuance of
Exchange Notes is intended to satisfy certain
obligations of the Company contained in the
Registration Rights Agreement. The Exchange Notes
represent the same debt as the Outstanding Notes,
and will be issued, and holders thereof are
entitled to the same benefits as holders of
Outstanding Notes, under the Indenture. The
Company is making the Exchange Offer in reliance
on the position of the staff of the Commission as
set forth in certain no-action letters addressed
to other parties in other transactions. However,
the Company has not sought its own no-action
letter and there can be no assurance that the
staff of the Commission would make a similar
determination with respect to the Exchange Offer
as in such other circumstances. Based upon these
interpretations by the staff of the Commission,
the Company believes that Exchange Notes issued
pursuant to this Exchange Offer in exchange for
Outstanding Notes may be offered for resale,
resold and otherwise transferred by a holder
thereof other than (i) a broker-dealer who
purchased such Outstanding Notes directly from the
Company to resell pursuant to Rule 144A under the
Securities Act or any other available exemption
under the Securities Act or (ii) a person that is
an "affiliate" (as defined in Rule 405 under the
Securities Act) of the Company without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that
such Exchange Notes are acquired in the ordinary
course of such Holder's business and that such
Holder is not participating, and has no
arrangement or understanding with any person to
participate, in the distribution of such Exchange
Notes. See "The Exchange Offer--Purpose and
Effects."
Expiration Date............. 5:00 P.M., New York City time, on __________,
unless extended. See "The Exchange Offer--Period
for Tendering Outstanding Notes."
11
<PAGE>
Accrued Interest
on the Notes................ The Exchange Notes will bear interest from their
date of issuance (_____________, unless the
Exchange Offer is extended). Interest on the
Outstanding Notes which are exchanged for Exchange
Notes will cease to accrue on the day preceding
the date of issuance of the Exchange Notes.
Interest payable on __________________, with
respect to Exchange Notes will include accrued but
unpaid interest due on the Outstanding Notes for
the period from __________________, to the
Expiration Date, and will be paid to holders of
record of Exchange Notes as of
____________________.
Conditions of the
Exchange Offer.............. The Exchange Offer is subject to certain customary
conditions, any or all of which may be waived by
the Company. See "The Exchange Offer--Certain
Conditions to the Exchange Offer."
Procedures for Tendering
Outstanding Notes........... Each holder of Outstanding Notes wishing to accept
the Exchange Offer must complete and sign the
Letter of Transmittal, in accordance with the
instructions contained herein and therein, and
forward or hand-deliver such Letter of Transmittal
to the Exchange Agent identified below at the
address set forth herein and therein. Each
exchanging holder will be required to represent in
the Letter of Transmittal that such holder is
acquiring the Exchange Notes in the ordinary
course of business, is not engaged in, and does
not intend to engage in, a distribution of
Exchange Notes and is not an affiliate of the
Company or the Subsidiary Guarantors. Any holder
of Outstanding Notes whose Outstanding Notes are
registered in the name of brokers, dealers,
commercial banks, trust companies or nominees is
urged to contact such registered holders promptly
if such holder wishes to accept the Exchange
Offer. See "The Exchange Offer--Procedures for
Tendering Outstanding Notes."
Withdrawal of Tenders....... Tenders of Outstanding Notes may be withdrawn at
any time prior to 5:00 P.M., New York City time,
on the Expiration Date. See "The Exchange
Offer--Withdrawal Rights."
Acceptance of Outstanding
Notes and Delivery of
Exchange Notes.............. The Company will accept for exchange any and all
Outstanding Notes which are properly tendered in
the Exchange Offer prior to 5:00 P.M., New York
City time, on the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer will
be delivered promptly following the Expiration
Date. See "The Exchange Offer--Acceptance of
Outstanding Notes for Exchange; Delivery of
Exchange Notes."
12
<PAGE>
Certain Federal Income
Tax Considerations.......... For a discussion of certain federal income tax
consequences of the exchange of the Outstanding
Notes, see "Certain Federal Income Tax
Considerations."
Rights of Dissenting
Noteholders................. Holders of Outstanding Notes do not have any
appraisal or dissenters' rights under the Delaware
General Corporation Law in connection with the
Exchange Offer.
Use of Proceeds............. There will be no proceeds to the Company from the
exchange of Outstanding Notes pursuant to the
Exchange Offer.
Exchange Agent.............. United States Trust Company of New York, 114 West
47th Street, New York, New York 10036; telephone
(212) 852-1663.
DESCRIPTION OF EXCHANGE NOTES
Exchange Notes Subject to
Exchange Offer.............. $110,000,000 aggregate principal amount of 95/8%
Senior Subordinated Notes Due 2007, Series B.
Comparison with
Outstanding Notes;
Transferability............. Generally, the Exchange Notes will be freely
transferable under the Securities Act by Holders
who are not affiliates of the Company and are not
broker-dealers who purchased Outstanding Notes
directly from the Company to resell pursuant to
Rule 144A under the Securities Act or any other
available exemption under the Securities Act. The
holders of Outstanding Notes currently are
entitled to certain registration rights pursuant
to the Registration Rights Agreement. However,
upon consummation of the Exchange Offer, holders
of Outstanding Notes who do not exchange their
Outstanding Notes for Exchange Notes will no
longer be entitled to any registration rights and
will not be able to reoffer, resell or otherwise
dispose of their Outstanding Notes, unless they
are subsequently registered under the Securities
Act, which the Company and the Subsidiary
Guarantors will have no obligation to do, or
unless an exemption from the registration
requirements of the Securities Act is available.
The Exchange Notes otherwise will be identical in
all respects (including interest rate, maturity,
guarantee and restrictive covenants) to the
Outstanding Notes. See "The Exchange Offer."
Maturity Date............... June 15, 2007.
Interest Payment Dates...... June 15 and December 15 of each year, commencing
__________________.
13
<PAGE>
Optional Redemption......... The Exchange Notes are not redeemable prior to
June 15, 2002, except that, until June 15, 2000,
the Company may redeem at its option up to an
aggregate of $36.0 million of the principal amount
of the Notes at the redemption price set forth
herein plus accrued interest to the date of
redemption with the net proceeds of one or more
Public Equity Offerings of Holdings if at least
$74.0 million of the principal amount of the Notes
remains outstanding after each such redemption. On
or after June 15, 2002, the Exchange Notes are
redeemable at the option of the Company, in whole
or in part, at the redemption prices set forth
herein plus accrued interest to the date of
redemption. See "Description of the Notes-Optional
Redemption."
Change of Control........... Upon a Change of Control, and subject to certain
conditions, each Holder of Exchange Notes may
require the Company to repurchase the Exchange
Notes held by such Holder at 101% of the principal
amount thereof plus accrued interest to the date
of repurchase. See "Description of the
Notes-Change of Control."
Ranking..................... The Exchange Notes will be senior subordinated
unsecured obligations of the Company and will be
subordinate in right of payment to all existing
and future Senior Indebtedness of the Company
including the Company's obligations under the
Senior Credit Facilities and will rank pari passu
to all future senior subordinated indebtedness of
the Company. As of September 27, 1997, the amount
of Senior Indebtedness of the Company was
approximately $26.5 million and the Company had
the ability to borrow up to an additional $43.1
million under the Revolving Credit Facility.
Guarantees.................. The payment of the principal of and premium (if
any) and interest on the Notes is fully and
unconditionally guaranteed, jointly and severally,
on a senior subordinated basis by the Subsidiary
Guarantors (the "Subsidiary Guarantees"). Each
Subsidiary Guarantee will be subordinated to all
existing and future Senior Indebtedness of the
respective Subsidiary Guarantor, including the
guarantee by such Subsidiary Guarantor of the
Company's obligations under the Senior Credit
Facilities. See "Description of the
Notes-Subsidiary Guarantees."
14
<PAGE>
Restrictive Covenants....... The indenture under which the Outstanding Notes
were, and the Exchange Notes are being, issued
(the "Indenture") limits (i) the incurrence of
additional debt by the Company and certain of its
subsidiaries, (ii) the payment of dividends on
capital stock of the Company and the purchase,
redemption or retirement of capital stock or
subordinated indebtedness, (iii) investments, (iv)
certain transactions with affiliates, (v) sales of
assets, including capital stock of subsidiaries
and (vi) certain consolidations, mergers and
transfers of assets. The Indenture also prohibits
certain restrictions on distributions from certain
subsidiaries. All of these limitations and
prohibitions, however, are subject to a number of
important qualifications. See "Description of the
Notes-Certain Covenants."
Risk Factors
Prospective participants in the Exchange Offer should consider carefully
the information set forth under the caption "Risk Factors" and all other
information contained in this Prospectus before making any determination as to
their participation.
15
<PAGE>
Summary Consolidated Historical Financial Information
(dollars in thousands except share and per share data)
The summary consolidated historical financial information presented below
for each of the fiscal years in the three-year period ended March 29, 1997, has
been derived from the audited Consolidated Financial Statements of the Company
contained elsewhere in this Prospectus. The summary consolidated historical
financial information presented below for each of the fiscal years in the
two-year period ended April 2, 1994, for the six-month periods ended September
28, 1996 and September 27, 1997 and at September 27, 1997 has been derived from
the consolidated financial statements of the Company. The pro forma summary
consolidated historical information for the fiscal year ended March 29, 1997 is
based on the consolidated financial statements of the Company and gives effect
to the acquisitions of Nice and LPP and the Recapitalization as if each of such
transactions had occurred as of the beginning of fiscal year 1997. The pro forma
selected consolidated historical information for the six-month period ended
September 27, 1997 is based on the condensed consolidated financial statements
of the Company and gives effect to the acquisition of Bremen and the
Recapilatization as if such transactions had occurred as of the beginning of
fiscal year 1998. The information presented below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Condensed Consolidated
Financial Statements of the Company contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Pro Forma
Fiscal Year Ended Fiscal Year
----------------- Ended
April 3, April 2, April 1, March 30, March 29, March 29,
1993 1994(a) 1995 1996 1997(b) 1997(c)
---- ------- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ............................... $ 53,837 $ 65,306 $ 73,904 $ 82,233 $ 93,427 $111,287
Cost of sales ........................... 36,774 49,596(f) 57,204 60,054 64,215 77,741
-------- -------- -------- -------- -------- --------
Gross profit ............................ 17,063 15,710(f) 16,700 22,179 29,212 33,546
Selling, general and administrative
expense ............................ 8,917 10,201 8,987 11,104 14,537 16,365
Other expense, net of other income (g)(h) 945 8,694 1,057 1,388 1,473 1,044
-------- -------- -------- -------- -------- --------
Income (loss) from operations ........... 7,201 (3,185) 6,656 9,687 13,202 16,137
Interest expense, net ................... 3,471 4,333 6,445 6,165 5,338 13,388
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary charge ............... 3,730 (7,518) 211 3,522 7,864 2,749
Provision (benefit) for income taxes .... 1,810 (2,721) 110 1,700 3,224 1,127
Extraordinary charge (i) ................ -- -- -- 995 -- 816
-------- -------- -------- -------- -------- --------
Net income (loss) ....................... $ 1,920 $ (4,797) $ 101 $ 827 $ 4,640 $ 806
======== ======== ======== ======== ======== ========
Net income (loss) per share ........ $ 19,200 $(47,970) $ 1,010 $ 8,270 $ 46,396 $ 8,060
======== ======== ======== ======== ======== ========
Weighted average number of
shares outstanding ................. 100 100 100 100 100 100
Ratio of earnings to fixed charges (j) .. 2.0x (k) 1.0x 1.5x 2.4x 1.2x
</TABLE>
Pro Forma
Six
Six Months Ended Months
---------------- Ended
Sept. 28, Sept. 27, Sept. 27,
1996 1997(d) 1997(e)
---- ------- -------
Statement of Operations Data:
Net sales ............................... $ 41,967 $ 60,971 $ 64,843
Cost of sales ........................... 29,447 43,143 46,201
-------- -------- --------
Gross profit ............................ 12,520 17,830 18,642
Selling, general and administrative
expense ............................ 6,450 8,661 8,934
Other expense, net of other income (g)(h) 410 1,022 914
-------- -------- --------
Income (loss) from operations ........... 5,660 8,147 8,794
Interest expense, net ................... 2,748 4,894 6,770
-------- -------- --------
Income (loss) before income taxes and
extraordinary charge ............... 2,912 3,253 2,024
Provision (benefit) for income taxes .... 1,194 1,334 845
Extraordinary charge (i) ................ 0 625 625
-------- -------- --------
Net income (loss) ....................... $ 1,718 $ 1,294 $ 554
======== ======== ========
Net income (loss) per share ........ $ 17,180 $ 12,940 $5,540
======== ======== ========
Weighted average number of
shares outstanding ................. 100 100 100
Ratio of earnings to fixed charges (j) .. 2.0x 1.6x 1.3x
As of
Sept. 27, 1997
--------------
Balance Sheet Data:
Cash and cash equivalents..................................... $10,020
Working capital............................................... 46,158
Property, plant and equipment................................. 44,588
Total assets.................................................. 150,276
Total debt (including current portion)........................ 137,650
Stockholder's equity.......................................... (17,552)
- ----------
(a) Includes the results of operations for Heim following the effective date
of its acquisition in May 1993.
(b) Includes the results of operations for LPP and Nice following their
respective effective dates of acquisition as of October 1996 and as of
February 1997.
(c) The Company acquired LPP effective as of October 1996, and Nice effective
as of February 1997. Results of operations of LPP and Nice subsequent to
their respective effective dates of acquisition are included in the
historical results of operations of RBC. The combined results of LPP and
Nice (based upon unaudited historical information provided by the
respective sellers of the acquired companies to RBC) for their respective
pre-acquisition periods from March 31, 1996 through the effective dates of
such acquisitions and the adjustments made to the pre-acquisition
historical results of LPP and Nice are summarized as follows:
Effect of
LPP Nice Combined Adjustments Acquisitions
--- ---- -------- ----------- ------------
Net sales $ 4,239 $13,621 $17,860 $ $17,860
Cost of sales 3,369 11,598 14,967 (1,441) 13,526
------- ------- ------- ------- -------
Gross margin 870 2,023 2,893 1,441 4,334
Selling, general and
administrative expense 141 1,534 1,675 (683) 992
------- ------- ------- ------- -------
Income from operations 729 489 1,218 2,124 3,342
Interest expense -- -- -- 774 774
------- ------- ------- ------- -------
Income before income
taxes and extraordinary
charge 729 489 1,218 1,350 2,568
16
<PAGE>
Provisions for income
taxes 299 200 499 554 1,053
------- ------- ------- ------- -------
Net income $ 430 $ 289 $ 719 $ 796 $ 1,515
======= ======= ======= ======= =======
The adjustments primarily relate to recording charges consistent with
Company policy, and to remove effect of expenses which are not expected to
be recurring.
In addition to the effect of the acquisitions noted above, the Company
reflected all adjustments which would be necessary to give effect to the
Recapitalization as the beginning of the fiscal year. These adjustments
included the following:
Charge of $836 recorded in selling, general and administrative expense for
additional compensation expense incurred by the Company as a result of the
redemption by Holdings of certain Common Stock Purchase Warrants held by
members of management of the Company in connection with the
Recapitalization.
Credit of $429 to other expense, net of other income for the elimination
of the consulting fee paid to Tribos Management Company, Inc. ("Tribos"),
an affiliate of Aurora Capital Partners, L.P. ("Aurora"), the former
principal stockholder of Holdings, pursuant to a consulting agreement.
This agreement will be terminated in connection with the Recapitalization.
See "Certain Relationships and Related Transactions."
Charge $12,547, offset by credit of $5,271 to interest expense due to the
pro forma interest expense on borrowings under the Term Loans and the
Notes. Debt issuance costs are amortized over the terms of the related
debt and included as a component of interest expense. The interest rate on
the Term Loans is assumed to be 8% (30-day LIBOR + 2.5%) and the
outstanding borrowings under the Term Loans is assumed to remain at
$16,000 throughout the period. Pro forma interest expense for the year
ended March 29, 1997 consists of the following:
Terms Loans.................................. $ 1,280
Notes........................................ 10,587
Amortization of debt issuance costs.......... 680
-------
$12,547
=======
A 1% change in the interest rate payable on the Term Loans would change
annual interest expense by $160 before the effect of income taxes.
The credit results from the elimination of interest expense and
amortization of financing costs related to the repayment of the Existing
Revolving Credit Facility and the Existing Term Loan with a portion of the
proceeds of the Offering and the Term Loans.
Taxes have been adjusted to reflect the adjustments noted, at an effective
rate of 41%.
The adjustment to extraordinary charge represents the estimated write-off
of unamortized deferred financing costs ($1,383) related to existing
indebtedness repaid with the proceeds of the offering of the Outstanding
Notes and the Term Loans. The entry has been recorded net of tax and is
reflected as an extraordinary charge of $816.
(d) Includes the results of operations of Bremen following the effective date
of acquisition as of July 1997.
(e) The Company acquired Bremen effective as of July 1997. Results of
operations of Bremen subsequent to the effective date of acquisition are
included in the historical results of operations of the Company. The
results of Bremen (based upon unaudited historical information provided by
the seller of the acquired company to the Company) for it's
pre-acquisition periods from March 30, 1997 through the effective date of
such acquisition, and the adjustments to give effect to the
Recapitalization as of the beginning of the fiscal year are as follows:
<TABLE>
<CAPTION>
Historical Acquisition Transaction Total
Bremen Adjustments Adjustments Adjustments
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 3,872 $ -- $ -- $ 3,872
Costs of sales 3,160 (67) -- 3,093
----------------------------------------------------
Gross margin 712 67 -- 779
Operating expenses: 340 -- -- 340
Selling, general and administrative expenses -- -- (108) (108)
Other expenses, net of other income 340 -- (108) 232
----------------------------------------------------
Operating income 372 67 108 547
Interest expense, net -- 107 2,963 3,070
----------------------------------------------------
Income before taxes and extraordinary charge 372 (40) (1,661) (1,329)
Provision for income taxes 167 (16) (681) (530)
----------------------------------------------------
Income before extraordinary charge 205 (24) (980) (799)
Extraordinary charge, net -- -- -- --
----------------------------------------------------
Net income $ 205 $ (24) $ (980) $ (799)
======= ======= ======= =======
</TABLE>
The acquisition adjustments primarily relate to recording charges
consistent with Company policy and to remove effect of expenses which are
not expected to be recurring.
(f) Cost of sales and the related gross profit for the fiscal year ended April
2, 1994, reflects a charge of $2,454, representing start up costs
associated with new production processes. It is the Company's policy to
expense such costs in the period incurred.
(g) Includes a consulting fee of $292, $393, $400, $400 and $429 paid to
Tribos, an affiliate of Aurora Capital, pursuant to a consulting agreement
in fiscal 1993, 1994, 1995, 1996 and 1997, respectively. The amounts paid
for the six months ended September 28, 1996 and September 27, 1997 were
$209 and $108, respectively.
(h) Includes a $7,578 non-recurring restructuring charge in fiscal 1994, a
$425 non-recurring environmental remediation charge in fiscal 1996, a $500
non-recurring pension termination charge in fiscal 1997 and $645 in
non-recurring charges related to the Recapitalization in the amounts of
$63 and $82 for various fees relating to legal settlements for the six
months ended September 27, 1997.
(i) The extraordinary charge results from the write-off of unamortized
deferred financing costs in connection with the early extinguishment of
debt. The extraordinary charge is recorded net of tax benefit.
(j) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent income (loss) before income taxes and fixed charges.
Fixed charges consist of (i) interest, whether expensed or capitalized,
(ii) amortization of debt expense and discount or premium relating to any
indebtedness, whether expensed or capitalized and (iii) that portion of
rental expense considered to represent interest cost (assumed to be
one-third).
(k) Earnings were insufficient to cover fixed charges in fiscal 1994 by
$7,518.
17
<PAGE>
RISK FACTORS
Prospective participants in the Exchange Offer should carefully consider
the following specific risk factors, as well as the other information contained
in this Prospectus, before making an investment in the Exchange Notes.
Substantial Leverage; Ability to Service Debt
RBC incurred substantial indebtedness in connection with the
Recapitalization and RBC is highly leveraged. At September 27, 1997, RBC's total
indebtedness was $125.8 million and RBC had the ability to borrow an additional
$43.1 million under the Revolving Credit Facility. For the six months ended
September 27, 1997, RBC's ratio of earnings to fixed charges was 1.6 to 1.0 and
as of such date RBC had negative net worth of $17.6 million.
The degree to which RBC is leveraged could have important consequences for
RBC, including the following: (i) the ability of RBC to obtain additional
financing for working capital, capital expenditures, acquisitions, debt service
requirements or other purposes may be impaired; (ii) a substantial portion of
RBC's cash flow from operations will be required to pay RBC's interest expense
and principal repayment obligations and will not be available for its general
corporate needs; (iii) RBC's flexibility to adjust to changing market conditions
may be limited, and its ability to compete against its less highly leveraged
competitors may be reduced; (iv) RBC may be more vulnerable in the event of a
downturn in its business, in the aerospace or heavy equipment industries, or in
any other industry to which RBC markets its products or in the economy
generally; and (v) to the extent that RBC incurs borrowings under the Senior
Credit Facilities, which borrowings will be at variable rates, it will be
vulnerable to increases in interest rates. In order to provide for RBC's working
capital needs, the Senior Credit Facilities provide for up to $54 million of
revolving credit loans (subject to customary conditions to borrowing) which RBC
believes will provide, together with cash flow from operations, sufficient
capital resources to conduct its business for the foreseeable future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources" and "Description of Certain
Indebtedness."
RBC's ability to pay interest on the Exchange Notes and satisfy its other
obligations (including its obligation to purchase the Notes upon a Change of
Control (see "-Obligations in the Event of a Change of Control"), and its
obligations under the Senior Credit Facilities) will depend on its future
operating performance, which will be affected by prevailing economic conditions
and financial, business and other factors, many of which are beyond its control.
Although RBC believes it will be able to pay its obligations as they come due,
there can be no assurance that it will generate earnings in any future period
sufficient to cover its fixed charges. In the absence of adequate operating
results and cash flows, RBC might be required to adopt alternative strategies
that may include reducing or delaying capital expenditures, disposing of
material assets or operations, refinancing its indebtedness, including the
Exchange Notes, or seeking additional equity capital to meet its debt service
obligations. The Senior Credit Facilities and the Indenture, as well as the
indenture governing the Discount Debentures (the "Discount Indenture"), contain
covenants that restrict RBC's ability to take certain of the foregoing actions,
including selling assets and using the proceeds therefrom. See "-Restrictions
Imposed by Debt Instruments." There can be no assurance as to the timing of such
actions, the ability of RBC to consummate such actions under its or Holdings'
existing financing agreements or the proceeds that RBC could realize therefrom,
and there can be no assurance that any such transactions would be feasible at
the time or that such proceeds would be adequate to meet the obligations then
due. In addition, there can be no assurance that the Subsidiary Guarantors will
generate sufficient cash flow to meet their respective obligations under the
Subsidiary Guarantees. See "Description of Certain Indebtedness," "Description
of the Notes" and "-Ranking of the Exchange Notes and Subsidiary Guarantees."
18
<PAGE>
In connection with the Recapitalization, Holdings issued the Discount
Debentures. See "Description of Certain Indebtedness-Discount Debentures."
Although the Discount Debentures generally do not require the payment of cash
interest until December 15, 2002, and do not mature until June 15, 2009,
Holdings will be required to redeem approximately $34 million of the Discount
Debentures no later than December 15, 2002. If Holdings is unable to obtain
sufficient cash to make such redemption payment, an event of default with
respect to the Discount Debentures would occur which would allow the holders
thereof to accelerate the Discount Debentures and enforce their pledge of the
capital stock of RBC. Holdings' only asset is the capital stock of RBC, and the
ability of RBC to pay dividends to Holdings is restricted by both the Senior
Credit Facilities and the Indenture. See "Description of the Notes-Certain
Covenants-Limitation on Restricted Payments."
Cyclical Nature of Business
The aerospace, heavy equipment and other industries to which the Company
sells its products are, to varying degrees, cyclical and have historically
experienced periodic downturns, which often have had a negative effect on demand
for the Company's products. Prior industry downturns have resulted in negative
effects on the Company's net sales, gross margin and net income. Although the
Company believes that by concentrating on products with strong aftermarket
demand it has reduced its exposure to such business downturns, any future
material weakness in demand in any of these industries could have a material
adverse effect on the financial condition and results of operations of the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Dependence on Key Customers; Government Regulation; OEM Approvals; Defense
Industry Consolidation
The demand for the Company's products is largely dependent on the
aerospace and heavy equipment industries. Sales to the Company's largest
customer accounted for approximately 9.7% of the Company's fiscal 1997 net
sales. Sales to the Company's ten largest customers accounted for approximately
40.2% of the Company's fiscal 1997 net sales. The Company has contractual
relationships with almost all of its top ten customers, and in certain cases
such relationships cover significant portions of the sales to such customer,
however, in the aggregate, such relationships do not constitute substantially
all sales to the Company's largest customers. A substantial portion of its
business relationships are informal and certain of the Company's contractual
arrangements may be terminated at will. Although the Company believes that its
business relationships with its major customers are currently mutually
satisfactory, there can be no assurance that sales to the Company's major
customers will continue at the same level of volume or pricing or that one or
more major customers will not terminate or seek to materially alter the terms of
its relationship with the Company. There can be no assurance that any of the
Company's major customers will not shift its sourcing to other suppliers,
develop in-house manufacturing capabilities for the Company's products or take
other actions which could adversely affect the Company. The loss of any of the
Company's major customers or a substantial decrease in any of such customer's
purchases from the Company, a material decrease in the demand for new aircraft
or heavy equipment or replacement parts therefor or a material deterioration in
the ability of the Company to obtain orders to supply products for aircraft or
heavy equipment could have a material adverse effect on the financial condition
and results of operations of the Company.
A significant portion of the Company's sales are to government agencies or
departments or customers who are government contractors or are regulated by the
government. As such, compliance with various government regulations and
provisions in such customers' contracts may be required. Violations of these
regulations could result in termination of the Company's contracts with such
customers, imposition of fines or suspension or debarment from supplying
component parts for government contracts.
19
<PAGE>
Several of the Company's customers, including many of the Company's
largest customers, have strict manufacturing and quality standards (some of
which are imposed by government regulation) with which the Company must comply.
In many cases, the Company's compliance with such standards must be demonstrated
prior to supplying the product. Failure by the Company to maintain compliance or
to obtain approvals for new products could result in a material loss of sales to
such customers. Additionally, the Company is able to utilize its position as an
approved supplier to certain of such customers in order to promote sales to
other customers. Such opportunities would be lost by any failure to maintain
product approvals. The occurrence of any of the foregoing events could have a
material adverse effect on the financial condition and results of operations of
the Company.
Many of the Company's products are used in a number of different
applications in military equipment and aircraft. The defense industry has been
undergoing rapid consolidation over the last few years. Consolidations and
combinations in the industry may eliminate customers from the market (including
customers of the Company who are acquired by companies that are not customers of
the Company) or produce downward pricing pressures on component parts sales to
the defense industry. Downward pricing pressures on sales of component parts,
the elimination of customers from the industry generally or the loss of the
Company's customers could have a material adverse effect on the financial
condition and results of operations of the Company.
Potential Exposure to Environmental Liabilities
The Company is subject to various federal, state and local environmental
laws, ordinances and regulations, including those governing discharges of
pollutants into the air and water, the storage, handling and disposal of solid
wastes, hazardous wastes and hazardous substances and the health and safety of
employees ("Environmental Laws"). Agencies responsible for enforcing
Environmental Laws have authority to impose significant civil or criminal
penalties for non-compliance. The Company believes it is currently in material
compliance with all applicable requirements of Environmental Laws, but there can
be no assurance that some future non-compliance will not result in the
imposition of significant liabilities.
The Company also may be liable under Environmental Laws, including the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), state analogs to CERCLA and certain state property transfer laws,
for the costs of investigation and remediation of contamination at facilities
owned or operated by the Company, or at other facilities at which the Company
has disposed of hazardous substances. In connection with such contamination, the
Company may also be liable for natural resource damages, government penalties
and claims by third parties for personal injury and property damage. State
agencies are currently overseeing investigation and remediation activities at
the Company's facilities in Fairfield, Connecticut, West Trenton, New Jersey,
Santa Ana, California, and Rancho Dominguez, California, and the prior property
owner has conducted limited remediation at the Company's Kulpsville,
Pennsylvania facility. The former owners of these facilities have agreed to
indemnify the Company for liabilities arising from environmental conditions that
existed prior to the date of purchase of such facilities by the Company, which
has covered most of the costs of ongoing remediation to date, although the
Company has relinquished the indemnity for the Fairfield, Connecticut facility.
Moreover, there can be no assurance that the indemnities relating to the other
facilities, all of which contain negotiated dollar limits, will be adequate to
resolve any remaining cleanup liabilities or that the indemnifying parties will
continue to perform their indemnification obligations.
Future events, such as new releases of hazardous substances, new
information concerning past releases of hazardous substances, changes in
existing Environmental Laws or their interpretation, and more rigorous
enforcement by regulatory authorities, may give rise to additional expenditures,
compliance
20
<PAGE>
requirements or liabilities that could have a material adverse effect on the
financial condition and results of the operations of the Company. See
"Business-Environmental Matters."
Ability to Implement Acquisition Strategy and Ability to Manage Growth
A key component of the Company's business strategy is the growth of the
Company's product and customer base through the acquisition of competitors in
similar lines of business and operators in segments of the bearing industry in
which the Company has not historically operated. Although the Company believes
that there currently exist ample opportunities for such acquisitions, there can
be no assurance that the Company will be able to successfully exploit any such
opportunities or that such opportunities will be available in the future. In
order to capitalize on any such acquisition opportunities, the Company may need
to obtain additional capital. To raise such capital, the Company may elect to
undertake additional debt financings. The issuance of additional debt securities
or borrowings would result in additional leverage and reduced working capital.
Additionally, the issuances of additional debt securities or borrowings is
restricted by the terms of the Indenture, the Discount Indenture and the Senior
Credit Facilities. See "--Restrictions Imposed by Debt Instruments." There can
be no assurance that the Company will be able to obtain such financing on terms
acceptable to the Company, if at all, and the inability to obtain such financing
when desired could have a material adverse effect on the Company's ability to
implement its acquisition strategy and capitalize on profitable opportunities.
Following the Exchange Offer, the Company intends to grow and expand its
business through internal expansion and acquisitions. If such growth occurs, it
will place demands on the Company's management, employees, operations and
physical and financial resources. To manage its growth, the Company must
continue to implement and improve its operational and financial systems and to
expand, train and manage its employee base, and any inability of the Company to
attract and retrain the executive and managerial personnel required by its
expanding business could have a material adverse effect on the results of
operations and financial condition of the Company. If the Company's systems,
procedures or controls are not adequate to support the Company's operations,
management may not be able to achieve the rapid expansion necessary to exploit
potential market opportunities for the Company's products. In addition, any
anticipated expansion of the Company's marketing efforts outside of the United
States will expose the Company to the economic, political and regulatory
environments within the countries in which the Company's new and potential
customers are located, which may be more restrictive or burdensome than those in
the United States and with which the Company may be unfamiliar.
Competition
Segments of the bearing industry are subject to intense competition, on a
price, quality and customer service basis. The Company faces competition from
other bearing manufacturers, many of whom are diversified manufacturing concerns
and have significantly greater financial and other resources than the Company.
Additionally, certain of the Company's competitors are able to produce their own
raw materials and possess a greater market share in many segments of the bearing
industry than the Company. Such competitors are able to expend greater resources
on research and new product development. The Company believes, however, that by
operating in the markets within the bearing industry in which it competes, it
faces less competition from the larger bearing manufacturers and that
competition in such markets is less dependent on price and the ability to expend
significant financial resources. See "Business-Competition." Additionally, the
Company relies on certain of its competitors for its own raw materials and in
certain circumstances produces products for, and sells products to, its
competitors for resale under such competitors' names. See "Business-Suppliers
and Raw Materials."
21
<PAGE>
Ranking of the Exchange Notes and Subsidiary Guarantees
The Exchange Notes will be subordinated in right of payment to all Senior
Indebtedness of RBC, including RBC's obligations under the Senior Credit
Facilities. As of September 27, 1997, the amount of Senior Indebtedness of RBC
was approximately $26.5 million, and RBC had the ability to borrow an additional
$43.1 million under the Revolving Credit Facility. Although the Indenture
contains limitations on the amount of additional indebtedness that the Company
may incur, under certain circumstances the amount of such indebtedness could be
substantial and, in any case, such indebtedness may be senior to the Notes.
Under the Indenture, the Company is permitted to incur indebtedness so
long as the Consolidated Coverage Ratio (as defined herein) of the Company as of
the date of such incurrence and after giving effect thereto exceeds 2.0 to 1.0
if the indebtedness is incurred prior to June 15, 2002 or 2.25 to 1.0 if
incurred thereafter. Additionally the Company is permitted to incur the
indebtedness under the Senior Credit Facilities and up to $10 million of
additional indebtedness without regard to compliance with the ratio referred to
above. All such debt will be Senior Indebtedness.
Pursuant to the Senior Credit Facilities, the Company may, in addition to
the borrowings under the Senior Credit Facilities incur a maximum of
approximately $10,750,000 in Senior Indebtedness not existing on the date of the
closing of the Indenture and the Senior Credit Facilities. Under the restriction
on the Company's ability to incur additional Indebtedness contained in the
Senior Credit Facilities, the Company may incur the following additional Senior
indebtedness: (i) up to $10,000,000 of indebtedness secured by certain liens or
in respect of capitalized leases, (ii) indebtedness arising from endorsement of
negotiable instruments, (iii) indebtedness under certain indemnity agreements,
(iv) up to $250,000 in indebtedness relating to surety, appeal and similar
bonds, (iv) indebtedness with respect to open account arrangements or accrued
expenses in current account payables, (v) indebtedness up to $250,000 relating
to certain acquisitions and (vi) up to $250,000 of other indebtedness.
Upon any payment or distribution of assets of RBC upon liquidation,
dissolution, reorganization or any similar proceeding, the holders of Senior
Indebtedness will be entitled to receive payment in full before the Holders are
entitled to receive any payment. In addition, RBC may not make any payments in
respect of the Exchange Notes during the continuance of a payment default under
any Senior Indebtedness. Moreover, if certain non-payment defaults exist under
certain Senior Indebtedness, RBC may be prohibited from making any payments in
respect of the Exchange Notes for a specified period of time.
The obligations of RBC under the Exchange Notes and the Senior Credit
Facilities are, subject to certain limitations, fully and unconditionally
guaranteed by the Subsidiary Guarantors on a joint and several basis. The
Subsidiary Guarantees with respect to the Exchange Notes are limited in amount
to the maximum amount that can be guaranteed under applicable fraudulent
transfer laws and are subordinated to Senior Indebtedness of each Subsidiary
Guarantor to the same extent that the Exchange Notes are subordinated to Senior
Indebtedness of RBC. Accordingly, the obligation of a Subsidiary Guarantor under
its Subsidiary Guarantee may be limited or reduced to zero, and the ability to
collect under any Subsidiary Guarantee may be limited. The obligations of RBC
and its subsidiaries, whether as borrower or guarantor, under the Senior Credit
Facilities are collateralized by substantially all of each such entity's present
and future assets. Any default thereunder could effectively permit the holders
of Senior Indebtedness to control RBC's and its subsidiaries' cash and other
assets which could indirectly prevent RBC from meeting its debt service
obligations on other indebtedness, including the Exchange Notes. The Exchange
Notes will be unsecured and, therefore, do not have the benefit of such
collateral. If RBC becomes insolvent or is liquidated or if the indebtedness
under the Senior Credit Facilities is accelerated, including
22
<PAGE>
any acceleration as a result of a bankruptcy or insolvency of, or other event of
default with respect to, Holdings, the lenders under the Senior Credit
Facilities will be entitled to payment in full from the proceeds of the
collateral prior to any payment to the Holders. In such event, it is possible
that there would be no assets remaining from which claims of the Holders could
be satisfied or, if any assets remain, such assets may be insufficient to fully
satisfy such claims. See "Description of the Notes-Ranking," "-Subsidiary
Guarantees" and "-Certain Covenants."
Fraudulent Transfer Considerations
A significant portion of the proceeds of the offering of the Outstanding
Notes were distributed to Holdings, the sole stockholder of the Company, and
used to redeem and purchase Common Stock, Preferred Stock and Common Stock
Purchase Warrants in the Recapitalization. Under relevant federal bankruptcy law
and state fraudulent transfer laws, the Exchange Notes under certain
circumstances may be subject to avoidance or may be subordinated to existing or
future indebtedness of the Company (in addition to the Senior Indebtedness to
which the Exchange Notes are expressly subordinated). Such circumstances would
include a court finding in a suit by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy or the Company as
debtor-in-possession, finding that, after giving effect to the sale of the
Outstanding Notes and the Discount Debentures and the incurrence of the
indebtedness under the Senior Credit Facilities (collectively, the
"Recapitalization Indebtedness") and the application of the net proceeds
therefrom either (a) the Company received less than a reasonably equivalent
value or fair consideration for the issuance of the Outstanding Notes (including
by reason of the fact the proceeds therefrom were distributed to Holdings to
purchase Common Stock, Preferred Stock and Common Stock Purchase Warrants, which
courts generally consider of no value to the issuer of such equity securities or
its subsidiaries) and either (i) was insolvent at the time of such issuance or
was rendered insolvent thereby, (ii) was engaged in business or transactions 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 such debts matured; or (b) the Company issued the
Outstanding Notes with actual intent to hinder, delay or defraud its existing
creditors. In such case, the court could avoid the Exchange Notes and order that
all or part of any payments on the Exchange Notes be returned to the Company or
to a fund for the benefit of its creditors, or subordinate the Exchange Notes to
some or all other indebtedness of the Company, or take other action detrimental
to the Holders.
In addition, the Company will rely on upstream dividends from its
subsidiaries as a source of payment on the Exchange Notes. Dividend payments are
generally considered to have been made for less than a reasonably equivalent
value as the payor receives no value in return. As a result, such dividend
payments may be attacked by an unpaid creditor of such subsidiary or
representative of such creditors pursuant to the same fraudulent transfer theory
set forth above. If such an attack were successful, the Company's subsidiaries
could be prevented from paying dividends to the Company, or the Company could be
obliged to repay dividends received if such dividends were successfully avoided
as fraudulent transfers. In such case, the ability of the Company to make
payments on the Exchange Notes would be materially impaired.
Upstream guarantees themselves, such as the Subsidiary Guarantees, may be
avoided as fraudulent transfers pursuant to the same fraudulent transfer theory
set forth above. However, each Subsidiary Guarantee is limited in amount to the
maximum amount that can be guaranteed under applicable fraudulent transfer laws.
Accordingly, a Subsidiary Guarantor's obligation under its Subsidiary Guarantee
may be limited or reduced to zero. In determining whether a Subsidiary Guarantor
received reasonably equivalent value, courts generally will consider the
benefits the Subsidiary Guarantor derives from the Company's financing,
management and position and reputation in the marketplace.
23
<PAGE>
The measure of insolvency for purposes of all of the foregoing varies
based upon the law of the jurisdiction applied. Generally, however, an entity
would be considered insolvent if the sum of its debts (including contingent
liabilities) is greater than all of its property at a fair valuation, or if the
present fair saleable value of its assets is less than the amount that will be
required to pay its probable liabilities on its existing debts (including
contingent liabilities), as they become absolute and matured. In addition, an
entity may be presumed insolvent under some fraudulent transfer laws if it is
not generally paying its debts as they become due. Although, following the
Recapitalization, as determined in accordance with generally accepted accounting
principles, the Company currently has a negative net worth for financial
accounting purposes, the Company believes, based upon valuations and forecasts,
that the Company was at the time of consummation of the Recapitalization, was at
the time the Outstanding Notes were issued, will be at the time the Exchange
Notes are issued, and will continue to be at all times that payments on the
Exchange Notes are made solvent, will have sufficient capital to carry on its
business, and will continue to be able to pay its debts as they mature.
Similarly, the Company believes that, based on such information, each subsidiary
of the Company was at the time of the Recapitalization, was at the time the
Outstanding Notes were issued, will be at the time the Exchange Notes are issued
and will continue to be at the times it is projected to pay dividends to the
Company solvent, will have sufficient capital to carry on its business and will
continue to be able to pay its debts as they mature. Accordingly, the Company
believes that in a bankruptcy case or a lawsuit by creditors of the Company,
none of the Exchange Notes should be held to have been issued, nor payments on
the Exchange Notes held to have been made, in violation of applicable federal
bankruptcy law or state fraudulent transfer laws, and that in a suit by the
creditors of the subsidiaries of the Company, none of the dividends to the
Company should be held to have been made in violation of applicable federal
bankruptcy law or state fraudulent transfer laws. There can be no assurance,
however, as to what standard a court would apply to determine whether the
Company and its subsidiaries were "insolvent" as of the date the Outstanding
Notes or the Exchange Notes were issued; or that, regardless of the method of
valuation, a court would not determine that the Company or its subsidiaries was
insolvent on such other relevant dates. Nor can there be any assurance that a
court would not determine, regardless of whether the Company was solvent on the
date the Exchange Notes were issued, that the payments constituted fraudulent
transfers on another of the grounds set forth above.
Restrictions Imposed by Debt Instruments
The Senior Credit Facilities, the Indenture and the Discount Indenture
contain numerous financial and operating covenants, including, but not limited
to, restrictions on the Company's ability to incur indebtedness, pay dividends,
redeem stock, issue stock, create liens, sell assets, engage in certain mergers
and acquisitions and make investments. Such covenants could materially limit the
Company's ability to finance its future operations or capital needs or to engage
in potentially profitable activities in which the Company might otherwise
engage. The ability of the Company to comply with the covenants and other terms
of the Senior Credit Facilities, the Indenture and the Discount Indenture will
depend on the future performance of the Company.
In addition, the credit agreement relating to the Senior Credit Facilities
(the "Credit Agreement") requires the maintenance of certain financial
covenants, including a maximum Consolidated Leverage Ratio (as defined in the
Credit Agreement; a ratio of total debt to EBITDA (as defined in the Credit
Agreement)), a minimum Consolidated Interest Coverage Ratio (as defined in the
Credit Agreement; a ratio of EBITDA to interest expense) and a minimum
Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement; a
ratio of EBITDA to fixed charges) certain of which become more restrictive over
time as follows: Consolidated Leverage Ratio - 5.95 to 1.00 for fiscal 1998 to
3.25 to 1.00 following fiscal 2002; Consolidated Interest Coverage Ratio - 1.60
to 1.00 for fiscal 1998 to 2.50 to 1.00 following fiscal 2002; Consolidated
Fixed Charge Coverage Ratio - 1.00 to 1.00 for fiscal 1998 to 1.05 to 1.00
following fiscal 2002.
24
<PAGE>
As the Credit Agreement was entered into during the course of the 1998
fiscal year, determination of compliance with each of the foregoing financial
ratios for the 1998 fiscal year is made based on quarterly figures that are
annualized as set forth in the Credit Agreement. Based upon such calculation,
the Company currently meets all required ratios.
The ability of the Company to comply with its covenants and achieve such
ratios may be affected by events beyond the Company's control. In the event the
Company fails to comply with the various covenants contained in the Senior
Credit Facilities, the lenders thereunder would have the ability to accelerate
such debt, which would constitute a default under the Indenture. If the
indebtedness under the Senior Credit Facilities or the Indenture were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay such indebtedness in full. See "Description of the
Notes-Defaults."
Obligations in the Event of a Change of Control
Upon a Change of Control, the Company is obligated to make an offer to
purchase all outstanding Notes at a price equal to 101% of the principal amount
of the Notes, plus accrued interest thereon. The Senior Credit Facilities
prohibit the Company from purchasing any Notes and also provide that the
occurrence of certain Change of Control events with respect to the Company
constitutes a default thereunder. In the event of a Change of Control, the
Company would be required to repay all borrowings under the Senior Credit
Facilities or obtain the consent of its lenders under the Senior Credit
Facilities to make the purchase of the Notes. If the Company does not obtain
such consent or repay such borrowings, the Company will remain prohibited from
purchasing Notes. In such case, the Company's failure to purchase tendered Notes
would constitute a default under the Indenture, which, in turn, would constitute
a default under the Senior Credit Facilities. There can be no assurance that the
Company will have the financial ability to purchase the Notes upon the
occurrence of a Change of Control.
Notwithstanding the requirement that the Company repurchase the Notes upon
the occurrence of a Change of Control, the Company may enter into transactions,
including acquisitions, refinancings or other recapitalizations or highly
leveraged transactions, that, while not constituting a Change of Control under
the Indenture, may result in an increase in the amount of indebtedness of the
Company, otherwise affect the capital structure or credit ratings of the Company
or have adverse affects on the holders of the Notes, certain of which are
restricted by other covenants contained in the Indenture. See "Description of
the Notes-Change of Control" and "___ Certain Covenants."
The meaning of the phrase "all or substantially all" as used in the
definition of Change of Control varies according to the facts and circumstances
of the subject transaction, has no clearly established meaning under relevant
law and is subject to judicial interpretation. Accordingly, in certain
circumstances, there may be a degree of uncertainty in ascertaining whether a
particular transaction would involve a disposition of "all or substantially all"
of the assets of the Company, and therefore it may be unclear whether the
foregoing provisions are applicable.
Dependence On Key Personnel
The Company's business is managed by a small number of key executive
officers. The loss of the services of certain of these executives, including Dr.
Hartnett, could have a material adverse impact on the financial condition and
results of operations of the Company. There can be no assurance that the
services of such personnel will continue to be made available. The Company has
entered into a five-year employment agreement with Dr. Hartnett. See
"Management-Employment Agreement" and "Certain Relationships and Related
Transactions."
25
<PAGE>
Labor Relations
As of September 27, 1997, the Company had approximately 1,099 active
employees, of whom approximately 23.1%, representing employees at the Company's
West Trenton, New Jersey and Fairfield, Connecticut facilities, were represented
by the United Auto Workers ("UAW"), and 7.1%, representing employees at the
Company's Kulpsville, Pennsylvania facility, were represented by the United
Steel Workers of America (the "USWA"). There can be no assurance that additional
employees not currently represented by unions will not elect to be so
represented in the future.
The Company's agreement with the UAW for the West Trenton, New Jersey
facility expires May 31, 1999, its agreement with the UAW for the Fairfield,
Connecticut facility expires January 31, 1999, and its agreement with the USWA
expires on October 23, 1999. There can be no assurance that any of these
agreements will be renewed when they expire or that the Company will not
experience strikes, work stoppages or other situations.
Controlling Stockholders
All of the outstanding stock of the Company is held by Holdings. As of
September 27, 1997, Dr. Hartnett owned approximately 43% (approximately 42% on a
fully diluted basis) and members of management of the Company (16 persons) owned
approximately 61% (approximately 62% on a fully diluted basis) of the
outstanding capital stock of Holdings. In addition, through the ownership of
Class B Supervoting Common Stock of Holdings ("Class B Common Stock"), Dr.
Hartnett has, subject to certain limitations, the power to control a majority of
the voting rights of all capital stock of Holdings. Accordingly, management, in
particular Dr. Hartnett, is in a position to control Holdings and the Company
and is able to determine the outcome of any corporate transaction or other
matter submitted to the stockholders of Holdings for approval, including the
election of directors, mergers, acquisitions, consolidations or the sale of all
or substantially all of the Company's assets. See "Certain Relationships and
Related Transactions."
Lack of Public Market for the Exchange Notes; Restrictions on Resales
There is no existing trading market for the Exchange Notes, and there can
be no assurance regarding the future development of a market for the Exchange
Notes, or the ability of Holders to sell their Exchange Notes or the price at
which such Holders may be able to sell their Exchange Notes. If such a market
were to develop, the Exchange Notes could trade at prices that may be higher or
lower than the initial offering price of Outstanding Notes depending on many
factors, including prevailing interest rates, the Company's operating results
and the market for similar securities. The Initial Purchaser has advised the
Company that it currently intends to make a market in the Exchange Notes. The
Initial Purchaser is not obligated to do so, however, and any market making with
respect to the Exchange Notes may be discontinued at any time without notice.
Therefore, there can be no assurance as to the liquidity of any trading market
for the Exchange Notes, or that an active market for the Exchange Notes will
develop. The Company does not intend to apply for listing or quotation of the
Exchange Notes, on any securities exchange or stock market; however, the
Outstanding Notes are, Exchange Notes are expected to be, eligible for trading
in The Private Offerings, Resale and Trading through Automated Linkages (PORTAL)
Market of The Nasdaq Stock Market, Inc.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the Exchange Notes,
will not be subject to similar disruptions. Any such disruptions could have an
adverse effect on Holders of the Exchange Notes.
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<PAGE>
USE OF PROCEEDS
The Company will receive no proceeds from the issuance of the Exchange
Notes pursuant to the Exchange Offer.
The Company received approximately $106.2 million in proceeds from the
sale of the Outstanding Notes. The proceeds of such sale, together with the
proceeds from the Term Loans were used to repay the outstanding balance on the
Existing Revolving Credit Agreement and the Existing Term Loan, to pay the
Dividend to Holdings and to pay certain fees incurred in connection with the
Recapitalization. See "Prospectus Summary-Recent Developments," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Certain Relationships and Related Transactions."
CAPITALIZATION
(dollars in thousands)
The following table sets forth, as of March 29, 1997, (i) the historical
capitalization of the Company and (ii) the capitalization of the Company, pro
forma for the Recapitalization. This table should be read in conjunction with
"Unaudited Pro Forma Consolidated Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of the Company contained elsewhere in this
Offering Circular.
As of September 27, 1997
------------------------
Total debt:
Revolving Credit Facility (a).................... ----
Term Loans....................................... 15,750
Industrial Development Revenue Bonds ("IRBs").... 10,700
Capitalized leases............................... 3,773
Notes............................................ 110,000
Total debt....................................... 140,223
Total stockholder's equity (deficit)................... (17,552)
--------
Total capitalization............................. $122,671
========
- ----------
(a) The Revolving Credit Facility is a five-year $54,000 facility, of which
availability is reduced by $10,900 as a result of the issuance of letters
of credit thereunder to support the Company's obligations in respect of
the IRBs.
27
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(dollars in thousands except share and per share data)
The selected consolidated historical financial information presented below
for each of the fiscal years in the three-year period ended March 29, 1997, and
at March 29, 1997, has been derived from the Consolidated Financial Statements
of the Company, which have been audited by Ernst & Young LLP, independent
certified public accountants. The selected consolidated historical financial
information presented below for each of the fiscal years in the two-year period
ended April 2, 1994, for the six-month periods ended September 28, 1996 and
September 27, 1997 and at September 27, 1997 has been derived from the
consolidated financial statements of the Company. The pro forma selected
consolidated historical information for the fiscal year ended March 29, 1997 is
based on the consolidated financial statements of the Company and gives effect
to the acquisitions of Nice and LPP and the Recapitalization as if each of such
transactions had occurred as of the beginning of fiscal year 1997. The pro forma
selected consolidated historical information for the six-month period ended
September 27, 1997 is based on the condensed consolidated financial statements
of the Company and gives effect to the acquisition of Bremen and the
Recapitalization as if such transactions had occurred as of the beginning of
fiscal year 1998. The information presented below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and condensed the
beginning of fiscal year 1998. Consolidated Financial Statements of the Company
contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Pro Forma
Fiscal Year Ended Fiscal Year
----------------- Ended
April 3, April 2, April 1, March 30, March 29, March 29,
1993 1994(a) 1995 1996 1997(b) 1997(c)
---- ------- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ................................... $ 53,837 $ 65,306 $ 73,904 $ 82,233 $ 93,427 $111,287
Cost of sales ............................... 36,774 49,596(f) 57,204 60,054 64,215 77,741
-------- -------- -------- -------- -------- --------
Gross profit ................................ 17,063 15,710(f) 16,700 22,179 29,212 33,546
Selling, general and administrative expense . 8,917 10,201 8,987 11,104 14,537 16,365
Other expense, net of other income (g)(h) ... 945 8,694 1,057 1,388 1,473 1,044
-------- -------- -------- -------- -------- --------
Income (loss) from operations ............... 7,201 (3,185) 6,656 9,687 13,202 16,137
Interest expense, net ....................... 3,471 4,333 6,445 6,165 5,338 13,388
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary charge ................... 3,730 (7,518) 211 3,522 7,864 2,749
Provision (benefit) for income taxes ........ 1,810 (2,721) 110 1,700 3,224 1,127
Extraordinary charge (i) .................... -- -- -- 995 -- 816
-------- -------- -------- -------- -------- --------
Net income (loss) ........................... $ 1,920 $ (4,797) $ 101 $ 827 $ 4,640 $ 806
======== ======== ======== ======== ======== ========
Net income (loss) per share ............ $ 19,200 $(47,970) $ 1,010 $ 8,270 $ 46,396 $ 8,060
======== ======== ======== ======== ======== ========
Weighted average number of
shares outstanding ..................... 100 100 100 100 100 100
Ratio of earnings to fixed charges (j) ...... 2.0x (k) 1.0x 1.5x 2.4x 1.2x
</TABLE>
Pro Forma
Six
Six Months Ended Months
---------------- Ended
Sept. 28, Sept. 27, Sept. 27,
1996 1997(d) 1997(e)
---- ------- -------
Statement of Operations Data:
Net sales ................................... $ 41,967 $ 60,971 $ 64,843
Cost of sales ............................... 29,447 43,143 46,201
-------- -------- --------
Gross profit ................................ 12,520 17,830 18,642
Selling, general and administrative expense . 6,450 8,661 8,934
Other expense, net of other income (g)(h) ... 410 1,022 914
-------- -------- --------
Income (loss) from operations ............... 5,660 8,147 8,794
Interest expense, net ....................... 2,748 4,894 6,770
-------- -------- --------
Income (loss) before income taxes and
extraordinary charge ................... 2,912 3,253 2,024
Provision (benefit) for income taxes ........ 1,194 1,334 845
Extraordinary charge (i) .................... 0 625 625
-------- -------- --------
Net income (loss) ........................... $ 1,718 $ 1,294 $ 554
======== ======== ========
Net income (loss) per share ............ $ 17,180 $ 12,940 $ 5,540
======== ======== ========
Weighted average number of
shares outstanding ..................... 100 100 100
Ratio of earnings to fixed charges (j) ...... 2.0x 1.6x 1.3x
As of
Sept. 27, 1997
--------------
Balance Sheet Data:
Cash and cash equivalents.................................... $ 10,020
Working capital.............................................. 46,158
Property, plant and equipment................................ 44,588
Total assets................................................. 150,276
Total debt (including current portion)....................... 137,650
Stockholder's equity......................................... (17,552)
- ----------
(a) Includes the results of operations for Heim following the effective date
of its acquisition in May 1993.
(b) Includes the results of operations for LPP and Nice following their
respective effective dates of acquisition as of October 1996 and as of
February 1997.
(c) The Company acquired LPP effective as of October 1996, and Nice effective
as of February 1997. Results of operations of LPP and Nice subsequent to
their respective effective dates of acquisition are included in the
historical results of operations of RBC. The combined results of LPP and
Nice (based upon unaudited historical information provided by the
respective sellers of the acquired companies to RBC) for their respective
pre-acquisition periods from March 31, 1996 through the effective dates of
such acquisitions and the adjustments made to the pre-acquisition
historical results of LPP and Nice are summarized as follows:
Effect of
LPP Nice Combined Adjustments Acquisitions
--- ---- -------- ----------- ------------
Net sales $4,239 $13,621 $17,860 $ -- $17,860
Cost of sales 3,369 11,598 14,967 (1,441) 13,526
------ ------- ------- ------- -------
Gross margin 870 2,023 2,893 1,441 4,334
Selling, general and
administrative expense 141 1,534 1,675 (683) 992
------ ------- ------- ------- -------
Income from operations 729 489 1,218 2,124 3,342
Interest expense -- -- -- 774 774
------ ------- ------- ------- -------
Income before income
taxes and extraordinary
charge 729 489 1,218 1,350 2,568
Provision for income taxes 299 200 499 554 1,053
------ ------- ------- ------- -------
28
<PAGE>
Net income $ 430 $ 289 $ 719 $ 796 $ 1,515
====== ======= ======= ======= =======
The adjustments primarily relate to recording charges consistent with
Company policy, and to remove effect of expenses which are not expected to
be recurring.
In addition to the effect of the acquisitions noted above, the Company
reflected all adjustments which would be necessary to give effect to the
Recapitalization as of the beginning of the fiscal year. These adjustments
included the following:
Charge of $836 recorded in selling, general and administrative expense for
additional compensation expense incurred by the Company as a result of the
redemption by Holdings of certain Common Stock Purchase Warrants held by
members of management of the Company in connection with the
Recapitalization.
Credit of $429 to other expense, net of other income for the elimination
of the consulting fee paid to Tribos pursuant to a consulting agreement.
This agreement will be terminated in connection with the Recapitalization.
See "Certain Relationships and Related Transactions."
Charge $12,547, offset by credit of $5,271 to interest expense due to the
pro forma interest expense on borrowings under the Term Loans and the
Notes. Debt issuance costs are amortized over the terms of the related
debt and included as a component of interest expense. The interest rate on
the Term Loans is assumed to be 8% (30-day LIBOR + 2.5%) and the
outstanding borrowings under the Term Loans is assumed to remain at
$16,000 throughout the period. Pro forma interest expense for the year
ended March 29, 1997 consists of the following:
Terms Loans............................... $ 1,280
Notes..................................... 10,587
Amortization of debt issuance costs....... 680
-------
$12,547
=======
A 1% change in the interest rate payable on the Term Loans would change
annual interest expense by $160 before the effect of income taxes.
The credit results from the elimination of interest expense and
amortization of financing costs related to the repayment of the Existing
Revolving Credit Facility and the Existing Term Loan with a portion of the
proceeds of the Offering and the Term Loans.
Taxes have been adjusted to reflect the adjustments noted, at an effective
rate of 41%.
The adjustment to extraordinary charge represents the estimated write-off
of unamortized deferred financing costs ($1,383) related to existing
indebtedness repaid with the proceeds of the offering of the Outstanding
Notes and the Term Loans. The entry has been recorded net of tax and is
reflected as an extraordinary charge of $816.
(d) Includes the results of operations of Bremen following the effective date
of acquisition as of July 1997.
(e) The Company acquired Bremen effective as of July 1997. Results of
operations of Bremen subsequent to the effective date of acquisition are
included in the historical results of operations of the Company. The
results of Bremen (based upon unaudited historical information provided by
the seller of the acquired company to the Company) for it's
pre-acquisition periods from March 30, 1997 through the effective date of
such acquisition, and the adjustments to give effect to the
Recapitalization as of the beginning of the fiscal year are as follows:
<TABLE>
<CAPTION>
Historical Acquisition Transaction Total
Bremen Adjustments Adjustments Adjustments
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 3,872 $ -- $ -- $ 3,872
Costs of sales 3,160 (67) -- 3,093
----------------------------------------------------
Gross margin 712 67 -- 779
Operating expenses:
Selling, general and administrative expenses 340 -- -- 340
Other expenses, net of other income -- -- (108) (108)
----------------------------------------------------
340 -- (108) 232
----------------------------------------------------
Operating income 372 67 108 547
Interest expense, net -- 107 2,963 3,070
(1,194) (1,194)
----------------------------------------------------
Income before taxes and extraordinary charge 372 (40) (1,661) (1,329)
167 (16) (681) (530)
Provision for income taxes
----------------------------------------------------
Income before extraordinary charge 205 (24) (980) (799)
Extraordinary charge, net -- -- -- --
----------------------------------------------------
Net income $ 205 $ (24) $ (980) $ (799)
======= ======= ======= =======
</TABLE>
The acquisition adjustments primarily relate to recording charges
consistent with Company policy and to remove effect of expenses which are
not expected to be recurring.
(f) Cost of sales and related gross profit for the fiscal year ended April 2,
1994, reflects a charge of $2,454, representing start up costs associated
with new production processes. It is the Company's policy to expense such
costs in the period incurred.
(g) Includes a consulting fee of $292, $393, $400, $400 and $429 paid to
Tribos, an affiliate of Aurora, pursuant to a consulting agreement in
fiscal 1993, 1994, 1995, 1996 and 1997, respectively. The amounts paid for
the six months ended September 28, 1996 and September 27, 1997 were $209
and $108, respectively.
(h) Includes a $7,578 non-recurring restructuring charge in fiscal 1994, a
$425 non-recurring environmental remediation charge in fiscal 1996 and a
$500 non-recurring pension termination charge in fiscal 1997 and $645 in
non-recurring charges related to the Recapitalization in the amounts of
$563 and $82 for various fees relating to legal settlements for the six
months ended September 27, 1997.
(i) The extraordinary charge results from the write-off of unamortized
deferred financing costs in connection with the early extinguishment of
debt. The extraordinary charge is recorded net of tax benefit.
29
<PAGE>
(j) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent income (loss) before income taxes and fixed charges.
Fixed charges consist of (i) interest, whether expensed or capitalized,
(ii) amortization of debt expense and discount or premium relating to any
indebtedness, whether expensed or capitalized and (iii) that portion of
rental expense considered to represent interest cost (assumed to be
one-third).
(k) Earnings were insufficient to cover fixed charges in fiscal 1994 by
$7,518.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis of the results of operations,
financial condition and liquidity of the Company should be read in conjunction
with the Consolidated Financial Statements of the Company contained elsewhere in
this Prospectus.
Overview
The Company is a manufacturer and distributor of highly engineered
precision roller, ball and plain bearings in the United States, with, the
Company believes, a leading position in many of the markets in which it
competes. The Company targets the higher end segment of the domestic bearing
market, focusing primarily on highly technical or regulated bearing products for
niche markets, where it believes that its value added manufacturing, engineering
capabilities and high levels of ongoing technical support enable it to
differentiate itself from its competitors and to enhance its profitability. In
fiscal 1997, the Company had sales to more than 1,200 customers, with no single
customer amounting to more than 9.7% of net sales. The Company sells primarily
to domestic OEMs and distributors in the industrial, aerospace and government
market segments. Approximately 60% of the Company's fiscal 1997 net sales were
sold directly or indirectly for use in the replacement market, which the Company
believes increases the stability of its revenue base. The Company expects to
continue to target sales into the replacement market and expects similar levels
of replacement sales in the near future.
The United States market for bearings was estimated by the Commerce
Department to be approximately $5.3 billion in 1996, and, according to the
Commerce Department, the United States represents approximately 30% of the
worldwide market for bearings. The significant purchasers of bearings include
automotive manufacturers, industrial equipment and machinery manufacturers,
construction and specialized equipment manufacturers, agricultural machinery
manufacturers and commercial and military aerospace equipment manufacturers.
According to Frost & Sullivan, the domestic bearing market is expected to reach
$7.0 billion by 2000.
The aerospace market segment, which represents approximately 33% of the
Company's fiscal 1997 net sales, is expected to show significant future growth.
According to Boeing, worldwide air travel is expected to grow 75% for the period
from 1996 to 2006 and the world fleet is expected to double by 2016. Sales to
the aerospace market segment have been increasing as a percentage of total net
sales, a trend which the Company expects to continue. Demand in the industrial
market segment, which represents approximately 61% of the Company's fiscal 1997
net sales, is also expected to grow due to the increasing demand for industrial
machinery in both domestic and international markets and the trend towards
greater emphasis on maintenance and repair of capital goods given the increasing
cost of such items.
The markets for the Company's products are cyclical and general market
conditions could negatively impact the Company's operating results. The Company
has mitigated its exposure to the cyclicality of the markets for its products by
entering into contractual agreements, sole source relationships or long-term
purchase orders, diversifying across industry market segments and across
multiple market segments within the industrial market segment and increasing
sales to the aftermarket.
The Company's target markets are generally not as price sensitive given
the highly engineered nature of the products and significant contractual/sole
source relationships with its customers. Further, on selected product lines, the
Company sells certain products produced in large volumes to customers in small
quantities to meet specific needs and achieves relatively higher price
realization on such sales. In
31
<PAGE>
addition, the Company seeks to expand into geographic regions not currently
served and to exploit new markets and industries for existing and new products.
The Company's principal raw material is steel, which has historically been
readily available. The Company has been able to pass through increases in raw
material prices to its customers and therefore has not been exposed to raw
material price fluctuations.
The Company has improved gross margins primarily due to the implementation
of its operating strategy. Under this strategy, the Company determines
achievable market prices and volume levels for a specific product line. Once
these are determined, the Company develops a manufacturing process that,
assuming such volume and price levels, will result in a targeted gross profit
margin. Only product lines where the Company believes that the developed
manufacturing process will yield the targeted margins are manufactured.
Management monitors gross margins of all product lines on a monthly basis to
determine which manufacturing processes should be adjusted and which product
lines, if any, should be eliminated.
The Company has developed an operating strategy that focuses on growth
both internally and through selective acquisitions, maximizing profitability,
expanding markets and market share and introducing new products. The Company
recently consummated the purchase of Bremen for approximately $5.3 million, of
which $3.6 million was paid at closing. The purchase price was financed by
borrowings under the Term Loans. See "Prospectus Summary-Recent Developments."
Environmental Matters
In 1996, the Company recorded a $425,000 charge against earnings for
expenditures relating to the settlement of claims relating to a release of
certain pollutants from its West Trenton Facility. See "--Fiscal 1997 Compared
to Fiscal 1996."
Under applicable Connecticut law, the purchase by the Company of its
Fairfield facility in 1996 necessitated the undertaking of an environmental
investigation of the facility. The results of such investigation revealed the
presence of certain low level soil and groundwater contamination the remediation
of which had been commenced by the previous owner of the facility. In 1996, the
Company received regulatory approval of an investigation and remediation plan,
and has implemented that plan at a total cost that the Company estimates will
reach $50,000 (including attorney's fees). All costs incurred to date in
connection with such remediation activities have been satisfied out of current
operational revenues of the Company and are expensed currently. The
investigation has not to date revealed conditions that would require further
remediation, although the regulatory authorities may require ongoing monitoring
of any residual contamination to ensure that it does not reach unsafe levels. As
the magnitude of such costs, if any, is impossible to determine at this time,
the Company has not made any reserves or taken any charges in connection
therewith.
There are certain ongoing remediation activities being conducted at
certain of the Company's other facilities by past owners of such facilities. See
"Risk Factors--Potential Exposure to Environmental Liabilities" and
"Business--Environmental Matters." The Company may be required to expend funds
in the future to address these and other environmental issues; however, the
Company believes that indemnification from prior owners of the facilities should
adequately cover costs relating to such remediation activities, and accordingly,
does not believe such activities will have a material effect on the results of
operations, liquidity or financial condition of the Company.
Prior to, and in connection with, the acquisition of a facility or
business, the Company endeavors to obtain indemnification from parties whom the
Company believes to be able to support such indemnities.
32
<PAGE>
Further, the Company takes such actions as it deems warranted to establish the
scope of any environmental issues that exist as of such purchase, as well as to
project what potential environmental liabilities exist. Such actions include
investigations by members of management of the Company of the records and
facilities relating to the facility or business to be acquired, analysis of
existing investigations, analyses and compliance work done by the sellers and
commissioning its own studies, investigations or analyses.
The Company continuously monitors its various facilities and operations
for compliance with Environmental Laws and exposure to environmental claims,
including, where deemed necessary, the hiring of outside consultants to conduct
surveys and tests. When presented with a potential violation or claim, the
manager of the facility in question will, in coordination and consultation with
management of the Company, endeavor to establish the scope and nature of the
issue, and, if possible, resolve the issue without resort to litigation or
formal proceedings. The Company also undertakes an analysis of the various
indemnification obligations owed to it to ascertain which, if any, would apply,
and the procedures to be followed to perfect its rights with respect to
potential recoveries. Several members of management of the Company have
experience in dealing with such issues and take a leading role in resolving
issues that arise.
The Recapitalization
Accounting Treatment
Stockholders of Holdings who owned approximately 7% of the outstanding
voting shares prior to the effective date of the Recapitalization, owned
approximately 71% of the outstanding voting shares of Holdings immediately
following the Recapitalization. Affiliates of the Initial Purchaser, one of the
Discount Purchasers and a newly appointed director of Holdings owned the
remaining 29% of the voting shares and thus are not controlling shareholders of
either Holdings or the Company. As a result, the transaction did not result in
the establishment of new bases in Holdings' or the Company's assets and
liabilities.
The redemption of shares of Common Stock and Preferred Stock and Common
Stock Purchase Warrants were treated as a recapitalization transaction.
Accordingly, funds disbursed by Holdings and the Company (other than for the
additional compensation described below), were charged against their capital
accounts to the extent permitted by law.
In connection with the Recapitalization and certain related matters the
Company and Holdings paid certain fees and expenses totaling approximately $11.2
million. The fees included the Hartnett Fee, a fee in the amount of
approximately $1 million paid to Ernst & Young LLP for investment banking
services, fees in the amount of $1.75 million and $5.45 million to the Initial
Purchaser and affiliates of the Initial Purchaser in connection with the Senior
Credit Facilities and the issuances of the Notes and the Discount Debentures,
legal and accounting fees, printing fees, rating agency fees, and other fees and
reimbursement of expenses to various parties who provided services in connection
with the Recapitalization. As all such fees and expenses were paid in the first
quarter of fiscal 1998 out of the proceeds of the Recapitalization Indebtedness,
they are not expected to affect the Company's results of operations or liquidity
in the future. See "Certain Relationships and Related Transactions."
33
<PAGE>
Additional Compensation Expense
In connection with the Recapitalization, Holdings redeemed certain Common
Stock Purchase Warrants held by certain members of management of the Company.
Such warrants had been issued to members of management as compensation for
services rendered to the Company in prior periods. In accordance with generally
accepted accounting principles, the redemption of such Warrants by Holdings
resulted in additional compensation expense to the Company of $563,000 (which
was recorded in the first quarter of fiscal 1998), representing the excess of
the fair value of the Common Stock underlying the Common Stock Purchase Warrants
over the exercise price of such Common Stock Purchase Warrants.
Results of Operations
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
----------------------------------------------------------------------------------
April 1, 1995 March 30, 1996 March 29, 1997 Sept. 28, 1996 Sept. 27, 1997
$ % $ % $ % $ % $ %
- - - - - - - - - -
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ............... $ 73.9 100.0% $ 82.2 100.0% $ 93.4 100.0% $ 42.0 100.0% $ 61.0 100.0%
Cost of sales ........... 57.2 77.4 60.1 73.1 64.2 68.7 29.5 70.2 43.2 70.8
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Gross profit ............ 16.7 22.6 22.1 26.9 29.2 31.3 12.5 17.8 29.2
Selling, general and
administrative expense. 9.0 12.2 11.1 13.5 14.5 15.5 6.5 8.7
Other expense, net of
other income........... 1.1 1.5 1.4 1.7 1.5 1.6 0.4 1.0
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Income from operations .. $ 6.6 8.9% $ 9.6 11.7% $ 13.2 14.1% $ 5.6 13.3% $ 8.1 13.3%
</TABLE>
Six Months Ended September 28, 1997 Compared to Six Months Ended
September 27, 1996
Net Sales
Net sales for the six months ended September 27, 1997 were approximately
$61.0 million an increase of $19.0 million or 45.2% over the six months ended
September 28, 1996. The increase included sales totaling approximately $15.1
million from LPP, Nice and Bremen, acquired effective October 1996, February
1997, and July 1997, respectively. Net sales increased approximately $3.9
million or 9.3% without the LPP, Nice and Bremen sales. The primary reason for
this increase was due to continued strong performance particularly in the
aerospace, airframe and construction & mining segments of the Company's
business.
Gross Profit
Gross Profit increased by approximately $5.3 million or 42.4% for the six
months ended September 27, 1997, as compared to the corresponding period in the
prior year, as a result of higher sales volume. Gross profit as a percentage of
net sales decreased by 0.6% from 29.8% for the first six months of fiscal 1997,
to 29.2% for the first six months of fiscal 1998 primarily due to the lower
gross margins realized on sales from LPP, Nice, and Bremen. Gross margins
excluding these acquired companies was 31.0% when compared to the same period
last year.
Selling, General and Administrative
Selling, general and administrative expense increased by approximately
$2.2 million or 33.8% for the six month period ended September 27, 1997 compared
to the corresponding period in the prior year. The increase was
34
<PAGE>
primarily due to infrastructure costs necessary to support the Company's
expanded business as well as the additional expenses related to the three
acquired companies. Selling, General and Administrative Expense as a percentage
of net sales decreased from 15.5% for the first six months of fiscal 1997, to
14.3% for the first six months of fiscal 1998. Other operating expenses
increased by $612,000 primarily due to a change relating to the difference
between redemption price and exercise price ($563,000) of certain options
repurchased by Holdings at the time of the Recapitalization and other charges
net of other income ($49,000).
Income from Operations
Income from operations increased by approximately $2.5 million or 44.6% to
approximately $8.1 million for the six months ended September 27, 1997, as
compared to approximately $5.7 million for the corresponding period in the prior
year. The increase primarily resulted from higher gross margin from higher sales
volume, partially offset by higher Selling General and Administrative Expense
and other operating expenses.
Income Before Taxes and Extraordinary Charges
Income before taxes and extraordinary charges increased for the six month
period ended September 27, 1997 to approximately $3.3 million from approximately
$2.9 million for the corresponding period in the prior year, as a result of
higher operating income less higher interest expense resulting from the debt
incurred in connection with acquisition financing and the Recapitalization.
Net Income
Net income for the six months ended September 27, 1997 reflects a tax
provision of approximately $1.3 million compared to approximately $1.2 million
for the first six months of fiscal 1997, an effective combined Federal and State
effective tax rate of 41% in both years. Income before extraordinary charges
increased by $201,000 to approximately $1.9 million from approximately $1.7
million for the corresponding period in the prior year. However, net income
decreased to approximately $1.3 million from approximately $1.7 million in
fiscal 1997, due to an extraordinary charge relating to the early extinguishment
of debt of approximately $1.1 million less related tax benefit of $434,000
($625,000 net). The early extinguishment of debt related to the
Recapitalization.
Fiscal 1997 Compared to Fiscal 1996
Net Sales
The Company's net sales increased by approximately 13.6%, or $11.2
million, to $93.4 million for fiscal 1997 from $82.2 million for fiscal 1996.
Net sales growth in fiscal 1997 occurred both through internal growth in base
business and through acquisitions. The net sales figure for fiscal 1997 includes
partial year results for LPP, acquired effective October 1996, and Nice,
acquired effective February 1997. These acquisitions contributed approximately
$3.2 million and $2.9 million, respectively, to the Company's fiscal 1997 net
sales. Net sales for the Company without giving effect to such acquisitions
increased by approximately 6.2%, or $5.1 million, to $87.3 million for fiscal
1997 from $82.2 million for fiscal 1996. As the Company instituted only nominal
price increases and did not realize significant growth in net sales due to the
introduction of new products in fiscal 1997, the Company believes that most of
the increase in net sales resulted from increases in volume of products sold.
This increase in net sales of $5.1 million was primarily due to an increase in
aerospace OEM sales of $3.3 million and an increase in aviation distribution
sales of $1.6 million and was offset by $0.8 million relating to the termination
of a private labelling agreement in the industrial OEM market segment.
35
<PAGE>
Gross Profit
Gross profit increased by approximately 32.1%, or $7.1 million, to $29.2
million for fiscal 1997 from $22.1 million for fiscal 1996. Gross margin during
the period increased from 26.9% to 31.3%. Fiscal 1996 gross profit includes the
effect of a write-down of inventory of $1.4 million, taken in connection with
the Company's ongoing process of evaluating its inventory in light of changes in
its customer base, market conditions and sales opportunities. Based upon such
analyses, the Company determined that no additional write-down was required for
fiscal 1997. Excluding this write-down, gross profit as a percentage of net
sales in 1996 would have been 28.6% as compared to 31.3% in 1997. This
improvement of 2.7% is primarily attributed to overhead absorption, increased
sale of custom products and improved pricing and was partially offset by lower
margins relating to the acquisition of LPP and Nice.
Selling, General and Administrative Expense
Selling, general and administrative expense increased by approximately
30.6%, or $3.4 million, to $14.5 million for fiscal 1997 from $11.1 million in
fiscal 1996. Selling, general and administrative expense as a percentage of net
sales increased from approximately 13.5% in fiscal 1996 to approximately 15.5%
in fiscal 1997. Fiscal 1996 selling, general and administrative expense reflects
an adjustment of $1.2 million relating to a reduction in other post-employment
benefits ("OPEB") liability. This $1.2 million adjustment represents a reduction
of reserves previously established in fiscal 1994 related to the Company's West
Trenton facility. The reserves were originally established to cover severance
benefits related to personnel reductions caused primarily by a downturn in the
Company's aerospace business at this facility. Improvements in this sector of
the Company's business and a shift in certain operations resulted in rehirings
of personnel, which in turn, reduced the post employment liability previously
accrued. Excluding this adjustment, selling, general and administrative expense
in fiscal 1996 would have been $12.3 million, or approximately 15.0% of net
sales, as compared to 15.5% in fiscal 1997. The increase of 0.5% was primarily
attributable to an increase in selling expenditures to support geographic
expansion and increased corporate expenses to support the growing organizational
infrastructure.
Income from Operations
Income from operations increased by approximately 37.5%, or $3.6 million,
to $13.2 million for fiscal 1997 from $9.6 million for fiscal 1996. The increase
in income from operations was attributable to the same factors that contributed
to the increased gross profit less the increased selling, general and
administrative expense. Income from operations increased to 14.2% of net sales
for fiscal 1997 from 11.7% for fiscal 1996. Operating earnings were reduced by a
one-time non-recurring estimated charge of $0.5 million related to the
termination of the West Trenton pension fund made and accrued for in fiscal
1997. Similarly, fiscal 1996 income from operations reflects a charge for
environmental expenditures of $0.4 million.
The charge for environmental expenditures resulted from costs incurred in
connection with the settlement by the Company of its liability relating to the
release of certain pollutants from the Company's West Trenton facility. The
Company entered into a stipulated settlement with the New Jersey Attorney
General which called for the payment by the Company of a $150,000 civil penalty
to the State of New Jersey and for the Company to make an additional donation of
$50,000 to a local conservation group. Additionally, the Company expended
approximately $225,000 in legal fees relating to the release and settlement. See
"Business--Environmental Matters."
36
<PAGE>
Fiscal 1996 Compared to Fiscal 1995
Net Sales
The Company's net sales increased by approximately 11.2%, or $8.3 million,
to $82.2 million for fiscal 1996 from $73.9 million for fiscal 1995. As the
Company instituted only nominal price increases and did not realize significant
growth in net sales due to the introduction of new products in fiscal 1996, the
Company believes that most of the increase in net sales resulted from increases
in volume of products sold. This increase in net sales was primarily due to a
$3.5 million increase in aerospace sales and a $3.3 million increase in
industrial sales.
Gross Profit
Gross profit increased by approximately 32.3%, or $5.4 million, to $22.1
million for fiscal 1996 from $16.7 million for fiscal 1995. Gross profit as a
percentage of net sales during the period increased from 22.6% to 26.9%. The
$5.4 million improvement reflected a decrease of $1.7 million in preproduction
costs and a decrease of $1.2 million in inventory write-offs from the write-down
of $2.6 million in fiscal 1995. The inventory write-downs were made in
connection with the Company's ongoing process of evaluating its inventory in
light of changes in its customer base, market conditions and sales
opportunities. The additional $2.5 million improvement was primarily the result
of the increased level of net sales in fiscal 1996.
Selling, General and Administrative Expense
Selling, general and administrative expense increased by approximately
23.3%, or $2.1 million, to $11.1 million for fiscal 1996 from $9.0 million in
fiscal 1995. Selling, general and administrative expense as a percentage of net
sales increased from approximately 12.2% in fiscal 1995 to approximately 13.5%
in fiscal 1996. Fiscal 1996 selling, general and administrative expense reflects
a $1.2 million adjustment relating to a reduction in OPEB liability. This $1.2
million adjustment represents a reduction of reserves previously established in
fiscal 1994 related to the Company's West Trenton facility. The reserves were
originally established to cover severance benefits related to personnel
reductions caused primarily by a downturn in the Company's aerospace business at
this facility. Improvements in this sector of the Company's business and a shift
in certain operations resulted in rehirings of personnel, which in turn, reduced
the post employment liability previously accrued. Excluding such adjustment,
selling, general and administrative expense as a percentage of sales would have
been 15.0% in fiscal 1996, as compared to 12.2% in fiscal 1995. The increase of
2.8% was primarily attributable to increased corporate expenses to support the
growing organizational infrastructure, including an increased number of field
sales representatives, expanded product management and upgrades in management
information systems.
Income from Operations
Income from operations increased by approximately 45.5%, or $3.0 million,
to $9.6 million for fiscal 1996 from $6.6 million for fiscal 1995. Income from
operations increased to 11.7% of net sales for fiscal 1996 from 8.9% for fiscal
1995. The increase in income from operations was attributable to the same
factors that contributed to increased gross profit less increased selling,
general and administrative expense. Fiscal 1996 income from operations reflect a
charge for environmental expenditures of $0.4 million.
37
<PAGE>
Liquidity and Capital Resources
Six Months Ended September 27, 1997 Compared to Six Months Ended
September 28, 1996
Working capital at September 27, 1997 was approximately $46.1 million
compared to approximately $37.6 million at March 29, 1997, an increase of
approximately $8.5 million. For the six months ended September 27, 1997, the
Company provided approximately $7.2 million of cash from operating activities.
Cash used for capital expenditures for the six months ended September 27,
1997 was approximately $2.8 million as compared to approximately $4.2 million
for the corresponding period in the prior year.
The Company had net cash inflows from financing activities of
approximately $8.6 million , primarily due to the Recapitalization. In
connection with the Recapitalization, the Company received gross proceeds of
$110.0 million from the sale of the Notes and $16.0 million under the Term
Loans. The Company utilized these funds to pay off the balance of the Company's
Existing Revolving Credit Facility of $24.6 million, and its then Existing Term
Loan of $27.5 million. The Company has also used funds of $250,000 for principal
payments on the Term Loans. In addition, the Company has paid a dividend to
Holdings, aggregating approximately $56.2 million; used by Holdings for the
redemption of its common stock in the amount of $17.6 million, its preferred
stock in the amount of $37.0 million, and warrants to purchase its common stock
for approximately $823,000; and approximately $778,000 for professional fees
paid by Holdings. Finally, the Company paid approximately $8.2 million in fees
related to the Recapitalization, which have been capitalized as deferred
financing costs and are being amortized over the term of the Notes and Term
Loans. During the six month period ended September 27, 1997, the Company used
$692,000 of funds for capital lease obligations.
Fiscal 1997 Compared to Fiscal 1996
Net cash provided by operating activities was $12.7 million for fiscal
1997 compared to $1.4 million for fiscal 1996. The increase of $11.3 million was
primarily attributable to an increase in income from operations and improvements
in net cash from working capital.
Net cash used in investing activities was $17.7 million for fiscal 1997
compared to $4.6 million for fiscal 1996. The increase was primarily
attributable to cash used in the acquisitions of LPP and Nice and the purchase
of the Heim facility which was previously leased by the Company.
Net cash provided by financing activities for fiscal 1997 was $5.5 million
compared to $3.6 million for 1996. The net increase was primarily related to
borrowings under the revolving credit facility with Heller Financial, Inc. which
was terminated in connection with the Recapitalization in connection with the
above mentioned acquisitions.
Fiscal 1996 Compared to Fiscal 1995
Net cash provided by operating activities was $1.4 million for fiscal 1996
compared to $(1.0) million used in operating activities for fiscal 1995. The
increase of $2.4 million was primarily attributable to an increase in income
from operations.
Net cash used in investing activities was $4.6 million for fiscal 1996
compared to $7.3 million for fiscal 1995. The difference was primarily due to
the reduced purchase of restricted marketable securities in 1996 relating to the
IRBs, offset by higher capital expenditures.
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Financing activities reflected proceeds from a new financing arrangement
and sale of Preferred Stock by Holdings, the proceeds of which were contributed
to the capital of the Company, used to redeem existing bank debt and other
obligations. In fiscal 1995, the primary source of financing was the proceeds
from the IRBs.
Liquidity
The Company's liquidity needs arise primarily from debt service on the
Recapitalization Indebtedness and for acquisitions. As of September 27, 1997,
the Company had outstanding approximately $125.8 million of indebtedness,
primarily consisting of $110.0 million principal amount of the Notes and the
Term Loans of $15.8 million. Additionally, the Company had the ability to borrow
up to $54.0 million under the Revolving Credit Facility of which $10.9 million
was utilized for the issuance of letters of credit securing the Company's
obligations relating to the IRBs. See "Risk Factors-Substantial Leverage;
Ability to Service Debt."
Principal and interest payments under the Senior Credit Facilities,
interest payments on the Notes, and the funding of acquisitions, represent
significant liquidity requirements for the Company. With respect to the Term
Loans, the Company is required to make scheduled principal payments commencing
in September 1997. The Term Loans bear interest at a floating rate based upon
the interest rate option elected by the Company. See "Description of Certain
Indebtedness." As a result of the indebtedness to be incurred in connection with
the Recapitalization, the Company's post-Recapitalization interest expense will
be higher and will have a greater proportionate impact on net income in
comparison to pre-Recapitalization periods.
The Company's historical capital expenditures since 1995 have in
substantial part resulted from implementing its manufacturing and marketing
strategy to improve operating efficiency. The Company's capital expenditures
were $2.9 million, $4.9 million and $5.8 million for the fiscal years ended
April 2, 1995, March 30, 1996 and March 29, 1997, respectively and $2.8 million
and $4.2 million for the six-month periods ended September 27, 1997 and
September 28, 1996, respectively. Capital expenditures are expected to be $7.0
million for the fiscal year ended March 28, 1998 which are expected to be
utilized for acquisition of equipment and upgrade and maintenance of facilities.
Additional expenditures may be made in connection with acquisitions.
The Company believes that cash flows from operations and amounts available
under the Revolving Credit Facility will provide adequate funds for ongoing
operations, planned capital expenditures and debt service payments for the
foreseeable future. The Company's ability to borrow is limited by the terms of
the Senior Credit Facilities and the Indenture. The Company is restricted in its
borrowings under the Senior Credit Facilities by its obligation to comply with
the financial ratios contained therein (consisting of leverage, fixed charge
coverage and interest coverage ratios) and the other covenants contained
therein. The ability of the Company to borrow outside of the Senior Credit
Facilities is strictly limited by the covenants contained therein, including
covenants restricting the incurrence of indebtedness, the ability of the Company
to enter into sale and leaseback transactions, the ability of the Company and
its subsidiaries to issue additional capital stock and the ability of the
Company to dispose of assets. The Senior Credit Facilities also limit the
ability of the Company to pay dividends to Holdings and to make capital
expenditures above a certain threshold amount.
The Indenture, among other things, (i) prohibits the Company from (x)
incurring indebtedness other than indebtedness in connection with the Notes and
the Senior Credit Facilities if its Consolidated Coverage Ratio does not meet
certain standards, and (y) making Restricted Payments (as defined herein),
including the payment of dividends to Holdings and redemptions of capital stock
of the Company, (ii)
39
<PAGE>
limits the ability of the Company to sell certain assets and stock in its
subsidiaries, and (iii) limits the Company's ability to enter into certain
transactions with its affiliates.
The foregoing restrictions limit the ability of the Company to locate
alternative sources of liquidity. The Company believes that these restrictions
will not adversely impact its continuing operations or liquidity in the
foreseeable future. See "Risk Factors-Restrictions Imposed by Debt Instruments,"
"Description of Certain Indebtedness-Senior Credit Facilities" and "Description
of the Notes."
40
<PAGE>
BUSINESS
General
The Company is a manufacturer and distributor of highly engineered
precision roller, ball and plain bearings in the United States with, the Company
believes, a leading position in many of the markets in which it competes.
Bearings, which are integral to the manufacture and operation of most machines
and mechanical systems, reduce wear to moving parts, facilitate proper power
transmission and reduce damage and energy loss caused by friction. Many of the
Company's products are custom designed or highly engineered for specific
applications to meet demanding specifications. While the Company manufactures
products in all major bearing categories, the Company focuses primarily on
highly technical or regulated bearing products for niche markets. For the fiscal
year ended March 29, 1997, the Company had pro forma net sales of $111.3
million. The Company's net sales have grown at a compound annual growth rate
("CAGR") of approximately 20%, from fiscal 1993 to fiscal 1997 (pro forma for
acquisitions).
The United States market for bearings was estimated by the United
States Department of Commerce (the "Commerce Department") to be approximately
$5.3 billion in 1996, and, according to the Commerce Department, the United
States represents approximately 30% of the worldwide market for bearings. The
Company targets the higher end market segment of the domestic bearing market
where it believes its value added manufacturing and engineering capabilities
enable it to differentiate itself from its competitors and to enhance
profitability. The Company believes that it is the leading supplier to many of
its targeted markets and maintains secondary positions in other product niches
where it believes market share gains can be achieved. In fiscal 1997, the
Company had sales to more than 1,200 customers with no single customer amounting
to more than 9.7% of net sales. The Company believes its rapid turnaround on
orders, custom designed engineering and strict adherence to quality and
reliability provide it with significant competitive advantages. The Company's
key customers include Caterpillar, John Deere, Boeing, Pratt & Whitney, General
Electric, Bell Helicopter and Motion Industries.
The Company sells primarily to domestic OEMs and distributors in three
markets: industrial, aerospace and government. Many of the Company's product
offerings are in market segments (market sizes between $30 million and $150
million) which require high service levels, extensive technical engineering
support, short lead times and small production runs. Generally, such market
segments are not as price sensitive as other market segments of the bearing
market. In combination with the Company's efficient production processes,
targeting such market segments has allowed the Company to achieve higher
margins. Additionally, in an effort to generate more stable revenues, the
Company has increased sales to the replacement market. Management estimates that
currently over 60% of the Company's products are sold directly or indirectly for
use in the replacement market.
Approximately 61% of the Company's fiscal 1997 net sales were to the
industrial market segment. The Company believes opportunities exist to increase
sales in this market segment as a result of (i) increasing demand for industrial
machinery in both the domestic and international markets, which is expected to
expand existing OEM selling opportunities, (ii) growth in aftermarket demand as
the installed base continues to expand and (iii) the increased emphasis being
placed on maintenance and repair of capital goods given the increasing cost of
such items.
Approximately 33% of the Company's fiscal 1997 net sales were to the
aerospace market segment for applications in commercial and military aviation.
According to Boeing, worldwide air travel is expected to grow 75% between 1996
and 2006 and the world commercial aircraft fleet is expected to double by 2016.
The Company provides bearings for virtually every model of commercial aircraft
in production, as well as many military applications, and its customers include
all major aerospace
41
<PAGE>
manufacturers. Sales to the aerospace market segment have been increasing as a
percentage of total sales, a trend which the Company expects will continue.
Approximately 6% of the Company's fiscal 1997 net sales were to the
government market segment. The Company expects sales to this segment to remain
stable in the foreseeable future due to (i) increased emphasis on repair and
maintenance of existing military platforms, (ii) sole source supplier
relationships and replacement part sales for existing programs and (iii) long
product lives of existing programs, which should ensure steady sales relating to
such programs for several years.
The Company believes there will continue to be many consolidation
opportunities within the bearing industry. Since 1992, the Company has acquired
TDC, a manufacturer of plain bearings, Heim, a leading producer of rod end and
ball bearings, LPP, a pioneer in grinding techniques for precision ball screws,
Nice, the oldest active brand name in the domestic bearing industry and Bremen,
a manufacturer of needle bearings. Following an acquisition, management
typically rationalizes operations, reduces overhead costs, develops additional
cross-selling opportunities and establishes new customer relationships.
Management believes that the Company is well positioned to achieve
continued growth and market share gains through (i) increasing sales to the
aftermarket, (ii) continuing its focus on high margin niche market segments
where the Company believes it has a sustainable competitive advantage, (iii)
penetrating new markets with innovative products, (iv) expanding international
OEM and distributor sales and (v) acquiring bearing manufacturers which have
complementary products or similar distribution channels or provide significant
potential for margin enhancement.
Competitive Strengths
The Company believes that it has the following competitive strengths:
o Strong Management Team-The Company's management team possesses
extensive managerial experience in the bearing industry, with its
top six operating executives having an average of over 20 years of
bearing industry experience.
o Design and Manufacturing Capabilities-The Company has manufactured
over 20,000 items, many of which have received OEM, military or
FAA/PMA product approvals. Additionally, the Company has
demonstrated consistent and timely delivery performance with, it
believes, shorter lead times than its direct competitors,
particularly in the aerospace market.
o Sole Supplier/Long-Term Customer Relationships-Many of the Company's
customers have been doing business with the Company for decades. The
Company believes that its customers continue to seek long-term
partnerships with a small number of core suppliers. The Company's
customer relationships are strengthened by the fact that it works
jointly with many of its customers at the design stage in the
development of new products.
o Focus on Niche Markets-The Company believes that its reputation and
strategic focus on niche segments of the bearing market, which
require high service levels, extensive technical engineering
support, short lead times and small production runs, provide it with
a competitive advantage over its larger competitors who, the Company
believes, are often less focused on smaller sales volume
opportunities and generally provide lower levels of technical
support to these niche market segments.
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o Proprietary Manufacturing Processes-The Company sells products to
the aerospace, industrial and government markets which products
typically require sophisticated engineering and production
techniques. The Company believes that its proprietary manufacturing
processes enable it to attract and retain customers who require its
products.
o Low Cost Operations-The Company believes that its vertically
integrated manufacturing capabilities have allowed it to become a
low cost manufacturer of products within the niche markets it
services. By controlling its manufacturing processes, the Company
has been able to reduce scrap and increase yields of its products.
Furthermore, the Company continually develops proprietary technology
to increase efficiency and enhance economies of scale to further
reduce costs.
o Commitment to Quality and Service-The Company believes that its
commitment to provide consistent, high quality products and service,
flexible manufacturing and custom designed products at competitive
prices form the basis for its strong and diversified customer
relationships.
Business Strategy
The Company has developed a business strategy that focuses on maximizing
profitability while growing, both internally and through acquisitions.
Maximizing Profitability-The Company attempts to maximize profitability
through the implementation of its operating strategy. With respect to higher
volume products, the Company emphasizes the production process and related
efficiency programs designed to improve overall profitability and incorporates
its strategy on both a facility and a product basis. Under its operating
strategy, the Company determines the achievable market prices and volume levels
for a specific product line. Once these are determined, the Company develops a
manufacturing process that, assuming such volume and price levels, will result
in a targeted gross profit margin. Only product lines where the Company believes
that the developed manufacturing process will yield the targeted margins are
manufactured. Management monitors gross margins of all product lines on a
monthly basis to determine which manufacturing processes should be adjusted.
Additionally, the Company's non-standard custom designed products are typically
not as price sensitive.
Expanding Geographic Presence-The Company seeks to expand into geographic
regions not currently served and to exploit new markets and industries for
existing and new products. Recently, the Company increased its sales efforts in
Seattle, Dallas, Chicago and Detroit and believes that, with this increased
field coverage and further geographic expansion in major domestic industrial
geographic regions, including St. Louis, Houston and Kansas City, there is
potential to substantially increase sales of existing product lines. In
addition, the Company is increasing its focus on international sales.
Leveraging Customer Relationships-The Company works closely with many of
its OEM customers to jointly develop and design new products and to improve the
performance of existing products. The Company shares product development and
enters into sole source supply contracts and teaming arrangements with many key
customers, which strengthens and broadens its relationships. The Company
believes that this strategy, together with successful performance under existing
contracts, leads to additional long-term business from key customers.
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Increasing Focus on the Aftermarket-The Company seeks to continue to
increase its sales to key aerospace and industrial distributors. The Company
believes that this strategy helps to generate more stable revenues. In addition,
the Company is generally able to realize higher margins on aftermarket sales.
Management estimates that currently over 60% of the Company's products are sold
directly or indirectly for use in the replacement market.
Pursuing Selective Acquisitions-The Company has demonstrated expertise in
acquiring niche bearing and precision-engineered component manufacturers which
have complementary products or similar distribution channels or provide
significant potential for margin enhancement. The Company has historically
acquired complementary bearing companies and integrated them effectively into
its existing operations. From fiscal 1992 through fiscal 1997, the Company
consummated four acquisitions. After the end of fiscal 1997, the Company
completed the purchase of Bremen. Such acquisitions, together with internal
growth, have resulted in increased net sales from $53.8 million in fiscal 1993
to $111.3 million on a pro forma basis in fiscal 1997. The Company intends to
pursue selective acquisitions and to add products and capabilities that are
complementary to its existing operations. The Company believes that there will
continue to be consolidation opportunities within the bearing industry.
Introducing New Product Lines-By focusing on niche products within the
highly engineered bearing market, the Company believes that it can compete
profitably and achieve attractive margins. This product focus leads the Company
to the development of proprietary designs, technology and relationships with
customers that in turn create future sales opportunities. A number of these
products require either OEM, military or FAA/PMA approvals, which provide a
barrier to entry to other bearing manufacturers. Furthermore, the Company
believes that as a result of some of its recent acquisitions, significant
cross-selling opportunities exist to expand its existing product offerings to
new customers or to provide new product lines to existing customers.
Additionally, the Company periodically enters into arrangements with other
bearing manufacturers, whereby the Company sells bearings to such manufacturers
for resale under their brand names.
Acquisition History
In July 1991, the Company's current Chairman, President and Chief
Executive Officer, Dr. Hartnett, teamed up with affiliates of Aurora to
implement a plan to acquire a series of small to medium size domestic companies
in the roller and ball bearing industry. In March 1992, the Company's capital
stock was acquired for $52 million by RBC Acquisition Company, which was
subsequently merged into the Company and the Company became a wholly-owned
subsidiary of Holdings. Since 1992, the Company has acquired TDC, a manufacturer
of plain bearings, for $5.8 million, Heim, a leading producer of rod end and
ball bearings, for $6.8 million, LPP, a pioneer in grinding techniques for
precision ball bearing screws, for $5.5 million, Nice, the oldest active brand
name in the domestic bearing industry, for $7.5 million and Bremen, a
manufacturer of needle bearings.
The Company has historically acquired complementary bearing companies and
integrated them effectively into its existing operations. Following an
acquisition, management typically rationalizes operations, reduces overhead
costs, develops additional cross-selling opportunities and establishes new
customer relationships. As a result of its integration efforts and internal
growth spurred by an effective marketing strategy, the Company's sales have
increased from $53.8 million in fiscal year 1993 to $111.3 million on a pro
forma basis for fiscal 1997.
The Company believes that there will continue to be consolidation
opportunities within the bearing industry. The Company is currently in
discussion with several companies, and recently consummated the
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purchase of Bremen for approximately $5.3 million, of which $3.6 million was
paid at closing. The purchase price was financed by borrowings under the Terms
Loans. See "Prospectus Summary-Recent Developments", "Risk Factors-Ability to
Implement Acquisition Strategy and Ability to Manage Growth." Priority will be
given to acquiring bearing companies with sales in the $15 million to $25
million range. Additionally, the Company will seek smaller "fold-in"
acquisitions (businesses whose products can be manufactured at the Company's
existing facilities).
Industry
Bearings are integral to the manufacture and operation of machines and
mechanical systems. Bearings serve to reduce the wear to moving parts, ensure
proper power transmission and reduce damage and energy loss caused by friction.
Demand for bearings generally follows the market for products in which bearings
are incorporated and the general economy as a whole. Purchasers of bearings
include (i) automotive manufacturers, (ii) industrial equipment and machinery
manufacturers, (iii) producers of commercial and military aerospace equipment,
(iv) agricultural machinery manufacturers and (v) construction and specialized
equipment manufacturers. The Company estimates that approximately one-third of
all bearings manufactured are for use in the automobile industry, a market in
which the Company does not currently compete.
The United States market for bearings was estimated by the Commerce
Department to be approximately $5.3 billion in 1996, and, according to the
Commerce Department, the United States represents approximately 30% of the
worldwide market for bearings. The domestic bearing industry grew at a CAGR of
7.4% between 1992 and 1996. The domestic bearing market is comprised of three
primary product categories: ball bearings (approximately $1.7 billion), roller
bearings (approximately $2.27 billion) and plain bearings (approximately $0.5
billion).
Ball bearings are used for high speed applications; roller bearings for
lower speed, heavily loaded applications; and plain bearings for sliding action
and misalignment applications.
The domestic market for standard bearings is dominated by three major
international competitors who, according to Frost & Sullivan, control 55% of the
total market (The Timken Company ("Timken"), Torrington Company ("Torrington")
and SKF. The balance of the domestic market, consisting primarily of specialty
and custom engineered bearings, is more fragmented. Due to the shorter
production runs and significant post-sale technical support associated with
these products, the Company believes they are not the primary focus of the
larger bearing manufacturers. A group of smaller companies (including the
Company) frequently establish leading positions, in market share and reputation,
in certain of these niche product lines. Furthermore, competition in these niche
markets is based on lead times and reliability of product and service, and these
markets are generally not as price sensitive as the markets for standard
bearings.
Customers and Markets
The Company supplies bearings to OEMs and distributors in the industrial,
aerospace and government markets. The industrial OEM market segment continues to
be the largest market segment for the Company, accounting for 42% of the
Company's fiscal 1997 net sales. While the Company's sales in its target markets
have historically been concentrated on OEMs, the Company has recently shifted
its focus in the aerospace and industrial market segments towards replacement
part sales. The Company believes this generates more stable revenues. The
Company's top ten customers comprised 40.2% of the Company's fiscal 1997 net
sales and no single customer comprised more than 9.7% of net sales. Five of the
Company's top ten customers are distributors and the remaining five are OEMs.
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The following table summarizes the Company's sales to its three market
segments:
<TABLE>
<CAPTION>
============================================================================================================
Industrial Aerospace Government
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Applications: Heavy equipment Helicopters (CH46,CH47), Helicopters (CH46, CH47,
Mining equipment Airplanes (737, 747, 757, 767, Blackhawk)
Machine tools 777, DC10, MD80, MD90) Airplanes (C2130, F14, F15,
Agricultural equipment Aircraft engines (PW4000, F16, F18, F117
Pumps CFM56, V2500) Armored vehicles (M60,
M117)
- ------------------------------------------------------------------------------------------------------------
Customers: OEMs: OEMs: U.S. Army
Caterpillar Boeing U.S. Navy
John Deere Lockheed Martin U.S. Air Force
Euclid Hitachi Bell Helicopter U.S. Marine Corps
General Electric Foreign Military Sales
Pratt & Whitney
Distributors: Distributors:
Motion Industries Aerospace Bearing Support
Applied Industrial Dixie Aerospace Bearings
Technologies WS Wilson
Kaman
- ------------------------------------------------------------------------------------------------------------
Percentage of fiscal OEMs: 42% OEMs: 23% 6%
1997 net sales: Distributors: 19% Distributors: 10%
============================================================================================================
</TABLE>
Industrial
Industrial bearings are used in a wide range of industries such as heavy
equipment, machine tools, agricultural equipment, pumps and packaging. Nearly
all mechanical devices and machinery require bearings to relieve friction where
one part moves relative to another. The Company's products target existing
market applications in which the Company's engineering and manufacturing
capabilities provide it with a competitive advantage in the marketplace.
The Company manufactures a wide range of roller, ball and plain bearings
for industrial uses. See "-Products." Sales to the industrial market segment
accounted for 61% of the Company's fiscal 1997 net sales. Approximately 69% of
such sales were to OEMs while 31% were to distributors. Within the industrial
market, the Company sells to the construction and mining equipment, material
handling, machine tools and energy and natural resources market segments. The
Company believes that the diversification of its sales among the various market
segments of the industrial bearings market reduces its exposure to downturns in
any individual market segment.
Aerospace
Bearings are used in numerous applications in all manner of airplanes,
helicopters and aircraft engines. The aerospace market segment utilizes
spherical plain bearings, rod ends, journal bearings and thin section ball
bearings. Bearings are regularly replaced on aircraft in conjunction with
routine
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maintenance procedures and include such items as high precision ball and roller
bearings and metal-to-metal and self-lubricating plain bearings. Commercial
aerospace customers generally require precision products, often of special
materials, made to unique designs and specifications.
The Company's penetration of the commercial aerospace market segment
expanded through the acquisitions of TDC and Heim. Sales to the aerospace market
segment accounted for 33% of the Company's fiscal 1997 net sales. Of this total,
70% reflected sales to OEMs and the remaining 30% were to distributors.
Management estimates that over 75% of commercial aerospace net sales are
actually used as replacement parts since a portion of OEM sales also are
ultimately intended for replacement market use. Sales of products for use in the
aftermarket helped the Company's sales over the past five years despite the
depressed levels of new aircraft construction. The Company supplies bearings for
commercial aircraft, commercial aircraft engines and for private aircraft
manufacturers as well as to various military contractors for airplanes,
helicopters and missile systems.
Essential to servicing the aerospace market is the ability to obtain
product approvals. See "Risk Factors-Dependence on Key Customers; Government
Regulation; OEM Approvals; Defense Industry Consolidation." The Company has in
excess of 20,000 product approvals, which enable it to provide products used in
virtually all domestic aircraft platforms presently in production or operation.
Product approvals are typically issued by FAA designated OEMs who are Production
Approval Holders ("PAHs") of FAA approved aircraft. These PAHs provide quality
control oversight and generally limit the number of suppliers directly servicing
the commercial aerospace aftermarket. Recent regulatory changes enacted by the
FAA provide for an independent process (the PMA process), which enables
suppliers who currently sell their products to the PAH, to sell products to the
aftermarket. The Company has submitted over 5,800 PMA applications and has
received over 600 approvals to date.
Government
The Company manufactures high precision ball and roller bearings,
commercial ball bearings and metal to metal and self-lubricating plain bearings
for all branches of the United States military and for sales to certain foreign
military forces. In addition to products that meet military specifications,
these customers often require precision products made of specialized materials
to custom designs and specifications. The Company manufactures an extensive line
of standard products that conform to many domestic military application
requirements, as well as customized products designed for unique applications.
Product approval for use on military equipment is often a lengthy process
ranging from six months to three years, and represents a significant barrier to
new entrants.
Government sales accounted for 6% of the Company's fiscal 1997 net sales,
consisting primarily of replacement bearings on programs for which the Company
is the sole source supplier. Despite cutbacks in the overall defense budget
during the 1990s, appropriations for maintenance and repairs for product
platforms serviced by the Company have remained stable. Military programs for
which the Company supplies component products include airplanes, helicopters,
turbine engines and armored vehicles.
While a significant portion of the Company's sales are either directly or
indirectly to the government or related to military or other government
projects, no significant portion of such sales are subject to renegotiation of
profits or termination of contracts at the election of the government.
Products
The Company's product offerings can be divided into four broad categories:
plain bearings, roller bearings, ball bearings and linear precision products,
each of which includes both standard and highly
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<PAGE>
specialized and customized products. Within the four major categories that
encompass the Company's product offerings, its major bearing products include
heavy duty needle roller bearings, cam follower bearings, metal-to-metal and
self-lubricating rod ends and spherical bearings, high precision ball and roller
bearings and semi-precision unground ball bearings. Bearings are employed to
fulfill several functions including reduction of friction, transfer of motion
and carriage of loads.
The Company seeks to provide a broad array of new products designed to
meet the evolving needs of its customers. The Company focuses on market niches
in which it believes it can be a low cost producer. The Company often
manufactures custom-engineered bearings from designs or application descriptions
provided by its customers. Custom-engineered bearings are frequently designed
and specially treated to withstand high loads, corrosion and other extreme
environments. The Company's products feature a broad variety of enhancements
that have resulted in longer product life and increased load support at reduced
costs.
The Company has entered into agreements with other bearing manufacturers
which provide those manufacturers with products which round out their offerings
and ultimately increase the Company's market share of these products. The
Company will continue to actively pursue the establishment of new agreements and
the expansion of existing "private branding" agreements.
Plain Bearings
Plain bearings accounted for approximately 50.5% of the Company's fiscal
1997 net sales. In general, plain bearings are produced with either
self-lubricating or metal-to-metal designs and consist of several sub-classes,
including rod end bearings, spherical plain bearings and journal bearings.
Unlike ball bearings, which are used in high speed rotational applications,
plain bearings are primarily used to rectify inevitable misalignments in various
mechanical components. Such misalignments are either due to machining
inaccuracies or result when components change position relative to each other.
Spherical plain bearings, are designed for heavy equipment applications.
Spherical plain bearings and rod end bearings are used in the aerospace market
segment in the same applications as airframe control ball bearings. Heim and TDC
also produce teflon fabric lined sleeves for the aerospace market segment.
Roller Bearings
Roller bearings are anti-friction bearings that use rollers instead of
balls. The Company manufactures three basic types of roller bearings: heavy duty
needle roller bearings and inner rings, cam followers and mast guides and
aircraft roller bearings. The sale of roller bearings accounted for 29.0% of the
Company's fiscal 1997 net sales. The Company offers several heavy duty needle
roller bearing designs that are used in various industrial applications and in
certain U.S. military aircraft platforms. Cam followers and mast guides have
widespread use in heavy industrial machinery applications. The Company is a
leading producer of roller bearings for use in helicopters.
The Company offers several heavy duty needle roller bearing designs that
are used in various industrial applications and in certain U.S. military
aircraft platforms. The Company is the sole source supplier of rotor head
bearings for certain military helicopter platforms. Given the long product lives
of these programs and the increased emphasis which is being placed on repair and
maintenance versus the purchase of new airframes, the Company believes that,
with the number of airframes currently in operation, this market segment will be
stable for the foreseeable future.
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Ball Bearings
The Company manufactures four basic types of ball bearings: high precision
aerospace, airframe control, thin section and commercial ball bearings. Ball
bearings accounted for 17.3% of the Company's fiscal 1997 net sales. High
precision aerospace bearings are primarily sold to customers in government or
the defense industry that require more technically sophisticated bearing
products providing higher degrees of fault tolerance given the criticality of
the applications in which they are used. Airframe control ball bearings are
precision ball bearings that are plated to resist corrosion and are qualified
under a military specification. Thin section ball bearings are specialized
bearings which use extremely thin cross sections and give specialized machinery
manufacturers many advantages. The Company is also involved in two niche market
segments: unground ball bearings and specialty inch and metric ball bearings.
Linear Precision Products
LPP produces precision ground ball bearing screws that offer repeatable
accuracy in machine tools, transfer lines, robotic handling and semiconductor
equipment. Linear precision products contributed approximately $3.2 million to
the Company's fiscal 1997 net sales during the five months since LPP was
acquired. LPP's products are primarily used in the machine tool industry where
the Company believes significant opportunities to cross-sell the Company's other
products exists. LPP also serves many new, replacement and repair markets
through an agreement with Warner Electric, a division of Dana Corporation.
New Products
The Company aggressively develops and acquires new products and determines
new applications for existing products. Some of the Company's recent new product
introductions in the industrial market segment include: the RBC Roller(R),
introduced in November 1988 and expected to improve bearing life by more than
400% over a needle bearing cam follower and can be used in maintenance free
applications; the RBC self-lubricated, fibriloid lined spherical plain bearing,
designed to meet an increasing demand for products that are not lubricated and
totally maintenance free; the NBC heavy duty needle roller bearing series,
introduced in 1995, of which the Company is already shipping over $400,000
annually to commercial customers; a commercial thin section ball bearing, which
the Company developed by capitalizing on ITB's expertise in the aerospace
industry and adapted for industrial use; and the Spherco self-lubricated
fiberglide rod end, a maintenance-free rod end with reduced radial play.
In the aerospace and defense markets, the Company's new products include
the ITB swashplate thin section ball bearings, and Heim ball bearing rod ends.
The Company is also concurrently working with Boeing to develop weight saving
products. The Company has submitted samples and test data to the Department of
the Navy for military approval, which is required for the sale of the Company's
aircraft cam follower product line to the aerospace industry.
Bearing Refurbishment Program
ITB is developing a bearing refurbishment center which commenced
operations in April 1997. Management estimates this to be a $100 million market
which historically has not been well served. The Company believes that, as an
OEM manufacturer of bearing components, it is well positioned to service this
industry. With new bearing lead times for some products that will be served by
this facility in excess of 430 days, the Company believes bearing refurbishment
will continue to be a growing market segment. As material costs are minimal and
most primary machining and grinding operations are not required to
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operate in this market, the opportunity exists for higher margins. The Company
does not expect this program to have a material impact upon its results of
operations or liquidity for the immediate future.
Manufacturing and Operations
The Company's production processes are designed to reduce costs and
improve overall profitability. Using its operating strategy, the Company
endeavors to design its manufacturing process so that machine and labor
utilization are optimized and total costs are reduced. Cost savings are
generated through effective management of monthly product line profit and loss.
On a monthly basis, gross margins of every product line within each product
group are reviewed. The Company monitors the progress of its efficiency efforts
on an ongoing basis, both monthly and quarterly, and reacts quickly to resolve
problems or exploit unanticipated opportunities.
Custom products are sold at a premium to direct manufacturing costs based
on factors such as lot size and availability. Management believes it has a
thorough understanding of the products and customers in the markets it serves,
allowing the Company to utilize aggressive and competitive pricing practices.
Capacity
The Company's plants currently run on a single shift and a light second
shift at selected locations to meet the demands of its customers. Management
believes that current capacity levels, with annual capital expenditures equal to
approximately 5% of sales in turning and grinding equipment in the future, will
permit the Company to effectively meet demand levels through at least 2002.
Management also believes that as it continues to invest in bearing
professionals, the ability to increase capacity and move to full second shifts,
if required, could be accomplished without compromising product quality or
involving significant additional capital expenditure.
Inventory Management
The Company's increasing emphasis on the distributor/aftermarket has
required it to maintain greater inventories of a broader range of products than
the OEM market historically demanded. As a result, the Company has implemented
an inventory management program designed to balance customer delivery
requirements with economically optimal inventory levels. In this program, each
product is categorized based on characteristics including order frequency,
number of customers and sales volume. Using this classification system,
management's primary goal is to maintain a sufficient supply of standard items
while minimizing warehousing costs. In addition, production cost savings are
achieved by optimizing plant scheduling around inventory levels and customer
delivery requirements. This leads to more efficient utilization of manufacturing
facilities and minimized plant production changes while maintaining sufficient
inventories to service customer needs.
Integration of Acquisitions
The Company has demonstrated an ability to quickly institute programs
which improve the performance of acquired companies. The process involves
applying the Company's operating strategy, rationalizing the product offerings
and appropriately capitalizing the acquisition.
Marketing
The Company's marketing strategy is aimed at increasing sales within its
three current primary market sectors (industrial, aerospace and government) and
targeting specific profitable niche products.
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To effect this strategy, the Company seeks to expand into geographic areas not
previously served by it and continues to exploit new markets and industries for
existing and new products. The Company employs a technically proficient sales
force and also utilizes marketing managers, product managers, customer service
representatives and product application engineers in its selling efforts.
Despite the difficulties inherent in the development of a quality,
technically astute, sales force in the bearing industry, the Company has been
able to accelerate the growth of its sales force through the hiring of sales
personnel with prior bearing industry experience, complemented by an in-house
training program, which was implemented in 1995 and which has graduated 8
professionals. The Company will continue to hire and develop expert sales
professionals and strategically locate them to implement its expansion strategy.
Today, the Company employs 25 strategically located sales professionals and more
than 60 people nationwide in its sales and marketing effort.
The Company has placed an emphasis on increasing sales to distributors
serving the spare parts aftermarket in the Company's key industry markets. Sales
to this market tend to be less cyclical as they arise out of end users' needs
for replacement bearings on existing equipment. See "-Customers and Markets."
Management estimates that sales to the replacement market exceeded 60% of the
Company's fiscal 1997 net sales. Management intends to continue to focus on
building distributor sales volume.
With regard to its OEM customers, the Company has and continues to focus
on establishing and maintaining relationships with OEMs that produce products
with strong aftermarket demand characteristics for the Company's products. The
Company's OEM relationships also provide it with extensive cross-selling
opportunities, as many OEM products utilize several of the types of bearings
manufactured by the Company.
Competition
Competition in the bearing industry is based on a number of factors,
including price, product line offering, technical service and timeliness of
supply. The Company believes that it is well positioned to compete in each of
the markets in which it operates with regard to each of these factors.
For large run bearing products, price is a very important factor. Larger
manufacturers generally are relative low cost producers in the more standard
bearing product lines and are thus able to attain extensive market shares.
However, with niche product lines, when the production runs are smaller, larger
manufacturers are often unable to achieve the economies of scale needed to
maintain their low-cost producer status. As a result, while the Company competes
with the larger bearing manufacturers in some of the more standard bearing
product markets, its primary competition in several product categories includes
smaller niche companies including Kaydon Corporation, New Hampshire Ball
Bearings and McGill Manufacturing Company, Inc. Competitors to the Company's
ballscrews are 20th Century and Thompson, both privately held companies.
Bearings manufacturers operating in the more specialized market compete by
maintaining a broad product line and adequate inventories to service the
aftermarket. This enables such manufacturers to exploit the trend of OEMs
towards sourcing a broader range of products from a small number of suppliers.
Additionally, in certain industries and groups, purchasers require product
approval on an industry or company specific level for their component parts. See
"-Customers and Markets."
Other factors in the more specialized bearing market include strong
distribution channels, quality product, strong technical product service,
customer support and long-term customer relationships.
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Backlog
As of September 27, 1997, the Company had a backlog, including orders to
LPP, Nice and Bremen, of $74.0 million ($66.6 million excluding LPP, Nice and
Bremen) as compared to a backlog of $53.3 million as of September 28, 1996. The
Company has historically maintained a strong backlog of orders. The Company
sells many of its products pursuant to contractual agreements, single source
relationships or long-term purchase orders, each of which may permit early
termination by the customer. However, due to the nature of many of the products
supplied by the Company and the lack of availability of alternative suppliers to
meet the demands of such customers' orders in a timely manner, the Company
believes that it is not practical or prudent for most customers, including many
of the Company's largest customers, to shift their bearing business to other
suppliers.
Employees
The Company had 1,099 employees at September 27, 1997.
Currently, collective bargaining agreements with the UAW cover
substantially all the hourly employees at the Company's West Trenton, New Jersey
and Fairfield, Connecticut plants, and a collective bargaining agreement with
the USWA covers substantially all the hourly employees at the Company's
Kulpsville, Pennsylvania plant. The West Trenton agreement expires on May 31,
1999, the Fairfield Agreement expires on January 31, 1999 and the Kulpsville
agreement expires on October 23, 1999. All other hourly employees are not
unionized. See "Risk Factors-Labor Relations."
The Company cannot predict whether any of its employees who currently are
not represented by unions will elect to be so represented in the future. The
Company considers its relations with its employees to be satisfactory and has
not experienced a significant work stoppage in over twelve years.
Suppliers and Raw Materials
The Company obtains raw materials, component parts and supplies from a
variety of sources and generally from more than one supplier. The Company's
principal raw material is steel. The Company's suppliers and sources of raw
materials are based in the United States and the Company believes that its
sources are adequate for its needs for the foreseeable future, that there exist
alternative suppliers for its raw materials and that in most cases readily
available alternative materials can be used for most of its raw materials. The
Company does not believe that the loss of any one supplier would have a material
adverse effect on the financial condition or results of operations of the
Company.
Intellectual Property
The Company's policy is to file patent applications to protect its
technology, inventions and improvements that are important to the development of
its business, and to seek trademark protection with respect to its product
titles that have achieved brand name recognition. The Company also relies upon
trade secrets, know-how and continuing technological innovation to develop and
maintain its competitive position. The Company holds six United States patents
(including those covering the RBC Roller(TM) cam follower and Quadlube(TM)
spherical plain bearing) and has three additional United States patent
applications pending. The Company has registered twelve trademarks in the United
States. There can be no assurance that such rights will not be infringed upon,
that additional patents will be issued as a result of the Company's
applications, that the Company's trade secrets will not otherwise become known
to or independently developed by competitors, that the Company would have
adequate remedies for any such infringement or use or that claims allowed under
such patents or any existing patents will not be
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challenged or invalidated or would be of adequate scope to protect the Company's
technology. The Company does not believe that any individual item of
intellectual property is material to its business.
Facilities
The Company is headquartered in 13,728 square feet of owned office space
located at the Heim division in Fairfield, Connecticut which it owns, and
conducts manufacturing in approximately 80,000 square feet at such facility
where it manufactures plain bearing product, both teflon lined and metal to
metal, and commercial ball bearings. The Company also owns: (i) a facility in
Hartsville, South Carolina, consisting of approximately 104,000 square feet of
manufacturing space, occupied by the RBC division, at which facility the Company
manufacturers the smaller end of all of the RBC division's product lines, and
performs the initial machining operations for a large percentage of the product
manufactured in the West Trenton, New Jersey facility; (ii) a facility in
Kulpsville, Pennsylvania, consisting of approximately 130,000 square feet of
manufacturing space, occupied by Nice, at which facility the Company
manufactures commercial ground and unground ball bearings; (iii) a facility in
Santa Ana, California, consisting of approximately 80,000 square feet of
manufacturing space, occupied by TDC, at which facility the Company manufactures
teflon lined plain bearings; and (iv) a facility in Rancho Dominguez,
California, consisting of approximately 69,100 square feet of manufacturing
space, occupied by the ITB division, at which facility the Company manufactures
high precision ball and roller bearings for the aerospace industry, thin section
ball bearings and large diameter cam followers. Additionally the Company leases:
(i) 55,000 square feet of manufacturing space in West Trenton, New Jersey,
occupied by the RBC division, at which facility the Company manufactures heavy
duty needle roller bearings for the aerospace industry as well as the RBC
division's larger diameter heavy duty needle roller bearings and single fracture
spherical plain bearings; (ii) 40,000 square feet of manufacturing space in
Walterboro, South Carolina occupied by LPP, at which facility the Company
manufactures ball screws, ball spline and ball screw actuator product lines and
(iii) 8,000 square feet of space in Waterbury, Connecticut.
The lease for the West Trenton, New Jersey facility expires on July 31,
2000 and the lease for the Waterbury, Connecticut facility expires on March 31,
2001. The lease for the Walterboro, South Carolina facility expired on July 31,
1997, and the Company is currently renting such space on a month to month basis
while it negotiates with the landlord for the purchase of such facility.
At the Company's facility in Waterbury, Connecticut, its Engineered
Components Division ("ECD"), has recently come on line as a Computer Numerically
Controlled Turning center. The mission of ECD is to be a manufacturer of turned
rings for the other operating units of the Company. The operation currently has
6 employees and approximately $1 million in equipment.
Environmental Matters
The operations of the Company are subject to numerous Environmental Laws,
including those regulating air emissions and discharges to water, and the
storage, handling and disposal of solid wastes, hazardous wastes and hazardous
substances. The Company believes that it is in substantial compliance with all
applicable Environmental Laws. Capital expenditures and operating costs
associated with the Company's compliance with Environmental Laws may increase in
the future, however, if Environmental Laws become more stringent or are enforced
more rigorously, or if the Company's operations were to change.
In March 1996, the Company entered into a stipulated settlement agreement
with the New Jersey Attorney General settling its liability for an unpermitted
release of pollutants in July 1994 from its West Trenton, New Jersey facility
resulting in a fish kill in a tributary to the Delaware River. Under the terms
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of the agreement, the Company paid a $150,000 civil penalty to the State of New
Jersey and made a $50,000 donation to a local conservation group. The Company
does not believe that any further liability will result from this event.
In connection with the ownership and operation of its properties, the
Company may be liable under Environmental Laws, including CERCLA and state
analogs to CERCLA, and certain state property transfer laws, for the cost of
investigation, removal or remediation of contamination at facilities owned or
operated by the Company, or at other facilities at which the Company has
disposed of hazardous substances. In connection with such contamination, the
Company may also be liable for natural resource damages, government penalties
and claims by third parties for personal injury and property damage. State
agencies are currently overseeing investigation and remediation activities at
the Company's facilities in Fairfield, Connecticut, West Trenton, New Jersey,
Santa Ana, California, and Rancho Dominguez, California.
At the Company's two facilities located in California and its facility in
New Jersey, the previous owners of the assets purchased by the Company
indemnified the Company for liabilities arising from environmental conditions
that existed prior to the date of the Company's purchase of such assets, subject
to certain thresholds, limitations and caps, and are undertaking cleanup in
fulfillment of those indemnification obligations. With respect to the Rancho
Dominguez, CA facility, the Company has contributed a total of approximately
$100,000 toward the cost of the on-going cleanup. Under the acquisition
agreement, the previous facility owner is responsible for all further costs to
cleanup conditions existing at the time of the transfer of the facility, up to a
maximum of the full purchase price. The previous owner is in the final stages of
completing that cleanup, and costs are not expected to approach the cap amount.
At the Santa Ana, CA facility, the Company has not contributed toward the
cost of the on-going cleanup. The previous owner is working with the regional
regulatory authority to obtain its approval of the completed cleanup. To the
Company's knowledge, cleanup costs have not approached the $4,500,000 limit on
the previous owner's liability under the acquisition agreement for this
facility.
At the West Trenton, NJ facility, the previous facility owner has been
investigating and remediating the land where the facility is located since the
mid-1980s. The previous owner, who still owns the real property on which the
facility is located, both indemnified the Company with respect to its cleanup
obligations and is performing the cleanup pursuant to a consent order with the
New Jersey Department of Environmental Protection. The Company has not
contributed to the costs of remediation at this facility, and does not expect to
do so with respect to conditions existing at the time the Company acquired the
facility.
Similarly, the previous owner of the Kulpsville, Pennsylvania facility has
conducted limited remediation at that facility in fulfillment of its
indemnification obligation. Finally, at its Hartsville, South Carolina facility,
the Company is aware of what it believes to be residual contamination resulting
from operations prior to its acquisition of the facility; should a regulatory
agency require investigation or cleanup in the future, costs associated with
those activities would be covered by the indemnity from the prior facility
owner, subject to the negotiated limits discussed above. There can be no
assurance, however, that the expenditures ultimately required for resolution of
liabilities associated with these environmental conditions will not exceed the
limits of any of the applicable indemnification obligations.
The previous owner of the Fairfield, Connecticut facility retained
responsibility for most cleanup obligations, along with ownership of the real
property until early 1996, when the Company acquired the real estate, and, in
connection with negotiating the terms of the acquisition, assumed responsibility
for
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completing remediation at the facility. In 1996, the Company received regulatory
approval of an investigation and remediation plan, and has implemented that plan
at a total cost that the Company estimates will reach $50,000 (including
attorney's fees). The investigation has not to date revealed conditions that
would require further remediation, although the regulatory authorities may
require ongoing monitoring of any residual contamination to ensure that it does
not reach unsafe levels.
In some states, property transfers may trigger investigation and cleanup
obligations (for example, under the New Jersey Industrial Site Recovery Act
("ISRA") or the Connecticut Transfer Act (the "CTA")). The Recapitalization
triggered ISRA at the West Trenton facility, obligating the Company to evaluate
all possible past releases of hazardous substances at that facility, and clean
up any resulting contamination. ISRA provides for an abbreviated review of
facilities that have been previously remediated. In this case, the owner of the
real property at the West Trenton facility investigated and remediated
groundwater contamination at the facility under ISRA (and its predecessor
statute) beginning in 1987 with the Company's acquisition of the facility.
Although the Company believes that the real property owner has addressed
contamination resulting from past practices, there can be no assurance that the
current ISRA investigation will not reveal previously unknown contamination at
the facility, giving rise to additional remediation costs, which may or may not
be a liability for which the Company is indemnified. The Recapitalization also
required a filing under the CTA, which the Company believes will not result in
any further investigation or remediation obligations.
In connection with the Recapitalization and the redemption of certain
shares of Preferred Stock by Holdings pursuant thereto, Holdings released
certain Preferred Stockholders who were prior stockholders of the Company, from
certain indemnification obligations owing to Holdings. Such obligations arose
under the agreement pursuant to which Holdings purchased the Company from such
stockholders. The shares of Preferred Stock were held in escrow in connection
with such stockholders' obligations under such indemnification provisions. The
provisions of the escrow provided that the escrowed shares were to be released
upon any transaction involving a change in control of Holdings, except as to the
extent of claims previously made. As there were no pending claims, upon
consummation of the Recapitalization, such shares were released from escrow and
redeemed by Holdings. Any claims for environmental remediation at the facilities
covered by the released indemnification are being covered by other indemnifying
parties, and the Company believes that such other indemnification obligations
should be sufficient to cover all costs associated with the known or likely
environmental conditions at such facilities.
Moreover, future events, such as new releases of hazardous substances, new
information concerning past releases of hazardous substances, changes in
existing Environmental Laws or their interpretation and more rigorous
enforcement by regulatory authorities, may give rise to additional expenditures,
compliance requirements or liabilities that could be material to the business
and the results of the operations of the Company. See "Risk Factors-Potential
Exposure to Environmental Liabilities" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Products Liability and Insurance
Although the Company has not suffered any material losses to date by
reason of judgments or settlements in product liability litigation, the Company
may be exposed to product liability claims in the future relating to the
performance of a product or the performance of an end product in which the
Company's product was a component part. The Company currently maintains
insurance coverage for products liability claims. There can be no assurance that
product liability claims will not be brought against the Company in the future,
either by injured customers of an end product manufacturer who used a Company
product as a component or by a direct purchaser from the Company. In addition no
assurance
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can be given that coverage under insurance policies will be adequate to cover
future products liability claims against the Company. Moreover, liability
insurance is expensive, difficult to maintain and may be unobtainable in the
future on acceptable terms. The amount and scope of any insurance coverage may
be inadequate if a products liability claim is successfully asserted against the
Company.
Legal Proceedings
The Company was involved in three actions with the Emerson Power
Transmission Corporation ("Emerson") all arising out of the purchase of assets
and a requirements contract between the Company and Emerson pursuant to which
the Company supplied its Spherco line of bearings to Emerson. On September 26,
1997, the Company and Emerson entered into a Settlement Agreement and Mutual
Release (the "Settlement Agreement") settling all these actions.
The Settlement Agreement, the terms of which are confidential, provides
for the dismissal of all of the above claims and the execution of releases by
each of the Company and Emerson. The Company does not expect the terms of the
Settlement Agreement to have a material effect on its financial condition or
results of operations.
In September 1995, Emerson commenced an action in the Porter Superior
Court, located in Porter County, Indiana, alleging breach of contract by the
Company for failure to timely deliver certain bearings ordered by Emerson under
a requirements contract. An injunction was issued compelling the Company to
comply with the terms of the requirements contract, which injunction expired by
its terms in February 1996. In the same action, Emerson also sued for damages in
the amount of $400,000, resulting from the Company's failure to timely deliver
the bearings. The Company commenced an action against Emerson in the United
States District Court for the District of Connecticut in December 1995, claiming
ownership rights in the part numbers relating to the Spherco line of bearings
that were the subject of the requirements contract. The court denied the
Company's motion for preliminary injunction in February 1996. The Company also
filed an action against Emerson in the Superior Court for the Judicial District
of Fairfield, Connecticut in November 1995 alleging bad faith on the part of
Emerson in inflating its demand under the requirements contract and seeking to
recover sums due under the contract arising from a price increase for the
bearings which was not honored by Emerson in unspecified amounts. In addition,
in the Connecticut state court suit, Emerson counter-sued the Company, claiming
damages in unspecified amounts on the same theory as in the Indiana suit. The
damages claims have not yet been concluded, and settlement discussions have
commenced.
The Settlement Agreement, the terms of which are confidential, provides
for the dismissal of all of the above claims and the execution of releases by
each of the Company and Emerson. The Company does not expect the terms of the
Settlement Agreement to have a material effect on its financial condition or
results of operations.
Additionally, there are various claims and legal proceedings against the
Company relating to its operations in the normal course of business, none of
which the Company believes is material. The Company currently maintains
insurance coverage for product liability claims. There can be no assurance that
indemnification from its customers and coverage under insurance policies will be
adequate to cover any future product liability claims against the Company. With
respect to certain environmental claims against the Company, see "-Environmental
Matters."
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MANAGEMENT
The following table sets forth certain information concerning the
directors and executive officers of Holdings and the Company. Each director is
elected for a one year term or until such person's successor is duly elected and
qualified.
Name Age Position
- ---- --- --------
Dr. Michael J. Hartnett.... 52 Chairman, President and Chief Executive
Officer of Holdings and RBC Chairman and
President of ITB, President of Nice and LPP,
Director of RBC, ITB, Nice, LPP and Bremen
Anthony S. Cavalieri....... 51 Vice President and Chief Financial Officer
of Holdings and RBC, Chief Financial Officer
of ITB, Nice, LPP and Bremen
Michael S. Gostomski....... 46 Executive Vice President, Mergers and
Acquisitions, of Holdings, RBC, ITB, Nice
and LPP, Executive Vice President of Bremen,
Secretary of Nice, LPP and Bremen
Frederick L. Morlok........ 57 Vice President, Marketing and Sales of
Holdings and RBC
Richard J. Edwards......... 41 Vice President of Holdings and RBC, General
Manager of RBC Division
Edward J. Trainer.......... 55 Secretary of Holdings, RBC and ITB
Kurt B. Larsen............. 33 Director of Holdings and RBC
William E. Myers, Jr....... 37 Director of Holdings and RBC
Mitchell I. Quain.......... 45 Director of Holdings and RBC
Stephen A. Kaplan.......... 38 Director of Holdings and RBC
Dr. Michael J. Hartnett has been president and Chief Executive Officer of the
Company since April 1992 and Chairman since June 1993. Prior to that, Dr.
Hartnett served as Vice President and General Manager of ITB from 1990,
following eighteen years at Torrington Company, one of the three largest
bearings manufacturers in the United States. While at Torrington, Dr. Hartnett
held the position of Vice President and General Manager of the Aerospace
Business Unit and was, prior to that, Vice President of the Research and
Development Division. Dr. Hartnett holds an undergraduate degree from University
of New Haven, a Masters degree from Worcester Polytechnic Institute, and a Ph.D.
in Applied Mechanics from the University of Connecticut. Dr. Hartnett has also
developed numerous patents, authored more then two dozen technical papers and is
well known for his contributions to the field of Tribology (the study of
friction). Dr. Hartnett currently serves as a director of Aftermarket Technology
Company, a publicly-held company in the business of re-manufacturing aftermarket
components for automobiles.
Anthony S. Cavalieri joined the Company in July 1996. From August 1990 to
November 1995 he was Vice President and Chief Financial Officer of Duro-Test
Corporation, a medium sized lighting products manufacturer, and from December
1995 through June 1996 provided management and financial consulting services to
various entities. Prior to that he was a controller at the Mennen Company and
before that on the audit staff of Price Waterhouse, LLP. Mr. Cavalieri holds a
B.S. in Accounting from St. John's
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University and an M.B.A. from Fordham University. He is also a certified public
accountant as well as a certified management accountant, certified internal
auditor and certified in production and inventory management.
Michael S. Gostomski joined the Company in September 1993 as its Senior Vice
President. In July of 1996 he was named Executive Vice President, Mergers and
Acquisitions. From January 1991 through August 1993, he served as President and
Chief Executive Officer for Transnational Industries, a publicly held
manufacturer of components for commercial and military aircraft. Mr. Gostomski
holds a B.S. in Accounting and an M.B.A. in Finance from the University of
Connecticut. He is also a certified public accountant. Mr. Gostomski currently
serves as director of Transnational Industries and of Seatak, a publicly held
manufacturer of small tools for the electronics industry.
Frederick L. Morlok joined the Company in 1987 as Vice President, Marketing and
Sales. Prior to that he spent twenty-four years at Torrington where he served in
various sales and marketing positions including District Sales Manager, Product
Manager of Machined Race Products and Business Manager, Strategic Technology
Unit. He holds a B.S. in Management Engineering, Mechanical Engineering Option
and an M.B.A. from Rensselaer Polytechnic Institute.
Richard J. Edwards joined the Company as Manufacturing Manager in the
Hartsville, South Carolina facility in 1990 and was named Vice President and
General Manager of the RBC division in 1996. Prior to joining the Company he
spent six years with Torrington as Material Manager and Plant Superintendent in
their Tyger River plant.
Edward J. Trainer has been employed by the Company since 1967. He served from
1987 to January 1995 as Vice President of Human Resources and has served as
Director of International Sales since January 1995. Mr. Trainer was named
Secretary of the Company in 1993.
Kurt B. Larsen joined the Company in March 1992 and served as Vice President and
Secretary until January 1997. He served as a Director of the Company from March
1992 to January 1997 and from June 1997 to the present. From February 1990 to
January 1997, he served as a principal of Aurora, a leveraged buy-out firm,
where he oversaw and executed investments in several companies. He also serves
as Chairman of Enrich International, Inc., a privately-held company which
manufactures and distributes nutritional supplements, and has been a principal
investor and partner in Hunter Capital, an investment bank, since February 1997.
William E. Myers, Jr. served as a Director of the Company from March 1992 to May
1997 and from June 1997 to the present. Since November 1989 he has been the
Chief Executive Officer of W.E. Myers & Company, a merchant bank which
specializes in creating companies through the leveraged buy-out process. He is
also currently a Director of Aftermarket Technologies Corporation.
Mitchell I. Quain joined the Company as a Director in June 1997. Since May 1997
he has served as an Executive Vice President and member of the Board of
Directors of Furman Selz, LLC, an investment banking and brokerage company. From
June 1975 to May 1997 he served as a Managing Director of Schroeder Wertheim &
Company, an investment banking company. He also serves on the Board of Directors
of a number of publicly-held companies, including Allied Products Corporation, a
diversified manufacturing company, DeCrane Aircraft Holdings, Inc., an aircraft
supply company, Mechanical Dynamics, Inc., a software company, and Strategic
Distribution, Inc., a company in the business of industrial distribution.
58
<PAGE>
Stephen A. Kaplan joined the Company as a Director in June 1997. He is also a
principal of Oaktree Capital Management, LLC ("Oaktree"), the general partner of
the Oaktree Fund, one of the purchasers of the Discount Debentures. Prior to
joining Oaktree in June 1995, he was a managing director of Trust Company of the
West ("TCW"). Prior to joining TCW in 1993, he was a partner in the law firm of
Gibson, Dunn & Crutcher. He serves as a director of a number of publicly-held
companies, including Decorative Home Accents, Inc., a manufacturer of decorative
home accessories, KinderCare Learning Centers, Inc., which provides child care
and pre-school educational services, Acorn Products, Inc., a manufacturer of
lawn and garden tools, and Chief Auto Parts, Inc., an auto parts and accessories
retail chain.
The Board of Directors of the Company currently consists of Dr. Hartnett
and Messrs. Kaplan, Larsen, Myers and Quain. Dr. Hartnett is the sole director
of ITB, Nice and LPP. Pursuant to the Stockholders Agreement (as defined
herein), the Oaktree Fund has the right to designate one member of the board of
directors of Holdings and the Company. Mr. Kaplan is the designee of the Oaktree
Fund. See "Certain Relationships and Related Transactions."
Members of the Boards currently do not receive any compensation for their
service as directors but are reimbursed by the Company for any expenses incurred
in attending meetings of the Boards or otherwise performing their duties for the
Company and Holdings.
Executive Compensation
The following table sets forth the cash and other compensation paid by the
Company in fiscal years 1995, 1996 and 1997 to Dr. Hartnett, its Chairman,
President and Chief Executive Officer, and each other executive officer whose
salary and bonus in fiscal 1997 exceeded $100,000 (the "Named Executive
Officers"):
59
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------------------------ ----------------
Other Securities
Annual Underlying
Name and Principal Position Fiscal Year Salary Bonus Compensation Warrants
- --------------------------------- ------------- ---------------- ------------ -------------- ----------------
<S> <C> <C> <C> <C> <C>
Dr. Michael J. Hartnett,
Chairman,
President and Chief
Executive Officer ............. 1997 $305,000(a)(b)(c) $287,167(d) $ 39,466(g) -
1996 305,000(a)(b) 110,000(e) 11,962(h) -
1995 305,000(a)(b) 200,000(f) 16,326(i) -
Michael S. Gostomski,
Executive Vice President,
Mergers and Acquisitions ...... 1997 $159,500(b) $150,000(d) $ 6,840(j) -
1996 159,500(b) 86,000(e) 14,327(k) -
1995 148,625(b) 60,000(f) 15,167(l) -
Frederick L. Morlok,
Vice President
Marketing and Sales ........... 1997 $165,000(b)(c) $ 50,000(d) $ 14,102(m)
1996 159,167(b) 75,000(e) 12,709(n) 250(s)
1995 151,667(b) 40,000(f) 9,937(o) -
Richard J. Edwards,
Vice President
and General Manager,
RBC Division .................. 1997 $120,333(b)(c) 30,000(d) $124,031(p) -
1996 111,750(b) 51,625(e) 1,696(q) 250(s)
1995 105,833(b) 45,188(f) 2,241(r) 500(t)
</TABLE>
- ----------
(a) Includes $30,000 of compensation deferred by Dr. Hartnett.
(b) Includes amounts deferred by the executive pursuant to the Company's
401(k) Plan (as defined herein).
(c) Includes amounts deferred by the executive pursuant to the Company's SERP
(as defined herein).
(d) Bonus earned in fiscal 1996 and paid in fiscal 1997. Bonus for fiscal 1997
will be determined in fiscal 1998.
(e) Bonus earned in fiscal 1995 and paid in fiscal 1996. Bonus for fiscal 1996
is reflected in fiscal 1997.
(f) Bonus earned in fiscal 1994 and paid in fiscal 1995 Bonus for fiscal 1995
is reflected in fiscal 1996.
(g) Consists of (i) $5,313 contributed by the Company to Dr. Hartnett's 401(k)
Plan account, (ii) $28,104 contributed by the Company to Dr. Hartnett's
SERP account and (iii) $6,049 paid by the Company to lease a car for Dr.
Hartnett's use.
(h) Consists of (i) $4,104 contributed by the Company to Dr. Hartnett's 401(k)
Plan account and (ii) $7,858 paid by the Company to lease a car for Dr.
Hartnett's use.
60
<PAGE>
(i) Consists of (i) $7,760 contributed by the Company to Dr. Hartnett's 401(k)
Plan account and (ii) $8,566 paid by the Company to lease a car for Dr.
Hartnett's use.
(j) Consists of (i) $3,627 contributed by the Company to Mr. Gostomski's
401(k) Plan account and (ii) $3,213 paid by the Company to lease a car for
Mr. Gostomski's use.
(k) Consists of (i) $4,278 contributed by the Company to Mr. Gostomski's
401(k) Plan account and (ii) $10,049 paid by the Company to lease a car
for Mr. Gostomski's use.
(l) Consists of (i) $4,733 contributed by the Company to Mr. Gostomski's
401(k) Plan account and (ii) $10,434 paid by the Company to lease a car
for Mr. Gostomski's use.
(m) Consists of (i) $2,813 contributed by the Company to Mr. Morlok's 401(k)
Plan account, (ii) $2,987 contributed by the Company to Mr. Morlok's SERP
account and (iii) $8,302 paid by the Company to lease a car for Mr.
Morlok's use.
(n) Consists of (i) $4,021 contributed by the Company to Mr. Morlok's 401(k)
Plan account and (ii) $8,688 paid by the Company to lease a car for Mr.
Morlok's use.
(o) Consists of (i) $4,465 contributed by the Company to Mr. Morlok's 401(k)
Plan account and (ii) $5,472 paid by the Company to lease a car for Mr.
Morlok's use.
(p) Consists of (i) $119,700 realized upon the exercise of 350 Common Stock
Purchase Warrants at $100 per share, which shares were immediately
purchased by Holdings for $442 per share, (ii) $2,255 contributed by the
Company to Mr. Edwards' 401(k) Plan account and (iii) $2,076 contributed
by the Company to Mr. Edwards' SERP account.
(q) Contributed by the Company to Mr. Edwards' 401(k) Plan account.
(r) Contributed by the Company to Mr. Edwards' 401(k) Plan account.
(s) Represents Common Stock Purchase Warrants to purchase Class A Common Stock
at an exercise price of $100 per share granted on March 30, 1996.
(t) Represents Common Stock Purchase Warrants to purchase Class A Common Stock
at an exercise price of $100 per share granted on March 10, 1995.
No stock options were granted to the Named Executive Officers during
fiscal 1997.
The following table sets forth information concerning outstanding options
to purchase Common Stock held by the Named Executive Officers as of March 29,
1997:
61
<PAGE>
Warrant Exercises During Fiscal 1997
and Fiscal Year-end Option Values
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Shares Warrants at Warrants at
Acquired March 29, 1997 March 29, 1997
on Exercisable/ Exercisable/
Name Exercise Value Realized Unexercisable Unexercisable (a)
- ---- -------- -------------- ------------- -----------------
<S> <C> <C> <C> <C>
Dr. Michael J. Hartnett.......... 0 $0 9,977/0(b) $4,364,424/0
Michael S. Gostomski............. 0 0 350/0(c) 144,900/0
Frederick L. Morlok.............. 0 0 2,125/0(d) 879,750/0
Richard J. Edwards............... 350 119,700(e) 1,015/85 420,210/35,190
</TABLE>
- ----------
(a) Based upon a per share price of $514.00.
(b) In connection with the Recapitalization, (i) Holdings purchased 1,250 of
such Common Stock Purchase Warrants for approximately $437 per share of
Common Stock underlying such warrants ($514 per share less the
approximately $77 exercise price of such Common Stock Purchase Warrants)
and issued to Dr. Hartnett warrants to purchase 1,250 shares of Class B
Common Stock with an exercise price of $514 per share, and (ii) Dr.
Hartnett purchased 90 Common Stock Purchase Warrants from Mr. Myers and 10
Common Stock Purchase Warrants from Ann B. Ruple for $414 per share of
Common Stock underlying such warrants.
(c) In connection with the Recapitalization, Mr. Gostomski sold all of such
Common Stock Purchase Warrants to an affiliate of the Initial Purchaser
for $414 per share underlying such warrants ($514 per share less the $100
exercise price of such Common Stock Purchase Warrants).
(d) In connection with the Recapitalization, Mr. Morlok sold all of such
Common Stock Purchase Warrants to the Oaktree Fund and affiliates of the
Initial Purchaser for $414 per share underlying such warrants ($514 per
share less the $100 exercise price of such Common Stock Purchase
Warrants).
(e) Based upon a per share price of $442 (the price at which Holdings
repurchased such shares following exercise of the Common Stock Purchase
Warrants by Mr. Edwards) and an exercise price of $100 per warrant.
Employment Agreement
Concurrently with the closing of the Recapitalization, Dr. Hartnett
entered into a five-year employment agreement (the "Employment Agreement") with
the Company. The Employment Agreement provides for Dr. Hartnett to serve as the
President, Chief Executive Officer and Chairman of the Board of Directors of the
Company and requires that Dr. Hartnett devote his full business time and
attention to the affairs of the Company. The Employment Agreement contains
covenants regarding the treatment and disclosure of confidential information and
a covenant prohibiting Dr. Hartnett from competing with the Company during the
term of the Employment Agreement and for two years after its expiration. The
Employment Agreement provides for a salary of $31,250 per month with annual
increases linked to the increase in the All-Items Consumer Price Index for All
Urban Consumers, subject to a minimum increase, plus a bonus linked to the
achievement by the Company of milestones set forth in its Operating Plan
62
<PAGE>
(subject to limited discretion of the Board of Directors of the Company). The
Employment Agreement is terminable (i) upon the death or Total Disability of Dr.
Hartnett, (ii) by the Company for Cause, (iii) by the Company upon 60 days prior
notice and (iv) by Dr. Hartnett for Good Reason (as all such terms are defined
in the Employment Agreement) or upon 120 days prior notice. If the Employment
Agreement is terminated due to death or disability, by the Company without Cause
or by Dr. Hartnett for Good Reason, Dr. Hartnett shall be entitled to receive
his base salary through the end of the original term of the Employment Agreement
plus a pro rata portion of his bonus in the year in which the termination
occurred.
Option Plan
The Company intends to adopt an employee stock option plan pursuant to
which the Company will grant options to purchase up to 10% of the Common Stock
outstanding after the Recapitalization.
401(k) Plan
The Company maintains the Roller Bearing Company of America 401(k)
Retirement Plan (the "401(k) Plan"), a plan established pursuant to Section
401(k) of the Internal Revenue Code, for the benefit of its non-union employees.
All non-union employees who have completed six months of service with the
Company are entitled to participate. Subject to various limits, employees are
entitled to defer up to 15% of their annual salary on a pre-tax basis and up to
an additional 10% of their annual salary on an after tax basis. The Company
matches 50% of an employee's pre-tax contribution up to 10% of annual salary.
The Company may also make discretionary contributions that are allocated among
eligible accounts pro rata based upon salary. Employees vest in the Company's
contributions ratably over three years.
Supplemental Retirement Plan
Effective September 1, 1996 the Company adopted a non-qualified
supplemental retirement plan ("SERP") for a select group of highly compensated
and management employees designated by the Board of Directors of the Company.
The SERP allows eligible employees to elect to defer until termination of their
employment the receipt of up to 25% of their current salary. The Company makes
contributions equal to the lesser of 50% of the deferrals or 3.5% of the
employee's annual salary, which vest in full after three years of service
following the effective date of the SERP. Accounts are paid, either in a lump
sum or installments, upon retirement, death or termination of employment.
Accounts are generally payable from the general assets of the Company although
it is intended that the Company set aside in a "rabbi trust" invested in annuity
contracts amounts necessary to pay benefits. Employees' rights to receive
payments are subject to the rights of the creditors of the Company.
Compensation Committee Interlocks and Insider Participation
In fiscal 1997, the compensation committees of the Board of Directors of
Holdings (the "Board") consisted of designees of Aurora. All such directors have
resigned from the Board. Holdings anticipates the appointment of a new
compensation committee shortly.
63
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists, as of September 27, 1997, all shares of Common
Stock of Holdings beneficially owned by (i) each director of the Holdings, (ii)
each Named Executive Officer of the Company, (iii) each person known by the
Company to beneficially own more than 5% of the outstanding shares of Common
Stock of Holdings at such date and (iv) all directors and executive officers of
Holdings and the Company as a group (16 persons). As of September 27, 1997 there
were 5,228 shares of Class A Common Stock and 3,949 shares of Class B Common
Stock outstanding. Additionally, as of such date, there were outstanding
warrants to purchase up to an additional 14,402 shares of Class A Common Stock
and 10,077 shares of Class B Common Stock. As of September 27, 1997, there were
100 shares of common stock, par value $.01 per share, of the Company
outstanding, all of which were owned by Holdings. Such shares have been pledged
to the trustee under the Discount Indenture for the benefit of the holders of
the Discount Debentures, as security for Holdings obligations arising
thereunder. As of September 27, 1997, there were 100 shares, par value $.01 per
share, of ITB, and 10 shares, par value $.01 per share, of each of Nice, LPP and
Bremen outstanding, all of which were owned by the Company. All of such shares
have been pledged to the lenders under the Senior Credit Facility, as security
for the Company's obligations thereunder.
<TABLE>
<CAPTION>
Stockholder (a) Number of Shares (a) Percentage of Class
- --------------- -------------------- -------------------
<S> <C> <C>
Dr. Michael J. Hartnett............................ 14,216 (b) 72.8% (c)
Michael S. Gostomski............................... 1 *
Frederick L. Morlok................................ 525 5.7%
Christopher J. Sommers............................. 919 (d) 10.0%
Richard J. Edwards................................. 1,100 (e) 10.7%
William E. Myers
Two North Lake Avenue
Pasadena, California 91101........................ 2,275 (e) 19.9%
Kurt Larsen
P.O. Box 692547
Park City, Utah 84068............................. 0 0.0%
Stephen Kaplan
550 South Hope Street
Los Angeles, California 90071..................... 8,191 (f)(g) 51.3%
Mitchell Quain
230 Park Avenue
New York, New York 10020.......................... 400 (h) 4.2%
Oaktree Capital Management, LLC
550 South Hope Street
Los Angeles, California 90071..................... 8,191 (f)(g)(i) 51.3%
OCM Principal Opportunities Fund, L.P.
550 South Hope Street
Los Angeles, California 90071..................... 8,191 (f)(g) 51.3%
Bruce Karsh
550 South Hope Street
Los Angeles, California 90071...................... 8,191 (f)(g) 51.3%
Howard Marks
550 South Hope Street
Los Angeles, California 90071...................... 8,191 (f)(g) 51.3%
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
Stockholder (a) Number of Shares (a) Percentage of Class
- --------------- -------------------- -------------------
<S> <C> <C>
Northstar High Total Return Fund
Two Pickwick Plaza
Greenwich, Connecticut 06830...................... 1,262 (j) 12.1%
Northstar Investment Management Corp.
Two Pickwick Plaza
Greenwich, Connecticut 06830...................... 1,262 (j) 12.1%
Merban Equity(k)
c/o Credit Suisse First Boston
Bleichistrasse 8
P.O. Box 4263
CH-6304 Zug, Switzerland.......................... 1,400 (l) 14.3%
Mark Kennelley(k)
c/o Credit Suisse First Boston
11 Madison Avenue
New York, New York 10010.......................... 490 5.3%
All members of management as a group (16 persons).. 29,065 (m) 93.0%
</TABLE>
- ----------
* Less than 1%
(a) Except where otherwise indicated, (i) shares of Common Stock are of Class
A Common Stock (ii) Common Stock Purchase Warrants are to purchase shares
of Class A Common Stock and (iii) the address for each stockholder is c/o
the Company at 60 Round Hill Road, P.O. Box 430, Fairfield, Connecticut
06430.
(b) Consists of 3,948.4 shares of Class B Common Stock and Common Stock
Purchase Warrants to purchase up to 10,077.4 shares of Class B Common
Stock.
(c) Through the ownership of Class B Common Stock Dr. Hartnett has the power
to control a majority of the voting power of all voting securities of
Holdings even if he were to own less than 50% of the outstanding Common
Stock. See "Certain Relationships and Related Transactions."
(d) Such shares are held of record by The Sommers Family Trust. Mr. Sommers
beneficially owns such shares.
(e) Consists of Common Stock Purchase Warrants to purchase Class A Common
Stock.
(f) Consists of shares of Common Stock and Discount Warrants owned by the
Oaktree Fund. To the extent that the stockholder, as a principal of
Oaktree, participates in the process to vote or to dispose of any such
shares or warrants, he may be deemed under such circumstances for the
purpose of Section 13 of the Exchange Act to be the beneficial owner of
such shares of Common Stock and Discount Warrants. The stockholder
disclaims beneficial ownership of such shares of Common Stock and Discount
Warrants.
(g) Includes Discount Warrants to purchase up to 6,791 shares of Class A
Common Stock.
(h) Includes Common Stock Purchase Warrants to purchase up to 340 shares of
Class A Common Stock.
65
<PAGE>
(i) Consists of shares of Common Stock and Discount Warrants owned by the
Oaktree Fund of which the stockholder is the general partner.
(j) Consists of Discount Warrants to purchase Class A Common Stock owned by
Northstar High Total Return Fund (the "Northstar Fund"). Northstar is the
investment advisor of the Northstar Fund and may be deemed to beneficially
own such Discount Warrants.
(k) Affiliate of the Initial Purchaser. Such shares may be deemed to be
beneficially owned by the Initial Purchaser.
(l) Includes Common Stock Purchase Warrants to purchase 647 shares of Class A
Common Stock.
(m) Includes (i) (1) 1,633.4 shares of Class A Common Stock, (2) 3,948.4
shares of Class B Common Stock, (3) Common Stock Purchase Warrants to
purchase up to 5,215 shares of Class A Common Stock, and (4) Common Stock
Purchase Warrants to purchase up to 10,077.4 shares of Class B Common
Stock held by members of management and (ii) 1,400 shares of Common Stock
and 6,791 Discount Warrants held by the Oaktree Fund.
66
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a summary of certain agreements and arrangements, as
well as other transactions between the Company and related parties which have
taken place during the Company's most recently completed three fiscal years. See
"Prospectus Summary--Recent Developments."
The Recapitalization
In connection with the Recapitalization, (i) the Company paid the Dividend
to Holdings in the amount of approximately $56.1 million to finance the
Recapitalization, (ii) Holdings sold the Discount Debentures and the Discount
Warrants to the Oaktree Fund and Northstar Investment Management Corp.
("Northstar"), (iii) Holdings used the proceeds of the Dividend and the proceeds
from the sale of the Discount Debentures and the Discount Warrants to redeem
Common Stock and Preferred Stock and purchase Common Stock Purchase Warrants for
aggregate consideration of approximately $92.2 million (including shares of
Common Stock and Preferred Stock and Common Stock Purchase Warrants owned by
members of management and affiliates of Holdings), (iv) Holdings assigned its
rights to purchase certain shares of Common Stock and Common Stock Purchase
Warrants under the Recapitalization Agreement to Dr. Hartnett, certain
affiliates of the Initial Purchaser, the Oaktree Fund, Mr. Morrison, The Sommers
Family Trust and Mr. Quain, (v) Holdings effected the Hartnett Repurchase of
1,250 Common Stock Purchase Warrants from Dr. Hartnett for an amount per share
of Common Stock underlying the Common Stock Purchase Warrants equal to $514 less
the approximately $77 exercise price of such warrants (an aggregate of
approximately $550,000), (vi) Holdings issued Common Stock Purchase Warrants
exercisable for 1,250 shares of Common Stock at an exercise price of $514 per
share of Common Stock to Dr. Hartnett, (vii) Holdings made the Hartnett Loan in
the amount of $500,000, (viii) Holdings paid the Hartnett Fee in the amount of
$1 million, (ix) the Company repaid outstanding indebtedness (approximately
$52.1 million) on the Existing Revolving Credit Facility and the Existing Term
Loan, (x) Holdings paid a fee of $1.6 million to the Initial Purchaser, in
connection with the sale of the Discount Debentures, (xi) the Company paid a fee
to the Initial Purchaser of $3.85 million in connection with the sale of the
Outstanding Notes, (xii) the Company entered into the Senior Credit Facilities
with, among others, an affiliate of the Initial Purchaser and paid (1) certain
fees to such lenders and (2) a fee of $1.5 million to the Initial Purchaser in
connection therewith, and (xiii) agreed to indemnify the Initial Purchaser and
certain affiliates of the Initial Purchaser in connection with certain matters
relating to the Recapitalization.
The Hartnett Loan bears no interest and is recourse only to the securities
purchased with the proceeds thereof. As of September 27, 1997, the entire
principal balance of the Hartnett Loan remained outstanding.
The assignment of rights under the Recapitalization Agreement referred to
in clause (iv) above, was undertaken in order to achieve certain desired
post-Recapitalization equity positions and to satisfy certain contractual
obligations of the Company and Holdings. In exchange for such assignments, the
assignees assumed the obligations of the Company and Holdings under the
Recapitalization Agreement with respect to such shares of Common Stock or Common
Stock Purchase Warrants.
The Hartnett Repurchase and the grant of certain Common Stock Purchase
Warrants to Dr. Hartnett referred to in clause (vi) above were undertaken to
enable Dr. Hartnett to fulfill his obligations with respect to certain shares of
Common Stock assigned to him and referred to in clause (iv) above without Dr.
Hartnett suffering a diminution of his fully-diluted equity position in
Holdings. Upon the Hartnett Repurchase, all obligations of Holdings under the
Common Stock Purchase Warrants repurchased were extinguished.
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<PAGE>
The Hartnett Fee was paid to Dr. Hartnett in consideration of services
rendered in connection with the preparation, negotiation and consummation of the
Recapitalization.
The Company bears no direct, indirect or contingent liability under the
Discount Debentures. Under the terms of the Indenture, the payment of dividends
to Holdings is severely restricted. See "Description of the Notes--Certain
Covenants." All operations of Holdings are conducted through the Company and
subsidiaries of the Company. Payments under the Exchange Notes are not
subordinated in any way to payments under the Discount Debentures, and the
issuance by Holdings of the Discount Debentures should in no way affect the
ability of the Company to make payments under the Exchange Notes.
In connection with the Recapitalization, the Oaktree Fund purchased
approximately $59.8 million principal amount at maturity of Discount Debentures
and Discount Warrants to purchase 5,469 shares of Common Stock from Holdings in
exchange for approximately $32 million. Mr. Kaplan, a director of Holdings and
the Company, is a principal of Oaktree, the general partner of the Oaktree Fund.
In addition, in connection with the Recapitalization and the other
transactions consummated in connection therewith, the Company paid Ernst & Young
LLP a financial advisory and consulting fee, a portion of which was for the
benefit of Holdings.
In connection with the Recapitalization and the redemption of certain
shares of Preferred Stock by Holdings pursuant thereto, Holdings released
certain Preferred Stockholders who were prior stockholders of the Company, from
certain indemnification obligations owing to Holdings. Such obligations arose
under the agreement pursuant to which Holdings purchased the Company from such
stockholders. The shares of Preferred Stock were held in escrow in connection
with such stockholders' obligations under such indemnification provisions. The
provisions of the escrow provided that the escrowed shares were to be released
upon any transaction involving a change in control of Holdings, except as to the
extent of claims previously made. As there were no pending claims, upon
consummation of the Recapitalization, such shares were released from escrow and
redeemed by Holdings. Any claims for environmental remediation at the facilities
covered by the released indemnification are being covered by other indemnifying
parties, and the Company believes that such other indemnification obligations
should be sufficient to cover all costs associated with the known or likely
environmental conditions at such facilities.
Hartnett Control Provision
Through ownership of Class B Common Stock and the provisions of the
Certificate of Incorporation of Holdings granting such Class B Common Stock 10
votes per share, whether or not Dr. Hartnett owns a majority of the outstanding
capital stock of Holdings, he will have, subject to certain limitations, the
power to control a majority of the voting rights of all capital stock of
Holdings. Such right will be suspended for such periods during which Dr.
Hartnett ceases to serve in the management of the Company, or any successor
thereto, or owns less than 50% of the outstanding Common Stock on a fully
diluted basis that he owned immediately following the Recapitalization.
Employment Agreement
Effective upon the closing of the Recapitalization, Dr. Hartnett entered
into a five-year Employment Agreement with the Company containing a covenant
restricting competition with the Company. See "Management-Employment Agreement."
68
<PAGE>
Hartnett Bonus
In connection with the acquisition of Nice by the Company, the Company
paid a bonus to Dr. Hartnett in the amount of $136,000. Such bonus was paid in
the first quarter of fiscal 1998.
Myers' Fee
W.E. Myers & Company, an entity owned and controlled by Mr. Myers, a
director of Holdings, received a $100,000 fee in 1997 for the provision of
investment banking services in connection with the acquisition of LPP by the
Company. An additional $100,000 fee may become payable if LPP meets certain
financial targets.
Stockholder Agreements
Concurrently with the closing of the Recapitalization, Holdings entered
into a stockholders' agreement (the "Stockholders Agreement") with Dr. Hartnett,
the Oaktree Fund, Northstar and certain affiliates of the Initial Purchaser. The
Stockholders Agreement provides for (i) restrictions on transfer of all
securities of Holdings held by the parties to the Stockholders Agreement, (ii)
rights of first refusal in favor of the parties to the Stockholders Agreement
prior to any transfer by a party (other than transfers to certain affiliates of
the parties) of securities of Holdings, (iii) tag-along rights in favor of the
other parties to the Stockholders Agreement upon certain transfers of securities
of Holdings by Dr. Hartnett, (iv) certain rights in favor of Dr. Hartnett to
compel the other parties to the Stockholders Agreement to sell securities of
Holdings held by such parties upon certain sales of securities of Holdings by
Dr. Hartnett, (v) certain preemptive rights in favor of the Oaktree Fund,
Northstar and Dr. Hartnett with respect to securities of Holdings, (vi)
piggyback registration rights in favor of all of the parties to the Stockholders
Agreement with respect to securities of Holdings, (vii) demand registration
rights in favor of the Oaktree Fund and Northstar with respect to securities of
Holdings, with customary covenants regarding such registration and (viii) a
grant to the Oaktree Fund of the right to designate one member of the board of
directors of each of Holdings and the Company. Many of the rights and privileges
contained in the Stockholders Agreement terminate or become limited following an
initial public offering of securities of Holdings.
Holdings intends to enter into one or more additional stockholders'
agreements with its other stockholders and warrantholders providing for (i) the
right to repurchase the stock or warrants held by such parties upon the death or
termination of employment of any stockholder or warrantholder who is employed by
Holdings or its subsidiaries, (ii) the right to tag-along on certain sales of
securities by other stockholders of Holdings and (iii) certain rights in favor
of Dr. Hartnett to compel such stockholders and warrantholders to sell their
securities of Holdings upon certain sales of securities by Dr. Hartnett. The
exact terms of these agreements are currently being finalized.
Prior to the recapitalization, Holdings was a party to various
arrangements with its stockholders and warrantholders, all of which have been
terminated.
Consulting Agreement
Prior to the Recapitalization, the Company and Tribos, an affiliate of
Aurora (the former principal stockholder of Holdings), were parties to a
consulting agreement (the "Consulting Agreement"), whereby Tribos provided
certain consulting services to the Company in exchange for monthly payments of
approximately $36,000. The Consulting Agreement also provided for annual
adjustments to the fee, reimbursement of Tribos' expenses by the Company and the
payment of additional fees in connection with
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the acquisition of Nice. The total fees paid in fiscal 1997, 1996 and 1995
pursuant to the consulting agreement were $429,000, $400,000 and $400,000,
respectively. The Consulting Agreement was terminated in connection with the
Recapitalization. Prior to January 1997, Mr. Larsen, a director of Holdings and
the Company, served as a principal of Aurora.
Purchase of Shares From Mr. Edwards
In July 1996 Mr. Edwards exercised Common Stock Purchase Warrants for 350
shares of Class A Common Stock, at an exercise price of $100 per share.
Immediately following such exercise, Holdings repurchased such shares for a
purchase price of $442 per share.
THE EXCHANGE OFFER
Purpose and Effects
The Exchange Offer is designed to provide to holders of Outstanding Notes
an opportunity to acquire Exchange Notes which, unlike the Outstanding Notes,
will be freely transferable at all times (provided that the holder is not an
affiliate of the Company).
The Outstanding Notes were originally issued and sold on June 23, 1997, in
the principal amount of $110 million in a transaction exempt from the
registration requirements of the Securities Act. The Outstanding Notes may not
be reoffered, resold or transferred unless done so pursuant to a registration
statement filed pursuant to the Securities Act or unless an exemption from the
registration requirements of the Securities Act is available.
The Company is making the Exchange Offer in reliance on the position of
the staff of the Commission as set forth in certain no-action letters addressed
to other parties in other transactions. However, the Company has not sought its
own no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange Offer
as in such other circumstances. Based upon these interpretations by the staff of
the Commission, the Company believes that Exchange Notes issued pursuant to this
Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold and otherwise transferred by a holder thereof other than (i) a
broker-dealer who purchased such Outstanding Notes directly from the Company to
resell pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act or (ii) a person that is an "affiliate" (as
defined in Rule 405 under the Securities Act) of the Company without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in the distribution
of such Exchange Notes. Holders of Outstanding Notes accepting the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
may not rely on the position of the staff of the Commission as set forth in
these no-action letters and would have to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction. A secondary resale transaction in the United
States by a holder who is using the Exchange Offer to participate in the
distribution of Exchange Notes must be covered by a registration statement
containing the selling securityholder information required by Item 507 of
Regulation S-K under the Securities Act.
The Exchange Notes will be freely transferable by the Holders thereof,
subject to the limitations described in the immediately preceding paragraphs.
The Exchange Notes otherwise will be identical in
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all respects (including interest rate, maturity, security, guaranty and
restrictive covenants) to the Outstanding Notes for which they may be exchanged
pursuant to this Exchange Offer. Holders who do not exchange their Outstanding
Notes pursuant to this Exchange Offer will continue to hold Outstanding Notes
which are subject to restrictions on transfer.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
Terms of the Exchange Offer
Promptly after the Registration Statement of which this Prospectus
constitutes a part has been declared effective, the Company will offer the
Exchange Notes in exchange for surrender of the Outstanding Notes. The Company
will keep the Exchange Offer open for not less than 20 business days (or longer
if required by applicable law) after the date on which notice of the Exchange
Offer is mailed to the holders of the Outstanding Notes. For each $1,000
principal amount of Outstanding Notes validly tendered to the Company pursuant
to the Exchange offer and not withdrawn by the holder thereof, the holder of
such Outstanding Notes will receive $1,000 principal amount of Exchange Notes.
Interest on each Exchange Note will accrue from the last interest payment date
on which interest was paid on the Outstanding Note surrendered in exchange
therefor or, if no interest has been paid on such Outstanding Note, from the
date of the original issue of the Outstanding Notes. The Exchange Notes evidence
the same debt as the Outstanding Notes and are issued under and entitled to the
same benefits under the Indenture as the Outstanding Notes. In addition, the
Exchange Notes and the Outstanding Notes are treated as one series of securities
under the Indenture.
In the event that (a) neither the Registration Statement of which this
Prospectus constitutes a part nor a Shelf Registration (as defined in the
Registration Rights Agreement) with respect to the Outstanding Notes is filed on
or prior to the 45th day after the date of original issue of the Outstanding
Notes, (b) neither of such registration statements is declared effective by the
Commission on or prior to the 150th day after the Closing Date (the
"Effectiveness Target Date"), (c) the Registration Statement becomes effective,
and the Company fails to consummate the Exchange Offer within 45 days of the
earlier of the effectiveness of the Registration Statement or the Effectiveness
Target Date, or (d) the Shelf Registration with respect to the Outstanding Notes
is declared effective but thereafter ceases to be effective or usable in
connection with resales of Outstanding Notes during the period specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the interest rate payable on
the Outstanding Notes shall increase by 0.5% from and including the date such
Registration Default occurs to but excluding the date upon which such
registration Default is cured.
As of September 27, 1997, $110,000,000 aggregate principal amount of
Outstanding Notes were outstanding. This Prospectus and the Letter of
Transmittal are being sent to all registered holders of Outstanding Notes.
Tendering holders of Outstanding Notes will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Outstanding Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain transfer taxes which may be imposed, in connection with the
Exchange offer. See "Transfer Taxes" below.
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Holders of Outstanding Notes do not have any appraisal or dissenters'
rights under the Delaware General Corporation Law in connection with the
Exchange Offer.
Period for Tendering Outstanding 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 Outstanding 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 the Company's
obligation to accept Outstanding Notes for exchange pursuant to the Exchange
Offer is subject to certain conditions 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 of exchange of any Outstanding Notes, by giving oral or
written notice of such extension to the holders thereof as described below.
During any such extension, all Outstanding Notes previously tendered will remain
subject to the Exchange Offer and may be accepted for exchange by the Company.
Any Outstanding 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 Outstanding 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 oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the Outstanding Notes
as promptly as practicable, such notice in the case of any extension to be
issued by means of a press release or other public announcement 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 Outstanding Notes
Except as set forth below, a holder of Outstanding Notes who wishes to
tender Outstanding 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 the address set forth below
under "--Exchange Agent" on or prior to the Expiration Date. In addition, either
(i) certificates for such Outstanding Notes must be received by the Exchange
Agent, or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Outstanding Notes 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 on or prior to the Expiration Date, or (iii) the holder of
Outstanding Notes must comply with the guaranteed delivery procedures described
below.
Each exchanging holder of Outstanding Notes will be required to represent
in the Letter of Transmittal that such holder is acquiring the Exchange Notes in
the ordinary course of business, is not engaged in, and does not intend to
engage in, a distribution of Exchange Notes and is not an affiliate of the
Company or the Subsidiary Guarantors.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, LETTERS OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER
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OF OUTSTANDING NOTES. 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 ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO THE COMPANY.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Outstanding Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the
Outstanding 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 made by a
firm which is a member of a registered national securities exchange or a member
of the National Association of Securities Dealers, Inc. or by a commercial bank
or trust company having an office or correspondent in the United States
(collectively, "Eligible Institutions"). If Outstanding Notes are registered in
the name of a person other than a signer of the Letter of Transmittal, the
Outstanding 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 Outstanding 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 Outstanding Notes not properly tendered or to not
accept any particular Outstanding 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 Outstanding Notes either before or after the
Expiration Date. The interpretation of the terms and conditions of the Exchange
Offer as to any particular Outstanding 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 Outstanding
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 Outstanding Notes for exchange, nor
shall any of them incur any liability for failure to give such notification.
Tenders of Outstanding Notes received by the Exchange Agent that are not
properly tendered and as to which the irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holder, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Outstanding Notes, such Outstanding Notes
must be endorsed or accompanied by appropriate powers of attorney, in either
case signed exactly as the name or names of the registered holder or holders
that appear on the Outstanding Notes.
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If the Letter of Transmittal or any Outstanding 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 so act must be submitted.
In all cases, issuance of Exchange Notes for Outstanding 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 Outstanding Notes
or a timely Book-Entry Confirmation of such Outstanding Notes in the Exchange
Agent's account at the Book-Entry Transfer Facility, a properly completed and
duly executed Letter of Transmittal and all other required documents. If any
tendered Outstanding Notes are not accepted for any reason set forth in the
terms and conditions of the Exchange Offer or Outstanding Notes are submitted
for a greater principal amount than the holder thereof desires to exchange, such
unaccepted or non-exchanged Outstanding Notes will be returned without expense
to the tendering holder thereof (or, in the case of Outstanding Notes tendered
by book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry procedures described below, such
non-exchanged Outstanding Notes will be credited to an account maintained with
such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
Book-Entry Transfer
The Exchange Agent will make a request to establish an account with
respect to the Outstanding Notes at the Book-Entry Transfer Facility for
purposes of the Exchange Offer within two business days after the date of this
Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of
Outstanding Notes by causing the Book-Entry Transfer Facility to transfer such
Outstanding 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 Outstanding Notes may be effected
through book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal (or a copy thereof), with any required signature guarantees and any
other required documents, must, in any case, be transmitted to and received by
the Exchange Agent at the address set forth below under "--Exchange Agent" on or
prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
Acceptance of Outstanding Notes for Exchange; Delivery of Exchange Notes
Tenders of Outstanding Notes will be accepted only in principal amounts of
$1,000 and integral multiples thereof.
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will accept all Outstanding Notes validly tendered and not withdrawn
promptly prior to 5:00 P.M. on the Expiration Date. The Company will deliver
Exchange Notes in exchange for Outstanding Notes promptly following acceptance
of the Outstanding Notes.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Outstanding Notes when, as and if the Company has
given oral or written notice thereof to the Exchange Agent. The Exchange Agent
will act as agent for the tendering holders of Outstanding Notes for the
purposes of receiving the Exchange Notes. Under no circumstances will interest
be paid by the Company or the Exchange Agent by reason of any delay in making
such payment or delivery.
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The Company's acceptance for exchange of Outstanding Notes tendered
pursuant to the Exchange Offer will constitute a binding agreement between the
tendering holder and the Company upon the terms and subject to the conditions of
the Exchange Offer.
If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Outstanding Notes will be returned, at the
Company's expense, to the tendering holder thereof as promptly as practicable
after the expiration or termination of the Exchange Offer.
Guaranteed Delivery Procedures
If a registered holder of the Outstanding Notes desires to tender such
Outstanding Notes and the Outstanding Notes are not immediately available, or
time will not permit such holder's Outstanding 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 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 Outstanding Notes, the certificate number(s) of such Outstanding Notes
(except in the case of book-entry tenders) and the principal amount of
Outstanding Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three NYSE trading days after the Expiration Date, the
Letter of Transmittal (or a copy thereof) together with the certificates for all
physically tendered Outstanding Notes, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and any other documents required by
the Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) such properly completed and executed Letter of
Transmittal (or a copy thereof) together with the certificates for all
physically tendered Outstanding Notes, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and all other documents required by
the Letter of Transmittal, are received by the Exchange Agent within three NYSE
trading days after the Expiration Date.
Withdrawal Rights
Tenders of Outstanding Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address set forth below under "--Exchange
Agent." Any such notice of withdrawal must (i) specify the name of the person
having tendered the Outstanding Notes to be withdrawn, (ii) identify the
Outstanding Notes to be withdrawn (including the certificate numbers and
principal amount of such Outstanding Notes (except in the case of book-entry
tenders)), (iii) be signed by the holder of Outstanding Notes in the same manner
as the original signature on the Letter of Transmittal by which such Outstanding
Notes are tendered or be accompanied by sufficient documents of transfer and
(iv) specify the name in which such Outstanding Notes are registered, if
different from that of the withdrawing holder. If certificates for Outstanding
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 certificate numbers of the particular certificates to be withdrawn
and a signed notice of withdrawal with signatures guaranteed by an Eligible
Institution unless such holder of Outstanding Notes is an Eligible Institution.
If Outstanding Notes have been tendered for book-entry transfer as 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
Outstanding 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
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determined by the Company, whose determination shall be final and binding on all
parties. Any Outstanding Notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the Exchange Offer. Any
Outstanding Notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder (or, in the case of Outstanding Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such Outstanding
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility for the Outstanding Notes) as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Outstanding Notes may be retendered by following one of the procedures described
under "--Procedures for Tendering Outstanding 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 Exchange Notes in
exchange for, any Outstanding Notes and may terminate or amend the Exchange
Offer, if at any time before the acceptance of such Outstanding Notes for
exchange or the exchange of the Exchange Notes for such Outstanding Notes, any
of the following events shall occur:
(a) such acceptance or issuance would violate applicable law or any
applicable interpretation of the staff of the Commission;
(b) there shall be instituted or pending any action or proceeding by or
before any court or governmental agency with respect to the Exchange
Offer which, in the Company's sole judgment might impair the ability
of the Company to proceed with the Exchange Offer; or
(c) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation which, in the sole judgment of the Company, might
materially impair the ability of the Company to proceed with the
Exchange Offer.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its sole discretion. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Outstanding
Notes tendered, and no Exchange Notes will be issued in exchange for any such
Outstanding Notes, if at such time any stop order shall be threatened or in
effect with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939.
Exchange Agent
The 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 the
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be
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directed to the Exchange Agent, addressed as follows:
UNITED STATES TRUST COMPANY OF NEW YORK
By Facsimile: By Mail:
(212) 780-0592 United States Trust Company of New York
Attention: Customer Service P.O. Box 843 Cooper Station
Confirm by Telephone to: (800) 548-6565 New York, New York 10276
Attention: Corporate Trust Services
By Hand before 4:30 p.m.: By Overnight Courier
and By Hand after 4:30 p.m.:
United States Trust Company of New York United States Trust Company of New York
111 Broadway 770 Broadway, 13th Floor
New York, New York 10006 New York, New York 10003
Attention: Lower Level
Corporate Trust Window
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FAX TRANSMISSION OTHER THAN AS SET FORTH ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
Fees and Expenses
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The Company will pay certain other expenses to be incurred in connection
with the Exchange Offer, including the fees and expenses of the Exchange Agent,
accounting and certain legal fees.
Transfer Taxes
Holders who tender their Outstanding Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith, except that if a
holder of Outstanding Notes instructs the Company to register Exchange Notes in
the name of, or requests that Outstanding Notes not tendered or not accepted in
the Exchange Offer be returned to, a person other than the registered tendering
holder, or if a transfer tax is imposed for any reason other than the exchange
of Outstanding Notes pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder of the Outstanding
Notes or any other person) will be the responsibility of the registered
tendering holder.
Consequences of Failure to Exchange
Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Outstanding Notes as set forth in the
legend thereon as a consequence of the issuance of the Outstanding Notes
pursuant to exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Outstanding 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.
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The Company does not currently anticipate that it will register
Outstanding Notes under the Securities Act. To the extent that Outstanding Notes
are tendered in connection with the Exchange Offer, any trading market for
Outstanding Notes not tendered in connection with the Exchange Offer could be
adversely affected. The tender of Outstanding Notes pursuant to the Exchange
Offer may have an adverse effect upon, and increase the volatility of, the
market prices of the Outstanding Notes due to a reduction in liquidity.
Accounting Treatment
The Exchange Notes will be recorded at the same carrying value as the
Outstanding Notes, 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 expensed over the term of
the Exchange Notes.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Senior Credit Facilities
In connection with the Recapitalization, the Company entered into the
Senior Credit Facilities, consisting of $16 million in Term Loans and the $54
million Revolving Credit Facility, under which approximately $10.9 million of
letters of credit was issued at the closing of the Recapitalization (the
"Closing Date"). The Senior Credit Facilities mature on the fifth anniversary of
the Closing Date, and bear interest, at the Company's option, at either (i)
LIBOR plus 2.5% or (ii) the Alternate Base Rate plus 1.5%. The Alternate Base
Rate is defined as the highest of (x) Credit Suisse First Boston's prime rate,
(y) the federal funds effective rate plus 0.5% and (z) the three-month CD Rate
plus 1%. In addition, letters of credit will be available under the Revolving
Credit Facility in an aggregate amount not to exceed $16 million. Outstanding
letters of credit will require the Company to pay a participation fee equal to
2.5% per annum on the outstanding amount of letters of credit and a fronting fee
equal to 0.25% per annum on the outstanding amount of letters of credit.
The Company's obligations under the Senior Credit Facilities are
unconditionally guaranteed by each of the Subsidiary Guarantors on a joint and
several basis. In addition, the Senior Credit Facilities are secured by
substantially all the assets of the Company and the Subsidiary Guarantors.
The Credit Agreement contains certain covenants that, among other things,
restrict the ability of the Company and the Subsidiary Guarantors to: prepay,
redeem or repurchase subordinated or senior debt; create liens; engage in
sale-leaseback transactions; extend loans; make investments; incur indebtedness;
engage in mergers, acquisitions or asset sales; engage in transactions with
affiliates; change the nature of their businesses; amend debt and other material
agreements; and make capital expenditures. The Credit Agreement also prohibits
the Company and the Subsidiary Guarantors from declaring dividends on,
repurchasing or redeeming their capital stock, except that (a) the subsidiaries
of the Company may pay dividends to the Company, (b) the Company and its
subsidiaries may make certain payments to Holdings under tax sharing
arrangements, (c) the Company may pay dividends to Holdings solely in its
capital stock, (d) under certain circumstances, the Company may pay dividends to
Holdings to be used to pay its operating expenses, and (e) the Company may,
under certain circumstances, pay dividends of up to $500,000 in any calendar
year to Holdings to redeem capital stock of Holdings held by present and former
employees and directors.
In addition, the Credit Agreement requires the maintenance of certain
financial covenants, including a maximum Consolidated Leverage Ratio (as defined
in the Credit Agreement; a ratio of total debt to EBITDA (as defined in the
Credit Agreement)), a minimum Consolidated Interest Coverage Ratio (as defined
in the Credit Agreement; a ratio of EBITDA to interest expense) and a minimum
Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement; a
ratio of EBITDA to fixed charges) certain of which become more restrictive over
time as follows: Consolidated Leverage Ratio - 5.95 to 1.00 for fiscal 1998 to
3.25 to 1.00 following fiscal 2002; Consolidated Interest Coverage Ratio - 1.60
to 1.00 for fiscal 1998 to 2.50 to 1.00 following fiscal 2002; Consolidated
Fixed Charge Coverage Ratio - 1.00 to 1.00 for fiscal 1998 to 1.05 to 1.00
following fiscal 2002.
The Company is required to make mandatory prepayments of loans under the
Senior Credit Facilities in amounts equal to (i) 50% of Excess Cash Flow (as
defined in the Credit Agreement), (ii) 100% of the net cash proceeds from
certain asset sales by the Company or its subsidiaries, (iii) 100% of the net
cash proceeds from certain issuances of indebtedness by the Company, its
subsidiaries or Holdings and (iv) under certain circumstances, 50% of the net
cash proceeds from issuances of equity securities by the Company, its
subsidiaries or Holdings.
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Events of default under the Credit Agreement include, subject to cure
periods in certain circumstances, failure to pay principal or interest owed
under such agreement when due, violation of covenants contained therein, any
representation or warranty being materially incorrect when made, cross default
and cross acceleration to other indebtedness in a principal amount in excess of
$2,500,000, bankruptcy, material judgments, actual or asserted invalidity of the
guarantees or the security documents and a Change in Control (as defined in the
Credit Agreement).
Discount Debentures
In connection with the Recapitalization, Holdings sold the Discount
Debentures and Discount Warrants to the Oaktree Fund and Northstar for an
aggregate purchase price of $40 million. The Discount Debentures will not accrue
interest until June 15, 2002 except as described below. Thereafter, the Discount
Debentures will accrue interest at a rate of 13% per annum, payable semiannually
commencing December 15, 2002. The Discount Debentures mature on June 15, 2009
and are subject to redemption at the option of Holdings at any time, except that
prior to June 15, 2002 any such redemption can only be made from the proceeds of
certain public equity offerings.
The Discount Indenture requires Holdings to make a redemption payment in
2002 in the amount of $34 million with respect to the Discount Debentures so
that the Discount Debentures will not constitute "high yield discount
obligations" for federal income tax purposes. If the Discount Debentures were
high yield discount obligations, Holdings would be denied a deduction for a
small portion of the interest accruals on the Discount Debentures, and would be
entitled to deduct the remaining interest accruals (including accreted original
issue discount ("OID")) on the Discount Debentures, and would be entitled to
deduct the remaining interest and OID accruals only when actually paid. As a
result of the mandatory redemption the Discount Debentures will not constitute
high yield discount obligations, and Holdings will not be subject to such
limitations on the deductibility of such interest, and will be able to deduct
interest and OID on the Discount Debentures on an accrual basis.
In addition, in conjunction with the purchase of the Discount Debentures,
the Oaktree Fund was issued warrants to acquire up to 5,469 shares of Common
Stock and Northstar was issued warrants to acquire up to 1,262 shares of Common
Stock (representing, in the aggregate, approximately 20% of the
post-Recapitalization Common Stock outstanding on a fully diluted basis) for a
nominal exercise price. In addition, in conjunction with the Recapitalization,
the Oaktree Fund acquired 1,400 shares of Common Stock and 1,322 Common Stock
Purchase Warrants (representing in the aggregate approximately 8% of the
post-Recapitalization Common Stock outstanding on a fully diluted basis). In
addition, Holdings appointed a representative of the Oaktree Fund to the board
of directors of Holdings and the Company.
The Discount Debentures are senior obligations of Holdings and secured by
all the capital stock of RBC. The Discount Indenture contains certain covenants
and events of default similar to the covenants and events of default contained
in the Indenture. In addition, upon a Change of Control (as defined in the
Discount Indenture) or certain reductions in the ownership of Holdings by Dr.
Hartnett, each holder of Discount Debentures may require Holdings to repurchase
such Discount Debentures.
If an Event of Default (as defined in the Discount Indenture) occurs and
is continuing, including upon a failure to pay cash interest when due or to
repurchase the Discount Debentures upon a Change of Control (as defined in the
Discount Indenture) or otherwise, subject to the terms of the Discount
Indenture, the holders of the Discount Debentures will be able to accelerate the
maturity of the Discount Debentures and thereafter enforce their security
interest in the capital stock of RBC. Upon any such enforcement, the holders of
the Discount Debentures (or anyone that might purchase such capital stock in any
enforcement proceeding or public auction or in any resale by such holders) would
become shareholders of RBC and,
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as a group, would control (through their ownership of the common stock of RBC)
RBC and would be able to elect all the directors of RBC.
Holdings is a holding company, and the capital stock of RBC is the only
material asset of Holdings. In the absence of any additional financings by
Holdings, Holdings will be dependent on dividends and other distributions from
RBC to provide the cash needed to meet its debt service obligations.
For the benefit of the holders of the Discount Debentures, Holdings has
agreed to file a shelf registration statement with the SEC covering the resale
of the Discount Debentures. In the event that Holdings fails to comply with
certain of its obligations with respect to such registration statement, cash
interest will be payable with respect to the Discount Debentures in an amount
equal to 0.5% of the accrued value of the Discount Debentures at such time.
DESCRIPTION OF THE NOTES
General
The Exchange Notes are to be issued under the Indenture, dated as of June
15, 1997 between the Company and United States Trust Company of New York, as
Trustee (the "Trustee") pursuant to which the Outstanding Notes were issued on
June 23, 1997.
The following is a summary of all material provisions of the Indenture and
the Exchange Notes, a copy of which Indenture and the form of Exchange Note is
excluded as an exhibit to the Registration Statement of which this Prospectus
constitutes a part and is available upon request to the Company at the address
set forth under "Available Information." The following summary of all material
provisions of the Indenture 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. Except as
otherwise indicated below, the following summary applies to both the Outstanding
Notes and the Exchange Notes offered hereby. The terms of the Exchange Notes
will be identical in all respects to those of the Outstanding Notes, except for
the freely tradeable character of the Exchange Notes (provided the Holder
thereof is not an affiliate of the Company) and the absence of certain
registration rights granted to holders of the Outstanding Notes. See "The
Exchange Offer--Purpose and Effects." The Exchange Notes will be issued solely
in exchange for an equal principal amount of Outstanding Notes pursuant to the
Exchange Offer made hereby.
The Notes are and will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000. No
service charge shall be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection
therewith.
Many defined terms used in this section and throughout this Prospectus are
defined in the "Certain Definitions" section beginning on page 100 below.
Terms of the Notes
The Notes are unsecured senior subordinated obligations of the Company,
limited to $110 million aggregate principal amount, and will mature on June 15,
2007. The Exchange Notes will bear interest at the rate per annum shown on the
cover page hereof from the date of issuance thereof (______, 1997
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unless the Exchange Offer is extended) 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 June 1 or December 1 immediately
preceding the interest payment date on June 15 and December 15 of each year,
commencing _________________. Interest on the Outstanding Notes which are
exchanged for Exchange Notes pursuant to the Exchange Offer will cease to accrue
on the day preceding the date of issuance of the Exchange Notes, and such
accrued interest will be paid on _________________, the first interest payment
date following the consummation of the Exchange Offer, to holders of record of
the Notes as of ________________. The Company will pay interest on overdue
principal at 1% per annum in excess of such rate, and it will pay interest on
overdue installments of interest at such higher rate to the extent lawful.
Interest will be computed based on a 360-day year of twelve 30-day months.
Optional Redemption
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Company prior to June 15, 2002. Thereafter, the
Notes will be redeemable, at the Company's option, in whole or in part, at any
time or from time to time, upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each Holder's registered address, at the
following redemption prices (expressed in percentages of principal amount), plus
accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
June 15 of the years set forth below:
Redemption
Period Price
- ------ -----
2002 .......................................................... 104.8125%
2003 .......................................................... 103.2083
2004 .......................................................... 101.6041
2005 and thereafter............................................. 100.0000
In addition, at any time and from time to time prior to June 15, 2000, the
Company may redeem in the aggregate up to $36.0 million principal amount of the
Notes with the proceeds of one or more Public Equity Offerings following which
there is a Public Market (provided that a portion of the net cash proceeds
thereof equal to the amount required to redeem any such Notes is contributed to
the equity capital of the Company), at a redemption price (expressed as a
percentage of principal amount) of 109.625% plus accrued interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least $74.0 million aggregate principal amount of the
Notes must remain outstanding after each such redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before any redemption date to each holder of Notes to be redeemed at its
registered address. Notes in denominations larger than $1,000 may be redeemed in
part but only in whole multiples of $1,000. If money sufficient to pay the
redemption price of and accrued interest (if any) on all Notes (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date, on and after such date interest ceases
to accrue on such Notes (or such portions thereof) called for redemption.
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In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such 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.
Subsidiary Guarantees
The obligations of the Company pursuant to the Notes, including the
repurchase obligation resulting from a Change of Control, are fully and
unconditionally guaranteed, jointly and severally, on a senior subordinated
basis, by each of the Subsidiary Guarantors. However, each Subsidiary Guarantee
will be limited in amount to an amount not to exceed the maximum amount that can
be guaranteed by the applicable Subsidiary Guarantor without rendering the
Subsidiary Guarantee, as it relates to such Subsidiary Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. If a Subsidiary
Guarantee were to be rendered voidable, it could be subordinated by a court to
all other indebtedness (including guarantees and other contingent liabilities)
of the applicable Subsidiary Guarantor, and, depending on the amount of such
indebtedness, a Subsidiary Guarantor's liability on its Subsidiary Guarantee
could be reduced to zero. See "Risk Factors-Ranking of the Exchange Notes and
Subsidiary Guarantees" and "-Fraudulent Transfer Considerations."
Pursuant to the Indenture, a Subsidiary Guarantor may consolidate with,
merge with or into or transfer all or substantially all its assets to any other
Person to the extent described below under "-Certain Covenants-Merger and
Consolidation;" provided, however, that if such other Person is not the Company
or another Subsidiary Guarantor, such Subsidiary Guarantor's obligations under
its Subsidiary Guarantee must be expressly assumed by such other Person.
However, upon the sale or other disposition (including by way of consolidation
or merger) of a Subsidiary Guarantor or the sale or disposition of all or
substantially all the assets of a Subsidiary Guarantor (in each case other than
to an Affiliate of the Company) permitted by the Indenture, such Subsidiary
Guarantor will be released and relieved from all its obligations under its
Subsidiary Guarantee.
Ranking
The indebtedness evidenced by the Notes and the Subsidiary Guarantees will
be senior subordinated, unsecured obligations of the Company and the Subsidiary
Guarantors, as the case may be. The payment of the principal of, premium (if
any) and interest on the Notes and each Subsidiary Guarantee is subordinate in
right of payment, as set forth in the Indenture, to the prior payment in full of
all Senior Indebtedness of the Company or such Subsidiary Guarantor, as the case
may be, whether outstanding on the Issue Date or thereafter incurred, including
the obligations of the Company and the Subsidiary Guarantors under the Senior
Credit Facilities.
As of September 29, 1997, the Company's Senior Indebtedness was
approximately $26.5 million, and the Company had the ability to borrow up to an
additional $43.1 million under the Revolving Credit Facility. Although the
Indenture contains limitations on the amount of additional Indebtedness that the
Company may incur, under certain circumstances the amount of such Indebtedness
could be substantial and, in any case, such Indebtedness may be Senior
Indebtedness. See "-Certain Covenants-Limitation on Indebtedness."
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A substantial portion of the operations of the Company are conducted
through its subsidiaries. Claims of creditors of such subsidiaries, including
trade creditors, secured creditors and creditors holding indebtedness and
guarantees issued by such subsidiaries, and claims of preferred stockholders (if
any) of such subsidiaries generally will have priority with respect to the
assets and earnings of such subsidiaries over the claims of creditors of the
Company, including holders of the Notes, even though such obligations will not
constitute Senior Indebtedness. The Notes and each Subsidiary Guarantee,
therefore, will be effectively subordinated to creditors (including trade
creditors) and preferred stockholders (if any) of subsidiaries of the Company
(other than, as to a Subsidiary Guarantee, creditors of such Subsidiary
Guarantor). At the time of issuance of the Outstanding Notes, all the operating
subsidiaries of the Company were Subsidiary Guarantors. The Indenture limits the
incurrence of Indebtedness and preferred stock of certain of the Company's
subsidiaries, including the Subsidiary Guarantors. However, the Indenture does
not impose any limitation on the incurrence by such subsidiaries of liabilities
that are not considered Indebtedness or Preferred Stock under the Indenture. See
"-Certain Covenants-Limitation on Indebtedness."
Only Indebtedness of the Company or a Subsidiary Guarantor that is Senior
Indebtedness will rank senior to the Notes or the relevant Subsidiary Guarantee
in accordance with the provisions of the Indenture. The Notes and each
Subsidiary Guarantee will in all respects rank pari passu with all other Senior
Subordinated Indebtedness of the Company or the relevant Subsidiary Guarantor,
as the case may be. The Company and each Subsidiary Guarantor has agreed in the
Indenture that it will not Incur, directly or indirectly, any Indebtedness that
is subordinate or junior in ranking in right of payment to its Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness.
Unsecured Indebtedness is not deemed to be subordinated or junior to Secured
Indebtedness merely because it is unsecured.
The Company may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"-Defeasance" below and may not repurchase, redeem or otherwise retire any Notes
(collectively, "pay the Notes") if (i) any Obligations with respect to its
Senior Indebtedness are not paid when due or (ii) any other default on Senior
Indebtedness 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 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 such 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
(but subject to the provisions described in the first sentence of this
paragraph), unless the holders of such Designated Senior Indebtedness or the
Representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness, the Company may resume payments on the Notes after the end
of such Payment Blockage Period. The Notes shall not be subject to more than one
Payment
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Blockage Period in any consecutive 360-day period, irrespective of the number of
defaults with respect to Designated Senior Indebtedness during such period;
provided, however, that 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; provided further, however, that
in no event may the total number of days during which any 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 will
be entitled to receive payment in full in cash of such Senior Indebtedness
before the Noteholders are entitled to receive any payment, and until the Senior
Indebtedness 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 such Senior Indebtedness. If a distribution is made to
Noteholders that, due to the subordination provisions, should not have been made
to them, such Noteholders are required to hold it in trust for the holders of
Senior Indebtedness and pay it over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of Senior Indebtedness
or the Representative of such holders of the acceleration.
The obligations of a Subsidiary Guarantor under its Subsidiary Guarantee
are senior subordinated obligations. As such, the rights of Noteholders to
receive payment by a Subsidiary Guarantor pursuant to a Subsidiary Guarantee
will be subordinated in right of payment to the rights of holders of Senior
Indebtedness of such Subsidiary Guarantor. The terms of the subordination
provisions described above with respect to the Company's obligations under the
Notes apply equally to a Subsidiary Guarantor and the obligations of such
Subsidiary Guarantor under its Subsidiary Guarantee.
By reason of the subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company or a Subsidiary Guarantor who
are holders of Senior Indebtedness may recover more, ratably, than the
Noteholders, and creditors of the Company or a Subsidiary Guarantor who are not
holders of Senior Indebtedness may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than the Noteholders.
The terms of the subordination provisions described above will not apply
to payments from money or the proceeds of U.S. Government Obligations held in
trust by the Trustee for the payment of principal of and interest on the Notes
pursuant to the provisions described under "-Defeasance."
Book-Entry, Delivery and Form
The Exchange Notes sold will be issued in the form of a Global Exchange
Note. The Global Exchange Note will be deposited with, or on behalf of, the
Depository and registered in the name of the Depository or its nominee. Except
as set forth below, the Global Exchange Note may be transferred, in whole and
not in part, only to the Depository or another nominee of the Depository.
Investors may hold their beneficial interests in the Global Exchange Note
directly through the Depository if they have an account with the Depository or
indirectly through organizations which have accounts with the Depository.
Notes that are issued as described below under "Certificated Notes" will
be issued in definitive form. Upon the transfer of a Note in definitive form,
such Note will, unless the Global Exchange Note
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has previously been exchanged for Notes in definitive form, be exchanged for an
interest in the Global Exchange Note representing the principal amount of Notes
being transferred.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (which may
include the Initial Purchaser), banks, trust companies, clearing corporations
and certain other organizations. Access to the Depository's book-entry system is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
whether directly or indirectly.
Upon the issuance of the Global Exchange Note, the Depository will credit,
on its book-entry registration and transfer system, the principal amount of the
Notes represented by such Global Exchange Note to the accounts of participants.
Ownership of beneficial interests in the Global Exchange Note will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the Global Exchange Note will be shown on, and the
transfer of those ownership interests will be effected only through, records
maintained by the Depository (with respect to participants' interest) and such
participants (with respect to the owners of beneficial interests in the Global
Exchange Note other than participants). The laws of some jurisdictions may
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and laws may impair the ability to
transfer or pledge beneficial interests in the Global Exchange Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Exchange Note, the Depository or such nominee, as the case
may be, will be considered the sole legal owner and holder of the related
Exchange Notes for all purposes of such Exchange Notes and the Indenture. Except
as set forth below, owners of beneficial interests in the Global Exchange Note
will not be entitled to have the Exchange Notes represented by the Global
Exchange Note registered in their names, will not receive or be entitled to
receive physical delivery of certificated Exchange Notes in definitive form and
will not be considered to be the owners or holders of any Exchange Notes under
the Global Exchange Note. The Company understands that under existing industry
practice, in the event an owner of a beneficial interest in the Global Exchange
Note desires to take any action that the Depository, as the holder of the Global
Exchange Note, is entitled to take, the Depository would authorize the
participants to take such action, and that the participants would authorize
beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Payment of principal of and interest on Exchange Notes represented by the
Global Exchange Note registered in the name of and held by the Depository or its
nominee will be made to the Depository or its nominee, as the case may be, as
the registered owner and holder of the Global Exchange Note.
The Company expects that the Depository or its nominee, upon receipt of
any payment of principal of or interest on the Global Exchange Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Exchange
Note as shown on the records of the Depository or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in the
Global Exchange Note held through such
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participants will be governed by standing instructions and customary practices
and will be the responsibility of such participants. The Company will not have
any responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the Global
Exchange Note for any Exchange Note or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests or for any other
aspect of the relationship between the Depository and its participants or the
relationship between such participants and the owners of beneficial interests in
the Global Exchange Note owning through such participants.
Unless and until it is exchanged in whole or in part for certificated
Exchange Notes in definitive form, the Global Exchange Note may not be
transferred except as a whole by the Depository to a nominee of such Depository
or by a nominee of such Depository to such Depository or another nominee of such
Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Exchange Note among participants
of the Depository, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Trustee nor the Company will have any responsibility for the performance by
the Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
Certificated Notes
The Exchange Notes represented by the Global Exchange Note are
exchangeable for certificated Exchange Notes in definitive form of like tenor as
such Exchange Notes in denominations of U.S. $1,000 and integral multiples
thereof if (i) the Depository notifies the Company that it is unwilling or
unable to continue as Depository for the Global Exchange Note or if at any time
the Depository ceases to be a clearing agency registered under the Exchange Act
and a successor depository is not appointed by the Company within 90 days, (ii)
the Company in its discretion at any time determines not to have all of the
Exchange Notes represented by the Global Exchange Note or (iii) an Event of
Default has occurred and is continuing. Any Exchange Note that is exchangeable
pursuant to the preceding sentence is exchangeable for certificated Exchange
Notes issuable in authorized denominations and registered in such names as the
Depository shall direct. Subject to the foregoing, the Global Exchange Note is
not exchangeable, except for a Global Exchange Note of the same aggregate
denomination to be registered in the name of the Depository or its nominee.
Same-Day Payment
The Indenture requires that payments in respect of Notes (including
principal, premium and interest) be made by wire transfer of immediately
available funds to the accounts specified by the holders thereof or, if no such
account is specified, by mailing a check to each such holder's registered
address.
Registration Rights
The holders of Exchange Notes will not be entitled to any registration
rights with respect to the Exchange Notes. Pursuant to the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus constitutes a part, the Company is required
to have declared effective by the SEC no later than December 22, 1997 a
registration statement with respect to the Exchange Offer (or, if not
practicable, a "shelf" registration statement for an offering on a continuous
basis of Outstanding Notes). The Registration Statement, of which this
Prospectus constitutes a part, constitutes the registration statement for the
Exchange Offer. In the event the Registration
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Statement (or a shelf registration statement) is not timely declared effective
as aforementioned, additional interest will accrue on the Outstanding Notes at
the rate of 0.50% per annum from and including December 22, 1997 but excluding
the date upon which such default shall have been cured.
Assuming consummation of the Exchange Offer made hereby, all of the
Company's registration obligations with respect to the Outstanding Notes under
the Registration Rights Agreement will have been fulfilled.
Change of Control
Upon the occurrence of any of the following events (each a "Change of
Control"), each Noteholder will have the right to require that the Company
repurchase such Noteholder's Notes at a purchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date):
(i)(A) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that for purposes of this clause (i) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 35% of the total voting power of
the Voting Stock of the Parent and (B) the Permitted Holders beneficially own
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, in the aggregate less than 30% of the total voting power of the
Voting Stock of the Parent and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the Board
of Directors (for the purposes of this clause (i), such other person shall be
deemed to beneficially own any Voting Stock of a specified Person held by
another Person (the "parent entity"), if such other person is the beneficial
owner (as defined at the beginning of this clause (i)), directly or indirectly,
of more than 35% of the voting power of the Voting Stock of such parent entity
and the Permitted Holders beneficially own (as defined in this clause), directly
or indirectly, in the aggregate a lesser percentage of the voting power of the
Voting Stock of such parent entity and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of such parent entity); (ii) during any
period of two consecutive years following the first date on which the Parent
becomes subject to the proxy rules under the Exchange Act, individuals who at
the beginning of such period constituted the Board of Directors of the Parent
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Parent was approved by
a vote of 66-2/3% of the directors of the Parent then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Parent then in office; (iii) the
merger or consolidation of the Parent or the Company with or into another Person
or the merger of another Person with or into the Parent or the Company, or the
sale of all or substantially all the assets of the Company to another Person
(other than, in each such case, a Person that is controlled by the Permitted
Holders), and, in the case of any such merger or consolidation, the securities
of the Parent or the Company that are outstanding immediately prior to such
transaction and which represent 100% of the aggregate voting power of the Voting
Stock of the Parent or the Company are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such securities are
changed into or exchanged for, in addition to any other consideration,
securities of the surviving corporation that represent immediately after such
transaction, at least a majority of the aggregate voting power of the Voting
Stock of the surviving corporation; or (iv) the Parent ceases to own, directly
or indirectly, all the Capital Stock of the Company other than as a result of
the merger or consolidation of the Parent with the Company.
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The meaning of the phrase "all or substantially all" as used above varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear whether the foregoing provisions are applicable.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Noteholder with a copy to the Trustee stating: (1) that a Change
of Control has occurred and that such Noteholder has the right to require the
Company to purchase such Noteholder'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 on the relevant interest payment date);
(2) the repurchase date (which, except as otherwise required by law, shall be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed); and (3) the instructions determined by the Company, consistent with the
covenant described hereunder, that a Noteholder must follow in order to have its
Notes purchased.
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The Change of Control repurchase feature is a result of negotiations
between the Company and the Initial Purchaser. Management has no present
intention to engage in a transaction involving a Change of Control, although it
is possible that the Company would decide to do so in the future. Subject to the
limitations discussed below, the Company could, in the future, enter into
certain transactions, including acquisitions, refinancings 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.
Restrictions on the ability of the Company to incur additional Indebtedness are
contained in the covenants described under "-Certain Covenants-Limitation on
Indebtedness." Such restrictions can only be waived with the consent of the
holders of a majority in principal amount of the Notes then outstanding. Except
for the limitations contained in such covenants, however, the Indenture does not
contain any covenants or provisions that may afford holders of the Notes
protection in the event of a highly leveraged transaction.
The Senior Credit Facilities will prohibit the Company from purchasing any
Notes, and will also provide that the occurrence of certain change of control
events with respect to the Company would constitute a default thereunder. In the
event a Change of Control occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
the Senior Credit Facilities. In such circumstances, the subordination
provisions in the Indenture would likely restrict payment to the holders of
Notes.
Future indebtedness of the Company may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such indebtedness to be repurchased upon a Change
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of Control. Moreover, the exercise by the holders of Notes of their right to
require the Company to repurchase the Notes could cause a default under such
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 of Notes following the occurrence of a Change
of Control may be limited by the Company's then existing financial resources.
There can be no assurance that sufficient funds will be available when necessary
to make any required repurchases. The provisions under the Indenture relative to
the Company's obligation to make an offer to repurchase the Notes as a result of
a Change of Control may be waived or modified with the written consent of the
holders of a majority in principal amount of the Notes.
Certain Covenants
The Indenture contains covenants including the following:
Limitation on Indebtedness. (a) The Company shall not, and shall not
permit any Restricted Subsidiary to, Incur, directly or indirectly, any
Indebtedness except that the Company may Incur Indebtedness if, on the date of
such Incurrence and after giving effect thereto, the Consolidated Coverage Ratio
exceeds 2.0 to 1.0 if such Indebtedness is Incurred prior to June 15, 2000 or
2.25 to 1.0 if such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness of the Company or any Restricted Subsidiary
Incurred pursuant to the Revolving Credit Facilities; provided, however,
that, immediately after giving effect to any such Incurrence, the
aggregate principal amount of all Indebtedness incurred under this clause
(1) and then outstanding does not exceed the greater of (A) $54.0 million
less the sum of all principal payments actually made from time to time
after the Issue Date with respect to such Indebtedness pursuant to clause
(a)(ii)(A) under the covenant described under "-Limitations on Sales of
Assets and Subsidiary Stock" and (B) the sum of 50% of the book value of
the consolidated inventory of the Company and its Restricted Subsidiaries
and 85% of the book value of the consolidated accounts receivables of the
Company and its Restricted Subsidiaries;
(2) Indebtedness of the Company or any Restricted Subsidiary
Incurred pursuant to the Term Loan Facilities; provided, however, that
after giving effect to any such Incurrence, the aggregate principal amount
of all Indebtedness Incurred under this clause (2) and then outstanding
does not exceed $16.0 million less the aggregate sum of all principal
payments actually made from time to time after the Issue Date with respect
to such Indebtedness (other than principal payments made from any
permitted Refinancings thereof);
(3) Indebtedness of the Company or any Restricted Subsidiary owed to
and held by the Company or a Wholly Owned Subsidiary; provided, however,
that any subsequent issuance or transfer of any Capital Stock which
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of such Indebtedness (other than to
the Company or another Wholly Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the issuer
thereof;
(4) the Outstanding Notes and the Exchange Notes;
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(5) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3) or (4) of this covenant);
(6) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (4) or (5) or this clause
(6);
(7) (i) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred pursuant to the
Indenture, (ii) surety bonds Incurred in the ordinary course of business
and (iii) self-insurance arrangements;
(8) Indebtedness consisting of the Subsidiary Guarantees and the
Guarantees of Indebtedness Incurred pursuant to paragraph (a) or pursuant
to clause (1), (2), (4), (5) and (6) above and (9) below; and
(9) Indebtedness in an aggregate principal amount which, together
with all other Indebtedness of the Company outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (1) through (8)
above or paragraph (a)), does not exceed $10.0 million.
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof are
used, directly or indirectly, to Refinance any Subordinated Obligations unless
such Indebtedness shall be subordinated to the Notes to at least the same extent
as such Subordinated Obligations.
(d) For purposes of determining compliance with the foregoing covenant,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described above.
(e) Notwithstanding paragraphs (a) and (b) above, the Company shall not,
and shall not permit any Subsidiary Guarantor to, Incur (i) any Indebtedness if
such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness of the Company or such Subsidiary Guarantor, as applicable,
unless such Indebtedness is Senior Subordinated Indebtedness or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness or (ii) any
Secured Indebtedness that is not Senior Indebtedness of the Company or such
Subsidiary Guarantor unless contemporaneously therewith effective provision is
made to secure the Notes equally and ratably with such Secured Indebtedness for
so long as such Secured Indebtedness is secured by a Lien.
Limitation on Restricted Payments. (a) The Company shall not, and shall
not permit any Restricted Subsidiary, directly or indirectly, to make a
Restricted Payment if at the time the Company or such Restricted Subsidiary
makes such Restricted Payment: (1) a Default shall have occurred and be
continuing (or would result therefrom); (2) the Company is not able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant
described under "-Limitation on Indebtedness;" or (3) the aggregate amount of
such Restricted Payment and all other Restricted Payments since the Issue Date
would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during
the period (treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the Notes are
originally issued to the end of the most recent fiscal quarter for which
financial statements are available (or, in case such Consolidated Net Income
shall be a deficit, minus 100% of such deficit); (B) the aggregate Net Cash
Proceeds received by the Company from the issuance or sale of its Capital Stock
(other than Disqualified Stock) subsequent to the Issue Date (other than an
issuance
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or sale to a Subsidiary of the Company and other than an issuance or
sale to an employee stock ownership plan or to a trust established by the
Company or any of its Subsidiaries for the benefit of their employees); (C) the
amount by which Indebtedness of the Company or its Restricted Subsidiaries is
reduced on the Company's consolidated balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Company) subsequent to the Issue
Date of any Indebtedness of the Company or any Restricted Subsidiary for Capital
Stock (other than Disqualified Stock) of the Company (less the amount of any
cash, or the fair value of any other property, distributed by the Company upon
such conversion or exchange); and (D) an amount equal to the sum of (i) the net
reduction in Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances or other transfers of assets, in each case to
the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, and
(ii) the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of an Unrestricted
Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted
Subsidiary; provided, however, that the foregoing sum shall not exceed, in the
case of any Unrestricted Subsidiary, the amount of Investments previously made
(and treated as a Restricted Payment) by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary. (b) The provisions of the foregoing
paragraph (a) shall not prohibit: (i) any Restricted Payment made out of the
proceeds of the substantially concurrent sale of, or any acquisition of any
Capital Stock of the Company made by exchange for, Capital Stock of the Company
(other than Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of the Company or an employee stock ownership plan or to a trust
established by the Company or any of its Subsidiaries for the benefit of their
employees); provided, however, that (A) such Restricted Payment shall be
excluded in the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale shall be excluded from the calculation of amounts
under clause (3)(B) of paragraph (a) above; (ii) any purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value of
Subordinated Obligations 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 the covenant described under "-Limitation on
Indebtedness;" provided, however, that such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value shall be excluded in the
calculation of the amount of Restricted Payments; (iii) dividends paid within 60
days after the date of declaration thereof if at such date of declaration such
dividend would have complied with this covenant; provided, however, that at the
time of payment of such dividend, no other Default shall have occurred and be
continuing (or result therefrom); provided further, however, that such dividend
shall be included in the calculation of the amount of Restricted Payments; (iv)
dividends to the Parent to be used for the repurchase or other acquisition of
shares of, or options or warrants to purchase shares of, common stock of the
Parent from employees, former employees, directors or former directors of the
Parent or any of its Subsidiaries (or permitted transferees of such employees,
former employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements), plans (or amendments thereto) or
other arrangements approved by the board of directors of the Parent under which
such individuals purchase or sell or are granted the option to purchase or sell,
shares of such common stock; provided, however, that the aggregate amount of
such dividends shall not exceed $500,000 in any calendar year; provided further,
however, that such dividends shall be excluded in the calculation of the amount
of Restricted Payments; (v) any payment by the Company to the Parent pursuant to
the Tax Sharing Agreement; provided, however, that the amount of any such
payment shall not exceed the amount of taxes that the Company would have been
liable for on a stand-alone basis; provided further, however, that such payment
shall be excluded in the calculation of the amount of Restricted Payments; (vi)
dividends to the Parent to the extent required to pay non-deferrable scheduled
cash interest when due on the Discount Debentures and any additional cash
interest (at a rate not to exceed 1/2 of 1% per annum) payable with respect to
the Discount Debentures as a result of Parent's failure to comply with its
obligations to register the Discount Debentures; provided, however, that (A) no
Default shall have occurred and be continuing (or would result therefrom), (B)
the Parent shall immediately apply any such dividend to make such cash
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interest payment and (C) except in the case of such additional interest,
immediately after giving effect to any such dividend, the Company would be able
to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the
covenant described under "-Limitation on Indebtedness;" provided further,
however, that such dividends shall be included in the calculation of the amount
of Restricted Payments; (vii) dividends to the Parent to the extent necessary to
pay for general corporate and overhead expenses incurred by the Parent;
provided, however, that such dividends shall not exceed $500,000 in any calendar
year; provided further, however, that such dividends shall be excluded in the
calculation of the amount of Restricted Payments; (viii) a dividend to the
Parent on the Issue Date of $57.7 million; provided, however, that such dividend
shall be excluded in the calculation of the amount of Restricted Payments; and
(ix) a dividend or distribution by the Company to the Parent on December 15,
2002 to be used to fund the mandatory redemption on such date of Discount
Debentures pursuant to the terms thereof; provided, however, that (a) the amount
of such dividend or distribution may not exceed the lesser of (1) $34 million
and (2) the amount which when added to other available funds of the Parent on
such date are sufficient to satisfy the Parent's obligation to make such
mandatory redemption, (b) Parent applies such dividend to make such redemption
on December 15, 2002, (c) on the date of payment of such dividend and after
giving effect thereto, the Consolidated Debt Ratio does not exceed 3.0 to 1.0
and (d) that at the time of payment of such dividend, no other Default shall
have occurred and be continuing (or result therefrom); provided further,
however, that such dividend shall be included in the calculation of the amount
of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall 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 (a)
pay dividends or make any other distributions on its Capital Stock to the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(b) make any loans or advances to the Company or (c) transfer any of its
property or assets to the Company, except: (i) any encumbrance or restriction
pursuant to an agreement in effect at or entered into on the Issue Date,
including the Credit Agreement; (ii) any encumbrance or restriction with respect
to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding on such date; (iii)
any encumbrance or restriction pursuant to an agreement effecting a Refinancing
of Indebtedness Incurred pursuant to an agreement referred to in clause (i) or
(ii) of this covenant or this clause (iii) or contained in any amendment to an
agreement referred to in clause (i) or (ii) of this covenant or this clause
(iii); provided, however, that the encumbrances and restrictions with respect to
such Restricted Subsidiary contained in any such refinancing agreement or
amendment are no less favorable to the Noteholders than encumbrances and
restrictions with respect to such Restricted Subsidiary contained in such
predecessor agreements; (iv) any such encumbrance or restriction consisting of
customary non assignment provisions in leases governing leasehold interests
solely to the extent such provisions restrict the transfer of the lease or the
property leased thereunder; (v) in the case of clause (c) above, restrictions
contained in security agreements, mortgages or leases securing Indebtedness of a
Restricted Subsidiary solely to the extent such restrictions restrict the
transfer of the property subject to such security agreements or mortgages; (vi)
any restriction with respect to a Restricted Subsidiary imposed pursuant to an
agreement entered into for the sale or disposition of all or substantially all
the Capital Stock or assets of such Restricted Subsidiary pending the closing of
such sale or disposition; and (vii) any restriction imposed by applicable law.
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Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) the Company or such Restricted
Subsidiary receives consideration at the time of such Asset Disposition at least
equal to the fair market value (including as to the value of all non-cash
consideration), as determined in good faith by the Board of Directors, of the
shares and assets subject to such Asset Disposition and at least 75% of the
consideration thereof received by the Company or such Restricted Subsidiary is
in the form of cash or cash equivalents and (ii) 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) at the Company's option to
either (A) prepay, repay, redeem or purchase Senior Indebtedness or Indebtedness
(other than any Disqualified Stock) of a Wholly Owned Subsidiary (in each case
other than Indebtedness owed to the Company or an Affiliate of the Company) or
(B) acquire Additional Assets, in each case, within one year from the later of
the date of such Asset Disposition or the receipt of such Net Available Cash;
provided, however, that in connection with any prepayment, repayment or purchase
of such Indebtedness, the Company or such Restricted Subsidiary shall
permanently retire such Indebtedness and shall cause the related loan commitment
(if any) to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. To the extent of the balance of such Net Available
Cash after application in accordance with clauses (A) and (B), the Company shall
make an offer to the holders of the Notes (and to holders of other Senior
Subordinated Indebtedness designated by the Company) to purchase Notes (and such
other Senior Subordinated Indebtedness) pursuant to and subject to the
conditions contained in the Indenture. Notwithstanding the foregoing provisions
of this paragraph, the Company and the Restricted Subsidiaries shall not be
required to apply any Net Available Cash in accordance with this paragraph
except to the extent that the aggregate Net Available Cash from all Asset
Dispositions which are not applied in accordance with this paragraph exceeds $10
million. Pending application of Net Available Cash pursuant to this covenant,
such Net Available Cash shall be invested in Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: (x) the assumption of Indebtedness of the Company or any
Restricted Subsidiary (other than Indebtedness Incurred in connection with or in
anticipation of such Asset Disposition) and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness in connection with
such Asset Disposition, (y) 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 and (z) Temporary Cash Investments.
(b) In the event of an Asset Disposition that requires the purchase of the
Notes (and other Senior Subordinated Indebtedness) pursuant to clause (a), the
Company will be required to purchase Notes tendered pursuant to an offer by the
Company for the Notes (and other Senior Subordinated Indebtedness) at a purchase
price of 100% of their principal amount (without premium) plus accrued but
unpaid interest (or, in respect of such other Senior Subordinated Indebtedness,
such lesser price, if any, as may be provided for by the terms of such Senior
Subordinated Indebtedness) in accordance with the procedures (including
prorating in the event of oversubscription) set forth in the Indenture. The
Company shall not be required to make such an offer to purchase Notes (and other
Senior Subordinated Indebtedness) pursuant to this covenant if the Net Available
Cash available therefor is less than $10 million (which lesser amount shall be
carried forward for purposes of determining whether such an offer is required
with respect to the Net Available Cash from any subsequent Asset Disposition).
(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict
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with provisions of this covenant, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this clause by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property, employee compensation arrangements or the rendering of
any service) or enter into any agreement, loan, advance or guarantee with any
Affiliate (other than a Joint Venture Affiliate) of the Company (an "Affiliate
Transaction") unless the terms thereof (1) are no less favorable to the Company
or such Restricted Subsidiary than those that could be obtained at the time of
such transaction in arm's-length dealings with a Person who is not such an
Affiliate, (2) if such Affiliate Transaction (or series of related Affiliate
Transactions) involves an amount in excess of $2 million, (i) are set forth in
writing and (ii) have been approved by a majority of the members of the Board of
Directors having no personal stake in such Affiliate Transaction and (3) if such
Affiliate Transaction (or series of related Affiliate Transactions) involves an
amount in excess of $10 million, have been determined by a nationally recognized
investment banking firm to be fair, from a financial standpoint, to the Company
and its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to the covenant described
under "-Limitation on Restricted Payments," (ii) any issuance of securities, or
other payments, awards or grants in cash, securities or otherwise, pursuant to,
or the funding of, employment arrangements, director fees, stock options and
stock ownership plans approved by the Board of Directors, (iii) the grant of
stock options or similar rights to employees and directors of the Company
pursuant to plans approved by the Board of Directors, (iv) loans or advances to
employees in the ordinary course of business in accordance with the past
practices of the Company or its Restricted Subsidiaries, but in any event not to
exceed $700,000 in the aggregate outstanding at any one time, (v) the payment of
reasonable fees to directors of the Company and its Restricted Subsidiaries who
are not employees of the Company or its Restricted Subsidiaries, (vi) any
Affiliate Transaction between the Company and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries and (vii) any Tax Sharing Agreement; provided,
however, that the aggregate amount payable by the Company pursuant thereto shall
not exceed the amount of taxes that the Company would have been liable for on a
stand-alone basis.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Company shall not sell or otherwise dispose of any Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to the Company or a Wholly Owned Subsidiary,
(ii) if, immediately after giving effect to such issuance, sale or other
disposition, neither the Company nor any of its Subsidiaries own any Capital
Stock of such Restricted Subsidiary or (iii) if, immediately after giving effect
to such issuance, sale or other disposition, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect thereto would have been permitted to be made under
the covenant described under "-Limitation on Restricted Payments" if made on the
date of such issuance, sale or other disposition.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all its assets to, any Person, unless: (i)
the resulting, surviving or transferee Person (the "Successor Company") shall be
a Person organized and existing under the laws of the United States of America,
any State thereof or the District of Columbia and the Successor Company (if not
the Company) shall expressly assume, by an indenture supplemental thereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee,
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all the obligations of the Company under the Notes and the Indenture; (ii)
immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been Incurred by such
Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant
described under "-Limitation on Indebtedness;" (iv) immediately after giving
effect to such transaction, the Successor Company shall have Consolidated Net
Worth in an amount that is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction; and (v) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture; provided, however, that clauses
(iii) and (iv) shall not apply to a merger or consolidation involving only the
Company and one or more Wholly Owned Subsidiaries. The Successor Company shall
be the successor to the Company and shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under the Indenture, but
the predecessor Company in the case of a conveyance, transfer or lease shall not
be released from the obligation to pay the principal of and interest on the
Notes.
The Company will not permit any Subsidiary Guarantor to consolidate with
or merge with or into, or convey, transfer or lease, in one transaction or a
series of transactions, all or substantially all of its assets to any Person
unless: (i) the resulting, surviving or transferee Person (if not such
Subsidiary) shall be a Person organized and existing under the laws of the
jurisdiction under which such Subsidiary was organized or under the laws of the
United States of America, or any State thereof or the District of Columbia, and
such Person shall expressly assume, by executing a Guaranty Agreement, all the
obligations of such Subsidiary, if any, under its Subsidiary Guarantee; (ii)
immediately after giving effect to such transaction or transactions on a pro
forma basis (and treating any Indebtedness which becomes an obligation of the
resulting, surviving or transferee Person as a result of such transaction as
having been issued by such Person at the time of such transaction), no Default
shall have occurred and be continuing; and (iii) the Company delivers to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such Guaranty Agreement, if any,
complies with the Indenture. The provisions of clauses (i) and (ii) above shall
not apply to any one or more transactions which constitute an Asset Disposition
if the Company has complied with the applicable provisions of the covenant
described under "-Limitation on Sales of Assets and Subsidiary Stock" above.
The meaning of the phrase "all or substantially all" as used above varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear whether the foregoing provisions are applicable.
Future Guarantors. In the event that, after the Issue Date, any Restricted
Subsidiary Incurs any Indebtedness pursuant to clause (1), (2) or (8) of
paragraph (b) of the covenant described under "-Certain Covenants-Limitation on
Indebtedness" above, the Company shall cause such Restricted Subsidiary to
Guarantee the Notes pursuant to a Subsidiary Guarantee on the terms and
conditions set forth in the Indenture and shall cause all Indebtedness of such
Restricted Subsidiary owing to the Company or any other Subsidiary of the
Company and not previously discharged to be converted into Capital Stock of such
Restricted Subsidiary (other than Disqualified Stock).
SEC Reports. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the SEC and provide the Trustee
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and Noteholders with such annual reports and such information, documents and
other reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections.
Defaults
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest or any Additional Amounts on the Notes when due, continued
for 30 days, (ii) a default in the payment of principal of any Note when due at
its Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, (iii) the failure by the Company to comply with its
obligations under "-Certain Covenants-Merger and Consolidation" above, (iv) the
failure by the Company to comply for 30 days after notice with any of its
obligations in the covenants described above under "-Change of Control" (other
than a failure to purchase Notes) or under "-Certain Covenants" under
"-Limitation on Indebtedness," "-Limitation on Restricted Payments,"
"-Limitation on Restrictions on Distributions from Restricted Subsidiaries,"
"-Limitation on Sales of Assets and Subsidiary Stock" (other than a failure to
purchase Notes), "-Limitation on Affiliate Transactions," "-Limitation on the
Sale or Issuance of Capital Stock of Restricted Subsidiaries," "-Future
Guarantors" or "-SEC Reports," (v) the failure by the Company to comply for 60
days after notice with its other agreements contained in the Indenture, (vi)
Indebtedness of the Company or any Significant Subsidiary is not paid within any
applicable grace period after final maturity or is accelerated by the holders
thereof because of a default and the total amount of such Indebtedness unpaid or
accelerated exceeds $5 million (the "cross acceleration provision"), (vii)
certain events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary (the "bankruptcy provisions"), (viii) any judgment or
decree for the payment of money in excess of $5 million is entered against the
Company or a Significant Subsidiary, remains outstanding for a period of 60 days
following such judgment and is not discharged, waived or stayed within 10 days
after notice (the "judgment default provision") or (ix) any Subsidiary Guarantee
ceases to be in full force and effect (other than in accordance with the terms
of such Subsidiary Guarantee) or any Subsidiary Guarantor denies or disaffirms
its obligations under its Subsidiary Guarantee, as the case may be. However, a
default under clauses (iv), (v) and (viii) will not constitute an Event of
Default until the Trustee or the holders of 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the outstanding Notes may declare
the principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately; provided, however, that if upon such declaration there are
any amounts outstanding under the Credit Agreement and the amounts thereunder
have not been accelerated, such principal and interest shall be due and payable
upon the earlier of the time such amounts are accelerated or five Business Days
after receipt by the Company and the Representative under the Credit Agreement
of such declaration. 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 ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holders of the Notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences. Subject to the provisions of the Indenture relating to the duties
of the Trustee, in case an Event of Default occurs and is continuing, the
Trustee will be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any of the holders of the
Notes unless such holders have offered to the Trustee reasonable indemnity or
security against any loss, liability or expense. Except to enforce the right to
receive payment of principal, premium (if any) or interest when
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due, no holder of a Note may pursue any remedy with respect to the Indenture or
the Notes unless (i) such holder has previously given the Trustee notice that an
Event of Default is continuing, (ii) holders of at least 25% in principal amount
of the outstanding Notes have requested the Trustee to pursue the remedy, (iii)
such holders have offered the Trustee reasonable security or indemnity against
any loss, liability or expense, (iv) the Trustee has not complied with such
request within 60 days after the receipt thereof and the offer of security or
indemnity and (v) the holders of a majority in principal amount of the
outstanding Notes have not given the Trustee a direction inconsistent with such
request within such 60-day period. Subject to certain restrictions, the holders
of a majority in principal amount of the outstanding Notes are given the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that conflicts
with law or the Indenture or that the Trustee determines is unduly prejudicial
to the rights of any other holder of a Note or that would involve the Trustee in
personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its trust officers determines that
withholding notice is not opposed to the interest of the holders of the Notes.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
Amendments and Waivers
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or compliance with any provisions
may also be waived with the consent of the holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each
holder of an outstanding Note affected thereby, no amendment may (i) reduce the
principal amount at maturity of Notes whose holders must consent to an
amendment, (ii) reduce the rate of or extend the time for payment of interest on
any Note, (iii) reduce the principal of or extend the Stated Maturity of any
Note, (iv) reduce the amount 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 of Notes to receive payment of
principal of and interest on such holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such holder's Notes, (vii) make any change in the amendment
provisions which require each holder's consent or in the waiver provisions or
(viii) make any change to the subordination provisions of the Indenture that
would adversely affect the Noteholders. In addition, without the consent of
holders of at least 75% of the outstanding Notes, no amendment may release a
Subsidiary Guarantor from its Subsidiary Guarantee or make any change in any
Subsidiary Guarantee that would adversely affect the Noteholders.
Without the consent of any holder of Notes, 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
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described in Section 163(f)(2)(B) of the Code), to add Guarantees with respect
to the Notes, to secure the Notes, to add to the covenants of the Company for
the benefit of the holders of the Notes or to surrender any right or power
conferred upon the Company, to make any change that does not adversely affect
the rights of any holder of the Notes or to comply with any requirement of the
SEC in connection with the qualification of the Indenture under the Trust
Indenture Act. However, no amendment may be made to the subordination provisions
of the Indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
their Representative) consents to such change.
The consent of the holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
Transfer
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
The Company may require payment of a sum sufficient to cover any tax, assessment
or other governmental charge payable in connection with certain transfers and
exchanges.
Defeasance
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under "-Change of
Control" and under the covenants described under "-Certain Covenants" (other
than the covenant described under "-Merger and Consolidation"), the operation of
the cross acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under
"-Defaults" above and the limitations contained in clauses (iii) and (iv) of the
first paragraph and all the limitations contained in the second paragraph under
"-Certain Covenants-Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "-Defaults" above or because of the
failure of the Company to comply with clause (iii) or (iv) of the first
paragraph or with the limitations contained in the second paragraph under
"-Certain Covenants-Merger and Consolidation" above. If the Company exercises
its legal defeasance option or its covenant defeasance option, each Subsidiary
Guarantor will be released from all of its obligations with respect to its
Subsidiary Guarantee.
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
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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 amounts 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 the Trustee under the Indenture
and has been appointed by the Company as Registrar and Paying Agent with regard
to the Notes.
The Holders of a majority in principal amount of the outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that if an Event of Default occurs
(and is not cured), the Trustee will be required, in the exercise of its power,
to use the degree of care of a prudent man in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any Holder of
Notes, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense and then
only to the extent required by the terms of the Indenture.
Governing Law
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
Certain Definitions
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) 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 Restricted Subsidiary; provided, however, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "-Certain Covenants-Limitation on
Restricted Payments," "-Certain Covenants-Limitation on Affiliate Transactions"
and "-Certain Covenants-Limitation on Sales of Assets and Subsidiary Stock"
only, "Affiliate" shall also mean any beneficial owner of Capital Stock
representing 10% or more of the total voting power of the Voting Stock (on a
fully diluted basis) of the Company or of rights or warrants to purchase such
Capital Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.
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"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of the Company or any Restricted Subsidiary or (iii) any
other assets of the Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary (other than, in
the case of (i), (ii) and (iii) above, (x) a disposition by a Restricted
Subsidiary to the Company or by the Company or a Restricted Subsidiary to a
Wholly Owned Subsidiary, (y) for purposes of the covenant described under
"-Certain Covenants-Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition that constitutes a Restricted Payment permitted by the covenant
described under "-Certain Covenants-Limitation on Restricted Payments" and (z)
disposition of assets with a fair market value of less than $250,000).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as
at the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) 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
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Banks" has the meaning specified in the Credit Agreement.
"Bank Indebtedness" means all Obligations pursuant to the Credit
Agreement.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters prior to the date of
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such determination for which financial statements are available to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that (1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or if
the transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness 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, (2) if the Company or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness since the beginning of such
period or if any Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged (in each case other than Indebtedness Incurred under any
revolving credit facility unless such Indebtedness has been permanently repaid
and has not been replaced) on the date of the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated
Interest Expense for such period shall be calculated on a pro forma basis as if
such discharge had occurred on the first day of such period and as if the
Company or such Restricted Subsidiary has not earned the interest income
actually earned during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise discharge such
Indebtedness, (3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative),
directly attributable thereto for such period and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any 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 Asset Disposition 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), (4) 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 requiring a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period and (5) if since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(3) or (4) above if made by the Company or a 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 Asset Disposition,
Investment or acquisition occurred on the first day of such period. For purposes
of this definition, whenever pro forma effect is to be given to an acquisition
of assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any 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 of 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 in excess of
12 months).
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"Consolidated Debt Ratio" as of any date of determination means, the ratio
of (i) consolidated Indebtedness of the Company as of the end of the most recent
fiscal quarter for which financial statements are available to (ii) the
aggregate amount of the EBITDA of the Company for the four most recent fiscal
quarters for which financial statements are available, in each case with such
pro forma adjustments to consolidated Indebtedness and EBITDA as are appropriate
and consistent with the pro forma provisions set forth in the definition of
Consolidated Coverage Ratio.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, without duplication, (i)
interest expense attributable to capital leases and the interest expense
attributable to leases constituting part of a Sale/Leaseback Transaction, (ii)
amortization of debt discount and debt issuance cost, (iii) capitalized
interest, (iv) non-cash interest expenses, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Hedging Obligations (including
amortization of fees), (vii) Preferred Stock dividends in respect of all
Preferred Stock held by Persons other than the Company or a Wholly Owned
Subsidiary, (viii) interest incurred in connection with Investments in
discontinued operations, (ix) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by (or secured by the
assets of) the Company or any Restricted Subsidiary and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than the Company) in connection with Indebtedness Incurred
by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
Person (other than the Company) if such Person is not a Restricted Subsidiary,
except that (A) subject to the exclusion contained in clause (iv) below, the
Company's equity in the net income of any such Person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Person with respect to 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 paid 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 for such period shall be included in determining
such Consolidated Net Income; (ii) any net income (or loss) of any Person
acquired by the Company or a Subsidiary in a pooling of interests transaction
for any period prior to the date of such acquisition; (iii) any net income of
any Restricted Subsidiary if such Restricted 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 exclusion contained in clause (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 actually distributed by such Restricted Subsidiary with
respect to such period to the Company or another Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid 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 assets of the Company or its consolidated Subsidiaries
(including pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain or loss
realized upon the sale or other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and (vi) the cumulative effect of a change in
accounting principles.
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Notwithstanding the foregoing, for the purposes of the covenant described
under "-Certain Covenants-Limitation on Restricted Payments" only, there shall
be excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from 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.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company prior to the taking of any action for the purpose
of which the determination is being made for which financial statements are
available, as (i) the par or stated value of all outstanding Capital Stock of
the Company plus (ii) paid-in capital or capital surplus relating to such
Capital Stock plus (iii) any retained earnings or earned surplus less (A) any
accumulated deficit and (B) any amounts attributable to Disqualified Stock.
"Credit Agreement" means the Credit Agreement dated June 23, 1997, entered
into by and among the Company, certain of its Subsidiaries, the lenders referred
to therein and Credit Suisse First Boston, as Administrative Agent, together
with the related documents thereto (including without limitation the term loans
and revolving loans thereunder, any guarantees and security documents), as
amended, extended, renewed, restated, supplemented or otherwise modified (in
whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions) from time to time, and any agreement (and
related document) governing Indebtedness incurred to refund or refinance, in
whole or in part, the borrowings and commitments then outstanding or permitted
to be outstanding under such Credit Agreement or a successor Credit Agreement,
whether by the same or any other lender or group of lenders.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
"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 up to,
at least $25 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.
"Discount Debentures" means the 13% Senior Discount Debentures Due 2009 of
Parent issued on the Issue Date in an aggregate principal amount at maturity of
$74.88 million and any other Indebtedness of Parent that Refinances such
Debentures; provided, however, that such other Indebtedness does not require the
payment of cash interest or the repayment of principal (or the repurchase of
such Indebtedness) in an amount in excess of the amounts thereof provided for in
such Debentures being Refinanced or at a time prior to the time such amounts
would have been payable as provided for in such Debentures being Refinanced.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable
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at the option of the holder thereof, in whole or in part, in each case on or
prior to the first anniversary of the Stated Maturity of the Notes.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company and its consolidated Restricted Subsidiaries, (b) depreciation expense
of the Company and its consolidated Restricted Subsidiaries, (c) amortization
expense of the Company and its consolidated Restricted Subsidiaries (excluding
amortization expense attributable to a prepaid cash item that was paid in a
prior period) and (d) all other non-cash charges of the Company and its
consolidated Restricted Subsidiaries (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash expenditures in any
future period), 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 and non-cash charges of, a Restricted Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"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 (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC. An accounting
term not otherwise defined in the Indenture will have the meaning assigned to it
in accordance with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of another Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness 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. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Guaranty Agreement" means a supplemental indenture, in a form
satisfactory to the Trustee, pursuant to which a Subsidiary Guarantor guarantees
the Company's obligations with respect to the Notes on the terms provided for in
the Indenture.
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"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"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 Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal of and premium (if any) in respect of (A) indebtedness
of such Person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing obligations
(other than obligations described in clauses (i) through (iii) above) entered
into in the ordinary course of business of such Person to the extent such
letters of credit are not drawn upon or, if and to the extent drawn upon, such
drawing is reimbursed no later than the tenth Business Day following payment on
the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of such Person, the liquidation preference with
respect to, any Preferred Stock (but excluding, in each case, any accrued
dividends);
(vi) all obligations of the type referred to in clauses (i) through (v) of
other Persons and all dividends of other Persons for the payment of which, in
either case, such Person is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including by means of any Guarantee;
(vii) all obligations of the type referred to in clauses (i) through (vi)
of other Persons secured by any Lien on any property or asset of such Person
(whether or not such obligation is assumed by such Person), the amount of such
obligation being deemed to be the lesser of the value of such property or assets
or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
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The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all Indebtedness and the maximum liability,
upon the occurrence of the contingency giving rise to the obligation, of any
contingent obligations which constitute Indebtedness at such date.
"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions 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," the definition of "Restricted Payment" and the
covenant described under "-Certain Covenants-Limitation on Restricted Payments,"
(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 equal to 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 Outstanding Notes were originally
issued.
"Joint Venture Affiliate" shall mean a Person that is partially owned,
directly or indirectly, by the Company and no interest in which is owned,
directly or indirectly (other than through such Person's ownership of common
stock of the Company), by any Person that is an Affiliate of the Company.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
and proceeds from the sale or other disposition of any securities received as
consideration, but 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 such properties or assets or
received in any other noncash form), in each case net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses incurred,
and all Federal, state, provincial, foreign and local income, franchise, sales
and other applicable taxes required to be 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 or other security agreement of any
kind with respect to such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition, or by applicable law, be
repaid out of the proceeds from such Asset Disposition, (iii) all distributions
and other payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of their ownership interest in the
Subsidiary or Joint Venture engaging in such Asset Disposition and (iv) the
deduction of
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appropriate amounts provided by the seller as a reserve, in accordance with
GAAP, against any liabilities associated with the property or other assets
disposed in such Asset Disposition and retained by the Company or any Restricted
Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Obligations" means with respect to any Indebtedness all obligations for
principal, premium, interest, penalties, fees, reimbursements and other amounts
payable pursuant to the documentation governing such Indebtedness.
"Parent" means Roller Bearing Holding Company, Inc., a Delaware
corporation, and any successor corporation.
"Permitted Holders" means each Person owning, on the Issue Date after
giving effect to the recapitalization of the Parent occurring on such date,
shares of Common Stock of the Parent or warrants to purchase such common stock
and each Person controlled by any Permitted Holder (and, in the case of
individuals, the estate and heirs of any Permitted Holder).
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) the Company, a Restricted Subsidiary or a Person
that 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; (ii) 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;
(iii) Temporary Cash Investments; (iv) 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; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary;
(vii) 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; and (viii) any Person to the extent
such Investment represents the non-cash portion of the consideration received
for an Asset Disposition as permitted pursuant to the covenant described under
"-Certain Covenants-Limitation on Sales of Assets and Subsidiary Stock."
"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 Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
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"Principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Parent pursuant to an effective registration statement under
the Securities Act with gross proceeds to the Parent of not less than $25
million, resulting in the listing of the Parent's common stock on a nationally
recognized stock exchange or the inclusion of such stock on The Nasdaq National
Market System.
"Public Market" means any time after (x) a Public Equity Offering has been
consummated and (y) at least 15% of the total issued and outstanding common
stock of the Parent has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such 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 and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accredit value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary
to the businesses of the Company and the Restricted Subsidiaries on the Issue
Date.
"Representative" means any trustee, agent or representative (if any) for
an issue of Senior Indebtedness of the Company.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable to the Company or a Restricted Subsidiary and
other than pro rata dividends or other distributions made by a Subsidiary that
is not a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company held by any Person or of any
Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company
(other than a Restricted Subsidiary), including the exercise of any option to
exchange any Capital Stock (other than into Capital Stock of the Company that is
not Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance
or other acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment
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or scheduled sinking fund payment of any Subordinated Obligations (other than
the purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition) or (iv) the making of any Investment in any Person; provided,
however, that "Restricted Payments" will not include any Permitted Investment.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Revolving Credit Facilities" means the revolving credit facility
contained in the Credit Agreement and any other facility or financing
arrangement that Refinances or replaces, in whole or in part, any such revolving
credit facility.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Indebtedness" of any Person means all (i) Bank Indebtedness of or
guaranteed by such Person, whether outstanding on the Issue Date or thereafter
Incurred (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) and (ii) Indebtedness of such Person
whether outstanding on the Issue Date or thereafter Incurred, including interest
thereon (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), in respect of (A) Indebtedness for
money borrowed, (B) Indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable and (C) Hedging Obligations, unless, in the case of (i) and (ii), in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are subordinate in right of
payment to the obligations under the Notes; provided, however, that Senior
Indebtedness shall not include (1) any obligation of such Person to any
subsidiary of such Person, (2) any liability for Federal, state, local or other
taxes owed or owing by such Person, (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 of such Person (and any accrued and unpaid interest in respect
thereof) which is subordinate or junior by its terms to any other Indebtedness
or other obligation of such Person or (5) that portion of any Indebtedness which
at the time of Incurrence is Incurred in violation of the Indenture (but as to
any such Indebtedness under the Credit Agreement, no such violation shall be
deemed to exist if the Representative of the Lenders thereunder shall have
received an officers' certificate of the Company to the effect that the issuance
of such Indebtedness does not violate such covenant and setting forth in
reasonable detail the reasons therefor). If any Bank Indebtedness is disallowed,
avoided or subordinated pursuant to the provisions of Section 548 of the U.S.
Bankruptcy Code or any applicable state fraudulent conveyance law, such Bank
Indebtedness will still constitute Senior Indebtedness.
"Senior Subordinated Indebtedness" means (i) with respect to the Company,
the Notes and any other Indebtedness of the Company that specifically provides
that such Indebtedness is to rank pari passu with the Notes in right of payment
and is not subordinated by its terms in right of payment to any
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Indebtedness or other obligation of the Company which is not Senior Indebtedness
of the Company and (ii) with respect to a Subsidiary Guarantor, its respective
Subsidiary Guarantee of the Notes and any other indebtedness of such Person that
specifically provides that such Indebtedness rank pari passu with such Guarantee
in respect of payment and is not subordinated by its terms in respect of payment
to any Indebtedness or other obligation of such Person which is not Senior
Indebtedness of such Person.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company or any
Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to, in the case of
the Company, the Notes or, in the case of such Subsidiary Guarantor, its
Subsidiary Guarantee, pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
"Subsidiary Guarantor" means any subsidiary of the Company that Guarantees
the Company's obligations with respect to the Notes, which initially shall be
Industrial Tectonics Bearings Corporation, RBC Linear Precision Products, Inc.
and RBC Nice Bearings, Inc.
"Subsidiary Guarantee" means a Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Notes.
"Tax Sharing Agreement" means any tax sharing agreement between the
Company and Holdings or any other Person with which the Company is required to,
or is permitted to, file a consolidated tax return or with which the Company is
or could be part of a consolidated group for tax purposes.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 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, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50,000,000 (or the
foreign currency equivalent thereof) and has outstanding debt which is rated "A"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above,
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(iv) investments in commercial paper, maturing not more than 90 days after the
date of acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America or any foreign country recognized by the United States of America with a
rating at the time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. or "A-1" (or higher)
according to Standard and Poor's Ratings Group and (v) investments in securities
with maturities of 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 Standard & Poor's Ratings Group or "A" by Moody's Investors
Service, Inc.
"Term Loan Facilities" means the term loan facilities contained in the
Credit Agreement and any other facility or financing arrangement that Refinances
in whole or in part any such term loan facility.
"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) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the covenant described under "-Certain Covenants-Limitation on Restricted
Payments." The Board of Directors may designate any 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 "-Certain
Covenants-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 at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers, trustees or other governing board
thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or one or more Wholly Owned Subsidiaries.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal U.S. federal income tax
consequences of the Exchange Offer to a holder of Outstanding Notes that
purchased the Outstanding Notes pursuant to their original issue and that holds
the Outstanding Notes and will hold the Exchange Notes as capital assets. It
does not address beneficial owners that may be subject to special tax rules,
such as banks, insurance
112
<PAGE>
companies, dealers in securities or currencies, holders that hold the
Outstanding Notes or Exchange Notes as a hedge against currency risks or as part
of a straddle with other investments or as part of a "synthetic security" or
other integrated investment (including a "conversion transaction") comprised of
a Note and one or more investments, or holders that have a "functional currency"
other than the U.S. dollar. This summary is based upon the U.S. federal tax laws
and regulations as now in effect and as currently interpreted and does not take
into account possible changes in such tax laws or such interpretations, any of
which may be applied retroactively. It does not include any description of the
tax laws of any state, local or foreign government that may be applicable to the
Exchange Offer, the Outstanding Notes, the Exchange Notes or the holders
thereof.
The exchange of Exchange Notes for the Outstanding Notes pursuant to
the Exchange Offer should not be treated as an "exchange" for federal income tax
purposes because the Exchange Notes will not be considered to differ materially
in kind or extent from the Outstanding Notes. As a result, there should be no
federal income tax consequences to holders of the Outstanding Notes exchanging
the Outstanding Notes for the Exchange Notes pursuant to the Exchange Offer, and
therefore: (i) no gain or loss should be realized by a holder upon receipt of an
Exchange Note, (ii) the holding period of the Exchange Note should include the
holding period of the Outstanding Note exchanged therefor, and (iii) the
adjusted tax basis of the Exchange Note should be the same as the adjusted basis
of the Outstanding Note exchanged therefor immediately before the exchange.
THIS SUMMARY DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF U.S.
FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A HOLDER'S DECISION TO EXCHANGE
OUTSTANDING NOTES FOR EXCHANGE NOTES. EACH HOLDER SHOULD CONSULT WITH ITS OWN
TAX ADVISOR CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS OR OTHER
TAX LAWS TO ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE
OUTSTANDING NOTES FOR EXCHANGE NOTES.
113
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes where such Outstanding Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that for a period of 180 days after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer that
requests such documents in the Letter of Transmittal, for use in connection with
any such resale. In addition, until __________ (90 days after the date of this
Prospectus), all dealers effecting transactions in the Exchange Notes may be
required to deliver a prospectus.
Each holder of Outstanding Notes participating in the Exchange Offer will,
by execution of the Letter of Transmittal, represent to the Company that such
holder is not engaged in nor does such holder intend to engage in a distribution
of Exchange Notes.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
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 has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
114
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the legality of the Exchange
Notes will be passed upon for the Company by McDermott, Will & Emery, New York,
New York. McDermott, Will & Emery represented management of the Company in
connection with the Recapitalization.
EXPERTS
The consolidated financial statements of Roller Bearing Company of
America, Inc. at March 29, 1997 and March 30, 1996, and for each of the three
years in the period ended March 29, 1997, appearing in this Prospectus and
registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
INDEPENDENT AUDITORS
On June 23, 1997 management of the Company determined that the
Company's independent auditors for the fiscal year commencing March 30, 1997
will be Arthur Andersen LLP, and accordingly, has dismissed Ernst & Young LLP as
of such date. The reports prepared by Ernst & Young LLP for fiscal years 1996
and 1997 contained no adverse opinion or disclaimer of opinion, nor were either
of such reports qualified as to uncertainty, audit scope or accounting
principles. During fiscal years 1996 and 1997, and for the period from March 29,
1997 through June 23, 1997, there were no disagreements between the Company and
Ernst & Young LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure,which if not resolved to the
satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make a
reference to the subject matter of such disagreement in connection with its
reports. Arthur Andersen LLP provided advice to management of the Company in
connection with the Recapitalization.
AVAILABLE INFORMATION
The Company and the Subsidiary Guarantors have filed jointly with the SEC
a Registration Statement on Form S-4 under the Securities Act, with respect to
the Exchange Notes offered by this Prospectus. For the purposes hereof, the term
"Registration Statement" means the original Registration Statement and any and
all amendments thereto. This Prospectus does not contain all of the information
set forth in the Registration Statement and the schedules and exhibits thereto,
to which reference hereby is made. Each statement made in this Prospectus
concerning a document filed as an exhibit to the Registration Statement is
qualified in its entirety by reference to such exhibit for a complete statement
of its provisions. Any interested party may inspect the Registration Statement
and its exhibits, without charge, at the public reference facilities of the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at its regional office at 500 W. Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th
Floor, New York, New York 10007. Any interested party may obtain copies of all
or any portion of the Registration Statement and its exhibits at prescribed
rates from the Public Reference Section of the Commission at its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, DC
20549.
The Company, on a consolidated basis with the Subsidiary Guarantors,
intends to distribute to holders of the Exchange Notes and Outstanding Notes
annual reports containing financial statements audited by independent certified
public accountants and with quarterly reports containing unaudited financial
information for each of the first three quarters of each fiscal year.
115
<PAGE>
Index to Audited Condensed Consolidated Financial Statements
Contents
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets at March 29, 1997
and March 30, 1996 (audited).............................................. F-3
Consolidated Statements of Operations for Fiscal Years
Ended March 29, 1997 and March 30, 1996 (audited)......................... F-4
Consolidated Statements of Stockholder's Equity for Fiscal Years
Ended March 29, 1997 and March 30, 1996 (audited)......................... F-5
Consolidated Statements of Cash Flows for Fiscal Years
Ended March 29, 1997 and March 30, 1996 (audited)......................... F-6
Notes to Audited Consolidated Financial Statements........................ F-7
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholder
Roller Bearing Company of America, Inc.
We have audited the accompanying consolidated balance sheets of Roller Bearing
Company of America, Inc. (a wholly-owned subsidiary of Roller Bearing Holding
Company, Inc.) as of March 29, 1997 and March 30, 1996, and the related
consolidated statements of operations, stockholder's equity, and cash flows for
each of the three years in the period ended March 29, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Roller Bearing
Company of America, Inc. at March 29, 1997 and March 30, 1996 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended March 29, 1997, in conformity with generally accepted
accounting principles.
As discussed in Note 3 to the financial statements, during 1997 the Company
changed its inventory valuation and production cost capitalization policies.
Ernst & Young LLP
White Plains, New York
May 9, 1997, except for Note 15,
as to which the date is May 20, 1997
F-1
<PAGE>
Roller Bearing Company of America, Inc.
Consolidated Balance Sheets
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
March 29, 1997 March 30, 1996
-----------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 859 $ 366
Accounts receivable, less allowances of $236 in 1997 and $175 in 1996 19,766 16,243
Inventories:
Raw materials 1,711 1,830
Work-in-process 17,170 16,576
Finished goods 17,971 13,898
-----------------------------------
36,852 32,304
Prepaid expenses and other 764 670
Refundable income taxes 510
-----------------------------------
Total current assets 58,241 50,093
Restricted marketable securities 3,901 4,164
Property, plant, and equipment:
Land 7,537 4,806
Building and improvements 7,287 4,057
Machinery and equipment 43,885 34,344
-----------------------------------
58,709 43,207
Accumulated depreciation (18,611) (14,671)
-----------------------------------
40,098 28,536
Deferred income taxes 953 1,887
Excess of cost over net assets acquired, net of accumulated
amortization of $2,843 in 1997 and $2,265 in 1996 19,911 20,489
Deferred financing costs, net of accumulated amortization of
$337 in 1997 and $122 in 1996 1,383 1,598
Other assets 26 128
-----------------------------------
$124,513 $106,895
===================================
See accompanying notes.
Liabilities and stockholder's equity
Current liabilities:
Accounts payable $ 9,644 $ 5,874
Accrued expenses and other current liabilities 5,781 4,051
Current portion of long-term debt 2,500 1,500
Obligations under capital leases, current portion 1,325 1,112
Current income taxes payable 1,355 --
-----------------------------------
Total current liabilities 20,605 12,537
Obligations under capital leases 3,141 3,816
Long-term debt:
Revolving credit agreement 24,627 16,391
Term notes payable 24,988 27,488
Industrial development revenue bonds 10,700 10,700
-----------------------------------
60,315 54,579
Other noncurrent liabilities 3,080 3,231
-----------------------------------
Total liabilities 87,141 74,163
Stockholder's equity:
Common stock - par value $.01; authorized 1,000 shares, issued and
outstanding shares: 100 shares in 1997 and 1996 -- --
Additional paid-in capital 35,831 35,831
Retained earnings (deficit) 1,541 (3,099)
-----------------------------------
Total stockholder's equity 37,372 32,732
-----------------------------------
Total liabilities and stockholder's equity $124,513 $106,895
===================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
Roller Bearing Company of America, Inc.
Consolidated Statements of Operations
(dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
March 29, March 30, April 1,
1997 1996 1995
-----------------------------------------------------
(52 weeks) (52 weeks) (52 weeks)
<S> <C> <C> <C>
Net sales $93,427 $82,233 $73,904
Cost of sales 64,215 60,054 57,204
-----------------------------------------------------
Gross margin 29,212 22,179 16,700
Operating expenses:
Selling, general and administrative 14,537 11,104 8,987
Other expense, net of other income 1,473 1,388 1,057
-----------------------------------------------------
Income from operations 13,202 9,687 6,656
Interest expense, net 5,338 6,165 6,445
-----------------------------------------------------
Income before taxes and extraordinary
charge 7,864 3,522 211
Provision for income taxes 3,224 1,700 110
-----------------------------------------------------
Income before extraordinary charge 4,640 1,822 101
Extraordinary charge -- 995 --
-----------------------------------------------------
Net income $ 4,640 $ 827 $ 101
=====================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
Roller Bearing Company of America, Inc.
Consolidated Statements of Stockholder's Equity
(dollars in thousands)
<TABLE>
<CAPTION>
Additional Retained Minimum
Common Paid-In Earnings Pension
Stock Capital (Deficit) Liability Total
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at April 2, 1994 $ $23,682 $(2,979) $(271) $20,432
Dividends paid to Parent (48) (48)
Capital contribution from Parent 149 149
Minimum pension liability adjustment (94) (94)
Net income 101 101
------------------------------------------------------------
Balance at April 1, 1995 23,831 (2,926) (365) 20,540
Capital contribution from Parent 12,000 12,000
Dividends paid to Parent (1,000) (1,000)
Minimum pension liability adjustment 365 365
Net income 827 827
------------------------------------------------------------
Balance at March 30, 1996 35,831 (3,099) 32,732
Net income 4,640 4,640
------------------------------------------------------------
Balance at March 29, 1997 $ $35,831 $ 1,541 $ $37,372
============================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Roller Bearing Company of America, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
March 29, March 30,
1997 1996 April 1, 1995
------------------------------------------
(52 weeks) (52 weeks) (52 weeks)
<S> <C> <C> <C>
Cash flow from operating activities
Net income $ 4,640 $ 827 $ 101
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation of plant and equipment 5,348 4,954 4,127
Amortization 793 997 1,172
Extraordinary charge -- 995 --
Deferred income taxes 934 2,104 (567)
Changes in operating assets and liabilities:
Accounts receivable (1,219) (1,532) (1,372)
Inventories (1,118) (3,064) (851)
Prepaid expenses and other current assets 416 167 933
Other non current assets 102 315 (786)
Accounts payable 3,014 (507) (801)
Accrued expenses and other current liabilities 148 (2,249) 827
Other non current liabilities (358) (831) (4,258)
Other -- (741) 482
------------------------------------------
Net cash provided by (used in) operating activities 12,700 1,435 (993)
Cash flows from investing activities
Purchase of restricted marketable securities (254) (176) (5,085)
Sale of restricted marketable securities 517 384 713
Acquisition of subsidiaries (12,121) -- --
Purchases of property, plant, and equipment, net (5,819) (4,857) (2,902)
------------------------------------------
Net cash used in investing activities (17,677) (4,649) (7,274)
Cash flows from financing activities
Net increase (decrease) in revolving credit agreement 8,236 (4,225) 1,362
Proceeds from long-term debt -- 29,300 --
Payments of long-term debt (1,500) (29,812) (2,500)
Proceeds from industrial development revenue bonds -- -- 10,700
Principal payments on obligations under capital leases (1,266) (1,271) (1,274)
Payment of deferred financing fees -- (1,412) (308)
Dividends paid to Parent -- (1,000) --
Capital contribution from Parent -- 12,000 149
------------------------------------------
Net cash provided by financing activities 5,470 3,580 8,129
------------------------------------------
Net increase (decrease) in cash 493 366 (138)
Cash, at beginning of year 366 -- 138
------------------------------------------
Cash, at end of year $ 859 $ 366 $ --
==========================================
Supplemental disclosures of cash flow information
Cash paid (received) during the period for:
Interest $ 5,378 $ 6,277 $ 6,208
==========================================
Income taxes $ 425 $ 576 $ (460)
==========================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
1. Organization and Business
Roller Bearing Company of America, Inc., ("RBC" or the "Company") is a wholly
owned subsidiary of Roller Bearing Holding Company, Inc. ("Holdings"). Holdings
was formed by affiliates of Aurora Capital Partners L.P. ("Aurora") and certain
members of management of RBC. On March 31, 1992, Holdings acquired all of the
outstanding shares of RBC pursuant to an Agreement and Plan of Reorganization.
The acquisition was accounted for under the purchase method of accounting. The
excess of the purchase price ($20,100) over the fair market value of the
tangible net assets acquired by Holdings has been pushed down and recorded as
Excess of cost over net assets acquired by the Company.
The Company manufactures roller bearing components and assembled parts and
designs and manufactures high-precision roller and ball bearings. The Company
sells to a wide variety of original equipment manufacturers and distributors who
are primarily domestic but widely dispersed geographically.
On October 26, 1992, the Company purchased substantially all of the assets and
assumed certain liabilities of the Transport Dynamics Corporation ("TDC"), which
manufactures plain bearings used in various aerospace and industrial
applications. The acquisition was accounted for by the purchase method of
accounting and, accordingly, the excess of the purchase price ($1,300) over the
fair market value of the tangible net assets acquired has been recorded as
"Excess of cost over net assets acquired."
In May 1993, the Company purchased substantially all of the assets and assumed
certain liabilities of the Heim Corporation ("Heim"), which manufactures plain
and ball bearings. The acquisition was accounted for by the purchase method of
accounting. The excess of the purchase price ($1,200) over the fair market value
of tangible net assets acquired has been recorded as "Excess of cost over net
assets acquired."
2. Acquisition of Wholly Owned Subsidiaries
In October 1996, Linear Precision Products ("LPP"), a wholly owned subsidiary of
the Company, purchased substantially all of the assets and assumed certain
liabilities of a corporation that manufactures precision and ball bearings. The
acquisition was accounted for under the purchase method of accounting. The
purchase price (approximately $5,500) has been allocated to the assets acquired
and liabilities assumed based upon their respective estimated fair values.
In February 1997, RBC Nice Bearings, Inc. ("Nice"), a wholly owned subsidiary of
the Company, purchased substantially all of the assets and assumed certain
liabilities of a corporation that manufacturers ground or semi-ground specialty
and ball bearings. The acquisition was accounted for under the purchase method
of accounting. The purchase price (approximately $7,500) has been allocated to
the assets acquired and liabilities assumed based upon their respective
estimated fair values.
The combined purchased net assets of LLP and Nice were allocated as follows:
F-6
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
Allocation of Purchase Price
Accounts receivable, net $ 2,219
Inventory 3,430
Property, plant and equipment 10,287
Accounts payable and other (4,610)
Net other 1,712
------------
$ 13,038
============
Pro forma consolidated results of operations of the Company based upon unaudited
statements of LLP and Nice for the fiscal years ended March 29, 1997 and March
30, 1996, as if the acquisitions took place at the beginning of the period were
as follows:
Fiscal Year Ended
--------------------------------
March 29, March 30,
1997 1996
--------------------------------
(unaudited)
Net Sales $111,287 $105,571
Net Income $ 6,155 $ 2,317
3. Summary of Significant Accounting Policies
General
The consolidated financial statements include the accounts of RBC, and its
wholly owned subsidiaries, Industrial Tectonics Bearings Corporation ("ITB"),
LPP, and Nice, as well as its TDC and Heim divisions. All material intercompany
balances and transactions have been eliminated in consolidation.
The Company has a fiscal year consisting of 52 or 53 weeks, ending on the
Saturday closest to March 31.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
F-7
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
3. Summary of Significant Accounting Policies (continued)
Change in Accounting Methods
At the beginning of the fiscal year ended March 29, 1997, the Company changed
its method of accounting for certain inventories from the last-in, first-out
("LIFO") method to the first in, first-out ("FIFO") method. In the last several
years, the Company has experienced productivity and technological improvements
resulting in a deflationary impact on certain product costs. Management expects
similar productivity improvements to continue for the foreseeable future and
consequently believes that the FIFO method is the preferable method because it
will produce a better matching of revenues and expenses.
In addition, inventory costs did not differ significantly under the LIFO method
when compared to the FIFO method for the periods presented in the financial
statements.
Effective March 31, 1996, the Company changed its method of accounting for
pre-production and certification costs pursuant to a recent announcement by the
Securities and Exchange Commission and a recent exposure draft issued by the
Accounting Standards Exchange Committee. Previously such costs, including direct
material, labor, supplies and tooling, were capitalized and amortized over their
expected period of benefit. Pursuant to the exposure draft, such costs are
expensed as incurred.
The Company has retroactively restated its financial statements for these
changes in accordance with the provisions of Accounting Principles Board Opinion
No. 20 "Accounting Changes" that allow retroactive restatement of financial
statements in connection with an initial public distribution. These restatements
resulted in a decrease to net income of $88 (net of tax effect of $83) in fiscal
1996 and $1,183 (net of tax effect of $1,318) in fiscal 1995. The effect on
retained earnings as of April 2, 1994 was $1,782.
Inventories
Inventories are stated at the lower of cost or market, using the FIFO method.
Property, Plant, and Equipment and Depreciation
Property, plant, and equipment is recorded at cost. Depreciation of plant and
equipment, including equipment under capital leases, is provided for by the
straight-line method over the estimated useful lives (3 to 31 years) of the
respective assets or the lease term, if shorter. Amortization of assets under
capital leases is reported with depreciation. The cost of equipment under
capital leases is equal to the lower of the net present value of the minimum
lease payments or the fair market value of the leased equipment at the inception
of the lease.
F-8
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
3. Summary of Significant Accounting Policies (continued)
Revenue Recognition and Concentration of Credit Risk
Revenue is recognized upon shipment of products. The Company sells to a large
number of original equipment manufacturers and distributors who service the
aftermarket. The Company's credit risk associated with accounts receivable is
minimized due to its customer base and wide geographic dispersion. The Company
performs ongoing credit evaluations of its customers financial condition, and
bad debt losses have historically been within the Company's expectations.
Intangible Assets
The excess of purchase price over the fair market value of tangible net assets
acquired is being amortized by the straight-line method over a 40-year period.
Deferred financing costs and related expenses are amortized by the straight-line
method over the lives of the related credit agreements (7 to 23 years). The
Company employs the straight line method, as it approximates the results
achieved using the effective interest method.
Income Taxes
The Company is included in the consolidated tax return of Holdings and
calculates its provision for income taxes on a separate entity basis.
Income taxes are recognized during the year in which transactions enter into the
determination of financial statement income, with deferred taxes being provided
for temporary differences between amounts of assets and liabilities for
financial reporting purposes and such amounts for tax purposes. The differences
relate primarily to the timing of deductions for depreciation, goodwill
amortization relating to the acquisition of operating divisions, basis
differences arising from acquisition accounting, pension and retirement
benefits, and various accrued and prepaid expenses. Deferred tax assets and
liabilities are recorded at the rates expected to be in effect when the
temporary differences reverse.
Extraordinary Charge
The extraordinary charge in fiscal 1996 resulted from the write-off of
unamortized deferred financing costs in connection with the Company's early
extinguishment of debt. The extraordinary charge was $1,687 and is reflected net
of the related income tax benefit of $692.
Use of Estimates
The preparation of the 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.
F-9
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
3. Summary of Significant Accounting Policies (continued)
Impairments
Effective March 31, 1996, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of". The Company periodically assesses
the net realizable value of its long-lived assets and evaluates such assets for
impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. For assets to be held, impairment is
determined to exist if estimated undiscounted future cash flows are less than
the carrying amount. For assets to be disposed of, impairment is determined to
exist if the estimated net realizable value is less than the carrying amount.
Stock Based Compensation
Management participates in Holdings stock compensation plan. During 1997, the
Company adopted the disclosure provision for SFAS No. 123, "Accounting for Stock
Based Compensation." SFAS No. 123 establishes a fair value method of accounting
and reporting standards for stock based compensation plans. However, as
permitted by SFAS No. 123, the Company has elected to continue to apply the
provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees" and related interpretations. Under APB No. 25,
because the exercise prices of the Company's employee stock options were not
less than the market price of the underlying stock on the date of grant, no
compensation expense is recognized. The Company is required to disclose the pro
forma net income as if the fair value method had been applied to all grants made
on or after March 31, 1996. See Note 14 for pro forma disclosures.
4. Restricted Marketable Securities
Restricted marketable securities which are classified as available for sale
consist of short-term investments of $3,901, and $1,752 and fixed maturities of
$0 and $2,412 at March 29, 1997 and March 30, 1996, respectively, which were
purchased with proceeds from industrial development revenue bonds issued by the
Company during fiscal 1995. The use of these investments is restricted primarily
for capital expenditure requirements in accordance with the applicable loan
agreement and, accordingly, are classified as long-term. These investments
consist of highly liquid investments with insignificant interest rate risk and
original maturities of three months or less, and are carried at market value,
which approximates cost. Fixed maturities consist of U.S.
Treasury Notes and are stated at amortized cost, which approximates market.
Realized gains and losses on restricted marketable securities were not material,
and interest income amounted to $254, $176 and $138 in fiscal 1997, 1996 and
1995, respectively.
At March 29, 1997, all restricted marketable securities are due in one year or
less.
F-10
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
5. Long-Term Debt
In September 1995, the Company replaced its existing credit facility with an $80
million credit facility (the "Credit Facility") comprised of a $40,000 revolving
credit facility (the "Existing Revolving Credit Facility"), two term loan
facilities (the "Term Loans") aggregating $29,300, and a $10,700 enhanced letter
of credit guaranteeing the repayment of industrial development revenue bonds.
The funding occurred contemporaneously with Holdings issuance of $12,000 of
preferred stock (see Note 14). Refinancing costs of $1,412 were incurred as a
result of the transaction. These costs have been deferred and are being
amortized over the life of the new debt agreements. The unamortized deferred
financing costs of $1,687 related to the prior debt agreements were written off
as a result of the refinancing transaction and are reflected as an extraordinary
charge in 1996 operating results, net of $692 income tax benefit.
The Credit Facility is secured by substantially all of the Company's assets.
Under the terms of the Credit Facility, the Company is required to comply with
various operational and financial covenants, including minimum EBITDA, minimum
fixed charge coverage, total interest coverage and maximum leverage ratio.
In addition, the Credit Facility places limitations on the Company's capital
expenditures in any fiscal year, restricts its ability to pay dividends,
requires the Company to obtain the lenders consent to certain acquisitions and
contains mandatory prepayment provisions which include prepayments from the sale
of the Company's stock and 50% of excess cash flow, as defined.
The Existing Revolving Credit Facility, which matures September 30, 2000,
provides for maximum borrowings of up to $40,000, subject to certain collateral
maintenance requirements. Amounts available under the Existing Revolving Credit
Facility are based upon a formula related to the Company's eligible accounts
receivable and inventories. Unused borrowings available under the formula at
March 29, 1997 are $10,979. Interest rates are based on the prime rate, plus the
applicable margin, or, at the Company's discretion, the LIBOR rate, plus the
applicable margin. Interest on outstanding balances under the Existing Revolving
Credit Facility is payable monthly in arrears except LIBOR-based elections,
which are payable quarterly in arrears. The applicable interest rate margin is
determined on the first day of each fiscal quarter based on the Company's
leverage ratio, as defined. The rates in effect at March 29, 1997 ranged from
8.0% to 8.22% based on LIBOR.
A commitment fee of 0.5% per annum payable monthly in arrears is required on the
unused portion of the Existing Revolving Credit Facility. At March 29, 1997,
borrowings outstanding under the Existing Revolving Credit Facility were
$24,627.
The Term Loans consist of Term Loan A in original principal amount of $16,000,
payable in 20 quarterly installments, and Term Loan B in original principal
amount of $13,300, payable in 28 quarterly installments. The Term Loans bear
interest at variable rates based upon prime or LIBOR, at the Company's election.
Interest based on prime is payable monthly; interest based on LIBOR is payable
quarterly. The rates in effect at March 29, 1997 for Term Loan A and Term Loan B
ranged from 8.04% to 8.54% based on LIBOR.
During fiscal 1995, the Company entered into a loan agreement with the South
Carolina Jobs Economic Development Authority which provides for borrowings up to
$10,700 under two industrial development revenue bonds (the "Bonds" or "IRBs").
The proceeds from the Bonds are restricted for working capital requirements and
capital expenditure purposes. As of March
F-11
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
5. Long-Term Debt (continued)
29, 1997, $7,367 of the proceeds has been expended, and the remaining $3,901
(including accumulated interest of $568) is invested by the trustee in
marketable securities.
The Bonds are secured by an irrevocable direct-pay letter of credit issued by
one of the Company's lenders. The letter of credit is equal to the aggregate
principal amounts of the Bonds plus not less than thirty-five days' interest
thereon, calculated at 15% per annum ($10,854). The provisions of the agreement
require the Company to pay a fee of 2.5% per annum on the outstanding amount of
the letter of credit. The Company's obligation to its lender is secured pursuant
to the provisions of the Credit Facility.
The term notes payable under the Credit Facility and the Bonds consist of the
following:
<TABLE>
<CAPTION>
March 29, March 30,
1997 1996
-----------------------------
<S> <C> <C>
Credit Facility
Term Loan A, payable in quarterly installments of $250,
commencing January 1, 1996, increasing annually thereafter to
$1,500 from January 1, 2000 with final payment due October 1,
2000; bears interest at variable rates, payable monthly and quarterly
for prime and LIBOR-based elections, respectively. $14,500 $15,750
Term Loan B, payable in quarterly installments of $62.5 from
January 1, 1996 to October 1, 2000 and $1,506.25 from January 1,
2001 with final payment due September 30, 2002; bears interest at
variable rates, payable monthly and quarterly for prime and
LIBOR-based elections, respectively. 12,988 13,238
Industrial Development Revenue Bonds
Series 1994 A due in annual installments of $180 beginning
September 1, 2006, graduating to $815 on September 1, 2014 with
final payment due on September 1, 2017; bears interest at a variable
rate, payable monthly. 7,700 7,700
Series 1994 B due in annual installments of $240 beginning
September 1, 1998 graduating to $420 on September 1, 2002 with
final payment of $360 due on September 1, 2006; bears interest at a
variable rate, payable monthly. 3,000 3,000
-----------------------------
38,188 39,688
Less current portion 2,500 1,500
-----------------------------
$35,688 $38,188
=============================
</TABLE>
F-12
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
5. Long-Term Debt (continued)
Maturities of long-term debt during each of the following five fiscal years and
thereafter are as follows:
1998 $ 2,500
1999 3,740
2000 4,990
2001 6,434
2002 6,265
Thereafter 14,259
-------------
Total $38,188
=============
6. Obligations Under Capital Leases
Machinery and equipment additions under capital leases amounted to $804 in
fiscal 1997, $2,085 in fiscal 1996 and $1,286 in fiscal 1995. The average
imputed rate of interest on these leases is 8.7%, 8.7% and 10.1% in fiscal year
1997, 1996, and 1995, respectively. The aggregate present value of future
minimum lease payments under these leases at March 29, 1997 are as follows:
1998 $ 1,325
1999 1,494
2000 676
2001 279
2002 235
Thereafter 457
---------------
Total 4,466
Less current portion 1,325
---------------
Obligations under capital leases, net of current portion $ 3,141
===============
7. Pension Plans
The Company has noncontributory defined benefit pension plans covering union
employees in its Heim division Fairfield, Connecticut plant and its RBC division
West Trenton, New Jersey plant. The Company annually contributes to the plans an
amount that is actuarially determined to provide the plans with sufficient
assets to meet future benefit payment requirements. Plan assets are comprised
primarily of U.S. government securities, corporate bonds, and stocks. The plans
provide benefits of stated amounts based on an employees years of service.
The funded status of the union plans is as follows:
F-13
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
7. Pension Plans (continued)
<TABLE>
<CAPTION>
Heim West Trenton
--------------------------- --------------------------
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation $5,127 $5,069 $4,404 $4,380
=========================== ==========================
Accumulated benefit obligation $5,128 $5,070 $4,434 $4,380
=========================== ==========================
Projected benefit obligation $5,128 $5,070 $4,434 $4,380
Plan assets at fair value 5,000 4,776 4,738 4,337
--------------------------- --------------------------
Projected benefit obligation in excess
of plan assets (128) (294) 304 (43)
Unrecognized net gain (530) (243) (360) (166)
Unrecognized prior service cost 270 301 76 87
--------------------------- --------------------------
Accrued pension liability $ (388) $ (236) $ 20 $ (122)
=========================== ==========================
</TABLE>
Benefits under the union plans are not a function of employees salaries, thus,
the accumulated benefit obligation equals the projected benefit obligation.
The plan's pension expense for the fiscal years ended is as follows:
March 29, March 30, April 1,
1997 1996 1995
----------------------------------------
Service cost $ 291 $ 264 $ 240
Interest cost 680 663 655
Actual return on plan assets (757) (612) (594)
Net amortization and deferrals 41 11 11
-----------------------------------------
Total pension expense $ 255 $ 326 $ 312
=========================================
The assumptions used in determining the funded status information were as
follows:
F-14
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
7. Pension Plans (continued)
1997 1996 1995
-----------------------
Discount rate 7.5% 7.5% 8.0%
Expected long-term rate of return on plan assets 8.5% 8.5% 8.0%
The Company recognized a minimum pension liability of $0 and $58 at March 29,
1997 and March 30, 1996, respectively, for the Heim and West Trenton union
pension plans, which represents the excess of the accumulated benefit
obligations over plan assets. A corresponding amount is recognized as an
intangible asset to the extent of previously unrecognized prior service cost ($0
and $58, at March 29, 1997 and March 30, 1996, respectively).
During 1997, the Company decided to terminate the West Trenton Union Pension
Plan effective May 31, 1997. The distribution of the plan assets is expected to
take place during fiscal 1998, pending Internal Revenue Service approval. In
1997, the Company recorded a $500 charge in connection with the termination.
In addition, the Company has a salary reduction plan under Section 401(k) of the
Internal Revenue Code for all of its employees not covered by a collective
bargaining agreement. The plan is funded by participants through employee
contributions and by Company contributions equal to a percentage of eligible
employee compensation. Employer contributions under this plan amounted to $386,
$394 and $385 in fiscal 1997, 1996 and 1995, respectively.
Effective September 1, 1996 the Company adopted a non-qualified supplemental
retirement plan ("SERP") for a select group of highly compensated and management
employees designated by the Board of Directors of the Company. The SERP allows
eligible employees to elect to defer until termination of their employment the
receipt of up to 25% of their current salary. The Company makes contributions
equal to the lesser of 50% of the deferrals or 3.5% of the employees annual
salary, which vest in full after three years of service following the effective
date of the SERP. Expenses in connection with the SERP were not material during
1997.
8. Postretirement Health Care and Life Insurance Benefits
The Company offers certain postretirement health care and life insurance
benefits to employees covered by collective bargaining contracts who retire
after attaining specific age and service requirements. The Company adopted SFAS
No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions in
fiscal 1996 but had previously recorded the contractual liability due to
purchase accounting and as part of its decision to restructure certain
operations; thus, the adoption of SFAS No. 106 had an immaterial effect on the
Company's financial statements.
F-15
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
8. Postretirement Health Care and Life Insurance Benefits (continued)
SFAS No. 106 requires that the projected future cost of providing postretirement
benefits be recognized as an expense as employees render service instead of when
benefits are paid.
Heim and West Trenton sponsor contributory defined benefit health care plans
that provide postretirement medical benefits to union employees who have worked
10 years and attained age 55 and 60, respectively, while in service with the
Company. The plans are unfunded and costs are paid as incurred. Postretirement
benefit obligations are included in Other noncurrent liabilities.
<TABLE>
<CAPTION>
Heim West Trenton
-----------------------------------------------
March March March March
29, 30, 29, 30,
1997 1996 1997 1996
-----------------------------------------------
<S> <C> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 482 $ 758 $ 389 $ 933
Eligible active participants 239 241 61 68
Other active participants 87 136 159 254
Unrecognized net actuarial (loss)/gain 389 9 564 (44)
Unrecognized prior service cost 710 818 -- --
-----------------------------------------------
Accrued postretirement benefit obligation $1,907 $1,962 $1,173 $1,211
===============================================
</TABLE>
The net periodic postretirement benefit cost for the fiscal years ended is as
follows:
March 29, March 30, April 1,
1997 1996 1995
---------------------------------------
Service cost $ 15 $ 28 $ 34
Interest cost 127 229 243
Prior service cost amortization (108) (18) --
---------------------------------------
$ 34 $239 $277
=======================================
The Company has contractually capped its liability for certain groups of future
retirees. As a result, there is no health care trend associated with these
groups. For certain grandfathered retirees, the assumed health care cost trend
rate used in measuring the accumulated postretirement benefit obligation is 5%
for fiscal year 1997 for the Heim and West Trenton plans. The effect
F-16
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
8. Postretirement Health Care and Life Insurance Benefits (continued)
of a 1% annual increase in the assumed cost trend rate would increase the
accumulated postretirement benefit obligation by approximately 2.4% for the Heim
and West Trenton plans; the annual service and interest cost components in the
aggregate would not be materially affected. The discount rate used in
determining the accumulated postretirement benefit obligation was 7.5%, 7.5% and
8.0% for fiscal 1997, 1996 and 1995, respectively, for the Heim and West Trenton
plans.
9. Income Taxes
The Company's effective income tax rate is reconciled to the U.S. Federal
statutory tax rate as follows:
Fiscal Year Ended
-----------------------------------
March 29, March 30, April 1,
1997 1996 1995
-----------------------------------
Federal statutory tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal tax 5.0% 6.9% 7.0%
benefit
Amortization of goodwill and other 2.0% 7.4% 11.7%
-----------------------------------
41.0% 48.3% 52.7%
===================================
The income tax provision (benefit) consists of:
Fiscal Year Ended
-----------------------------------
March 29, March 30, April 1,
1997 1996 1995
-----------------------------------
Current:
Federal $1,351 $ (404) $ 590
State 939 -- 87
-----------------------------------
2,290 (404) 677
-----------------------------------
Deferred 934 2,104 (567)
-----------------------------------
Total $3,224 $ 1,700 $ 110
===================================
The net deferred tax asset consists of the following:
F-17
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
9. Income Taxes (continued)
March 29, March 30,
1997 1996
---------------------------
---------------------------
Net operating loss carryforward $ -- $ 2,744
Alternative minimum tax carryforward 3,138 1,979
Postretirement benefits 1,347 1,301
Employee compensation accruals 980 995
Property, plant and equipment (3,030) (3,066)
Amortizable excess purchase price (362) (362)
Other, net (1,120) (1,704)
---------------------------
Net deferred tax asset $ 953 $ 1,887
===========================
10. Stockholder's Equity
The Company has 100 shares of Common Stock par value $.01 per share outstanding
which is owned by Holdings. The additional paid-in capital of the Company has
been derived from the purchase by Holdings of the Company described in Note 1.
All issuances and redemptions of equity by Holdings are shown on the financial
statements of the Company as dividends paid and capital contributions from
Holdings, since all amounts are contributed to the Company when proceeds are
received or dividended from the Company when amounts are dispersed.
11. Commitments and Contingencies
The Company leases factory facilities under non-cancelable operating leases,
which expire on various dates through October 2000 with rental expense
aggregating $500, $916 and $1,128 in fiscal 1997, 1996 and 1995, respectively.
The Company purchased one of these facilities in March 1996 for approximately
$2,500. In May 1996, the Company purchased another of the formerly leased
factory facilities for $2,100.
The Company also has non-cancelable operating leases for transportation,
computer and office equipment, which expire at various dates through March 2002.
Rental expense for 1997, 1996 and 1995 aggregated $652, $711 and $346,
respectively. The aggregate future minimum lease payments under leases are as
follows:
F-18
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
11. Commitments and Contingencies (continued)
1998 $ 829
1999 750
2000 548
2001 282
2002 11
------------
$ 2,420
============
The Company enters into government contracts and subcontracts that are subject
to audit by the government. In the opinion of the Company's management, the
results of such audits, if any, are not expected to have a material impact on
the financial statements of the Company.
The Company has a consulting agreement with an affiliate of Aurora which
terminates upon the date on which Aurora ceases to own more than 5% of Holdings
outstanding Class A common stock. The agreement provides for payments by the
Company in exchange for advisory and consulting services.
There are various claims and legal proceedings against the Company relating to
its operations in the normal course of business, none of which the Company
believes is material. The Company currently maintains insurance coverage for
product liability claims. The Company is subject to various federal, state and
local environmental laws, ordinances and regulations. The Company believes it is
currently in substantial compliance with all applicable requirements of
environmental laws. State agencies are currently overseeing investigation and/or
remediation activities at various Company facilities. In addition, the previous
owners of certain facilities are undertaking cleanup, and limited remediation,
in each case in fulfillment of certain indemnification obligations.
Under applicable Connecticut law, the purchase by the Company of its Fairfield
facility in 1996 necessitated the undertaking of an environmental investigation
of the facility. The results of such investigation revealed the presence of
certain low level soil and groundwater contamination the remediation of which
had been commenced by the previous owner of the facility. In 1996, the Company
received regulatory approval of an investigation and remediation plan, and has
implemented that plan at a total cost that the Company estimates will reach $50
(including attorney's fees). All costs
F-19
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
incurred to date in connection with such remediation activities have been
satisfied out of current operational revenues of the Company and are expensed
currently. The investigation has not to date revealed conditions that would
require further remediation, although the regulatory authorities may require
ongoing monitoring of any residual contamination to ensure that it does not
reach unsafe levels. As the magnitude of such costs, if any, is impossible to
determine at this time, the Company has not made any reserves or taken any
charges in connection therewith.
There are certain ongoing remediation activities being conducted at certain of
the Company's other facilities by past owners of such facilities. The Company
may be required to expend funds in the future to address these and other
environmental issues; however, the Company believes that indemnification from
prior owners of the facilities should adequately cover costs relating to such
remediation activities, and accordingly, does not believe such activities will
have a material effect on the results of operations, liquidity or financial
condition of the Company.
F-20
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
12. Other Expense, Net of Other Income
Other expense, net of other income is comprised of the following:
Fiscal 1997 Fiscal 1996 Fiscal 1995
------------------------------------------
Amortization of goodwill and
certain intangible assets $ 578 $ 670 $ 798
Management consulting fees 429 400 400
Royalty income (83) (192) (48)
Other (income)/expense 49 85 (93)
Pension termination 500 -- --
Environmental remediation -- 425 --
------------------------------------------
$ 1,473 $ 1,388 $ 1,057
==========================================
In 1996, the Company recorded a $425 charge against earnings for expenditures
relating to the settlement of claims relating to a release of certain pollutants
from its West Trenton Facility. The Company entered into a stipulated settlement
with the New Jersey Attorney General which called for the payment by the Company
of a $150 civil penalty to the State of New Jersey and for the Company to make
an additional donation of $50 to a local conservation group. Additionally, the
Company expended approximately $225 in legal fees relating to the release and
settlement.
13. Downsizing of Operations Reserve
The Company recorded a restructuring reserve during 1994 for costs associated
with the decision to restructure and downsize its operations. As a result of
this decision, the Company recorded a charge to operations of approximately
$7,500 related to employee severance costs; estimated loss on machinery and
equipment disposal; inventory and other cost; and health care and life insurance
benefits related to certain retired employees. During 1995, due to changes in
the business, the restructuring took a different form resulting in a
reallocation of the $7,500 as follows: employee severance and health care and
life insurance benefits of $2,000; inventory obsolescence related to the
restructuring of $3,500; and facility-related costs of $2,000. As of March 30,
1996, the reserve was fully utilized for its intended purposes.
F-21
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
14. Stockholders' Equity of Roller Bearing Holding Company, Inc.
The stockholders' equity of Holdings is as follows:
<TABLE>
<CAPTION>
March 29, March 30,
1997 1996
------------------------
<S> <C> <C>
Series A, nonvoting, 8% cumulative, redeemable
exchangeable preferred stock - $0.01 par value, authorized
250,000 shares; issued and outstanding shares: 127,533 in
fiscal 1997 and 1996 with a redemption value aggregating $ 1 $ 1
$18,665 in 1997
Series B, nonvoting, 8% cumulative, redeemable
exchangeable preferred stock - $0.01 par value, authorized
200,000 shares; issued and outstanding shares: 109,818 in
fiscal 1997 and 1996 with a redemption value aggregating 1 1
$12,353 in 1997
Series C, nonvoting, 8% cumulative, convertible redeemable
exchangeable preferred stock; $0.01 par value; authorized
20,000 shares; issued and outstanding shares: 10,182 in 1997
and 1996 with a redemption value aggregating $1,145 in -- --
1997
Class A, voting common stock -- $0.01 par value; authorized
300,000 shares, issued and outstanding shares: 113,772 in 1 1
1996 and 1995
Class B, nonvoting common stock -- $0.01 par value;
authorized 100,000 shares, none issued -- --
Additional paid-in capital 34,714 34,679
Retained earnings (deficit) 2,690 (1,950)
Treasury Stock of 350 shares, at cost (35) --
------------------------
Total stockholders' equity $37,372 $32,732
========================
</TABLE>
Preferred Stock
On September 22, 1995, Holdings completed a private placement of $12,000 of its
preferred stock. In September 1995, Holdings restated its certificate of
incorporation to authorize 600,000 shares, $0.01 par value, $100 stated value
per share, of preferred stock and to designate the following series (pursuant to
the completion of the proposed transaction as described in Note 15, the
following series will be redeemed):
F-22
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
14. Stockholders' Equity of Roller Bearing Holding Company, Inc. (continued)
Series A Redeemable Exchangeable Cumulative (Series A Preferred Stock)
The Series A Preferred Stock carries cumulative dividends, at an annual rate of
8% per share from date of issuance, payable annually at the discretion of
Holdings and an additional dividend of 8% per annum in arrears on unpaid
dividends. The Series A Preferred Stock is redeemable, in whole or in part, at
the option of Holdings at $100 per share plus any accrued but unpaid dividends.
The Series A Preferred Stock plus cumulative unpaid dividends is exchangeable
into a debt instrument of Holdings due March 31, 2004 at the sole option of
Holdings. However, if the terms of the debentures are less favorable than the
preferred stock, approval by holders of 66-2/3% of the preferred stock is
required. Undeclared dividends were $1,020 (1997) and $1,020 (1996) and
cumulative dividends of $5,912 were undeclared as of March 29, 1997. Cumulative
undeclared dividends include dividends on dividend arrearages of $815, $488 and
$243 for each of the years ended March 29, 1997, March 30, 1996 and April 1,
1995, respectively.
The Series A Preferred Stock is mandatorily redeemable if dividends are
undeclared and unpaid for 12 consecutive years, upon change in ownership of
Holdings, or sale of substantially all of the assets of Holdings. During 1995,
Holdings repurchased 237 shares of preferred stock and accrued dividends for $24
and sold 813 shares of preferred stock held in treasury to two employees of
Holdings for $86.
On March 31, 1992, stockholders of the predecessor company received 20,000
shares of the Series A Preferred Stock which are held in an escrow account to
collateralize an environmental indemnification pursuant to the purchase
agreement. These shares contain restrictive transfer rights and revert to
Holdings in the event of payments made by the Company for indemnified
environmental claims. All remaining shares held in the escrow account at March
31, 2004 will be released to the stockholders. See Note 15 for a discussion of
the treatment of such shares in connection with the Recapitalization.
Series B Redeemable Exchangeable Cumulative (Series B Preferred Stock)
The Series B Preferred Stock was issued on September 22, 1995. The holder of
this preferred stock becomes entitled to receive a dividend on the last business
day of March of each year. The Series B Preferred Stock carries cumulative
dividends at an annual rate of 8% per share from date of issuance, payable
annually at the discretion of Holdings plus an additional dividend at 8% per
annum on unpaid dividends. Undeclared dividends were $879 (1997) and $456 (1996)
and cumulative dividends of $1,371 were undeclared as of March 29, 1997.
Cumulative undeclared dividends include dividends on dividend arrearages of $36
for the year ended March 29, 1997.
F-23
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
14. Stockholders' Equity of Roller Bearing Holding Company, Inc. (continued)
The Series B Preferred Stock is redeemable, in whole or in part, at the option
of Holdings at $100 per share plus accrued but unpaid dividend amounts. The
Series B Preferred Stock is mandatorily redeemable in full if dividends are
unpaid for 12 consecutive years, upon change in ownership of Holdings, sale of
substantially all the assets of Holdings, or upon the effective registration of
Holdings common stock. In lieu of redeeming the Series B Preferred Stock upon an
effective registration of Holdings common stock, up to 80% of the outstanding
Series B Preferred Stock is exchangeable, at the sole option of Holdings, into a
debt instrument due on the tenth anniversary of the date of exchange. However,
if the terms of the debentures are less favorable than the preferred stock,
approval by holders of 66-2/3% of the preferred stock is required. If Holdings
calls the preferred stock for exchange on or before September 22, 2005, the
percentage of the outstanding Series B Preferred Stock that will be exchangeable
will not be 80% but a lesser amount as determined by a formula.
Series C Convertible Redeemable Exchangeable Cumulative (Series C Preferred
Stock)
The Series C Preferred Stock was issued on September 22, 1995. The holder of
this preferred stock becomes entitled to receive a dividend on the last business
day of March of each year. The Series C Preferred Stock carries cumulative
dividends at an annual rate of 8% per share from the date of issuance, payable
annually at the discretion of Holdings plus an additional 8% per annum on unpaid
dividends. Undeclared dividends were $82 (1997) and $42 (1996) and cumulative
dividends of $127 were undeclared as of March 29, 1997. Cumulative undeclared
dividends include dividends on dividend arrearages of $3 for the year ended
March 29, 1997.
The Series C Preferred Stock carries the same optional and mandatory redemption
features and optional exchange feature as the Series B Preferred Stock, except
that the 80% of the outstanding Series C Preferred Stock is not exchangeable
into a debt instrument until after September 22, 2005.
The Series C Preferred Stock is convertible, in whole or in part, at the
holder's election at any time prior to the close of business on September 22,
2005, into fully paid and nonassessable shares of Holdings Class A common stock
at a conversion rate of one share of Class A common stock for each $100 of
stated value of Series C Preferred Stock. The conversion rate is subject to
adjustment in the event of an affiliate issuance of shares of common stock,
options, warrants, or other rights to acquire shares of common stock;
subdivision or combination of the outstanding shares of common stock; or if
Holdings consummates a reorganization or recapitalization of its common stock.
Upon the conversion of the shares of Series C Preferred Stock into Class A
common stock, the holder shall be issued shares of Series B Preferred Stock
having an aggregate stated value equal to the aggregate amount of accrued and
unpaid dividends on the Series C
F-24
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
14. Stockholders' Equity of Roller Bearing Holding Company, Inc. (continued)
Preferred Stock to the date of conversion. Holdings has reserved 30,000 shares
of its Class A common stock for issuance upon the conversion of the Series C
Preferred Stock.
Warrants
Holdings has issued warrants to purchase shares of Class A common stock.
Warrants issued to the Company's management become vested and are exercisable in
one-third annual increments commencing on the date of award. All other warrants
are vested immediately. All warrants expire ten years from the date of issuance.
Activity in fiscal 1997, 1996 and 1995 is as follows:
Number
of Class A
Common
Shares
-----------
Outstanding, April 2, 1994 17,152.4
Awarded fiscal 1995 2,000.0
-----------
Outstanding, April 1, 1995 19,152.4
Awarded fiscal 1996 500.0
-----------
Outstanding, March 30, 1996 19,652.4
Awarded fiscal 1997 150.0
Redeemed fiscal 1997 (350.0)
-----------
Outstanding, March 29, 1997 19,452.4
===========
At March 29, 1997, of the outstanding warrants to purchase shares of Class A
common stock, 14,852.4 were held by management of the Company. The exercise
price per share is $100 on all outstanding warrants except 9,977.4 shares which
have an exercise price of $76.57 per share.
The Company has adopted the provisions of SFAS No. 123, "Accounting for Stock
Based Compensation" and as permitted by SFAS No. 123, the Company has elected to
account for the above warrants under APB No. 25, and as such no compensation
expenses were recorded. Pro forma information regarding net income is required
by SFAS No. 123, and has been determined as if the Company had accounted for
Holdings warrants under the fair value method of that Statement. The fair value
for the Holdings warrants was estimated at the date of grant using a
Black-Scholes warrant pricing model with the following weighted-average
assumptions: risk free interest rates of 6%; dividend yields of 0%; volatility
factors of expected market price of Holdings common stock of .44%; and a
weighted-average expected life of the warrants of three
F-25
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
years. For purposes of pro forma disclosures, the estimated fair value of the
warrants is amortized to expense over the warrants' vesting period. The
estimated weighted-average fair value per warrant is approximately $430.47. The
pro forma effect on the Company's fiscal 1996 and 1997 operations is as follows:
Net Income
-------------------------------
1996 1997
-------------------------------
As reported $827 $4,640
Pro forma $826 $4,554
The Black Scholes warrant valuation model was developed for use in estimating
the fair value of traded warrants which have no vesting restrictions and are
fully transferable. In addition, warrant valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Holdings warrants have characteristics significantly different from
those of traded warrants, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its warrants.
Because Statement 123 is applicable only to warrants granted subsequent to
fiscal years that began after December 15, 1994, its pro forma effect will not
be fully reflected until 1998.
In March 1992, Holdings lender received warrants to purchase 6,249 shares of
Holdings Class B common stock at an exercise price of $100 per share.
Subsequently, 1,524.1 of these warrants which are exercisable and expire on
March 31, 2002 were sold. Holdings redeemed the remaining 4,724.9 warrants for
$1,000 in September 1995 in conjunction with its refinancing transaction (see
Note 5).
15. Subsequent Event
A. The Recapitalization and the Offering
On May 20, 1997, pursuant to a Redemption and Warrant Purchase Agreement (the
"Recapitalization Agreement"), the Company Equity Partners, L.P. and, PRBC
Investment Partners, L.P. (together with all stockholders and warrantholders of
Holdings who elect to become a party to the Recapitalization Agreement, the
"Selling Group"), Holdings and Dr. Hartnett, as purchaser representative, agreed
to consummate a recapitalization of Holdings (the "Recapitalization"). As a
result of the Recapitalization, outstanding shares of Holdings common stock and
preferred stock, (respectively, the "Common Stock" and the "Preferred Stock")
held by members of the
F-26
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
15. Subsequent Event (continued)
Selling Group will be purchased by Holdings. Following the Recapitalization,
members of management of the Company, certain other current stockholders and
warrantholders of Holdings, certain affiliates of Credit Suisse First Boston
Corporation (the "Initial Purchaser"), OCM Principal Opportunities Fund, L.P.
("Oaktree"), Northstar Investment Management Corporation ("Northstar" and
together with Oaktree, the "Discount Purchasers") and Mitchell Quain will own
all of the outstanding capital stock of Holdings.
The Recapitalization Agreement provides for the redemption by Holdings of shares
of Common Stock held by members of the Selling Group for consideration of $514
per share (the "Common Consideration"), and of shares of Series A Preferred
Stock of Holdings for consideration equal to the stated value of such stock
($100 per share) plus any accrued but unpaid dividends to the date of
redemption. Additionally, Holdings will purchase from members of the Selling
Group, warrants to purchase Common Stock (the "Common Stock Purchase Warrants")
held by such member in exchange for $414 per share underlying such Common Stock
Purchase Warrants (the Common Consideration less the exercise price per share of
the Common Stock Purchase Warrants).
The Recapitalization Agreement contains representations and warranties of all
members of the Selling Group, including as to their ownership of the Common
Stock, Preferred Stock and Common Stock Purchase Warrants held by such members,
their authority to enter into the transaction and that no conflicts or
litigation exist with respect to their consummation of such transactions, and of
Holdings, as to authorization, conflicts, consents and regarding the proposed
financing for the Recapitalization.
The Recapitalization Agreement provides for covenants of the parties as to
conduct of the business of the Company, taking action to promote and not to
hinder the consummation of the Recapitalization, distribution of certain
information to members of the Selling Group, meetings of the Board of Directors
and stockholders of Holdings, granting certain members of management the right
to act on behalf of Holdings regarding payment of certain expenses relating to
the Recapitalization and certain indemnification matters.
The closing of the Recapitalization is conditioned on, among other things, the
representations of the parties being true on the closing date, the covenants of
the parties having been performed by such date, the provision of certain
releases, the obtaining by Holdings of all necessary appraisals and valuations
of the Company requested by the parties or otherwise required in connection with
the Recapitalization and the successful consummation of the financings necessary
to complete the Recapitalization and the satisfaction of all conditions
precedent thereto.
F-27
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
15. Subsequent Event (continued)
Under the Recapitalization Agreement, Holdings is permitted to, and it is
currently contemplated that Holdings will, assign certain of its rights to
redeem shares of Common Stock and purchase Common Stock Purchase Warrants to
certain persons, including, Dr. Hartnett, other members of management of
Holdings, affiliates of the Initial Purchaser and Oaktree.
To finance the Recapitalization, RBC will enter into bank credit facilities (the
"Senior Credit Facilities") (comprised of $16,000 term loans and a $54,000
revolving credit facility of which approximately $10,900 will be utilized in the
form of letters of credit to be issued upon the closing of the Recapitalization
as security for the IRBs) and will issue the Notes, and Holdings will issue to
the Discount Purchasers the Discount Debentures and the Discount Warrants (as
defined below) resulting in $40,000 gross proceeds to Holdings.
In connection with effecting the Recapitalization, (i) RBC will pay to Holdings
a dividend (the "Dividend") in the amount of approximately $56,100 to finance
the Recapitalization, (ii) using the proceeds of the Dividend and the issuance
of the Discount Debentures, Holdings will redeem Common Stock and Preferred
Stock and purchase Common Stock Purchase Warrants including as described above
for aggregate consideration of approximately $92,200, (iii) Holdings will
repurchase (the "Hartnett Repurchase") 1,250 Common Stock Purchase Warrants from
Dr. Hartnett for an amount per share of Common Stock underlying the Common Stock
Purchase Warrants equal to $514 less the approximately $77 exercise price of
such warrants (an aggregate of approximately $550), (iv) Holdings will issue
Common Stock Purchase Warrants exercisable for 1,250 shares of Common Stock at
an exercise price of $514 per share of Common Stock to Dr. Hartnett, (v)
Holdings will loan $500 to Dr. Hartnett (the "Hartnett Loan") to finance a
portion of Dr. Hartnett's purchase of Common Stock and Common Stock Purchase
Warrants referred to above, (vi) Holdings will pay to Dr. Hartnett a fee of
$1,000 (the "Hartnett Fee"), (vii) RBC will repay outstanding indebtedness
(approximately $52,100) on its revolving credit facility and its term loan both
with Heller Financial, Inc., and (viii) RBC and Holdings will pay certain other
fees and expenses payable in connection with the Transactions.
In addition, in conjunction with the purchase of the Discount Debentures, the
Discount Purchasers will be issued warrants (the "Discount Warrants") to acquire
an aggregate of 6,731 shares of Common Stock (representing approximately 20% of
the post-Recapitalization Common Stock outstanding on a fully diluted basis) for
a nominal exercise price. In addition, in conjunction with the Recapitalization,
Oaktree, one of the Discount Purchasers, will acquire 1,400 shares of Common
Stock and 1,322 Common Stock Purchase Warrants (representing in the aggregate
approximately 8% of the post-Recapitalization Common Stock outstanding on a
fully diluted basis). In addition, the Company has agreed to appoint a
representative of Oaktree to the board of directors of Holdings.
F-28
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
15. Subsequent Event (continued)
The Notes will pay interest semi-annually and mature on June 15, 2007, but will
be able to be redeemed at the Company's option beginning on June 15, 2002, as
well as, earlier under certain conditions specified in the indenture under which
the Notes will be issued. The Notes will be unsecured and subordinate to all
existing and future senior indebtedness of the Company. The Notes will be fully
and unconditionally and irrevocably guaranteed, jointly and severally, on a
senior subordinated basis by each of the wholly-owned subsidiaries of the
Company.
The separate financial statements of the subsidiary guarantors have not been
presented because management has determined that they would not be material to
investors. However, the summarized combined financial information of the
guarantor subsidiaries are as follows:
March 29, 1997
--------------
Balance Sheet Data
Total current assets $17,730
Noncurrent assets 16,417
-------
Total assets $34,147
-------
Total current liabilities $31,716
Noncurrent liabilities 1,228
-------
Total liabilities $32,944
-------
Stockholders equity $ 1,203
Operating Results
Net sales $23,858
Gross Margin 6,065
Income (loss) before extraordinary charge 1,925
Net income (loss) 1,925
Total current liabilities includes $28,312 of intercompany liabilities. Income
(loss) before extraordinary charge includes a charge of $1,148 for corporate
overhead allocated from the Company, and a provision for income taxes of $1,338.
Following the Recapitilization, stockholders of Holdings who owned approximately
7% of the outstanding voting shares prior to the effective date of the
Recapitalization, will own
F-29
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
15. Subsequent Event (continued)
approximately 71% of the outstanding voting shares of Holdings immediately
following the Recapitalization. Affiliates of the Initial Purchaser, one of the
Discount Purchasers and a newly appointed director of Holdings will own the
remaining 29% of the voting shares and thus will not be controlling shareholders
of either Holdings or the Company. As a result, the transaction will not result
in the establishment of new bases in Holdings' or the Company's assets and
liabilities.
Following the Recapitalization, Dr. Hartnett, the Chairman, President and Chief
Executive Officer of the Company, will own approximately 43% (approximately 42%
on a fully diluted basis) of the outstanding capital stock of Holdings, and,
through the operation of provisions of Holdings' Certificate of Incorporation,
he will have the power to control a majority of the voting rights of all capital
stock of Holdings.
The redemption of shares of Common Stock and Preferred Stock and Common Stock
Purchase Warrants will be treated as a recapitalization transaction.
Accordingly, funds disbursed by Holdings and the Company (other than for the
additional compensation described below) will be charged against their capital
accounts to the extent permitted by law.
In connection with the Recapitalization, Holdings will redeem (i) 5,253.022
shares of Class A Common Stock in exchange for aggregate consideration of
approximately $2,700, (ii) 127,545.876 shares of Series A Preferred Stock in
exchange for aggregate consideration of approximately $18,849, (iii) 109,818
shares of Class B Preferred Stock in exchange for aggregate consideration of
approximately $12,583, and (iv) 10,182 shares of Class C Preferred Stock in
exchange for aggregate consideration of approximately $5,382.
The Hartnett Loan will be reflected as an asset of Holdings, discounted to
reflect a market interest rate, since the loan is non-interest bearing. The
discounted amount will be reflected as a charge to compensation expense at the
time of the loan and will be accredited into interest income of Holdings through
maturity in 2007. The $1 million Hartnett Fee will be reflected as a charge to
operations of Holdings.
In connection with the Recapitalization, Holdings will purchase Common Stock
Purchase Warrants (i) to purchase 1,713 shares of Class A Common Stock from
current and former directors and employees of Holdings, and (ii) to purchase
1,524.2 shares of Class B Common Stock from entities who received such warrants
in connection with financing transactions.
Warrants that have been redeemed from current and former directors will be
accounted for as compensation expense at RBC based upon the amount of stock
appreciation redeemed (the difference between the redemption price and the
warrant exercise price). Warrants redeemed from individuals or companies that
provided financing to RBC or Holdings, have been accounted for as a capital
transaction since the original value of such warrants was assigned to equity at
the time the warrant was issued.
In connection with the redemption of certain shares of Preferred Stock by
Holdings, Holdings will release certain Preferred Stockholders who were prior
stockholders of RBC from certain
F-30
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
March 29, 1997
(dollars in thousands, except share data)
15. Subsequent Event (continued)
indemnification obligations owing to Holdings. Such obligations arose under the
agreement pursuant to which Holdings purchased RBC from such stockholders. The
shares of Preferred Stock have been held in escrow in connection with such
stockholders' obligations under such indemnification provisions. The provisions
of the escrow provided that the escrowed shares were to be released upon any
transaction involving a change in control of Holdings, except as to the extent
of claims previously made. As there are no pending claims, upon consummation of
the Recapitalization, such shares will be released from escrow and redeemed by
Holdings.
The Discount Debentures will be reflected in the financial statements of
Holdings net of both the discounted interest amount and the value of the
Discount Warrants issued in connection with these securities. The value of the
Discount Warrants, which have a nominal exercise price, is based upon the
redemption price established in connection with the recapitalization ($514 per
share) and will be included as a component of Holdings' stockholders' equity.
B. Related Transactions
In connection with the Recapitalization, (i) Holdings will pay to Dr. Hartnett
the Hartnett Fee of $1,000 out of the proceeds from the sale of the Discount
Debentures, which fee is to be paid at the closing of the Recapitalization, (ii)
Holdings will advance the Hartnett Loan in the amount of $500 to Dr. Hartnett,
the proceeds of which Dr. Hartnett will use to purchase shares of Common Stock
from IRBP, which loan will be recourse only to the securities being purchased
with the proceeds thereof, (iii) Holdings will purchase 1,250 Common Stock
Purchase Warrants from Dr. Hartnett for approximately $437 per share underlying
such Common Stock Purchase Warrants and will issue 1,250 new Common Stock
Purchase Warrants to Dr. Hartnett with an exercise price of $514 per share, (iv)
Holdings will redeem shares of Common Stock held by members of the Selling Group
and all outstanding shares of Preferred Stock (including shares of Common Stock
and Preferred Stock owned by members of management) and (v) Holdings and the
other parties will consummate the transactions set forth under Note 15.A.
Concurrently with the Recapitalization, through the operation of provisions to
be incorporated into the certificate of incorporation of Holdings, whether or
not Dr. Hartnett owns a majority of the outstanding capital stock of Holdings,
he will have, subject to certain limitations, the power to control a majority of
the voting rights of all capital stock of Holdings. Such right will be suspended
for such periods as Dr. Hartnett ceases to serve as an officer of the Company,
or any successor thereto, or owns less than 50% of the outstanding Common Stock
on a fully diluted basis that be owned immediately following the
Recapitalization.
F-31
<PAGE>
Index to Unaudited Condensed Financial Statements
Contents
Condensed Consolidated Balance Sheets at September 27, 1997
and March 29, 1997 ..................................................... F-36
Condensed Consolidated Statements of Operations for the
three and six months ended September 27, 1997 and
September 28, 1996 ..................................................... F-37
Condensed Consolidated Statements of Cash flows
for the three and six months ended September 27, 1997
and September 28, 1996 ................................................. F-38
Notes to Condensed Consolidated Financial Statements ..................... F-39
F-35
<PAGE>
Roller Bearing Company of America, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
Sept. 27, 1997 March 29, 1997
-----------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 10,020 $ 859
Accounts receivable, net 19,965 19,766
Inventories 41,559 36,852
Prepaid expenses and other current assets 1,289 764
-------- --------
Total current assets 72,833 58,241
-------- --------
Property, plant, and equipment, net 44,588 40,098
Restricted marketable securities 3,993 3,901
Goodwill, net of accumulated amortization of $3,131
at September 1997, and $2,843 at March 1997 19,622 19,911
Deferred financing costs, net of accumulated
amortization of $318 at September 1997, and
$337 at March 1998 8,162 1,383
Other assets 1,078 979
-------- --------
Total assets $150,276 $124,513
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $12,969 $9,644
Accrued expenses and other current liabilities 11,381 7,136
Current portion of long-term debt 1,125 2,500
Obligations under capital leases, current portion 1,200 1,325
-------- --------
Total current liabilities 26,675 20,605
-------- --------
Long-term debt:
Senior subordinated note payable 110,000 -
Bank term loan payable 114,625 -
Revolving credit agreement - 24,627
Term notes payable - 24,988
Industrial development revenue bonds 10,700 10,700
-------- --------
135,325 60,315
Capital lease obligations, less current portion 2,573 3,141
Other noncurrent liabilities 3,255 3,080
-------- --------
Total liabilities 167,828 87,141
-------- --------
Stockholder's equity:
Common stock - $.01 par value; 1,000 shares
authorized, issued and outstanding shares:
100 shares at September 1997, and at March 1997 -- --
Additional paid-in capital -- 35,831
-------- --------
Retained earnings (deficit) (17,552) 1,541
Total stockholder's equity (17,552) 37,372
-------- --------
Total liabilities and stockholder's equity $150,276 $124,513
======== ========
</TABLE>
See notes to condensed financial statements
F-32
<PAGE>
Roller Bearing Company of America, Inc.
Condensed Consolidated Statements of Operations
(dollars in thousands)
Three Months Ended Six Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 27,
1997 1996 1997 1996
------------------------------------------------
(Unaudited) (Unaudited)
Net sales $32,309 $20,847 $60,971 $41,967
Cost of sales 22,855 14,785 43,141 29,447
------- ------- ------- -------
Gross margin 9,454 6,062 17,830 12,520
Operating expenses:
Selling, general and
administrative 4,531 3,247 8,661 6,450
Other expense, net of other 234 222 1,022 410
income ------- ------- ------- -------
4,765 3,469 9,683 6,860
------- ------- ------- -------
Operating Income 4,689 2,593 8,147 5,660
Interest expense, net 3,311 1,393 4,894 2,748
------- ------- ------- -------
Income before taxes and
extraordinary charges 1,378 1,200 3,253 2,912
Provision for income taxes 565 492 1,334 1,194
------- ------- ------- -------
Income before extraordinary
charge 813 708 1,919 1,718
Extraordinary charge, net 0 0 625 0
------- ------- ------- -------
Net income $ 813 $ 708 1,294 $ 1,718
======= ======= ======= =======
See notes to condensed consolidated financial statements.
F-33
<PAGE>
Roller Bearing Company of America, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
Sept. 27, 1997 Sept. 28, 1996
-----------------------------------------
(Unaudited)
<S> <C> <C>
Cash flow from operating activities
Net income $ 1,294 $ 1,718
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Deferred income taxes (105) --
Depreciation 3,453 2,484
Amortization of goodwill 289 288
Amortization of deferred financing costs 333 107
Extraordinary charge 625 --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,765) 445
(Increase) decrease in Inventories (3,402) (1,211)
(Increase) decrease in prepaid (542) (240)
expenses and other current assets
(Increase) decrease in other noncurrent assets 434 (56)
Increase (decrease) in accounts payable 1,207 (541)
Increase (decrease) in accrued expenses and other current 4,995 (196)
liabilities --------- ----------
Net cash provided by operating activities 7,176 2,798
Cash flows from investing activities:
Purchase of property, plant & equipment, net (2,761) (4,176)
Purchase of restricted marketable securities (93) --
Acquisition of subsidiaries (3,721) --
--------- ----------
Net cash used in investing activities (6,575) (4,176)
--------- ----------
Cash flows from financing activities:
Net increase (decrease) in revolving credit facility (24,627) 1,589
Proceeds from long-term debt 126,000 --
Payments of long-term debt (27,488) (625)
Payments of bank term loan (250) --
Proceeds from capital lease obligations -- 804
Principal payments on capital lease obligations (692) (630)
Dividends paid to parent company (56,219) --
Financing fees paid in connection with the (8,164) --
Recapitalization --------- ----------
Net cash provided by financing activities 8,560 1,138
--------- ----------
Net increase (decrease) in cash 9,161 (240)
Cash, at beginning of period 859 366
--------- ----------
Cash, at end of period $ 10,020 $ 126
========= ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,830 $ 2,640
Income taxes $ 1,011 $ 425
</TABLE>
See notes to condensed consolidated financial statements.
F-34
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Condensed Consolidated Financial Statements
September 27, 1997
(dollars in thousands except share data)
The condensed consolidated financial statements included herein have been
prepared by Roller Bearing Company of America, Inc. (the "Company"), without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. The year end condensed balance sheet data was derived from the
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. The interim financial statements
furnished with this report have been prepared on a consistent basis with the
audited financial statements for the year ended March 29, 1997. These statements
reflect all adjustments, consisting only of items of a normal recurring nature,
which are, in the opinion of management, necessary for the fair statement of the
consolidated financial condition and consolidated results of operations for the
interim periods presented. It is suggested that these financial statements be
read in conjunction with the audited financial statements and notes thereto
included in the Company's registration on Form S-4, initially filed with the
Commission on August 7, 1997.
The results of operations for the six month period ended September 27, 1997 are
not necessarily indicative of the operating results for the full year.
All references to "Holdings" refer to Roller Bearing Holding Company, Inc., a
Delaware corporation and the corporate parent and sole stockholder of the
Company.
1. Acquisition of Wholly Owned Subsidiary
On August 8, 1997, Bremen Bearings, Inc., a wholly-owned subsidiary of the
Company, completed the acquisition of the Bremen Bearings Division of SKF USA,
Inc., a manufacturer of needle bearings with facilities in Bremen, Indiana. The
purchase was effective as of July 1, 1997. The acquisition was accounted for
under the purchase method of accounting. The aggregate purchase price of $5,313
was subject to certain adjustments and subsequent conditions. Thus, $3,640 was
paid at closing and the payments deferred include $473, which is due following
the installation of certain equipment, and $1,200, which is due on August 8,
1998.
2. Inventories
Inventories are summarized as follows:
September 27,1997 March 29, 1997
----------------- --------------
Raw material $ 2,375 $ 1,711
Work in process 18,300 17,170
Finished goods 20,884 17,971
------ ------
Total inventories $41,559 $36,852
------- -------
F-35
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Condensed Consolidated Financial Statements
September 27, 1997
(dollars in thousands)
3. Property, Plant and Equipment
Property, plant and equipment are summarized as follows:
September 27,1997 March 29, 1997
----------------- --------------
Land $ 7,536 $ 7,536
Building 7,764 7,287
Machinery & equipment 56,701 43,886
------ -------
Total property, plant &
equipment, at cost 72,001 58,709
Less, accumulated
depreciation and amortization 27,413 18,611
------- ------
Property, plant
and equipment, net $44,588 $40,098
------- -------
4. Recapitalization
On June 23, 1997, the Company and Holdings consummated a Recapitalization
transaction whereby all of Holdings' preferred stock as well as a substantial
portion of its common stock and warrants to purchase its common stock were
redeemed by Holdings. In connection with the Recapitalization, the Company
issued the Senior Subordinated Notes and incurred the Term Loans described
below. The proceeds therefrom were utilized to pay a dividend to Holdings to
finance its redemption of common stock, preferred stock and warrants to purchase
common stock and to pay certain Recapitalization fees and expenses. This
transaction was further financed from the proceeds of the certain debt issued
directly by Holdings. In addition, a new group of investors (who were not
previously stockholders of Holdings) purchased shares and warrants from certain
Holdings' stockholders directly. The redemption of shares and warrants were
treated as a recapitalization transaction.
Holdings stockholders constituting approximately 7% of the outstanding voting
shares prior to the effective date of the Recapitalization, owned approximately
71% of the outstanding voting shares immediately following the Recapitalization.
The new group of investors referred to above owned the remaining 29% of the
voting shares at such time and are thus not controlling stockholders of either
Holdings or the Company. As a result, the transaction did not result in the
establishment of new bases in Holdings' or the Company's assets and liabilities.
Funds disbursed by Holdings and the Company were charged against their capital
accounts to the extent permitted by law.
F-36
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Condensed Consolidated Financial Statements
September 27, 1997
(dollars in thousands)
5. Debt
In connection with the financing of the Recapitalization, the Company issued
$110,000 aggregate principal amount of 9 5/8% Senior Subordinated Notes Due 2007
(the "Notes"). The Notes pay interest semi-annually and mature on June 15, 2007,
but may be redeemed at the Company's option beginning on June 15, 2002, as well
as earlier under certain conditions specified in the indenture under which the
Notes were issued. The Notes are unsecured and subordinate to all existing and
future senior indebtedness of the Company. The Notes are fully, unconditionally
and irrevocably guaranteed jointly and severally on a senior subordinated basis
by each of the wholly owned subsidiaries of the Company. The separate financial
statements of the subsidiary guarantors have not been presented because
management has determined that they would not be material investors. However,
the summarized combined financial information of the guarantor subsidiaries are
as follows:
September 27, 1997
------------------
Balance Sheet Data
Total current assets $25,165
Noncurrent assets 21,081
-------
Total assets $46,246
-------
Total current liabilities $41,525
Noncurrent liabilities 1,123
-------
Total liabilities $42,648
-------
Stockholder's equity $ 3,598
Operating Results
Net sales $23,889
Gross margin 5,991
Income (loss) before extraordinary charge 2,161
Net Income (loss) $ 2,161
Total current liabilities includes $33,763 of intercompany liabilities. Income
(loss) before extraordinary charge includes a charge of $520 for corporate
overhead allocated from RBC, and a provision for income taxes of $1,502.
In addition, in connection with the Recapitalization, the Company entered into
bank credit facilities (the "Senior Credit Facilities") with a group of lenders
providing for $16,000 of term loans (the "Term Loans") and up to $54,000 of
revolving credit loans and letters of credit the "Revolving Credit Facility").
Approximately $10,900 of the Revolving Credit Facility is being utilized to
provide letters of credit to secure the Company's obligations relating to
certain Industrial Development Revenue Bonds. As of September 27, 1997 the
Company had the ability to borrow up to an additional $43,100 under the
Revolving Credit Facility.
Proceeds from these borrowings were used to repay certain existing indebtedness
as well as to pay a dividend to Holdings in order to consummate the
Recapitalization described above.
The debt agreements require that the Company meet certain financial covenants,
principally limiting the incurrence of additional indebtedness, the payment of
dividends and certain other transactions.
6. Extraordinary Charge
The extraordinary charge for the period ended September 27, 1997 resulted from
the write off of unamortized deferred financing costs due to the Company's early
extinguishment of debt in connection with the Recapitalization described above.
The extraordinary charge was $1,059 and is reflected net of the related tax
benefit of $434.
F-37
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized to give
any information or to make any representation not contained in this Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or any Subsidiary Guarantor. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer in such jurisdiction. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date hereof or that there has been no change in
the affairs of the Company since such date.
------------------------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary........................................................... 5
The Exchange Offer........................................................... 11
Description of Exchange Notes................................................ 13
Risk Factors................................................................. 18
Use of Proceeds.............................................................. 27
Capitalization............................................................... 27
Selected Consolidated Historical Financial Information....................... 28
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................... 31
Business..................................................................... 41
Management................................................................... 57
Securities Ownership of Certain Beneficial Owners
and Management......................................................... 64
Certain Relationships and Related Transactions............................... 67
The Exchange Offer........................................................... 70
Description of Certain Indebtedness.......................................... 79
Description of the Notes..................................................... 81
Certain Federal Income Tax Considerations....................................112
Plan of Distribution.........................................................114
Legal Matters................................................................115
Experts......................................................................115
Independent Auditors.........................................................115
Available Information........................................................115
Until ___________, all dealers effecting transactions in the securities,
whether or not participating in this distribution, may be required to deliver a
Prospectus. This delivery requirement is in addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
================================================================================
================================================================================
Roller Bearing Company of
America, Inc.
and Subsidiaries
$110,000,000
Offer to Exchange 9 5/8%
Senior Subordinated Notes Due 2007,
Series B
For 9 5/8% Senior Subordinated
Notes Due 2007
------------
PROSPECTUS
------------
__________________, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law ("DGCL"), the
Registrants have broad powers to indemnify their directors, officers and other
employees. This section (i) provides that the statutory indemnification and
advancement of expenses provisions of the DGCL are not exclusive, provided that
no indemnification may be made to or on behalf of any director or officer if a
judgment or other final adjudication adverse to the director or officer
establishes that his acts were committed in bad faith, (ii) establishes
procedures for indemnification and advancement of expenses that may be contained
in the by-laws, or set forth in a resolution of the stockholders or the
disinterested directors or an agreement providing for indemnification and
advancement of expenses, (iii) applies a single standard for statutory
indemnification for third-party and derivative suits by providing that
indemnification is available if the director or officer acted in good faith, for
a purpose which he reasonably believed to be in the best interests of the
corporation, and, in criminal actions, had no reasonable cause to believe that
his conduct was unlawful, and (iv) permits the advancement of litigation
expenses upon receipt of an undertaking to repay such advance if the director or
officer is ultimately determined not to be entitled to indemnification or to the
extent the expenses advanced exceed the indemnification to which the director or
officer is entitled. Section 145(g) of the DGCL permits the purchase of
insurance to indemnify a corporation or its officers and directors to the extent
permitted.
As permitted by Section 145(e) of the DGCL, the By-laws of each of ITB,
LPP and Nice, and the Certificate of Incorporation of RBC provide that the
Registrants shall indemnify their respective officers and directors, as such, to
the fullest extent permitted by applicable law, and, in the case of LPP and
Nice, that expenses reasonably incurred by any such officer or director in
connection with a threatened or actual action or proceeding shall be advanced or
promptly reimbursed by the Registrant in advance of the final disposition of
such action or proceeding upon receipt of an undertaking by or on behalf of such
officer or director to repay such amount if and to the extent that it is
ultimately determined that such officer or director is not entitled to
indemnification.
Article Seventh of the Certificate of Incorporation of ITB provides that
no director of ITB shall be personally liable to ITB or its stockholders for
monetary damages for breaches of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to ITB or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit. Article Eighth of the Certificates of Incorporation
of each of RBC, LPP and Nice provide that to the fullest extent allowed under
the DGCL no director shall be liable to such corporations or its stockholders
for a breach of his or her fiduciary duty as a director.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES
(a) Exhibits.
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------ -----------------------
3.1 Amended and Restated Certificate of Incorporation, dated June
23, 1997, of Roller Bearing Company of America, Inc. ("RBCA").
3.2 Bylaws of RBCA.
3.3 Certificate of Incorporation, dated January 28, 1997, of RBC
Nice Bearings, Inc.
3.4 Bylaws of RBC Nice Bearings, Inc.
3.5 Certificate of Incorporation, dated June 18, 1996, of BPP
Acquisition Corporation and Certificate of Amendment dated May
15, 1997, changing its name to RBC Linear Precision Products,
Inc.
3.6 Bylaws of BPP Acquisition Corporation.
3.7 Certificate of Incorporation, dated June 26, 1990, of ITI
Acquisition, Inc. and Certificate of Amendment changing its
name to Industrial Tectonics Bearings Corporation, filed July
19, 1990.
3.8 Bylaws of Industrial Tectonics Bearings Corporation.
3.9 Certificate of Incorporation, dated August 1, 1997, of Bremen
Bearings, Inc.
3.10 Bylaws of Bremen Bearings, Inc.
4.1 Indenture, dated as of June 15, 1997 between RBCA and the
Trustee with forms of Outstanding Note and Exchange Note.
4.1(a) Supplemental Indenture, dated as of August 8, 1997 by and
between Bremen Bearings, Inc. and United States Trust Company
of New York.
4.2 Global Note Issued to Depository Trust Co., duly authenticated
by the Company and the Trustee.
4.3 Registration Rights Agreement dated June 17, 1997 between
RBCA, the Subsidiary Guarantors and the Initial Purchaser.
5.1 Opinion of McDermott, Will & Emery regarding the legality of
the securities being registered.
10.1 Purchase Agreement, dated June 17, 1997 among RBCA, the
Subsidiary Guarantors and the Initial Purchaser (the "Purchase
Agreement").
II-2
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.2 Redemption and Warrant Purchase Agreement by and among Roller
Bearing Holding Company, Inc., Certain Stockholders of Roller
Bearing Holding Company, Inc., and Michael J. Hartnett, as
purchaser representative, dated as of May 20, 1997, as amended
by that certain Amendment No. 1, dated as of June 23, 1997.
10.3 Credit Agreement dated as of June 23, 1997, among RBCA, the
Lenders named therein and Credit Suisse First Boston, as
Administrative Agent.
10.4 Pledge Agreement dated as of June 23, 1997, among RBCA, each
Subsidiary of the Borrower named therein and Credit Suisse
First Boston.
10.5 Security Agreement dated as of June 23, 1997, among RBCA, each
Subsidiary of the Borrower named therein and Credit Suisse
First Boston.
10.6 Guarantee Agreement dated as of June 23, 1997, among each of
the subsidiaries named therein of RBCA and Credit Suisse First
Boston.
10.7 Asset Purchase Agreement by and among BFM Aerospace
Corporation, Ground Support, Inc., RBC Transport Dynamics
Corporation and Roller Bearing Holding Company, Inc., dated as
of October 26, 1992.
10.8 Asset Purchase Agreement by and among BFM Aerospace
Corporation, BFM Transport Dynamics Corporation, RBC Transport
Dynamics Corporation and Roller Bearing Holding Company, Inc.,
dated as of October 26, 1992.
10.9 Agreement and Plan of Reorganization among RBCA, Roller
Bearing Acquisition Company, Inc., Roller Bearing Holding
Company, Inc. and the Stockholders of RBCA, dated March 31,
1992.
10.10 Agreement of Merger between Roller Bearing Acquisition
Company, Inc. and RBCA, dated March 31, 1992.
10.11 Asset Sale Agreement by and between IMO Industries Inc. and
RBCA, dated as of May 10, 1993.
10.12 Asset Purchase Agreement by and among BPP Acquisition
Corporation, Beaver Precision Products, Inc., RBCA, and Lloyd
J. Baretz, dated as of October 18, 1996.
10.13 Asset Purchase Agreement By and Among SKF USA Inc., RBC Nice
Bearings, Inc. and RBCA, dated as of February 28, 1997.
10.14 Business Property Lease entered into October 30, 1996 by and
between Dana Corporation and BPP Acquisition for Walterboro,
South Carolina premises.
10.15 Lease between General Sullivan Group, Inc. and RBC Bearings,
dated July 11, 1995, for West Trenton, New Jersey premises.
II-3
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.16 Lease between Industrial Development Group and RBCA, dated
March 12, 1996 for Waterbury, Connecticut premises.
10.17 Letter of Credit Agreement, dated as of September 1, 1994,
between RBCA and Heller Financial, Inc.
10.18 Termination, Release and Enhancement Letter of Credit
Documents Continuation Agreement dated June 23, 1997, by and
between Heller Financial, Inc., RBCA and Industrial Tectonics
Bearings Corporation.
10.19 Executed counterpart of the Pledge and Security Agreement,
dated as of September 1, 1994, between RBCA, Heller and
Trustee.
10.20 Loan Agreement, dated as of September 1, 1994, between the
South Carolina Job - Economic Development Authority, ("the
Authority") and RBCA with respect to the Series 1994A Bonds.
10.21 Trust Indenture, dated as of September 1, 1994, between the
Authority and Mark Twain Bank, ("Bond Trustee"), with respect
to the Series 1994A Bonds.
10.22 Loan Agreement, dated as of September 1, 1994, between the
Authority and RBCA, with respect to the Series 1994B Bonds.
10.23 Trust Indenture, dated as of September 1, 1994, between the
Authority and Bond Trustee, with respect to the Series 1994B
Bonds.
10.24 Collective Bargaining Agreement between RBC Heim, the
International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America, U.A.W., and
Amalgamated Local 376, U.A.W., effective February 1, 1996.
10.25 Collective Bargaining Agreement between Nice Specialty
Bearings Division, SKF Bearing Industries and United
Steelworkers of America (AFL - CIO) and its Local 6326,
effective October 26, 1996.
10.26 Collective Bargaining Agreement between RBCA and the
International Union U.A.W. and its Local 502, effective
December 1, 1996.
10.27 Employment Agreement effective as of June 23, 1997 between
RBCA and Michael J. Hartnett, Ph.D.
10.28 Stockholders' Agreement dated as of June 23, 1997 by and among
Roller Bearing Holding Company, Inc., OCM Principal
Opportunities Fund, Northstar Investment Management
Corporation, Merban Equity, the CSFB Individuals named therein
and Dr. Michael J. Hartnett.
10.29 Promissory Note dated as of June 23, 1997 for $500,000 made by
Michael J. Hartnett, Ph.D. and payable to RBCA.
II-4
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.30 Tax Sharing Agreement effective as of June 23, 1997, by and
among Roller Bearing Holding Company, Inc. and RBCA,
Industrial Tectonics Bearings Corporation, RBC Linear
Precision Products, Inc. and RBC Nice Bearings, Inc.
10.31 Asset Purchase Agreement by and among SKF USA Inc., Bremen
Bearings, Inc. and RBCA dated as of August 8, 1997.
12 Statement regarding Computation of Ratios.
16.1 Statement of the Company regarding Change in Certifying
Accountant.
16.2 Letter of Ernst & Young LLP regarding Change in Certifying
Accountant.
21 Subsidiaries of RBCA.
23.1 Consent of McDermott, Will & Emery (contained in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
24.1 Powers of Attorney for RBCA (Included on signature page).
24.2* Powers of Attorney for Industrial Tectonics Bearings
Corporation (Included on signature page).
24.3* Powers of Attorney for RBC Linear Precision Products, Inc.
(Included on signature page).
24.4* Powers of Attorney for RBC Nice Bearings, Inc. (Included on
signature page).
24.5 Power of Attorney for Bremen Bearings, Inc. (Included on
signature page).
25* Statement of Eligibility of Trustee on Form T-1.
27 Financial Data Schedule.
99 Letter of Transmittal.
- ----------
* Previously filed.
II-5
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
this offering.
(d) 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), 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.
(e) That every prospectus: (i) that is filed pursuant to paragraph (a)
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 a post-effective amendment to
the registration statement and will not be used until such amendment is
effective, and for purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(f) That they will respond to requests for information that is
incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or
13 of this Form, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding to
the request.
(g) That they will 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-6
<PAGE>
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer or controlling
persons of the registrants in the successful defense of any action suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless in
the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the city of Fairfield,
State of Connecticut, on October 31, 1997.
ROLLER BEARING COMPANY
OF AMERICA, INC.
By: /s/ Michael J. Hartnett
---------------------------
Michael J. Hartnett
President and Chief Executive Officer
Chairman of the Board of Directors
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
the sole director of the Registrant, by virtue of his signature to this
Registration Statement appearing below, hereby constitutes and appoints Michael
J. Hartnett and Anthony S. Cavalieri, or any one of them, with full power of
substitution, as attorneys-in-fact in his name, place and stead to execute any
and all amendments to this Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, in the capacities set
forth opposite his name and hereby ratifies all that said attorneys-in-fact may
do by virtue hereof.
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
October 31, 1997 By: /s/ Michael J. Hartnett
---------------------------------------
Michael J. Hartnett
Chairman of the Board of Directors, President
and Chief Executive Officer
(Principal Executive Officer)
October 31, 1997 By: /s/ Stephen A. Kaplan
---------------------------------------
Stephen A. Kaplan
Director
October 31, 1997 By: /s/ Kurt B. Larsen
---------------------------------------
Kurt B. Larsen
Director
October 31, 1997 By: /s/ William E. Myers, Jr.
---------------------------------------
William E. Myers, Jr.
Director
- --------------------------
II-8
<PAGE>
October 31, 1997 By: /s/ Mitchell I. Quain
---------------------------------------
Mitchell I. Quain
Director
October 31, 1997 By: /s/ Anthony S. Cavalieri
---------------------------------------
Anthony S. Cavalieri
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
II=9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the city of Fairfield,
State of Connecticut, on October 31, 1997.
INDUSTRIAL TECTONICS
BEARINGS CORPORATION
By: /s/ Michael J. Hartnett
----------------------------------------
Michael J. Hartnett
President
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
October 31, 1997 By: /s/ Michael J. Hartnett
--------------------------------------
Michael J. Hartnett
Sole Director and President
(Principal Executive Officer)
October 31, 1997 By: /s/ Anthony S. Cavalieri
--------------------------------------
Anthony S. Cavalieri
Chief Financial Officer
(Principal Financial and Accounting Officer)
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the city of Fairfield,
State of Connecticut, on October 31, 1997.
RBC LINEAR PRECISION
PRODUCTS, INC.
By: /s/ Michael J. Hartnett
----------------------------------------
Michael J. Hartnett
President
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
October 31, 1997 By: /s/ Michael J. Hartnett
----------------------------------------
Michael J. Hartnett
Sole Director and President
(Principal Executive Officer)
October 31, 1997 By: /s/ Anthony S. Cavalieri
----------------------------------------
Anthony S. Cavalieri
Chief Financial Officer
(Principal Financial and Accounting Officer)
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the city of Fairfield,
State of Connecticut, on October 31, 1997.
RBC NICE BEARINGS INC.
By: /s/ Michael J. Hartnett
----------------------------------------
Michael J. Hartnett
President
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
October 31, 1997 By: /s/ Michael J. Hartnett
----------------------------------------
Michael J. Hartnett
Sole Director and President
(Principal Executive Officer)
October 31, 1997 By: /s/ Anthony S. Cavalieri
----------------------------------------
Anthony S. Cavalieri
Chief Financial Officer
(Principal Financial and Accounting Officer)
ii-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the city of Fairfield,
State of Connecticut, on October 31, 1997.
BREMEN BEARINGS, INC.
By: /s/ Michael J. Hartnett
----------------------------------------
Michael J. Hartnett
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
the sole director of the Registrant, by virtue of his signature to this
Registration Statement appearing below, hereby constitutes and appoints Michael
J. Hartnett and Anthony S. Cavalieri, or any one of them, with full power of
substitution, as attorneys-in-fact in his name, place and stead to execute any
and all amendments to this Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, in the capacities set
forth opposite his name and hereby ratifies all that said attorneys-in-fact may
do by virtue hereof.
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
October 31, 1997 By: /s/ Michael J. Hartnett
----------------------------------------
Michael J. Hartnett
Sole Director and President
(Principal Executive Officer)
October 31, 1997 By: /s/ Anthony S. Cavalieri
----------------------------------------
Anthony S. Cavalieri
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
ii-13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------ -----------------------
3.1 Amended and Restated Certificate of Incorporation, dated June
23, 1997, of ("RBCA").
3.2 Bylaws of RBCA.
3.3 Certificate of Incorporation, dated January 28, 1997, of RBC
Nice Bearings, Inc.
3.4 Bylaws of RBC Nice Bearings, Inc.
3.5 Certificate of Incorporation, dated June 18, 1996, of BPP
Acquisition Corporation and Certificate of Amendment changing
its name to RBC Linear Precision Products, Inc.
3.6 Bylaws of BPP Acquisition Corporation.
3.7 Certificate of Incorporation, dated June 26, 1990, of ITI
Acquisition, Inc. and Certificate of Amendment changing its
name to Industrial Tectonics Bearings Corporation, filed July
19, 1990.
3.8 Bylaws of Industrial Tectonics Bearings Corporation.
3.9 Certificate of Incorporation, dated August 1, 1997, of Bremen
Bearings, Inc.
3.10 Bylaws of Bremen Bearings, Inc.
4.1 Indenture, dated as of June 15, 1997 between RBCA and the
Trustee with forms of Outstanding Note and Exchange Note.
4.1(a) Supplemental Indenture dated as of August 8, 1997 by and
between Bremen Bearings, Inc. and United States Trust Company
of New York.
4.2 Global Note Issued to Depository Trust Co., duly authenticated
by RBCA and the Trustee.
4.3 Registration Rights Agreement dated June 17, 1997 between
RBCA, the Subsidiary Guarantors and the Initial Purchaser.
5.1 Opinion of McDermott, Will & Emery regarding the legality of
the securities being registered.
10.1 Purchase Agreement, dated June 17, 1997 among RBCA, the
Subsidiary Guarantors and the Initial Purchaser (the "Purchase
Agreement").
10.2 Redemption and Warrant Purchase Agreement by and among Roller
Bearing Holding Company, Inc., Certain Stockholders of Roller
Bearing Holding Company, Inc., and Michael J. Hartnett, as
purchaser representative, dated as of May 20, 1997, as amended
by that certain Amendment No. 1, dated as of June 23, 1997.
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.3 Credit Agreement dated as of June 23, 1997, among RBCA, the
Lenders named therein and Credit Suisse First Boston, as
Administrative Agent.
10.4 Pledge Agreement dated as of June 23, 1997, among RBCA, each
Subsidiary of the Borrower named therein and Credit Suisse
First Boston.
10.5 Security Agreement dated as of June 23, 1997, among RBCA, each
Subsidiary of the Borrower named therein and Credit Suisse
First Boston.
10.6 Guarantee Agreement dated as of June 23, 1997 among each of
the subsidiaries named therein of RBCA and Credit Suisse First
Boston.
10.7 Asset Purchase Agreement by and among BFM Aerospace
Corporation, Ground Support, Inc., RBC Transport Dynamics
Corporation and Roller Bearing Holding Company, Inc., dated as
of October 26, 1992.
10.8 Asset Purchase Agreement by and among BFM Aerospace
Corporation, BFM Transport Dynamics Corporation, RBC Transport
Dynamics Corporation and Roller Bearing Holding Company, Inc.,
dated as of October 26, 1992.
10.9 Agreement and Plan of Reorganization among RBCA, Roller
Bearing Acquisition Company, Inc., Roller Bearing Holding
Company, Inc. and the Stockholders of RBCA, dated March 31,
1992.
10.10 Agreement of Merger between Roller Bearing Acquisition
Company, Inc. and RBCA, dated March 31, 1992.
10.11 Asset Sale Agreement by and between IMO Industries Inc. and
RBCA dated as of May 10, 1993.
10.12 Asset Purchase Agreement by and among BPP Acquisition
Corporation, Beaver Precision Products, Inc., RBCA, and Lloyd
J. Baretz, dated as of October 18, 1996.
10.13 Asset Purchase Agreement By and Among SKF USA Inc., RBC Nice
Bearings, Inc. and RBCA, dated as of February 28, 1997.
10.14 Business Property Lease entered into October 30, 1996 by and
between Dana Corporation and BPP Acquisition for Walterboro,
South Carolina premises.
10.15 Lease between General Sullivan Group, Inc. and RBC Bearings,
dated July 11, 1995, for West Trenton, New Jersey premises.
10.16 Lease between Industrial Development Group and RBCA, dated
March 12, 1996 for Waterbury, Connecticut premises.
10.17 Letter of Credit Agreement, dated as of September 1, 1994,
between RBCA and Heller Financial, Inc.
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.18 Termination, Release and Enhancement Letter of Credit
Documents Continuation Agreement dated June 23, 1997 by and
between Heller Financial, Inc., RBCA and Industrial Tectonics
Bearings Corporation.
10.19 Executed counterpart of the Pledge and Security Agreement,
dated as of September 1, 1994, between RBCA, Heller and
Trustee.
10.20 Loan Agreement, dated as of September 1, 1994, between the
South Carolina Job - Economic Development Authority, ("the
Authority") and RBCA, with respect to the Series 1994A Bonds.
10.21 Trust Indenture, dated as of September 1, 1994, between the
Authority and Mark Twain Bank, ("Bond Trustee"), with respect
to the Series 1994A Bonds.
10.22 Loan Agreement, dated as of September 1, 1994, between the
Authority and RBCA, with respect to the Series 1994B Bonds.
10.23 Trust Indenture, dated as of September 1, 1994, between the
Authority and Bond Trustee, with respect to the Series 1994B
Bonds.
10.24 Collective Bargaining Agreement between RBC Heim, the
International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America, U.A.W., and
Amalgamated Local 376, U.A.W., effective February 1, 1996.
10.25 Collective Bargaining Agreement between Nice Specialty
Bearings Division, SKF Bearing Industries and United
Steelworkers of America (AFL - CIO) and its Local 6326,
effective October 26, 1996.
10.26 Collective Bargaining Agreement between RBCA and the
International Union U.A.W. and its Local 502, effective
December 1, 1996.
10.27 Employment Agreement effective as of June 23, 1997 between
RBCA and Michael J. Hartnett, Ph.D.
10.28 Stockholders' Agreement dated as of June 23, 1997 by and among
Roller Bearing Holding Company, Inc., OCM Principal
Opportunities Fund, Northstar Investment Management
Corporation, Merban Equity, the CSFB Individuals named therein
and Dr. Michael J. Hartnett.
10.29 Promissory Note dated as of June 23, 1997 for $500,000 made by
Michael J. Hartnett, Ph.D. and payable to RBCA.
10.30 Tax Sharing Agreement effective as of June 23, 1997, by and
among Roller Bearing Holding Company, Inc. and RBCA,
Industrial Tectonics Bearings Corporation, RBC Linear
Precision Products, Inc. and RBC Nice Bearings, Inc.
10.31 Asset Purchase Agreement by and among SFK USA Inc., Bremen
Bearings, Inc. and RBCA, dated as of August 8, 1997.
12 Statement regarding Computation of Ratios.
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
16.1 Statement of the Company regarding Change in Certifying
Accountant.
16.2 Letter of Ernst & Young LLP regarding Change in Certifying
Accountant.
21 Subsidiaries of RBCA.
23.1 Consent of McDermott, Will & Emery (contained in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
24.1 Powers of Attorney for RBCA (Included on signature page).
24.2* Powers of Attorney for Industrial Tectonics Bearings
Corporation (Included on signature page).
24.3* Powers of Attorney for RBC Linear Precision Products, Inc.
(Included on signature page).
24.4* Powers of Attorney for RBC Nice Bearings, Inc. (Included on
signature page).
24.5 Power of Attorney for Bremen Bearings, Inc. (Included on
signature page).
25* Statement of Eligibility of Trustee on Form T-1.
27 Financial Data Schedule.
99 Letter of Transmittal.
- ----------
* Previously filed.
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 08/16/1993
932595179 - 2136219
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ROLLER BEARING COMPANY OF AMERICA, INC.
The undersigned, for the purpose of amending and restating the Certificate
of Incorporation of Roller Bearing Company of America, Inc., a Delaware
corporation (the "Corporation"), do hereby certify that:
1. The Corporation was originally incorporated under the name RBC Holdings
Corp.;
2. The date of filing of the Corporation's original Certificate of
Incorporation with the Secretary of State of Delaware was August 27, 1987;
3. This Amended and Restated Certificate of Incorporation has been duly
adopted pursuant to Sections 242 and 245 of the Delaware General Corporation
Law; and
4. The Certificate of Incorporation of the Corporation is hereby amended
and restated in its entirety as follows:
FIRST: The name of the Corporation is:
Roller Bearing Company of America, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road, City of Wilmington, County of New Castle,
and the name of its registered agent at the address is Corporation Service
Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The Corporation shall be authorized to issue one class of stock to
be designated Common Stock, the total number of shares which the Corporation
shall have authority to issue is one thousand (1,000) and each share shall have
a par value of one cent ($0.01).
FIFTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend and rescind the bylaws of the Corporation.
SIXTH: Elections of directors need not be written ballot unless the bylaws
of the Corporation shall so provide.
SEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereinafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this reservation.
<PAGE>
EIGHTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a director of
the Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. If the Delaware
General Corporation Law is amended after the date of the filing of this Amended
and Restated Certificate of Incorporation to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended from
time to time. No repeal or modification of this Article EIGHTH by the
stockholders shall adversely affect any right or protection of a director of the
Corporation existing by virtue of this Article EIGHTH at the time of such repeal
or modification.
NINTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Certificate of Incorporation on behalf of the Corporation and have
attested such execution and do verify and affirm, under penalty of perjury, that
this Amended and Restated Certificate of Incorporation is an act and deed of the
Corporation and that the facts stated herein are true as of this 15th day of
September, 1993.
ROLLER BEARING COMPANY OF
AMERICA, INC.
By: /s/ Kurt B. Larsen
-----------------------------------
Kurt B. Larsen, Vice President and
Assistant Secretary
ATTEST:
/s/ Richard K. Roeder
Richard K. Roeder, Assistant Secretary
2
CONFIDENTIAL
BYLAWS
OF
ROLLER BEARING COMPANY OF AMERICA, INC.
<PAGE>
CONTENTS
ARTICLE I Offices ................................................... 1
SECTION 1.01 Registered Office ............................ 1
SECTION 1.02 Other Offices ................................ 1
ARTICLE II Meetings of Stockholders .................................. 1
SECTION 2.01 Annual Meetings ............................. 1
SECTION 2.02 Special Meetings ............................ 1
SECTION 2.03 Place of Meetings ........................... 1
SECTION 2.04 Notice of Meetings .......................... 1
SECTION 2.05 Quorum ...................................... 2
SECTION 2.06 Voting ...................................... 2
SECTION 2.07 Use of Stockholders ......................... 3
SECTION 2.08 Judges ...................................... 3
SECTION 2.09 Action Without Meeting ...................... 3
ARTICLE III Board of Directors ........................................ 4
SECTION 3.01 General Powers .............................. 4
SECTION 3.02 Number and Term of Office ................... 4
SECTION 3.03 Election of Directors ....................... 4
SECTION 3.04 Resignations ................................ 4
SECTION 3.05 Vacancies ................................... 4
SECTION 3.06 Place of Meeting, Etc. ...................... 4
SECTION 3.07 First Meeting ............................... 4
SECTION 3.08 Regular Meetings ............................ 4
SECTION 3.09 Special Meetings ............................ 5
SECTION 3.10 Quorum and Manner of Acting ................. 5
SECTION 3.11 Action by Consent ........................... 5
i
<PAGE>
SECTION 3.12 Removal of Directors ........................ 5
SECTION 3.13 Compensation ................................ 5
SECTION 3.14 Committees .................................. 5
ARTICLE IV Officers .................................................. 6
SECTION 4.01 Number ...................................... 6
SECTION 4.02 Election, Term of Office and Qualifications . 6
SECTION 4.03 Assistants, Agents and Employees, Etc. ...... 6
SECTION 4.04 Removal ..................................... 6
SECTION 4.05 Resignations ................................ 6
SECTION 4.06 Vacancies ................................... 6
SECTION 4.07 The President ............................... 7
SECTION 4.08 The Vice Presidents ......................... 7
SECTION 4.09 The Secretary ............................... 7
SECTION 4.10 The Chief Financial Officer ................. 7
SECTION 4.11 Compensation ................................ 7
ARTICLE V Contracts, Checks, Drafts, Bank Accounts, Etc. ............ 7
SECTION 5.01 Execution of Contracts ...................... 8
SECTION 5.02 Checks, Drafts, Etc. ........................ 8
SECTION 5.03 Deposits .................................... 8
SECTION 5.04 General and Special Bank Accounts ........... 8
ARTICLE VI Shares and Their Transfer ................................. 8
SECTION 6.01 Certificates for Stock ...................... 8
SECTION 6.02 Transfers of Stock .......................... 9
SECTION 6.03 Regulations ................................. 9
SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated
Certificates ................................ 9
ii
<PAGE>
SECTION 6.05 Fixing Date for Determination of
Stockholders of Record ...................... 9
ARTICLE VII Indemnification ........................................... 10
SECTION 7.01 Right of Indemnification .................... 10
SECTION 7.02 Insurance ................................... 10
ARTICLE VIII Miscellaneous ............................................. 10
SECTION 8.01 Seal ........................................ 10
SECTION 8.02 Waiver of Notices ........................... 10
SECTION 8.03 Amendments .................................. 10
iii
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC.
(a Delaware corporation)
BYLAWS
ARTICLE I
Offices
SECTION 1.01 Registered Office.. The registered office of Roller
Bearing Company of America, Inc. (hereinafter called the Corporation) in the
State of Delaware shall be at 1013 Centre Road, City of Wilmington, County of
New Castle, and the name of the registered agent in charge thereof shall be
Corporation Service Company.
SECTION 1.02 Other Offices. The Corporation may also have an office
or offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (hereinafter called the Board) may from time
to time determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 2.01 Annual Meetings. Annual meetings of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 Special Meetings. A special meeting of the stockholders
for the transaction of any proper business may be called at any time by the
Board or by the President.
SECTION 2.03 Place of Meetings. All meetings of the stockholders
shall be held at such places, within or without the State of Delaware, as may
from time to time be designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers of notice thereof.
SECTION 2.04 Notice of Meetings. Except as otherwise required by
law, notice of each meeting of the stockholders, whether annual or special,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting by delivering a typewritten or printed notice thereof to him personally,
or by depositing such notice in the United States mail, in a postage prepaid
envelope, directed to him at his post office address furnished by him to the
Secretary of the Corporation for such purpose or, if he shall not have furnished
to the Secretary his address for such purpose, then at his post office address
last known to the Secretary, or by transmitting a notice thereof to him at such
address by telegraph, cable, or wireless. Except as otherwise expressly required
by law, no publication of any notice of a meeting of the stockholders shall be
required. Every notice of a meeting of the stockholders shall state the place,
date and hour of the meeting, and, in the case of a special meeting, shall also
state the purpose or purposes for which the meeting is called. Notice of any
meeting of stockholders shall not be required to be given to any stockholder
1
<PAGE>
who shall have waived such notice and such notice shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, except as a
stockholder who shall attend such meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Except as otherwise expressly
required by law, notice of any adjourned meeting of the stockholders need not be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken.
SECTION 2.05 Quorum. Except in the case of any meeting for the
election of directors summarily ordered as provided by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. In the absence of a
quorum at any meeting or any adjournment thereof, a majority in voting interest
of the stockholders present in person or by proxy and entitled to vote thereat
or, in the absence therefrom of all the stockholders, any officer entitled to
preside at, or to act as secretary of, such meeting may adjourn such meeting
from time to time. At any such adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted at the meeting
as originally called.
SECTION 2.06 Voting.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws
as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting; or
(ii) if no such record date shall have been so fixed, then (a)
at the close of business on the day next preceding the day on which
notice of the meeting shall be given or (b) if notice of the meeting shall
be waived, at the close of business on the day next preceding the day on
which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledges to vote thereon, in which case
only the pledges, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants in common, tenants
by entirety or otherwise, or with respect to which two or more persons have the
same fiduciary relationship, shall be voted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by
2
<PAGE>
such stockholder or by his attorney thereunto authorized and delivered to the
secretary of the meeting; provided, however, that no proxy shall be voted or
acted upon after three years from its date unless said proxy shall provide for a
longer period. The attendance at any meeting of a stockholder who may
theretofore have given a proxy shall not have the effect of revoking the same
unless he shall in writing so notify the secretary of the meeting prior to the
voting of the proxy. At any meeting of the stockholders all matters, except as
otherwise provided in the Certificate of Incorporation, in these Bylaws or by
law, shall be decided by the vote of a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat and
thereon, a quorum being present. The vote at any meeting of the stockholders on
any question need not be by ballot, unless so directed by the chairman of the
meeting. On a vote by ballot each ballot shall be signed by the stockholder
voting, or by his proxy, if there be such proxy, and it shall state the number
of shares voted.
SECTION 2.07 List of Stockholders. The Secretary of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten(10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 2.08 Judges. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and shall
report the number of shares represented at the meeting and entitled to vote on
such question, shall conduct and accept the votes, and, when the voting is
completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The judges
need not be stockholders of the Corporation, and any officer of the Corporation
may be a judge on any question other than a vote for or against a proposal in
which he shall have a material interest.
SECTION 2.09 Action Without Meeting. Any action required to be taken
at any annual or special meeting of stockholders of the Corporation, or any
action which may be taken at any annual or special meeting of such stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
3
<PAGE>
ARTICLE III
Board of Directors
SECTION 3.01 General Powers. The property, business and affairs of
the Corporation shall be managed by the Board.
*
SECTION 3.03 Election of Directors. The directors shall be elected
annually by the stockholders of the Corporation and the persons receiving the
greatest number of votes, up to the number of directors to be elected, shall be
the directors.
SECTION 3.04 Resignations. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05 Vacancies. Except as otherwise provided in the
Certificate of Incorporation, any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors, or
any other cause, may be filled by vote of the majority of the remaining
directors, although less than a quorum. Each director so chosen to fill a
vacancy shall hold office until his successor shall have been elected and shall
qualify or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3.06 Place of Meeting, Etc. The Board may hold any of its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special meeting
of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as
practicable after each annual election of directors and notice of such first
meeting shall not be required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board may be
held at such times as the Board shall from time to time by resolution determine.
If any day fixed for a regular meeting shall be a legal holiday at the place
where the meeting
* See attached
4
<PAGE>
SECTION 3.02 Number and Term of Office. The number of directors of
the corporation shall be not less than one (1) nor more than eleven (11) until
changed in accordance with applicable law. The exact number of directors shall
be fixed from time to time, within the limits specified, by resolution of the
board of directors or the shareholders. Directors need not be stockholders. Each
of the directors of the Corporation shall hold office until his successor shall
have been duly elected and shall qualify or until he shall resign or shall have
been removed in the manner hereinafter provided.
<PAGE>
is to be held, then the meeting shall be held at the same hour and place on the
next succeeding business day not a legal holiday. Except as provided by law,
notice of regular meetings need not be given.
SECTION 3.09 Special Meetings. Special meetings of the Board shall
be held whenever called by the President or a majority of the authorized number
of directors. Except as otherwise provided by law or by these Bylaws, notice of
the time and place of each such special meeting shall be mailed to each
director, addressed to him at his residence or usual place of business, at least
five (5) days before the day on which the meeting is to be held, or shall be
sent to him at such place by telegraph or cable or be delivered personally not
less than forty-eight (48) hours before the time at which the meeting is to be
held. Except where otherwise required by law or by these Bylaws, notice of the
purpose of a special meeting need not be given. Notice of any meeting of the
Board shall not be required to be given to any director who is present at such
meeting, except a director who shall attend such meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 3.10 Quorum and Manner of Acting. Except as otherwise
provided in these Bylaws or by law, the presence of a majority of the authorized
number of directors shall be required to constitute a quorum for the transaction
of business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 3.11 Action by Consent. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 3.12 Removal of Directors. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
SECTION 3.13 Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.14 Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the
5
<PAGE>
extent provided in the resolution of the Board and except as otherwise limited
by law, shall have and may exercise all the powers and authority of the Board in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it.
Any such committee shall keep written minutes of its meetings and report the
same to the Board at the next regular meeting of the Board. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
ARTICLE IV
Officers
SECTION 4.01 Number. The officers of the Corporation shall be a
President, one or more vice Presidents (the number thereof and their respective
titles to be determined by the Board), a Secretary and a Chief Financial
Officer. The Corporation may also have, at the discretion of the board of
directors, a chairman and such other officers, with such titles and duties as
may be determined by the board of directors.
The officers of the Corporation, except such officers as may be
appointed in accordance with Section 4.03, shall be elected annually by the
Board at the first meeting thereof held after the election thereof Each officer
shall hold office until his successor shall have been duly chosen and shall
qualify or until his resignation or removal in the manner hereinafter provided.
SECTION 4.03 Assistants, Agents and Employees. Etc. In addition to
the officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
SECTION 4.04 Removal. Any officer, assistant, agent or employee of
the Corporation may be removed, with or without cause, at any time: (i) in the
case of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (ii) in the case of an officer, assistant, agent or
employee, appointed by an officer of the Corporation, by any officer of the
Corporation or committee of the Board upon whom or which such power of removal
may be conferred by the Board.
SECTION 4.05 Resignations. Any officer or assistant may resign at
any time by giving written notice of his resignation to the Board or the
Secretary of the Corporation. Any such resignation shall take effect at the time
specified therein, or, if the time be not specified, upon receipt thereof by the
Board or the Secretary, as the case may be; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 4.06 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or other cause, may be filled for the
unexpired
6
<PAGE>
portion of the term thereof in the manner prescribed in these Bylaws for regular
appointments or elections to such office.
SECTION 4.07 The President. The President of the Corporation shall
be the chief executive officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 4.08 The Vice Presidents. Each Vice President shall have
such powers and perform such duties as the Board may from time to time
prescribe. At the request of the President, or in case of the President's
absence or inability to act upon the request of the Board, a Vice President
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.
SECTION 4.09 The Secretary. The Secretary shall, if present, record
the proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
SECTION 4.10 The Chief Financial Officer. The Chief Financial
Officer shall have the general care and custody of the funds and securities of
the Corporation, and shall deposit all such funds in the name of the Corporation
in such banks, trust companies or other depositories as shall be selected by the
Board. He shall receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever. He shall exercise general supervision
over expenditures and disbursements made by officers, agents and employees of
the Corporation and the preparation of such records and reports in connection
therewith as may be necessary or desirable. He shall, in general, perform all
other duties incident to the office of Chief Financial Officer and such other
duties as from time to time may be assigned to him by the Board.
SECTION 4.11 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary corporation
in any other capacity and receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01 Execution of Contracts. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances; and
7
<PAGE>
unless so authorized by the Board or by these Bylaws, no officer, agent or
employee shall have any power or authority to bind the Corporation by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or in any amount.
SECTION 5.02 Checks, Drafts, Etc. All checks, drafts or other orders
for payment of money, notes or other evidence of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such officer, assistant, agent or attorney
shall give such bond, if any, as the Board may require.
SECTION 5.03 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 depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Chief Financial Officer (or any other officer or officers,
assistant or assistants, agent or agents, or attorney or attorneys of the
Corporation who shall from time to time be determined by the Board) may endorse,
assign and deliver checks, drafts and other orders for the payment of money
which are payable to the order of the Corporation.
SECTION 5.04 General and Special Bank Accounts. The Board may from
time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. The Board may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
SECTION 6.01 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Chief Financial Officer or an Assistant Chief Financial Officer. Any of
or all of the signatures on the certificates may be a facsimile. In case any
officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, any such certificate, shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued,
such certificate may nevertheless be issued by the Corporation with the same
effect as though the person who signed such certificate, or whose facsimile
signature shall have been placed thereupon, were such officer, transfer agent or
registrar at the date of issue. A record shall be kept of the respective names
of the persons, firms or corporations owning the stock represented by such
certificates, the number and class of shares represented by such certificates,
respectively, and the respective dates thereof, and in case of cancellation, the
respective dates of cancellation.
8
<PAGE>
Every certificate surrendered to the Corporation for exchange or transfer shall
be cancelled, and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
cancelled, except in cases provided for in Section 6.04.
SECTION 6.02 Transfers of Stock. Except as may otherwise be provided
in the Corporation's Certificate of Incorporation, as amended, transfers of
shares of stock of the Corporation shall be made only on the books of the
Corporation by the registered holder thereof, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary, or
with a transfer clerk or a transfer agent appointed as provided in Section 6.03,
and upon surrender of the certificate or certificates for such shares properly
endorsed and the payment of all taxes thereon. The person in whose name shares
of stock stand on the books of the Corporation shall be deemed the owner thereof
for all purposes as regards the Corporation. Whenever any transfer of shares
shall be made for collateral security, and not absolutely, such fact shall be so
expressed in the entry of transfer if, when the certificate or certificates
shall be presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
SECTION 6.03 Regulations. Except as may otherwise be provided in the
Corporation's Certificate of Incorporation, as amended, the Board may make such
rules and regulations as it may deem expedient, not inconsistent with these
Bylaws, concerning the issue, transfer and registration of certificates for
shares of the stock of the Corporation. It may appoint, or authorize any officer
or officers to appoint, one or more transfer clerks or one or more transfer
agents and one or more registrars, and may require all certificates for stock to
bear the signature or signatures of any of them.
SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In
any case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.05 Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than 60 nor less than 10 days before the date of such meeting, nor more than 60
days prior to any other action. If in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
stockholders or expressing consent to corporate action without a meeting the
Board shall not fix such a record date, the record date for determining
stockholders for such purpose shall be the close of business on the day on which
the Board shall adopt the resolution relating thereto. A determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of such meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
9
<PAGE>
ARTICLE VII
Indemnification
SECTION 7.01 Right of Indemnification. The Corporation shall
indemnity its directors, officers, employees and agents (collectively, the
"agents") in the manner set forth in the Certificate of Incorporation.
SECTION 7.02 Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any agent of the Corporation
against any liability asserted against or incurred by the agent in such capacity
or arising out of the agent's Status as such whether or not the Corporation
would have the power to indemnity the agent against such liability.
ARTICLE VIII
Miscellaneous
SECTION 8.01 Seal. The Board shall provide a corporate seal, which
shall be in the form of a circle and shall bear the name of the Corporation and
words and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
SECTION 8.02 Waiver of Notices. Whenever notice is required to be
given by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.03 Amendments, These Bylaws, or any of them, may be
altered, amended or repealed, and new Bylaws may be made, (i) by the Board, by
vote of a majority of the number of directors then in office as directors,
acting at any meeting of the Board, or (ii) by the stockholders, at any annual
meeting of stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, modification,
repeal or adoption is given in the notice of special meeting. Any Bylaws made or
altered by the stockholders may be altered or repealed by either the Board or
the stockholders.
10
Confidential
PAGE 1
State of Delaware
Office of the Secretary of State
-------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "RBC NICE BEARINGS, INC.", FILED IN THIS OFFICE ON THE
TWENTY-EIGHTH DAY OF JANUARY, A.D. 1997, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
[SEAL] -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8304388
DATE: 01-28-97
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 01/28/1997
971027911 - 2711257
CERTIFICATE OF INCORPORATION
OF
RBC NICE BEARINGS, INC.
ARTICLE I
NAME OF CORPORATION
The name of this corporation is:
RBC Nice Bearings, Inc.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the corporation in the State of
Delaware is 9 East Loockerman Street, in the City of Dover 19901, County of
Kent, and the name of its registered agent at that address is National
Registered Agents, Inc.
ARTICLE III
PURPOSE
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
AUTHORIZED CAPITAL STOCK
The corporation shall be authorized to issue one class of stock to be
designated Common Stock; the total number of shares which the corporation shall
have authority to issue is one thousand (1,000), and each such share shall have
a par value of one cent ($0.01).
<PAGE>
ARTICLE V
INCORPORATOR
The name and mailing address of the incorporator of the corporation is:
Jeanne Carnahan
c/o National Corporate Research, LTD.
9 East Loockerman Street
Dover, Delaware 19901
ARTICLE VI
BOARD POWER REGARDING BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, repeal, alter, amend and
rescind the bylaws of the corporation.
ARTICLE VII
ELECTION OF DIRECTORS
Elections of directors need not be by written ballot unless the bylaws of
the corporation shall so provide.
ARTICLE VIII
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or may hereafter be amended, a director of the corporation shall
not be liable to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director. If the Delaware General Corporation Law
is amended after the date of the filing of this Certificate of Incorporation to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended from time to time. No repeal or
modification of this Article VIII by the stockholders shall adversely affect any
right or protection of a director of the corporation existing by virtue of this
Article VIII at the time of such repeal or modification.
2
<PAGE>
ARTICLE IX
CORPORATE POWER
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
ARTICLE X
CREDITOR COMPROMISE OR ARRANGEMENT
Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this corporation and its
stockholder or any class of them, any court of equitable jurisdiction within the
State of Delaware may, on the application in a summary way of this corporation
or of any creditor or stockholder thereof or on the application of any receiver
or receivers appointed for this corporation under the provisions of Section 291
of Title 8 of the Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for this corporation under the
provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
3
<PAGE>
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation to do business both within and without the
State of Delaware, and in pursuance of the Delaware General Corporation Law,
does make and file this Certificate.
Date: January 28, 1997
/s/ Jeanne Carnahan
-----------------------------
Jeanne Carnahan, Incorporator
4
RBC NICE BEARINGS, INC.
(a Delaware corporation)
BYLAWS
ARTICLE I
Offices
SECTION 1.01 Registered Office. The registered office of RBC Nice
Bearings, Inc. (hereinafter called the "Corporation") in the State of Delaware
shall be at 9 East Loockerman Street, City of Dover, County of Kent, and the
name of the registered agent in charge thereof shall be National Registered
Agents, Inc.
SECTION 1.02 Other Offices. The Corporation may also have an office
or offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (hereinafter called the Board) may from time
to time determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 2.01 Annual Meetings. Annual meetings of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 Special Meetings. A special meeting of the stockholders
for the transaction of any proper business may be called at any time by the
Board or by the President.
SECTION 2.03 Place of Meetings. All meetings of the stockholders
shall be held at such places, within or without the State of Delaware, as may
from time to time be designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers of notice thereof.
SECTION 2.04 Notice of Meetings. Except as otherwise required by
law, notice of each meeting of the stockholders, whether annual or special,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting by delivering a typewritten or printed notice thereof to him personally,
or by depositing such notice in the United States mail, in a postage prepaid
envelope, directed to him at his post office address furnished by him to the
Secretary of the Corporation for such purpose or, if he shall not have furnished
to the Secretary his address for such purpose, then at his post office address
last known to the Secretary, or by transmitting a notice thereof to him at such
address by telegraph, cable, or
<PAGE>
wireless. Except as otherwise expressly required by law, no publication of any
notice of a meeting of the stockholders shall be required. Every notice of a
meeting of the stockholders shall state the place, date and hour of the meeting,
and, in the case of a special meeting, shall also state the purpose or purposes
for which the meeting is called. Notice of any meeting of stockholders shall not
be required to be given to any stockholder who shall have waived such notice and
such notice shall be deemed waived by any stockholder who shall attend such
meeting in person or by proxy, except as a stockholder who shall attend such
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Except as otherwise expressly required by law, notice of any adjourned
meeting of the stockholders need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
SECTION 2.05 Quorum. Except in the case of any meeting for the
election of directors summarily ordered as provided by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. In the absence of a
quorum at any meeting or any adjournment thereof, a majority in voting interest
of the stockholders present in person or by proxy and entitled to vote thereat
or, in the absence therefrom of all the stockholders, any officer entitled to
preside at, or to act as secretary of, such meeting may adjourn such meeting
from time to time. At any such adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted at the meeting
as originally called.
SECTION 2.06 Voting.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws as
the record date for the determination of stockholders entitled to notice
of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at
the close of business on the day next preceding the day on which notice of
the meeting shall be given or (b) if notice of the meeting shall be
waived, at the close of business on the day next preceding the day on
which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee,
<PAGE>
or his proxy, may represent such stock and vote thereon. Stock having voting
power standing of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants in common, tenants by
entirety or otherwise, or with respect to which two or more persons have the
same fiduciary relationship, shall be voted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 2.07 List of Stockholders. The Secretary of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 2.08 Judges. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and shall
report the number of shares represented at the meeting and entitled to vote on
such question, shall conduct and accept the votes, and, when the voting is
completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The judges
need not be stockholders of the Corporation, and any officer of the Corporation
may be a judge on any question other than a vote for or against a proposal in
which he shall have a material interest.
SECTION 2.09 Action Without Meeting. Any action required to be taken
at any annual or special meeting of stockholders of the Corporation, or any
action which may be taken at any annual or special meeting of such stockholders,
may be taken
<PAGE>
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
Board of Directors
SECTION 3.01 General Powers. The property, business and affairs of
the Corporation shall be managed by the Board.
SECTION 3.02 Number and Term of Office. The number of directors of
the corporation shall be four (4). Directors need not be stockholders. Each of
the directors of the Corporation shall hold office until his successor shall
have been duly elected and shall qualify or until he shall resign or shall have
been removed in the manner hereinafter provided.
SECTION 3.03 Election of Directors. The directors shall be elected
annually by the stockholders of the Corporation and the persons receiving the
greatest number of votes, up to the number of directors to be elected, shall be
the directors.
SECTION 3.04 Resignations. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05 Vacancies. Except as otherwise provided in the
Certificate of Incorporation, any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors, or
any other cause, may be filled by vote of the majority of the remaining
directors, although less than a quorum. Each director so chosen to fill a
vacancy shall hold office until his successor shall have been elected and shall
qualify or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3.06 Place of Meeting, Etc. The Board may hold any of its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special meeting
of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as
<PAGE>
practicable after each annual election of directors and notice of such first
meeting shall not be required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board may be
held at such times as the Board shall from time to time by resolution determine.
If any day fixed for a regular meeting shall be a legal holiday at the place
where the meeting is to be held, then the meeting shall be held at the same hour
and place on the next succeeding business day not a legal holiday. Except as
provided by law, notice of regular meetings need not be given.
SECTION 3.09 Special Meetings. Special meetings of the Board of
Directors may be called at any time, and for any purpose permitted by law, by
the President, or by the Secretary on the written request of a majority of the
members of the Board of Directors, which meetings shall be held at the time and
place either within or without the State of Delaware designated by the person or
persons calling the meeting.
SECTION 3.10 Notice. Notice of the time, place and purpose of any
special meeting shall be given to the Directors by the Secretary, or in case of
his absence, refusal or inability to act, by any other officer. Any such notice
may be given by mail, by telegraph, by telephone, by facsimile or by personal
service, to each of the Directors. If the notice is by mail, it shall be
deposited in a United States Post Office at least forty-eight hours before the
time of the meeting; if by facsimile, transmitted at least twelve hours before
the time of the meeting; and if by telegraph, by deposit of the message with the
telegraph company at least twelve hours before the time of the meeting, if by
telephone or by personal service, given at least twelve hours before the time of
the meeting.
Except where otherwise required by law or by these Bylaws, notice of
the purpose of a special meeting need not be given. Notice of any meeting of the
Board shall not be required to be given to any director who is present at such
meeting, except a director who shall attend such meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 3.11 Quorum and Manner of Acting. Except as otherwise
provided in these Bylaws or by law, the presence of a majority of the authorized
number of directors shall be required to constitute a quorum for the transaction
of business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 3.12 Action by Consent. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
<PAGE>
SECTION 3.13 Removal of Directors. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
SECTION 3.14 Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.15 Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the extent provided in the resolution of the Board and except as otherwise
limited by law, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of any such absent or disqualified
member.
ARTICLE IV
Officers
SECTION 4.01 Number. The officers of the Corporation shall be a
President, one or more Vice Presidents (the number thereof and their respective
titles to be determined by the Board), a Secretary and a Chief Financial
Officer. A Chief Executive Officer may be elected by the Board, if the Board
determines such officer is necessary to the Corporation.
SECTION 4.02 Election, Term of Office and Qualifications. The
officers of the Corporation, except such officers as may be appointed in
accordance with Section 4.03, shall be elected annually by the Board at the
first meeting thereof held after the election thereof. Each officer shall hold
office until his successor shall have been duly chosen and shall qualify or
until his resignation or removal in the manner hereinafter provided.
SECTION 4.03 Assistants, Agents and Employees, Etc. In addition to
the officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Board may from time to time
<PAGE>
determine. The Board may delegate to any officer of the Corporation or any
committee of the Board the power to appoint, remove and prescribe the duties of
any such assistants, agents or employees.
SECTION 4.04 Removal. Any officer, assistant, agent or employee of
the Corporation may be removed, with or without cause, at any time: (i) in the
case of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (ii) in the case of an officer, assistant, agent or
employee, by any officer of the Corporation or committee of the Board upon whom
or which such power of removal may be conferred by the Board.
SECTION 4.05 Resignations. Any officer or assistant may resign at
any time by giving written notice of his resignation to the Board or the
Secretary of the Corporation. Any such resignation shall take effect at the time
specified therein, or, if the time be not specified, upon receipt thereof by the
Board or the Secretary, as the case may be; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 4.06 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 4.07 The President. The President of the Corporation shall
be the chief executive officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 4.08 The Vice Presidents. Each Vice President shall have
such powers and perform such duties as the Board may from time to time
prescribe. At the request of the President, or in case of the President's
absence or inability to act upon the request of the Board, a Vice President
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.
SECTION 4.09 The Secretary. The Secretary shall, if present, record
the proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
SECTION 4.10 The Chief Financial Officer. The Chief Financial
Officer shall have the general care and custody of the funds and securities of
the Corporation, and shall deposit all such funds in the name of the Corporation
in such banks, trust companies or other depositories as shall be selected by the
Board. He shall receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever. He shall exercise general supervision
over expenditures and disbursements
<PAGE>
made by officers, agents and employees of the Corporation and the preparation of
such records and reports in connection therewith as may be necessary or
desirable. He shall, in general, perform all other duties incident to the office
of Chief Financial Officer and such other duties as from time to time may be
assigned to him by the Board.
SECTION 4.11 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01 Execution of Contracts. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
SECTION 5.02 Checks, Drafts, Etc. All checks, drafts or other orders
for payment of money, notes or other evidence of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such officer, assistant, agent or attorney
shall give such bond, if any, as the Board may require.
SECTION 5.03 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 depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Chief Financial Officer (or any other officer or officers,
assistant or assistants, agent or agents, or attorney or attorneys of the
Corporation who shall from time to time be determined by the Board) may endorse,
assign and deliver checks, drafts and other orders for the payment of money
which are payable to the order of the Corporation.
SECTION 5.04 General and Special Bank Accounts. The Board may from
time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be
<PAGE>
selected by any officer or officers, assistant or assistants, agent or agents,
or attorney or attorneys of the Corporation to whom such power shall have been
delegated by the Board. The Board may make such special rules and regulations
with respect to such bank accounts, not inconsistent with the provisions of
these Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
SECTION 6.01 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Chief Financial Officer, a Treasurer or an Assistant Treasurer. Any of or
all of the signatures on the certificates may be a facsimile. In case any
officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, any such certificate, shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued,
such certificate may nevertheless be issued by the Corporation with the same
effect as though the person who signed such certificate, or whose facsimile
signature shall have been placed thereupon, were such officer, transfer agent or
registrar at the date of issue. A record shall be kept of the respective names
of the persons, firms or corporations owning the stock represented by such
certificates, the number and class of shares represented by such certificates,
respectively, and the respective dates thereof, and in case of cancellation, the
respective dates of cancellation. Every certificate surrendered to the
Corporation for exchange or transfer shall be cancelled, and no new certificate
or certificates shall be issued in exchange for any existing certificate until
such existing certificate shall have been so cancelled, except in cases provided
for in Section 6.04.
SECTION 6.02 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 6.03 Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
<PAGE>
SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In
any case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.05 Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than 60 nor less than 10 days before the date of such meeting, nor more than 60
days prior to any other action. If in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
stockholders or expressing consent to corporate action without a meeting the
Board shall not fix such a record date, the record date for determining
stockholders for such purpose shall be the close of business on the day on which
the Board shall adopt the resolution relating thereto. A determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of such meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
ARTICLE VII
Indemnification
SECTION 7.01 Action, Etc. Other Than by or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
SECTION 7.02 Actions, Etc., by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be
<PAGE>
made a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 7.03 Determination of Right of Indemnification. Any
indemnification under Section 7.01 or 7.02 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 7.01 and 7.02. Such determination shall be made (i)
by the Board by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
SECTION 7.04 Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.01 or 7.02, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
SECTION 7.05 Prepaid Expenses. Expenses incurred by an officer or
director in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board deems appropriate.
SECTION 7.06 Other Rights and Remedies. The indemnification provided
by this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
<PAGE>
SECTION 7.07 Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
SECTION 7.08 Constituent Corporations. For the purposes of this
Article, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation, so that any person who is or was a director, officer, employee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article with respect to
the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.
SECTION 7.09 Other Enterprises, Fines, and Serving at Corporation's
Request. For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
ARTICLE VIII
Miscellaneous
SECTION 8.01 Seal. The Board shall provide a corporate seal, which
shall be in the form of a circle and shall bear the name of the Corporation and
words and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
SECTION 8.02 Waiver of Notices. Whenever notice is required to be
given by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.03 Amendments. These Bylaws, or any of them, may be
altered, amended or repealed, and new Bylaws may be made, (i) by the Board, by
vote of a majority of the number of directors then in office as directors,
acting at any meeting of the
<PAGE>
Board, or (ii) by the stockholders, at any annual meeting of stockholders,
without previous notice, or at any special meeting of stockholders, provided
that notice of such proposed amendment, modification, repeal or adoption is
given in the notice of special meeting. Any Bylaws made or altered by the
stockholders may be altered or repealed by either the Board or the stockholders.
<PAGE>
CERTIFICATE OF SECRETARY
The undersigned, being the duly elected Secretary of RBC Nice
Bearings, Inc., a Delaware corporation, hereby certifies that the Bylaws to
which this Certificate is attached were duly adopted by the Board of Directors
of said Corporation as of the 28th day of January, 1997.
--------------------------------
Michael S. Gostomski
BPP ACQUISITION CORPORATION
CHARTER DOCUMENTS
<PAGE>
State of Delaware
Office of the Secretary of State
-------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "BPP ACQUISITION CORPORATION", FILED IN THIS OFFICE ON THE
EIGHTEENTH DAY OF JUNE, A.D. 1996, AT 3 0'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.
[SEAL] /s/ Edward J. Freel
--------------------------------------
Edward J. Freel, Secretary of State
2633533 8100 AUTHENTICATION: 7991553
960178082 DATE: 06-18-96
<PAGE>
CERTIFICATE OF INCORPORATION
OF
BPP ACQUISITION CORPORATION
ARTICLE I
NAME OF CORPORATION
The name of this corporation is:
BPP Acquisition Corporation
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the corporation in the State of
Delaware is 9 East Loockerman Street, in the City of Dover 19901, County of
Kent, and the name of its registered agent at that address is National
Registered Agents, Inc.
ARTICLE III
PURPOSE
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the general Corporation Law of
Delaware.
ARTICLE VI
AUTHORIZED CAPITAL STOCK
The corporation shall be authorized to issue one class of stock to be
designated Common Stock; the total number of shares which the corporation shall
have authority to issue is one thousand (1,000), and each such share shall have
a par value of one cent ($0.01).
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 03:00 PM 06/16/1996
960178082 - 2633533
<PAGE>
ARTICLE V
INCORPORATION
The name and mailing address of the incorporator of the corporation is:
Kurt B. Larsen
c/o Aurora Capital Partners L.P.
1800 Century Park East, Suite 1000
Los Angeles, California 90067
ARTICLE VI
BOARD POWER REGARDING BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, repeal, alter, amend and
rescind the bylaws of the corporation.
ARTICLE VII
ELECTION OF DIRECTORS
Elections of directors need not be by written ballot unless the bylaws of
the corporation shall so provide.
ARTICLE VIII
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or may hereafter be amended, a director of the corporation shall
not be liable to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director. If the Delaware General Corporation Law
is amended after the date of the filing of this Certificate of Incorporation to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended from time to time. No repeal or
modification of this Article VIII by the stockholders shall adversely affect any
right or protection of a director of the corporation existing by virtue of this
Article VIII at the time of such repeal or modification.
2
<PAGE>
ARTICLE IX
CORPORATE POWER
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
ARTICLE X
CREDITOR COMPROMISE OR ARRANGEMENT
Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this corporation and its
stockholder or any class of them, any court of equitable jurisdiction within the
State of Delaware may, on the application in a summary way of this corporation
or of any creditor or stockholder thereof or on the application of any receiver
or receivers appointed for this corporation under the provisions of Section 291
of Title 8 of the Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for this corporation under the
provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors of class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, by binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
3
<PAGE>
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation to do business both within and without the
State of Delaware, and in pursuance of the Delaware General Corporation Law,
does make and file this Certificate.
Dated: June 18, 1996
/s/ Kurt B. Larsen
---------------------------------
Kurt B. Larsen, Incorporator
LC96164.076/37
4
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "BPP ACQUISITION CORPORATION", CHANGING ITS NAME FROM "BPP ACQUISITION
CORPORATION" TO "RBC LINEAR PRECISION PRODUCTS, INC.", FILED IN THIS OFFICE ON
THE TWENTIETH DAY OF MAY, A.D. 1997, AT 3 O'CLOCK P.M.
/s/ Edward J. Freel
[ESTATE SEAL] -----------------------------------
Edward J. Freel, Secretary of State
2633533 8100 AUTHENTICATION: 8484937
971173689 DATE: 05-28-97
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BPP ACQUISITION CORPORATION
(a Delaware corporation)
Michael S. Gostomski hereby certifies as follows:
FIRST: He is the Chief Financial Officer and Secretary of BPP
Acquisition Corporation, a Delaware corporation (the "Corporation").
SECOND: Article I of the Certificate of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:
"The name of this corporation is:
RBC Linear Precision Products, Inc."
THIRD: The foregoing amendment of the Certificate of Incorporation
of the Corporation has been approved by the sole stockholder of the Corporation
by written consent in accordance with Sections 228 and 242 of the Delaware
General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Michael S. Gostomski, its Chief Financial Officer and
Secretary, as of this 15th day of May, 1997.
/s/ Michael S. Gostomski
-------------------------------------
Michael S. Gostomski
Chief Financial Officer and Secretary
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 03:00 pm 05/20/1997
971164960 - 2633533
BPP ACQUISITION CORPORATION
BYLAWS
<PAGE>
BPP ACQUISITION CORPORATION
(a Delaware corporation)
BYLAWS
ARTICLE I
Offices
SECTION 1.01 Registered Office. The registered office of BPP
Acquisition Corporation, Inc. (hereinafter called the "Corporation") in the
State of Delaware shall be at 9 East Loockerman Street, City of Dover, County of
Kent, and the name of the registered agent in charge thereof shall be National
Registered Agents, Inc.
SECTION 1.02 Other Offices. The Corporation may also have an office
or offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (hereinafter called the Board) may from time
to time determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 2.01 Annual Meetings. Annual meetings of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 Special Meetings. A special meeting of the stockholders
for the transaction of any proper business may be called at any time by the
Board or by the President.
SECTION 2.03 Place of Meetings. All meetings of the stockholders
shall be held at such places, within or without the State of Delaware, as may
from time to time be designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers of notice thereof.
SECTION 2.04 Notice of Meetings. Except as otherwise required by
law, notice of each meeting of the stockholders, whether annual or special,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting by delivering a typewritten or printed notice thereof to
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him personally, or by depositing such notice in the United States mail, in a
postage prepaid envelope, directed to him at his post office address furnished
by him to the Secretary of the Corporation for such purpose or, if be shall not
have furnished to the Secretary his address for such purpose, then at his post
office address last known to the Secretary, or by transmitting a notice thereof
to him at such address by telegraph, cable, or wireless. Except as otherwise
expressly required by law, no publication of any notice of a meeting of the
stockholders shall be required. Every notice of a meeting of the stockholders
shall state the place, date and hour of the meeting, and, in the case of a
special meeting, shall also state the purpose or purposes for which the meeting
is called. Notice of any meeting of stockholders shall not be required to be
given to any stockholder who shall have waived such notice and such notice shall
be deemed waived by any stockholder who shall attend such meeting in person or
by proxy, except as a stockholder who shall attend such meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Except as
otherwise expressly required by law, notice of any adjourned meeting of the
stockholders need not be given if the time and place thereof are announced at
the meeting at which the adjournment is taken.
SECTION 2.05 Quorum. Except in the case of any meeting for the
election of directors summarily ordered as provided by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. In the absence of a
quorum at any meeting or any adjournment thereof, a majority in voting interest
of the stockholders present in person or by proxy and entitled to vote thereat
or, in the absence therefrom of all the stockholders, any officer entitled to
preside at, or to act as secretary of, such meeting may adjourn such meeting
from time to time. At any such adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted at the meeting
as originally called.
SECTION 2.06 Voting.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws as
the record date for the determination of stockholders entitled to notice
of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at
the close of business on the day next preceding the day on which notice of
the meeting shall be given or (b) if notice of the meeting shall be
waived, at the close of business on the day next preceding the day on
which the meeting shall be held.
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(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants in common, tenants
by entirety or otherwise, or with respect to which two or more persons have the
same fiduciary relationship, shall be voted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notice the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 2.07 List of Stockholders. The Secretary of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 2.08 Judges. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and shall
report the number of shares represented at the meeting and entitled to vote on
such question, shall conduct and accept the votes, and, when the voting is
completed, shall ascertain and report
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the number of shares voted respectively for and against the question. Reports of
judges shall be in writing and subscribed and delivered by them to the Secretary
of the Corporation. The judges need not be stockholders of the Corporation, and
any officer of the Corporation may be a judge on any question other than a vote
for or against a proposal in which he shall have a material interest.
SECTION 2.09 Action Without Meeting. Any action required to be taken
at any annual or special meeting of stockholders of the Corporation, or any
action which may be taken at any annual or special meeting of such stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
Board of Directors
SECTION 3.01 General Powers. The property, business and affairs of
the Corporation shall be managed by the Board.
SECTION 3.02 Number and Term of Office. The number of directors of
the corporation shall be three (3). Directors need not be stockholders. Each of
the directors of the Corporation shall hold office until his successor shall
have been duly elected and shall qualify or until he shall resign or shall have
been removed in the manner hereinafter provided.
SECTION 3.03 Election of Directors. The directors shall be elected
annually by the stockholders of the Corporation and the persons receiving the
greatest number of votes, up to the number of directors to be elected, shall be
the directors.
SECTION 3.04 Resignations. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05 Vacancies. Except as otherwise provided in the
Certificate of Incorporation, any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors, or
any other cause, may be filled by vote of the majority of the remaining
directors, although less than a quorum. Each director so chosen to fill a
vacancy shall hold office until his successor shall have been elected and shall
qualify or until he shall resign or shall have been removed in the manner
hereinafter provided.
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SECTION 3.06. Place of Meeting, Etc. The Board may hold any of its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special meeting
of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as
practicable after each annual election of directors and notice of such first
meeting shall not be required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board may be
held at such times as the Board shall from time to time by resolution determine.
If any day fixed for a regular meeting shall be a legal holiday at the place
where the meeting is to be held, then the meeting shall be held at the same hour
and place on the next succeeding business day not a legal holiday. Except as
provided by law, notice of regular meetings need not be given.
SECTION 3.09 Special Meetings. Special meetings of the Board of
Directors may be called at any time, and for any purpose permitted by law, by
the President, or by the Secretary on the written request of a majority of the
members of the Board of Directors, which meetings shall be held at the time and
place either within or without the State of Delaware designated by the person or
persons calling the meeting.
SECTION 3.10 Notice. Notice of the time, place and purpose of any
special meeting shall be given to the Directors by the Secretary, or in case of
his absence, refusal or inability to act, by any other officer. Any such notice
may be given by mail, by telegraph, by telephone, by facsimile or by personal
service, to each of the Directors. If the notice is by mail, it shall be
deposited in a United States Post Office at least forty-eight hours before the
time of the meeting; if by facsimile, transmitted at least twelve hours before
the time of the meeting; and if by telegraph, by deposit of the message with the
telegraph company at least twelve hours before the time of the meeting, if by
telephone or by personal service, given at least twelve hours before the time of
the meeting.
Except where otherwise required by law or by these Bylaws, notice of
the purpose of a special meeting need not be given. Notice of any meeting of the
Board shall not be required to be given to any director who is present at such
meeting, except a director who shall attend such meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 3.11 Quorum and Manner of Acting. Except as otherwise
provided in these Bylaws or by law, the presence of a majority of the authorized
number of directors shall be required to constitute a quorum for the transaction
of business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a
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majority of directors present at any meeting may adjourn the same from time to
time until a quorum shall be present. Notice of any adjourned meeting need not
be given. The directors shall act only as a Board, and the individual directors
shall have no power as such.
SECTION 3.12 Action by Consent. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 3.13 Removal of Directors. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
SECTION 3.14 Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.15 Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the extent provided in the resolution of the Board and except as otherwise
limited by law, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of any such absent or disqualified
member.
ARTICLE IV
Officers
SECTION 4.01 Number. The officers of the Corporation shall be a
President, one or more Vice Presidents (the number thereof and their respective
titles to be determined by the Board), a Secretary and a Chief Financial
Officer. A Chief Executive Officer may be elected by the Board, if the Board
determines such officer is necessary to the Corporation.
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SECTION 4.02 Election, Term of Office and Qualifications. The
officers of the Corporation, except such officers as may be appointed in
accordance with Section 4.03, shall be elected annually by the Board at the
first meeting thereof held after the election thereof Each officer shall hold
office until his successor shall have been duly chosen and shall qualify or
until his resignation or removal in the manner hereinafter provided.
SECTION 4.03 Assistants, Agents and Employees, Etc. In addition to
the officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
SECTION 4.04 Removal. Any officer, assistant, agent or employee of
the Corporation may be removed, with or without cause, at any time: (i) in the
case of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (ii) in the case of an officer, assistant, agent or
employee, by any officer of the Corporation or committee of the Board upon whom
or which such power of removal may be conferred by the Board.
SECTION 4.05 Resignations. Any officer or assistant may resign at
any time by giving written notice of his resignation to the Board or the
Secretary of the Corporation. Any such resignation shall take effect at the time
specified therein, or, if the time be not specified, upon receipt thereof by the
Board or the Secretary, as the case may be; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 4.06 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 4.07 The President. The President of the Corporation shall
be the chief executive officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 4.08 The Vice Presidents. Each Vice President shall have
such powers and perform such duties as the Board may from time to time
prescribe. At the request of the President, or in case of the President's
absence or inability to act upon the request of the Board, a Vice President
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.
SECTION 4.09 The Secretary. The Secretary shall, if present, record
the proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a
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secretary shall not have been appointed in one or more books provided for that
purpose; he shall see that all notices are duly given in accordance with these
Bylaws and as required by law; he shall be custodian of the seal of the
Corporation and shall affix and attest the seal to all documents to be executed
on behalf of the Corporation under its seal; and, in general, he shall perform
all the duties incident to the office of Secretary and such other duties as may
from time to time be assigned to him by the Board.
SECTION 4.10 The Chief Financial Officer. The Chief Financial
Officer shall have the general care and custody of the funds and securities of
the Corporation, and shall deposit all such funds in the name of the Corporation
in such banks, trust companies or other depositories as shall be selected by the
Board. He shall receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever. He shall exercise general supervision
over expenditures and disbursements made by officers, agents and employees of
the Corporation and the preparation of such records and reports in connection
therewith as may be necessary or desirable. He shall, in general, perform all
other duties incident to the office of Chief Financial Officer and such other
duties as from time to time may be assigned to him by the Board.
SECTION 4.11 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01 Execution of Contracts. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
SECTION 5.02 Checks, Drafts, Etc. All checks, drafts or other orders
for payment of money, notes or other evidence of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such officer, assistant, agent or attorney
shall give such bond, if any, as the Board may require.
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SECTION 5.03 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 depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Chief Financial Officer (or any other officer or officers,
assistant or assistants, agent or agents, or attorney or attorneys of the
Corporation who shall from time to time be determined by the Board) may endorse,
assign and deliver checks, drafts and other orders for the payment of money
which are payable to the order of the Corporation.
SECTION 5.04 General and Special Bank Accounts. The Board may from
time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. The Board may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
SECTION 6.01 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Chief Financial Officer, a Treasurer or an Assistant Treasurer. Any of or
all of the signatures on the certificates may be a facsimile. In case any
officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, any such certificate, shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued,
such certificate may nevertheless be issued by the Corporation with the same
effect as though the person who signed such certificate, or whose facsimile
signature shall have been placed thereupon, were such officer, transfer agent or
registrar at the date of issue. A record shall be kept of the respective names
of the persons, firms or corporations owning the stock represented by such
certificates, the number and class of shares represented by such certificates,
respectively, and the respective dates thereof, and in case of cancellation, the
respective dates of cancellation. Every certificate surrendered to the
Corporation for exchange or transfer shall be cancelled, and no new certificate
or certificates shall be issued in exchange for any existing certificate until
such existing certificate shall have been so cancelled, except in cases provided
for in Section 6.04.
SECTION 6.02 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed
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with the Secretary, or with a transfer clerk or a transfer agent appointed as
provided in Section 6.03, and upon surrender of the certificate or certificates
for such shares properly endorsed and the payment of all taxes thereon. The
person in whose name shares of stock stand on the books of the Corporation shall
be deemed the owner thereof for all purposes as regards the Corporation.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, such fact shall be so expressed in the entry of transfer if, when
the certificate or certificates shall be presented to the Corporation for
transfer, both the transferor and the transferee request the Corporation to do
so.
SECTION 6.03 Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In
any case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.05 Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than 60 nor less than 10 days before the date of such meeting, nor more than 60
days prior to any other action. If in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
stockholders or expressing consent to corporate action without a meeting the
Board shall not fix such a record date, the record date for determining
stockholders for such purpose shall be the close of business on the day on which
the Board shall adopt the resolution relating thereto. A determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of such meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
ARTICLE VII
Indemnification
SECTION 7.01 Action, Etc. Other Than by or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party or
is threatened
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to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
SECTION 7.02 Actions, Etc., by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 7.03 Determination of Right of Indemnification. Any
indemnification under Section 7.01 or 7.02 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 7.01 and 7.02. Such determination shall be made (i)
by the Board by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
SECTION 7.04 Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense
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of any action, suit or proceeding referred to in Section 7.01 or 7.02, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
SECTION 7.05 Prepaid Expenses. Expenses incurred by an officer or
director in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board deems appropriate.
SECTION 7.06 Other Rights and Remedies. The indemnification provided
by this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7.07 Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
SECTION 7.08 Constituent Corporations. For the purposes of this
Article, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation, so that any person who is or was a director, officer, employee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article with respect to
the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.
SECTION 7.09 Other Enterprises, Fines, and Serving at Corporation's
Request. For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person
12
<PAGE>
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article.
ARTICLE VIII
Miscellaneous
SECTION 8.01 Seal. The Board shall provide a corporate seal, which
shall be in the form of a circle and shall bear the name of the Corporation and
words and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
SECTION 8.02 Waiver of Notices. Whenever notice is required to be
given by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.03 Amendments. These Bylaws, or any of them, may be
altered, amended or repealed, and new Bylaws may be made, (i) by the Board, by
vote of a majority of the number of directors then in office as directors,
acting at any meeting of the Board, or (ii) by the stockholders, at any annual
meeting of stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, modification,
repeal or adoption is given in the notice of special meeting. Any Bylaws made or
altered by the stockholders may be altered or repealed by either the Board or
the stockholders.
13
<PAGE>
CERTIFICATE OF SECRETARY
The undersigned, being the duly elected Secretary of BPP Acquisition
Corporation, Inc., a Delaware corporation, hereby certifies that the Bylaws to
which this Certificate is attached were duly adopted by the Board of Directors
of said Corporation as of the 18th day of June, 1996.
/s/ Michael S. Gostomski
-----------------------------------
Michael S. Gostomski
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/26/1990 CONFIDENTIAL
710177032 - 2234420
CERTIFICATE OF INCORPORATION
OF
ITI ACQUISITION, INC.
(A Delaware Corporation)
FIRST: Name. The name of the Corporation is ITI Acquisition, Inc.
SECOND: Delaware Office and Registered Agent. The address of the
registered office of the Corporation in the State of Delaware is 1013 Centre
Road, in the City of Wilmington, County of New Castle. The name of its
registered agent for service of process at such address is Corporation Service
Company.
THIRD: Purpose. The nature of the business or purposes of the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware. The
Corporation shall possess and exercise all the powers and privileges granted by
the General Corporation Law of the State of Delaware, by any other law or by
this Certificate of Incorporation, together with any powers incidental thereto
as far as such powers and privileges are necessary or convenient to the conduct,
promotion, or attainment of the purposes of the Corporation.
FOURTH: Capital Stock. The total number of shares of Common stock
which the Corporation shall have authority to issue is 10,000 shares, par value
$.01 per share.
FIFTH: Management of the Affairs of the Corporation. The following
provisions relate to the management of the business and the conduct of the
affairs of the Corporation and are inserted for the purpose of creating,
defining, limiting and regulating the powers of the Corporation and its
Directors and stockholders:
(1) The election of Directors shall be conducted as provided
in the By-Laws, and need not be by written ballot.
(2) The Board of Directors shall have the power to make,
alter, amend or repeal the By-Laws of the Corporation, except to the
extent that the By-Laws otherwise provide.
SIXTH: Reorganization. Whenever a compromise or arrangement is
proposed between this Corporation and its
<PAGE>
creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application appointed for
this Corporation under the Provisions of Section 279 of Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as the consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
SEVENTH: Liability of Directors of the Corporation. A director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of his fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which the director derived any
improper personal benefit. If the General Corporation Law of the State of
Delaware is amended after the date hereof to authorise corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of the State of Delaware, as so
amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
EIGHTH: Reservation of Right to Amend. The Corporation reserves the
right to amend or repeal any provisions contained in this Certificate of
Incorporation from time to time and at any time in the manner now or hereafter
prescribed by the
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<PAGE>
law of the State of Delaware, and all rights herein conferred upon stockholders,
Directors and officers are subject to this reserved power.
NINTH: Incorporator. The name and post office address of the sole
incorporator are Ronald J. Prague, 885 Third Avenue, New York, New York
10022-4802.
I, THE UNDERSIGNED, being the sole incorporator, for the purpose of
forming a corporation under the laws of the State of Delaware do make, file and
record this Certificate of Incorporation, do certify that the facts herein
stated are true, and accordingly, have set my hand hereto this 26th day of June,
1990.
/s/ Ronald J. Prague
------------------------------
Ronald J. Prague, Incorporator
L:L060011RJP
<PAGE>
State of Delaware
PAGE 1
Office of the Secretary of State
--------------------------------
CONFIDENTIAL
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "ITI ACQUISITION, INC.", CHANGING ITS NAME FROM "ITI ACQUISITION, INC." TO
"INDUSTRIAL TECTONICS BEARINGS CORPORATION", FILED IN THIS OFFICE ON THE
NINETEENTH DAY OF JULY, A.D. 1990, AT 9 O'CLOCK A.M.
[SEAL] /s/ Edward J. Freel
-----------------------------------------
Edward J. Freel, Secretary of State
2234420 8100 AUTHENTICATION: 7646320
950213929 DATE: 09-20-95
<PAGE>
CONFIDENTIAL
710200009
CERTIFICATE OF AMENDMENT OF THE FILED
CERTIFICATE OF INCORPORATION
OF JUL 19 1990
ITI ACQUISITION, INC.
/s/ [Illegible]
(Under Section 242 of the Delaware
General Corporation Law) SECRETARY OF STATE
[Illegible]
The undersigned, being the Chairman of the Board and Assistant
Secretary, respectively, of ITI Acquisition, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), do hereby
certify that:
1. The name of the Corporation is ITI Acquisition, Inc.
2. The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on June 26, 1990.
3. This Certificate of Amendment of the Certificate of Incorporation
was duly authorized and adopted by the Board of Directors of the Corporation in
accordance with Section 242 of the General Corporation Law of the State of
Delaware.
4. The Amendment of the Certificate of Incorporation effected by
this Certificate of Amendment is to change the name of the Corporation to
Industrial Tectonics Bearings Corporation.
5. In order to effect the above-mentioned amendment, Article FIRST
of the Certificate of Incorporation is hereby deleted in its entirety and the
following Article FIRST substituted and inserted in lieu thereof:
FIRST: Name. The name of the Corporation is Industrial Tectonics
Bearings Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 18 day of July,
1990.
/s/ [Illegible]
-----------------------------
Chairman of the Board
ATTEST:
/s/ [Illegible]
- -------------------------
Assistant Secretary
INDUSTRIAL TECTONICS BEARINGS CORPORATION
BYLAWS
<PAGE>
Exhibit B
CONFIDENTIAL
BY-LAWS OF
ITI ACQUISITION, INC.
ARTICLE I
OFFICES
1.1. The registered office of the Corporation shall be in
Wilmington, Delaware.
1.2. The Corporation may also have offices at such other places
within and without the State of Delaware as the board of directors may from time
to time determine or as the business of the Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
2.1. Meetings of stockholders shall be held at such place, within or
without the State of Delaware, as shall be designated from time to time by the
board of directors.
2.2. Annual meetings of stockholders shall, unless otherwise
provided by the board of directors, be held on June 1 in each year if not a
legal holiday, and if a legal holiday, then on the next full business day
following, at 10:00 a.m., at which they shall elect a board of directors and
transact such other business as may properly be brought before the meeting.
2.3. Written notice of the annual meeting, stating the place, date
and hour thereof, shall be given to each stockholder entitled to vote thereat
not less than ten nor more than sixty days before the date of the meeting.
2.4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order with the address of and the number of
voting shares registered in the name of each stockholder. Such list shall be
open for ten days prior to any meeting of stockholders for the purpose of
examination by any stockholder, for any purpose germane to the meeting, during
ordinary business hours, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of meeting, or if not
specified, at the place where the meeting is to be held, and shall be produced
and kept at the time and place of the meeting during the entire meeting, and may
be inspected by any stockholder who is present.
<PAGE>
2.5. Special meetings of stockholders may be called by the board of
directors, by the chairman, by the president or by stockholders owning a
majority in amount of the entire capital stock of the Corporation issued and
outstanding and entitled to vote.
2.6. Written notice of a special meeting of stockholders, stating
the place, date, hour and purpose thereof, shall be given by the secretary to
each stockholder entitled to vote thereat not less than ten nor more than sixty
days before the date fixed for the meeting. Such notice shall state the purpose
or purposes of the proposed meeting.
2.7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
2.8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum shall not be present or represented at
any meeting of stockholders, the stockholders entitled to vote thereat, present
in person or represented by proxy, shall have the power to adjourn the meeting
from time to time without notice other than by announcement at the meeting if
the adjournment is not for more than thirty days and a new record date is not
fixed for the adjourned meeting, until a quorum shall be present or represented.
If a quorum shall be present or represented at such adjourned meeting any
business may be transacted which might have been transacted at the original
meeting.
2.9. When a quorum is present at any meeting, the affirmative vote
of a majority of the votes cast shall decide any question brought before that
meeting, unless the question is one upon which by express provision of the
statutes of the State of Delaware or of the Certificate of Incorporation a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
2.10. Each stockholder shall at every meeting of stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Two inspectors of election may be appointed by the board of directors, or if not
so appointed then by the presiding officer of the meeting. If inspectors of
election are appointed, all
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<PAGE>
questions regarding the qualification of voters, the validity of proxies and the
acceptance or rejection of votes shall be decided by such inspectors of
election.
2.11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken for or in connection with any corporate action
by any provisions of the statutes of the State of Delaware, the meeting and vote
of stockholders may be dispensed with if all of the stockholders who would have
been entitled to vote or less than all but not less than the holders of a
majority of the stock entitled to vote, upon the action if such meeting were
held shall consent in writing to such corporate action being taken; provided
that the written consent shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted, and provided that prompt notice must be given to
all stockholders of the taking of corporate action without a meeting and by less
than unanimous written consent.
2.12. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days prior to any such
action. A determination of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
ARTICLE III
DIRECTORS
3.1. The number of directors which shall constitute the whole board
of directors of the Corporation shall be one. By amendment of this By-Law the
number of directors may be increased or decreased from time to time by the board
of directors or the stockholders within the limits permitted by law, but no
decrease in the number of directors shall change the term of any director in
office at the time of such decrease. The directors shall be elected at the
annual meeting of stockholders, except as provided in Section 3.2 of this
Article, and each director shall hold office until his successor is elected and
qualified or until his earlier resignation or removal. Any director may resign
at any time upon
-3-
<PAGE>
written notice to the Corporation. Any director or the entire board of directors
may be removed, with or without cause, at any time by the holders of a majority
of the shares then entitled to vote at an election of directors, and any vacancy
in the board of directors caused by such removal may be filled by the
stockholders at the time of such removal. Directors need not be stockholders.
3.2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, and each of the
directors so chosen shall hold office until the next annual election and until
his successor is elected and qualified or until his earlier resignation or
removal.
3.3. The business and affairs of the Corporation shall be managed by
or under the direction of its board of directors which shall exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute, the Certificate of Incorporation or these By-laws directed or required
to be exercised or done by the stockholders.
3.4. The first meeting of each newly elected board of directors
shall be held immediately following the adjournment of the annual meeting of
stockholders and at the same place as such meeting of stockholders. No notice to
the directors of such meeting shall be necessary in order legally to constitute
the meeting, provided a quorum shall be present. In the event such meeting is
not so held, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors.
3.5. The board of directors of the Corporation or any committee
thereof may hold meetings, both regular and special, either within or without
the State of Delaware. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board of directors. Special meetings of the board of directors
may be called by the chairman or the president, and the president or the
secretary shall call a special meeting on the request of any two directors. If
given personally, by telephone or by telegram, the notice shall be given at
least the day prior to the meeting. Notice may be given by mail if it is mailed
at least three days before the meeting. The notice need not specify the business
to be transacted. In the event of an emergency which in the judgment of the
chairman or the president requires immediate action, a special meeting may be
convened without notice, consisting of those directors who are immediately
available in person or by telephone and can be joined in the meeting in person
-4-
<PAGE>
or by conference telephone. The actions taken at such a meeting shall be valid
if at least a quorum of the directors participates either personally or by
conference telephone.
3.6. At meetings of the board of directors, two-thirds of the
directors at the time in office shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors. If a quorum
shall not be present at any meeting of the board of directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
3.7. The board of directors may, by resolution passed by a majority
of the whole board, designate one or more committees of the board of directors,
each committee to consist of two or more of the directors of the Corporation,
which, to the extent provided in the resolution, shall have and may exercise the
powers of the board of directors in the management of the business and affairs
of the Corporation and may authorize the seal of the Corporation to be affixed
to all papers which may require it; but no such committee shall have the power
or authority to amend the Certificate of Incorporation, adopt an agreement of
merger or consolidation, recommend to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommend to the stockholders a dissolution of the Corporation or a revocation
of a dissolution, designate any committee of the board of directors, elect any
new directors to the board or to any committee of the board, declare a dividend,
authorize the issuance of stock, or amend the By-Laws of the Corporation. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. At meetings of any
such committee, a majority of the members or alternate members of such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of members or alternate members present at any meeting at which there
is a quorum shall be the act of the committee.
3.8. The board of directors and the committees thereof shall keep
regular minutes of their proceedings.
3.9. Any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting if a written consent thereto is signed by all members of the board or of
such committees, as the case may be, and such written consent is filed with the
minutes of proceedings of the board or committee.
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<PAGE>
3.10. The members of the board of directors or any committee thereof
may participate in a meeting of such board or committee by means or conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
3.11. The directors may be paid their expenses of attendance at each
meeting of the board of directors and may be paid a fixed sum for attendance at
each meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed similar reimbursement and compensation for attending
committee meetings.
ARTICLE IV
OFFICERS
4.1. The officers of the Corporation shall be chosen by the board of
directors at its first meeting after each annual meeting of stockholders and
shall be a chairman, a president, a secretary and a treasurer. The board of
directors may also choose such vice presidents and additional officers or
assistant officers as it may deem advisable. Any number of offices may be held
by the same person.
4.2. The board of directors may appoint such other officers and
agents as it desires who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined form time to
time by the board.
4.3. The officers of the Corporation shall hold office at the
pleasure of the board of directors. Each officer shall hold his office until his
successor is elected and qualified or until his earlier resignation or removal.
Any officer may resign at any time on written notice to the Corporation. Any
officer elected or appointed by the board of directors may be removed at any
time with or without cause by the board of directors. Any vacancy occurring in
any office of the Corporation by death, resignation, removal or otherwise shall
be filled by the board of directors.
4.4. The chairman shall be the chief executive officer of the
Corporation, shall preside at all meetings of stockholders and of the board of
directors, and shall have overall authority over the management of the business
of the Corporation.
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<PAGE>
4.5. The president shall be the chief operating officer of the
Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the board of
directors are carried into effect. In the absence or disability of the chairman,
the president shall preside at all meetings of stockholders and of the board of
directors. He shall execute on behalf of the Corporation and may affix the seal
or cause the seal to be affixed to all instruments requiring such execution
except to the extent the signing and execution thereof shall be expressly
delegated by the board of directors to some other officer or agent of the
Corporation.
4.6. The vice presidents shall act under the direction of the
chairman and the president and in the absence or disability of the president
shall perform the duties and exercise the powers of the president. They shall
perform such other duties and have such other powers as the president or the
board of directors may from time to time prescribe. The board of directors may
specify the order of seniority of the vice presidents and in that event the
duties and powers of the president shall descend to the vice presidents in the
specified order of seniority. The board of directors may designate one or more
vice presidents with particular titles, for example "executive vice president",
"senior vice president", "vice president operations" or "vice president -
sales".
4.7. The secretary shall act under the direction of the chairman and
the president. Subject to the direction of the chairman and the president, he
shall attend all meetings of the board of directors and all meetings of
stockholders and record the proceedings in books to be kept for that purpose and
shall perform like duties for the committees designated by the board of
directors when required. He shall give or cause to be given notice of all
meetings of stockholders and special meetings of the board of directors and
shall perform such other duties as may be prescribed by the chairman, the
president or the board of directors. He shall keep in safe custody the seal of
the Corporation and cause it to be affixed to any instrument requiring it.
4.8. The assistant secretaries in the order of their seniority,
unless otherwise determined by the chairman, the president or the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary. They shall perform such other
duties and have such other powers as the chairman, the president or the board of
directors may from time to time prescribe.
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<PAGE>
4.9. The treasurer shall act under the direction of the chairman and
the president. Subject to the direction of the chairman and the president he
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the board of directors. He shall disburse the funds of the Corporation as may
be ordered by the chairman, the president or the board of directors, taking
proper vouchers for such disbursements, and shall render to the chairman, the
president and the board of directors, at its regular meetings, or when the board
of directors so requires, an account of all his transactions as treasurer and of
the financial condition of the Corporation.
4.10. The assistant treasurers in the order of their seniority,
unless otherwise determined by the chairman, the president or the board of
directors, shall in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer. They shall perform such other
duties and have such other powers as the chairman, the president or the board of
directors may from time to time prescribe.
ARTICLE V
CERTIFICATES OF STOCK
5.1. Every holder of stock in the Corporation shall be entitled to
have a certificate, signed by, or in the name of the Corporation by, the
chairman or the president or a vice president and by the treasurer or an
assistant treasurer or the secretary or an assistant secretary of the
Corporation, certifying the number of shares owned by him in the Corporation.
5.2. Any or all of the signatures on a certificate may be a
facsimile. In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall cease to be such officer before such
certificate is issued, it may be issued with the same effect as if he were such
officer at the date of issue. The seal of the Corporation or a facsimile thereof
may, but need not, be affixed to certificates of stock.
5.3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates previously
issued by the Corporation and alleged to have been lost, stolen or destroyed, on
the making of any affidavit of that fact by the person claiming the certificate
or certificates were lost, stolen or destroyed. When authorizing such issue of a
new certificate or certificates, the
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<PAGE>
board of directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate or
certificates alleged to have been lost, stolen or destroyed.
5.4. Upon surrender to the Corporation or a transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation, if it is satisfied that all provisions of the
Certificate of Incorporation, the By-Laws and the law regarding the transfer of
shares have been duly complied with, to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction on the
books of the Corporation.
5.5. The Corporation shall be entitled to recognize the person
registered on its books as the owner of shares to be the exclusive owner for all
purposes including voting and dividends, and the Corporation shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VI
MISCELLANEOUS
6.1. Notices to directors and stockholders mailed to them at their
addresses appearing on the books of the Corporation shall be deemed to be given
at the time when deposited in the United States mail. Whenever any notice is
required to be given under the provisions of the statutes of the State of
Delaware, the Certificate of Incorporation or these By-Laws, waiver thereof in
writing, signed by the person or persons entitled to that notice, whether before
or after the time stated therein, shall be deemed the equivalent of notice.
6.2. Attendance of a director or stockholder at a meeting shall
constitute a waiver of notice of such meeting except when the director or
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction or any business because the meeting
is not lawfully called or convened.
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6.3. There may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for the purchase or lease of additional
property, or for such other purposes as the directors shall think conducive to
the interests of the Corporation, and the directors may modify or abolish any
such reserve.
6.4. In addition to any officers authorized in the By-Laws, all
checks or demands for money and notes of the Corporation, and all contracts,
certificates and other instruments of, by or on behalf of the Corporation shall
be signed by such officer or officers or such other person or persons as the
board of directors may from time to time designate by resolution.
6.5. The fiscal year of the Corporation shall be fixed by resolution
of the board of directors.
6.6. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed, affixed or in any other manner reproduced.
6.7. (a) Every person who was or is a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact he or a person
of whom he is the legal representative is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation or for its
benefit as director or officer of another corporation, or as the Corporation's
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
and pursuant to any procedure specified in the General Corporation Law of the
State of Delaware, as amended from time to time, against all expenses,
liabilities and losses (including attorneys' fees, judgments, fines and amounts
paid or to be paid in settlement) reasonably incurred or suffered by him in
connection therewith. Such right of indemnification shall be a contract right
which may be enforced in any manner desired by such person. Such right of
indemnification shall not be exclusive of any other right which such directors,
officers or representatives may have or hereafter acquire and, without limiting
the generality of such statement, they shall be entitled to their respective
rights of indemnification under any by-law,
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agreement, vote of stockholders, provision of law or otherwise, as well as their
rights under this Article.
(b) The board of directors may cause the Corporation to
purchase and maintain insurance on behalf of any person who is or was a director
or officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, or as the
Corporation's representative in a partnership, joint venture, trust or other
enterprise against any liability asserted against such person and incurred in
any such capacity or arising out of such status, whether or not the Corporation
would have the power to indemnify such person.
6.8. These By-Laws may be amended by the stockholders at any annual
or special meeting of stockholders, provided notice of the intention to amend
shall have been contained in the notice of the meeting. The board of directors
by a majority vote of the whole board at any meeting may amend these By-Laws,
including By-Laws adopted by the stockholders, provided the stockholders may
from time to time specify particular provisions of the By-Laws which shall not
be amended by the board of directors.
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CERTIFICATE OF INCORPORATION
OF
BREMEN BEARINGS, INC.
ARTICLE I
NAME OF CORPORATION
The name of this corporation is:
Bremen Bearings, Inc.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the corporation in the State
of Delaware is 9 East Loockerman Street, in the City of Dover, 19901, County of
Kent, and the name of its registered agent at that address is National Corporate
Research, Ltd.
ARTICLE III
PURPOSE
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
AUTHORIZED CAPITAL STOCK
The corporation shall be authorized to issue one class of stock to
be designated common stock; the total number of shares which the Corporation
shall have authority to issue is one thousand (1,000), and each such share shall
have a par value of one cent ($0.01).
<PAGE>
ARTICLE V
INCORPORATOR
The name and mailing address of the incorporator of the corporation
is:
Michael S. Gostomski
c/o Roller Bearing Company of America, Inc.
60 Round Hill Road
Fairfield, Connecticut 06430
ARTICLE VI
BOARD POWER REGARDING BYLAWS
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend and rescind the bylaws of the corporation.
ARTICLE VII
ELECTION OF DIRECTORS
Elections of directors need not be by written ballot unless the
bylaws of the corporation shall so provide.
ARTICLE VIII
LIMITATION OF DIRECTOR LIABILITY
The corporation shall indemnify, in the manner and to the full
extent permitted by law, any person (or the estate of any person) who was or is
a party to, or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether or not by or in the right of the
corporation, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was a director, officer,
employee, agent or fiduciary of another corporation, partnership, joint venture,
trust or other enterprise. The corporation may, to the full extent permitted by
law, purchase and maintain insurance on behalf of any such person against any
liability which may be asserted against him. To the full extent permitted by
law, the indemnification provided herein shall include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, and, in the
manner provided by law, any such expenses may be paid by the corporation in
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advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the person seeking indemnification to repay
such amounts if it is ultimately determined that he is not entitled to be
indemnified. The indemnification provided herein shall not be deemed to limit
the right of the corporation to indemnify any other person for any such expenses
to the full extent permitted by law, nor shall it be deemed exclusive of any
other rights to which any person seeking indemnification from the corporation
may be entitled under any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
A director of this corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the Delaware General Corporation Law
as the same exists or may hereafter be amended.
Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a director of the corporation
existing hereunder with respect to any act or omission occurring prior such
repeal or modification.
ARTICLE IX
CORPORATE POWER
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation to do business both within and without the
State of Delaware, and in pursuance of the Delaware General Corporation Law,
does make and file this Certificate.
Dated: July ____, 1997
------------------------------------
Michael S. Gostomski, Incorporator
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BREMEN BEARINGS, INC.
(a Delaware corporation)
BYLAWS
ARTICLE I.
Offices
SECTION 1.01 Registered Office. The registered office of Bremen
Bearings, Inc. (hereinafter called the "Corporation") in the State of Delaware
shall be at 9 East Loockerman Street, City of Dover, County of Kent, and the
name of the registered agent in charge thereof shall be National Corporate
Research, Ltd.
SECTION 1.02 Other Offices. The Corporation may also have an office
or offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (hereinafter called the "Board") may from
time to time determine or as the business of the Corporation may require.
ARTICLE II.
Meetings of Stockholders
SECTION 2.01 Annual Meetings. Annual meetings of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place, as the Board shall determine by resolution.
SECTION 2.02 Special Meetings. A special meeting of the stockholders
for the transaction of any proper business may be called at any time by the
Board or by the President.
SECTION 2.03 Place of Meetings. All meetings of the stockholders
shall be held at such places, within or without the State of Delaware, as may
from time to time be designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers of notice thereof
SECTION 2.04 Notice of Meetings. Except as otherwise required by
law, notice of each meeting of the stockholders,
<PAGE>
whether annual or special, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting to each stockholder of record
entitled to vote at such meeting by delivering a typewritten or printed notice
thereof to him personally, or by depositing such notice in the United States
mail, in a postage prepaid envelope, directed to him at his post office address
furnished by him to the Secretary of the Corporation for such purpose or, if he
shall not have famished to the Secretary his address for such purpose, then at
his post office address last known to the Secretary, or by transmitting a notice
thereof to him at such address by telegraph, cable, or wireless. Except as
otherwise expressly required by law, no publication of any notice of a meeting
of the stockholders shall be required. Every notice of a meeting of the
stockholders shall state the place, date and hour of the meeting, and, in the
case of a special meeting, shall also state the purpose or purposes for which
the meeting is called. Notice of any meeting of stockholders shall not be
required to be given to any stockholder who shall have waived such notice and
such notice shall be deemed waived by any stockholder who shall attend such
meeting in person or by proxy, except as a stockholder who shall attend such
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Except as otherwise expressly required by law, notice of any adjourned
meeting of the stockholders need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
SECTION 2.05 Quorum. Except in the case of any meeting for the
election of directors summarily ordered as provided by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof In the absence of a
quorum at any meeting or any adjournment thereof, a majority in voting interest
of the stockholders present in person or by proxy and entitled to vote thereat
or, in the absence therefrom of all the stockholders, any officer entitled to
preside at, or to act as secretary of, such meeting may adjourn such meeting
from time to time. At any such adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted at the meeting
as originally called.
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SECTION 2.06 Voting.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws as
the record date for the determination of stockholders entitled to notice
of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at
the close of business on the day next preceding the day on which notice of
the meeting shall be given or (b) if notice of the meeting shall be
waived, at the close of business on the day next preceding the day on
which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants in common, tenants
by entirety or otherwise, or with respect to which two or more persons have the
same fiduciary relationship, shall be voted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the
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proxy. At any meeting of the stockholders a matters, except as otherwise
provided in the Certificate of Incorporation, in these Bylaws or by law, shall
be decided by the vote of a majority in voting interest of the stockholders
present in person or by proxy and entitled to vote thereat and thereon, a quorum
being present. The vote at any meeting of the stockholders on any question need
not be by ballot, unless so directed by the chairman of the meeting. On a vote
by ballot each ballot shall be signed by the stockholder voting, or by his
proxy, if there be such proxy, and it shall state the number of shares voted.
SECTION 2.07 List of Stockholders. The Secretary of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 2.08 Judges. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and shall
report the number of shares represented at the meeting and entitled to vote on
such question, shall conduct and accept the votes, and, when the voting is
completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The judges
need not be stockholders of the Corporation, and any officer of the Corporation
may be a judge on any question other than a vote for or against a proposal in
which he shall have a material interest.
SECTION 2.09 Action Without Meeting. Any action required to be taken
at any annual or special meeting of stockholders of the Corporation, or any
action which may be taken at any annual or special meeting of such stockholders,
may be
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<PAGE>
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III.
Board of Directors
SECTION 3.01 General Powers. The property, business and affairs of
the Corporation shall be managed by the Board.
SECTION 3.02 Number and Term of Office. The number of directors of
the Corporation shall be not less than one (1) nor more than eleven (11) until
changed in accordance with applicable law. The exact number of directors shall
be fixed from time to time within the limits specified by resolution of the
Board of Directors or the shareholders. Directors need not be stockholders. Each
of the directors of the Corporation shall hold office until his successor shall
have been duly elected and shall qualify until he shall resign or shall have
been removed in the manner hereinafter provided.
SECTION 3.03 Election of Directors. The directors shall be elected
annually by the stockholders of the Corporation and the persons receiving the
greatest number of votes, up to the number of directors to be elected, shall be
the directors.
SECTION 3.04 Resignations. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05 Vacancies. Except as otherwise provided in the
Certificate of Incorporation, any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors, or
any other cause, may be filled by vote of the majority of the remaining
directors, although less than a quorum. Each director so chosen vacancy shall
hold office
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<PAGE>
until his successor shall have been elected and shall qualify or shall resign or
shall have been removed in the manner hereinafter provided.
SECTION 3.06 Place of Meeting, Etc. The Board may hold any of its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special meeting
of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as
practicable after each annual election of directors and notice of such first
meeting shall not be required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board may be
held at such times as the Board shall from time to time by resolution determine.
If any day fixed for a regular meeting shall be a legal holiday at the place
where the meeting is to be held, then the meeting shall be held at the same hour
and place on the next succeeding business day not a legal holiday. Except as
provided by law, notice of regular meetings need not be given.
SECTION 3.09 Special Meetings. Special meetings of the Board of
Directors may be called at any time, and for any purpose permitted by law, by
the President, or by the Secretary on the written request of a majority of the
members of the Board of Directors, which meetings shall be held at the time and
place either within or without the State of Delaware designated by the person or
persons calling the meeting.
SECTION 3.10 Notice. Notice of the time, place and purpose of any
special meeting shall be given to the Directors by the Secretary, or in case of
his absence, refusal or inability to act, by any other officer. Any such notice
may be given by mail by telegraph, by telephone, by facsimile or by personal
service, to each of the Directors. If the notice is by mail, it shall be
deposited in a United States Post Office at least forty-eight hours before the
time of the meeting; if by facsimile, transmitted at least twelve hours before
the time of the meeting; and if by telegraph, by deposit of the message with the
telegraph company at least twelve hours before the time of the meeting, if by
telephone or by personal service, given at least twelve hours before the time of
the meeting.
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Except where otherwise required by law or by these Bylaws, notice of
the purpose of a special meeting need not be given. Notice of any meeting of the
Board shall not be required to be given to any director who is present at such
meeting, except a director who shall attend such meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 3.11 Quorum and Manner of Acting. Except as otherwise
provided in these Bylaws or by law, the presence of a majority of the authorized
number of directors shall be required to constitute a quorum for the transaction
of business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 3.12 Action by Consent. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 3.13 Removal of Directors. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
SECTION 3.14 Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.15 Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of
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the directors of the Corporation. Any such committee, to the extent provided in
the resolution of the Board and except as otherwise limited by law, shall have
and may exercise all the powers and authority of the Board in the management of
the business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it. Any such committee
shall keep written minutes of its meetings and report the same to the Board at
the next regular meeting of the Board. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member.
ARTICLE IV.
Officers
SECTION 4.01 Number. The officers of the Corporation shall be a
President, one or more Vice Presidents (the number thereof and their respective
titles to be determined by the Board), a Secretary and a Chief Financial
Officer. A Chief Executive Officer may be elected by the Board, if the Board
determines such officer is necessary to the Corporation.
SECTION 4.02 Election, Term of Office and Qualifications. The
officers of the Corporation, except such officers as may be appointed in
accordance with Section 4.03, shall be elected annually by the Board at the
first meeting thereof held after the election thereof. Each officer shall hold
office until his successor shall have been duly chosen and shall qualify or
until his resignation or removal in the manner hereinafter provided.
SECTION 4.03 Assistants, Agents and Employees, Etc. In addition to
the officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
SECTION 4.04 Removal. Any officer, assistant, agent or employee of
the Corporation may be removed, with or without cause, at any time: (i) in the
case of an officer, assistant,
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agent or employee appointed by the Board, only by resolution of the Board; and
(ii) in the case of an officer, assistant, agent or employee, by any officer of
the Corporation or committee of the Board upon whom or which such power of
removal may be conferred by the Board.
SECTION 4.05 Resignations. Any officer or assistant may resign at
any time by giving written notice of his resignation to the Board or the
Secretary of the Corporation. Any such resignation shall take effect at the time
specified therein, or, if the time be not specified, upon receipt thereof by the
Board or the Secretary, as the case may be; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 4.06 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 4.07 The President. The President of the Corporation shall
be the chief executive officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 4.08 The Vice Presidents. Each Vice President shall have
such powers and perform such duties as the Board may from time to time
prescribe. At the request of the President, or in case of the President's
absence or inability to act upon the request of the Board, a Vice President
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.
SECTION 4.09 The Secretary. The Secretary shall, if present, record
the proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
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SECTION 4.10 The Chief Financial Officer. The Chief Financial
Officer shall have the general care and custody of the funds and securities of
the Corporation, and shall deposit all such funds in the name of the Corporation
in such banks, trust companies or other depositories as shall be selected by the
Board. He shall receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever. He shall exercise general supervision
over expenditures and disbursements made by officers, agents and employees of
the Corporation and the preparation of such records and reports in connection
therewith as may be necessary or desirable. He shall, in general, perform a
other duties incident to the office of Chief Financial Officer and such other
duties as from time to time may be assigned to him by the Board.
SECTION 4.11 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V.
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01 Execution of Contracts. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
SECTION 5.02 Checks, Drafts, Etc. All checks, drafts or other orders
for payment of money, notes or other evidence of indebtedness, issued in the
name of or payable to the Corporation shall be signed or endorsed by such person
or persons and in such manner as, from time to time, shall be determined by
resolution
10
<PAGE>
of the Board. Each such officer, assistant, agent or attorney shall give such
bond, if any, as the Board may require.
SECTION 5.03 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 depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Chief Financial Officer (or any other officer or officers,
assistant or assistants, agent or agents, or attorney or attorneys of the
Corporation who shall from time to time be determined by the Board) may endorse,
assign and deliver checks, drafts and other orders for the payment of money
which are payable to the order of the Corporation.
SECTION 5.04 General and Special Bank Accounts. The Board may from
time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. The Board may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI.
Shares and Their Transfer
SECTION 6.01 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Chief Financial Officer, a Treasurer or an Assistant Treasurer. Any of or
all of the signatures on the certificates may be a facsimile. In case any
officer, transfer agent or registrar who has signed, or whose, facsimile
signature has been placed upon, any such certificate, shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued,
such certificate may
11
<PAGE>
nevertheless be issued by the Corporation with the same effect as though the
person who signed such certificate, or whose facsimile signature shall have been
placed thereupon, were such officer, transfer agent or registrar at the date of
issue. A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 6.04.
SECTION 6.02 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 6.03 Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In
any case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without
12
<PAGE>
requiring any bond when, in the judgment of the Board, it is proper so to do.
SECTION 6.05 Fixing a Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than 60 nor less than 10 days before the date of such meeting, nor more than 60
days prior to any other action. If in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
stockholders or expressing consent to corporate action without a meeting the
Board shall not fix such a record date, the record date for determining
stockholders for such purpose shall be the close of business on the day on which
the Board shall adopt the resolution relating thereto. A determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of such meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
ARTICLE VII.
Indemnification
SECTION 7.01 Action, Etc., Other Than By or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a
13
<PAGE>
plea of nolo contenders or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
SECTION 7.02 Actions, Etc., By or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 7.03 Determination of Right of Indemnification. Any
indemnification under Section 7.01 or 7.02 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 7.01 and 7.02. Such determination shall be made (i)
by the Board by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
SECTION 7.04 Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or
14
<PAGE>
otherwise in defense of any action, suit or proceeding referred to in Section
7.01 or 7.02, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
SECTION 7.05 Prepaid Expenses. Expenses incurred by an officer or
director in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board deems appropriate.
SECTION 7.06 Other Rights and Remedies. The indemnification provided
by this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7.07 Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
SECTION 7.08 Constituent Corporations. For the purposes of this
Article, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation, so that any person who is or was a director, officer, employee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise shall
stand in the same
15
<PAGE>
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
SECTION 7.09 Other Enterprises, Fines, and Serving at Corporation's
Request. For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
ARTICLE VIII.
Miscellaneous
SECTION 8.01 Seal. The Board shall provide a corporate seal, which
shall be in the form of a circle and shall bear the name of the Corporation and
words and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
SECTION 8.02 Waiver of Notices. Whenever notice is required to be
given by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.03 Amendments. These Bylaws, or any of them, may be
altered, amended or repealed, and new Bylaws may be made, (i) by the Board, by
vote of a majority of the number of directors then in office as directors,
acting at any meeting of the Board, or (ii) by the stockholders, at any annual
meeting of stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, modification,
repeal or adoption is given in the notice of special meeting. Any Bylaws made or
altered by the stockholders may be altered or repealed by either the Board or
the stockholders.
16
===========================================================
ROLLER BEARING COMPANY OF AMERICA, INC.
Issuer
9 5/8% Senior Subordinated Notes Due 2007
INDENTURE
Dated as of June 15, 1997
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
===========================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions ................................................... 1
SECTION 1.02. Other Definitions..............................................24
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act................................................24
SECTION 1.04. Rules of Construction .........................................25
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating................................................26
SECTION 2.02. Execution and Authentication...................................26
SECTION 2.03. Registrar and Paying Agent.....................................27
SECTION 2.04. Paying Agent To Hold Money in Trust............................27
SECTION 2.05. Securityholder Lists...........................................28
SECTION 2.06. Replacement Securities.........................................28
SECTION 2.07. Outstanding Securities.........................................28
SECTION 2.08. Temporary Securities...........................................29
SECTION 2.09. Cancelation ...................................................29
SECTION 2.10. Defaulted Interest.............................................29
SECTION 2.11. CUSIP Numbers..................................................30
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee.............................................30
SECTION 3.02. Selection of Securities To Be
Redeemed.....................................................30
SECTION 3.03. Notice of Redemption...........................................31
SECTION 3.04. Effect of Notice of Redemption.................................31
SECTION 3.05. Deposit of Redemption Price....................................31
SECTION 3.06. Securities Redeemed in Part....................................32
<PAGE>
2
Page
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities..........................................32
SECTION 4.02. SEC Reports....................................................32
SECTION 4.03. Limitation on Indebtedness.....................................33
SECTION 4.04. Limitation on Restricted Payments..............................35
SECTION 4.05. Limitation on Restrictions on
Distributions from Restricted
Subsidiaries................................................38
SECTION 4.06. Limitation on Sales of Assets and
Subsidiary Stock.............................................40
SECTION 4.07. Limitation on Affiliate
Transactions.................................................43
SECTION 4.08. Limitation on the Sale or Issuance
of Capital Stock of Restricted
Subsidiaries.................................................44
SECTION 4.09. Change of Control..............................................45
SECTION 4.10. Future Guarantors..............................................46
SECTION 4.11. Existence......................................................46
SECTION 4.12. Compliance Certificate.........................................47
SECTION 4.13. Further Instruments and Acts...................................47
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer
Assets.......................................................47
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default..............................................49
SECTION 6.02. Acceleration...................................................51
SECTION 6.03. Other Remedies.................................................52
SECTION 6.04. Waiver of Past Defaults........................................52
SECTION 6.05. Control by Majority............................................52
SECTION 6.06. Limitation on Suits............................................53
<PAGE>
3
Page
SECTION 6.07. Rights of Holders to Receive Payment...........................53
SECTION 6.08. Collection Suit by Trustee.....................................53
SECTION 6.09. Trustee May File Proofs of Claim...............................54
SECTION 6.10. Priorities.....................................................54
SECTION 6.11. Undertaking for Costs..........................................54
SECTION 6.12. Waiver of Stay or Extension Laws...............................55
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee..............................................55
SECTION 7.02. Rights of Trustee..............................................56
SECTION 7.03. Individual Rights of Trustee...................................57
SECTION 7.04. Trustee's Disclaimer...........................................57
SECTION 7.05. Notice of Defaults.............................................57
SECTION 7.06. Reports by Trustee to Holders..................................58
SECTION 7.07. Compensation and Indemnity.....................................58
SECTION 7.08. Replacement of Trustee.........................................59
SECTION 7.09. Successor Trustee by Merger....................................60
SECTION 7.10. Eligibility; Disqualification..................................60
SECTION 7.11. Preferential Collection of Claims
Against Company..............................................60
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance...................................................61
SECTION 8.02. Conditions to Defeasance.......................................62
SECTION 8.03. Application of Trust Money.....................................63
SECTION 8.04. Repayment to Company...........................................63
SECTION 8.05. Indemnity for Government
Obligations..................................................64
SECTION 8.06. Reinstatement..................................................64
<PAGE>
4
Page
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders.....................................64
SECTION 9.02. With Consent of Holders........................................65
SECTION 9.03. Compliance with Trust Indenture................................66
SECTION 9.04. Revocation and Effect of Consents
and Waivers..................................................66
SECTION 9.05. Notation on or Exchange of
Securities...................................................67
SECTION 9.06. Trustee To Sign Amendments.....................................67
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate.......................................68
SECTION 10.02. Liquidation, Dissolution, Bankruptcy...........................68
SECTION 10.03. Default on Senior Indebtedness.................................68
SECTION 10.04. Acceleration of Payment of Securities..........................70
SECTION 10.05. When Distribution Must Be Paid Over............................70
SECTION 10.06. Subrogation....................................................70
SECTION 10.07. Relative Rights................................................70
SECTION 10.08. Subordination May Not be Impaired
by Company..................................................70
SECTION 10.09. Rights of Trustee and Paying Agent.............................71
SECTION 10.10. Distribution or Notice to
Representative..............................................71
SECTION 10.11. Article 10 Not To Prevent Events of
Default or Limit Right to Accelerate........................71
SECTION 10.12. Trust Moneys Not Subordinated..................................71
SECTION 10.13. Trustee Entitled To Rely.......................................72
SECTION 10.14. Trustee To Effectuate Subordination............................72
SECTION 10.15. Trustee Not Fiduciary for Holders of
Senior Indebtedness.........................................72
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions..................................................73
<PAGE>
5
Page
ARTICLE 11
Subsidiary Guaranties
SECTION 11.01. Guaranties.....................................................73
SECTION 11.02. Limitation on Liability........................................75
SECTION 11.03. Successors and Assigns.........................................76
SECTION 11.04. No Waiver......................................................76
SECTION 11.05. Modification...................................................76
SECTION 11.06. Release of Subsidiary Guarantor................................76
ARTICLE 12
Subordination of Subsidiary Guaranties
SECTION 12.01. Agreement To Subordinate.......................................77
SECTION 12.02. Liquidation, Dissolution, Bankruptcy...........................77
SECTION 12.03. Default on Senior Indebtedness
of Subsidiary Guarantor.....................................78
SECTION 12.04. Demand for Payment.............................................78
SECTION 12.05. When Distribution Must Be Paid Over............................78
SECTION 12.06. Subrogation....................................................78
SECTION 12.07. Relative Rights................................................79
SECTION 12.08. Subordination May Not Be Impaired by
Subsidiary Guarantor........................................79
SECTION 12.09. Rights of Trustee and Paying Agent.............................79
SECTION 12.10. Distribution or Notice to Representative.......................80
SECTION 12.11. Article 12 Not To Prevent Defaults
Under a Subsidiary Guaranty or Limit
Right To Demand Payment.....................................80
SECTION 12.12. Trustee Entitled to Rely.......................................80
SECTION 12.13. Trustee To Effectuate Subordination............................81
SECTION 12.14. Trustee Not Fiduciary for Holders of
Senior Indebtedness of Subsidiary
Guarantor...................................................81
SECTION 12.15. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions..................................................81
<PAGE>
6
Page
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls...................................82
SECTION 13.02. Notices........................................................82
SECTION 13.03. Communication by Holders with Other Holders....................83
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.............83
SECTION 13.05. Statements Required in Certificate or Opinion..................83
SECTION 13.06. When Securities Disregarded....................................83
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar...................84
SECTION 13.08. Legal Holidays.................................................84
SECTION 13.09. Governing Law..................................................84
SECTION 13.10. No Recourse Against Others.....................................84
SECTION 13.11. Successors.....................................................84
SECTION 13.12. Multiple Originals.............................................84
SECTION 13.13. Table of Contents; Headings....................................85
Exhibit A - Form of Security
Rule 144A/Regulation S Appendix
<PAGE>
7
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
310(a)(1) .......................................... 7.10
(a)(2) .......................................... 7.10
(a)(3) .......................................... N.A.
(a)(4) .......................................... N.A.
(b) .......................................... 7.08; 7.10
(c) .......................................... N.A.
311(a) .......................................... 7.11
(b) .......................................... 7.11
(c) .......................................... N.A.
312(a) .......................................... 2.05
(b) .......................................... 13.03
(c) .......................................... 13.03
313(a) .......................................... 7.06
(b)(1) .......................................... N.A.
(b)(2) .......................................... 7.06
(c) .......................................... 13.02
(d) .......................................... 7.06
314(a) .......................................... 4.02;
4.10; 13.02
(b) .......................................... N.A.
(c)(1) .......................................... 13.04
(c)(2) .......................................... 13.04
(c)(3) .......................................... N.A.
(d) .......................................... N.A.
(e) .......................................... 13.05
(f) .......................................... 4.10
315(a) .......................................... 7.01
(b) .......................................... 7.05; 13.02
(c) .......................................... 7.01
(d) .......................................... 7.01
(e) .......................................... 6.11
316(a)(last sentence).......................................... 13.06
(a)(1)(A) .......................................... 6.05
(a)(1)(B) .......................................... 6.04
(a)(2) .......................................... N.A.
(b) .......................................... 6.07
317(a)(1) .......................................... 6.08
(a)(2) .......................................... 6.09
(b) .......................................... 2.04
318(a) .......................................... 13.01
<PAGE>
8
Page
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
INDENTURE dated as of June 15, 1997, among ROLLER
BEARING COMPANY OF AMERICA, INC., a Delaware corporation (the
"Company"), INDUSTRIAL TECTONICS BEARINGS CORPORATION, a
Delaware corporation and a wholly owned subsidiary of the
Company, RBC LINEAR PRECISION PRODUCTS, INC., a Delaware
corporation and a wholly owned subsidiary of the Company, and
RBC NICE BEARINGS, INC., a Delaware corporation and a wholly
owned subsidiary of the Company, and UNITED STATES TRUST
COMPANY OF NEW YORK, a New York trust company (the "Trustee").
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of the Company's 9-5/8%
Senior Subordinated Notes Due 2007 (the "Initial Securities") and, if and when
issued pursuant to a registered exchange for Initial Securities, the Company's
9-5/8% Senior Subordinated Notes Due 2007 (the "Exchange Securities") and, if
and when issued pursuant to a private exchange for Initial Securities the
Company's 9-5/8% Senior Subordinated Notes Due 2007 (the "Private Exchange
Securities" and, together with the Initial Securities and the Exchange
Securities, the "Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) 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
<PAGE>
2
Restricted Subsidiary; provided, however, that any such Restricted Subsidiary
described in clauses (ii) or (iii) above is primarily engaged in a Related
Business.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.04, 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of Capital Stock representing 10% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or of rights
or warrants to purchase such Capital Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares or
shares required by applicable law to be held by a Person other than the Company
or a Restricted Subsidiary), (ii) all or substantially all the assets of any
division or line of business of the Company or any Restricted Subsidiary or
(iii) any other assets of the Company or any Restricted Subsidiary outside of
the ordinary course of business of the Company or such Restricted Subsidiary
(other than, in the case of (i), (ii) and (iii) above, (x) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary, (y) for purposes of Section 4.06 only,
a disposition that
<PAGE>
3
constitutes a Restricted Payment permitted by Section 4.04 and (z) disposition
of assets with a fair market value of less than $250,000).
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) 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 redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Banks" has the meaning specified in the Credit Agreement.
"Bank Indebtedness" means all Obligations pursuant to the Credit
Agreement.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to
be classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the
<PAGE>
4
Stated Maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following
events:
(i) (A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is
or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that for purposes of this clause (i) such person
shall be deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
more than 35% of the total voting power of the Voting Stock of the Parent
and (B) the Permitted Holders beneficially own (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, in the
aggregate less than 30% of the total voting power of the Voting Stock of
the Parent and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors (for the purposes of this clause (i), such other person shall be
deemed to beneficially own any Voting Stock of a specified Person held by
another Person (the "parent entity"), if such other person is the
beneficial owner (as defined at the beginning of this clause (i)),
directly or indirectly, of more than 35% of the voting power of the Voting
Stock of such parent entity and the Permitted Holders beneficially own (as
defined in this clause), directly or
<PAGE>
5
indirectly, in the aggregate a lesser percentage of the voting power of
the Voting Stock of such parent entity and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of such parent entity);
(ii) during any period of two consecutive years following the first
date on which Holdings becomes subject to the proxy rules under the
Exchange Act, individuals who at the beginning of such period constituted
the board of directors of the Parent (together with any new directors
whose election by such board of directors or whose nomination for election
by the shareholders of the Parent was approved by a vote of 66-2/3% of the
directors of the Parent then still in office who were either directors at
the beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of the board of directors of the Parent then in office;
(iii) the merger or consolidation of the Parent or the Company with
or into another Person or the merger of another Person with or into the
Parent or the Company, or the sale of all or substantially all the assets
of the Company to another Person (other than, in each case, a Person that
is controlled by the Permitted Holders), and, in the case of any such
merger or consolidation, the securities of the Parent or the Company that
are outstanding immediately prior to such transaction and which represent
100% of the aggregate voting power of the Voting Stock of the Parent or
the Company are changed into or exchanged for cash, securities or
property, unless pursuant to such transaction such securities are changed
into or exchanged for, in addition to any other consideration, securities
of the surviving Person or transferee that represent immediately after
such transaction, at least a majority of the aggregate voting power of the
Voting Stock of the surviving Person or transferee; or
<PAGE>
6
(iv) the Parent ceases to own, directly or indirectly, all the
Capital Stock of the Company other than as a result of the merger or
consolidation of the Parent with the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"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 prior to the date of such determination
for which financial statements are available to (ii) Consolidated Interest
Expense for such four fiscal quarters; provided, however, that (1) if the
Company or any Restricted Subsidiary has Incurred any Indebtedness since the
beginning of such period that remains outstanding or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence
of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
Indebtedness 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, (2) if the Company or
any Restricted Subsidiary has repaid, repurchased, defeased or otherwise
discharged any Indebtedness since the beginning of such period or if any
Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in
each case other than Indebtedness Incurred under any revolving credit facility
unless such Indebtedness has been permanently repaid and has not been replaced)
on the date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated
<PAGE>
7
Interest Expense for such period shall be calculated on a pro forma basis as if
such discharge had occurred on the first day of such period and as if the
Company or such Restricted Subsidiary has not earned the interest income
actually earned during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise discharge such
Indebtedness, (3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative),
directly attributable thereto for such period and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any 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 Asset Disposition 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), (4) 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 requiring a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period and (5) if since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
<PAGE>
8
of such period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(3) or (4) above if made by the Company or a 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 Asset Disposition,
Investment or acquisition occurred on the first day of such period. For purposes
of this definition, whenever pro forma effect is to be given to an acquisition
of assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any 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 of 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 in excess of
12 months).
"Consolidated Debt Ratio" as of any date of determination means, the
ratio of (i) consolidated Indebtedness of the Company as of the end of the most
recent fiscal quarter for which financial statements are available to (ii) the
aggregate amount of the EBITDA of the Company for the four most recent fiscal
quarters for which financial statements are available, in each case with such
pro forma adjustments to consolidated Indebtedness and EBITDA as are appropriate
and consistent with the pro forma provisions set forth in the definition of
Consolidated Coverage Ratio.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, without duplication, (i)
interest expense attributable to capital leases and the interest expense
attributable to leases constituting part of a Sale/Leaseback Transaction,
<PAGE>
9
(ii) amortization of debt discount and debt issuance cost, (iii) capitalized
interest, (iv) non-cash interest expenses, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Hedging Obligations (including
amortization of fees), (vii) Preferred Stock dividends in respect of all
Preferred Stock held by Persons other than the Company or a Wholly Owned
Subsidiary, (viii) interest incurred in connection with Investments in
discontinued operations, (ix) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by (or secured by the
assets of) the Company or any Restricted Subsidiary and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than the Company) in connection with Indebtedness Incurred
by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of
the Company and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income:
(i) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that (A) subject to the
exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person with respect to 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 paid 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 for such period shall be included
in determining such Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by the Company
or a Subsidiary in a pooling of
<PAGE>
10
interests transaction for any period prior to the date of such
acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
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 exclusion contained in clause (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 actually distributed by such Restricted Subsidiary with
respect to such period to the Company or another Restricted Subsidiary as
a dividend or other distribution (subject, in the case of a dividend or
other distribution paid 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 assets of the Company or its consolidated Subsidiaries (including
pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain or
loss realized upon the sale or other disposition of any Capital Stock of
any Person;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purpose of Section 4.04 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
<PAGE>
11
Restricted Payments permitted pursuant to such Section 4.04(a)(3)(D).
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company prior to the taking of any action for the purpose
of which the determination is being made for which financial statements are
available, as (i) the par or stated value of all outstanding Capital Stock of
the Company plus (ii) paid-in capital or capital surplus relating to such
Capital Stock plus (iii) any retained earnings or earned surplus less (A) any
accumulated deficit and (B) any amounts attributable to Disqualified Stock.
"Credit Agreement" means the Credit Agreement dated June 23, 1997,
to be entered into by and among the Company, certain of its Subsidiaries, the
lenders referred to therein and Credit Suisse First Boston, as Administrative
Agent, together with the related documents thereto (including without limitation
the term loans and revolving loans thereunder, any guarantees and security
documents), as amended, extended, renewed, restated, supplemented or otherwise
modified (in whole or in part, and without limitation as to amount, terms,
conditions, covenants and other provisions) from time to time, and any agreement
(and related document) governing Indebtedness incurred to refund or refinance,
in whole or in part, the borrowings and commitments then outstanding or
permitted to be outstanding under such Credit Agreement or a successor Credit
Agreement, whether by the same or any other lender or group of lenders.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement designed
to protect such Person against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
<PAGE>
12
"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 up to,
at least $25 million and is specifically designated by the Company in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of this Indenture.
"Discount Debentures" means the 13% Senior Discount Debentures Due
2009 of Parent issued on the Issue Date in an aggregate principal amount at
maturity of $74,882,000 and any other Indebtedness of Parent that Refinances
such Debentures; provided, however, that such other Indebtedness does not
require the payment of cash interest or the repayment of principal (or the
repurchase of such Indebtedness) in an amount in excess of the amounts thereof
provided for in such Debentures being Refinanced or at a time prior to the time
such amounts would have been payable as provided for in such Debentures being
Refinanced.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for 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 the first anniversary of the
Stated Maturity of the Securities.
"EBITDA" for any period means the sum of Consolidated Net Income,
plus Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company and its consolidated Restricted Subsidiaries, (b) depreciation expense
of the Company and its consolidated Restricted Subsidiaries, (c) amortization
expense of the Company and its consolidated Restricted Subsidiaries
<PAGE>
13
(excluding amortization expense attributable to a prepaid cash item that was
paid in a prior period) and (d) all other non-cash charges of the Company and
its consolidated Restricted Subsidiaries (excluding any such non-cash charge to
the extent that it represents an accrual of or reserve for cash expenditures in
any future period), 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 and non-cash charges of, a Restricted Subsidiary shall be added
to Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"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 (i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC. An accounting
term not otherwise defined in this Indenture will have the meaning assigned to
it in accordance with GAAP. All ratios
<PAGE>
14
and computations based on GAAP contained in this 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
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation of such Person (whether arising by
virtue of partnership arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness 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. The term
"Guarantor" shall mean any Person Guaranteeing any obligation.
"Guaranty Agreement" means a supplemental indenture, in a form
satisfactory to the Trustee, pursuant to which a Subsidiary Guarantor guarantees
the Company's obligations with respect to the Securities on the terms provided
for in this Indenture.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"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 Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to
<PAGE>
15
be Incurred by such Subsidiary at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. The accretion
of principal of a non-interest bearing or other discount security shall not be
deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered into
by such Person;
(iii) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
such Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i)
through (iii) above) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the
tenth Business Day following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation
<PAGE>
16
preference with respect to, any Preferred Stock (but excluding, in each
case, any accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(viii) 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 Indebtedness and the maximum liability, upon the
occurrence of the contingency giving rise to the obligation, of any contingent
obligations at such date.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Interest Rate Agreement" means in respect of a Person any interest
rate swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of
<PAGE>
17
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", the definition of
"Restricted Payment" and Section 4.04, (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 equal to 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 Securities are originally
issued.
"Joint Venture Affiliate" shall mean a Person that is partially
owned, directly or indirectly, by the Company and no interest in which is owned,
directly or indirectly (other than through such Person's ownership of common
stock of the Company), by any Person that is an Affiliate of the Company.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash
<PAGE>
18
payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise and proceeds from the sale or other
disposition of any securities received as consideration, but 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 such properties or assets or received in any other noncash form), in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, provincial, foreign
and local income, franchise, sales and other applicable taxes required to be
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
or other security agreement of any kind with respect to such assets, or which
must by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of their
ownership interest in the Subsidiary or joint venture engaging in such Asset
Disposition and (iv) the deduction of appropriate amounts provided by the seller
as a reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such Asset Disposition and retained by
the Company or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Obligations" means with respect to any Indebtedness all obligations
for principal, premium, interest, penalties, fees, reimbursements and other
amounts
<PAGE>
19
payable pursuant to the documentation governing such Indebtedness.
"Officer" means the Chairman of the Board, 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, at the Company's discretion, may be
an employee of or counsel to the Company or the Trustee.
"Parent" means Roller Bearing Holding Company, Inc., a Delaware
corporation, and any successor corporation.
"Permitted Holders" means each Person owning, on the Issue Date
after giving effect to the recapitalization of the Parent occurring on such
date, shares of Common Stock of the Parent or warrants to purchase such common
stock and each Person controlled by any Permitted Holder (and, in the case of
individuals, the estate and heirs of any Permitted Holder).
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) the Company, a Restricted Subsidiary or a Person
that 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; (ii) 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;
(iii) Temporary Cash Investments; (iv) 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
<PAGE>
20
concessionary trade terms as the Company or any such Restricted Subsidiary deems
reasonable under the circumstances; (v) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the ordinary
course of business; (vi) loans or advances to employees made in the ordinary
course of business consistent with past practices of the Company or such
Restricted Subsidiary; (vii) 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; and (viii)
any Person to the extent such Investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted pursuant to Section
4.06.
"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 Person,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.
"principal" of a Security means the principal of the Security plus
the premium, if any, payable on the Security which is due or overdue or is to
become due at the relevant time.
"Public Equity Offering" means an underwritten primary public
offering of common stock of the Parent pursuant to an effective registration
statement under the Securities Act.
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"Public Market" means any time after (x) a Public Equity Offering
has been consummated and (y) at least 15% of the total issued and outstanding
common stock of the Parent has been distributed by means of an effective
registration statement under the Securities Act or sales pursuant to Rule 144
under the Securities Act with gross proceeds to the Parent of not less than $25
million, resulting in the listing of the Parent's common stock on a nationally
recognized stock exchange or the inclusion of such stock on the Nasdaq Market's
National Market.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such 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 and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
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"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Issue Date.
"Representative" means any trustee, agent or representative (if any)
for an issue of Senior Indebtedness of the Company.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company held by any Person
or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock), (iii) the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase, or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) or (iv) the making of any
Investment in any Person; provided, however, that "Restricted Payments" will not
include any Permitted Investment.
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"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Revolving Credit Facilities" means the revolving credit facility
contained in the Credit Agreement and any other facility or financing
arrangement that Refinances or replaces, in whole or in part, any such revolving
credit facility.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Restricted
Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securities" means the Securities issued under this Indenture.
"Senior Indebtedness" of any Person means all (i) Bank Indebtedness
of or guaranteed by such Person, whether outstanding on the Issue Date or
thereafter Incurred (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) and (ii) Indebtedness of such
Person whether outstanding on the Issue Date or thereafter Incurred, including
interest thereon (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), in respect of (A) Indebtedness
for money borrowed, (B) Indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is responsible or
liable and (C) Hedging Obligations, unless, in the case of (i) and (ii), in the
instrument creating or evidencing the same or pursuant to which the same is
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24
outstanding, it is provided that such obligations are subordinate in right of
payment to the obligations under the Securities; provided, however, that Senior
Indebtedness shall not include (1) any obligation of such Person to any
subsidiary of such Person, (2) any liability for Federal, state, local or other
taxes owed or owing by such Person, (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 of such Person (and any accrued and unpaid interest in respect
thereof) which is subordinate or junior by its terms to any other Indebtedness
or other obligation of such Person or (5) that portion of any Indebtedness which
at the time of Incurrence is Incurred in violation of this Indenture (but as to
any such Indebtedness under the Credit Agreement, no such violation shall be
deemed to exist if the Representative of the Lenders thereunder shall have
received an officers' certificate of the Company to the effect that the issuance
of such Indebtedness does not violate such covenant and setting forth in
reasonable detail the reasons therefor). If any Bank Indebtedness is disallowed,
avoided or subordinated pursuant to the provisions of Section 548 of the U.S.
Bankruptcy Code or any applicable state fraudulent conveyance law, such Bank
Indebtedness will still constitute Senior Indebtedness.
"Senior Subordinated Indebtedness" means (i) with respect to the
Company, the Securities and any other Indebtedness of the Company that
specifically provides that such Indebtedness is to rank pari passu with the
Securities in right of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligations of the Company which is not
Senior Indebtedness of the Company and (ii) with respect to a Subsidiary
Guarantor, its respective Subsidiary Guaranty of the Securities and any other
indebtedness of such Person that specifically provides that such Indebtedness
rank pari passu with such Guarantee in respect of payment and is not
subordinated by its terms in respect of payment to any Indebtedness or other
obligation of such Person which is not Senior Indebtedness of such Person.
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25
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02
under Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company or
any Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to, in the case of
the Company, the Securities or, in the case of such Subsidiary Guarantor, its
Subsidiary Guaranty, pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
"Subsidiary Guarantor" means any subsidiary of the Company that
Guarantees the Company's obligations with respect to the Securities, which
initially shall be Industrial Tectonics Bearings Corporation, RBC Linear
Precision Products, Inc. and RBC Nice Bearings, Inc.
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26
"Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of
the Company's obligations with respect to the Securities.
"Tax Sharing Agreement" means any tax sharing agreement between the
Company and the Parent or any other Person with which the Company is required
to, or is permitted to, file a consolidated tax return or with which the Company
is or could be part of a consolidated group for tax purposes.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 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, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000 (or
the foreign currency equivalent thereof) and has outstanding debt that is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the United States
of America or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of "P-1"
(or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher)
according to Standard and Poor's Ratings Group, and
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27
(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 Standard & Poor's Ratings
Group or "A" by Moody's Investors Service, Inc.
"Term Loan Facilities" means the term loan facilities contained in
the Credit Agreement and any other facility or financing arrangement that
Refinances in whole or in part any such term loan facility.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of this Indenture.
"Trustee" means the party named as such in this 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.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"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
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the
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Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under Section 4.04. The Board of Directors may designate any 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 Section 4.03(a) 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 Person means all classes of Capital Stock or
other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, trustees or other
governing board thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is owned by the
Company or one or more Wholly Owned Subsidiaries.
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SECTION 1.02. Other Definitions.
Defined in
Term Section
"Affiliate Transaction".................................. 4.07
"Bankruptcy Law"......................................... 6.01
"Blockage Notice"....................................... 10.03
"covenant defeasance option"............................. 8.01(b)
"Custodian".............................................. 6.01
"Event of Default"....................................... 6.01
"legal defeasance option"................................ 8.01(b)
"Legal Holiday"......................................... 13.08
"Offer".................................................. 4.06(b)
"Offer Amount"........................................... 4.06(c)(2)
"Offer Period"........................................... 4.06(c)(2)
"pay the Securities".................................... 10.03
"Paying Agent"........................................... 2.03
"Payment Blockage Period"............................... 10.03
"Purchase Date".......................................... 4.06(c)(1)
"Registrar".............................................. 2.03
"Successor Company"...................................... 5.01
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
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30
"obligor" on the indenture securities means the Company and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater; and
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31
(9) all references to the date the Securities were originally issued
shall refer to the date the Initial Securities were originally issued.
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating. Provisions relating to the Initial
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in the Rule 144A/Regulation S Appendix attached hereto (the "Appendix")
which is hereby incorporated in and expressly made part of this Indenture. The
Initial Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit 1 to the Appendix which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities, the Private Exchange Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
Each Security shall be dated the date of its authentication. The terms of the
Securities set forth in the Appendix and Exhibit A are part of the terms of this
Indenture.
SECTION 2.02. Execution and Authentication. Two Officers shall sign
the Securities for the Company by manual or facsimile signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on the Securities and
may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall
be valid nevertheless.
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A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and deliver Securities for original
issue, in an aggregate principal amount of $110,000,000, upon a written order of
the Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. Such order shall specify the
amount of the Securities to be authenticated and the date on which the original
issue of Securities is to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed that amount except as provided
in Section 2.07.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the
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terms of the TIA. The agreement shall implement the provisions of this Indenture
that relate to such agent. The Company shall notify the Trustee of the name and
address of any such agent. If the Company fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such and shall be entitled to appropriate
compensation therefor pursuant to Section 7.07. The Company or any of its
domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent,
Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent a sum sufficient to pay such principal and interest when
so becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. If the Company
or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as
Paying Agent and hold it as a separate trust fund. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and to account
for any funds disbursed by the Paying Agent. Upon complying with this Section,
the Paying Agent shall have no further liability for the money delivered to the
Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date
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34
as the Trustee may reasonably require of the names and addresses of
Securityholders.
SECTION 2.06. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security.
Every duly issued replacement Security shall be an additional
obligation of the Company.
SECTION 2.07. Outstanding Securities. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancelation and those described in this Section
as not outstanding. A Security does not cease to be outstanding because the
Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.06, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may be,
and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date
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35
pursuant to the terms of this Indenture, then on and after that date such
Securities (or portions thereof) cease to be outstanding and interest on them
shall cease to accrue.
SECTION 2.08. Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary Securities.
SECTION 2.09 Cancelation. The Company at any time may deliver
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver a certificate of such destruction to the Company unless
the Company directs the Trustee to deliver canceled Securities to the Company.
The Company may not issue new Securities to replace Securities it has redeemed,
paid or delivered to the Trustee for cancelation.
SECTION 2.10. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
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36
SECTION 2.11. CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
The Company shall give each notice to the Trustee provided for in
this Section at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee in its
sole discretion shall deem to be fair and appropriate and in accordance with
methods generally used at the time of selection by fiduciaries in similar
circumstances. The Trustee shall make the selection from outstanding Securities
not
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37
previously called for redemption. The Trustee may select for redemption portions
of the principal of Securities that have denominations larger than $1,000.
Securities and portions of them the Trustee selects shall be in amounts of
$1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to
be redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Securities (or
portion thereof) called for redemption ceases to accrue on and after the
redemption date; and
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(7) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date.
Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to the redemption
date, the Company shall deposit with the Paying Agent (or, if the Company or a
Subsidiary is the Paying Agent, shall segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Company to the
Trustee for cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security
surrendered.
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39
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. The Company shall file with the Trustee
and provide Securityholders, within 15 days after it files them with the SEC,
copies of its annual report and the information, documents and other reports
which the Company is required to file with the SEC pursuant to Section 13 or
15(d) of the Exchange Act. Notwithstanding that the Company may not be subject
to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall continue to file with the SEC and provide the Trustee and
Securityholders with such annual reports and such information, documents and
other reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and reports to be so filed and provided at the times specified for the
filing of such information, documents and reports under such Sections. The
Company also shall comply with the other provisions of TIA ss. 314(a).
SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not,
and shall not permit any
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40
Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness except
that the Company may Incur Indebtedness if, on the date of such Incurrence and
after giving effect thereto, the Consolidated Coverage Ratio of the Company
exceeds 2.0 to 1.0 if such Indebtedness is Incurred prior to June 15, 2000 or
2.25 to 1.0 if such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness of the Company or any Restricted Subsidiary
Incurred pursuant to the Revolving Credit Facilities; provided, however,
that, immediately after giving effect to any such Incurrence, the
aggregate principal amount of all Indebtedness incurred under this clause
(1) and then outstanding does not exceed the greater of (A) $54.0 million
less the sum of all principal payments actually made from time to time
after the Issue Date with respect to such Indebtedness pursuant to Section
4.06(a)(ii)(A) and (B) the sum of 50% of the book value of the
consolidated inventory of the Company and its Restricted Subsidiaries and
85% of the book value of the consolidated accounts receivables of the
Company and its Restricted Subsidiaries;
(2) Indebtedness of the Company or any Restricted Subsidiary
Incurred pursuant to the Term Loan Facilities; provided, however, that
after giving effect to any such Incurrence, the aggregate principal amount
of all Indebtedness Incurred under this clause (2) and then outstanding
does not exceed $16.0 million less the aggregate sum of all principal
payments actually made from time to time after the Issue Date with respect
to such Indebtedness (other than principal payments made from any
permitted Refinancings thereof);
(3) Indebtedness of the Company or any Restricted Subsidiary owed to
and held by a Wholly Owned Subsidiary; provided, however, that any
subsequent issuance or transfer of any Capital Stock which results
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41
in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of such Indebtedness (other than to
the Company or another Wholly Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the issuer
thereof;
(4) the Securities;
(5) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3) or (4) of this Section
4.03(b));
(6) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to Section 4.03(a) or pursuant to clause (4) or (5) of this
Section 4.03(b) or this clause (6);
(7)(i) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the Company
pursuant to this Indenture, (ii) surety bonds Incurred in the ordinary
cause of business and (iii) self-insurance arrangements;
(8) Indebtedness consisting of the Subsidiary Guaranties and the
Guarantees of Indebtedness Incurred pursuant to paragraph (a) or pursuant
to clause (1), (2), (4), (5), (6) and (9) of this Section 4.03(b); and
(9) Indebtedness in an aggregate principal amount which, together
with all other Indebtedness of the Company outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (1) through (8)
of this Section 4.03(b) or Section 4.03(a)) does not exceed $10.0 million.
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to Section 4.03(b) if the proceeds thereof are used,
directly or indirectly, to Refinance any Subordinated Obligations unless such
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42
Indebtedness shall be subordinated to the Securities to at least the same extent
as such Subordinated Obligations.
(d) For purposes of determining compliance with this Section 4.03,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described herein, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described herein.
(e) Notwithstanding Section 4.03(a) or 4.03(b), the Company shall
not, and shall not permit any Subsidiary Guarantor to, Incur (i) any
Indebtedness if such Indebtedness is subordinate or junior in ranking in any
respect to any Senior Indebtedness of the Company or such Subsidiary Guarantor,
as applicable, unless such Indebtedness is Senior Subordinated Indebtedness or
is expressly subordinated in right of payment to Senior Subordinated
Indebtedness or (ii) any Secured Indebtedness that is not Senior Indebtedness of
the Company or such Subsidiary Guarantor unless contemporaneously therewith
effective provision is made to secure the Securities equally and ratably with
such Secured Indebtedness for so long as such Secured Indebtedness is secured by
a Lien.
SECTION 4.04. Limitation on Restricted Payments. (a) The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company is not able to Incur an additional $1.00 of
Indebtedness under Section 4.03(a); or
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43
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the beginning of the
fiscal quarter immediately following the fiscal quarter during which
the Securities are originally issued to the end of the most recent
fiscal quarter for which financial statements are available (or, in
case such Consolidated Net Income shall be a deficit, minus 100% of
such deficit);
(B) the aggregate Net Cash Proceeds received by the Company
from the issuance or sale of its Capital Stock (other than
Disqualified Stock) subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company and other than an
issuance or sale to an employee stock ownership plan or to a trust
established by the Company or any of its Subsidiaries for the
benefit of their employees);
(C) the 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 the
Company) subsequent to the Issue Date of any Indebtedness of the
Company or any Restricted Subsidiary for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any cash, or
the fair value of any other property, distributed by the Company
upon such conversion or exchange); and
(D) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances or other transfers of assets, in
each case to the Company or any Restricted Subsidiary from
Unrestricted Subsidiaries, and
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44
(ii) the portion (proportionate to the Company's equity interest in
such Subsidiary) of the fair market value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; provided, however, that the
foregoing sum shall not exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made (and treated
as a Restricted Payment) by the Company or any Restricted Subsidiary
in such Unrestricted Subsidiary.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any Restricted Payment made out of the proceeds of the
substantially concurrent sale of, or any acquisition of any Capital Stock
of the Company made by exchange for, Capital Stock of the Company (other
than Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of the Company or an employee stock ownership plan or to a
trust established by the Company or any of its Subsidiaries for the
benefit of their employees); provided, however, that (A) such Restricted
Payment shall be excluded in the calculation of the amount of Restricted
Payments and (B) the Net Cash Proceeds from such sale shall be excluded
from the calculation of amounts under clause (3)(B) of Section 4.04(a);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations 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 Section 4.03; provided, however, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value shall
be excluded in the calculation of the amount of Restricted Payments;
<PAGE>
45
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.04(a); provided, however, that at the time of payment of
such dividend, no other Default shall have occurred and be continuing (or
result therefrom); provided further, however, that such dividend shall be
included in the calculation of the amount of Restricted Payments;
(iv) dividends to the Parent to be used for the repurchase or other
acquisition of shares of, or options or warrants to purchase shares of,
common stock of the Parent from employees, former employees, directors or
former directors of the Parent or any of its Subsidiaries (or permitted
transferees of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements (including employment
agreements), plans (or amendments thereto) or other arrangements approved
by the board of directors of the Parent under which such individuals
purchase or sell or are granted the option to purchase or sell, shares of
such common stock; provided, however, that the aggregate amount of such
dividends shall not exceed $500,000 in any calendar year; provided
further, however, that such dividends shall be excluded in the calculation
of the amount of Restricted Payments;
(v) any payment by the Company to the Parent pursuant to the Tax
Sharing Agreement; provided, however, that the amount of any such payment
shall not exceed the amount of taxes that the Company would have been
liable for on a stand-alone basis; provided further, however, that such
payment shall be excluded in the calculation of the amount of Restricted
Payments;
(vi) dividends to the Parent to the extent required to pay
non-deferrable scheduled cash interest when due on the Discount Debentures
and any additional cash interest (at a rate not to exceed 1/2 of 1% per
annum) payable with respect to the Discount Debentures as a
<PAGE>
46
result of Parent's failure to comply with its obligations to register the
Discount Debentures; provided, however, that (A) no Default shall have
occurred and be continuing (or would result therefrom), (B) the Parent
shall immediately apply any such dividend to make such cash interest
payment and (C) except in the case of such additional interest,
immediately after giving effect to any such dividend, the Company would be
able to Incur an additional $1.00 of Indebtedness under Section 4.03(a);
provided further, however, that such dividends shall be included in the
calculation of the amount of Restricted Payments;
(vii) dividends to the Parent to the extent necessary to pay for
general corporate and overhead expenses incurred by the Parent; provided,
however, that such dividends shall not exceed $500,000 in any calendar
year; provided further, however, that such dividends shall be excluded in
the calculation of the amount of Restricted Payments;
(viii) a dividend to the Parent on the Issue Date of $57.7 million;
provided, however, that such dividend shall be excluded in the calculation
of the amount of Restricted Payments; and
(ix) a dividend or distribution by the Company to the Parent on
December 15, 2002 to be used to fund the mandatory redemption on such date
of Discount Debentures pursuant to the terms thereof; provided, however,
that (a) the amount of such dividend or distribution may not exceed the
lesser of (1) $34 million and (2) the amount which when added to other
available funds of the Parent on such date are sufficient to satisfy the
Parent's obligation to make such mandatory redemption, (b) Parent applies
such dividend to make such redemption on December 15, 2002, (c) on the
date of payment of such dividend and after giving effect thereto, the
Consolidated Debt Ratio does not exceed 3.0 to 1.0 and (d) that at the
time of payment of such dividend, no other Default shall have
<PAGE>
47
occurred and be continuing (or result therefrom); provided further,
however, that such dividend shall be included in the calculation of the
amount of Restricted Payments.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall 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 (a) pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) make any loans or advances to the Company
or (c) transfer any of its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date, including the Credit
Agreement;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or series
of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by the Company) and
outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this Section 4.05 or this clause
(iii) or contained in any amendment to an agreement referred to in clause
(i) or (ii) of this Section 4.05 or this clause (iii); provided, however,
that the encumbrances and restrictions with respect to
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48
such Restricted Subsidiary contained in any such refinancing agreement or
amendment are no less favorable to the Securityholders than encumbrances
and restrictions with respect to such Restricted Subsidiary contained in
such predecessor agreements;
(iv) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests solely to
the extent such provisions restrict the transfer of the lease or the
property leased thereunder;
(v) in the case of clause (c) above, restrictions contained in
security agreements, mortgages or leases securing Indebtedness of a
Restricted Subsidiary solely to the extent such restrictions restrict the
transfer of the property subject to such security agreements or mortgages;
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition; and
(vii) any restriction imposed by applicable law.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless (i) the Company
or such Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including as to the value
of all non-cash consideration), as determined in good faith by the Board of
Directors, of the shares and assets subject to such Asset Disposition and at
least 75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash or cash equivalents and (ii) an
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by the Company (or such Restricted
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49
Subsidiary, as the case may be) at the Company's option to either (A) prepay,
repay, redeem or purchase Senior Indebtedness or Indebtedness (other than any
Disqualified Stock) of a Wholly Owned Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) or (B) acquire
Additional Assets, in each case, within one year from the later of the date of
such Asset Disposition or the receipt of such Net Available Cash; provided,
however, that in connection with any prepayment, repayment or purchase of such
Indebtedness, the Company or such Restricted Subsidiary shall permanently retire
such Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. To the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), the Company shall make
an offer to the holders of the Securities (and to holders of other Senior
Subordinated Indebtedness designated by the Company) to purchase Securities (and
such other Senior Subordinated Indebtedness) pursuant to and subject to the
conditions contained in this Indenture. Notwithstanding the foregoing provisions
of this paragraph, the Company and the Restricted Subsidiaries shall not be
required to apply any Net Available Cash in accordance with this paragraph
except to the extent that the aggregate Net Available Cash from all Asset
Dispositions which are not applied in accordance with this paragraph exceeds $10
million. Pending application of Net Available Cash pursuant to this covenant,
such Net Available Cash shall be invested in Permitted Investments.
For the purposes of this Section 4.06, the following are deemed to
be cash or cash equivalents: (x) the assumption of Indebtedness of the Company
or any Restricted Subsidiary (other than Indebtedness Incurred in connection
with or in anticipation of such Asset Disposition) and the release of the
Company or such Restricted Subsidiary from all liability on such Indebtedness in
connection with such Asset Disposition, (y) securities received by the Company
or any Restricted Subsidiary from the transferee that are promptly converted
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50
by the Company or such Restricted Subsidiary into cash and (z) Temporary Cash
Investments.
(b) In the event of an Asset Disposition that requires the purchase
of Securities (and other Senior Subordinated Indebtedness) pursuant to Section
4.06(a), the Company shall be required to purchase Securities tendered pursuant
to an offer by the Company for the Securities (and other Senior Subordinated
Indebtedness) (the "Offer") at a purchase price of 100% of their principal
amount (without premium) plus accrued but unpaid interest (or, in respect of
such other Senior Subordinated Indebtedness, such lesser price, if any, as may
be provided for by the terms of such Senior Subordinated Indebtedness) in
accordance with the procedures (including prorationing in the event of over-
subscription) set forth in Section 4.06(c). The Company shall not be required to
make an Offer to purchase Securities (and other Senior Subordinated
Indebtedness) pursuant to this Section 4.06 if the Net Available Cash available
therefor is less than $10 million (which lesser amount shall be carried forward
for purposes of determining whether such an Offer is required with respect to
the Net Available Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 10 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver to
the Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Securities purchased by the
Company either in whole or in part (subject to prorating as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice shall
specify a purchase date not less than 30 days nor more than 60 days after the
date of such notice (the "Purchase Date") and shall contain such information
concerning the business of the Company which the Company in good faith believes
will enable such Holders to make an informed decision (which at a minimum will
include (i) the most recently filed Annual Report on Form 10-K (including
audited consolidated financial statements) of the Company, the most recent
subsequently filed Quarterly Report on Form
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51
10-Q and any Current Report on Form 8-K of the Company filed subsequent to such
Quarterly Report, other than Current Reports describing Asset Dispositions
otherwise described in the offering materials (or corresponding successor
reports), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such Reports, and (iii) if material,
appropriate pro forma financial information) and all instructions and materials
necessary to tender Securities pursuant to the Offer, together with the
information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided below, the Company shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer
Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.06(a). On such date, the
Company shall also irrevocably deposit with the Trustee or with a paying agent
(or, if the Company is acting as its own paying agent, segregate and hold in
trust) in Temporary Cash Investments, maturing on the last day prior to the
Purchase Date or on the Purchase Date if funds are immediately available by open
of business, an amount equal to the Offer Amount to be held for payment in
accordance with the provisions of this Section. Upon the expiration of the
period for which the Offer remains open (the "Offer Period"), the Company shall
deliver to the Trustee for cancelation the Securities or portions thereof which
have been properly tendered to and are to be accepted by the Company. The
Trustee shall, on the Purchase Date, mail or deliver payment to each tendering
Holder in the amount of the purchase price. In the event that the aggregate
purchase price of the Securities delivered by the Company to the Trustee is less
than the Offer Amount applicable to the Securities, the Trustee shall deliver
the excess to the Company immediately after the expiration of the Offer Period
for application in accordance with this Section.
(3) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appro-
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52
priate form duly completed, to the Company at the address specified in the
notice at least three Business Days prior to the Purchase Date. Holders shall be
entitled to withdraw their election if the Trustee or the Company receives not
later than one Business Day prior to the Purchase Date, a telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such Security
purchased. If at the expiration of the Offer Period the aggregate principal
amount of Securities (and any other Senior Subordinated Indebtedness included in
the Offer) surrendered by holders thereof exceeds the Offer Amount, the Company
shall select the Securities and the other Senior Subordinated Indebtedness to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities and the other Senior
Subordinated Indebtedness in denominations of $1,000, or integral multiples
thereof, shall be purchased). Holders whose Securities are purchased only in
part shall be issued new Securities and the other Senior Subordinated
Indebtedness equal in principal amount to the unpurchased portion of the
Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security shall
be deemed to have been accepted for purchase at the time the Trustee, directly
or through an agent, mails or delivers payment therefor to the surrendering
Holder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to
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53
have breached its obligations under this Section by virtue thereof.
SECTION 4.07. Limitation on Affiliate Transactions. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, enter into or
permit to exist any transaction (including, without limitation, the purchase,
sale, lease or exchange of any property, employee compensation arrangements or
the rendering of any service) or enter into any agreement, loan, advance or
Guarantee with any Affiliate (other than a Joint Venture Affiliate) of the
Company (an "Affiliate Transaction") unless the terms thereof (i) are no less
favorable to the Company or such Restricted Subsidiary than those that could be
obtained at the time of such transaction in arm's-length dealings with a Person
who is not such an Affiliate, (ii) if such Affiliate Transaction (or series of
related Affiliate Transactions) involves an amount in excess of $2 million, (1)
are set forth in writing and (2) have been approved by a majority of the members
of the Board of Directors having no personal stake in such Affiliate Transaction
(or series of related Affiliate Transactions) and (iii) if such Affiliate
Transaction involves an amount in excess of $10 million, have been determined by
a nationally recognized investment banking firm to be fair, from a financial
standpoint, to the Company and its Restricted Subsidiaries.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors, (iii) the
grant of stock options or similar rights to employees and directors of the
Company pursuant to plans approved by the Board of Directors, (iv) loans or
advances to employees in the ordinary course of business in accordance with the
past practices of the Company or its Restricted Subsidiaries, but in any event
not to exceed $700,000 in the aggregate outstanding at any one time, (v) the
payment of reasonable fees to directors of the Company and its Restricted
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54
Subsidiaries who are not employees of the Company or its Restricted
Subsidiaries, (vi) any Affiliate Transaction between the Company and a Wholly
Owned Subsidiary or between Wholly Owned Subsidiaries and (vii) any Tax Sharing
Agreement; provided, however, that the aggregate amount payable by the Company
pursuant thereto shall not exceed the amount of taxes that the Company would
have been liable for on a stand-alone basis.
SECTION 4.08. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries. The Company shall not sell or otherwise dispose of any
Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to the Company or a Wholly Owned Subsidiary,
(ii) if, immediately after giving effect to such issuance, sale or other
disposition, neither the Company nor any of its Subsidiaries own any Capital
Stock of such Restricted Subsidiary or (iii) if, immediately after giving effect
to such issuance, sale or other disposition, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect thereto would have been permitted to be made under
the covenant described in Section 4.04 if made on the date of such issuance,
sale or other disposition.
SECTION 4.09. Change of Control. (a) Upon the occurrence of a Change
of Control, each Holder shall have the right to require that the Company
repurchase such Holder's Securities 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 on the relevant interest payment date), in
accordance with the terms contemplated in Section 4.09(b). In the event that at
the time of such Change of Control the terms of the Senior Indebtedness of the
Company restrict or prohibit the repurchase of Securities pursuant to this
Section, then prior to the mailing of the notice to Holders provided for in
Section 4.09(b) below but in any event within 30 days following any Change of
Control, the Company
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55
shall (i) repay in full all such Senior Indebtedness or offer to repay in full
all such Senior Indebtedness and repay such Senior Indebtedness of each lender
who has accepted such offer or (ii) obtain the requisite consent under the
agreements governing such Senior Indebtedness to permit the repurchase of the
Securities as provided for in Section 4.09(b).
(b) Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase such Holder's Securities 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 on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical
income, cash flow and capitalization, each after giving effect to such
Change of Control);
(3) the repurchase date (which, except as otherwise required by law,
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
Section, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased will be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders will be entitled to withdraw their election
if the Trustee or the Company receives not
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56
later than one Business Day prior to the purchase date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Security which was delivered for purchase by the Holder
and a statement that such Holder is withdrawing his election to have such
Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered by the Trustee for cancelation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.10. Future Guarantors. In the event that, after the Issue
Date, any Restricted Subsidiary Incurs any Indebtedness pursuant to clause (1),
(2) or (8) of Section 4.03(b), the Company shall cause such Restricted
Subsidiary to Guarantee the Securities pursuant to a Subsidiary Guaranty on the
terms and conditions set forth in the Indenture and shall cause all Indebtedness
of such Restricted Subsidiary owing to the Company or any other Subsidiary of
the Company and not previously discharged to be converted into Capital Stock of
such Restricted Subsidiary (other than Disqualified Stock).
SECTION 4.11. Existence. Subject to Article 5, the Company will do
or cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights (charter and statutory) and franchises; provided,
however, that the Company shall not be required to preserve any such right or
franchise if the Board of Directors shall
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57
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and that the loss thereof is not disadvantageous in
any material respect to the Holders.
SECTION 4.12. Compliance Certificate. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with TIA ss. 314(a)(4).
SECTION 4.13. Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets. (a) The
Company shall not consolidate with or merge with or into, or convey, transfer or
lease, in one transaction or a series of transactions, all or substantially all
its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia
and the Successor Company (if not the Company) shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the Trustee,
in form
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satisfactory to the Trustee, all the obligations of the Company under the
Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Subsidiary as a result of such transaction as having been
Incurred by the Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount that is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction; and
(v) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture;
provided, however, that clauses (iii) and (iv) shall not apply to a merger or
consolidation involving only the Company and one or more Wholly Owned
Subsidiaries.
The Successor Company shall be the successor to the Company and
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture, but the predecessor Company in the case of
a conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Securities.
(b) The Company shall not permit any Subsidiary Guarantor to
consolidate with or merge with or into, or
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59
convey, transfer or lease, in one transaction or series of transactions, all or
substantially all of its assets to any Person unless: (i) the resulting,
surviving or transferee Person (if not such Subsidiary) shall be a Person
organized and existing under the laws of the jurisdiction under which such
Subsidiary was organized or under the laws of the United States of America, or
any State hereof or the District of Columbia, and such Person shall expressly
assume, by executing a Guaranty Agreement, all the obligations of such
Subsidiary, if any, under its Subsidiary Guaranty; (ii) immediately after giving
effect to such transaction or transactions on a pro forma basis (and treating
any Indebtedness which becomes an obligation of the resulting, surviving or
transferee Person as a result of such transaction as having been issued by such
Person at the time of such transaction), no Default shall have occurred and be
continuing; and (iii) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such amendment to this Indenture, if any, complies with
this Indenture. The provisions of clauses (i) and (ii) above shall not apply to
any one or more transactions which constitute an Asset Disposition if the
Company has complied with the applicable provisions of Section 4.06.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, whether or not such payment shall
be prohibited by Article 10, and such default continues for a period of 30
days;
(2) the Company (i) defaults in the payment of the principal of any
Security when the same becomes due and
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payable at its Stated Maturity, upon redemption, upon declaration or
otherwise, whether or not such payment shall be prohibited by Article 10,
or (ii) fails to redeem or purchase Securities when required pursuant to
this Indenture or the Securities, whether or not such redemption or
purchase shall be prohibited by Article 10;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08, 4.09 or 4.10 (other than a failure to purchase
Securities when required under Section 4.06 or 4.09) and such failure
continues for 30 days after the notice specified below;
(5) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in clause (1),
(2), (3) or (4) above) and such failure continues for 60 days after the
notice specified below;
(6) Indebtedness of the Company or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $5.0 million, or
its foreign currency equivalent at the time;
(7) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
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(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess of
$5.0 million or its foreign currency equivalent at the time is entered
against the Company or any Significant Subsidiary, remains outstanding for
a period of 60 days following the entry of such judgment or decree and is
not discharged, waived or the execution thereof stayed within 10 days
after the notice specified below; or
(10) a Subsidiary Guaranty ceases to be in full force and effect
(other than in accordance with the terms of such Subsidiary Guaranty) or a
Subsidiary Guarantor denies or disaffirms its obligations under its
Subsidiary Guaranty.
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
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62
order of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clauses (4), (5), or (9) is not an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
outstanding Securities notify the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the outstanding Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately;
provided, however, that if upon such declaration there are any amounts
outstanding under the Credit Agreement and the amounts thereunder have not been
accelerated, such principal and interest shall be due and payable upon the
earlier of the time such amounts are accelerated or five Business Days after
receipt by the
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63
Company and the Representative under the Credit Agreement of such declaration.
If an Event of Default specified in Section 6.01(7) or (8) with respect to the
Company occurs, the principal of and interest on all the Securities shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Securityholders. The Holders of a majority
in principal amount of the outstanding Securities by notice to the Trustee may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
principal amount of the outstanding Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Security or (ii) a Default in
respect of a provision that under Section 9.02 cannot be amended without the
consent of each Securityholder affected. When a Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
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64
SECTION 6.05. Control by Majority. The Holders of a majority in
principal amount of the outstanding Securities may 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. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
reasonably satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the outstanding
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
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65
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.07.
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66
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness of the Company to the
extent required by Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in principal amount of the outstanding Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatso-
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67
ever claim or take the benefit or advantage of, any stay or extension law or
usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
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68
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
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69
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Secur-
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70
ities, it shall not be accountable for the Company's use of the proceeds from
the Securities, and it shall not be responsible for any statement of the Company
in the Indenture or in any document issued in connection with the sale of the
Securities or in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each February 1 beginning with the February 1 following the
date of this Indenture, and in any event prior to March 1 in each year, the
Trustee shall mail to each Securityholder a brief report dated as of February 1
that complies with TIA ss. 313(a). The Trustee also shall comply with TIA ss.
313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to
the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable
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71
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. The Company shall indemnify the Trustee
against any and all loss, liability or expense (including reasonable attorneys'
fees) incurred by it in connection with the administration of this trust and the
performance of its duties hereunder. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its obligations
hereunder. The Company shall defend the claim and the Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(7) or (8) with respect to
the Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in principal amount
of the outstanding Securities may remove the Trustee by so notifying the Trustee
and may appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
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(3) a receiver or other public officer takes charge of the Trustee
or its property;
(4) the Trustee otherwise becomes incapable of acting; or
(5) the Trustee increases its fees by more than 15% in any twelve
month period.
If the Trustee resigns, is removed by the Company or by the Holders
of a majority in principal amount of the outstanding Securities and such Holders
do not reasonably promptly appoint a successor Trustee, or if a vacancy exists
in the office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly appoint
a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under
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Section 7.07 shall continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); provided, however, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA ss.310(b)(1)
are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA
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ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA
ss. 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a)
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3 hereof and
the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Securities, including interest
thereon to maturity or such redemption date (other than Securities replaced
pursuant to Section 2.07), and if in either case the Company pays all other sums
payable hereunder by the Company, then this Indenture shall, subject to Sections
8.01(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time
may terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.09 and 4.10 and the operation of Sections
6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections
6.01(7) and (8), with respect only to Significant Subsidiaries) and the
limitations contained in Sections 5.01(a)(iii) and (iv) ("covenant defeasance
option"). 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
Securities may not be accelerated
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because of an Event of Default with respect thereto. If the Company exercises
its covenant defeasance option, payment of the Securities may not be accelerated
because of an Event of Default specified in Sections 6.01(4), 6.01(6), 6.01(7),
6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and (8), with respect
only to Significant Subsidiaries) or because of the failure of the Company to
comply with Section 5.01(a)(iii) or (iv). If the Company exercises its legal
defeasance option or its covenant defeasance option, each Subsidiary Guarantor,
if any, shall be released from all its obligations with respect to its
Subsidiary Guaranty.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
SECTION 8.02. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal of and
interest on the Securities to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on
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all the Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Sections 6.01(7) or (8) with respect to the
Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there
has been a change in the applicable Federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Securityholders will not recognize income, gain or loss
for Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance had not
occurred;
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such covenant defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such covenant defeasance
had not occurred; and
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(8) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the defeasance and discharge of the Securities as contemplated by this
Article 8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities. Money and securities
so held in trust are not subject to Article 10.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon request any money held by them
for the payment of principal or interest that remains unclaimed for two years,
and, thereafter, Securityholders entitled to the money must look to the Company
for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of
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any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 8 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with this
Article 8; provided, however, that, if the Company has made any payment of
interest on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article 10 that would limit or terminate
the benefits available to any holder of Senior Indebtedness (or
Representatives therefor) under Article 10;
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(5) to add Guarantees with respect to the Securities, including any
Subsidiary Guaranties, or to secure the Securities;
(6) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(7) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA; or
(8) to make any change that does not adversely affect the rights of
any Securityholder.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 or the definitions relating
thereto of any holder of Senior Indebtedness then outstanding unless the holders
of such Senior Indebtedness (or any group or representative thereof authorized
to give a consent) consent to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to any Securityholder
but with the written consent of the Holders of at least a majority in principal
amount of the Securities then outstanding (including consents obtained in
connection with a tender offer or exchange for the Securities). However, without
the consent of each Securityholder affected thereby, an amendment may not:
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment;
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(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the amount payable upon the redemption of any Security or
change the time at which any Security may be redeemed in accordance with
Article 3;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Article 10 that adversely affects the rights
of any Securityholder under Article 10; or
(7) make any change in Section 6.04 or 6.07 or the second sentence
of this Section.
In addition, without the consent of holders of at least 75% of the
outstanding Securities, no amendment may release a Subsidiary Guarantor from its
Subsidiary Guaranty or make any change in any Subsidiary Guaranty that would
adversely affect the Securityholders.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect
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therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
An amendment or waiver becomes effective upon the execution of such amendment or
waiver by the Trustee.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or
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the Trustee so determines, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or to issue a new Security shall
not affect the validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate. The Company agrees, and
each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment of all
Senior Indebtedness of the Company and that the subordination is for the benefit
of and enforceable by the holders of such Senior Indebtedness. The Securities
shall in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company and only Indebtedness of the Company which is Senior
Indebtedness shall rank senior to the Securities in accordance with the
provisions set forth herein. All provisions of this Article 10 shall be subject
to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation
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or a total or partial dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property:
(1) holders of Senior Indebtedness of the Company shall be entitled
to receive payment in full of such Senior Indebtedness before
Securityholders shall be entitled to receive any payment of principal of
or interest on the Securities; and
(2) until such Senior Indebtedness is paid in full, any payment or
distribution to which Securityholders would be entitled but for this
Article 10 shall be made to holders of such Senior Indebtedness, except
that Securityholders may receive shares of stock and any debt securities
that are subordinated to such Senior Indebtedness to at least the same
extent as the Securities.
SECTION 10.03. Default on Senior Indebtedness. The Company may not
pay the principal of or interest on the Securities or make any deposit pursuant
to Section 8.01 and may not repurchase, redeem or otherwise retire any
Securities (collectively, "pay the Securities") if (i) any Senior Indebtedness
is not paid when due or (ii) any other default on Senior Indebtedness occurs and
the maturity of such Senior Indebtedness is accelerated in accordance with its
terms unless, in either case, (x) the default has been cured or waived and any
such acceleration has been rescinded or (y) such Senior Indebtedness has been
paid in full; provided, however, that the Company may pay the Securities without
regard to the foregoing if the Company and the Trustee receive written notice
approving such payment from the Representative of such Senior Indebtedness.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the 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 shall not pay the Securities for a period (a "Payment Blockage Period")
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commencing upon the receipt by the Company and the Trustee of written notice (a
"Blockage Notice") of such default from the Representative of such 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 (but subject to the provisions
contained in the first sentence of this Section), unless the holders of such
Designated Senior Indebtedness or the Representative of such holders shall have
accelerated the maturity of such Designated Senior Indebtedness, the Company may
resume payments on the Securities after termination of such Payment Blockage
Period. 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; provided, however, that 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 one other Blockage Notice
within such period; provided further, however, that in no event may the total
number of days during which any Payment Blockage Period or Periods is in effect
exceed 179 days in the aggregate during any 360-consecutive-day period. For
purposes of this Section, no default or event of default which existed or was
continuing on the date of the commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period shall be, or be made, the basis of the commencement of a subsequent
Payment Blockage Period by the Representative of such Designated Senior
Indebtedness, whether or not within a period of 360 consecutive days, unless
such default or event of default shall have been cured or waived for a period of
not less than 90 consecutive days.
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SECTION 10.04. Acceleration of Payment of Securities. If payment of
the Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Senior Indebtedness (or their
Representatives) of the acceleration.
SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 10 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness of the Company and pay
it over to them as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of the
Company is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to such Senior Indebtedness. A
distribution made under this Article 10 to holders of such Senior Indebtedness
which otherwise would have been made to Securityholders is not, as between the
Company and Securityholders, a payment by the Company on such Senior
Indebtedness.
SECTION 10.07. Relative Rights. This Article 10 defines the relative
rights of Securityholders and holders of Senior Indebtedness of the Company.
Nothing in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness of the Company to receive distributions otherwise
payable to Securityholders.
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SECTION 10.08. Subordination May Not Be Impaired by Company. No
right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article 10. The Company, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness may give the notice; provided,
however, that, if an issue of Senior Indebtedness of the Company has a
Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Company with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article 10 with respect to any Senior Indebtedness of the Company which may
at any time be held by it, to the same extent as any other holder of such Senior
Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article 10 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Company, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to
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make a payment pursuant to the Securities by reason of any provision in this
Article 10 shall not be construed as preventing the occurrence of a Default.
Nothing in this Article 10 shall have any effect on the right of the
Securityholders or the Trustee to accelerate the maturity of the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Trustee for
the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness or subject to the
restrictions set forth in this Article 10, and none of the Securityholders shall
be obligated to pay over any such amount to the Company or any holder of Senior
Indebtedness of the Company or any other creditor of the Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section
10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent
or other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of the Company for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of such Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 10. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness of the Company to participate
in any payment or distribution pursuant to this Article 10, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of such Senior Indebtedness held by such Person, the
extent to
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which such Person is entitled to participate in such payment or distribution and
other facts pertinent to the rights of such Person under this Article 10, and,
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to
all actions or omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to acknowledge
or effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Company as provided in this Article 10 and appoints
the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Securityholders or the Company or any
other Person, money or assets to which any holders of Senior Indebtedness of the
Company shall be entitled by virtue of this Article 10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Company, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness and such holder of
such Senior Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.
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ARTICLE 11
Subsidiary Guaranties
SECTION 11.01. Guaranties. Each Subsidiary Guarantor hereby
unconditionally and irrevocably guarantees, jointly and severally, to each
Holder and to the Trustee and its successors and assigns (a) the full and
punctual payment of principal of and interest on the Securities when due,
whether at maturity, by acceleration, by redemption or otherwise, and all other
monetary obligations of the Company under this Indenture and the Securities and
(b) the full and punctual performance within applicable grace periods of all
other obligations of the Company under this Indenture and the Securities (all
the foregoing being hereinafter collectively called the "Obligations"). Each
Subsidiary Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from such
Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under
this Article 11 notwithstanding any extension or renewal of any Obligation.
Each Subsidiary Guarantor waives presentation to, demand of, payment
from and protest to the Company of any of the Obligations and also waives notice
of protest for nonpayment. Each Subsidiary Guarantor waives notice of any
default under the Securities or the Obligations. The obligations of each
Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Company or any other Person under this Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Securities or any other agreement;
(d) the release of any security held by any Holder or the Trustee for the
Obligations or any of them; (e) the failure of any Holder or the Trustee to
exercise any right or remedy against any other guarantor of the Obligations; or
(f) any change in the ownership of such Subsidiary Guarantor (except as provided
in Section 11.06).
<PAGE>
90
Each Subsidiary Guarantor further agrees that its Subsidiary
Guaranty herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Holder or the Trustee to any security held for
payment of the Obligations.
Each Subsidiary Guaranty is, to the extent and in the manner set
forth in Article 12, subordinated and subject in right of payment to the prior
payment in full of the principal of and premium, if any, and interest on all
Senior Indebtedness of the Subsidiary Guarantor giving such Subsidiary Guaranty
and each Subsidiary Guaranty is made subject to such provisions of this
Indenture.
Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06,
the obligations of each Subsidiary Guarantor hereunder shall not be subject to
any reduction, limitation, impairment or termination for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and shall not
be subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Subsidiary Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the Trustee to
assert any claim or demand or to enforce any remedy under this Indenture, the
Securities or any other agreement, by any waiver or modification of any thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the obligations, or by any other act or thing or omission or delay to do any
other act or thing which may or might in any manner or to any extent vary the
risk of such Subsidiary Guarantor or would otherwise operate as a discharge of
such Subsidiary Guarantor as a matter of law or equity.
Each Subsidiary Guarantor further agrees that its Subsidiary
Guarantee herein shall continue to be effective or be reinstated, as the case
may be, if at any time payment, or any part thereof, of principal of or interest
on
<PAGE>
91
any Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay
the principal of or interest on any Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Obligation, each Subsidiary Guarantor hereby
promises to and will, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (i) the unpaid amount of such Obligations, (ii) accrued and unpaid
interest on such Obligations (but only to the extent not prohibited by law) and
(iii) all other monetary Obligations of the Company to the Holders and the
Trustee.
Each Subsidiary Guarantor agrees that it shall not be entitled to
any right of subrogation in respect of any Obligations guaranteed hereby until
payment in full of all Obligations and all obligations to which the Obligations
are subordinated as provided in Article 12. Each Subsidiary Guarantor further
agrees that, as between it, on the one hand, and the Holders and the Trustee, on
the other hand, (x) the maturity of the Obligations Guaranteed hereby may be
accelerated as provided in Article 6 for the purposes of such Subsidiary
Guarantor's Subsidiary Guaranty herein, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6, such Obligations (whether or not due
and payable) shall forthwith become due and payable by such Subsidiary Guarantor
for the purposes of this Section.
Each Subsidiary Guarantor also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section.
<PAGE>
92
SECTION 11.02. Limitation on Liability. Any term or provision of
this Indenture to the contrary notwithstanding, the maximum, aggregate amount of
the Obligations guaranteed hereunder by any Subsidiary Guarantor shall not
exceed the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
SECTION 11.03. Successors and Assigns. This Article 11 shall be
binding upon each Subsidiary Guarantor and its successors and assigns and shall
enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
SECTION 11.04. No Waiver. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article 11 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 11 at law,
in equity, by statute or otherwise.
SECTION 11.05. Modification. No modification, amendment or waiver of
any provision of this Article 11, nor the consent to any departure by any
Subsidiary Guarantor therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Subsidiary Guarantor in any case shall
entitle such Subsidiary Guarantor to any other or further
<PAGE>
93
notice or demand in the same, similar or other circumstances.
SECTION 11.06. Release of Subsidiary Guarantor. Upon the sale (including any
sale pursuant to any exercise of remedies by a holder of Senior Indebtedness) or
other disposition (including by way of consolidation or merger) of a Subsidiary
Guarantor or the sale or disposition of all or substantially all the assets of
such Subsidiary Guarantor (in each case other than to the Company or an
Affiliate of the Company), such Subsidiary Guarantor shall be deemed released
from all obligations under this Article 11 without any further action required
on the part of the Trustee or any Holder. At the request of the Company, the
Trustee shall execute and deliver an appropriate instrument evidencing such
release.
ARTICLE 12
Subordination of Subsidiary Guaranties
SECTION 12.01. Agreement To Subordinate. Each Subsidiary Guarantor
agrees, and each Securityholder by accepting a Security agrees, that the
Obligations of such Subsidiary Guarantor are subordinated in right of payment,
to the extent and in the manner provided in this Article 12, to the prior
payment of all Senior Indebtedness of such Subsidiary Guarantor and that the
subordination is for the benefit of and enforceable by the holders of such
Senior Indebtedness. The Obligations of a Subsidiary Guarantor shall in all
respects rank pari passu with all other Senior Subordinated Indebtedness of such
Subsidiary Guarantor and only Senior Indebtedness of such Subsidiary Guarantor
(including such Subsidiary Guarantor's Guarantee of Senior Indebtedness of the
Company) shall rank senior to the Obligations of such Subsidiary Guarantor in
accordance with the provisions set forth herein.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of any Subsidiary Guarantor to creditors
upon a total or
<PAGE>
94
partial liquidation or a total or partial dissolution of such Subsidiary
Guarantor or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to such Subsidiary Guarantor or its property:
(1) holders of Senior Indebtedness of such Subsidiary Guarantor
shall be entitled to receive payment in full of such Senior Indebtedness
in cash or cash equivalents before Securityholders shall be entitled to
receive any payment pursuant to any Obligations of such Subsidiary
Guarantor; and
(2) until the Senior Indebtedness of any Subsidiary Guarantor is
paid in full in cash or cash equivalents, any payment or distribution to
which Securityholders would be entitled but for this Article 12 shall be
made to holders of such Senior Indebtedness as their interests may appear,
except that Securityholders may receive shares of stock and any debt
securities of such Subsidiary Guarantor that are subordinated to Senior
Indebtedness, and to any debt securities received by holders of Senior
Indebtedness, of such Subsidiary Guarantor to at least the same extent as
the Obligations of such Subsidiary Guarantor are subordinated to Senior
Indebtedness of such Subsidiary Guarantor.
SECTION 12.03. Default on Senior Indebtedness of Subsidiary
Guarantor. No Subsidiary Guarantor may make any payment pursuant to any of its
Obligations or repurchase, redeem or otherwise retire or defease any Securities
or other Obligations (collectively, "pay its Subsidiary Guaranty") 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, (x) the default has been cured or waived and any such acceleration
has been rescinded or (y) such Senior Indebtedness has been paid in full;
provided, however, that any Subsidiary Guarantor may pay its Subsidiary Guaranty
without regard to the foregoing if such
<PAGE>
95
Subsidiary Guarantor and the Trustee receive written notice approving such
payment from the Representatives of such Senior Indebtedness. No Subsidiary
Guarantor may pay its Subsidiary Guaranty during the continuance of any Payment
Blockage Period after receipt by the Company and the Trustee of a Payment Notice
under Section 10.03. Notwithstanding the provisions described in the immediately
preceding sentence (but subject to the provisions contained in the first
sentence of this Section), unless the holders of Senior Indebtedness giving such
Payment Notice or the Representative of such holders shall have accelerated the
maturity of such Senior Indebtedness, any Subsidiary Guarantor may resume
payments pursuant to its Subsidiary Guaranty after termination of such Payment
Blockage Period.
SECTION 12.04. Demand for Payment. If a demand for payment is made
on a Subsidiary Guarantor pursuant to Article 11, the Trustee shall promptly
notify the Company and the Company shall promptly notify the holders of the
Senior Indebtedness (or their Representatives) of such demand.
SECTION 12.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 12 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of the relevant Senior Indebtedness and pay
it over to them or their Representatives as their interests may appear.
SECTION 12.06. Subrogation. After all Senior Indebtedness of a
Subsidiary Guarantor is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to Senior Indebtedness. A
distribution made under this Article 12 to holders of such Senior Indebtedness
which otherwise would have been made to Securityholders is not, as between the
relevant Subsidiary Guarantor and Securityholders, a payment by such Subsidiary
Guarantor on such Senior Indebtedness.
<PAGE>
96
SECTION 12.07. Relative Rights. This Article 12 defines the relative
rights of Securityholders and holders of Senior Indebtedness of a Subsidiary
Guarantor. Nothing in this Indenture shall:
(1) impair, as between a Subsidiary Guarantor and Securityholders,
the obligation of such Subsidiary Guarantor, which is absolute and
unconditional, to pay the Obligations to the extent set forth in Article
11 or the relevant Subsidiary Guaranty; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a default by such Subsidiary Guarantor under the
Obligations, subject to the rights of holders of Senior Indebtedness of
such Subsidiary Guarantor to receive distributions otherwise payable to
Securityholders.
SECTION 12.08. Subordination May Not Be Impaired by Subsidiary
Guarantor. No right of any holder of Senior Indebtedness of any Subsidiary
Guarantor to enforce the subordination of the Obligations of such Subsidiary
Guarantor shall be impaired by any act or failure to act by such Subsidiary
Guarantor or by its failure to comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 12.03, the Trustee or Paying Agent may continue to receive payments with
respect to any Subsidiary Guaranty and shall not be charged with knowledge of
the existence of facts that would prohibit receiving any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives written notice satisfactory to it that payments
may not be received under this Article 12. The Company, the relevant Subsidiary
Guarantor, the Registrar or co-registrar, the Paying Agent, a Representative or
a holder of Senior Indebtedness of any Subsidiary Guarantor may give the notice;
provided, however, that, if an issue of Senior Indebtedness of any Subsidiary
Guarantor has a Representative, only the Representative may give the notice.
<PAGE>
97
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not the Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 12 with respect to any Senior Indebtedness of any Subsidiary Guarantor
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any
of its rights as such holder. Nothing in this Article 12 shall apply to claims
of, or payments to, the Trustee under or pursuant to Section 7.07.
SECTION 12.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of any Subsidiary Guarantor, the distribution may be made and the notice given
to their Representative (if any).
SECTION 12.11. Article 12 Not To Prevent Defaults Under a Subsidiary
Guaranty or Limit Right To Demand Payment. The failure to make a payment
pursuant to a Subsidiary Guaranty by reason of any provision in this Article 12
shall not be construed as preventing the occurrence of a default under such
Subsidiary Guaranty. Nothing in this Article 12 shall have any effect on the
right of the Securityholders or the Trustee to make a demand for payment on any
Subsidiary Guarantor pursuant to Article 11.
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section
12.02 are pending, (ii) upon a certificate of the liquidating trustee or agent
or other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of any Subsidiary Guarantor for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
such Senior
<PAGE>
98
Indebtedness and other indebtedness of such Subsidiary Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article 12. In the event that
the Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Senior Indebtedness of any Subsidiary
Guarantor to participate in any payment or distribution pursuant to this Article
12, the Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness of such
Subsidiary Guarantor held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article 12, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article 12.
SECTION 12.13. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to acknowledge
or effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of any Subsidiary Guarantor as provided in this Article 12
and appoints the Trustee as attorney-in-fact for any and all such purposes.
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of Subsidiary Guarantor. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of any Subsidiary Guarantor
and shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Securityholders or the Company or any other Person, money or
assets to which any holders of such Senior Indebtedness shall be entitled by
virtue of this Article 12 or otherwise.
<PAGE>
99
SECTION 12.15. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of any Subsidiary Guarantor, whether such Senior Indebtedness was
created or acquired before or after the issuance of the Securities, to acquire
and continue to hold, or to continue to hold, such Senior Indebtedness and such
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company or any Subsidiary Guarantor:
Roller Bearing Company of America, Inc.
60 Round Hill Road
P.O. Box 430
Fairfield, Connecticut 06430-0430
Facsimile No.: (203) 255-3862
Attention of President
<PAGE>
100
if to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention of Corporate Trust Department
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be
mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent,
<PAGE>
101
if any, provided for in this Indenture relating to the proposed action
have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. When Securities Disregarded. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so
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102
owned shall be so disregarded. Also, subject to the foregoing, only Securities
outstanding at the time shall be considered in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in
the State of New York. If a payment date is a Legal Holiday, payment shall be
made on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 13.09. Governing Law. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State of
New York but without giving effect to applicable principles of conflicts of law
to the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 13.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 13.11. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each
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103
signed copy shall be an original, but all of them together represent the same
agreement. One signed copy is enough to prove this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
ROLLER BEARING COMPANY OF
AMERICA, INC.,
by
------------------------
Name:
Title:
INDUSTRIAL TECTONICS BEARINGS
CORPORATION,
by
------------------------
Name:
Title:
RBC LINEAR PRECISION PRODUCTS,
INC.,
by
------------------------
Name:
Title:
<PAGE>
104
RBC NICE BEARINGS, INC.,
by
------------------------
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK,
by
------------------------
Name:
Title:
<PAGE>
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY OR
PRIVATE EXCHANGE SECURITY]
*
** CUSIP No.
No. $
9-5/8% Senior Subordinated Notes Due 2007
ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware corporation, promises to pay
to , or registered assigns, the principal sum of
Dollars on June 15, 2007.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
- ----------
* If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the Attachment from such Exhibit 1
captioned "[TO BE ATTACHED TO GLOBAL SECURITIES]--SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".
** If the Security is a Private Exchange Security issued in a Private
Exchange to an Initial Purchaser holding an unsold portion of its initial
allotment, add the Restricted Securities Legend from Exhibit 1 to Appendix A and
replace the Assignment Form included in this Exhibit A with the Assignment Form
included in such Exhibit 1.
<PAGE>
2
Additional provisions of this Security are set forth on the other
side of this Security.
Dated:
ROLLER BEARING COMPANY OF
AMERICA, INC.
by
-----------------------
President
-----------------------
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST
COMPANY OF NEW YORK,
as Trustee, certifies that
this is one of [Seal]
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
<PAGE>
3
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY
OR PRIVATE EXCHANGE SECURITY]
9-5/8% Senior Subordinated Note Due 2007
1. Interest
Roller Bearing Company of America, Inc., a Delaware corporation
(such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the "Company"), promises to pay
interest on the principal amount of this Security at the rate per annum shown
above; provided, however, that if a Registration Default (as defined in the
Registration Rights Agreement) occurs, additional interest will accrue on this
Security at a rate of 0.50% per annum from and including the date on which any
such Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured. The Company will pay interest
semiannually on June 15 and December 15 of each year, commencing on December 15,
1997. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from June 23, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne by
the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the June 1 or December 1 next preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
<PAGE>
4
money of the United States that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
(including principal, premium and interest) will be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof or,
if no U.S. dollar account maintained by the payee with a bank in the United
States is designated by any holder to the Trustee or the Paying Agent at least
30 days prior to the relevant due date for payment (or such other date as the
Trustee may accept in its discretion), by mailing a check to the registered
address of such holder.
3. Paying Agent and Registrar
Initially, United States Trust Company of New York, a New York trust
company ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
June 15, 1997 ("Indenture"), among the Company, the Subsidiary Guarantors and
the Trustee. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture
(the "Act"). Terms defined in the Indenture and not defined herein have the
meanings ascribed thereto in the Indenture. The Securities are subject to all
such terms, and Securityholders are referred to the Indenture and the Act for a
statement of those terms.
The Securities are general unsecured obligations of the Company
limited to $110,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). The Indenture contains certain covenants which, among other
things, limit (a) the incurrence of additional indebtedness
<PAGE>
5
by the Company and certain of its subsidiaries, (b) the payment of Restricted
Payments (c) certain transactions with affiliates, (d) sales of assets,
including capital stock of subsidiaries, (e) sales and issuances of capital
stock by certain subsidiaries and (f) certain consolidations and mergers. The
Indenture also will prohibit certain restrictions on distributions from
subsidiaries. In addition, the Company may be obligated, under certain
circumstances, to offer to repurchase Securities at a purchase price equal to
101% of the principal amount thereof, plus accrued and unpaid interest to the
date of repurchase.
5. Optional Redemption
Except as set forth in the following paragraph, the Securities may
not be redeemed prior to June 15, 2002. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount), plus
accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the related
interest payment date):
if redeemed during the
12-month period beginning June 15
of the years set forth below: Percentage
2002.............................................................. 104.8125%
2003.............................................................. 103.2083
2004.............................................................. 101.6041
2005 and thereafter............................................... 100.0000
In addition, at any time and from time to time prior to June 15,
2000, the Company may redeem in the aggregate up to $36.0 million principal
amount of the Securities with the proceeds of one or more Public Equity
Offerings following which there is a Public Market (provided that a portion of
the net cash proceeds thereof equal to the amount required to redeem any such
Securities is contributed to the equity capital of the Company), at a redemption
price (expressed as a percentage of principal amount) of 109.625% plus accrued
interest to the redemption date (subject to the
<PAGE>
6
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date); provided, however, that at least $74.0
million aggregate principal amount of the Securities must remain outstanding
after each such redemption.
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued interest
on all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right to cause the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price equal to 101% of the principal amount of the
Secur ities to be repurchased plus accrued interest to the date of repurchase
(subject to the right of holders of record on the relevant record date to
receive interest due on the related interest payment date) as provided in, and
subject to the terms of, the Indenture.
<PAGE>
7
8. Subordination
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give it effect and
appoints the Trustee as attorney-in-fact for such purpose.
9. Guarantees
The Company's obligations with respect to the Securities are
guaranteed, to the extent provided in the Indenture, by the Subsidiary
Guarantors.
10. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
<PAGE>
8
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority (or, in certain cases, 75%) in principal amount
outstanding of the Securities and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Holders of a majority in
principal amount outstanding of the Securities. Subject to certain exceptions
set forth in the Indenture, without the consent of any Securityholder, the
Company and the Trustee may amend the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities or to secure the Securities, or to add additional covenants or
surrender rights and powers conferred on the Company, or to comply with any
request of the SEC in connection with qualifying the Indenture under the Act, or
to make any change that does not adversely affect the rights of any
Securityholder.
<PAGE>
9
15. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph
5 of the Securities, upon acceleration or otherwise, or failure by the Company
to redeem or purchase Securities when required; (iii) failure by the Company to
comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $5
million; (v) certain events of bankruptcy or insolvency with respect to the
Company and the Significant Subsidiaries; (vi) certain judgments or decrees for
the payment of money in excess of $5 million; and (vii) certain events with
respect to the guarantees of the Company's obligations under the Securities by
the Subsidiary Guarantors. If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the Securities may
declare all the Securities to be due and payable immediately or, in certain
circumstances, after giving notice to the Representative under the Credit
Agreement. Certain events of bankruptcy or insolvency are Events of Default
which will result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or
security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders.
<PAGE>
10
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates (including the Subsidiary Guarantors) and
may otherwise deal with the Company or its Affiliates (including the Subsidiary
Guarantors) with the same rights it would have if it were not Trustee.
17. No Recourse Against Others
Any past, present or future director, officer, employee or
stockholder, as such, of the Company, any Subsidiary Guarantor or the Trustee
shall not have any liability for any obligations of the Company or any
Subsidiary Guarantor under the Securities or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. By
accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Securities.
18. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
<PAGE>
11
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
21. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
22. Governing Law.
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in
it the text of this Security in larger type. Requests may be made to:
Roller Bearing Company of America, Inc.
60 Round Hill Road
P.O. Box 430
Fairfield, Connecticut 06430-0430
Attention of: Secretary
<PAGE>
12
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
- --------------------------------------------------------------------------------
- ---------
Date: ____________________ Your Signature: _____________________________________
- --------------------------------------------------------------------------------
- ---------
Sign exactly as your name appears on the other side of this Security.
<PAGE>
13
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.09 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount
in principal amount: $
Date: _______________ Your Signature:
- ----------------------
(Sign exactly as
your name appears
on the other side
of this Security.)
Signature Guarantee: ___________________________________________________________
(Signature must be guaranteed)
<PAGE>
RULE 144A/REGULATION S APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
RULE 144A AND TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN
RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix the following terms shall have the
meanings indicated below:
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Exchange Securities" means the 9-5/8% Senior Subordinated Notes Due
2007 to be issued pursuant to this Indenture in connection with a Registered
Exchange Offer pursuant to the Registration Rights Agreement.
"Initial Purchaser" means Credit Suisse First Boston Corporation.
"Initial Securities" means the 9-5/8% Senior Subordinated Notes Due
2007, issued under this Indenture on or about the date hereof.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Rights Agreement, to the Initial Purchaser to issue and deliver to
the Initial Purchaser, in exchange for the Initial Securities held by the
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
"Private Exchange Securities" means the 9-5/8% Senior Subordinated
Notes Due 2007 to be issued pursuant to this Indenture to the Initial Purchasers
in a Private Exchange.
<PAGE>
2
"Purchase Agreement" means the Purchase Agreement dated June 17,
1997, among the Company, the Subsidiary Guarantors and the Initial Purchaser.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Registered Exchange Offer" means the offer by the Company, pursuant
to the Registration Rights Agreement, to certain Holders of Initial Securities,
to issue and deliver to such Holders, in exchange for the Initial Securities, a
like aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement dated June 17, 1997, among the Company, the Subsidiary Guarantors and
the Initial Purchaser.
"Securities" means the Initial Securities, the Exchange Securities
and the Private Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depositary), or any successor person thereto and
shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement
issued by the Company, in connection with the offer and sale of Initial
Securities or Private Exchange Securities, pursuant to the Registration Rights
Agreement.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.3(b) hereto.
<PAGE>
3
1.2 Other Definitions
Defined in
Term Section:
"Agent Members".........................................................2.1(b)
"Global Security".......................................................2.1(a)
"Regulation S"..........................................................2.1(a)
"Rule 144A".............................................................2.1(a)
2. The Securities.
2.1 Form and Dating.
The Initial Securities are being offered and sold by the Company
pursuant to the Purchase Agreement.
(a) Global Securities. Initial Securities offered and sold to a QIB
in reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance
on Regulation S under the Securities Act ("Regulation S"), in each case as
provided in the Purchase Agreement, shall be issued initially in the form of one
or more permanent global Securities in definitive, fully registered form without
interest coupons with the global securities legend and restricted securities
legend set forth in Exhibit 1 hereto (each, a Global Security"), which shall be
deposited on behalf of the purchasers of the Initial Securities represented
thereby with the Trustee, at its New York office, as custodian for the
Depositary (or with such other custodian as the Depositary may direct), and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Global Securities may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depositary.
<PAGE>
4
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depositary for such
Global Security or Global Securities or the nominee of such Depositary and (b)
shall be delivered by the Trustee to such Depositary or pursuant to such
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$110,000,000 and (2) Exchange Securities or Private Exchange Securities for
issue only in a Registered Exchange Offer or a Private Exchange, respectively,
pursuant to the Registration Rights Agreement, for a like principal amount of
Initial Securities, in each case upon a written order of the Company signed by
two Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company. Such order shall specify the amount of the Securities
to be authenticated and the date on which the original issue of Securities is to
be authenticated and whether the Securities are to be Initial Securities,
Exchange Securities or Private Exchange Securities. The aggregate principal
amount of Securities outstanding at any time may not exceed $110,000,000 except
as provided in Section 2.07 of this Indenture.
<PAGE>
5
2.3 Transfer and Exchange. (a) Transfer and Exchange of Global
Securities. (i) The transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depositary, in accordance with
this Indenture (including applicable restrictions on transfer set forth herein,
if any) and the procedures of the Depositary therefor. A transferor of a
beneficial interest in a Global Security shall deliver to the Registrar a
written order given in accordance with the Depositary's procedures containing
information regarding the participant account of the Depositary to be credited
with a beneficial interest in the Global Security. The Registrar shall, in
accordance with such instructions, instruct the Depositary to credit to the
account of the Person specified in such instructions a beneficial interest in
the Global Security and to debit the account of the Person making the transfer
the beneficial interest in the Global Security being transferred.
(ii) Notwithstanding any other provisions of this Rule
144A/Regulation S Appendix (other than the provisions set forth in Section 2.4),
a Global Security may not be transferred as a whole except by the Depositary to
a nominee of the Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary or by the Depositary or any such nominee to
a successor Depositary or a nominee of such successor Depositary.
(iii) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4 or Section 2.09
of the Indenture prior to the consummation of a Registered Exchange Offer or the
effectiveness of a Shelf Registration Statement with respect to such Securities,
such Securities may be exchanged only in accordance with such procedures as are
substantially consistent with the provisions of this Section 2.3 (including the
certification requirements set forth on the reverse of the Initial Securities
intended to ensure that such transfers comply with Rule 144A or Regulation S, as
the case may be) and such other procedures as may from time to time be adopted
by the Company.
<PAGE>
6
(b) Legends.
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Security certificate evidencing the Global Securities (and all
Securities issued in exchange therefor or in substitution thereof) shall bear a
legend in substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY
NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES
IS A QIB (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (iv) TO THE COMPANY OR (v) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES
(i) THROUGH (v) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A)
ABOVE.
BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
<PAGE>
7
SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S.
(ii) Upon any sale or transfer of a Transfer Restricted Security
represented by a Global Security pursuant to Rule 144 under the Securities Act,
the Registrar shall permit the Holder thereof to exchange such Transfer
Restricted Security for a certificated Security that does not bear the legend
set forth above and rescind any restriction on the transfer of such Transfer
Restricted Security, if the Holder certifies in writing to the Registrar that
its request for such exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of the Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of a Shelf Registration
Statement with respect to such Initial Securities or Private Exchange
Securities, as the case may be, all requirements pertaining to legends on such
Initial Security or such Private Exchange Security will cease to apply, the
requirements requiring any such Initial Security or such Private Exchange
Security issued to certain Holders to be issued in global form will cease to
apply, and a certificated Initial Security or Private Exchange Security without
legends will be available to the transferee of the Holder of such Initial
Securities or Private Exchange Securities upon exchange of such transferring
Holder's certificated Initial Security or Private Exchange Security or
directions to transfer such Holder's interest in the Global Security, as
applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that Initial
Securities issued to certain Holders be issued in global form will cease to
apply and certificated Initial Securities with the Restricted Securities Legend
set forth in Exhibit 1 hereto will be available to Holders of such Initial
Securities that do not exchange their Initial Securities, and Exchange
Securities in certificated or global form (without the legends set forth above)
will be available to Holders that
<PAGE>
8
exchange such Initial Securities in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities are
offered Private Exchange Securities in exchange for their Initial Securities,
all requirements pertaining to such Initial Securities that Initial Securities
issued to certain Holders be issued in global form will still apply, and Private
Exchange Securities in global form with the Restricted Securities Legend set
forth in Exhibit 1 hereto will be available to Holders that exchange such
Initial Securities in such Private Exchange.
(e) Cancelation or Adjustment of Global Security. At such time as
all beneficial interests in a Global Security have either been exchanged for
certificated Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to the Depositary for cancelation or retained and canceled by
the Trustee. At any time prior to such cancelation, if any beneficial interest
in a Global Security is exchanged for certificated Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by such
Global Security shall be reduced and an adjustment shall be made on the books
and records of the Trustee (if it is then the Securities Custodian for such
Global Security) with respect to such Global Security, by the Trustee or the
Securities Custodian, to reflect such reduction.
(f) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate certificated Securities and
Global Securities at the Registrar's or co-registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments or similar governmental charge payable in
connection therewith (other than any such transfer taxes, assessments or similar
governmental charge payable upon
<PAGE>
9
exchange or transfer pursuant to Sections 3.06, 4.09 and 9.05 of the Indenture).
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) any certificated Security selected
for redemption in whole or in part pursuant to Article 3 of this Indenture,
except the unredeemed portion of any certificated Security being redeemed in
part, or (b) any Security for a period beginning 15 Business Days before the
mailing of a notice of an offer to repurchase or redeem Securities or 15
Business Days before an interest payment date.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Company, the Subsidiary Guarantors, the Trustee, the Paying
Agent, the Registrar or any co-registrar may deem and treat the person in whose
name a Security is registered as the absolute owner of such Security for the
purpose of receiving payment of principal of and interest on such Security and
for all other purposes whatsoever, whether or not such Security is overdue, and
none of the Company, the Subsidiary Guarantors, the Trustee, the Paying Agent,
the Registrar or any co-registrar shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be entitled
to the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of or a participant in the
Depositary or other Person with respect to the accuracy of the records of the
Depositary or its nominee or of any participant or member thereof with respect
to any ownership interest in the Securities or with respect to the delivery to
any participant, member, beneficial owner or other Person (other than the
Depositary) of any notice (including any notice of redemption) or the payment of
any amount under or with respect to such Securities. All notices and
communications to be given to the Holders and all
<PAGE>
10
payments to be made to Holders under the Securities shall be given or made only
to or upon the order of the registered Holders (which shall be the Depositary or
its nominee in the case of a Global Security). The rights of beneficial owners
in any Global Security shall be exercised only through the Depositary subject to
the applicable rules and procedures of the Depositary. The Trustee may rely and
shall be fully protected in relying upon information furnished by the Depositary
with respect to its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among Depositary
participants, members or beneficial owners in any Global Security) other than to
require delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
2.4 Certificated Securities.
(a) A Global Security deposited with the Depositary or with the
Trustee as custodian for the Depositary pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for such Global
Security or if at any time such Depositary ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days, or (ii) an Event of Default has occurred and is
continuing or (iii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of certificated Securities under
this Indenture.
<PAGE>
11
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section shall be surrendered by the Depositary
to the Trustee located in the Borough of Manhattan, The City of New York, to be
so transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Security, an equal aggregate principal amount of certificated
Initial Securities of authorized denominations. Any portion of a Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 principal amount and any integral
multiple thereof and registered in such names as the Depositary shall direct.
Any certificated Initial Security delivered in exchange for an interest in the
Global Security shall, except as otherwise provided by Section 2.3(b), bear the
Restricted Securities Legend set forth in Exhibit 1 hereto.
(c) In the event of the occurrence of any of the events specified in
Section 2.4(a), the Company will promptly make available to the Trustee a
reasonable supply of certificated Securities in definitive, fully registered
form without interest coupons.
2.5 Proxies.
Subject to the provisions of Section 2.4(b), the registered Holder
of a Global Security may grant proxies and otherwise authorize any Person,
including Agent Members and Persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
<PAGE>
EXHIBIT 1
to
RULE 144A/REGULATION S APPENDIX
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS
SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) TO A
PERSON WHOM
<PAGE>
2
THE SELLER REASONABLY BELIEVES IS A QIB (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) IN
AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (iv) TO THE COMPANY OR (v)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH OF CASES (i) THROUGH (v) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE
RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.
BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B)
IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH REGULATION S.
<PAGE>
3
CUSIP No.
$
9-5/8% Senior Subordinated Notes Due 2007
ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware corporation, promises to pay
to , or registered assigns, the principal sum of
Dollars on June 15, 2007.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
<PAGE>
4
Additional provisions of this Security are set forth on the other
side of this Security.
Dated:
ROLLER BEARING COMPANY OF
AMERICA, INC.
by
-----------------------
President
-----------------------
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST
COMPANY OF NEW YORK,
as Trustee, certifies that
this is one of [Seal]
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
<PAGE>
5
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
9-5/8% Senior Subordinated Note Due 2007
1. Interest
Roller Bearing Company of America, Inc., a Delaware corporation
(such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the "Company"), promises to pay
interest on the principal amount of this Security at the rate per annum shown
above; provided, however, that if a Registration Default (as defined in the
Registration Rights Agreement) occurs, additional interest will accrue on this
Security at a rate of 0.50% per annum from and including the date on which any
such Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured. The Company will pay interest
semiannually on June 15 and December 15 of each year, commencing on December 15,
1997. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from June 23, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne by
the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the June 1 or December 1 next preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
<PAGE>
6
money of the United States that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Company will make all payments in
respect of a certificated Security (including principal, premium and interest)
by mailing a check to the registered address of each Holder thereof; provided,
however, that payments on a certificated Security will be made by wire transfer
to a U.S. dollar account maintained by the payee with a bank in the United
States if such Holder elects payment by wire transfer by giving written notice
to the Trustee or the Paying Agent to such effect designating such account no
later than 30 days immediately preceding the relevant due date for payment (or
such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, United States Trust Company of New York, a New York trust
company ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
June 15, 1997 ("Indenture"), among the Company, the Subsidiary Guarantors and
the Trustee. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture
(the "Act"). Terms defined in the Indenture and not defined herein have the
meanings ascribed thereto in the Indenture. The Securities are subject to all
such terms, and
<PAGE>
7
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to $110,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). The Indenture contains certain covenants which, among other
things, limit (a) the incurrence of additional indebtedness by the Company and
certain of its subsidiaries, (b) the payment of Restricted Payments (c) certain
transactions with affiliates, (d) sales of assets, including capital stock of
subsidiaries, (e) sales and issuances of capital stock by certain subsidiaries
and (f) certain consolidations and mergers. The Indenture also will prohibit
certain restrictions on distributions from subsidiaries. In addition, the
Company may be obligated, under certain circumstances, to offer to repurchase
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest to the date of repurchase.
5. Optional Redemption
Except as set forth in the following paragraph, the Securities may
not be redeemed prior to June 15, 2002. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount), plus
accrued interest to the
<PAGE>
8
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the related interest payment date):
if redeemed during the 12-month
period beginning June 15 of the
years set forth below: Percentage
2002................................................................ 104.8125%
2003................................................................ 103.2083
2004................................................................ 101.6041
2005 and thereafter................................................. 100.0000
In addition, at any time and from time to time prior to June 15,
2000, the Company may redeem in the aggregate up to $36.0 million principal
amount of the Securities with the proceeds of one or more Public Equity
Offerings following which there is a Public Market (provided that a portion of
the net cash proceeds thereof equal to the amount required to redeem any such
Securities is contributed to the equity capital of the Company), at a redemption
price (expressed as a percentage of principal amount) of 109.625% plus accrued
interest to the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date); provided, however, that at least $74.0 million aggregate
principal amount of the Securities must remain outstanding after each such
redemption.
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued interest
on all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied,
<PAGE>
9
on and after such date interest ceases to accrue on such Securities (or such
portions thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right to cause the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price equal to 101% of the principal amount of the
Securities to be repurchased plus accrued interest to the date of repurchase
(subject to the right of holders of record on the relevant record date to
receive interest due on the related interest payment date) as provided in, and
subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give it effect and
appoints the Trustee as attorney-in-fact for such purpose.
9. Guarantees
The Company's obligations with respect to the Securities are
guaranteed, to the extent provided in the Indenture, by the Subsidiary
Guarantors.
10. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees
<PAGE>
10
required by law or permitted by the Indenture. The Registrar need not register
the transfer of or exchange any Securities selected for redemption (except, in
the case of a Security to be redeemed in part, the portion of the Security not
to be redeemed) or any Securities for a period of 15 days before a selection of
Securities to be redeemed or 15 days before an interest payment date.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority (or, in certain cases, 75%) in principal amount
outstanding of the Securities and (ii) any default or noncompliance with any
provision may be waived with the
<PAGE>
11
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add guarantees with respect to the Securities or to secure the Securities,
or to add additional covenants or surrender rights and powers conferred on the
Company, or to comply with any request of the SEC in connection with qualifying
the Indenture under the Act, or to make any change that does not adversely
affect the rights of any Securityholder.
15. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph
5 of the Securities, upon acceleration or otherwise, or failure by the Company
to redeem or purchase Securities when required; (iii) failure by the Company to
comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $5
million; (v) certain events of bankruptcy or insolvency with respect to the
Company and the Significant Subsidiaries; (vi) certain judgments or decrees for
the payment of money in excess of $5 million; and (vii) certain events with
respect to the guarantees of the Company's obligations under the Securities by
the Subsidiary Guarantors. If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the Securities may
declare all the Securities to be due and payable immediately or, in certain
circumstances, after giving notice to the Representative under the Credit
Agreement. Certain events of bankruptcy or
<PAGE>
12
insolvency are Events of Default which will result in the Securities being due
and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or
security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders.
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates (including the Subsidiary Guarantors) and
may otherwise deal with the Company or its Affiliates (including the Subsidiary
Guarantors) with the same rights it would have if it were not Trustee.
17. No Recourse Against Others
Any past, present or future director, officer, employee or
stockholder, as such, of the Company, any Subsidiary Guarantor or the Trustee
shall not have any liability for any obligations of the Company or any
Subsidiary Guarantor under the Securities or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. By
accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Securities.
<PAGE>
13
18. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
21. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
<PAGE>
14
22. Governing Law.
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in
it the text of this Security in larger type. Requests may be made to:
Roller Bearing Company of America, Inc.
60 Round Hill Road
P.O. Box 430
Fairfield, Connecticut 06430-0430
Attention of: Secretary
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
- ---------
Date: ____________________________ Your Signature: _____________________________
<PAGE>
15
- --------------------------------------------------------------------------------
- ---------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) |_| inside the United States to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933)
that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that
such transfer is being made in reliance on Rule 144A, in each
case pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
(4) |_| outside the United States in an offshore transaction within
the meaning of Regulation S under the Securities Act in
compliance with Rule 904 under the Securities Act of 1933; or
(5) |_| pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
<PAGE>
16
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however, that
if box (4) or (5) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption provided
by Rule 144 under such Act.
------------------------
Signature
Signature Guarantee:
- --------------------- --------------------------
Signature must be guaranteed Signature
- --------------------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has
<PAGE>
17
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
18
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have
been made:
<TABLE>
<CAPTION>
Date of Amount of decrease Amount of increase Principal amount Signature of
Exchange in Principal in Principal of this Global authorized officer
Amount of this Amount of this Security following of Trustee or
Global Security Global Security such decrease or Securities
increase) Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
19
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.09 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount
in principal amount: $
Date: _______________ Your Signature: ______________________
(Sign exactly as your name
appears on the other side of
this Security.)
Signature Guarantee: ___________________________________________________________
(Signature must be guaranteed)
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
August 8, 1997, by and between Bremen Bearings, Inc. (the "Bremen") and United
States Trust Company of New York, a New York trust company (the "Trustee").
RECITALS:
WHEREAS, pursuant to that certain Indenture (the "Existing
Indenture"), dated as of June 15, 1997, a copy of which is attached hereto as
Schedule 1, among Roller Bearing Company of America, Inc. ("RBCA"), Industrial
Tectonics Bearings Corporation ("ITB"), RBC Linear Precision Products, Inc.
("LPP"), RBC Nice Bearings, Inc. ("Nice") and the Trustee, RBCA has issued and
ITB, LPP and Nice have guaranteed RBCA's 9-5/8% Senior Subordinated Notes Due
2007 (the "Notes"); and
WHEREAS, Bremen wishes to join in the guarantee of the obligations
of RBCA under the Notes, all on the terms and conditions set forth in the
Existing Indenture.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is agreed as follows:
1. Joinder to Existing Indenture. Bremen hereby joins in the
Existing Indenture in accordance with Section 4.10 of the Existing Indenture,
agrees to be bound by the Existing Indenture for all purposes as a Subsidiary
Guarantor thereunder, including, without limitation, for the purposes of the
undertakings contained in Articles 11 and 12 thereof, all as if Bremen were an
original party thereto.
2. Entire Agreement. Bremen and the Trustee hereby acknowledge that
this Indenture and the Existing Indenture embody the entire agreement and
understanding of Bremen and the other parties to the Existing Indenture in
respect of the subject matter contained herein or therein. There are no
agreements, representatives, warranties or covenants other than those expressly
set forth herein or therein. This Indenture and the Indenture supersede all
prior agreements and understandings between the parties hereto, whether written
or oral, express or implied, with respect to such subject matter herein or
therein.
3. Binding Effect. This Indenture shall take effect as of the date
and year first above written and shall be binding upon the parties hereto and
shall be binding on their respective heirs, executors, administrators, personal
representatives, successors and assigns, as the case may be. The parties hereto
may not assign or transfer any of their rights or obligations under this
Indenture.
<PAGE>
4. Governing Law. This Indenture shall be governed by, construed and
enforced in accordance with the internal laws of the State of New York, without
regard to the conflicts of laws principles thereof.
IN WITNESS WHEREOF, the undersigned have executed this Indenture as
of the day and year first written above.
BREMEN BEARINGS, INC.
By:
------------------------
Michael J. Hartnett
President
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
------------------------
Name:
Title:
2
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS
SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (ii) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (iv) TO THE
COMPANY OR (v) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (i) THROUGH (v) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.
BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B)
IT IS NOT A U.S.
<PAGE>
2
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH REGULATION S.
<PAGE>
3
CUSIP 775631AA2
No. C 01 $110,000,000
9 5/8% Senior Subordinated Notes Due 2007
ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware corporation, promises to pay
to CEDE & CO., or registered assigns, the principal sum of ONE HUNDRED AND TEN
MILLION DOLLARS on June 15, 2007.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: June 23, 1997
ROLLER BEARING COMPANY OF
AMERICA, INC.
by
/s/ Michael J. Hartnett
------------------------------------
President
------------------------------------
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST
COMPANY OF NEW YORK,
as Trustee, certifies that
this is one of [Seal]
the Securities referred
to in the Indenture.
by
---------------------------
Authorized Signatory
<PAGE>
4
ROLLER BEARING COMPANY OF AMERICA, INC.
9 5/8% Senior Subordinated Note Due 2007
1. Interest
Roller Bearing Company of America, Inc., a Delaware corporation
(such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the "Company"), promises to pay
interest on the principal amount of this Security at the rate per annum shown
above; provided, however, that if a Registration Default (as defined in the
Registration Rights Agreement) occurs, additional interest will accrue on this
Security at a rate of 0.50% per annum from and including the date on which any
such Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured. The Company will pay interest
semiannually on June 15 and December 15 of each year, commencing on December 15,
1997. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from June 23, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne by
the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the June 1 or December 1 next preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. Payments in respect of the Securities represented by a
Global Security (including principal, premium and interest) will be made by wire
transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest) by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on a certificated Security will be made by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by
<PAGE>
5
giving written notice to the Trustee or the Paying Agent to such effect
designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Trustee may accept in
its discretion).
3. Paying Agent and Registrar
Initially, United States Trust Company of New York, a New York trust
company ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
June 15, 1997 ("Indenture"), among the Company, the Subsidiary Guarantors and
the Trustee. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture
(the "Act"). Terms defined in the Indenture and not defined herein have the
meanings ascribed thereto in the Indenture. The Securities are subject to all
such terms, and Securityholders are referred to the Indenture and the Act for a
statement of those terms.
The Securities are general unsecured obligations of the Company
limited to $110,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). The Indenture contains certain covenants which, among other
things, limit (a) the incurrence of additional indebtedness by the Company and
certain of its subsidiaries, (b) the payment of Restricted Payments (C) certain
transactions with affiliates, (d) sales of assets, including capital stock of
subsidiaries, (e) sales and issuances of capital stock by certain subsidiaries
and (f) certain consolidations and mergers. The Indenture also will prohibit
certain restrictions on distributions from subsidiaries. In addition, the
Company may be obligated, under certain circumstances, to offer to repurchase
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest to the date of repurchase.
<PAGE>
6
5. Optional Redemption
Except as set forth in the following paragraph, the Securities may
not be redeemed prior to June 15, 2002. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount), plus
accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the related
interest payment date):
if redeemed during the, 12-month
period beginning June 15 of the
years set forth, below: Percentage
-------------------------------- ----------
2002 ............................................... 104.8125%
2003 ............................................... 103.2083
2004 ............................................... 101.6041
2005 and thereafter ................................ 100.0000
In addition, at any time and from time to time prior to June 15,
2000, the Company may redeem in the aggregate up to $36.0 million principal
amount of the Securities with the proceeds of one or more Public Equity
Offerings following which there is a Public Market (provided that a portion of
the net cash proceeds thereof equal to the amount required to redeem any such
Securities is contributed to the equity capital of the Company), at a redemption
price (expressed as a percentage of principal amount) of 109.625% plus accrued
interest to the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date); provided, however, that at least $74.0 million aggregate
principal amount of the Securities must remain outstanding after each such
redemption.
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued interest
on all Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.
<PAGE>
7
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right to cause the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price equal to 101% of the principal amount of the
Securities to be repurchased plus accrued interest to the date of repurchase
(subject to the right of holders of record on the relevant record date to
receive interest due on the related interest payment date) as provided in, and
subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give it effect and
appoints the Trustee as attorney-in-fact for such purpose.
9. Guarantees
The Company's obligations with respect to the Securities are
guaranteed, to the extent provided in the Indenture, by the Subsidiary
Guarantors.
10. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
<PAGE>
8
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority (or, in certain cases, 75%) in principal amount
outstanding of the Securities and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Holders of a majority in
principal amount outstanding of the Securities. Subject to certain exceptions
set forth in the Indenture, without the consent of any Securityholder, the
Company and the Trustee may amend the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities or to secure the Securities, or to add additional covenants or
surrender rights and powers conferred on the Company, or to comply with any
request of the SEC in connection with qualifying the Indenture under the Act, or
to make any change that does not adversely affect the rights of any
Securityholder.
15. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon acceleration or otherwise, or failure by the Company to
redeem or purchase Securities when required; (iii) failure by the Company to
comply with
<PAGE>
9
other agreements in the Indenture or the Securities, in certain cases subject to
notice and lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after final maturity) of other Indebtedness of the
Company if the amount accelerated (or so unpaid) exceeds $5 million; (v) certain
events of bankruptcy or insolvency with respect to the Company and the
Significant Subsidiaries; (vi) certain judgments or decrees for the payment of
money in excess of $5 million; and (vii) certain events with respect to the
guarantees of the Company's obligations under the Securities by the Subsidiary
Guarantors. If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities may declare all
the Securities to be due and payable immediately or, in certain circumstances,
after giving notice to the Representative under the Credit Agreement. Certain
events of bankruptcy or insolvency are Events of Default which will result in
the Securities being due and payable immediately upon the occurrence of such
Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates (including the Subsidiary Guarantors) and
may otherwise deal with the Company or its Affiliates (including the Subsidiary
Guarantors) with the same rights it would have if it were not Trustee.
17. No Recourse Against Others
Any past, present or future director, officer, employee or
stockholder, as such, of the Company, any Subsidiary Guarantor or the Trustee
shall not have any liability for any obligations of the Company or any
Subsidiary Guarantor under the Securities or the Indenture
<PAGE>
10
or for any claim based on, in respect of or by reason of such obligations or
their creation. By accepting a Security, each Securityholder waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Securities.
18. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
21. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
22. Governing Law.
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
<PAGE>
11
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to:
Roller Bearing Company of America, Inc.
60 Round Hill Road
P.O. Box 430
Fairfield, Connecticut 06430-0430
Attention of: Secretary
________________________________________________________________________________
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date: _____________________ Your Signature:_____________________________________
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such
<PAGE>
12
Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) |_| inside the United States to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer
is being made in reliance on Rule 144A, in each case pursuant
to and in compliance with Rule 144A under the Securities Act of
1933; or
(4) |_| outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance
with Rule 904 under the Securities Act of 1933; or
(5) |_| pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however, that
if box (4) or (5) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made
<PAGE>
13
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the
exemption provided by Rule 144 under such Act.
---------------------------------
Signature
Signature Guarantee:
- ---------------------- ---------------------------------
Signature must be guaranteed Signature
- --------------------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated:
-------------------------- -----------------------------------------
NOTICE: To be executed by
an executive officer
<PAGE>
14
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have
been made:
<TABLE>
<CAPTION>
Date of Amount of decrease Amount of increase Principal amount Signature of
Exchange in Principal in Principal of this Global authorized officer
Amount of this Amount of this Security following of Trustee or
Global Security Global Security such decrease or Securities
increase Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
15
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.09 of the Indenture, check the box:
|__|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount
in principal amount: $
Dated: Your Signature:
------------------------ -----------------------------
(Sign exactly as your name
appears on the other side of
this Security.)
Signature Guarantee:
------------------------------------------------------------
(Signature must be guaranteed)
EXECUTION COPY
ROLLER BEARING COMPANY OF AMERICA, INC.
$110,000,000
9-5/8% Senior Subordinated Notes Due 2007
REGISTRATION RIGHTS AGREEMENT
June 17, 1997
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
Roller Bearing Company of America, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated in a purchase
agreement of even date herewith (the "Purchase Agreement"), to issue and sell to
Credit Suisse First Boston Corporation (the "Initial Purchaser"), $110,000,000
principal amount of 9-5/8% Senior Subordinated Notes Due 2007 (the "Notes") to
be unconditionally guaranteed, jointly and severally, on a senior subordinated
basis by Industrial Tectonics Bearings Corporation, RBC Linear Precision
Products, Inc. and RBC Nice Bearings, Inc. (the "Subsidiary Guarantors"). The
Notes will be issued pursuant to an Indenture dated as of June 15, 1997 (the
"Indenture"), among the Company, the Subsidiary Guarantors and United States
Trust Company of New York, as trustee (the "Trustee"). As an inducement to the
Initial Purchaser, the Company and the Subsidiary Guarantors hereby agree with
the Initial Purchaser, for the benefit of the holders of the Notes (including,
without limitation, the Initial Purchaser), the Exchange Notes (as defined
below) and the Private Exchange Notes (as defined below) (collectively, the
"Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its cost,
prepare and, not later than 45 days after (or
<PAGE>
2
if the 45th day is not a business day, the first business day thereafter) the
Issue Date (as defined in the Indenture) of the Notes, file with the Securities
and Exchange Commission (the "Commission") a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to a
proposed offer (the "Registered Exchange Offer") to the Holders of Transfer
Restricted Notes (as defined below), who are not prohibited by any law or policy
of the Commission from participating in the Registered Exchange Offer, to issue
and deliver to such Holders, in exchange for such Transfer Restricted Notes, a
like aggregate principal amount of debt securities (the "Exchange Notes") of the
Company issued under the Indenture and identical in all material respects to the
Notes (except for the transfer restrictions relating to the Notes) that would be
registered under the Securities Act. The Company shall use commercially
reasonable efforts to cause such Exchange Offer Registration Statement to become
effective under the Securities Act within 150 days (or if the 150th day is not a
business day, the first business day thereafter) after the Issue Date of the
Notes and shall keep the Exchange Offer Registration Statement effective for not
less than 30 days (or longer if required by applicable law) after the date on
which notice of the Registered Exchange Offer is mailed to the Holders (such
period being called the "Exchange Offer Registration Period").
If the Company effects the Registered Exchange Offer, the Company
will be entitled to close the Registered Exchange Offer 30 days after the
commencement thereof; provided, however, that the Company has accepted all the
Notes theretofore validly tendered in accordance with the terms of the
Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Notes electing to exchange such Notes
for Exchange Notes (assuming that such Holder is not an affiliate of the Company
within the meaning
<PAGE>
3
of the Securities Act, acquires the Exchange Notes in the ordinary course of
such Holder's business, has no arrangements with any person to participate in
the distribution of the Exchange Notes and is not prohibited by any law or
policy of the Commission from participating in the Registered Exchange Offer) to
trade such Exchange Notes from and after their receipt without any limitations
or restrictions under the Securities Act and without material restrictions under
the securities laws of the several states of the United States. In connection
with such Registered Exchange Offer, the Company shall take such further action,
including, without limitation, appropriate filings under state securities laws,
as may be necessary to realize the foregoing objective subject to Section 3(h)
below.
The Company acknowledges that, pursuant to current interpretations
by the Commission's staff of Section 5 of the Securities Act, in the absence of
an applicable exemption therefrom, (i) each Holder that is a broker-dealer
electing to exchange Notes, acquired for its own account as a result of market
making activities or other trading activities, for Exchange Notes (an
"Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and in Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Notes received by such
Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) if the
Initial Purchaser elects to sell Exchange Notes acquired in exchange for Notes
constituting any portion of an unsold allotment, such Initial Purchaser is
required to deliver a prospectus containing the information required by Items
507 or 508 of Regulation S-K under the Securities Act, as applicable, in
connection with such sale.
The Company shall use commercially reasonable efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be lawfully
delivered by all persons subject to the prospectus
<PAGE>
4
delivery requirements of the Securities Act for such period of time as such
persons must comply with such requirements in order to resell the Exchange
Notes; provided, however, that (i) in the case where such prospectus and any
amendment or supplement thereto must be delivered by an Exchanging Dealer or the
Initial Purchaser, such period shall be the lesser of 180 days after the
expiration date of the Registered Exchange Offer and the date on which all
Exchanging Dealers and the Initial Purchaser have sold all Exchange Notes held
by them (unless such period is extended pursuant to Section 3(j) below), and
(ii) the Company shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Notes for a period not less than 90 days after the consummation of
the Registered Exchange Offer; provided further, however, that upon the
occurrence of any event described in Section 6(a)(iii), such 180 days or 90
days, as applicable, shall be extended by the number of days during which such
event continues.
If, upon consummation of the Registered Exchange Offer, the Initial
Purchaser holds Notes acquired by it as part of its initial distribution, the
Company, simultaneously with the delivery of the Exchange Notes pursuant to the
Registered Exchange Offer, shall issue and deliver to the Initial Purchaser upon
the written request of the Initial Purchaser, in exchange (the "Private
Exchange") for the Notes held by the Initial Purchaser, a like principal amount
of debt securities of the Company issued under the Indenture and identical in
all material respects (including the existence of restrictions on transfer under
the Securities Act and the securities laws of the several states of the United
States) to the Notes (the "Private Exchange Notes"). The Notes, the Exchange
Notes and the Private Exchange Notes are herein collectively called the
"Securities".
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration
<PAGE>
5
Statement, together with an appropriate letter of transmittal and related
documents;
(b) keep the Registered Exchange Offer open for not less than 30
days (or longer, if required by applicable law) after the date notice
thereof is mailed to the Holders;
(c) utilize the services of a depositary ("Depository Trust
Company") for the Registered Exchange Offer with an address in the Borough
of Manhattan, The City of New York, which may be the Trustee or an
affiliate of the Trustee;
(d) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all material respects with all applicable
law.
As soon as practicable after the close of the Registered Exchange
Offer or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all the Notes validly tendered and not
withdrawn pursuant to the Registered Exchange Offer or the Private
Exchange, as the case may be;
(ii) deliver to the Trustee for cancelation all the Notes so
accepted for exchange; and
(iii) cause the Trustee to authenticate and promptly deliver
Exchange Notes or Private Exchange Notes, as the case may be, equal in
principal amount to the Notes of each Holder so accepted for exchange.
The Indenture will provide that the Exchange Notes will not be
subject to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and
<PAGE>
6
consent together on all matters as one class and that none of the Securities
will have the right to vote or consent as a class separate from one another on
any matter.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Notes received by such Holder will be
acquired in the ordinary course of business, (ii) such Holder will have no
arrangements or understanding with any person to participate in the distribution
of the Notes or the Exchange Notes within the meaning of the Securities Act,
(iii) such Holder is not an "affiliate", as defined in Rule 405 of the
Securities Act, of the Company or, if it is an affiliate, such Holder will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Notes and (v) if such Holder is a broker-dealer,
that it will receive Exchange Notes for its own account in exchange for Notes
that were acquired as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any resale
of such Exchange Notes.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming a part thereof and any supplement thereto will comply in
all material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, will not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
<PAGE>
7
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within
180 days of the date of this Agreement, (iii) the Initial Purchaser so requests
with respect to the Notes (or the Private Exchange Notes) not eligible to be
exchanged for Exchange Notes in the Registered Exchange Offer and held by it
following consummation of the Registered Exchange Offer or (iv) any Holder
(other than an Exchanging Dealer) is not eligible to participate in the
Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange Notes on the date of the
exchange, the Company shall take the following actions:
(a) The Company shall, at its cost, as promptly as practicable (but
in no event more than 45 days after so required or requested pursuant to
this Section 2) file with the Commission and thereafter shall use
commercially reasonable efforts to cause to be declared effective a
registration statement (the "Shelf Registration Statement"; each of it and
the Exchange Offer Registration Statement being referred to herein as a
"Registration Statement") on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Notes by the
Holders thereof from time to time in accordance with the methods of
distribution set forth in the Shelf Registration Statement and Rule 415
under the Securities Act (hereinafter, the "Shelf Registration");
provided, however, that no Holder (other than the Initial Purchaser) shall
be entitled to have the Securities held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing to be bound by
all the provisions of this Agreement applicable to such Holder.
<PAGE>
8
(b) The Company shall keep the Shelf Registration Statement
continuously effective in order to permit the prospectus included therein
to be lawfully delivered by the Holders of the relevant Securities until
the earlier of (i) the time when the Notes covered by the Shelf
Registration Statement can be sold pursuant to Rule 144 under the
Securities Act without any limitations under clauses (c), (e), (f) and (h)
of Rule 144 and (ii) two years from the Issue Date (or for such longer
period if extended pursuant to Section 3(j) below) or such shorter period
that will terminate when all the Securities covered by the Shelf
Registration Statement have been sold pursuant thereto.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3. Registration Procedures. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent applicable, any
Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Company shall (i) furnish to the Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereto and each supplement, if any, to the
prospectus included therein and, in the event that the Initial Purchaser
(with respect to any portion of an unsold allotment from the original
offering) is
<PAGE>
9
participating in the Registered Exchange Offer or the Shelf Registration
Statement, shall in its reasonable judgment reflect in each such document,
when so filed with the Commission, such comments as such Initial Purchaser
reasonably may propose, (ii) include the information set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C
hereto in the "Plan of Distribution" section of the prospectus forming a
part of the Exchange Offer Registration Statement and include the
information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer, (iii) if requested by
the Initial Purchaser, include the information required by Items 507 or
508 of Regulation S-K under the Securities Act, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement,
(iv) include within the prospectus contained in the Exchange Offer
Registration Statement a section entitled "Plan of Distribution",
reasonably acceptable to the Initial Purchaser, which shall contain a
summary statement of the positions taken or policies made by the staff of
the Commission with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
Exchange Notes received by such broker-dealer in the Registered Exchange
Offer (a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the Commission or
such positions or policies, in the reasonable judgment of the Initial
Purchaser based upon advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the Commission, and (v) in
the case of a Shelf Registration Statement, include the names of the
Holders who propose to sell Securities pursuant to the Shelf Registration
Statement as selling security holders.
<PAGE>
10
(b) The Company shall give written notice to the Initial Purchaser,
the Holders of the Securities and any Participating Broker-Dealer from
whom the Company has received prior written notice that it will be a
Participating Broker-Dealer in the Registered Exchange Offer (which notice
pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction
to suspend the use of the prospectus until the requisite changes have been
made):
(i) when the Registration Statement or any amendment thereto
has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of
the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to
make changes in the Registration Statement or the prospectus in
order that the Registration Statement or the prospectus does not
contain an untrue statement of a material fact nor omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
<PAGE>
11
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least
one copy of the Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if
the Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(e) The Company shall deliver to the Initial Purchaser, each
Exchanging Dealer and any other Holder who so requests, without charge, at
least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules and, if the Initial Purchaser or any such Holder so requests,
all exhibits thereto (including those incorporated by reference).
(f) The Company shall deliver to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in the Shelf Registration Statement and any amendment or supplement
thereto as such person may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the prospectus
or any amendment or supplement thereto included in the Shelf Registration
Statement by each of the selling Holders of the Securities in connection
with the offering and sale of the Securities covered by such prospectus or
any such amendment or supplement.
(g) The Company shall deliver to the Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final
<PAGE>
12
prospectus included in the Exchange Offer Registration Statement and any
amendment or supplement thereto as such persons may reasonably request.
The Company consents, subject to the provisions of this Agreement, to the
use of the prospectus or any amendment or supplement thereto by the
Initial Purchaser, if necessary, any Exchanging Dealer, any Participating
Broker-Dealer and such other persons required to deliver a prospectus
following the Registered Exchange Offer in connection with the offering
and sale of the Exchange Notes covered by the prospectus, or any amendment
or supplement thereto, included in such Exchange Offer Registration
Statement.
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Company shall register or qualify or cooperate
with the Holders of the Securities included therein and their respective
counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of
such states of the United States as any Holder of the Securities
reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such jurisdictions
of the Securities covered by such Registration Statement; provided,
however, that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it is not then so qualified or
(ii) take any action which would subject it to general service of process
or to taxation in any jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Holders of the Securities
to facilitate the timely preparation and delivery of certificates
representing the Securities to be sold pursuant to any Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as the Holders may request a reasonable period of
time prior to sales of the Securities pursuant to such Registration
Statement.
<PAGE>
13
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Company
is required to maintain an effective Registration Statement, the Company
shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Notes or purchasers of Securities, the prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
If the Company notifies the Initial Purchaser, the Holders of the
Securities and any known Participating Broker-Dealer in accordance with
paragraphs (ii) through (v) of Section 3(b) above to suspend the use of
the prospectus until the requisite changes to the prospectus have been
made, then the Initial Purchaser, the Holders of the Securities and any
such Participating Broker-Dealers shall suspend use of such prospectus,
and the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration
Statement provided for in Section 1 above shall each be extended by the
number of days from and including the date of the giving of such notice to
and including the date when the Initial Purchaser, the Holders of the
Securities and any known Participating Broker-Dealer shall have received
such amended or supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide one CUSIP number for all of the Notes,
the Exchange Notes or the Private Exchange Notes, as the case may be, and
provide the applicable trustee with printed certificates for the Notes,
the Exchange Notes or the Private Exchange Notes, as the case may be, in a
form eligible for deposit with The Depository Trust Company.
<PAGE>
14
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make
generally available to its security holders (or otherwise provide in
accordance with Section 11(a) of the Securities Act) an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act, no later
than 45 days after the end of a 12-month period (or 90 days, if such
period is a fiscal year) beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of the
Registration Statement, which statement shall cover such 12-month period.
(m) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing
such changes, if any, as shall be necessary for such qualification. In the
event that such qualification would require the appointment of a new
trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(n) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company
such information regarding the Holder and the distribution of the
Securities as the Company may from time to time reasonably require for
inclusion in the Shelf Registration Statement, and the Company may exclude
from such registration the Securities of any Holder that unreasonably
fails to furnish such information within a reasonable time after receiving
such request.
(o) The Company shall enter into such customary agreements
(including if requested an underwriting agreement in customary form) and
take all such other action, if any, as any Holder of the Securities shall
reasonably request in order to facilitate the disposition of the
Securities pursuant to any Shelf Registration.
<PAGE>
15
(p) In the case of any Shelf Registration, the Company shall (i)
make reasonably available for inspection by the Holders of the Securities,
any underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent
retained by the Holders of the Securities or any such underwriter all
relevant financial and other records, pertinent corporate documents and
properties of the Company and (ii) cause the Company's officers,
directors, employees, accountants and auditors to supply all relevant
information reasonably requested by the Holders of the Securities or any
such underwriter, attorney, accountant or agent in connection with the
Shelf Registration Statement, in each case as shall be reasonably
necessary, in the judgment of the Holder or any such underwriter,
attorney, accountant or agent referred to in this paragraph, to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated by the Initial Purchaser and on
behalf of the other parties by one counsel designated by and on behalf of
such other parties as described in Section 4 hereof.
(q) In the case of any Shelf Registration, the Company, if requested
by any Holder of Securities covered thereby, shall cause (i) its counsel
to deliver an opinion and updates thereof relating to the Securities in
customary form addressed to the managing underwriters, if any, thereof and
dated, in the case of the initial opinion, the effective date of such
Shelf Registration Statement (it being agreed that the matters to be
covered by such opinion shall include, without limitation, the due
incorporation and good standing of the Company and its subsidiaries; the
due authorization, execution and delivery of the relevant agreement of the
type referred to in Section 3(o) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of the
applicable Securities; the
<PAGE>
16
absence of material legal or governmental proceedings involving the
Company; the absence of governmental approvals required to be obtained in
connection with the Shelf Registration Statement, the offering and sale of
the applicable Securities or any agreement of the type referred to in
Section 3(o) hereof; the compliance as to form of such Shelf Registration
Statement and any documents incorporated by reference therein and of the
Indenture with the requirements of the Securities Act and the Trust
Indenture Act, respectively; and, as of the date of the opinion and as of
the effective date of the Shelf Registration Statement or most recent post
effective amendment thereto, as the case may be, the absence from such
Shelf Registration Statement and the prospectus included therein, as then
amended or supplemented, and from any documents incorporated by reference
therein of an untrue statement of a material fact or the omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of any such documents,
in the light of the circumstances existing at the time that such documents
were filed with the Commission under the Exchange Act); (ii) its officers
to execute and deliver all customary documents and certificates and
updates thereof requested by any underwriters of the applicable Securities
and (iii) its independent public accountants to provide to the selling
Holders of the applicable Securities and any underwriter therefor a
comfort letter in customary form and covering matters of the type
customarily covered in comfort letters in connection with primary
underwritten offerings, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing Standards
No. 72.
(r) In the case of the Registered Exchange Offer, if requested by
the Initial Purchaser or any known Participating Broker-Dealer, the
Company shall cause (i) its counsel to deliver to such Initial Purchaser
or such Participating Broker-Dealer a signed opinion covering the matters
set forth in Section 6(d) of the Purchase Agreement with such changes as
are customary
<PAGE>
17
in connection with the preparation of a Registration Statement and (ii)
its independent public accountants to deliver to such Initial Purchaser or
such Participating Broker-Dealer a comfort letter, in customary form,
meeting the requirements as to the substance thereof as set forth in
Section 6(a) of the Purchase Agreement, with appropriate date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Notes by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Company shall
mark, or cause to be marked, on the Notes so exchanged that such Notes are
being canceled in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be; in no event shall the Notes be marked as paid
or otherwise satisfied.
(t) The Company will use its best efforts to cause the Securities
covered by a Registration Statement to be rated (or to have any existing
rating confirmed) with the appropriate rating agencies, if so requested by
Holders of a majority in aggregate principal amount of Securities covered
by such Registration Statement, or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a member of
an underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Rules of Fair Practice and the By-Laws of the
National Association of Securities Dealers, Inc. ("NASD")) thereof,
whether as a Holder of such Securities or as an underwriter, a placement
or sales agent or a broker or dealer in respect thereof, or otherwise, the
Company shall assist such broker-dealer in complying with the requirements
of such Rules and By-Laws, including, without limitation, by (i) if such
Rules or By-Laws
<PAGE>
18
shall so require, engaging a "qualified independent underwriter" (as
defined in Section 2720 thereof), at such broker-dealer's expense, to
participate in the preparation of the Registration Statement relating to
such Securities, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such
Registration Statement is an underwritten offering or is made through a
placement or sales agent, to recommend the yield of such Securities, (ii)
indemnifying any such qualified independent underwriter to the extent of
the indemnification of underwriters provided in Section 5 hereof and (iii)
providing such information to such broker-dealer as may be required in
order for such broker-dealer to comply with the requirements of the Rules
of Fair Practice of the NASD.
(v) The Company and the Subsidiary Guarantors shall use their best
efforts to take all other steps necessary to effect the registration of
the Securities covered by a Registration Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 1 through 3 hereof (including the reasonable fees and expenses of
Cravath, Swaine & Moore, counsel for the Initial Purchaser, incurred in
connection with the Registered Exchange Offer), whether or not the Registered
Exchange Offer or a Shelf Registration is filed or becomes effective, and, in
the event of a Shelf Registration, shall bear, or reimburse the Holders of the
Securities covered thereby for, the reasonable fees and disbursements of one
firm of counsel designated by the Holders of a majority in principal amount of
the Securities covered thereby to act as counsel for the Holders of the
Securities in connection therewith.
5. Indemnification. (a) The Company and the Subsidiary Guarantors
agree, jointly and severally, to indemnify and hold harmless each Holder of the
Securities, any Participating Broker-Dealer and each person, if any, who
<PAGE>
19
controls such Holder or such Participating Broker-Dealer within the meaning of
the Securities Act or the Exchange Act (each Holder, any Participating
Broker-Dealer and such controlling persons being referred to collectively as the
"Indemnified Parties") from and against any losses, claims, damages or
liabilities, joint or several, or any actions in respect thereof (including, but
not limited to, any losses, claims, damages, liabilities or actions relating to
purchases and sales of the Securities) to which each Indemnified Party may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement or prospectus or in any amendment or
supplement thereto, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse, as
incurred, each Indemnified Party for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof; provided, however, that
(i) the Company and the Subsidiary Guarantors shall not be liable in any such
case to the extent that such loss, claim, damage, liability or action arises out
of or is based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein and (ii) with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
prospectus relating to a Shelf Registration Statement, the indemnity agreement
contained in this subsection (a) shall not inure to the benefit of any Holder or
Participating Broker-Dealer from whom the person asserting any such losses,
claims, damages or liabilities purchased the Securities concerned, to the extent
that a prospectus relating to such Securities was required to be delivered by
such Holder or Participating
<PAGE>
20
Broker-Dealer under the Securities Act in connection with such purchase and any
such loss, claim, damage or liability of such Holder or Participating
Broker-Dealer results from the fact that there was not sent or given to such
person, at or prior to the written confirmation of the sale of such Securities
to such person, a copy of the final prospectus, as amended or supplemented, if
the Company had previously furnished copies thereof to such Holder or
Participating Broker-Dealer; provided further, however, that this indemnity
agreement will be in addition to any liability which the Company may otherwise
have to such Indemnified Party. The Company and the Subsidiary Guarantors shall
also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution (in each
case as described in the Registration Statement), their officers and directors
and each person who controls such persons within the meaning of the Securities
Act or the Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders of the Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company, each Subsidiary Guarantor and each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act from and against any losses, claims, damages,
liabilities or actions in respect thereof to which the Company or any such
controlling person may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such
<PAGE>
21
Holder specifically for inclusion therein; and, subject to the limitation set
forth immediately preceding this clause, shall reimburse, as incurred, the
Company and the Subsidiary Guarantors for any legal or other expenses reasonably
incurred by the Company, such Subsidiary Guarantors or any such controlling
person in connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. This indemnity agreement will be in
addition to any liability which such Holder may otherwise have to the Company,
the Subsidiary Guarantors or any of their controlling persons.
(c) Promptly after receipt by an Indemnified Party under this
Section 5 of notice of the commencement of any action or proceeding (including a
governmental investigation), such Indemnified Party will, if a claim in respect
thereof is to be made against any person (the "Indemnifying Party") under this
Section 5, notify the Indemnifying Party of the commencement thereof; but the
omission so to notify the Indemnifying Party will not, in any event, relieve the
Indemnifying Party from any obligations to any Indemnified Party other than the
indemnification obligation provided in paragraph (a) or (b) above. In case any
such action is brought against any Indemnified Party, and it notifies the
Indemnifying Party of the commencement thereof, the Indemnifying Party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other Indemnifying Party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party (who
shall not, except with the consent of the Indemnified Party, be counsel to the
Indemnifying Party), and after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume the defense thereof the
Indemnifying Party will not be liable to such Indemnified Party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such Indemnified Party in connection
with the defense thereof. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending or
threatened action in respect of which any Indemnified Party is or could have
been a party
<PAGE>
22
and indemnity could have been sought hereunder by such Indemnified Party unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on any claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an Indemnified Party under
subsections (a) or (b) above, then each Indemnifying Party shall contribute to
the amount paid or payable by such Indemnified Party as a result of the losses,
claims, damages, liabilities or actions in respect thereof referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the Indemnifying Party or parties on the one
hand and the Indemnified Party on the other from the exchange of the Notes,
pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Indemnifying Party or
Parties on the one hand and the Indemnified Party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company and the Subsidiary
Guarantors, on the one hand, or such Holder or such other indemnified person, as
the case may be, on the other, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid by an Indemnified Party as a result of the losses,
claims, damages, liabilities or actions referred to in the first sentence of
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any action or claim which is the subject of this subsection (d).
<PAGE>
23
Notwithstanding any other provision of this Section 5(d), the Holders of the
Securities shall not be required to contribute any amount in excess of the
amount by which the net proceeds received by such Holders from the sale of the
Securities pursuant to a Registration Statement exceeds the amount of damages
which such Holders have otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this paragraph (d),
each person, if any, who controls such Indemnified Party within the meaning of
the Securities Act or the Exchange Act shall have the same rights to
contribution as such Indemnified Party and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act shall have
the same rights to contribution as the Company.
(e) The agreements contained in this Section 5 shall survive the
sale of the Securities pursuant to a Registration Statement and shall remain in
full force and effect, regardless of any termination or cancelation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a) Additional
cash interest (the "Additional Interest") with respect to the Securities shall
be assessed as follows if any of the following events occur for any reason
whatsoever (each such event in clauses (i) through (iii) below a "Registration
Default"):
(i) If by August 7, 1997, neither the Exchange Offer Registration
Statement nor a Shelf Registration Statement has been filed with the
Commission;
(ii) If by December 22, 1997, neither the Registered Exchange Offer
is consummated nor, if required in lieu thereof, the Shelf Registration
Statement is declared effective by the Commission; or
<PAGE>
24
(iii) If after December 22, 1997 and after either the Exchange Offer
Registration Statement or the Shelf Registration Statement is declared
effective (A) such Registration Statement thereafter ceases to be
effective or (B) such Registration Statement or the related prospectus
ceases to be usable (except as permitted in paragraph (b)) in connection
with resales of Transfer Restricted Notes during the periods specified
herein because either (1) any event occurs as a result of which the
related prospectus forming part of such Registration Statement would
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or (2) it shall
be necessary to amend such Registration Statement or supplement the
related prospectus to comply with the Securities Act or the Exchange Act
or the respective rules thereunder.
Additional Interest shall accrue on the Notes (over and above the interest set
forth in the title of the Notes) from and including the date on which any such
Registration Default shall occur to but excluding the date on which all such
Registration Defaults have been cured, at a rate of 0.50% per annum.
(b) A Registration Default referred to in Section 6(a)(iii)(B) shall
be deemed not to have occurred and be continuing in relation to a Registration
Statement or the related prospectus if (i) such Registration Default has
occurred solely as a result of (x) the filing of a post-effective amendment to
such Registration Statement to incorporate annual audited financial information
with respect to the Company where such post-effective amendment is not yet
effective and needs to be declared effective to permit Holders to use the
related prospectus or (y) other material events with respect to the Company that
would need to be described in such Registration Statement or the related
prospectus and (ii) in the case of clause (y), the Company is proceeding
promptly and in good faith to amend or supplement such Registration Statement
and related prospectus to describe such events; provided, however, that
<PAGE>
25
in any case if such Registration Default occurs for a continuous period in
excess of 45 days, Additional Interest shall be payable in accordance with the
above paragraph from the 46th day following the day such Registration Default
occurs until the date on which such Registration Default is cured.
(c) Any Additional Interest accruing on the Notes will be payable in
cash on the regular interest payment dates with respect to the Notes to the
holders of record on the applicable record date. The amount of Additional
Interest will be determined by multiplying the applicable Additional Interest
rate by the principal amount of the Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Notes" means each Security until (i) the
date on which such Security has been exchanged by a person other than a
broker-dealer for a freely transferrable Exchange Note in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of such Security for an Exchange Note, the date on which such
Exchange Note is sold to a purchaser who receives from such broker-dealer on or
prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Security has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Security is distributed to the public pursuant to Rule 144 under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act.
7. Rules 144 and 144A. The Company and the Subsidiary Guarantors
shall use commercially reasonable efforts to file the reports required to be
filed by them under the Securities Act and the Exchange Act in a timely manner
and, if at any time the Company and the Subsidiary Guarantor are not required to
file such reports, they will,
<PAGE>
26
upon the request of any Holder of Transfer Restricted Notes, make publicly
available other information so long as necessary to permit sales of their
securities pursuant to Rules 144 and 144A. The Company and the Subsidiary
Guarantors covenant that they will take such further action as any Holder of
Transfer Restricted Notes may reasonably request, all to the extent required
from time to time to enable such Holder to sell Transfer Restricted Notes
without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including the requirements of Rule
144A(d)(4)). The Company will provide a copy of this Agreement to prospective
purchasers of Transfer Restricted Notes identified to the Company by the Initial
Purchaser upon request. Upon the request of any Holder of Transfer Restricted
Notes, the Company shall deliver to such Holder a written statement as to
whether the Company and the Subsidiary Guarantors have complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require the Company or any Subsidiary Guarantor to register any of its
securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Notes covered by any Shelf Registration are to be sold in an underwritten
offering, the managing underwriters will be selected by the Holders of a
majority in aggregate principal amount of such Transfer Restricted Notes to be
included in such offering.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Notes on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the Subsidiary
Guarantors and with the written consent of the Holders of a majority in
principal amount of the Securities
<PAGE>
27
affected by such amendment, modification, supplement, waiver or consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address
given by such Holder to the Company in accordance with the provisions of
this Section 9(b), which address initially is, with respect to each
Holder, the address of such Holder to which confirmation of the sale of
the Notes to such Holder was first sent by the Initial Purchaser (and
which address the Initial Purchaser provided to the Company), with a copy
in like manner to you as follows:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Fax No.: (212) 325-2017
Attention: Transactions Advisory Group
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Fax No.: (212) 474-3700
Attention: Kris F. Heinzelman
(2) if to the Initial Purchaser, at the addresses specified in
Section 9(b)(1);
<PAGE>
28
(3) if to the Company or any Subsidiary Guarantor, at the Company's
address as follows:
Roller Bearing Company of America, Inc.
60 Round Hill Road
P.O. Box 430
Fairfield, Connecticut 06430-0430
Attention: President
with a copy to:
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Attention: Brian Hoffmann
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged by recipient's facsimile machine operator, if sent
by facsimile transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
(c) No Inconsistent Agreements. Neither the Company nor any
Subsidiary Guarantor has, as of the date hereof, entered into, nor shall any of
them, on or after the date hereof, enter into, any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders herein or
otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Company and the Subsidiary Guarantors and their respective successors and
assigns; provided, however, that no successor or assign may exercise any rights
under this Agreement unless such successor or assign agrees in writing to be
bound by the provisions hereof.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in
<PAGE>
29
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Securities is
required hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
(j) Termination. In the event the transactions contemplated by the
Purchase Agreement are not consummated as contemplated therein, this Agreement
shall terminate without any liability on the part of the Company, the Subsidiary
Guarantors or the Initial Purchaser.
<PAGE>
30
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to CSFBC a counterpart hereof, whereupon this
Agreement will become a binding agreement among the Company, the Subsidiary
Guarantors and the Initial Purchaser in accordance with its terms.
Very truly yours,
ROLLER BEARING COMPANY OF
AMERICA, INC.
By:_________________________________
Name:
Title:
INDUSTRIAL TECTONICS BEARINGS
CORPORATION
By:_________________________________
Name:
Title:
RBC LINEAR PRECISION PRODUCTS,
INC.
By:_________________________________
Name:
Title:
<PAGE>
31
RBC NICE BEARINGS, INC.
By:_________________________________
Name:
Title:
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
By:_____________________________
Name:
Title:
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, for a period of 180 days
after the Expiration Date (as defined herein), it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account
in exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Existing Notes where such Existing Notes were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 199 ,
all dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus. */
The Company will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the
- ----------
*/ In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
2
Securities Act and any profit on any such resale of Exchange Notes and any
commission or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
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 has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
<PAGE>
ANNEX D
|___| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ____________________________________________
Address: _________________________________________
_________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
October 31, 1997
Roller Bearing Company of America, Inc.
Industrial Tectonics Bearings Corporation
RBC Linear Precision Products, Inc.
RBC Nice Bearings, Inc.
Bremen Bearings, Inc.
60 Round Hill Road
Fairfield, Connecticut 06340
Gentlemen:
We have acted as your special counsel in connection with the proposed
offering and issuance of $110 million of 9-5/8% Senior Subordinated Notes Due
2007, Series B (the "Exchange Notes") of Roller Bearing Company of America, Inc.
(the "Company"), together with the guarantees thereof (the "Subsidiary
Guarantees" and collectively with the Exchange Notes, the "Securities") by each
of Industrial Tectonics Bearings Corporation. RBC Linear Precision Products,
Inc., RBC Nice Bearings, Inc. and Bremen Bearings, Inc. (collectively, the
"Subsidiary Guarantors") in exchange for a like amount of 9-5/8% Senior
Subordinated Notes Due 2007 (the "Outstanding Notes") of the Company, as
contemplated by the Prospectus (the "Prospectus") included as part of the
Registration Statement on Form S-4 (the "Registration Statement") with respect
to the Securities, which is being filed herewith with the Securities and
Exchange Commission under the Securities Act of 1993, as amended (the
"Securities Act").
For the purposes of this opinion, we have examined the Registration
Statement and the Prospectus contained therein, and have also examined and
relied upon the representations and warranties as to factual matters contained
in such documents and upon originals or copies of such corporate records and
other documents and have reviewed such
<PAGE>
October 31, 1997
Page 2
questions of law as we considered necessary or appropriate for the purposes of
this opinion. In our examination, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the original
documents of all documents submitted to us as copies, the genuineness of all
signatures on documents reviewed by us and the legal capacity of natural
persons.
Members of this firm are admitted to the Bar of the State of New York and
we express no opinon as to the applicability of, compliance with or effect of,
the law of any jurisdiction other than United States Federal law, the General
Corporation Law of the State of Delaware and the laws of the State of New York.
Based on such examination and review, we are of the opinion that:
1. The Exchange Notes have been duly authorized by the Company and the
Subsidiary Guarantees have been duly authorized by the Subsidiary
Guarantors; and
2. When (i) authenticated (in the case of the Exchange Notes) by the
trustee therefor (the "Trustee") in accordance with the provisions of
the Indenture (as defined in the Registration Statement, (ii) duly
executed by the Company and the Subsidiary Guarantors respectively and
(iii) issued and delivered in exchange for Outstanding Notes in
accordance with the terms of the Exchange Offer (as defined in the
Registration Statement), (a) the Exchange Notes will constitute valid
and legally binding obligations of the Company, enforceable against
the Company in accordance with their terms, and (b) the Subsidiary
Guarantees will constitute valid and legally binding obligations of
the Subsidiary Guarantors, enforceable against the Subsidiary
Guarantors respectively in accordance with their terms, subject in
each case to the following qualifications:
A. enforcement may be limited by applicable bankruptcy, insolvency,
reoganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter axisting affecting creditors' rights
generally and by general principles of equity (regardless of
whether enforcement is sought in equity or at law); and
<PAGE>
October 31, 1997
Page 3
B. we express no opinion to the enforceability of any rights to
contribution or indemnification provided for in the Securities
which are violative of the public policy underlying any law, rule
or regulation (including any federal or state securities law,
rule or regulation).
To the extent that the obligations of the Company of the Subsidiary
Guarantors under the Indenture may be dependent upon such matters, we have
assumed for purposes of this opinion the (i) the Trustee is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and is duly qualified to engage in the activities contemplated by
the Indenture, (ii) the Indenture has been duly authorized, executed and
delivered by and constitutes the legal, valid and binding obligation of the
Trustee, (iii) the Trustee is in compliance, generally and with respect to
acting as Trustee, under the Indenture, with all applicable laws and regulations
and (iv) the Trustee has the requisite organizational and legal power and
authority to perform its obligations under the Indenture.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving this consent, we do not thereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act and the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ McDermott, Will & Emery
EXECUTION COPY
$110,000,000
ROLLER BEARING COMPANY OF AMERICA, INC.
9-5/8% Senior Subordinated Notes Due 2007
PURCHASE AGREEMENT
June 17, 1997
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, N.Y. 10010
Ladies and Gentlemen:
1. Introductory. Roller Bearing Company of America, Inc., a Delaware
corporation (the "Company"), proposes, subject to the terms and conditions
stated herein, to issue and sell to Credit Suisse First Boston Corporation (the
"Initial Purchaser") U.S.$110,000,000 principal amount of its 9-5/8% Senior
Subordinated Notes Due 2007 (the "Offered Securities") to be unconditionally
guaranteed (the "Guaranty"), jointly and severally, on a senior subordinated
basis by Industrial Tectonics Bearings Corporation, RBC Linear Precision
Products, Inc. and RBC Nice Bearings, Inc. (collectively, the "Subsidiary
Guarantors"). The Offered Securities are to be issued under an Indenture dated
as of June 15, 1997 (the "Indenture") between the Company, the Subsidiary
Guarantors and United States Trust Company of New York, as trustee (the
"Trustee").
The Offered Securities are being offered and sold in connection with the
consummation of the transactions
<PAGE>
2
contemplated by the Redemption and Warrant Purchase Agreement dated as of May
20, 1997 (the "Recapitalization Agreement"), among Roller Bearing Holding
Company, Inc. ("Holdings") and certain of its security holders. To finance the
Recapitalization, the Company will enter into senior credit facilities and will
issue the Offered Securities, Holdings will issue units (the "Units") consisting
of its senior secured discount debentures and warrants to purchase its common
stock.
Holders (including subsequent transferees) of the Offered Securities will
have the registration rights set forth in a registration rights agreement of
even date herewith among the Company, the Subsidiary Guarantors and the Initial
Purchaser (the "Registration Rights Agreement"). Pursuant to the Registration
Rights Agreement, the Company has agreed to file with the Securities and
Exchange Commission (the "Commission") (i) a registration statement under the
United States Securities Act of 1933 (the "Securities Act"), registering an
issue of a series of senior subordinated notes (the "Exchange Securities")
identical in all material respects to the Offered Securities (except that the
Exchange Securities will not contain terms with respect to transfer
restrictions) to be offered in exchange for the Offered Securities and (ii)
under certain circumstances, a shelf registration statement pursuant to Rule 415
under the Securities Act.
This Agreement, the Indenture and the Registration Rights Agreement are
referred to herein collectively as the "Operative Documents".
The Company and the Subsidiary Guarantors hereby agree with the Initial
Purchaser as follows:
2. Representations and Warranties of the Company and the Subsidiary
Guarantors. The Company and the Subsidiary Guarantors, jointly and severally,
represent and warrant to, and agree with, the Initial Purchaser that:
<PAGE>
3
(a) A preliminary offering circular, dated May 30, 1997 (the
"Preliminary Offering Circular"), and an offering circular, dated June 17, 1997
(the "Offering Circular"), relating to the Offered Securities to be offered by
the Initial Purchaser have been prepared by the Company. Such Preliminary
Offering Circular and Offering Circular are hereinafter collectively referred to
as the "Offering Document". As of their respective dates and, in the case of the
Offering Circular, as of the date of this Agreement, the Offering Document does
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except for such
misstatements or omissions in the Preliminary Offering Circular that were
corrected in the Offering Circular. The preceding sentence does not apply to
statements in or omissions from the Offering Document based upon written
information furnished to the Company by the Initial Purchaser specifically for
use therein, it being understood and agreed that the only such information is
that described as such in Section 7(b) hereof.
(b) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Offering Document; the Company is duly qualified to
do business as a foreign corporation in good standing in all other jurisdictions
in which its ownership or lease of property or the conduct of its business
requires such qualification, except where the failure to so qualify could not
reasonably be expected to have a material adverse effect upon the condition
(financial or other), results of operations, business affairs or business
prospects of the Company and its subsidiaries, taken as a whole (a "Material
Adverse Effect"); and all of the issued and outstanding capital stock of the
Company has been duly authorized and issued, is fully paid and nonassessable and
is owned by Holdings.
<PAGE>
4
(c) Each subsidiary of the Company has been duly incorporated and is
an existing corporation in good standing under the laws of the jurisdiction of
its incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering Document; and
each subsidiary of the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such qualification,
except where the failure to so qualify could not reasonably be expected to have
a Material Adverse Effect; all of the issued and outstanding capital stock of
each subsidiary of the Company has been duly authorized and validly issued and
is fully paid and nonassessable; and the capital stock of each subsidiary owned
by the Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects, except for liens incurred in relation to the Company's
credit facility with Heller Financial (the "Heller Credit Facility").
(d) The Indenture has been duly authorized by the Company and the
Subsidiary Guarantors; the Offered Securities have been duly authorized by the
Company; the Guaranty of the Offered Securities by each Subsidiary Guarantor has
been duly authorized by such Subsidiary Guarantor; and when the Offered
Securities are delivered and paid for pursuant to this Agreement on the Closing
Date (as defined below), the Indenture will have been duly executed and
delivered by the Company and the Subsidiary Guarantors, such Offered Securities
will have been duly executed, authenticated, issued and delivered by the Company
and (together with the Guaranty) will conform to the description thereof
contained in the Offering Document and the Indenture, such Offered Securities
and the Guaranty will constitute valid and legally binding obligations of the
Company and the Subsidiary Guarantors, as the case may be, enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
<PAGE>
5
relating to or affecting creditors' rights and to general equity principles.
(e) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and the Subsidiary Guarantors and conforms
in all material respects to the description thereof contained in the Offering
Document. The Registration Rights Agreement constitutes a valid and legally
binding obligation of each of the Company and the Subsidiary Guarantors.
(f) The Recapitalization Agreement has been duly authorized,
executed and delivered by Holdings and conforms in all material respects to the
descriptions thereof in the Offering Document. The Recapitalization Agreement
constitutes a valid and legally binding obligation of Holdings.
(g) Except as disclosed in the Offering Document, there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or the Initial Purchaser
for a brokerage commission, finder's fee or other like payment in connection
with the offering of the Offered Securities.
(h) Except as provided in Schedule 2(h), no consent, approval,
authorization, or order of, or filing with, any governmental agency or body or
any court is required for the consummation of the transactions contemplated by
the Operative Documents or the Recapitalization Agreement or in connection with
the issuance and sale of the Offered Securities by the Company or the Units by
Holdings, other than as may be required under the Securities Act and the Rules
and Regulations of the Commission thereunder with respect to the Registration
Rights Agreement and the transactions contemplated thereunder and such as may be
required by state securities or blue sky laws in connection with the offer and
sale of the Offered Securities, except where failure to obtain such consent,
approval or authorization could not reasonably be expected to have a Material
Adverse Effect or would not
<PAGE>
6
materially and adversely affect the legal, valid and binding obligations of the
Company under the Operative Documents, the ability of the Company to perform its
obligations under any of the Operative Documents or which are otherwise material
in the context of the sale of the Offered Securities.
(i) The execution, delivery and performance of the Operative
Documents, the Recapitalization Agreement and the issuance and sale of the
Offered Securities and compliance with the terms and provisions thereof, will
not result in a breach or violation of any of the terms and provisions of, or
constitute a default under, (i) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over Holdings, the Company or any subsidiary of the Company or any
of their properties, (ii) any agreement or instrument to which Holdings, the
Company or any such subsidiary is a party or by which Holdings, the Company or
any such subsidiary is bound or to which any of the properties of Holdings, the
Company or any such subsidiary is subject or (iii) the charter or by-laws of
Holdings, the Company or any such subsidiary; and the Company and the Subsidiary
Guarantors have full power and authority to authorize, issue and sell the
Offered Securities (and related Guaranty) as contemplated by this Agreement,
except, in the case of the clause (i) or (ii), such breaches, violations or
defaults that individually or in the aggregate could not be reasonably expected
to have a Material Adverse Effect or would not materially and adversely affect
the legal, valid and binding obligations of the Company under the Operative
Documents, the ability of the Company to perform its obligations under any of
the Operative Documents or which are otherwise material in the context of the
sale of the Offered Securities.
(j) This Agreement has been duly authorized, executed and delivered
by the Company and the Subsidiary Guarantors.
<PAGE>
7
(k) Except as disclosed in the Offering Document, the Company and
its subsidiaries have good and marketable title to all material real properties
and all other material properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or to be made thereof by them,
except for liens incurred in relation to the Heller Credit Facility; and except
as disclosed in the Offering Document, the Company and its subsidiaries hold any
leased real or personal property under valid and enforceable leases with no
exceptions that would materially interfere with the use made or to be made
thereof by them.
(l) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by them and have not received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(m) Except as disclosed in the Offering Document, no labor dispute
with the employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent that might have a Material Adverse Effect.
(n) Except as disclosed in the Offering Document, the Company and
its subsidiaries own, possess or can acquire on reasonable terms, adequate
trademarks, trade names and other rights to inventions, know-how, patents,
copyrights, confidential information and other intellectual property
(collectively, "Intellectual Property Rights") necessary to conduct the business
now operated by them, except where the failure to possess or acquire such
Intellectual Property Rights could not reasonably be expected to have a Material
Adverse Effect, or presently employed by them, and have not received any notice
of infringement of or conflict with asserted rights of others with respect to
any Intellectual
<PAGE>
8
Property Rights that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material Adverse
Effect.
(o) Except as disclosed in the Offering Document, neither the
Company nor any of its subsidiaries is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous or
toxic substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively, "Environmental
Laws"), or owns or operates any real property contaminated with any substance
that is subject to any Environmental Laws, is liable for any off-site disposal
or contamination pursuant to any Environmental Laws, or is subject to any claim
relating to any Environmental Laws, which violation, contamination, liability or
claim would individually or in the aggregate have a Material Adverse Effect; and
the Company is not aware of any pending investigation which might lead to such a
claim.
(p) Except as disclosed in the Offering Document, there are no
pending actions, suits or proceedings against or affecting the Company, any of
its subsidiaries or any of their respective properties that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect,
or would materially and adversely affect the legal, valid and binding
obligations of the Company under the Operative Documents, the ability of the
Company to perform its obligations under any of the Operative Documents or which
are otherwise material in the context of the sale of the Offered Securities; and
no such actions, suits or proceedings are threatened or, to the Company's
knowledge, contemplated.
(q) The Company has delivered to the Initial Purchaser true and
correct copies of the Recapitalization Agreement in the form as originally
executed, and there have been no amendments or waivers thereto or in the
exhibits or
<PAGE>
9
schedules thereto other than those as to which the Initial Purchaser shall have
been advised.
(r) The historical financial statements included in the Offering
Document present fairly the financial position of the Company and its
consolidated subsidiaries as of the dates shown and their results of operations
and cash flows for the periods shown, and, except as otherwise disclosed in the
Offering Document, such financial statements have been prepared in conformity
with the generally accepted accounting principles in the United States applied
on a consistent basis and the assumptions used in preparing the pro forma
financial statements included in the Offering Document provide a reasonable
basis for presenting the significant effects directly attributable to the
transactions or events described therein, the related pro forma adjustments give
appropriate effect to those assumptions, and the pro forma columns therein
reflect the proper application of those adjustments to the corresponding
historical financial statement amounts.
(s) Except as disclosed in the Offering Document, since the date of
the latest audited financial statements included in the Offering Document there
has been no material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole, and, except as disclosed in or contemplated by
the Offering Document, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
(t) Neither the Company nor any Subsidiary Guarantor is an open-end
investment company, unit investment trust or face-amount certificate company
that is or is required to be registered under Section 8 of the United States
Investment Company Act of 1940 (the "Investment Company Act"); neither the
Company nor any Subsidiary Guarantor is a closed-end investment company required
to be registered, but not registered, thereunder; and nor, after
<PAGE>
10
giving effect to the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the Offering Document, will
any of them be, an "investment company" as defined in the Investment Company
Act.
(u) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Offered Securities or the Guaranty
are listed on any national securities exchange registered under Section 6 of the
United States Securities Exchange Act of 1934 ("Exchange Act") or quoted in a
U.S. automated inter-dealer quotation system.
(v) Assuming the correctness of the representations and warranties
of the Initial Purchaser contained in Section 4, the offer and sale of the
Offered Securities in the manner contemplated by this Agreement will be exempt
from the registration requirements of the Securities Act; and it is not
necessary to qualify an indenture in respect of the Offered Securities or the
Guaranty under the United States Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
(w) Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf (i) has, within the six-month period prior to the
date hereof, offered or sold in the United States or to any U.S. person (as such
terms are defined in Regulation S under the Securities Act) the Offered
Securities, the Guaranty or any security of the same class or series as the
Offered Securities or the Guaranty (except the Senior Secured Discount
Debentures offered by Holdings in connection with the transactions contemplated
by the Recapitalization Agreement) or (ii) has offered or will offer or sell the
Offered Securities or the Guaranty (A) in the United States by means of any form
of general solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act or (B) with respect to any such securities sold in
reliance on Rule 903 of Regulation S ("Regulation S") under the Securities Act,
by means of any directed
<PAGE>
11
selling efforts within the meaning of Rule 902(b) of Regulation S. The Company,
its affiliates and any person acting on its or their behalf have complied and
will comply with the offering restrictions requirement of Regulation S. Neither
the Company nor any Subsidiary Guarantor has entered or will enter into any
contractual arrangement with respect to the distribution of the Offered
Securities or the Guaranty except for this Agreement and the Registration Rights
Agreement.
3. Purchase, Sale and Delivery of Offered Securities. On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, the Company agrees to sell to the
Initial Purchaser, and the Initial Purchaser agrees to purchase from the
Company, at a purchase price of 96.5% of the principal amount thereof plus
accrued interest from June 23, 1997 to the Closing Date (as hereinafter
defined), U.S. $110,000,000 principal amount of the Offered Securities.
The Company will deliver against payment of the purchase price the
Offered Securities in the form of one or more permanent global securities in
definitive form (the "Global Securities") deposited with the Trustee as
custodian for The Depository Trust Company ("DTC") and registered in the name of
Cede & Co., as nominee for DTC. Interests in any permanent Global Securities
will be held only in book-entry form through DTC, except in the limited
circumstances described in the Offering Document. Payment for the Offered
Securities shall be made by the Initial Purchaser in Federal (same day) funds by
wire transfer to an account previously designated to the Initial Purchaser by
the Company at a bank acceptable to the Initial Purchaser at the office of
McDermott, Will & Emery at 10:00 A.M. (New York Time) on June 23, 1997, or at
such other time not later than seven full business days thereafter as the
Initial Purchaser and the Company determine, such time being herein referred to
as the "Closing Date", against delivery to the Trustee as custodian for DTC of
the Global Securities representing all of the Offered Securities. The Global
Securities will be
<PAGE>
12
made available for checking at the office of the Trustee at least 24 hours prior
to the Closing Date.
4. Representations by the Initial Purchaser; Resale by the Initial
Purchaser. (a) The Initial Purchaser represents and warrants to the Company that
it is an "accredited investor" within the meaning of Regulation D under the
Securities Act.
(b) The Initial Purchaser acknowledges that the Offered Securities
have not been registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons
except in accordance with Regulation S or pursuant to an exemption from the
registration requirements of the Securities Act. The Initial Purchaser
represents and agrees that it has offered and sold the Offered Securities, and
will offer and sell the Offered Securities (i) as part of its distribution at
any time and (ii) otherwise until 40 days after the later of the commencement of
the offering of the Offered Securities and the Closing Date, only in accordance
with Rule 903 or Rule 144A under the Securities Act ("Rule 144A"). Accordingly,
neither the Initial Purchaser nor its affiliates, nor any persons acting on its
or their behalf, have engaged or will engage in any directed selling efforts
with respect to the Offered Securities, and the Initial Purchaser, its
affiliates and all persons acting on its or their behalf have complied and will
comply with the offering restrictions requirement of Regulation S. The Initial
Purchaser agrees that, at or prior to confirmation of sale of the Offered
Securities, other than a sale pursuant to Rule 144A, the Initial Purchaser will
have sent to each distributor, dealer or person receiving a selling concession,
fee or other remuneration that purchases the Offered Securities from it during
the restricted period a confirmation or notice substantially to the following
effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or
sold within the
<PAGE>
13
United States or to, or for the account or benefit of, U.S. persons (i) as part
of their distribution at any time or (ii) otherwise until 40 days after the date
of the commencement of the offering and the closing date, except in either case
in accordance with Regulation S (or Rule 144A if available) under the Securities
Act. Terms used above have the meanings given to them by Regulation S."
Terms used in this subsection (b) have the meanings given to them by
Regulation S.
(c) The Initial Purchaser agrees that it and each of its affiliates
has not entered and will not enter into any contractual arrangement with respect
to the distribution of the Offered Securities except with the prior written
consent of the Company.
(d) The Initial Purchaser agrees that it and each of its affiliates
will not offer or sell the Offered Securities in the United States by means of
any form of general solicitation or general advertising within the meaning of
Rule 502(c) under the Securities Act, including, but not limited to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. The Initial Purchaser agrees, with respect
to resales made in reliance on Rule 144A of any of the Offered Securities, to
deliver either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that the resale of such Offered
Securities has been made in reliance upon the exemption from the registration
requirements of the Securities Act provided by Rule 144A.
(e) The Initial Purchaser represents and agrees that (i) it has not
offered or sold and prior to the date six months after the date of issue of the
Offered Securities will not offer or sell any Offered Securities to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or
<PAGE>
14
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Offered Securities in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on and will only issue or pass on in the United Kingdom any document received by
it in connection with the issue of the Offered Securities to a person who is of
a kind described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom such document may
otherwise lawfully be issued or passed on.
(f) This Agreement has been duly authorized, executed and delivered
by the Initial Purchaser.
5. Certain Agreements of the Company. The Company agrees with the
Initial Purchaser that:
(a) The Company will advise the Initial Purchaser promptly of any
proposal to amend or supplement the Offering Document and will not effect such
amendment or supplementation without the Initial Purchaser's consent (which
consent shall not be unreasonably withheld). If, at any time prior to the
completion of the resale of the Offered Securities by the Initial Purchaser, any
event occurs as a result of which the Offering Document as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, the
Company promptly will notify the Initial Purchaser of such event and promptly
will prepare, at its own expense, an amendment or supplement which will correct
such statement or omission. The Initial Purchaser's consent to delivery to
offerees or investors of any such amendment or supplement
<PAGE>
15
shall not constitute a waiver of any of the conditions set forth in Section 6.
(b) The Company will furnish to the Initial Purchaser copies of the
Offering Document and all amendments and supplements to such document, in each
case as soon as available and in such quantities as the Initial Purchaser
requests, and the Company will furnish to the Initial Purchaser on the date
hereof one copy of the Offering Circular which will include the independent
accountants' reports therein manually signed by such independent accountants. At
any time when the Company is not subject to Section 13 or 15(d) of the Exchange
Act, the Company will promptly furnish or cause to be furnished to the Initial
Purchaser and, upon request of holders and prospective purchasers of the Offered
Securities, to such holders and purchasers, copies of the information required
to be delivered to holders and prospective purchasers of the Offered Securities
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision
thereto) in order to permit compliance with Rule 144A in connection with resales
by such holders of the Offered Securities. The Company will pay the expenses of
printing and distributing to the Initial Purchaser all such documents.
(c) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions in the United States
and Canada as the Initial Purchaser designates and will continue such
qualifications in effect so long as required for the resale of the Offered
Securities by the Initial Purchaser, provided that the Company will not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any such state.
(d) During the period of ten years hereafter, the Company will
furnish to the Initial Purchaser, (i) as soon as available, a copy of each
report or other document furnished to the Commission or mailed to its
shareholders and (ii) from time to time, such other information
<PAGE>
16
concerning the Company as the Initial Purchaser may reasonably request.
(e) During the period of two years after the Closing Date, the
Company will, upon request, furnish to the Initial Purchaser and any holder of
Offered Securities a copy of the restrictions on transfer applicable to the
Offered Securities.
(f) During the period of two years after the Closing Date or, if
earlier, until such time as the Offered Securities are no longer restricted
securities (as defined in Rule 144 under the Securities Act), the Company will
not, and will not permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to, resell any of the Offered Securities that have been
reacquired by any of them.
(g) During the period of two years after the Closing Date or, if
earlier, until such time as the Offered Securities are no longer restricted
securities (as defined in Rule 144 under the Securities Act), the Company will
not be or become and will not permit any Subsidiary Guarantor to be or become,
an open-end investment company, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act, and will not be or become and will not permit any
Subsidiary Guarantor to be or become, a closed-end investment company required
to be registered, but not registered, under the Investment Company Act.
(h) The Company will pay all expenses incidental to the performance
of its obligations under the Operative Documents, including (i) the fees and
expenses of the Trustee and its professional advisers, (ii) all expenses in
connection with the execution, issue, authentication, packaging and initial
delivery of the Offered Securities, the preparation and printing of the Offered
Securities, the Operative Documents, the Offering Document and amendments and
supplements thereto, and any other document relating to the issuance, offer,
sale and delivery of the Offered Securities and (iii) the cost of qualifying the
Offered
<PAGE>
17
Securities for trading in the Private Offerings, Resale and Trading through
Automated Linkages (PORTAL) Market and any expenses incidental thereto. The
Company will also pay or reimburse the Initial Purchaser (to the extent incurred
by it) for any expenses (including fees and disbursements of counsel) incurred
in connection with qualification of the Offered Securities for sale under the
laws of such jurisdictions in the United States and Canada as the Initial
Purchaser designates and the printing of memoranda relating thereto, for any
fees charged by investment rating agencies for the rating of the Offered
Securities, for all travel expenses of the Company's officers and employees and
any other expenses of the Initial Purchaser and the Company in connection with
attending or hosting meetings with prospective purchasers of the Offered
Securities from the Initial Purchaser and for expenses incurred in distributing
the Offering Document (including any amendments and supplements thereto) to the
Initial Purchaser.
(i) In connection with the offering of the Offered Securities, until
the Initial Purchaser shall have notified the Company of the completion of the
resale of the Offered Securities, neither the Company nor any of its affiliates
has or will, either alone or with one or more other persons, bid for or purchase
for any account in which it or any of its affiliates has a beneficial interest
any Offered Securities or attempt to induce any person to purchase any Offered
Securities; and neither it nor any of its affiliates will make bids or purchases
for the purpose of creating actual, or apparent, active trading in, or of
raising the price of, the Offered Securities.
(j) For a period of 180 days after the date of the Offering
Circular, neither the Company nor any of its subsidiaries will offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, any
United States dollar-denominated debt securities issued or guaranteed by
Holdings, the Company or any of its subsidiaries in any transaction involving a
public offering or a private placement in connection with intended resale under
Rule 144A under the Securities Act and having a
<PAGE>
18
maturity of more than three years from the date of issue, or publicly disclose
the intention to make any such offer, sale, pledge or disposal, without the
prior written consent of the Initial Purchaser. Neither Holdings, the Company
nor any of its subsidiaries will at any time offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any securities under
circumstances where such offer, sale, pledge, contract or disposition would
cause the exemption afforded by Section 4(2) of the Securities Act or the safe
harbor of Regulation S thereunder to cease to be applicable to the offer and
sale of the Offered Securities.
(k) The Company will use its best efforts to cause the Offered
Securities to become eligible for the PORTAL trading system of the National
Association of Securities Dealers, Inc.
6. Conditions of the Obligation of the Initial Purchaser. The
obligation of the Initial Purchaser to purchase and pay for the Offered
Securities will be subject to the accuracy of the representations and warranties
on the part of the Company and the Subsidiary Guarantors herein, to the accuracy
of the statements of officers of the Company made pursuant to the provisions
hereof, to the performance by the Company and the Subsidiary Guarantors of their
obligations hereunder and to the following additional conditions precedent:
(a) The Initial Purchaser shall have received a letter, dated the
date of this Agreement, of Ernst & Young LLP, in agreed form, confirming that
they are independent public accountants within the meaning of the Securities Act
and the applicable published rules and regulations thereunder ("Rules and
Regulations") and stating to the effect that they have compared specified dollar
amounts (or percentages derived from such dollar amounts) and other financial
information contained in the Offering Document (in each case to the extent that
such dollar amounts, percentages and other financial information are derived
from the general accounting records of the Company and its subsidiaries subject
to the internal controls of the
<PAGE>
19
Company's accounting system or are derived directly from such records by
analysis or computation) with the results obtained from inquiries, a reading of
such general accounting records and other procedures specified in such letter
and have found such dollar amounts, percentages and other financial information
to be in agreement with such results, except as otherwise specified in such
letter.
(b) The Initial Purchaser shall have received a letter, dated the
date of this Agreement, of Arthur Andersen LLP, in agreed form, setting forth
the procedures performed with respect to the pro forma financial information set
forth in Offering Document and stating to the effect that they have compared
specified dollar amounts (or percentages derived from such dollar amounts) and
other financial information contained in the Offering Document (in each case to
the extent that such dollar amounts, percentages and other financial information
are derived from the general accounting records of the Company and its
subsidiaries subject to the internal controls of the Company's accounting system
or are derived directly from such records by analysis or computation) with the
results obtained from inquiries, a reading of such general accounting records
and other procedures specified in such letter and have found such dollar
amounts, percentages and other financial information to be in agreement with
such results, except as otherwise specified in such letter.
(c) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) a change in U.S. or international financial,
political or economic conditions or currency exchange rates or exchange controls
as would, in the judgment of the Initial Purchaser, be likely to prejudice
materially the success of the proposed issue, sale or distribution of the
Offered Securities, whether in the primary market or in respect of dealings in
the secondary market, or (ii) (A) any change, or any development or event
involving a prospective change, in the condition (financial or other), business,
assets, operations, properties or results of operations of the Company or its
Subsidiaries which, in the judgment of the
<PAGE>
20
Initial Purchaser, is material and adverse and makes it impractical or
inadvisable to proceed with completion of the offering or the sale of and
payment for the Offered Securities, (B) any downgrading in the rating of any
debt securities of the Company by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Securities Act),
or any public announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating), (C) any suspension or
limitation of trading in securities generally on the New York Stock Exchange, or
any setting of minimum prices for trading on such exchange, or any suspension of
trading of any securities of the Company on any exchange or in the
over-the-counter market, (D) any banking moratorium declared by U.S. Federal or
New York authorities, or (E) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war by Congress or any
other substantial national or international calamity or emergency if, in the
judgment of the Initial Purchaser, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable to
proceed with completion of the offering or sale of and payment for the Offered
Securities.
(d) The Initial Purchaser shall have received an opinion, dated the
Closing Date, of McDermott, Will & Emery, counsel for the Company and the
Subsidiary Guarantors, that:
(i) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its business as
described in the Offering Document; and, based solely on a certificate of the
Secretary of State of each of the jurisdictions listed on Exhibit A hereto, the
Company is duly qualified to do business as a foreign corporation in
<PAGE>
21
each such jurisdiction and is in good standing in each such jurisdiction as of
the date specified in such certificate;
(ii) Each Subsidiary Guarantor has been duly incorporated and
is an existing corporation in good standing under the laws of the jurisdiction
of its incorporation, with corporate power and authority to own its properties
and conduct its business as described in the Offering Document; and, based
solely on a certificate of the Secretary of State of each of the jurisdictions
listed on Exhibit A hereto, each Subsidiary Guarantor is duly qualified to do
business as a foreign corporation in each such jurisdiction and is in good
standing in each such jurisdiction as of the date specified in such certificate;
(iii) The Indenture has been duly authorized, executed and
delivered by the Company and each Subsidiary Guarantor and constitutes a valid
and legally binding obligation of the Company and of each Subsidiary Guarantor,
enforceable against the Company and each Subsidiary Guarantor in accordance with
its terms, subject to the following qualifications:
(A) enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in equity or at law); and
(B) we express no opinion as to: the enforceability of
any rights to contribution or indemnification provided for in the Operative
Documents which are violative of the public policy underlying any law, rule or
regulation (including any federal or state securities law, rule or regulation).
(iv) The Guaranty has been duly authorized, executed and
delivered by each Subsidiary Guarantor.
<PAGE>
22
(v) This Agreement has been duly authorized, executed and
delivered by the Company and each Subsidiary Guarantor.
(vi) The Offered Securities have been duly authorized by the
Company and, when authenticated in accordance with the provisions of the
Indenture and delivered and paid for pursuant to the terms of this Agreement on
the Closing Date, will have been duly executed, issued and delivered by the
Company and will constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms and
entitled to the benefit of the Indenture, subject to the following
qualifications:
(A) enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in equity or at law); and
(B) we express no opinion as to: the enforceability of
any rights to contribution or indemnification provided for in the Operative
Documents which are violative of the public policy underlying any law, rule or
regulation (including any federal or state securities law, rule or regulation).
(vii) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and the Subsidiary Guarantors
and conforms in all material respects to the description thereof contained in
the Offering Document. The Registration Rights Agreement constitutes a valid and
legally binding obligation of each of the Company and the Subsidiary Guarantors,
enforceable against the Company and each Subsidiary Guarantor in accordance with
its terms, subject to the following qualifications:
(A) enforcement may be limited by applicable bankruptcy,
insolvency, reorganization,
<PAGE>
23
moratorium or other similar laws affecting creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in
equity or at law); and
(B) we express no opinion as to: the enforceability of
any rights to contribution or indemnification provided for in the Operative
Documents which are violative of the public policy underlying any law, rule or
regulation (including any federal or state securities law, rule or regulation).
(viii) The Recapitalization Agreement has been duly
authorized, executed and delivered by Holdings and conforms in all material
respects to the descriptions thereof in the Offering Document.
(ix) The Offered Securities and the Guaranty conform in all
material respects to the description thereof contained in the Offering Document.
(x) To the best of such counsel's knowledge, no consent,
approval authorization, or order of, or filing with, any governmental agency or
body or any court, which has not been obtained or taken and is not in full force
and effect and which is, in the experience of such counsel, normally applicable
to transactions of the type contemplated by the Operative Documents, is required
for the consummation of the transactions contemplated by the Operative Documents
or in connection with the issuance and sale of the Offered Securities (including
the Guaranty) by the Company or the Subsidiary Guarantors, other than (A) as may
be required under the Securities Act and the Rules and Regulations of the
Commission thereunder with respect to the Registration Rights Agreement and the
transactions contemplated thereunder, (B) such as may be required by state
securities or blue sky laws in connection with the offer and sale of the Offered
Securities and (C) filings required under the New Jersey Industrial Site
Recovery Act and the Connecticut Transfer Act.
<PAGE>
24
(xi) The execution, delivery and performance of the Operative
Documents and the issuance and sale of the Offered Securities and compliance by
the Company and the Subsidiary Guarantors with the terms and provisions thereof,
will not result in a breach or violation of any of the terms and provisions of,
or constitute a default under, (A) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any subsidiary of the Company or any of their
properties which is, in the experience of such counsel, normally applicable to
transactions of the type contemplated by the Operative Documents, (B) any
agreement or instrument to which the Company or any such subsidiary is a party
or by which the Company or any such subsidiary is bound or to which any of the
properties of the Company or any such Subsidiary Guarantor is subject that is
set forth in the officer's certificate of the Company attached hereto as Exhibit
A or (C) the charter or by-laws of the Company or any such subsidiary; and the
Company and the Subsidiary Guarantors have full power and authority to
authorize, issue and sell the Offered Securities (including the Guaranty) as
contemplated by this Agreement.
(xii) Except as disclosed in the Offering Document, to the
best of our knowledge, there are no pending actions, suits or proceedings
against or affecting the Company, any of its subsidiaries or any of their
respective properties that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material Adverse
Effect, or would materially and adversely affect the ability of the Company to
perform its obligations under any of the Operative Documents or which are
otherwise material in the context of the sale of the Offered Securities; and no
such actions, suits or proceedings are threatened or, to the Company's
knowledge, contemplated.
(xiii) Assuming the accuracy of the representations of the
Company contained in Section 2(w) and of the Subsidiary Guarantors and the
Initial Purchaser
<PAGE>
25
contained in this Agreement, and assuming compliance by the Initial Purchaser
with its obligations under this Agreement, the issuance and sale of the Offered
Securities and the Guaranty to you, and the offering, resale and delivery by you
of the Offered Securities and Guaranty, in each case in the manner contemplated
by this Agreement, will be exempt from the registration requirements of the
Securities Act, and it is not necessary to qualify the Indenture under the Trust
Indenture Act of 1939, as amended.
(xiv) Neither the Company nor any Subsidiary Guarantor is and,
after giving effect to the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the Offering Circular, none
of them will be an "investment company" as defined in the Investment Company
Act.
(xv) Additionally, such counsel shall state that such counsel
has participated in conferences with officers and other representatives of the
Company and the Subsidiary Guarantors, representatives of the independent public
accountants for the Company and the Subsidiary Guarantors and representatives
and counsel for the Initial Purchaser at which the contents of the Offering
Circular were discussed, and although such counsel is not passing upon, and is
not assuming any responsibility for, the accuracy, completeness or fairness of
the statements contained in the Offering Circular and has not and will not make
any independent check or verification thereof, on the basis of the foregoing, no
facts have come to such counsel's attention that will have led such counsel to
believe that the Offering Circular (other than the historical and pro forma
financial statements and notes thereto and other financial data included therein
or omitted therefrom, as to which such counsel will express no opinion), as of
the date of the Offering Circular, contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein not misleading.
(e) The Initial Purchaser shall have received from Cravath, Swaine &
Moore, counsel for the Initial
<PAGE>
26
Purchaser, such opinion or opinions, dated the Closing Date, with respect to the
incorporation of the Company and the Subsidiary Guarantors, the validity of the
Offered Securities, the Offering Document, the exemption from registration for
the offer and sale of the Offered Securities by the Company to the Initial
Purchaser and the resales by it as contemplated hereby and other related matters
as the Initial Purchaser may require, and the Company shall have furnished to
such counsel such documents as they request for the purpose of enabling them to
pass upon such matters.
(f) The Initial Purchaser shall have received a certificate, dated
the Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, in their
capacity as such officers, on behalf of the Company and the Subsidiary
Guarantors, shall state that the representations and warranties of the Company
and the Subsidiary Guarantors in this Agreement are true and correct, that the
Company and the Subsidiary Guarantors have complied with all agreements and
satisfied all conditions on their part to be performed or satisfied hereunder at
or prior to the Closing Date, and that, subsequent to the date of the most
recent financial statements in the Offering Document there has been no material
adverse change, nor any development or event involving a prospective material
adverse change, in the condition (financial or other), business, properties or
results of operations of the Company and its subsidiaries taken as a whole
except as set forth in or contemplated by the Offering Document or as described
in such certificate.
(g) The Initial Purchaser shall have received letters, dated the
Closing Date, of Ernst & Young LLP and Arthur Andersen LLP which meets the
requirements of subsection (a) of this Section, except that the procedures
specified in such subsection will be conducted to a date not more than five days
prior to the Closing Date for the purposes of this subsection.
<PAGE>
27
(h) Concurrently with the issue and sale of the Offered Securities
by the Company, the transactions contemplated by the Recapitalization Agreement,
including the issuance of the Units and the Company's contemporaneous borrowing
under a new credit facility, shall be consummated on terms that conform in all
material respects to the description thereof in the Offering Document; and the
Initial Purchaser shall have received true and correct copies of all documents
pertaining thereof and evidence reasonably satisfactory to the Initial Purchaser
of the consummation thereof.
The Company will furnish the Initial Purchaser with such conformed
copies of such opinions, certificates, letters and documents as the Initial
Purchaser may reasonably request.
7. Indemnification and Contribution. (a) The Company and the
Subsidiary Guarantors will, jointly and severally, indemnify and hold harmless
the Initial Purchaser against any losses, claims, damages or liabilities (or
actions in respect thereof) to which the Initial Purchaser may become subject,
under the Securities Act or the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Offering Document, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
and will reimburse the Initial Purchaser for any legal or other expenses
reasonably incurred by the Initial Purchaser in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of or is based upon an untrue statement or alleged untrue statement in or
omission or alleged omission from any of such documents in reliance upon
<PAGE>
28
and in conformity with written information furnished to the Company by the
Initial Purchaser specifically for use therein, it being understood and agreed
that the only such information consists of the information described as such in
subsection (b) below; provided further, that with respect to any untrue
statement or alleged untrue statement in or omission or alleged omission from
any preliminary offering circular the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of the Initial Purchaser if the
Initial Purchaser sold the Offered Securities concerned to the person asserting
any such losses, claims, damages or liabilities, to the extent that such sale
was an initial resale by the Initial Purchaser and any such loss, claim, damage
or liability of the Initial Purchaser results from the fact that there was not
sent or given to such person, at or prior to the written confirmation of the
sale of such Offered Securities to such person, a copy of the Offering Document
(exclusive of any material included therein but not attached thereto) if the
Company had previously furnished copies thereof to the Initial Purchaser.
(b) The Initial Purchaser will indemnify and hold harmless the
Company and each Subsidiary Guarantor against any losses, claims, damages or
liabilities (or actions in respect thereof), joint or several, to which the
Company or any such Subsidiary Guarantor may become subject, under the
Securities Act or the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Offering Document, or any amendment or supplement thereto, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by the
Initial Purchaser
<PAGE>
29
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Company or any such Subsidiary Guarantor in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by the Initial Purchaser
consists of the following information in the Offering Document furnished on
behalf of the Initial Purchaser: the last paragraph at the bottom of the cover
page concerning the terms of the offering of the Offered Securities by the
Initial Purchaser and the legend concerning over-allotments on page 4 and the
fourth paragraph, the seventh paragraph and the second sentence of the sixth
paragraph under the caption "Plan of Distribution".
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a) or (b) above. In case any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the prior
<PAGE>
30
written consent of the indemnified party, effect any settlement of any pending
or threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages, liabilities or actions referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Subsidiary Guarantors on the one hand and the
Initial Purchaser on the other from the offering of the Offered Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Subsidiary Guarantors on the one hand and the Initial
Purchaser on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or actions as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Subsidiary Guarantors on the one hand and the Initial Purchaser
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Offered Securities (before deducting expenses)
received by the Company bear to the total discounts and commissions received by
the Initial Purchaser from the Company under this Agreement. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company and the
Subsidiary Guarantors or the Initial Purchaser and the
<PAGE>
31
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages, liabilities or
actions referred to in the first sentence of this subsection (d) shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), the Initial Purchaser shall not be required to contribute any
amount in excess of the amount by which the total price at which the Offered
Securities purchased by it were resold exceeds the amount of any damages which
the Initial Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(e) The obligations of the Company and the Subsidiary Guarantors
under this Section shall be in addition to any liability which the Company and
the Subsidiary Guarantors may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls the Initial Purchaser
within the meaning of the Securities Act or the Exchange Act; and the
obligations of the Initial Purchaser under this Section shall be in addition to
any liability which the Initial Purchaser may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Company and the Subsidiary Guarantors within the meaning of the Securities Act
or the Exchange Act.
8. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, the Subsidiary Guarantors or their officers and of
the Initial Purchaser set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation, or statement
as to the results thereof, made by or on behalf of the Initial Purchaser, the
Company, the Subsidiary Guarantors or any of their respective representatives,
officers or directors or any
<PAGE>
32
controlling person, and will survive delivery of and payment for the Offered
Securities. If for any reason the purchase of the Offered Securities by the
Initial Purchaser is not consummated, the Company shall remain responsible for
the expenses to be paid or reimbursed by it pursuant to Section 5 and the
respective obligations of the Company, the Subsidiary Guarantors and the Initial
Purchaser pursuant to Section 7 shall remain in effect. With respect to fees and
expenses, the Amended and Restated Engagement Letter dated May 1, 1997, between
the Company and the Initial Purchaser shall not be superseded by this Agreement.
9. Notices. All communications hereunder will be in writing and, if
sent to the Initial Purchaser will be mailed, delivered or telegraphed and
confirmed to the Initial Purchaser at Eleven Madison Avenue, New York, NY 10010,
Attention: Investment Banking Department-Transactions Advisory Group, or, if
sent to the Company, will be mailed, delivered or telegraphed and confirmed to
it at 60 Round Hill Road, P.O. Box 430, Fairfield, CT 06430-0430, Attention:
President.
10. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
controlling persons referred to in Section 7, and no other person will have any
right or obligation hereunder, except that holders of Offered Securities shall
be entitled to enforce the agreements for their benefit contained in the second
and third sentences of Section 5(b) hereof against the Company as if such
holders were parties thereto.
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
12. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to principles of conflicts of laws.
<PAGE>
33
The Company and the Initial Purchaser hereby submit to the
non-exclusive jurisdiction of the Federal and state courts in the Borough of
Manhattan in The City of New York in any suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
If the foregoing is in accordance with the Initial Purchaser's
understanding of our agreement, kindly sign and
<PAGE>
34
return to us one of the counterparts hereof, whereupon it will become a binding
agreement between the Company, the Subsidiary Guarantors and the Initial
Purchaser in accordance with its terms.
Very truly yours,
ROLLER BEARING COMPANY OF
AMERICA, INC.
By............................
Name:
Title:
INDUSTRIAL TECTONICS BEARINGS
CORPORATION
By............................
Name:
Title:
RBC LINEAR PRECISION PRODUCTS,
INC.
By.............................
Name:
Title:
<PAGE>
35
RBC NICE BEARINGS, INC.
By.............................
Name:
Title:
The foregoing Purchase Agreement is hereby confirmed and accepted as
of the date first above written.
CREDIT SUISSE FIRST BOSTON
CORPORATION
By............................
Name:
Title:
REDEMPTION AND WARRANT PURCHASE AGREEMENT
By and Among
ROLLER BEARING HOLDING COMPANY, INC.
CERTAIN STOCKHOLDERS OF ROLLER BEARING HOLDING COMPANY, INC.
and
MICHAEL J. HARTNETT, AS PURCHASER REPRESENTATIVE
May 20, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS.......................................................... 3
1.1 Index of Defined Terms...................................... 3
1.2 General Defined Terms....................................... 4
2. THE REDEMPTION AND PURCHASE.......................................... 6
2.1 Redemption.................................................. 6
2.2 Effects of the Primary Redemption........................... 6
2.3 Additional Redemption and Purchase.......................... 6
2.4 The Closing................................................. 7
2.5 Closing Deliveries.......................................... 8
2.6 Closing Deliveries - Holdings............................... 9
3. CONSIDERATION........................................................ 10
3.1 Redemption Consideration.................................... 10
3.2 Purchase Consideration...................................... 10
4. REPRESENTATIONS AND WARRANTIES OF THE REDEEMING
STOCKHOLDERS AND THE SELLING WARRANTHOLDERS.......................... 11
4.1 Litigation.................................................. 11
4.2 Status and Authority........................................ 11
4.3 Conflicts, Consents and Approvals........................... 12
4.4 Shares and Warrants......................................... 13
4.5 Brokers..................................................... 13
4.6 Validity of Representations and Warranties.................. 14
5. REPRESENTATIONS AND WARRANTIES OF HOLDINGS........................... 14
5.1 Authorization............................................... 14
5.2 Conflicts................................................... 15
5.3 Consent of Government Authorities........................... 15
5.4 Brokers..................................................... 16
5.5 Financing Commitments....................................... 16
5.6 Solvency; Surplus........................................... 16
5.7 California Corporations Code Section 2115................... 18
5.8 Capitalization.............................................. 18
6. ADDITIONAL AGREEMENTS................................................ 18
6.1 Conduct of the Business..................................... 18
6.2 Actions of Redeeming Stockholders and Selling Warrantholders 21
6.3 Meetings of Stockholders of Holdings and the Subsidiaries... 23
6.4 Closing Authorizations...................................... 24
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<PAGE>
6.5 The Purchaser Representative; Authority to Act on Behalf of
Holdings; Enforcement....................................... 24
6.6 Cooperation................................................. 26
6.7 1997 Financial Statements................................... 27
6.8 Payment of Expenses......................................... 28
6.9 Public Announcements........................................ 29
6.10 Directors' and Officers' Insurance, Indemnification......... 29
6.11 Reasonable Efforts; Consents................................ 32
6.12 Notification of Certain Matters............................. 34
6.13 No Solicitation............................................. 34
6.14 Indemnification of Redeeming Stockholders and Selling
Warrantholders.............................................. 35
6.15 Draft of Solvency Opinion; Access; Supporting Materials..... 37
7. CONDITIONS PRECEDENT................................................. 38
7.1 Conditions Precedent to Obligations of Redeeming
Stockholders and Selling Warrantholders..................... 38
7.2 Conditions Precedent to Obligations of Holdings............. 40
8. SURVIVAL; RECOURSE................................................... 42
8.1 Survival.................................................... 42
8.2 Recourse.................................................... 43
9. TERMINATION; AMENDMENT; WAIVER....................................... 44
9.1 Termination................................................. 44
9.2 Effect of Termination....................................... 44
9.3 Amendment and Waivers....................................... 44
9.4 Extension; Waiver........................................... 45
10. MISCELLANEOUS........................................................ 45
10.1 Notices..................................................... 45
10.2 Further Assurances.......................................... 47
10.3 Entire Agreement............................................ 47
10.4 Captions.................................................... 48
10.5 No Third Party Beneficiary.................................. 48
10.6 Remedies Cumulative......................................... 48
10.7 Dispute Resolution.......................................... 48
10.8 Governing Law............................................... 49
10.9 Assignment.................................................. 49
10.10 Expenses.................................................... 50
10.11 Counterparts................................................ 50
ii
<PAGE>
REDEMPTION AND WARRANT PURCHASE AGREEMENT
This Redemption and Warrant Purchase Agreement dated as of this 20th day
of May, 1997 (this "Agreement") by and among:
ROLLER BEARING HOLDING COMPANY, INC., a Delaware corporation having a
principal place of business at 60 Round Hill Road, Fairfield, CT 06430
("Holdings");
THOSE STOCKHOLDERS OF HOLDINGS WHO ARE LISTED ON SCHEDULE
A ATTACHED HERETO (collectively, the "Primary Stockholders"); and
MICHAEL J. HARTNETT AS THE REPRESENTATIVE OF THE NON-
REDEEMING STOCKHOLDERS AND NON-SELLING WARRANTHOLDERS, an
individual having a principal place of business at 60 Round Hill Road, CT
06430 (the "Purchaser Representative").
WHEREAS, the authorized capital stock of Holdings is comprised of shares
of the Class A Voting Common Stock, par value $.01 per share (the "Class A
Common Stock"), Class B Non-Voting Common Stock, par value $.01 per share (the
"Class B Common Stock") Series A Redeemable Exchangeable Cumulative Preferred
Stock (the "Series A Preferred Stock"), Series B Redeemable Exchangeable
Cumulative Preferred Stock (the "Series B Preferred Stock") and Series C
Convertible Redeemable Exchangeable Cumulative Preferred Stock (the "Series C
Preferred Stock" and, together with the Class A Common Stock, the Series A
Preferred Stock, and the Series B Preferred Stock, the "Shares");
WHEREAS, the issued and outstanding Shares are held by those Persons (the
"Stockholders") and in those amounts, as set forth on Schedule B attached
hereto;
WHEREAS, Holdings has issued warrants (the "Warrants") to purchase Class A
Common Stock and Class B Common Stock to those Persons (the "Warrantholders")
and in those amounts set forth on Schedule C attached hereto;
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<PAGE>
WHEREAS, the Primary Stockholders are desirous of having Holdings redeem
those shares of Class A Common Stock and Series A Preferred Stock set forth
opposite such Primary Stockholders' names on Schedule A (collectively, the
"Primary Redeemed Shares") and Holdings is desirous of redeeming all of the
Primary Redeemed Shares;
WHEREAS, Holdings is prepared to redeem Shares and purchase Warrants from
those Stockholders ("Additional Stockholders") and Warrantholders ("Additional
Warrantholders") set forth on Schedule D attached hereto;
WHEREAS, the shares of Class A Common Stock, Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock (collectively the
"Non-Redeemed Shares") held by those Stockholders (the "Non-Redeeming
Stockholders") whose names are set forth on Schedule E shall not be redeemed by
Holdings and shall remain outstanding with the same rights as exist on the date
of this Agreement;
WHEREAS, the Warrants (collectively the "Non-Purchased Warrants") held by
those Warrantholders (the "Non-Selling Warrantholders") whose names are set
forth on Schedule F shall not be purchased by Holdings and shall remain in full
force and effect with the same rights and obligations as they exist on the date
of this Agreement; and
WHEREAS, the Purchaser Representative is a Non-Redeeming Stockholder and
Non-Selling Warrantholder, and by reason of the Redemption and Purchase shall be
the largest holder of Shares on a fully diluted basis.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements, representations and warranties hereinafter set forth and other good
and valuable
2
<PAGE>
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. DEFINITIONS
1.1 Index of Defined Terms. The following is an index of defined terms
utilized in this Agreement:
Defined Term Section Page
- ------------ ------- ----
1997 Financial Statements 6.7 27
Additional Share Redemption 2.3 6
Additional Redeemed Stock 2.3 6
Additional Stockholders Recitations 2
Additional Warrantholders Recitations 2
Affiliate 1.2 4
Agreement Preface 1
Class A Common Stock Recitations 1
Class B Common Stock Recitations 1
Closing 2.4 7
Closing Date 2.4 7
Consideration 3.2 10
Control 1.2 4
CSFB 6.5(b)(iv) 25
Financing 5.5 16
Financing Assurances 5.5 16
Government Authority 1.2 5
Holdings Preface 1
Holdings Related Agreements 5.1(a) 14
Holdings' Release 7.1(c) 38
Indemnified Parties 6.10(b) 30
Joinder Agreement 2.3 7
Knowledge 1.2 5
Liens 4.3(a) 13
Material 1.2 5
Non-Purchased Warrants Recitations 7
Non-Redeemed Shares Recitations 2
Non-Redeeming Stockholders Recitations 2
3
<PAGE>
Non-Selling Warrantholders Recitations 2
Person 1.2 5
Present Fair Salable Value 5.6(a) 17
Primary Redeemed Shares Recitations 2
Primary Redemption 2.1 2.1
Primary Stockholders Preface 1
Purchased Warrants 2.3 7
Purchaser Representative Preface 1
Redeemed Shares 2.3 7
Redeeming Stockholders 2.3 7
Redemption and Purchase 2.3 7
Redemption Consideration 3.1 10
Related Agreements 4.2 12
Sellers' Releases 7.2(b) 40
Series A Preferred Stock Recitations 1
Series B Preferred Stock Recitations 1
Series C Preferred Stock Recitations 1
Shares Recitations 1
Shopping Activities 6.13 34
Solvency 5.6 16
Stockholders Recitations 1
Subject Transactions 5.6(a) 17
Subsidiary 1.2 6
Third Party Transaction 6.13 34
Valuation 7.1(b) 38
Warrant Purchase 2.3 7
Warrant Purchase Consideration 3.2 10
Warrantholders Recitations 1
Warrants Recitations 1
1.2 General Defined Terms. As used herein, the following terms shall have
the meaning indicated:
"Affiliate" shall mean a Person controlled by, in control of, or under
common control with, another Person. For purposes of this definition, "control"
(including the correlative terms "controlled by", "in control of" and "under
common control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the
4
<PAGE>
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Government Authority" shall mean any foreign, federal, state or local
court, arbitration tribunal, legislative body, administrative agency or
commission, or other governmental or other regulatory authority, agency or
department.
"Knowledge," whether capitalized or not, when used to qualify a
representation, warranty or covenant contained in this Agreement shall mean (i)
that knowledge actually in the possession of the Person making the
representation or warranty or bound by the covenant, or of such other Person as
is referred to and (ii) that knowledge that could be obtained by any such Person
following a reasonable inquiry into the facts underlying the representation,
warranty or covenant. The Knowledge of a Person not a natural person shall be
the Knowledge of such Person's executive officers.
"Material," whether capitalized or not, when used to qualify a
representation, warranty, or covenant contained in this Agreement shall mean,
unless otherwise defined, that there is a reasonable probability, under all the
circumstances and in view of the total mix of information available, that a
reasonable Person in the position of the party relying thereon would attach
importance in deciding whether to enter into and consummate this Agreement in
accordance with the specific terms contained herein.
"Person" shall mean any natural person, corporation, organization,
partnership, association, joint-stock company, limited liability company, joint
venture, trust or other entity or government, or any agency or political
subdivision of any government.
5
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"Subsidiary" shall mean any entity in which Holdings or a subsidiary of
Holdings, directly or indirectly, owns more than fifty percent (50%) of the
outstanding voting equity securities or ownership interests.
2. THE REDEMPTION AND PURCHASE
2.1 Redemption. Subject to the terms and conditions contained herein, on
the Closing Date, Holdings shall redeem, and the Primary Stockholders shall
deliver to Holdings in consideration for the Redemption Consideration, the
Primary Redeemed Shares (the "Primary Redemption").
2.2 Effects of the Primary Redemption. On the Closing Date, by reason of
the Primary Redemption, and with no further action on the part of Holdings or
the Primary Stockholders, each Primary Redeemed Share shall be returned to the
treasury of Holdings and shall be available for future issuance in accordance
with the Certificate of Incorporation of Holdings and applicable law, and the
Primary Stockholders will cease to have any rights with respect thereto.
2.3 Additional Redemption and Purchase. On the Closing Date, Holdings
shall purchase, and the Additional Stockholders shall deliver to Holdings in
consideration for the Redemption Consideration, all of the Shares held by the
Additional Stockholders which the Additional Stockholders wish to sell to
Holdings (such Shares being sold constituting the "Additional Redeemed Stock"
and such purchase of such shares constituting the "Additional Share
Redemption"); and Holdings shall purchase, and the Additional Warrantholders
shall sell to Holdings in consideration for the Warrant Purchase Consideration,
all of those Warrants which the Additional Warrantholders wish to sell (such
Warrants being sold
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constituting the "Purchased Warrants" and such purchase of such Warrant
constituting the "Warrant Purchase"). Each Additional Stockholder wishing to
sell Stock to Holdings and each Additional Warrantholder wishing to sell
Warrants to Holdings shall, as a condition to any such sale, enter into a
Joinder Agreement (a "Joinder Agreement") in the form attached hereto as
Schedule 2.3 pursuant to which each such sale and each such Additional
Stockholder wishing to sell stock (upon delivery of such Joinder Agreement, a
"Selling Stockholder") and Additional Warrantholder wishing to sell Warrants
(upon delivery of such Joinder Agreement, a "Selling Warrantholder") shall
become subject to the terms and conditions of this Agreement.
For the purposes hereof, the Primary Stockholders and the Selling
Stockholders shall hereinafter be referred to as the "Redeeming Stockholders;"
the Primary Redeemed Shares and the Additional Redeemed Stock shall hereinafter
be referred to as the "Redeemed Shares;" and the Primary Redemption, the
Additional Share Redemption and the Warrant Purchase shall hereinafter be
referred to as the "Redemption and Purchase."
2.4 The Closing. The closing of the transactions described herein (the
"Closing") shall take place as soon as practicable following the satisfaction of
all conditions set forth in Article 7 of this Agreement (the date upon which the
Closing occurs, being referred to herein as the "Closing Date") at the offices
of McDermott, Will & Emery, 50 Rockefeller Plaza, New York, New York 10020 or at
such other place in the City of New York as may be agreed to by the parties. The
Closing shall be effective as of the close of business on the Closing Date. At
the Closing, the parties shall deliver, or cause to be delivered, such
certificates, receipts or other documents or instruments as are provided for in
this Agreement
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and shall attend to such other matters as may be required to comply with the
terms of this Agreement.
2.5 Closing Deliveries.
(a) Primary Stockholders. At the Closing, the Primary Stockholders
shall deliver, or cause to be delivered to Holdings the following:
(i) an opinion, dated the Closing Date, of Gibson, Dunn & Crutcher,
LLP ("GDC"), counsel to the Primary Stockholders and, as to certain matters
(litigation, injunctions and other governmental orders and governmental
consents), to Holdings, in form reasonably satisfactory to Holdings; and
(ii) the terminations referred to in Section 7.2(c) below.
(b) Redeeming Stockholders and Selling Warrantholders. At the
Closing, each of the Redeeming Stockholders and the Selling Warrantholders
(including, without limitation, the Primary Stockholders), as the case may be,
shall deliver, or cause to be delivered, to Holdings the following as to each
such Person:
(i) stock certificates representing the Redeemed Shares;
(ii) warrant certificates representing the Purchased
Warrants;
(iii) in accordance with Section 2.3, Joinder Agreements
executed by each of the Selling Stockholders and the Selling Warrantholders
(other than the Primary Stockholders);
(iv) the Sellers' Releases; and
(v) such other documents as the Purchaser Representative and
his counsel may reasonably request prior to the Closing.
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2.6 Closing Deliveries - Holdings. At the Closing, Holdings shall deliver
to the Redeeming Stockholders and Selling Warrantholders the following:
(a) the Consideration;
(b) an opinion, dated the Closing Date, of McDermott, Will & Emery,
counsel, as to certain matters, to Holdings, in form reasonably satisfactory to
the Primary Stockholders;
(c) certified copies of resolutions adopted by the Board of
Directors of Holdings authorizing the execution, delivery and performance by
Holdings of this Agreement and the consummation of all transactions contemplated
by this Agreement;
(d) the Solvency Opinion referred to in Section 7.1(b) below;
(e) a certificate of good standing of Holdings and each of the
Subsidiaries issued by the Secretaries of State of the states of their
incorporation and qualification;
(f) the Holdings' Release;
(g) the Certificate of the Chief Financial Officer of Holdings
referred to in Section 7.1(d) below;
(h) (i) all fees payable under the Consulting Agreement with the
Primary Stockholders, and (ii) an amount equal to all expenses to be reimbursed
pursuant to Section 6.8(a);
(i) the agreements contemplated by Section 6.11(d); and
(j) such other documents as the Primary Stockholders and their
counsel may reasonably request prior to the Closing.
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3. CONSIDERATION
3.1 Redemption Consideration. At the Closing, in exchange for each of the
Redeemed Shares and against delivery of a stock certificate representing such
Redeemed Share, Holdings shall cause to be paid, by wire transfer of funds to
the Redeeming Stockholder holding such Redeemed Share (the "Redemption
Consideration"):
(a) for each Redeemed Share of Class A Common Stock, $514.00;
(b) for each Redeemed Share of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock, the Stated Value of such Redeemed
Share plus an amount equal to any and all dividends, declared or undeclared,
which have accrued but have not been paid from the date of issuance of such
Redeemed Share through the Closing Date, as set forth on Schedule 3.1(b)
attached hereto (which shall be updated to the Closing). The Redeeming
Stockholders holding such Preferred Stock acknowledge and agree that the
calculations of the Redemption Consideration for Preferred Stock set forth on
Schedule 3.1(b) constitute an accurate calculation of the stated value of such
Redeemed Shares plus accrued and unpaid dividends thereon, assuming that the
Closing Date is June 30, 1997.
3.2 Purchase Consideration. At the Closing, in exchange for each Purchased
Warrant and against delivery of a warrant certificate representing such
Purchased Warrant, Holdings shall cause to be paid, by wire transfer of funds to
each Selling Warrantholder the sum of $514.00 less the exercise price applicable
to such Purchased Warrant for each share represented by such Purchased Warrant
(the "Warrant Purchase Consideration" and collectively with the Redemption
Consideration, the "Consideration").
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4. REPRESENTATIONS AND WARRANTIES OF THE REDEEMING
STOCKHOLDERS AND THE SELLING WARRANTHOLDERS
Each Redeeming Stockholder and each Selling Warrantholder represents
and warrants to Holdings and to the Non-Redeeming Stockholders and the
Non-Selling Warrantholders, severally as to each such Redeeming Stockholder or
Selling Warrantholder and not jointly, as follows:
4.1 Litigation. There is no lawsuit, arbitration, action, claim,
investigation hearing, charge, complaint, demand or administrative proceeding by
any Person either (i) pending in any court or before any Government Authority or
non-governmental body against such Redeeming Stockholder or Selling
Warrantholder, (ii) to the Knowledge of such Redeeming Stockholder or Selling
Warrantholder, pending in any court or before any Government Authority or
non-governmental body against Holdings or (iii) to the Knowledge of such
Redeeming Stockholder or Selling Warrantholder, threatened, against Holdings or
such Redeeming Stockholder or Selling Warrantholder, that in any such case could
reasonably be expected to have a Material adverse effect on any of the
transactions contemplated by this Agreement or any Related Agreement, including
any prohibition or restriction on the sale, transfer or exchange of the Redeemed
Shares or the Purchased Warrants.
4.2 Status and Authority. If such Redeeming Stockholder or Selling
Warrantholder is a corporation, such Redeeming Stockholder or Selling
Warrantholder is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated. If such
Redeeming Stockholder or Selling Warrantholder is a limited partnership, such
Redeeming Stockholder or Selling
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Warrantholder is a limited partnership duly organized and validly existing under
the laws of the jurisdiction in which it is organized. Such Redeeming
Stockholder or Selling Warrantholder has the right, power and authority (i) to
own the Shares or Warrants owned by it, (ii) to execute and deliver, as
applicable, this Agreement, the Sellers' Release and its Joinder Agreement (the
Sellers' Release and Joinder Agreement being the "Related Agreements"), (iii) to
perform its obligations hereunder and thereunder and (iv) to consummate the
transactions in accordance with the terms contemplated hereby and thereby. The
execution, delivery and performance of this Agreement and the Related Agreements
by such Redeeming Stockholder or Selling Warrantholder and the consummation of
the transactions in accordance with the terms contemplated hereby and thereby
have been duly authorized by all necessary action on the part of such Redeeming
Stockholder or Selling Warrantholder. This Agreement and the Related Agreements
have been duly executed and delivered by such Redeeming Stockholder or Selling
Warrantholder and constitute the valid and binding obligations of such Redeeming
Stockholder or Selling Warrantholder, enforceable against such Redeeming
Stockholder or Selling Warrantholder in accordance with their terms.
4.3 Conflicts, Consents and Approvals.
(a) The execution, delivery and performance of this Agreement and
the Related Agreements by such Redeeming Stockholder or Selling Warrantholder do
not and will not result in (i) any conflict with any organizational documents of
such Redeeming Stockholder or Selling Warrantholder (if such Redeeming
Stockholder or Selling Warrantholder is not an individual), (ii) any breach or
violation of or default under any law,
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rule, statute, regulation, judgment, order or decree or any note, bond,
mortgage, agreement, deed of trust, indenture, license, permit, lease, loan
agreement, contract, agreement or any other instrument or arrangement to which
such Redeeming Stockholder or Selling Warrantholder is a party or by which such
Redeeming Stockholder or Selling Warrantholder or its properties or assets are
bound or (iii) the creation or imposition of any liens, security interests,
claims, charges or encumbrances, limitations, rights of others and other
encumbrances of any kind or nature whatsoever ("Liens") on the Shares or
Warrants owned by the Redeeming Stockholder or Selling Warrantholder.
(b) No consent, approval or authorization of or filing,
registration, qualification, designation or declaration with, or notice to, any
Government Authority or any third party is required on the part of such
Redeeming Stockholder or Selling Warrantholder in connection with the execution
and delivery of this Agreement and the Related Agreements or the consummation of
the transactions contemplated hereby and thereby.
4.4 Shares and Warrants. Such Redeeming Stockholder or Selling
Warrantholder owns the Shares and/or Warrants in the amount set forth opposite
its name on Schedule B and/or Schedule C free and clear of all Liens. Except as
indicated on Schedule 4.4 and except for this Agreement, such Redeeming
Stockholder or Selling Warrantholder is not a party to any agreement restricting
the transfer or the voting of any of the Shares or the transfer of any Warrants.
4.5 Brokers. Such Redeeming Stockholder or Selling Warrantholder has not
retained, nor has anyone acting on such Redeeming Stockholder's or Selling
Warrantholder's behalf engaged, retained, or incurred any liability to, any
broker, investment banker, finder
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or agent or agreed to pay any brokerage fees, commission, finder's fees or other
fees with respect to the transactions contemplated hereby. All negotiations
relating to this Agreement and the transactions contemplated hereby have been
carried out without the intervention of any Person acting on behalf of such
Redeeming Stockholder or Selling Warrantholder in such manner as to give rise to
any claim for any brokerage or finder's commission, fee or similar compensation.
4.6 Validity of Representations and Warranties. No representation or
warranty of such Redeeming Stockholder or Selling Warrantholder in this Article
4 contains any untrue statement of a Material fact or omits to state a Material
fact necessary in order to make the statements in this Article 4 not misleading.
5. REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Holdings represents and warrants to the Redeeming Stockholders and to the
Selling Warrantholders as follows:
5.1 Authorization.
(a) Holdings has full and unrestricted right, power and authority
(i) to execute and deliver this Agreement, and every Related Agreement to which
it is a party (the "Holdings Related Agreements"); (ii) to perform its
obligations hereunder and under the Holdings Related Agreements; and (iii) to
consummate the transactions contemplated hereby and thereby.
(b) The execution and delivery by Holdings of this Agreement and
each of the Holdings Related Agreements, and the performance by Holdings of its
obligations
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hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by all requisite corporate action.
(c) This Agreement and each of the Holdings Related Agreements have
been duly executed and delivered by Holdings and constitute the valid and
legally binding obligations of Holdings enforceable against it in accordance
with their respective terms.
5.2 Conflicts. Neither the execution, delivery or performance by Holdings
of this Agreement or of any Holdings Related Agreement, or the consummation of
the transactions contemplated hereby or thereby, does or will (i) violate or
contravene any provision of the Certificate of Incorporation, By-Laws or any
other organizational documents of Holdings, or of any law, rule, or regulation
of any governmental body or any order, decree or judgment of any court or
Government Authority, (ii) violate, contravene or constitute a breach of or
default under any mortgage, indenture, loan agreement, contract, note or other
agreement or instrument binding upon Holdings or any of its property, (iii)
result in the creation of any Lien upon any property of Holdings, or (iv)
require the consent, approval or action of, or any filing with, or notice to,
any Person.
5.3 Consent of Government Authorities. No consent, approval or action of,
or any filing, registration or qualification with, or notice to, any Government
Authority is required in connection with the execution and delivery by Holdings
of this Agreement or any Holdings Related Agreement in connection with the
performance by of its obligations under this Agreement or such Holdings Related
Agreement or the consummation by Holdings of the transactions contemplated
hereby or thereby.
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5.4 Brokers. Holdings has not retained, nor has anyone acting on Holdings'
behalf engaged, retained, or incurred any liability to, any broker, investment
banker, finder or agent or agreed to pay any brokerage fees commission, finder's
fees or other fees with respect to the transactions contemplated hereby. All
negotiations relating to this Agreement and the transactions contemplated hereby
have been carried out without the intervention of any Person acting on behalf of
Holdings in such manner as to give rise to any claim for any brokerage or
finder's commission, fee or similar compensation.
5.5 Financing Commitments. Holdings has received a written commitment from
Credit Suisse First Boston Corporation ("CSFB") with respect to a senior secured
credit facility in the amount of $70,000,000, and a highly confident letter from
CSFB with respect to senior subordinated notes in the amount of $100,000,000 and
other debt and/or equity securities in the amount of $40,000,000 (in the
aggregate, the "Financing") subject in each case to the conditions and caveats
contained therein (the "Financing Assurances"). Copies of the Financing
Assurances are attached hereto as Schedule 5.5. It is the good faith belief of
Holdings, as of the date hereof, that the Financing contemplated by this Section
5.5 will be obtained. Holdings shall use its commercially reasonable efforts to
obtain all Financing required to consummate the transactions contemplated by
this Agreement, including using commercially reasonable efforts to fulfill or
cause to be fulfilled the conditions contained in such Financing Assurances
which are within its control.
5.6 Solvency; Surplus.
(a) Each of Holdings and its Subsidiary Roller Bearing Corporation
of America, Inc. ("RBCA") will be Solvent immediately after giving effect to (x)
the
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Redemption and Purchase, (y) the Financing and the application of the proceeds
thereof and (z) any other transactions contemplated by this Agreement or by the
agreements related to the Financing (the "Subject Transactions"). For purposes
of this Agreement, "Solvent" when used with respect to either Holdings or RBCA,
shall mean that, as of any date of determination, (i) the amount of the Present
Fair Salable Value of its assets will, as of such date, exceed all its
liabilities, contingent or otherwise, as of such date, (ii) such corporation
will not have, as of such date, an unreasonably small amount of capital for the
business in which it is engaged or will be engaged and (iii) such corporation
will be able to pay its debts as they become absolute and mature, taking into
account the timing of and amounts of cash to be received by it and the timing of
and amounts of cash to be payable on or in respect of its indebtedness, in each
case after giving effect to the Subject Transactions. For purposes of the
definition of "Solvent, " (A) "debt" means liability on a "claim"; and (B)
"claim" means (i) any right to payment, whether or not such a right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (ii) the right
to an equitable remedy for breach or performance if such breach gives rise to a
right to payment, whether or not such equitable remedy is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured. The term "Solvency" shall
have its correlative meaning. "Present Fair Salable Value" means the amount that
may be realized if Holdings' or RBCA's aggregate assets (including goodwill) are
sold as an entirety with reasonable promptness in an arms length transaction
under present conditions for the sale of comparable business enterprises.
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(b) After giving effect to the Subject Transactions, including the
Financing, the Present Fair Saleable Value of each of Holdings' and RBCA's
assets will exceed such corporation's debt, as defined above, plus the total
"capital" of such corporation, as such "capital" is determined in accordance
with Section 154 of the Delaware General Corporation Law.
5.7 California Corporations Code Section 2115. Neither Holdings nor RBCA
is subject to the provisions of California Corporations Code Section 2115.
5.8 Capitalization. Attached hereto as Schedule 5.8 is a table of the
capitalization of Holdings and its consolidated subsidiaries, as presently
contemplated, and after giving pro forma effect to the transactions contemplated
hereby.
6. ADDITIONAL AGREEMENTS
6.1 Conduct of the Business. Except as otherwise contemplated by this
Agreement, during the period from the date of this Agreement to the Closing,
Holdings and the Subsidiaries will conduct their operations consistent with the
ordinary and usual course of business and with past practice, and Holdings and
the Subsidiaries will take all actions reasonably within their power to ensure
that Holdings and the Subsidiaries, preserve intact their business organization,
keep available the services of their officers and employees and maintain
satisfactory relationships with licensors, licensees, suppliers, contractors,
distributors, customers and others having business relationships with them.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the Closing, neither Holdings nor
any of the Subsidiaries will take any action so as to cause Holdings or any
Subsidiary to:
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(a) amend any of their Certificates of Incorporation or Bylaws or
similar charter documents;
(b) authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities, except upon the
conversion of the Series C Preferred Stock in accordance with its terms as
in effect on the date hereof;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeem or otherwise acquire any of its securities or any
securities of the Subsidiaries;
(d) except (x) for the Financing or (y) in the ordinary course of
business in respect of presently existing lines of credit, and consistent
with past practices, (i) incur or assume any long-term or short-term
indebtedness, (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the
obligations of any other Person or (iii) make any loans, advances or
capital contributions to, or investments in, any other Person;
(e) transfer any assets or liabilities to any new Subsidiary or,
except in the ordinary course of business and consistent with past
practice, to any Subsidiary;
(f) grant, waive any infringement of, license or transfer, rights
under any patents, patent rights, trademarks rights, trade names, trade
name rights, copyrights or know-how or waive any Material rights under,
terminate or Materially modify any
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existing Material license, lease, contract or other agreement or
instrument, other than in the ordinary course of business and consistent
with past practice;
(g) except pursuant to the Financing, acquire, sell, lease, create
Liens with respect to, or otherwise dispose of any Material assets outside
the ordinary course of business or enter into or modify any Material
commitment or transaction outside the ordinary course of business;
(h) change the rates of compensation, commission or bonus payable,
or pay or agree to pay, conditionally or otherwise, any bonus or any extra
compensation, pension, severance pay or vacation pay, to any of Holdings'
or any Subsidiary's employees;
(i) acquire any assets, including any acquisition of any business
enterprise, or otherwise commit to any capital expenditures, other than in
the normal course of business;
(j) discharge any liability except in the ordinary course of
business consistent with past practice;
(k) otherwise in any respect operate other than in the ordinary
course of business;
(l) except as may be required by law, take any action to terminate
or amend any of its employee benefits plans;
(m) except as contemplated by Section 6.7, change any accounting
methods or policies; or
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(n) take or agree in writing or otherwise to take, any of the
actions or any other action which would make any representation or
warranty of Holdings contained in this Agreement untrue or incorrect in
any Material respect as of the date made or as of a future date
contemplated by such representation or warranty or which will have the
effect of (x) causing Holdings to fail to perform any of its affirmative
covenants contained in this Agreement or in any Related Agreement, or (y)
causing Holdings to violate any negative covenant contained in this
Agreement or in any Related Agreement; or
(o) enter into any agreement or make any commitments to take any of
the types of action described in subsections (a) through (n) above.
6.2 Actions of Redeeming Stockholders and Selling Warrantholders.
(a) None of the Redeeming Stockholders or Selling Warrantholders
shall take any action, or fail to take any reasonable action, which shall have
the effect of causing (i) a representation or warranty of such Redeeming
Stockholder or Selling Warrantholder contained in this Agreement or any Related
Agreement to fail to be true, (ii) such Redeeming Stockholder or Selling
Warrantholder to fail to perform any of its positive covenants contained in this
Agreement or in any Related Agreement, or (iii) such Redeeming Stockholder or
Selling Warrantholder to take any action that violates any of its negative
covenants contained in this Agreement or in any Related Agreement.
(b) None of the Redeeming Stockholders shall take any action in its
capacity as a stockholder of Holdings, which shall have the effect of causing
(i) a representation or warranty of Holdings contained in this Agreement or any
Related
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Agreement to fail to be true, (ii) Holdings to fail to perform any of its
positive covenants contained in this Agreement or in any Related Agreement, or
(iii) Holdings to take any action that violates any of its negative covenants
contained in this Agreement or in any Related Agreement.
(c) Whether or not the Redemption and Purchase is deemed to be a
"tender offer" within the meaning of Section 14(e) of the Securities Exchange
Act of 1934, as amended, Holdings will:
(i) distribute to each Additional Stockholder disclosure
materials containing (A) a description of the materials terms of the offer
to redeem the Shares and to purchase the Warrants, (B) a copy of this
Agreement, (C) a description of the proposed Financing transactions, (D)
historical financial statements of the Company for the fiscal years ended
March 28, 1992, March 27, 1993, March 26, 1994, March 25, 1995 and March
31, 1996, (E) pro forma financial statements of the Company for the fiscal
year ended March 29, 1997, (F) a description of the federal income tax
considerations of the Redemption and Purchase, (G) a description of the
risks associated with the general corporation laws and the fraudulent
conveyance laws of the State of Delaware, (H), a copy of the Joinder
Agreement and the procedure for executing and delivering such document to
Holdings (I) one or more execution copies of the Joinder Agreement and (J)
any other information necessary to comply with Section 6.2(c)(ii);
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(ii) ensure that the disclosure materials described in Section
6.2(c)(i) shall not contain any untrue statement of a Material fact or
omit to state a Material fact necessary in order to make the statements
made therein not misleading;
(iii) keep open the offer to redeem the Additional Shares and
to purchase the Additional Warrants for a reasonable period of time; and
(iv) inform each Additional Stockholder in writing of any
material amendment of this Agreement or modification of the terms and
conditions of the offer to redeem the Additional Shares and to purchase
the Additional Warrants and keep open the offer to redeem the Additional
Shares and to purchase the Additional Warrants for a reasonable period of
time after any such amendment or modification.
6.3 Meetings of Stockholders of Holdings and the Subsidiaries. Holdings
and the Redeeming Stockholders and Selling Warrantholders agree that, should any
vote of stockholders of Holdings or any Subsidiary be required by applicable law
or determined to be advisable in respect of the transactions contemplated
hereby, such parties shall vote all shares of stock of any class or series of
Holdings and the Subsidiaries in favor of proceeding with such transactions, and
agree to call any meetings required for such purpose; provided, however, that
the ultimate votes in respect of the within transactions and the Financing shall
be undertaken in accordance with Section 6.4 below; and provided, further, that
the Redeeming Stockholders and Selling Warrantholders shall not be required to
vote any Shares in favor of matters (a) which would be Materially adverse to the
interests of such Redeeming Stockholder or Selling Warrantholder if the Closing
does not occur, (b) which would Materially adversely affect its rights under
this Agreement or any Related Agreement or (c)
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which would Materially adversely affect its rights as a stockholder or
warrantholder except as otherwise contemplated by this Agreement or any Related
Agreement.
6.4 Closing Authorizations. In the event that there is a change in the
composition of the Board of Directors of Holdings or any Subsidiary prior to the
Closing or the termination of this Agreement, the Redeeming Stockholders shall
vote their respective shares in Holdings as may be necessary to approve,
execute, deliver and, if necessary, ratify this Agreement, the Related
Agreements and the Financing and as may otherwise be necessary in order to
complete Closing, including, without limitation, electing additional or
replacement directors.
6.5 The Purchaser Representative; Authority to Act on Behalf of Holdings;
Enforcement.
(a) The Purchaser Representative shall act as the representative of
the Non-Redeeming Stockholders and Non-Selling Warrantholders for the purposes
of this Agreement, and in respect of the transactions contemplated hereby.
(b) In connection with pursuing the transactions contemplated hereby
on behalf of Holdings, including the Financing, the Purchaser Representative and
his designated agents and representatives shall have the express authority to
act on behalf of Holdings and to represent and hold themselves out to third
parties as having such authority; provided, however, (i) the Purchaser
Representative shall keep the Primary Stockholders reasonably informed of the
status of all discussions respecting the Financing; (ii) the Purchaser
Representative shall not enter into any binding commitments with respect to the
Financing (A) which will survive the termination of this Agreement if the
Closing does not occur or (B)
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which (x) differ Materially and in a manner adverse to Holdings from those terms
set forth in the Financing Assurances and (y) in the reasonable opinion of the
Primary Stockholders, by reason of such differences, Materially and adversely
affect the Solvency of Holdings; (iii) the Purchaser Representative shall not
enter into any binding commitments in respect of the Financing that would commit
Holdings to complete such Financing unless the aggregate proceeds thereof are
sufficient to complete the Redemption and Purchase; and (iv) the Purchaser
Representative shall not enter into any binding commitments with respect to the
Financing which will subject the Primary Stockholders to any liability under
applicable federal or state securities laws. Without limiting the generality of
the foregoing, the Primary Stockholders acknowledge that Holdings has entered
into an engagement arrangement with CSFB in connection with which CSFB has been
retained to arrange the Financing. The Primary Stockholders hereby consent to
such engagement in the form attached hereto as Schedule 6.5.
(c) Notwithstanding anything contained herein to the contrary, and
without limiting the generality of the provisions of Section 8 below, neither
Holdings, nor any of the Stockholders (including the Redeeming Stockholders and
the Selling Warrantholders) shall have any rights of recourse of any kind or
nature whatsoever against the Purchaser Representative on account of this
Agreement or the Related Agreement or the transactions contemplated hereby or
thereby, (i) regardless of whether or not the Closing occurs, and (ii) if the
Closing does not occur, regardless of the reason therefor, and (iii) if the
Closing does not occur, regardless of the nature of the Purchaser
Representative's actions or omissions in connection therewith.
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(d) The parties hereto acknowledge that after the Redemption and
Purchase, the Non-Redeeming Stockholders and the Non-Selling Warrantholders
shall be the primary holders of all outstanding equity interests in Holdings and
that they, therefore, will ultimately benefit by virtue of the transactions
contemplated thereby. Pursuant thereto, each of Holdings, the Redeeming
Stockholders and the Selling Warrantholders hereby acknowledges and confirms
that the Non-Redeeming Stockholders and the Non-Selling Warrantholders are
ultimate beneficiaries of the transactions contemplated hereby. Therefore, each
of Holdings, the Redeeming Stockholders and the Selling Warrantholders hereby
grant to the Purchaser Representative, in the capacity of representative of the
Non-Redeeming Stockholders and Non-Selling Warrantholders, the right to enforce
the obligations of Holdings, the Redeeming Stockholders and the Selling
Warrantholders hereunder, insofar as such obligations relate to the consummation
of the Redemption and Purchase. Without limiting the generality of the
foregoing, and in recognition of the possibility that remedies of law may be
inadequate, the Purchaser Representative shall be entitled to seek and obtain
injunctive or other equitable relief on behalf of the Non-Redeeming Stockholders
and the Non-Selling Warrantholders in order to effect and enforce the obligation
of all of the parties hereto to consummate the Redemption and Purchase. Such
actions by the Purchaser Representative may be to compel performance hereof by
Holdings or, on behalf of Holdings, to compel performance by the Redeeming
Stockholders and Selling Warrantholders.
6.6 Cooperation.
(a) The Primary Stockholders shall cooperate with CSFB as may be
reasonably requested by CSFB in connection with the arrangement of the
Financing.
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Pursuant thereto, Holdings, the Subsidiaries and the Primary Stockholders hereby
authorize the Purchaser Representative, in his capacity as an officer of
Holdings and the Subsidiaries, to pursue the arrangement of the Financing in
such fashion as is, and subject to Section 6.5(b)(ii), (iii) and (iv), on such
terms as are, acceptable to the Purchaser Representative in such capacity.
(b) Between the date hereof and the Closing, Holdings will give the
Purchaser Representative and its authorized representatives (including CSFB),
and potential sources of the Financing and their authorized representatives,
access during normal business hours to all facilities, books and records of
Holdings and the Subsidiaries as the Purchaser Representative and its authorized
representatives may reasonably request; will permit the Purchaser
Representative, potential sources of the Financing and their respective
authorized representatives to make such inspections as they may reasonably
require; and will cause its officers and those of the Subsidiaries to furnish
the Purchaser Representative, potential sources of the Financing and their
respective authorized representatives with such financial and operating data and
other information with respect to the business and properties of Holdings and
the Subsidiaries as the Purchaser Representative may from time to time
reasonably request.
6.7 1997 Financial Statements. The Purchaser Representative has notified
Holdings and the Primary Stockholders that it wishes to institute the changes
set forth on Schedule 6.7 to Holdings' accounting methods effective with the
financial statements covering the fiscal year ended March 29, 1997 (the "1997
Financial Statements") and certain prior periods. Pursuant thereto, (i) unless
otherwise approved by the Primary Stockholders,
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Holdings shall not issue its 1997 Financial Statements prior to the Closing
Date, (ii) Holdings shall instruct its employees and accountants to cooperate
with the Purchaser Representative in preparing the 1997 Financial Statements
with the changes in accounting methods designated by the Purchaser
Representative, and (iii) concurrently with the Closing (or earlier, but only
with the approval of the Primary Stockholders), Holdings shall issue the 1997
Financial Statements with such changes in accounting methods included therein.
If for any reason the Closing is not consummated by June 30, 1997, Holdings
shall be free to issue the 1997 Financial Statements with or without such
changes in accounting methods as it deems appropriate, without regard to the
foregoing.
6.8 Payment of Expenses.
(a) Holdings shall reimburse each of the Primary Stockholders for,
or at the request of either Primary Stockholder directly satisfy, the following
amounts in respect of the expenses of such parties in connection with the
negotiation of this Agreement and the Related Agreements, the consummation of
the Redemption and Purchase and otherwise in connection with the transactions
contemplated by this Agreement:
(i) if the transactions contemplated by this Agreement are not
consummated, up to $150,000 in reasonable legal fees actually incurred by such
parties, to GDC, plus GDC's actual out-of-pocket disbursements,
(ii) if the transactions contemplated by this Agreement are
consummated, a fixed amount of $200,000 payable to GDC in respect of all of its
fees and disbursements.
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(b) If (i) the transactions contemplated by this Agreement are
consummated or (ii) the transactions contemplated by this Agreement are not
consummated because of the failure of a condition set forth in Section 7,
Holdings shall satisfy all reasonable out-of-pocket expenses (including fees and
expenses) actually incurred by it or by the Non-Redeeming Stockholders and
Non-Selling Warrantholders in connection with the transactions contemplated by
this Agreement (including the arrangement of the Financing). Following the date
hereof, the Purchaser Representative shall provide Holdings with a reasonable
budget for all such expenses. Holdings' present good faith estimate of the
dollar amount of such expenses is $1,000,000 in the aggregate.
6.9 Public Announcements. The Purchaser Representative, Holdings and the
Primary Stockholders will consult with each other before issuing any press
release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or compulsory legal process or by obligations pursuant to
any listing agreement with any national securities exchange.
6.10 Directors' and Officers' Insurance, Indemnification.
(a) Holdings agrees that all rights to indemnification now existing
or thereafter arising at or prior to Closing in favor of the present or former
directors or officers of Holdings, together with such other directors of
Holdings as may be acting as such prior to the Closing, as provided in its
Certificate of Incorporation or Bylaws as in effect on the date thereof or
pursuant to other agreements in effect on the date thereof (it being understood
that between the date hereof and the Closing Date, Holdings shall enter into
indemnification
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agreements in the form provided by the Primary Stockholders to Holdings prior to
the date hereof with all persons who have served as directors or officers of
Holdings or any Subsidiary at any time during 1997) shall survive the
termination of this Agreement, the consummation of the transaction contemplated
by this Agreement and the Closing, and continue in full force and effect until
the expiration of the applicable statute of limitations periods, provided that,
in the event any claim or claims are asserted or made within such period, all
rights to indemnification in respect of any such claim or claims shall continue
until final disposition of any and all such claims.
(b) Holdings shall, regardless of whether the transactions
contemplated by this Agreement are effected, indemnify and hold harmless to the
fullest extent permitted under applicable law and under its Certificate of
Incorporation, Bylaws and any other agreement in effect on the date hereof (and
shall also advance expenses as incurred to the fullest extent permitted under
applicable law provided the person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification), all of the present and former
officers and directors of Holdings and the Subsidiaries, such other officers and
directors of Holdings and the Subsidiaries as may be acting as such prior to the
Closing and all of the Stockholders (collectively, the "Indemnified Parties")
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to any action or omission occurring with respect to the transactions
contemplated by this Agreement (other than any of
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the above arising from the breach by such Indemnified Party of any
representation, warranty or covenant contained in this Agreement, any Related
Agreement or any Financing Assurance). In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the Closing),
if Holdings has the financial capacity to pay all monies due under this Section
6.10 and such payment is not prohibited by compulsory legal process, Holdings
shall have the right to assume the defense thereof, except that if Holdings
elects not to assume such defense or counsel for the Indemnified Parties advises
that there are issues which may raise conflicts of interest between Holdings and
the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory
to them, and Holdings shall pay all reasonable fees and expenses of such counsel
for the Indemnified Parties promptly as statements therefor are received,
provided, however, that Holdings shall pay for only one firm of counsel for all
Indemnified Parties in any jurisdiction unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest and
provided, that Holdings shall not be liable for any settlement effected without
its prior written consent, and provided further that Holdings shall not have any
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim indemnification under this Section 6.10, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify Holdings
thereof, but the failure to so notify shall not relieve Holdings of any
liability it may have to such Indemnified Party if such failure does not
Materially prejudice Holdings as the indemnifying
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party. The parties intend, to the extent not prohibited by applicable law, that
the indemnification provided for in this Section 6.10 shall apply to negligent
acts or omissions by the Indemnified Parties. If such indemnify is not available
with respect to any Indemnified Party, then Holdings and the Indemnified Party
shall contribute to the amount payable in such proportion as is appropriate to
reflect relative faults and benefits.
(c) In the event any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated hereby is commenced by a
third party whether before or after the Closing, the parties hereto agree to
cooperate and use their reasonable efforts to defend against and respond
thereto.
(d) The Indemnified Parties shall be deemed to be third party
beneficiaries of, and shall have the legal right to enforce, the provisions of
this Section 6.10.
6.11 Reasonable Efforts; Consents.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its reasonable efforts to take or cause to be taken
all action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement. In case at any time after the
Closing any further action is necessary or desirable to carry out the purposes
of this Agreement, the proper officers and directors of each party to this
Agreement shall take all such necessary action.
(b) Holdings, the Purchaser Representative and the Redeeming
Stockholders and Selling Warrantholders each will use its reasonable efforts to
obtain
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consents of all third parties and Government Authorities necessary to the
consummation of the transactions contemplated by this Agreement.
(c) Subject to the review and approval of the Primary Stockholders
(which approval shall not be unreasonably delayed or withheld), Holdings shall,
at its sole expense, take all actions necessary to ensure that the transactions
contemplated by this Agreement comply with all applicable state environmental
laws regarding the transfer of real property, including, without limitation, the
New Jersey Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq. and the
Connecticut Transfer Act, as amended, Conn. Gen. Stat. Sec. 22a-134 et seq.
(collectively, the "Transfer Statutes"). Holdings shall indemnify and hold
harmless the Primary Stockholders for all Damages incurred by the Primary
Stockholders as a result of the failure of Holdings to secure any consents from
any Government Authorities required under the Transfer Statutes. As used in this
Section 6.11, "Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement net of
insurance proceeds actually received, including without limitation, reasonable
costs, fees and expenses of attorneys, accountants and other agents of Holdings.
(d) Holdings shall use its commercially reasonable efforts to obtain
a written agreement, signed by each of the Non-Redeeming Stockholders and
Non-Selling Warrantholders, and shall be obligated to obtain a written agreement
signed by the Purchaser Representative in his individual capacity, in each case
agreeing to waive any and all rights under any circumstances to unwind the
Redemption and Purchase or otherwise to seek to obtain a return of any or all of
the Consideration, whether on a theory that the Redemption
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and Purchase constituted, or resulted in, a fraudulent conveyance under
applicable law, the Redemption and Purchase violated Section 174 of the Delaware
General Corporation Law, or otherwise.
6.12 Notification of Certain Matters. The parties hereto each agree to
give prompt notice to each other party of (i) the occurrence, or failure to
occur, of any event which occurrence or failure to occur would be likely to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any Material respect at any time from the date hereof to the
Closing, (ii) any Material failure on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.12 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice, and (iii) any action, suit or
proceeding that shall be instituted or threatened against such party to
restrain, prohibit or otherwise challenge the legality of any transaction
contemplated by this Agreement.
6.13 No Solicitation. From the date hereof through the earlier to occur of
(i) the Closing Date, and (ii) the termination of this Agreement in accordance
with its terms, neither Holdings nor any of the Subsidiaries nor any of the
Redeeming Stockholders or Selling Warrantholders shall directly or indirectly,
including through any third-party intermediaries, representatives, investment
bankers, or the like, engage in any Shopping Activities (as defined below).
"Shopping Activities" shall mean any and all activities having the direct or
indirect intent or possible effect of leading to a transaction involving either
(A) a sale of all or substantially all of the assets of Holdings (or of Holdings
and the Subsidiaries taken as a
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whole) or such portion of the Shares as may constitute control of Holdings (or
of the Subsidiaries), or (B) a recapitalization of the Holdings (a "Third Party
Transaction"). In connection therewith, neither Holdings nor any Subsidiary, nor
any Redeeming Stockholder or Selling Warrantholder shall directly or indirectly
(i) solicit any inquiries respecting a Third Party Transaction, (ii) respond to
any inquiries respecting a Third Party Transaction other than to indicate that
no such Transaction will be considered during the period covered by this Section
6.13, (iii) engage any intermediary to act in any fashion in respect of a Third
Party Transaction, or (iv) otherwise undertake any activities that could
reasonably be expected to lead to a Third Party Transaction.
6.14 Indemnification of Redeeming Stockholders and Selling Warrantholders.
Holdings shall, from and after the Closing, indemnify and hold harmless to the
fullest extent permitted under applicable law (and shall also advance expenses
as incurred to the fullest extent permitted under applicable law provided the
person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification), the Redeeming Stockholders and the Selling Warrantholders
against the amount of any portion of the Consideration returned to Holdings,
together with related costs or expenses (including attorneys' fees) by virtue of
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to a breach of the representation and warranty contained in
Section 5.6 of this Agreement. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Closing), if
Holdings has the
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financial capacity to pay all monies due under this Section 6.14 and such
payment is not prohibited by compulsory legal process, Holdings shall have the
right to assume the defense thereof, except that if Holdings elects not to
assume such defense or counsel for the Redeeming Stockholders and Selling
Warrantholders advises that there are issues which may raise conflicts of
interest between Holdings and the Redeeming Stockholders and Selling
Warrantholders, the Redeeming Stockholders and Selling Warrantholders may retain
counsel satisfactory to them, and Holdings shall pay all reasonable fees and
expenses of such counsel for the Redeeming Stockholders and Selling
Warrantholders promptly as statements therefor are received, provided, however,
that Holdings shall pay for only one firm of counsel for all Redeeming
Stockholders and Selling Warrantholders in any jurisdiction unless the use of
one counsel for such Redeeming Stockholders and Selling Warrantholders would
present such counsel with a conflict of interest and provided, that Holdings
shall not be liable for any settlement effected without its prior written
consent, and provided further that Holdings shall not have any obligation
hereunder to any Redeeming Stockholders and Selling Warrantholders when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that the indemnification of such
Redeeming Stockholders and Selling Warrantholders in the manner contemplated
hereby is prohibited by applicable law. Any Redeeming Stockholders and Selling
Warrantholders wishing to claim indemnification under this Section 6.14, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify Holdings thereof, but the failure to so notify shall not relieve Holdings
of any liability it may have to such Redeeming Stockholders and Selling
Warrantholders if such failure does not Materially prejudice Holdings as the
indemnifying
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party. If such indemnify is not available with respect to any Redeeming
Stockholders and Selling Warrantholders, then Holdings and the Redeeming
Stockholders and Selling Warrantholders shall contribute to the amount payable
in such proportion as is appropriate to reflect relative faults and benefits.
6.15 Draft of Solvency Opinion; Access; Supporting Materials.
(a) Not later than three (3) days prior to the Closing Date,
Holdings shall cause to be delivered to the Primary Stockholders a substantially
complete draft of the Solvency Opinion prepared by Houlihan, Lokey, Howard &
Zukin or by such other valuation consultant reasonably approved in writing by
the Primary Stockholders (the "Valuation Consultant").
(b) Holdings shall instruct the Valuation Consultant to make
available to the Primary Stockholders all materials provided to the Valuation
Consultant by Holdings to assist the Valuation Consultant in preparing the
Solvency Opinion.
(c) Holdings shall make available to the Primary Stockholders such
other materials reasonably accessible to it as may be necessary or, in the
reasonable discretion of the Primary Stockholders, desirable, to evaluate the
Solvency Opinion or any of the materials made available pursuant to Section
6.15(b). Without limiting the foregoing, Holdings shall distribute to designated
representatives of the Primary Stockholders draft copies of the Confidential
Memorandum under preparation by Holdings in connection with the Financing on or
after May 23, 1997 as such drafts are generally distributed to the parties
involved in the preparation of such Confidential Memorandum and shall invite
designated representatives
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of the Primary Stockholders to attend as observers all drafting sessions
respecting such Confidential Memorandum.
7. CONDITIONS PRECEDENT
7.1 Conditions Precedent to Obligations of Redeeming Stockholders and
Selling Warrantholders. The obligations of the Redeeming Stockholders and the
Selling Warrantholders to consummate the Redemption and Purchase are subject to
the satisfaction at or prior to the Closing of the following conditions:
(a) The representations and warranties of Holdings contained in
Section 5 hereof shall be true and correct in all Material respects at and as of
the Closing;
(b) Holdings shall have delivered (i) to the Redeeming Stockholders
and the Selling Warrantholders a so-called "Solvency Opinion" with respect to
each of Holdings and RBCA (the "Solvency Opinion") dated the Closing Date,
addressed to the Redeeming Stockholders and Selling Warrantholders, containing
the "Opinion" described in paragraph 2 of the proposed engagement letter
attached hereto as Schedule 7.1(b) and otherwise in form and substance
reasonably satisfactory to the Primary Stockholders and (ii) to the current and
former directors of Holdings and RBCA, a reliance letter entitling each of them
to rely on such Solvency Opinion;
(c) Holdings and the Subsidiaries shall have delivered to each of
the Redeeming Stockholders and Selling Warrantholders a release of any and all
claims (other than claims arising out of or relating to the rights of Holdings
under this Agreement and the Related Agreements or, in the case of Redeeming
Stockholders and Selling Warrantholders other than the Primary Stockholders,
claims arising out of or relating to any past or present
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employment of such Person with Holdings or the Subsidiaries) whether matured or
contingent, known or unknown, in the form attached hereto as Schedule 7.1(c)
(the "Holdings' Release");
(d) There shall have been delivered a certificate of the Chief
Financial Officer of Holdings and RBCA, solely in his capacity as such and with
no personal recourse to such officer, dated the Closing Date, to the effect that
(i) each such corporation is Solvent (as defined in Section 5.6(a)) immediately
after giving effect to the Subject Transactions and (ii) after giving effect to
the Subject Transactions, the Present Fair Saleable Value of each of Holdings'
and RBCA's assets exceeds its "debt" (as such term is defined in Section
5.6(a)), plus the total "capital" of such corporation, as such "capital" is
determined in accordance with Section 154 of the Delaware General Corporation
Law;
(e) Holdings shall have performed in all Material respects its
obligations under this Agreement required to be performed at or prior to the
Closing;
(f) No Government Authority shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other order
(whether temporary, preliminary or permanent) which has the effect of
prohibiting consummation of the Redemption and Purchase;
(g) All fees and expenses owing to GDC for services rendered to
Holdings and the Subsidiaries other than in respect of the transactions
contemplated hereby shall have been paid; provided that Holdings shall have
received billings with respect to all matters thereto on or before June 15, 1997
and shall have approved such billings for payment after having had a reasonable
opportunity to discuss such fees and expenses with GDC; and
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provided, further, that Holdings acknowledges that the fees and expenses due and
owing through February 28, 1997 are $19,960.91 and shall be responsible for no
additional fees and expenses to GDC in respect of such period.
(h) All outstanding fees and billings in respect of the Consulting
Agreement with the Primary Stockholders shall have been paid by wire transfer to
an account designated by the Primary Stockholders; provided, further, that the
expenses set forth on Schedule 7.1(h) are all such expenses due and owing
through April 30, 1997; and
(i) All consents necessary to undertake the Redemption and Purchase
shall have been obtained.
7.2 Conditions Precedent to Obligations of Holdings. The obligations of
Holdings to consummate the Redemption and Purchase with respect to each
Redeeming Stockholder or Selling Warrantholder are subject to the satisfaction
at or prior to the Closing of each of following conditions; provided that
Holdings shall have no obligation to consummate the Redemption and Purchase with
respect to any Redeeming Stockholder or Selling Stockholder unless and until
each of such conditions shall have been satisfied with respect to the Primary
Stockholders:
(a) The representations and warranties of such Redeeming Stockholder
or such Selling Warrantholders contained in Section 4 hereof shall be true and
correct in all Material respects at and as of the Closing;
(b) Such Redeeming Stockholder or Selling Warrantholder shall have
delivered to Holdings and the Purchaser Representative a release of any and all
claims (other than claims arising out of or relating to the rights of such
Redeeming Stockholder or Selling
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Warrantholder under this Agreement and the Related Agreements or, in the case of
Redeeming Stockholders and Selling Warrantholders other than the Primary
Stockholders, claims arising out of or relating to any past or present
employment of the Redeeming Stockholders or Selling Warrantholders with Holdings
or the Subsidiaries), whether matured or contingent, known or unknown, from and
after the Closing (the "Sellers' Releases") in the form attached hereto as
Schedule 7.2(b);
(c) The Primary Stockholders and their respective Affiliates shall
have fully and indefeasibly terminated all contractual relationships with
Holdings and/or the Subsidiaries (including that certain Third Amended and
Restated Consulting Agreement, dated as of October 30, 1996 (the "Consulting
Agreement")); provided, however, that the indemnity provided by Section 14 of
the Consulting Agreement shall survive the termination thereof in accordance
with its terms.
(d) Such Redeeming Stockholder or Selling Warrantholder shall have
performed in all Material respects its obligations under this Agreement required
to be performed by it at or prior to the Closing;
(e) No Government Authority shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and has the
effect of prohibiting consummation of the Redemption and Purchase or the
provision of the Financing necessary for such transaction;
(f) All consents necessary to undertake the Redemption and Purchase
and to conduct the businesses of Holdings and the Subsidiaries after the Closing
Date in a manner
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consistent with that as conducted by Holdings and the Subsidiaries prior to the
Closing Date shall have been obtained, except for such consents the failure of
which to have been so obtained would not, individually or in the aggregate,
Materially adversely affect the businesses of Holdings and the Subsidiaries
after the Closing Date or the transactions contemplated by this Agreement; and
(g) The Financing shall have been consummated on terms and
conditions satisfactory to the Purchaser Representative (provided that the terms
set forth on Schedule 7.2(g) hereto, or more favorable terms (taken as a whole),
shall be deemed to be satisfactory) so as to provide sufficient funds to effect
the Redemption and Purchase; provided, however, the Purchaser Representative, on
behalf of Holdings shall not have the right to elect not to consummate the
Financing unless either (i) the terms thereof are not satisfactory, as
aforesaid, or (ii) despite its commercially reasonable efforts, it is unable to
satisfy one or more conditions to the consummation of the Financing contemplated
by the Financing Assurances and by reason of such failure, the financial
institutions providing such Financing shall elect not to consummate such
Financing.
8. SURVIVAL; RECOURSE
8.1 Survival. Except for the warranties and representations of the
Redeeming Stockholders and Selling Warrantholders set forth in Section 4 hereof
(other than the first two sentences of Section 4.2) and of Holdings set forth in
Section 5 hereof, and the covenants set forth in Sections 6.8, 6.9, 6.10, 6.11
and 6.14 and Section 10 hereof, which warranties, representations and covenants
shall survive the Closing and the consummation of the transactions contemplated
by this Agreement (or the earlier termination hereof), the
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warranties, representations and covenants of Holdings, the Redeeming
Stockholders and the Selling Warrantholders contained in this Agreement or in
any Related Agreement shall not survive the Closing and the consummation of the
transactions contemplated hereby.
8.2 Recourse. Except as set forth below, none of the Purchaser
Representative, Holdings, or any Redeeming Stockholder or Selling Warrantholder
shall be subject to any recourse of any kind or nature to any other Person
(including without limitation each other or any Non-Redeeming Stockholder or
Non-Selling Warrantholder) on account of the transactions contemplated hereby:
(a) A Redeeming Stockholder and a Selling Warrantholder shall be
subject to recourse after the Closing on account of any breach of a
representation or warranty by it under Section 4 hereof (other than the first
two sentences of Section 4.2); provided that the maximum liability of such
Redeeming Stockholder or Selling Warrantholder shall be the total amount of
Consideration received by it.
(b) Holdings shall be subject to recourse to a Redeeming Stockholder
or a Selling Warrantholder on account of a breach by it of a representation or
warranty under Section 5 hereof, and pursuant to its indemnification obligations
under Sections 6.10 and 6.14.
(c) As set forth in Section 6.5(d) above, the Purchaser
Representative shall have the right to seek recourse against Holdings and any
Redeeming Stockholder and Selling Warrantholder on account of the failure by any
one of them prior to the Closing to satisfy its respective obligations under
Section 6 hereof, as well as to consummate the Redemption and
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Purchase. Further, and as set forth in such Section 6.5, the Purchaser
Representative shall have the right to obtain injunctive relief in respect of
any such violation.
9. TERMINATION; AMENDMENT; WAIVER
9.1 Termination. This Agreement may be terminated and the Redemption and
Purchase may be abandoned at any time prior to the Closing;
(a) by written consent of the Purchaser Representative and each
Primary Stockholder; or
(b) by the Primary Stockholders if the parties providing the
Financing shall not have provided, on or before June 27, 1997, a written
commitment, in form and substance as to the commitment itself and not as to the
terms of the financing (subject to Section 6.5(b)) reasonably satisfactory to
the Primary Stockholders, to consummate the Financing on or before June 30,
1997; or
(c) by the Purchaser Representative, the Primary Stockholders or
Holdings if the Closing shall not have occurred on or before June 30, 1997;
provided, however, that the right to terminate this Agreement under this Section
9.1(c) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date.
9.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 9.1 hereof, this Agreement shall forthwith
become void and have no effect, without any liability on the part of any party
or its directors, officers, partners or stockholders, other than as set forth in
Sections 6.8, 6.10 and 8.2 above.
44
<PAGE>
9.3 Amendment and Waivers. This Agreement may be amended and any provision
hereof may be waived by Holdings (but in either case only with the consent of
the Purchaser Representative) and the Primary Stockholders at any time by
execution of a written instrument signed on behalf of such parties and upon
notice to any other Redeeming Stockholders and Selling Warrantholders; provided
that, notwithstanding the provisions of this Section 9.3, upon receipt of such
notice, any other Redeeming Stockholder or Selling Warrantholder may terminate
its obligations hereunder in accordance with the terms of its Joinder Agreement.
9.4 Extension; Waiver. At any time prior to the Closing, the parties may
(i) extend the time for the performance of any of the obligations to other acts
of the other party hereto, (ii) waive any inaccuracies in the representations
and warranties continue herein or in any document, certificate or writing
delivered pursuant hereto or (iii) waive compliance with any of the agreements
or conditions contained herein. Any agreement on the part of any party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
10. MISCELLANEOUS
10.1 Notices. Any notice, request, instruction, or other communication to
be given hereunder by any party to another shall be in writing and shall be
deemed to have been duly given if delivered by hand or sent by telecopier
(transmission confirmed), certified or registered mail (return receipt
requested), postage prepaid, or by overnight express service, addressed to the
respective party or parties at the following addresses:
45
<PAGE>
If to the Non-Redeeming Stockholders and Non-Selling Warrantholders:
Michael J. Hartnett, as
Purchaser Representative
c/o Roller Bearing Holding Company, Inc.
60 Round Hill Road
P.O. Box 430
Fairfield, Connecticut 06430-0430
Telecopier: 203-256-0775
with a copy (which shall
not constitute notice) to: C. David Goldman, Esq.
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Telecopier: 212 547-5444
If to Holdings: Roller Bearing Holding Company, Inc.
60 Round Hill Road
P.O. Box 430
Fairfield, Connecticut 06430-0430
Telecopier: 203-256-0775
Attention: Michael J. Hartnett
with a copy (which shall
not constitute notice) to: C. David Goldman, Esq.
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Telecopier: 212-547-5444
and Bruce D. Meyer, Esq.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Telecopier: 213-229-7000
If to the Primary
Stockholders: c/o Aurora Capital Partners, L.P.
1800 Century Park East
Suite 1000
Los Angeles, CA 90067
Telecopier: 310-277-5591
Attention: Richard K. Roeder
46
<PAGE>
with a copy (which shall
not constitute notice) to: Bruce D. Meyer, Esq.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Telecopier: 213-229-7000
and to any other Redeeming Stockholder or Selling Warrantholder at such address
for notice as may be set forth in the Joinder Agreement executed by such
Redeeming Stockholder or Selling Warrantholder or to such other address or
addresses as any party may designate to the others by like notice as set forth
above. Any notice given hereunder shall be deemed given and received on the date
of hand delivery or transmission by telecopier, or three (3) days after mailing
by certified or registered mail or one (1) day after delivery to an overnight
express service for next day delivery, as the case may be.
10.2 Further Assurances. At any time and from time to time after the
Closing, at the request of any party and without further consideration, the
other parties hereto shall execute and deliver such other instruments of sale,
conveyance, transfer, lease, assignment, assumption and confirmation, and take
such other action, as the requesting party may reasonably deem necessary or
desirable, in order to carry out and implement more effectively the provisions
and purposes of this Agreement.
10.3 Entire Agreement. This Agreement (including the Schedules and the
Exhibits hereto) contains the entire agreement between the parties with respect
to the transactions contemplated hereby. There are no agreements,
representations, warranties or covenants with respect to the transactions
contemplated herein other than those expressly set forth or
47
<PAGE>
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties hereto, whether written or oral, express or
implied, with respect to the subject matter herein.
10.4 Captions. The captions of the various Articles, Sections and
Schedules of this Agreement have been inserted only for convenience of reference
and shall not be deemed to modify, explain, enlarge or restrict any provision of
this Agreement or affect the construction hereof.
10.5 No Third Party Beneficiary. Except as otherwise specifically set
forth herein, nothing expressed or implied in this Agreement is intended, or
shall be construed, to confer upon or give any person other than the parties
hereto and their respective heirs, personal representatives, legal
representatives, and successors, any rights or remedies under or by reason of
this Agreement.
10.6 Remedies Cumulative. No remedy made available by any of the
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity.
10.7 Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement or any Related Agreement shall be resolved by
arbitration in New York, New York, in accordance with the rules of the American
Arbitration Association then in effect and judgment upon such award rendered by
the arbitrator may be entered in any court. The arbitrator shall be determined
by the mutual agreement of Primary Stockholders, on the one hand, and the
Purchaser Representative, on the other hand. In the event Primary
48
<PAGE>
Stockholders and the Purchaser Representative are unable to agree on an
arbitrator, the Primary Stockholders shall appoint an arbitrator and the
Purchaser Representative shall appoint one arbitrator and the two arbitrators so
chosen shall appoint a third, neutral arbitrator. Each party shall pay its own
expenses of arbitration and the expenses of the arbitrator shall be shared
equally; provided, however, that the arbitrator may assess as part of the award,
all or any part of the arbitration expenses (including reasonable attorneys'
fees) of the prevailing party against the losing party.
10.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO CONFLICT OF LAWS OF SUCH STATE.
10.9 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, except that Holdings, and the Non-Redeeming Stockholders and the
Non-Selling Warrantholders may assign any or all of their rights, interests and
obligations hereunder as security for obligations to any Person providing
Financing to such parties in connection with the Redemption and Purchase and
except that Holdings or any Primary Stockholder may assign its rights under this
Agreement provided (i) that notice of such assignment is provided, as
applicable, to Holdings, the Purchaser Representative and each of the Primary
Stockholders not more than two (2) days after such assignment and (ii) that
Holdings or such Redeeming Stockholder shall not be released from any of its
obligations hereunder by reason of such assignment.
49
<PAGE>
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
10.10 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense except to the extent otherwise provided in Section 6.8.
10.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when a counterpart has been signed by each of the parties
and delivered to the other party, it being understood that all parties need not
sign the same counterpart.
50
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Redemption and
Warrant Purchase Agreement on this 20th day of May, 1997.
ROLLER BEARING HOLDING
COMPANY, INC.
By: ______________________
Name: Michael J. Hartnett
Title: President
RBC EQUITY PARTNERS, L.P.
By: TRIBOS Management Company, Inc.,
its General Partner
By: ______________________
Gerald L. Parsky
President
PRBC INVESTMENT PARTNERS, L.P.
By: PRBC Management Company, Inc.,
its General Partner
By: ______________________
Richard K. Roeder
Vice President
PURCHASER REPRESENTATIVE
By: _______________________
Michael J. Hartnett
51
<PAGE>
AMENDMENT NO. 1
Dated as of June __, 1997
AMENDMENT by and among ROLLER BEARING HOLDING COMPANY, INC., a Delaware
corporation, CERTAIN STOCKHOLDERS OF ROLLER BEARING HOLDING COMPANY, INC. and
MICHAEL J. HARTNETT, AS PURCHASER REPRESENTATIVE.
PRELIMINARY STATEMENTS:
A. The parties hereto have entered into a Redemption and Warrant Purchase
Agreement dated as of May 20, 1997 (the "Purchase Agreement"; the capitalized
terms defined therein being used herein as therein defined unless otherwise
defined herein).
B. The parties hereto have agreed to amend the Purchase Agreement as
hereinafter set forth.
SECTION 1. Amendments. The Purchase Agreement is, effective as of the date
hereof, hereby amended as follows:
(a) Section 2.1 of the Purchase Agreement is amended and restated to read
in full as follows:
2.1 Redemption. Subject to the terms and conditions contained herein, on
the Closing Date, Holdings shall purchase and the Primary Stockholders shall
deliver to Holdings in consideration for the Redemption Consideration, the
Primary Redeemed Shares (the "Primary Redemption").
(b) The form of the Holdings' Release attached to the Purchase Agreement
as Schedule 7.1(c) is hereby replaced with the form of Holdings' Release
attached hereto as Schedule 7.1(c).
SECTION 2. Reference to and Effect on the Purchase Agreement.
(a) On and after the date hereof each reference in the Purchase Agreement
to "this Agreement," "hereunder," "hereof," "herein" or words of like import and
each reference in any other document to the Purchase Agreement, shall mean and
be a reference to the Purchase Agreement as amended hereby.
<PAGE>
(b) Except as specifically amended above, the Purchase Agreement shall
remain in full force and effect and is hereby ratified and confirmed.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
ROLLER BEARING HOLDING
COMPANY, INC.
By: ______________________
Name: Michael J. Hartnett
Title: President
RBC EQUITY PARTNERS, L.P.
By: TRIBOS Management Company, Inc.,
its General Partner
By: ______________________
Name:
Title:
PRBC INVESTMENT PARTNERS, L.P.
By: PRBC Management Company, Inc.,
its General Partner
By: ______________________
Name:
Title:
PURCHASER REPRESENTATIVE
By: _______________________
Michael J. Hartnett
CONFORMED COPY
================================================================================
CREDIT AGREEMENT
dated as of June 23, 1997,
among
ROLLER BEARING COMPANY OF AMERICA, INC.,
THE LENDERS NAMED HEREIN
and
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
================================================================================
<PAGE>
1
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Defined Terms.............................................. 1
SECTION 1.02. Terms Generally............................................ 20
ARTICLE II
The Credits
SECTION 2.01. Commitments................................................ 20
SECTION 2.02. Loans...................................................... 21
SECTION 2.03. Borrowing Procedure........................................ 22
SECTION 2.04. Evidence of Debt; Repayment of Loans....................... 23
SECTION 2.05. Fees....................................................... 23
SECTION 2.06. Interest on Loans.......................................... 24
SECTION 2.07. Default Interest........................................... 25
SECTION 2.08. Alternate Rate of Interest................................. 25
SECTION 2.09. Termination and Reduction of Commitments................... 25
SECTION 2.10. Conversion and Continuation of Borrowings.................. 26
SECTION 2.11. Repayment of Term Borrowings............................... 27
SECTION 2.12. Prepayment................................................. 28
SECTION 2.13. Mandatory Prepayments...................................... 28
SECTION 2.14. Reserve Requirements; Change in Circumstances.............. 30
SECTION 2.15. Change in Legality......................................... 31
SECTION 2.16. Indemnity.................................................. 32
SECTION 2.17. Pro Rata Treatment......................................... 32
SECTION 2.18. Sharing of Setoffs......................................... 32
SECTION 2.19. Payments................................................... 33
SECTION 2.20. Taxes...................................................... 33
SECTION 2.21. Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate.......................... 36
SECTION 2.22. Letters of Credit.......................................... 37
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers....................................... 41
SECTION 3.02. Authorization.............................................. 41
<PAGE>
2
SECTION 3.03. Enforceability............................................. 41
SECTION 3.04. Governmental Approvals..................................... 42
SECTION 3.05. Financial Statements....................................... 42
SECTION 3.06. No Material Adverse Change................................. 42
SECTION 3.07. Title to Properties; Possession Under Leases............... 42
SECTION 3.08. Subsidiaries............................................... 43
SECTION 3.09. Litigation; Compliance with Laws........................... 43
SECTION 3.10. Agreements................................................. 43
SECTION 3.11. Federal Reserve Regulations................................ 44
SECTION 3.12. Investment Company Act; Public Utility Holding
Company Act.............................................. 44
SECTION 3.13. Use of Proceeds............................................ 44
SECTION 3.14. Tax Returns................................................ 44
SECTION 3.15. No Material Misstatements.................................. 44
SECTION 3.16. Employee Benefit Plans..................................... 44
SECTION 3.17. Environmental Matters...................................... 45
SECTION 3.18. Insurance.................................................. 45
SECTION 3.19. Security Documents......................................... 45
SECTION 3.20. Location of Real Property and Leased Premises.............. 46
SECTION 3.21. Labor Matters.............................................. 46
SECTION 3.22. Solvency................................................... 47
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Credit Events.......................................... 47
SECTION 4.02. First Credit Event......................................... 48
ARTICLE V
Affirmative Covenants
SECTION 5.01. Existence; Businesses and Properties....................... 52
SECTION 5.02. Insurance.................................................. 52
SECTION 5.03. Obligations and Taxes...................................... 53
SECTION 5.04. Financial Statements, Reports, etc. ....................... 54
SECTION 5.05. Litigation and Other Notices............................... 55
SECTION 5.06. Employee Benefits.......................................... 55
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections.............................................. 55
SECTION 5.08. Use of Proceeds............................................ 56
SECTION 5.09. Compliance with Environmental Laws......................... 56
SECTION 5.10. Preparation of Environmental Reports....................... 56
SECTION 5.11. Further Assurances......................................... 56
<PAGE>
3
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness............................................... 57
SECTION 6.02. Liens...................................................... 59
SECTION 6.03. Sale and Lease-Back Transactions........................... 60
SECTION 6.04. Investments, Loans and Advances............................ 61
SECTION 6.05. Mergers, Consolidations, Sales of Assets
and Acquisitions......................................... 61
SECTION 6.06. Dividends and Distributions; Restriction on
Ability of Subsidiaries to Pay Dividends................. 62
SECTION 6.07. Transactions with Affiliates............................... 63
SECTION 6.08. Management and Other Fees.................................. 63
SECTION 6.09. Business of Borrower and Subsidiaries...................... 63
SECTION 6.10. Other Indebtedness and Agreements.......................... 63
SECTION 6.11. Capital Expenditures....................................... 64
SECTION 6.12. Consolidated Leverage Ratio................................ 64
SECTION 6.13. Consolidated Interest Coverage Ratio....................... 64
SECTION 6.14. Consolidated Fixed Charge Coverage Ratio................... 65
SECTION 6.15. Fiscal Year................................................ 66
ARTICLE VII
Events of Default 66
ARTICLE VIII
The Administrative Agent and the Collateral Agent 69
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices.................................................... 71
SECTION 9.02. Survival of Agreement...................................... 71
SECTION 9.03. Binding Effect............................................. 72
SECTION 9.04. Successors and Assigns..................................... 72
SECTION 9.05. Expenses; Indemnity........................................ 75
SECTION 9.06. Right of Setoff............................................ 76
SECTION 9.07. Applicable Law............................................. 76
SECTION 9.08. Waivers; Amendment......................................... 76
SECTION 9.09. Interest Rate Limitation................................... 77
<PAGE>
4
SECTION 9.10. Entire Agreement........................................... 77
SECTION 9.11. WAIVER OF JURY TRIAL....................................... 77
SECTION 9.12. Severability............................................... 78
SECTION 9.13. Counterparts............................................... 78
SECTION 9.14. Headings................................................... 78
SECTION 9.15. Jurisdiction; Consent to Service of Process................ 78
SECTION 9.16. Confidentiality............................................ 79
SCHEDULES
Schedule 1.01(a) Continuing Investors
Schedule 1.01(b) Guarantors
Schedule 1.01(c) Existing Letters of Credit
Schedule 1.01(d) Mortgaged Properties
Schedule 2.01 Lenders; Commitments
Schedule 3.08 Subsidiaries
Schedule 3.09 Litigation
Schedule 3.16 ERISA Events
Schedule 3.17 Environmental Matters
Schedule 3.18 Insurance
Schedule 3.19(d) Mortgage Filing Offices
Schedule 3.20(a) Real Property Owned
Schedule 3.20(b) Real Property Leased
Schedule 4.02(a) Local Counsel
Schedule 6.01 Existing Indebtedness
Schedule 6.02 Existing Liens
Schedule 6.07 Transactions with Affiliates
Schedule 6.08 Management Fees
EXHIBITS
Exhibit A Form of Administrative Questionnaire
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Borrowing Request
Exhibit D Form of Guarantee Agreement
Exhibit E Form of Indemnity, Subrogation and Contribution Agreement
Exhibit F Form of Mortgage
Exhibit G Form of Pledge Agreement
Exhibit H Form of Security Agreement
Exhibit I Form of Tax Sharing Agreement
Exhibit J-1 Form of Opinion of McDermott, Will & Emery
Exhibit J-2 Form of Local Counsel Opinion
<PAGE>
1
CREDIT AGREEMENT dated as of June 23, 1997, among
ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware
corporation (the "Borrower"), the Lenders (as defined in
Article I), the Issuing Banks (as defined in Article I)
and CREDIT SUISSE FIRST BOSTON, a bank organized under
the laws of Switzerland, acting through its New York
branch ("CSFB"), as administrative agent (in such
capacity, the "Administrative Agent"), and as collateral
agent (in such capacity, the "Collateral Agent") for the
Lenders.
Pursuant to the Recapitalization Agreement (such term and each other
capitalized term used but not defined herein having the meaning given it in
Article I), the Continuing Investors intend to recapitalize Holdings (the
"Recapitalization") in a transaction in which (a) all the outstanding preferred
stock of Holdings and (b) all the outstanding common stock and warrants of
Holdings owned by shareholders of Holdings (the "Outside Shareholders") other
than the Continuing Investors will be redeemed or repurchased.
The Borrower has requested the Lenders to extend credit in the form of (a)
Term Loans on the Closing Date, in an aggregate principal amount not in excess
of $16,000,000, and (b) Revolving Loans at any time and from time to time prior
to the Maturity Date, in an aggregate principal amount at any time outstanding
not in excess of $54,000,000. The Borrower has requested the Issuing Banks to
issue letters of credit, in an aggregate face amount at any time outstanding not
in excess of $16,000,000 to support payment obligations incurred in the ordinary
course of business by the Borrower and its Subsidiaries. The proceeds of the
Term Loans, together with the proceeds of the Senior Subordinated Notes, the
Discount Debentures and Revolving Loans to be received by the Borrower on the
Closing Date, are to be used solely (a) to finance the Recapitalization, (b) to
repay existing Indebtedness of the Borrower, and (c) to pay related fees, costs
and expenses in connection with the Transactions. The proceeds of the Revolving
Loans (other than those used as described in the immediately preceding sentence)
are to be used solely for general corporate purposes in the ordinary course of
the Borrower's business (including Permitted Acquisitions).
The Lenders are willing to extend such credit to the Borrower and the
Issuing Banks are willing to issue letters of credit for the account of the
Borrower on the terms and subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan " shall mean any ABR Term Loan or ABR Revolving Loan.
<PAGE>
2
"ABR Revolving Loan" shall mean any Revolving Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"ABR Term Borrowing" shall mean a Borrowing comprised of ABR Term Loans.
"ABR Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum equal to the product of (a)
the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves.
"Administrative Agent Fees" shall have the meaning assigned to such term
in Section 2.05(b).
"Administrative Questionnaire" shall mean an Administrative Questionnaire
in the form of Exhibit A.
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified and, for purposes of Section 6.07 only, shall include another person
who Controls 10% or more (on a fully diluted basis) of the voting securities of
the person specified.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount of
the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to
the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. If for any reason the Administrative Agent shall
have determined (which determination shall be conclusive absent manifest error)
that it is unable to ascertain the Base CD Rate or the Federal Funds Effective
Rate or both for any reason, including the inability or failure of the
Administrative Agent to obtain sufficient quotations in accordance with the
terms of the definition thereof, the Alternate Base Rate shall be determined
without regard to clause (b) or (c), or both, of the preceding sentence, as
appropriate, until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime Rate,
the Base CD Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate, the Base CD Rate or the Federal
Funds Effective Rate, respectively. The term "Prime Rate" shall mean the rate of
interest per annum publicly announced from time to time by the Administrative
Agent as its prime rate in effect at its principal office in New York City; each
change in the Prime Rate shall be effective on the date such change is publicly
announced as being effective. The term "Base CD Rate" shall mean the sum of (a)
the product of (i) the Three-Month Secondary CD Rate and (ii) Statutory Reserves
and (b) the Assessment Rate. The term "Federal Funds Effective Rate" shall mean,
for any day, the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business
<PAGE>
3
Day, the average of the quotations for the day for such transactions received by
the Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"Applicable Percentage" of any Revolving Credit Lender at any time shall
mean the percentage of the Total Revolving Credit Commitment represented by such
Lender's Revolving Credit Commitment. In the event the Revolving Credit
Commitments shall have expired or been terminated, the Applicable Percentages
shall be determined on the basis of the Revolving Credit Commitments most
recently in effect.
"Assessment Rate" shall mean for any date the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the
Administrative Agent as the then current net annual assessment rate that will be
employed in determining amounts payable by the Administrative Agent to the
Federal Deposit Insurance Corporation (or any successor thereto) for insurance
by such Corporation (or such successor) of time deposits made in dollars at the
Administrative Agent's domestic offices.
"Asset Sale" shall mean the sale, transfer or other disposition (by way of
merger or otherwise (other than a merger of the type contemplated by Section
6.05(a)(ii)(c)) and including by way of a Sale and Leaseback) by the Borrower or
any Subsidiary to any person other than the Borrower or any Guarantor of (a) any
capital stock of any Subsidiary (other than directors' qualifying shares) or (b)
any other assets of the Borrower or any Subsidiary (other than inventory,
excess, damaged, obsolete or worn out assets, scrap and Permitted Investments,
in each case disposed of in the ordinary course of business); provided that any
asset sale or series of related asset sales described in clause (b) above having
a value not in excess of $250,000 shall be deemed not to be an "Asset Sale" for
purposes of this Agreement.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Administrative
Agent, in the form of Exhibit B or such other form as shall be approved by the
Administrative Agent.
"Board" shall mean the Board of Governors of the Federal Reserve System of
the United States of America.
"Bond Documents" shall mean (a) the Loan Agreement dated as of September
1, 1994, between South Carolina Jobs-Economic Development Authority (the
"Authority") and the Borrower relating to $7,700,000 Variable Rate Demand
Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc.
Project) Series 1994A, (b) the Trust Indenture dated as of September 1, 1994, by
and between the Authority and Mark Twain Bank, as trustee, with respect to the
bonds described in clause (a) of this definition, (c) the Loan Agreement dated
as of September 1, 1994, between the Authority and the Borrower relating to
$3,000,000 Variable Rate Demand Industrial Development Revenue Bonds (Roller
Bearing Company of America, Inc. Project) Series 1994B, and (d) the Trust
Indenture dated as of September 1, 1994, by and between the Authority and Mark
Twain Bank, as trustee, with respect to the bonds described in clause (c) of
this definition and, in each case, the other documents executed in connection
therewith.
<PAGE>
4
"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders on a single date and as to which a single Interest Period is in effect.
"Borrowing Request" shall mean a request by the Borrower in accordance
with the terms of Section 2.03 and substantially in the form of Exhibit C.
"Business Day" shall mean any day other than a Saturday, Sunday or day on
which banks in New York City are authorized or required by law to close;
provided, however, that when used in connection with a Eurodollar Loan, the term
"Business Day" shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Capital Lease Obligations" of any person shall mean the obligations of
such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
A "Change in Control" shall be deemed to have occurred if (a) Michael J.
Hartnett and his Permitted Transferees shall cease to own directly or
indirectly, beneficially or of record, shares representing at least 66-2/3% of
the capital stock (on a fully diluted basis) of Holdings owned by him on the
Closing Date; (b) any person or group (within the meaning of Rule 13d-5 of the
Securities Exchange Act of 1934 as in effect on the date hereof) other than the
Continuing Investors shall own directly or indirectly, beneficially or of
record, shares representing more than 25% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of Holdings; (c) a
majority of the seats (other than vacant seats) on the board of directors of
Holdings shall at any time be occupied by persons who were neither (i) nominated
by the Continuing Investors, or by the board of directors of Holdings, nor (ii)
appointed by directors so nominated; (d) any change in control (or similar
event, however denominated) with respect to Holdings, the Borrower or any
Subsidiary shall occur under and as defined in any indenture or agreement to
which Holdings, the Borrower or any Subsidiary is a party in respect of
Indebtedness in an aggregate principal amount in excess of $1,000,000; or (e)
Holdings shall cease to own, beneficially and of record, 100% of the issued and
outstanding capital stock of the Borrower.
"Closing Date" shall mean the date of the first Credit Event.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" shall mean all the "Collateral" as defined in any Security
Document and shall also include the Mortgaged Properties.
"Commitment" shall mean, with respect to any Lender, such Lender's
Revolving Credit Commitment and Term Loan Commitment.
"Commitment Fee" shall have the meaning assigned to such term in Section
2.05(a).
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5
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum of the Borrower dated May 1997.
"Consolidated Capital Expenditures" shall mean, for any period, the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability) by the Borrower or any of the Subsidiaries during such
period that, in accordance with GAAP, are or should be included in "additions to
property, plant and equipment" or similar items reflected in the consolidated
statement of cash flows of the Borrower and the Subsidiaries for such period
(including the amount of assets leased in connection with any Capital Lease
Obligation), provided that the following shall not constitute Consolidated
Capital Expenditures: (a) expenditures for Permitted Acquisitions and (b)
expenditures made pursuant to the proviso following clause (a)(iv) of the
definition of the term "Net Cash Proceeds".
"Consolidated Current Assets" shall mean, as of any date of determination,
the total assets that would properly be classified as current assets (other than
cash and cash equivalents) of the Borrower and the Subsidiaries as of such date,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Current Liabilities" shall mean, as of any date of
determination, the total liabilities (other than, without duplication, (a) the
current portion of long-term Indebtedness and (b) outstanding Revolving Loans)
that would properly be classified as current liabilities of the Borrower and the
Subsidiaries as of such date, determined on a consolidated basis in accordance
with GAAP.
"Consolidated EBITDA" shall mean, for any period, the sum of (a)
Consolidated Net Income for such period, (b) any provision for (or less any
benefit from) income and franchise taxes included in the determination of such
Consolidated Net Income; (c) Consolidated Interest Expense for such period; (d)
amortization and depreciation deducted in determining such Consolidated Net
Income; and (e) expenses of the Transactions included in the determination of
such Consolidated Net Income, provided that such expenses were included in the
pro forma consolidated financial statements described in Section 3.05(b), or
disclosed in the notes thereto or in writing from the Borrower to the
Administrative Agent prior to the Closing Date.
"Consolidated Fixed Charge Coverage Ratio" shall mean for any period, the
ratio of (a) Consolidated EBITDA for such period to (b) the sum of (i)
Consolidated Interest Expense for such period; (ii) any provision for (or less
any benefit from) income or franchise taxes paid in cash during such period and
included in the determination of Consolidated Net Income; (iii) scheduled
payments of principal with respect to all Indebtedness (including the principal
portion of scheduled payments of Capital Lease Obligations) of the Borrower and
its Subsidiaries on a consolidated basis during such period (other than
repayments of Indebtedness pursuant to the Existing Credit Agreement on or prior
to the Closing Date); (iv) payments permitted pursuant to Section 6.06 (other
than Section 6.06(a)(iv)) made in cash during such period; and (v) Consolidated
Capital Expenditures made during such period, to the extent not financed
pursuant to Section 6.01(f).
"Consolidated Interest Coverage Ratio" shall mean shall mean, for any
period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated
Interest Expense for such period.
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6
"Consolidated Interest Expense" of the Borrower and its Subsidiaries shall
mean, for any period, (a) interest expense of the Borrower and its Subsidiaries
for such period, net of interest income, included in the determination of
Consolidated Net Income, less (b) (i) amortization of capitalized fees and
expenses incurred with respect to the Transactions and, without duplication, the
Related Transactions (as defined in the Existing Credit Agreement) included in
interest expense for such period, (ii) amortization of any original discount
attributable to any warrants included in interest expense for such period and
(iii) interest paid in kind and included in interest expense for such period.
"Consolidated Leverage Ratio" shall mean, for any period, the ratio of (a)
the excess of (i) all Indebtedness of the Borrower and its Subsidiaries (other
than Indebtedness described in clause (h) of the definition of the term
"Indebtedness") as of the last day of such period over (ii) cash in excess of
$1,000,000 of the Borrower and its Subsidiaries as of the last day of such
period to (b) Consolidated EBITDA for such period, as adjusted by Pro Forma
Acquisition EBITDA with respect to any entity acquired in a Permitted
Acquisition during such period.
"Consolidated Net Income" shall mean, for any period, the sum of net
income (or loss) for such period of the Borrower and its Subsidiaries on a
consolidated basis determined in accordance with GAAP (on a "first in, first
out" inventory basis), but excluding: (a) the income (or loss) of any person
other than the Borrower or any wholly owned Subsidiary unless received by the
Borrower or any wholly owned Subsidiary in a cash distribution; (b) the income
(or loss) of any person accrued prior to the date it became a Subsidiary of the
Borrower or is merged into or consolidated with the Borrower or such person's
assets are acquired by the Borrower or any of its Subsidiaries; (c)
non-recurring gains (or losses) during such period and (d) extraordinary gains
(or losses), as defined under GAAP, net of related tax effects.
"Continuing Investors" shall mean the persons listed on Schedule 1.01(a)
and their Permitted Transferees.
"Control" shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Credit Event" shall have the meaning assigned to such term in Section
4.01.
"Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"Discount Debentures" shall mean the 13% Debentures of Holdings, issued on
the Closing Date for gross proceeds of $40,000,000.
"dollars" or "$" shall mean lawful money of the United States of America.
"Domestic Subsidiaries" shall mean all Subsidiaries incorporated or
organized under the laws of the United States of America, any State thereof or
the District of Columbia.
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7
"environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" shall mean any written accusation, allegation,
notice of violation, claim, demand, order, directive, cost recovery action or
other cause of action by, or on behalf of, any Governmental Authority or any
person for damages, injunctive or equitable relief, personal injury (including
sickness, disease or death), Remedial Action costs, tangible or intangible
property damage, natural resource damages, nuisance, pollution, any adverse
effect on the environment caused by any Hazardous Material, or for fines,
penalties or restrictions, resulting from or based upon (a) the existence, or
the continuation of the existence, of a Release (including sudden or non-sudden,
accidental or non-accidental Releases), (b) exposure to any Hazardous Material,
(c) the presence, use, handling, transportation, storage, treatment or disposal
of any Hazardous Material or (d) the violation or alleged violation of any
Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable present and future
treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the management,
Release or threatened Release of any Hazardous Material or to health and safety
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U. S.C. ss. ss. 9601 et seq. (collectively
"CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. ss.ss. 6901 et seq., the Federal Water Pollution Control Act, as amended
by the Clean Water Act of 1977, 33 U.S.C. ss.ss. 1251 et seq., the Clean Air Act
of 1970, as amended 42 U.S.C. ss.ss. 7401 et seq., the Toxic Substances Control
Act of 1976, 15 U.S.C. ss.ss. 2601 et seq., the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. ss.ss. 651 et seq., the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. ss.ss. 11001 et seq., the
Safe Drinking Water Act of 1974, as amended, 42 U.S.C. ss.ss. 300(f) et seq.,
the Hazardous Materials Transportation Act, 49 U. S.C. ss.ss. 5101 et seq., and
any similar or implementing state or local law, and all amendments or
regulations promulgated under any of the foregoing.
"Environmental Permit" shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
"Equity Issuance" shall mean any issuance or sale by Holdings, the
Borrower or any Subsidiary of any shares of capital stock or other equity
securities of any such person or any obligations convertible into or
exchangeable for, or giving any person a right, option or warrant to acquire
such securities or such convertible or exchangeable obligations, except in each
case for (a) any issuance or sale to Holdings, the Borrower or any Subsidiary,
(b) any issuance of directors' qualifying shares, (c) sales or issuances of
common stock to management or employees of Holdings, the Borrower or any
Subsidiary under any employee stock option, stock purchase plan or other
employee benefit plan in existence from time to time to the extent that (i) the
excess of (A) the proceeds from all sales and issuances described in this clause
(c) over (B) in the case of Holdings, the
<PAGE>
8
amount of all redemptions of Holdings capital stock pursuant to Section
6.06(a)(iii) shall not exceed in the aggregate $1,000,000 in any Fiscal Year and
(ii) the shares of common stock issued pursuant to this clause (c) shall not
exceed 10% of the common stock of Holdings, the Borrower or such Subsidiary, as
applicable and (d) securities issued pursuant to the Recapitalization on the
Closing Date.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code, or solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b)
the adoption of any amendment to a Plan that would require the provision of
security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c)
the existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA
with respect to the termination of any Plan or the withdrawal or partial
withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or
Multiemployer Plan; (f) the receipt by the Borrower or any ERISA Affiliate from
the PBGC or a plan administrator of any notice relating to the intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g)
the receipt by the Borrower or any ERISA Affiliate of any notice concerning the
imposition of Withdrawal Liability or a determination that a Multiemployer Plan
is, or is expected to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA; (h) the occurrence of a "prohibited transaction" with respect
to which the Borrower or any of its Subsidiaries is a "disqualified person"
(within the meaning of Section 4975 of the Code) or with respect to which the
Borrower or any such Subsidiary could otherwise be liable; and (i) any other
event or condition with respect to a Plan or Multiemployer Plan that could
reasonably be expected to result in liability of the Borrower.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Loan" shall mean any Eurodollar Revolving Loan or Eurodollar
Term Loan.
"Eurodollar Revolving Loan" shall mean any Revolving Loan bearing interest
at a rate determined by reference to the Adjusted LIBO Rate in accordance with
the provisions of Article II.
"Eurodollar Revolving Borrowing" shall mean a Borrowing comprised of
Eurodollar Revolving Loans.
"Eurodollar Term Borrowing" shall mean a Borrowing comprised of Eurodollar
Term Loans.
<PAGE>
9
"Eurodollar Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning assigned to such term in Article
VII.
"Excess Cash Flow" shall mean, for any Fiscal Year, the excess of (a) the
sum, without duplication, of (i) Consolidated EBITDA for such Fiscal Year, (ii)
extraordinary cash income of the Borrower and its Subsidiaries, if any, during
such Fiscal Year and not included in Consolidated EBITDA and (iii) reductions to
non-cash working capital of the Borrower and its Subsidiaries for such Fiscal
Year (i.e., the decrease, if any, in Consolidated Current Assets minus
Consolidated Current Liabilities from the beginning to the end of such Fiscal
Year), over (b) the sum, without duplication, of (i) the amount of any cash
income taxes payable by the Borrower and its Subsidiaries with respect to such
Fiscal Year, (ii) cash interest paid by the Borrower and its Subsidiaries during
such Fiscal Year, (iii) Consolidated Capital Expenditures committed or made in
cash in accordance with Section 6.11 during such Fiscal Year (and not deducted
from Excess Cash Flow in any prior year), (iv) scheduled principal repayments of
Indebtedness made by the Borrower and its Subsidiaries during such Fiscal Year,
(v) optional and mandatory prepayments of the principal of Loans during such
Fiscal Year, but only to the extent that such prepayments by their terms cannot
be reborrowed or redrawn and do not occur in connection with a refinancing of
all or any portion of the Loans, (vi) extraordinary cash expenses and losses
paid or incurred by the Borrower and its Subsidiaries, if any, during such
Fiscal Year and not included in Consolidated EBITDA and (vii) additions to
non-cash working capital for such Fiscal Year (i.e., the increase, if any, in
Consolidated Current Assets minus Consolidated Current Liabilities from the
beginning to the end of such Fiscal Year), provided that, to the extent
otherwise included therein, the Net Cash Proceeds of Asset Sales, Equity
Issuances, and cash expenditures (to the extent not financed) to make
investments pursuant to Section 6.04(c), (f) and (h) shall be excluded from the
calculation of Excess Cash Flow.
"Existing Credit Agreement" shall mean the Second Amended and Restated
Credit Agreement dated as of September 22, 1995, among the Borrower, Industrial
Tectonics Bearings Corporation, the lenders named therein and Heller Financial,
Inc., as amended.
"Existing Letter of Credit" shall mean each letter of credit issued for
the account of the Borrower or a Subsidiary under the Existing Credit Agreement
and set forth on Schedule 1.01(c).
"Fee Letter" shall mean the Fee Letter dated May 16, 1997, between the
Borrower and Credit Suisse First Boston.
"Fees" shall mean the Commitment Fees, the Administrative Agent's Fees,
the L/C Participation Fees and the Issuing Bank Fees.
"Financial Officer" of any corporation shall mean the chief financial
officer, principal accounting officer, Treasurer or Controller of such
corporation.
<PAGE>
10
"Fiscal Year" shall mean the fiscal year of the Borrower and the
Subsidiaries ending on the Saturday closest to March 31 of each calendar year.
For purposes of this Agreement, any particular Fiscal Year shall be designated
by reference to the calendar year in which such Fiscal Year ends.
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis.
"Governmental Authority" shall mean any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guarantee" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business.
"Guarantee Agreement" shall mean the Guarantee Agreement, substantially in
the form of Exhibit D, made by the Guarantors in favor of the Collateral Agent
for the benefit of the Secured Parties.
"Guarantors" shall mean each person listed on Schedule 1.01(b) and each
other person that becomes party to a Guarantee Agreement as a Guarantor, and the
permitted successors and assigns of each such person.
"Hazardous Materials" shall mean all explosive or radioactive substances
or wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or
gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing materials or equipment, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Heller" shall mean Heller Financial, Inc.
"Holdings" shall mean Roller Bearing Holding Company, Inc. a Delaware
corporation.
"Immediate Family", with respect to any individual, shall mean his
brothers, sisters, spouse, children (including adopted children), parents,
parents-in-law, grandchildren, great grandchildren and other lineal descendants
and spouses of any of the foregoing.
<PAGE>
11
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such person under conditional sale or other title retention
agreements relating to property or assets purchased by such person, (d) all
obligations of such person issued or assumed as the deferred purchase price of
property or services (excluding trade accounts payable and accrued obligations
incurred in the ordinary course of business), (e) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such person, whether or not the obligations secured thereby have
been assumed, (f) all Guarantees by such person of Indebtedness of others, (g)
all Capital Lease Obligations of such person, (h) all obligations of such person
in respect of interest rate protection agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements and (i) all
obligations of such person as an account party in respect of letters of credit
and bankers' acceptances; provided, however, that amounts on deposit in the
Projects Fund pursuant to Section 5.03 of each of the Trust Indentures described
in the definition of the term "Bond Documents" shall not constitute Indebtedness
unless and until such amounts are disbursed to the Borrower pursuant to Section
3.4 of each of the Loan Agreements described in the definition of the term "Bond
Documents". The Indebtedness of any person (a) shall include the Indebtedness of
any partnership in which such person is a general partner and (b) in the case of
any limited recourse liability, shall not exceed the amount of such recourse.
"Indemnity, Subrogation and Contribution Agreement" shall mean the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit E, among the Borrower, the Guarantors and the Collateral Agent.
"Interest Payment Date" shall mean, (a) with respect to any ABR Loan, the
last Business Day of each March, June, September and December, (b) with respect
to any Eurodollar Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than three months' duration, each day
that would have been an Interest Payment Date had successive Interest Periods of
three months' duration been applicable to such Borrowing, and, (c) in addition,
the date of any prepayment of such Borrowing or conversion of such Borrowing to
a Borrowing of a different Type.
"Interest Period" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the
Borrower may elect and (b) as to any ABR Borrowing, the period commencing on the
date of such Borrowing and ending on the earliest of (i) the next succeeding
March 31, June 30, September 30 or December 31, (ii) the Maturity Date and (iii)
the date such Borrowing is converted to a Borrowing of a different Type in
accordance with Section 2.10 or repaid or prepaid in accordance with Section
2.12 or 2.13; provided, however, that if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such
next succeeding Business Day would fall in the next calendar month, in which
case such Interest Period shall end on the next preceding Business Day. Interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
<PAGE>
12
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or
similar agreement or arrangement designed to protect the Borrower or any
Subsidiary against fluctuations in interest rates, and not entered into for
speculation.
"Issuing Bank" shall mean, as the context may require, (a) Heller, with
respect to each Existing Letter of Credit so long as such Existing Letter of
Credit remains outstanding, (b) CSFB, with respect to each Letter of Credit
issued by it, (c) any other Lender that may become an Issuing Bank pursuant to
Section 2.22(i) or (d) collectively, all of the foregoing.
"Issuing Bank Fees" shall have the meaning assigned to such term in
Section 2.05(c).
"Joint Venture" shall mean a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form.
"L/C Commitment" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.22.
"L/C Disbursement" shall mean a payment or disbursement made by an Issuing
Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
principal amount of all L/C Disbursements that have not yet been reimbursed at
such time. The L/C Exposure of any Revolving Credit Lender at any time shall
mean its Applicable Percentage of the aggregate L/C Exposure at such time.
"L/C Participation Fee" shall have the meaning assigned to such term in
Section 2.05(c).
"Lenders" shall mean (a) the financial institutions listed on Schedule
2.01 (other than any such financial institution that has ceased to be a party
hereto pursuant to an Assignment and Acceptance) and (b) any financial
institution that has become a party hereto pursuant to an Assignment and
Acceptance in accordance with the terms hereof.
"Letter of Credit" shall mean (a) any letter of credit issued pursuant to
Section 2.22 and (b) the Existing Letters of Credit.
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing, the rate
per annum determined by the Administrative Agent at approximately 11:00 a.m.
(London time) on the date which is two Business Days prior to the beginning of
the relevant Interest Period (as specified in the applicable Borrowing Request)
by reference to the British Bankers' Association Interest Settlement Rates for
deposits in Dollars (as set forth by any service selected by the Administrative
Agent which has been nominated by the British Bankers' Association as an
authorized information vendor for the purpose of displaying such rates) for a
period equal to such Interest Period, provided that, to the extent that an
interest rate is not ascertainable pursuant to the foregoing provisions of this
definition, the "LIBO Rate" shall be the interest rate per annum determined by
the Administrative Agent to be the
<PAGE>
13
average of the rates per annum at which deposits in Dollars are offered for such
relevant Interest Period to major banks in the London interbank market in
London, England by the Administrative Agent at approximately 11:00 a.m. (London
time) on the date which is two Business Days prior to the beginning of such
Interest Period.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Loan Documents" shall mean this Agreement, the Letters of Credit, the
Guarantee Agreement, the Security Documents and the Indemnity, Subrogation and
Contribution Agreement.
"Loan Parties" shall mean the Borrower and the Guarantors.
"Loans" shall mean the Revolving Loans and the Term Loans.
"Margin Stock" shall have the meaning assigned to such term in Regulation
U.
"Material Adverse Effect" shall mean (a) a materially adverse effect on
the business, assets, operations or condition, financial or otherwise, of the
Borrower and the Subsidiaries, taken as a whole, (b) material impairment of the
ability of the Borrower or any other Loan Party to perform any of its
obligations under any Loan Document to which it is or will be a party or (c)
material impairment of the validity or enforceability of this Agreement or any
of the other Loan Documents.
"Maturity Date" shall mean the fifth anniversary of the Closing Date.
"Mortgaged Properties" shall mean the owned real properties and leasehold
and subleasehold interests of the Loan Parties specified on Schedule 1.01(d).
"Mortgages" shall mean the mortgages, deeds of trust, leasehold mortgages,
assignments of leases and rents, modifications and other security documents
delivered pursuant to clause (i) of Section 4.02(j) or pursuant to Section 5.11,
each substantially in the form of Exhibit F.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Net Cash Proceeds" shall mean (a) with respect to any Asset Sale, the
cash proceeds (including cash proceeds subsequently received (as and when
received) in respect of non-cash consideration initially received and including
all insurance settlements and condemnation awards in excess of $250,000 from any
single event or series of related events), net of (i) transaction expenses
(including reasonable broker's fees or commissions, legal fees, accounting fees,
investment banking fees and other professional fees, transfer and similar taxes
and the Borrower's good faith estimate of income taxes paid or payable in
connection with the receipt of such cash proceeds), (ii) amounts
<PAGE>
14
provided as a reserve, in accordance with GAAP, including pursuant to any escrow
arrangement, against any liabilities under any indemnification obligations
associated with such Asset Sale (provided that, to the extent and at the time
any such amounts are released from such reserve, such amounts shall constitute
Net Cash Proceeds), (iii) the principal amount, premium or penalty, if any,
interest and other amounts on any Indebtedness for borrowed money which is
secured by the asset sold in such Asset Sale or which is listed on Schedule 6.01
and is required to be repaid with such proceeds (other than any such
Indebtedness assumed by the purchaser of such asset) and (iv) distributions and
other payments made to holders of interests in Joint Ventures and Subsidiaries
that are not wholly owned by the Borrower or any of its Subsidiaries, in each
case made pro rata in accordance with their interests in such Joint Ventures or
Subsidiaries, as applicable; provided, however, that, with respect to the
proceeds of any Asset Sale in the amount of $250,000 or more from any single
event or series of related events and less than or equal to $5,000,000 in the
aggregate in any Fiscal Year, if (A) the Borrower shall deliver a certificate of
a Financial Officer to the Administrative Agent at the time of receipt thereof
setting forth the Borrower's intent to reinvest such proceeds in productive
assets of a kind then used or usable in the business of the Borrower and its
Subsidiaries within one year of receipt of such proceeds and (B) no Default or
Event of Default shall have occurred and shall be continuing at the time of such
certificate or at the proposed time of the application of such proceeds, such
proceeds shall not constitute Net Cash Proceeds except to the extent not so used
at the end of such one-year period, at which time such proceeds shall be deemed
to be Net Cash Proceeds, and (b) with respect to any Equity Issuance or any
other issuance or disposition of Indebtedness, the cash proceeds thereof, net of
all taxes and customary fees, commissions, costs and other expenses (including
reasonable broker's fees or commissions, legal fees, accounting fees, investment
banking fees and other professional fees, and underwriter's discounts and
commissions) incurred in connection therewith.
"Obligations" shall mean all obligations defined as "Obligations" in the
Guarantee Agreement and the Security Documents.
"Outside Shareholders" shall have the meaning assigned to such term in the
preamble to this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"Perfection Certificate" shall mean the Perfection Certificate
substantially in the form of Annex 2 to the Security Agreement.
"Permitted Acquisitions" shall mean acquisitions of not less than 100% of
the outstanding capital stock or other equity interests of any corporation,
partnership, a division of any corporation or any similar business unit (or of
substantially all the assets and business of any of the foregoing) engaged in a
Related Business (each, an "Acquisition") so long as (a) in the case of each
such Acquisition of capital stock, such Acquisition was not preceded by an
unsolicited tender offer for such capital stock by the Borrower or any of its
Affiliates, (b) in the case of each Acquisition, the excess of the Revolving
Credit Commitments over the Aggregate Revolving Credit Exposure after giving
effect to any Revolving Loans used to finance the cash consideration paid in
connection with such Acquisition, to refinance Indebtedness in connection with
such Acquisition and to pay related fees
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15
and expenses, shall equal at least $5,000,000, (c) such corporation,
partnership, division, business or assets, as applicable, are located in the
United States (or the principal place of business with respect thereto and
substantially all of the applicable assets are located in the United States) or,
in the case of Acquisitions with respect to which the total consideration does
not exceed $15,000,000 in the aggregate for all Acquisitions, in any country
included in the European Economic Community on the date hereof and (d) the
Borrower shall have delivered to the Administrative Agent a certificate
certifying that at the time of and immediately after giving effect to such
Permitted Acquisition, (i) no Event of Default or Default shall have occurred
and be continuing, (ii) the ratio of (A) Indebtedness incurred by the Borrower
or any Subsidiary to finance such Permitted Acquisition to (B) Pro Forma
Acquisition EBITDA of the entity acquired pursuant to such Permitted Acquisition
for the period of four fiscal quarters ended on the last day of the most recent
fiscal quarter shall be less than 4.75 to 1.00 and (iii) the Pro Forma
Acquisition EBITDA of the entity acquired pursuant to such Permitted Acquisition
for the period of four fiscal quarters ended on the last day of the most recent
fiscal quarter shall be less than or equal to 20% of the sum of (A) the
Consolidated EBITDA of the Borrower and its Subsidiaries for the period of four
fiscal quarters ended on the last day of the most recent fiscal quarter and (B)
such Pro Forma Acquisition EBITDA.
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from Standard & Poor's Ratings
Service or from Moody's Investors Service, Inc.;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within one year from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any Lender or any domestic office of any
commercial bank organized under the laws of the United States of America
or any State thereof that has a combined capital and surplus and undivided
profits of not less than $250,000,000;
(d) other investment instruments approved in writing by the Required
Lenders and offered by financial institutions which have a combined
capital and surplus and undivided profits of not less than $250,000,000;
and
(e) shares of funds registered under the Investment Company Act of
1940, as amended, that have assets of at least $100,000,000 and invest
substantially all their assets in obligations described in clauses (a)
through (d) above, to the extent that such shares are rated by Moody's
Investors Service, Inc. or Standard & Poor's Ratings Service in one of the
two highest rating categories assigned by such agency for shares of such
nature;
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16
provided that any investment which, when made, constituted an Permitted
Investment may continue to be held (but not reinvested) notwithstanding
that such investment may thereafter cease to constitute a Permitted
Investment.
"Permitted Transferee" shall mean, with respect to any person, (a) if such
person is an individual, (i) a member of the Immediate Family of such person,
(ii) a trust or other similar legal entity for the primary benefit of such
person and/or one or more members of his Immediate Family, or (iii) a
partnership, limited partnership, limited liability company, corporation or
other entity in which such person and members of his Immediate Family possess
100% of the outstanding voting securities, (b) if such person is a partnership
or limited liability company, the general partners, limited partners or members
thereof to whom securities are transferred on a pro rata basis in accordance
with the terms of the underlying partnership agreement or limited liability
company agreement and (c) if such person is a corporation, any wholly owned
subsidiary or parent of such corporation that wholly owns such corporation.
"person" shall mean any natural person, corporation, business trust, joint
venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" shall mean the Pledge Agreement, substantially in the
form of Exhibit G, between the Borrower, the Subsidiaries party thereto and the
Collateral Agent for the benefit of the Secured Parties.
"Pro Forma Acquisition EBITDA" shall mean with respect to any entity
acquired in a Permitted Acquisition, the amount of Consolidated EBITDA of such
entity (as if such entity were the Borrower) determined by the Borrower and
acceptable to Administrative Agent in its reasonable discretion, based upon and
derived from financial information delivered to Administrative Agent prior to
consummation of such Permitted Acquisition for the four-quarter period ending on
the last day of the immediately preceding fiscal quarter of the Borrower for
which such financial information for such entity have been delivered to
Administrative Agent, adjusted by the estimated amount of non-recurring revenues
and expenditures with respect to the business of such entity, as calculated by
the Borrower and acceptable to Administrative Agent in its reasonable
discretion. On each subsequent determination date occurring within one year
after the consummation of a Permitted Acquisition, the entity's Pro Forma
Acquisition EBITDA shall include the Pro Forma Acquisition EBITDA only for those
fiscal quarters in the trailing four-quarter period occurring prior to the
closing of such Permitted Acquisition.
"Recapitalization" shall have the meaning assigned to such term in the
preamble to this Agreement.
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17
"Redemption Agreement" shall mean the Redemption and Warrant Purchase
Agreement dated as of May 20, 1997, among Holdings, the Continuing Investors,
the Outside Shareholders and Michael J. Hartnett, as purchaser representative.
"Register" shall have the meaning given such term in Section 9.04(d).
"Regulation G" shall mean Regulation G of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation T" shall mean Regulation T of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Related Business" shall mean any business of the Borrower and its
Subsidiaries as conducted on the Closing Date and any business related or
ancillary thereto.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.
"Remedial Action" shall mean (a) "remedial action" as such term is defined
in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any
Governmental Authority or voluntarily undertaken to: (i) cleanup, remove, treat,
abate or in any other way address any Hazardous Material in the environment;
(ii) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material so it does not migrate or endanger or threaten to
endanger public health, welfare or the environment; or (iii) perform studies and
investigations in connection with, or as a precondition to, (i) or (ii) above.
"Repayment Date" shall have the meaning given such term in Section 2.11.
"Required Lenders" shall mean, at any time, Lenders having Loans
outstanding, L/C Exposure and unused Revolving Credit and Term Loan Commitments
representing at least a majority of the sum of all Loans outstanding, L/C
Exposure and unused Revolving Credit and Term Loan Commitments at such time.
"Responsible Officer" of any corporation shall mean any executive officer
or Financial Officer of such corporation and any other officer or similar
official thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving
Loans.
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"Revolving Credit Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Loans hereunder as set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
assumed its Revolving Credit Commitment, as applicable, as the same may be (a)
reduced from time to time pursuant to Section 2.09 and (b) reduced or increased
from time to time pursuant to assignments by or to such Lender pursuant to
Section 9.04.
"Revolving Credit Exposure" shall mean, with respect to any Lender at any
time, the aggregate principal amount at such time of all outstanding Revolving
Loans of such Lender, plus the aggregate amount at such time of such Lender's
L/C Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving Credit
Commitment.
"Revolving Loans" shall mean the revolving loans made by the Lenders to
the Borrower pursuant to clause (b) of Section 2.01. Each Revolving Loan shall
be a Eurodollar Revolving Loan or an ABR Revolving Loan.
"Sale and Leaseback" shall have the meaning assigned to such term in
Section 6.03.
"Secured Parties" shall have the meaning assigned to such term in the
Security Agreement.
"Security Agreement" shall mean the Security Agreement, substantially in
the form of Exhibit H, among the Borrower, the Subsidiaries party thereto and
the Collateral Agent for the benefit of the Secured Parties.
"Security Documents" shall mean the Mortgages, the Security Agreement, the
Pledge Agreement and each of the security agreements, mortgages and other
instruments and documents executed and delivered pursuant to any of the
foregoing or pursuant to Section 5.11.
"Senior Subordinated Notes" shall mean (a) the 9-5/8% Senior Subordinated
Notes due 2007 of the Borrower, issued on the Closing Date in an aggregate
principal amount of $110,000,000 (the "Original Senior Subordinated Notes") and
(b) notes (the "Exchange Notes") of the Borrower having terms substantially
identical in all material respects to the Original Senior Subordinated Notes
(except that the Exchange Notes will not contain terms with respect to transfer
restrictions).
"Statutory Reserves" shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority, domestic or foreign,
to which the Administrative Agent or any Lender (including any branch,
Affiliate, or other fronting office making or holding a Loan) is subject (a)
with respect to the Base CD Rate, for new negotiable nonpersonal time deposits
in dollars of over $100,000 with maturities approximately equal to three months,
and (b) with respect to the Adjusted LIBO Rate, for Eurocurrency Liabilities (as
defined in Regulation D of the Board). Such reserve percentages shall include
those imposed pursuant to such Regulation D Eurodollar Loans shall be deemed to
constitute Eurocurrency Liabilities and to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets
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19
that may be available from time to time to any Lender under such Regulation D.
Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
"subsidiary" shall mean, with respect to any person (herein referred to as
the "parent"), any corporation, partnership, association or other business
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or more
than 50% of the general partnership interests are, at the time any determination
is being made, owned, controlled or held, or (b) that is, at the time any
determination is made, otherwise Controlled, by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent.
"Subsidiary" shall mean any subsidiary of the Borrower.
"Tax Sharing Agreement" shall mean the Tax Sharing Agreement,
substantially in the form of Exhibit I, among Holdings, the Borrower and
Holdings' other direct and indirect subsidiaries.
"Term Borrowing" shall mean a Borrowing comprised of Term Loans.
"Term Loan Commitments" shall mean, with respect to each Lender, the
commitment of such Lender to make Term Loans hereunder as set forth on Schedule
2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed
its Term Loan Commitment, as applicable, as the same may be (a) reduced from
time to time pursuant to Section 2.09 and (b) reduced or increased from time to
time pursuant to assignments by or to such Lender pursuant to Section 9.04.
"Term Loans" shall mean the term loans made by the Lenders to the Borrower
pursuant to Section 2.01. Each Term Loan shall be a Eurodollar Term Loan or an
ABR Term Loan.
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so reported
on such day or such next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10: 00 a.m., New York City
time, on such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Administrative Agent from three New York City
negotiable certificate of deposit dealers of recognized standing selected by it.
"Total Revolving Credit Commitment" shall mean, at any time, the aggregate
amount of the Revolving Credit Commitments, as in effect at such time.
"Transactions" shall have the meaning assigned to such term in Section
3.02.
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20
"Type", when used in respect of any Loan or Borrowing, shall refer to the
Rate by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, the term "Rate" shall include the
Adjusted LIBO Rate and the Alternate Base Rate.
"wholly owned Subsidiary" of any person shall mean a subsidiary of such
person of which securities (except for directors' qualifying shares) or other
ownership interests representing 100% of the equity or 100% of the ordinary
voting power or 100% of the general partnership interests are, at the time any
determination is being made, owned, controlled or held by such person or one or
more wholly owned subsidiaries of such person or by such person and one or more
wholly owned subsidiaries of such person.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". All references
herein to Articles, Sections, Exhibits and Schedules shall be deemed references
to Articles and Sections of, and Exhibits and Schedules to, this Agreement
unless the context shall otherwise require. Except as otherwise expressly
provided herein, (a) any reference in this Agreement to any agreement,
instrument or other document shall mean such agreement, instrument or other
document as amended, restated, supplemented or otherwise modified from time to
time (subject to any restrictions on such amendments, restatements, supplements
or modifications set forth herein) and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect on the
date of the financial statements referred to in Section 3.05(a).
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions and relying
upon the representations and warranties herein set forth, each Lender agrees,
severally and not jointly, (a) to make a Term Loan to the Borrower on the
Closing Date in a principal amount not to exceed its Term Loan Commitment, and
(b) to make Revolving Loans to the Borrower, at any time and from time to time
on or after the date hereof, and until the earlier of the Maturity Date and the
termination of the Revolving Credit Commitment of such Lender in accordance with
the terms hereof, in an aggregate principal amount at any time outstanding that
will not result in (i) such Lender's Revolving Credit Exposure exceeding (ii)
such Lender's Revolving Credit Commitment. Within the limits set forth in clause
(b) of the preceding sentence and subject to the terms, conditions and
limitations set forth herein, the Borrower may borrow, pay or prepay and
reborrow Revolving Loans. Amounts paid or prepaid in respect of Term Loans may
not be reborrowed.
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21
SECTION 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing
consisting of Loans made by the Lenders ratably in accordance with their
applicable Revolving Credit Commitments; provided, however, that the failure of
any Lender to make any Loan shall not in itself relieve any other Lender of its
obligation to lend hereunder (it being understood, however, that no Lender shall
be responsible for the failure of any other Lender to make any Loan required to
be made by such other Lender). Except for Loans deemed made pursuant to Section
2.02(f), the Loans comprising any Borrowing shall be in an aggregate principal
amount that is (i) in the case of Eurodollar Loans, an integral multiple of
$1,000,000 and not less than $3,000,000 or (ii) in the case of ABR Loans, (A) an
integral multiple of $100,000 and not less than $500,000 or (B) equal to the
remaining available balance of the applicable Commitments.
(b) Subject to Sections 2.08 and 2.15, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request pursuant
to Section 2.03. Each Lender may at its option make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement. Borrowings of more than one Type may be outstanding at the same time;
provided, however, that the Borrower shall not be entitled to request any
Borrowing that, if made, would result in more than 10 Eurodollar Borrowings
outstanding hereunder at any time. For purposes of the foregoing, Borrowings
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Borrowings.
(c) Except with respect to Loans made pursuant to Section 2.02(f), each
Lender shall make each Loan to be made by it hereunder on the proposed date
thereof by wire transfer of immediately available funds to such account in New
York City as the Administrative Agent may designate not later than 1:00 p.m.,
New York City time, and the Administrative Agent shall by 2:00 p.m., New York
City time, credit the amounts so received to an account in the name of the
Borrower, maintained with the Administrative Agent and designated by the
Borrower in the applicable Borrowing Request or, if a Borrowing shall not occur
on such date because any condition precedent herein specified shall not have
been met, return the amounts so received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent at (i) in the case of the Borrower, the
interest rate applicable at the time to the Loans comprising such Borrowing and
(ii) in the case of such Lender, a rate determined by the Administrative Agent
to represent its cost of overnight or short-term funds (which determination
shall be conclusive absent manifest error). If such Lender shall repay to the
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Administrative Agent such corresponding amount, such amount shall constitute
such Lender's Loan as part of such Borrowing for purposes of this Agreement.
(e) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request any Borrowing if the Interest Period requested
with respect thereto would end after the Maturity Date.
(f) If any Issuing Bank shall not have received from the Borrower the
payment required to be made by Section 2.22(e) within the time specified in such
Section, such Issuing Bank will promptly notify the Administrative Agent of the
L/C Disbursement and the Administrative Agent will promptly notify each
Revolving Credit Lender of such L/C Disbursement and its Applicable Percentage
thereof. Each Revolving Credit Lender shall pay by wire transfer of immediately
available funds to the Administrative Agent not later than 2:00 p.m., New York
City time, on such date (or, if such Revolving Credit Lender shall have received
such notice later than 12:00 (noon), New York City time, on any day, not later
than 10:00 a.m., New York City time, on the immediately following Business Day),
an amount equal to such Lender's Applicable Percentage of such L/C Disbursement
(it being understood that such amount shall be deemed to constitute an ABR
Revolving Loan of such Lender and such payment shall be deemed to have reduced
the L/C Exposure), and the Administrative Agent will promptly (and not later
than 5:00 p.m. on such date of receipt by the Administrative Agent) pay to such
Issuing Bank amounts so received by it from the Revolving Credit Lenders. The
Administrative Agent will promptly pay to the applicable Issuing Bank any
amounts received by it from the Borrower pursuant to Section 2.22(e) prior to
the time that any Revolving Credit Lender makes any payment pursuant to this
paragraph (f); any such amounts received by the Administrative Agent thereafter
will be promptly remitted by the Administrative Agent to the Revolving Credit
Lenders that shall have made such payments and to the Issuing Banks, as their
interests may appear. If any Revolving Credit Lender shall not have made its
Applicable Percentage of such L/C Disbursement available to the Administrative
Agent as provided above, such Lender and the Borrower severally agree to pay
interest on such amount, for each day from and including the date such amount is
required to be paid in accordance with this paragraph to but excluding the date
such amount is paid, to the Administrative Agent for the account of such Issuing
Bank at (i) in the case of the Borrower, a rate per annum equal to the interest
rate applicable to Revolving Loans pursuant to Section 2.06(a), and (ii) in the
case of such Lender, for the first such day, the Federal Funds Effective Rate,
and for each day thereafter, the Alternate Base Rate.
SECTION 2.03. Borrowing Procedure. In order to request a Borrowing (other
than a deemed Borrowing pursuant to Section 2.02(f), as to which this Section
2.03 shall not apply), the Borrower shall deliver or telecopy to the
Administrative Agent a duly completed Borrowing Request (a) in the case of a
Eurodollar Borrowing, not later than 12:00 noon, New York City time, three
Business Days before a proposed Borrowing, and (b) in the case of an ABR
Borrowing, not later than 12:00 noon, New York City time, one Business Day
before a proposed Borrowing. Each Borrowing Request shall be irrevocable, shall
be signed by or on behalf of the Borrower and shall specify the following
information: (i) whether the Borrowing then being requested is to be a Term
Borrowing or a Revolving Credit Borrowing, and whether such Borrowing is to be a
Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which
shall be a Business Day), (iii) the number and location of the account to which
funds are to be disbursed (which shall be an account that complies with the
requirements of Section 2.02(c)); (iv) the amount of such Borrowing; and (v) if
such
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Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect
thereto; provided, however, that, notwithstanding any contrary specification in
any Borrowing Request, each requested Borrowing shall comply with the
requirements set forth in Section 2.02. If no election as to the Type of
Borrowing is specified in any such notice, then the requested Borrowing shall be
an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing
is specified in any such notice, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration. The Administrative Agent
shall promptly advise the applicable Lenders of any notice given pursuant to
this Section 2.03 (and the contents thereof), and of each Lender's portion of
the requested Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of each Lender the principal amount of each Term Loan of such Lender as
provided in Section 2.11 and the then unpaid principal amount of each Revolving
Loan on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid such Lender from time to time
under this Agreement.
(c) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder from the Borrower or any Guarantor and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs (b)
and (c) above shall be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided, however, that the failure of any Lender
or the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligations of the Borrower to repay the Loans in
accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in the event
any Lender shall request and receive a promissory note payable to such Lender
and its registered assigns, the interests represented by such note shall at all
times (including after any assignment of all or part of such interests pursuant
to Section 9.04) be represented by one or more promissory notes payable to the
payee named therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender, through
the Administrative Agent, on the last Business Day of March, June, September and
December in each year and on each date on which any Commitment of such Lender
shall expire or be terminated as provided herein, a commitment fee (a
"Commitment Fee") of 0.50% per annum on the average daily unused amount of the
Commitments of such Lender during the preceding quarter (or other period
commencing with the date hereof or ending with the Maturity Date or the date on
which the Commitments of such Lender shall expire or be terminated). All
Commitment Fees shall be computed on the basis of the actual number of days
elapsed in a year of 360 days. The Commitment Fee due
<PAGE>
24
to each Lender shall commence to accrue on the date hereof and shall cease to
accrue on the date on which the Commitment of such Lender shall expire or be
terminated as provided herein.
(b) The Borrower agrees to pay to the Administrative Agent, for its own
account, the administrative fees set forth in the Fee Letter at the times and in
the amounts specified therein (the "Administrative Agent Fees").
(c) The Borrower agrees to pay (i) to each Revolving Credit Lender,
through the Administrative Agent, on the last Business Day of March, June,
September and December of each year and on the date on which the Revolving
Credit Commitment of such Lender shall be terminated as provided herein, a fee
(an "L/C Participation Fee") calculated on such Lender's Applicable Percentage
of (A) the average daily aggregate L/C Exposure (excluding the portion thereof
attributable to unreimbursed L/C Disbursements and the portion thereof for which
cash collateral has been provided pursuant to Section 2.22(j)) and (B) the
portion of the average daily L/C Exposure for which cash collateral has been
provided pursuant to Section 2.22(j), in each case during the preceding quarter
(or shorter period commencing with the date hereof or ending with the Maturity
Date or the date on which all Letters of Credit have been canceled or have
expired and the Revolving Credit Commitments of all Lenders shall have been
terminated) at a rate equal to 2.5% per annum in the case of amounts described
in clause (A) of this clause (i) and .50% per annum in the case of amounts
described in clause (B) of this clause (i), and (ii) to each Issuing Bank with
respect to each Letter of Credit, a fronting fee at a rate of 0.25% per annum of
the average daily L/C Exposure (excluding the portion thereof attributable to
unreimbursed L/C Disbursements, plus the standard issuance and drawing fees
specified from time to time by such Issuing Bank (the "Issuing Bank Fees"). All
L/C Participation Fees and Issuing Bank Fees shall be computed on the basis of
the actual number of days elapsed in a year of 360 days.
All Fees shall be paid on the dates due, in immediately available funds,
to the Administrative Agent for distribution, if and as appropriate, among the
Lenders, except that the Issuing Bank Fees shall be paid directly to the
applicable Issuing Bank. Once paid, none of the Fees shall be refundable under
any circumstances.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of Section
2.07, the Loans comprising each ABR Borrowing shall bear interest (computed on
the basis of the actual number of days elapsed over a year of 365 or 366 days,
as the case may be, when the Alternate Base Rate is determined by reference to
the Prime Rate and over a year of 360 days at all other times) at a rate per
annum equal to the Alternate Base Rate plus 1.50%.
(b) Subject to the provisions of Section 2.07, the Loans comprising each
Eurodollar Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus
2.50%.
Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or
day within an Interest Period, as the case may be, shall be
<PAGE>
25
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, by acceleration or otherwise, or under any other Loan Document,
the Borrower shall on demand from time to time pay interest, to the extent
permitted by law, on such defaulted amount to but excluding the date of actual
payment (after as well as before judgment) (a) in the case of overdue principal,
at the rate otherwise applicable to such Loan pursuant to Section 2.06 plus
2.00% per annum and (b) in all other cases, at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 365 or 366 days, as
the case may be, when determined by reference to the Prime Rate and over a year
of 360 days at all other times) equal to the sum of the Alternate Base Rate plus
2.00%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that dollar deposits in the principal amounts of the Loans comprising
such Borrowing are not generally available in the London interbank market, or
that the rates at which such dollar deposits are being offered will not
adequately and fairly reflect the cost to any Lender of making or maintaining
its Eurodollar Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall,
as soon as practicable thereafter, give written or telecopy notice of such
determination to the Borrower and the Lenders. In the event of any such
determination, until the Administrative Agent shall have advised the Borrower
and the Lenders that the circumstances giving rise to such notice no longer
exist, any request by the Borrower for a Eurodollar Borrowing pursuant to
Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each
determination by the Administrative Agent hereunder shall be conclusive absent
manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) The unused
Term Loan Commitments shall automatically terminate at 5:00 p.m., New York City
time, on the Closing Date. The Revolving Credit Commitments and the L/C
Commitment shall automatically terminate on the Maturity Date. Notwithstanding
the foregoing, all the Commitments shall automatically terminate at 5:00 p.m.,
New York City time, on June 30, 1997, if the initial Credit Event shall not have
occurred by such time.
(b) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Administrative Agent, the Borrower may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
the Term Loan Commitments or the Revolving Credit Commitments; provided,
however, that (i) each partial reduction of the aggregate Term Loan Commitments
or the aggregate Revolving Credit Commitments shall be in an integral multiple
of $1,000,000 and in a minimum amount of $3,000,000 and (ii) the Total Revolving
Credit Commitment shall not be reduced to an amount that is less than the
Aggregate Revolving Credit Exposure at the time.
(c) Each reduction in the Term Loan Commitments or the Revolving Credit
Commitments hereunder shall be made ratably among the Lenders in accordance with
their respective applicable Commitments. The Borrower shall pay to the
Administrative Agent for the account of the applicable
<PAGE>
26
Lenders, on the date of each termination or reduction, the Commitment Fees on
the amount of the Commitments so terminated or reduced accrued to but excluding
the date of such termination or reduction.
SECTION 2.10. Conversion and Continuation of Borrowings. The Borrower
shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (a) not later than 12:00 noon, New York City time, one
Business Day prior to conversion, to convert any Eurodollar Borrowing into an
ABR Borrowing, (b) not later than 12:00 noon, New York City time, three Business
Days prior to conversion or continuation, to convert any ABR Borrowing into a
Eurodollar Borrowing or to continue any Eurodollar Borrowing as a Eurodollar
Borrowing for an additional Interest Period, and (c) not later than 12:00 noon,
New York City time, three Business Days prior to conversion, to convert the
Interest Period with respect to any Eurodollar Borrowing to another permissible
Interest Period, subject in each case to the following:
(i) each conversion or continuation shall be made pro rata among the
Lenders in accordance with the respective principal amounts of the Loans
comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting Borrowing
shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b)
regarding the principal amount and maximum number of Borrowings of the
relevant Type;
(iii) each conversion shall be effected by each Lender and the
Administrative Agent by recording for the account of such Lender the new
Loan of such Lender resulting from such conversion and reducing the Loan
(or portion thereof) of such Lender being converted by an equivalent
principal amount; accrued interest on any Eurodollar Loan (or portion
thereof) being converted shall be paid by the Borrower at the time of
conversion;
(iv) if any Eurodollar Borrowing is converted at a time other than
the end of the Interest Period applicable thereto, the Borrower shall pay,
upon demand, any amounts due to the Lenders pursuant to Section 2.16;
(v) no Interest Period may be requested that would end after the
Maturity Date;
(vi) any portion of a Eurodollar Borrowing that cannot be converted
into or continued as a Eurodollar Borrowing by reason of the immediately
preceding clause shall be automatically converted at the end of the
Interest Period in effect for such Borrowing into an ABR Borrowing; and
(vii) upon notice to the Borrower from the Administrative Agent
given at the request of the Required Lenders, after the occurrence and
during the continuance of a Default or Event of Default, no outstanding
Loan may be converted into, or continued as, a Eurodollar Loan.
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27
Each notice pursuant to this Section 2.10 shall be irrevocable and shall
refer to this Agreement and specify (i) the identity and amount of the Borrowing
that the Borrower requests be converted or continued, (ii) whether such
Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR
Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such Borrowing is to be
converted to or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurodollar Borrowing, the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. The Administrative Agent shall advise the Lenders of any notice given
pursuant to this Section 2.10 and of each Lender's portion of any converted or
continued Borrowing. If the Borrower shall not have given notice in accordance
with this Section 2.10 to continue any Borrowing into a subsequent Interest
Period (and shall not otherwise have given notice in accordance with this
Section 2.10 to convert such Borrowing), such Borrowing shall, at the end of the
Interest Period applicable thereto (unless repaid pursuant to the terms hereof),
automatically be continued into a new Interest Period as an ABR Borrowing.
SECTION 2.11. Repayment of Term Borrowings. (a) The Term Borrowings shall
be payable as to principal in twenty consecutive installments payable on the
dates (each a "Repayment Date") and in the amounts set forth below; provided
that if any such Repayment Date is not a Business Day, the payment with respect
to such date shall be payable on the next preceding Business Day:
Repayment Date Amount
September 30, 1997 $ 250,000
December 31, 1997 250,000
March 31, 1998 250,000
June 30, 1998 250,000
September 30, 1998 375,000
December 31, 1998 375,000
March 31, 1999 375,000
June 30, 1999 375,000
September 30, 1999 875,000
December 31, 1999 875,000
March 31, 2000 875,000
June 30, 2000 875,000
September 30, 2000 1,125,000
December 31, 2000 1,125,000
March 31, 2001 1,125,000
June 30, 2001 1,125,000
September 30, 2001 1,375,000
December 31, 2001 1,375,000
March 31, 2002 1,375,000
Maturity Date 1,375,000
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28
(b) To the extent not previously paid, all Term Borrowings shall be due
and payable on the Maturity Date. Each payment of Term Borrowings pursuant to
this Section 2.11 shall be accompanied by accrued interest on the principal
amount paid to but excluding the date of payment.
SECTION 2.12. Prepayment. (a) The Borrower shall have the right at any
time and from time to time to prepay any Borrowing, in whole or in part, upon at
least three Business Days' prior written or telecopy notice (or telephone notice
promptly confirmed by written or telecopy notice) to the Administrative Agent
before 11: 00 a.m., New York City time; provided, however, that each partial
prepayment shall be in an amount that is an integral multiple of (i) in the case
of Eurodollar Loans, $1,000,000 and not less than $3,000,000 and (ii) in the
case of ABR Loans, $100,000 and not less than $500,000.
(b) Optional prepayments of Term Loans shall be applied pro rata against
the remaining scheduled installments of principal due in respect of the Term
Loans.
(c) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay such Borrowing by the amount
stated therein on the date stated therein. All prepayments under this Section
2.12 shall be subject to Section 2.16 but otherwise without premium or penalty.
All prepayments under this Section 2.12 shall be accompanied by accrued interest
on the principal amount being prepaid to the date of payment.
SECTION 2.13. Mandatory Prepayments. (a) In the event of any termination
of all the Revolving Credit Commitments, the Borrower shall repay or prepay all
its outstanding Revolving Credit Borrowings on the date of such termination. In
the event of any partial reduction of the Revolving Credit Commitments, then (i)
at or prior to the effective date of such reduction, the Administrative Agent
shall notify the Borrower and the Revolving Credit Lenders of the Aggregate
Revolving Credit Exposure after giving effect thereto and (ii) if the Aggregate
Revolving Credit Exposure would exceed the Total Revolving Credit Commitment
after giving effect to such reduction or termination, then the Borrower shall,
on the date of such reduction or termination, repay or prepay Revolving Credit
Borrowings in an amount sufficient to eliminate such excess.
(b) Not later than the third Business Day following the completion of any
Asset Sale, the Borrower shall apply 100% of the Net Cash Proceeds received with
respect thereto to prepay outstanding Term Loans in accordance with Section
2.13(f).
(c) In the event and on each occasion that an Equity Issuance occurs at
any time when the Consolidated Leverage Ratio for the period of four consecutive
fiscal quarters most recently ended for which financial statements have been
delivered pursuant to Section 5.04(a) or (b), as applicable, is greater than or
equal to 3.50 to 1.00, the Borrower shall, substantially simultaneously with
(and in any event not later than the third Business Day next following) the
occurrence of such Equity Issuance, apply 50% of the Net Cash Proceeds therefrom
to prepay outstanding Term Loans in accordance with Section 2.13(f); provided,
however, that in the event such Equity Issuance is made
<PAGE>
29
in contemplation of, and within five Business Days of, a Permitted Acquisition
pursuant to Section 6.04, such Net Cash Proceeds shall be reduced by an amount
equal to 25% of the purchase price of such Permitted Acquisition.
(d) No later than the earlier of (i) 90 days after the end of each Fiscal
Year, commencing with the Fiscal Year ending on March 31, 1998, and (ii) the
third Business Day next following the date on which the financial statements
with respect to such Fiscal Year are delivered pursuant to Section 5.04(a), the
Borrower shall prepay outstanding Term Loans in accordance with Section 2.13(f)
in an aggregate principal amount equal to 50% of Excess Cash Flow for the Fiscal
Year then ended.
(e) In the event that Holdings, any Loan Party or any subsidiary of a Loan
Party shall receive Net Cash Proceeds from the issuance or other disposition of
Indebtedness for money borrowed of Holdings, any Loan Party or any subsidiary of
a Loan Party (other than (i) any cash proceeds from the issuance of the Senior
Subordinated Notes or the Discount Debentures, or (ii) Indebtedness for money
borrowed permitted pursuant to Section 6.01), the Borrower shall, substantially
simultaneously with (and in any event not later than the third Business Day next
following) the receipt of such Net Cash Proceeds by Holdings, such Loan Party or
such subsidiary, apply an amount equal to 100% of such Net Cash Proceeds to
prepay outstanding Term Loans in accordance with Section 2.13(f).
(f) Mandatory prepayments of outstanding Term Loans under this Agreement
shall be applied pro rata against the remaining scheduled installments of
principal due in respect of the Term Loans under Section 2.11.
(g) The Borrower shall deliver to the Administrative Agent, at the time of
each prepayment required under this Section 2.13, (i) a certificate signed by a
Financial Officer of the Borrower setting forth in reasonable detail the
calculation of the amount of such prepayment and (ii) to the extent practicable,
at least one day's prior written notice of such prepayment. Each notice of
prepayment shall specify the prepayment date, the Type of each Loan being
prepaid and the principal amount of each Loan (or portion thereof to be prepaid.
All prepayments of Borrowings under this Section 2.13 shall be subject to
Section 2.16, but shall otherwise be without premium or penalty.
(h) Amounts to be applied pursuant to this Section 2.13 to the prepayment
of Term Loans and Revolving Loans shall be applied, as applicable, first to
reduce outstanding ABR Term Loans and ABR Revolving Loans. Any amounts remaining
after each such application shall, at the option of the Borrower, be applied to
prepay Eurodollar Term Loans or Eurodollar Revolving Loans, as the case may be,
immediately and/or shall be deposited in the Prepayment Account (as defined
below). The Administrative Agent shall apply any cash deposited in the
Prepayment Account (i) allocable to Term Loans to prepay Eurodollar Term Loans
and (ii) allocable to Revolving Loans to prepay Eurodollar Revolving Loans, in
each case on the last day of their respective Interest Periods (or, at the
direction of the Borrower, on any earlier date) until all outstanding Term Loans
or Revolving Loans, as the case may be, have been prepaid or until all the
allocable cash on deposit with respect to such Loans has been exhausted. For
purposes of this Agreement, the term "Prepayment Account" shall mean an account
established by the Borrower with the Administrative Agent and over which the
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal for application in accordance with this paragraph
(i). The Administrative Agent will, at the request of the Borrower, invest
amounts on deposit in the Prepayment Account in Permitted
<PAGE>
30
Investments that mature prior to the last day of the applicable Interest Periods
of the Eurodollar Term Borrowings or Eurodollar Revolving Borrowings to be
prepaid, as the case may be; provided, how ever, that (i) the Administrative
Agent shall not be required to make any investment that, in its sole judgment,
would require or cause the Administrative Agent to be in, or would result in
any, violation of any law, statute, rule or regulation and (ii) the
Administrative Agent shall have no obligation to invest amounts on deposit in
the Prepayment Account if a Default or Event of Default shall have occurred and
be continuing. The Borrower shall indemnify the Administrative Agent for any
losses relating to the investments so that the amount available to prepay
Eurodollar Borrowings on the last day of the applicable Interest Period is not
less than the amount that would have been available had no investments been made
pursuant thereto. Other than any interest earned on such investments, the
Prepayment Account shall not bear interest. Interest or profits, if any, on such
investments shall be deposited in the Prepayment Account and reinvested and
disbursed as specified above. If the maturity of the Loans has been accelerated
pursuant to Article VII, the Administrative Agent may, in its sole discretion,
apply all amounts on deposit in the Prepayment Account to satisfy any of the
Obligations. The Borrower hereby grants to the Administrative Agent, for its
benefit and the benefit of the Issuing Banks and the Lenders, a security
interest in the Prepayment Account to secure the Obligations.
SECTION 2.14. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision of this Agreement, if after the date of this
Agreement any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of or
credit extended by any Lender or any Issuing Bank (except any such reserve
requirement which is reflected in the Adjusted LIBO Rate) or shall impose on
such Lender or such Issuing Bank or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by such Lender or
any Letter of Credit or participation therein, and the result of any of the
foregoing shall be to increase the cost to such Lender or such Issuing Bank of
making or maintaining any Eurodollar Loan or increase the cost to any Lender of
issuing or maintaining any Letter of Credit or purchasing or maintaining a
participation therein or to reduce the amount of any sum received or receivable
by such Lender or such Issuing Bank hereunder (whether of principal, interest or
otherwise) by an amount deemed by such Lender or such Issuing Bank to be
material, then the Borrower will pay to such Lender or such Issuing Bank, as the
case may be, upon demand such additional amount or amounts as will compensate
such Lender or such Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.
(b) If any Lender or any Issuing Bank shall have determined that the
adoption after the date hereof of any law, rule, regulation, agreement or
guideline regarding capital adequacy, or any change after the date hereof in any
such law, rule, regulation, agreement or guideline (whether such law, rule,
regulation, agreement or guideline has been adopted) or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or any Issuing Bank or any Lender's or any
Issuing Bank's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) of any Governmental Authority
has or would have the effect of reducing the rate of return on such Lender's or
such Issuing Bank's capital or on the capital of such Lender's or such Issuing
Bank's holding company, if any, as a consequence of this Agreement or the Loans
made or participations in Letters of Credit purchased by such Lender pursuant
hereto or the
<PAGE>
31
Letters of Credit issued by such Issuing Bank pursuant hereto to a level below
that which such Lender or such Issuing Bank or such Lender's or such Issuing
Bank's holding company could have achieved but for such applicability, adoption,
change or compliance (taking into consideration such Lender's or such Issuing
Bank's policies and the policies of such Lender's or such Issuing Bank's holding
company with respect to capital adequacy) by an amount deemed by such Lender or
such Issuing Bank to be material then from time to time the Borrower shall pay
to such Lender or such Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or such Issuing Bank or such Lender's
or such Issuing Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or an Issuing Bank setting forth in
reasonable detail the amount or amounts necessary to compensate such Lender or
such Issuing Bank or its holding company, as applicable, as specified in
paragraph (a) or (b) above shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender or such
Issuing Bank the amount shown as due on any such certificate delivered by it
within 10 days after its receipt of the same.
(d) Failure or delay on the part of any Lender or any Issuing Bank to
demand compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
such Lender's or such Issuing Bank's right to demand such compensation. The
protection of this Section shall be available to each Lender and each Issuing
Bank regardless of any possible contention of the invalidity or inapplicability
of the law, rule, regulation, agreement, guideline or other change or condition
that shall have occurred or been imposed.
SECTION 2.15. Change in Legality. (a) Notwithstanding any other provision
of this Agreement, if, after the date hereof, any change in any law or
regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan, then, by
written notice to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not
thereafter (for the duration of such unlawfulness) be made by such Lender
hereunder (or be continued for additional Interest Periods and ABR Loans
will not thereafter (for such duration) be converted into Eurodollar
Loans), whereupon any request for a Eurodollar Borrowing (or to convert an
ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar
Borrowing for an additional Interest Period) shall, as to such Lender
only, be deemed a request for an ABR Loan (or a request to continue an ABR
Loan as such for an additional Interest Period or to convert a Eurodollar
Loan into an ABR Loan, as the case may be), unless such declaration shall
be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar Loans
made by it be converted to ABR Loans, in which event all such Eurodollar
Loans shall be automatically converted to ABR Loans as of the effective
date of such notice as provided in paragraph (b) below.
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32
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.15, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan made by such Lender, if
lawful, on the last day of the Interest Period currently applicable to such
Eurodollar Loan; in all other cases such notice shall be effective on the date
of receipt by the Borrower.
SECTION 2.16. Indemnity. The Borrower shall indemnify each Lender against
any loss or expense that such Lender may sustain or incur as a consequence of
(a) any event, other than a default by such Lender in the performance of its
obligations hereunder, which results in (i) such Lender receiving or being
deemed to receive any amount on account of the principal of any Eurodollar Loan
prior to the end of the Interest Period in effect therefor, (ii) the conversion
of any Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period
with respect to any Eurodollar Loan, in each case other than on the last day of
the Interest Period in effect therefor, or (iii) any Eurodollar Loan to be made
by such Lender (including any Eurodollar Loan to be made pursuant to a
conversion or continuation under Section 2.10) not being made after notice of
such Loan shall have been given by the Borrower hereunder (any of the events
referred to in this clause (a) being called a "Breakage Event") or (b) any
default in the making of any payment or prepayment required to be made
hereunder. In the case of any Breakage Event, such loss shall include an amount
equal to the excess, as reasonably determined by such Lender, of (i) its cost of
obtaining funds for the Eurodollar Loan that is the subject of such Breakage
Event for the period from the date of such Breakage Event to the last day of the
Interest Period in effect (or that would have been in effect) for such Loan over
(ii) the amount of interest likely to be realized by such Lender in redeploying
the funds released or not utilized by reason of such Breakage Event for such
period. A certificate of any Lender setting forth in reasonable detail any
amount or amounts which such Lender is entitled to receive pursuant to this
Section 2.16 shall be delivered to the Borrower and shall be conclusive absent
manifest error.
SECTION 2.17. Pro Rata Treatment. Except as required under Section 2.15,
each Borrowing, each payment or prepayment of principal of any Borrowing, each
payment of interest on the Loans, each payment of the Commitment Fees, each
reduction of the Term Loan Commitments or the Revolving Credit Commitments and
each conversion of any Borrowing to or continuation of any Borrowing as a
Borrowing of any Type shall be allocated pro rata among the Lenders in
accordance with their respective applicable Commitments (or, if such Commitments
shall have expired or been terminated, in accordance with the respective
principal amounts of their outstanding Loans). Each Lender agrees that in
computing such Lender's portion of any Borrowing to be made hereunder, the
Administrative Agent may, in its discretion, round each Lender's percentage of
such Borrowing to the next higher or lower whole dollar amount.
SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower or any other Loan Party, including pursuant to Section 9.06, or
pursuant to a secured claim under Section 506 of Title 11 of the United States
Code or other security or interest arising from, or in lieu of, such secured
claim,
<PAGE>
33
received by such Lender under any applicable bankruptcy, insolvency or other
similar law or otherwise, or by any other means, obtain payment (voluntary or
involuntary) in respect of any Loan or Loans or L/C Disbursement as a result of
which the unpaid principal portion of its Term Loans and Revolving Loans and
participations in L/C Disbursements shall be proportionately less than the
unpaid principal portion of the Term Loans and Revolving Loans and
participations in L/C Disbursements of any other Lender, it shall be deemed
simultaneously to have purchased from such other Lender at face value, and shall
promptly pay to such other Lender the purchase price for, a participation in the
Term Loans and Revolving Loans and L/C Exposure, as the case may be of such
other Lender, so that the aggregate unpaid principal amount of the Term Loans
and Revolving Loans and L/C Exposure and participations in Term Loans and
Revolving Loans and L/C Exposure held by each Lender shall be in the same
proportion to the aggregate unpaid principal amount of all Term Loans and
Revolving Loans and L/C Exposure then outstanding as the principal amount of its
Term Loans and Revolving Loans and L/C Exposure prior to such exercise of
banker's lien, setoff or counterclaim or other event was to the principal amount
of all Term Loans and Revolving Loans and L/C Exposure outstanding prior to such
exercise of banker's lien, setoff or counterclaim or other event; provided,
however, that if any such purchase or purchases or adjustments shall be made
pursuant to this Section 2.18 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Borrower expressly consents to the
foregoing arrangements and agrees that any Lender holding a participation in a
Term Loan or Revolving Loan or L/C Disbursement deemed to have been so purchased
may exercise any and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by the Borrower to such Lender by reason
thereof as fully as if such Lender had made a Loan directly to the Borrower in
the amount of such participation.
SECTION 2.19. Payments. (a) The Borrower shall make each payment
(including principal of or interest on any Borrowing or any L/C Disbursement or
any Fees or other amounts) hereunder and under any other Loan Document not later
than 12:00 (noon), New York City time, on the date when due in immediately
available dollars, without setoff, defense or counterclaim. Each such payment
(other than Issuing Bank Fees, which shall be paid directly to the applicable
Issuing Bank,) shall be made to the Administrative Agent at its offices at 11
Madison Avenue, New York, New York and shall thereafter be promptly paid by the
Administrative Agent to the Lenders.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Busi ness Day
(except as provided elsewhere in this Agreement), and such extension of time
shall in such case be included in the computation of interest or Fees, if
applicable.
SECTION 2.20. Taxes. (a) Any and all payments by or on behalf of the
Borrower or any Loan Party hereunder and under any other Loan Document shall be
made, in accordance with Section 2.19, free and clear of and without deduction
for any and all current or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding (i) income
taxes imposed on the net income of the Administrative Agent, any Lender or any
Issuing Bank (or any transferee or assignee thereof, including a participation
holder (any such entity a "Transferee")) and (ii) franchise taxes imposed on the
net income of the Administrative Agent, any
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34
Lender or any Issuing Bank (or Transferee), in each case by the jurisdiction
under the laws of which the Administrative Agent, such Lender or such Issuing
Bank (or Transferee) is organized or any political subdivision thereof (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities, collectively or individually, being called "Taxes"). If the
Borrower or any Loan Party shall be required to deduct any Taxes from or in
respect of any sum payable hereunder or under any other Loan Document to the
Administrative Agent, any Lender or any Issuing Bank (or any Transferee), (i)
the sum payable shall be increased by the amount (an "additional amount")
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.20) the
Administrative Agent, such Lender or such Issuing Bank (or Transferee), as the
case may be, shall receive an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower or such Loan Party shall make
such deductions and (iii) the Borrower or such Loan Party shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, the Borrower agrees to pay to the relevant Governmental
Authority in accordance with applicable law any current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies (including, without limitation, mortgage recording taxes and similar
fees) that arise from any payment made hereunder or under any other Loan
Document or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Document ("Other Taxes").
(c) The Borrower will indemnify the Administrative Agent, each Lender and
each Issuing Bank (or Transferee) for the full amount of Taxes and Other Taxes
paid by the Administrative Agent, such Lender or such Issuing Bank (or
Transferee), as the case may be, and any liability (including penalties,
interest and expenses (including reasonable attorney's fees and expenses))
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability prepared by the
Administrative Agent, a Lender or an Issuing Bank (or Transferee), or the
Administrative Agent on its behalf, absent manifest error, shall be final,
conclusive and binding for all purposes. Such indemnification shall be made
within 30 days after the date the Administrative Agent, any Lender or any
Issuing Bank (or Transferee), as the case may be, makes written demand therefor.
(d) As soon as practicable after the date of any payment of Taxes or Other
Taxes by the Borrower or any other Loan Party to the relevant Governmental
Authority, the Borrower or such other Loan Party will deliver to the
Administrative Agent, at its address referred to in Section 9.01, the original
or a certified copy of a receipt issued by such Governmental Authority
evidencing payment thereof.
(e) Each Lender (or Transferee) that is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "Non-U.S. Lender") shall deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue Service
Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption
from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a
Form W-8, a certificate representing that such Non-U.S. Lender is
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35
not a bank for purposes of Section 881(c) of the Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrower and is not a controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from, or
reduced rate of, U.S. Federal withholding tax on payments by the Borrower under
this Agreement and the other Loan Documents. Such forms shall be delivered by
each Non-U.S. Lender on or before the date it becomes a party to this Agreement
(or, in the case of a Transferee that is a participation holder, on or before
the date such participation holder becomes a Transferee hereunder) and on or
before the date, if any, such Non-U.S. Lender changes its applicable lending
office by designating a different lending office (a "New Lending Office"). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Notwithstanding any other provision of this Section 2.20(e), a Non-U.S.
Lender shall not be required to deliver any form pursuant to this Section
2.20(e) that such Non-U.S. Lender is not legally able to deliver.
(f) The Borrower shall not be required to indemnify any Non-U.S. Lender or
to pay any additional amounts to any Non-U.S. Lender, in respect of United
States Federal withholding tax pursuant to paragraph (a) or (c) above to the
extent that (i) the obligation to withhold amounts with respect to United States
Federal withholding tax existed on the date such Non-U.S. Lender became a party
to this Agreement (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S. Lender
designated such New Lending Office with respect to a Loan; provided, however,
that this paragraph (f) shall not apply (x) to any Transferee or New Lending
Office that becomes a Transferee or New Lending Office as a result of an
assignment, participation, transfer or designation made at the request of the
Borrower and (y) to the extent the indemnity payment or additional amounts any
Transferee, or any Lender (or Transferee), acting through a New Lending Office,
would be entitled to receive (without regard to this paragraph (f)) do not
exceed the indemnity payment or additional amounts that the person making the
assignment, participation or transfer to such Transferee, or Lender (or
Transferee) making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of paragraph (e) above. All indemnification payments that are payable
to or on behalf of a Transferee that is a Participant are subject to Section
9.04(f)(iii).
(g) Nothing contained in this Section 2.20 shall require any Lender or any
Issuing Bank (or any Transferee) or the Administrative Agent to make available
any of its tax returns (or any other information that it deems to be
confidential or proprietary).
(h) If the Administrative Agent or any Lender (or Transferee) receives a
refund in respect of any Taxes or other Taxes as to which it has been
indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts pursuant to this Section 2.20, it shall within 30 days from
the date of such receipt pay over such refund to the Borrower (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrower
under this Section 2.20 with respect to the Taxes or Other Taxes giving rise to
such refund), net of all out-of-pocket expenses of the Administrative Agent or
such Lender (or Transferee) and without interest; provided, however, that
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36
the Borrower, promptly following the request of the Administrative Agent or such
Lender (or Transferee), agrees to repay on an after-tax basis any amount paid
over to the Borrower (plus penalties, interest or other charges imposed by the
relevant Government Authority) to the Administrative Agent or such Lender in the
event the Administrative Agent or such Lender (or Transferee) is required to
repay such refund to such Governmental Authority.
SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty
to Mitigate. (a) In the event (i) any Lender or any Issuing Bank delivers a
certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or
any Issuing Bank delivers a notice described in Section 2.15 or (iii) the
Borrower is required to pay any additional amount to any Lender or any Issuing
Bank or any Governmental Authority on account of any Lender or any Issuing Bank
pursuant to Section 2.20, the Borrower may, at its sole expense and effort
(including with respect to the processing and recordation fee referred to in
Section 9.04(b)), upon notice to such Lender or such Issuing Bank and the
Administrative Agent, require such Lender or such Issuing Bank to transfer and
assign, without recourse (in accordance with and subject to the restrictions
contained in Section 9.04), all of its interests, rights and obligations under
this Agreement to an assignee that shall assume such assigned obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that (x) such assignment shall not conflict with any law, rule or regulation or
order of any court or other Governmental Authority having jurisdiction, (y) the
Borrower shall have received the prior written consent of the Administrative
Agent (and, if a Revolving Credit Commitment is being assigned, of the Issuing
Banks), which consent shall not unreasonably be withheld, and (z) the Borrower
or such assignee shall have paid to the affected Lender or the affected Issuing
Bank in immediately available funds an amount equal to the sum of the principal
of and interest accrued to the date of such payment on the outstanding Loans or
L/C Disbursements of such Lender or such Issuing Bank, respectively, plus all
Fees and other amounts accrued for the account of such Lender or such Issuing
Bank hereunder (including any amounts under Section 2.14 and Section 2.16);
provided further that, if prior to any such transfer and assignment the
circumstances or event that resulted in such Lender's or such Issuing Bank's
claim for compensation under Section 2.14 or notice under Section 2.15 or the
amounts paid pursuant to Section 2.20, as the case may be, cease to cause such
Lender or such Issuing Bank to suffer increased costs or reductions in amounts
received or receivable or reduction in return on capital, or cease to have the
consequences specified in Section 2.15, or cease to result in amounts being
payable under Section 2.20, as the case may be (including as a result of any
action taken by such Lender or such Issuing Bank pursuant to paragraph (b)
below), or if such Lender or such Issuing Bank shall waive its right to claim
further compensation under Section 2.14 in respect of such circumstances or
event or shall withdraw its notice under Section 2.15 or shall waive its right
to further payments under Section 2.20 in respect of such circumstances or
event, as the case may be, then such Lender or such Issuing Bank shall not
thereafter be required to make any such transfer and assignment hereunder.
(b) If (i) any Lender or any Issuing Bank shall request compensation under
Section 2.14, (ii) any Lender or any Issuing Bank delivers a notice described in
Section 2.15 or (iii) the Borrower is required to pay any additional amount to
any Lender or any Issuing Bank or any Governmental Authority on account of any
Lender or any Issuing Bank, pursuant to Section 2.20, then such Lender or such
Issuing Bank shall use reasonable efforts (which shall not require such Lender
or such Issuing Bank to incur an unreimbursed loss or unreimbursed cost or
expense or otherwise take any action
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37
inconsistent with its internal policies or legal or regulatory restrictions or
suffer any disadvantage or burden deemed by it to be significant) (x) to file
any certificate or document reasonably requested in writing by the Borrower or
(y) to assign its rights and delegate and transfer its obligations hereunder to
another of its offices, branches or affiliates, if such filing or assignment
would reduce its claims for compensation under Section 2.14 or enable it to
withdraw its notice pursuant to Section 2.15 or would reduce amounts payable
pursuant to Section 2.20, as the case may be, in the future. The Borrower hereby
agrees to pay all reasonable costs and expenses incurred by any Lender or any
Issuing Bank in connection with any such filing or assignment, delegation and
transfer.
SECTION 2.22. Letters of Credit. (a) General. The Borrower may request the
issuance of a Letter of Credit for its own account, in a form reasonably
acceptable to the Administrative Agent and the applicable Issuing Bank, at any
time and from time to time while the Revolving Credit Commitments remain in
effect. This Section shall not be construed to impose an obligation upon any
Issuing Bank to issue any Letter of Credit that is inconsistent with the terms
and conditions of this Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.
In order to request the issuance of a Letter of Credit (or to amend, renew or
extend an existing Letter of Credit), the Borrower shall deliver or telecopy to
the applicable Issuing Bank and the Administrative Agent (at least three
Business Days in advance of the requested date of issuance, amendment, renewal
or extension) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, the date of
issuance, amendment, renewal or extension, the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) below), the amount of
such Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare such Letter of Credit. A
Letter of Credit shall be issued, amended, renewed or extended only if, and upon
issuance, amendment, renewal or extension of each Letter of Credit the Borrower
shall be deemed to represent and warrant that, after giving effect to such
issuance, amendment, renewal or extension (A) the L/C Exposure shall not exceed
$16,000,000 and (B) the Aggregate Revolving Credit Exposure shall not exceed the
Total Revolving Credit Commitment.
(c) Expiration Date. Each Letter of Credit shall expire at the close of
business on the earlier of the date one year after the date of the issuance of
such Letter of Credit and the date that is five Business Days prior to the
Maturity Date, unless such Letter of Credit expires by its terms on an earlier
date; provided, however, that any Letter of Credit issued to support obligations
pursuant to the Bond Documents, including any Existing Letter of Credit, may
expire on any date on or prior to September 30, 2002.
(d) Participations. By the issuance of a Letter of Credit and without any
further action on the part of any Issuing Bank or the Lenders, each Issuing Bank
hereby grants to each Revolving Credit Lender, and each such Lender hereby
acquires from the applicable Issuing Bank, a participation in such Letter of
Credit equal to such Lender's Applicable Percentage of the aggregate amount
available to be drawn under such Letter of Credit, effective upon the issuance
of such Letter of Credit. In addition, Heller hereby grants to each Revolving
Credit Lender, and each Revolving Credit Lender hereby acquires from Heller, a
participation in each Existing Letter of Credit equal to such Lender's
Applicable Percentage of the aggregate amount available to be drawn under such
Existing Letter of Credit, effective as of the Closing Date; provided that such
participations shall cease on the date that
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is five Business Days prior to the Maturity Date unless there shall have
occurred a drawing under such Letter of Credit on or prior to such date. In
consideration and in furtherance of the foregoing, each Revolving Credit Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent,
for the account of the applicable Issuing Bank, such Lender's Applicable
Percentage of each L/C Disbursement made by such Issuing Bank and not reimbursed
by the Borrower (or, if applicable, another party pursuant to its obligations
under any other Loan Document) forthwith on the date due as provided in Section
2.02(f). Each Revolving Credit Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or an Event of Default, and that each such payment shall be made without any
offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If any Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Borrower shall pay to the Administrative
Agent an amount equal to such L/C Disbursement not later than two hours after
the Borrower shall have received notice from such Issuing Bank that payment of
such draft will be made, or, if the Borrower shall have received such notice
later than 10:00 a.m., New York City time, on any Business Day, not later than
10:00 a.m., New York City time, on the immediately following Business Day.
(f) Obligations Absolute. The Borrower's obligations to reimburse L/C
Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit
or any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit or any Loan Document;
(iii) the existence of any claim, setoff, defense or other right
that the Borrower, any other party guaranteeing, or otherwise obligated
with, the Borrower, any Subsidiary or other Affiliate thereof or any other
person may at any time have against the beneficiary under any Letter of
Credit, any Issuing Bank, the Administrative Agent or any Lender or any
other person, whether in connection with this Agreement, any other Loan
Document or any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
(v) payment by any Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of any
Issuing Bank, the Lenders, the Administrative Agent or any other person or
any other event or circumstance
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39
whatsoever, whether or not similar to any of the foregoing, that might,
but for the provisions of this Section, constitute a legal or equitable
discharge of the Borrower's obligations hereunder.
Without limiting the generality of the foregoing, it is expressly
understood and agreed that the absolute and unconditional obligation of the
Borrower hereunder to reimburse L/C Disbursements will not be excused by the
gross negligence or wilful misconduct of any Issuing Bank. However, the
foregoing shall not be construed to excuse any Issuing Bank from liability to
the Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
such Issuing Bank's gross negligence or wilful misconduct in determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof; it is understood that each Issuing Bank may, subject to the
standard of gross negligence or willful misconduct set forth in this sentence,
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary and, in making any payment under any Letter of
Credit (i) such Issuing Bank's exclusive reliance on the documents presented to
it under such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary thereunder equals the
amount of such draft and whether or not any document presented pursuant to such
Letter of Credit proves to be insufficient in any respect, if such document on
its face appears to be in order, and whether or not any other statement or any
other document presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever and (ii) any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the terms thereof shall, in
each case, be deemed not to constitute wilful misconduct or gross negligence of
such Issuing Bank.
(g) Disbursement Procedures. Each Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. Each Issuing Bank shall as promptly as
possible give telephonic notification, confirmed by telecopy, to the
Administrative Agent and the Borrower of such demand for payment and whether
such Issuing Bank has made or will make an L/C Disbursement thereunder; provided
that any failure to give or delay in giving such notice shall not relieve the
Borrower of its obligation to reimburse such Issuing Bank and the Revolving
Credit Lenders with respect to any such L/C Disbursement. The Administrative
Agent shall promptly give each Revolving Credit Lender notice thereof.
(h) Interim Interest. If any Issuing Bank shall make any L/C Disbursement
in respect of a Letter of Credit, then, unless the Borrower shall reimburse such
L/C Disbursement in full on such date, the unpaid amount thereof shall bear
interest for the account of such Issuing Bank, for each day from and including
the date of such L/C Disbursement, to but excluding the earlier of the date of
payment by the Borrower or the date on which interest shall commence to accrue
thereon as provided in Section 2.02(f), at the rate per annum that would apply
to such amount if such amount were an ABR Loan.
(i) Resignation or Removal of the Issuing Bank. Each Issuing Bank may
resign at any time by giving 180 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower,
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and may be removed at any time by the Borrower by notice to such Issuing
Bank, the Administrative Agent and the Lenders. Subject to the next
succeeding paragraph, upon the acceptance of any appointment as an Issuing
Bank hereunder by a Lender that shall agree to serve as successor Issuing
Bank, such successor shall succeed to and become vested with all the
interests, rights and obligations of the retiring Issuing Bank and the
retiring Issuing Bank shall be discharged from its obligations to issue
additional Letters of Credit hereunder. At the time such removal or
resignation shall become effective, the Borrower shall pay all accrued and
unpaid fees pursuant to Section 2.05(c)(ii). The acceptance of any
appointment as an Issuing Bank hereunder by a successor Lender shall be
evidenced by an agreement entered into by such successor, in a form
satisfactory to the Borrower and the Administrative Agent, and, from and
after the effective date of such agreement, (i) such successor Lender
shall have all the rights and obligations of the previous Issuing Bank
under this Agreement and the other Loan Documents and (ii) references
herein and in the other Loan Documents to the term "Issuing Bank" shall be
deemed to refer to such successor or to any previous Issuing Bank, or to
such successor and all previous Issuing Banks, as the context shall
require. After the resignation or removal of any Issuing Bank hereunder,
the retiring Issuing Bank shall remain a party hereto and shall continue
to have all the rights and obligations of an Issuing Bank under this
Agreement and the other Loan Documents with respect to Letters of Credit
issued by it prior to such resignation or removal, but shall not be
required to issue additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, the Borrower shall, on the Business Day it receives notice from the
Administrative Agent, any Issuing Bank with outstanding Letters of Credit or the
Required Lenders (or, if the maturity of the Loans has been accelerated,
Revolving Credit Lenders holding participations in outstanding Letters of Credit
representing greater than 50% of the aggregate undrawn amount of all outstanding
Letters of Credit) thereof and of the amount to be deposited, deposit in an
account with the Collateral Agent, for the benefit of the Revolving Credit
Lenders, an amount in cash equal to the L/C Exposure as of such date. In
addition, the Borrower may deposit an amount in cash equal to 100% of the L/C
Exposure to cash collateralize Letters of Credit at any time. Any such deposit
shall be held by the Collateral Agent as collateral for the payment and
performance of the Obligations. The Collateral Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
account. Other than any interest earned on the investment of such deposits in
Permitted Investments, which investments shall be made at the option and sole
discretion of the Collateral Agent, such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such
account. Moneys in such account shall (i) automatically be applied by the
Administrative Agent to reimburse the applicable Issuing Bank for L/C
Disbursements for which it has not been reimbursed, (ii) be held for the
satisfaction of the reimbursement obligations of the Borrower for the L/C
Exposure at such time and (iii) if the maturity of the Loans has been
accelerated (but subject to the consent of each Issuing Bank with any
outstanding Letter of Credit and the Revolving Credit Lenders holding
participations in outstanding Letters of Credit representing greater than 50% of
the aggregate undrawn amount of all outstanding Letters of Credit), be applied
to satisfy the Obligations; provided, however, that if (A) there are no
outstanding Letters of Credit (other than the Existing Letter of Credit), (B)
there are no L/C Disbursements that have not been reimbursed, (c) the
commitments of the Issuing Banks (other than Heller) and the Lenders pursuant to
this Section 2.22 (including paragraph (d) of this Section 2.22) shall have
terminated and (d) the Existing Letter of Credit shall remain outstanding, the
Collateral Agent shall turn over all moneys in such account to the Issuing Bank
with respect to the Existing Letter of Credit, to be held in an account with
such Issuing Bank as cash collateral for
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the Existing Letter of Credit. If the Borrower is required to provide an amount
of cash collateral hereunder as a result of the occurrence of an Event of
Default, such amount (to the extent not applied as aforesaid) shall be returned
to the Borrower within three Business Days after all Events of Default have been
cured or waived.
ARTICLE III
Representations and Warranties
The Borrower represents and warrants to the Administrative Agent, the
Collateral Agent, each Issuing Bank and each of the Lenders that:
SECTION 3.01. Organization; Powers. The Borrower and each of the
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has all
requisite power and authority to own its property and assets and to carry on its
business as now conducted and as proposed to be conducted, (c) is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required, except where the failure so to qualify could not
reasonably be expected to result in a Material Adverse Effect, and (d) has the
corporate power and authority to execute, deliver and perform its obligations
under each of the Loan Documents and each other agreement or instrument
contemplated hereby to which it is or will be a party and, in the case of the
Borrower, to borrow hereunder.
SECTION 3.02. Authorization. The execution, delivery and performance by
each Loan Party of each of the Loan Documents and the borrowings hereunder and
the consummation of the Recapitalization, the financing therefor and the other
transactions contemplated by the Recapitalization Agreement (collectively, the
"Transactions") as of the Closing Date (in the case of the Recapitalization) and
at all times (in all other cases) (a) have been duly authorized by all requisite
corporate and, if required, stockholder action and (b) will not (i) violate any
provision of the certificate or articles of incorporation or other constitutive
documents or by-laws of the Borrower or any Subsidiary, (ii) violate in any
material respect (A) any material provision of material law, statute, rule or
regulation, or (B) any material order of any Governmental Authority or (C) any
material provision of any indenture, agreement or other instrument to which the
Borrower or any Subsidiary is a party or by which any of them or any of their
property is or may be bound, (ii) be in conflict with, result in a breach of or
constitute (alone or with notice or lapse of time or both) a default under, or
give rise to any right to accelerate or to require the prepayment, repurchase or
redemption of any obligation under any such indenture, agreement or other
instrument or (iii) result in the creation or imposition of any Lien upon or
with respect to any property or assets now owned or hereafter acquired by the
Borrower or any Subsidiary (other than any Lien created hereunder or under the
Security Documents).
SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by the Borrower and constitutes, and each other Loan Document when
executed and delivered by the each Loan Party thereto will constitute, a legal,
valid and binding obligation of such Loan Party enforceable against such Loan
Party in accordance with its terms.
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SECTION 3.04. Governmental Approvals. As of the Closing Date, in the case
of the Recapitalization, and at all times, in the case of the other
Transactions, no action, consent or approval of, registration or filing with or
any other action by any Governmental Authority is or will be required in
connection with the Transactions, except for (a) the filing of Uniform
Commercial Code financing statements and filings with the United States Patent
and Trademark Office and the United States Copyright Office, (b) recordation of
the Mortgages and (c) such as have been made or obtained and are in full force
and effect.
SECTION 3.05. Financial Statements. (a) The Borrower has heretofore
furnished to the Lenders its consolidated and consolidating balance sheets and
statements of income and stockholders' equity and consolidated cash flows as of
and for the 1996 and 1997 Fiscal Years, audited by and accompanied by the
opinion of Ernst & Young LLP, independent public accountants. Such financial
statements present fairly the financial condition and results of operations and
cash flows of the Borrower and its consolidated Subsidiaries as of such dates
and for such periods. Such balance sheets and the notes thereto disclose all
material liabilities, direct or contingent, of the Borrower and its consolidated
Subsidiaries as of the dates thereof. Such financial statements were prepared in
accordance with GAAP applied on a consistent basis (except as provided in such
March 29, 1997 financial statements).
(b) The Borrower has heretofore delivered to the Lenders its unaudited pro
forma consolidated balance sheet and statements of income, stockholders' equity
and cash flows as of and for the 1997 Fiscal Year, prepared giving effect to the
Recapitalization as if it had occurred on such date. Such pro forma balance
sheet and other financial statements have been prepared in good faith by the
Borrower, based on the assumptions used to prepare the pro forma financial
information contained in the Confidential Information Memorandum (which
assumptions are believed by the Borrower on the date hereof and on the Closing
Date to be reasonable), are based on the best information available to the
Borrower as of the date of delivery thereof, accurately reflects all adjustments
required to be made to give effect to the Recapitalization and presents fairly
on a pro forma basis the estimated consolidated financial position of the
Borrower and its consolidated Subsidiaries as of such date, assuming that the
Recapitalization had actually occurred at such date.
SECTION 3.06. No Material Adverse Change. Except as disclosed in writing
to the Lenders prior to the date hereof, there has been no material adverse
change in the business, assets, operations, prospects, condition, financial or
otherwise, or material agreements of the Borrower and the Subsidiaries, taken as
a whole, since March 29, 1997.
SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of
the Borrower and the Subsidiaries has good and marketable title to, or valid
leasehold interests in, all its material properties and assets (including all
Mortgaged Property), except for minor defects in title that do not interfere
with its ability to conduct its business as currently conducted or to utilize
such properties and assets for their intended purposes. All such material
properties and assets are free and clear of Liens, other than Liens expressly
permitted by Section 6.02.
(b) Each of the Borrower and the Subsidiaries has complied in all material
respects with all obligations under all material leases to which it is a party
and all such leases are in full force and
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43
effect. Each of the Borrower and the Subsidiaries enjoys peaceful and
undisturbed possession under all such material leases.
(c) The Borrower has not received any notice of, nor has any knowledge of,
any pending or contemplated condemnation proceeding affecting the Mortgaged
Properties or any sale or disposition thereof in lieu of condemnation, other
than any such notice delivered or knowledge disclosed to the Lenders.
(d) Neither the Borrower nor any of the Subsidiaries is obligated under
any right of first refusal, option or other contractual right to sell, assign or
otherwise dispose of any Mortgaged Property or any interest therein.
SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Closing
Date a list of all Subsidiaries and the percentage ownership interest of the
Borrower therein. The shares of capital stock or other ownership interests so
indicated on Schedule 3.08 are fully paid and non-assessable and are owned by
the Borrower, directly or indirectly, free and clear of all Liens.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth on
Schedule 3.09, there are not any actions, suits or proceedings at law or in
equity or by or before any Governmental Authority now pending or, to the
knowledge of the Borrower, threatened against or affecting Holdings, the
Borrower or any Subsidiary or any business, property or rights of any such
person (i) that purport to affect the legality, validity or enforceability of
any Loan Document or the Transactions as of the Closing Date, in the case of the
Recapitalization, and at all times, in the case of the other Transactions (other
than, in the case of any Mortgage, any condemnation proceeding) or (ii) as to
which there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.
(b) Neither the Borrower nor any of the Subsidiaries or any of their
respective material properties or assets is in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate, any law, rule or regulation (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permits) or any
restrictions of record or agreements affecting the Mortgaged Property, or is in
default with respect to any judgment, writ, injunction, decree or order of any
Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect.
(c) Certificates of occupancy and permits are in effect for each Mortgaged
Property as currently constructed, and true and complete copies of such
certificates of occupancy have been delivered to the Collateral Agent as
mortgagee with respect to each Mortgaged Property.
SECTION 3.10. Agreements. None of Holdings, the Borrower or any of the
Subsidiaries is in default in any manner under any provision of any indenture or
other agreement or instrument evidencing Indebtedness, or any other material
agreement or instrument to which it is a party or by which it or any of its
properties or assets are or may be bound, where such default could reasonably be
expected to result in a Material Adverse Effect.
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44
SECTION 3.11. Federal Reserve Regulations. (a) Neither the Borrower nor
any of the Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of buying or
carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, for any purpose that entails a violation of, or that is inconsistent
with, the provisions of the Regulations of the Board, including Regulation G, T,
U or X.
SECTION 3.12. Investment Company Act; Public Utility Holding Company Act.
Neither the Borrower nor any Subsidiary is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of the
Loans and will request the issuance of Letters of Credit only for the purposes
specified in the preamble to this Agreement.
SECTION 3.14. Tax Returns. Each of Holdings, the Borrower and the
Subsidiaries has filed or caused to be filed all material Federal, state, local
and foreign tax returns or materials required to have been filed by it and has
paid or caused to be paid all taxes due and payable by it and all assessments
received by it, except taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, shall have set aside on its books adequate reserves.
SECTION 3.15. No Material Misstatements. None of (a) the Confidential
Information Memorandum or (b) any other written information, report, financial
statement, exhibit or Schedule furnished by or on behalf of the Borrower to the
Administrative Agent or any Lender in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto contained,
contains or will contain (when taken as a whole) any material misstatement of
fact or omitted, omits or will omit (when taken as a whole) to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were, are or will be made, not misleading;
provided that to the extent any such information, report, financial statement,
exhibit or Schedule was based upon or constitutes a forecast or projection, the
Borrower represents only that it acted in good faith and utilized reasonable
assumptions and due care in the preparation of such information, report,
financial statement, exhibit or schedule.
SECTION 3.16. Employee Benefit Plans. Each of the Borrower and its ERISA
Affiliates is in compliance in all material respects with the applicable
provisions of ERISA and the Code and the regulations and published
interpretations thereunder. Except as set forth in Schedule 3.16, no ERISA Event
has occurred or is reasonably expected to occur that, when taken together with
all other such ERISA Events, could reasonably be expected to result in material
liability of the Borrower or any of its ERISA Affiliates. The present value of
all benefit liabilities under each Plan (based on those assumptions used to fund
such Plan) did not, as of the last annual valuation date applicable thereto,
exceed by more than $197,324 the fair market value of the assets of such Plan,
and the present value of all benefit liabilities of all underfunded Plans (based
on those assumptions used to fund each such
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45
Plan) did not, as of the last annual valuation dates applicable thereto, exceed
by more than $273,029 the fair market value of the assets of all such
underfunded Plans.
SECTION 3.17. Environmental Matters. Except as set forth in Schedule 3.17:
(a) The properties owned or operated by the Borrower and the Subsidiaries
(the "Properties") do not contain any Hazardous Materials in amounts or
concentrations which (i) constitute, or constituted a violation of, (ii) require
Remedial Action under, or (iii) could give rise to liability under,
Environmental Laws, which violations, Remedial Actions and liabilities, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect;
(b) The Properties and all operations of the Borrower and the Subsidiaries
are in compliance, and in the last five years have been in compliance, with all
Environmental Laws and all necessary Environmental Permits have been obtained
and are in effect, except to the extent that such non-compliance or failure to
obtain any necessary permits, in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect;
(c) There have been no Releases or threatened Releases at, from, under or
proximate to the Properties or otherwise in connection with the operations of
Holdings, the Borrower or the Subsidiaries, which Releases or threatened
Releases, in the aggregate, could reasonably be expected to result in a Material
Adverse Effect;
(d) Neither the Borrower nor any of the Subsidiaries has received any
notice of an Environmental Claim in connection with the Properties or the
operations of the Borrower or the Subsidiaries or with regard to any person
whose liabilities for environmental matters Holdings, the Borrower or the
Subsidiaries has retained or assumed, in whole or in part, contractually, by
operation of law or otherwise, which, in the aggregate, could reasonably be
expected to result in a Material Adverse Effect, nor do the Borrower or the
Subsidiaries have reason to believe that any such notice will be received or is
being threatened; and
(e) Hazardous Materials have not been transported from the Properties, nor
have Hazardous Materials been generated, treated, stored or disposed of at, on
or under any of the Properties in a manner that could give rise to liability
under any Environmental Law, nor have the Borrower or the Subsidiaries retained
or assumed any liability, contractually, by operation of law or otherwise, with
respect to the generation, treatment, storage or disposal of Hazardous
Materials, which transportation, generation, treatment, storage or disposal, or
retained or assumed liabilities, in the aggregate, could reasonably be expected
to result in a Material Adverse Effect.
SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and
correct description of all insurance maintained by the Borrower or by the
Borrower for its Subsidiaries as of the Closing Date. As of such date, such
insurance is in full force and effect and all premiums have been duly paid. The
Borrower and the Subsidiaries have insurance in such amounts and covering such
risks and liabilities as are in accordance with normal industry practice.
SECTION 3.19. Security Documents. (a) The Pledge Agreement is effective to
create in favor of the Collateral Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable
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46
security interest in the Collateral (as defined in the Pledge Agreement) and,
when the Collateral is delivered to (and continue to remain in the possession
of) the Collateral Agent, the Pledge Agreement shall constitute a fully
perfected first priority Lien on, and security interest in, all right, title and
interest of the pledgors thereunder in such Collateral, in each case prior and
superior in right to any other person.
(b) The Security Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Collateral (as defined in the Security
Agreement) and, when financing statements in appropriate form are filed in the
offices specified on Schedule 6 to the Perfection Certificate, the Security
Agreement shall constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the grantors thereunder in such Collateral
(other than the Intellectual Property, as defined in the Security Agreement), in
each case prior and superior in right to any other person, other than with
respect to Liens expressly permitted by Section 6.02.
(c) When the Security Agreement is filed in the United States Patent and
Trademark Office and the United States Copyright Office, the Security Agreement
shall constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the grantors thereunder in the Intellectual Property (as
defined in the Security Agreement), in each case prior and superior in right to
any other person (it being understood that subsequent recordings in the United
States Patent and Trademark Office and the United States Copyright Office may be
necessary to perfect a lien on registered trademarks, trademark applications and
copyrights acquired by the grantors after the date hereof).
(d) The Mortgages are effective to create in favor of the Collateral
Agent, for the ratable benefit of the Secured Parties, a legal, valid and
enforceable Lien on all of the Loan Parties' right, title and interest in and to
the Mortgaged Property thereunder and the proceeds thereof, and when the
Mortgages are filed in the offices specified on Schedule 3.19(d), the Mortgages
shall constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the Loan Parties in such Mortgaged Property and the
proceeds thereof, in each case prior and superior in right to any other person,
other than with respect to the rights of persons pursuant to Liens expressly
permitted by Section 6.02.
SECTION 3.20. Location of Real Property and Leased Premises. (a) Schedule
3.20(a) lists completely and correctly as of the Closing Date all real property
owned by the Borrower and the Subsidiaries and the addresses thereof. The
Borrower and the Subsidiaries own in fee all the real property set forth on
Schedule 3.20(a).
(b) Schedule 3.20(b) lists completely and correctly as of the Closing Date
all real property leased by the Borrower and the Subsidiaries and the addresses
thereof. The Borrower and the Subsidiaries have valid leases in all the real
property set forth on Schedule 3.20(b).
SECTION 3.21. Labor Matters. As of the Closing Date, there are no strikes,
lockouts or slowdowns against the Borrower or any Subsidiary pending or, to the
knowledge of the Borrower, threatened. The hours worked by and payments made to
employees of the Borrower and the Subsidiaries have not been in violation of the
Fair Labor Standards Act or any other applicable Federal, state, local or
foreign law, dealing with such matters. All payments due from the Borrower
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47
or any Subsidiary, or for which any claim may be made against the Borrower or
any Subsidiary, on account of wages and employee health and welfare insurance
and other benefits, have been paid or accrued as a liability on the books of the
Borrower or such Subsidiary. The consummation of the Transactions will not give
rise to any right of termination or right of renegotiation on the part of any
union under any collective bargaining agreement to which the Borrower or any
Subsidiary is bound.
SECTION 3.22. Solvency. (a) Immediately after the consummation of the
Transactions to occur on the Closing Date and immediately following the making
of each Loan made on the Closing Date and after giving effect to the application
of the proceeds of such Loans, to the savings provisions contained in Section 1
of the Guarantee Agreement and to all rights of indemnity, reimbursement,
contribution and subrogation of each Loan Party (including under the Indemnity,
Subrogation and Contribution Agreement), (i) the fair value of the assets of
each Loan Party, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (ii) the present fair saleable value of
the property of each Loan Party will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (iii) each Loan Party will be able to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (iv) each Loan Party will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Closing Date.
ARTICLE IV
Conditions of Lending
The obligations of the Lenders to make Loans and of each Issuing Bank to
issue or continue Letters of Credit hereunder are subject to the satisfaction of
the following conditions:
SECTION 4.01. All Credit Events. On the date of each Borrowing, including
on the date of each issuance of a Letter of Credit (each such event being called
a "Credit Event"), but excluding any continuation or conversion of the Interest
Period with respect to any Borrowing that does not result in an increase in the
aggregate principal amount of Loans outstanding of any Lender:
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 (or such notice shall have been deemed
given in accordance with Section 2.03) or, in the case of the issuance of a
Letter of Credit, the applicable Issuing Bank and the Administrative Agent shall
have received a notice requesting the issuance of such Letter of Credit as
required by Section 2.22(b).
(b) The representations and warranties set forth in Article III hereof
shall be true and correct in all material respects on and as of the date of such
Credit Event with the same effect as though made on and as of such date, except
to the extent such representations and warranties expressly relate to an earlier
date.
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(c) The Borrower and each other Loan Party shall be in compliance with all
the terms and provisions set forth herein and in each other Loan Document on its
part to be observed or performed, and at the time of and immediately after such
Credit Event, no Event of Default or Default shall have occurred and be
continuing.
Each Credit Event shall be deemed to constitute a representation and
warranty by the Borrower on the date of such Credit Event as to the matters
specified in paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. First Credit Event. On the Closing Date:
(a) The Administrative Agent shall have received, on behalf of itself, the
Lenders and the Issuing Banks, a favorable written opinion of (i) McDermott,
Will & Emery, counsel for the Borrower, substantially to the effect set forth in
Exhibit J-1, and (ii) each local counsel listed on Schedule 4.02(a),
substantially to the effect set forth in Exhibit J-2, in each case (a) dated the
Closing Date, (b) addressed to the Issuing Banks, the Administrative Agent and
the Lenders, and (c) covering such other matters relating to the Loan Documents
and the Transactions as the Administrative Agent shall reasonably request, and
the Borrower hereby requests such counsel to deliver such opinions.
(b) All legal matters incident to this Agreement, the Borrowings and
extensions of credit hereunder and the other Loan Documents shall be
satisfactory to the Lenders, to the Issuing Banks and to Cravath, Swaine &
Moore, counsel for the Administrative Agent.
(c) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments thereto, of
each Loan Party, certified as of a recent date by the Secretary of State of the
state of its organization, and a certificate as to the good standing of each
Loan Party as of a recent date, from such Secretary of State; (ii) a certificate
of the Secretary or Assistant Secretary of each Loan Party dated the Closing
Date and certifying (A) that attached thereto is a true and complete copy of the
by-laws of such Loan Party as in effect on the Closing Date and at all times
since a date prior to the date of the resolutions described in clause (b) below,
(B) that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such Loan Party authorizing the execution,
delivery and performance of the Loan Documents to which such person is a party
and, in the case of the Borrower, the borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (C) that the certificate or articles of incorporation of such Loan
Party have not been amended since the date of the last amendment thereto shown
on the certificate of good standing furnished pursuant to clause (i) above, and
(D) as to the incumbency and specimen signature of each officer executing any
Loan Document or any other document delivered in connection herewith on behalf
of such Loan Party; (iii) a certificate of another officer as to the incumbency
and specimen signature of the Secretary or Assistant Secretary executing the
certificate pursuant to (ii) above; and (iv) such other documents as the
Lenders, the Issuing Banks or Cravath, Swaine & Moore, counsel for the
Administrative Agent, may reasonably request.
(d) The Administrative Agent shall have received a certificate, dated the
Closing Date and signed by a Financial Officer of the Borrower, confirming
compliance with the conditions precedent set forth in paragraphs (b) and (c) of
Section 4.01.
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49
(e) The Administrative Agent shall have received all Fees and other
amounts due and payable on or prior to the Closing Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses required
to be reimbursed or paid by the Borrower hereunder or under any other Loan
Document.
(f) The Pledge Agreement shall have been duly executed by the parties
thereto and delivered to the Collateral Agent and shall be in full force and
effect, and all the outstanding capital stock of the Subsidiaries shall have
been duly and validly pledged thereunder to the Collateral Agent for the ratable
benefit of the Secured Parties and certificates representing such shares,
accompanied by instruments of transfer and stock powers endorsed in blank, shall
be in the actual possession of the Collateral Agent; provided that to the extent
to do so would cause adverse tax consequences to the Borrower, (i) neither the
Borrower nor any Domestic Subsidiary shall be required to pledge more than 65%
of the capital stock of any Foreign Subsidiary and (ii) no Foreign Subsidiary
shall be required to pledge the capital stock of any of its Foreign
Subsidiaries.
(g) The Security Agreement shall have been duly executed by the Loan
Parties party thereto and shall have been delivered to the Collateral Agent and
shall be in full force and effect on such date and each document (including each
Uniform Commercial Code financing statement) required by law or reasonably
requested by the Administrative Agent to be filed, registered or recorded in
order to create in favor of the Collateral Agent for the benefit of the Secured
Parties a valid, legal and perfected first-priority security interest in and
lien on the Collateral (subject to any Lien expressly permitted by Section 6.02)
described in such agreement shall have been delivered to the Collateral Agent.
(h) The Collateral Agent shall have received the results of a search of
the Uniform Commercial Code (or equivalent filings) filings made with respect to
the Loan Parties in the states (or other jurisdictions) in which the chief
executive office of each such person is located, any offices of such persons in
which records have been kept relating to Accounts and the other jurisdictions in
which Uniform Commercial Code filings (or equivalent filings) are to be made
pursuant to the preceding paragraph, together with copies of the financing
statements (or similar documents) disclosed by such search, and accompanied by
evidence satisfactory to the Collateral Agent that the Liens indicated in any
such financing statement (or similar document) would be permitted under Section
6.02 or have been released.
(i) The Collateral Agent shall have received a Perfection Certificate with
respect to the Loan Parties dated the Closing Date and duly executed by a
Responsible Officer of the Borrower.
(j)(i) Each of the Security Documents, in form and substance satisfactory
to the Lenders, relating to each of the Mortgaged Properties shall have been
duly executed by the parties thereto and delivered to the Collateral Agent and
shall be in full force and effect, (ii) each of such Mortgaged Properties shall
not be subject to any Lien other than those permitted under Section 6.02, (iii)
each of such Security Documents shall have been filed and recorded in the
recording office as specified on Schedule 3.19(d) (or a lender's title insurance
policy, in form and substance acceptable to the Collateral Agent, insuring such
Security Document as a first lien on such Mortgaged Property (subject to any
Lien permitted by Section 6.02) shall have been received by the Collateral
Agent) and, in connection therewith, the Collateral Agent shall have received
evidence satisfactory to it of each such filing and recordation and (iv) the
Collateral Agent shall have received such other documents,
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including a policy or policies of title insurance issued by a nationally
recognized title insurance company, together with such endorsements, coinsurance
and reinsurance as may be requested by the Collateral Agent and the Lenders,
insuring the Mortgages as valid first liens on the Mortgaged Properties, free of
Liens other than those permitted under Section 6.02, together with such
abstracts, appraisals and legal opinions required to be furnished pursuant to
the terms of the Mortgages or as reasonably requested by the Collateral Agent or
the Lenders.
(k) The Guarantee Agreement shall have been duly executed by the parties
thereto, shall have been delivered to the Collateral Agent and shall be in full
force and effect.
(l) The Indemnity, Subrogation and Contribution Agreement shall have been
duly executed by the parties thereto, shall have been delivered to the
Collateral Agent and shall be in full force and effect.
(m) The Administrative Agent shall have received a copy of, or a
certificate as to coverage under, the insurance policies required by Section
5.02 and the applicable provisions of the Security Documents, each of which
shall be endorsed or otherwise amended to include a "standard" or "New York"
lender's loss payable endorsement and to name the Collateral Agent as additional
insured, in form and substance satisfactory to the Administrative Agent.
(n) The Lenders shall be satisfied as to the amount and nature of any
environmental and employee health and safety exposures to which the Borrower and
the Subsidiaries may be subject and the plans of the Borrower with respect
thereto.
(o) The Administrative Agent shall have received for each Mortgaged
Property the following:
(i) a copy of all material applications, licenses, permits and
authorizations which are necessary for the construction and operation of
the Mortgaged Property; and
(ii) one of the following: (A) a written confirmation from the
applicable zoning commission or other appropriate Governmental Authority
stating that each Mortgaged Property complies with existing land use and
zoning ordinances, regulations and restrictions applicable to such
Mortgaged Property or (B) a zoning endorsement satisfactory to the
Administrative Agent in connection with the Collateral Agent's mortgagee
title insurance policy of such Mortgaged Property.
(p) The Administrative Agent shall have received an environmental
assessment report in form, scope and substance reasonably satisfactory to the
Lenders, from Cody Ehlers Group, as to any environmental hazards, liabilities or
Remedial Action to which the Borrower or any of the Subsidiaries may be subject
and the Lenders shall be reasonably satisfied with the nature and cost of any
such hazards, liabilities or Remedial Action and with the Borrower's plans with
respect thereto.
(q) The Borrower shall have received gross proceeds from the issuance of
the Senior Subordinated Notes in the aggregate amount of not less than
$110,000,000, and there shall be no material change in the terms and conditions
of the Senior Subordinated Notes (including, without
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51
limitation, the interest rate, maturity, covenants, subordination provisions and
events of default) from those disclosed to the Administrative Agent and the
Lenders prior to May 16, 1997.
(r) Holdings shall have received gross proceeds from the issuance of the
Discount Debentures in the aggregate amount of not less than $40,000,000 and
there shall be no material change in the terms and conditions of the Discount
Debentures (including, without limitation, the interest rate, maturity,
covenants and events of default) and of any attached warrants from those
disclosed to the Administrative Agent and the Lenders prior to May 16, 1997.
(s)(i) The Recapitalization shall have been consummated, or shall be
consummated simultaneously with the initial Credit Event, in accordance with
applicable law and the Recapitalization Agreement, without giving effect to any
material waiver or amendment of the Recapitalization Agreement not approved in
writing by the Lenders, and (ii) the Lenders shall (a) be reasonably satisfied
with the capitalization, structure and equity ownership of Holdings, the
Borrower and its Subsidiaries and (b) be reasonably satisfied that the aggregate
level of fees and expenses to be paid in connection with the Recapitalization,
the financing therefor and the other transactions contemplated hereby shall not
exceed $12,000,000.
(t)(i) After giving effect to the Recapitalization and the other
transactions contemplated hereby, Holdings, the Borrower and its Subsidiaries
shall have outstanding no Indebtedness or preferred stock other than (A) the
extensions of credit under this Agreement, (B) the Senior Subordinated Notes,
(C) the Discount Debentures, (D) the Indebtedness described in Section 6.01(i)
and (E) the Indebtedness listed on Schedule 6.01 and (ii) the Administrative
Agent shall have received evidence satisfactory to it that all Indebtedness
pursuant to the Existing Credit Agreement shall have been repaid in full (except
with respect to the Existing Letters of Credit), any commitments thereunder
shall have been terminated, all Liens with respect thereto shall have been
released (other than Liens securing obligations under the Existing Letters of
Credit) and the Existing Letters of Credit shall constitute all the letters of
credit issued and outstanding thereunder.
(u) The Lenders shall have received the consolidated financial statements
described in Section 3.05(a) and the pro forma consolidated financial statements
described in Section 3.05(b), which shall be reasonably satisfactory to the
Lenders and shall not be materially inconsistent with the preliminary financial
statements previously provided to the Lenders.
(v) The Lenders shall have received a solvency letter from Houlihan,
Lokey, Howard and Zukin, in form and substance reasonably satisfactory to the
Lenders, as to the solvency of the Borrower and its Subsidiaries on a
consolidated basis after giving effect to the Recapitalization, the initial
Credit Event and the consummation of the other Transactions.
(w) All requisite material Governmental Authorities and third parties
shall have approved or consented to the Recapitalization and the other
transactions contemplated hereby to the extent required, all applicable appeal
periods shall have expired and there shall be no governmental or judicial
action, actual or threatened, that has or could have a reasonable likelihood of
restraining, preventing or imposing burdensome conditions on the
Recapitalization or the other transactions contemplated hereby.
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52
ARTICLE V
Affirmative Covenants
The Borrower covenants and agrees with each Lender that so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan, all Fees and all other expenses
or amounts payable under any Loan Document shall have been paid in full and all
Letters of Credit have been canceled or have expired (or the Collateral Agent
shall have received cash collateral therefor pursuant to Section 2.22(j)) and
all amounts drawn thereunder have been reimbursed in full, unless the Required
Lenders shall otherwise consent in writing, the Borrower will, and will cause
each of the Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence, except as otherwise expressly permitted under Section 6.05.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; maintain and operate such business in
substantially the manner in which it is presently conducted and operated; comply
in all material respects with all applicable laws, rules, regulations (including
any zoning, building, Environmental Law, ordinance, code or approval or any
building permits or any restrictions of record or agreements affecting the
Mortgaged Properties) and decrees and orders of any Governmental Authority,
whether now in effect or hereafter enacted; and at all times maintain and
preserve all property material to the conduct of such business and keep such
property in good repair, working order and condition and from time to time make,
or cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times
except, in each case, to the extent that the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
SECTION 5.02. Insurance. (a) Keep its insurable properties adequately
insured at all times by financially sound and reputable insurers; maintain such
other insurance, to such extent and against such risks, including fire and other
risks insured against by extended coverage, as is customary with companies in
the same or similar businesses operating in the same or similar locations,
including public liability insurance against claims for personal injury or death
or property damage occurring upon, in, about or in connection with the use of
any properties owned, occupied or controlled by it; and maintain such other
insurance as may be required by law.
(b) Cause all such policies to be endorsed or otherwise amended to include
a "standard" or "New York" lender's loss payable endorsement, in form and
substance satisfactory to the Administrative Agent and the Collateral Agent,
which endorsement shall provide that, from and after the Closing Date, if the
insurance carrier shall have received written notice from the Administrative
Agent or the Collateral Agent of the occurrence of an Event of Default, the
insurance carrier shall pay all proceeds otherwise payable to the Borrower or
the Loan Parties under such policies directly to the Collateral Agent; cause all
such policies to provide that neither the Borrower, the Administrative Agent,
the Collateral Agent nor any other party shall be a coinsurer thereunder and to
contain a
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53
"Replacement Cost Endorsement" without any deduction for depreciation, and such
other provisions as the Administrative Agent or the Collateral Agent may
reasonably require from time to time to protect their interests; promptly
following a request therefor, deliver original or certified copies of all such
policies to the Collateral Agent; cause each such policy to provide that it
shall not be canceled, modified or not renewed (i) by reason of nonpayment of
premium upon not less than 10 days' prior written notice thereof by the insurer
to the Administrative Agent and the Collateral Agent (giving the Administrative
Agent and the Collateral Agent the right to cure defaults in the payment of
premiums) or (ii) for any other reason upon not less than 30 days' prior written
notice thereof by the insurer to the Administrative Agent and the Collateral
Agent; deliver to the Administrative Agent and the Collateral Agent, prior to
the cancelation, modification or nonrenewal of any such policy of insurance, a
copy of a renewal or replacement policy (or other evidence of renewal of a
policy previously delivered to the Administrative Agent and the Collateral
Agent) together with evidence satisfactory to the Administrative Agent and the
Collateral Agent of payment of the premium therefor.
(c) If at any time the area in which the Premises (as defined in the
Mortgages) are located is designated (i) a "special flood hazard area" in any
Flood Insurance Rate Map published by the Federal Emergency Management Agency
(or any successor agency), obtain flood insurance in such total amount as the
Administrative Agent, the Collateral Agent or the Required Lenders may from time
to time require, and otherwise comply with the National Flood Insurance Program
as set forth in the Flood Disaster Protection Act of 1973, as it may be amended
from time to time, or (ii) a "Zone I" area, obtain earthquake insurance in such
total amount as the Administrative Agent, the Collateral Agent or the Required
Lenders may from time to time require.
(d) With respect to any Mortgaged Property, carry and maintain
comprehensive general liability insurance including the "broad form CGL
endorsement" and coverage on an occurrence basis against claims made for
personal injury (including bodily injury, death and property damage) and
umbrella liability insurance against any and all claims, in no event for a
combined single limit of less than that in effect on the Closing Date, naming
the Collateral Agent as an additional insured, on forms satisfactory to the
Collateral Agent.
(e) Notify the Administrative Agent and the Collateral Agent immediately
whenever any separate insurance concurrent in form or contributing in the event
of loss with that required to be maintained under this Section 5.02 is taken out
by the Borrower; and promptly deliver to the Administrative Agent and the
Collateral Agent a duplicate original copy of such policy or policies.
SECTION 5.03. Obligations and Taxes. Pay its obligations promptly and in
accordance with their terms and pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property, before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise that, if unpaid, could reasonably be expected to give rise
to a Lien upon such properties or any part thereof, provided, however, that such
payment and discharge shall not be required with respect to any such tax,
assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings and the Borrower
shall have set aside on its books adequate reserves with respect thereto in
accordance with GAAP and such contest operates to suspend collection of the
contested obligation, tax, assessment or charge and enforcement of a Lien.
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54
SECTION 5.04. Financial Statements, Reports, etc. In the case of the
Borrower, furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each Fiscal Year, its
consolidated and consolidating balance sheets and related statements of
income and stockholders' equity and consolidated cash flows showing the
financial condition of the Borrower and its consolidated Subsidiaries as
of the close of such Fiscal Year and the results of its operations and the
operations of such Subsidiaries during such year, all audited by Ernst &
Young LLP or other independent public accountants of recognized national
standing acceptable to the Administrative Agent and accompanied by an
opinion of such accountants (which shall not be qualified in any material
respect) to the effect that such consolidated financial statements fairly
present the financial condition and results of operations of the Borrower
and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each Fiscal Year, its consolidated and consolidating balance
sheets and related statements of operations and stockholders' equity and
consolidated cash flows showing the financial condition of the Borrower
and its consolidated Subsidiaries as of the close of such fiscal quarter
and the results of its operations and the operations of such Subsidiaries
during such fiscal quarter and the then elapsed portion of the Fiscal
Year, all certified by one of its Financial Officers as fairly presenting
the financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments;
(c) within 45 days after the end of each of the first two months of
each fiscal quarter, its consolidated and consolidating balance sheets and
related statements of operations and stockholders' equity and consolidated
cash flows showing the financial condition of the Borrower and its
consolidated Subsidiaries as of the close of such month and the results of
its operations and the operations of such Subsidiaries during such month
and the then elapsed portion of the Fiscal Year, all certified by one of
its Financial Officers as fairly presenting the financial condition and
results of operations of the Borrower and its consolidated Subsidiaries on
a consolidated basis in accordance with GAAP consistently applied, subject
to normal year-end audit adjustments;
(d) concurrently with any delivery of financial statements under
sub-paragraph (a) or (b) above, a letter of the accounting firm or
Financial Officer reporting on or certifying such statements (which
letter, when furnished by an accounting firm, may be limited to accounting
matters and disclaim responsibility for legal interpretations) (i)
reporting that they are unaware that any Event of Default has occurred, in
the case of the accounting firm, or certifying that no Event of Default or
Default has occurred, in the case of the Financial Officer, or, if such an
Event of Default or Default has occurred, specifying the nature and extent
thereof and any corrective action taken or proposed to be taken with
respect thereto and (ii) in the case of any such letter from such
Financial Officer, setting forth reasonably detailed calculations
demonstrating compliance with Sections 6.11, 6.12, 6.13 and 6.14;
<PAGE>
55
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of the
functions of said Commission, or with any national securities exchange, or
distributed to its shareholders, as the case may be;
(f) prior to April 30 of each Fiscal Year, a copy of the budget for
its consolidated balance sheet and related statements of income and cash
flows for each quarter of such Fiscal Year; and
(g) promptly, from time to time, such other information regarding
the operations, business affairs and financial condition of the Borrower
or any Subsidiary, or compliance with the terms of any Loan Document, as
the Administrative Agent or any Lender may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative
Agent, each Issuing Bank and each Lender prompt written notice of the following:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) taken or proposed to be
taken with respect thereto;
(b) the filing or commencement of, or any written threat or notice
of intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against the Borrower or any Affiliate thereof that could
reasonably be expected to result in a Material Adverse Effect; and
(c) any development that has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect.
SECTION 5.06. Employee Benefits. (a) Comply in all material respects with
the applicable provisions of ERISA and the Code and (b) furnish to the
Administrative Agent (i) as soon as possible after, and in any event within 10
days after any Responsible Officer of the Borrower or any ERISA Affiliate knows
or has reason to know that, any ERISA Event has occurred that, alone or together
with any other ERISA Event could reasonably be expected to result in liability
of the Borrower in an aggregate amount exceeding $2,500,000 or requiring
payments exceeding $2,500,000 in any year, a statement of a Financial Officer of
the Borrower setting forth details as to such ERISA Event and the action, if
any, that the Borrower proposes to take with respect thereto.
SECTION 5.07. Maintaining Records; Access to Properties and Inspections.
Keep proper books of record and account in which full, true and correct entries
in conformity with GAAP and all material requirements of law are made of all
dealings and transactions in relation to its business and activities. Each Loan
Party will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender to visit
and inspect the financial records and the properties of the Borrower or any
Subsidiary at reasonable times and as often as reasonably requested (subject to
the proviso below) and to make extracts from and copies of such financial
records, and permit any representatives designated by the Administrative Agent
or any Lender to
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56
discuss the affairs, finances and condition of the Borrower or any Subsidiary
with the officers thereof and independent accountants therefor ; provided that,
so long as no Default or Event of Default shall have occurred and be continuing,
the Administrative Agent or such Lender, as applicable, (a) shall not make any
such visits and inspections more than once per year and (b) shall give the
Borrower reasonable notice of any such discussions with accountants and shall
provide the Borrower with a reasonable opportunity to participate in such
discussions.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and request
the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.
SECTION 5.09. Compliance with Environmental Laws. Comply, and cause all
lessees and other persons occupying its Properties to comply, with all
Environmental Laws and Environmental Permits applicable to its operations and
Properties, except where the failure to do so could not reasonably be expected
to have a Material Adverse Effect; obtain and renew all Environmental Permits
necessary for its operations and Properties, except where the failure to do so
could not reasonably be expected to have a Material Adverse Effect; and conduct
any Remedial Action in accordance with Environmental Laws; provided, however,
that neither the Borrower nor any of the Subsidiaries shall be required to
undertake any Remedial Action to the extent that its obligation to do so is
being contested in good faith and by proper proceedings and appropriate reserves
are being maintained with respect to such circumstances.
SECTION 5.10. Preparation of Environmental Reports. If a Default caused by
reason of a breach of Section 3.17 or 5.09 shall have occurred and be
continuing, at the request of the Required Lenders through the Administrative
Agent, provide to the Lenders as soon as is reasonably practicable but in no
event later than 60 days after such request, at the expense of the Borrower, an
environmental site assessment report for the Properties which are the subject of
such default prepared by an environmental consulting firm acceptable to the
Administrative Agent and indicating the presence or absence of Hazardous
Materials and the estimated cost of any compliance or Remedial Action in
connection with such Properties.
SECTION 5.11. Further Assurances. (a) Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements, mortgages and deeds of trust) that may be required under applicable
law, or that the Required Lenders, the Administrative Agent or the Collateral
Agent may reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and
perfect the validity and first priority of the security interests created or
intended to be created by the Security Documents. In the event of any Permitted
Acquisition by the Borrower of any assets or business other than capital stock
of any corporation, in each case permitted pursuant to Section 6.04(c), the
Borrower will, at the time of such Permitted Acquisition, contribute such assets
or business to a Domestic Subsidiary. The Borrower will cause any subsequently
acquired or organized Domestic Subsidiary to execute a Subsidiary Guarantee
Agreement, Indemnity Subrogation and Contribution Agreement and each applicable
Security Document in favor of the Collateral Agent. In addition, from time to
time, the Borrower will, at its cost and expense, promptly secure the
Obligations by pledging or creating, or causing to be pledged or created,
perfected security interests with respect to such of its assets and properties
located in the United States as the Administrative Agent or the Required Lenders
shall reasonably designate (it
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57
being understood that it is the intent of the parties that the Obligations shall
be secured by, among other things, substantially all the assets of the Borrower
(including real and other properties acquired subsequent to the Closing Date)
located in the United States). Such security interests and Liens will be created
under the Security Documents and other security agreements, mortgages, deeds of
trust and other instruments and documents (the terms of which shall be
substantially the same as the Security Documents and the Guarantee Agreement,
except as required by applicable law) in form and substance satisfactory to the
Collateral Agent, and the Borrower shall deliver or cause to be delivered to the
Lenders all such instruments and documents (including legal opinions, title
insurance policies and lien searches) as the Collateral Agent shall reasonably
request to evidence compliance with this Section. The Borrower agrees to provide
such evidence as the Collateral Agent shall reasonably request as to the
perfection and priority status of each such security interest and Lien.
(b) Within 60 days after the Closing Date, furnish the Collateral
Agent with an as-built survey of each Mortgaged Property, in form and substance
reasonably satisfactory to the Collateral Agent and endorsements to the title
policies insuring each Mortgaged Property providing survey coverage, including,
without limitation, access, ALTA 9 (excluding minor encroachments agreed upon by
the Administrative Agent and the Borrower) and "land same as survey"
endorsements.
(c) Use commercially reasonable efforts to furnish the Collateral
Agent with a copy of the original permanent or temporary certificate of
occupancy, if any, issued upon completion of each Mortgaged Property (or any
amendment issued upon completion of any alteration) by the appropriate
Governmental Authority or appropriate evidence that the use and occupancy of
each Mortgaged Property is authorized.
ARTICLE VI
Negative Covenants
The Borrower covenants and agrees with each Lender that, so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan, all Fees and all other expenses
or amounts payable under any Loan Document have been paid in full and all
Letters of Credit have been canceled or have expired (or the Collateral Agent
shall have received cash collateral therefor pursuant to Section 2.22(j)) and
all amounts drawn thereunder have been reimbursed in full, unless the Required
Lenders shall otherwise consent in writing, the Borrower will not, and will not
cause or permit any of the Subsidiaries to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness for borrowed money existing on the date hereof and
set forth in Schedule 6.01;
(b) Indebtedness created hereunder and under the other Loan
Documents;
(c) the Senior Subordinated Notes;
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58
(d) Guarantees of Indebtedness permitted under this Section 6.01,
provided that the obligations under such Guarantees are subordinated to
Indebtedness hereunder to the extent, and on the same terms, such primary
Indebtedness is subordinated to Indebtedness hereunder;
(e) intercompany Indebtedness among the Borrower and its
Subsidiaries; provided that the obligations of each obligor of such
Indebtedness shall (i) be subordinated in right of payment to the
Obligations; and (ii) be evidenced by promissory notes, which shall have
been pledged to the Collateral Agent, for the benefit of Lenders, as
security for the Obligations;
(f) Indebtedness not to exceed $10,000,000 in the aggregate at any
time outstanding either (i) secured by Liens described in Section
6.02(c)(excluding any such Indebtedness owed to the seller with respect to
any Permitted Acquisition) or Section 6.02(i), or (ii) in respect of
Capital Lease Obligations;
(g) Indebtedness under the Bond Documents not to exceed
$10,853,094.11 in the aggregate at any one time outstanding.
(h) Indebtedness resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;
(i) Indebtedness arising under indemnity agreements to title
insurers to cause such title insurers to issue to the Collateral Agent
mortgagee title insurance policies;
(j) Indebtedness arising with respect to customary indemnification
and purchase price adjustment obligations incurred in connection with
Asset Sales and Permitted Acquisitions permitted hereunder;
(k) Indebtedness incurred in the ordinary course of business with
respect to surety and appeal bonds, performance and return-of-money bonds
and other similar obligations not exceeding at any time outstanding
$250,000 in aggregate liability;
(l) prior to the Closing Date, Indebtedness arising under the
Redemption Agreement;
(m) Indebtedness incurred in the ordinary course of business with
respect to open account arrangements or accrued expenses in current
account payables;
(n) Indebtedness incurred in connection with Permitted Acquisitions
permitted by Section 6.04(c) in an aggregate amount not exceeding
$250,000;
(o) any extensions, renewals or replacements of Indebtedness
described in paragraph (a), (c), (d) or (h) above to the extent that (i)
the aggregate principal amount of such Indebtedness is not at any time
increased and neither the maturity nor the average life of such
Indebtedness is shortened, (ii) if the Indebtedness being refinanced is
subordinated to the Obligations, the refinancing Indebtedness shall be
subordinated to the same extent and (iii)
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59
no material terms applicable to such Indebtedness shall be less favorable
to the Lenders in any material respect than the terms of the Indebtedness
being refinanced;
(p) Indebtedness incurred in connection with Interest Rate
Protection Agreements with any Lender (or any Affiliate thereof) with
respect to the Loans, in each case with the consent of the Administrative
Agent, which shall not be unreasonably withheld; and
(q) Indebtedness not permitted by clauses (a) through (p) above, so
long as all such Indebtedness, in the aggregate at any time outstanding,
does not exceed $250,000.
SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on
any property or assets (including stock or other securities of any person,
including any Subsidiary) now owned or hereafter acquired by it or on any income
or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower and its Subsidiaries
existing on the date hereof and set forth in Schedule 6.02; provided that
such Liens shall secure only those obligations which they secure on the
date hereof or any extensions, renewals or replacements thereof permitted
pursuant to Section 6.01(o);
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary; provided that (i)
such Lien is not created in contemplation of or in connection with such
acquisition, (ii) such Lien does not apply to any other property or assets
of the Borrower or any Subsidiary and (iii) such Lien does not (A)
materially interfere with the use, occupancy and operation of any
Mortgaged Property, (B) materially reduce the fair market value of such
Mortgaged Property but for such Lien or (C) result in any material
increase in the cost of operating, occupying or owning or leasing such
Mortgaged Property;
(d) Liens for taxes not yet due or which are being contested in
compliance with Section 5.03;
(e) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
and securing obligations that are not due and payable or which are being
contested in compliance with Section 5.03;
(f) pledges and deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and other
social security laws or regulations;
(g) deposits to secure the performance of bids, trade contracts
(other than for Indebtedness), leases (other than Capital Lease
Obligations), statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary
course of business;
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60
(h) zoning restrictions, easements, rights-of-way, restrictions on
use of real property and other similar encumbrances incurred in the
ordinary course of business which, in the aggregate, are not substantial
in amount and do not materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the business of
the Borrower or any of its Subsidiaries;
(i) purchase money security interests in real property, improvements
thereto or equipment hereafter acquired (or, in the case of improvements,
constructed) by the Borrower or any Subsidiary; provided that (i) such
security interests secure Indebtedness permitted by Section 6.01, (ii)
such security interests are incurred, and the Indebtedness secured thereby
is created, within 90 days after such acquisition (or construction), (iii)
the Indebtedness secured thereby does not exceed 85% of the lesser of the
cost or the fair market value of such real property, improvements or
equipment at the time of such acquisition (or construction) and (iv) such
security interests do not apply to any other property or assets of the
Borrower or any Subsidiary;
(j) deposits made in the ordinary course of business to secure
liability to insurance carriers;
(k) any attachment or judgment Lien not constituting an Event of
Default under sub- paragraph (i) of Article VII;
(l) leases or subleases granted to others not interfering in any
material respect with the business of the Borrower or any of its
Subsidiaries;
(m) any interest or title of a lessor or sublessor under any lease;
(n) Liens on goods held for consignment by the Borrower and its
Subsidiaries in the ordinary course of business;
(o) Liens arising from precautionary Uniform Commercial Code
financing statements with respect to assets leased by the Borrower or any
Subsidiary pursuant to operating leases; and
(p) Liens securing obligations under the Existing Letters of Credit.
SECTION 6.03. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred (a "Sale and Leaseback")
unless (a) the associated Indebtedness would be permitted by Section 6.01(f) and
(b) the Net Cash Proceeds thereof are used to prepay the Loans to the extent
required pursuant to Section 2.13(b).
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61
SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire
any capital stock, evidences of indebtedness or other securities of, make or
permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other person, except:
(a) investments by the Borrower in the capital stock of the
Subsidiaries that are Guarantors;
(b) Permitted Investments;
(c) the Borrower may make any Permitted Acquisition; provided that
the Borrower complies, and causes any acquired entity to comply, with the
applicable provisions of Section 5.11 and the Security Documents with
respect to the person or assets so acquired.
(d) the Borrower and its Subsidiaries may make intercompany loans
and investments to the extent permitted under Section 6.01(e);
(e) the Borrower and its Subsidiaries may make loans and advances to
employees for moving, entertainment, travel and other similar expenses in
the ordinary course of business not to exceed $500,000 in the aggregate at
any time outstanding;
(f) the Borrower and its Subsidiaries may make and own investments
in Joint Ventures; provided that as of any date, the sum of (i) the
cumulative aggregate amount of such investments plus (ii) the additional
amounts thereafter required to be contributed or paid by the Borrower and
its Subsidiaries in connection therewith minus (iii) the amount in cash
received by the Borrower and the Subsidiaries as returns on equity from
such Joint Ventures does not exceed $2,000,000 over the term of this
Agreement;
(g) Capital Expenditures permitted pursuant to Section 6.11;
(h) cash collateral provided to the Collateral Agent pursuant to the
Loan Documents; and
(i) promissory notes made by any purchaser in connection with any
Asset Sale permitted pursuant to Section 6.05(b).
SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions.
(a) Merge into or consolidate with any other person, or permit any other person
to merge into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all or any
substantial part of its assets (whether now owned or hereafter acquired) or any
capital stock of any Subsidiary, or purchase, lease or otherwise acquire (in one
transaction or a series of transactions) all or any substantial part of the
assets of any other person, except that (i) the Borrower and any Subsidiary may
purchase and sell inventory in the ordinary course of business, (ii) if at the
time thereof and immediately after giving effect thereto no Event of Default or
Default shall have occurred and be continuing (A) any wholly owned Domestic
Subsidiary may merge into the Borrower in a transaction in which the Borrower is
the surviving corporation, (B) any wholly owned Domestic Subsidiary may merge
into or consolidate with any other wholly owned Domestic Subsidiary in a
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transaction in which the surviving entity is a wholly owned Subsidiary that is a
Guarantor and no person other than the Borrower or a wholly owned Subsidiary
receives any consideration and (C) in connection with any Permitted Acquisition
pursuant to Section 6.04(c), the Borrower or any wholly owned Subsidiary that is
a Guarantor may merge into or consolidate with any entity acquired pursuant to
such Permitted Acquisition in a transaction in which the surviving entity is the
Borrower or a wholly owned Subsidiary that is a Guarantor and (iii) the Borrower
and its Subsidiaries may make dispositions of obsolete equipment not used or
useful in the business.
(b) Engage in any Asset Sale not otherwise prohibited by Section
6.05(a) unless all of the following conditions are met: (i) the consideration
received is at least equal to the fair market value of such assets; (ii) 90% of
the consideration received is cash; (iii) the Net Cash Proceeds of such Asset
Sale are applied as required by Section 2.13(b); (iv) after giving effect to the
sale or other disposition of the assets included within the Asset Sale and the
repayment of Indebtedness with the proceeds thereof, the Borrower is in
compliance on a pro forma basis with the covenants set forth in Sections 6.12,
6.13 and 6.14 recomputed for the most recently ended fiscal quarter for which
information is available and is in compliance with all other terms and
conditions contained in this Agreement; and (v) no Default or Event of Default
shall result from such sale or other disposition.
SECTION 6.06. Dividends and Distributions; Restrictions on Ability of
Subsidiaries to Pay Dividends. (a) Declare or pay, directly or indirectly, any
dividend or make any other distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof, with respect to
any shares of its capital stock or directly or indirectly redeem, purchase,
retire or otherwise acquire for value (or permit any Subsidiary to purchase or
acquire) any shares of any class of its capital stock or set aside any amount
for any such purpose; provided, however, that (i) any Subsidiary may declare and
pay dividends or make other distributions to the Borrower; (ii) the Borrower or
any Subsidiary may make payments and distributions pursuant to the Tax Sharing
Agreement to Holdings; (iii) in addition to the payments permitted to be made by
Borrower to Holdings pursuant to clause (ii) above, the Borrower may pay
dividends to Holdings, provided all of the following conditions are satisfied:
(A) at the time of the dividends and after giving effect thereto, no Default or
Event of Default has occurred and is continuing or would arise as a result
thereof; (B) the dividends received by Holdings shall be used solely by Holdings
for redemption of Holdings capital stock from employees, former employees,
directors or former directors of Holdings or any subsidiary of Holdings (or
permitted transferees of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements (including employment
agreements), or plans (or amendments thereto) or other arrangements approved by
the Board of Directors of Holdings under which such individuals purchase or sell
or are granted the option to purchase or sell, shares of such capital stock; (C)
the amount of dividends made pursuant to this clause (iii) during the term of
this Agreement and the amount used by Holdings for redemption of Holdings
capital stock shall not exceed $500,000 in any calendar year; and (D) on a pro
forma basis and after giving effect to such payment as if it were made in the
twelve month period ending on the last day of the month immediately preceding
the month in which the dividend is to be made, the Borrower is in compliance
with Section 6.14; (iv) the Borrower may pay a dividend to Holdings on the
Closing Date in an aggregate amount not exceeding $56,600,000, the proceeds of
which are used by Holdings solely (A) to finance the Recapitalization and (B) to
pay related fees, costs and expenses in connection with the Transactions; (v)
dividends or distributions payable to Holdings solely in common stock of the
Borrower; and (vi) so long as no Default shall have occurred and be continuing,
dividends to Holdings used to pay its operating
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expenses incurred in the ordinary course of business in an aggregate amount not
exceeding $100,000 in any Fiscal Year.
(b) Permit its subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such subsidiary to (i) pay any dividends or
make any other distributions on its capital stock or any other interest or (ii)
make or repay any loans or advances to the Borrower or the parent of such
subsidiary.
SECTION 6.07. Transactions with Affiliates. Except as set forth on
Schedule 6.07 and except for transactions between Loan Parties, sell or transfer
any property or assets to, or purchase or acquire any property or assets from,
or otherwise engage in any other transactions with, any of its Affiliates,
except (a) that the Borrower or any Subsidiary may engage in any of the
foregoing transactions in the ordinary course of business at prices and on terms
and conditions (taken as a whole) not less favorable to the Borrower or such
Subsidiary than could be obtained on an arm's-length basis from unrelated third
parties and (b) the Borrower may enter into the Employment Agreement dated as of
the date hereof, with Dr. Michael J. Hartnett, a copy of which has been provided
to the Lenders.
SECTION 6.08. Management and Other Fees. Except as set forth on Schedule
6.08, pay any management, consulting or similar fees to any Affiliate or to any
director, officer or employee of Holdings or any Loan Party except for customary
fees to directors.
SECTION 6.09. Business of Borrower and Subsidiaries. Engage at any time in
any business or business activity other than the Related Businesses.
SECTION 6.10. Other Indebtedness and Agreements. (a) Permit any waiver,
supplement, modification, amendment, termination or release of (i) the
Recapitalization Agreement or (ii) any instrument or agreement pursuant to which
any preferred stock of the Borrower or any Subsidiary is outstanding with an
aggregate liquidation value in excess of $1,000,000, or modify its charter or
by-laws, in each case to the extent that any such waiver, supplement,
modification, amendment, termination or release would be adverse to the Lenders
in any material respect.
(b) Permit any waiver, supplement, modification, amendment, termination or
release of any indenture, instrument or agreement pursuant to which any
Indebtedness of the Borrower or any Subsidiary in an aggregate principal amount
in excess of $1,000,000 is outstanding if the effect of such waiver, supplement,
modification, amendment, termination or release is to (i) increase the interest
rate on such Indebtedness; (ii) change the dates upon which payments of
principal or interest are due on such Indebtedness; (iii) change any event of
default or add any covenant with respect to such Indebtedness; (iv) change the
prepayment provisions of such Indebtedness; (v) change the subordination
provisions thereof (or the subordination terms of any Guarantee thereof); or
(vi) change or amend any other term if such change or amendment would materially
increase the obligations of the obligor or confer additional material rights on
the holder of such Indebtedness in a manner adverse to the Borrower, any
Subsidiary, the Administrative Agent or the Lenders.
(c)(i) Make any distribution, whether in cash, property, securities or a
combination thereof, other than regular scheduled payments of principal and
interest as and when due (to the extent not
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prohibited by applicable subordination provisions), in respect of, or pay, or
offer or commit to pay, or directly or indirectly redeem, repurchase, retire or
otherwise acquire for consideration, or set apart any sum for the aforesaid
purposes, any Indebtedness for borrowed money of the Borrower or any Subsidiary
in an outstanding principal amount exceeding $1,000,000 or (ii) pay in cash any
amount in respect of such Indebtedness that may at the obligor's option be paid
in kind or in other securities.
SECTION 6.11. Capital Expenditures. Permit the aggregate amount of
Consolidated Capital Expenditures made in cash by the Borrower and the
Subsidiaries, taken as a whole, in any Fiscal Year to exceed the sum of
$7,000,000; provided, however, that the amount of Consolidated Capital
Expenditures in any Fiscal Year permitted to be incurred shall be increased by
an amount equal to the amount of unused Consolidated Capital Expenditures
permitted to be incurred pursuant to this covenant for the immediately preceding
Fiscal Year (without giving effect to this proviso).
SECTION 6.12. Consolidated Leverage Ratio. Permit the Consolidated
Leverage Ratio as of, and for the period of four consecutive fiscal quarters
ending during any period set forth below, commencing with the period ending on
the last day of the second fiscal quarter of the 1998 Fiscal Year, to be in
excess of the ratio set forth below for such period.
Period Ratio
Closing Date through end of
1998 Fiscal Year 5.95 to 1.00
1999 Fiscal Year 5.95 to 1.00
2000 Fiscal Year 5.35 to 1.00
2001 Fiscal Year 4.50 to 1.00
2002 Fiscal Year 3.75 to 1.00
Thereafter 3.25 to 1.00
; provided, however, that for purposes of determining the Consolidated Leverage
Ratio for the four-fiscal-quarter periods ending on the last day of the second
and third quarters of the 1998 Fiscal Year, Consolidated EBITDA shall be deemed
to be (a) in the case of the four-fiscal-quarter period ending on the last day
of the second fiscal quarter of the 1998 Fiscal Year, Consolidated EBITDA for
the first two quarters ending on such date plus $11,950,000 and (b) in the case
of the four-fiscal-quarter period ending on the last day of the third fiscal
quarter of the 1998 Fiscal Year, Consolidated EBITDA for the first three
quarters ending on such date plus $5,975,000.
SECTION 6.13. Consolidated Interest Coverage Ratio. Permit the
Consolidated Interest Coverage Ratio as of, and for the period of four
consecutive fiscal quarters ending during any period set forth below, commencing
with the period ending on the last day of the second fiscal quarter of the 1998
Fiscal Year, to be less than the ratio set forth below for such period.
Period Ratio
Closing Date through end of
1998 Fiscal Year 1.60 to 1.00
1999 Fiscal Year 1.75 to 1.00
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65
2000 Fiscal Year 1.90 to 1.00
2001 Fiscal Year 2.10 to 1.00
2002 Fiscal Year 2.25 to 1.00
Thereafter 2.50 to 1.00
; provided, however, that for purposes of determining the Consolidated Interest
Coverage Ratio for the four-fiscal-quarter periods ending on the last day of the
second, third and fourth quarters of the 1998 Fiscal Year, (a) Consolidated
EBITDA shall be deemed to be (i) in the case of the four-fiscal-quarter period
ending on the last day of the second fiscal quarter of the 1998 Fiscal Year,
Consolidated EBITDA for the first two quarters ending on such date plus
$11,950,000 and (ii) in the case of the four-fiscal-quarter period ending on the
last day of the third fiscal quarter of the 1998 Fiscal Year, Consolidated
EBITDA for the first three quarters ending on such date plus $5,975,000, and (b)
Consolidated Interest Expense shall be deemed to be (i) in the case of the
four-fiscal-quarter period ending on the last day of the second quarter of the
1998 Fiscal Year, Consolidated Interest Expense for the second fiscal quarter
ending on such date multiplied by 4, (ii) in the case of the four-fiscal-quarter
period ending on the last day of the third quarter on the 1998 Fiscal Year,
Consolidated Interest Expense for the second and third fiscal quarters ending on
such date, multiplied by 2 and (iii) in the case of the four-fiscal-quarter
period ending on the last day of the 1998 Fiscal Year, Consolidated Interest
Expense for the second, third and fourth fiscal quarters ending on such date,
multiplied by 1-1/3.
SECTION 6.14. Consolidated Fixed Charge Coverage Ratio. Permit the
Consolidated Fixed Charge Coverage Ratio as of, and for the period of four
consecutive fiscal quarters ending during any period set forth below, commencing
with the period ending on the last day of the second fiscal quarter of the 1988
Fiscal Year, to be less than the ratio set forth below for such period.
Period Ratio
Closing Date through end of
1998 Fiscal Year 1.00 to 1.00
1999 Fiscal Year 1.00 to 1.00
2000 Fiscal Year 1.00 to 1.00
2001 Fiscal Year 1.05 to 1.00
2002 Fiscal Year 1.05 to 1.00
Thereafter 1.05 to 1.00
; provided, however, that for purposes of determining the Consolidated Fixed
Charge Coverage Ratio for the four-fiscal-quarter periods ending on the last day
of the second, third and fourth quarters of the 1998 Fiscal Year, (a)
Consolidated EBITDA shall be deemed to be (i) in the case of the
four-fiscal-quarter period ending on the last day of the second fiscal quarter
of the 1998 Fiscal Year, Consolidated EBITDA for the first two quarters ending
on such date plus $11,950,000 and (ii) in the case of the four-fiscal-
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quarter period ending on the last day of the third fiscal quarter of the 1998
Fiscal Year, Consolidated EBITDA for the first three quarters ending on such
date plus $5,975,000, (b) Consolidated Interest Expense shall be deemed to be
(i) in the case of the four-fiscal-quarter period ending on the last day of the
second quarter of the 1998 Fiscal Year, Consolidated Interest Expense for the
second fiscal quarter ending on such date multiplied by 4, (ii) in the case of
the four-fiscal-quarter period ending on the last day of the third quarter on
the 1998 Fiscal Year, Consolidated Interest Expense for the second and third
fiscal quarters ending on such date, multiplied by 2 and (iii) in the case of
the four-fiscal-quarter period ending on the last day of the 1998 Fiscal Year,
Consolidated Interest Expense for the second, third and fourth fiscal quarters
ending on such date, multiplied by 1-1/3; and (c) any provision for (or any
benefit from) income taxes or franchise taxes and Consolidated Capital
Expenditures shall be deemed to be such provision for taxes or such Consolidated
Capital Expenditures from the Closing Date through the last day of such second
quarter, third quarter or fourth quarter, as applicable.
SECTION 6.15. Fiscal Year. Permit the Fiscal Year to end on a day other
than the Saturday closest to March 31.
ARTICLE VII
Events of Default
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made by any Loan
Party in or in connection with any Loan Document or the borrowings or
issuances of Letters of Credit hereunder, or any representation, warranty,
statement or information contained in any report, certificate, financial
statement or other instrument furnished on behalf of any Loan Party in
connection with or pursuant to any Loan Document, shall prove to have been
false or misleading in any material respect when so made, deemed made or
furnished;
(b) default shall be made in the payment of any principal of any
Loan or the reimbursement with respect to any L/C Disbursement when and as
the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof or by acceleration thereof or
otherwise (other than any failure to make any such payment to the extent,
and during the period, such payment is not required pursuant to Section
2.13(i));
(c) default shall be made in the payment of any interest on any
Loan, interest on any L/C Disbursement or any Fee or any other amount
(other than an amount referred to in (b) above) due under any Loan
Document, when and as the same shall become due and payable, and such
default shall continue unremedied for a period of three Business Days
(other than any failure to make any such payment to the extent, and during
the period, such payment is not required pursuant to Section 2.13(i));
(d) default shall be made in the due observance or performance by
the Borrower or any Subsidiary of any covenant, condition or agreement
contained in Section 5.01(a), 5.05 or 5.08 or in Article VI;
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(e) default shall be made in the due observance or performance by
the Borrower or any Subsidiary of any covenant, condition or agreement
contained in any Loan Document (other than those specified in (b), (c) or
(d) above) and such default shall continue unremedied for a period of 30
days after notice thereof from the Administrative Agent or any Lender to
the Borrower;
(f) Holdings, the Borrower or any Subsidiary shall (i) fail to pay
any principal or interest, regardless of amount, due in respect of any
Indebtedness in a principal amount in excess of $2,500,000, when and as
the same shall become due and payable, or (ii) fail to observe or perform
any other term, covenant, condition or agreement contained in any
agreement or instrument evidencing or governing any such Indebtedness if
the effect of any failure referred to in this clause (ii) is to cause, or
to permit the holder or holders of such Indebtedness or a trustee on its
or their behalf (with or without the giving of notice, or the lapse of
time in the case of any event described in clause (i) of this paragraph,
or following any required lapse of time, in the case of any event
described in clause (ii) of this paragraph) to cause, such Indebtedness to
become due prior to its stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of Holdings, the Borrower or any Subsidiary, or of a
substantial part of the property or assets of Holdings, the Borrower or a
Subsidiary, under Title 11 of the United States Code, as now constituted
or hereafter amended, or any other Federal, state or foreign bankruptcy,
insolvency, receivership or similar law, (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for Holdings, the Borrower or any Subsidiary or for a substantial
part of the property or assets of Holdings, the Borrower or a Subsidiary
or (iii) the winding-up or liquidation of Holdings, the Borrower or any
Subsidiary; and such proceeding or petition shall continue undismissed for
60 days or an order or decree approving or ordering any of the foregoing
shall be entered;
(h) Holdings, the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11
of the United States Code, as now constituted or hereafter amended, or any
other Federal, state or foreign bankruptcy, insolvency, receivership or
similar law, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or the filing of any
petition described in (g) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for Holdings, the Borrower or any Subsidiary or for a
substantial part of the property or assets of Holdings, the Borrower or
any Subsidiary, (iv) file an answer admitting the material allegations of
a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable, admit in
writing its inability or fail generally to pay its debts as they become
due or (vii) take any action for the purpose of effecting any of the
foregoing;
(i) one or more judgments for the payment of money in an aggregate
amount in excess of $2,500,000 (to the extent not adequately covered by
insurance as to which the insurance company has acknowledged coverage
pursuant to a writing reasonably satisfactory to the Administrative Agent)
shall be rendered against Holdings, the Borrower, any Subsidiary
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or any combination thereof and the same shall remain undischarged for a
period of 30 consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment
creditor to levy upon assets or properties of Holdings, the Borrower or
any Subsidiary to enforce any such judgment;
(j) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other such ERISA Events,
could reasonably be expected to result in liability of the Borrower and
its ERISA Affiliates in an aggregate amount exceeding $2,500,000 or
requires payments exceeding $2,500,000;
(k) any security interest purported to be created by any Security
Document shall cease to be, or shall be asserted by the Borrower or any
other Loan Party not to be, a valid, perfected, first priority (except as
otherwise expressly provided in this Agreement or such Security Document)
security interest in the securities, assets or properties covered thereby,
except to the extent that any such loss of perfection or priority results
from the failure of the Collateral Agent to maintain possession of
certificates representing securities pledged under the Pledge Agreement
and except to the extent that such loss is covered by a lender's title
insurance policy and the related insurer promptly after such loss shall
have acknowledged in writing that such loss is covered by such title
insurance policy; or
(l) there shall have occurred a Change in Control or
(m) the Borrower shall fail to replace the Existing Letters of
Credit at least 180 days prior to their respective stated expiry dates.
then, and in every such event (other than an event with respect to the
Borrower described in paragraph (g) or (h) above), and at any time
thereafter during the continuance of such event, the Administrative Agent
may, and at the request of the Required Lenders shall, by notice to the
Borrower, take either or both of the following actions, at the same or
different times: (i) terminate forthwith the Commitments and (ii) declare
the Loans then outstanding to be forthwith due and payable in whole or in
part, whereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and any unpaid accrued
Fees and all other liabilities of the Borrower accrued hereunder and under
any other Loan Document, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which
are hereby expressly waived by the Borrower, anything contained herein or
in any other Loan Document to the contrary notwithstanding; and in any
event with respect to the Borrower described in paragraph (g) or (h)
above, the Commitments shall automatically terminate and the principal of
the Loans then outstanding, together with accrued interest thereon and any
unpaid accrued Fees and all other liabilities of the Borrower accrued
hereunder and under any other Loan Document, shall automatically become
due and payable, without presentment, demand, protest or any other notice
of any kind, all of which are hereby expressly waived by the Borrower,
anything contained herein or in any other Loan Document to the contrary
notwithstanding.
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ARTICLE VIII
The Administrative Agent and the Collateral Agent
In order to expedite the transactions contemplated by this Agreement,
Credit Suisse First Boston is hereby appointed to act as Administrative Agent
and Collateral Agent on behalf of the Lenders and the Issuing Banks (for
purposes of this Article VIII, the Administrative Agent and the Collateral Agent
are referred to collectively as the "Agents"). Each of the Lenders and each
assignee of any such Lender, hereby irrevocably authorizes the Agents to take
such actions on behalf of such Lender or assignee or the Issuing Banks and to
exercise such powers as are specifically delegated to the Agents by the terms
and provisions hereof and of the other Loan Documents, together with such
actions and powers as are reasonably incidental thereto. The Administrative
Agent is hereby expressly authorized by the Lenders and the Issuing Banks,
without hereby limiting any implied authority, (a) to receive on behalf of the
Lenders and the Issuing Banks all payments of principal of and interest on the
Loans, all payments in respect of L/C Disbursements and all other amounts due to
the Lenders hereunder, and promptly to distribute to each Lender or each Issuing
Bank its proper share of each payment so received; (b) to give notice on behalf
of each of the Lenders to the Borrower of any Event of Default specified in this
Agreement of which the Administrative Agent has actual knowledge acquired in
connection with its agency hereunder; and (c) to distribute to each Lender
copies of all notices, financial statements and other materials delivered by the
Borrower or any other Loan Party pursuant to this Agreement or the other Loan
Documents as received by the Administrative Agent. Without limiting the
generality of the foregoing, the Agents are hereby expressly authorized to
execute any and all documents (including releases) with respect to the
Collateral and the rights of the Secured Parties with respect thereto, as
contemplated by and in accordance with the provisions of this Agreement and the
Security Documents.
Neither the Agents nor any of their respective directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his gross negligence or wilful misconduct, or be
responsible for any statement, warranty or representation herein or the contents
of any document delivered in connection herewith, or be required to ascertain or
to make any inquiry concerning the performance or observance by the Borrower or
any other Loan Party of any of the terms, conditions, covenants or agreements
contained in any Loan Document. The Agents shall not be responsible to the
Lenders for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement or any other Loan Documents, instruments or
agreements. The Agents shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders and, except as otherwise specifically provided herein, such
instructions and any action or inaction pursuant thereto shall be binding on all
the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good faith to
be genuine and correct and to have been signed or sent by the proper person or
persons. Neither the Agents nor any of their respective directors, officers,
employees or agents shall have any responsibility to the Borrower or any other
Loan Party on account of the failure of or delay in performance or breach by any
Lender or any Issuing Bank of any of its obligations hereunder or to any Lender
or any Issuing Bank on account of the failure of or delay in performance or
breach by any other Lender or any Issuing Bank or the Borrower or any other Loan
Party of any of their respective obligations hereunder or under any other Loan
Document or in connection herewith or therewith. Each of the Agents may execute
any and all duties hereunder by
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or through agents or employees and shall be entitled to rely upon the advice of
legal counsel selected by it with respect to all matters arising hereunder and
shall not be liable for any action taken or suffered in good faith by it in
accordance with the advice of such counsel.
The Lenders hereby acknowledge that neither Agent shall be under any duty
to take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by
the Required Lenders.
Subject to the appointment and acceptance of a successor Agent as provided
below, either Agent may resign at any time by notifying the Lenders and the
Borrower. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor. If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Agent gives notice of its resignation, then the retiring Agent may,
on behalf of the Lenders, appoint a successor Agent which shall be a bank with
an office in New York , New York, having a combined capital and surplus of at
least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of any
appointment as Agent hereunder by a successor bank, such successor shall succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from its duties and
obligations hereunder. After the Agent's resignation hereunder, the provisions
of this Article and Section 9.05 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Agent.
With respect to the Loans made by it hereunder, each Agent in its
individual capacity and not as Agent shall have the same rights and powers as
any other Lender and may exercise the same as though it were not an Agent, and
the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not an Agent.
Each Lender agrees (a) to reimburse the Agents, on demand, in the amount
of its pro rata share (based on its Commitments hereunder) of any expenses
incurred for the benefit of the Lenders by the Agents, including reasonable
counsel fees and compensation of agents and employees paid for services rendered
on behalf of the Lenders, that shall not have been reimbursed by the Borrower as
required under this Agreement and (b) to indemnify and hold harmless each Agent
and any of its directors, officers, employees or agents, on demand, in the
amount of such pro rata share, from and against any and all liabilities, taxes,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by or asserted against it in its capacity as Agent or any of them
in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by it or any of them under this
Agreement or any other Loan Document, to the extent the same shall not have been
reimbursed by the Borrower or any other Loan Party, provided that no Lender
shall be liable to an Agent or any such other indemnified person for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements that are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of such Agent or any of
its directors, officers, employees or agents. Each Revolving Credit Lender
agrees to reimburse and indemnity each of the Issuing Banks and its directors,
employees and agents, in each case, to the same extent and subject to the same
limitations as provided above for the Agents.
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Each Lender acknowledges that it has, independently and without reliance
upon the Agents or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Agents or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement or any other Loan Docu ment, any related agreement or any
document furnished hereunder or thereunder.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at 60 Round Hill Road, Fairfield,
Connecticut 06430, Attention of Dr. Michael J. Hartnett (Telecopy No.
(203) 256-0775);
(b) if to the Administrative Agent, to Credit Suisse First Boston,
11 Madison Avenue, New York, New York 10010, Attention of Bruce MacKenzie
(Telecopy No. (212) 325-8304); and
(c) if to a Lender, to it at its address (or telecopy number) set
forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to
which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Banks and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Banks, regardless of any investigation made by the Lenders or the
Issuing Banks or on their behalf, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any Fee or any
other amount payable under this Agreement or any other Loan Document is
outstanding and unpaid or any Letter of Credit is outstanding and so long as the
Commitments have not been terminated. The provisions of Sections 2.14, 2.16,
2.20 and 9.05 shall remain operative and in full force and effect regardless of
the expiration of the term of this Agreement, the consummation of the
<PAGE>
72
transactions contemplated hereby, the repayment of any of the Loans, the
expiration of the Commitments, the expiration of any Letter of Credit, the
invalidity or unenforceability of any term or provision of this Agreement or any
other Loan Document, or any investigation made by or on behalf of the
Administrative Agent, the Collateral Agent, any Lender or any Issuing Bank.
SECTION 9.03. Binding Effect. This Agreement shall become effective when
it shall have been executed by the Borrower and the Administrative Agent and
when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the permitted successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Borrower, the Administrative Agent, the
Issuing Banks or the Lenders that are contained in this Agreement shall bind and
inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided,
however, that (i) except in the case of an assignment to a Lender or an
Affiliate of such Lender, (x) the Borrower and the Administrative Agent (and, in
the case of any assignment of a Revolving Credit Commitment, the Issuing Banks)
must give their prior written consent to such assignment (which consent shall
not be unreasonably withheld) and (y) the amount of the Commitment of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 (or, if less, the entire
remaining amount of such Lender's Commitment), (ii) the parties to each such
assignment shall execute and deliver to the Administrative Agent an Assignment
and Acceptance, together with a processing and recordation fee of $3,500 and
(iii) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire and any documents required
pursuant to Section 2.20(e). Upon acceptance and recording pursuant to paragraph
(e) of this Section 9.04, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least five Business
Days after the execution thereof, (A) the assignee thereunder shall be a party
hereto and, to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Lender under this Agreement and
(B) the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Lender's rights and obligations
under this Agreement, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 2.14, 2.16, 2.20 and 9.05,
as well as to any Fees accrued for its account and not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Term Loan Commitment and Revolving Credit Commitment, and the outstanding
balances of its Term
<PAGE>
73
Loans and Revolving Loans, in each case without giving effect to assignments
thereof which have not become effective, are as set forth in such Assignment and
Acceptance, (ii) except as set forth in (i) above, such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto, or the financial condition of
the Borrower or any Subsidiary or the performance or observance by the Borrower
or any Subsidiary of any of its obligations under this Agreement, any other Loan
Document or any other instrument or document furnished pursuant hereto; (iii)
such assignee represents and warrants that it is legally authorized to enter
into such Assignment and Acceptance; (iv) such assignee confirms that it has
received a copy of this Agreement, together with copies of the most recent
financial statements referred to in Section 3.05(a) or delivered pursuant to
Section 5.04 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Administrative Agent, the Collateral Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (vi) such assignee appoints
and authorizes the Administrative Agent and the Collateral Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Administrative Agent and the Collateral Agent,
respectively, by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in The City of New York a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the "Register"). The entries in the Register shall be
conclusive absent manifest error and the Borrower, the Administrative Agent, the
Issuing Banks, the Collateral Agent and the Lenders may treat each person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower, any
Issuing Bank, the Collateral Agent and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and, if required, the written consent of the Borrower, the Issuing
Banks and the Administrative Agent to such assignment, the Administrative Agent
shall (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Lenders and the Issuing Banks. No assignment shall be effective unless it has
been recorded in the Register as provided in this paragraph (e).
<PAGE>
74
(f) Each Lender may without the consent of the Borrower, the Issuing Banks
or the Administrative Agent sell participations to one or more banks or other
entities in all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
provided, however, that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the participating
banks or other entities shall be entitled to the benefit of the cost protection
provisions contained in Sections 2.14, 2.16 and 2.20 to the same extent as if
they were Lenders (provided that the Borrower shall not be required to pay an
amount pursuant to this clause (iii) that is greater than the amount that it
would have been required to pay had no participating interest been sold) and
(iv) the Borrower, the Administrative Agent, the Issuing Banks and the Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement, and such Lender shall
retain the sole right to enforce the obligations of the Borrower relating to the
Loans or L/C Disbursements and to approve any amendment, modification or waiver
of any provision of this Agreement (other than amendments, modifications or
waivers decreasing any fees payable hereunder or the amount of principal of or
the rate at which interest is payable on the Loans, extending any scheduled
principal payment date or date fixed for the payment of interest on the Loans or
increasing or extending the Commitments).
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender by
or on behalf of the Borrower; provided that, prior to any such disclosure of
information, each such assignee or participant or proposed assignee or
participant shall execute an agreement whereby such assignee or participant
shall agree (subject to customary exceptions) to preserve the confidentiality of
such confidential information on terms no less restrictive than those applicable
to the Lenders pursuant to Section 9.16.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement to a Federal Reserve Bank to secure extensions of credit by
such Federal Reserve Bank to such Lender; provided that no such assignment shall
release a Lender from any of its obligations hereunder or substitute any such
Bank for such Lender as a party hereto. In order to facilitate such an
assignment to a Federal Reserve Bank, the Borrower shall, at the request of the
assigning Lender, duly execute and deliver to the assigning Lender a promissory
note or notes evidencing the Loans made to the Borrower by the assigning Lender
hereunder.
(i) The Borrower shall not assign or delegate any of its rights or duties
hereunder without the prior written consent of the Administrative Agent, each
Issuing Bank and each Lender, and any attempted assignment without such consent
shall be null and void.
(j) In the event that Standard & Poor's Ratings Group, Moody's Investors
Service, Inc., and Thompson's BankWatch (or InsuranceWatch Ratings Service, in
the case of Lenders that are insurance companies (or Best's Insurance Reports,
if such insurance company is not rated by InsuranceWatch Ratings Service))
shall, after the date that any Lender becomes a Revolving Credit Lender,
downgrade the long-term certificate deposit ratings of such Lender, and the
resulting ratings shall be below BBB-, Baa3 and C (or BB, in the case of a
Lender that is an insurance company (or B, in the case of an insurance company
not rated by InsuranceWatch Ratings Service)), then each Issuing
<PAGE>
75
Bank shall have the right, but not the obligation, at its own expense, upon
notice to such Lender and the Administrative Agent, to replace (or to request
the Borrower to use its reasonable efforts to replace) such Lender with an
assignee (in accordance with and subject to the restrictions contained in
paragraph (b) above), and such Lender hereby agrees to transfer and assign
without recourse (in accordance with and subject to the restrictions contained
in paragraph (b) above) all its interests, rights and obligations in respect of
its Revolving Credit Commitment to such assignee; provided, however, that (i) no
such assignment shall conflict with any law, rule and regulation or order of any
Governmental Authority and (ii) such Issuing Bank or such assignee, as the case
may be, shall pay to such Lender in immediately available funds on the date of
such assignment the principal of and interest accrued to the date of payment on
the Loans made by such Lender hereunder and all other amounts accrued for such
Lender's account or owed to it hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all
reasonable out-of-pocket expenses incurred by the Administrative Agent, the
Collateral Agent and the Issuing Banks in connection with the syndication of the
credit facilities provided for herein and the preparation and administration of
this Agreement and the other Loan Documents or in connection with any
amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions hereby or thereby contemplated shall be
consummated) or incurred by the Administrative Agent, the Collateral Agent, any
Issuing Bank or any Lender in connection with the enforcement or protection of
its rights in connection with this Agreement and the other Loan Documents or in
connection with the Loans made or Letters of Credit issued hereunder, including
the reasonable fees, charges and disbursements of Cravath, Swaine & Moore,
counsel for the Administrative Agent and the Collateral Agent, and, in
connection, with any such enforcement or protection, the reasonable fees,
charges and disbursements of any other counsel for the Administrative Agent, the
Collateral Agent, an Issuing Bank or any Lender.
(b) The Borrower agrees to indemnify the Administrative Agent, the
Collateral Agent, each Lender and each Issuing Bank, each Affiliate of any of
the foregoing persons and each of their respective directors, officers,
employees and agents (each such person being called an "Indemnitee") against,
and to hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, charges and
disbursements, incurred by or asserted against any Indemnitee arising out of, in
any way connected with, or as a result of (i) the execution or delivery of this
Agreement or any other Loan Document or any agreement or instrument contemplated
thereby, the performance by the parties thereto of their respective obligations
thereunder or the consummation of the Transactions and the other transactions
contemplated thereby, (ii) the use of the proceeds of the Loans or issuance of
Letters of Credit, (iii) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not any Indemnitee is a party
thereto, or (iv) any actual or alleged presence or Release of Hazardous
Materials on any property owned or operated by the Borrower or any of the
Subsidiaries, or any Environmental Claim related in any way to the Borrower or
the Subsidiaries; provided that such indemnity shall not, as to any Indemnitee,
be available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction to have
resulted from the gross negligence or wilful misconduct of such Indemnitee.
(c) The provisions of this Section 9.05 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions
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76
contemplated hereby, the repayment of any of the Loans, the expiration of the
Commitments, the expiration of any Letter of Credit, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the Administrative Agent,
the Collateral Agent, any Lender or any Issuing Bank. All amounts due under this
Section 9.05 shall be payable on written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time to
time, except to the extent prohibited by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any and all the obligations of the
Borrower now or hereafter existing under this Agreement and other Loan Documents
held by such Lender, irrespective of whether or not such Lender shall have made
any demand under this Agreement or such other Loan Document and although such
obligations may be unmatured. The rights of each Lender under this Section 9.06
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have. Any Lender that sets off any deposits pursuant to
this Section shall give the Borrower notice of such setoff at the time thereof
or promptly thereafter.
SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent, the Collateral Agent, any Lender or any Issuing Bank in
exercising any power or right hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the
Administrative Agent, the Collateral Agent, the Issuing Banks and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agree ment or any other Loan Document or consent to any
departure by the Borrower or any other Loan Party therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Borrower and the Required Lenders; provided, however, that no such
agreement shall (i) decrease the principal amount
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77
of, or extend the maturity of or any scheduled principal payment date or date
for the payment of any interest on any Loan or any date for reimbursement of an
L/C Disbursement, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan or L/C Disbursement, without the prior
written consent of each Lender affected thereby, (ii) change or extend the
Commitment or decrease or extend the date for payment of the Commitment Fees or
L/C Participation Fee of any Lender without the prior written consent of such
Lender or (iii) amend or modify the pro rata requirement of Section 2.17, the
provisions of Section 9.04(i), the provisions of this Section, the definition of
the term "Required Lenders" or release any Guarantor or all or any substantial
part of the Collateral, without the prior written consent of each Lender;
provided further that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Administrative Agent, the Collateral Agent or any
Issuing Bank hereunder or under any other Loan Document without the prior
written consent of the Administrative Agent, the Collateral Agent or such
Issuing Bank.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to any Loan or
participation in any L/C Disbursement, together with all fees, charges and other
amounts which are treated as interest on such Loan or participation in such L/C
Disbursement under applicable law (collectively, the "Charges"), shall exceed
the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan or
participation in accordance with applicable law, the rate of interest payable in
respect of such Loan or participation hereunder, together with all Charges
payable in respect thereof, shall be limited to the Maximum Rate and, to the
extent lawful, the interest and Charges that would have been payable in respect
of such Loan or participation but were not payable as a result of the operation
of this Section 9.09 shall be cumulated and the interest and Charges payable to
such Lender in respect of other Loans or participations or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to the date
of repayment, shall have been received by such Lender.
SECTION 9.10. Entire Agreement. This Agreement, the Fee Letter and the
other Loan Documents constitute the entire contract between the parties relative
to the subject matter hereof. Any other previous agreement among the parties
with respect to the subject matter hereof is superseded by this Agreement and
the other Loan Documents. Nothing in this Agreement or in the other Loan
Documents, expressed or implied, is intended to confer upon any party other than
the parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS
<PAGE>
78
AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original but all of which when taken together shall constitute a
single contract, and shall become effective as provided in Section 9.03.
Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 9.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) The
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Administrative Agent, the Collateral Agent, any Issuing Bank or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
the other Loan Documents against the Borrower or its properties in the courts of
any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
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79
SECTION 9.16. Confidentiality. The Administrative Agent, the Collateral
Agent, each Issuing Bank and each of the Lenders agrees to keep confidential
(and to use its best efforts to cause its respective agents and representatives
to keep confidential) the Information (as defined below) and all copies thereof,
extracts therefrom and analyses or other materials based thereon, except that
the Administrative Agent, the Collateral Agent, any Issuing Bank or any Lender
shall be permitted to disclose Information (a) to such of its respective
officers, directors, employees, agents, affiliates and representatives as need
to know such Information, (b) to the extent requested by any regulatory
authority, (c) to the extent otherwise required by applicable laws and
regulations or by any subpoena or similar legal process, (d) in connection with
any suit, action or proceeding relating to the enforcement of its rights
hereunder or under the other Loan Documents or (e) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section 9.16 or (ii) becomes available to the Administrative Agent, any
Issuing Bank, any Lender or the Collateral Agent on a nonconfidential basis from
a source other than the Borrower. For the purposes of this Section,
"Information" shall mean all financial statements, certificates, reports,
agreements and information (including all analyses, compilations and studies
prepared by the Administrative Agent, the Collateral Agent, any Issuing Bank or
any Lender based on any of the foregoing) that are received from the Borrower
and related to the Borrower, any shareholder of the Borrower or any employee,
customer or supplier of the Borrower, other than any of the foregoing that were
available to the Administrative Agent, the Collateral Agent, any Issuing Bank or
any Lender on a nonconfidential basis prior to its disclosure thereto by the
Borrower, and which are in the case of
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80
Information provided after the date hereof, clearly identified at the time of
delivery as confidential. The provisions of this Section 9.16 shall remain
operative and in full force and effect regardless of the expiration and term of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
ROLLER BEARING COMPANY OF
AMERICA, INC.,
by
/s/ Anthony S. Cavalieri
-----------------------------
Name: Anthony S. Cavalieri
Title: Vice President and
Chief Financial Officer
CREDIT SUISSE FIRST BOSTON, individually
and as Administrative Agent, Collateral Agent and
Issuing Bank,
by
/s/ Heather Riekenberg
-----------------------------
Name: Heather Riekenberg
Title: Vice President
by
/s/ J. Scott Karro
-----------------------------
Name: J. Scott Karro
Title: Associate
HELLER FINANCIAL, INC., individually and as
Issuing Bank,
by
/s/ Robert M. Horak
-----------------------------
Name: Robert M. Horak
Title: Assistant Vice President
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81
MASS MUTUAL LIFE INSURANCE CO.,
by
/s/ Mark A. Ahmed
-----------------------------
Name: Mark A. Ahmed
Title: Managing Director
CORESTATES BANK, N.A.,
by
/s/ Marcus F. Brown
-----------------------------
Name: Marcus F. Brown
Title: Vice President
FIRST SOURCE FINANCIAL LLP,
by First Source Financial, Inc.,
its agent/manager
by
/s/ Gary L. Francis
-----------------------------
Name: Gary L. Francis
Title: Senior Vice President
FLEET NATIONAL BANK,
by
/s/ H. Frazier Caner
-----------------------------
Name: H. Frazier Caner
Title: Vice President
TRANSAMERICA BUSINESS CREDIT
CORPORATION,
by
/s/ Steven Fischer
-----------------------------
Name: Steven Fischer
Title: Senior Vice President
<PAGE>
82
UNION BANK OF CALIFORNIA, N.A.,
by
/s/ Ali Pasha Moghaddam
-----------------------------
Name: Ali Pasha Moghaddam
Title: Vice President
WELLS FARGO BANK, N.A.,
by
/s/ James I. Chu
-----------------------------
Name: James I. Chu
Title: Vice President
EXECUTION COPY
PLEDGE AGREEMENT dated as of June 23, 1997, among ROLLER
BEARING COMPANY OF AMERICA, INC., a Delaware corporation (the
"Borrower"), each Subsidiary of the Borrower listed on
Schedule I hereto (each such Subsidiary individually a
"Subsidiary Pledgor" and collectively, the "Subsidiary
Pledgors"; the Borrower and the Subsidiary Pledgors are
referred to collectively herein as the "Pledgors") and CREDIT
SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as collateral
agent (in such capacity, the "Collateral Agent"), for the
Secured Parties (as defined in the Credit Agreement referred
to below).
Reference is made to (a) the Credit Agreement dated as of June 23, 1997
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders"), Credit Suisse First Boston, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), Collateral Agent, and
issuing bank (in such capacity, the "Issuing Bank"), and (b) the Guarantee
Agreement dated as of June 23, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Guarantee Agreement") among the Pledgors and
the Collateral Agent.
The Lenders have agreed to make Loans to the Borrower and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrower, pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. The Guarantors have agreed to guarantee, among other things, all the
obligations of the Borrower under the Credit Agreement. The obligations of the
Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are
conditioned upon, among other things, the execution and delivery by the Pledgors
of a Pledge Agreement in the form hereof to secure (a) the due and punctual
payment by the Borrower of (i) the principal of and premium, if any, and
interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Loans, when and as due, whether
at maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (ii) each payment required to be made by the Borrower under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
the Borrower to the Secured Parties under the Credit Agreement and the other
Loan Documents, (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrower under or pursuant to the
Credit Agreement and the other Loan Documents, (c) the due and punctual payment
and performance of all the covenants, agreements, obligations and liabilities of
each Subsidiary Pledgor under or pursuant to the Guarantee Agreement or the
other Loan Documents and (d) the due and punctual payment and performance of all
obligations of the Borrower under each Interest Rate Protection Agreement
entered into with any counterparty that was a Lender at the time such Interest
Rate Protection Agreement was entered into (all the monetary and other
obligations referred to in the preceding clauses (a) through (d) being referred
to collectively as the "Obligations"). Capitalized terms used herein and not
defined herein shall have meanings assigned to such terms in the Credit
Agreement.
Accordingly, the Pledgors and the Collateral Agent, on behalf of itself
and each Secured Party (and each of their respective successors or assigns),
hereby agree as follows:
SECTION 1. Pledge. As security for the payment and performance, as the
case may be, in full of the Obligations, each Pledgor hereby transfers, grants,
bargains, sells, conveys, hypothecates, pledges, sets over and delivers unto the
Collateral Agent, its successors and assigns, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in all of the Pledgor's right, title and
interest in, to and under (a) the shares of capital stock owned by it and listed
on Schedule II hereto
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and any shares of capital stock of or any Subsidiary obtained in the future by
the Pledgor and the certificates representing all such shares (the "Pledged
Stock"); provided that the Pledged Stock shall not include (i) more than 65% of
the issued and outstanding shares of stock of any Foreign Subsidiary or (ii) to
the extent that applicable law requires that a Subsidiary of the Pledgor issue
directors' qualifying shares, such qualifying shares; (b)(i) the debt securities
listed opposite the name of the Pledgor on Schedule II hereto, (ii) any debt
securities in the future issued to the Pledgor and (iii) the promissory notes
and any other instruments evidencing such debt securities (the "Pledged Debt
Securities"); (c) all other property that may be delivered to and held by the
Collateral Agent pursuant to the terms hereof; (d) subject to Section 5, all
payments of principal or interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed, in
respect of, in exchange for or upon the conversion of the securities referred to
in clauses (a) and (b) above; (e) subject to Section 5, all rights and
privileges of the Pledgor with respect to the securities and other property
referred to in clauses (a), (b), (c) and (d) above; and (f) all proceeds of any
of the foregoing (the items referred to in clauses (a) through (f) above being
collectively referred to as the "Collateral"). Upon delivery to the Collateral
Agent, (a) any stock certificates, notes or other securities now or hereafter
included in the Collateral (the "Pledged Securities") shall be accompanied by
stock powers duly executed in blank or other instruments of transfer
satisfactory to the Collateral Agent and by such other instruments and documents
as the Collateral Agent may reasonably request, in each case in order to give
effect to the pledge granted hereby, and (b) all other property comprising part
of the Collateral shall be accompanied by proper instruments of assignment duly
executed by the applicable Pledgor and such other instruments or documents as
the Collateral Agent may reasonably request. Each delivery of Pledged Securities
shall be accompanied by a schedule describing the securities theretofore and
then being pledged hereunder, which schedule shall be attached hereto as
Schedule II and made a part hereof. Each schedule so delivered shall supersede
any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent, its successors and assigns, for the ratable benefit
of the Secured Parties, forever; subject, however, to the terms, covenants and
conditions hereinafter set forth.
SECTION 2. Delivery of the Collateral. (a) Each Pledgor agrees promptly to
deliver or cause to be delivered to the Collateral Agent any and all Pledged
Securities, and any and all certificates or other instruments or documents
representing the Collateral.
(b) Each Pledgor will cause any Indebtedness for borrowed money owed to
the Pledgor by any person to be evidenced by a duly executed promissory note
that is pledged and delivered to the Collateral Agent pursuant to the terms
thereof.
SECTION 3. Representations, Warranties and Covenants. Each Pledgor hereby
represents, warrants and covenants, as to itself and the Collateral pledged by
it hereunder, to and with the Collateral Agent that:
(a) the Pledged Stock represents that percentage as set forth on
Schedule II of the issued and outstanding shares of each class of the
capital stock of the issuer with respect thereto;
(b) except for the security interest granted hereunder and as
otherwise permitted by the Credit Agreement, the Pledgor (i) is and will
at all times continue to be the direct owner, beneficially and of record,
of the Pledged Securities indicated on Schedule II, (ii) holds the same
free and clear of all Liens, (iii) will make no assignment, pledge,
hypothecation or transfer of, or create or permit to exist any security
interest in or other Lien on, the Collateral, other than pursuant hereto,
and (iv) subject to Section 5, will cause any and all Collateral, whether
for value paid by the Pledgor or otherwise, to be forthwith deposited with
the Collateral Agent and pledged or assigned hereunder;
(c) the Pledgor (i) has the power and authority to pledge the
Collateral in the manner hereby done or contemplated and (ii) will, except
as otherwise provided in the Credit Agreement, defend its
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title or interest thereto or therein against any and all Liens (other than
the Lien created by this Agreement), however arising, of all persons
whomsoever;
(d) except as previously obtained, no consent of any other person
(including stockholders or creditors of any Pledgor) and no consent or
approval of any Governmental Authority or any securities exchange was or
is necessary to the validity of the pledge effected hereby;
(e) by virtue of the execution and delivery by the Pledgors of this
Agreement, when the Pledged Securities, certificates or other documents
representing or evidencing the Collateral are delivered to, and continue
to be in possession of, the Collateral Agent in accordance with this Agree
ment, the Collateral Agent will obtain a valid and perfected first lien
upon and security interest in such Pledged Securities as security for the
payment and performance of the Obligations;
(f) the pledge effected hereby is effective to vest in the
Collateral Agent, on behalf of the Secured Parties, the rights of the
Collateral Agent in the Collateral as set forth herein;
(g) all of the Pledged Stock has been duly authorized and validly
issued and is fully paid and nonassessable;
(h) all information set forth herein relating to the Pledged Stock
is accurate and complete in all material respects as of the date hereof;
and
(i) the pledge of the Pledged Stock pursuant to this Agreement does
not violate Regulation G, T, U or X of the Federal Reserve Board or any
successor thereto as of the date hereof.
SECTION 4. Registration in Nominee Name; Reasonable Care. (a) The
Collateral Agent, on behalf of the Secured Parties, shall have the right (in its
sole and absolute discretion) to hold the Pledged Securities in its own name as
pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the
Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent.
Each Pledgor will promptly give to the Collateral Agent copies of all material
written notices received by it with respect to Pledged Securities registered in
the name of such Pledgor. The Collateral Agent shall at all times have the right
to exchange the certificates representing Pledged Securities for certificates of
smaller or larger denominations for any purpose consistent with this Agreement.
(b) The Collateral Agent is required to exercise reasonable care in the
custody and preservation of any of the Collateral in its possession; provided,
however, the Collateral Agent shall be deemed to have exercised reasonable care
in the custody and preservation of any of the Collateral in its possession if it
deals with such Collateral in the same manner as it deals with similar property
for its own account, provided further that the failure of the Collateral Agent
to do the same shall not in itself be deemed to be a failure to exercise
reasonable care.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and
until an Event of Default shall have occurred and be continuing:
(i) Each Pledgor shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of Pledged
Securities or any part thereof for any purpose consistent with the terms
of this Agreement, the Credit Agreement and the other Loan Documents;
provided, however, that such Pledgor will not be entitled to exercise any
such right if the result thereof could materially and adversely affect the
rights inuring to a holder of the Pledged Securities or the rights and
remedies of any of the Secured Parties, in each case under this Agreement
or the Credit Agreement or any other Loan Document, or the ability of the
Secured Parties to exercise the same.
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(ii) The Collateral Agent shall execute and deliver to each Pledgor,
or cause to be executed and delivered to each Pledgor, all such proxies,
powers of attorney and other instruments as such Pledgor may reasonably
request for the purpose of enabling such Pledgor to exercise the voting
and/or consensual rights and powers it is entitled to exercise pursuant to
subparagraph (i) above and to receive the cash dividends it is entitled to
receive pursuant to subparagraph (iii) below.
(iii) Each Pledgor shall be entitled to receive and retain any and
all cash dividends, interest and principal paid on the Pledged Securities
to the extent and only to the extent that such cash dividends, interest
and principal are permitted by, and otherwise paid in accordance with, the
terms and conditions of the Credit Agreement, the other Loan Documents and
applicable laws. All noncash dividends, interest and principal, and all
dividends, interest and principal paid or payable in cash or otherwise in
connection with a partial or total liquidation or dissolution, return of
capital, capital surplus or paid-in surplus, and all other distributions
(other than distributions referred to in the preceding sentence) made on
or in respect of the Pledged Securities, whether paid or payable in cash
or otherwise, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the issuer of any
Pledged Securities or received in exchange for Pledged Securities or any
part thereof, or in redemption thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which such
issuer may be a party or otherwise, shall be and become part of the
Collateral, and, if received by any Pledgor, shall not be commingled by
such Pledgor with any of its other funds or property but shall be held
separate and apart therefrom, shall be held in trust for the benefit of
the Collateral Agent and shall be forthwith delivered to the Collateral
Agent in the same form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of Default,
all rights of any Pledgor to dividends, interest or principal that such Pledgor
is authorized to receive pursuant to paragraph (a)(iii) above shall cease, and
all such rights shall thereupon become vested in the Collateral Agent, which
shall have the sole and exclusive right and authority to receive and retain such
dividends, interest or principal. All dividends, interest or principal received
by the Pledgor contrary to the provisions of this Section 5 shall be held in
trust for the benefit of the Collateral Agent, shall be segregated from other
property or funds of such Pledgor and shall be forthwith delivered to the
Collateral Agent upon demand in the same form as so received (with any necessary
endorsement). Any and all money and other property paid over to or received by
the Collateral Agent pursuant to the provisions of this paragraph (b) shall be
retained by the Collateral Agent in an account to be established by the
Collateral Agent upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 7. After all Events of
Default have been cured or waived, the Collateral Agent shall, within five
Business Days after all such Events of Default have been cured or waived, repay
to each Pledgor all cash dividends, interest or principal (without interest),
that such Pledgor would otherwise be permitted to retain pursuant to the terms
of paragraph (a)(iii) above and which remain in such account.
(c) Upon the occurrence and during the continuance of an Event of Default,
all rights of any Pledgor to exercise the voting and consensual rights and
powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section
5, and the obligations of the Collateral Agent under paragraph (a)(ii) of this
Section 5, shall cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclu sive right and authority
to exercise such voting and consensual rights and powers in a manner intended to
give effect to the terms of this Agreement, provided that, unless otherwise
directed by the Required Lenders, the Collateral Agent shall have the right from
time to time following and during the continuance of an Event of Default to
permit the Pledgors to exercise such rights. After all Events of Default have
been cured or waived, such Pledgor will have the right to exercise the voting
and consensual rights and powers that it would otherwise be entitled to exercise
pursuant to the terms of paragraph (a)(i) above.
SECTION 6. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, subject to applicable regulatory and legal
requirements, the Collateral Agent may sell the Collateral,
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or any part thereof, in any commercially reasonable manner at public or private
sale or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem appropriate.
The Collateral Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing the Collateral for their
own account for investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale the Collateral Agent shall have
the right to assign, transfer and deliver to the purchaser or purchasers thereof
the Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of any
Pledgor, and, to the extent permitted by applicable law, the Pledgors hereby
waive all rights of redemption, stay, valuation and appraisal any Pledgor now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Any sale of Collateral pursuant to this Section 6
shall be made by the Collateral Agent in a commercially reasonable manner.
The Collateral Agent shall give a Pledgor 10 days' prior written notice
(which each Pledgor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of such Pledgor's Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix and state in the
notice of such sale. At any such sale, the Collateral, or portion thereof, to be
sold may be sold in one lot as an entirety or in separate parcels, as the
Collateral Agent may (in its sole and absolute discretion) determine. The
Collateral Agent shall not be obligated to make any sale of any Collateral if it
shall determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Collateral Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Collateral Agent until the sale price is paid in full by the
purchaser or purchasers thereof, but the Collateral Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice. At any public (or, to the extent permitted by
applicable law, private) sale made pursuant to this Section 6, any Secured Party
may bid for or purchase, free from any right of redemption, stay or appraisal on
the part of any Pledgor (all said rights being also hereby waived and released),
the Collateral or any part thereof offered for sale and may make payment on
account thereof by using any claim then due and payable to it from such Pledgor
as a credit against the purchase price, and it may, upon compliance with the
terms of sale, hold, retain and dispose of such property without further
accountability to such Pledgor therefor. For purposes hereof, (a) a written
agreement to purchase the Collateral or any portion thereof shall be treated as
a sale thereof, (b) the Collateral Agent shall be free to carry out such sale
pursuant to such agreement and (c) such Pledgor shall not be entitled to the
return of the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after the Collateral Agent shall have entered into such an
agreement all Events of Default shall have been remedied and the Obligations
paid in full. As an alternative to exercising the power of sale herein conferred
upon it, the Collateral Agent may proceed by a suit or suits at law or in equity
to foreclose upon the Collateral and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale
pursuant to the provisions of this Section 6 shall be deemed to conform to the
commercially reasonable standards as provided in Section 9-504(3) of the Uniform
Commercial Code as in effect in the State of New York or its equivalent in other
jurisdictions.
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SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6, as well as any Collateral consisting of cash,
shall be applied reasonably promptly by the Collateral Agent after receipt
thereof as follows:
FIRST, to the payment of all reasonable costs and expenses incurred
by the Collateral Agent in connection with such sale or otherwise in
connection with this Agreement, any other Loan Document or any of the
Obligations, including all court costs and the reasonable fees and
expenses of its agents and legal counsel, the repayment of all advances
made by the Collateral Agent hereunder or under any other Loan Document on
behalf of any Pledgor and any other reasonable costs or expenses incurred
in connection with the exercise of any right or remedy hereunder or under
any other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Obligations owed to them on the date of any such
distribution); and
THIRD, to the Pledgors, their successors or assigns, or as a court
of competent jurisdiction may otherwise direct.
Subject to the foregoing, the Collateral Agent shall have absolute
discretion as to the time of application of any such proceeds, moneys or
balances in accordance with this Agreement. Upon any sale of the Collateral by
the Collateral Agent (including pursuant to a power of sale granted by statute
or under a judicial proceeding), the receipt of the purchase money by the
Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Collateral Agent or such officer or
be answerable in any way for the misapplication thereof.
SECTION 8. Reimbursement of Collateral Agent. (a) Each Pledgor agrees to
pay upon demand to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees, other charges and disbursements of its
counsel and of any experts or agents, that the Collateral Agent may incur in
connection with (i) the sale of, collection from, or other realization upon, any
of the Collateral, (ii) the exercise or enforce ment of any of the rights of the
Collateral Agent hereunder or (iii) the failure by such Pledgor to perform or
observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and the
Indemnitees (as defined in Section 9.05 of the Credit Agreement) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, other
charges and disbursements, incurred by or asserted against any Indemnitee
arising out of, in any way connected with, or as a result of (i) the execution
or delivery of this Agreement or any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto
of their respective obligations thereunder or the consummation of the
Transactions and the other transactions contemplated thereby or (ii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction to have resulted from the gross negligence or wilful
misconduct of such Indemnitee.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 8 shall remain operative and in full force and effect regardless
of the termination of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document or any investigation made by or on behalf of the Collateral Agent
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or any other Secured Party. All amounts due under this Section 8 shall be
payable on written demand therefor and shall bear interest at the rate specified
in Section 2.06(a) of the Credit Agreement.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. During the
continuance of any Event of Default, each Pledgor hereby appoints the Collateral
Agent the attorney-in-fact of such Pledgor for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any instrument
that the Collateral Agent may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, the Collateral Agent shall
have the right, upon the occurrence and during the continuance of an Event of
Default, with full power of substitution either in the Collateral Agent's name
or in the name of such Pledgor, to ask for, demand, sue for, collect, receive
and give acquittance for any and all moneys due or to become due under and by
virtue of any Collateral, to endorse checks, drafts, orders and other
instruments for the payment of money payable to the Pledgor representing any
interest or dividend or other distribution payable in respect of the Collateral
or any part thereof or on account thereof and to give full discharge for the
same, to settle, compromise, prosecute or defend any action, claim or proceeding
with respect thereto, and to sell, assign, endorse, pledge, transfer and to make
any agreement respecting, or otherwise deal with, the same, in each case in a
manner intended to give effect to the terms of this Agreement; provided,
however, that nothing herein contained shall be construed as requiring or
obligating the Collateral Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by the Collateral Agent, or
to present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the other
Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to any
Pledgor for any act or failure to act hereunder, except for their own gross
negligence or wilful misconduct.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and of
the other Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provisions of this Agreement or consent to any departure by any
Pledgor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Pledgor in any case shall entitle such Pledgor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Collateral Agent and the Pledgor or Pledgors with respect to which such waiver,
amendment or modification is to apply, subject to any consent required in
accordance with Section 9.08 of the Credit Agreement.
SECTION 11. Securities Act, etc. In view of the position of the Pledgors
in relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities permitted hereunder. Each Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Securities, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Securities could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Securities under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. Each Pledgor recognizes that in light of such
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restrictions and limitations the Collateral Agent may, with respect to any sale
of the Pledged Securities, limit the purchasers to those who will agree, among
other things, to acquire such Pledged Securities for their own account, for
investment, and not with a view to the distribution or resale thereof. Each
Pledgor acknowledges and agrees that in light of such restrictions and
limitations, the Collateral Agent, in its sole and absolute discretion, (a) may
proceed to make such a sale whether or not a registration statement for the
purpose of regis tering such Pledged Securities or part thereof shall have been
filed under the Federal Securities Laws and (b) may approach and negotiate with
a single potential purchaser to effect such sale. Each Pledgor acknowledges and
agrees that any such sale might result in prices and other terms less favorable
to the seller than if such sale were a public sale without such restrictions. In
the event of any such sale, the Collateral Agent shall incur no responsibility
or liability for selling all or any part of the Pledged Securities at a price
that the Collateral Agent, in its sole and absolute discretion, may in good
faith deem reasonable under the circumstances, notwithstanding the possibility
that a substantially higher price might have been realized if the sale were
deferred until after registration as aforesaid or if more than a single
purchaser were approached. The provisions of this Section 11 will apply
notwithstanding the existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Collateral Agent sells.
SECTION 12. Registration, etc. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default hereunder, if for
any reason the Collateral Agent desires to sell any of the Pledged Securities of
the Borrower at a public sale, it will, at any time and from time to time, upon
the written request of the Collateral Agent, use its best efforts to take or to
cause the issuer of such Pledged Securities to take such action and prepare,
distribute and/or file such documents, as are required or advisable in the
reasonable opinion of counsel for the Collateral Agent to permit the public sale
of such Pledged Securities. Each Pledgor further agrees to indemnify, defend and
hold harmless the Collateral Agent, each other Secured Party, any underwriter
and their respective officers, directors, affiliates and controlling persons
from and against all loss, liability, expenses, costs of counsel (including,
without limitation, reasonable fees and expenses to the Collateral Agent of
legal counsel), and claims (including the costs of investigation) that they may
incur insofar as such loss, liability, expense or claim arises out of or is
based upon any alleged untrue statement of a material fact contained in any
prospectus (or any amendment or supplement thereto) or in any notification or
offering circular, or arises out of or is based upon any alleged omission to
state a material fact required to be stated therein or necessary to make the
statements in any thereof not misleading, except insofar as the same may have
been caused by any untrue statement or omission based upon information furnished
in writing to such Pledgor or the issuer of such Pledged Securities by the
Collateral Agent or any other Secured Party expressly for use therein. Each
Pledgor further agrees, upon such written request referred to above, to use its
best efforts to qualify, file or register, or cause the issuer of such Pledged
Securities to qualify, file or register, any of the Pledged Securities under the
Blue Sky or other securities laws of such states as may be requested by the
Collat eral Agent and keep effective, or cause to be kept effective, all such
qualifications, filings or registrations. Each Pledgor will bear all costs and
expenses of carrying out its obligations under this Section 12. Each Pledgor
acknowledges that there is no adequate remedy at law for failure by it to comply
with the provisions of this Section 12 and that such failure would not be
adequately compensable in damages, and therefore agrees that its agreements
contained in this Section 12 may be specifically enforced.
SECTION 13. Security Interest Absolute. All rights of the Collateral Agent
hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the foregoing,
(c) any exchange, release or nonperfection of any other collateral, or any
release or amendment or waiver of or consent to or departure from any guaranty,
for all or any of the Obligations or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any Pledgor in
respect of the Obligations or in respect of this Agreement (other than the
indefeasible payment in full of all the Obligations).
<PAGE>
9
SECTION 14. Termination or Release. (a) This Agreement and the security
interests granted hereby shall terminate when all the monetary Obligations have
been indefeasibly paid in full, the Lenders have no further commitment to lend
under the Credit Agreement, the L/C Exposure has been reduced to zero or, in the
case of outstanding Letters of Credit, cash collateral has been provided
therefor pursuant to Section 2.22(j) of the Credit Agreement, and the Issuing
Bank has no further obligation to issue Letters of Credit under the Credit
Agreement.
(b) Upon any sale or other transfer by any Pledgor of any Collateral that
is permitted under the Credit Agreement to any person that is not a Pledgor, or,
upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.08(b) of the
Credit Agreement, the security interest in such Collateral shall be
automatically released.
(c) In connection with any termination or release pursuant to paragraph
(a) or (b), the Collateral Agent shall promptly execute and deliver to any
Pledgor, at such Pledgor's expense, all documents that such Pledgor shall
reasonably request to evidence such termination or release. Any execution and
delivery of documents pursuant to this Section 14 shall be without recourse to
or warranty by the Collateral Agent.
SECTION 15. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to any Subsidiary Pledgor shall be given to
it in care of the Borrower.
SECTION 16. Further Assurances. Each Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Collateral Agent may at any time
reasonably request in connection with the administration and enforcement of this
Agreement or with respect to the Collateral or any part thereof or in order
better to assure and confirm unto the Collateral Agent its rights and remedies
hereunder.
SECTION 17. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Pledgor that are contained in
this Agreement shall bind and inure to the benefit of its successors and
assigns. This Agreement shall become effective as to any Pledgor when a
counterpart hereof executed on behalf of such Pledgor shall have been delivered
to the Collateral Agent and a counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon such
Pledgor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of such Pledgor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
no Pledgor shall have the right to assign its rights hereunder or any interest
herein or in the Collateral (and any such attempted assignment shall be void),
except as expressly contemplated by this Agreement or the other Loan Documents.
If all of the capital stock of a Pledgor then beneficially owned by the Borrower
and its Affiliates is sold, transferred or otherwise disposed of to a person
that is not an Affiliate of the Borrower pursuant to a transaction permitted by
Section 6.05 of the Credit Agreement or such Pledgor ceases to be a Guarantor
pursuant to such Section 6.05, such Pledgor shall be released from its
obligations under this Agreement without further action. This Agreement shall be
construed as a separate agreement with respect to each Pledgor and may be
amended, modified, supplemented, waived or released with respect to any Pledgor
without the approval of any other Pledgor and without affecting the obligations
of any other Pledgor hereunder.
SECTION 18. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by each Pledgor herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans and the issuance of the
Letters of Credit by the Issuing Bank, regardless of any investigation made
<PAGE>
10
by the Secured Parties or on their behalf, and shall continue in full force and
effect, until this Agreement terminates pursuant to the terms of Section 14(a).
(b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 19. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute a single contract, and shall become effective
as provided in Section 17. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Agreement.
SECTION 21. Rules of Interpretation. The rules of interpretation specified
in Section 1.02 of the Credit Agreement shall be applicable to this Agreement.
Section headings used herein are for convenience of reference only, are not part
of this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting this Agreement.
SECTION 22. Jurisdiction; Consent to Service of Process. (a) Each Pledgor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that, to the extent permitted by applicable law, all claims in respect of
any such action or proceeding may be heard and determined in such New York State
or, to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Collateral Agent or any other Secured Party may otherwise have to
bring any action or proceeding relating to this Agreement or the other Loan
Documents against any Pledgor or its properties in the courts of any
jurisdiction.
(b) Each Pledgor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 15. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 23. Waiver Of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES
<PAGE>
11
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 24. Additional Pledgors. Pursuant to Section 5.11 of the Credit
Agreement, each Subsidiary of the Borrower that was not in existence or not a
Subsidiary on the date of the Credit Agreement is required to enter in this
Agreement as a Subsidiary Pledgor upon becoming a Subsidiary if such Subsidiary
owns or possesses property of a type that would be considered Collateral
hereunder. Upon execution and delivery by the Collateral Agent and a Subsidiary
of an instrument in the form of Annex 1, such Subsidiary shall become a
Subsidiary Pledgor hereunder with the same force and effect as if originally
named as a Subsidiary Pledgor herein. The execution and delivery of such
instrument shall not require the consent of any Pledgor hereunder. The rights
and obligations of each Pledgor hereunder shall remain in full force and effect
notwithstanding the addition of any new Subsidiary Pledgor as a party to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
ROLLER BEARING COMPANY OF AMERICA, INC.,
by
-----------------------------
Name:
Title:
<PAGE>
12
INDUSTRIAL TECTONICS BEARINGS CORPORATION,
by
Name:
Title: Authorized Officer
RBC LINEAR PRODUCTS INC.,
by
Name:
Title: Authorized Officer
RBC NICE BEARINGS INC.,
by
Name:
Title: Authorized Officer
CREDIT SUISSE FIRST BOSTON,
as Collateral Agent,
by
--------------------------------------
Name:
Title: Authorized Officer
by
--------------------------------------
Name:
Title:
<PAGE>
Schedule I to the
Pledge Agreement
SUBSIDIARY PLEDGORS
<TABLE>
<CAPTION>
Name Address
<S> <C>
Industrial Tectonics Bearings Corporation c/o Roller Bearing Company of America, Inc.
RBC Linear Products Inc. c/o Roller Bearing Company of America, Inc.
RBC Nice Bearings Inc. c/o Roller Bearing Company of America, Inc.
</TABLE>
<PAGE>
Schedule II to the
Pledge Agreement
CAPITAL STOCK
Issuer Number of Registered Number and Percentage of
Certificate Owner Class of Shares Shares
DEBT SECURITIES
Principal
Issuer Amount Date of Note Maturity Date
<PAGE>
Annex 1 to the
Pledge Agreement
SUPPLEMENT NO. [ ] dated as of [ ], to the PLEDGE
AGREEMENT dated as of June 23, 1997, among ROLLER BEARING
COMPANY OF AMERICA, INC., a Delaware corporation (the
"Borrower"), each subsidiary of the Borrower listed on
Schedule I hereto (each such subsidiary individually a
"Subsidiary Pledgor" and collectively, the "Subsidiary
Pledgors"; the Borrower and Subsidiary Pledgors are referred
to collectively herein as the "Pledgors") and CREDIT SUISSE
FIRST BOSTON, a bank organized under the laws of Switzerland,
acting through its New York branch, as collateral agent (in
such capacity, the "Collateral Agent") for the Secured Parties
(as defined in the Credit Agreement referred to below)
A. Reference is made to (a) the Credit Agreement dated as of June 23, 1997
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders"), Credit Suisse First Boston, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), Collateral Agent, and
issuing bank (in such capacity, the "Issuing Bank"), and (b) the Guarantee
Agreement dated as of June 23, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Guarantee Agreement") among the Pledgors and
the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
C. The Pledgors have entered into the Pledge Agreement in order to induce
the Lenders to make Loans and the Issuing Bank to issue Letters of Credit.
Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of the
Borrower that was not in existence or not a Subsidiary on the date of the Credit
Agreement is required to enter into the Pledge Agreement as a Subsidiary Pledgor
upon becoming a Subsidiary if such Subsidiary owns or possesses property of a
type that would be considered Collateral under the Pledge Agreement. Section 24
of the Pledge Agreement provides that such Subsidiaries may become Subsidiary
Pledgors under the Pledge Agreement by execution and delivery of an instrument
in the form of this Supplement. The undersigned Subsidiary (the "New Pledgor")
is executing this Supplement in accordance with the require ments of the Credit
Agreement to become a Subsidiary Pledgor under the Pledge Agreement in order to
induce the Lenders to make additional Loans and the Issuing Bank to issue
additional Letters of Credit and as consideration for Loans previously made and
Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Pledgor agree as follows:
SECTION 1. In accordance with Section 24 of the Pledge Agreement, the New
Pledgor by its signature below becomes a Pledgor under the Pledge Agreement with
the same force and effect as if originally named therein as a Pledgor and the
New Pledgor hereby agrees (a) to all the terms and provisions of the Pledge
Agreement applicable to it as a Pledgor thereunder and (b) represents and
warrants that the representations and warranties made by it as a Pledgor
thereunder are true and correct on and as of the date hereof. In furtherance of
the foregoing, the New Pledgor, as security for the payment and performance in
full of the Obligations (as defined in the Pledge Agreement), does hereby create
and grant to the Collateral Agent, its successors and assigns, for the benefit
of the Secured Parties, their successors and assigns, a security interest in and
lien on all of the New Pledgor's right, title and interest in and to the
Collateral (as defined in the Pledge Agreement) of the New Pledgor. Each
reference to a "Subsidiary Pledgor" or a "Pledgor" in the Pledge Agreement shall
be deemed to include the New Pledgor. The Pledge Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Pledgor represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
<PAGE>
2
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Pledgor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that set forth
on Schedule I attached hereto is a true and correct schedule of all its Pledged
Securities.
SECTION 5. Except as expressly supplemented hereby, the Pledge Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Pledge Agreement shall not in any way be affected or impaired.
The parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 15 of the Pledge Agreement. All communications
and notices hereunder to the New Pledgor shall be given to it [at the address
set forth under its signature hereto][in care of the Borrower].
SECTION 9. The New Pledgor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.
[Name of New Pledgor],
by
Name:
Title:
Address:
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by
<PAGE>
3
Name:
Title:
by
Name:
Title:
<PAGE>
4
Schedule I to
Supplement No.
to the Pledge Agreement
Pledged Securities of the New Pledgor
CAPITAL STOCK
Issuer Number of Registered Number and Percentage of
Certificate Owner Class of Shares Shares
DEBT SECURITIES
Principal
Issuer Amount Date of Note Maturity Date
EXECUTION COPY
SECURITY AGREEMENT dated as of June 23, 1997, among
ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware
corporation (the "Borrower"), each subsidiary of the Borrower
listed on Schedule I hereto (each such subsidiary individually
a "Guarantor" and collectively, the "Guarantors"; the
Guarantors and the Borrower are referred to collectively
herein as the "Grantors") and CREDIT SUISSE FIRST BOSTON, a
bank organized under the laws of Switzerland, acting through
its New York branch, as collateral agent (in such capacity,
the "Collateral Agent") for the Secured Parties (as defined
herein).
Reference is made to (a) the Credit Agreement dated as of June 23, 1997
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders"), Credit Suisse First Boston, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), Collateral Agent and as
issuing bank (in such capacity, the "Issuing Bank") and (b) the Guarantee
Agreement dated as of June 23, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Guarantee Agreement"), among the Guarantors and
the Collateral Agent.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Guarantors has agreed to guarantee, among other
things, all the obligations of the Borrower under the Credit Agreement. The
obligations of the Lenders to make Loans and of the Issuing Bank to issue
Letters of Credit are conditioned upon, among other things, the execution and
delivery by the Grantors of an agreement in the form hereof to secure (a) the
due and punctual payment by the Borrower of (i) the principal of and premium, if
any, and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each payment required to be made by the Borrower under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
the Borrower to the Secured Parties under the Credit Agreement and the other
Loan Documents, (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrower under or pursuant to the
Credit Agreement and the other Loan Documents, (c) the due and punctual payment
and performance of all the covenants, agreements, obligations and liabilities of
each Loan Party under or pursuant to this Agreement and the other Loan Documents
and (d) the due and punctual payment and performance of all obligations of the
Borrower under each Interest Rate Protection Agreement entered into with any
counterparty that was a Lender at the time such Interest Rate Protection
Agreement was entered into (all the monetary and other obligations described in
the preceding clauses (a) through (d) being collectively called the
"Obligations").
<PAGE>
2
Accordingly, the Grantors and the Collateral Agent, on behalf of itself
and each Secured Party (and each of their respective successors or assigns),
hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall have
the meanings set forth in the Credit Agreement.
SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the
following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.
"Accounts" shall mean any and all right, title and interest of any Grantor
to payment for goods and services sold or leased, including any such right
evidenced by chattel paper, whether due or to become due, whether or not it has
been earned by performance, and whether now or hereafter acquired or arising in
the future, including accounts receivable from Affiliates of the Grantors.
"Accounts Receivable" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.
"Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c)
Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash accounts
and (g) Proceeds.
"Copyright License" shall mean any written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or which such Grantor otherwise has the right to
license, or granting any right to such Grantor under any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including those listed on Schedule II.
"Credit Agreement" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Documents" shall mean all instruments, files, records, ledger sheets and
documents covering or relating to any of the Collateral.
"Equipment" shall mean all equipment, furniture and furnishings, and all
tangible personal property similar to any of the foregoing, including tools,
parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter owned by any
Grantor. The term Equipment shall include Fixtures.
<PAGE>
3
"Fixtures" shall mean all items of Equipment, whether now owned or
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.
"General Intangibles" shall mean all choses in action and causes of action
and all other assignable intangible personal property of any Grantor of every
kind and nature (other than Accounts Receivable) now owned or hereafter acquired
by any Grantor, including corporate or other business records, indemnification
claims, contract rights (including rights under leases, whether entered into as
lessor or lessee, Interest Rate Protection Agreements and other agreements),
Intellectual Property, goodwill, registrations, franchises, tax refund claims
and any letter of credit, guarantee, claim, security interest or other security
held by or granted to any Grantor to secure payment by an Account Debtor of any
of the Accounts Receivable.
"Intellectual Property" shall mean all intellectual and similar property
of any Grantor of every kind and nature now owned or hereafter acquired by any
Grantor, including inventions, designs, Patents, Copyrights, Licenses,
Trademarks, trade secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing.
"Inventory" shall mean all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service, or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing supplies
and spare parts, and all such goods that have been returned to or repossessed by
or on behalf of any Grantor.
"License" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party,
including those listed on Schedule III (other than those license agreements in
existence on the date hereof and listed on Schedule III and those license
agreements entered into after the date hereof, which by their terms prohibit
assignment or a grant of a security interest by such Grantor as licensee
thereunder).
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Patent License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.
"Patents" shall mean all of the following now owned or hereafter acquired
by any Grantor: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, including
those listed on Schedule IV, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate substantially in the
form of Annex 2 hereto, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by a Financial Officer and
the chief legal officer of the Borrower.
<PAGE>
4
"Proceeds" shall mean any consideration received from the sale, exchange,
license, lease or other disposition of any asset or property that constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include, (a) any claim of any Grantor against any third
party for (and the right to sue and recover for and the rights to damages or
profits due or accrued arising out of or in connection with) (i) past, present
or future infringement of any Patent now or hereafter owned by any Grantor, or
licensed under a Patent License, (ii) past, present or future infringement or
dilution of any Trademark now or hereafter owned by any Grantor or licensed
under a Trademark License or injury to the goodwill associated with or
symbolized by any Trademark now or hereafter owned by any Grantor, (iii) past,
present or future breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any Grantor or licensed
under a Copyright License and (b) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"Secured Parties" shall mean (a) the Lenders, (b) the Administrative
Agent, (c) the Collateral Agent, (d) the Issuing Bank, (e) each counterparty to
an Interest Rate Protection Agreement entered into with the Borrower if such
counterparty was a Lender at the time the Interest Rate Protection Agreement was
entered into, (f) the beneficiaries of each indemnification obligation
undertaken by any Grantor under any Loan Document and (g) the successors and
assigns of each of the foregoing.
"Security Interest" shall have the meaning assigned to such term in
Section 2.01.
"Trademark License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"Trademarks" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office,
any State of the United States or any similar offices in any other country or
any political subdivision thereof, and all extensions or renewals thereof,
including those listed on Schedule V, (b) all goodwill associated therewith or
symbolized thereby and (c) all other assets, rights and interests that uniquely
reflect or embody such goodwill.
SECTION 1.03. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest in, all of such Grantor's right, title and interest
in, to and under the Collateral (the "Security Interest"). Without limiting the
foregoing, the Collateral Agent is hereby authorized, after the occurrence and
during the continuance of an Event of Default, to file one or more financing
statements
<PAGE>
5
(including fixture filings), continuation statements, filings with the United
States Patent and Trademark Office or United States Copyright Office (or any
successor office or any similar office in any other country) or other documents
for the purpose of perfecting, confirming, continuing, enforcing or protecting
the Security Interest granted by each Grantor, without the signature of any
Grantor, and naming any Grantor or the Grantors as debtors and the Collateral
Agent as secured party.
SECTION 2.02. No Assumption of Liability. The Security Interest is granted
as security only and shall not subject the Collateral Agent or any other Secured
Party to, or in any way alter or modify, any obligation or liability of any
Grantor with respect to or arising out of the Collateral.
ARTICLE III
Representations and Warranties
The Grantors jointly and severally represent and warrant to the Collateral
Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good and valid rights
in and title to the Collateral with respect to which it has purported to grant a
Security Interest hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other person other than
any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete in all material respects. Fully executed Uniform Commercial
Code financing statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations containing a description of the
Collateral have been delivered to the Collateral Agent for filing in each
governmental, municipal or other office specified in Schedule 6 to the
Perfection Certificate, which are all the filings, recordings and registrations
(other than filings required to be made in the United States Patent and
Trademark Office and the United States Copyright Office in order to perfect the
Security Interest in Collateral consisting of United States Patents, Trademarks
and Copyrights) that are necessary to publish notice of and protect the validity
of and to establish a legal, valid and perfected security interest in favor of
the Collateral Agent (for the ratable benefit of the Secured Parties) in respect
of all Collateral in which the Security Interest may be perfected by filing,
recording or registration in the United States (or any political subdivision
thereof) and its territories and possessions, and no further or subsequent
filing, refiling, recording, rerecording, registration or reregistration is
necessary in any such jurisdiction, except as provided under applicable law with
respect to the filing of continuation statements.
(b) Each Grantor represents and warrants that fully executed security
agreements in the form hereof and containing a description of all Collateral
consisting of Intellectual Property with respect to United States Patents and
United States registered Trademarks (and Trademarks for which United States
registration applications are pending) and United Sates registered Copyrights
have been delivered to the Collateral Agent for recording by the United States
Patent and Trademark Office and the United States Copyright Office pursuant to
35 U.S.C. ss. 261, 15 U.S.C. ss. 1060 or 17 U.S.C. ss. 205 and the regulations
thereunder, as applicable, and otherwise as may be required pursuant to the laws
of any other necessary jurisdiction, to protect the validity of and to establish
a legal, valid and perfected security interest in favor of the Collateral Agent
(for the ratable benefit of the Secured Parties) in respect of all Collateral
consisting of Patents, Trademarks and Copyrights in which a security interest
may be perfected by filing, recording or registration in the United States (or
any political subdivision thereof) and its territories and possessions, or in
any other necessary jurisdiction, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary (other than
such actions as are necessary to perfect the Security Interest with respect to
any Collateral consisting of
<PAGE>
6
Patents, Trademarks and Copyrights (or registration or application for
registration thereof) acquired or developed after the date hereof).
SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United States (or
any political subdivision thereof) and its territories and possessions pursuant
to the Uniform Commercial Code or other applicable law in such jurisdictions and
(c) a security interest that shall be perfected in all Collateral in which a
security interest may be perfected upon the receipt and recording of this
Agreement with the United States Patent and Trademark Office and the United
States Copyright Office, as applicable, within the three month period
(commencing as of the date hereof) pursuant to 35 U.S.C. ss. 261 or 15 U.S.C.
ss. 1060 or the one month period (commencing as of the date hereof) pursuant to
17 U.S.C. ss. 205 and otherwise as may be required pursuant to the laws of any
other necessary jurisdiction. The Security Interest is and shall be prior to any
other Lien on any of the Collateral, other than Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement. The Grantor has not filed or
consented to the filing of (a) any financing statement or analogous document
under the Uniform Commercial Code or any other applicable laws covering any
Collateral, (b) any assignment in which any Grantor assigns any Collateral or
any security agreement or similar instrument covering any Collateral with the
United States Patent and Trademark Office or the United States Copyright Office
or (c) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect, except, in each case, for Liens expressly permitted pursuant to
Section 6.02 of the Credit Agreement.
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
Business. (a) Each Grantor agrees promptly to notify the Collateral Agent in
writing of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility) or
(iii) in its Federal Taxpayer Identification Number. Each Grantor agrees not to
effect or permit any change referred to in the preceding sentence unless all
filings have been made under the Uniform Commercial Code or otherwise that are
required in order for the Collateral Agent to continue at all times following
such change to have a valid, legal and perfected first priority security
interest in all the Collateral. Each Grantor agrees promptly to notify the
Collateral Agent if any material portion of the Collateral owned or held by such
Grantor is damaged or destroyed.
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which such Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect to
any part of the Collateral, and, at such time or times as the Collateral Agent
may reasonably request, promptly to prepare and deliver to the Collateral Agent
a duly certified schedule or schedules
<PAGE>
7
in form and detail satisfactory to the Collateral Agent showing the identity,
amount and location of any and all Collateral.
SECTION 4.02. Periodic Certification. Each year, at the time of delivery
of annual financial statements with respect to the preceding fiscal year
pursuant to Section 5.04 of the Credit Agreement, the Borrower shall deliver to
the Collateral Agent a certificate executed by a Financial Officer and the chief
legal officer of the Borrower (a) setting forth the information required
pursuant to Section 2 of the Perfection Certificate or confirming that there has
been no change in such information since the date of such certificate or the
date of the most recent certificate delivered pursuant to Section 4.02 and (b)
certifying that none of the Loan Parties has consented to, or is aware of the
filing of any Uniform Commercial Code financing statement naming such person as
the debtor therein by any person other than the Collateral Agent since the date
of the Perfection Certificate or the most recent certificate delivered pursuant
to this Section 4.02 or, if any such filing has been made, setting forth a
reasonably detailed description thereof and of the related financing. Each
certificate delivered pursuant to this Section 4.02 shall identify in the format
of Schedule II, III, IV or V, as applicable, all Intellectual Property of any
Grantor in existence on the date thereof and not then listed on such Schedules
or previously so identified to the Collateral Agent.
SECTION 4.03. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all actions necessary to defend title to the
Collateral against all persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted pursuant to Section 6.02 of the Credit Agreement.
SECTION 4.04. Further Assurances. Each Grantor agrees, at its own expense,
to execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Collateral Agent may
from time to time request to better assure, preserve, protect and perfect the
Security Interest and the rights and remedies created hereby, including the
payment of any fees and taxes required in connection with the execution and
delivery of this Agreement, the granting of the Security Interest and the filing
of any financing statements (including fixture filings) or other documents in
connection herewith or therewith. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory note
or other instrument, such note or instrument shall be promptly pledged and
delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the
Collateral Agent. The Grantor expressly acknowledges and agrees that, in
applying the law of any jurisdiction that has now or hereafter enacted all or
substantially all of the uniform revision of Article 8 of the Uniform Commercial
Code, with new provisions added to Article 9 contemplated by such revision, all
as approved in 1994 by the American Law Institute and the National Conference of
Commissioners on Uniform State Laws, the Collateral shall be deemed to include
"investment property" as defined in such new provisions of Article 9, it being
the intention of the Grantor that such collateral be included in such Collateral
description, whether prior to or after the effectiveness of such revision in
such jurisdiction.
Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by supplementing Schedule II, III, IV or V hereto or
adding additional schedules hereto to specifically identify any asset or item
that may constitute Copyrights, Licenses, Patents or Trademarks; provided,
however, that any Grantor shall have the right, exercisable within 10 days after
it has been notified by the Collateral Agent of the specific identification of
such Collateral, to advise the Collateral Agent in writing of any inaccuracy of
the representations and warranties made by such Grantor hereunder with respect
to such Collateral. Each Grantor agrees that it will use its best efforts to
take such action as shall be necessary in order that all representations and
warranties hereunder shall be true and correct with respect to such Collateral
within 30 days after the date it has been notified by the Collateral Agent of
the specific identification of such Collateral.
SECTION 4.05. Inspection and Verification. The Collateral Agent and such
persons as the Collateral Agent may reasonably designate shall have the right,
at the Grantors' own cost and expense, to inspect the
<PAGE>
8
Collateral, all records related thereto (and to make extracts and copies from
such records) and to visit the pre mises upon which any of the Collateral is
located at reasonable times and as often as reasonably requested, to discuss the
Grantors' affairs with the officers of the Grantors and their independent
accountants and to verify under reasonable procedures, the validity, amount,
quality, quantity, value, condition and status of, or any other matter relating
to, the Collateral, including, in the case of Accounts or collateral in the
possession of any third person, at any time following the occurrence and during
the continuance of any Default or Event of Default by contacting Account Debtors
or the third person possessing such Collateral for the purpose of making such a
verification; provided that so long as no Default or Event of Default shall have
occurred and be continuing, the Administrative Agent or such Lender, as
applicable, (a) shall not be entitled to visit such premise more than one time
in any fiscal year and (b) shall give the Borrower reasonable notice of any such
discussions with accountants and shall provide the Borrower with a reasonable
opportunity to participate in such discussions. The Collateral Agent shall have
the absolute right to share any information it gains from such inspection or
verification with any Secured Party (it being understood that any such
information shall be deemed to be "Information" subject to the provisions of
Section 9.16).
SECTION 4.06. Taxes; Encumbrances. Subject to Section 5.03 of the Credit
Agreement, at its option, the Collateral Agent may discharge past due taxes,
assessments, charges, fees, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral and not permitted pursuant to
Section 6.02 of the Credit Agreement, and may pay for the maintenance and
preservation of the Collateral to the extent any Grantor fails to do so as
required by the Credit Agreement or this Agreement and an Event of Default
exists as a result thereof or otherwise, and each Grantor jointly and severally
agrees to reimburse the Collateral Agent on demand for any payment made or any
expense incurred by the Collateral Agent pursuant to the foregoing
authorization; provided, however, that nothing in this Section 4.06 shall be
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Party to cure or perform, any
covenants or other promises of any Grantor with respect to taxes, assessments,
charges, fees, liens, security interests or other encumbrances and maintenance
as set forth herein or in the other Loan Documents.
SECTION 4.07. Assignment of Security Interest. If at any time any Grantor
shall take a security interest in any property of an Account Debtor or any other
person to secure payment and performance of an Account, such Grantor shall
promptly assign such security interest to the Collateral Agent. Such assignment
need not be filed of public record unless necessary to continue the perfected
status of the security interest against creditors of and transferees from the
Account Debtor or other person granting the security interest.
SECTION 4.08. Continuing Obligations of the Grantors. Each Grantor, rather
than the Collateral Agent, shall remain liable to observe and perform in all
material respects all the material provisions of each contract, agreement or
instrument relating to the Collateral, all in accordance with the terms and
conditions thereof, and each Grantor jointly and severally agrees to indemnify
and hold harmless the Collateral Agent and the Secured Parties from and against
any and all liability for such performance provided that such indemnity shall
not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent
jurisdiction, to have resulted from the gross negligence or willful conduct of
such Indemnitee.
SECTION 4.09. Use and Disposition of Collateral. None of the Grantors
shall make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral, except as
expressly permitted by Section 6.02 of the Credit Agreement. None of the
Grantors shall make or permit to be made any transfer of the Collateral and each
Grantor shall remain at all times in possession of the Collateral owned by it,
except that (a) Inventory may be sold in the ordinary course of business and (b)
unless and until the Collateral Agent shall notify the Grantors that an Event of
Default shall have occurred and be continuing and that during the continuance
thereof the Grantors may use and dispose of the Collateral in any lawful manner
not inconsistent with the provisions of this Agreement, the Credit Agreement or
any other Loan Document. Without limiting the generality of the foregoing, each
Grantor agrees that it shall not permit any Inventory having an aggregate value
at any time outstanding in excess of $200,000 to be in the possession
<PAGE>
9
or control of any warehouseman, bailee, agent or processor for more than [ ]
days unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have agreed in writing to hold the
Inventory subject to the Security Interest and the instructions of the
Collateral Agent and to waive and release any Lien held by it with respect to
such Inventory, whether arising by operation of law or otherwise.
SECTION 4.10. Limitation on Modification of Accounts. None of the Grantors
will, without the Collateral Agent's prior written consent, grant any extension
of the time of payment of any of the Accounts Receivable, compromise, compound
or settle the same for less than the full amount thereof, release, wholly or
partly, any person liable for the payment thereof or allow any credit or
discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its good faith business judgment.
SECTION 4.11. Insurance. The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage to
the Inventory and Equipment in accordance with Section 5.02 of the Credit
Agreement. Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact)
for the purpose, during the continuance of an Event of Default, of making,
settling and adjusting claims in respect of Collateral under policies of
insurance, endorsing the name of such Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
any Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto and an Event of Default exists as a result thereof or
otherwise, the Collateral Agent may, without waiving or releasing any obligation
or liability of the Grantors hereunder or any Event of Default, in its sole
discretion, obtain and maintain such policies of insurance and pay such premium
and take any other actions with respect thereto as the Collateral Agent deems
advisable. All sums disbursed by the Collateral Agent in connection with this
Section 4.11, including reasonable attorneys' fees, court costs, expenses and
other charges relating thereto, shall be payable, promptly upon demand, by the
Grantors to the Collateral Agent and shall be additional Obligations secured
hereby.
SECTION 4.12. Legend. Each Grantor shall legend, in form and manner
reasonably satisfactory to the Collateral Agent, its Accounts Receivable and its
books, records and documents evidencing or pertaining thereto with an
appropriate reference to the fact that such Accounts Receivable have been
assigned to the Collateral Agent for the benefit of the Secured Parties and that
the Collateral Agent has a security interest therein.
SECTION 4.13. Covenants Regarding Patent, Trademark and Copyright
Collateral. (a) Each Grantor agrees that it will not, and will exercise its best
efforts to ensure that its licensees will not, do any act, or omit to do any
act, whereby any Patent which is material to the conduct of such Grantor's
business may become invalidated or dedicated to the public, and agrees that it
shall continue to mark any products covered by a Patent with the relevant patent
number as necessary and sufficient to establish and preserve its maximum rights
under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of Federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(c) Each Grantor (either itself or through licensees) will, for each work
covered by a material Copyright, continue to publish, reproduce, display, adopt
and distribute the work with appropriate copyright
<PAGE>
10
notice as necessary and sufficient to establish and preserve all of its material
rights under applicable copyright laws.
(d) Each Grantor shall notify the Collateral Agent promptly if it knows
that any Patent, Trademark or Copyright material to the conduct of the business
of the Grantors (taken as a whole) that may reasonably be expected to become
abandoned, lost or dedicated to the public, or of any material adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, United States Copyright Office or any court or similar office
of any country) regarding such Grantor's ownership of any such Patent, Trademark
or Copyright, its right to register the same, or to keep and maintain the same.
(e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or in any
other country or any political subdivision thereof, unless it promptly informs
the Collateral Agent, and, upon request of the Collateral Agent, executes and
delivers any and all agreements, instruments, documents and papers as the
Collateral Agent may reasonably request to evidence the Collateral Agent's
security interest in such Patent, Trademark or Copyright, and each Grantor
hereby appoints the Collateral Agent as its attorney-in-fact to execute and file
such writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable.
(f) Each Grantor will take all necessary steps that are consistent with
the practice in any proceeding before the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, to maintain and pursue each material application relating
to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant
or registration) and to maintain each issued Patent and each registration of the
Trademarks and Copyrights that is material to the conduct of the business of the
Grantors (taken as a whole), including timely filings of applications for
renewal, affidavits of use, affidavits of incontestability and payment of
maintenance fees, and, if consistent with good business judgment, to initiate
opposition, interference and cancelation proceedings against third parties.
(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any business of the Grantors (taken as a whole) that has been or is
about to be infringed, misappropriated or diluted by a third party in any
material respect, such Grantor promptly shall notify the Collateral Agent and
shall, if consistent with good business judgment, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions as are
appropriate under the circumstances to protect such Collateral.
(h) Upon and during the continuance of an Event of Default, each Grantor
shall use its best efforts to obtain all requisite consents or approvals by the
licensor of each Copyright License, Patent License or Trademark License to
effect the assignment of all of such Grantor's right, title and interest
thereunder to the Collateral Agent or its designee.
<PAGE>
11
ARTICLE V
Power of Attorney
Each Grantor irrevocably makes, constitutes and appoints the Collateral
Agent (and all officers, employees or agents designated by the Collateral Agent)
as such Grantor's true and lawful agent and attorney-in-fact, and in such
capacity the Collateral Agent shall have the right, with power of substitution
for each Grantor and in each Grantor's name or otherwise, for the use and
benefit of the Collateral Agent and the Secured Parties, upon the occurrence and
during the continuance of an Event of Default (a) to receive, endorse, assign
and/or deliver any and all notes, acceptances, checks, drafts, money orders or
other evidences of payment relating to the Collateral or any part thereof; (b)
to demand, collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral; (c) to sign the name of any Grantor on
any invoice or bill of lading relating to any of the Collateral; (d) to send
verifications of Accounts Receivable to any Account Debtor; (e) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any of
the Collateral or to enforce any rights in respect of any Collateral; (f) to
settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; (g) to notify, or to require any
Grantor to notify, Account Debtors to make payment directly to the Collateral
Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with
respect to or otherwise deal with all or any of the Collateral, and to do all
other acts and things necessary to carry out the purposes of this Agreement, as
fully and completely as though the Collateral Agent were the absolute owner of
the Collateral for all purposes; provided, however, that nothing herein
contained shall be construed as requiring or obligating the Collateral Agent or
any Secured Party to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Collateral Agent or any Secured
Party, or to present or file any claim or notice, or to take any action with
respect to the Collateral or any part thereof or the moneys due or to become due
in respect thereof or any property covered thereby, and no action taken or
omitted to be taken by the Collateral Agent or any Secured Party with respect to
the Collateral or any part thereof shall give rise to any defense, counterclaim
or offset in favor of any Grantor or to any claim or action against the
Collateral Agent or any Secured Party. It is understood and agreed that the
appointment of the Collateral Agent as the agent and attorney-in-fact of the
Grantors for the purposes set forth above is coupled with an interest and is
irrevocable. The provisions of this Section shall in no event relieve any
Grantor of any of its obligations hereunder or under any other Loan Document
with respect to the Collateral or any part thereof or impose any obligation on
the Collateral Agent or any Secured Party to proceed in any particular manner
with respect to the Collateral or any part thereof, or in any way limit the
exercise by the Collateral Agent or any Secured Party of any other or further
right which it may have on the date of this Agreement or hereafter, whether
hereunder, under any other Loan Document, by law or otherwise.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each item of
Collateral to the Collateral Agent promptly following a request therefor, and it
is agreed that the Collateral Agent shall have the right to take any of or all
the following actions at the same or different times in a commercially
reasonable manner: (a) with respect to any Collateral consisting of Intellectual
Property, on demand, to cause the Security Interest to become an assignment,
transfer and conveyance of any of or all such Collateral by the applicable
Grantors to the Collateral Agent, or to license or sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive basis, any
such Collateral throughout the world on such terms and conditions and in such
manner as the Collateral Agent shall determine (other than in violation of any
then-existing licensing arrangements to the extent
<PAGE>
12
that waivers cannot be obtained), and (b) with or without legal process and with
or without prior notice or demand for performance (but subject to the
requirements of applicable law), to take possession of the Collateral and
without liability for trespass to enter any premises owned by the Grantors where
the Collateral may be located for the purpose of taking possession of or
removing the Collateral and, generally, to exercise any and all rights afforded
to a secured party under the Uniform Commercial Code or other applicable law.
Without limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by law) all rights of redemption, stay and appraisal
which such Grantor now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted. Any sale of Collateral
pursuant to this Section 6.01 shall be made by the Collateral Agent in a
commercially reasonable manner.
The Collateral Agent shall give the Grantors 10 days' written notice
(which each Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker's
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion thereof,
will first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Collateral Agent may fix and state in the notice (if any)
of such sale. At any such sale, the Collateral, or portion thereof, to be sold
may be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The Collateral Agent
shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, any Secured Party may bid for or purchase, free (to
the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of any Grantor (all said rights being also hereby waived
and released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to such Secured Party from any Grantor as a credit against the
purchase price, and such Secured Party may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to any Grantor therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Collateral Agent shall be free to carry out such sale pursuant to such agreement
and no Grantor shall be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Collateral
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Obligations paid in full. As an alternative to exercising
the power of sale herein conferred upon it, the Collateral Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
<PAGE>
13
SECTION 6.02. Application of Proceeds. The Collateral Agent shall
reasonably promptly after receipt thereof apply the proceeds of any collection
or sale of the Collateral, as well as any Collateral consisting of cash, as
follows:
FIRST, to the payment of all costs and expenses incurred by the
Administrative Agent or the Collateral Agent (in its capacity as such
hereunder or under any other Loan Document) in connection with such
collection or sale or otherwise in connection with this Agreement or any
of the Obligations, including all court costs and the reasonable fees and
expenses of its agents and legal counsel, the repayment of all advances
made by the Collateral Agent hereunder or under any other Loan Document on
behalf of any Grantor and any other reasonable costs or expenses incurred
in connection with the exercise of any right or remedy hereunder or under
any other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Obligations owed to them on the date of any such
distribution); and
THIRD, to the Grantors, their successors or assigns, or as a court
of competent jurisdiction may otherwise direct.
Subject to the foregoing, the Collateral Agent shall have absolute discretion as
to the time of application of any such proceeds, moneys or balances in
accordance with this Agreement. Upon any sale of the Collateral by the
Collateral Agent (including pursuant to a power of sale granted by statute or
under a judicial proceeding), the receipt of the Collateral Agent or of the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof. The use of such license by the Collateral Agent
shall be exercised, at the option of the Collateral Agent, upon the occurrence
and during the continuation of an Event of Default; provided that any license,
sub-license or other transaction entered into by the Collateral Agent in
accordance herewith shall be binding upon the Grantors notwithstanding any
subsequent cure of an Event of Default.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.01 of the Credit Agreement. All communications and notices
hereunder to any Guarantor shall be given to it at its address or telecopy
number set forth on Schedule I, with a copy to the Borrower.
SECTION 7.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any
<PAGE>
14
lack of validity or enforceability of the Credit Agreement, any other Loan
Document, any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Credit Agreement, any other Loan Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Grantor in respect of the
Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in full force and effect until this Agreement shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except as
expressly contemplated by this Agreement or the Credit Agreement. This Agreement
shall be construed as a separate agreement with respect to each Grantor and may
be amended, modified, supplemented, waived or released with respect to any
Grantor without the approval of any other Grantor and without affecting the
obligations of any other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 7.06. Collateral Agent's Fees and Expenses; Indemnification. (a)
Each Grantor jointly and severally agrees to pay upon demand to the Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees, disbursements and other charges of its counsel and of any experts or
agents, which the Collateral Agent may incur in connection with preservation of,
or the sale of, collection from or other realization upon any of the Collateral,
(iii) the exercise, enforcement or protection of any of the rights of the
Collateral Agent hereunder or (iv) the failure of any Grantor to perform or
observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Grantor jointly and severally agrees to indemnify the
Collateral Agent and the other Indemnitees against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable fees, disbursements and other charges of counsel,
incurred by or asserted against any of them arising out of, in any way connected
with, or as a result of, the execution, delivery or performance of this
Agreement or any claim, litigation, investigation or proceeding relating hereto
or to the Collateral, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 7.06 shall remain operative and in full
<PAGE>
15
force and effect regardless of the termination of this Agreement or any other
Loan Document, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Collateral Agent or any Lender. All amounts due
under this Section 7.06 shall be payable on written demand therefor.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.08. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, the Issuing Bank, the Administrative Agent and the
Lenders under the other Loan Documents are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of any
provisions of this Agreement or any other Loan Document or consent to any
departure by any Grantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Grantor in any case shall entitle such
Grantor or any other Grantor to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Collateral Agent and the Grantor or Grantors with respect to which
such waiver, amendment or modification is to apply, subject to any consent
required in accordance with Section 9.08 of the Credit Agreement.
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09.
SECTION 7.10. Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 7.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract (subject to Section 7.04), and
shall become effective as provided in Section 7.04. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
<PAGE>
16
SECTION 7.12. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent, the Administrative Agent, the Issuing Bank or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
the other Loan Documents against any Grantor or its properties in the courts of
any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 7.14. Termination. This Agreement and the Security Interest shall
terminate when all the monetary Obligations have been indefeasibly paid in full,
the Lenders have no further commitment to lend, the L/C Exposure has been
reduced to zero or, in the case of outstanding Letters of Credit, cash
collateral has been provided therefor pursuant to Section 2.22(j) of the Credit
Agreement, and the Issuing Bank has no further commitment to issue Letters of
Credit under the Credit Agreement, at which time the Collateral Agent shall
execute and deliver to the Grantors, at the Grantors' expense, all Uniform
Commercial Code termination state ments and similar documents which the Grantors
shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this Section 7.14
shall be without recourse to or warranty by the Collateral Agent. A Guarantor
shall automatically be released from its obligations hereunder and the Security
Interest in the Collateral of such Guarantor shall be automatically released in
the event that all the capital stock of such Guarantor shall be sold,
transferred or otherwise disposed of to a person that is not an Affiliate of the
Borrower in accordance with the terms of the Credit Agreement; provided that the
Required Lenders shall have consented to such sale, transfer or other
disposition (to the extent required by the Credit Agreement) and the terms of
such consent did not provide otherwise.
SECTION 7.15. Additional Grantors. Upon execution and delivery by the
Collateral Agent and a Subsidiary of an instrument in the form of Annex 3
hereto, such Subsidiary shall become a Grantor hereunder
<PAGE>
17
with the same force and effect as if originally named as a Grantor herein. The
execution and delivery of any such instrument shall not require the consent of
any Grantor hereunder. The rights and obligations of each Grantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Grantor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
ROLLER BEARING COMPANY OF AMERICA,
INC.,
by
--------------------------
Name:
Title:
INDUSTRIAL TECTONICS BEARINGS
CORPORATION,
by
--------------------------
Name:
Title: Authorized Officer
RBC LINEAR PRODUCTS INC.,
by
--------------------------
Name:
Title: Authorized Officer
RBC NICE BEARINGS INC.,
by
--------------------------
Name:
Title: Authorized Officer
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
by
--------------------------
Name:
Title: Authorized Officer
<PAGE>
18
by
--------------------------
Name:
Title: Authorized Officer
<PAGE>
SCHEDULE I
GUARANTORS
Name Address
Industrial Tectonics Bearings Corporation c/o Roller Bearing Company of
America, Inc.
RBC Linear Products Inc. c/o Roller Bearing Company of
America, Inc.
RBC Nice Bearings Inc. c/o Roller Bearing Company of
America, Inc.
<PAGE>
SCHEDULE II
COPYRIGHTS
<PAGE>
SCHEDULE III
LICENSES
<PAGE>
SCHEDULE IV
PATENTS
<PAGE>
SCHEDULE V
TRADEMARKS
<PAGE>
Annex 1 to the
Security Agreement
[Form Of]
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of June 23, 1997
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the financial institutions party thereto (the
"Lenders"), Credit Suisse First Boston, as administrative agent for the Lenders
(in such capacity, the "Administrative Agent"), collateral agent for the Lenders
(in such capacity, the "Collateral Agent") and as issuing bank (in such
capacity, the "Issuing Bank") and (b) the Guarantee Agreement dated as of June
23, 1997 (as amended, supplemented or otherwise modified from time to time, the
"Guarantee Agreement"), among the Guarantors and the Collateral Agent.
The undersigned, a Financial Officer and a Legal Officer, respectively, of
the Borrower, hereby certify to the Collateral Agent and each other Secured
Party as follows:
1. Names. (a) The exact corporate name of each Grantor, as such name
appears in its respective certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name each Grantor has had in
the past five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, no Grantor has changed its
identity or corporate structure in any way within the past five years. Changes
in identity or corporate structure would include mergers, consolidations and
acquisitions, as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include in Schedule 1
the information required by Sections 1 and 2 of this certificate as to each
acquiree or constituent party to a merger or consolidation.
(d) The following is a list of all other names (including trade names or
similar appellations) used by each Grantor or any of its divisions or other
business units in connection with the conduct of its business or the ownership
of its properties at any time during the past five years:
(e) Set forth below is the Federal Taxpayer Identification Number of each
Grantor:
<PAGE>
2
2. Current Locations. (a) The chief executive office of each Grantor is
located at the address set forth opposite its name below:
Grantor Mailing Address County State
(b) Set forth below opposite the name of each Grantor are all locations
where such Grantor maintains any books or records relating to any Accounts
Receivable (with each location at which chattel paper, if any, is kept being
indicated by an "*"):
Grantor Mailing Address County State
(c) Set forth below opposite the name of each Grantor are all the places
of business of such Grantor not identified in paragraph (a) or (b) above:
Grantor Mailing Address County State
(d) Set forth below opposite the name of each Grantor are all the
locations where such Grantor maintains any Collateral not identified above:
Grantor Mailing Address County State
(e) Set forth below opposite the name of each Grantor are the names and
addresses of all persons other than such Grantor that have possession of any of
the Collateral of such Grantor:
Grantor Mailing Address County State
3. Unusual Transactions. All Accounts Receivable have been originated by
the Grantors and all Inventory has been acquired by the Grantors in the ordinary
course of business.
4. File Search Reports. Attached hereto as Schedule 4(A) are true copies
of file search reports from the Uniform Commercial Code filing offices where
filings described in Section 3.19 of the Credit Agreement are to be made.
Attached hereto as Schedule 4(B) is a true copy of each financing statement or
other filing identified in such file search reports.
5. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in the
Uniform Commercial Code filing office in each jurisdiction where a Grantor has
Collateral as identified in Section 2 hereof.
6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings described in Section 5 above, each
filing and the filing office in which such filing is to be made.
<PAGE>
3
7. Filing Fees. All filing fees and taxes payable in connection with the
filings described in Section 5 above have been paid.
8. Stock Ownership. Attached hereto as Schedule 8 is a true and correct
list of all the duly authorized, issued and outstanding stock of each Subsidiary
and the record and beneficial owners of such stock. Also set forth on Schedule 8
is each equity Investment of the Borrower and each Subsidiary that represents
50% or less of the equity of the entity in which such investment was made.
9. Notes. Attached hereto as Schedule 9 is a true and correct list of all
notes held by the Borrower and each Subsidiary and all intercompany notes
between the Borrower and each Subsidiary of the Borrower and between each
Subsidiary of the Borrower and each other such Subsidiary.
10. Advances. Attached hereto as Schedule 10 is (a) a true and correct
list of all advances made by the Borrower to any Subsidiary of the Borrower or
made by any Subsidiary of the Borrower to the Borrower or any other Subsidiary
of the Borrower, which advances will be on and after the date hereof evidenced
by one or more intercompany notes pledged to the Collateral Agent under the
Pledge Agreement, and (b) a true and correct list of all unpaid intercompany
transfers of goods sold and delivered by or to the Borrower or any Subsidiary of
the Borrower.
11. Mortgage Filings. Attached hereto as Schedule 11 is a schedule setting
forth, with respect to each Mortgaged Property, (i) the exact corporate name of
the corporation that owns such property as such name appears in its certificate
of incorporation, (ii) if different from the name identified pursuant to clause
(i), the exact name of the current record owner of such property reflected in
the records of the filing office for such property identified pursuant to the
following clause and (iii) the filing office in which a Mortgage with respect to
such property must be filed or recorded in order for the Collateral Agent to
obtain a perfected security interest therein.
IN WITNESS WHEREOF, the undersigned have duly executed this certificate on
this 23rd day of June, 1997.
ROLLER BEARING COMPANY OF AMERICA,
INC.,
by
-------------------------------
Name:
Title:[Financial Officer]
by
-------------------------------
Name:
Title: [Legal Officer]
<PAGE>
Annex 2 to the
Security Agreement
SUPPLEMENT NO. __ dated as of [ ], to the Security
Agreement dated as of June 23, 1997, among ROLLER BEARING
COMPANY OF AMERICA, INC., a Delaware corporation (the
"Borrower"), each subsidiary of the Borrower listed on
Schedule I thereto (each such subsidiary individually a
"Guarantor" and collectively, the "Guarantors"; the Guarantors
and the Borrower are referred to collectively herein as the
"Grantors") and CREDIT SUISSE FIRST BOSTON, a bank organized
under the law of Switzerland, acting through its New York
branch, as collateral agent (in such capacity, the "Collateral
Agent") for the Secured Parties (as defined herein).
A. Reference is made to (a) the Credit Agreement dated as of June 23, 1997
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders"), Credit Suisse First Boston, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), Collateral Agent and as
issuing bank (in such capacity, the "Issuing Bank") and (b) the Guarantee
Agreement dated as of June 23, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Guarantee Agreement"), among the Guarantors and
the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement and the
Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Section 7.15 of Security Agreement provides that additional Subsidiaries
of the Borrower may become Grantors under the Security Agreement by execution
and delivery of an instrument in the form of this Supplement. The undersigned
Subsidiary (the "New Grantor") is executing this Supplement in accordance with
the requirements of the Credit Agreement to become a Grantor under the Security
Agreement in order to induce the Lenders to make additional Loans and the
Issuing Bank to issue additional Letters of Credit and as consideration for
Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Grantor agree as follows:
SECTION 1. In accordance with Section 7.15 of the Security Agreement, the
New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of
the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment and
performance in full of the Obligations (as defined in the Security Agreement),
does hereby create and grant to the Collateral Agent, its successors and
assigns, for the benefit of the Secured Parties, their successors and assigns, a
security interest in and lien on all of the New Grantor's right, title and
interest in and to the Collateral (as defined in the Security Agreement) of the
New Grantor. Each reference to a "Grantor" in the Security Agreement shall be
deemed to include the New Grantor. The Security Agreement is hereby incorporated
herein by reference.
SECTION 2. The New Grantor represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
<PAGE>
2
SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth under
its signature hereto, is the true and correct location of the chief executive
office of the New Grantor.
SECTION 5. Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 7.01 of the Security Agreement. All
communications and notices hereunder to the New Grantor shall be given to it at
the address set forth under its signature below.
SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.
[Name Of New Grantor],
by
----------------------------------
Name:
Title:
Address:
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by
----------------------------------
Name:
Title:
by
----------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
to Supplement No.___ to the
Security Agreement
LOCATION OF COLLATERAL
Description Location
<PAGE>
EXHIBIT J-1
[Letterhead of]
McDermott, Will & Emery
June 23, 1997
Credit Suisse First Boston,
as Administrative Agent, Issuing Bank, Collateral Agent and Arranger
11 Madison Avenue
New York, NY 10010
The Lenders party to the Credit
Agreement referred to below (all of
the Addressees, collectively, the
"Creditors")
Ladies and Gentlemen:
We have acted as counsel to Roller Bearing Company of America, Inc., a
Delaware corporation (the "Borrower"), and each of the subsidiaries of the
Borrower listed on the attached Schedule A (the "Subsidiaries"), in connection
with the execution and delivery today of, and the consummation of the
transactions contemplated by, the Credit Agreement dated as of June 23, 1997
(the "Credit Agreement"), among the Borrower, the financial institutions party
thereto as lenders (the "Lenders") and Credit Suisse First Boston, as
administrative agent (in such capacity, the "Administrative Agent"), as issuing
bank (in such capacity, the "Issuing Bank") and as collateral agent (in such
capacity, the "Collateral Agent"). This opinion is delivered pursuant to Section
[ ] of the Credit Agreement. Capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents:
(a) the Credit Agreement;
(b) the Guarantee Agreement;
(c) the Security Agreement;
(d) the Pledge Agreement;
(e) the Indemnity, Subrogation and Contribution Agreement;
(f) the Mortgages;
(g) UCC-1 financing statements, copies of which are attached
hereto as Exhibit A (the "Financing Statements")
In addition, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of such records, agreements, instruments and
other documents, and have made such other investigations, as we have deemed
necessary for the purpose of this opinion.
<PAGE>
2
[References in this opinion to the "[ ] UCC" shall mean the Uniform
Commercial Code as in effect on the date hereof in the State of [ ]. [References
in this opinion to the "[ ] UCC", the "[ ] UCC", the "[ ] UCC", the "[ ] UCC"
and the "[ ] UCC", shall mean the Uniform Commercial Code as in effect on the
date hereof in the States of [ ], [ ], [ ], [ ] and [ ], respectively, and
solely as set forth in the CCH Secured Transactions Guide and without regard to
the case law decided thereunder.]
Based upon the foregoing, it is our opinion that:
1. The Borrower and each Subsidiary (a) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite corporate power and authority to own its
property and assets and to carry on its business as now conducted and as
proposed to be conducted, (c) is qualified to do business and is in good
standing in each jurisdiction where such qualification is required, except where
the failure so to qualify could not reasonably be expected to result in a
Material Adverse Effect, and (d) has the corporate power and authority to
execute, deliver and perform its obligations under each of the Loan Documents to
which it is a party and, in the case of the Borrower, to borrow under the Credit
Agreement.
2. The execution, delivery and performance of each of the Loan Documents
by the Borrower and each Subsidiary party thereto, the borrowings thereunder,
the issuances of the Letters of Credit and the creation of the security
interests contemplated thereby (a) have been duly authorized by all requisite
corporate and, if necessary, stockholder action of the Borrower and each
Subsidiary and (b) will not (i) violate (A) any provision of the certificate of
incorporation or by-laws of the Borrower or any Subsidiary, (B) any law,
statute, rule or regulation or any order of any Governmental Authority
applicable to the Borrower or any Subsidiary or their properties or (C) any
provision of any indenture or other material agreement or other material
instrument to which the Borrower or any Subsidiary is a party or by which any of
them or any of their property is or may be bound, (ii) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under, or give rise to any right to accelerate or to require the
prepayment, repurchase or redemption of any obligation under any such indenture,
agreement or other instrument or (iii) result in the creation or imposition of
any Lien upon or with respect to any property or assets now owned or hereafter
acquired by the Borrower or any Subsidiary (other than any Lien created under
the Loan Documents).
3. Each Loan Document has been duly executed and delivered by the Borrower
and each Subsidiary party thereto and constitutes the legal, valid and binding
obligation of the Borrower and each such Subsidiary, in each case enforceable
against the Borrower and each such Subsidiary in accordance with its terms.
4. No action, consent or approval of, registration or filing with or any
other action by any Governmental Authority is or will be required in connection
with the execution, delivery and performance of the Loan Documents by the Loan
Parties party thereto or the consummation of the transactions contemplated
thereby, other than (i) the filing of any UCC-1 financing statements and filings
with the United States Patent and Trademark Office and the United States
Copyright Office, (ii) the recordation of the Mortgages and (iii) such
authorizations and approvals as have already been obtained and are in full force
and effect.
5. There are not any actions, suits or proceedings at law or in equity or
by or before any Governmental Authority now pending or, to our knowledge,
threatened against or affecting the Borrower or any Subsidiary or any business,
property or rights of any such person (i) that involve any Loan Documents or the
transactions contemplated thereby or (ii) as to which there is a reasonable
possibility of an adverse determination and that, if adversely determined, could
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.
6. All shares of capital stock of each Subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable and, except as
set forth on Schedule 3.08 to the Credit Agreement, are owned by the Borrower,
directly or indirectly, free and clear of all Liens (other than Liens created
under the Loan Documents). No authorized but unissued or treasury shares of
capital stock of any Subsidiary are subject to any option, warrant, right to
call or commitment of any kind. Neither the Borrower nor any Subsidiary is
subject to any obligation
<PAGE>
3
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock or any securities convertible into or for shares of
its capital stock. Neither the Borrower nor any Subsidiary is a party to any
agreement restricting the transfer or voting of any shares of any capital stock
of any Subsidiary.
7. Neither the Borrower nor any of the Subsidiaries is an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940.
8. Neither the Borrower nor any of the Subsidiaries is a "holding company"
or a "subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935.
9. The making of the Loans to the Borrower and the application of the
proceeds thereof by the Borrower pursuant to the terms of the Credit Agreement
will not violate Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
10. The Pledge Agreement, together with possession by the Collateral Agent
of the stock certificates or notes evidencing the Pledged Securities (as defined
in the Pledge Agreement), creates in favor of the Collateral Agent for the
benefit of the Secured Parties a valid and perfected security interest in, lien
on or pledge of the Collateral (as defined in the Pledge Agreement), subject to
no equal or prior security interest of any creditor.
11. The Security Agreement creates in favor of the Collateral Agent for
the benefit of the Secured Parties a valid and perfected security interest in,
lien on or pledge of those items and types of Collateral (as defined in the
Security Agreement).
12. Upon the filing of the Security Agreement in the United States Patent
and Trademark Office and the United States Copyright Office, the Collateral
Agent for the benefit of the Secured Parties will have a valid and duly
perfected security interest in the Intellectual Property (as defined in the
Security Agreement).
13. The Financing Statements (a) are in proper form for filing under the
applicable laws of the State of [ ], (b) adequately identify the Collateral
described therein to provide sufficient notice to third parties of the security
interest referenced therein and (c) are required to be filed with the Office of
the Secretary of State of the State of [ ] and with the Recorder of [ ] [and ]
County [Counties]. Upon the filing of the [ ] Financing Statements, the
Collateral Agent for the benefit of the Secured Parties will have a valid and
duly perfected security interest in those items and types of Collateral (as
defined in the Security Agreement) in which a security interest may be perfected
under the [ ] UCC (the "Filing Collateral"). The filing of the Financing
Statements [with the recorders and] in the offices described above are the only
actions, recordings or filings necessary to publish notice and protect the
validity of and to establish of record the rights of the parties under the
Security Agreement with respect to the Collateral, except (i) that continuation
statements under the [ ] UCC are required to be filed within six months prior to
the expiration of five years from the date of filing of the Financing
Statements, and (ii) that a security interest in or pledge of money or
instruments, other than money or instruments constituting chattel paper, cannot
be perfected by filing financing statements, but must be perfected by taking
physical possession thereof.
14. Subject to appropriate continuation or perfection under the [ ] UCC as
set forth in the preceding paragraph, the priority of the security interest in,
lien on or pledge of the Collateral created by the Pledge Agreement and the
Security Agreement with respect to any extension of credit (each, a "Further
Advance") made or deemed to have been made by the Creditors after the date (the
"Perfection Date") on which the security interest in, lien on or pledge of the
Collateral shall have been perfected will be the same as the priority of the
security interest, lien on or pledge of the Collateral with respect to all
extensions of credit made or deemed to have been made by the Creditors on or
before the Perfection Date, and such priority will not be affected by the rights
in and to the Collateral of any third party whose interest in the Collateral
attached thereto after the Perfection Date but prior to the date of such Further
Advance.
<PAGE>
4
15. [The [ ] Financing Statements (a) are in proper form for filing under
the [ ] UCC, (b) adequately identify the Collateral described therein to provide
sufficient notice to third parties of the security interest referenced therein
and (c) are required to be filed with the Office of the Secretary of State of
the State of [ ] and with the Recorder of [and ] County
[Counties]. Upon the filing of the [ ] Financing Statements, the Collateral
Agent for the benefit of the Secured Parties will have a valid and duly
perfected security interest in those items and types of Collateral (as defined
in the Security Agreement) in which a security interest may be perfected under
the [ ] UCC.(1)]
We are admitted to practice in the State of New York. We express no
opinion as to matters under or involving the laws of any jurisdiction other than
the laws of the State of New York, [the General Corporation Law of the State of
Delaware], the Federal Laws of the United States and [, to the extent
specifically referred to herein, the [ ] UCC].
This opinion may be relied upon by each of you, by any successors and
assigns of the Administrative Agent, the Collateral Agent or the Issuing Bank,
and any participant, assignee or successor to the interests of the Lenders under
the Loan Documents.
Very truly yours,
- ----------
(1) Repeat for each state, if any, as to which counsel opines on the basis
of a review of the CCH Secured Transactions Guide.
<PAGE>
Schedule A
SUBSIDIARIES
<PAGE>
EXHIBIT J-2
[Letterhead of]
Local Counsel
June 23, 1997
Credit Suisse First Boston,
as Administrative Agent, Issuing Bank, Collateral Agent and Arranger
11 Madison Avenue
New York, NY 10010
The Lenders party to the Credit
Agreement referred to below (all of
the Addressees, collectively, the
"Creditors")
Ladies and Gentlemen:
We have acted as special counsel in the State of [ ] (the "State") to
Roller Bearing Company of America, Inc., a Delaware corporation (the
"Borrower"), and each of the subsidiaries of the Borrower listed on the attached
Schedule A (the "Subsidiaries"), in connection with the execution and delivery
today of, and the consummation of the transactions contemplated by, the Credit
Agreement dated as of June 23, 1997 (the "Credit Agreement"), among the
Borrower, the financial institutions party thereto as lenders (the "Lenders")
and Credit Suisse First Boston, as administrative agent (in such capacity, the
"Administrative Agent"), as issuing bank (in such capacity, the "Issuing Bank")
and as collateral agent (in such capacity, the "Collateral Agent"). This opinion
is delivered pursuant to Section [ ] of the Credit Agreement. Capitalized terms
used but not defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents (collectively, the "Documents"):
(a) the Credit Agreement;
(b) the Guarantee Agreement;
(c) the Security Agreement;
(d) the Pledge Agreement;
(e) the Indemnity, Subrogation and Contribution Agreement;
(f) the Mortgages;
(g) UCC-1 financing statements, copies of which are attached
hereto as Exhibit A (the "Financing Statements")
In addition, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of such records, agreements, instruments and
other documents, and have made such other investigations, as we have deemed
necessary for the purpose of this opinion.
<PAGE>
3
References in this opinion to the "UCC" shall mean the Uniform Commercial
Code as in effect on the date hereof in the State.
In rendering this opinion to you, we have assumed that:
(a) there has occurred due execution and delivery of the Documents;
and
(b) except as otherwise set forth in the applicable Security
Documents, the Borrower and each Guarantor, as applicable, owns the
Mortgaged Property (as defined in [the] [each] Mortgage) and the
Collateral (as defined in the Security Agreement and the Pledge
Agreement).
Subject to the foregoing assumptions, we are of the opinion that:
1. Neither the Collateral Agent or the other Creditors is required (a) to
be qualified to do business, file any designation for service of process or file
any reports or pay any taxes in the State, or (b) to comply with any statutory
or regulatory requirement applicable only to financial institutions chartered or
qualified or required to be chartered or qualified to do business in the State,
in each case by reason of the execution and delivery or filing or recording, as
applicable, of any of the Documents, or by reason of the participation in any of
the transactions under or contemplated by the Documents, including, without
limitation, the extension of any credit contemplated thereby, the making and
receipt of payments pursuant thereto and the exercise of any remedy thereunder.
If it were determined that such qualification and filing were required, the
validity of the Documents would not be affected thereby, but (a) if the
Collateral Agent were not qualified it would be precluded from enforcing its
rights as collateral agent on behalf of the Creditors in the courts of the State
until such time as it is admitted to transact business in the State or (b)
assuming the Creditors would institute remedies without the Collateral Agent,
they would be precluded from enforcing their rights in the courts of the State
until such time as they were admitted to transact business in the State.
However, the lack of qualification would not result in any waiver of rights or
remedies pending such qualification.
2. The execution, delivery, filing or recording, as applicable, and
performance by the Borrower and each Guarantor of each of the Documents to which
each of them is a party (i) will not violate any existing law, governmental rule
or regulation of the State and (ii) do not require any license, permit,
authorization, consent or other approval of, any exemption by, or any
registration, recording or filing with any court, administrative agency or other
Governmental Authority of the State.
3. Assuming that the Security Agreement and the Pledge Agreement were
governed by the law of the State for the purpose of rendering the opinion set
forth in this paragraph, each of the Security Agreement and the Pledge Agreement
is in proper form under the applicable laws of the State to (i) be enforceable
against the grantors or pledgors named therein in accordance with its terms and
(ii) create and constitute a valid security interest in, lien on or pledge of
the Collateral.
4. The Mortgage[s] [is] [are] in proper form under applicable laws of the
State (a)(i) to be accepted for recording by the Recorder of [and
] County [Counties] and (ii) to be enforceable against the Borrower
and each Guarantor, as applicable, in accordance with [its] [their] terms, and
(b)(i) to create and constitute valid, legal, binding and enforceable mortgage
lien[s] on the real property described therein (the "Real Property"), (ii) to
create and constitute valid, legal, binding and enforceable perfected security
interests in such of the Mortgaged Property (the "UCC Property") as is subject
to the provisions of Article 9 of the UCC, and (iii) to create and constitute
valid, legal, binding and enforceable perfected common law liens on or pledges
of such of the Mortgaged Property as is not UCC Property or Real Property (such
property, together with the UCC Property, the "Personal Property").
5. The Financing Statements relating to the Mortgage[s] (a) are in proper
form under the applicable laws of the State for filing, (b) adequately identify
the collateral described therein to provide sufficient notice to third parties
of the security interest referenced therein and (c) are required to be filed
with the Office of the Secretary of
<PAGE>
4
State of the State and with the Recorder of [and ] County
[Counties]. The Financing Statements relating to the Security Agreement (a) are
in proper form under the applicable laws of the State for filing, (b) adequately
identify the collateral described therein to provide sufficient notice to third
parties of the security interest referenced therein and (c) are required to be
filed with the Office of the Secretary of State of the State and with the
Recorder of [and ] County [Counties]. Upon the filing of the
Financing Statements, the Collateral Agent for the benefit of the Creditors will
have a valid and duly perfected security interest in and lien on the Personal
Property and Collateral (including after-acquired property) described in the
Mortgage[s] and the Security Agreement, respectively.
6. The recording of the Mortgage[s] and the filing of the Financing
Statements with the recorders and in the offices described above are the only
actions, recordings or filings necessary to publish notice and protect the
validity of and to establish of record the rights of the parties under the
Mortgage[s] and Security Agreement, except (i) that continuation statements
under the UCC are required to be filed within six months prior to the expiration
of five years from the date of filing of the Financing Statements, and (ii) that
a security interest in or pledge of money or instruments, other than money or
instruments constituting chattel paper, cannot be perfected by filing Financing
Statements or recording a Mortgage, but must be perfected by taking physical
possession thereof.
7. The Financing Statements (a) are in proper form for filing under the
applicable laws of the State of [ ], (b) adequately identify the Collateral
described therein to provide sufficient notice to third parties of the security
interest referenced therein and (c) are required to be filed with the Office of
the Secretary of State of the State of [ ] and with the Recorder of
[ ] [and ] County [Counties]. Upon the filing of the [ ]
Financing Statements, the Collateral Agent for the benefit of the Secured
Parties will have a valid and duly perfected security interest in those items
and types of Collateral (as defined in the Security Agreement) in which a
security interest may be perfected under the [ ] UCC (the "Filing
Collateral"). The filing of the Financing Statements [with the recorders and] in
the offices described above are the only actions, recordings or filings
necessary to publish notice and protect the validity of and to establish of
record the rights of the parties under the Security Agreement with respect to
the Collateral, except (i) that continuation statements under the [ ]
UCC are required to be filed within six months prior to the expiration of five
years from the date of filing of the Financing Statements, and (ii) that a
security interest in or pledge of money or instruments, other than money or
instruments constituting chattel paper, cannot be perfected by filing financing
statements, but must be perfected by taking physical possession thereof.
8. Subject to appropriate continuation or perfection under the UCC as set
forth the preceding paragraph, the priority of the security interest in, lien on
or pledge of the Collateral created by the Security Agreement and the Pledge
Agreement with respect to any extension of credit (each, a "Further Advance")
made or deemed to have been made by the Creditors after the date (the
"Perfection Date") on which the security interest in, lien on or pledge of the
Collateral shall have been perfected will be the same as the priority of the
security interest, lien on or pledge of the Collateral with respect to all
extensions of credit made or deemed to have been made by the Creditors on or
before the Perfection Date, and such priority will not be affected by the rights
in and to the Collateral of any third party whose interest in the Collateral
attached thereto after the Perfection Date but prior to the date of such Further
Advance.
9. The Collateral Agent has the power without naming all the Creditors in
any applicable legal proceeding to exercise remedies under the Security
Documents for the realization of any of the Mortgaged Property or the Collateral
in its own name, as collateral agent.
10. No taxes or other charges, including, without limitation, intangible
or documentary stamp taxes, mortgage or recording taxes, transfer taxes or
similar charges, are payable to the State or to any jurisdiction therein on
account of the execution or delivery or recording or filing of the Mortgage[s]
or any of the other Documents or the creation of the indebtedness evidenced or
secured by any of the Documents, as applicable, except for nominal filing or
recording fees.
<PAGE>
5
[In the event that an intangible tax would be required to be paid in
connection with any of the transactions described in the preceding paragraph,
please describe with specificity in the context of this transaction, and the
collateral to be secured in your State, (a) the nature of the tax, (b) how and
when it is paid, (c) how it is calculated, (d) what forms or other documentation
would be required, and (e) any other information that would be necessary or
useful in order for the Borrower or any Guarantor to comply with the payment of
such tax. In the event that an intangible tax would not be required to be paid,
please specify that the intangible tax is inapplicable and the basis for such
conclusion.]
11. The transfer of all or any portion of the Mortgaged Property in
connection with the exercise of any remedy under the Mortgage[s], including,
without limitation, by way of judicial foreclosure, will not restrict, affect or
impair the liability of the Borrower and the other Loan Parties with respect to
the indebtedness secured thereby or the mortgagee's rights or remedies relating
thereto, including the foreclosure or enforcement of any other security interest
or liens securing such indebtedness, and the laws of the State do not require a
lienholder to elect to pursue its remedies either against mortgaged real
property or personal property where such lienholder holds security interests and
liens on both real and personal property of a debtor.
12. A State court or a federal court applying the choice of laws
principles prevailing under the laws of the State to which the question is
presented will give effect to the provisions in the Documents selecting the laws
of the State of New York as the governing law thereof (except as therein
provided) and will apply such laws, rather than the laws of the State, to the
construction and application thereof.
13. Assuming that the Documents were governed by the law of the State for
the purpose of rendering the opinion set forth in this paragraph, (a) none of
the provisions of the Documents will violate any law, statute or regulation of
the State relating to usury and (b) the use of counterpart copies of any of the
Documents does not affect the enforceability of any of the Documents.
We are admitted to practice in the State. We express no opinion as to
matters under or involving the laws of any jurisdiction other than laws of the
United States and the State and its political subdivisions.
This opinion may be relied upon by each of you, by any successors and
assigns of the Administrative Agent, the Collateral Agent or the Issuing Bank,
and any participant, assignee or successor to the interests of the Lenders under
the Loan Documents.
Very truly yours,
<PAGE>
Schedule A
SUBSIDIARIES
EXECUTION COPY
GUARANTEE AGREEMENT dated as of June 23, 1997, among
each of the subsidiaries listed on Schedule I hereto (each
such subsidiary individually, a "Guarantor" and collectively,
the "Guarantors") of ROLLER BEARING COMPANY OF AMERICA, INC.,
a Delaware corporation (the "Borrower"), and CREDIT SUISSE
FIRST BOSTON, a bank organized under the laws of Switzerland,
acting through its New York branch, as collateral agent (in
such capacity, the "Collateral Agent") for the Secured Parties
(as defined in the Credit Agreement referred to below).
Reference is made to the Credit Agreement dated as of June 23, 1997 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders"), Credit Suisse First Boston, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), Collateral Agent and
issuing bank (in such capacity, the "Issuing Bank"). Capitalized terms used
herein and not defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Guarantors is a wholly owned Subsidiary of the
Borrower and acknowledges that it will derive substantial benefit from the
making of the Loans by the Lenders, and the issuance of the Letters of Credit by
the Issuing Bank. The obligations of the Lenders to make Loans and of the
Issuing Bank to issue Letters of Credit are conditioned on, among other things,
the execution and delivery by the Guarantors of a Guarantee Agreement in the
form hereof. As consideration therefor and in order to induce the Lenders to
make Loans and the Issuing Bank to issue Letters of Credit, the Guarantors are
willing to execute this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Guarantor unconditionally guarantees, jointly
with the other Guarantors and severally, as a primary obligor and not merely as
a surety, (a) the due and punctual payment of (i) the principal of and premium,
if any, and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each payment required to be made by the Borrower under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
the Loan Parties to the Secured Parties under the Credit Agreement and the other
Loan Documents, (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Loan Parties under or pursuant to
the Credit Agreement and the other Loan Documents and (c) unless otherwise
agreed upon in writing by the applicable Lender party thereto, all obligations
of the Borrower, monetary or otherwise, under each Interest Rate Protection
Agreement entered into with a counterparty that was a Lender at the time such
Interest Rate Protection Agreement was entered into (all the monetary and other
obligations referred to in the preceding clauses (a) through (c) being
collectively called the "Obligations"). Each Guarantor further agrees that the
Obligations may be extended or renewed, in whole or in part, without notice to
or further assent from it, and that it will remain bound upon its guarantee
notwithstanding any extension or renewal of any Obligation.
Anything contained in this Agreement to the contrary notwithstanding, the
obligations of each Guarantor hereunder shall be limited to a maximum aggregate
amount equal to the greatest amount that would not render
<PAGE>
2
such Guarantor's obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States Code
or any provisions of applicable state law (collectively, the "Fraudulent
Transfer Laws"), in each case after giving effect to all other liabilities of
such Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (a) in respect of intercompany indebtedness to the Borrower or
Affiliates of the Borrower to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by such Guarantor hereunder and
(b) under any Guarantee of senior unsecured indebtedness or Indebtedness
subordinated in right of payment to the Obligations which Guarantee contains a
limitation as to maximum amount similar to that set forth in this paragraph,
pursuant to which the liability of such Guarantor hereunder is included in the
liabilities taken into account in determining such maximum amount) and after
giving effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
contribution, reimbursement, indemnity or similar rights of such Guarantor
pursuant to (i) applicable law or (ii) any agreement providing for an equitable
allocation among such Guarantor and other Affiliates of the Borrower of
obligations arising under Guarantees by such parties (including the Indemnity,
Subrogation and Contribution Agreement).
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, each Guarantor waives presentment to, demand of payment from and
protest to the Borrower of any of the Obligations, and also waives notice of
acceptance of its guarantee and notice of protest for nonpayment. To the fullest
extent permitted by applicable law, the obligations of each Guarantor hereunder
shall not be affected by (a) the failure of the Collateral Agent or any other
Secured Party to assert any claim or demand or to enforce or exercise any right
or remedy against the Borrower or any other Guarantor under the provisions of
the Credit Agreement, any other Loan Document or otherwise, (b) any rescission,
waiver, amendment or modification of, or any release from any of the terms or
provisions of this Agreement, any other Loan Document, any Guarantee or any
other agreement, including with respect to any other Guarantor under this
Agreement or (c) the failure to perfect any security interest in, or the release
of, any of the security held by or on behalf of the Collateral Agent or any
other Secured Party.
SECTION 3. Security. Each of the Guarantors authorizes the Collateral
Agent and each of the other Secured Parties, to (a) take and hold, pursuant to
the terms of the Security Documents, security for the payment of this Guarantee
and the Obligations and exchange, enforce, waive and release any such security,
(b) apply such security and direct the order or manner of sale thereof as
provided in the Security Documents and (c) release or substitute any one or more
endorsees, other guarantors of other obligors.
SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of the Borrower or any
other person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment in
full in cash or cash collateralization as provided in Section 2.22(j) of the
Credit Agreement of the Obligations), including any claim of waiver, release,
surrender, alteration or compromise of any of the Obligations, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor hereunder shall not be discharged or impaired or
otherwise affected by the failure of the Collateral Agent or any other Secured
Party to assert any claim or demand or to enforce any remedy under the Credit
Agreement, any other Loan Document or any other agreement, by any waiver or
modification of any provision of any thereof, by any default, failure or delay,
wilful or otherwise, in the performance of the Obligations, or by any other act
or omission that may or might in any
<PAGE>
3
manner or to any extent vary the risk of any Guarantor or that would otherwise
operate as a discharge of each Guarantor as a matter of law or equity (other
than the indefeasible payment in full in cash of all the Obligations).
SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted by
applicable law, each of the Guarantors waives any defense based on or arising
out of any defense of the Borrower or the unenforceability of the Obligations or
any part thereof from any cause, or the cessation from any cause of the
liability of the Borrower, other than the final and indefeasible payment in full
in cash of the Obligations. The Collateral Agent and the other Secured Parties
may, at their election, foreclose on any security held by one or more of them by
one or more judicial or nonjudicial sales, accept an assignment of any such
security in lieu of foreclosure, compromise or adjust any part of the
Obligations, make any other accommodation with the Borrower or any other
guarantor or exercise any other right or remedy available to them against the
Borrower or any other guarantor, without affecting or impairing in any way the
liability of any Guarantor hereunder except to the extent the Obligations have
been fully, finally and indefeasibly paid in cash or, in the case of Letters of
Credit, cash collateral has been provided pursuant to Section 2.22(j) of the
Credit Agreement. Pursuant to applicable law, each of the Guarantors waives any
defense arising out of any such election even though such election operates,
pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against
the Borrower or any other Guarantor or guarantor, as the case may be, or any
security.
SECTION 7. Agreement to Pay; Subordination. In furtherance of the
foregoing and not in limitation of any other right that the Collateral Agent or
any other Secured Party has at law or in equity against any Guarantor by virtue
hereof, upon the failure of the Borrower or any other Loan Party to pay any
Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, each Guarantor hereby
promises to and will forthwith pay, or cause to be paid, to the Collateral Agent
or such other Secured Party as designated thereby in cash the amount of such
unpaid Obligations. Upon payment by any Guarantor of any sums to the Collateral
Agent or any Secured Party as provided above, all rights of such Guarantor
against the Borrower arising as a result thereof by way of right of subrogation,
contribution, reimbursement, indemnity or otherwise shall in all respects be
subordinate and junior in right of payment to the prior indefeasible payment in
full in cash of all the Obligations. In addition, any indebtedness of the
Borrower now or hereafter held by any Guarantor is hereby subordinated in right
of payment to the prior payment in full of the Obligations. If any amount shall
erroneously be paid to any Guarantor on account of (i) such subrogation,
contribution, reimbursement, indemnity or similar right or (ii) any such
indebtedness of the Borrower, such amount shall be held in trust for the benefit
of the Secured Parties and shall forthwith be paid to the Collateral Agent to be
credited against the payment of the Obligations, whether matured or unmatured,
in accordance with the terms of the Loan Documents.
SECTION 8. Information. Each of the Guarantors assumes all responsibility
for being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks that such
Guarantor assumes and incurs hereunder, and agrees that none of the Collateral
Agent or the other Secured Parties will have any duty to advise any of the
Guarantors of information known to it or any of them regarding such
circumstances or risks.
SECTION 9. Representations and Warranties. Each of the Guarantors
represents and warrants as to itself that all representations and warranties
relating to it contained in the Credit Agreement are true and correct.
SECTION 10. Termination. The Guarantees made hereunder (a) shall terminate
when all the monetary Obligations have been indefeasibly paid in full, the
Lenders have no further commitment to lend under the Credit Agreement, the L/C
Exposure has been reduced to zero or, in the case of the outstanding Letters of
Credit, cash collateral has been provided therefor pursuant to Section 2.22(j)
of the Credit Agreement, and the Issuing Bank has no further obligation to issue
Letters of Credit under the Credit Agreement and (b) shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any Obligation is
<PAGE>
4
rescinded or must otherwise be restored by any Secured Party or any Guarantor
upon the bankruptcy or reorganization of the Borrower, any Guarantor or
otherwise.
SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Guarantors that are contained in
this Agreement shall bind and inure to the benefit of each party hereto and
their respective successors and assigns. This Agreement shall become effective
as to any Guarantor when a counterpart hereof executed on behalf of such
Guarantor shall have been delivered to the Collateral Agent, and a counterpart
hereof shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Guarantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Guarantor, the Collateral Agent and the other Secured Parties, and their
respective successors and assigns, except that no Guarantor shall have the right
to assign its rights or obligations hereunder or any interest herein (and any
such attempted assignment shall be void). If all of the capital stock of a
Guarantor is sold, transferred or otherwise disposed of or such Guarantor is no
longer a Subsidiary pursuant to a transaction permitted by Section 6.05 of the
Credit Agreement, such Guarantor shall be released from its obligations under
this Agreement without further action. This Agreement shall be construed as a
separate agreement with respect to each Guarantor and may be amended, modified,
supplemented, waived or released with respect to any Guarantor without the
approval of any other Guarantor and without affecting the obligations of any
other Guarantor hereunder.
SECTION 12. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and of
the other Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by any
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantors with respect to which such waiver, amendment or modification relates
and the Collateral Agent, with the prior written consent of the Required Lenders
(except as otherwise provided in the Credit Agreement).
SECTION 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to each Guarantor shall be given to it in
care of the Borrower.
SECTION 15. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by the Guarantors herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans and the issuance of the
Letters of Credit by the Issuing Bank regardless of any investigation made by
the Secured Parties or on their behalf, and shall continue in full force and
effect, until this Agreement terminates pursuant to the terms of Section 10.
<PAGE>
5
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 16. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 11. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 17. Rules of Interpretation. The rules of interpretation specified
in Section 1.02 of the Credit Agreement shall be applicable to this Agreement.
SECTION 18. Jurisdiction; Consent to Service of Process. (a) Each
Guarantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent or any other Secured Party may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents
against any Guarantor or its properties in the courts of any jurisdiction.
(b) Each Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 14. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 19. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.
<PAGE>
6
SECTION 20. Additional Guarantors. Pursuant to Section 5.11 of the Credit
Agreement, each Subsidiary of the Borrower that was not in existence on the date
of the Credit Agreement is required to enter into this Agreement as a Guarantor
upon becoming a Subsidiary. Upon execution and delivery after the date hereof by
the Collateral Agent and such a Subsidiary of an instrument in the form of Annex
1, such Subsidiary shall become a Guarantor hereunder with the same force and
effect as if originally named as a Guarantor herein. The execution and delivery
of any instrument adding an additional Guarantor as a party to this Agreement
shall not require the consent of any other Guarantor hereunder. The rights and
obligations of each Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor as a party to this Agreement.
SECTION 21. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Secured Party is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other Indebtedness at any time owing by such Secured Party to
or for the credit or the account of any Guarantor against any or all the
obligations of such Guarantor now or hereafter existing under this Agreement and
the other Loan Documents held by such Secured Party, irrespective of whether or
not such Secured Party shall have made any demand under this Agreement or any
other Loan Document and although such obligations may be unmatured. The rights
of each Secured Party under this Section 21 are in addition to other rights and
remedies (including other rights of setoff) which such Secured Party may have.
Any Secured Party that sets off any deposits pursuant to this Section shall give
the Borrower notice of such setoff at the time thereof or promptly thereafter.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
INDUSTRIAL TECTONICS BEARINGS
CORPORATION,
by
--------------------------------
Name:
Title: Authorized Officer
RBC LINEAR PRODUCTS INC.,
by
--------------------------------
Name:
Title: Authorized Officer
RBC NICE BEARINGS INC.,
by
--------------------------------
Name:
Title: Authorized Officer
<PAGE>
7
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
by
--------------------------------
Name:
Title:
by
--------------------------------
Name:
Title:
<PAGE>
8
Schedule I to the
Guarantee Agreement
Guarantor Address
Industrial Tectonics Bearings Corporation c/o Roller Bearing Company
of America, Inc.
RBC Linear Products Inc. c/o Roller Bearing Company
of America, Inc.
RBC Nice Bearings Inc. c/o Roller Bearing Company
of America, Inc.
<PAGE>
Annex 1 to the
Guarantee Agreement
SUPPLEMENT NO. [ ] dated as of [ ], to the
Guarantee Agreement dated as of June 23, 1997, among each of
the subsidiaries listed on Schedule I thereto (each such
subsidiary individually, a "Guarantor" and collectively, the
"Guarantors") of ROLLER BEARING COMPANY OF AMERICA, INC., a
Delaware corporation (the "Borrower"), and CREDIT SUISSE FIRST
BOSTON, a bank organized under the laws of Switzerland, acting
through its New York branch, as collateral agent (in such
capacity, the "Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
A. Reference is made to the Credit Agreement dated as of June 23, 1997 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders"), Credit Suisse First Boston, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), Collateral Agent and
issuing bank (in such capacity, the "Issuing Bank").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement and the
Credit Agreement.
C. The Guarantors have entered into the Guarantee Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit, in each case to or for the account of the Borrower. Pursuant to Section
5.11 of the Credit Agreement, each Subsidiary of the Borrower that was not in
existence or not a Subsidiary on the date of the Credit Agreement is required to
enter into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary.
Section 20 of the Guarantee Agreement provides that additional Subsidiaries of
the Borrower may become Guarantors under the Guarantee Agreement by execution
and delivery of an instrument in the form of this Supplement. The undersigned
Subsidiary of the Borrower (the "New Guarantor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a Guarantor
under the Guarantee Agreement in order to induce the Lenders to make additional
Loans and the Issuing Bank to issue additional Letters of Credit and as
consideration for Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 20 of the Guarantee Agreement, the
New Guarantor by its signature below becomes a Guarantor under the Guarantee
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) agrees to all the terms and
provisions of the Guarantee Agreement applicable to it as a Guarantor thereunder
and (b) represents and warrants that the representations and warranties made by
it as a Guarantor thereunder are true and correct on and as of the date hereof.
Each reference to a "Guarantor" in the Guarantee Agreement shall be deemed to
include the New Guarantor. The Guarantee Agreement is hereby incorporated herein
by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Guarantor and the Collateral
Agent. Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually executed
counterpart of this Supplement.
<PAGE>
2
SECTION 4. Except as expressly supplemented hereby, the Guarantee
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guarantee Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof in a particular jurisdiction shall not in and of itself affect
the validity of such provision in any other jurisdiction). The parties hereto
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 14 of the Guarantee Agreement. All
communications and notices hereunder to the New Guarantor shall be given to it
at the address set forth under its signature below, with a copy to the Borrower.
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, disbursements and other charges of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Guarantee Agreement as of the day and year first
above written.
[Name of New Guarantor],
by
Name:
Title:
Address:
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
by
Name:
Title:
by
Name:
Title:
CONFIDENTIAL
Execution Copy
ASSET PURCHASE AGREEMENT
BY AND AMONG
BFM AEROSPACE CORPORATION,
GROUND SUPPORT, INC.,
RBC TRANSPORT DYNAMICS CORPORATION
AND
ROLLER BEARING HOLDING COMPANY, INC.
Dated as of October 26, 1992
<PAGE>
TABLE OF CONTENTS
Section Page
1. The Acquisition .................................................... 1
1.1. Purchase and Sale .......................................... 1
1.2. Purchase Price ............................................. 3
1.3. The Closing ................................................ 3
1.4. Deliveries by GSI at the Closing ........................... 3
1.5. Deliveries by Buyer at the Closing ......................... 4
2. Representations and Warranties of GSI .............................. 5
2.1. Organization of GSI; Authorization ......................... 5
2.2. No Conflict ................................................ 5
2.3. Government Consents and Approvals .......................... 6
2.4. Financial Statements ....................................... 6
2.5. Title to Properties ........................................ 6
2.6. No Undisclosed Liabilities ................................. 7
2.7. Litigation ................................................. 7
2.8. Taxes ..................................................... 7
2.9. Absence of Certain Changes ................................. 8
2.10. Patents, Trademarks, Etc ................................... 8
2.11. Leases ..................................................... 8
2.12. Contracts and Commitments .................................. 8
2.13. Status of Agreements ....................................... 9
2.14. Pension and Employee Benefit Plans ......................... 9
2.15. Compliance with Law ........................................ 10
2.16. Labor Relations; Employees ................................. 10
2.17. Permits and Licenses ....................................... 10
2.18. Government Contracts ....................................... 10
2.19. Environmental Matters ...................................... 12
3. Representations and Warranties of Buyer ............................ 12
3.1. Organization of Buyer; Authorization ....................... 12
3.2. No Conflict as to Buyer .................................... 13
3.3. Investigation .............................................. 13
3.4. Government Consents and Approvals .......................... 13
4. Covenants by Buyer and GSI ......................................... 13
4.1. Employees .................................................. 13
4.2. Business Records and Files ................................. 15
4.3. Tax Worksheets ............................................. 15
4.4. Sales Taxes Arising from Sale of Assets .................... 16
4.5. Sales Tax Clearance Certificate ............................ 16
4.6. Mail and Other Communications .............................. 16
4.7. Governmental Contract Novations ............................ 16
5. Survival of Representations and Warranties;
Indemnification .................................................... 16
5.1. Survival ..................................................... 16
5.2. Time Limitations ............................................. 16
5.3. Indemnification by BFM and GSI. .............................. 17
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Section Page
5.4. Indemnification by RBC and Buyer ............................. 17
5.5. Limitations as to Amount ..................................... 18
5.6. Brokers ...................................................... 18
5.7. Bulk Sales Law ............................................... 18
5.8. Procedure for Indemnification ................................ 19
6. Definitions ........................................................ 19
7. Notices ............................................................ 22
8. Jurisdiction; Service of Process ................................... 23
8.1. Jurisdiction ................................................. 23
8.2. Service of Process ........................................... 23
9. Miscellaneous ...................................................... 23
9.1. Expenses ..................................................... 23
9.2. Captions ..................................................... 23
9.3. No Waiver .................................................... 23
9.4. Exclusive Agreement; Amendment ............................... 23
9.5. Counterparts ................................................. 24
9.6. Governing Law ................................................ 24
9.7. Representation By Counsel; Interpretation .................... 24
9.8. Damages ...................................................... 24
9.9. Further Assurances; Knowledge ................................ 24
9.10. Permitted Assignment ......................................... 25
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INDEX OF EXHIBITS
Exhibit 1.4(a) - Bill of Sale
Exhibit 1.4(b) - Assumption of Lease
Exhibit 1.4(c) - Opinion of O'Melveny & Myers
Exhibit 1.5(b) - Assumption Agreement
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INDEX OF SCHEDULES
Schedule 1.1(a)(iii) - Inventory
Schedule 1.1(a)(iv) - Machinery, Furniture and
Leasehold Improvements
Schedule 1.1(a)(ix) - Contracts
Schedule 1.1(a)(x) - Patent and Trademark Rights
Schedule 1.1(b) - Assumed Liabilities
Schedule 2.2 - No Conflict
Schedule 2.3 - Government Consents and
Approvals (GSI)
Schedule 2.5 - Encumbrances
Schedule 2.8 - Taxes
Schedule 2.10 - Disclosure Regarding Patents
and Trademark Rights
Schedule 2.11 - Leases
Schedule 2.14 - Employee Plans
Schedule 2.16 - Labor Relations; Employees
Schedule 2.17 - Permits and Licenses
Schedule 3.4 - Government Consents and
Approvals (Buyer)
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of October 26, 1992, by and among BFM AEROSPACE CORPORATION, a Delaware
corporation ("BFM"), GROUND SUPPORT, INC., a California corporation ("GSI"), RBC
TRANSPORT DYNAMICS CORPORATION, a Delaware corporation ("Buyer"), and ROLLER
BEARING HOLDING COMPANY, INC., a Delaware corporation ("RBC").
R E C I T A L S:
A. GSI manufactures and sells pre-conditioned air systems for ground
support of aircraft. The business of GSI is hereinafter referred to as the
"Business."
B. GSI desires to sell to Buyer, and Buyer desires to purchase from
GSI, substantially all of the assets of GSI, upon the terms and subject to the
conditions set forth herein (all capitalized terms used herein without
definition shall have the meanings assigned to them in Section 6 hereof).
C. BFM is the owner of all of the issued and outstanding capital
stock of GSI.
D. RBC is the owner of all of the issued and outstanding capital
stock of Roller Bearing Company of America, Inc., a Delaware corporation
("Roller Bearing"). Roller Bearing is the owner of all of the issued and
outstanding capital stock of Buyer.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained below, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. The Acquisition.
1.1. Purchase and Sale; Assumption of Liabilities.
(a) Subject to the terms and conditions contained in this Agreement,
on the date hereof, GSI shall sell, convey, assign, transfer and deliver to
Buyer, and Buyer shall purchase, acquire and accept from GSI, all of the assets,
properties, rights, privileges, claims and contracts of every kind and nature
owned by GSI and used by GSI in the operation of the Business as of the date
hereof (the "Assets"), free and clear of all Encumbrances other than Permitted
Encumbrances, and including, without limitation, the assets described below:
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(i) Cash. All of the cash on hand or in bank or in other
accounts of GSI.
(ii) Accounts Receivable. All trade accounts receivable and
other receivables.
(iii) Inventory. All of the inventories of raw materials,
work-in-process, finished products, scraps and rejects, spare parts
and supplies, including, without limitation, the items set forth in
Schedule 1.1(a) (iii) attached hereto, except for the items sold
after the date of such schedule in the ordinary course of business
of GSI.
(iv) Machinery and Equipment. All machinery, apparatus,
commercial tooling, equipment and trade fixtures, including, without
limitation, the items set forth in Schedule 1.1(a) (iv) attached
hereto.
(v) Office Furniture and Fixtures. All office furniture and
fixtures, including, without limitation, the items set forth in
Schedule 1.1(a) (iv) attached hereto.
(vi) Leasehold Improvements. All of GSI's leasehold
improvements located at the premises occupied by GSI at 11135 and
11155 Condor Avenue, Fountain Valley, California (the "Premises"),
including, without limitation, the items set forth in Schedule
1.1(a) (iv) attached hereto.
(vii) Goodwill. The goodwill incident to the Business.
(viii) Records and Other Information. All records of the
Business, including, without limitation, property, production,
engineering, contract and accounting records, sales data and
records, customer lists and other information relating to customers,
catalogs, brochures, suppliers' names, mailing lists and any
photographic and advertising materials.
(ix) Contracts. All rights in, to and under all purchase and
sales orders and commitments, personal property leases and other
agreements made in the ordinary course of business, including,
without limitation, those set forth in Schedule 1.1(a) (ix) attached
hereto (the "Contracts"); provided, however, that to the extent such
Contracts are Government Contracts (as hereinafter defined), only to
the extent the same are assignable.
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(x) Intellectual Property. All right, title and interest in
and to all copyrights, service marks, trademarks, logos, trade names
(including the name "Ground Support, Inc."), patents, patent
applications, licenses (including patent licenses), royalty rights
and inventions, processes, know-how, formulae, trade secrets,
compositions, designs, drawings, specifications, patterns,
blueprints, plans, files, notebooks and records relating to
research, engineering and development activities, production data
and shop rights, including, without limitation, the items set forth
in Schedule 1.1(a)(x) attached hereto (the "Patent and Trademark
Rights").
(b) Buyer shall assume, perform and discharge only the liabilities
and obligations identified in Schedule 1.1(b) and only to the extent set
forth therein (the "Assumed Liabilities"). Except as provided in Schedule
1.1(b), or as set forth in Section 4.1 or 5.4 hereof, Buyer shall not
purchase, assume or have any liability whatsoever with regard to any
Employee Benefit Plan (as such term is hereinafter defined).
1.2. Purchase Price.
(a) The aggregate purchase price for the Assets as defined herein
and the Assets as defined in that certain Asset Purchase Agreement, dated
as of the date hereof, by and among BFM, BFM Transport Dynamics
Corporation, a California corporation ("TDC"), Buyer and RBC (the "TDC
Purchase Agreement"), shall consist of (i) $4,500,000, payable by Buyer to
GSI and TDC to a bank account designated by BFM to be held for the benefit
of each, and such shall be payable at the Closing in immediately available
funds, (ii) 6,000 shares of preferred stock of RBC, which shares are
consideration for the Assets as defined in the TDC Purchase Agreement, and
(iii) the assumption of the Assumed Liabilities as defined herein and in
the TDC Purchase Agreement.
(b) The purchase price shall be allocated among the Assets as
defined herein and the Assets as defined in the TDC Purchase Agreement,
based on a schedule to be prepared by Buyer and approved by GSI, which
approval shall not be unreasonably withheld, and GSI and Buyer agree to
report the purchase and sale of the Assets in a manner consistent with
such allocation of purchase price.
1.3. The Closing. The closing of the sale and purchase of the Assets
(the "Closing") shall take place at the offices of Latham & Watkins (counsel to
RBC's acquisition financing lender, Heller Financial, Inc.) at 633 West Fifth
Street, Suite 4000, Los Angeles, California, at 9:00 a.m. (local time) on the
date hereof.
1.4. Deliveries by GSI at the Closing. At the Closing, GSI shall
deliver the following to Buyer:
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(a) A Bill of Sale in substantially the form attached hereto as
Exhibit 1.4(a);
(b) An Assignment and Assumption of Lease (the "Assumption of
Lease") executed by GSI and TDC, in substantially the form attached hereto
as Exhibit 1.4(b);
(c) An opinion of O'Melveny & Myers ("OMM"), special counsel to GSI,
in substantially the form of Exhibit 1.4(c) attached hereto, dated as of
the date hereof and addressed to Buyer and a letter from OMM as to
reliance thereon addressed to Heller Financial, Inc.;
(d) UCC-2 release forms, executed by Wells Fargo Bank, N.A. ("Wells
Fargo"), pursuant to which Wells Fargo shall release its security interest
in the Assets;
(e) An officers' certificate for GSI as to the Articles of
Incorporation and Bylaws of GSI, the resolutions adopted by the Board of
Directors and sole shareholder of GSI authorizing the execution and
delivery of this Agreement and the transactions contemplated hereby, and
the incumbency of certain officers of GSI;
(f) An officers' certificate for BFM as to the Certificate of
Incorporation and Bylaws of BFM, the resolutions adopted by the Board of
Directors of BFM authorizing the execution and delivery of this Agreement
and the transactions contemplated hereby, and the incumbency of certain
officers of BFM; and
(h) All other documents, instruments and writings required by this
Agreement to be delivered by GSI at the Closing or otherwise reasonably
requested by Buyer to complete the transactions contemplated hereby.
1.5. Deliveries by Buyer at the Closing. At the Closing, Buyer
shall deliver the following to GSI:
(a) By wire transfer of immediately available funds to the account
of GSI designated in writing to Buyer prior to the date hereof, the amount
of the cash portion of the purchase price set forth in Section 1.2(a)
hereof;
(b) An Assumption Agreement executed by Buyer in substantially the
form attached hereto as Exhibit 1.5(b);
(c) The Assumption of Lease executed by Buyer;
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(d) An officers' certificate for Buyer as to the Certificate of
Incorporation and Bylaws of Buyer, the resolutions adopted by the Board of
Directors and sole stockholder of Buyer authorizing the execution and
delivery of this Agreement, the Assumption Agreement and the Lease and the
transactions contemplated hereby and thereby and the incumbency of certain
officers of Buyer;
(e) An officers' certificate for RBC as to the Certificate of
Incorporation and Bylaws of RBC, the resolutions adopted by the Board of
Directors of RBC authorizing the execution and delivery of this Agreement
and the transactions contemplated hereby and the incumbency of certain
officers of RBC; and
(f) All other documents, instruments and writings required by this
Agreement to be delivered by. Buyer at the Closing or otherwise reasonably
requested by GSI to complete the transactions contemplated hereby.
2. Representations and Warranties of GSI.
GSI represents and warrants to, and agrees with, Buyer as follows:
2.1. Organization of GSI; Authorization. GSI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California with full corporate power and corporate authority to execute and
deliver this Agreement and the Assumption of Lease and to perform its
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and the Assumption of Lease have been duly authorized by all
necessary corporate action on the part of GSI and this Agreement and the
Assumption of Lease constitute legally valid and binding obligations of GSI,
enforceable against GSI in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally.
2.2. No Conflict. Except as set forth in Schedule 2.2 attached
hereto, neither the execution and delivery of this Agreement or the Assumption
of Lease nor the sale of the Assets to Buyer will (a) violate any provision of
the Articles of Incorporation or Bylaws of GSI or (b) violate, conflict with, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, any material agreement or commitment to which
GSI is a party or (c) to the best knowledge of GSI, violate any material statute
or law or any judgment, decree, order, regulation or rule of any court or other
Governmental Body applicable to GSI.
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2.3. Government Consents and Approvals. Except as set forth in
Schedule 2.3 attached hereto, no consent, license, permit, approval or
authorization of, or declaration, filing or registration, or any novation or
assignment of any contract, with, any Governmental Body is required to be
obtained by GSI in connection with its execution and delivery of this Agreement
or the Assumption of Lease or the sale of the Assets to Buyer.
2.4. Financial Statements. GSI has delivered to Buyer: (a) an
unaudited balance sheet of GSI as at October 31, 1991 and unaudited statements
of income and cash flow for the fiscal year then ended, and (b) an unaudited
balance sheet of GSI as at August 31, 1992, and unaudited statements of income
and cash flow for the ten months then ended, including in each case the notes
thereto. The financial statements described in clause (a) of the preceding
sentence are referred to collectively as the "GSI Financial Statements," the
balance sheet as at August 31, 1992 is referred to as the "GSI Balance Sheet"
and the financial statements described in clause (b) of the preceding sentence
are referred to collectively as the "GSI Interim Statements." The GSI Financial
Statements and notes thereto present fairly the financial condition and results
of operations of GSI as at the respective dates thereof and for the period
therein referred to, in accordance with GAAP, except as otherwise disclosed
therein. The GSI Interim Statements present fairly the financial condition and
results of operations of GSI as at the date thereof and for the period therein
referred to in accordance with GAAP on a basis consistent with the GSI Financial
Statements, except that the GSI Interim Statements do not contain complete
footnote disclosure and are subject to normal year-end adjustments, which will
not be material.
2.5. Title to Properties. GSI has good and marketable title to all
the Assets (including those reflected on the Balance Sheet, except for assets
sold, consumed or otherwise disposed of in the ordinary course of business since
the date of the Balance Sheet,), and on the date hereof Buyer shall receive good
and marketable title to the Assets, free and clear of all Encumbrances, except
for (a) Encumbrances set forth in Schedule 2.5 attached hereto, (b) liens for
taxes not yet due or being contested in good faith by appropriate proceedings
(which proceedings, if any, are identified in Schedule 2.5) or (c) other
Encumbrances which, individually or in the aggregate, do not (i) have a material
adverse effect on the use of the asset in question or (ii) materially or
adversely affect the value of the asset in question or the operation of the
Business (the Encumbrances referred to in (a) through (c) above are collectively
referred to herein as "Permitted Encumbrances"). Since the date of the Balance
Sheet, GSI
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has not sold or disposed of any of its assets outside of the ordinary course of
business. The Assets comprise all of the assets, and the only assets, used by
GSI in conducting the Business as presently operated.
2.6. No Undisclosed Liabilities. GSI has no liabilities or
obligations that were not reflected or reserved against in the Balance Sheet,
except for liabilities and obligations incurred since the date of the GSI
Balance Sheet in the ordinary course of business and consistent with past
practice.
2.7. Litigation. There is no claim, action, suit or proceeding by or
before any court or Governmental Body pending or, to the best knowledge of GSI,
threatened against GSI, nor does GSI know of any facts that would form the basis
of any such claim, action, suit or proceeding.
2.8. Taxes
(a) GSI (and any affiliated group of which GSI is now or has been a
member), has duly and timely filed with the appropriate taxing authorities all
returns (including, without limitation, information returns and reports) in
respect of Taxes required to be filed through the date hereof. The information
filed is complete and accurate in all material respects. Neither GSI, nor any
group of which GSI is now or was a member, has requested any extension of time
within which to file returns (including, without limitation, information
returns) in respect of any Taxes.
(b) All Taxes in respect of periods beginning before the date
hereof, have been paid, or an adequate reserve has been established therefor and
GSI has no liability for such taxes in excess of the amounts so paid or reserves
so established.
(c) (i) No deficiencies for Taxes have been claimed, proposed or
assessed by any taxing or other governmental authority; (ii) there are no
pending or threatened audits, investigations or claims for or relating to any
liability in respect of Taxes, and there are no matters under discussion with
any governmental authorities with respect to Taxes that are likely to result in
an additional amount of Taxes; (iii) no issues have been raised in any pending
or completed audit of GSI which could reasonably be expected to affect the tax
liability of GSI for a taxable year which has either not been audited or as to
which no audit is pending; (iv) audits of federal, state, and local returns for
Taxes by the relevant taxing authorities have been completed for each period set
forth in Schedule 2.8; (v) GSI has not been notified that any taxing authority
intends to audit a return for any other period;
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and (vi) no extension of a statute of limitations relating to Taxes
is in effect with respect to GSI, and no Tax lien has been filed by any Tax
authority against any property or assets of GSI.
(d) GSI is not a "foreign person" as defined in Section 1445(f)(3)
of the Code.
2.9. Absence of Certain Changes. Since the date of the Balance
Sheet, (a) there has been no material adverse change in the business, financial
condition, prospects or operations of GSI (other than changes resulting from
general economic conditions and matters generally affecting companies engaged in
businesses similar to GSI) and (b) the Business has been conducted by GSI only
in the ordinary course and consistent with past practices.
2.10. Patents, Trademarks, Etc. Schedule 1.1(a) (x) sets forth a
list of the Patent and Trademark Rights, which are all United States and foreign
patents, registered trademarks, registered trade names, copyrights, and
applications therefor owned or used by GSI in the conduct of the Business.
Except as disclosed in Part A of Schedule 2.10 attached hereto, (a) GSI owns (or
possesses licenses or other rights to use) all material Patent and Trademark
Rights necessary to the conduct of its business as currently conducted and (b)
there are no existing or, to the best knowledge of GSI, threatened claims by any
Person with respect to the use, or challenging the ownership, of the Patent and
Trademark Rights by GSI. To the best knowledge of GSI, there is no material
infringing use by any Person of the Patent and Trademark Rights and GSI has not
granted a license or sub-license in the Patent and Trademark Rights to any third
parties except for such licenses in the Trademark Rights granted to
distributors, pursuant to those certain agreements, a complete list of which is
contained in Part B of Schedule 2.10, as are necessary for such distributors to
effectively advertise and sell GSI's goods.
2.11. Leases. Schedule 2.11 attached hereto contains a list of all
real property leases and material personal property leases pursuant to which GSI
is a party. All such leases are valid, binding and enforceable in accordance
with their terms, and are in full force and effect, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws or equitable
principles relating to or affecting the rights of creditors generally; there are
no existing material defaults (or events which, with notice or lapse of time or
both, would constitute a material default) by GSI thereunder.
2.12. Contracts and Commitments. Except as set forth in Schedule
2.12, Schedule 2.11, Schedule 1.1(a) (ix)
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or Schedule 2.5, GSI is not a party to or bound by, and the
Contracts shall not include, any written agreement, contract or commitment (a)
having a remaining term of more than two years or providing for payments to or
by GSI in excess of $50,000; (b) providing for employment or the payment of any
bonus or commission based on sales or earnings, or which contains any severance
or termination pay liabilities or obligations; (c) with any union or other
collective bargaining representative of its employees; (d) providing for or
evidencing indebtedness for borrowed money; (e) providing for capital
expenditures in excess of $100,000 in the aggregate; (f) with an Affiliate; (g)
with a distributor or dealer, franchiser, retail sales organization, sales
agency or manufacturer's representative; or (h) granting any preferential rights
to purchase any of GSI's assets, property or rights or requiring the consent of
any party to the transfer to or assignment of such assets, properties or rights
or expressly limiting or restricting the ability to transfer or assign such
assets, property or rights other than in the ordinary course of business.
2.13. Status of Agreements. All Contracts are valid and in full
force and effect and there are no existing material defaults (or events which,
with notice or lapse of time or both, would constitute a material default) by
GSI or, to the best knowledge of GSI, by any other party thereunder
2.14. Pension and Employee Benefit Plans.
(a) Schedule 2.14 attached hereto lists each plan sponsored by BFM
or GSI that covers employees of GSI and is subject to Part 6 of Title I of ERISA
(the "Employee Plans"). Notwithstanding the foregoing, the term "Employee Plans"
shall exclude the GSI Security 90 Plan for all purposes under this Agreement.
True and complete copies of all Employee Plans have been delivered or made
available to Buyer.
(b) Schedule 2.14 discloses each Multiemployer Plan to which GSI or
any ERISA Affiliate has at any time within the last six years had an obligation
to contribute or with respect to which it may be secondarily liable for
withdrawal liability payments under Section 4201 of ERISA.
(c) Except as disclosed in Schedule 2.14 hereto, there has been no
withdrawal by GSI or any of its ERISA Affiliates from any Multiemployer Plan
within the past six years, and if a complete or partial withdrawal were to occur
as of the Closing, there is no basis to expect that any withdrawal liability
would be imposed on GSI, either primarily or secondarily, with respect to any
Multiemployer Plan.
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2.15. Compliance with Law. To the best knowledge of GSI, the
Business has been operated by GSI in compliance in all material respects with
all laws, rules, regulations and orders applicable to the Business (including,
without limitation, any such laws, rules, regulations and orders pertaining to
the discharge or release of any pollutants, contaminants, chemicals or
industrial, toxic or hazardous materials into the environment), except for
failures to comply that would not, individually or in the aggregate, have a
Material Adverse Effect.
2.16. Labor Relations; Employees. Except as set forth in Schedule
2.16, GSI is not delinquent in any material payments to any of its employees for
any wages, salaries, commissions, bonuses or other direct compensation for any
services performed by them to the date hereof or amounts required to be
reimbursed to such employees, there is no unfair labor practice complaint
against GSI pending before the National Labor Relations Board or any comparable
state, local or foreign agency and neither any grievance which might have a
Material Adverse Effect nor any arbitration proceeding arising out. of or under
any collective bargaining agreement is currently pending. There is no strike,
work stoppage, slowdown or other labor difficulty actually occurring or, to the
knowledge of GSI, threatened against or directly affecting the operations of
GSI.
2.17. Permits and Licenses. Schedule 2.17 lists, and GSI currently
has in full force and effect, all governmental licenses and permits required for
the conduct of the Business as now conducted, the absence of which would have a
Material Adverse Effect, and within the past three years GSI has conducted its
operations pursuant to then effective governmental licenses and permits.
2.18. Government Contracts.
(a) Government Contracts Compliance. With respect to each Government
Contract or Bid to which GSI is a party, to the best knowledge of GSI, (i) GSI
has complied with all material terms and conditions of such Government Contract
or Bid, including all clauses, provisions and requirements incorporated
expressly, by reference or by operation of law therein; (ii) GSI has complied
with all requirements of any statute, rule, regulation, order or agreement
pertaining to such Government Contract or Bid; (iii) all representations and
certifications executed, acknowledged or set forth in or pertaining to such
Government Contract or Bid were current, accurate and complete as of their
effective date, and GSI has fully complied with all such representations and
certifications;
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(iv) neither the U.S. Government nor any prime contractor, subcontractor or
other person has notified GSI, either orally or in writing, that GSI has
breached or violated any statute, rule, regulation, certification,
representation, clause, provision or requirement; (v) no termination for
convenience, termination for default, cure notice or show cause notice has been
issued; (vi) no cost incurred by GSI has been questioned or disallowed; and
(vii) no money due to GSI has been (or has been attempted to be) withheld or set
off.
(b) Investigations and Audits. To the best knowledge of GSI, (i)
neither GSI, any of GSI's Affiliates nor any of GSI's directors, officers,
employees, agents or consultants is (or for the last five years has been) under
administrative, civil or criminal investigation, indictment, audit or internal
investigation with respect to any alleged irregularity, misstatement or omission
arising under or relating to any Government Contract or Bid; (ii) neither GSI
nor any of GSI's Affiliates has made a voluntary disclosure to the U.S
Government with respect to any alleged irregularity, misstatement or omission
arising under or relating to a Government Contract or Bid; (iii) there is no
irregularity, misstatement or omission arising under or relating to any
Government Contract or Bid that has led or could lead, either before or after
the date hereof, to any of the consequences set forth in (i) - (ii) above or any
other damage, penalty assessment, recoupment of payment or disallowance of cost.
(c) Financing Arrangements and Claims. To the best knowledge of GSI,
there exists (i) no financing arrangement with respect to performance of any
current Government Contract; (ii) no outstanding claim against GSI, either by
the U.S. Government or by any prime contractor, subcontractor, vendor or other
third party, arising under or relating to any Government Contract or Bid; (iii)
no fact upon which such a claim may be based on the future; (iv) no dispute
between GSI and the U.S. Government or any prime contractor, subcontractor or
vendor arising under or relating to any Government Contract or Bid; and (v) no
fact known by GSI over which such a dispute may arise in the future. To the best
knowledge of GSI, GSI has no interest in any pending or potential claim against
the U.S. Government or any prime contractor, subcontractor or vendor arising
under or relating to any Government Contract or Bid.
(d) No Suspension or Debarment. Neither GSI nor any of its
directors or officers, nor, to the best knowledge of GSI, any employee of GSI is
(or for the last five years has been) suspended or debarred from doing business
with the U.S. Government or has been declared nonresponsible or ineligible for
U.S. Government contracting. GSI knows of no
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circumstances that, to the best knowledge of GSI, would warrant the institution
of suspension or debarment proceedings or the finding of nonresponsibility or
ineligibility on the part of GSI in the future.
2.19. Environmental Matters. No Environmental Condition relating to
the Assets or the Business exists in violation of any Environmental Laws. For
purposes of this Section 2.19, "Environmental Condition" means the existence,
release, emission, discharge, generation, removal or disposition of any
Hazardous Substance; "Hazardous Substance" means (i) any chemical, compound,
material or substance that is defined, listed in, or otherwise classified
pursuant to, any Environmental Laws as a "hazardous substance", "hazardous
material", "hazardous waste", "toxic substance'1 or "toxic pollutant", and (ii)
asbestos, petroleum, natural gas, natural gas liquids, liquified natural gas,
synthetic gas usable for fuel and drilling fluids, produced waters, and other
wastes associated with the exploration, development or production of crude oil,
natural gas, or geothermal resources; and "Environmental Laws" means any and all
federal, state and local laws (whether under common law, statute, rule,
regulation or otherwise) and other requirements of governmental authorities
relating to the environment or to any Hazardous Substance or Environmental
Condition (including, without limitation, CERCLA and the applicable provisions
of the California Health and Safety Code and the California Water Code).
3. Representations and Warranties of Buyer.
Buyer represents and warrants to, and agrees with, GSI as follows:
3.1. Organization of Buyer; Authorization. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and corporate authority to execute
and deliver this Agreement, the Assumption Agreement and the Assumption of Lease
and to perform its obligations hereunder and thereunder. The execution, delivery
and performance of this Agreement, the Assumption Agreement and the Assumption
of Lease have been duly authorized by all necessary corporate action (including,
but not limited to, approval by the Board of Directors) on the part of Buyer and
each of this Agreement, the Assumption Agreement and the Assumption of Lease
constitutes a valid and binding obligation of Buyer, enforceable against it in
accordance with its respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws
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affecting the enforcement of creditors' rights generally.
3.2. No Conflict as to Buyer. Neither the execution and delivery of
this Agreement, the Assumption Agreement or the Assumption of Lease nor the
performance of Buyer's obligations hereunder or thereunder will (a) violate any
provision of the Certificate of Incorporation or Bylaws of Buyer, (b) violate,
conflict with or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under any agreement or commitment
to which Buyer is party or (c) to the best knowledge of Buyer, violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or other Governmental Body applicable to Buyer.
3.3. Investigation.
(a) Buyer has performed extensive due diligence and investigations
with respect to GSI with the intention of forming its own conclusions
regarding GSI (financial and otherwise) in response to the parties'
express intention and agreement that as of the Closing the sale hereunder
shall be without representation or warranty of any kind (express or
implied) regarding the Assets, except as set forth in this Agreement and
the Bill of Sale. Buyer will rely solely on its own business judgment and
investigation with respect to the Assets.
(b) In connection with Buyer's investigation of GSI, Buyer has
received from GSI certain projections and other forecasts, including the
projections and other forecasts contained in the Confidential Offering
Memorandum provided to Buyer. Buyer acknowledges that GSI makes no
representation or warranty with respect to such projections or forecasts.
3.4. Government Consents and Approvals. Except as set forth in
Schedule 3.4 attached hereto, no consent, approval or authorization of, or
declaration, filing or registration with any Governmental Body is required to
be. obtained by Buyer in connection with the execution and delivery of this
Agreement, the Assumption Agreement or the Assumption of Lease or the purchase
of the Assets by Buyer.
4. Covenants by Buyer and GSI.
4.1. Employees.
(a) Effective as of the Closing, Buyer shall offer employment to
all persons who are employees of GSI immediately prior to the Closing on
terms of
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employment and compensation comparable to that received by such employees
immediately prior to the Closing; provided, however, that "compensation"
for this purpose shall not be deemed to include benefits under any
employee benefit plan within the meaning of Section 3(3) of ERISA and
provided further that such employees shall not be third party
beneficiaries of this Agreement and shall remain terminable at will. All
employees of GSI who accept employment with Buyer shall be referred to
herein as "Transferred Employees." Effective as of the Closing, Buyer
shall assume sponsorship for the Employee Plans (as defined in Section
2.14(a)), and shall be responsible for all liabilities arising under such
plans on or after the Closing, but shall be permitted to amend or
terminate any of such plans at any time after the Closing. Buyer agrees
that it shall use its reasonable efforts to cause the insurer under the
Employee Plans to give Transferred Employees full credit under the
Employee Plans for all expenses incurred by Transferred Employees and
their beneficiaries under the benefit deductible and co-payment provisions
of the Employee Plans. Buyer agrees that it shall be liable for any
continuation coverage under the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA") (i) imposed as the result of a "Qualifying Event"
(as that term is defined in ERISA Section 603 or Code Section 4980B(f)(3))
that occurs on or after the Closing with respect to any Transferred
Employee or (ii) imposed under the Employee Plans for any period extending
beyond the Closing with respect to a Qualifying Event which occurred on or
before the Closing, provided that GSI (or the plan administrator appointed
by it) has met all relevant notice requirements under Section 606 or
Section 4980B(f) (6) of the Code pertaining to any Covered Employee or
Qualified Beneficiary (as such terms are defined in Section 607 of ERISA
and Sections 4980B(f) and (g) of the Code) affected by such Qualifying
Event. Furthermore, Buyer shall indemnify BFM and TDC for any liability or
penalty imposed under COBRA (i) with respect to any Transferred Employee
as the result of a Qualifying Event that occurs on or after the Closing,
and (ii) with respect to any employee of GSI (including GSI employees who
are not Transferred Employees) who is eligible to receive continuation
coverage under the Employee Plans in accordance with COBRA for any period
of time extending beyond the Closing, but excluding for purposes of this
Section 4.1(a) any liability for which BFM and GSI are liable under
Section 5.3(e).
(b) Buyer understands that certain employees of GSI have accrued
benefits in the LS, Inc. Plan and that in
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accordance with Section 9.02(b)(2) of that agreement between BFM Acquisition
Corp. and Lear Siegler Aerospace Products Holding Corp., dated July 30, 1987,
the LS, Inc. Plan provides (i) that certain service by employees of BFM and its
Affiliates is taken into account for purposes of vesting (but not benefit
accrual) under the LS, Inc. Plan and (ii) that certain compensation of employees
of BFM and its Affiliates is used in computing the benefit of such employees
under the L5, Inc. Plan ("Rollup Agreement"). BFM, TDC and Buyer agree that any
benefits payable under the Rollup Agreement are an obligation solely of the LS,
Inc. Plan and neither BFM, TDC nor Buyer shall have any liability for any
benefits payable under the Roll-Up Agreement and that neither BFM, TDC nor Buyer
is responsible in any way for any effect on benefits otherwise payable under the
Rollup Agreement caused by the transactions contemplated under this Agreement.
Buyer agrees that it shall notify LS, Inc. or its designee promptly after the
end of each calendar year and at such other times as LS, Inc. or its designee
may reasonably request as to the employment status of each Transferred Employee
(as defined in Section 4.1) who has an accrued benefit under the LS, Inc. Plan.
4.2. Business Records and Files. For a period of five years with
respect to Tax records of GSI and three years with respect to other business
records of GSI from and after the date hereof:
(a) Buyer shall not dispose of or destroy any of such records and
files of the Business without first offering to turn over possession
thereof to GSI by notice to GSI at least 30 days prior to the proposed
date of such disposition or destruction.
(b) Buyer shall allow GSI and its agents access to all such records
and files of GSI that are transferred to Buyer in connection herewith for
any reasonable purpose upon 10 business days notice that sets forth the
documents to be reviewed and the purpose for such review, during normal
working hours at Buyer's principal place of business or at any location
where such records are stored, and GSI shall have the right, at its own
expense, to make copies of any such records and files; any such access or
copying shall be had or done in such a manner so as not to interfere with
the normal conduct of Buyer's business.
4.3. Tax Worksheets. Within three months after the date hereof,
Buyer shall prepare and deliver to BFM, at the sole expense of Buyer, tax
worksheets as at the date hereof of the type customarily prepared by GSI prior
to the date hereof, for the purpose of enabling BFM and GSI to file Tax Returns
for tax periods ending prior to the date hereof.
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4.4. Sales Taxes Arising from Sale of Assets. Buyer shall be liable
for the payment of any and all sales taxes arising out of or related to the
transfer of the Assets by GSI to Buyer hereunder. Seller shall be liable for the
payment of any and all sales taxes arising out of or related to GSI's operation
of the Business through the date hereof.
4.5. Sales Tax Clearance Certificate. After the date hereof, Buyer
intends to file a request with the California State Board of Equalization (the
"Board") for a sales tax clearance certificate as to the satisfaction by GSI of
all sales and use tax liability arising from GSI's operation of the Business
through the date hereof. GSI will use its reasonable efforts to cooperate with
Buyer in connection with Buyer's efforts to obtain such certificate, including,
without limitation, making its records available to the Board for audit upon its
request.
4.6. Mail and Other Communications. After the date hereof, Buyer
shall forward to GSI all mail, telegrams and other communications, and all
express or other packages, addressed to GSI or its agents, promptly after
Buyer's receipt thereof. GSI thereupon shall promptly return to Buyer any and
all of the same to the extent they relate to the Assets or the Assumed
Liabilities.
4.7. Governmental Contract Novations. After the date hereof, GSI
shall use its reasonable efforts to assist Buyer in obtaining all necessary
novations to the Government Contracts and any and all other approvals as may be
reasonably requested by Buyer in connection with the transfer and assignment of
the Government Contracts to Buyer hereunder and GSI shall take such other
actions as may be reasonably requested by Buyer in connection therewith.
5. Survival of Representations and Warranties; Indemnification.
5.1. Survival. Subject to Section 5.2 hereof, all representations,
warranties and agreements contained in this Agreement shall survive the Closing.
5.2. Time Limitations. Neither BFM nor GSI shall have any liability
(for indemnification or otherwise) with respect to any representation or
warranty or any claim under Section 5.3(h) hereof, unless on or before the first
anniversary of the date hereof (or the second anniversary of the date hereof, in
the case of a claim with respect to the breach of Section 2.19 or any claim
under Section 5.3(h) hereof), GSI and BFM are given notice asserting a claim
with respect thereto and specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer. Neither RBC nor Buyer shall
have any liability (for
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<PAGE>
indemnification or otherwise) with respect to any representation or warranty
unless on or before the first anniversary of the date hereof, Buyer and RBC are
given notice of a claim with respect thereto and specifying the factual basis of
that claim in reasonable detail to the extent then known by GSI.
5.3. Indemnification by BFM and GSI. BFM and GSI shall indemnify and
hold harmless Buyer, and shall reimburse Buyer for, any debt, obligation, claim,
loss, liability, damage or expense (including, but not limited to, costs of
investigation and defense and reasonable attorneys' fees) (collectively,
"Damages") relating to, arising from or in connection with (a) any inaccuracy in
any of the representations and warranties of GSI in this Agreement, (b) any
failure by GSI to perform or comply with any agreement contained in this
Agreement, (c) the operation of the Business prior to and on the date hereof
other than the Assumed Liabilities and other than claims for breach of warranty
or product liabilities (except as specified in clause (d) of this Section 5.3),
(d) all claims made, whether on, after or prior to the date hereof, for breach
of warranty or product liability arising out of (i) products shipped by GSI on
or prior to the date hereof and (ii) products shipped by Buyer after the date
hereof with respect to which Buyer provides GSI with written or other reasonable
evidence that such products were manufactured by GSI and constituted finished
goods on or prior to the date hereof, (e) any liability or claim of liability
arising from the failure of GSI or BFM to comply with the continuation coverage
requirements of Sections 601 through 608 of ERISA regarding continued insurance
coverage with respect to any Qualified Event occurring prior to the Closing
under the Employee Plans, (f) any and all sales and payroll tax liabilities
arising out of GSI's operation of the Business through the date hereof, (g) the
remaining 50% of the amount of the liability, if any, not assumed by Buyer
pursuant to Section 1.1(b) hereof, for severance payments or termination
benefits owing to Frank E. Cole pursuant to that certain Termination Benefits
Agreement, dated January 31, 1990, by and between TDC and Frank E. Cole, and (h)
the existence or occurrence of any Environmental Condition in violation of any
Environmental Law relating to the Business or the Premises prior to the Closing,
except to the extent that such Environmental Condition continues to exist solely
because of the operation of Buyer's business on the Premises.
5.4. Indemnification by RBC and Buyer. RBC and Buyer shall indemnify
and hold harmless GSI, and shall reimburse GSI for, any Damages relating to,
arising from or in connection with (a) any inaccuracy in any of the
representations and warranties of Buyer in this Agreement, and (b) any failure
by Buyer to perform or comply with any
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covenant or agreement contained in this Agreement, (c) the Assumed Liabilities,
(d) the operation of the Business after the date hereof, including, without
limitation, the performance of the Government Contracts, (e) all claims made
after the date hereof for breach of warranty or product liability arising out of
products shipped by Buyer after the date hereof with respect to which Buyer is
unable to provide to GSI written or other reasonable evidence that such products
were manufactured by GSI and constituted finished goods on or prior to the date
hereof, (f) any and all sales taxes arising out of or related to the transfer of
the Assets by GSI to Buyer hereunder, and (g) any liability imposed on TDC or
BFM for benefit payments under the GSI Severance Policy on account of the
termination of any Transferred Employee occurring on or after the Closing.
5.5. Limitations as to Amount. Neither BFM nor GSI shall have any
liability with respect to any claim made by Buyer pursuant to Section 5.3 until
the total of all Damages exceeds $100,000 in the aggregate, at which time BFM
and GSI shall be liable only for the amount by which such Damages exceed
$100,000 in the aggregate. Neither RBC nor Buyer shall have any liability with
respect to any claim made by TDC pursuant to Section 5.4 until the total of all
Damages exceeds $50,000 in the aggregate, at which time Buyer and/or RBC shall
be liable only for the amount by which such Damages exceed $50,000 in the
aggregate. BFM and GSI's collective aggregate liability with respect to matters
described in Section 5.3 shall be limited to the amount of the cash portion of
the purchase price set forth in Section 1.2 hereof.
5.6. Brokers. RBC and Buyer shall indemnify and hold harmless GSI,
and shall reimburse BFM and GSI for, and GSI shall indemnify and hold harmless
Buyer, and shall reimburse Buyer for, all Damages resulting from any claims made
by any Person for brokerage or finder's fees or commissions in connection with
the transactions contemplated by this Agreement based on any agreement or
understanding alleged to have been made by such Person with RBC and Buyer or its
Affiliates (in the case of Buyer as the indemnifying party) or BFM and GSI or
its Affiliates (in the case of GSI as the indemnifying party).
5.7. Bulk Sales Law. The parties agree to waive compliance with the
provisions of the bulk transfer and bulk sales laws of any applicable state or
jurisdiction (the "Bulk Sales Laws") in connection with the purchase and sale of
the Assets hereunder. RBC and Buyer shall indemnify and hold harmless GSI, and
shall reimburse GSI for, any Damages that GSI may suffer as a result of or due
to noncompliance with the provisions of the Bulk Sales Law insofar as they
relate to any of the Assumed Liabilities. BFM and GSI shall
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indemnify and hold harmless Buyer, and shall reimburse Buyer for, any Damages
that Buyer may suffer as a result of or due to noncompliance with the provisions
of the Bulk Sales Law insofar as they relate to liabilities of GSI other than
the Assumed Liabilities.
5.8. Procedure for Indemnification. Promptly after receipt by an
indemnified party under Section 5.3, 5.41 5.6 or 5.7 of notice of the
commencement of any action brought by a third party, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under such section, give notice to the indemnifying party of the commencement
thereof. In case any such action shall be brought against an indemnified party
and it shall give notice to the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under such section for any fees of other counsel or any other expenses, in each
case subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation. If an
indemnifying party assumes the defense of such an action, no compromise or
settlement thereof may be effected by the indemnifying party without the
indemnified party's consent (which shall not be unreasonably withheld) unless
(i) there is no finding or admission of any violation of law or any violation of
the rights of any Person and no effect on any other claims that may be made
against the indemnified party and (ii) the sole relief provided is monetary
damages that are paid in full by the indemnifying party. In any event, the
indemnifying party shall have no liability with respect to any compromise or
settlement thereof effected without its consent (which shall not be unreasonably
withheld).
6. Definitions.
As used in this Agreement, the following terms have the meanings
specified or referred to in this Section 6:
"Affiliate" -- A Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, another Person.
"Assets" -- See Section 1.1(a).
"Assumed Liabilities" -- See Section 1.1(b).
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Business" -- See Section l.1(a)(vii).
"Business Day" -- Any day that is not a Saturday or Sunday or a day
on which banks located in the City of Los Angeles are authorized or required to
be closed.
"Buyer" -- See the first paragraph of this Agreement.
"Closing" -- See Section 1.3.
"Code" -- The Internal Revenue Code of 1986, as amended.
"Company Pension Plan" -- Each employee pension benefit plan within
the meaning of Section 3(2) of the ERISA, covered by Part 2 of Title I of ERISA,
excluding multiemployer plans within the meaning of Section .3(37) of ERISA
maintained within the last six years of GSI or any of its ERISA Affiliates.
"Company Welfare Plan" -- Each employee welfare benefit plan within
the meaning of Section 3(1) of ERISA maintained by GSI or any of its ERISA
Affiliates.
"Contracts" -- See Section 1.1(a) (ix).
"Damages" -- See Section 5.3.
"Employee Benefit Plans" -- Each Company Pension Plan, Company
Welfare Plan and each other profit sharing, group insurance, bonus, deferred
compensation, stock option, severance pay, insurance, pension or retirement plan
or written agreement relating to employment or "fringe benefits" for employees
or officers of GSI.
"Employee Plans" -- See Section 2.14.
"Encumbrance" -- Any security interest, mortgage, lien, charge or
other adverse claim.
"ERISA" -- The Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" -- Any company that, as of the relevant measuring
date under ERISA, is a member of a controlled group of corporations or under
common control with TDC within the meaning of Section 414 of the Code.
"Excluded Assets" -- See Section 1.1(a).
"GAAP" -- Generally accepted accounting principles in the United
States, consistently applied.
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"Governmental Body" -- Any domestic or foreign national, state or
municipal or other local government or multi-national body, any subdivision,
agency, commission or authority thereof, or any quasi-governmental or private
body exercising any regulatory or taxing authority thereunder.
"Government Contract" or "Government Contract or Bid" -- Any
contract with an agency or instrumentality of the U.S. government and all U.S.
government sub-contracts.
"GSI" -- See the first paragraph of this Agreement.
"GSI Balance Sheet" -- See Section 2.5.
"GSI Financial Statements" -- See Section 2.5.
"GSI Interim Statements" -- See Section 2.5.
"IRS" -- See Section 2.14.
"Material Adverse Effect" -- A material adverse effect on the Assets
or on the financial condition, prospects or affairs of the Business.
"Multiemployer Plan" -- Each multiemployer plan within the meaning
of Section 3(37) of ERISA.
"PBGC" -- See Section 2.14(i).
"Patent and Trademark Rights" -- See Section 1.1(a) (x)
"Permitted Encumbrances" -- See Section 2.5.
"Person" -- Any individual, corporation, partnership, joint venture,
trust, association, unincorporated organization, other entity or Governmental
Body.
"Plans" -- See Section 2.14.
"Premises" -- See Section 1.1(a)(vi).
"Subsidiary" -- With respect to any Person, any corporation of which
securities having the power to elect a majority of that corporation's Board of
Directors (other than securities having that power only upon the happening of a
contingency that has not occurred) are held by such Person or one or more of its
Subsidiaries.
"Taxes" -- All taxes, charges, fees, levies, interest, penalties,
additions to tax or other assessments, including, but not limited to, income,
excise, property,
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sales, use, value added and franchise taxes, imposed by any Governmental Body.
"Tax Returns" -- Any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any Governmental Body in connection with the determination,
assessment or collection of any Taxes or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
7. Notices.
All notices, consents and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when (a)
delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate as to itself by notice to the other
parties):
(a) If to Buyer or RBC:
Roller Bearing Holding Company, Inc.
c/o TRIBOS Management Company, Inc.
1800 Century Park East, Suite 1000
Los Angeles, California 90067
Telecopier No.: (310) 277-5591
Attention: Mr. Richard R. Crowell
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Telecopier No.: (213) 229-7520
Attention: Terrance L. Carlson, Esq.
(b) If to BFM or GSI:
c/o Oak Hill Partners, Inc.
65 East 55th Street
32nd Floor
Telecopier No.: (212) 421-4578
Attention: Mr. Anthony P. Scotto
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with a copy to:
O'Melveny & Myers
610 Newport Center Drive, 17th Floor
Newport Beach, California 92660-6429
Telecopier No.: (714) 669-6994
Attention: Gary J. Singer, Esq.
8. Jurisdiction; Service of Process.
8.1. Jurisdiction. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against any of the parties in the courts of the State of California, or,
if it has or can acquire jurisdiction, in the United States District Court for
the Central District of California, and each of the parties hereby consents to
the jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any obligation to venue laid therein.
8.2. Service of Process. Process in any action or proceeding
referred to in Section 8.1 may be served on any party anywhere in the world,
whether within or without the State of California.
9. Miscellaneous.
9.1. Expenses. Each party shall bear its own expenses incident to
the preparation, negotiation, execution and delivery of this Agreement and the
performance of its obligations hereunder.
9.2. Captions. The captions in this Agreement are for convenience of
reference only and shall not be given any effect in the interpretation of this
Agreement.
9.3. No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver must be
in writing.
9.4. Exclusive Agreement; Amendment. This Agreement supersedes all
prior agreements among the parties with respect to its subject matter (other
than any confidentiality agreement), is intended (with the documents referred to
herein) as a complete and exclusive statement of the terms of the agreement
among the parties with respect thereto and cannot be changed or terminated
orally.
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9.5. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
9.6. Governing Law. This Agreement and (unless otherwise provided)
all amendments hereof and waivers and consents hereunder shall be governed by
the internal law of the State of California, without regard to the conflicts of
law principles thereof.
9.7. Representation By Counsel; Interpretation. BFM, GSI, RBC and
Buyer each acknowledges that it has been represented by legal counsel in
connection with this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of law, including but not limited to Section
1654 of the California Civil Code, or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement against the party
that drafted it has no application and is expressly waived. The provisions of
this Agreement shall be interpreted in a reasonable manner to effect the intent
of Buyer, BFM, RBC and GSI.
9.8. Damages. Notwithstanding anything to the contrary elsewhere in
this Agreement, no party (or its Affiliates) shall, in any event, be liable to
the other party (or its Affiliates) for any consequential damages, including,
but not limited to, loss of revenue or income, cost of capital, or loss of
business reputation or opportunity relating to the breach or alleged breach of
this Agreement. Each party agrees that it will not seek punitive damages as to
any matter under, relating to or arising out of this Agreement.
9.9. Further Assurances; Knowledge.
(a) Further Assurances. Each party shall execute and deliver both
before and after the Closing such further certifications, agreements and
other documents and take such other actions as the other party may
reasonably request to consummate or implement the transactions
contemplated hereby or to evidence such events or matters.
(b) Knowledge. As used in this Agreement, the terms "knowledge" or
"knowledge and belief" when used with respect to any party shall mean the
actual "knowledge" or actual "knowledge and belief" of any one or more of
the executive officers of such party.
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9.10. Permitted Assignment. Notwithstanding anything herein to the
contrary, Buyer and RBC are permitted to grant to Heller Financial, Inc., a
Delaware corporation, for the benefit of the Lenders (as defined in the Amended
and Restated Credit Agreement dated as of October 26, 1992) a continuing
security interest in and to all right, title and interest of Buyer and RBC in
this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date and year first written above.
BFM AEROSPACE CORPORATION
By: /s/ [Illegible]
----------------------------
Title: Secretary
GROUND SUPPORT, INC.
By: /s/ [Illegible]
----------------------------
Title: Secretary
RBC TRANSPORT DYNAMICS CORPORATION
By: /s/ Michael J. Hartnell
----------------------------
Title: President & CEO
ROLLER BEARING HOLDING
COMPANY, INC.
By: /s/ Michael J. Hartnell
----------------------------
Title: President & CEO
<PAGE>
EXHIBIT 1.4(a)
BILL OF SALE
THIS BILL OF SALE is made as of the 26th day of October, 1992, by
BFM TRANSPORT DYNAMICS CORPORATION, a California corporation ("GSI").
W I T N E S S E T H:
That for the consideration set forth in that certain Asset Purchase
Agreement, dated as of October 26, 1992 (the "Agreement"), by and between GSI
and RBC Holding Company, Inc., a Delaware corporation ("Buyer"), GSI hereby
conveys, transfers, assigns and delivers to and vests in Buyer, free and clear
of all Encumbrances except Permitted Encumbrances (all capitalized terms used
herein and not otherwise defined having the meanings given to them in the
Agreement) all of GSI's good and marketable title, right and interest in and to
the Assets, which are all the assets of every type and nature (tangible or
intangible) owned by GSI as of the date hereof, including, without limitation:
(i) all of the cash of GSI on hand or in bank or in other accounts of GSI, (ii)
all trade accounts receivable and other receivables of GSI, (iii) all of the
inventories of raw materials, work-in-process, finished products, scrap and
rejects, spare parts and supplies identified in Schedule 1 attached hereto,
except for the items sold after the date of such schedule in the ordinary course
of business of GSI; (iv) all machinery, apparatus, commercial tooling, equipment
and trade fixtures identified in Schedule 2 attached hereto; (v) all office
furniture and fixtures identified in Schedule 3 attached hereto; (vi) all of
GSI's leasehold improvements located at the premises occupied by GSI at 11135
and 11155 Condor Avenue, Fountain Valley, California and identified in Schedule
4 attached hereto; (vii) the goodwill incident to the business of GSI; (viii)
all records of the Business including, without limitation, property, production,
engineering, contract and accounting records, sales data and records, customer
lists and other information relating to customers, catalogs, brochures,
suppliers' names, mailing lists and any photographic and advertising materials;
(ix) all rights in, to and under all Contracts, including purchase and sales
orders and commitments, personal property leases and other agreements made in
the ordinary course of business, including, without limitation, those set forth
in Schedule 5 attached hereto; and (x) all of GSI's right, title and interest in
and to all copyrights, service marks, trademarks, logos, trade names (including
the name "Ground Support, Inc."), patents, patent applications, licenses
(including patent licenses) royalty rights and inventions, processes, know-how,
formulae, trade secrets,
1.4(a)-l
<PAGE>
compositions, designs, drawings, specifications, patterns, blueprints, plans,
files, notebooks and records relating to research, engineering and development
activities, production data and shop rights, including, without limitation, the
items set forth in Schedule 6 attached hereto.
EXCEPT AS SET FORTH HEREIN AND IN SECTION 2 OF THE AGREEMENT, THE
ASSETS HAVE BEEN EXAMINED BY BUYER AND ARE CONVEYED BY GSI TO BUYER "AS IS" AND
"WHERE IS" AND GSI HEREBY EXPRESSLY DISCLAIMS THE EXISTENCE OF ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO CONDITION, MERCHANTABILITY,
OPERATION, FITNESS FOR USE OR AS TO ANY MATTER WHATSOEVER.
Subject to the terms and conditions of the Agreement, GSI hereby
constitutes and appoints Buyer and its successors and assigns as GSI's true and
lawful attorney and stead, on behalf of and for the benefit of Buyer, its
successors and assigns, to demand and receive any and all of the Assets and to
give receipts and releases for and in respect of the same and any part thereof,
and from time to time to institute and prosecute in GSI's name or otherwise for
the benefit of Buyer, its successors and assigns, any and all proceedings at
law, in equity or otherwise, which Buyer, its successors and assigns, may deem
proper for the collection or reduction to possession of any of the Assets or
Assumed Liabilities or for the collection and enforcement of any claim or right
of any kind hereby sold, conveyed, transferred, assigned and delivered, or
intended so to be, and to do all acts and things in relation to the Assets and
Assumed Liabilities that Buyer, its successors and assigns, shall deem
desirable; GSI hereby declaring that the foregoing powers are coupled with an
interest and are not and shall not be revocable by GSI in any manner for any
reason whatsoever.
From time to time after the date hereof, at the request of Buyer,
GSI shall, without consideration, deliver such further instruments of transfer
and shall take such other action as Buyer may reasonably request in order to
convey more effectively any of the Assets transferred hereunder to Buyer.
This Bill of Sale may be assigned and a security interest in this
Bill of Sale may be granted by Buyer and may be enforced by any financial
institution or other entity providing financing to Buyer for the transactions
contemplated herein.
This Bill of Sale is executed and delivered by GSI pursuant to the
Agreement and shall be binding upon GSI, its successors and assigns for the uses
and purposes above set
1.4(a)-2
<PAGE>
forth and referred to, effective on the date first written above.
1.4(a)-3
<PAGE>
IN WITNESS WHEREOF, GSI has executed this Bill of Sale on the day
and year first written above.
GROUND SUPPORT, INC.,
a California corporation
By:
-----------------------------
Title:
----------------------
1.4(a)-4
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF KINGS )
On October __, 1992, before me, the undersigned a Notary Public in
and for said County and State, personally appeared __________________________,
known or proved to me on the basis of satisfactory evidence to be the
_______________ of the corporation that executed the within instrument, and
known to me to be the person who executed the within instrument on behalf of the
corporation therein named, and acknowledged to me that, acting on behalf of such
corporation, he executed the same.
WITNESS my hand and official seal.
-----------------------------
Notary Public in and for said
County and State
1.4(a)-5
<PAGE>
EXHIBIT 1.5(b)
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (this "Assumption Agreement") is made as
of the 26th day of October, 1992, by RBC TRANSPORT DYNAMICS CORPORATION, a
Delaware corporation ("Buyer").
R E C I T A L S:
A. Buyer, Roller Bearing Holding Company, Inc., a Delaware
corporation, BFM Aerospace Corporation, a Delaware corporation, and Ground
Support, Inc., a California corporation ("GSI"), have entered into that certain
Asset Purchase Agreement, dated as of the date hereof (the "Agreement")
B. Pursuant to the Agreement, Buyer has agreed to assume certain of
the debts, obligations, liabilities and claims of GSI as of the date hereof.
C. All capitalized terms used herein without definition shall have
the meanings given to them in the Agreement
NOW, THEREFORE, in consideration of the above premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer agrees as follows:
Section 1. Assumption of Liabilities.
Buyer hereby assumes as of the date hereof and shall hereafter
perform and discharge the following and only the following debts, obligations
and liabilities of and claims against GSI: (i) all agreements, contracts,
commitments, purchase orders, personal property leases and sales orders relating
to the Business, including, without limitation, those items identified in
Schedule 1 attached hereto; (ii) all debts, obligations, liabilities and claims
identified in Schedule 2 attached hereto to the extent set forth therein; (iii)
all debts, liabilities, obligations and claims arising from the operation of the
Business after the date hereof; and (iv) all claims made after the date hereof
for breach of warranty or product liability arising out of products shipped by
Buyer after the date hereof with respect to which Buyer is unable to provide to
GSI written or other reasonable evidence that such products were manufactured by
GSI and constituted finished goods on or prior to the date hereof.
1.5(b)-l
<PAGE>
Section 2. Governing Law.
This Assumption Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California.
Section 3. Construction.
This Assumption Agreement is subject to the terms and conditions of
the Agreement and, notwithstanding anything contained herein to the contrary,
this Assumption Agreement shall not be deemed to limit, enlarge or extinguish
any obligation of GSI, Buyer or the other parties to the Agreement under the
Agreement, all of which obligations shall survive the execution and delivery of
this Agreement in accordance with the terms of the Agreement.
1.5(b)-2
<PAGE>
IN WITNESS WHEREOF, Buyer has duly executed this Assumption
Agreement as of the day and year first set forth above.
RBC TRANSPORT DYNAMICS
CORPORATION,
a Delaware corporation
By:
-------------------------
Title:
----------------------
l.5(b)-3
<PAGE>
SCHEDULE 1
Contracts
<PAGE>
SCHEDULE 2
Other Assumed Liabilities
<PAGE>
Schedule 1.1(a) (iii)
Inventories
AUGUST 31, 1992
($ IN 000'S)
GROUND SUPPORT
--------------
RAW MATERIAL --
WORK-IN-PROCESS $ 1,108
FINISHED GOODS --
RESERVES FOR INVENTORY
EVALUATION (28)
-------
TOTAL $ 1,080
=======
GSI-l
<PAGE>
Schedule 1.1(a)(iv)
Machinery, Furniture and Leasehold Improvements
See attached lists. The cost of each item referenced to therein
reflects the original book cost.
GSI-2
<PAGE>
This Schedule is also referenced
in Section 2.12 of the Purchase Agreement.
Schedule 1.1(a)(ix)
Contracts
1. The following Purchase Order agreements from customers:
Order Contract
Customer Date in 000's Ship Date
- -------- ---- -------- ---------
United Air Lines 5-92 $ 143 10-92
United Airlines 6-92 137 10-92
Qantas 8-92 129 11-92
Kelly AFB 8-92 433 1-93
VIASA (SAISA) 8-92 350 10-93
BAE (AeroTech) 7-92 72 10-92
See Schedule 2.3 which schedule is incorporated herein by reference.
2. Distributor Agreements:
(a) Agreement with Aviation Parts & Support Corp. dated January 1, 1990
for sale of ground support equipment. Agreement is subject to
automatic one-year renewals.
(b) Agreements with AVIA Equipment Pte. Ltd. dated January 1, 1991 for
sale of ground support equipment. Agreement expires December 31,
1991 and, thereafter, is subject to automatic one-year renewals.
(c) Agreement with AeroTech World Trade Corp. dated June 5, 1991, for
sale of mobile and fixed pre-conditioned air equipment.
(d) Agreement with Mudira Internacional dated June 10, 1991, for sale of
mobile and fixed pre-conditioned air equipment, solid state power
converters and pantographs.
(e) Agreement with AviaTech Ltd. dated January 1, 1991, for sale of
mobile and fixed pre-conditioned air equipment, pantographs and
cables.
(f) Agreement with S&S Motors dated October 26, 1990 for sale of ground
support equipment.
GSI-3
<PAGE>
Schedule 1.1(a)(ix) (continued)
(g) Agreement with SAISA (U.S.A.) dated February 1, 1992 for sale of
ground support equipment.
3. Union agreements:
(a) Union Agreement dated June 1, 1989 between GSI and District 720
International Association of Machinists & Aerospace Workers.
(Agreement expired May 31, 1992. The employees have continued to
work without an agreement and the parties are attempting to
negotiate a new contract.]
(b) Union Agreement dated September 1, 1991 between GSI and United
Association of Journeymen and Apprentices of the Plumbing and Pipe
Fitting Industry, Air-Conditioning and Refrigeration Fitters
Division of Local Union 250, AFL-CIO. Agreement expires August 31,
1994.
4. Lease Agreement between TDC and Xerox Corporation for lease of copying
equipment at GSI facilities. Lease expires in October of 1993.
TDC and GSI
1. Compensation Agreements:
(a) Letter Agreement dated March 14, 1990 regarding payment to Frank
Cole of Deferred Bonus.
(b) Letter dated April 10, 1992 regarding proposals for the 1992 Key
Employee Incentive Bonus Program.
2. Security Maintenance Agreement dated July 19g1991 between Sea Coast
Security System and TDC. Security Agreement expires June 30, 1994.
3. Equipment Maintenance and Service Agreement dated October 1,
1991 between MS-COM Telecommunications and TDC.
4. Maintenance Agreement dated June 15, 1987 between IDEA Servcom and TDC.
This agreement is terminable by either party to the agreement upon 90 days
prior written notice.
5. Personal Property Leases:
(a) Vehicle lease agreements between TDC and McCullagh-Gelco for the use
of seven company vehicles by TDC's
GSI-4
<PAGE>
Schedule 1.l(a)(ix) (continued)
president and field sales personnel. Leases have various expiration
dates.
(b) Lease agreement between TDC and G. E. Capital Business Center for
lease of ROLM VXCBX telephone system. Lease expires December 31,
1992.
GSI-5
<PAGE>
This Schedule is also referenced in
Section 2.10 of the Purchase Agreement.
Schedule 1.1(a)(x)
Patent and Trademark Rights
U.S. Patents
- -------------
U.S. Patent No. Issue Date Title
- --------------- ---------- -----
No. 4,272,967 June 16, 1981 Self-contained
Portable Air-
Conditioning
System
No. 5,031,690 July 16, 1991 Portable
Unitary
Aircraft Air-
Conditioner
GSI-6
<PAGE>
Schedule 1.1(b)
Assumed Liabilities
1. Workers' compensation liabilities accrued on the balance sheet of TDC as
of the date hereof (the "Balance Sheet"), which, as of August 31, 1992,
were $3,000.
2. All Employee Plans listed on Schedule 2.14.
3. Frank Cole's deferred compensation pursuant to that certain Deferred Bonus
Agreement dated March 14, 1990 (approximately $43,000).
4. Fifty percent of the amount of the liability, if any, for severance
payments or termination benefits owing to Frank E. Cole pursuant to that
certain Termination Benefits Agreement dated January 31, 1990.
5. Liability for benefit payments under the Severance Policy on account of
the termination of any Transferred Employee occurring on or after the
Closing.
6. The Contracts (as defined in Section 1.1(a)(ix) of the Agreement).
7. Trade accounts payable accrued on the Balance Sheet, which, as of August
31, 1992, were $38,000.
8. Accrued payroll as accrued on the Balance Sheet, which, as of August 31,
1992, was $7,000.
9. Accrued payroll taxes and property taxes as accrued on the Balance Sheet,
which, as of August 31, 1992, were $10,000.
10. The leases as set forth in Schedule 2.11, other than the lease agreement
described in Schedule 1.1(a).
11. Product warranties for products shipped by Buyer after the date hereof
with respect to which Buyer is unable to provide to TDC written or other
reasonable evidence that such products were manufactured by TDC and
constituted finished goods on or prior to the date hereof.
12. Vacation, holiday and sick leave accruals on the Balance Sheet, which, as
of August 31, 1992, were $69,000.
13. Bonuses accrued on the Balance Sheet, if any, with respect to the Employee
Incentive Bonus Proposal dated April 10, 1992, which, as of August 31,
1992, were zero.
GSI-7
<PAGE>
14. Any other liabilities on the Balance Sheet not listed herein, which, as of
August 31, 1992, were approximately $21,000.
GSI-8
<PAGE>
Schedule 2.2
No Conflict
The terms of the lease between GSI and Xerox Corporation ("Xerox"), require the
prior written consent of Xerox in connection with the assignment of such lease
by GSI. GSI has undertaken to obtain such consent, which Xerox has informed GSI
will be forthcoming.
GSI-9
<PAGE>
Schedule 2.3
Government Consents and Approvals
A novation agreement, in accordance with Federal Acquisition Regulations System
subpart 42.12, is required on the following Government Contracts:
Open U.S. Government Contracts as of September 30, 1992
Dept. of the Air Force
F41608-92-C-1259 Kelly AFB
Defense Logistics Agency, Richmond, VA
DLA430-92-M-H232
Defense General Supply Center, Richmond, VA
DLA 430-92-M-M418
DLA 441-92-M-P575
Navy Ships Parts Control Center, Mechanicsburg, PA
N00104-92-P-AL40
GSI-l0
<PAGE>
Schedule 2.5
Encumbrances
None.
GSI-11
<PAGE>
Schedule 2.8
Taxes
Federal income tax returns of BFM have not been audited. California income tax
returns of BFM have been audited through October 31, 1989.
Sales tax returns have been audited through calendar year 1990. Property tax
statements have been audited for the 1992-93 tax year.
GSI-12
<PAGE>
Schedule 2.10
Disclosure Regarding Patents
and Trademark Rights
A. A producer of ground support central air-conditioning systems has been
issued a patent regarding the cooling of air to a temperature below the freezing
point of water for delivery to passenger air-crafts. Two other manufacturers of
ground air-conditioning equipment have settled patent infringement actions
brought by the patent holder.
Although GSI manufactures air-conditioning systems, it does not
manufacture products that generate air below the freezing point of water. For
that reason, GSI believes that it will not be served with an action regarding
that patent.
B. None.
GSI-13
<PAGE>
This Schedule is also referenced in Section 2.12
of the Purchase Agreement.
Schedule 2.11
Leases
1. Lease agreement dated February 1, 1992 between TDC and Condor Associates,
Ltd. for lease of GSI facilities at 11135 and 11155 Condor Avenue,
Fountain Valley, California. Lease expires July 31, 1993.
2. Lease Agreement between TDC and Xerox Corporation for lease of copying
equipment at GSI facilities. Lease expires in October of 1993.
TDC and GSI
1. Vehicle lease agreements between TDC and McCullagh-Gelco for the use of
seven company vehicles by TDC's president and field sales personnel.
Leases have various expiration dates.
2. Lease agreement between TDC and G. E. Capital Business Center for lease of
ROLM VXCBX telephone system. Lease expires December 31, 1992.
GSI-14
<PAGE>
Schedule 2.12
(Contracts and Commitments)
1. Severance policy.
2. Documents executed by GSI in connection with BFM's Credit Agreement with
Wells Fargo.
GSI-15
<PAGE>
Schedule 2.14
Employee Benefit Plans
A. Employee Plans
1. Medical Benefit Plans for Salaried Employees:
(a) Blue Cross Prudent Buyer Plan;
(b) Pacificare HMO (for I.A.M. Union Hourly Employees only);
(C) Blue Cross California Care HMO; and
(d) Blue Cross Out-of-State Plan.
2. Dental Benefit Plans for Salaried and Hourly Employees:
(a) Confederation Life;
(b) Denticare HMO; and
(c) Dental Net HMO.
B. Multi-Employer Plans
1. I.A.M. National Pension Fund Trust Agreement.
2. Vision Care Plan for I.A.M. Union Employees.
3. Air-Conditioning and Refrigeration Industry Retirement Trust Fund.
4. Air-Conditioning and Refrigeration Industry Health and Welfare Trust
Fund.
GSI-16
<PAGE>
Schedule 2.16
Labor Relations; Employees
The Union Agreement dated June 1, 1989 between GSI and District 720
International Association of Machinists and Aerospace Workers expired May 31,
1992. The employees have continued to work without an agreement and the parties
are attempting to negotiate a new contract.
GSI-17
<PAGE>
Schedule 2.17
Permits and Licenses
1. City of Fountain Valley
Business License Certificate #67-850688A
Hazardous Material Disclosure #6696
2. South Coast Air Quality
Management District
Spray Booth Paint and Solvent #D37989
3. State Board of Equalization
Hazardous Waste EPA
3CAD000039681
GSI-18
<PAGE>
Schedule 3.4
Governmental Consents and Approvals (Buyer)
Consents required pursuant to the Federal Assignment of Contracts
Act, 41 U.S.C. Section 15, the Assignment of Claims Act, 31 U.S.C. Section 3727
(the "Statutes") and the regulations implementing the Statutes.
GSI-19
CONFIDENTIAL
Execution Copy
ASSET PURCHASE AGREEMENT
BY AND AMONG
BFM AEROSPACE CORPORATION,
BFM TRANSPORT DYNAMICS CORPORATION,
RBC TRANSPORT DYNAMICS CORPORATION
AND
ROLLER BEARING HOLDING COMPANY, INC.
Dated as of October 26, 1992
<PAGE>
TABLE OF CONTENTS
Section Page
1. The Acquisition .................................................... 1
1.1. Purchase and Sale ........................................... 1
1.2. Purchase Price .............................................. 3
1.3. The Closing ................................................. 4
1.4. Deliveries by TDC at the Closing ............................ 4
1.5. Deliveries by Buyer at the Closing .......................... 5
2. Representations and Warranties of TDC .............................. 6
2.1. Organization of TDC; Authorization .......................... 6
2.2. No Conflict ................................................. 6
2.3. Government Consents and Approvals ........................... 6
2.4. Financial Statements ........................................ 6
2.5. Title to Properties ......................................... 7
2.6. No Undisclosed Liabilities .................................. 7
2.7. Litigation .................................................. 7
2.8. Taxes ....................................................... 7
2.9. Absence of Certain Changes .................................. 8
2.10. Patents, Trademarks, Etc .................................... 8
2.11. Leases ...................................................... 9
2.12. Contracts and Commitments ................................... 9
2.13. Status of Agreements ........................................ 10
2.14. Pension and Employee Benefit Plans .......................... 10
2.15. Compliance with Law ........................................ 10
2.16. Labor Relations; Employees ................................. 10
2.17. Permits and Licenses ....................................... 11
2.18. Government Contracts ....................................... 11
2.19. Environmental Matters ...................................... 12
3. Representations and Warranties of Buyer ............................ 13
3.1. Organization of Buyer; Authorization ........................ 13
3.2. No Conflict as to Buyer ..................................... 13
3.3. Investigation ............................................... 13
3.4. Government Consents and Approvals ........................... 14
4. Representations and Warranties of RBC .............................. 14
4.1. Organization of RBC; Authorization .......................... 14
4.2. No Conflict as to RBC ....................................... 14
4.3. RBC Preferred Shares. ....................................... 15
4.4. Capital Structure ........................................... 15
4.5. No Prior Activities ......................................... 15
4.6. Financial Statements ........................................ 15
4.7. Litigation .................................................. 16
4.8. Subsidiaries and Affiliates ................................. 16
4.9. Nonforeign Status ........................................... 16
5. Covenants by Buyer and TDC ......................................... 17
5.1. Employees ................................................... 17
5.2. Business Records and Files .................................. 18
i
<PAGE>
Section Page
5.3. Tax Worksheets .............................................. 18
5.4. Delivery of Financial Statements ............................ 19
5.5. Sales Taxes Arising from Sale of Assets ..................... 19
5.6. Sales Tax Clearance Certificate ............................. 19
5.7. Mail and Other Communications ............................... 19
5.8. Governmental Contract Novations ............................. 19
6. Survival of Representations and Warranties;
Indemnification ..................................................... 20
6.1. Survival .................................................... 20
6.2. Time Limitations ............................................ 20
6.3. Indemnification by BFM and TDC .............................. 20
6.4. Indemnification by RBC and Buyer ............................ 21
6.5. Limitations as to Amount .................................... 21
6.6. Brokers ..................................................... 22
6.7. Bulk Sales Law .............................................. 22
6.8. Procedure for Indemnification ............................... 22
7. Definitions ........................................................ 23
8. Notices ............................................................ 25
9. Jurisdiction; Service of Process ................................... 26
9.1. Jurisdiction ................................................ 26
9.2. Service of Process .......................................... 26
10. Miscellaneous ...................................................... 27
10.1. Expenses .................................................... 27
10.2. Captions .................................................... 27
10.3. No Waiver ................................................... 27
10.4. Exclusive Agreement; Amendment .............................. 27
10.5. Counterparts ................................................ 27
10.6. Governing Law ............................................... 27
10.7. Representation By Counsel; Interpretation ................... 27
10.8. Damages ..................................................... 27
10.9. Further Assurances; Knowledge ............................... 28
10.10. Permitted Assignment ........................................ 28
ii
<PAGE>
INDEX OF EXHIBITS
Exhibit 1.2(a) - Certificate of Designations of
Preferred Stock of RBC
Exhibit 1.4(a) - Bill of Sale
Exhibit 1.4(b) - Standard Industrial Lease
Exhibit 1.4(c) - Opinion of O'Melveny & Myers
Exhibit 1.4(g) - Roller Bearing Holding
Company, Inc. Stock Subscription and
Shareholder Agreement
Exhibit 1.5(b) - Assumption Agreement
Exhibit 1.5(g) - Opinion of Gibson, Dunn &
Crutcher
iii
<PAGE>
Index of Schedules
Schedule 1.1(a) - Excluded Assets
Schedule 1.1(a)(iii) - Inventory
Schedule 1.1(a)(iv) - Machinery and Furniture
Schedule 1.1(a)(vi) - Leasehold Improvements
Schedule 1.1(a)(ix) - Contracts
Schedule 1.1(a)(x) - Patent and Trademark Rights
Schedule 1.1(b) - Assumed Liabilities
Schedule 2.2 - No Conflict
Schedule 2.3 - Government Consents and
Approvals (TDC)
Schedule 2.5 - Encumbrances
Schedule 2.8 - Taxes
Schedule 2.10 - Disclosure Regarding Patents
and Trademark Rights
Schedule 2.11 - Leases
Schedule 2.14 - Employee Plans
Schedule 2.15 - Compliance with Law
Schedule 2.17 - Permits and Licenses
Schedule 2.19 - Environmental Matters
Schedule 3.4 - Government Consents and
Approvals (Buyer)
iv
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of October 26, 1992, by and among BFM AEROSPACE CORPORATION, a Delaware
corporation ("BFM"), BFM TRANSPORT DYNAMICS CORPORATION, a California
corporation ("TDC"), RBC TRANSPORT DYNAMICS CORPORATION, a Delaware corporation
("Buyer"), and ROLLER BEARING HOLDING COMPANY, INC., a Delaware corporation
("RBC").
R E C I T A L S:
A. TDC manufactures and sells plain bearings, primarily
self-lubricating types, used in various aerospace and industrial applications.
The business of TDC is hereinafter referred to as the "Business."
B. TDC desires to sell to Buyer, and Buyer desires to purchase from
TDC, substantially all of the assets of TDC, upon the terms and subject to the
conditions set forth herein (all capitalized terms used herein without
definition shall have the meanings assigned to them in Section 7 hereof).
C. BFM is the owner of all of the issued and outstanding capital
stock of TDC.
D. RBC is the owner of all of the issued and outstanding capital
stock of Roller Bearing Company of America, Inc., a Delaware corporation
("Roller Bearing"). Roller Bearing is the owner of all of the issued and
outstanding capital stock of Buyer.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained below, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. The Acquisition.
1.1. Purchase and Sale; Assumption of Liabilities.
(a) Subject to the terms and conditions contained in this Agreement,
on the date hereof, TDC shall sell, convey, assign, transfer and deliver
to Buyer, and Buyer shall purchase, acquire and accept from TDC, all of
the assets, properties, rights, privileges, claims and contracts of every
kind and nature owned by TDC and used by TDC in the operation of the
Business as of the date hereof (the "Assets"), free and clear of all
Encumbrances other than Permitted Encumbrances, and including, without
limitation, the assets described
1
<PAGE>
below, other than the assets specifically identified in Schedule 1.1(a)
attached hereto (the "Excluded Assets"):
(i) Cash. All of the cash on hand or in bank or in other
accounts of TDC.
(ii) Accounts Receivable. All trade accounts receivable and
other receivables.
(iii) Inventory. All of the inventories of raw materials,
work-in-process, finished products, scraps and rejects, spare parts
and supplies, including, without limitation, the items set forth in
Schedule 1.1(a) (iii) attached hereto, except for the items sold
after the date of such schedule in the ordinary course of business
of TDC.
(iv) Machinery and Equipment. All machinery, apparatus,
commercial tooling, equipment and trade fixtures, including, without
limitation, the items set forth in Schedule 1.1(a) (iv) attached
hereto.
(v) Office Furniture and Fixtures. All office furniture and
fixtures, including, without limitation, the items set forth in
Schedule 1.1(a) (iv) attached hereto.
(vi) Leasehold Improvements. All of TDC's leasehold
improvements located at the premises occupied by TDC at 3131 West
Segerstrom Avenue, Santa Ana, California 92702 (the "Premises"),
including, without limitation, the items set forth in Schedule
1.1(a) (vi) attached hereto.
(vii) Goodwill. The goodwill incident to the Business.
(viii) Records and Other Information. All records of the
Business, including, without limitation, property, production,
engineering, contract and accounting records, sales data and
records, customer lists and other information relating to customers,
catalogs, brochures, suppliers' names, mailing lists and any
photographic and advertising materials.
(ix) Contracts. All rights in, to and under all purchase and
sales orders and commitments, personal property leases and other
agreements made in the ordinary course of business, including,
without limitation, those set forth in Schedule 1.1(a) (ix) attached
hereto (the "Contracts");
2
<PAGE>
provided, however, that to the extent such Contracts are Government
Contracts (as hereinafter defined) only to the extent the same are
assignable.
(x) Intellectual Property. All right, title and interest in
and to all copyrights, service marks, trademarks, logos, trade names
(including the name "BFM Transport Dynamics Corporation"), patents,
patent applications, licenses (including patent licenses), royalty
rights and inventions, processes, know-how, formulae, trade secrets,
compositions, designs, drawings, specifications, patterns,
blueprints, plans, files, notebooks and records relating to
research, engineering and development activities, production data
and shop rights, including, without limitation, the items set forth
in Schedule l.1(a)(x) attached hereto (the "Patent and Trademark
Rights").
(b) Buyer shall assume, perform and discharge only the liabilities
and obligations identified in Schedule 1.1(b) and only to the extent set
forth therein (the "Assumed Liabilities"). Except as provided in Schedule
1.1(b), or as set forth in Section 5.1 or 6.4 hereof, Buyer shall not
purchase, assume or have any liability whatsoever with regard to any
Employee Benefit Plan (as such term is hereinafter defined).
1.2. Purchase Price.
(a) The aggregate purchase price for the Assets as defined herein
and the Assets as defined in that certain Purchase Agreement, dated as of
the date hereof by and among BFM, Ground Support, Inc., a California
corporation, Buyer and RBC (the "GSI Purchase Agreement"), shall consist
of (i) $4,500,000, payable by Buyer to TDC and GSI to a bank account
designated by BFM to be held for the benefit of each, and such shall be
payable at the Closing in immediately available funds, (ii) six thousand
(6,000) shares of preferred stock, $.O1 par value, of RBC issued to TDC,
having the rights, preferences and privileges set forth in the Certificate
of Designations (the "Certificate of Designations") attached hereto as
Exhibit 1.2(a) (the "RBC Preferred Shares"), which shares are
consideration for the Assets as defined herein, and (iii) the assumption
of the Assumed Liabilities as defined herein and in the GSI Purchase
Agreement.
(b) The purchase price shall be allocated among the Assets as
defined herein and the Assets as defined in the GSI Purchase Agreement,
based on a schedule to be prepared by Buyer and approved by TDC, which
approval shall not be unreasonably withheld, and TDC and Buyer agree to
report the purchase and sale of the Assets in a manner consistent with
such allocation of purchase price.
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1.3. The Closing. The closing of the sale and purchase of the
Assets (the "Closing") shall take place at the offices of Latham & Watkins
(counsel to RBC's acquisition financing lender, Heller Financial, Inc.), 633
West Fifth Street, Suite 4000, Los Angeles, California, at 9:00 a.m. (local
time) on the date hereof.
1.4. Deliveries by TDC at the Closing. At the Closing, TDC shall
deliver the following to Buyer:
(a) A Bill of Sale in substantially the form attached hereto as
Exhibit 1.4(a);
(b) A Standard Industrial Lease - Net (the "Lease") executed by TD
Land, Inc., in substantially the form attached hereto as Exhibit 1.4(b);
(c) An opinion of O'Melveny & Myers ("OMM"), special counsel to TDC,
in substantially the form of Exhibit 1.4(c) attached hereto, dated as of
the date hereof and addressed to Buyer and a letter from OMM as to
reliance thereon addressed to Heller Financial, Inc.;
(d) UCC-2 release forms, executed by Wells Fargo Bank, N.A. ("Wells
Fargo"), pursuant to which Wells Fargo shall release its security interest
in the Assets;
(e) An officers' certificate for TDC as to the Articles of
Incorporation and Bylaws of TDC, the resolutions adopted by the Board of
Directors and sole shareholder of TDC authorizing the execution and
delivery of this Agreement and the transactions contemplated hereby, and
the incumbency of certain officers of TDC;
(f) An officers' certificate for BFM as to the Certificate of
Incorporation and Bylaws of BFM, the resolutions adopted by the Board of
Directors of BFM authorizing the execution and delivery of this Agreement
and the transactions contemplated hereby, and the incumbency of certain
officers of BFM;
(g) A Roller Bearing Holding Company, Inc. Stock Subscription and
Shareholder Agreement, in substantially the form of Exhibit 1.4(g)
attached hereto, executed by TDC; and
(h) All other documents, instruments and writings required by this
Agreement to be delivered by TDC at the Closing or otherwise reasonably
requested by Buyer to complete the transactions contemplated hereby.
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1.5. Deliveries by Buyer at the Closing. At the Closing, Buyer
shall deliver the following to TDC:
(a) By wire transfer of immediately available funds to the account
of TDC designated in writing to Buyer prior to the date hereof, the amount
of the cash portion of the purchase price set forth in Section 1.2(a)
hereof;
(b) An Assumption Agreement executed by Buyer in substantially the
form attached hereto as Exhibit 1.5(b);
(c) The Lease executed by Buyer;
(d) A certificate representing the RBC Preferred Shares issued to
TDC;
(e) An officers' certificate for Buyer as to the Certificate of
Incorporation and Bylaws of Buyer, the resolutions adopted by the Board of
Directors and sole stockholder of Buyer authorizing the execution and
delivery of this Agreement, the Assumption Agreement and the Lease and the
transactions contemplated hereby and thereby and the incumbency of certain
officers of Buyer;
(f) An officers' certificate for RBC as to the Certificate of
Incorporation and Bylaws of RBC, the resolutions adopted by the Board of
Directors of RBC authorizing the execution and delivery of this Agreement,
the filing with the Secretary of State of the State of Delaware of the
Certificate of Designations, the issuance of the Preferred Shares to TDC
and the transactions contemplated hereby and the incumbency of certain
officers of RBC;
(g) An opinion of Gibson, Dunn & Crutcher, special counsel to RBC,
in substantially the form of Exhibit 1.5(g) attached hereto, dated as of
the date hereof and addressed to TDC; and
(h) All other documents, instruments and writings required by this
Agreement to be delivered by Buyer at the Closing or otherwise reasonably
requested by TDC to complete the transactions contemplated hereby.
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2. Representations and Warranties of TDC.
TDC represents and warrants to, and agrees with, Buyer as follows:
2.1. Organization of TDC; Authorization. TDC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California with full corporate power and corporate authority to execute and
deliver this Agreement and to perform its obligations hereunder. The execution,
delivery and performance of this Agreement have been duly authorized by all
necessary corporate action on the part of TDC and this Agreement constitutes a
legally valid and binding obligation of TDC, enforceable against TDC in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally.
2.2. No Conflict. Except as set forth in Schedule 2.2 attached
hereto, neither the execution and delivery of this Agreement nor the sale of the
Assets to Buyer will (a) violate any provision of the Articles of Incorporation
or Bylaws of TDC or (b) violate, conflict with, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, any material agreement or commitment to which TDC is a party or (c) to
the best knowledge of TDC, violate any material statute or law or any judgment,
decree, order, regulation or rule of any court or other Governmental Body
applicable to TDC.
2.3. Government Consents and Approvals. Except as set forth in
Schedule 2.3 attached hereto, no consent, license, permit, approval or
authorization of, or declaration, filing or registration, or any novation or
assignment of any contract, with, any Governmental Body is required to be
obtained by TDC in connection with its execution and delivery of this Agreement
or the sale of the Assets to Buyer.
2.4. Financial Statements. TDC has delivered to Buyer: (a) an
unaudited balance sheet of TDC as at October 31, 1991 and unaudited statements
of income and cash flow for the fiscal year then ended, and (b) an unaudited
balance sheet of TDC as at August 31, 1992, and unaudited statements of income
and cash flow for the ten months then ended, including in each case the notes
thereto. The financial statements described in clause (a) of the preceding
sentence are referred to collectively as the "TDC Financial Statements," the
balance sheet as at August 31, 1992 is referred to as the "TDC Balance Sheet"
and the financial statements described in clause (b) of the preceding sentence
are referred to collectively as the "TDC Interim
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Statements." The TDC Financial Statements and notes thereto present fairly the
financial condition and results of operations of TDC as at the respective dates
thereof and for the period therein referred to, in accordance with GAAP, except
as otherwise disclosed therein. The TDC Interim Statements present fairly the
financial condition and results of operations of TDC as at the date thereof and
for the period therein referred to in accordance with GAAP on a basis consistent
with the TDC Financial Statements, except that the TDC Interim Statements do not
contain complete footnote disclosure and are subject to normal year-end
adjustments, which will not be material.
2.5. Title to Properties. TDC has good and marketable title to all
the Assets (including those reflected on the Balance Sheet, except for assets
sold, consumed or otherwise disposed of in the ordinary course of business since
the date of the Balance Sheet), and on the date hereof Buyer shall receive good
and marketable title to the Assets, free and clear of all Encumbrances, except
for (a) Encumbrances set forth in Schedule 2.5 attached hereto, (b) liens for
taxes not yet due or being contested in good faith by appropriate proceedings
(which proceedings, if any, are identified in Schedule 2.5) or (c) other
Encumbrances which, individually or in the aggregate, do not (i) have a material
adverse effect on the use of the asset in question or (ii) materially or
adversely affect the value of the asset in question or the operation of the
Business (the Encumbrances referred to in (a) through (c) above are collectively
referred to herein as "Permitted Encumbrances"). Since the date of the Balance
Sheet, TDC has not sold or disposed of any of its assets outside of the ordinary
course of business. The Assets and the Excluded Assets comprise all of the
assets, and the only assets, used by TDC in conducting the Business as presently
operated.
2.6. No Undisclosed Liabilities. TDC has no liabilities or
obligations that were not reflected or reserved against in the Balance Sheet,
except for liabilities and obligations incurred since the date of the TDC
Balance Sheet in the ordinary course of business and consistent with past
practice.
2.7. Litigation. There is no claim, action, suit or proceeding by or
before any court or Governmental Body pending or, to the best knowledge of TDC,
threatened against TDC, nor does TDC know of any facts that would form the basis
of any such claim, action, suit or proceeding.
2.8. Taxes
(a) TDC (and any affiliated group of which TDC is now or has been a
member), has duly and timely filed with
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the appropriate taxing authorities all returns (including, without limitation,
information returns and reports) in respect of Taxes required to be filed
through the date hereof. The information filed is complete and accurate in all
material respects. Neither TDC, nor any group of which TDC is now or was a
member, has requested any extension of time within which to file returns
(including, without limitation, information returns) in respect of any Taxes.
(b) All Taxes in respect of periods beginning before the date
hereof, have been paid, or an adequate reserve has been established therefor and
TDC has no liability for such taxes in excess of the amounts so paid or reserves
so established.
(c) (i) No deficiencies for Taxes have been claimed, proposed or
assessed by any taxing or other governmental authority; (ii) there are no
pending or threatened audits, investigations or claims for or relating to any
liability in respect of Taxes, and there are no matters under discussion with
any governmental authorities with respect to Taxes that are likely to result in
an additional amount of Taxes; (iii) no issues have been raised in any pending
or completed audit of TDC which could reasonably be expected to affect the tax
liability of TDC for a taxable year which has either not been audited or as to
which no audit is pending; (iv) audits of federal, state, and local returns for
Taxes by the relevant taxing authorities have been completed for each period set
forth in Schedule 2.8; (v) TDC has not been notified that any taxing authority
intends to audit a return for any other period; and (vi) no extension of a
statute of limitations relating to Taxes is in effect with respect to TDC, and
no Tax lien has been filed by any Tax authority against any property or assets
of TDC.
(d) TDC is not a "foreign person" as defined in Section 1445(f)(3)
of the Code.
2.9. Absence of Certain Changes. Since the date of the Balance
Sheet, (a) there has been no material adverse change in the business, financial
condition, prospects or operations of TDC (other than changes resulting from
general economic conditions and matters generally affecting companies engaged in
businesses similar to TDC) and (b) the Business has been conducted by TDC only
in the ordinary course and consistent with past practices.
2.10. Patents, Trademarks, Etc. Schedule 1.1(a)(x) sets forth a
list of the Patent and Trademark Rights, which are all United States and foreign
patents, registered trademarks, registered trade names, copyrights, and
applications therefor owned or used by TDC in the
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conduct of the Business. Except as disclosed in Part A of Schedule 2.10 attached
hereto, (a) TDC owns (or possesses licenses or other rights to use) all material
Patent and Trademark Rights necessary to the conduct of its business as
currently conducted and (b) there are no existing or, to the best knowledge of
TDC, threatened claims by any Person with respect to the use, or challenging the
ownership, of the Patent and Trademark Rights by TDC. To the best knowledge of
TDC, there is no material infringing use by any Person of the Patent and
Trademark Rights and TDC has not granted a license or sub-license in the Patent
and Trademark Rights to any third parties except for such licenses in the
Trademark Rights granted to distributors, pursuant to those certain agreements,
a complete list of which is contained in Part B of Schedule 2.10, as are
necessary for such distributors to effectively advertise and sell TDC's goods.
2.11. Leases. Schedule 2.11 attached hereto contains a list of all
real property leases and material personal property leases pursuant to which TDC
is a party. All such leases are valid, binding and enforceable in accordance
with their terms, and are in full force and effect, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws or equitable
principles relating to or affecting the rights of creditors generally; there are
no existing material defaults (or events which, with notice or lapse of time or
both, would constitute a material default) by TDC thereunder.
2.12. Contracts and Commitments. Except as set forth in Schedule
2.12, Schedule 2.11, Schedule 1.1(a) (ix) or Schedule 2.5, TDC is not a party to
or bound by, and the Contracts shall not include, any written agreement,
contract or commitment (a) having a remaining term of more than two years or
providing for payments to or by TDC in excess of $50,000; (b) providing for
employment or the payment of any bonus or commission based on sales or earnings,
or which contains any severance or termination pay liabilities or obligations;
(c) with any union or other collective bargaining representative of its
employees; (d) providing for or evidencing indebtedness for borrowed money; (e)
providing for capital expenditures in excess of $100,000 in the aggregate; (f)
with an Affiliate; (g) with a distributor or dealer, franchiser, retail sales
organization, sales agency or manufacturer's representative; or (h) granting any
preferential rights to purchase any of TDC's assets, property or rights or
requiring the consent of any party to the transfer to or assignment of such
assets, properties or rights or expressly limiting or restricting the ability to
transfer or assign such assets, property or rights other than in the ordinary
course of business.
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2.13. Status of Agreements. All Contracts are valid and in full
force and effect and there are no existing material defaults (or events which,
with notice or lapse of time or both1 would constitute a material default) by
TDC or, to the best knowledge of TDC, by any other party thereunder.
2.14. Pension and Employee Benefit Plans.
(a) Schedule 2.14 attached hereto lists each plan sponsored by BFM
or TDC that covers employees of TDC and is subject to Part 6 of Title I of ERISA
(the "Employee Plans"). Notwithstanding the foregoing, the term "Employee Plans"
shall exclude the TDC Security 90 Plan for all purposes under this Agreement.
True and complete copies of all Employee Plans have been delivered or made
available to Buyer.
(b) Schedule 2.14 discloses each Multiemployer Plan to which TDC or
any ERISA Affiliate has at any time within the last six years had an obligation
to contribute or with respect to which it may be secondarily liable for
withdrawal liability payments under Section 4201 of ERISA.
(c) Except as disclosed in Schedule 2.14 hereto, there has been no
withdrawal by TDC or any of its ERISA Affiliates from any Multiemployer Plan
within the past six years, and if a complete or partial withdrawal were to occur
as of the Closing, there is no basis to expect that any withdrawal liability
would be imposed on TDC, either primarily or secondarily, with respect to any
Multiemployer Plan.
2.15. Compliance with Law. Except as set forth in Schedule 2.15, to
the best knowledge of TDC, the Business has been operated by TDC in compliance
in all material respects with all laws, rules, regulations and orders applicable
to the Business (including, without limitation, any such laws, rules,
regulations and orders pertaining to the discharge or release of any pollutants,
contaminants, chemicals or industrial, toxic or hazardous materials into the
environment), except for failures to comply that would not, individually or in
the aggregate, have a Material Adverse Effect.
2.16. Labor Relations; Employees. TDC is not delinquent in any
material payments to any of its employees for any wages, salaries, commissions,
bonuses or other direct compensation for any services performed by them to the
date hereof or amounts required to be reimbursed to such employees, there is no
unfair labor practice complaint against TDC pending before the National Labor
Relations Board or any comparable state, local or foreign agency and
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<PAGE>
neither any grievance which might have a Material Adverse Effect nor any
arbitration proceeding arising out of or under any collective bargaining
agreement is currently pending. There is no strike, work stoppage, slowdown or
other labor difficulty actually occurring or, to the knowledge of TDC,
threatened against or directly affecting the operations of TDC.
2.17. Permits and Licenses. Schedule 2.17 lists, and TDC currently
has in full force and effect, all governmental licenses and permits required for
the conduct of the Business as now conducted, the absence of which would have a
Material Adverse Effect, and within the past three years TDC has conducted its
operations pursuant to then effective governmental licenses and permits.
2.18. Government Contracts.
(a) Government Contracts Compliance. With respect to each Government
Contract or Bid to which TDC is a party, to the best knowledge of TDC, (i) TDC
has complied with all material terms and conditions of such Government Contract
or Bid, including all clauses, provisions and requirements incorporated
expressly, by reference or by operation of law therein; (ii) TDC has complied
with all requirements of any statute, rule, regulation, order or agreement
pertaining to such Government Contract or Bid; (iii) all representations and
certifications executed, acknowledged or set forth in or pertaining to such
Government Contract or Bid were current, accurate and complete as of their
effective date, and TDC has fully complied with all such representations and
certifications; (iv) neither the U.S. Government nor any prime contractor,
subcontractor or other person has notified TDC, either orally or in writing,
that TDC has breached or violated any statute, rule, regulation, certification,
representation, clause1 provision or requirement; (v) no termination for
convenience, termination for default, cure notice or show cause notice has been
issued; (vi) no cost incurred by TDC has been questioned or disallowed; and
(vii) no money due to TDC has been (or has been attempted to be) withheld or set
off.
(b) Investigations and Audits. To the best knowledge of TDC, (i)
neither TDC, any of TDC's Affiliates nor any of TDC's directors, officers,
employees, agents or consultants is (or for the last five years has been) under
administrative, civil or criminal investigation, indictment, audit or internal
investigation with respect to any alleged irregularity, misstatement or omission
arising under or relating to any Government Contract or Bid; (ii) neither TDC
nor any of TDC's Affiliates has made a voluntary disclosure to the U.S.
Government with respect to any alleged
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irregularity, misstatement or omission arising under or relating to a Government
Contract or Bid; (iii) there is no irregularity, misstatement or omission
arising under or relating to any Government Contract or Bid that has led or
could lead, either before or after the date hereof, to any of the consequences
set forth in (i) - (ii) above or any other damage, penalty assessment,
recoupment of payment or disallowance of cost.
(c) Financing Arrangements and Claims. To the best knowledge of TDC,
there exists (i) no financing arrangement with respect to performance of any
current Government Contract; (ii) no outstanding claim against TDC, either by
the U.S. Government or by any prime contractor, subcontractor, vendor or other
third party, arising under or relating to any Government Contract or Bid; (iii)
no fact upon which such a claim may be based on the future; (iv) no dispute
between TDC and the U.S. Government or any prime contractor, subcontractor or
vendor arising under or relating to any Government Contract or Bid; and (v) no
fact known by TDC over which such a dispute may arise in the future. To the best
knowledge of TDC, TDC has no interest in any pending or potential claim against
the U.S. Government or any prime contractor, subcontractor or vendor arising
under or relating to any Government Contract or Bid.
(d) No Suspension or Debarment. Neither TDC nor any of its directors
or officers, nor, to the best knowledge of TDC, any employee of TDC is (or for
the last five years has been) suspended or debarred from doing business with the
U.S. Government or has been declared nonresponsible or ineligible for U.S.
Government contracting. TDC knows of no circumstances that, to the best
knowledge of TDC, would warrant the institution of suspension or debarment
proceedings or the finding of nonresponsibility or ineligibility on the part of
TDC in the future.
2.19. Environmental Matters. Except as set forth in Schedule 2.19
attached hereto, no Environmental Condition relating to the Assets or the
Business exists in violation of any Environmental Laws. For purposes of this
Section 2.19, "Environmental Condition" means the existence, release, emission,
discharge, generation, removal or disposition of any Hazardous Substance;
"Hazardous Substance" means (i) any chemical, compound, material or substance
that is defined, listed in, or otherwise classified pursuant to, any
Environmental Laws as a "hazardous substance", "hazardous material", "hazardous
waste", "toxic substance" or "toxic pollutant", and (ii) asbestos, petroleum,
natural gas, natural gas liquids, liquified natural gas, synthetic gas usable
for fuel and drilling fluids, produced waters, and other wastes associated with
the exploration, development or production
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of crude oil, natural gas, or geothermal resources; and "Environmental Laws"
means any and all federal, state and local laws (whether under common law,
statute, rule, regulation or otherwise) and other requirements of governmental
authorities relating to the environment or to any Hazardous Substance or
Environmental Condition (including, without limitation, CERCLA and the
applicable provisions of the California Health and Safety Code and the
California Water Code).
3. Representations and Warranties of Buyer.
Buyer represents and warrants to, and agrees with, TDC as follows:
3.1. Organization of Buyer; Authorization. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and corporate authority to execute
and deliver this Agreement, the Assumption Agreement and the Lease and to
perform its obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement, the Assumption Agreement and the Lease have been
duly authorized by all necessary corporate action (including, but not limited
to, approval by the Board of Directors) on the part of Buyer and each of this
Agreement, the Assumption Agreement and the Lease constitutes a valid and
binding obligation of Buyer, enforceable against it in accordance with its
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally.
3.2. No Conflict as to Buyer. Neither the execution and delivery of
this Agreement, the Assumption Agreement or the Lease nor the performance of
Buyer's obligations hereunder or thereunder will (a) violate any provision of
the Certificate of Incorporation or Bylaws of Buyer, (b) violate, conflict with
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under any agreement or commitment to which
Buyer is party or (c) to the best knowledge of Buyer, violate any statute or law
or any judgment, decree, order, regulation or rule of any court or other
Governmental Body applicable to Buyer.
3.3. Investigation.
(a) Buyer has performed extensive due diligence and investigations
with respect to TDC with the intention of forming its own conclusions
regarding TDC (financial and otherwise) in response to the parties'
express intention and agreement that as of the Closing
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the sale hereunder shall be without representation or warranty of any kind
(express or implied) regarding the Assets, except as set forth in this
Agreement and the Bill of Sale. Buyer will rely solely on its own business
judgment and investigation with respect to the Assets.
(b) In connection with Buyer's investigation of TDC, Buyer has
received from TDC certain projections and other forecasts, including the
projections and other forecasts contained in the Confidential Offering
Memorandum provided to Buyer. Buyer acknowledges that TDC makes no
representation or warranty with respect to such projections or forecasts.
3.4. Government Consents and Approvals. Except as set forth in
Schedule 3.4 attached hereto, no consent, approval or authorization of, or
declaration, filing or registration with any Governmental Body is required to be
obtained by Buyer in connection with the execution and delivery of this
Agreement, the Assumption Agreement or the Lease or the purchase of the Assets
by Buyer.
4. Representations and Warranties of RBC.
RBC represents and warrants to, and agrees with, TDC as follows:
4.1. Organization of RBC; Authorization. RBC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and corporate authority to execute and
deliver this Agreement, to issue the RBC Preferred Shares and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the issuance of the RBC Preferred Shares have been duly
authorized by all necessary corporate action on the part of RBC and each of this
Agreement and the Certificate of Designations constitutes the legally valid and
binding obligation of RBC, enforceable against it in accordance with its
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally.
4.2. No Conflict as to RBC. Neither the execution and delivery of
this Agreement nor the performance of RBC's obligations hereunder, the issuance
of the RBC Preferred Shares nor the performance of the Certificate of
Designations by RBC will (a) violate any provision of the Certificate of
Incorporation or Bylaws of RBC, (b) violate, conflict with or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a
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default) under any material agreement or commitment to which RBC is a party or
(c) to the best knowledge of RBC, violate any material statute or law or any
judgment, decree, order, regulation or rule of any court or other Governmental
Body applicable to RBC.
4.3. RBC Preferred Shares. The RBC Preferred Shares, when they are
issued, sold and delivered hereunder, shall be validly issued, fully paid and
nonassessable, with no personal liability attaching to the ownership thereof.
The terms, designations, powers, preferences and relative, participating,
optional and other special rights and the qualifications, limitations and
restrictions of the RBC Preferred Shares are as set forth in the Certificate of
Designations.
4.4. Capital Structure. The authorized capital stock of RBC consists
of (i) 200,000 shares of preferred stock, of which 150,000 shares are designated
as Redeemable Exchangeable Cumulative Preferred Stock (the "Preferred Stock")
and of which 123,319.534 shares are issued and outstanding immediately prior to
the Closing. All such outstanding shares are duly authorized, validly issued,
fully paid and nonassessable, and there are no preemptive rights to purchase or
otherwise acquire any shares of Preferred Stock pursuant to RBC's Certificate of
Incorporation or Bylaws.
4.5. No Prior Activities. RBC, since its inception, has not (a)
engaged in any business, (b) entered into any agreements, contracts, guarantees,
understandings or other commitments (written or oral) or (c) incurred any
liabilities or become subject to any obligations of any nature (matured or
unmatured, fixed or contingent), other than in connection with its formation,
the Existing Stockholders Agreement, this Agreement or the transactions
contemplated hereby or thereby or actions taken in its capacity as the sole
stockholder of Roller Bearing, including actions taken in connection with the
financing of the operations and acquisition of Roller Bearing and its direct and
indirect wholly owned subsidiaries.
4.6. Financial Statements. RBC has delivered to TDC: (a)
substantially final drafts of an audited consolidated balance sheet of RBC and
Roller Bearing as at March 31, 1992 (the "RBC Audited Balance Sheet") and
related consolidated statements of income and cash flow for the fiscal year then
ended (the "RBC Audited Statements"), and (b) an unaudited consolidated balance
sheet of RBC and Roller Bearing as at August 31, 1992 (the "RBC Unaudited
Balance Sheet") and unaudited statements of income and cash flow for the five
months then ended (together with the RBC Unaudited Balance Sheet, the "RBC
Unaudited Statements"),
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including, with respect to each of items (a) and (b) above, the notes thereto.
To the best knowledge of RBC, the RBC Audited Statements and notes thereto
present fairly the financial condition and results of operations of RBC and
Roller Bearing, respectively, as at the date thereof and for the period therein
referred to, in accordance with GAAP; provided, however, that RBC did not
prepare such statements, although in the ordinary course of RBC's business it
has not discovered any fact that would cause RBC to believe that such statements
and notes do not present fairly such financial condition and results of
operation or were not prepared in accordance with GAAP. To the best knowledge of
RBC, the RBC Unaudited Statements present fairly the financial condition and
results of operations of RBC and Roller Bearing, respectively, as at the date
thereof and for the period therein referred to in accordance with GAAP on a
basis consistent with the RBC Audited Statements, except that such Unaudited
Statements do not contain complete footnote disclosure and are subject to normal
year-end adjustments, which will not be material. Neither RBC nor Roller Bearing
has any liabilities or obligations that were not reflected or reserved against
in the RBC Unaudited Balance Sheet, except liabilities and obligations incurred
since the date of the RBC Unaudited Balance Sheet in the ordinary course of
business and consistent with past practice.
4.7. Litigation. There is no claim, action, suit or proceeding by or
before any court or Governmental Body pending or, to the best knowledge of RBC,
threatened against RBC or Roller Bearing that could have a material adverse
effect on the financial condition, prospects or affairs of RBC or Roller
Bearing.
4.8. Subsidiaries and Affiliates. RBC is the legal and beneficial
owner of all of the issued and outstanding capital stock of Roller Bearing.
Roller Bearing is the legal and beneficial owner of all of the issued and
outstanding capital stock of Buyer. RBC has no Subsidiaries other than Roller
Bearing and the Subsidiaries of Roller Bearing.
4.9. Nonforeign Status. RBC is not a "foreign person" as defined
in Section 800.211 of the regulations proposed by the United States Department
of the Treasury under Section 721 of the Defense Production Act of 1950, as
amended.
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5. Covenants by Buyer and TDC.
5.1. Employees.
(a) Effective as of the Closing, Buyer shall offer employment to all
persons who are employees of TDC immediately prior to the Closing on terms of
employment and compensation comparable to that received by such employees
immediately prior to the Closing; provided, however, that "compensation" for
this purpose shall not be deemed to include benefits under any employee benefit
plan within the meaning of Section 3(3) of ERISA and provided further that such
employees shall not be third party beneficiaries of this Agreement and shall
remain terminable at will. All employees of TDC who accept employment with Buyer
shall be referred to herein as "Transferred Employees." Effective as of the
Closing, Buyer shall assume sponsorship for the Employee Plans (as defined in
Section 2.14(a)), and shall be responsible for all liabilities arising under
such plans on or after the Closing, but shall be permitted to amend or terminate
any of such plans at any time after the Closing. Buyer agrees that it shall use
its reasonable efforts to cause the insurer under the Employee Plans to give
Transferred Employees full credit under the Employee Plans for all expenses
incurred by Transferred Employees and their beneficiaries under the benefit
deductible and co-payment provisions of the Employee Plans. Buyer agrees that it
shall be liable for any continuation coverage under the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA") (i) imposed as the result of a
"Qualifying Event" (as that term is defined in ERISA Section 603 or Code Section
4980B(f)(3)) that occurs on or after the Closing with respect to any Transferred
Employee or (ii) imposed under the Employee Plans for any period extending
beyond the Closing with respect to a Qualifying Event which occurred on or
before the Closing, provided that TDC (or the plan administrator appointed by
it) has met all relevant notice requirements under Section 606 of ERISA or
Section 4980B(f) (6) of the Code pertaining to any Covered Employee or Qualified
Beneficiary (as such terms are defined in Section 607 of ERISA and Sections
4980B(f) and (g) of the Code) affected by such Qualifying Event. Furthermore,
Buyer shall indemnify BFM and TDC for any liability or penalty imposed under
COBRA (i) with respect to any Transferred Employee as the result of a Qualifying
Event that occurs on or after the Closing, and (ii) with respect to any employee
of TDC (including TDC employees who are not Transferred Employees) who is
eligible to receive continuation coverage under the Employee Plans in accordance
with COBRA for any period of time extending beyond the Closing, but excluding
any purposes of this Section 5.1(a) any liability for which BFM and TDC are
liable under Section 6.3(e).
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(b) Buyer understands that certain employees of TDC have accrued
benefits in the LS, Inc. Plan and that in accordance with Section 9.02(b)(2) of
that agreement between BFM Acquisition Corp. and Lear Siegler Aerospace Products
Holding Corp., dated July 30, 1987, the LS, Inc. Plan provides (i) that certain
service by employees of BFM and its Affiliates is taken into account for
purposes of vesting (but not benefit accrual) under the LS, Inc. Plan and (ii)
that certain compensation of employees of BFM and its Affiliates is used in
computing the benefit of such employees under the LS, Inc. Plan ("Rollup
Agreement"). BFM, TDC and Buyer agree that any benefits payable under the
Rollup Agreement are an obligation solely of the LS, Inc. Plan and neither BFM,
TDC nor Buyer shall have any liability for any benefits payable as a result of
the Rollup Agreement and that neither BFM, TDC nor Buyer is responsible in any
way for any effect on benefits otherwise payable under the Rollup Agreement
caused by the transactions contemplated under this Agreement. Buyer agrees that
it shall notify LS, Inc. or its designee promptly after the end of each calendar
year and at such other times at LS, Inc. or its designee may reasonably request
as to the employment status of each Transferred Employee (as defined in Section
5.1) who has an accrued benefit under the LS, Inc. Plan.
5.2. Business Records and Files. For a period of five years with
respect to Tax records of TDC and three years with respect to other business
records of TDC from and after the date hereof:
(a) Buyer shall not dispose of or destroy any of such records and
files of the Business without first offering to turn over possession
thereof to TDC by notice to TDC at least 30 days prior to the proposed
date of such disposition or destruction.
(b) Buyer shall allow TDC and its agents access to all such records
and files of TDC that are transferred to Buyer in connection herewith for
any reasonable purpose upon 10 business days notice that sets forth the
documents to be reviewed and the purpose for such review, during normal
working hours at Buyer's principal place of business or at any location
where such records are stored, and TDC shall have the right, at its own
expense, to make copies of any such records and files; any such access or
copying shall be had or done in such a manner so as not to interfere with
the normal conduct of Buyer's business.
5.3. Tax Worksheets. Within three months after the date hereof,
Buyer shall prepare and deliver to BFM, at the sole expense of Buyer, tax
worksheets as at the date hereof of the type customarily prepared by TDC prior
to the
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<PAGE>
date hereof, for the purpose of enabling BFM and TDC to file Tax Returns for tax
periods ending prior to the date hereof.
5.4. Delivery of Financial Statements. Until such time as the RBC
Preferred Shares have been redeemed in full, RBC shall furnish to TDC annual
financial information in the form and at the same time as such information is
supplied to any creditor to which RBC is obligated to provide such information
or, if RBC is not obligated to deliver annual financial information to any
creditor, RBC shall provide TDC a balance sheet as of each fiscal year end of
RBC and a statement of operations and cash flows for each such fiscal year then
ended, prepared in accordance with GAAP within 90 days after the end of each
such fiscal year.
5.5. Sales Taxes Arising from Sale of Assets. Buyer shall be liable
for the payment of any and all sales taxes arising out of or related to the
transfer of the Assets by TDC to Buyer hereunder. Seller shall be liable for the
payment of any and all sales taxes arising out of or related to TDC's operation
of the Business through the date hereof.
5.6. Sales Tax Clearance Certificate. After the date hereof, Buyer
intends to file a request with the California State Board of Equalization (the
"Board") for a sales tax clearance certificate as to the satisfaction by TDC of
all sales and use tax liability arising from TDC's operation of the Business
through the date hereof. TDC will use its reasonable efforts to cooperate with
Buyer in connection with Buyer's efforts to obtain such certificate, including,
without limitation, making its records available to the Board for audit upon its
request.
5.7. Mail and Other Communications. After the date hereof, Buyer
shall forward to TDC all mail, telegrams and other communications, and all
express or other packages, addressed to TDC or its agents, promptly after
Buyer's receipt thereof. TDC thereupon shall promptly return to Buyer any and
all of the same to the extent they relate to the Assets or the Assumed
Liabilities.
5.8. Governmental Contract Novations. After the date hereof, TDC
shall use its reasonable efforts to assist Buyer in obtaining all necessary
novations to the Government Contracts and any and all other approvals as may be
reasonably requested by Buyer in connection with the transfer and assignment of
the Government Contracts to Buyer hereunder and TDC shall take such other
actions as may be reasonably requested by Buyer in connection therewith.
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<PAGE>
6. Survival of Representations and Warranties; Indemnification.
6.1. Survival. Subject to Section 6.2 hereof, all representations,
warranties and agreements contained in this Agreement shall survive the Closing.
6.2. Time Limitations. Neither BFM nor TDC shall have any liability
(for indemnification or otherwise) with respect to any representation or
warranty or any claim under Section 6.3(h) hereof, unless on or before the first
anniversary of the date hereof (or the second anniversary of the date hereof, in
the case of a claim with respect to the breach of Section 2.19 or any claim
under Section 6.3(h) hereof), TDC and BFM are given notice asserting a claim
with respect thereto and specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer. Neither RBC nor Buyer shall
have any liability (for indemnification or otherwise) with respect to any
representation or warranty unless on or before the first anniversary of the date
hereof, Buyer and RBC are given notice of a claim with respect thereto and
specifying the factual basis of that claim in reasonable detail to the extent
then known by TDC.
6.3. Indemnification by BFM and TDC. BFM and TDC shall indemnify and
hold harmless Buyer, and shall reimburse Buyer for, any debt, obligation, claim,
loss, liability, damage or expense (including, but not limited to, costs of
investigation and defense and reasonable attorneys' fees) (collectively,
"Damages") relating to, arising from or in connection with (a) any inaccuracy in
any of the representations and warranties of TDC in this Agreement, (b) any
failure by TDC to perform or comply with any agreement contained in this
Agreement, (c) the operation of the Business prior to and on the date hereof
other than the Assumed Liabilities and other than claims for breach of warranty
or product liabilities (except as specified in clause (d) of this Section 6.3),
(d) all claims made, whether on, after or prior to the date hereof, for breach
of warranty or product liability arising out of (i) products shipped by TDC on
or prior to the date hereof and (ii) products shipped by Buyer after the date
hereof with respect to which Buyer provides TDC with written or other reasonable
evidence that such products were manufactured by TDC and constituted finished
goods on or prior to the date hereof, (e) any liability or claim of liability
arising from the failure of TDC or BEM to comply with the continuation coverage
requirements of Sections 601 through 608 of ERISA regarding continued insurance
coverage with respect to any Qualifying Event occurring prior to the Closing
under the Employee Plans, (f) any and all sales and payroll tax liabilities
arising out of TDC's operation of the Business through the date hereof, (g) the
remaining 50% of the amount
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<PAGE>
of the liability, if any, not assumed by Buyer pursuant to Section 1.1(b)
hereof, for severance payments or termination benefits owing to Frank E. Cole
pursuant to that certain Termination Benefits Agreement, dated January 31, 1990,
by and between TDC and Frank E. Cole, and (h) the existence or occurrence of any
Environmental Condition in violation of any Environmental Law relating to the
Business or the Premises prior to the Closing, except to the extent that such
Environmental Condition continues to exist solely because of the operation of
Buyer's business on the premises.
6.4. Indemnification by RBC and Buyer. RBC and Buyer shall indemnify
and hold harmless TDC, and shall reimburse TDC for, any Damages relating to,
arising from or in connection with (a) any inaccuracy in any of the
representations and warranties of Buyer in this Agreement, and (b) any failure
by Buyer to perform or comply with any covenant or agreement contained in this
Agreement, (c) the Assumed Liabilities, (d) the operation of the Business after
the date hereof, including, without limitation, the performance of the
Government Contracts, (e) all claims made after the date hereof for breach of
warranty or product liability arising out of products shipped by Buyer after the
date hereof with respect to which Buyer is unable to provide to TDC written or
other reasonable evidence that such products were manufactured by TDC and
constituted finished goods on or prior to the date hereof, (f) any and all sales
taxes arising out of or related to the transfer of the Assets by TDC to Buyer
hereunder, and (g) liability imposed on TDC or BFM for benefit payments under
the TDC Severance Policy on account of the termination of any Transferred
Employee of TDC occurring on or after the Closing. RBC shall indemnify and hold
harmless TDC, and shall reimburse TDC for, any Damages relating to, arising from
or in connection with any inaccuracy in any of the representations and
warranties of RBC in this Agreement and any failure by RBC to perform or comply
with any covenant or agreement contained in this Agreement.
6.5. Limitations as to Amount. Neither BFM nor TDC shall have any
liability with respect to any claim made by Buyer pursuant to Section 6.3 until
the total of all Damages exceeds $100,000 in the aggregate, at which time BFM
and TDC shall be liable only for the amount by which such Damages exceed
$100,000 in the aggregate. Neither RBC nor Buyer shall have any liability with
respect to any claim made by TDC pursuant to Section 6.4 until the total of all
Damages exceeds $50,000 in the aggregate, at which time Buyer and/or RBC shall
be liable only for the amount by which such Damages exceed $50,000 in the
aggregate. BFM and TDC's collective aggregate liability with respect to matters
described in Section 6.3 shall be limited to the amount of
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<PAGE>
the cash portion of the purchase price set forth in Section 1.2 hereof.
6.6. Brokers. RBC and Buyer shall indemnify and hold harmless TDC,
and shall reimburse BFM and TDC for, and TDC shall indemnify and hold harmless
Buyer, and shall reimburse Buyer for, all Damages resulting from any claims made
by any Person for brokerage or finder's fees or commissions in connection with
the transactions contemplated by this Agreement based on any agreement or
understanding alleged to have been made by such Person with RBC and Buyer or its
Affiliates (in the case of Buyer as the indemnifying party) or BFM and TDC or
its Affiliates (in the case of TDC as the indemnifying party).
6.7. Bulk Sales Law. The parties agree to waive compliance with the
provisions of the bulk transfer and bulk sales laws of any applicable state or
jurisdiction (the "Bulk Sales Laws") in connection with the purchase and sale of
the Assets hereunder. RBC and Buyer shall indemnify and hold harmless TDC, and
shall reimburse TDC for, any Damages that TDC may suffer as a result of or due
to noncompliance with the provisions of the Bulk Sales Law insofar as they
relate to any of the Assumed Liabilities. BFM and TDC shall indemnify and hold
harmless Buyer, and shall reimburse Buyer for, any Damages that Buyer may suffer
as a result of or due to noncompliance with the provisions of the Bulk Sales Law
insofar as they relate to liabilities of TDC other than the Assumed Liabilities.
6.8. Procedure for Indemnification. Promptly after receipt by an
indemnified party under Section 6.3, 6.4, 6.6 or 6.7 of notice of the
commencement of any action brought by a third party, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under such section, give notice to the indemnifying party of the commencement
thereof. In case any such action shall be brought against an indemnified party
and it shall give notice to the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under such section for any fees of other counsel or any other expenses, in each
case subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation. If an
indemnifying party assumes the defense of such an action, no compromise or
settlement thereof may be effected by the indemnifying party without the
indemnified party's consent
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(which shall not be unreasonably withheld) unless (i) there is no finding or
admission of any violation of law or any violation of the rights of any Person
and no effect on any other claims that may be made against the indemnified party
and (ii) the sole relief provided is monetary damages that are paid in full by
the indemnifying party. In any event, the indemnifying party shall have no
liability with respect to any compromise or settlement thereof effected without
its consent (which shall not be unreasonably withheld).
7. Definitions.
As used in this Agreement, the following terms have the meanings
specified or referred to in this Section 7:
"Affiliate" -- A Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, another Person.
"Assets" -- See Section 1.1(a).
"Assumed Liabilities" -- See Section 1.1(b).
"Business" -- See Section 1.1(a)(vii).
"Business Day" -- Any day that is not a Saturday or Sunday or a day
on which banks located in the City of Los Angeles are authorized or required to
be closed.
"Buyer" -- See the first paragraph of this Agreement.
"Closing" -- See Section 1.3.
"Code" -- The Internal Revenue Code of 1986, as amended.
"Company Pension Plan" -- Each employee pension benefit plan within
the meaning of Section 3(2) of the ERISA, covered by Part 2 of Title I of ERISA,
excluding multiemployer plans within the meaning of Section 3(37) of ERISA
maintained within the last six years of TDC or any of its ERISA Affiliates.
"Company Welfare Plan" -- Each employee welfare benefit plan within
the meaning of Section 3(1) of ERISA maintained by TDC or any of its ERISA
Affiliates.
"Contracts" -- See Section 1.1(a)(ix).
"Damages" -- See Section 6.3.
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<PAGE>
"Employee Benefit Plans" -- Each Company Pension Plan, Company
Welfare Plan and each other profit sharing, group insurance, bonus, deferred
compensation, stock option, severance pay, insurance, pension or retirement plan
or written agreement relating to employment or "fringe benefits" for employees
or officers of TDC.
"Employee Plans" -- See Section 2.14.
"Encumbrance" -- Any security interest, mortgage, lien, charge or
other adverse claim.
"ERISA" -- The Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" -- Any company that, as of the relevant measuring
date under ERISA, is a member of a controlled group of corporations or under
common control with TDC within the meaning of Section 414 of the Code.
"Excluded Assets" -- See Section 1.1(a).
"GAAP" -- Generally accepted accounting principles in the United
States, consistently applied.
"Governmental Body" -- Any domestic or foreign national, state or
municipal or other local government or multi-national body, any subdivision,
agency, commission or authority thereof, or any quasi-governmental or private
body exercising any regulatory or taxing authority thereunder.
"Government Contract" or "Government Contract or Bid" -- Any
contract with an agency or instrumentality of the U.S. government and all U.S.
government sub-contracts.
"IRS" -- See Section 2.14.
"Material Adverse Effect" -- A material adverse effect on the Assets
or on the financial condition, prospects or affairs of the Business.
"Multiemployer Plan" -- Each multiemployer plan within the meaning
of Section 3(37) of ERISA.
"PBGC" -- See Section 2.14(i).
"Patent and Trademark Rights" -- See Section 1.1(a) (x).
"Permitted Encumbrances" -- See Section 2.5.
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"Person" -- Any individual, corporation, partnership, joint venture,
trust, association, unincorporated organization, other entity or Governmental
Body.
"Plans" -- See Section 2.14.
"Premises" -- See Section 1.1(a)(vi).
"Subsidiary" -- With respect to any Person, any corporation of which
securities having the power to elect a majority of that corporation's Board of
Directors (other than securities having that power only upon the happening of a
contingency that has not occurred) are held by such Person or one or more of its
Subsidiaries.
"Taxes" -- All taxes, charges, fees, levies, interest, penalties,
additions to tax or other assessments, including, but not limited to, income,
excise, property, sales, use, value added and franchise taxes, imposed by any
Governmental Body.
"Tax Returns" -- Any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any Governmental Body in connection with the determination,
assessment or collection of any Taxes or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
"TDC" -- See the first paragraph of this Agreement.
"TDC Balance Sheet" -- See Section 2.5.
"TDC Financial Statements" -- See Section 2.5.
"TDC Interim Statements" -- See Section 2.5.
8. Notices.
All notices, consents and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when (a)
delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate as to itself by notice to the other
parties):
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(a) If to Buyer or RBC:
Roller Bearing Holding Company, Inc.
c/o TRIBOS Management Company, Inc.
1800 Century Park East, Suite 1000
Los Angeles, California 90067
Telecopier No.: (310) 277-5591
Attention: Mr. Richard R. Crowell
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Telecopier No.: (213) 229-7520
Attention: Terrance L. Carlson, Esq.
(b) If to BFM or TDC:
c/o Oak Hill Partners, Inc.
65 East 55th Street
32nd Floor
Telecopier No.: (212) 421-4578
Attention: Mr. Anthony P. Scotto
with a copy to:
O'Melveny & Myers
610 Newport Center Drive, 17th Floor
Newport Beach, California 92660-6429
Telecopier No.: (714) 669-6994
Attention: Gary J. Singer, Esq.
9. Jurisdiction; Service of Process.
9.1. Jurisdiction. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against any of the parties in the courts of the State of California, or,
if it has or can acquire jurisdiction, in the United States District Court for
the Central District of California, and each of the parties hereby consents to
the jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any obligation to venue laid therein.
9.2. Service of Process. Process in any action or proceeding
referred to in Section 9.1 may be served on any party anywhere in the world,
whether within or without the State of California.
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10. Miscellaneous.
10.1. Expenses. Each party shall bear its own expenses incident to
the preparation, negotiation, execution and delivery of this Agreement and the
performance of its obligations hereunder.
10.2. Captions. The captions in this Agreement are for convenience
of reference only and shall not be given any effect in the interpretation of
this Agreement.
10.3. No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver must be
in writing.
10.4. Exclusive Agreement; Amendment. This Agreement supersedes all
prior agreements among the parties with respect to its subject matter (other
than any confidentiality agreement), is intended (with the documents referred to
herein) as a complete and exclusive statement of the terms of the agreement
among the parties with respect thereto and cannot be changed or terminated
orally.
10.5. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
10.6. Governing Law. This Agreement and (unless otherwise provided)
all amendments hereof and waivers and consents hereunder shall be governed by
the internal law of the State of California, without regard to the conflicts of
law principles thereof.
10.7. Representation By Counsel; Interpretation. BFM, TDC, RBC and
Buyer each acknowledges that it has been represented by legal counsel in
connection with this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of law, including but not limited to Section
1654 of the California Civil Code, or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement against the party
that drafted it has no application and is expressly waived. The provisions of
this Agreement shall be interpreted in a reasonable manner to effect the intent
of Buyer, BFM, RBC and TDC.
10.8. Damages. Notwithstanding anything to the contrary elsewhere
in this Agreement, no party (or its Affiliates) shall, in any event, be liable
to the other
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party (or its Affiliates) for any consequential damages, including, but not
limited to, loss of revenue or income, cost of capital, or loss of business
reputation or opportunity relating to the breach or alleged breach of this
Agreement. Each party agrees that it will not seek punitive damages as to any
matter under, relating to or arising out of this Agreement.
10.9. Further Assurances; Knowledge.
(a) Further Assurances. Each party shall execute and deliver both
before and after the Closing such further certifications, agreements and
other documents and take such other actions as the other party may
reasonably request to consummate or implement the transactions
contemplated hereby or to evidence such events or matters.
(b) Knowledge. As used in this Agreement, the terms "knowledge" or
"knowledge and belief" when used with respect to any party shall mean the
actual "knowledge" or actual "knowledge and belief" of any one or more of
the executive officers of such party.
10.10. Permitted Assignment. Notwithstanding anything herein to the
contrary, Buyer and RBC are permitted to grant to Heller Financial, Inc., a
Delaware corporation, for the benefit of the Lenders (as defined in the Amended
and Restated Credit Agreement, dated as of October 26, 1992) a continuing
security interest in and to all right, title and interest of Buyer and RBC in
this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date and year first written above.
BFM AEROSPACE CORPORATION
By: /s/ [Illegible]
---------------------------
Title: Secretary
--------------------
BFM TRANSPORT DYNAMICS
CORPORATION
By: /s/ [Illegible]
---------------------------
Title: Secretary
--------------------
RBC TRANSPORT DYNAMICS
CORPORATION
By: /s/ [Illegible]
---------------------------
Title: President & CEO
--------------------
ROLLER BEARING HOLDING
COMPANY, INC.
By: /s/ [Illegible]
---------------------------
Title: President & CEO
--------------------
<PAGE>
EXHIBIT 1.2(a)
CERTIFICATE OF DESIGNATIONS, PREFERENCES, AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
OF
REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK
OF
ROLLER BEARING HOLDING COMPANY, INC.
---------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
---------------------------------
Roller Bearing Holding Company, Inc., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in Article
Fourth of its Certificate of Incorporation, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, its Board of Directors by unanimous written consent dated October 20,
1992, adopted the following resolution creating a series of its Preferred Stock,
par value $0.01 per share, designated as Redeemable Exchangeable Cumulative
Preferred Stock.
WHEREAS, on March 24, 1992, the Board of Directors of this
Corporation by Action by Unanimous Consent and the filing of a Certificate of
Designations, Preferences, and Relative, Participating, Optional and Other
Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof of Redeemable Exchangeable Cumulative Preferred Stock of
Roller Bering Holding Company, Inc. created a series of Preferred Stock, par
value $0.01 per share, designated as Redeemable Exchangeable Cumulative
Preferred Stock with the maximum number of shares issuable fixed at 125,000; and
WHEREAS, this Corporation authorized an additional 25,000 shares of
Preferred Stock having the same designations preferences, and relative,
participating optional and other special rights and qualifications, limitations
and restrictions as the Redeemable Exchangeable Cumulative Preferred Stock
created on March 24, 1992.
<PAGE>
RESOLVED, that a series of the class of authorized Preferred Stock,
par value $0.01 per share, of the Corporation be hereby created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
1. Designation, Issuance and Stated Value. The designation of the
series of Preferred Stock authorized by this resolution shall be "Redeemable
Exchangeable Cumulative Preferred Stock" (the "Redeemable Preferred Stock"). The
maximum number of shares of Redeemable Preferred Stock issuable hereunder shall
be 25,000. The shares of Redeemable Preferred Stock shall be issued by the
Corporation for their Stated Value (as herein defined), in such amounts, at such
times and to such persons as shall be specified by the Corporation's Board of
Directors, from time to time. For the purposes hereof, the "Stated Value" of
each share of Redeemable Preferred Stock (regardless of its par value) shall be
$100 per share, which Stated Value shall be proportionately increased or
decreased for any stock consolidation or stock split, respectively, of the
outstanding shares of Redeemable Preferred Stock.
2. Rank. The Redeemable Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and dissolution, rank
junior to all classes and series of stock of the Corporation now or hereafter
authorized, issued or outstanding (collectively, the "Senior Securities") other
than the Corporation's "Junior Securities." For the purposes hereof, "Junior
Securities" means all series and classes of Common Stock, $.0l par value per
share (the "Common Stock") of the Corporation, and such classes or series of
stock of the Corporation as shall be designated as junior to the Redeemable
Preferred Stock.
3. Dividends.
(a) Amount. On the last business day of March in each calendar
year (the "Dividend Accrual Date"), the holder of each share of the Redeemable
Preferred Stock shall become entitled to receive (when as and if declared by the
Board of Directors of the Corporation) a dividend (the "Annual Dividend") equal
to the sum of (i) eight percent (8%) of the Stated Value of such share
(pro-rated for any portion of a full year that such share shall have been issued
and outstanding) plus (ii) eight percent (8%) of the Unpaid Dividend Amount (as
defined below) as of the previous Dividend Accrual Date. The Unpaid Dividend
Amount with respect to each share of the Redeemable Preferred Stock shall be
equal to the aggregate of all Annual Dividends that the holder of such share
shall have become entitled to receive for such share but that shall not have
been declared and paid by the Board of Directors of the Corporation.
(b) Accumulation And Time of Payment. Dividends on each share
of the Redeemable Preferred Stock shall be cumulative and shall accrue from day
to day, whether or not earned or declared, commencing with the date of issue of
such share.
2
<PAGE>
Dividends shall be payable annually, when, as and if declared by the Board of
Directors of the Corporation.
(c) Payment of Accumulated Dividends. Accumulated dividends
not paid on prior Dividend Accrual Dates may be declared by the Board of
Directors and paid to the holders of record of outstanding shares of Redeemable
Preferred Stock as their names shall appear on the stock register of the
Corporation on a record date to be established by the Board of Directors, which
record date shall be not more than sixty (60) nor less than thirty (30) days
preceding the date of payment, whether or not such date is a Dividend Accrual
Date. Holders of outstanding shares of Redeemable Preferred Stock shall not be
entitled to receive any dividends in excess of the full cumulative dividends to
which such holders are entitled as provided in this Section 3.
(d) Priority of Cumulative Dividends. So long as any shares of
Redeemable Preferred Stock are outstanding, the Corporation shall not (i)
declare, pay or set apart for payment any dividend on, or make any distribution
in respect of, the Junior Securities or any warrants, rights, calls or options
exercisable or convertible into any of the Junior Securities, either directly or
indirectly, whether in cash, obligations or shares of the Corporation or other
property (other than distributions or dividends of a particular class or series
of Junior Securities, or warrants, rights or options exercisable for such Junior
Securities, to holders of such Junior Securities) (ii) make any payment on
account of, or set apart for payment money for a sinking or other similar fund
for, the purchase, redemption, retirement or other acquisition for value of any
of, or redeem, purchase, retire or otherwise acquire for value any of, the
Junior Securities (other than as a result of a reclassification of Junior
Securities or the exchange or conversion of one class or series of Junior
Securities for or into another class or series of Junior Securities, other than
through the use of the proceeds of a substantially contemporaneous sale of other
Junior Securities) or any warrants, rights, calls or options exercisable for or
convertible into any of the Junior Securities, or (iii) permit any corporation
or other entity directly or indirectly controlled by the Corporation to
purchase, redeem, retire or otherwise acquire for value any of the Junior
Securities or any warrants, rights, calls or options exercisable for or
convertible into any of the Junior Securities, unless, prior to or concurrently
with such declaration, payment, setting apart for payment, purchase, redemption,
other acquisition for value or distribution, all accrued and unpaid dividends
(including accrued dividends, if any, not paid by reason of the terms and
conditions of Section 3(e) hereof), if any, on shares of Redeemable Preferred
Stock shall have been paid through the immediately preceding Dividend Accrual
Date or, if such declaration, payment, setting apart for payment, purchase,
other acquisition for value or distribution occurs on a Dividend Accrual Date,
through such Dividend Accrual Date; provided, however, that this restriction
shall not apply to the repurchase of shares of Common Stock held by employees,
officers, directors, or consultants of the Corporation (or their permitted
transferees) that are subject to restrictive stock purchase agreements under
which the Corporation has the option or obligation to repurchase such shares
upon the occurrence of certain events, such as termination of employment, and
shall not apply to the repurchase of warrants to purchase
3
<PAGE>
Class B Nonvoting Common Stock of the Corporation issued to Heller Financial,
Inc. ("Heller") which the Corporation has the option or obligation to purchase
pursuant to the terms of the warrant certificate representing such warrants.
(e) Restrictions on Payment of Dividends. Notwithstanding
anything contained herein to the contrary, no dividends on shares of Redeemable
Preferred Stock shall be declared by the Board of Directors or paid or set apart
for payment by the Corporation: (i) unless, prior to or concurrently with such
declaration, payment or setting apart, all accrued and unpaid dividends, if any,
on shares of Senior Securities shall have been paid or declared and set apart
for payment through the dividend payment period with respect to such Senior
Securities which next precedes or coincides with the Dividend Accrual Date; or
(ii) at such time as such declaration, payment or setting apart is prohibited by
the Delaware General Corporation Law (the "DGCL); or (iii) at such time as the
terms and provisions of any contract or other agreement of the Corporation or
any of its subsidiaries entered into or assumed providing financing (including
acquisition financing) or working capital to the Corporation or any of its
subsidiaries (whether or not entered into prior to, at or after the issuance of
the Redeemable Preferred Stock), specifically prohibits such declaration,
payment or setting apart for payment or provides that such declaration, payment
or setting apart for payment would constitute a breach thereof or a default
thereunder.
4. Liquidation Preference.
(a) The Liquidation Preference. In the event of any voluntary
or involuntary liquidation, dissolution or winding up the affairs of the
Corporation, the holders of shares of Redeemable Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, whether such assets are capital
or surplus and whether or not any dividends are declared, an amount equal to
$100 for each share outstanding plus an amount equal to all accrued but unpaid
dividends thereon to the date fixed for liquidation, dissolution or winding up
(the "Liquidation Preference"), before any payment shall be made or any assets
distributed to the holders of Junior Securities. If the assets of the
Corporation are not sufficient to pay in full the liquidation payments payable
to the holders of outstanding shares of the Redeemable Preferred Stock and any
series of preferred stock or any other class of stock on a parity, as to rights
on liquidation, dissolution or winding up, with the Redeemable Preferred Stock,
then the holders of all such shares shall share ratably in such distribution of
assets in accordance with the amount that would be payable on such distribution
if the amounts to which the holders of outstanding shares of Redeemable
Preferred Stock and the holders of outstanding shares of such other securities
are entitled were paid in full. Nothing herein contained shall be deemed to
prevent redemption of shares of the Redeemable Preferred Stock by the
Corporation in the manner provided in Section 5. The liquidation payment with
respect to each outstanding fractional share of Redeemable Preferred Stock shall
be equal to a ratably proportionate amount of the liquidation payment with
respect to each outstanding share of Redeemable Preferred Stock. All payments
for
4
<PAGE>
which this Section 4 provides shall be in cash, property (valued at its fair
market value, as determined by an independent nationally recognized investment
banking firm) or a combination thereof. After payment of the full amount of the
Liquidation Preference to which each holder is entitled, such holders of shares
of Redeemable Preferred Stock will not be entitled to any further participation
in any distribution of the assets of the Corporation.
(b) Events Not Constituting Liquidation. For the purposes of
this Section 4, neither the voluntary sale, conveyance, exchange or transfer
(for cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Corporation nor the
consolidation or merger of the Corporation with or into any other corporation
shall be deemed to be a voluntary or involuntary liquidation, dissolution or
winding up of the Corporation.
5. Redemption.
(a) Optional Redemption. Subject to the restrictions set forth
in Section 5(d) hereof, the Corporation may, at the option of the Board of
Directors, at any time or from time to time, in whole or in part, redeem the
shares of Redeemable Preferred Stock at the time outstanding, upon notice given
as hereinafter specified and on a date as specified in such notice (the
"Optional Redemption Date"), at a redemption price equal to the Stated Value per
share, together with accrued and unpaid dividends thereon to the Optional
Redemption Date ("Optional Redemption Price").
(b) Mandatory Redemption. Subject to the restrictions set
forth in Section 5(d) hereof, the Corporation shall redeem in full the
Redeemable Preferred Stock at the earliest to occur of any of the following
circumstances (each a "Mandatory Redemption Date"): (i) if Annual Dividends
shall not have been declared or paid for twelve (12) consecutive years; (ii)
upon the sale, lease or transfer of all or substantially all of the assets of
the Corporation and its subsidiaries, taken as a whole; (iii) on the date that
RBC Equity Partners L.P. and its affiliates, considered as one entity, cease to
be the largest single holder of Class A Voting Common Stock of the Corporation;
or (iv) upon the consolidation or merger of the corporation with or into any
other corporation, in which the Corporation is not the surviving entity. The
price at which outstanding shares of Redeemable Preferred Stock shall be
redeemed pursuant to this subparagraph (b) of Section 5 shall be the Stated
Value per share, together with all accrued but unpaid dividends on such shares
to the date fixed for such redemption (the "Mandatory Redemption Price").
(c) Manner of Redemption. Notice of redemption of
outstanding shares of Redeemable Preferred Stock pursuant to Sections 5(a) and
5(b) shall be sent by or on behalf of the Corporation to the holders of record
of outstanding shares of Redeemable Preferred Stock selected for redemption in
the manner provided in Section 7(b) hereof. If, as a result of a redemption, a
holder would be left with fractions of a share of Redeemable
5
<PAGE>
Preferred Stock ("Fractional Shares"), the Corporation shall redeem the number
of shares of such holder that it otherwise would redeem rounded up or down, in
the Corporation's sole discretion, to the nearest whole number.
(d) Restrictions on Redemptions. No shares of Redeemable
Preferred Stock shall be redeemed in whole or part under Sections 5(a) or 5(b)
hereof: (i) at any time that such redemption is prohibited by the DGCL; (ii) at
any time that the terms and provisions of any contract or other agreement of the
Corporation or any of its subsidiaries entered into or assumed providing
financing (including acquisition financing) or working capital to the
Corporation or any of its subsidiaries (whether or not entered into prior to, at
or after the issuance of the Redeemable Preferred Stock), specifically prohibits
such redemption or provides that such redemption would constitute a breach
thereof or a default thereunder; (iii) unless, prior to or concurrently with
such redemption, all unpaid and accrued dividends on Redeemable Preferred Stock
and on Senior Securities for dividend periods preceding or ending on the
redemption date have been paid in full or have been declared and set aside for
payment in full; or (iv) at any time that the Corporation shall be in default in
respect of any of its redemption obligations on or under Senior Securities.
(e) Priority As To Junior Securities. If the Corporation fails
to discharge its obligation to redeem any outstanding shares of Redeemable
Preferred Stock required to be redeemed pursuant to paragraph 5(b) hereof (the
"Mandatory Redemption Obligation"), (x) the Mandatory Redemption Obligation
shall be discharged as soon as the Corporation is able to discharge such
Mandatory Redemption Obligation, and (y) so long as such Mandatory Redemption
Obligation shall not be fully discharged, the Corporation shall not (i) declare,
pay or set apart for payment any dividend on, or make any distribution in
respect of, the Junior Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior Securities, either
directly or indirectly, whether in cash, obligations or shares of the
Corporation or other property (other than distributions or dividends of a
particular class or series of Junior Securities, or warrants, rights or options
exercisable for such Junior Securities, to holders of such Junior Securities),
or (ii) make any payment on account of, or set apart for payment money for a
sinking or other similar fund for, the purchase, redemption, retirement or other
acquisition for value of any of, or redeem, purchase, retire or otherwise
acquire for value any of, the Junior Securities (other than as a result of a
reclassification of Junior Securities or the exchange or conversion of one class
or series of Junior Securities for or into another class or series of Junior
Securities, other than through the use of the proceeds of a substantially
contemporaneous sale of other Junior Securities) or any warrants, rights, calls
or options exercisable for or convertible into any of the Junior Securities, or
(iii) permit any corporation or other entity directly or indirectly controlled
by the Corporation to purchase, redeem, retire or otherwise acquire for value
any of the Junior Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior Securities, provided,
however, that this restriction shall not apply to the repurchase of shares of
Common Stock held by employees, officers, directors, or consultants of the
Corporation
6
<PAGE>
(or their permitted transferees) that are subject to restrictive stock purchase
agreements under which the Corporation has the option or obligation to
repurchase such shares upon the occurrence of certain events, such as
termination of employment, and shall not apply to the repurchase of warrants to
purchase Class B Nonvoting Common Stock of the Corporation issued to Heller
which the Corporation has the option or obligation to purchase pursuant to the
terms of the warrant certificate representing such warrants.
6. Exchange.
The Redeemable Preferred Stock is exchangeable out of funds
legally available therefor, at the sole option of the Corporation, in whole or
in part, on any Dividend Accrual Date on or after March 31, 1994, for the
Corporation's Subordinated Exchange Debentures due March 31 , 2004 (the
"Exchange Debentures"). The Exchange Debentures shall be issued pursuant to an
indenture, the form of which shall have been approved by the Corporation and the
holders of a majority of the outstanding shares of Redeemable Preferred Stock;
provided, however, that if any terms of such Exchange Debentures are less
favorable in any material respect to the holders thereof than any comparable
term of the Redeemable Preferred Stock, such terms shall have been approved in
writing by the holders of 66-2/3% of the Redeemable Preferred Stock. Holders of
the outstanding shares of Redeemable Preferred Stock will be entitled to receive
$100.00 principal amount of the Exchange Debentures in exchange for each share
of Redeemable Preferred Stock held by them at the time of exchange and cash or
such principal amount of the Exchange Debentures equal to all accrued but unpaid
dividend amounts at the time of the exchange. Such holders may receive Exchange
Debentures in amounts less than $100.00 as may be necessary due to the issuance
of fractional shares of Redeemable Preferred Stock. On the date of exchange, the
rights of the holders of Redeemable Preferred Stock to be exchanged as
stockholders of the Corporation shall cease (except the right to receive on the
date of the exchange out of funds legally available therefore an amount equal to
the amount of accrued and unpaid dividends (in cash or Exchange Debentures) to
the Dividend Accrual Date that coincides with the date of exchange), and the
person or persons entitled to receive the Exchange Debentures issuable upon
exchange shall be treated for all purposes as the registered holder or holders
of such Exchange Debentures as of the Dividend Accrual Date that coincides with
the date of exchange. The Corporation will cause the Exchange Debentures to be
authenticated as of the date on which the exchange is effective and dated the
Dividend Accrual Date that coincides with the date of exchange.
7. Procedure for Redemption or Exchange
(a) Selection. In the event that fewer than all of the
outstanding shares of Redeemable Preferred Stock are to be redeemed or exchanged
pursuant to Section 5 or 6 hereof, the number of shares to be redeemed or
exchanged, shall be determined by the Board of Directors at its sole option and
shall be redeemed or exchanged pro rata among all holders of the Redeemable
Preferred Stock.
7
<PAGE>
(b) Notice. If the Corporation redeems or exchanges shares of
Redeemable Preferred Stock, notice of every redemption or exchange of shares of
Redeemable Preferred Stock shall be mailed by first class mail, postage prepaid,
not less than thirty (30) days nor more than sixty (60) days prior to the
redemption or exchange date addressed to the holders of record of the shares to
be redeemed or exchanged at their respective last addresses as they shall appear
on the books of the Corporation; provided, however, that the failure to give
such notice or any defect therein or in the mailing thereof shall not affect the
validity of the redemption or exchange of any shares so to be redeemed or
exchanged except as to the holder to whom the Corporation has failed to give
such notice or except as to the holder to whom such notice was defective. Each
such notice shall state: (i) the redemption or exchange date; (ii) that shares
of Redeemable Preferred Stock are to be redeemed or exchanged and, if less than
all the shares held by such holder are to be redeemed or exchanged, the number
of such shares to be redeemed or exchanged; (iii) the redemption or exchange
price; (iv) the place or places where certificates for such shares are to be
surrendered for payment of the redemption or exchange price; and (v) that
dividends on the shares to be redeemed or exchanged will cease to accrue on such
redemption date.
(c) Effect of Redemption or Exchange. Notice having been
mailed as aforesaid, from and after the redemption date or as of the exchange
date, dividends on the shares of Redeemable Preferred Stock so called for
redemption or exchange shall cease to accrue, and said shares shall no longer be
deemed to be outstanding and shall be retired and shall have the status of
authorized but unissued shares of preferred stock, unclassified as to series,
and shall not be reissued as shares of Redeemable Preferred Stock, and all
rights of the holders thereof as stockholders of the Corporation (except the
right to receive from the Corporation the redemption price or the Exchange
Debentures upon exchange and any accrued and unpaid dividends, in cash or
Exchange Debentures) shall cease and terminate. In the event of redemption, if
notice of redemption shall have been mailed and if prior to the date of
redemption specified in such notice all said funds necessary for such redemption
shall have been irrevocably deposited in trust, for the account of the holders
of the shares of the Redeemable Preferred Stock to be redeemed (and so as to be
and continue to be available therefor), with a bank or trust company named in
such notice, thereupon and without awaiting the redemption date, all shares of
the Redeemable Preferred Stock with respect to which such notice shall have been
so mailed and such deposit shall have been so made, shall be deemed to be no
longer outstanding and all rights with respect to such shares of the Redeemable
Preferred Stock shall forthwith upon such deposit in trust cease and terminate
(except the right of the holders thereof on or after the redemption date to
receive from such deposit the amount payable upon the redemption). In case the
holders of shares of the Redeemable Preferred Stock that shall have been called
for redemption shall not within two years (or any longer period if required by
law) after the redemption date claim any amount so deposited in trust for the
redemption of such shares, such bank or trust company shall, upon demand and if
permitted by applicable law, pay over to the Corporation any such unclaimed
amount so
8
<PAGE>
deposited with it and shall thereupon be relieved of all responsibility in
respect thereof, and thereafter the holders of such shares shall, subject to
applicable escheat laws, look only to the Corporation for payment of the
redemption price thereof. Upon surrender in accordance with said notice of the
certificates for any shares so redeemed or exchanged (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such shares shall be redeemed or
exchanged by the Corporation at the redemption price or exchange rate aforesaid.
In case fewer than all the shares represented by any such certificate are
redeemed or exchanged, a new certificate shall be issued representing the
unredeemed or unexchanged shares without cost to the holder thereof.
8. Voting Rights. Except as specifically set forth in the DGCL, the
holders of shares of Redeemable Preferred Stock shall not be entitled to any
voting rights with respect to any matters voted upon by stockholders of the
Corporation.
9. Section Headings. Section headings are for convenience of
reference only and shall not constitute a part of this Certificate or be
referred to in connection with the interpretation or construction hereof.
IN WITNESS WHEREOF, the Corporation has caused this certificate to
be executed, signed and acknowledged by Richard K. Roeder, its Vice President,
and to be attested by Kurt B. Larsen, its Secretary, this 20th day of October,
1992.
/s/ Richard K. Roeder
-------------------------
Richard K. Roeder
Vice President
Attest: /s/ Kurt B. Larsen
-------------------------
Kurt B. Larsen
Assistant Secretary
9
<PAGE>
EXHIBIT 1.4(a)
BILL OF SALE
THIS BILL OF SALE is made as of the 26th day of October, 1992, by
BFM TRANSPORT DYNAMICS CORPORATION, a California corporation ("TDC").
W I T N E S S E T H:
That for the consideration set forth in that certain Asset Purchase
Agreement, dated as of October 26, 1992 (the "Agreement"), by and between TDC
and RBC Holding Company, Inc., a Delaware corporation ("Buyer"), TDC hereby
conveys, transfers, assigns and delivers to and vests in Buyer, free and clear
of all Encumbrances except Permitted Encumbrances (all capitalized terms used
herein and not otherwise defined having the meanings given to them in the
Agreement) all of TDC's good and marketable title, right and interest in and to
the Assets, which are all the assets of every type and nature (tangible or
intangible) owned by TDC as of the date hereof (other than the Excluded Assets
identified in Schedule 1.1(a) attached to the Agreement), including, without
limitation: (i) all of the cash of TDC on hand or in bank or in other accounts
of TDC, (ii) all trade accounts receivable and other receivables of TDC, (iii)
all of the inventories of raw materials, work-in-process, finished products,
scrap and rejects, spare parts and supplies identified in Schedule 1 attached
hereto, except for the items sold after the date of such schedule in the
ordinary course of business of TDC; (iv) all machinery, apparatus, commercial
tooling, equipment and trade fixtures identified in Schedule 2 attached hereto;
(v) all office furniture and fixtures identified in Schedule 3 attached hereto;
(vi) all of TDC's leasehold improvements located at the premises occupied by TDC
at 3131 West Segerstrom Avenue, Santa Ana, California and identified in Schedule
4 attached hereto; (vii) the goodwill incident to the business of TDC; (viii)
all records of the Business including, without limitation, property, production,
engineering, contract and accounting records, sales data and records, customer
lists and other information relating to customers, catalogs, brochures,
suppliers' names, mailing lists and any photographic and advertising materials;
(ix) all rights in to and under all Contracts, including purchase and sales
orders and commitments, personal property leases and other agreements made in
the ordinary course of business, including, without limitation, those set forth
in Schedule 5 attached hereto; and (x) all of TDC's right, title and interest in
and to all copyrights, service marks, trademarks, logos, trade names (including
the name "BFM Transport Dynamics Corporation") , patents, patent
1.4(a)-1
<PAGE>
applications, licenses (including patent licenses) royalty rights and
inventions, processes, know-how, formulae, trade secrets, compositions, designs,
drawings, specifications, patterns, blueprints, plans, files, notebooks and
records relating to research, engineering and development activities, production
data and shop rights, including, without limitation, the items set forth in
Schedule 6 attached hereto.
EXCEPT AS SET FORTH HEREIN AND IN SECTION 2 OF THE AGREEMENT, THE
ASSETS HAVE BEEN EXAMINED BY BUYER AND ARE CONVEYED BY TDC TO BUYER "AS IS" AND
"WHERE IS" AND TDC HEREBY EXPRESSLY DISCLAIMS THE EXISTENCE OF ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO CONDITION, MERCHANTABILITY,
OPERATION, FITNESS FOR USE OR AS TO ANY MATTER WHATSOEVER.
Subject to the terms and conditions of the Agreement, TDC hereby
constitutes and appoints Buyer and its successors and assigns as TDC's true and
lawful attorney and stead, on behalf of and for the benefit of Buyer, its
successors and assigns, to demand and receive any and all of the Assets and to
give receipts and releases for and in respect of the same and any part thereof,
and from time to time to institute and prosecute in TDC's name or otherwise for
the benefit of Buyer, its successors and assigns, any and all proceedings at
law, in equity or otherwise, which Buyer, its successors and assigns, may deem
proper for the collection or reduction to possession of any of the Assets or
Assumed Liabilities or for the collection and enforcement of any claim or right
of any kind hereby sold, conveyed, transferred, assigned and delivered, or
intended so to be, and to do all acts and things in relation to the Assets and
Assumed Liabilities that Buyer, its successors and assigns, shall deem
desirable; TDC hereby declaring that the foregoing powers are coupled with an
interest and are not and shall not be revocable by TDC in any manner for any
reason whatsoever.
From time to time after the date hereof, at the request of Buyer,
TDC shall, without consideration, deliver such further instruments of transfer
and shall take such other action as Buyer may reasonably request in order to
convey more effectively any of the Assets transferred hereunder to Buyer.
This Bill of Sale may be assigned and a security interest in this
Bill of Sale may be granted by Buyer and may be enforced by any financial
institution or other entity providing financing to Buyer for the transactions
contemplated herein.
1.4(a)-2
<PAGE>
This Bill of Sale is executed and delivered by TDC pursuant to the
Agreement and shall be binding upon TDC, its successors and assigns for the uses
and purposes above set forth and referred to, effective on the date first
written above.
1.4(a)-3
<PAGE>
IN WITNESS WHEREOF, TDC has executed this Bill of Sale on the day
and year first written above.
BFM TRANSPORT DYNAMICS
CORPORATION,
a California corporation
By:
-------------------------------
Title:
------------------------
1.4(a)-4
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF KINGS )
On October __, 1992, before me, the undersigned a Notary Public in
and for said County and State, personally appeared _________________________,
known or proved to me on the basis of satisfactory evidence to be the
_______________ of the corporation that executed the within instrument, and
known to me to be the person who executed the within instrument on behalf of the
corporation therein named, and acknowledged to me that, acting on behalf of such
corporation, he executed the same.
WITNESS my hand and official seal.
-----------------------------
Notary Public in and for said
County and State
1.4(a)-5
<PAGE>
EXHIBIT 1.5(b)
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (this "Assumption Agreement") is made as
of the 26th day of October, 1992, by RBC TRANSPORT DYNAMICS CORPORATION, a
Delaware corporation ("Buyer").
R E C I T A L S:
A. Buyer, Roller Bearing Holding Company, Inc., a Delaware
corporation, BFM Aerospace Corporation, a Delaware corporation, and BFM
Transport Dynamics Corporation, a California corporation ("TDC") , have entered
into that certain Asset Purchase Agreement, dated as of the date hereof (the
"Agreement").
B. Pursuant to the Agreement, Buyer has agreed to assume certain
of the debts, obligations, liabilities and claims of TDC as of the date hereof.
C. All capitalized terms used herein without definition shall have
the meanings given to them in the Agreement.
NOW, THEREFORE, in consideration of the above premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer agrees as follows:
Section 1. Assumption of Liabilities.
Buyer hereby assumes as of the date hereof and shall hereafter
perform and discharge the following and only the following debts, obligations
and liabilities of and claims against TDC: (i) all agreements, contracts,
commitments, purchase orders, personal property leases and sales orders relating
to the Business, including, without limitation, those items identified in
Schedule 1 attached hereto, but excluding, however, that certain Lease
Agreement, dated November 1, 1988, by and between TDC and TD Land, Inc. with
respect to the Premises; (ii) all debts, obligations, liabilities and claims
identified in Schedule 2 attached hereto to the extent set forth therein; (iii)
all debts, liabilities, obligations and claims arising from the operation of the
Business after the date hereof; and (iv) all claims made after the date hereof
for breach of warranty or product liability arising out of products shipped by
Buyer after the date hereof with respect to which Buyer is unable to provide to
TDC written or other reasonable
1.5(b)-1
<PAGE>
evidence that such products were manufactured by TDC and constituted finished
goods on or prior to the date hereof.
Section 2. Governing Law.
This Assumption Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California.
Section 3. Construction.
This Assumption Agreement is subject to the terms and conditions of
the Agreement and, notwithstanding anything contained herein to the contrary,
this Assumption Agreement shall not be deemed to limit, enlarge or extinguish
any obligation of TDC, Buyer or the other parties to the Agreement under the
Agreement, all of which obligations shall survive the execution and delivery of
this Agreement in accordance with the terms of the Agreement.
1.5(b)-2
<PAGE>
IN WITNESS WHEREOF, Buyer has duly executed this Assumption
Agreement as of the day and year first set forth above.
RBC TRANSPORT DYNAMICS
CORPORATION,
a Delaware corporation
By:
----------------------------
Title:
---------------------
1.5(b)-3
<PAGE>
SCHEDULE 1
Contracts
<PAGE>
SCHEDULE 2
Other Assumed Liabilities
<PAGE>
INDEX OF SCHEDULES
Schedule 1.1(a) - Excluded Assets
Schedule 1.1(a)(iii) - Inventory
Schedule 1.1(a)(iv) - Machinery and Furniture
Schedule 1.1(a)(vi) - Leasehold Improvements
Schedule 1.1(a)(ix) - Contracts
Schedule 1.1(a)(x) - Patent and Trademark Rights
Schedule 1.1(b) - Assumed Liabilities
Schedule 2.3 - Government Consents and
Approvals (TDC)
Schedule 2.5 - Encumbrances
Schedule 2.8 - Taxes
Schedule 2.10 - Disclosure Regarding Patents
and Trademark Rights
Schedule 2.11 - Leases
Schedule 2.14 - Employee Plans
Schedule 2.15 - Compliance with Law
Schedule 2.17 - Permits and Licenses
Schedule 2.19 - Environmental Matters
Schedule 3.4 - Government Consents and
Approvals (Buyer)
iv
<PAGE>
Schedule 1.1(a)
Excluded Assets
1. Lease agreement, dated November 1, 1988 between TDC and TD Land, Inc. with
respect to the Premises.
TDC-1
<PAGE>
Schedule 1.1(a)(iii)
Inventory
August 31, 1992
($ in 000's)
AEROSPACE INDUSTRIAL TOTAL
--------- ---------- -----
RAW MATERIAL $ 219 $ 156 $ 375
WORK-IN-PROCESS 1,723 189 1,912
FINISHED GOODS 1,074 74 1,148
RESERVES FOR INVENTORY
EVALUATION (65) (15) (80)
------ ----- ------
TOTAL $2,951 $ 404 $3,355
====== ===== ======
TDC-2
<PAGE>
Schedu1e 1.1(a) (iv)
Machinery and Furniture
See attached lists. The cost of each item referred to therein reflects the
original book cost.
TDC-3
<PAGE>
Schedule 1.1(a)(vi)
Leasehold Improvements
None
TDC-4
<PAGE>
This Schedule is also referenced in
Section 2.12 of the Purchase Agreement.
Schedule 1.1(a)(ix)
Contracts
1. Multi-year Procurement Agreement with General Electric dated April 26,
1990 for purchase of various bearings. Agreement expires in three years,
with an option for two additional years.
2. The following Purchase Order agreements from customers:
Order Contract
Customer Date 000's Ship Date
- -------- ---- ----- ---------
Jet 1-92 82 2-92-Unscheduled
Western Methods 4-91 106 2-92-Unscheduled
FMC 1-92 167 7-92-1-94
Chalco 1-90 82 10-92-3-93
Ambel Prec. 9-91 96 1-93 Unscheduled
CPC 5-91 77 11-92-11-93
Bell H/C 5-90 62 5-94-10-94
U.S. Airforce 3-92 94 1-93
Rolls-Royce 7-91 122 Stop-Work
G.E. Ohio 3-91 354 9-92-8-93
G.E. Ohio 5-91 88 8-93-12-93
Lear Astronics 7-92 89 10-92-5-94
P&W Ct. 2-91 90 2-93-3-94
McDD H/C 5-91 169 5-92-10-93
Northrop 6-91 100 10-92-11-92
G.E. Lynn 7-90 302 2-93-1-95
G.E. Hooksett 7-91 162 10-92-11-92
G.E. Hooksett 2-92 98 12-92-8-93
G.E. Hooksett 7-91 138 1-93
G.E. Hooksett 7-91 138 12-91-11-92
G.E. Hooksett 7-91 78 11-92
G.E. Hooksett 7-91 59 1-93
G.E. Hooksett 7-91 78 11-92-7-93
Bell H/C 6-91 56 11-92-1-93
G.E. Hooksett 3-91 82 11-92-Unscheduled
P&W Ct. 5-89 96 8-92-6-94
G.E. Ohio 7-90 408 9-92
Northrop 8-92 60 6-93-10-93
Hill AFB 7-92 287 5-93-9-93
U.S. Army 5-92 195 Unscheduled
G.E. Lynn 1-90 293 8-92-3-95
G.E. Ohio 6-90 74 8-92-10-92
U.S. Army 9-92 68 6-93
TDC-5
<PAGE>
Schedule 1.1(a)(ix) (continued)
G.E. Hooksett 1-91 132 10-92
G.E. Ohio 10-90 63 11-92
G.E. Hooksett 1-91 95 Unscheduled
G.E. Hooksett 2-92 98 2-93-10-93
G.E. Hooksett 2-92 116 3-93-9-93
P&W Ct. 3-87 79 Termination *
P&W Ct. 7-90 131 6-93
See Schedule 2.3 which schedule is incorporated herein by reference.
3. Manufacturers' Representative Agreements:
(a) Agreement with DP Aviation dated March 26, 1985.
(b) Two agreements with Mills Associates dated February 4, 1985
and June 1, 1987.
(c) Agreement with Magna Engineering Sales Co., Inc., dated
November 2, 1983.
(d) Agreement with Interfast, Inc. dated January 12,
1973.
(e) Agreement with Benson Engineering dated June 1,
1987.
(f) Agreement with East Air Corporation dated September 14, 1991.
(g) Agreement with Erma Werke GmbH dated February 3, 1992.
4. Personal Property Leases:
(a) Three lease agreements between TDC and Xerox Corporation for
lease of various copying equipment and engineering systems.
Leases expire between September 1993 and October 1995.
(b) Lease agreement between TDC and Bell Atlantic Tricon dated
April 10, 1989 for lease of a Cannon NP 3225F Copier. Lease
expires April 1993.
* Contract has been terminated by customer and certain termination charges
may be owed by customer.
TDC-6
<PAGE>
Schedule 1.1(a)(ix) (continued)
(c) Lease agreement between TDC and KS&C Industries dated January
29, 1992 for the rental of various gauges and fixtures. Lease
expires December 31, 1992.
(d) Lease agreement between TDC and New Era Supplier dated
February 15, 1991 for lease of three hot/cold water coolers.
Lease expires February 14, 1994.
TDC and GSI
1. Compensation Agreements:
(a) Letter Agreement dated March 14, 1990 regarding payment to Frank
Cole of Deferred Bonus.
(b) Letter dated April 10, 1992 regarding proposals for the 1992 Key
Employee Incentive Bonus Program.
2. Security Maintenance Agreement dated July 19, 1991 between Sea Coast
Security System and TDC. Agreement expires June 30, 1994.
3. Equipment Maintenance and Service Agreement dated October 1, 1991 between
MS-COM Telecommunications and TDC.
4. Maintenance Agreement dated June 15, 1987 between IDEA Servcom and TDC.
5. Personal Property Leases:
(a) Vehicle lease agreements between TDC and McCullagh-Gelco for the use
of seven company vehicles by TDC's president and field sales
personnel. Leases have various expiration dates.
(b) Lease agreement between TDC and G.E. Capital Business Center for
lease of ROLM VXCBX telephone system. Lease expires December 31,
1992.
6. Erma Werke GmbH has a paid-up license for the use of the technological
know-how relating to FIBERGLIDE and the use of the FIBERGLIDE(R)
trademark.
TDC-7
<PAGE>
Schedule 1.1(a)(x)
Patent and Trademark Rights
See also Section 2.10
1. U. S. Patents
U.S. Patent No. Issue Date Title
- --------------- ---------- -----
No. 4,080,015 March 21, 1978 Sealed Bearing
2. U. S. Trademark Registrations
Trademark Registration No. Expiration Date**
- --------- ---------------- -----------------
DYNASPHERE 781,731 12-15-2004
FABROID 651,079 09-03-1997
FIBERGLIDE 703,508 08-30-2000
FIBRILEX 1,081,557 01-10-1998
FIBRILOID 1,005,036 02-18-1995
THERMALOID 1,617,323 10-16-2000
3. Foreign Trademark Registrations
Expiration Class
Country Trademark Regis. No. Date** of Goods
- ------- --------- ---------- ------ --------
*Argentina FABROID 1,150,953 07-01-1995 Bearings (#6)
*Argentina FABROID 1,150,954 07-01-1995 Bearings (#7)
*Argentina FABROID 1,150,956 07-01-1995 Bearings (#12)
*Argentina FIBERGLIDE 1,150,955 07-01-1995 Bearings (#6)
*Argentina FIBERGLIDE 1,150,957 07-01-1995 Bearings (#7)
*Argentina FIBERGLIDE 1,150,958 07-01-1995 Bearings (#12)
Australia FABROID A186,490 03-13-1999 Bearings (#7)
Australia FABROID A196,586 03-13-1999 Bearings (#12)
Australia FIBERGLIDE 186,488 08-13-1999 Bearings (#7)
TDC-8
<PAGE>
Schedule 1.l(a)(x) (continued)
Expiration Class
Country Trademark Regis. No. Date** of Goods
- ------- --------- ---------- ------ --------
Australia FIBERGLIDE 196,567 08-13-1999 Bearings (#12)
Canada FABROID 137,562 10-02-1994 Bearings
Canada FIBERGLIDE 123,503 08-09-2006 Bearings
Canada FIBRILOID 211,048 01-06-2006 Bearings
Italy FABROID 459,737 04-09-2004 Bearings (#1,7,17)
Italy FIBERGLIDE 291,535 02-14-1993 Bearings (#6,7)
Italy FIBRILOID 299,376 10-25-1993 Bearings
Japan FABROID 678,008 06-11-1995 Bearings (#9)
Sweden FIBERGLIDE 113,762 08-13-1995 Bearings (#7)
U.K. FIBERGLIDE 819,203 04-07-1996 Bearings (#7)
U.K. THERMALOID 1,400,234 10-16-2000 Bearings
W. Germany FABROID 810,100 03-13-1994 Bearings
W. Germany FIBERGLIDE 757,565 04-05-2001 Bearings (#6,7,12,17)
W. Germany FIBRILOID 939,229 11-14-1993 Bearings (#7)
* Argentina has not provided formal recording documents for the trademarks
listed herein:
(a) FABROID(R), and
(b) FIBERGLIDE(R)
Argentina has advised TDC that all documents have been filed and reports
are expected to be received in the near future from the patent and
trademark office.
** The expiration dates listed herein are provided for reference purposes
only and should not be considered as representations as to their accuracy.
TDC-9
<PAGE>
Schedule 1.1(b)
Assumed Liabilities
1. Workers' compensation liabilities accrued on the balance sheet of TDC as
of the date hereof (the "Balance Sheet"), which, as of August 31, 1992,
were $28,000.
2. All Employee Plans listed on Schedule 2.14.
3. Frank Cole's deferred compensation pursuant to that certain Deferred Bonus
Agreement dated March 14, 1990 (approximately $170,000).
4. Fifty percent of the amount of the liability, if any, for severance
payments or termination benefits owing to Frank E. Cole pursuant to that
certain Termination Benefits Agreement dated January 31, 1990.
5. Liability for benefit payments under the Severance Policy on account of
the termination of any Transferred Employee occurring on or after the
Closing.
6. The Contracts (as defined in Section 1.1(a) (ix) of the Agreement).
7. Trade accounts payable accrued on the Balance Sheet, which, as of August
31, 1992, were $226,000.
8. Accrued payroll as accrued on the Balance Sheet, which, as of August 31,
1992, was $31,000.
9. Accrued payroll taxes and property taxes as accrued on the Balance Sheet,
which, as of August 31, 1992, were $36,000.
10. The leases as set forth in Schedule 2.11, other than the lease agreement
described in Schedule 1.1(a).
11. Product warranties for products shipped by Buyer after the date hereof
with respect to which Buyer is unable to provide to TDC written or other
reasonable evidence that such products were manufactured by TDC and
constituted finished goods on or prior to the date hereof.
12. Vacation, holiday and sick leave accruals on the Balance Sheet, which, as
of August 31, 1992, were $265,000.
13. Bonuses accrued on the Balance Sheet, if any, with respect to the Employee
Incentive Bonus Proposal dated April 10, 1992, which, as of August 31,
1992, were zero.
TDC-10
<PAGE>
14. Any other liabilities on the Balance Sheet not listed herein, which, as of
August 31, 1992, were approximately $95,000.
TDC-11
<PAGE>
Schedule 2.2
No Conflict
The terms of the lease between TDC and Xerox Corporation ("Xerox"), require the
prior written consent of Xerox in connection with the assignment of such leases
by TDC. TDC has undertaken to obtain such consents, which Xerox has informed TDC
will be forthcoming.
TDC-12
<PAGE>
Schedule 2.3
Government Consents and Approvals
A novation agreement, in accordance with Federal Acquisition Regulations System
subpart 42.12, is required on the following Government Contracts:
Open U.S. Government Contracts as of September 30, 1992
Dept. of the Army-St. Louis, MO
F04606-91-G-0038-BSO1
DAAJO9-92-C-0864
DAAJO9-92-C-0865
DAAJO9-92-P-1051
DAAJO9-92-P-1160
DAAJO9-92-C-0503
Dept. of the Air Force
F04606-92-G-0021-QPOl Hill AFB
F04606-92-G-0021-RJOl Warner Robins AFB
F04606-92-G-0021-5A05 Kelly AFB
F42620-92-M-0995 Hill AFB
F42630-92-M-1313 Hill AFB
F41608-92-D-1523 Kelly AFB
F34601-92-M-2193 Kelly AFB
F04606-92-G-0021-SA03 Kelly AFB
F42630-92-C--721 Hill AFB
Defense Industrial Supply Center - Philadelphia, PA.
DLA5OO-92-M-MK06 DLA5OO-92-M-GBl6 DLA5OO-92-M-MAl7 DLA5OO-92-M-RV27
DLA5OO-92-M-UN28 DLA5OO-92-M-VC2S DLA5OO-92-M-TM9l DLA5OO-92-M-UC97
DLA5OO-92-C-1288 DLA5OO-92-M-EY55 DLA5OO-92-M-KF98 DLA5OO-92-M-LY77
DLA5OO-92-M-0E98 DLA5OO-92-M-5U17 DLA5OO-92-M-5N67
TDC-13
<PAGE>
Schedule 2.3 (continued)
Defense Industrial Supply Center - Philadelphia, PA (continued)
DLA5OO-92-M-CXO7
DLA5OO-92-M-UG97
DLA5OO-92-M-VP4O
DLA5OO-93-M-0633
DLA5OO-93-M-0484
U.S. Army - Corpus Christi, Texas
DAAC83-92-D-0003
Defense Construction Supply Center, Columbus, OH
DLA750-92-M-7319
U.S. Navy Aviation Supply Office, Philadelphia, PA
N00383-92-P-Z984
U.S. Army AVN & Troop CMD, St. Louis, MO
DAAJO9-92-C-0894
TDC-14
<PAGE>
Schedule 2.5
Encumbrances
Type of Filing Date and Place of Parties
Filing
- --------------------------------------------------------------------------------
1. UCC-l 12/07/89 BFM Transport Dynamics,
Financing California Secretary as Debtor, and Xerox
Statement of State Corporation, as Secured
Party
TDC-15
<PAGE>
Schedule 2.8
Taxes
Federal income tax returns of BFM have not been audited. California income tax
returns of BFM have been audited through October 31, 1989.
Sales tax returns have been audited through calendar year 1990. Property tax
statements have been audited for the 1992-93 tax year.
TDC-16
<PAGE>
Schedule 2.10
Disclosure Regarding Patents
and Trademark Rights
A. Argentina has not provided formal recording documents for the trademarks
listed herein:
(a) FABROID(R), and
(b) FIBERGLIDE(R)
Argentina has advised TDC that all documents have been filed and reports
are expected to be received in the near future from the patent and
trademark office.
B. Erma Werke GmbH has a paid-up license for the use of the technological
know-how relating to FIBERGLIDE and the use of the FIBERGLIDE(R)
trademark.
TDC-17
<PAGE>
This Schedule is also referenced
in Section 2.12 of the Purchase Agreement.
Schedule 2.11
Leases
1. Three lease agreements between TDC and Xerox Corporation for lease of
various copying equipment and engineering systems. Leases expire between
September 1993 and October 1995.
2. Lease agreement between TDC and Bell Atlantic Tricon dated April 10, 1989
for lease of a Cannon NP 3225F Copier. Lease expires April 1993.
3. Lease agreement between TDC and KS&C Industries dated January 29, 1992 for
the rental of various gauges and fixtures. Lease expires December 31,
1992.
4. Lease agreement between TDC and New Era Supplier dated February 15, 1991
for lease of three hot/cold water coolers. Lease expires February 14,
1994.
5. Lease agreement dated November 1, 1988 between TDC and TD Land, Inc. with
respect to the Premises.
TDC and GSI
1. Vehicle lease agreements between TDC and McCullagh-Gelco for the use of
seven company vehicles by TDC's president and field sales personnel.
Leases have various expiration dates.
2. Lease agreement between TDC and G.E. Capital Business Center for lease of
ROLM VXCBX telephone system. Lease expires December 31, 1992.
TDC-18
<PAGE>
Schedule 2.12
Contracts and Commitments
1. Severance Policy
2. Termination Benefits Agreement, dated January 31, 1990, by and between TDC
and Frank E. Cole
3. Documents executed by TDC in connection with BFM's Credit Agreement with
Wells Fargo.
TDC-19
<PAGE>
Schedule 2.14
Employee Benefit Plans
A. Employee Plans
1. Medical Benefit Plans for Salaried Employees:
(a) Blue Cross Prudent Buyer Plan;
(b) Pacificare HMO (for I.A.M. Union Hourly Employees only);
(c) Blue Cross California Care HMO; and
(d) Blue Cross Out-of-State Plan.
2. Dental Benefit Plans for Salaried and Hourly Employees:
(a) Confederation Life;
(b) Denticare HMO; and
(c) Dental Net HMO.
B. Multi-Employer Plans
1. I.A.M. National Pension Fund Trust Agreement.
2. Vision Care Plan for I.A.M. Union Employees.
3. Air-Conditioning and Refrigeration Industry Retirement Trust Fund.
4. Air-Conditioning and Refrigeration Industry Health and Welfare Trust
Fund.
TDC-20
<PAGE>
Schedule 2.15
Compliance with Law
The following is an index showing all communications between TDC and
the County Sanitation District of Orange County ("District") in connection with
a Probation Order issued to TDC pursuant to Section 602 of the District's
Wastewater Discharge Regulations for discharging cadmium and chromium
contaminated water into the District's sewer system. Copies of said
communications have been or will be provided to the Buyer upon its request.
DATE SUBJECT
- ---- -------
12/20/90 Probation Order Regarding Violations of Cadmium and Chromium
Discharge Limits.
05/28/91 Pre-Treatment System Drawing Review.
10/31/91 Amendment to Enforce Compliance Schedule Agreement.
01/22/92 Review of Operation and Maintenance Manual.
09/01/92 Notice of Violation Regarding Cadmium Discharge Limits.
TDC-21
<PAGE>
Schedule 2.17
Permits and Licenses
Government Licenses and Permits.
a. County of Orange Health Care Agency Environmental Health Waste Management
(#929).
b. State Board of Equalization Special Tax Division Hazardous Waste Disposal
(EPA CAD # 046057063).
C. Division of Occupational Safety & Health Permit to operate liquified
petroleum gas tanks, expires 2/9/93.
d. City of Santa Ana 1992 Business License Tax Workers Compensation
Verification Statement for the 1992 tax period (#0142519).
e. State Water Resource Control Board Notice of Intent for General Permit to
Discharge Storm Water application submitted 3/31/92.
f. County Sanitation District of Orange County, California Industrial Waste
Division Class I Permit for discharge of waste water (#1-335) expired
3/31/92 and a new application has been submitted.
g. South Coast Air Quality Management District : D06962 - oven, plastic/resin
curing; D06963 - oven, plastic/resin curing; D06964 - oven, plastic/resin
curing; D07303 - degreaser solvent dip - greater than 1 pound/day scrubber
other; D06965 - absorber scrubber other; D34079 - soil treat vapor
extracts other VOC above; all expiring 12/16/92. An application has been
submitted for a waste water treatment system (application #261180).
TDC-22
<PAGE>
Schedule 2.19
Environmental Matters
Copies of the following audit reports
have been provided to Buyer:
ENVIRONMENTAL AUDIT REPORTS
INDEX
Date From To Subject
3-1-89 Targhee Frank Cole Environmental Audit Report
7-3-89 Targhee Frank Cole Transmittal Letter and Report of
Phase II Sub-Surface
Investigation Report - Final
7-7-89 Targhee Water Bd. Subsurface Investigation Report
11-1-89 Water Bd. Frank Cole Phase II Subsurface Investigation Report
11-9-89 Targhee Frank Cole Proposed Workplan - Additional
Phase II Sub-surface
Investigation & Soil Remediation
1-29-90 Targhee Water Bd. Transmittal Letter - Supplement
to Approved Workplan for
Additional Phase II Subsurface
Investigation and Soil Remediation
2-28-90 Water Bd. Frank Cole Approval of Phase II Soil
Remediation Workplan
4-20-90 Targhee Water Bd. Site Remediation
5-21-90 Water Bd. Frank Cole Approval of Modifications to
Phase II Soil Remediation Workplan
6-6-90 Targhee Water Bd. Report of Soil Remediation
7-19-90 Targhee Water Bd. Groundwater Remediation Plan
7-31-90 Water Bd. Frank Cole Approval of Phase II Soil
Remediation
TDC-23
<PAGE>
Schedule 2.19 (continued)
8-21-90 Targhee Frank Cole Report of Findings - Subfloor
Analysis at Plating Shop and
Report dated 8-22-90
9-24-90 Water Bd. Frank Cole Approval of Conceptual
Groundwater Remediation Workplan
10-23-90 Targhee Water Bd. Transmittal Letter with
Bioremediation Workplan
12-19-90 Water Bd. Frank Cole Approval of Workplan for
Excavated Soil Remediation
1-16-91 Targhee Water Bd. Groundwater Remediation Plan
2-28-91 Water Bd. Frank Cole Transmittal of Adapted Order No.
91-20 containing Waste Discharge
Requirements for Ground-Water
Cleanup Project
3-6-91 Water Bd. Frank Cole Groundwater Remediation Plan,
Approval of
6-18-91 Targhee Frank Cole Quarterly Report of Soil
Bioremediation Program
7-8-91 Targhee Water Bd. Groundwater Monitoring Results
of 5-24-91 Sampling
8-19-91 Targhee Water Bd. Final Analytical Data for Soil
Bioremediation
9-11-91 Targhee Frank Cole Closure Report for Soil
Bioremediation
9-16-91 Targhee Water Bd. Quarterly Groundwater Monitoring
Report
9-23-91 Targhee Frank Cole Estimated Yearly Operating Costs
for Groundwater Remediation
11-1-91 Targhee Frank Cole Closure Letter from City of
Santa Ana Fire Department for
Soil Bioremediation
12-16-91 Water Bd. Frank Cole Approval of Closure of Soil
Bioremediation
12-17-91 Targhee Water Bd. Quarterly Groundwater Monitoring
Report
TDC-24
<PAGE>
Schedule 2.19 (continued)
3-24-92 Targhee Water Bd. Quarterly Groundwater Monitoring
Report
6-19-92 Targhee Water Bd. Quarterly Groundwater Monitoring
Report
6-26-92 Targhee Frank Cole Estimated Yearly Operating Costs
for Ground Water Remediation
9-11-92 Targhee Water Bd. Quarterly Groundwater Monitoring
Report
TDC-25
<PAGE>
Schedule 3.4
Government Consents and Approvals (Buyer)
Consents required pursuant to the Federal Assignment of Contracts
Act, 41 U.S.C. Section 15, the Assignment of Claims Act, 31 U.S.C. Section 3727
(the "Statutes") and the regulations implementing the Statutes.
TDC-26
CONFIDENTIAL
ACQUISITION OF
ROLLER BEARING COMPANY
OF AMERICA, INC.
MARCH 31, 1992
<PAGE>
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF REORGANIZATION
DATED MARCH 31, 1992,
AMONG
ROLLER BEARING COMPANY OF AMERICA, INC.,
ROLLER BEARING ACQUISITION COMPANY, INC.
ROLLER BEARING HOLDING COMPANY, INC.,
AND
THE STOCKHOLDERS OF ROLLER BEARING COMPANY OF AMERICA, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I GENERAL ................................................ 1
1.1. The Merger ............................................. 1
1.2. The Effective Time of the Merger ....................... 2
1.3. Effect of Merger ....................................... 2
1.4. Charter and By-Laws of Surviving Corporation ........... 2
1.5. Taking of Necessary Action; Further
Assurances ........................................ 3
ARTICLE II PURCHASE OF SHARES; EFFECT OF MERGER ON
CAPITAL STOCK AND OTHER SECURITIES OF
CONSTITUENT CORPORATIONS; ETC ..................... 3
2.1. Purchase of Shares ..................................... 3
2.2. Effect of Merger on Securities ......................... 3
2.3. Exchange of Certificates; Delivery of Funds ............ 4
2.4. Deposit into Escrow .................................... 5
2.5. Exercise of Warrants and Exchange of Options ........... 5
2.6. Authorization of the Merger, this Agreement
and the Agreement of Merger ....................... 6
2.7. After the Effective Time ............................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES ......................... 6
3.1. Several Representations and Warranties of
Each Stockholder .................................. 6
(a) Title to the Shares .................................... 6
(b) Organization, Good Standing and Power .................. 7
(c) Authority .............................................. 7
(d) Investment Representations ............................. 7
3.2. Representations and Warranties of the
Stockholders and RBC .............................. 8
(a) Organization; Good Standing; Qualification
and Power ......................................... 8
(b) Authority .............................................. 9
(c) Capital Structure ...................................... 9
(d) Equity Investments ..................................... 10
(e) Financial Information .................................. 10
(f) Absence of Undisclosed Liabilities ..................... 11
(g) Absence of Changes ..................................... 11
(h) Title to Assets, Properties and Rights and
Related Matters ................................... 13
(i) Agreements, Etc ........................................ 13
(j) Compliance; Governmental Authorization ................. 15
(k) Litigation, Etc ........................................ 15
(l) Tax .................................................... 16
(m) ERISA .................................................. 18
(n) Environmental Matters .................................. 19
(o) Intellectual Property .................................. 22
(p) Labor Relations; Employees ............................. 23
(q) Insurance .............................................. 23
- i -
<PAGE>
Page
----
(r) Brokers ................................................ 23
(s) Material Adverse Effect ................................ 23
(t) Depositions, Powers of Attorney ........................ 23
(u) Government Contracts ................................... 23
(v) Disclosure ............................................. 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE ACQUISITION CORPORATION ................... 24
4.1. Representations and Warranties of the Buyer
and the Acquisition Corporation ................... 24
(a) Organization; Good Standing; and Power ................. 24
(b) Authority .............................................. 24
(c) Authorization of Buyer's Preferred Stock ............... 26
(d) Capital Structure ...................................... 26
(e) No Prior Activities; Pro Forma Balance Sheet ........... 26
(f) Brokers' or Finders' Fees .............................. 26
(g) Nonforeign Status ...................................... 26
ARTICLE V CONDITIONS PRECEDENT ................................... 27
5.1. Conditions to Each Party's Obligations ................. 27
(a) Legal Action ........................................... 27
(b) Legislation ............................................ 27
5.2. Conditions to Obligations of the Buyer and
the Acquisition Corporation ....................... 27
(a) Representations and Warranties ......................... 27
(b) Performance of Obligations ............................. 27
(c) Authorization of Merger ................................ 27
(d) Termination of Management Agreements. .................. 28
(e) Escrow Agreement ....................................... 28
(f) Consents ............................................... 28
(g) Defense Contracts ...................................... 28
(h) Opinion of Counsel ..................................... 28
5.3. Conditions to Obligations of RBC and the
Stockholders ...................................... 28
(a) Representations and Warranties ......................... 28
(b) Performance of Obligations of the Buyer and
the Acquisition Corporation ....................... 28
(c) Authorization of Merger ................................ 29
(d) Issuance of Preferred Stock ............................ 29
(e) Satisfaction of Indebtedness ........................... 29
(f) Escrow Agreement ....................................... 29
(g) Exchange Agreements .................................... 29
(h) Consents ............................................... 29
(i) Defense Contracts ...................................... 29
(j) Opinion of Counsel ..................................... 29
ARTICLE VI CLOSING ................................................ 30
ARTICLE VII ADDITIONAL AGREEMENTS .................................. 30
7.1. Officer and Director Indemnification ................... 30
7.2. Noncompetition ......................................... 30
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Page
----
7.3. Information Rights ..................................... 30
7.4. Restrictions on Transfer of the Buyer's
Preferred Stock ................................... 31
7.5. Repurchase of Buyer's Preferred Stock .................. 33
7.6. Mandatory Sale ......................................... 34
ARTICLE VIII SURVIVAL AND INDEMNIFICATION ........................... 34
8.1. Survival of Representations and Warranties ............. 34
8.2. Indemnification ........................................ 35
8.2.1. Definitions .................................... 35
8.2.2. Indemnification ................................ 35
8.2.3. Procedure for Claims by Parties ................ 37
8.2.4. Third Party Claims ............................. 37
8.2.5. Limitations on Indemnification ................. 38
8.2.6. Limitation of Remedies ......................... 39
ARTICLE IX MISCELLANEOUS .......................................... 40
9.1. Expenses; Transfer Taxes; Etc. ......................... 40
9.2. Parties in Interest .................................... 40
9.3. Entire Agreement; Amendments ........................... 40
9.4. Headings ............................................... 40
9.5. Notices ................................................ 40
9.6. Publicity .............................................. 41
9.7. Counterparts ........................................... 42
9.8. Governing Law .......................................... 42
9.9. Gender ................................................. 42
9.10. Waivers ................................................ 42
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ATTACHMENTS
ANNEX I - Stockholders
ANNEX II - Merger Consideration
EXHIBITS
EXHIBIT A - Agreement of Merger
EXHIBIT B - Escrow Agreement
EXHIBIT C - Opinions of Counsel to RBC and certain Stockholders
EXHIBIT D - Exchange Agreements
EXHIBIT E - Opinion of Gibson, Dunn & Crutcher
SCHEDULES
3.1(a) - Title to Shares
3.1(c) - Authority (Stockholders)
3.2(b) - Authority (RBC)
3.2(c) - Capital Structure
3.2(e) - Financial Information
3.2(f) Absence of Undisclosed Liabilities
3.2(g) - Absence of Changes
3.2(h) - Title to Assets, Properties and Rights and Related
Matters
3.2(i) - Agreements
3.2(j) - Compliance; Governmental Authorities
3.2(k) - Litigation
3.2(l) - Tax Matters
3.2(m) - ERISA
3.2(n) - Environmental Reports
3.2(o) - Intellectual Property
3.2(p) - Labor Relations; Employees
3.2(q) - Insurance
4.1(b) - Authority (Buyer)
4.1(d) - Buyer's Capital Structure
4.1(e) - Balance Sheet of Buyer
4.1(f) - Brokers' or Finders' Fees
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<PAGE>
CERTAIN DEFINITIONS
The following terms used in this Agreement are defined in the
following Sections:
Section or
Term Other Location
---- --------------
AC Common Stock 2.2(a)
Acquisition Corporation Caption
Affiliate 3.2(g) (vii)
Agreement First Paragraph
Allotted Shares 7.4
Agreement of Merger First Paragraph
Asserted Liability 8.2.4
Balance Sheet 3.2
Buyer Caption
Buyer Indemnified Persons 8.2.1
Buyer's Common Stock 2.2(a)
Buyer's Preferred Stock 2.1(c) (ii)
Cash Consideration 2.2(a)
Claims Notice 8.2.4
Class A Common Stock First Paragraph
Class B Common Stock First Paragraph
Closing Article VI
Closing Date Article VI
Code 3.2(l)
Company Property 3.2(n)
Company Option Period 7.4
Company Rejected Shares 7.4
Constituent Corporations 1.1
Contracts 3.2(i)
Delaware Statute First Paragraph
Effective Time 1.2
Employee 3.2(m)
Employee Plan 3.2(m)
Encumbrances 3.1(a)
Environmental Damages 3.2(n)
Environmental Reports 3.2(n)
Environmental Requirement 3.2(n)
ERISA 3.2(m)
ERISA Affiliate 3.2(m)
Escrow Account 2.3
Escrow Agreement 5.2(e)
Escrow Deposit Box 2.3
Evaluation Material 5.1(b)
Event of Buyer Indemnification 8.2.1
Event of Stockholder Indemnification 8.2.1
Exchange Agreements 5.3(g)
Financial Statements 3.2(e)
Financing Commitments 5.2(d)
Former Employee 3.2(m)
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GAAP 3.2(e) (ii)
Hazardous Substances 3.2(n)
Indemnifying Party 8.2.4
Indemnitee 8.2.4
Intellectual Property 3.2(o)
Losses 8.2.1
Material Adverse Effect 3.2(s)
Merger 1.1
Multiemployer Plan 3.2(m)
OPI 5.2(d)
Option Notice 7.4
Other Preferred Stockholders 7.4
Other Preferred Stockholders' Option Period 7.4
Per Common Share Cash Consideration 2.2(a)
Per Common Share Preferred
Stock Consideration 2.2(a)
Permitted Transferee 7.4
Per Preferred Share Cash Consideration 2.2(a)
Permitted Liens 3.2(h)
RBC Caption
RBC Common Stock First Paragraph
RBC Preferred Stock First Paragraph
Selling Stockholder 7.4
Stockholder Indemnified Persons 8.2.1
Stockholder(s) Caption
Subsidiary 3.2(d)
Subject Shares 7.4
Survival Date 8.1
Surviving Corporation 1.1
Taxes 3.2(1)
Transfer 7.4
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION dated March
31, 1992, among ROLLER BEARING COMPANY OF AMERICA, INC.,
a Delaware corporation ("RBC"), ROLLER BEARING HOLDING
COMPANY, INC., a Delaware corporation (the "Buyer"),
ROLLER BEARING ACQUISITION COMPANY, INC., a Delaware
corporation and a wholly-owned subsidiary of the Buyer
(the "Acquisition Corporation"), and the STOCKHOLDERS of
RBC set forth on Annex I attached hereto (each a
"Stockholder" and collectively the "Stockholders").
The respective Boards of Directors of each of RBC, the Buyer and the
Acquisition Corporation, by resolutions duly adopted, have approved and adopted
this Agreement and Plan of Reorganization (this "Agreement"), the Agreement of
Merger in substantially the form of Exhibit A attached hereto (the "Agreement of
Merger") and the proposed merger of the Acquisition Corporation with and into
RBC in accordance with this Agreement, the Agreement of Merger and the Delaware
General Corporation Law (the "Delaware Statute"), whereby, among other things,
the holders of issued and outstanding shares of the Class A Common Stock, $.01
par value (the "Class A Common Stock"), the Class B Common Stock, $.0i par value
(the "Class B Common Stock"; the Class A Common Stock and the Class B Common
Stock being sometimes collectively referred to herein as the "RBC Common
Stock"), and the Series A Preferred Stock, $.01 par value (the "RBC Preferred
Stock"), of RBC will receive cash and shares of the Buyer's Preferred Stock (as
defined herein) therefor, in the manner set forth in Article II hereof and in
the Agreement of Merger, upon the terms and subject to the conditions set forth
in this Agreement and the Agreement of Merger.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the Agreement of Merger and of the
representations, warranties, covenants, agreements, conditions and promises
contained herein and in the Agreement of Merger, the parties hereto hereby
approve and adopt this Agreement and the Agreement of Merger whereby, at the
Effective Time, the Acquisition Corporation shall be merged with and into RBC on
the terms and conditions contained herein and therein and, in connection
therewith, agree as follows:
ARTICLE I
GENERAL
1.1. The Merger. In accordance with the provisions of this
Agreement, the Agreement of Merger and the Delaware Statute, the Acquisition
Corporation shall be merged with and into RBC (the "Merger"), which, at and
after the Effective Time, shall be and is hereinafter sometimes referred to as
the "Surviving
<PAGE>
Corporation". The Acquisition Corporation and RBC are hereinafter 'sometimes
collectively referred to as the "Constituent Corporations".
1.2. The Effective Time of the Merger. The Merger shall become
effective upon the filing with the Secretary of State of the State of Delaware
of the Agreement of Merger (or a Certificate of Merger relating thereto), which
shall be executed and delivered by each of the Constituent Corporations in the
manner provided under Section 251 of the Delaware Statute. The date and time
when the Merger shall become effective is herein called the "Effective Time".
The Agreement of Merger, as executed and delivered by RBC and the Acquisition
Corporation, is hereby incorporated herein by reference and made a part hereof
as if set forth herein in its entirety.
1.3. Effect of Merger. (a) Except as specifically set forth herein
or in the Agreement of Merger, at the Effective Time, the separate existence of
the Acquisition Corporation shall cease and the Acquisition Corporation shall be
merged with and into the Surviving Corporation, possessing all the rights,
privileges, powers and franchises, as well of a public as of a private nature,
and being subject to all of the restrictions, disabilities and duties of each of
the Constituent Corporations.
(b) At the Effective Time, all and singular, the rights,
privileges, powers and franchises of each of the Constituent Corporations, and
all property, real, personal and mixed, and all debts due to any of the
Constituent Corporations on whatever account, as well for stock subscriptions as
all other things in action or belonging to each of the Constituent Corporations
shall be vested in the Surviving Corporation; and all property, rights,
privileges, powers and franchises, and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the several and respective Constituent Corporations, and the title to any
real estate vested by deed or otherwise, under the laws of the State of Delaware
in either of the Constituent Corporations, shall not revert or be in any way
impaired by reason of the Delaware Statute; but all rights of creditors and all
liens upon any property of either of the Constituent Corporations shall be
preserved unimpaired, and all debts, liabilities and duties of the respective
Constituent Corporations shall thenceforth attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
1.4. Charter and By-Laws of Surviving Corporation. Immediately
following the Effective Time, (i) the Certificate of Incorporation of RBC shall
be the Certificate of Incorporation of the Surviving Corporation until altered,
amended or repealed as provided in the Delaware Statute, (ii) the By-laws of RBC
shall become the By-laws of the Surviving Corporation until altered,
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amended or repealed as provided in the Delaware Statute or in the Certificate of
Incorporation or said By-laws of the Surviving Corporation, (iii) the directors
of the Acquisition Corporation shall be the directors of the Surviving
Corporation and (iv) the officers of the Acquisition Corporation shall become
the officers of the Surviving Corporation.
1.5. Taking of Necessary Action; Further Assurances. Prior to the
Effective Time, and subject to the terms and conditions provided herein, the
parties hereto shall take, or cause to be taken (as the case may be), all such
action as may be necessary or appropriate in order to effectuate the Merger as
provided in this Agreement as expeditiously as reasonably practicable.
ARTICLE II
PURCHASE OF SHARES; EFFECT OF MERGER ON CAPITAL STOCK
AND OTHER SECURITIES
OF CONSTITUENT CORPORATIONS; ETC.
2.1. Purchase of Shares. Immediately prior to the Effective Time,
RBC shall purchase 15 shares of its Class B Common Stock from Bitrix Associates
C.V. ("Bitrix") and 5 shares of its Class B Common Stock from Columbus Holdings
Limited ("Columbus"), and Bitrix and Columbus shall sell such shares to RBC, for
the purchase price of $2,500 per share. Delivery of certificates representing
such shares, together with duly executed stock powers, shall be made against
receipt by Bitrix and Columbus of the purchase price therefor, payable by wire
transfers of immediately available funds to accounts designated by Bitrix and
Columbus or by certified or cashier's check. Immediately prior to the Effective
Time, the Buyer shall provide to RBC the funds necessary to effect the purchases
contemplated by this Section 2.1.
2.2. Effect of Merger on Securities. (a) The following terms shall
have the following respective meanings:
(i) "AC Common Stock" shall mean the Common Stock, $.01 par
value, of the Acquisition Corporation.
(ii) "Buyer's Common Stock" shall mean the Common Stock, $.01
par value, of the Buyer.
(iii) "Buyer's Preferred Stock" shall mean the Series A
Preferred Stock, $.01 par value, of the Buyer.
(iv) "Cash Consideration" means the amount indicated as such
on Annex II hereto.
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(v) "Per Common Share Preferred Stock Consideration" means the
number of shares of the Buyer's Preferred Stock indicated as the Per Common
Share Preferred Stock Consideration on Annex II hereto.
(vi) "Per Common Share Cash Consideration" means the amount
indicated as such on Annex II hereto.
(vii) "Per Preferred Share Cash Consideration" means the
amount indicated as such on Annex II hereto.
(b) The manner and basis of converting or exchanging the shares of
capital stock of each of the Constituent Corporations into or for cash or
securities of the Surviving Corporation or the Buyer shall be as follows:
(i) each share of AC Common Stock outstanding at the Effective
Time shall be converted into one share of Class A Common Stock of the
Surviving Corporation;
(ii) each share of RBC Common Stock or RBC Preferred Stock
outstanding at the Effective Time and owned directly or indirectly by RBC
or the Subsidiary or owned by the Buyer or the Acquisition Corporation or
any other subsidiary of the Buyer shall, by virtue of the Merger and
without any action on the part of the holder thereof, be cancelled and no
consideration shall be delivered in exchange therefor;
(iii) each share of RBC Common Stock listed on Annex II hereto
shall, by virtue of the Merger and without any action on the part of the
holder thereof, cease to be outstanding and be converted into the right to
receive the Per Common Share Cash Consideration and the Per Common Share
Preferred Stock Consideration;
(iv) each share of RBC Preferred Stock outstanding at the
Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, cease to be outstanding and be converted
into the right to receive the Per Preferred Share Cash Consideration; and
(v) each authorized but unissued share of capital stock of RBC
at the Effective Time shall be cancelled.
2.3. Exchange of Certificates; Delivery of Funds. At the Effective
Time, the Surviving Corporation shall deliver:
(a) with respect to the RBC Common Stock then held by each
Stockholder, (i) a wire transfer of immediately available funds in an
amount equal to the
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Net Cash Amount set forth opposite such Stockholder's name on Annex II and
(ii) duly executed certificates representing that number of shares of the
Buyer's Preferred Stock set forth opposite such Stockholder's name on
Annex II hereto, against receipt by the Surviving Corporation of
certificates representing all shares of RBC Common Stock held by such
Stockholder immediately prior to the Effective Time; and
(b) with respect to the RBC Preferred Stock then held by each
Stockholder, a wire transfer of immediately available funds in an amount
equal to the Preferred Share Cash Consideration set forth opposite such
Stockholder's name on Annex II, against receipt by the Surviving
Corporation of certificates representing all shares of RBC Preferred Stock
held by such Stockholder immediately prior to the Effective Time.
OPI shall receive and distribute the dollar amounts and shares of
the Buyer's Preferred Stock set forth in this Section 2.3 on behalf of the
Stockholders (and shall be held harmless by the Stockholders in connection
therewith).
2.4. Deposit into Escrow. (a) As soon as practicable following the
Closing, the Stockholders (or OPI on behalf of the Stockholders) shall deposit
(i) into the Escrow Account (as defined in the Escrow Agreement) an aggregate of
$100,000, to be held and distributed in accordance with the terms of the Escrow
Agreement, and (ii) into the Escrow Deposit Box (as defined in the Escrow
Agreement) certificates representing in the aggregate 20,000 shares of the
Buyer's Preferred Stock (issued to the Stockholders in the Merger and, with
respect to certain Stockholders, pursuant to the Exchange Agreements or
otherwise), to be held and distributed in accordance with the terms of Section
8.2 hereof and the terms of the Escrow Agreement.
(b) As soon as practicable following the Closing, the Buyer
shall deposit $100,000 into the Escrow Account, to be held and disbursed in
accordance with the terms of the Escrow Agreement.
2.5. Exercise of Warrants and Exchange of Options. (a) Immediately
prior to the Effective Time, each of Bitrix Associates C.V. and Overland Trust
Bank shall exercise all warrants to purchase RBC Common Stock then held by them.
(b) Immediately prior to the Effective Time, options to purchase
41.237, 15 and 5 shares of RBC Common Stock from RBC, Bitrix and Columbus,
respectively, held by Michael Hartnett shall be cancelled in exchange for
purchase shares of the Buyer's Common Stock and/or the Buyer's Preferred Stock.
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2.6. Authorization of the Merger, this Agreement and the Agreement
of Merger. The Stockholders, at a meeting duly called and held in accordance
with the Delaware Statute, or pursuant to a written consent in lieu of a meeting
in accordance with the Delaware Statute, have approved, and the Buyer, as the
sole stockholder of the Acquisition Corporation, pursuant to a written consent
in lieu of a meeting in accordance with the Delaware Statute has approved, (a)
the Merger, as required by the Delaware Statute, and (b) the provisions of this
Agreement and the Agreement of Merger.
2.7. After the Effective Time. At and after the Effective Time, the
stock transfer books of the Surviving Corporation shall be closed with respect
to the RBC Common Stock and the RBC Preferred Stock and there shall be no
further registration of transfers of RBC Common Stock or RBC Preferred Stock
thereafter on the records of the Surviving Corporation. If, after the Effective
Time, certificates formerly representing shares of RBC Common Stock or RBC
Preferred Stock are presented to the Surviving Corporation, they shall be
cancelled and exchanged for the consideration set forth in Sections 2.2(b)(iii)
and 2.2(b)(iv), respectively, hereof, as provided in, and subject to, this
Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Several Representations and Warranties of Each Stockholder.
Each Stockholder hereby represents and warrants, severally as to himself or
itself and not jointly, to the Buyer as follows:
(a) Title to the Shares. Such Stockholder is the lawful owner,
of record and beneficially, of the number of shares of RBC Common Stock and/or
RBC Preferred Stock (or options to acquire RBC Common Stock), as the case may
be, set forth opposite such Stockholder's name on Annex I attached hereto and,
except as set forth on Schedule 3.1(a) attached hereto, has good and marketable
title to such shares, free and clear of any Encumbrances (as defined below)
whatsoever and with no restriction on the voting rights and the other incidents
of record and beneficial ownership pertaining thereto. Except as set forth on
Schedule 3.1(a), there are no agreements or understandings between such
Stockholder and any other person with respect to the voting of any of the
capital stock of RBC. As used herein, the term "Encumbrances" shall mean and
include covenants, restrictions, voting arrangements, adverse claims, security
interests, mortgages, liens, pledges, charges, options, rights of first refusal
and all other encumbrances, whether or not relating to the extension of credit
or the borrowing of money.
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<PAGE>
(b) Organization, Good Standing and Power. In the case of any
Stockholder which is a corporation or a partnership, such Stockholder is duly
organized or formed and validly existing under the laws of the jurisdiction of
its incorporation or formation and has the corporate or other organizational
power and authority under such laws to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
(c) Authority. In the case of any Stockholder which is a
corporation or a partnership, the execution, delivery and performance of this
Agreement and the Escrow Agreement, and the consummation by such Stockholder of
the transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate or partnership action, as the case may be,
on the part of such Stockholder. Such Stockholder has full and absolute power
and authority to enter into this Agreement and the Escrow Agreement and to
perform its or his obligations hereunder and thereunder, and this Agreement and
the Escrow Agreement are valid and binding obligations of such Stockholder,
enforceable against such Stockholder in accordance with their terms. Except as
set forth on Schedule 3.1(c) attached hereto, neither the execution, delivery
and performance of this Agreement or the Escrow Agreement, nor the consummation
by such Stockholder of the transactions contemplated hereby or thereby, nor
compliance by such Stockholder with any of the provisions hereof or thereof,
will (i) violate or conflict with the charter or by-laws of such Stockholder,
(ii) violate, conflict with or constitute (or with notice or lapse of time or
both constitute) a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of, or result in the creation of any Encumbrance upon any shares of RBC Common
Stock or RBC Preferred Stock owned by such Stockholder pursuant to the terms of,
any note, bond, lease, mortgage, indenture, license, agreement or other
instrument or obligation to which such Stockholder is a party, or by which such
Stockholder or any of his or its respective properties or assets may be bound or
affected, or (iii) violate any law, statute, rule or regulation or order,
judgment, award, writ, injunction or decree of any court, administrative agency
or governmental body applicable to such Stockholder or any of his or its
properties or assets. Except as contemplated by this Agreement or as set forth
on Schedule 3.1(c), no permit, authorization, consent or approval of or by, or
any notification of or filing with, any person (governmental or private) is
required in connection with the execution, delivery and performance of this
Agreement by such Stockholder or the consummation by such Stockholder of the
transactions contemplated hereby.
(d) Investment Representations. (i) Such Stockholder is
acquiring the shares of the Buyer's Preferred Stock being issued to such
Stockholder pursuant to the Merger for
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such Stockholder's own account and not as a nominee or agent for any other
person and with no present intention of distributing or reselling such shares or
any part thereof in any transactions that would be in violation of the
securities laws of the United States of America or any state thereof.
(ii) Each Stockholder that is a natural person (A) is an
executive officer of the Buyer, (B) has had an opportunity to ask questions of
and to receive answers from the officers and directors of the Buyer or persons
acting on the Buyer's behalf concerning the terms and conditions of an
investment in the Buyer's Preferred Stock, (C) has knowledge and experience in
financial affairs and is capable of evaluating the risks of acquiring and
holding shares of the Buyer's Preferred Stock, (D) can afford to suffer a
complete loss of his investment in shares of the Buyer's Preferred Stock and (E)
understands that there is no public market for the Buyer's Preferred Stock and
that the shares of the Buyer's Preferred Stock held by him may not be sold until
such shares are registered under the Securities Act of 1933, as amended (the
"Securities Act"), and any applicable state securities laws, unless an exemption
from such registration is available.
(iii) Each Stockholder which is a corporation,
partnership or other entity is an "accredited investor" within the meaning of
Rule 501 under the Securities Act.
3.2. Representations and Warranties of the Stockholders and RBC.
Each of the Stockholders and RBC, jointly and severally, hereby represents and
warrants to the Buyer as follows:
(a) Organization; Good Standing; Qualification and Power. Each
of RBC and the Subsidiary (as herein defined) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has all requisite corporate power and authority, and all requisite governmental
authority, to own, lease and operate its assets and properties, to carry on its
business as now being conducted by it and to enter into and consummate the
transactions contemplated by this Agreement and the Agreement of Merger. Each of
RBC and the Subsidiary is duly qualified and in good standing to do business as
a foreign corporation in all jurisdictions in which the failure to be so
qualified and in good standing could reasonably be expected to have a Material
Adverse Effect (as herein defined). RBC has delivered to the Buyer copies of its
Certificate of Incorporation and By-laws, and the Certificate of Incorporation
and By-laws of the Subsidiary, in each case, as in effect on the date hereof.
The stock certificates and stock transfer books of RBC and the Subsidiary have
been heretofore made available to the Buyer and are true and complete.
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<PAGE>
(b) Authority. The execution, delivery and performance of this
Agreement and the Agreement of Merger by RBC and the consummation by RBC of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of RBC. This Agreement
has been, and the Agreement of Merger when executed and delivered by RBC will
be, duly and validly executed and delivered by RBC, and this Agreement is, and
the Agreement of Merger when executed and delivered by the parties thereto will
be, valid and binding obligations of RBC, enforceable against RBC in accordance
with their respective terms. Except as set forth on Schedule 3.2(b) attached
hereto, neither the execution, delivery and performance of this Agreement or the
Agreement of Merger by RBC, nor the consummation by RBC of the transactions
contemplated hereby or thereby, nor compliance by RBC with any of the provisions
hereof or thereof, will (i) conflict with or violate any provision of the
Certificate of Incorporation or By-laws of RBC or the Subsidiary, (ii) violate,
conflict with or constitute (or with notice or lapse of time or both constitute)
a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of, or result in
the creation of any Encumbrance upon any of the property of RBC or the
Subsidiary pursuant to the terms of, any note, bond, lease, mortgage, indenture,
license, agreement or other instrument or obligation to which RBC or the
Subsidiary is a party or by which any of their respective properties or assets
may be bound or affected, which violation, conflict or default would have a
Material Adverse Effect, or (iii) violate any law, statute, rule or regulation
or order, judgment, award, writ, injunction or decree of any court,
administrative agency or governmental body, applicable to RBC or the Subsidiary
or any of their respective properties or assets in any manner which could
reasonably be expected to have a Material Adverse Effect. Except as contemplated
by this Agreement or the Agreement of Merger and as set forth on Schedule
3.2(b), no permit, authorization, consent or approval of or by, any person
(governmental or private) is required in connection with the execution, delivery
and performance of this Agreement or the Agreement of Merger by RBC or the
consummation by RBC of the transactions contemplated hereby or thereby.
(c) Capital Structure. Immediately prior to the Effective
Time, after taking into effect the repurchase of shares and exercise of warrants
contemplated by Sections 2.1 and 2.4(a) hereof, the authorized capital stock of
RBC shall consist of (i) 3,000 shares of Class A Common Stock, $.O1 par value,
of which (A) 2,047.43 shares shall be validly issued and outstanding and (B)
61.23 shares shall be reserved for issuance upon the exercise of options, (ii)
3,000 shares of Class B Common Stock, $.01 par value, of which 40 shares shall
be validly issued and outstanding, and (iii) 4,000 shares of Preferred Stock,
$.0l par value, of which 1,000 shares are designated as Series A Preferred
Stock, of which 945 shares shall be validly issued and
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outstanding. All of such issued and outstanding shares of RBC Common Stock and
RBC Preferred Stock have been duly authorized and are validly issued, fully paid
and nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except as set forth on Schedule 3.2(c),
there are no options, warrants, rights, calls, commitments or agreements of any
character to which RBC or the Subsidiary is a party or by which either of them
is bound calling for the issuance of shares of capital stock of RBC or the
Subsidiary or any securities convertible into or exercisable or exchangeable
for, or representing the right to purchase or otherwise receive, any such
capital stock, or other arrangement to acquire, at any time or under any
circumstance, capital stock or such other securities of RBC or the Subsidiary.
Except as set forth on Schedule 3.2(c), there are no voting trusts, voting
agreements, proxies or other agreements or instruments or understandings with
respect to the voting of the capital stock of RBC to which RBC is a party.
(d) Equity Investments. Except for Industrial Tectonics
Bearings Corporation, a Delaware corporation wholly-owned by RBC (the
"Subsidiary"), RBC does not, directly or indirectly, own, have the power to vote
or to exercise a controlling influence with respect to or have the right to
acquire any equity interest in, any corporation, association, trust,
partnership, joint venture or other entity.
(e) Financial Information. (i) Schedule 3.2(e) attached hereto
contains the following financial information:
(A) the consolidated balance sheet of RBC as at November 2, 1991
(the "Balance Sheet"), and the related statements of
operations and accumulated deficit and of cash flows for the
52-week period then ended, audited by Deloitte & Touche,
independent certified public accountants (collectively, the
"1991 Financial Statements"); and
(B) the consolidated balance sheet of RBC as at November 3, 1990
and October 28, 1989 and the related consolidated statements
of operations and accumulated deficit for the 53-week and
52-week, respectively, periods then ended, audited by
Goldstein Golub Kessler & Company, P.C., independent certified
public accountants (together with the 1991 Financial
Statements, the "Financial Statements").
(ii) Except with respect to financial information adjusted by the
prior period adjustments set forth in the 1991 Financial Statements, the
Financial Statements (A) are in accordance with the books and records of RBC,
(B) fairly present
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the financial condition of RBC as of the respective dates indicated and the
results of operations of RBC for the respective periods indicated, (C) have been
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied and (D) contain and reflect adequate provisions for all
product warranty claims, taxes and anticipated losses on contracts and
commitments for the sale of goods and services.
(f) Absence of Undisclosed Liabilities. Except as disclosed on
Schedule 3.2(f) attached hereto or any other Schedule to this Agreement, at the
date of the Balance Sheet, RBC had no liabilities (matured or unmatured, fixed
or contingent secured or unsecured, direct or indirect, or otherwise) except (i)
as provided for or disclosed on the Balance Sheet or (ii) for purchase contracts
and orders for inventory entered into in the ordinary course of business and
consistent with past practice. Without in any way limiting the generality of the
immediately preceding sentence, except as disclosed in Schedule 3.2(f) or the
Balance Sheet, neither RBC nor the Subsidiary has any liability, known or
unknown, contingent or otherwise, relating to product warranty claims or for
injuries or damage caused by such products.
(g) Absence of Changes. Except as contemplated by this
Agreement or as set forth on Schedule 3.2(g) attached hereto, since the date of
the Balance Sheet:
(i) RBC has been operated in the ordinary course;
(ii) there has been no material adverse change in the
business, prospects, assets or liabilities of RBC or the Subsidiary;
(iii) there has been no damage, destruction or loss which has
materially adversely affected the business, prospects or assets of RBC or
the Subsidiary;
(iv) RBC has not declared any dividend or made any
distributions on its capital stock;
(v) neither RBC nor the Subsidiary has borrowed, or agreed to
borrow, funds (except borrowings under the Senior Loan (as defined in
Section 5.3(e));
(vi) neither RBC nor the Subsidiary has subjected or agreed to
subject any of its assets, tangible or intangible, to any Encumbrance
other than pursuant to the terms of the Senior Loan;
(vii) neither RBC nor the Subsidiary has incurred or become
subject to, or agreed to incur or become subject to, any liability except
current
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liabilities incurred in the ordinary course of business;
(viii) except in connection with the transactions contemplated
hereby, neither RBC nor the Subsidiary has entered into any transaction,
contract or commitment involving any Stockholder or Affiliate (as such
term is defined in the Securities Act of 1933, as amended) of any
Stockholder;
(ix) neither RBC nor the Subsidiary has made any accrual for
or any payment of bonuses or special compensation of any kind in excess of
$1,000 to any employee otherwise than under a plan or arrangement in
effect on or accrued at November 2, 1991, or agreed to make any accrual or
arrangement for or payment of bonuses or special compensation of any kind
in excess of $1,000;
(x) neither RBC nor the Subsidiary has directly or indirectly
paid, or agreed to pay, any severance or termination pay to any individual
employee which exceeds $2,000 unless such pay was accrued at November 2,
1991;
(xi) neither RBC nor the Subsidiary has made, or agreed to
make, any changes in its accounting methods or practices;
(xii) neither RBC nor the Subsidiary has made capital
expenditures which for any item exceeds $25,000 or entered into any
commitment to make such expenditures;
(xiii) except with respect to the Senior Loan and/or the
Subordinated Loan, neither RBC nor the Subsidiary has taken any action, or
omitted to take any action, that resulted in or is likely to result in a
default (or would, with the giving of notice or passage of time or both,
be likely to result in such a default) under any note, indenture, lease,
license, agreement or other instrument, or obligation to which RBC or the
Subsidiary is a party, or by which RBC or the Subsidiary is bound, or
resulted in (or would, with the giving of notice or the passage of time or
both, be likely to result in) the creation or imposition of any
Encumbrance upon any property or asset of the Company or the Subsidiary;
(xiv) neither RBC nor the Subsidiary has repaid any
indebtedness (other than with respect to capital leases) other than
scheduled or revolving
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payments under the Senior Loan and the Subordinated Loan;
(xv) neither RBC nor the Subsidiary has entered into or
modified any agreement of employment with any individual; and
(xvi) neither RBC nor the Subsidiary has entered into any
other transaction, contract or commitment except in the ordinary course
and except the transactions contemplated by this Agreement.
(h) Title to Assets, Properties and Rights and Related
Matters. RBC or the Subsidiary has good and marketable (and with respect to real
property, good and insurable) title to all the properties, interests in
properties and assets, real, personal or mixed, reflected as being owned on the
Balance Sheet (except for assets acquired or disposed of since the date of the
Balance Sheet in the ordinary course), free and clear of all Encumbrances of any
kind or character, except (i) those set forth on Schedule 3.2(h) attached
hereto, (ii) those set forth on the Balance Sheet, (iii) mechanics, carriers,
repairmen's and other similar liens arising in the ordinary course of business,
(iv) liens for current taxes, assessments and charges or other governmental
levies not yet due and payable, (v) with respect to real property, easements,
covenants, rights of way and other restrictions and conditions, whether or not
of record or referred to in an applicable instrument of title, which do not
materially impair the present value of the property subject thereto and zoning
and similar restrictions (and the state of title to real property is subject to
variations between fences, area walls, retaining walls and the lines of record
title and any facts an accurate survey would show) and (vi) Encumbrances, if
any, which do not materially impair the use of the property subject thereto or
materially affect the value thereof (collectively, the "Permitted Liens"). All
property and assets owned by RBC or the Subsidiary, or in which they have an
interest, or which they have in their possession, which are used by and are
material to RBC or the Subsidiary in their respective businesses, are in good
operating condition and repair, reasonable wear and tear excepted. Schedule
3.2(h) attached hereto sets forth a list of all real property owned or leased by
RBC or the Subsidiary.
(i) Agreements, Etc. Schedule 3.2(i) attached hereto contains
a list of all material contracts, agreements and other instruments made other
than in the ordinary course of business to which RBC and/or the Subsidiary is a
party at the date hereof, or made in the ordinary course of business and
referred to in Sections 3.2(i)(i) through (xv) hereof. Except as set forth on
Schedule 3.2(i), neither RBC nor the Subsidiary is a party to any:
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(i) collective bargaining or other agreement with any labor
union or association of employees;
(ii) contract with or commitment for the employment or
retention of any officer, employee or consultant with annual wages,
consulting or similar fees or an annual salary in excess of $50,000;
(iii) profit-sharing, bonus, stock option, pension,
retirement, stock purchase, hospitalization, insurance or similar plan or
agreement, providing benefits to any current officer or employee;
(iv) indenture, mortgage, promissory note, loan agreement or
other agreement or commitment for the borrowing of money or for a line of
credit;
(v) contract or commitment for capital expenditures involving
more than $50,000;
(vi) lease, sublease or other agreement pursuant to which it
is a lessee of or holds or operates any real property owned by any third
party;
(vii) guaranty of the obligations of third parties in excess
of $50,000;
(viii) agreement which materially restricts RBC from doing
business anywhere in the world or materially limits the business in which
it may engage;
(ix) licensing or similar agreement involving payments to
third parties by RBC in excess of $50,000 per annum;
(x) agreement or arrangement for the sale of any of its
assets, property or rights other than in the ordinary course of its
business;
(xi) contract, other than for the compensation of any officer,
employee or consultant, under which the total payments to be made by RBC
and/or the Subsidiary exceed $50,000 per year;
(xii) distributor, dealer, franchisee, sales representative,
sales agency, manufacturer's representative or similar agreement;
(xiii) contract granting any rights to purchase any of its
assets other than inventory in the ordinary course or requiring the
consent or approval of any party to the transfer to or assignment of such
assets
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or limiting or restricting in any way the ability to transfer or assign
any of such assets;
(xiv) any contract for the sale of goods or services under
which the anticipated cost of its performance exceeds the revenues
expected to be received under such contract; or
(xv) any contract to supply goods or services, directly or
indirectly, to the government of the United States of America or any
agency thereof or to supply goods or services to any other person known to
RBC or the Subsidiary to incorporate such goods or services into goods or
services provided to the U.S. Government.
Except as set forth on Schedule 3.2(i), neither RBC or the Subsidiary, nor, to
the knowledge of RBC or the Subsidiary, any other party, is in default under any
material provision of any contract, agreement or instrument set forth on
Schedule 3.2(i). Assuming that such contracts, agreements and instruments are
the valid and binding obligations of the other parties thereto and that such
parties have performed the obligations required to be performed by them
thereunder, such contracts, agreements and instruments are in full force and
effect.
(j) Compliance; Governmental Authorization. Except as set
forth on Schedule 3.2(j) attached hereto, and except with respect to any of the
following as they may relate to the environment (which is addressed in Section
3.2(n) hereof), (a) RBC and the Subsidiary have complied with all Federal,
state, local or foreign laws, ordinances, rules or regulations and all
judgments, orders and decrees applicable to their respective assets, properties,
operations or businesses as currently conducted and (b) RBC and the Subsidiary
have obtained, and maintained in full force and effect, all permits, licenses,
franchises, orders or approvals from governmental authorities required to
conduct their respective businesses as currently being conducted.
(k) Litigation, Etc. Except as set forth on Schedule 3.2(k),
there are no (a) actions, suits, claims, investigations or legal, administrative
or arbitration proceedings pending or, to the best knowledge of RBC, threatened
against or affecting RBC or the Subsidiary, or any of their respective officers,
directors or employees in their capacities as such, or the assets of RBC or the
Subsidiary, whether at law or in equity, whether civil or criminal in nature or
whether before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, the resolution of which could reasonably be expected to result in
liabilities to RBC or the Subsidiary of $50,000 or more in the aggregate or to
have an adverse effect on
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<PAGE>
the ability of RBC to consummate the transactions contemplated hereby or to have
a Material Adverse Effect, or (b) judgments, decrees, injunctions or orders of
any court, governmental department, commission, agency, instrumentality or
arbitrator against or affecting the assets of RBC or the Subsidiary.
(1) Tax. (i) RBC and the Subsidiary (and any affiliated group
of which RBC or the Subsidiary is now or has been a member), has duly and timely
filed with the appropriate taxing authorities all returns (including, without
limitation, information returns and reports) in respect of Taxes for all periods
through the date hereof, except for state and Federal returns for the 1991
taxable year for which appropriate requests for extensions have been made;
(ii) All Taxes due prior to the date hereof in respect of
periods beginning before the date hereof have been paid in full, or an adequate
reserve has been established therefor, as set forth in the Balance Sheet, and
neither RBC nor the Subsidiary has any liability for Taxes in excess of the
amounts so paid or reserves so established.
(iii) Except as set forth on Schedule 3.2(1), (A) no
deficiencies for Taxes have been claimed, proposed or assessed by any taxing or
other governmental authority; (B) there are no completed, pending or threatened
audits, investigations or claims for or relating to any liability in respect of
Taxes, and there are no matters under discussion with any governmental
authorities with respect to Taxes that are likely to result in an additional
amount of Taxes; (C) neither RBC nor the Subsidiary has been notified that any
taxing authority intends to audit a return for any other period; and (D) no
extension of a statute of limitations relating to Taxes is in effect, or any
request therefor pending, with respect to RBC or the Subsidiary.
(iv) The only election with respect to Taxes affecting RBC or
any Subsidiary as of the date hereof is the election of 52-53 week taxable year
pursuant to Treas. Reg. S 1.441-2T(c)(2), filed with RBC's federal income tax
return for the taxable year ending October 29, 1988.
(v) Neither RBC nor the Subsidiary: (i) has made or will make
a deemed dividend election under Treas. Reg. S l.1502-32(f)(2) or a consent
dividend election under section 565 of the Internal Revenue Code of 1986, as
amended (the "Code"); (ii) has consented at any time under section 341(f)(1) of
the Code, to have the provisions of section 341(f)(2) of the Code apply to any
disposition of the RBC's or the Subsidiary's assets; (iii) has agreed, or is
required, to make any adjustment under section 481(a) of the Code by reason of a
change in accounting method or otherwise; or (iv) has made any of the foregoing
elections or is required to apply any of the foregoing rules under any
comparable state or local income tax provision.
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<PAGE>
(vi) Neither RBC nor the Subsidiary has, at any time, been an
includable corporation in an affiliated group of corporations, within the
meaning of section 1504 of the Code, other than in the affiliated group of which
RBC is the common parent corporation.
(vii) Neither RBC nor the Subsidiary is a party to any
tax-sharing agreement or similar arrangement with respect to or involving RBC or
the Subsidiary, including any terminated agreement as to which RBC or the
Subsidiary could have any continuing liability.
(viii) Neither RBC nor the Subsidiary is a "foreign person" as
defined in section 1445(f)(3) of the Code.
(ix) Neither RBC nor the Subsidiary is a party to any joint
venture, partnership, or other arrangement or contract which is treated as a
partnership for federal income tax purposes.
(x) Neither RBC nor the Subsidiary has made or become
obligated to make, or will make, as a result of any event connected with the
acquisition of RBC and the Subsidiary by Buyer or any other transaction
contemplated herein, any "excess parachute payment" as defined in section 280G
of the Code (without regard to subsection (b)(4) thereof).
(xi) There are no outstanding balances of deferred gain or
loss accounts related to deferred intercompany transactions between RBC and the
Subsidiary.
(xii) The amount of consolidated net operating losses, net
capital losses, foreign tax credits, investment, and other tax credits of the
consolidated group of which RBC is the common parent allocable to RBC and the
Subsidiary under Treas. Reg. S 1.1502-79 as of the taxable year ending November
3, 1990 is set forth in the consolidated federal income tax return filed for
that period.
(xiii) RBC has no excess loss account in the Subsidiary.
(xiv) Neither RBC nor the Subsidiary has any (i) investment
tax credit subject to recapture, or (ii) foreign losses of the consolidated
group of which RBC is the common parent allocable to RBC and the Subsidiary
under Treas. Reg. S 1.1502-9 and subject to recapture.
(xv) Neither RBC nor the Subsidiary has participated in, or
cooperated with, any international boycott within the meaning of Section 999 of
the Code nor has any such corporation had operations prior to the Effective Time
which are or may thereafter become reportable thereunder.
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<PAGE>
(xvi) No power of attorney granted by RBC of the Subsidiary
with respect to the determination of federal income or other material Taxes in
force.
(xvii) There are no material liens for Taxes upon the assets
of RBC or the Subsidiary except for statutory liens for taxes not yet due or
delinquent.
(xviii) As used herein, "Taxes" means any Federal, state,
local, foreign or other tax assessments or other governmental charges,
including, without limitation, any income, estimated income, business,
occupation, franchise, property, sales, employment or withholding tax, including
interest, penalties and additions in connection therewith for which RBC or the
Subsidiary is or may be liable.
(m) ERISA. (i) For the purposes of this Agreement, the term
"Employee Plan" means each employee bonus, retirement, pension, profit sharing,
stock option, stock appreciation, stock purchase or other equity based,
incentive, deferred compensation, hospitalization, medical, dental, vision, life
and other health, accident and disability (whether provided by insurance or
otherwise), severance, termination and other plan, program, arrangement, policy
or payroll practice providing employee benefits including without limitation,
each employee benefit plan as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), other than a multiemployer
plan within the meaning of Section 3(37) of ERISA ("Multiemployer Plan"),
maintained by RBC or any Person that would be aggregated with, or treated as the
same employer as, RBC for any purpose under the Code or ERISA (an "ERISA
Affiliate") or to which RBC or an ERISA Affiliate contributes or has contributed
and under which any person presently employed by RBC or the Subsidiary primarily
in the conduct of their respective businesses (an "Employee") or formerly so
employed by RBC or the Subsidiary (a "Former Employee") participates or had
accrued any rights or under which RBC is liable in respect of an Employee or
Former Employee. The terms "Employee" and "Former Employee" will include, where
applicable, the beneficiaries and dependents of an Employee or Former Employee.
Schedule 3.2(m) attached hereto lists all material Employee Plans. Each Employee
Plan has been maintained in all material respects in accordance with its terms
and with applicable Law. Except as set forth on Schedule 3.2(m), each Employee
Plan which is intended to be qualified within the meaning of Section 401 of the
Code has received a determination letter to that effect from the Internal
Revenue Service and all actions required to be taken as conditions for such
letters have been taken in a timely manner and nothing has occurred since the
date of such letter which would prevent any such Employee Plan from remaining so
qualified or which cannot be cured within the remedial amendment period provided
by Section 401(b) of the Code. Each defined contribution profit sharing plan
maintained for RBC
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or the Subsidiary has satisfied the non-discrimination rules for qualified plans
under Section 401(a) of the Code. Up to and including the period ending
immediately prior to the Effective Time, neither RBC nor any Affiliate of RBC
has maintained or had any obligation, primarily or secondarily, to contribute to
any Multiemployer Plan.
(ii) RBC has not engaged in any transaction involving any
Employee Plan in connection with which RBC would be subject to either a material
civil penalty assessed pursuant to Section 502(i) of ERISA or a material tax
imposed pursuant to Section 4975(a) or (b) of the Code and neither RBC nor any
Affiliate of RBC has incurred, or reasonably expects to incur, any liability
under Section 4980B of the Code. There are no material pending, or, to the best
knowledge of RBC, threatened claims by or on behalf of any Employee Plan or by
any Employee or Former Employee involving any Employee Plan (other than routine
claims for benefits). All contributions required to have been made by RBC and
each ERISA Affiliate to each Employee Plan which is subject to the minimum
funding standards of Section 412 of the Code or Section 302 of ERISA have been
made within the time required under such sections and no such Employee Plan has
incurred an "accumulated funding deficiency" within the meaning of such
sections. Neither RBC nor any ERISA Affiliate has incurred any material
liability to the Pension Benefit Guaranty Corporation at any time within the
preceding six years in connection with any Employee Plan other than liability
for premiums due in connection with any such Plan.
(n) Environmental Matters. (i) Except as disclosed in the
reports and documents listed in Schedule 3.2(n) (collectively, the
"Environmental Reports"), since RBC or the Subsidiary has occupied, leased or
owned Company Property, neither RBC or the Subsidiary, nor, to the best
knowledge of RBC or the Subsidiary, any other person or entity, (A) has engaged
in or permitted any operation or activity upon, or any use or occupancy of, any
Company Property, or any portion thereof, for the purpose of or in any way
involving the handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal of any Hazardous Materials
(whether accidental or intentional) on, under, in or about any such property
other than in compliance with Environmental Requirements or (B) has transported
Hazardous Materials to, from or across Company Property. Except as disclosed in
the Environmental Reports, no Hazardous Materials are currently constructed,
deposited, stored, or otherwise located on, under, in or about Company Property
other than in compliance with Environmental Requirements or, since RBC or the
Subsidiary has occupied, owned or leased Company Property, to the knowledge of
RBC and the Subsidiary, have migrated or threatened to migrate from other
properties upon, about or beneath any Company Property.
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(ii) Except as disclosed in the Environmental Reports since
RBC or the Subsidiary has owned, occupied or leased Company Property, no
underground improvements, including but not limited to treatment or storage
tanks, sumps, gas pipelines or oil wells have been placed on any Company
Property.
(iii) Except as disclosed in the Environmental Reports, since
RBC or the Subsidiary has occupied, leased or owned Company Property, RBC and
the Subsidiary's use, maintenance and occupation of Company Property has
complied with all Environmental Requirements.
(iv) Except as disclosed in the Environmental Reports, since
RBC or the Subsidiary has owned, occupied or leased Company Property, neither
RBC nor the Subsidiary has received notice or other communication concerning any
alleged (A) violation of Environmental Requirements with respect to Company
Property, unless corrected to the satisfaction of the appropriate authority, or
(B) liability for Environmental Damages in connection with any Company Property,
and there exists no writ, injunction, decree, order or judgment outstanding, nor
any lawsuit, claim, proceeding, citation, directive, summons or investigation,
pending or threatened, relating to (1) any alleged violation by RBC or the
Subsidiary of Environmental Requirements whether relating to the ownership use,
maintenance or operation of Company Property or otherwise, or (2) the suspected
presence of material quantities of Hazardous Material thereon, nor to the
knowledge of RBC and the Subsidiary does there exist any basis for such lawsuit,
claim, proceeding, citation, directive, summons or investigation being
instituted or filed.
(v) Except as disclosed in the Environmental Reports, since
RBC or the Subsidiary has owned, occupied or leased Company Property, each of
RBC and the Subsidiary has obtained all environmental permits and licenses
required to be issued to it by any governmental authority on account of any of
its activities on any Company Property and is in full compliance with the terms
and conditions of such permits and licenses, each of which remains in full force
and effect.
(vi) Except as disclosed in the Environmental Reports, since
RBC or the Subsidiary has owned, occupied or leased Company Property, no
Encumbrance has attached or threatens to attach to any revenue or any real or
personal property owned by RBC or the Subsidiary as a result of monies being
expended or to be expended by any governmental agency or fund with respect to
environmental matters, including without limitation the New Jersey Spill
Compensation Fund, the New Jersey Sanitary Landfill Contingency Fund and the
United States Hazardous Response Trust Fund, nor is RBC or the Subsidiary aware
of any facts or circumstances that could give rise to such an Encumbrance.
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(vii) RBC and the Subsidiary have provided to the Buyer copies
of all environmental studies, reports, audits or analyses in their possession
relating to Company Property and have used their best efforts to obtain from
prior stockholders of RBC and the Subsidiary all such reports in the possession
of such former stockholders.
(viii) As used herein, the following terms shall have the
following meanings:
(A) "Company Property" means any property now or at any time
owned or occupied by RBC or the Subsidiary.
(B) "Environmental Damages" means all claims, judgments,
damages, losses, penalties, fines, liabilities (including strict liability),
encumbrances, liens, costs and expenses of investigation and defense of any
claim, whether or not such claim is ultimately defeated, and of any good faith
settlement or judgment, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, including, without limitation, reasonable
attorneys' fees and disbursements and consultants' fees, incurred as a result of
(i) the existence, since RBC or the Subsidiary has owned, occupied or leased
Company Property, of Hazardous Material upon, about or beneath any Company
Property or migrating or threatening to migrate to or from Company Property or
(ii) the violation of any Environmental Requirement pertaining to such property,
including without limitation:
(1) Damages for personal injury, or injury to property
or natural resources occurring upon the Company Property or
elsewhere, including without limitation the cost of demolition and
rebuilding of any improvements on real property, interest and
penalties (including but not limited to claims brought by or on
behalf of former or current employees of RBC or any Subsidiary):
(2) Fees incurred for the services of attorneys,
consultants, contractors, experts, laboratories and all other costs
incurred in connection with the remediation of any Hazardous
Materials found to be present at, or to have originated from, any
Company Property, including, but not limited to, the investigation,
preparation of any feasibility studies or reports or the performance
of any cleanup, remediation, removal, response, abatement,
containment, closure, restoration or monitoring work required by any
federal, state or local governmental agency or political
subdivision; and
(3) Liability to any third person or governmental agency
to indemnify such person or agency for costs expended in connection
with the items referenced in subparagraph (b) herein.
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(C) "Environmental Requirement" means any statutes,
regulations, rules, ordinances, codes, licenses, permits, orders, approvals,
plans or authorizations in effect as of the Closing of any governmental
agencies, departments, commissions, boards, bureaus, or instrumentalities of the
Untied States, any states or political subdivisions thereof and any applicable
judicial, administrative, or regulatory decrees, judgments, or orders relating
to the protection of human health or the environment in effect as of the
Closing, including, without limitation, all requirements, including but not
limited to those pertaining to reporting, licensing, permitting, investigation,
and remediation of emissions, discharges, releases or threatened releases of
Hazardous Materials, or relating to the manufacture, processing, distribution,
use treatment, storage, disposal, transport, or handling of Hazardous Materials.
(D) "Hazardous Material" means any substance (1) defined as a
"hazardous waste," "hazardous substance," pollutant or contaminant under any
federal, state or local statute, regulation, rule of ordinance or amendments
thereto including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. section 9601 et seq.) and/or the
Resource Conservation and Recovery Act (42 U.S.C. section 6901 et seq.); or (2)
defined by law as toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or otherwise hazardous and is regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of the United States or of any state or any political
subdivision thereof with jurisdiction over any Environmental Requirement,
including, without limitation, gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenyls, asbestos or urea formaldehyde foam
insulation.
(o) Intellectual Property. Schedule 3.2(o) hereto sets forth a
list of all trademarks, service marks, tradenames, registered copyrights and
patents and applications for any of the foregoing owned by or registered in the
name of RBC or. the Subsidiary or used in the business of RBC or the Subsidiary
as presently conducted, in each case which are material to such business
(collectively, the "Intellectual Property"). Except as set forth on Schedule
3.2(o) or on the Balance Sheet, (i) RBC or the Subsidiary owns the Intellectual
Property free and clear of any Encumbrances, (ii) the business conducted by RBC
and the Subsidiary does not infringe any proprietary right of any third party
and (iii) to the knowledge of RBC and the Subsidiary, no third party has
infringed against any of the Intellectual Property. RBC or the Subsidiary owns
or has the right to use all material intellectual property rights, including,
without limitation, the Intellectual Property, currently utilized by RBC in the
conduct of its business without compensation to third parties. Except as set
forth on Schedule 3.2(o), neither RBC nor the Subsidiary has granted any license
to
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use Intellectual Property and, to the knowledge of RBC and the Subsidiary, no
person has asserted the invalidity of the Intellectual Property.
(p) Labor Relations; Employees. Except as set forth on
Schedule 3.2(p) attached hereto, (i) neither RBC nor the Subsidiary is
delinquent in any material payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them to the date hereof or amounts required to be reimbursed to
such employees, (ii) there is no unfair labor practice complaint against RBC or
the Subsidiary pending before the National Labor Relations Board or any
comparable state, local or foreign agency and (iii) neither any grievance which
might have a Material Adverse Effect nor any arbitration proceeding arising out
of or under any collective bargaining agreement is currently pending. There is
no strike, work stoppage, slowdown or other labor difficulty actually occurring
or, to the knowledge of RBC, threatened against or directly affecting the
operations of RBC or the Subsidiary.
(q) Insurance. Schedule 3.2(q) attached hereto lists all
policies or binders of fire, product liability, workmen's compensation,
vehicular and other insurance held by or on behalf of RBC or the Subsidiary. All
premiums due under such policies and binders are currently paid and no notice of
increased premiums, cancellation or non-renewal of any of such policies or
binders has been received by RBC or the Subsidiary.
(r) Brokers. Neither RBC, any of the officers, directors or
employees of RBC, nor any Stockholder has retained the services of any broker or
finder in connection with the transactions contemplated hereby except Goldman,
Sachs & Co., the fees and expenses of which shall be paid by RBC at the Closing.
(s) Material Adverse Effect. As used in this Agreement, the
term "Material Adverse Effect" shall mean a material adverse effect on the
business, prospects or financial condition of RBC and the Subsidiary, taken as a
whole, other than as a result of general economic conditions.
(t) Depositions, Powers of Attorney. Schedule 3.2(t) sets
forth (i) the name of each bank or similar entity in which RBC or the Subsidiary
has an account, lockbox or safe deposit box and the names of all persons
authorized to draw thereon or to have access to them and (ii) the name of each
person, corporation, firm or other entity holding a general or special power of
attorney from RBC or the Subsidiary and a description of the terms of such
power.
(u) Government Contracts. All information supplied to any
agency of the government of the United States of America in connection with any
contract or proposal, including,
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without limitation, information supplied on Department of Defense forms SF1411,
is true, complete and accurate in all material respects.
(v) Disclosure. No representation or warranty by RBC, the
Subsidiary or any of the Stockholders in this Agreement, and no other statement,
document, or certificate furnished or to be furnished by or on behalf of the
Stockholders, RBC or the Subsidiary pursuant to this Agreement or in connection
with the transactions contemplated hereby contains any untrue statement of
material fact or omits or shall omit to state a material fact necessary to make
any statements contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE ACQUISITION CORPORATION
4.1. Representations and Warranties of the Buyer and the Acquisition
Corporation. The Buyer and the Acquisition Corporation hereby jointly and
severally represent and warrant to RBC and each of the Stockholders as follows:
(a) Organization; Good Standing; and Power. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
enter into this Agreement and the Escrow Agreement and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The Acquisition Corporation is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to enter
into this Agreement and the Agreement of Merger, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The Acquisition Corporation has not conducted any business prior to
the date hereof other than its corporate organization, the issuance of shares of
its capital stock, the negotiation of this Agreement and the preparation for the
transactions contemplated hereby. The Buyer and the Acquisition Corporation have
delivered to RBC copies of their respective certificates of incorporation and
by-laws, in each case, as in effect on the date hereof.
(b) Authority. The execution, delivery and performance of this
Agreement and the Escrow Agreement and the consummation by the Buyer of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of the Buyer. This
Agreement and the Escrow Agreement have been duly and validly executed and
delivered by the Buyer and are the valid and binding
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obligations of the Buyer, enforceable against the Buyer in accordance with their
terms. The execution, delivery and performance of this Agreement and the
Agreement of Merger and the consummation by the Acquisition Corporation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Acquisition
Corporation. This Agreement has been, and the Agreement of Merger when executed
and delivered by the Acquisition Corporation will be, duly and validly executed
and delivered by the Acquisition Corporation, and this Agreement is, and the
Agreement of Merger when executed and delivered by the parties thereto will be,
valid and binding obligations of the Acquisition Corporation, enforceable
against the Acquisition Corporation in accordance with their respective terms.
Neither the execution, delivery and performance of this Agreement and the Escrow
Agreement by the Buyer or the Acquisition Corporation, as applicable, or the
execution, delivery and performance of the Agreement of Merger by the
Acquisition Corporation, nor the consummation by the Buyer or the Acquisition
Corporation, as the case may be, of the transactions contemplated by this
Agreement and the Escrow Agreement or the Agreement of Merger, nor compliance by
the Buyer or the Acquisition Corporation, as the case may be, with any of the
provisions hereof or thereof, including, without limitation, the issuance by the
Buyer of the Buyer's Preferred Stock pursuant to the Merger, will (i) conflict
with or violate any provision of the Certificate of Incorporation or By-laws of
the Buyer or the Acquisition Corporation, (ii) violate, conflict with or
constitute (or with notice or lapse of time or both constitute) a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of, or result in the creation of any
Encumbrance upon any of the property of the Buyer or the Acquisition Corporation
pursuant to the terms of, any note, bond, lease, mortgage, indenture, license,
agreement, or other instrument or obligation to which the Buyer or the
Acquisition Corporation is a party or by which any of their respective
properties or assets may be bound or affected or (iii) violate any law, statute,
rule or regulation or judgment, order, award, writ, injunction or decree of any
court, administrative agency or governmental body, applicable to the Buyer or
the Acquisition Corporation or any of their respective properties or assets.
Except as contemplated by this Agreement and as set forth on Schedule 4.1(b)
attached hereto, no permit, authorization, consent or approval of or by any
person, governmental or private is required in connection with the execution,
delivery and performance of this Agreement, the Escrow Agreement or the
Agreement of Merger by the Buyer or the Acquisition Corporation or the
consummation by the Buyer or the Acquisition Corporation of the transactions
contemplated hereby or thereby including, without limitation, the issuance by
the Buyer of the Buyer's Preferred Stock pursuant to the Merger.
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(c) Authorization of Buyer's Preferred Stock. The
authorization, issuance, sale and delivery of the Buyer's Preferred Stock to the
holders of RBC Common Stock in the Merger has been duly authorized by all
requisite corporate action of the Buyer, and, when issued, sold and delivered in
the Merger, such shares shall be validly issued, fully-paid and nonassessable,
with no personal liability attaching to the ownership thereof. The terms,
designations, powers, preferences and relative, participating, optional and
other special rights and the qualifications, limitations and restrictions, of
the Buyer's Preferred Stock shall be as stated in the Certificate of
Designations relating thereto (the "Certificate of Designations") filed with the
Secretary of State of Delaware prior to the Closing, a true and complete copy of
which has been provided to the Stockholders.
(d) Capital Structure. Schedule 4.1(d) hereto sets forth the
authorized and outstanding capital stock of the Buyer immediately following the
Closing, including all options, warrants and other securities convertible into
or exercisable or exchangeable for capital stock of the Buyer outstanding
immediately following the Closing.
(e) No Prior Activities; Pro Forma Balance Sheet. (i) Neither
the Buyer nor the Acquisition Corporation, since its inception, has (A) engaged
in any business, (B) entered into any agreements, contracts, guarantees,
understandings or other commitments (written or oral) or (C) incurred any
liabilities or become subject to any obligations of any nature (matured or
unmatured, fixed or contingent), other than in connection with its formation or
the transactions contemplated by this Agreement.
(ii) Set forth in Schedule 4.1(e) hereof is the unaudited pro
forma consolidated balance sheet of the Buyer as at the Closing, which has been
prepared in accordance with GAAP and accurately reflects the financial condition
of the Buyer immediately after giving effect to the Merger.
(f) Brokers' or Finders' Fees. Except as set forth on Schedule
4.1(f) attached hereto, neither the Buyer or the Acquisition Corporation nor any
of their respective officers, directors, employees or stockholders has retained
any broker or finder in connection with the transactions contemplated hereby.
(g) Nonforeign Status. The Buyer is not a "foreign person" as
defined in S800.211 of the regulations proposed by the United States Department
of the Treasury under Section 721 of the Defense Production Act of 1950, as
amended.
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ARTICLE V
CONDITIONS PRECEDENT
5.1. Conditions to Each Party's Obligations. The obligations of each
party to perform this Agreement are subject to the satisfaction of the following
conditions unless waived in writing (to the extent such conditions can be
waived) by all of the other parties hereto:
(a) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the transactions contemplated hereby or by the Agreement of Merger shall have
been issued by any Federal or state court and remain in effect. Each party
agrees to use its best efforts to have any such injunction lifted.
(b) Legislation. No Federal, state, local or foreign statute,
rule or regulation shall have been enacted which prohibits, restricts or delays
the consummation of the transactions contemplated hereby or by the Agreement of
Merger or any of the conditions to the consummation of such transactions.
5.2. Conditions to Obligations of the Buyer and the Acquisition
Corporation. The obligations of the Buyer to consummate the transactions
contemplated by this Agreement and of the Acquisition Corporation to consummate
the transactions contemplated by this Agreement and the Agreement of Merger are
subject to the satisfaction of the following conditions unless waived in writing
(to the extent such conditions can be waived) by the Buyer and the Acquisition
Corporation:
(a) Representations and Warranties. The representations and
warranties of the Stockholders and RBC set forth in Sections 3.1 and 3.2 hereof
shall in each case be true and correct in all material respects as of
immediately prior to the Effective Time as though made immediately prior to the
Effective Time.
(b) Performance of Obligations. Each of RBC and the
Stockholders shall have performed in all material respects the obligations
required to be performed by them under this Agreement and the Agreement of
Merger, as applicable, immediately prior to the Effective Time.
(c) Authorization of Merger. All action necessary to authorize
the execution, delivery and performance of this Agreement and the Agreement of
Merger and the consummation of the transactions contemplated hereby and thereby
shall have been duly and validly taken by the Board of Directors of RBC and the
Stockholders.
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(d) Termination of Management Agreements. The Management
Agreement dated October 29, 1987, between RBC and Overseas Partners, Inc.
("OPI"), and the Management Agreement dated November 1, 1991, between the
Subsidiary and OPI, shall each have been terminated and the Buyer shall have
received evidence thereof reasonably satisfactory to the Buyer.
(e) Escrow Agreement. The Stockholders shall have executed and
delivered an escrow agreement substantially in the form of Exhibit B hereto (the
"Escrow Agreement").
(f) Consents. All permits, authorizations, consents and
approvals of or by any person (governmental or private) required in connection
with the execution, delivery and performance of this Agreement shall have been
obtained.
(g) Defense Contracts. All permits, authorizations and
approvals required under contracts and agreements with the United States
Department of Defense or other United States governmental entity in connection
with the execution, delivery and performance of this Agreement shall have been
obtained by RBC.
(h) Opinion of Counsel. The Buyer and the Acquisition
Corporation shall have received opinions dated the date of the Closing of
O'Sullivan Graev & Karabell, Wormser, Kiely, Galef & Jacobs, I.C. Corbridge
Gough & Co., Smeets Thesseling & Van Bokhorst, De Brauw Blackstone & Westbroek
and Spengler, Carlson, Gubar, Brodsky & Frischling, substantially in the forms
attached as Exhibit C hereto.
5.3. Conditions to Obligations of RBC and the Stockholders. The
obligations of the Stockholders to consummate the transactions contemplated by
this Agreement and of RBC to consummate the transactions contemplated by this
Agreement and the Agreement of Merger are subject to the satisfaction of the
following conditions unless waived in writing (to the extent such conditions can
be waived) by RBC and the Stockholders:
(a) Representations and Warranties. The representations and
warranties of the Buyer and the Acquisition Corporation set forth in Article IV
hereof shall be true and correct in all material respects as of immediately
prior to the Effective Time as though made immediately prior to the Effective
Time.
(b) Performance of Obligations of the Buyer and the
Acquisition Corporation. The Buyer and the Acquisition Corporation shall have
performed in all material respects their respective obligations required to be
performed by them under this Agreement and the Agreement of Merger, as
applicable, immediately prior to the Effective Time.
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(c) Authorization of Merger. All action necessary to authorize
the execution, delivery and performance of this Agreement and the Agreement of
Merger and the consummation of the transactions contemplated hereby and thereby
shall have been duly and validly taken by the Buyer and the Acquisition
Corporation and by the Buyer as the sole stockholder of the Acquisition
Corporation.
(d) Issuance of Preferred Stock. The Certificate of
Designations shall have been filed with the Secretary of State of the State of
Delaware (and the Stockholders shall have received satisfactory evidence
thereof), and the Surviving Corporation shall have deposited into the Escrow
Deposit Box, to be held and distributed in accordance with the terms of the
Escrow Agreement, duly executed certificates, registered in the names of the
Stockholders, representing an aggregate of 20,000 shares of the Buyer's
Preferred Stock.
(e) Satisfaction of Indebtedness. Simultaneously with the
Closing, the Buyer shall have paid in full all principal and interest then due
under (i) the Loan and Security Agreement dated October 30, 1987, among RBC, the
Subsidiary and Citicorp North America, Inc., as amended and (ii) the Loan
Agreement dated August 14, 1989, among RBC, Bitrix Associates C.V. and Overland
Trust Bank.
(f) Escrow Agreement. The Buyer shall have executed and
delivered the Escrow Agreement.
(g) Exchange Agreements The Buyer shall have executed and
delivered exchange agreements (the "Exchange Agreements") with each of Gary
Holmes, Harold Macsata and Frederick Morlok, substantially in the forms attached
as Exhibit D hereto.
(h) Consents. All permits, authorizations, consents and
approvals of or by any person (governmental or private) required in connection
with the execution, delivery and performance of this Agreement shall have been
obtained or made.
(i) Defense Contracts. All permits, authorizations and
approvals required under contracts and agreements with the United States
Department of Defense or other United States governmental entity in connection
with the execution, delivery and performance of this Agreement shall have been
obtained by RBC, other than those which if not obtained would not individually
or in the aggregate have a Material Adverse Effect.
(j) Opinion of Counsel. RBC and the Stockholders shall have
received an opinion dated the Closing Date of Gibson, Dunn & Crutcher, counsel
to the Buyer and the Acquisition Corporation, substantially in the form of
Exhibit E hereto.
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ARTICLE VI
CLOSING
The closing (the "Closing") for the consummation of the transactions
contemplated by this Agreement shall, unless another date or place is agreed to
in writing by the parties hereto, take place at the offices of O'Melveny &
Meyers, counsel to the senior lender to the Buyer, at 400 South Hope Street, Los
Angeles, California 90071, simultaneously with the execution and delivery
hereof. The date hereof is sometimes referred to herein as the "Closing Date".
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Officer and Director Indemnification. The Surviving Corporation
shall, and the Buyer shall cause the Surviving Corporation to, for a period of
three years after the Effective Time, maintain in full force and effect all
applicable provisions contained in the By-Laws and Certificate of Incorporation
of each of RBC and the Subsidiary with respect to the rights of the present and
former officers and directors of RBC and the Subsidiary to indemnification from
RBC or the Subsidiary, as the case may be.
7.2. Noncompetition. Until the second anniversary of the Closing,
neither Gary Holmes, Michael Hartnett, Bitrix Associates C.V. or Columbus
Holdings Limited, nor any Affiliate thereof, nor any officer, director or holder
of ten percent or more of the voting stock thereof, shall directly or indirectly
take any action to solicit or induce employees of the Surviving Corporation to
terminate their employment with the Surviving Corporation or engage in, invest
in more than ten percent of the voting stock of, assist, act as an advisor to,
or become a director or officer of, any entity that is engaged in any business
which competes with the business of the Surviving Corporation as presently
conducted.
7.3. Information Rights. For so long as Bitrix and Columbus shall
hold shares of the Buyer's Preferred Stock, the Buyer shall furnish to Overseas
Partners, Inc., as their representative, annual financial information in the
form and at the same time as such information is supplied to any creditor to
which the Buyer is obligated to provide such information (or, if the Buyer is
not obligated to deliver annual financial information to any creditor, the Buyer
shall provide to Overseas Partners a balance sheet as of each fiscal year-end of
the Buyer and a statement of operations and cash flows for each such fiscal
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year then ended, prepared in accordance with GAAP, within 90 days of the end of
each such fiscal year).
7.4. Restrictions on Transfer of the Buyer's Preferred Stock. (a) No
Stockholder shall Transfer (other than to a Permitted Transferee) any shares of
the Buyer's Preferred Stock (or any interest therein) while such shares are
subject to the terms of the Escrow Agreement.
(b) Unless consented to in writing by all holders of the Buyer's
Preferred Stock then outstanding, following the release to any Stockholder of
the Buyer's Preferred Stock pursuant to the terms of the Escrow Agreement, no
Stockholder shall Transfer (other than to a Permitted Transferee) any of such
released shares of the Buyer's Preferred Stock (or any interest therein) except
as follows:
(i) Such Stockholder (for the purposes of this Section 7.4(b),
a "Selling Stockholder") shall first deliver a written notice (an "Option
Notice"), which shall be irrevocable for a period of 35 days after
delivery thereof, to the Buyer (and the Buyer shall promptly deliver a
copy of such Option Notice to each holder of the Buyer's Preferred Stock
at such holder's address as set forth in the Buyer's stock transfer
ledger) offering all of the Buyer's Preferred Stock proposed to be
Transferred by such Selling Stockholder at the purchase price and on the
terms specified therein. The Buyer (and or its assignee(s) or designee(s))
shall then have the option to purchase all or any portion of the shares of
the Buyer's Preferred Stock specified in the Option Notice (the "Subject
Shares"), said option to be exercised within 15 days after the giving of
such Option Notice (the "Company Option Period") by giving written notice
(a copy of which shall simultaneously be delivered to each Other Preferred
Stockholder (as defined below)) of the Buyer's desire to exercise such
purchase option and specifying the number of Subject Shares that the Buyer
shall acquire. If the Buyer shall not exercise its option or shall elect
to acquire less than all of the Subject Shares (the Subject Shares not
elected to be purchased by the Buyer being referred to herein as the
"Company Rejected Shares"), each holder of the Buyer's Preferred Stock who
or which is not a Stockholder as defined herein (the "Other Preferred
Stockholders"), shall have a non-assignable option to purchase all or any
part of the Company Rejected Shares, said option to be exercised within 25
days after the giving of the Option Notice (the "Other Preferred
Stockholders' Option Period") by giving a written counter-notice to such
Selling Stockholder. Each Other Preferred Stockholder who gives such a
counter-notice is referred to hereinafter as an "Electing Preferred
Stockholder", and the number of shares an Electing Preferred Stockholder
shall elect to purchase is referred to as the "Elected Shares".
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(ii) The number of Company Rejected Shares an Electing
Preferred Stockholder shall be entitled to purchase (the "Allotted
Shares") shall be equal to that number of the Company Rejected Shares that
bears the same ratio to the total number of Company Rejected Shares as the
number of shares of the Buyer's Preferred Stock held by such Electing
Preferred Stockholder bears to the number of shares of the Buyer's
Preferred Stock held by all Electing Preferred Stockholders. If the number
of Elected Shares of any Electing Preferred Stockholder shall be less than
the Allotted Shares for such Electing Preferred Stockholder, each Electing
Preferred Stockholder who or which elected to purchase all of his or its
Allotted Shares shall be entitled to purchase any remaining Allotted
Shares of any Electing Preferred Stockholder, to be allocated among the
Electing Preferred Stockholders having the right to purchase such
remaining Allotted Shares in accordance with this paragraph as if such
Allotted Shares were all the Company Rejected Shares and as if such
remaining Electing Preferred Stockholders were all the Electing Preferred
Stockholders, such procedure to be repeated until either (a) all Company
Rejected Shares are allotted to Electing Preferred Stockholders as
aforesaid or (b) there remain Company Rejected Shares to allot but no
Electing Preferred Stockholders to whom to allot them.
(iii) If the Buyer alone, or the Buyer in combination with one
or more Electing Preferred Stockholders elect to purchase all (but not
less than all) the Subject Shares, the Buyer and such Electing Preferred
Stockholder(s) shall be obligated to purchase, and the Selling Stockholder
shall be obligated to sell, the Subject Shares at the price and terms
indicated in the Option Notice, except that the closing of the purchase
shall be held on the twentieth (20th) day after the expiration of the
Company Option Period, in the case where the Company elects to acquire all
Subject Shares, or on the fifteenth (15th) day after the expiration of the
Other Preferred Stockholders' Option Period, in the case where Electing
Preferred Stockholders participate in the acquisition of Subject Shares
(or if such day is not a business day, on the next following business day)
at 10:00 a.m., local time, at the principal executive office of the Buyer,
or at such other time and place as may be agreed in writing by the Selling
Stockholder, the Buyer and the Electing Preferred Stockholder(s).
(iv) If the Company and Electing Preferred Stockholder(s)
collectively elect to purchase less than all the Subject Shares, the
Company and the Electing Preferred Stockholders shall have no right to
purchase any of the Subject Shares, and the Selling Stockholder may, at
any time within a period 90 days after the expiration of the Other
Preferred Stockholders' Option Period, Transfer all (but not
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less than all) the Subject Shares at the price and terms contained in the
Option Notice; provided that as a condition to such Transfer, the
purchaser thereof shall have agreed in writing to be subject to and bound
by the terms of this Section 7.4(b). If the Selling Stockholder does not
so transfer the Subject Shares within such 90-day period, the Subject
Shares may not be transferred without repeating the procedures set forth
in this Section 7.4(b).
(c) As used in this Section 7.4, (i) "Transfer" shall mean to sell,
pledge, give, bequeath, transfer, assign or in any other way whatsoever encumber
or dispose of, directly or indirectly, and (ii) "Permitted Transferee" shall
mean (A) with respect to any Stockholder that is an individual, such
Stockholder's spouse or lineal descendants or any trust for the benefit of any
thereof or the personal representative of such Stockholder or his estate and (B)
with respect to any Stockholder which is a corporation, partnership or other
entity, the stockholders or general or limited partners of such corporation or
partnership or any affiliate (as defined in the Securities Act of 1933, as
amended) of such Stockholder or any corporation, partnership or other entity
which acquires substantially all of the assets of such Stockholder or which
shall merge with such Stockholder (if such Stockholder is not the surviving
entity in such merger).
(d) A legend substantially as follows shall be placed on the
certificates representing the Buyer's Preferred Stock owned by each Stockholder:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER COMPLIES WITH THE PROVISIONS OF
SECTION 7.4 OF THE AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF
MARCH 31, 1992, AMONG ROLLER BEARING HOLDING COMPANY, INC. AND THE
OTHER PARTIES THERETO, A COPY OF WHICH IS ON FILE AT THE OFFICES OF
ROLLER BEARING HOLDING COMPANY, INC."
(e) Each person or entity who or which is now or shall become in the
future an Other Preferred Stockholder as defined in this Section 7.4, is and
shall be an intended third-party beneficiary of the provisions of this Section
7.4.
7.5. Repurchase of Buyer's Preferred Stock. Neither the Buyer nor
any subsidiary thereof shall purchase or otherwise acquire any shares of the
Buyer's Preferred Stock (other than from any executive officer of the Buyer in
the event of the termination of such officer's employment with the Buyer) from
any holder thereof other than pursuant to a redemption in accordance with the
terms of the Buyer's Preferred Stock, as set forth in the Buyer's Certificate of
Incorporation, or pursuant to an offer
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extended to all holders of the Buyer's Preferred Stock on a pro rata basis.
7.6. Mandatory Sale. If one or more holders of the Buyer's Preferred
Stock shall at any time while the Stockholders hold shares of the Buyer's
Preferred Stock sell shares of the Buyer's Preferred Stock representing 50% or
more of the Buyer's Preferred Stock then outstanding to any party who or which
is not an Affiliate of the Buyer, or if an Affiliate of the Buyer, at a per
share purchase price not less than $100 plus accrued dividends, each Stockholder
shall sell all shares of the Buyer's Preferred Stock then held by such
Stockholder in the same transaction.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1. Survival of Representations and Warranties. Except with respect
to the representations and warranties set forth in Sections 3.1(a), 3.2(1) and
3.2(n) hereof, the representations and warranties set forth in Articles III and
IV hereof shall survive the Closing and remain in effect until the second
anniversary of the Closing Date. The representations and warranties set forth in
Section 3.1(a) shall survive indefinitely. The representations and warranties
set forth in Section 3.2(1) hereof shall survive until all applicable statutes
of limitations have expired. The representations and warranties set forth in
Section 3.2(n) hereof shall survive the Closing until the twelfth anniversary of
the Closing Date or, if earlier, the date upon which the Buyer's Preferred Stock
held by the Stockholders shall be required to be redeemed or repurchased
pursuant to the terms of the Buyer's Preferred Stock or otherwise, or the date
set for any such redemption or repurchase agreed to by the Buyer, whether or not
there shall be legally available funds to effect any such redemption or
repurchase on such date. All covenants of any party hereto shall survive
indefinitely, until by their respective terms they become inoperative. The date
upon which any representation and warranty or covenant expires is referred to
herein as the "Survival Date" of such representation and warranty or covenant
(except that the Survival Date of any representation and warranty or covenant
with respect to any claim made pursuant to Section 8.2.3 or 8.2.4 hereof prior
to the date of expiration of such representation, warranty or covenant shall be,
solely with respect to such claim, the date of final adjudication of such
claim). The Survival Date with respect to the representations and warranties set
forth in Section 3.2(n) hereof is referred to herein as the "Environmental
Survival Date".
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8.2. Indemnification.
8.2.1. Definitions. As used in this Section 8.2, the following
terms shall have the following meanings:
(a) "Event of Buyer Indemnification" shall mean the untruth,
inaccuracy or breach of any representation, warranty, agreement or covenant of
the Stockholders contained in this Agreement.
(b) "Event of Stockholder Indemnification" shall mean the
untruth, inaccuracy or breach of any representation, warranty, agreement or
covenant of the Buyer contained in this Agreement.
(c) "Buyer Indemnified Persons" shall mean and include the
Buyer, the Acquisition Corporation, the Surviving Corporation and their
successors and assigns.
(d) "Stockholder Indemnified Persons" shall mean and include
the Stockholders and their respective successors and assigns.
(e) "Losses" shall mean any and all losses, shortages,
damages, including, without limitation, Environmental Damages, expenses
(including reasonable attorneys' and accountants' fees), assessments, tax
deficiencies and taxes (including interest or penalties thereon), liabilities,
settlements, payments, awards, judgments, fines, penalties or interest charges
sustained, suffered or incurred by any Buyer Indemnified Person or Stockholder
Indemnified Person, as the case may be, arising from any Event of Buyer
Indemnification or Event of Stockholder Indemnification, computed net of (i)
actual recoveries pursuant to insurance coverage or otherwise from indemnities
identified prior to the Effective Time, (ii) any specific reserves provided for
the applicable event in the Balance Sheet and (iii) any tax benefits actually
recognized by the Buyer Indemnified Person or the Stockholder Indemnified
Person, as the case may be.
8.2.2. Indemnification. (a) Subject to Sections 8.2.3, 8.2.4
and 8.2.5, the Stockholders shall (i) severally, as to Losses arising out of any
breach of any representation or warranty set forth in Section 3.1 hereof, and
(ii) jointly and severally, with respect to all Losses (other than Losses which
constitute Environmental Damages) arising out of any other Event of Buyer
Indemnification (other than any breach of any representation or warranty set
forth in Section 3.2(n) hereof), indemnify and hold harmless the Buyer
Indemnified Persons, and each of them, from and against any and all Losses
arising from any Event of Buyer Indemnification.
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<PAGE>
(b) Until the Environmental Survival Date, subject to Sections
8.2.3, 8.2.4 and 8.2.5, the Stockholders, jointly and severally, shall indemnify
and hold harmless the Buyer Indemnified Persons, and each of them, from and
against any and all Environmental Damages if and only to the extent such
Environmental Damages result from any circumstance existing, or any action or
inaction or event or occurrence which occurred, prior to the Closing and (i)
with respect to any such Environmental Damages relating to Company Property
owned, occupied or leased by the Subsidiary, after July 16, 1990 and (ii) with
respect to any such Environmental Damages relating to Company Property owned,
occupied or leased by RBC, after October 30, 1987; provided, however, that the
Stockholders shall have no indemnification obligations under the preceding
clause 8.2.2(b)(ii) unless (and then only to the extent that) the Buyer
Indemnified Persons making such claim shall have failed, after using
commercially reasonable efforts (including, without limitation, the filing and
pursuit of a claim in any Federal or state court of the United States of
competent jurisdiction until such claim is dismissed, or a decision is rendered,
by such court), to have obtained indemnification payments with respect to such
Environmental Damages pursuant to the Inventory Purchase and Indemnification
Agreement (the "General Sullivan Indemnification Agreement") dated the date
hereof, between RBC and General Sullivan Group, Inc., a New Jersey corporation
("General Sullivan"), if such claim is within the scope of the General Sullivan
Indemnification Agreement. Nothing herein shall be interpreted to mean that the
General Sullivan Indemnification Agreement in any way limits the scope of the
indemnity in that portion of clause 8.2.2(b)(ii) preceding the proviso in such
clause. If any Stockholder shall make any payments pursuant to clause
8.2.2(b)(ii) of the preceding sentence, such Stockholder shall be subrogated, to
the extent of such payment, to any rights and remedies available to RBC or any
of its assigns, in respect of the claim on account of which such payment shall
have been made, under the General Sullivan Indemnification Agreement.
(c) Until the Environmental Survival Date, subject to Sections
8.2.3, 8.2.4 and 8.2.5, the Stockholders, jointly and severally, shall indemnify
and hold harmless the Buyer Indemnified Persons, and each of them from and
against any and all Losses (i) relating to or arising out of any excluded
liability set forth in Section 1.04(j) of the Asset Purchase Agreement dated
September 18, 1987, among RBC (formerly RBC Holdings Corp.), General Sullivan
and the other parties thereto or (ii) with respect to which RBC or the
Subsidiary or any of their respective assigns shall have a right of recovery
(but only to extent of such right of recovery) pursuant to Section 10.11 or
10.12 of the Asset Purchase Agreement dated as of June 29, 1990, among RBC, the
Subsidiary (formerly ITI Acquisition, Inc.), Axel Johnson, Inc., a Delaware
corporation, and the other parties thereto; provided, however, that the
Stockholders shall have no indemnification obligations under this Section
8.2.2(c) unless
- 36 -
<PAGE>
(and then only to the extent that) the Buyer Indemnified Persons making such
claim shall have failed, after using commercially reasonable efforts (including,
without limitation, the filing and pursuit of a claim in any Federal or state
court of the United States of competent jurisdiction until such claim is
dismissed, or a decision is rendered, by such court), to have obtained
indemnification payments with respect to such Losses pursuant to the provisions
of the agreements specified in the preceding clause (i) or (ii) or of the
General Sullivan Indemnification Agreement, as applicable. If any Stockholder
shall make any payments pursuant to this Section 8.2.2(c), such Stockholder
shall be subrogated, to the extent of such payment, to any rights and remedies
available to RBC and the Subsidiary or any of their respective assigns, in
respect of the claim on account of which such payment shall have been made,
under the RBC Purchase Agreement, the ITB Purchase Agreement or the General
Sullivan Indemnification Agreement, as applicable, with respect to the claim
giving rise to such required payment.
(d) The Buyer shall indemnify and hold harmless the
Stockholder Indemnified Persons, and each of them, from and against all Losses
arising from any Event of Stockholder Indemnification.
8.2.3. Procedure for Claims by Parties. No claim, demand, suit
or cause of action shall be brought under Section 8.2.2 hereof unless the party
or parties seeking indemnification, at any time prior to the applicable Survival
Date, shall give prompt written notice of the existence of any such claim,
stating the nature and basis of such claim and the amount thereof, to the extent
known; provided, however, that the failure to give prompt notice of the
existence of a claim by the party or parties seeking indemnification shall not
obviate the right to indemnity unless the delay in giving such notice shall
adversely affect the ability of the indemnifying party to defend against such
claim or to minimize the subject Loss. Upon the giving of such written notice as
aforesaid, the party or parties seeking indemnification shall have the right to
commence legal proceedings subsequent to the applicable Survival Date for the
enforcement of their rights under Section 8.2.2 hereof.
8.2.4. Third Party Claims. The obligations and liabilities of
any party hereto against which indemnification is sought hereunder with respect
to claims resulting from the assertion of liability by third parties shall be
subject to the following terms and conditions:
(a) Notice of Asserted Liability. Promptly after receipt by
any indemnified person (the "Indemnitee") of notice of any demand, claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give prompt written notice thereof (the "Claims Notice") to
- 37 -
<PAGE>
any other party (or parties) obligated to provide indemnification pursuant to
Section 8.2.2 (the "Indemnifying Party"); provided, however, that the failure to
give the Claims Notice promptly by the Indemnitee shall not obviate the right to
indemnity unless the delay in giving such notice shall adversely affect the
Indemnifying Party. The Claims Notice shall describe the Asserted Liability in
reasonable detail, and shall indicate the amount (estimated, if necessary) of
the Loss that has been or may be suffered by the Indemnitee.
(b) Defense. The Indemnifying Party shall be entitled to
assume the defense of any action, suit or claim brought against the Indemnitee
with respect to which the Indemnifying Party may have any indemnity liability
hereunder, upon delivering written notice to the Indemnitee to such effect. The
Indemnifying Party shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with the defense
thereof other than (i) those relating to investigation or the furnishing of
documents or witnesses and (ii) all reasonable fees and expenses of counsel
retained by such Indemnitee if (A) the Indemnifying Party and the Indemnitee
shall have agreed in writing to the retention of such counsel or (B) the
Indemnitee shall have reasonably concluded that a potential conflict exists or
that a defense is potentially available to it which is not available to the
Indemnifying Party. Each party shall make available to the other party and their
attorneys and accountants all books and records of such party relating to such
proceedings or litigation and the parties hereto agree to render to each other
such assistance as they may reasonably require of each other in order to ensure
the proper and adequate defense of any such action, suit or proceeding.
(c) Settlement. Neither the Indemnifying Party nor the
Indemnitee shall make any settlement of any claims without the written consent
of the other party (which consent shall not be unreasonably withheld).
8.2.5. Limitations on Indemnification. The indemnification provided
for in this Section 8.2 shall be subject to the following limitations:
(a) The Stockholders shall have no liability and no obligation
to indemnify the Buyer for any Losses arising from the untruth, inaccuracy or
breach of any representation, warranty, agreement or covenant of the
Stockholders contained in Article III hereof other than Section 3.2(n) (with
respect to which there shall be no basket amount) unless, until and only to the
extent that such Losses, in the aggregate, shall exceed $500,000 (the "Basket
Amount") and the Buyer shall not be entitled to receive any indemnification
payments from the Stockholders hereunder unless, until and only to the extent
that such Losses exceed the Basket Amount.
- 38 -
<PAGE>
(b) Subject to Section 8.2.5(c) and notwithstanding anything
in this Section 8.2 to the contrary, the several liability of each Stockholder,
with respect to any Loss, shall be equal to the product of (A) the percentage
(the "Stockholder's Percentage") set forth opposite such Stockholder's name on
Annex I hereto multiplied by (B) the dollar amount of such Loss; provided,
however, that no Stockholder's liability for indemnification pursuant to this
Section 8.2 shall exceed the product of (x) such Stockholder's Percentage
multiplied by either (y) $4,000,000 if such Loss arises from a claim made
pursuant to Section 8.2.3 or 8.2.4 hereof prior to the first anniversary of the
date hereof, or (z) $2,000,000 (reduced dollar-for-dollar by any claims
described in the preceding clause (y)) if such Loss arises from a claim made
pursuant to Section 8.2.3 or 8.2.4 hereof after the first anniversary of the
date hereof.
(c) If there shall be any indemnification obligation of the
Stockholders (A) under Section 8.2.2(a), such obligation shall be paid, before
any cash payment is made, by the distribution to the applicable Buyer
Indemnified Person of Escrow Shares (as defined in the Escrow Agreement) having
a value equal to the indemnification amount, and such shares shall be deemed to
have been assigned and transferred by the Stockholders to such Buyer Indemnified
Person, free and clear of any claim of any kind by the Stockholders or any of
them, or (B) under Section 8.2.2(b) or 8.2.2(c), such obligation shall be paid
(x) first by the distribution to the applicable Buyer Indemnified Person of cash
from the Stockholders' interest in the Escrow Cash (as defined in the Escrow
Agreement), to the extent amounts of the Escrow Cash shall then be available for
such use in accordance with the terms of the Escrow Agreement set forth in the
preceding paragraph 8.2.5(b)) and (y) second by the distribution to the
applicable Buyer Indemnified Person of Escrow Shares having a value equal to the
indemnification amount, and such shares shall be deemed to have been assigned
and transferred by the Stockholders to such Buyer Indemnified Person free and
clear of any claim of any kind by the Stockholders or any of them, in each case
prior to any other cash payment. For the purposes of this Section 8.2.5(c), the
value of the Escrow Shares shall be their liquidation preference plus any
dividends accrued and unpaid with respect thereto.
8.2.6. Limitation of Remedies. Except as provided in this Agreement,
the remedies provided for in Section 8.2 shall be the sole remedies, contractual
or otherwise, of the indemnified persons and shall preclude assertion by the
indemnified persons of any other rights or the seeking of any other remedies
against the indemnifying persons with respect to this Agreement and the
transactions contemplated hereby.
- 39 -
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.1. Expenses; Transfer Taxes; Etc. All fees and expenses incurred
by RBC and the Stockholders in connection with the preparation for, and the
consummation of, the transactions contemplated hereby and the other writings
referenced herein shall be borne by the Stockholders, including, without
limitation, the fees and disbursements of O'Sullivan Graev & Karabell, counsel
to RBC, and Goldman, Sachs & Co., which fees and disbursements shall be paid by
the Stockholders at the Closing; each of the Buyer and the Acquisition
Corporation shall bear its own fees and expenses in connection with the
preparation for, and consummation of, the transactions contemplated hereby and
the other writings referenced herein, which fees and expenses shall be paid by
the Surviving Corporation at the Closing. The Buyer shall pay all sales,
registration, recording or transfer taxes which may be payable in connection
with the transactions contemplated by this Agreement.
9.2. Parties in Interest. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the respective successors and
assigns of the parties hereto; provided, however, that neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
either RBC and the Stockholders, on the one hand, or the Buyer or the
Acquisition Corporation, on the other hand, without the prior written consent of
the other party hereto.
9.3. Entire Agreement; Amendments This Agreement and the other
writings and agreements referred to herein or delivered pursuant hereto contain
the entire understanding of the parties with respect to its subject matter. This
Agreement and such other writings and agreements referred to herein supersede
all prior agreements and understandings between the parties with respect to
their subject matter. This Agreement may be amended only by a written instrument
duly executed by the parties and expressly stating that it is intended to modify
this Agreement, and any condition to a party's obligations hereunder may only be
waived in writing by such party.
9.4. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.5. Notices. All notices, claims, certificates, requests, demands
and other communications hereunder shall be in writing sent by facsimile
transmission or recognized courier service or delivered personally or mailed (by
registered or certified mail, return receipt requested and postage prepaid),
addressed as follows;
- 40 -
<PAGE>
If to RBC, to:
Roller Bearing Company of America, Inc.
140 Terry Drive
P.O. Box 1237
Newtown, Pennsylvania 18940
Attention: President
Telecopy: (215) 579-4318;
If to any Stockholder, to such Stockholder at his or its address set
forth on Annex I;
In each case, with a copy to:
Overseas Partners, Inc.
375 Park Avenue
New York, New York 10152
Attention: Mr. Emanuele Costa
Telecopy: (212) 421-5704; and
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Attention: Kenneth S. Siegel, Esq.
Telecopy: (212) 408-2420; and
If to the Buyer or the Acquisition Corporation, to:
Roller Bearing Holding Company, Inc.
1800 Century Park East, Suite 1000
Los Angeles, California 90067
Attention: Mr. Richard R. Crowell
Telecopy: (310) 277-5810;
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Attention: Terrance L. Carison, Esq.
Telecopy: (213) 229-7520;
or to such other address as the parties may have furnished to the other parties
hereto in writing. Any such notice or communication shall be deemed to have been
given (a) in the case of personal or facsimile delivery, on the date of such
delivery (or, if such day is not a business day, on the first business day
thereafter), (b) in the case of air courier, on the next business day after the
date when sent and (c) in the case of mailing, on the third business day
following the date of posting.
9.6. Publicity. The parties hereto agree that all public
announcements relating to this Agreement or the
- 41 -
<PAGE>
transactions contemplated hereby, including announcements to employees, will be
made only as may be agreed upon in writing by both RBC and the Buyer.
9.7. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
9.8. Governing Law. This Agreement shall be governed by and
construed in accordance with (a) the laws of the State of New York applicable to
agreements made and to be wholly performed within such State and (b) with
respect to corporate law governing the Merger, solely by the General Corporation
Law of the State of Delaware. Each of Bitrix and Columbus hereby irrevocably
submits to the jurisdiction of the courts of the State of New York for the
resolution of any dispute arising in connection with this Agreement, the Escrow
Agreement or any of the transactions contemplated hereby or thereby, and hereby
irrevocably appoints Wormser, Kiely, Galef & Jacobs, having the address set
forth on Annex I hereto, as agent for service of process in connection therewith
(provided that the foregoing submission to jurisdiction shall not be construed
to mean that either Bitrix or Columbus conducts any business within the State of
New York).
9.9. Gender. Any reference to the masculine gender shall be deemed
to include the feminine and neuter genders unless the context otherwise
requires.
9.10. Waivers. Any party to this Agreement may, by written notice to
the other parties hereto, waive any provision of this Agreement. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
- 42 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered on the date first above written.
ROLLER BEARING COMPANY OF
AMERICA, INC.
By: /s/ Gary W. Holmes
----------------------------------
Gary W. Holmes
President and CEO
ROLLER BEARING HOLDING
COMPANY, INC.
By: /s/ Michael J. Hartnett
----------------------------------
Name: Michael J. Hartnett
Title: President
ROLLER BEARING ACQUISITION
COMPANY, INC.
By: /s/ Michael J. Hartnett
----------------------------------
Name: Michael J. Hartnett
Title: President
STOCKHOLDERS:
BITRIX ASSOCIATES C.V.
By: BISUB INVESTMENTS N.V.,
Managing General Partner
By: /s/ Todd M. Brinberg
----------------------------------
Attorney-In-Fact
COLUMBUS HOLDINGS LIMITED
By: /s/ Todd M. Brinberg
----------------------------------
Name: Todd M. Brinberg
Title: Assistant Secretary
OVERLAND TRUST BANK
By: /s/ Todd M. Brinberg
----------------------------------
Attorney-In-Fact
<PAGE>
BAY STREET CORPORATION
By: /s/ [ILLEGIBLE]
----------------------------------
Name: [ILLEGIBLE]
Title: [ILLEGIBLE]
--------------------------------------
Gary w. Holmes
--------------------------------------
Michael J. Hartnett
--------------------------------------
Frederick L. Morlok
--------------------------------------
Harold J. Macsata
<PAGE>
BAY STREET CORPORATION
By:
----------------------------------
Name:
Title:
/s/ Gary w. Holmes
--------------------------------------
Gary w. Holmes
--------------------------------------
Michael J. Hartnett
--------------------------------------
Frederick L. Morlok
--------------------------------------
Harold J. Macsata
<PAGE>
BAY STREET CORPORATION
By:
----------------------------------
Name:
Title:
--------------------------------------
Gary w. Holmes
/s/ Michael J. Hartnett
--------------------------------------
Michael J. Hartnett
--------------------------------------
Frederick L. Morlok
/s/ Harold J. Macsata
--------------------------------------
Harold J. Macsata
<PAGE>
BAY STREET CORPORATION
By:
----------------------------------
Name:
Title:
--------------------------------------
Gary w. Holmes
--------------------------------------
Michael J. Hartnett
/s/ Frederick L. Morlok
--------------------------------------
Frederick L. Morlok
--------------------------------------
Harold J. Macsata
<PAGE>
ANNEX I
CLASS A CLASS B PREFERRED
HOLDER COMMON COMMON SHARES PERCENTAGE
------ ------- ------- --------- ----------
Bitrix Associates C.V 1,057.36(1) 15(2) 648.75 49.2102%
c/o Bisub Investments N.V
P.O. Box 812
De Ruyterkade 62
Curacao, Netherlands Antilles
with a copy to:
Todd M. Brinberg, Esq
Wormser, Kiely, Galef & Jacobs
711 Third Avenue
New York, NY 10017
Columbus Holdings Limited 340.66 5(2) 216.25 15.8545%
36 Finch Road
Douglas, Isle of Man
British Isles
with a copy to:
Todd M. Brinberg, Esq
Worinser, Kiely, Galef & Jacobs
711 Third Avenue
New York, NY 10017
Gary W. Holmes 454.08(3) -- -- 21.1332%
1925 Brickell Avenue
Miaini, Florida 33129
Bay Street Corporation .82 40 20 1.8998%
871 Seaview Avenue
Osterville, MA 02655
- ----------
(1) Includes 35.38 shares which will be acquired upon exercise of
outstanding warrants prior to the closing.
(2) Will be repurchased by RBC immediately prior to the Closing.
(3) 122.2122701 of such shares will be exchanged immediately prior to
the Merger for shares of the Buyer's Common Stock and the Buyer's
Preferred Stock, resulting in 331.8677299 shares being held for the
purposes of receiving consideration in the Merger.
<PAGE>
Harold J. Macsata 61.23(4) -- 30 2.8497%
2820 West Fox Chase Circle
Doylestown, PA 18901
Frederick L. Morlok 61.23(4) -- 30 2.8497%
315 Society Place
Newtown, PA 18940
Overland Trust Bank 72.05(5) -- -- 3.3533%
Via Serafino Balestra 5
CH-6900 Lugano
Switzerland
with a copy to:
Todd M. Brinberg, Esq
Wormser, Kiely, Galef & Jacobs
711 Third Avenue
New York, NY 10017
Michael J. Hartnett 61.23(6) -- -- 2.8497%
25871 Prairsetone
Laguna, CA 92523
Totals:
-------- --- --- ------
2,108.66 60 945 100%
- ----------
(4) 54.3164883 of such shares will be exchanged immediately prior to the
Merger for shares of the Buyer's Common Stock and the Buyer's
Preferred Stock, resulting in 6.91351157 shares being held for the
purposes of receiving consideration in the Merger.
(5) Will be acquired upon exercise of outstanding warrants prior to
closing.
(6) Consists of options (which will not be exercised prior to the
closing) to purchase 41.23 shares of Class A Common Stock from RBC
and 15 and 5 shares of Class B Common Stock from Bitrix and Columbus
(which shares of Class B Common Stock will be repurchased by TLBC
immediately prior to the Closing), respectively.
<PAGE>
ANNEX II
MERGER CONSIDERATION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cash Consideration:
Basic Cash $50,000,000.00
PLUS:
50% Holmes Note $535,036.22
D & T Fees $80,300.00
Hartnett Option $310,000.00 $925,336.22
------------------------------
Subtotal $50,925,336.22
MINUS:
Axel Johnson Note $4,138,437.50
Citicorp Cap Ex $1,597,576.15
Citi Term 1 $1,631,404.00
Citi Term 2 $3,964,512.50
Citi Revolver $12,134,295.93
Bitrix $1,676,594.36
OTB Sub Debt $3,414,794.53 $28,557,614.97
--------------------------------
Subtotal $22,367,721.25
MINUS
--------------------------------------------------------
RBC Preferred $754,051.44 $797.94 PER PREFERRED SHARE CASH CONSIDERATION
--------------------------------------------------------
Sellers' Expenses $2,676,472.58 $3,430,524.02
--------------------------------
---------
Per Share
--------------------------------------------------------
Net Cash Consideration $18,937,197.23 $8,813.49 PER COMMON SHARE CASH CONSIDERATION
Preferred Stock Consideration $2,000,000.00 $930.81 PER COMMON SHARE PREFERRED STOCK CONSIDERATION
--------------------------------------------------------
Total Consideration $20,937,197.23 $9,744.30
---------
Environmental Escrow $100,000.00 $46.54
---------
Fully Diluted Common Shares 2148.66
</TABLE>
ENTITLEMENTS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
2.3(a)(i) 2.3(a)(ii) 2.3(a)(ii) 2.3(b)
Shares Preferred Shares of Preferred
Available Total Cash Stock Buyer's Share Cash
Stockholder at Closing Entitlement Amount Consideration Preferred Stock Consideration
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bitrix 1057.36 $10,303,237.77 $ 9,319,033.66 $ 984,204.11 $ 9,842.04 $517,662.30
Columbus 340.66 $ 3,319,494.76 $ 3,002,404.11 $ 317,090.65 $ 3,170.91 $172,554.10
Bay Street 40.82 $ 397,762.51 $ 359,766.73 $ 37,995.77 $ 379.96 $ 15,958.76
Overland Trust 72.05 $ 702,077.14 $ 635,012.08 $ 67,065.05 $ 670.65 $ 0.00
Gary Holmes 331.8677299 $ 3,233,820.20 $ 2,924,913.51 $ 308,906.70 $ 3,089.07 $ 0.00
Hal Macsata 6.91351157 $ 67,367.36 $ 60,932.18 $ 6,435.18 $ 64.35 $ 23,938.14
Fred Morlok 6.91351157 $ 67,367.36 $ 60,932.18 $ 6,435.18 $ 64.35 $ 23,938.14
- ------------------------------------------------------------------------------------------------------------
TOTAL 1856.584753 $18,091,127.10 $16,362,994.44 $1,728,132.65 $17,281.33 $754,051.44
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT A
AGREEMENT OF MERGER dated as of March 31, 1992,
between ROLLER BEARING ACQUISITION COMPANY, INC., a
Delaware corporation (the "Acquisition Corporation"),
and ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware
corporation (the "Company")
The respective Boards of Directors of each of the Acquisition
Corporation and the Company have, by resolutions duly adopted, approved and
adopted this Agreement, the Agreement and Plan of Reorganization dated the date
hereof (the "Reorganization Agreement"), among the Company, Roller Bearing
Holding Company, Inc., a Delaware corporation (the "Buyer"), the Acquisition
Corporation, which is a wholly-owned subsidiary of the Buyer, and the
Stockholders (as defined in the Reorganization Agreement), and the proposed
merger of the Acquisition Corporation with and into the Company in accordance
with this Agreement, the Reorganization Agreement and the Delaware General
Corporation Law (the "Delaware Statute"), whereby, among other things, the
holders of issued and outstanding shares of the Class A Common Stock, $.01 par
value (the "Class A Common Stock"), the Class B Common Stock, $.0l par value
(the "Class B Common Stock"; and the Class A Common Stock and the Class B Common
Stock being collectively referred to herein as the "Company Common Stock") and
the Series A Preferred Stock, $.01 par value (the "Company Preferred Stock"), of
the Company will receive cash and shares of the Buyer's Preferred Stock (as
defined herein) therefor in the manner set forth in this Agreement and the
Reorganization Agreement, upon the terms and subject to the conditions set forth
in this Agreement and the Reorganization Agreement. All capitalized terms used
but not defined herein shall have the meanings ascribed to them in the
Reorganization Agreement.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the Reorganization Agreement, the parties hereto
agree as follows:
ARTICLE I
GENERAL
1.1. The Merger. In accordance with the provisions of this
Agreement, the Reorganization Agreement and the Delaware Statute, the
Acquisition Corporation shall be merged with and into the Company (the
"Merger"), which, at and after the Effective Time (as hereinafter defined),
shall be and is sometimes referred to herein as the "Surviving Corporation". The
Acquisi-
<PAGE>
tion Corporation and the Company are sometimes collectively referred to herein
as the "Constituent Corporations".
1.2. The Effective Time of the Merger. The Merger shall become
effective upon the filing of the Certificate of Merger (as defined in Article IV
hereof) with the Secretary of State of the State of Delaware, in accordance with
Article IV hereof. The date and time when the Merger shall become effective as
aforesaid is herein referred to as the "Effective Time".
1.3. Effect of Merger. (a) At the Effective Time, the separate
existence of the Acquisition Corporation shall cease and the Acquisition
Corporation shall be merged with and into the Surviving Corporation, possessing
all of the rights, privileges, powers and franchises, as well of a public as of
a private nature, and being subject to all of the restrictions, disabilities and
duties of each of the Constituent Corporations.
(b) At the Effective Time, all and singular, the rights,
privileges, powers and franchises of each of the Constituent Corporations, and
all property, real, personal and mixed, and all debts due to any of the
Constituent Corporations on whatever account, as well for stock subscriptions as
all other things in action or belonging to each of the Constituent Corporations
shall be vested in the Surviving Corporation; and all property, rights,
privileges, powers and franchises, and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the several and respective Constituent Corporations, and the title to any
real estate vested by deed or otherwise, under the laws of the State of Delaware
in either of the Constituent Corporations, shall not revert or be in any way
impaired by reason of the Delaware Statute; but all rights of creditors and all
liens upon any property of either of the Constituent Corporations shall be
preserved unimpaired, and all debts, liabilities and duties of the respective
Constituent Corporations shall thenceforth attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
1.4. Charter and By-Laws of Surviving Corporation. Immediately
following the Effective Time, (a) the Certificate of Incorporation of the
Company shall be the Certificate of Incorporation of the Surviving Corporation
until altered, amended or repealed as provided in the Delaware Statute, (b) the
by-laws of the Company shall become the by-laws of the Surviving Corporation
until altered, amended or repealed as provided in the Delaware Statute, the
Certificate of Incorporation or such by-laws, (c) the directors of the
Acquisition Corporation shall become the directors of the Surviving Corporation
and (d) the officers of the Acquisition Corporation shall become the officers of
the Surviving Corporation.
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<PAGE>
1.5. Taking of Necessary Action; Further Assurances. Prior to the
Effective Time, and subject to the terms and conditions provided in the
Reorganization Agreement, the parties hereto shall take, or cause to be taken
(as the case may be), all such action as may be necessary or appropriate in
order to effectuate the Merger as provided in this Agreement as expeditiously as
reasonably practicable.
ARTICLE II
EFFECT OF MERGER ON CAPITAL STOCK AND OTHER SECURITIES
OF CONSTITUENT CORPORATIONS; ETC.
2.1. Effect of Merger on Securities. (a) The following terms shall
have the following respective meanings:
(i) "AC Common Stock" shall mean the Common Stock, $.0l par
value, of the Acquisition Corporation.
(ii) "Buyer's Common Stock" shall mean the Common Stock, $.0l
par value, of the Buyer.
(iii) "Buyer's Preferred Stock" shall mean the Series A
Preferred Stock, $100 par value, of the Buyer.
(iv) "Cash Consideration" means the amount indicated as such
on Annex I hereto.
(v) "Per Common Share Preferred Stock Consideration" means the
number of shares of the Buyer's Preferred Stock indicated as the Per Common
Share Preferred Stock Consideration on Annex I hereto.
(vi) "Per Common Share Cash Consideration" means the amount
indicated as such on Annex I hereto.
(vii) "Per Preferred Share Cash Consideration" means the
amount indicated as such on Annex I hereto.
(b) The manner and basis of converting or exchanging the shares of
capital stock of each of the Constituent Corporations into or for cash or
securities of the Surviving Corporation or the Buyer shall be as follows:
(i) each share of AC Common Stock outstanding at the Effective
Time shall be converted into one share of Class A Common Stock of the
Surviving Corporation;
(ii) each share of Company Common Stock or Company Preferred
Stock outstanding at the Effective Time and owned directly or indirectly
by the Company or the Subsidiary or owned by the Buyer or the Acquisition
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<PAGE>
Corporation or any other subsidiary of the Buyer shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
cancelled and no consideration shall be delivered in exchange therefor;
(iii) each share of Company Common Stock listed on Annex I
hereto shall, by virtue of the Merger and without any action on the part
of the holder thereof, cease to be outstanding and be converted into the
right to receive the Per Common Share Cash Consideration and the Per
Common Share Preferred Stock Consideration;
(iv) each share of Company Preferred Stock outstanding at the
Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, cease to be outstanding and be converted
into the right to receive the Per Preferred Share Cash Consideration; and
(v) each authorized but unissued share of capital stock of the
Company at the Effective Time shall be cancelled.
2.2. Exchange of Certificates; Delivery of Funds. At the Effective
Time, the Surviving Corporation shall deliver:
(a) with respect to the Company Common Stock then held by each
Stockholder, (i) a wire transfer of immediately available funds in an
amount equal to the Net Cash Amount set forth opposite such Stockholder's
name on Annex I and (ii) duly executed certificates representing that
number of shares of the Buyer's Preferred Stock set forth opposite such
Stockholder's name on Annex I hereto, against receipt by the Surviving
Corporation of certificates representing all shares of Company Common
Stock held by such Stockholder immediately prior to the Effective Time;
and
(b) with respect to the Company Preferred Stock then held by
each Stockholder, a wire transfer of immediately available funds in an
amount equal to the Preferred Share Cash Consideration set forth opposite
such Stockholder's name on Annex I, against receipt by the Surviving
Corporation of certificates representing all shares of Company Preferred
Stock held by such Stockholder immediately prior to the Effective Time.
OPI shall receive and distribute the dollar amounts and shares of
the Buyer's Preferred Stock set forth in this Section 2.2 on behalf of the
Stockholders (and shall be held harmless by the Stockholders in connection
therewith).
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<PAGE>
2.3. Deposit into Escrow. (a) As soon as practicable following the
Closing, the Stockholders (or OPI on behalf of the Stockholders) shall deposit
(i) into the Escrow Account (as defined in the Escrow Agreement) an aggregate of
$100,000, to be held and distributed in accordance with the terms of the Escrow
Agreement, and (ii) into the Escrow Deposit Box (as defined in the Escrow
Agreement) certificates representing in the aggregate 20,000 shares of the
Buyer's Preferred Stock (issued to the Stockholders in the Merger and, with
respect to certain Stockholders, pursuant to the Exchange Agreements or
otherwise), to be held and distributed in accordance with the terms of Section
8.2 of the Reorganization Agreement and the terms of the Escrow Agreement.
(b) As soon as practicable following the Closing, the Buyer
shall deposit $100,000 into the Escrow Account, to be held and disbursed in
accordance with the terms of the Escrow Agreement.
2.4. Exercise of Warrants and Exchange of Options. (a) Immediately
prior to the Effective Time, each of Bitrix Associates C.V. and Overland Trust
Bank shall exercise all warrants to purchase Company Common Stock then held by
them.
(b) Immediately prior to the Effective Time, options to purchase
41.237, 15 and 5 shares of Company Common Stock from the Company, Bitrix and
Columbus, respectively, held by Michael Hartnett shall be cancelled in exchange
for shares of the Buyer's Common Stock and/or the Buyer's Preferred Stock.
2.5. After the Effective Time. At and after the Effective Time, the
stock transfer books of the Surviving Corporation shall be closed with respect
to the Company Common Stock and the Company Preferred Stock and there shall be
no further registration of transfers of Company Common Stock or Company
Preferred Stock thereafter on the records of the Surviving Corporation. If,
after the Effective Time, certificates formerly representing shares of Company
Common Stock or Company Preferred Stock are presented to the Surviving
Corporation, they shall be cancelled and exchanged for the consideration set
forth in Sections 2.1(b)(iii) and 2.1(b)(iv), respectively, hereof, as provided
in, and subject to, this Article II.
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<PAGE>
ARTICLE III
TERMINATION
This Agreement may be terminated, and the Merger abandoned, by
resolutions of the Boards of Directors of the Constituent Corporations prior to
the Merger becoming effective, notwithstanding prior approval thereof by their
respective stockholders. In the event of the termination and abandonment of this
Agreement and the Merger, this Agreement shall become void and of no further
effect without any liability on the part of either Constituent Corporation or
the stockholders or the directors or officers in respect thereof.
ARTICLE IV
APPROVAL OF AGREEMENT;
FILING OF CERTIFICATE OF MERGER
The respective Board of Directors of each of the Constituent
Corporations have, by resolutions duly adopted, unanimously approved and adopted
the Merger, this Agreement and the Reorganization Agreement. The respective
stockholders of each of the Constituent Corporations have, by resolutions duly
adopted, approved and adopted the Merger, this Agreement and the Reorganization
Agreement in accordance with Section 251 of the Delaware Statute. Upon
satisfaction of all conditions of the Merger contained in Article V of the
Reorganization Agreement (or appropriate waiver thereof by the party or parties
entitled to satisfaction of such conditions or any of them) and execution and
delivery of this Agreement, the parties hereto shall cause a certificate of
merger (the "Certificate of Merger"), substantially in the form attached as
Exhibit hereto, to be executed and filed with the Secretary of State of the
State of Delaware in accordance with Section 103 of the Delaware Statute and the
Merger shall thereupon become effective.
ARTICLE V
MISCELLANEOUS
5.1. Entire Agreement; Amendments. This Agreement, the Certificate
of Merger and the Reorganization Agreement and the other writings and agreements
referred to herein and therein or delivered pursuant thereto contain the entire
understanding of the parties with respect to the subject matter hereof. This
Agreement, the Certificate of Merger and the Reorganization Agreement and such
other writings and agreements referred to herein and therein supersede all prior
agreements and understandings between the parties with respect to the subject
matter hereof. To the extent permitted by applicable law, this
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<PAGE>
Agreement and the Certificate of Merger may be amended by action taken by or on
behalf of the Boards of Directors of the Constituent Corporations at any time
before or after adoption of this Agreement by the stockholders of the
Constituent Corporations. This Agreement may be amended only by a written
instrument duly executed by the parties, and any condition to a party's
obligations hereunder may only be waived in writing by such party.
5.2. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.3. Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by facsimile transmission, air courier or by registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
If to the Acquisition Corporation, to:
Roller Bearing Acquisition Company, Inc.
1800 Century Park East, Suite 1000
Los Angeles, California 90067
Attention: Richard R. Crowell
Telecopy: (310) 277-5810
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Telecopy: (213) 229-7520
Attention: Terrance L. Carlson, Esq.; and
If to the Company, to:
Roller Bearing Company
of America, Inc.
140 Terry Drive
P.O. Box 1237
Newtown, Pennsylvania 18490
Telecopy: (215) 579-4318
Attention: President
with a copy to:
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Telecopy: (212) 408-2420
Attention: Kenneth S. Siegel, Esq.;
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<PAGE>
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such notice
or communication shall be deemed to have been received (a) in the case of
personal delivery or facsimile transmission, on the date of such delivery, (b)
in the case of air courier, on the next business day after the date when sent
and (c) in the case of mailing, on the third business day following the date on
which the piece of mail containing such communication was posted.
5.4. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
5.5. Governing Law. This Agreement shall be governed by and
construed in accordance with (a) the laws of the State of New York applicable to
agreements made and to be wholly performed within such State and (b) with
respect to corporate law governing the Merger, solely by the General Corporation
Law of the State of Delaware.
5.6. Gender. Any reference to the masculine gender shall be deemed
to include the feminine and neuter genders unless the context otherwise
requires.
5.7. Parties in Interest. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the parties hereto and their
respective successors and assigns. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assigned by any party hereto
without the consent of the other party hereto.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the day and year first above
written.
ROLLER BEARING COMPANY
OF AMERICA, INC.
By:
-----------------------------------
Gary W. Holmes
President and CEO
ATTEST:
- ---------------------------------
Emanuele Costa
Secretary
ROLLER BEARING ACQUISITION
COMPANY, INC.
By:
-----------------------------------
Name:
Title
ATTEST:
- ---------------------------------
Name:
Secretary
<PAGE>
EXHIBIT A TO THE
AGREEMENT OF MERGER
CERTIFICATE OF MERGER
OF
ROLLER BEARING ACQUISITION COMPANY, INC.
WITH AND INTO
ROLLER BEARING COMPANY OF AMERICA, INC.
We, the undersigned, being respectively the President and Secretary
of Roller Bearing Company of America, Inc., a Delaware corporation ("the
Company"), pursuant to Section 251 of the General Corporation Law of the State
of Delaware, hereby certify as follows:
1. The respective names and states of incorporation of the
constituent corporations (the "Constituent Corporations") are as follows:
Name of Constituent State of
Corporation Incorporation
- ------------------- -------------
Roller Bearing Company of America, Inc. Delaware
Roller Bearing Acquisition Company, Inc. Delaware
2. The Agreement of Merger (the "Agreement of Merger") and the
merger (the "Merger") to which this certificate relates has been approved,
adopted, certified, executed and acknowledged by each of the Constituent
Corporations in accordance with Section 251 of the General Corporation Law of
the State of Delaware.
3. The Company shall be the surviving corporation.
4. The Certificate of Incorporation of the Company shall be the
Certificate of Incorporation of the surviving corporation.
5. The executed Agreement of Merger is on file at the principal
place of business of the surviving corporation, the address of which is:
Roller Bearing Company of America, Inc.
140 Terry Drive
P.O. Box 1237
Newtown, Pennsylvania 18940.
<PAGE>
6. A copy of the Agreement of Merger will be furnished by the
surviving corporation, on the request and without cost, to any stockholder of
any Constituent Corporation.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Certificate to
be duly executed and delivered as of the ______ day of March, 1992.
ROLLER BEARING COMPANY
OF AMERICA, INC.
By:
-----------------------------------
Name:
Title
ATTEST:
- ---------------------------------
[Name]
Secretary
<PAGE>
EXHIBIT B
<PAGE>
EXHIBIT B
ESCROW AGREEMENT (the "Agreement") dated March 31,
1992, among ROLLER BEARING HOLDING COMPANY, INC., a
Delaware corporation (the "Buyer"), the STOCKHOLDERS (as
defined herein) and the STOCKHOLDERS' REPRESENTATIVE (as
defined herein).
The parties are entering into this Agreement pursuant to the
Agreement and Plan of Reorganization dated the date hereof (the "Agreement and
Plan of Reorganization"), among Roller Bearing Company of America, Inc., a
Delaware corporation ("RBC"), the Buyer, Roller Bearing Acquisition Company,
Inc., a Delaware corporation and a wholly-owned subsidiary of the Buyer, and the
Stockholders (as defined therein). This Agreement is the Escrow Agreement
referred to in Sections 2.4 and 8.2 of the Agreement and Plan of Reorganization.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Agreement and Plan of Merger.
Accordingly, in consideration of the premises and of the mutual
agreements contained herein and in the Agreement and Plan of Reorganization, the
parties agree as follows:
1. Establishment of Escrow.
1.1. Escrow Shares. As soon as practicable following the date
hereof, as contemplated by Section 2.4 of the Agreement and Plan of
Reorganization, the Buyer and the Stockholders' Representative (on behalf of the
Stockholders) shall deposit or cause to be deposited into a safe deposit box
(the "Escrow Deposit Box") at Citibank, N.A. ("Citibank") located at 640 Fifth
Avenue, New York, New York 10019 (Safe Deposit Box No. C5049) one or more
certificates representing in the aggregate 20,000 shares of the Buyer's
Preferred Stock (which shares were issued to the Stockholders in the Merger and,
with respect to certain Stockholders, pursuant to the Exchange Agreements or a
subscription agreement), such shares to remain in the Escrow Deposit Box until
removed therefrom and distributed in accordance with Section 2 hereof. Such
shares, or a lesser number of such shares as shall result from distributions of
such shares from time to time in accordance with Section 2 hereof, are referred
to herein as the "Escrow Shares".
1.1.1. Ownership Interest in Escrow Shares. At all times
during the term of this Agreement for the purpose of determining the interest of
the respective Stockholders in the Escrow Shares, whether in connection with the
distribution of Escrow Shares or otherwise, each Stockholder shall be deemed to
own that number of Escrow Shares as shall equal the product obtained by
multiplying (A) the percentage set forth opposite such Stockholder's name on
Schedule I hereto (hereinafter
<PAGE>
referred to as such Stockholder's "Proportionate Interest") by (B) the number of
Escrow Shares then held in escrow.
1.1.2. Use of Escrow Shares. The Escrow Shares shall be
removed from the Escrow Deposit Box and used for the payment of the indemnity
obligations, if any, of the Stockholders pursuant to and in accordance with
Section 8.2.5(c) of the Agreement and Plan of Reorganization. On the twelfth
anniversary of the date hereof (or, if not a business day, the next business
day), or any earlier date agreed to in writing by the Buyer, all Escrow Shares
remaining in escrow shall promptly be returned to the Stockholders, in
accordance with each Stockholder's Proportionate Interest in such Escrow Shares.
The Buyer shall execute and deliver certificates representing shares of the
Buyer's Preferred Stock in such denominations as shall be necessary to effect
distributions of the Escrow Shares hereunder.
1.1.3. Dividends and Redemptions. Any dividends paid or other
distributions made on the Escrow Shares (other than the proceeds from any
redemption or repurchase of the Escrow Shares) shall be transferred directly to
the Stockholders and shall not be deemed to be a part of the Escrow Shares
hereunder. If during the term of this Agreement the Escrow Shares or any part
thereof shall be required to be redeemed or otherwise repurchased by the
Corporation pursuant to the terms of the Escrow Shares or otherwise, or if the
Corporation shall agree to effect any redemption or repurchase of the Escrow
Shares, the Escrow Shares subject to such redemption or repurchase shall be
released from the Escrow Deposit Box prior to the date set for such redemption
or repurchase so that such shares may be surrendered to the Corporation in
exchange for the redemption or repurchase price therefor, and the proceeds from
any such redemption or repurchase shall be distributed to the Stockholders and
shall not be subject to this Agreement; provided, however, that if a bona-fide
claim, pursuant to Section 8.2 of the Agreement and Plan of Reorganization,
shall be pending at the date set for such redemption or repurchase, an amount of
the proceeds from such redemption or repurchase equal to the dollar amount of
such claim shall be deposited into the Escrow Account (as defined herein), and
shall be deemed to constitute Escrow Cash for the purposes hereof (except that
the Buyer shall have no interest in such proceed. pursuant to Section 1.2.1 or
otherwise), to be held in escrow hereunder until such claim is resolved (in
which case such proceeds shall be distributed to the Stockholders and/or such
claimant in accordance with such resolution). The release from escrow of the
Escrow Shares contemplated by this Section 1.1.3 shall be effected whether or
not there shall be legally available funds for the redemption or repurchase
giving rise to the obligation to release such shares.
1.1.4. Restrictions on Transfer of Escrow Shares. The Escrow
Shares shall be subject to the restrictions on
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<PAGE>
transfer set forth in Section 7.4(a) of the Agreement and Plan of
Reorganization.
1.2. Escrow Cash. As contemplated by Section 2.4 of the
Agreement and Plan of Reorganization, on the date hereof the Buyer and the
Stockholders' Representative (on behalf of the Stockholders) have each deposited
$100,000 by wire transfer of immediately available funds into an account (the
"Escrow Account") at Wells Fargo Bank, N.A. ("Wells Fargo") located at 333 South
Grand Avenue, Los Angeles, California 90071 (Account No. 6709-012843), to be
held in the Escrow Account until withdrawn and disbursed in accordance with
Section 2 hereof. Such amount, together with any interest earned thereon or
proceeds derived therefrom, as the same may be reduced from time to time by
distributions therefrom in accordance with Section 2 hereof, is referred to
herein as the "Escrow Cash" (the Escrow Shares and the Escrow Cash being
sometimes collectively referred to herein as the "Escrow Consideration").
1.2.1. Interest in Escrow Cash. At all times during the term
of this Agreement for the purpose of determining the interest of the Buyer and
the respective Stockholders in the Escrow Cash, whether in connection with the
disbursement of Escrow Cash or otherwise, (a) the Buyer shall be deemed to have
a 50% interest (the "Buyer's Proportionate Interest") in the Escrow Cash and (b)
each Stockholder shall be deemed to have that interest in the Escrow Cash as
shall be equal to the product obtained by multiplying (A) such Stockholder's
Proportionate Interest by (B) the remaining 50% of the amount of the Escrow Cash
then held in escrow.
1.2.2. Use of Escrow Cash. (a) Unless otherwise agreed to in
writing by the Buyer and the Stockholders' Representative, the Escrow Cash
(other than any interest earned thereon or proceeds derived therefrom) shall be
used solely for the following purposes:
(i) NJDEP Escrow Account. Within five days following the date
hereof, $100,000 of the Escrow Cash shall be deposited into an
escrow account (the "NJDEP Escrow Account") at the New Jersey
National Bank for the benefit of the New Jersey Department of
Environmental Protection, to be held in the NJDEP Escrow
Account in accordance with the terms of (i) the Administrative
Consent Order dated the date hereof (the "ACO"), among RBC and
the NJDEP and (ii) the Fully Funded Trust Agreement (the
"Trust Agreement") dated the date hereof between RBC and the
New Jersey National Bank. Upon termination of the NJDEP Escrow
Account such $100,000, as the same may be reduced by
distributions made from the NJDEP Escrow Account in accordance
with the terms of the ACO and the Trust Agreement, together
with
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<PAGE>
any interest earned thereon, shall be returned to the Escrow
Account, and shall be subject to the uses set forth in
Sections 1.2.2 (ii) and 1.2.2 (iii) hereof. The fees of the
New Jersey National Bank for maintaining such NJDEP Escrow
Account shall also be paid from the Escrow Cash.
(ii) Environmental Testing Costs. Upon approval of invoices by the
Buyer and the Stockholders' Representative, up to $100,000 of
the Escrow Cash shall be used to pay the fees and charges of
H+GCL and Law Environmental incurred in connection with
certain environmental tests performed by them relating to
property located in Rancho Dominguez, California and
Hartsville, South Carolina, owned by the Subsidiary and RBC,
respectively.
(iii) Indemnification Obligations of Stockholders. The Escrow Cash
shall be used to pay any indemnification obligation of the
Stockholders under Section 8.2.2(b) of the Agreement and Plan
of Reorganization.
(iv) Fees of Citibank and Wells Fargo. The Escrow Cash shall be
used to pay the fees of Citibank and Wells Fargo related to
the Escrow Deposit Box and the Escrow Account.
(b) Subject to the proviso set forth in Section 1.1.3 hereof, the
Escrow Cash shall be withdrawn from the Escrow Account and distributed to the
Buyer and the Stockholders, in accordance with their respective Proportionate
Interests, on the first to occur of (i) the twelfth anniversary of the date
hereof and (ii) the date set for any redemption or repurchase by the Buyer of
the Escrow Shares, whether such redemption or repurchase shall be required or
agreed to by the Buyer.
1.2.3. Interest on Escrow Cash. Any part of the Escrow Cash
which constitutes interest earned thereon or proceeds derived therefrom shall be
disbursed to the Buyer and the Stockholders, in accordance with their respective
Proportionate Interests therein, within 30 days following each date upon which
such interest or proceeds exceeds $5,000. Any taxes due with respect to interest
earned on the Escrow Cash shall be paid from the Escrow Cash.
2. Release of Escrow Consideration The Buyer and the Stockholders
agree that no part of the Escrow Consideration shall be distributed unless
agreed to in writing by both the Buyer (or a representative thereof) and the
Stockholders' Representative, and the Buyer and the Stockholders' Representative
agree to execute such withdrawal advices or other instructions to Citibank
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<PAGE>
and Wells Fargo, and to take all such other actions, as shall be necessary to
carry out the intent of the provisions of Section 1 hereof.
3. Stockholders' Representative. The Stockholders, by their
execution and delivery of this Agreement, appoint (for themselves, their
successors and assigns and their personal representatives) Overseas Partners,
Inc., a New York corporation (the "Stockholders' Representative"), as their
agent and attorney-in-fact (and, by its execution of this Agreement, the
Stockholders' Representative accepts such appointment), to take all action
required or permitted to be taken by the Stockholders hereunder and under and in
connection with Section 8.2 of the Agreement and Plan of Reorganization,
including, without limitation, the giving and receipt of all notices hereunder
and under Section 8.2 of the Agreement and Plan of Reorganization and the
settlement of any dispute or claim hereunder or under Section 8.2 of the
Agreement and Plan of Reorganization. The Stockholders' Representative shall
incur no liability in connection herewith, except for willful misconduct or
gross negligence. The Stockholders, jointly and severally, shall indemnify and
hold harmless the Stockholders' Representative against any loss, liability,
expense (including reasonable attorney's fees and expenses), claim or demand
arising out of or in connection with its actions hereunder, except with respect
to any loss, liability, expense, claim or demand arising out of the gross
negligence or willful misconduct of the Stockholders' Representative. The
Stockholders' Representative may resign and be discharged from its duties
hereunder at any time upon 10 days' prior written notice to the Stockholders,
whereupon a successor Stockholders' Representative shall be appointed by the
Stockholders representing a majority-in-interest of the Stockholders'
Proportionate Interests.
4. Rights to Escrow Consideration. The Escrow Consideration shall be
for the exclusive benefit of the Buyer and the Stockholders and their respective
permitted successors and assigns, and no other person or entity shall have any
right, title or interest therein. Any claim of any person to the Escrow
Consideration, or any part thereof, shall be subject and subordinate to the
prior right thereto of the Buyer and the Stockholders and their respective
permitted successors and assigns.
5. Settlement of Disputes. Any dispute which may arise under this
Agreement with respect to the rights of the Buyer or any Stockholder to the
Escrow Consideration shall be settled either by mutual agreement of the parties
concerned, by binding arbitration (if agreed to in writing by such parties)
conducted by the American Arbitration Association in the City of New York or by
a final order, decree or judgment of a court of competent jurisdiction in the
United States of America (the time for appeal having expired and no appeal
having been perfected);
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<PAGE>
all costs and expenses pertaining thereto shall be borne by the interested
parties in accordance with their respective Proportionate Interests.
6. Termination. This Agreement shall terminate upon the distribution
of the entire Escrow Consideration in accordance with the provisions hereof;
provided, however, that the distribution contemplated by Section 1.2.2(a)(i) of
$100,000 to the NJDEP Escrow Account shall not be deemed to be a distribution
under this Section 6, and, assuming the Escrow Consideration (other than such
amount deposited into the NJDEP Escrow Account) has previously been fully
distributed pursuant to the terms hereof, this Agreement shall remain in full
force and effect, and such $100,000 shall be deemed to constitute a part of the
Escrow Fund hereunder, until the amount deposited in the NJDEP Escrow Account
(as the same may have been reduced pursuant to the terms of the ACO) is returned
to the Escrow Account and subsequently distributed in accordance with the terms
hereof.
7. Miscellaneous.
(a) Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered or if sent by
nationally-recognized overnight courier, by telecopy (if automated receipt of
full transmission is received), or by registered or certified mail, return
receipt requested and postage prepaid, addressed as follows:
(i) If to the Buyer, to:
Roller Bearing Holding Company, Inc.
1800 Century Park East, Suite 1000
Los Angeles, California 90067
Telecopy: (310) 277-5810
Attention: Mr. Richard R. Crowell
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Telecopy: (213) 229-7520
Attention: Terrance L. Carlson, Esq.
(ii) If to the Stockholders' Representative, to:
Overseas Partners, Inc.
375 Park Avenue
New York, New York 10152
Telecopy: (212) 421-5704
Attention: Mr. Emanuele Costa
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<PAGE>
with a copy to:
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Telecopier: (212) 408-2420
Attention: Kenneth S. Siegel, Esq.;
or to such other address as the parties may have furnished to the other parties
hereto in writing. Any such notice or communication shall be deemed to have been
received (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case of nationally recognized overnight courier, on the next
business day after the date when sent, (iii) in the case of telecopy
transmission, when transmitted (if automated receipt of full transmission is
received) and (iv) in the case of mailing, on the third business day following
the post-date of such mailing.
(b) Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed therein.
(d) Benefits of Agreement. All the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Anything contained herein to
the contrary notwithstanding, this Agreement shall not be assignable by any
party hereto without the consent of the other parties hereto.
(e) Modification. This Agreement shall not be altered or
otherwise amended except pursuant to an instrument in writing signed by the
Buyer and the Stockholders' Representative.
(f) Descriptive Headings. The descriptive headings in this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any provision of this Agreement.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed and delivered on the date first above written.
ROLLER BEARING HOLDING
COMPANY, INC.
By:
----------------------------------
Name:
Title:
ROLLER BEARING ACQUISITION
COMPANY, INC.
BITRIX ASSOCIATES C.V.
By: BISUB INVESTMENTS N.V.,
Managing General Partner
By:
----------------------------------
Attorney-In-Fact
COLUMBUS HOLDINGS LIMITED
By:
----------------------------------
Name: Todd M. Brinberg
Title:
OVERLAND TRUST BANK
By:
----------------------------------
Attorney-In-Fact
<PAGE>
BAY STREET CORPORATION
By:
----------------------------------
Name:
Title:
--------------------------------------
Gary W. Holmes
--------------------------------------
Frederick L. Morlok
--------------------------------------
Harold J. Macsata
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST ABOVE WRITTEN:
OVERSEAS PARTNERS, INC.
By:
-------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
PREFERRED CASH PROPORTIONATE
STOCKHOLDER DEPOSITED DEPOSITED INTEREST
- ----------- --------- --------- --------
Bitrix Associates CN 9,842.041 49,210.10 49.2101%
c/o Bisub investments N.V
P.O. Box 812
De Ruyterkade 62
Curacao, Netherlands Antilles
with a copy to:
Todd M. Brinberg, Esq
Worinser, Kiely, Galef & Jacobs
711 Third Avenue
New York, NY 10017
Telecopy: (212) 683-0236
Columbus Holdings Limited 3,170.907 15,854.50 15.8545%
36 Finch Road
Douglas, Isle of Man
British Isles
with a copy to:
Todd M. Brinberg, Esq
Worinser, Kiely, Galef & Jacobs
711 Third Avenue
New York, NY 10017
Telecopy: (212) 683-0236
Overland Trust Bank 670.651 3,353.30 3.3533%
Via Serafino Balestra 5
CH-900 Lugano
Switzerland
with a copy to:
Todd M. Brinberg, Esq
Wormser, Kiely, Galef & Jacobs
711 Third Avenue
New York, NY 10017
Telecopy: (212) 683-0236
Bay Street Corporation 379.958 1,899.80 1.8998%
871 Seaview Avenue
Osterville, MA 02655
<PAGE>
PREFERRED CASH PROPORTIONATE
STOCKHOLDER DEPOSITED DEPOSITED INTEREST
- ----------- --------- --------- --------
Gary W. Holmes 4,226.634 21,133.20 21.1332%
1925 Brickell Avenue
Miami, FL 33129
Frederick L. Modok 569.937 2,849.70 2.8497%
315 Society Place
Newtawn, PA 18940
Harold J. Macsata 569.937 2,849.70 2.8497%
2820 West Fox Chase Circle
Daylestown, PA 18901
Michael J. Hartnett 569.937 2,849.70 2.8497%
25871 Prairestone
laguna, CA 92523
---------- ----------- -------
TOTAL 20,000 $ 100,000 100%
<PAGE>
EXHIBIT C
<PAGE>
[Letterhead of O'Sullivan Graev & Karabell]
March 31, 1992
Roller Bearing Holding Company, Inc.
Roller Bearing Acquisition Company, Inc.
1900 Century Park East, Suite 1000
Los Angeles, California 90067
Merger of Roller Bearing Acquisition Company, Inc.
with and into Roller Bearing Company of America Inc.
Dear Sirs:
We have acted as special counsel to Roller Bearing Company of
America, Inc., a Delaware corporation ("RBC"), solely in connection with the
transactions contemplated by (i) the Agreement and Plan of Reorganization dated
the date hereof (the "Reorganization Agreement"), among RBC, Roller Bearing
Holding Company, Inc., a Delaware corporation (the "Buyer"), Roller Bearing
Acquisition Company, Inc., a Delaware corporation and a wholly-owned subsidiary
of the Buyer (the "Acquisition Corporation"), and the Stockholders of RBC (as
defined in the Reorganization Agreement) and (ii) the Agreement of Merger dated
the date hereof (the "Agreement of Merger"), between the Acquisition Corporation
and RBC. Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Reorganization Agreement.
In connection with the rendering of the opinions set forth below, we
have examined originals, or copies certified or otherwise identified to our
satisfaction, of such documents, corporate records, certificates and other
instruments as we have deemed necessary or appropriate, including, without
limitation, the Reorganization Agreement and the Agreement of Merger. In our
examination, we have assumed the due authorization, execution and delivery by
each person other than RBC of each document heretofore executed and delivered or
hereafter to be executed and delivered by such person, the genuineness of all
signatures, the legal capacity of all natural persons signing such documents,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as certified or
photostatic copies and the authenticity of the originals of such latter
documents.
We have also assumed that (a) there is no agreement or understanding
between or among RBC, the Subsidiary, the Buyer,
<PAGE>
O'SULLIVAN GRAEV & KARABELL
the Acquisition Corporation or any third party that would expand, modify or
otherwise affect the terms of the Reorganization Agreement or the Agreement of
Merger or the respective rights or obligations of the parties thereunder, and
the Reorganization Agreement, the Agreement of Merger and the Escrow Agreement
correctly and completely set forth the intent of all parties thereto with
respect to the transactions contemplated therein; (b) each of the Buyer and the
Acquisition Corporation is a Delaware corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to engage in the transactions contemplated by
the Reorganization Agreement and the Agreement of Merger; and (c) at the time
the Buyer seeks to enforce its rights under the Reorganization Agreement, the
Buyer will have taken all actions required to be taken by it in order to enforce
such rights.
Whenever a statement is made in this letter to be "to our knowledge"
(a "Statement of Knowledge"), such statement means that, during the course of
our representation of RBC (as described in the first paragraph of this letter),
and without undertaking any independent investigation with respect thereto
(including, without limitation, undertaking any lien, docket or similar search),
no information has come to the attention of the lawyers of this firm working on
the transactions contemplated by the Reorganization Agreement and the Agreement
of Merger that gives us actual knowledge of the existence or absence of facts
contrary to the Statement of Knowledge, and no inference should be drawn from
any Statement of Knowledge or from our representation of RBC (a) as to the
existence or absence of facts contrary to the Statement of Knowledge or (b) that
we have undertaken any independent investigation to determine the existence or
absence of any facts contrary to such Statement of Knowledge.
In connection with the rendering of the opinions set forth below, as
to matters of fact, we have relied solely and without independent investigation
upon the representations and warranties contained in or made pursuant to the
Reorganization Agreement and certificates of public officials and officers of
RBC and the Subsidiary.
Based upon the foregoing, and subject to the limitations set forth
herein, we are of the opinion that:
1. RBC and the Subsidiary are corporations validly existing and in
good standing under the laws of the State of Delaware. RBC has all requisite
corporate power and authority to enter into and consummate the transactions
contemplated by, and perform its obligations under, the Reorganization Agreement
and the Agreement of Merger. RBC is qualified to do business and is in good
standing in the states of South Carolina, New Jersey and Pennsylvania. The
Subsidiary is a corporation qualified to do
-2-
<PAGE>
O'SULLIVAN GRAEV & KARABELL
business and in good standing under the laws of the State of California.
2. Each of RBC and the Subsidiary has the corporate power and
authority under its Certificate of Incorporation and By-laws and the Delaware
General Corporation Law to own or lease its properties and to conduct its
business as such business is described in the Confidential Memorandum dated July
1991 prepared by Goldman, Sachs & Co. relating to the business operations of
RBC.
3. To our knowledge, except as disclosed in the Reorganization
Agreement, there are no claims, actions, suits or proceedings pending against
RBC or the Subsidiary that could reasonably be expected to have a Material
Adverse Effect.
4. To our knowledge, except as disclosed in the Reorganization
Agreement, neither RBC nor the Subsidiary has received any written notice that
either of them is in material non-compliance with any Federal, state or local
laws, rules or regulations applicable to their respective businesses, the
noncompliance with which could reasonably expected to have a Material Adverse
Effect.
5. To our knowledge, the outstanding capital stock of RBC has been
issued in transactions exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended. Except as disclosed in
the Reorganization Agreement, to our knowledge, all shares of issued and
outstanding capital stock of the Subsidiary are owned of record by RBC, free and
clear of any Encumbrances.
6. The execution, delivery and performance of the Reorganization
Agreement and the Agreement of Merger by RBC and the consummation by REC of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action on the part of RBC. The Reorganization Agreement and
the Agreement of Merger have been duly and validly executed and delivered by
RBC, and the Reorganization Agreement and the Agreement of Merger are valid and
binding obligations of RBC, enforceable against RBC in accordance with their
respective terms, subject, as to the enforcement of remedies, to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws affecting creditors' rights generally and, with respect to the
remedy of specific performance, equitable doctrines applicable thereto.
7. Except as disclosed in the Reorganization Agreement, neither the
execution, delivery and performance of the Reorganization Agreement or the
Agreement of Merger by RBC, nor the consummation by RBC of the transactions
contemplated thereby, nor compliance by RBC with any of the provisions thereof,
will (i) conflict with or violate any provision of the Certificate of
-3-
<PAGE>
O'SULLIVAN GRAEV & KARABELL
Incorporation or By-laws of REC or the Subsidiary, (ii) violate, conflict with
or constitute (or with notice or lapse of time or both constitute) a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of, or result in the creation of any
Encumbrance upon any of the property of RBC or the Subsidiary pursuant to the
terms of, any note, bond, lease, mortgage, indenture, license, agreement or
other instrument or obligation set forth on the Disclosure Schedules attached to
the Reorganization Agreement to which RBC or the Subsidiary is a party or by
which any of their respective properties or assets may be bound or affected,
which violation, conflict or default would have a Material Adverse Effect, or
(iii) to our knowledge, violate any New York law, statute, rule or regulation or
order, judgment, award, writ, injunction or decree of any New York court,
administrative agency or governmental body, applicable to RBC or the Subsidiary
or any of their respective properties or assets in any manner which could
reasonably be expected to have a Material Adverse Effect.
The foregoing opinions are subject to the following exceptions,
qualifications and limitations:
A. We are admitted to the Bar of the State of New York and we
express no opinion as to laws of any other jurisdiction other than the Delaware
General Corporation Law and the Federal laws of the United States of America. We
are not admitted to practice in the State of Delaware, but we are generally
familiar with the Delaware General Corporation Law as currently in effect. This
opinion is limited to the effect of the present state of the laws of the State
of New York, the United States of America, the Delaware General Corporation Law
and the facts as they currently exist. We assume no obligation to revise or
supplement this opinion in the event of future changes in such laws or the
interpretations thereof or such facts. We express no opinion as to the
enforceability of any choice of law, choice of forum or severability provisions
in the Reorganization Agreement or the Agreement of Merger. Our opinion in
paragraph 7(iii) is based upon our consideration of only those statutes, rules
and regulations that, in our experience, are normally applicable to transactions
of the type contemplated by the Reorganization Agreement and the Agreement of
Merger.
B. We express no opinion regarding or relating to (i) the ability to
obtain specific performance, injunctive relief or other equitable relief
(whether sought in a proceeding at law or in equity) as a remedy for
noncompliance with the Reorganization Agreement or the Agreement of Merger, and
the use of the term "enforceable" shall not imply any opinion as to the
availability of equitable remedies, (ii) the rights or remedies available to any
party for violations or breaches of any provisions which are immaterial or for
violations or breaches of any provisions the enforcement of which a court
determines would be unreasonable
-4-
<PAGE>
O'SULLIVAN GRAEV & KARABELL
under the then existing circumstances, (iii) the rights or remedies available to
any party for any material violation or breach that is the proximate result of
any action taken by any party other than the party against whom enforcement is
sought, which actions such other party is not entitled to take pursuant to the
relevant agreement or instrument or applicable laws or which otherwise violate
applicable laws, (iv) the rights or remedies available to any party insofar as
such party may take discretionary action that is arbitrary, unreasonable or
capricious, or is not taken in good faith or in a commercially reasonable
manner, whether or not such action is permitted under the Reorganization
Agreement or the Agreement of Merger, and (v) the strict enforcement of certain
covenants in contracts absent a showing of damage to the other party.
C. We express no opinion with respect to the legality, validity,
binding nature or enforceability of any provision of the Reorganization
Agreement or the Agreement of Merger to the effect that rights or remedies are
not exclusive, that every right or remedy is cumulative and may be exercised in
addition to any other right or remedy, that the election of some particular
remedy does not preclude recourse to one or more others or that failure to
exercise or delay in exercising rights or remedies will not operate as a waiver
of any such right or remedy.
D. We express no opinion as to the legality, validity, binding
nature or enforceability of any provision in the Reorganization Agreement or the
Agreement of Merger (i) that purports to indemnify a party against liability for
its own wrongful or negligent acts or to the extent such provisions may be held
unenforceable as contrary to public policy, (ii) insofar as it provides for the
payment or reimbursement of costs and expenses or indemnification for claims,
losses or liabilities in excess of a reasonable amount determined by any court
or other' tribunal, (iii) regarding the Buyer's ability to collect attorneys'
fees and costs in an action involving the Reorganization Agreement or the
Agreement of Merger if the Buyer is not the prevailing party in such action or
(iv) purporting to restrict the ability of any person or entity to engage in any
business or activity, directly or indirectly, in any jurisdiction.
E. We express no opinion as to any provision of the Reorganization
Agreement or the Agreement of Merger requiring written amendments or waivers of
such documents insofar as it suggests that oral or other modifications,
amendments or waivers could not be effectively agreed upon by the parties or
that the doctrine of promissory estoppel might not apply.
Our opinion set forth above is being furnished solely to and for the
benefit of Roller Bearing Holding Company, Inc. and Roller Bearing Acquisition
Company, Inc. in connection with
-5-
<PAGE>
O'SULLIVAN GRAEV & KARABELL
the transactions contemplated by the Reorganization Agreement. Accordingly, it
may not be relied upon by any other person without our prior written consent.
Very truly yours,
/s/ O'Sullivan Graev & Karabell
-6-
<PAGE>
[Letterhead of Wormser, Kiely, Galef & Jacobs]
March 31, 1992
Roller Bearing Holding Company, Inc.
Roller Bearing Acquisition Company, Inc.
c/o WSGP Partners L.P.
1800 Century Park East
Suite 1000
Los Angeles, California 90067
Merger of Roller Bearing Acquisition Company, Inc.
with and into Roller Bearing Company of America, Inc.
Ladies and Gentlemen:
We have acted as counsel in the United States to Bitrix Associates C.V., a
Netherlands limited partnership ("Bitrix"), and Columbus Holdings Limited, an
Isle of Man corporation ("Columbus"), in connection with the transactions
contemplated by (1) the Agreement and Plan of Reorganization (the
"Reorganization Agreement"), dated the date hereof, among Roller Bearing Company
of America, Inc., a Delaware corporation ("RBC"), Roller Bearing Holding
Company, Inc. a Delaware corporation (the "Buyer"), Roller Bearing Acquisition
Company, Inc., a Delaware corporation (the "Acquisition Corporation"), and the
Stockholders of RBC (as that term is defined in the Reorganization Agreement),
and (2) the Escrow Agreement (the "Escrow Agreement"), dated the date hereof,
among the Buyer, the Stockholders, the Stockholders' Representative (as that
term is defined in the Escrow Agreement) and the Escrow Agent identified in the
Escrow Agreement. The Reorganization Agreement and the Escrow Agreement are
collectively referred to here as the "Documents".
We have also acted from time to time as counsel to RBC in connection with
specific matters, including the transfer of shares of stock of RBC prior to the
date of this letter, but we are not representing RBC in connection with the
transactions contemplated by the Documents.
<PAGE>
WORMSER, KIELY, GALEF & JACOBS
Roller Bearing Holding Company, Inc.
Roller Bearing Acquisition Company, Inc.
Page 2
In connection with the opinions set forth below, we have examined
originals, or copies certified or otherwise identified to our satisfaction, of
such documents, corporate records, certificates and other instruments as we have
deemed necessary or appropriate. In our examination, we have assumed the due
authorization, execution and delivery of each party to the Documents and the
enforceability of those documents against each of the parties to the Documents.
With respect to matters involving Bitrix and Columbus, we refer you to the legal
opinion letters addressed to you of Smeets, Thesseling & Van Bokhorst and Gough
& Co., respectively. We have also assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified copies or
photocopies, and the authenticity of the originals of such latter documents.
In connection with the opinions set forth below, as to matters of fact we
have relied solely on certificates of public officials and representatives and
officers of RBC, Bitrix and Columbus. We have also assumed the accuracy of the
representations and warranties set forth in the Reorganization Agreement,
including without limitation the various Schedules to the Reorganization
Agreement.
Based on the foregoing and subject to the limitations set forth below, we
are of the opinion that:
1. Immediately prior to the Effective Time (as that term is defined in the
Reorganization Agreement), after taking into effect the repurchase of shares and
the exercise of warrants referred to in Sections 2.1 and 2.4(a) of the
Reorganization Agreement, the authorized stock of RBC consists of (a) 3,000
shares of Class A Common Stock, par value $0.01, of which 2,047.43 shares are
validly issued and outstanding and additional shares may be reserved for
issuance on the exercise of options which may be held by Michael Hartnett, (b)
3,000 shares of Class B Common Stock, par value $0.01, of which 40.00 shares are
validly issued and outstanding and (c) 4,000 shares of Preferred Stock, par
value $0.01, of which 1,000 shares have been designated as Series A Preferred
Stock, 945 of which designated shares are validly issued and outstanding.
2. All such issued and outstanding shares of RBC's Class A Common Stock,
Class B Common Stock and Preferred Stock were duly authorized and validly
issued, and are fully paid and non-assessable and free of preemptive rights,
with no personal liability attaching to the ownership of any of those shares
under the Delaware General Corporation Law.
3. The stock certificates representing all such issued and outstanding
shares of RBC's Class A Common Stock, Class B Common
<PAGE>
WORMSER, KIELY, GALEF & JACOBS
Roller Bearing Holding Company, Inc.
Roller Bearing Acquisition Company, Inc.
Page 3
Stock and Preferred Stock have been duly executed by RBC and comply as to form
with the Delaware General Corporation Law.
4. Except as set forth in Schedule 3.2(c) to the Reorganization Agreement,
to our knowledge there are no options, warrants, rights, calls, commitments or
agreements of any character to which RBC is a party or by which it is bound
calling for the issuance of, or any commitment, plan or arrangement to issue,
any shares of stock of RBC or any securities convertible into or exercisable or
exchangeable for, or representing the right to purchase or otherwise receive any
such stock, or other arrangement to acquire, at any time or under any
circumstance, stock or other securities of RBC. Except as set forth in Schedule
3.2(c) to the Reorganization Agreement, to our knowledge there are no voting
trusts, voting agreements, proxies or other agreements or understandings with
respect to the voting of the stock of RBC to which RBC is a party.
5. Immediately prior to the Effective Time, after taking into effect the
repurchase of shares and the exercise of warrants contemplated by Sections 2.1
and 2.4(a) of the Reorganization Agreement, except as set forth on Schedule
3.1(a) to the Reorganization Agreement, Bitrix is the lawful owner of record and
beneficially of 1057.36 shares of the Class A Common Stock of RBC and 648.75
shares of the Preferred Stock of RBC and has good and marketable (subject to
compliance with applicable securities laws) title to such shares, free and clear
of any Encumbrances (as that term is defined in the Reorganization Agreement)
whatsoever and with no restriction on the voting rights or other incidents of
record and beneficial ownership pertaining to such shares. To. our knowledge,
there are no agreements or understandings between Bitrix and any other person
with respect to the voting of any of the shares of stock of RBC.
6. Immediately prior to the Effective Time, after taking into effect the
repurchase of shares and the exercise of warrants contemplated by Sections 2.1
and 2.4(a) of the Reorganization Agreements except as set forth on Schedule
3.1(a) to the Reorganization Agreement, Columbus is the lawful owner of record
and beneficially of 340.66 shares of the Class A Common Stock of RBC and 216.25
shares of the Preferred Stock of RBC and has good and marketable (subject to
compliance with applicable securities laws) title to such shares, free and clear
of any Encumbrances whatsoever and with no restriction on the voting rights or
other incidents of record and beneficial ownership pertaining to such shares. To
our knowledge, there are no agreements or understandings between Columbus and
any other person with respect to the voting of any of the shares of stock of
RBC.
<PAGE>
WORMSER, KIELY, GALEF & JACOBS
Roller Bearing Holding Company, Inc.
Roller Bearing Acquisition Company, Inc.
Page 4
7. Assuming that (a) Bitrix is a limited partnership duly organized and
validly existing under the laws of the Netherlands, (b) Columbus is a
corporation, duly incorporated and validly existing under the laws of the Isle
of Man, (c) each of Bitrix and Columbus has the power and authority to enter
into and perform its obligations under the Documents and the transactions
contemplated by the Documents, and (d) all corporate and partnership actions
required to be taken by or on behalf of Bitrix and Columbus to authorize Bitrix
and Columbus to enter into and perform their obligations under the Documents
have been duly and properly taken, then each of the Documents constitutes a
legal, valid and binding obligation of Bitrix and Columbus, enforceable against
Bitrix and Columbus in accordance with its terms, subject to the effect of
applicable bankruptcy, reorganization, insolvency, moratorium and other similar
laws and court decisions of general application, including without limitation
statutory or other laws regarding fraudulent or preferential transfers relating
to, limiting or affecting the enforcement of creditors' rights generally and
general principles of equity.
8. Except as set forth in Schedule 3.1(c) to the Reorganization Agreement,
to our knowledge neither the execution, delivery or performance of the Documents
by Bitrix and Columbus, nor the consummation by Bitrix or Columbus of the
transactions and the performance of their respective obligations contemplated by
the Documents, nor compliance by Bitrix and Columbus with any of the provisions
of the Documents, will (a) violate, conflict with or constitute (or with notice
or lapse of time or both constitute) a default (or give rise to any right of
termination, cancellation or acceleration) or result in the creation of any
encumbrance on any shares of the Class A Common Stock, Class B Common Stock or
Preferred Stock of RBC owned by Bitrix or Columbus, under the terms of, any
note, bond, lease, mortgage, indenture, license, agreement or other instrument
or obligation to which Bitrix or Columbus is a party or by which Bitrix or
Columbus or any of their respective properties or assets are bound or affected,
or (b) violate any order, judgement, award, writ, injunction or decree of any
court, administrative agency or governmental body having jurisdiction over
Bitrix or Columbus or any of their respective properties or assets, or (c)
violate any applicable statute, rule or regulation of the State of New York or
any applicable Federal statute, rule or regulation of the United States of
America.
We are members of the Bar of the State of New York, and our opinions are
limited to matters involving the laws of the State of New York, the Federal laws
of the United States of America and the Delaware General Corporation Law. We do
not express any opinion as to the laws of any other jurisdiction, including
without limitation the laws of the Netherlands or the Isle of Man.
<PAGE>
WORMSER, KIELY, GALEF & JACOBS
Roller Bearing Holding Company, Inc.
Roller Bearing Acquisition Company, Inc.
Page 5
Our opinions set forth above are being furnished solely to and for the
benefit of the Buyer and the Acquisition Corporation in connection with the
transactions contemplated by the Documents. Accordingly, it may not be relied on
by any other person without our prior written consent.
Very truly yours,
/s/ WORMSER, KIELY, GALEF & JACOBS
WORMSER, KIELY, GALEF & JACOBS
<PAGE>
[Letterhead of Gough & Co.]
Date: March 31, 1992
Messrs. Roller Bearing Acquisition
c/o WSGP Partners,
1800 Century Park East, Suite 1000,
Los Angeles,
California 90067
Dear Sirs,
RE: Columbus Holdings Limited - RBC
We have acted as special Isle of Man Counsel to Columbus Holdings Limited
("Columbus") in connection with (i) the Agreement and Plan of Reorganisation
dated the date hereof; (ii) the Agreement of Merger dated the date hereof; (iii)
the Escrow Agreement dated the date hereof and (iv) the Disclosure Schedules
dated the date hereof. The Agreement and Plan of Reorganisation, the Agreement
of Merger, the Escrow Agreement and the Disclosure Schedules are herein
collectively called the "Documents").
We have not seen the stock powers referred to in the Resolutions hereinafter
mentioned.
We have reviewed the originals or facsimile transmissions of such records and
documents as we have deemed necessary or desirable for our opinions hereinafter
set forth including:-
(1) The Memorandum of Articles of Association of Columbus;
(2) A Certificate of good standing of Columbus dated 6th March 1992 issued by
the Deputy Assistant Chief Registrar of the Isle of Man; and
(3) Resolutions in writing adopted by the Directors of Columbus dated 6th
March 1992;
<PAGE>
Gough & Co.
Page 2
In giving the opinions expressed below, we have assumed:-
(a) the authenticity of all documents submitted to us and the conformity with
the originals of all documents submitted to us as copies;
(b) the due authorisation and delivery of the Documents by the parties thereto
other than Columbus;
(c) the legal right and power of all parties under all applicable laws and
regulations of each party to the Documents other than Columbus to enter
into, execute, deliver and perform the obligations under the Documents to
which it is a party;
(d) that all Documents executed by each party to the Documents other than
Columbus are valid, binding and enforceable against the parties thereto in
accordance with their respective terms.
Our opinion is limited to the laws of the Isle of Man and we do not express any
opinion with respect to the laws of any other jurisdiction, including, without
limitation, the laws of the United States or any of them.
Based as of the date hereof upon and subject to the foregoing, and also subject
to the specific assumption, limitations and reliances set forth herein, and on
the basis of our consideration of such facts deemed necessary:
1. Columbus is duly organised and validly existing under the laws of the Isle
of Man and has the corporate power and authority under such laws to enter
into the Reorganisation Agreement and Escrow Agreement, to perform its
obligations thereunder and to consummate the transactions contemplated
thereby.
2. The execution, delivery and performance of the Reorganisation Agreement
and Escrow Agreement and the consummation by Columbus of the transactions
contemplated thereby have been duly and validly authorised by all
necessary corporate action on the part of Columbus. Columbus has full and
absolute power and authority to enter into the Reorganisation Agreement
and Escrow Agreement and to perform its obligations thereunder and the
Reorganisation Agreement and the Escrow Agreement a valid and binding
obligation of Columbus, enforceable against Columbus in accordance with
their terms.
3. Except as set forth on Schedule 3.1(c) attached to the Reorganisation
Agreement, to our knowledge, neither the execution, delivery and
performance of the Reorganisation Agreement or Escrow Agreement, nor the
consummation by Columbus of the transactions contemplated thereby, nor
compliance by Columbus with any of the provisions thereof,
<PAGE>
Gough & Co.
Page 3
will (i) violate or conflict with the Memorandum or Articles of
Association of Columbus or (ii) violate any law, statute, rule or
regulation under Isle of Man law. Except as contemplated by the
Reorganisation Agreement, or as set forth on Schedule 3.1(c) attached to
the Reorganisation Agreement, to our knowledge, no permit, authorisation,
consent or approval of or by, or any notification of or filing with, any
person (governmental or private) is required under Isle of Man law in
connection with the execution, delivery and performance of the
Reorganisation Agreement by Columbus or the consummation by Columbus of
the transactions contemplated thereby.
4. No Isle of Man governmental approval is required in connection with the
execution and delivery of each of the Agreement of Reorganisation or the
Escrow Agreement by Columbus or the performance by Columbus of its
obligations thereunder.
5. A final and conclusive judgement of a Court of the United States of
America or the State of New York against Columbus in respect of the
Agreement of Reorganisation and the Escrow Agreement would be enforced
against Columbus by an action in the courts of the Isle of Man without
re-examination of the merits of the case under the common law doctrine of
obligation, provided that such judgement was not obtained by fraud or that
its enforcement would not be contrary to public policy in the Isle of Man
that the proceedings in which the same was obtained were not contrary to
natural justice.
Yours faithfully,
/s/ I. C. Corbridge,
I. C. Corbridge,
Gough & Co.
<PAGE>
[Letterhead of Smeets, Thesseling & Van Bokhorst]
March 31, 1992
Roller Bearing Holding Company Inc.
Roller Bearing Acquisition Company, Inc.
1800 Century Park East, Suite 1000
Los Angeles, CA 90007
Re: Bitrix Associates C.V.
Dear Sirs,
We have acted as counsel as to the laws of the Netherlands and the
Netherlands Antilles to Bitrix Associates C.V. (the "Partnership") in connection
with the Agreement and Plan of Reorganization (the "Agreement and Plan"), dated
March 31, 1992, among Roller Bearing Company of America, Inc., Roller Bearing
Acquisition Company, Inc., Roller Bearing Holding Company, Inc. and the
Shareholders of Roller Bearing Company of America, Inc., including, without
limitation, the Partnership and the Escrow Agreement (the "Escrow Agreement"),
dated March 31, 1992, among Roller Bearing Holding Company, Inc. and the
shareholders of Roller Bearing Company of America, Inc., including, without
limitation, the Partnership. The Agreement and Plan and the Escrow Agreement are
hereinafter together referred to as the "Documents".
As such counsel we have reviewed copies of the Documents.
We have considered such questions of Netherlands and Netherlands Antilles
law as we have deemed relevant or necessary for the purposes of this opinion and
we have reviewed originals or copies, certified or otherwise identified to our
satisfaction, of such records of the Partnership and of the managing general
partner of the Partnership, certificates of public officials and such other
documents as we have deemed relevant or necessary as a basis for the opinion
hereinafter expressed.
In giving this opinion we have assumed:
i) the genuineness of all signatures on the documents we have reviewed;
ii) the authenticity of all such documents submitted to us as originals:
<PAGE>
SMEETS, THESSELING & VAN BOKHORST
Bitrix Associates C.V.
Page Two
iii) the conformity with originals of all documents submitted to us as
certified or photostatic copies;
iv) the due power and authority of the parties to the Documents, other
than the Partnership, to execute, deliver and perform their
obligations under the Documents and that the Documents constitute
the legal, valid, binding and enforceable obligations of said
parties; and
v) that the Documents are legal, valid, binding and enforceable under
the laws under which they have been construed and by which they have
been chosen to be governed.
In rendering the following opinion we are opining on the matters
hereinafter referred to, only insofar as they are governed by the laws of the
Netherlands and the Netherlands Antilles as currently in effect. We have made no
investigation of and express no opinion in relation to the laws of any
jurisdiction other than the Netherlands and the Netherlands Antilles.
As to certain matters of fact of which we have no or insufficient
independent knowledge, we have relied upon representations and certificates of
the general partner of the Partnership as well as upon the accuracy of the
recitals made in the Resolutions.
Based upon and subject to the foregoing and having regard to such legal
considerations as we deem relevant, we are of the opinion that:
1. Based solely on the legal opinion of De Brauw Blackstone Westbroek,
dated on the date hereof, a copy which is attached hereto ("the BBW
Opinion"), the Partnership was duly entered into and is validly
existing as a limited Partnership ("Commanditaire Vennootschap")
under the laws of the Netherlands. In the following paragraphs of
this opinion, we have assumed and based ourselves on the correctness
of the BBW Opinion.
2. Bisub Investments N.V. ("Bisub") is a corporation duly organized and
validly existing under the laws of the Netherlands Antilles, with
full corporate power and authority to conduct its business in
accordance with Article 2 of its Articles of Incorporation, which
includes the corporate power and authority to execute and deliver
the Partnership Agreement and to act as Managing General Partner of
the Partnership. Bisub is duly registered with the Commercial
Register of the Chamber of Commerce and Industry at Curacao.
<PAGE>
SMEETS, THESSELING & VAN BOKHORST
Bitrix Associates c.v.
Page Three
3. The Partnership has all requisite partnership power and authority to
enter into, execute, deliver, and to perform its obligations under
the Documents.
4. The management of the Partnership, including but not limited to, the
day to day management of the Partnership will, pursuant to the
Partnership Agreement, be conducted by Bisub in its capacity of
Managing General Partner. Bisub has taken all requisite corporate
action to execute and deliver the Documents for and on behalf of the
Partnership in its capacity of Managing General Partner of the
Partnership. No other partnership action has to be taken in
connection with the execution and delivery of the Documents for and
on behalf of the Partnership.
5. The Documents have been duly signed for and on behalf of Bisub, in
its capacity of Managing General Partner of the Partnership, and
constitute legal, valid and binding obligations of the Partnership,
enforceable against the Partnership in accordance with their
respective terms, except as such enforcement may be limited by
applicable bankruptcy, moratorium, insolvency and other similar laws
affecting the enforcement of creditors' rights generally.
6. Bisub in its capacity of Managing General Partner of the
Partnership, has been granted a foreign exchange control exemption
by the Bank of the Netherlands Antilles as well as a Business
License, which exemption and license are in full force and effect.
No other authorization, approval or other action by, or notices to
or filing with any Netherlands Antilles governmental authority or
regulatory body is required for the due execution, delivery and
performance by the Partnership of any of its obligations pursuant to
the Documents.
7. Except as set forth on Schedule 3.1 (c) attached to the Agreement
and Plan, to the best of our knowledge, neither the execution,
delivery and performance of the Documents, nor the consummation by
the Partnership of the transactions and the performance by the
Partnership of its obligations contemplated thereby, nor compliance
by the Partnership with any of the provisions thereof, will: (i)
violate or conflict with the Partnership Agreement; or (ii) violate
any law, statute, rule or regulation of the Netherlands Antilles.
Except as contemplated by the Agreement and Plan, or as set forth on
Schedule 3.1 (c) attached to the Agreement and Plan, to the best of
our knowledge, no permit, authorization, consent or approval of or
by, or any notification of or filing with, any person (governmental
or private) is required under the
<PAGE>
SMEETS, THESSELING & VAN BOKHORST
Bitrix Associates C.V.
Page Four
laws of the Netherlands or the Netherlands Antilles in connection
with the execution, delivery and performance of the Documents by the
Partnership or the consummation by the Partnership of the
transactions contemplated thereby.
8. Since there is no treaty regarding the enforcement of judgments in
existence between the Netherlands and the United States of America,
enforcement of a judgment obtained in a court located in the City
and State of New York cannot be obtained directly in the Netherlands
courts. However, since the Partnership has chosen the laws of the
State of New York to govern the Documents, a final and conclusive
judgment of a Court of the United States of America or the State of
New York against the Company in respect of the Documents would be
considered by the Netherlands courts to be a part of the Documents
and, as such, should be enforceable in accordance with its terms,
provided, however, that enforcement of the Documents, including a
judgment of the aforesaid courts, would not lead to a result which
would be in conflict with the public order of the Netherlands.
However, a Netherlands court has discretionary power not to
recognize any such judgment.
The opinions set forth above are subject to the qualification that any
specific performance or injunctive relief may be subject to the discretion of
the competent courts before which any proceedings are brought, and we express no
opinion as to the availability of such remedies.
This opinion is delivered to you and your counsel, solely in connection
with the transaction described in the Documents, and may not be relied upon or
used by you, your counsel, for any other purpose or any other person, firm or
company without our written consent.
Sincerely yours,
SMEETS, THESSELING & VAN BOKHORST
/s/ Frank P.C. Zeven
Frank P.C. Zeven
<PAGE>
[Letterhead of De Brauw Blackstone Westbroek]
March 31, 1992
02023MSS. 001
Roller Bearing Holding Company, Inc.
Roller Bearing Acquisition Company, Inc.
c/o WSGP Partners L.P.
1800 Century Park East
Suite 1000
Los Angeles, California 90067
Dear Sirs:
Re: BITRIX ABSOCIATES C.V.
I have acted as counsel as to matters of Netherlands law for BITRIX ASSOCIATES
C.V. (the "Limited Partnership"), a commanditaire vennootschap (limited
partnership) organized under the laws of the Netherlands with its registered
office in Curacao, Netherlands Antilles.
In connection therewith, I have examined the following documents:
a. a copy of the limited partnership agreement (the "Agreement"), dated as of
February 15, 1988, among BITRIX N.V., a company incorporated under the
laws of the Netherlands Antilles, as beherend vennoot (general partner,
hereinafter the "General Partner"), BISUB INVESTMENTS N.V., a company
incorporated under the laws of the Netherlands Antilles, as beherend
vennoot (general partner, hereinafter the "Managing General
<PAGE>
2
Partner" and collectively with the General Partner the "General
Partners"), and BLP INVESTMENTS B.V., a company incorporated under the
laws of the Netherlands, as commanditaire vennoot (limited partner,
hereinafter the "Limited Partner" and collectively with the General
Partners the "Partners");
b. a telecopy of an extract from the Commercial Register of the Chamber of
Commerce and Industry at Curacao, Netherlands Antilles with respect to the
Limited Partnership, dated March 20, 1992, confirmed to me to be correct
as at the date hereof;
c. a telecopy of a confirmation letter, dated March 23, 1992, with respect to
the Limited Partnership from Curacao Corporation Company N.V., in its
capacity as Managing Director of the Managing General Partner, confirmed
to me to be correct as at the date hereof;
d. a telecopy of a confirmation letter, dated March 23, 1992, with respect to
the General Partner from Curacao Corporation Company N.V., in its capacity
as Managing Director of the General Partner, confirmed to me to be correct
as at the date hereof;
e. a telecopy of a confirmation letter, dated March 23, 1992, with respect to
the Managing General Partner from Curacao Corporation Company N.V., in its
capacity as Managing Director of the Managing General Partner, confirmed
to me to be correct as at the date hereof;
f. a telecopy of a confirmation letter, dated March 24, 1992, with respect to
the Limited Partner from Trust International Management (T.I.M.) B.V., in
its capacity as Managing Director of the Limited Partner, confirmed to me
to be correct as at the date hereof;
- --------------------------------------------------------------------------------
DE BRAUW BLACKSTONE WESTBROEK
<PAGE>
3
and such other documents as I have deemed necessary to enable me to render this
opinion.
I have not investigated the laws of any jurisdiction but the Netherlands and do
not express an opinion on the laws of any jurisdiction but the Netherlands.
In rendering the following opinion, I have made the following assumptions:
(i) that all documents submitted to me as photocopies, specimen documents,
drafts, forms, final versions or telecopies conform or conform in all
material respects to the respective originals thereof and that such
documents, where applicable, will be executed in a form substantially
similar to the documents reviewed by me;
(ii) that the signatures on the originals of all documents are the genuine
signatures of the persons purported to have executed the same;
(iii) that the confirmation letters referred to above under c. through f. are
true and correct.
Based upon and subject to the foregoing and subject to the qualifications set
forth below and subject to any matters, documents, and events not disclosed to
me, I am at the date hereof of the following opinion:
1. The Limited Partnership was duly entered into in accordance with the laws
of the Netherlands and is validly existing as a commanditaire vennootschap
(limited partnership) under the laws of the Netherlands.
- --------------------------------------------------------------------------------
DE BRAUW BLACKSTONE WESTBROEK
<PAGE>
4
2. The Limited Partnership has full power and authority under the Agreement
and under the laws of the Netherlands to carry out its business as such
business is described in the objects clause (Article 1.2) of the
Agreement.
The opinions expressed above are subject to the following qualifications:
(aa) I do not express an opinion with respect to any Netherlands tax law;
(bb) The opinions expressed herein are limited by any bankruptcy, surseance van
betaling (temporary suspension of payments), moratorium or similar laws
generally affecting. the enforceability of rights of creditors,. as well
as by principles of redelijkheid (reasonableness) and billijkheid
(fairness) as applicable under Netherlands law;
(cc) The courts of the Netherlands will observe and give effect to the choice
of law provisions. contained in the Agreement save that in all events the
courts of the Netherlands may give effect to mandatory rules of the law of
any jurisdiction with which the matter has a close connection, if and to
the extent under the laws of such jurisdiction, those rules must be
applied whatever the chosen law.
This opinion is addressed to you and for your sole benefit and the benefit of
your counsel. Except as stated in the preceding sentence, this opinion may not
be relied upon by, transmitted to or filed with any person, firm, company or
institution without my prior written consent.
Very truly yours
/s/ Cees N. Peijster
Cees N. Peijster
- --------------------------------------------------------------------------------
DE BRAUW BLACKSTONE WESTBROEK
<PAGE>
[Letterhead of Spengler Carlson Gubar Brodsky & Frischling]
March 31, 1992
RBC Holding Company, Inc.
RBC Acquisition Company, Inc.
c/o WSGP Partners, L.P.
1800 Century Park East, Suite 1000
Los Angeles, California 90067
Re: Merger of RBC Acquisition Company, Inc. With and Into Roller Bearing
Company of America, Inc.
Gentlemen:
We have acted as special counsel to Bay Street Corporation, a
Delaware corporation (the "Company"), in connection with the proposed
disposition of its shareholdings in Roller Bearing Company of America, Inc., a
Delaware corporation ("RBC"), as contemplated by (i) the Agreement and Plan of
Reorganization dated March __, 1992 (the "Reorganization Agreement"), among RBC,
RBC Holding Company, Inc., a Delaware corporation (the "Buyer"), RBC Acquisition
Company, Inc., a Delaware corporation, the Company and the other stockholders of
RBC and (ii) the Escrow Agreement dated March ___, 1992 (the "Escrow
Agreement"), among Buyer, the Stockholders and the Escrow Agent (as defined
therein). Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Reorganization Agreement.
In connection with the rendering of the opinions set forth below, we
have examined originals, or copies certified or otherwise identified to our
satisfaction, of such documents, corporate records, certificates and other
instruments as we have deemed necessary or appropriate, including, without
<PAGE>
Spengler Carlson Gubar Brodsky & Frischling
RBC Holding Company, Inc.
RBC Acquisition Company, Inc.
c/o WSGP Partners, L.P.
March , 1992
Page -2-
limitation, (a) the Reorganization Agreement and (b) the Escrow Agreement. In
our examination, we have assumed the due authorization, execution and delivery
by each person other than the Company of each document heretofore executed and
delivered or hereafter to be executed and delivered by such person, the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such latter documents.
In connection with the rendering of the opinions set forth below, as
to matters of fact, we have relied solely upon (without independent
investigation) the representations and warranties contained in or made pursuant
to the Reorganization Agreement and certificates of public officials and
officers of the Company.
Based upon the foregoing, and subject to the limitations set forth
herein, we are of the opinion that:
1. The Company is a corporation, duly incorporated, validly existing
and in good standing under the laws of Delaware.
2. All corporate actions required to be taken by or on behalf of the
Company to authorize the Company to enter into and perform its obligations under
each of the Reorganization Agreement and the Escrow Agreement have been duly and
properly taken.
3. The Company has the corporate power and authority to enter into
and perform its obligations under each of the Reorganization Agreement and the
Escrow Agreement and the transactions contemplated therein.
4. The execution and delivery of each of the Reorganization
Agreement and the Escrow Agreement and the consummation of the transactions
contemplated therein (i) will not conflict with, or result in a material breach
of, any of the terms, conditions or provisions of, or constitute a material
default under, the certificate of incorporation or by-laws of the Company, (ii)
will not conflict with, or result in a material breach of any of the terms,
conditions or provisions of, or constitute a material default under, any
material agreement of which we have knowledge to which the Company is a party or
by which it may be bound, (iii) to our knowledge, will not result in the
violation by the Company of
<PAGE>
Spengler Carlson Gubar Brodsky & Frischling
RBC Holding Company, Inc.
RBC Acquisition Company, Inc.
c/o WSGP Partners, L.P.
March , 1992
Page -3-
any order, rule, regulation, judgment or decree of any federal or state
government, governmental instrumentality or court having jurisdiction over the
Company or any of its properties, and (iv) will not result in the violation by
the Company of any applicable federal or State of Delaware statute, rule or
regulation (except that we express no opinion as to compliance with federal or
state securities laws).
5. Each of the Reorganization Agreement and the Escrow Agreement
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to the effect of
applicable bankruptcy, reorganization, insolvency, moratorium and other similar
laws and court decisions of general application, including without limitation,
statutory or other laws regarding fraudulent or preferential transfers relating
to, limiting or affecting the enforcement of creditors' rights generally.
7. Based solely upon a review of stock certificates and the
representations of officers of the Company, and no independent investigation:
prior to the transactions contemplated by the Reorganization Agreement, the
Company is the lawful owner, of record and beneficially, of 0.82 shares of RBC
Class A common stock, par value $.0l, and 40 shares of RBC Class B common stock,
par value $.01 (collectively with the common stock, the "Shares"); upon the
effectiveness of the transactions contemplated by the Reorganization Agreement,
assuming that the Buyer is a bona fide purchaser (as such term is defined in
Section 8-302 of the Uniform Commercial Code), it will acquire the Shares free
of any claims of third parties and with no restriction on the voting rights and
the other incidents of ownership pertaining thereto (other than those which may
be imposed by applicable securities laws); and there are no agreements or
understandings of which we have knowledge between the Company and any other
person with respect to the voting of the Shares subject to which Buyer would be
acquiring title to the Shares.
We are admitted to the Bar of the State of New York and we express
no opinion as to laws of any other jurisdiction other than the Delaware General
Corporation Law and laws of the United States of America.
Our opinion set forth above is being furnished solely to and for the
benefit of RBC Holding Company, Inc. and subsidiaries in connection with the
transactions contemplated
<PAGE>
Spengler Carlson Gubar Brodsky & Frischling
RBC Holding Company, Inc.
RBC Acquisition Company, Inc.
c/o WSGP Partners, L.P.
March , 1992
Page -4-
by the Reorganization Agreement. Accordingly, it may not be relied upon by any
other person without our prior written consent.
Very truly yours,
/s/ [ILLEGIBLE]
7844c
<PAGE>
EXHIBIT D
<PAGE>
ROLLER BEARING HOLDING COMPANY, INC.
EXCHANGE AGREEMENT
by and between
ROLLER BEARING HOLDING COMPANY, INC.
and
GARY W. HOLMES
Dated: March 30, 1992
<PAGE>
ROLLER BEARING HOLDING COMPANY, INC.
EXCHANGE AGREEMENT
This Exchange Agreement (the "Agreement") is entered into as of
March 30, 1992, by and among Roller Bearing Holding Company, Inc., a Delaware
corporation ("Holding Company") and Gary W. Holmes ("Exchanging Shareholder").
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Holding Common Stock" means Holding Company's Class A Voting Common
Stock, par value $0.01.
"Holding Preferred Stock" means Holding Company's Redeemable
Exchangeable Cumulative Preferred Stock, par value $0.01.
"RBC Common Stock" means, the Class A Common Stock, $0.01 par value
of Roller Bearing Company of America, Inc., a Delaware corporation ("RBC").
"Holding Common Shares" means the shares of Holding Common Stock
listed on Exhibit A.
"Holding Preferred Shares" means the shares of Holding Preferred
Stock listed on Exhibit A.
"RBC Common Shares" means the shares of RBC Common Stock listed on
Exhibit A.
ARTICLE 2
EXCHANGE OF STOCK
Holding Company shall issue and deliver to the Exchanging
Stockholder, concurrently with the execution and delivery of this Agreement, the
Holding Common Shares and the Holding Preferred Shares in exchange for the RBC
Common Shares, the certificates for which shall be delivered to Holding Company
by Exchanging Stockholder concurrently herewith.
<PAGE>
ARTICLE 3
REPRESENTATIONS OF EXCHANGING SHAREHOLDER
Exchanging Shareholder hereby represents and warrants to Holding
Company that:
(a) This Agreement has been duly executed and delivered by
Exchanging Shareholder and, assuming the due execution and delivery hereof by
Holding Company, constitutes a valid and binding obligation of Exchanging
Shareholder, enforceable against Exchanging Shareholder in accordance with its
terms.
(b) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate, conflict
with or result in a default or breach under (i) any term or provision of any
contract, agreement, indebtedness, lease, commitment, license, franchise, permit
authorization or concession to which Exchanging Shareholder is a party, which
breach or default would have a material adverse effect on the ability of
Exchanging Shareholder to consummate the transactions contemplated hereby, or
(ii) any statute, law, rule, regulation, ordinance, code, order, judgment, writ,
injunction, decree or award, applicable to Exchanging Shareholder, which
violation would have a material adverse effect on the ability of Exchanging
Shareholder to consummate the transactions contemplated hereby.
(c) Exchanging Shareholder is acquiring the Holding Common
Shares and the Holding Preferred Shares for his own account and not as a nominee
or agent for any other person and with no intention of distributing or reselling
such securities or any part thereof in any transactions that would be in
violation of the securities laws of the United States of America or any state
thereof.
(d) Exchanging Shareholder has had an opportunity to ask
questions of and to receive answers from the officers of Holding Company and his
affiliates, or a person or persons acting on Holding Company's or its
affiliates' behalf, concerning the terms and conditions of this investment.
(e) Exchanging Shareholder has such knowledge and experience
in financial affairs that Exchanging Shareholder is capable of evaluating the
merits and risks of acquiring and holding the Holding Common Shares and the
Holding Preferred Shares.
(f) Exchanging Shareholder has not relied, in connection with
the decision to accept or to provide consideration for the Holding Common Shares
and the Holding Preferred Shares, upon the identity or advice of any other
person or upon any representations, warranties or agreements other than those in
this Agreement.
(g) Exchanging Shareholder's financial situation is such that
Exchanging Shareholder can afford to suffer the complete loss of the
consideration given in exchange for the Holding Common Shares and the Holding
Preferred Shares.
(h) Exchanging Shareholder's net worth or joint net worth with
Exchanging Shareholder's spouse, exceeds $1,000,000; or Exchanging Shareholder's
individual income was in excess of $200,000 in each of the two most recent years
or my joint income with Exchanging Shareholder's spouse was in excess of
2
<PAGE>
$300,000 in each of the two most recent years, and Exchanging Shareholder
reasonably expects to reach the same income level in the current year.
(i) Exchanging Shareholder is an "accredited investor" within
the meaning of Rule 501 under the Securities Act of 1933, as amended (the "1933
Act"); has made his own investigation regarding a determination to purchase the
Holding Common Stock and the Holding Preferred Stock and has received all
information it considers necessary or appropriate for deciding whether to
purchase the Holding Common Stock and the Holding Preferred Stock; and, in
making its decision to so purchase, is not in any way relying on the fact that
any other person has decided to participate in the purchase.
(j) Exchanging Shareholder understands that there is no public
market for the Holding Common Stock or the Holding Preferred Stock, that the
Holding Common Stock and the Holding Preferred Stock have not been registered
under the 1933 Act or registered or qualified under any state securities ("Blue
Sky") laws, and that the Holding Common Stock and the Holding Preferred Stock
cannot be resold by Exchanging Shareholder unless registered and qualified under
the 1933 Act and all applicable Blue Sky laws or unless an exemption from
registration and qualification is available.
(k) No consent, approval or authorization of, or declaration,
filing or registration with, any United States federal, state or local
governmental or regulatory authority is required to be made or obtained by
Exchanging Shareholder in connection with the execution and delivery of this
Agreement by Exchanging Shareholder, the purchase of the Holding Common Stock or
the Holding Preferred Stock by Exchanging Shareholder, and the performance by
Exchanging Shareholder of the other specific obligations of Exchanging
Shareholder contained herein, other than any consents or approvals obtained by
Exchanging Shareholder prior to the Closing Date, notices and filings required
pursuant to the 1933 Act or Blue Sky laws, or any consents or approvals which,
if not obtained, would not have a material adverse effect on Holding Company or
the interest of Exchanging Shareholder in the Holding Common Stock or the
Holding Preferred Stock.
(l) Exchanging Shareholder represents that he is a resident of
the State of Florida.
ARTICLE 4
RESTRICTIONS ON TRANSFER
Exchanging Shareholder agrees as follows:
(a) Exchanging Shareholder agrees that he shall not sell,
assign, convey, hypothecate or in any other manner transfer any of the shares of
Holding Common Stock or shares of Holding Preferred Stock except in compliance
with the 1933 Act and any applicable state securities laws.
(b) Exchanging Shareholder agrees that prior to making any
disposition of any Holding Common Stock or Holding Preferred Stock (other than a
disposition to Holding Company) Exchanging Shareholder will give written notice
to Holding Company describing the manner of such proposed disposition.
Exchanging
3
<PAGE>
Shareholder further agrees not to effect such proposed disposition until either
(i) Holding Company has notified Exchanging Shareholder that, in the opinion of
Holding Company's counsel, no registration of such Holding Common Stock or
Holding Preferred Stock under the 1933 Act or registration or qualification
under the securities or Blue Sky laws of any state is required in connection
with such proposed disposition, or (ii) a registration statement under the 1933
Act covering such proposed disposition has been filed by Holding Company under
the Act and has become effective and compliance with applicable state securities
or Blue Sky laws has been effected. Holding Company shall respond as promptly as
reasonably practicable to any notice of sale given hereunder.
(c) Each certificate representing the shares of Holding Common
Stock and Holding Preferred Stock issued pursuant to this Agreement shall bear
legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES ACT OF ANY JURISDICTION. SUCH SECURITIES MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED PLEDGED OR HYPOTHECATED
EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE
SECURITIES LAW, OR (ii) ANY EXEMPTION FROM REGISTRATION UNDER SUCH
ACT OR APPLICABLE STATE SECURITIES LAW RELATING TO THE DISPOSITION
OF SECURITIES, INCLUDING RULE 144, PROVIDED AN OPINION OF COUNSEL IS
FURNISHED, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO ROLLER
BEARING HOLDING COMPANY, INC. (THE "COMPANY") THAT AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE
SECURITIES LAW IS AVAILABLE.
ARTICLE 5
5.1 Notices. Any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and delivered
in person or by courier, or by facsimile transmission or by mail, postage
prepaid, as follows:
4
<PAGE>
If to Holding Company, to:
Roller Bearing Holding Company, Inc.
1800 Century Park East, Suite 1000
Los Angeles, California 90067
Attention: Mr. Richard R. Crowell
Telecopy: (310) 277-5810
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Attention: Terrance L. Carison, Esq.
Telecopy: (213) 229-7520
If to Exchanging Shareholder, to:
Gary W. Holmes
1925 Brickell Avenue, PH 3 &4
Miami, Florida 33129
Notices delivered in person shall be effective when so delivered
Notices delivered by courier shall be effective three (3) business days after
delivery b; the sender to an air courier of national reputation who guarantees
delivery within such three (3) business day period. Faxed notices shall be
effective when receipt is acknowledged telephonically by the addressee or its
agent or employee. Notices sent by mail shall be effective five (5) business
days after the sender's deposit of such notice in the United States mails, first
class postage prepaid.
5.2 Governing Law. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the internal laws of
the State of New York governing contracts executed and to be performed wholly
within such state, without regard to the principles of conflicts of laws.
5.3 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.
5.4 Specific Performance. The parties will be irreparably damaged in
the event that this Agreement is not specifically enforced. In the event of a
breach or threatened breach of the terms, covenants and/or conditions of this
Agreement by any of the parties hereto, the other parties shall, in addition to
all other remedies, be entitled (without any bond or other security being
required) to a temporary and/or permanent injunction, without showing any actual
damage or that monetary damages would not provide an adequate remedy, and/or a
decree for specific performance, in accordance with the provisions hereof.
5.5 Severability. If any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision
5
<PAGE>
and shall not in any manner affect or render invalid or unenforceable any other
severable provision of this Agreement, and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.
5.6 Additional Action. Each party hereto shall cooperate and shall
take such further action and shall execute and deliver such further documents as
may be reasonably requested by any other party in order to carry out the
provisions and purposes of this Agreement.
5.7 Headings. The headings of the Articles and Sections herein are
for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
ROLLER BEARING HOLDING COMPANY, INC.,
a Delaware corporation
By: /s/ M. J. Hartnett
------------------------------------
Its: President
EXCHANGING SHAREHOLDER
/s/ Gary W. Holmes
- ----------------------------------------
Gary W. Holmes
<PAGE>
EXHIBIT A
Holding Common Shares: 5,625 shares of Holding Common Stock.
Holding Preferred Shares: 6,226.857 shares of Holding Redeemable Exchangeable
Cumulative Preferred Stock.
RBC Common Shares: 122.2122701 shares of RBC Class A Common Stock.
7
<PAGE>
ROLLER BEARING HOLDING COMPANY, INC.
EXCHANGE AGREEMENT
by and between
ROLLER BEARING HOLDING COMPANY, INC.
and
FREDERICK MORLOK
Dated: March 30, 1992
<PAGE>
ROLLER BEARING HOLDING COMPANY, INC.
EXCHANGE AGREEMENT
This Exchange Agreement (the "Agreement") is entered into as of
March 30, 1992, by and among Roller Bearing Holding Company, Inc., a Delaware
corporation ("Holding Company") and Frederick Morlock ("Exchanging
Shareholder").
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Holding Common Stock" means Holding Company's Class A Voting Common
Stock, par value $0.01.
"Holding Preferred Stock" means Holding Company's Redeemable
Exchangeable Cumulative Preferred Stock, par value $0.01.
"RBC Common Stock" means, collectively, the Class A Common Stock,
$0.01 par value, and the Class B Common Stock, $0.01 par value, of Roller
Bearing Company of America, Inc., a Delaware corporation ("RBC").
"Holding Common Shares" means the shares of Holding Common Stock
listed on Exhibit A.
"Holding Preferred Shares" means the. shares of Holding Preferred
Stock listed on Exhibit A.
"REC Common Shares" means the shares of RBC Common Stock listed on
Exhibit A.
ARTICLE 2
EXCHANGE OF STOCK
Holding Company shall issue and deliver to the Exchanging
Stockholder, concurrently with the execution and delivery of this Agreement, the
Holding Common Shares and the Holding Preferred Shares in exchange for the RBC
Common Shares, the certificates for which shall be delivered to Holding Company
by Exchanging Stockholder concurrently herewith.
<PAGE>
ARTICLE 3
REPRESENTATIONS OF EXCHANGING SHAREHOLDER
Exchanging Shareholder hereby represents and warrants to Holding
Company that:
(a) This Agreement has been duly executed and delivered by
Exchanging Shareholder and, assuming the due execution and delivery hereof by
Holding Company, constitutes a valid and binding obligation of Exchanging
Shareholder, enforceable against Exchanging Shareholder in accordance with its
terms.
(b) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate, conflict
with or result in a default or breach under (i) any term or provision of any
contract, agreement, indebtedness, lease, commitment, license, franchise, permit
authorization or concession to which Exchanging Shareholder is a party, which
breach or default would have a material adverse effect on the ability of
Exchanging Shareholder to consummate the transactions contemplated hereby, or
(ii) any statute, law, rule, regulation, ordinance, code, order, judgment, writ,
injunction, decree or award, applicable to Exchanging Shareholder, which
violation would have a material adverse effect on the ability of Exchanging
Shareholder to consummate the transactions contemplated hereby.
(c) Exchanging Shareholder is acquiring the Holding Common
Shares and the Holding Preferred Shares for his own account and not as a nominee
or agent for any other person and with no intention of distributing or reselling
such securities or any part thereof in any transactions that would be in
violation of the securities laws of the United States of America or any state
thereof.
(d) Exchanging Shareholder has had an opportunity to ask
questions of and to receive answers from the officers of Holding Company and his
affiliates, or a person or persons acting on Holding Company's or its
affiliates' behalf, concerning the terms and conditions of this investment.
(e) Exchanging Shareholder has such knowledge and experience
in financial affairs that Exchanging Shareholder is capable of evaluating the
merits and risks of acquiring and holding the Holding Common Shares and the
Holding Preferred Shares.
(f) Exchanging Shareholder has not relied, in connection with
the decision to accept or to provide consideration for the Holding Common Shares
and the Holding Preferred Shares, upon the identity or advice of any other
person or upon any representations, warranties or agreements other than those in
this Agreement.
(g) Exchanging Shareholder's financial situation is such that
Exchanging Shareholder can afford to suffer the complete loss of the
consideration given in exchange for the Holding Common Shares and the Holding
Preferred Shares.
(h) Exchanging Shareholder's net worth or joint net worth with
Exchanging Shareholder's spouse, exceeds $1,000,000; or Exchanging Shareholder's
individual income was in excess of $200,000 in each of the two most recent years
or my joint income with Exchanging Shareholder's spouse was in excess of
2
<PAGE>
$300,000 in each of the two most recent years, and Exchanging Shareholder
reasonably expects to reach the same income level in the current year.
(i) Exchanging Shareholder is an executive officer of Holding
Company.
(j) Exchanging Shareholder is an "accredited investor" within
the meaning of Rule 501 under the Securities Act of 1933, as amended (the "1933
Act"); has made his own investigation regarding a determination to purchase the
Holding Common Stock and the Holding Preferred Stock and has received all
information it considers necessary or appropriate for deciding whether to
purchase the Holding Common Stock and the Holding Preferred Stock; and, in
making its decision to so purchase, is not in any way relying on the fact that
any other person has decided to participate in the purchase.
(k) Exchanging Shareholder understands that there is no public
market for the Holding Common Stock or the Holding Preferred Stock, that the
Holding Common Stock and the Preferred Stock have not been registered under the
1933 Act or registered or qualified under any state securities ("Blue Sky")
laws, and that the Holding Common Stock and the Holding Preferred Stock cannot
be resold by Exchanging Shareholder unless registered and qualified under the
1933 Act and all applicable Blue Sky laws or unless an exemption from
registration and qualification is available.
(l) No consent, approval or authorization of, or declaration,
filing or registration with, any United States federal, state or local
governmental or regulatory authority is required to be made or obtained by
Exchanging Shareholder in connection with the execution and delivery of this
Agreement by Exchanging Shareholder, the purchase of the Holding Common Stock or
the Holding Preferred Stock by Exchanging Shareholder, and the performance by
Exchanging Shareholder of the other specific obligations of Exchanging
Shareholder contained herein, other than any consents or approvals obtained by
Exchanging Shareholder prior to the Closing Date, notices and filings required
pursuant to the 1933 Act or Blue Sky laws, or any consents or approvals which,
if not obtained, would not have a material adverse effect on Holding Company or
the interest of Exchanging Shareholder in the Holding Common Stock or the
Holding Preferred Stock.
(m) Exchanging Shareholder represents that he is a resident of
the State of Pennsylvania.
ARTICLE 4
RESTRICTIONS ON TRANSFER
Exchanging Shareholder agrees as follows:
(a) Exchanging Shareholder agrees that he shall not sell,
assign, convey, hypothecate or in any other manner transfer any of the shares of
Holding Common Stock or shares of Holding Preferred Stock except in compliance
with the 1933 Act and any applicable state securities laws.
(b) Exchanging Shareholder agrees that prior to making any
disposition of any Holding Common Stock or Holding Preferred Stock (other than a
3
<PAGE>
disposition to Holding Company) Exchanging Shareholder will give written notice
to Holding company describing the manner of such proposed disposition.
Exchanging Shareholder further agrees not to effect such proposed disposition
until either (i) Holding Company has notified Exchanging Shareholder that, in
the opinion of Holding Company's counsel, no registration of such Holding Common
Stock or Holding Preferred Stock under the 1933 Act or registration or
qualification under the securities or Blue Sky laws of any state is required in
connection with such proposed disposition, or (ii) a registration statement
under the 1933 Act covering such proposed disposition has been filed by Holding
Company under the Act and has become effective and compliance with applicable
state securities or Blue Sky laws has been effected. Holding Company shall
respond as promptly as reasonably practicable to any notice of sale given
hereunder.
(c) Each certificate representing the shares of Holding Common
Stock and Holding Preferred Stock issued pursuant to this Agreement shall bear
legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES ACT OF ANY JURISDICTION. SUCH SECURITIES MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED PLEDGED OR HYPOTHECATED
EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE
SECURITIES LAW, OR (ii) ANY EXEMPTION FROM REGISTRATION UNDER SUCH
ACT OR APPLICABLE STATE SECURITIES LAW RELATING TO THE DISPOSITION
OF SECURITIES, INCLUDING RULE 144, PROVIDED AN OPINION OF COUNSEL IS
FURNISHED, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO ROLLER
BEARING HOLDING COMPANY, INC. (THE "COMPANY") THAT AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE
SECURITIES LAW IS AVAILABLE.
THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED WITHIN ONE
YEAR FROM THE DATE OF PURCHASE EXCEPT IN ACCORDANCE WITH THE
REQUIREMENTS OF SECTION 204.011 OF THE PENNSYLVANIA BLUE SKY
REGULATIONS.
(d) Pennsylvania law also requires the following legend to
appear in this Agreement.
EACH PENNSYLVANIA RESIDENT WHO ACCEPTS AN OFFER TO PURCHASE
THE SECURITIES HAS THE RIGHT TO CANCEL AND WITHDRAW HIS OR HER
ACCEPTANCE, WITHOUT INCURRING ANY
4
<PAGE>
LIABILITY TO THE SELLER, UNDERWRITER (IF ANY) OR ANY OTHER PERSON,
WITHIN TWO BUSINESS DAYS FOLLOWING THE RECEIPT BY THE ISSUER OF HIS
OR HER WRITTEN BINDING CONTRACT OF PURCHASE, OR IN THE CASE OF A
TRANSACTION IN WHICH THERE IS NO BINDING CONTRACT OF PURCHASE WITHIN
TWO BUSINESS DAYS AFTER MAKING THE INITIAL PAYMENT FOR THE
SECURITIES BEING OFFERED.
ARTICLE 5
MISCELLANEOUS
5.1 Notices. Any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and delivered
in person or by courier, or by facsimile transmission or by mail, postage
prepaid, as follows:
If to Holding Company, to:
Roller Bearing Holding Company, Inc.
1800 Century Park East, Suite 1000
Los Angeles, California 90067
Attention: Mr. Richard R. Crowell
Telecopy: (310) 277-5810
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Attention: Terrance L. Carlson, Esq.
Telecopy: (213) 229-7520
If to Exchanging Shareholder, to:
Frederick Morlok
315 Society Place
Newtown, Pennsylvania 18940
Notices delivered in person shall be effective when so delivered.
Notices delivered by courier shall be effective three (3) business days after
delivery by the sender to an air courier of national reputation who guarantees
delivery within such three (3) business day period. Faxed notices shall be
effective when receipt is acknowledged telephonically by the addressee or its
agent or employee. Notices sent by mail shall be effective five (5) business
days after the sender's deposit of such notice in the United States mails, first
class postage prepaid.
5.2 Governing Law. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the internal laws of
the State of New York governing contracts executed and to be performed wholly
within such state, without regard to the principles of conflicts of laws.
5
<PAGE>
5.3 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.
5.4 Specific Performance. The parties will be irreparably damaged in
the event that this Agreement is not specifically enforced. In the event of a
breach or threatened breach of the terms, covenants and/or conditions of this
Agreement by any of the parties hereto, the other parties shall, in addition to
all other remedies, be entitled (without any bond or other security being
required) to a temporary and/or permanent injunction, without showing any actual
damage or that monetary damages would not provide an adequate remedy, and/or a
decree for specific performance, in accordance with the provisions hereof.
5.5 Severability. If any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid or
unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable provision
were not contained herein.
5.6 Additional Action. Each party hereto shall cooperate and shall
take such further action and shall execute and deliver such further documents as
may be reasonably requested by any other party in order to carry out the
provisions and purposes of this Agreement.
5.7 Headings. The headings of the Articles and Sections herein are
for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
ROLLER BEARING HOLDING COMPANY, INC.,
a Delaware corporation
By: /s/ M. J. Hartnett
------------------------------------
Its: President
EXCHANGING SHAREHOLDER
/s/ Frederick Morlok
- ----------------------------------------
Frederick Morlok
7
<PAGE>
EXHIBIT A
Holding Common Shares: 2,500 shares of Holding Common Stock.
Holding Preferred Shares: 2,767.485 shares of Holding Redeemable Exchangeable
Cumulative Preferred Stock.
RBC Common Shares: 54.31648843 shares of RBC Class A Common Stock.
8
<PAGE>
ROLLER BEARING HOLDING COMPANY, INC.
EXCHANGE AGREEMENT
by and between
ROLLER BEARING HOLDING COMPANY, INC.
and
HAROLD J. MACSATA
Dated: March 30, 1992
<PAGE>
ROLLER BEARING HOLDING COMPANY, INC.
EXCHANGE AGREEMENT
This Exchange Agreement (the "Agreement") is entered into as of
March 30, 1992, by and among Roller Bearing Holding Company, Inc., a Delaware
corporation ("Holding Company") and Harold J. Macsata ("Exchanging
Shareholder").
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Holding Common Stock" means Holding Company's Class A Voting Common
Stock, par value $0.01.
"Holding Preferred Stock" means Holding Company's Redeemable
Exchangeable Cumulative Preferred Stock, par value $0.01.
"RBC Common Stock" means, collectively, the Class A Common Stock,
$0.01 par value, and the Class B Common Stock, $0.01 par value, of Roller
Bearing Company of America, Inc., a Delaware corporation ("RBC").
"Holding Common Shares" means the shares of Holding Common Stock
listed on Exhibit A.
"Holding Preferred Shares" means the shares of Holding Preferred
Stock listed on Exhibit A.
"RBC Common Shares" means the shares of RBC Common Stock listed on
Exhibit A.
ARTICLE 2
EXCHANGE OF STOCK
Holding Company shall issue and deliver to the Exchanging
Stockholder, concurrently with the execution and delivery of this Agreement, the
Holding Common Shares and the Holding Preferred Shares in exchange for the RBC
Common Shares, the certificates for which shall be delivered to Holding Company
by Exchanging Stockholder concurrently herewith.
<PAGE>
ARTICLE 3
REPRESENTATIONS OF EXCHANGING SHAREHOLDER
Exchanging Shareholder hereby represents and warrants to Holding
Company that:
(a) This Agreement has been duly executed and delivered by
Exchanging Shareholder and, assuming the due execution and delivery hereof by
Holding Company, constitutes a valid and binding obligation of Exchanging
Shareholder, enforceable against Exchanging Shareholder in accordance with its
terms.
(b) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate, conflict
with or result in a default or breach under (i) any term or provision of any
contract, agreement, indebtedness, lease, commitment, license, franchise, permit
authorization or concession to which Exchanging Shareholder is a party, which
breach or default would have a material adverse effect on the ability of
Exchanging Shareholder to consummate the transactions contemplated hereby, or
(ii) any statute, law, rule, regulation, ordinance, code, order, judgment, writ,
injunction, decree or award, applicable to Exchanging Shareholder, which
violation would have a material adverse effect on the ability of Exchanging
Shareholder to consummate the transactions contemplated hereby.
(c) Exchanging Shareholder is acquiring the Holding Common
Shares and the Holding Preferred Shares for his own account and not as a nominee
or agent for any other person and with no intention of distributing or reselling
such securities or any part thereof in any transactions that would be in
violation of the securities laws of the United States of America or any state
thereof.
(d) Exchanging Shareholder has had an opportunity to ask
questions of and to receive answers from the officers of Holding Company and his
affiliates, or a person or persons acting on Holding Company's or its
affiliates' behalf, concerning the terms and conditions of this investment.
(e) Exchanging Shareholder has such knowledge and experience
in financial affairs that Exchanging Shareholder is capable of evaluating the
merits and risks of acquiring and holding the Holding Common Shares and the
Holding Preferred Shares.
(f) Exchanging Shareholder has not relied, in connection with
the decision to accept or to provide consideration for the Holding Common Shares
and the Holding Preferred Shares, upon the identity or advice of any other
person or upon any representations, warranties or agreements other than those in
this Agreement.
(g) Exchanging Shareholder's financial situation is such that
Exchanging Shareholder can afford to suffer the complete loss of the
consideration given in exchange for the Holding Common Shares and the Holding
Preferred Shares.
(h) Exchanging Shareholder's net worth or joint net worth with
Exchanging Shareholder's spouse, exceeds $1,000,000; or Exchanging Shareholder's
individual income was in excess of $200,000 in each of the two most recent years
or my joint income with Exchanging Shareholder's spouse was in excess of
2
<PAGE>
$300,000 in each of the two most recent years, and Exchanging Shareholder
reasonably expects to reach the same income level in the current year.
(i) Exchanging Shareholder is an executive officer of Holding
Company.
(j) Exchanging Shareholder is an "accredited investor" within
the meaning of Rule 501 under the Securities Act of 1933, as amended (the "1933
Act"); has made his own investigation regarding a determination to purchase the
Holding Common Stock and the Holding Preferred Stock and has received all
information it considers necessary or appropriate for deciding whether to
purchase the Holding Common Stock and the Holding Preferred Stock; and, in
making its decision to so purchase, is not in any way relying on the fact that
any other person has decided to participate in the purchase.
(k) Exchanging Shareholder understands that there is no public
market for the Holding Common Stock or the Holding Preferred Stock, that the
Holding Common Stock and the Holding Preferred Stock have not been registered
under the 1933 Act or registered or qualified under any state securities ("Blue
Sky") laws, and that the Holding Common Stock and the Holding Preferred Stock
cannot be resold by Exchanging Shareholder unless registered and qualified under
the 1933 Act and all applicable Blue Sky laws or unless an exemption from
registration and qualification is available.
(l) No consent, approval or authorization of, or declaration,
filing or registration with, any United States federal, state or local
governmental or regulatory authority is required to be made or obtained by
Exchanging Shareholder in connection with the execution and delivery of this
Agreement by Exchanging Shareholder, the purchase of the Holding Common Stock or
the Holding Preferred Stock by Exchanging Shareholder, and the performance by
Exchanging Shareholder of the other specific obligations of Exchanging
Shareholder contained herein, other than any consents or approvals obtained by
Exchanging Shareholder prior to the Closing Date, polices and filings required
pursuant to the 1933 Act or Blue Sky laws, or any consents or approvals which,
if not obtained, would not have a material adverse effect on Holding Company or
the interest of Exchanging Shareholder in the Holding Common Stock or the
Holding Preferred Stock.
(m) Exchanging Shareholder represents that he is a resident of
the State of Pennsylvania.
ARTICLE 4
RESTRICTIONS ON TRANSFER
Exchanging Shareholder agrees as follows:
(a) Exchanging Shareholder agrees that he shall not sell,
assign, convey, hypothecate or in any other manner transfer any of the shares of
Holding Common Stock or shares of Holding Preferred Stock except in compliance
with the 1933 Act and any applicable state securities laws.
(B) Exchanging Shareholder agrees that prior to making any
disposition of any Holding Common Stock or Holding Preferred Stock (other than a
3
<PAGE>
disposition to Holding Company) Exchanging Shareholder will give written notice
to Holding Company describing the manner of such proposed disposition.
Exchanging Shareholder further agrees not to effect such proposed disposition
until either (i) Holding Company has notified Exchanging Shareholder that, in
the opinion of Holding Company's counsel, no registration of such Holding Common
Stock or Holding Preferred Stock under the 1933 Act or registration or
qualification under the securities or Blue Sky laws of any state is required in
connection with such proposed disposition, or (ii) a registration statement
under the 1933 Act covering such proposed disposition has been filed by Holding
Company under the Act and has become effective and compliance with applicable
state securities or Blue Sky laws has been effected. Holding Company shall
respond as promptly as reasonably practicable to any notice of sale given
hereunder.
(c) Each certificate representing the shares of Holding Common
Stock and Holding Preferred Stock issued pursuant to this Agreement shall bear
legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES ACT OF ANY JURISDICTION. SUCH SECURITIES
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR
APPLICABLE STATE SECURITIES LAW, OR (ii) ANY EXEMPTION FROM
REGISTRATION UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW
RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING RULE 144,
PROVIDED AN OPINION OF COUNSEL IS FURNISHED, REASONABLY SATISFACTORY
IN FORM AND SUBSTANCE TO ROLLER BEARING HOLDING COMPANY, INC. (THE
"COMPANY") THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND/OR APPLICABLE STATE SECURITIES LAW IS AVAILABLE.
THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED WITHIN ONE
YEAR FROM THE DATE OF PURCHASE EXCEPT IN ACCORDANCE WITH THE
REQUIREMENTS OF SECTION 204.011 OF THE PENNSYLVANIA BLUE SKY
REGULATIONS.
(d) Pennsylvania law also requires the following legend to
appear in this Agreement.
EACH PENNSYLVANIA RESIDENT WHO ACCEPTS AN OFFER TO PURCHASE
THE SECURITIES HAS THE RIGHT TO CANCEL AND WITHDRAW HIS OR HER
ACCEPTANCE, WITHOUT INCURRING ANY
4
<PAGE>
LIABILITY TO THE SELLER, UNDERWRITER (IF ANY) OR ANY OTHER PERSON,
WITHIN TWO BUSINESS DAYS FOLLOWING THE RECEIPT BY THE ISSUER OF HIS
OR HER WRITTEN BINDING CONTRACT OF PURCHASE, OR IN THE CASE OF A
TRANSACTION IN WHICH THERE IS NO BINDING CONTRACT OF PURCHASE WITHIN
TWO BUSINESS DAYS AFTER MAKING THE INITIAL PAYMENT FOR THE
SECURITIES BEING OFFERED.
ARTICLE 5
MISCELLANEOUS
5.1 Notices. Any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and delivered
in person or by courier, or by facsimile transmission or by mail, postage
prepaid, as follows:
If to Holding Company, to:
Roller Bearing Holding Company, Inc.
1800 Century Park East, Suite 1000
Los Angeles, California 90067
Attention: Mr. Richard R. Crowell
Telecopy: (310) 277-5810
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Attention: Terrance L. Carlson, Esq.
Telecopy: (213) 229-7520
If to Exchanging Shareholder, to:
Harold J. Macsata
2820 West Fox Chase Circle
Doylestown, Pennsylvania 18901
Notices delivered in person shall be effective when so delivered.
Notices delivered by courier shall be effective three (3) business days after
delivery by the sender to an air courier of national reputation who guarantees
delivery within such three (3) business day period. Faxed notices shall be
effective when receipt is acknowledged telephonically by the addressee or its
agent or employee. Notices sent by mail shall be effective five (5) business
days after the sender's deposit of such notice in the United States mails, first
class postage prepaid.
5.2 Governing Law. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the internal laws of
the State
5
<PAGE>
of New York governing contracts executed and to be performed wholly within such
state, without regard to the principles of conflicts of laws.
5.3 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.
5.4 Specific Performance. The parties will be irreparably damaged in
the event that this Agreement is not specifically enforced. In the event of a
breach or threatened breach of the terms, covenants and/or conditions of this
Agreement by any of the parties hereto, the other parties shall, in addition to
all other remedies, be entitled (without any bond or other security being
required) to a temporary and/or permanent injunction, without showing any actual
damage or that monetary damages would not provide an adequate remedy, and/or a
decree for specific performance, in accordance with the provisions hereof.
5.5 Severability. If any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid or
unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable provision
were not contained herein.
5.6 Additional Action. Each party hereto shall cooperate and shall
take such further action and shall execute and deliver such further documents as
may be reasonably requested by any other party in order to carry out the
provisions and purposes of this Agreement.
5.7 Headings. The headings of the Articles and Sections herein are
for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
ROLLER BEARING HOLDING COMPANY, INC.,
a Delaware, corporation
By: /s/ M. J. Hartnett
------------------------------------
Its: President
EXCHANGING SHAREHOLDER
/s/ Harold J. Macsata
- ----------------------------------------
Harold J. Macsata
7
<PAGE>
EXHIBIT A
Holding Common Shares: 2,500 shares of Holding Common Stock.
Holding Preferred Shares: 2,767.485 shares of Holding Redeemable Exchangeable
Cumulative Preferred Stock.
RBC Common Shares: 54.31648843 shares of RBC Class A Common Stock.
8
<PAGE>
EXHIBIT E
<PAGE>
[Letterhead of Gibson, Dunn & Crutcher]
March 31, 1992
Roller Bearing Company of America, Inc.
140 Terry Drive
Newtown, Pennsylvania 18940
Re: Agreement and Plan of Reorganization dated March 31,1992 among
Roller Bearing Company of America, Inc., Roller Bearing Holding
Company, Inc., Roller Bearing Acquisition Company, Inc., and the
stockholders of Roller Bearing Company of America Inc.
Ladies and Gentlemen:
We have acted as special counsel to Roller Bearing Holding Company,
Inc., a Delaware corporation ("Holding Company") and Roller Bearing Acquisition
Company, Inc., a Delaware corporation ("Acquisition Company") in connection
with (i) that certain Agreement and Plan of Reorganization dated the date hereof
(the "Agreement of Reorganization") among Roller Bearing Company of America,
Inc. ("RBC"), Holding Company, Acquisition Company, and the Stockholders (as
defined in the Agreement of Reorganization), (ii) the Agreement of Merger dated
the date hereof between Acquisition Company and RBC (the "Agreement of Merger")
and (iii) the Escrow Agreement among Holding Company, the Stockholders and the
Stockholders' Representative (as defined in the Escrow Agreement).
<PAGE>
GIBSON, DUNN & CRUTCHER
March 31, 1992
Page 2
This letter is delivered to you pursuant to Section 5.3(i) of the
Agreement of Reorganization. Capitalized terms used in this letter shall have
the meanings ascribed to them in the Agreement of Reorganization unless
otherwise defined in this letter. Each of Holding Company and Acquisition
Company is referred to herein as a "Purchasing Transaction Party." The Agreement
of Reorganization, the Agreement of Merger, and the Escrow Agreement are
referred to herein collectively as the "Transaction Documents."
In rendering this opinion, we have made such inquiries and reviewed
such documents as we considered necessary. As to factual matters, we have, with
your consent, relied exclusively upon oral and written statements and
certificates of public officials and of stockholders, directors, officers and
other representatives of Holding Company, Acquisition Company, RBC, and
Industrial Tectonics Bearings Corporation, a Delaware corporation ("ITB"), and
we have made no effort to establish or verify the accuracy or completeness of
such factual matters.
In our capacity as special counsel to Holding Company and
Acquisition Company, we have reviewed the Transaction Documents and the
Certificate of Designations of the Redeemable Exchangeable Cumulative Preferred
Stock, par value $0.01, of Holding Company (the "Buyer's Preferred Stock").
Among other things, we have assumed with your permission that:
(a) the signatures on all documents examined by us are
genuine, all natural persons whose signatures appear on documents have the
legal capacity to sign such documents, all individuals (other than those
who have signed on behalf of a Purchasing Transaction Party) whose
signatures appear on such documents were duly authorized to execute such
documents on behalf of the party for whom they purport to have signed, the
documents submitted to us as originals are authentic, the documents
submitted to us as certified or reproduction copies conform to the
originals and the originals of such copies are authentic;
<PAGE>
GIBSON, DUNN & CRUTCHER
March 31, 1992
Page 3
(b) each of RBC and each Stockholder (each, a "Selling
Transaction Party") has the power and authority to execute, deliver and
perform its respective obligations under each Transaction Document to
which such Selling Transaction Party is a party, the execution and
delivery of each such Transaction Document and performance of such
obligations have been duly authorized by all necessary action on the part
of each such Selling Transaction Party and each such Transaction Document
is the legal, valid and binding obligation of such Selling Transaction
Party, enforceable against such Selling Transaction Party in accordance
with its terms;
(c) no Selling Transaction Party or Purchasing Transaction
Party is party to any agreement or understanding that would expand, modify
or otherwise affect the terms of the Transaction Documents or the
respective rights or obligations of the parties thereunder, and the
Transaction Documents correctly and completely set forth the intent of all
parties thereto;
(d) each of RBC and ITB is a Delaware corporation, duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite power and authority to engage in
the transactions contemplated by the Transaction Documents;
(e) each Stockholder not a natural person is duly organized,
validly existing and in good standing under the laws of its jurisdiction
of incorporation or organization, as the case may be; and
(f) at the time any Selling Transaction Party seeks to enforce
its rights under the Transaction Documents, such Selling Transaction Party
will have taken all actions required to be taken by it in order to enforce
such rights.
Whenever a statement is made in this letter to be "to our knowledge"
a ("Statement of Knowledge"), such statement means that, during the course of
our representation of Holding Company and Acquisition Company (as described in
the first paragraph of this letter), and without undertaking any independent
investigation with respect thereto, no information has come to the attention of
the lawyers of this firm working on the transactions contemplated by the
Transaction Documents that would
<PAGE>
GIBSON, DUNN & CRUTCHER
March 31, 1992
Page 4
give us actual knowledge of the existence or absence of facts contrary to the
Statement of Knowledge, and no inference should be drawn from any Statement of
Knowledge or from our representation of Holding Company or Acquisition Company,
(a) as to the existence or absence of facts contrary to such Statement of
Knowledge or (b) that we have undertaken any independent investigation to
determine the existence or absence of any facts contrary to such Statement of
Knowledge.
Based on the foregoing and in reliance thereon, and subject to the
assumptions, exceptions, qualifications and limitations set forth herein, we are
of the opinion that:
1. Each Purchasing Transaction Party is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.
2. Each Purchasing Transaction Party has the corporate power and
authority to execute and deliver the Transaction Documents and to consummate the
transactions contemplated thereby. Each Purchasing Transaction Party has taken
all necessary corporate action to authorize the execution and delivery of the
Transaction Documents and the performance by it of its obligations thereunder.
Each Transaction Document has been duly and validly executed and delivered by
each Purchasing Transaction Party that is a party to such document, and
constitutes the legal, valid and binding obligation of each such Purchasing
Transaction Party, enforceable against each such Purchasing Transaction Party in
accordance with its terms.
3. Except for matters that in the aggregate would not have a
material adverse effect on the ability of either Purchasing Transaction Party to
consummate the transactions contemplated by the Transaction Documents, neither
the execution, delivery and performance of the Transaction Documents by Holding
Company or Acquisition Company nor the consummation by Holding Company or
Acquisition Company of the transactions contemplated thereby, nor compliance by
Holding Company or Acquisition Company with any of the provisions thereof,
including the issuance by Holding Company of the Buyer's Preferred Stock
pursuant to the Merger, will (A) conflict with or violate the certificate of
incorporation or bylaws of either Purchasing Transaction Party, (B) violate any
law, statute,
<PAGE>
GIBSON, DUNN & CRUTCHER
March 31, 1992
Page 5
rule or regulation binding on either Purchasing Transaction Party, or (C) to our
knowledge, violate, conflict with, result in a breach of or constitute (or with
notice or lapse of time or both constitute) a default (or give rise to any right
of termination, cancellation or acceleration) under any contract to which either
Purchasing Transaction Party is a party, or (D) to our knowledge, based solely
upon a review of any orders, writs, judgments or decrees identified to us by
officers of Holding Company and Acquisition Company as applicable to any of them
or binding or affecting any of their respective assets (the "Judicial Orders"),
violate any Judicial Orders.
4. The authorization, issuance, sale and delivery of the Buyer's
Preferred Stock to the holders of RBC Common Stock in the Merger in accordance
with Section 2.2(b)(iii) of the Agreement of Reorganization have been duly
authorized by all requisite corporate action of Holding Company and when issued
in the Merger (A) such shares of the Buyer's Preferred Stock will be validly
issued, fully-paid and nonassessable, (B) the terms, rights, privileges and
preferences of such shares of the Buyer's Preferred Stock are as set forth in
the Certificate of Incorporation of Holding Company filed with the Secretary of
State of the State of Delaware, as amended (the "Buyer's Certificate"), (C)
there are no preemptive rights to purchase or otherwise acquire any shares of
the Buyer's Preferred Stock pursuant to the Buyer's Certificate, By-laws or, to
our knowledge, any agreement to which Holding Company is a party, and (D) such
shares will be, to our knowledge, issued in compliance with the Securities Act
of 1933.
5. The authorized capital stock of Holding Company consists of the
following: (i) three hundred thousand (300,000) shares of Class A Voting Common
Stock, par value one cent ($0.01) per share; (ii) one hundred thousand (100,000)
shares of Class B Non-Voting Common Stock, par value one cent ($0.01) per share;
and (iii) two hundred thousand (200,000) shares of Redeemable Exchangeable
Cumulative Preferred Stock, par value one cent ($0.01) per share, of which
123,319.534 shares will be validly issued and outstanding as of the Effective
Time of the Merger.
The foregoing opinions are subject to the following exceptions,
qualifications and limitations:
A. We are not admitted to practice in the State of Delaware;
however, we are generally familiar with the General Corporation Law of the
<PAGE>
GIBSON, DUNN & CRUTCHER
March 31, 1992
Page 6
State of Delaware as currently in effect. This opinion is limited to the effect
of the current state of the laws of the State of New York, the United States of
America, the General Corporation Law of the State of Delaware and the facts as
they currently exist. We assume no obligation to revise or supplement this
opinion in the event of future changes in such laws or the interpretations
thereof or such facts. We express no opinion as to the enforceability of any
choice of law, choice of forum or severability provision in any Transaction
Document. Our opinion in paragraph 3(B) is based upon our consideration of only
those New York, Delaware and United States statutes, rules and regulations that,
in our experience, are normally applicable to transactions of the type
contemplated by the Transaction Documents, and we express no opinion as to
whether the consummation of the transactions contemplated by the Transaction
Documents violate: (i) the federal Assignment of Contracts Act, 41 U.S.C. ss.15,
or the Assignment of Claims Act, 31 U.S.C. ss.3727, which generally prohibit the
transfer of federal government contracts without government consent; (ii) any
regulation implementing those two statutes; and (iii) contracts to which RBC or
ITB is a party and that are being transferred pursuant to any Transaction
Document implementing either of those two statutes.
B. Our opinion set forth in paragraph 2 is subject to (i) the effect
of any bankruptcy, insolvency, reorganization, moratorium, arrangement or
similar laws affecting the enforcement of creditors' rights (including, without
limitation, the effect of statutory or other laws regarding fraudulent transfers
or preferential transfers) and (ii) general principles of equity, regardless of
whether enforceability is considered in a proceeding in equity or at law.
C. Without limitation in respect of clause B(ii) above, we express
no opinion regarding or relating to (i) the ability to obtain specific
performance, injunctive relief or other equitable relief (whether sought in a
proceeding at law or in equity) as a remedy for noncompliance with any
Transaction Document, and the use of the term "enforceable" shall not imply any
opinion as to the availability of equitable remedies, (ii) the rights or
remedies available to any party for any violation or breach of any provision
that is immaterial or for any violation or breach of any provision the
enforcement of which a court determines would be unreasonable under the then
existing circumstances, (iii) the rights or remedies available to any
<PAGE>
GIBSON, DUNN & CRUTCHER
March 31, 1992
Page 7
party for any material violation or breach that is the proximate result of any
action taken by any party other than the party against whom enforcement is
sought, which actions (A) such other party is not entitled to take pursuant to
the relevant agreement or instrument or applicable laws or (B) violate
applicable laws, (iv) the rights or remedies available to any party insofar as
such party may take discretionary action that is arbitrary, unreasonable or
capricious, or is not taken in good faith or in a commercially reasonable
manner, whether or not such action is permitted under the Transaction Documents,
and (v) the strict enforcement of certain covenants in contracts absent a
showing of damage to the other party.
D. We express no opinion with respect to the legality, validity,
binding nature or enforceability of any provision in any Transaction Document to
the effect that rights or remedies are not exclusive, that every right or remedy
is cumulative and may be exercised in addition to any other right or remedy,
that the election of some particular remedy does not preclude recourse to one or
more others or that failure to exercise or delay in exercising rights or
remedies will not operate as a waiver of any such right or remedy.
E. We express no opinion as to the legality, validity, binding
nature or enforceability of any provision in any Transaction Document (i) that
purports to indemnify a party against liability for its own wrongful or
negligent acts or to the extent such provisions may be held unenforceable as
contrary to public policy, or (ii) insofar as it provides for the payment or
reimbursement of costs and expenses or indemnification for claims, losses or
liabilities in excess of a reasonable amount determined by any court or other
tribunal. We express no opinion regarding RBC's or any Stockholder's ability to
collect attorneys' fees and costs in an action involving any Transaction
Document if RBC or such Stockholder, as the case may be, is not the prevailing
party in such action.
F. We express no opinion as to any provision in any Transaction
Document requiring written amendments or waivers of such documents insofar as it
suggests that oral or other modifications, amendments or waivers could not be
effectively agreed upon by the parties or that the doctrine of promissory
estoppel might not apply.
<PAGE>
GIBSON, DUNN & CRUTCHER
March 31, 1992
Page 8
This opinion is rendered as of the date set forth above solely for
the benefit of RBC in connection with the Transaction Documents and is not to be
relied upon, used, circulated, referred to or quoted to any other party or for
any other purpose without our prior written consent, except that the
Stockholders, with the exception of the Stockholder identified on Annex I to the
Agreement of Reorganization as Overland Trust Bank, may rely hereon.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER
GIBSON, DUNN & CRUTCHER
TLC/GNN
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
DISCLOSURE SCHEDULES
TO THE
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 31, 1992,
AMONG
ROLLER BEARING COMPANY OF AMERICA, INC.,
ROLLER BEARING ACQUISITION, INC.,
ROLLER BEARING HOLDING COMPANY, INC.
AND
THE STOCKHOLDERS OF ROLLER BEARING COMPANY OF AMERICA, INC.
- --------------------------------------------------------------------------------
All capitalized terms not defined herein shall have the meanings ascribed to
them in the Agreement and Plan of Reorganization.
<PAGE>
TABLE OF CONTENTS
Page
----
Schedule 3.1(a) - Title to Shares ........................................... 1
Schedule 3.1(c) - Authority (Stockholders) .................................. 3
Schedule 3.2(b) - Authority (RBC) ........................................... 4
Schedule 3.2(c) - Capital Structure ......................................... 5
Schedule 3.2(e) - Financial Information ..................................... 6
Schedule 3.2(f) - Absence of Undisclosed Liabilities ........................ 7
Schedule 3.2(g) - Absence of Changes ........................................ 8
Schedule 3.2(h) - Title to Assets, Properties and Rights and
Related Matters ......................................... 12
Schedule 3.2(i) - Agreements ................................................ 14
Schedule 3.2(j) - Compliance; Governmental Authorization .................... 24
Schedule 3.2(k) - Litigation, Etc............................................ 25
Schedule 3.2(1) - Tax ....................................................... 27
Schedule 3.2(m) - ERISA ..................................................... 28
Schedule 3.2(n) - Environmental Reports ..................................... 29
Schedule 3.2(0) - Intellectual Property ..................................... 31
Schedule 3.2(p) - Labor Relations; Employees ................................ 33
Schedule 3.2(q) - Insurance ................................................. 34
Schedule 3.2(t) - Depositions, Powers of Attorney ........................... 37
Schedule 4.1(b) - Authority (Buyer) ......................................... 39
Schedule 4.1(e) - Balance Sheet of Buyer .................................... 40
Schedule 4.1(f) - Brokers' or Finders' Fees ................................. 41
-i-
<PAGE>
Schedule 3.l(a) - Title to Shares
A. All shares of capital stock of Roller Bearing Company of America, Inc.
("RBC"), Industrial Tectonics Bearings Corporation, a wholly-owned
subsidiary of RBC ("ITB"), and RBC Fineblanking, Inc., a wholly-owned
subsidiary of RBC ("RBCF"), are currently pledged to Citicorp North
America, Inc. (formerly known as Citicorp Industrial Credit, Inc.)
("Citicorp") (the "Citicorp Pledge") pursuant to a Loan and Security
Agreement dated as of October 30, 1987, as amended (the "Citicorp Loan
Agreement" or "Citicorp Loan"), among RBC, ITB, RBCF and Citicorp, which
loan will be paid in full at Closing.
B. In addition to the Citicorp Pledge, all shares of capital stock of RBC
held by Gary Holmes have been pledged to (1) RBC (which pledge is
subordinated to the Citicorp Pledge) pursuant to a stock pledge agreement
between Mr. Holmes and RBC as security for a loan made by RBC to Mr.
Holmes and (2) Bitrix Associates C.V. (which pledge is subordinated to the
Citicorp Pledge and the pledge to RBC), pursuant to certain stock pledge
agreements between Gary Holmes and Bitrix Associates C.V. as security for
loans made by Bitrix Associates C.V. to Mr. Holmes, all of which loans
will be paid in full at Closing.
C. There are no voting agreements or understandings between any stockholders
of RBC, or, to the knowledge of RBC, between any of them and any other
person, with respect to the voting of any of the shares of capital stock
of RBC.
D. Item (B) on Schedule 3.2(c) is incorporated herein by reference in its
entirety.
E. All of the shares of Class A Common Stock and Series A Preferred Stock
held by Harold Macsata and Fred Morlok, in addition to the Citicorp
Pledge, are subject to (1) a right of first refusal in favor of Bitrix
Associates C.V. and Columbus Holdings Limited in the event such employees
are not employed by RBC at any time after October 30, 1992, (2) a purchase
option or obligation, as the case may be, in favor of Bitrix Associates
C.V. and Columbus Holdings Limited in the event such employees are
terminated voluntarily or for cause prior to October 30, 1992, as the case
may be, (3) a "bring-along right" in favor of Bitrix Associates C.V. and
Columbus Holdings Limited in the event that they propose to transfer a
majority of the shares of RBC then held by them to any person and (4)
certain other transfer restrictions in favor of Bitrix Associates C.V. and
Columbus Holdings Limited, all as delineated in the Stock
<PAGE>
Purchase Agreements dated as of November 30, 1991, and January 31, 1992, as
amended, between each of Mr. Macsata and Mr. Morlok, respectively, and RBC,
Bitrix Associates C.V. and Columbus Holdings Limited.
-2-
<PAGE>
Schedule 3.1(c) - Authority (Stockholders)
A. Items (A), (B) and (D) on Schedule 3.1(a) are incorporated herein by
reference in their entirety.
-3-
<PAGE>
Schedule 3.2(b) - Authority (RBC)
A. The transaction would constitute a default under the Citicorp Loan
Agreement and the related Citicorp Pledge; however, the Citicorp Loan will
be will be paid in full at Closing.
B. The transaction will require a filing pursuant to the New Jersey
Environmental Cleanup and Responsibility Act with, and the approval of or
negative declaration from, the New Jersey Department of Environmental
Protection prior to Closing.
C. Consents to the transaction may be required pursuant to the following
leases and contracts:
1. Consents may be required to transfer the U.S. Government contracts
of RBC and ITB pursuant to the Anti-Assignment Act, 41 U.S.C. ss.15
and 48 C.F.R. 42.1204.
2. Lease dated as of March 27, 1991, between Walnut Realty, Ltd. and
RBC with respect to an office and warehouse located at 2974
Congressman Lane, Dallas, Texas.
3. Lease Agreement dated August 31, 1997, between RBC and U.S. Fleet
Leasing, Inc. for the lease of certain automobiles.
4. Master Lease Agreement dated April 29, 1990, between Sun Financial
Group, Inc. and RBC for certain computer software equipment.
5. Lease Agreement dated October 9, 1990, between MDC Newtown
Partnership and RBC with respect to 13,700 square feet at 140 Terry
Drive, Newtown, Pennsylvania (only prior notice required).
D. The transaction would constitute a default under the Loan Agreement dated
as of August 14, 1989 (the "Subordinated Loan Agreement"), among RBC,
Bitrix Associates C.V., and Overland Trust Bank; however, all amounts
outstanding under the Subordinated Loan Agreement will be paid in full at
the Closing.
-4-
<PAGE>
Schedule 3.2(c) - Capital Structure
A. Each of the items on Schedule 3.1(a) are incorporated herein by reference
in their entirety.
B. Mike Hartnett ("Hartnett") holds options to purchase an aggregate of
61.237 shares of REC's Class A Common Stock, $.0l par value (the "Class A
Common Stock"), as follows:
(a) Options to purchase an aggregate of 41.237 shares of Class A Common
Stock from RBC for an aggregate purchase price of $310,000
($7,517.52 per share); and
(b) Options to purchase 15 shares of RBC Class B Common Stock, $.01 par
value (the "Class B Common Stock"), from Bitrix Associates C.V., and
5 shares of RBC Class B Common Stock from Columbus Holdings Limited,
in each case for $2,500 per share, which Hartnett must then
immediately sell to RBC in exchange for 20 shares of Class A Common
Stock (this option is available only after August 15, 1992, and only
if the options described in the preceding clause (a) are exercised
in full).
C. Bitrix Associates C.V. and Overland Trust Bank ("OTB") hold warrants (the
"Warrants") to purchase 35.38 and 72.05 shares of Class A Common Stock,
respectively, at an exercise price of $.0l per share, pursuant to the
Subordinated Loan Agreement dated August 14, 1989, among RBC, Bitrix
Associates C.V. and OTB. In the event of a merger or consolidation of RBC
with another entity, the right to purchase each share of Class A Common
Stock pursuant to the Warrants will be automatically converted into the
right to receive the securities or property issuable or distributable in
respect of one share of Class A Common Stock of RBC, or its successors,
upon such merger or consolidation.
-5-
<PAGE>
Schedule 3.2(e) - Financial Information
A. See attached consolidated balance sheet of RBC as at November 2, 1991, and
the related statements of operations and accumulated deficit and of cash
flows for the 52-week period then ended, audited by Deloitte & Touche,
independent certified public accountants.
B. See attached consolidated balance sheet of RBC as at November 3, 1990 and
October 26, 1989 and the related consolidated statements of operations and
accumulated deficit for the 53-week and 52-week, respectively, periods
then ended, audited by Goldstein Golub Kessler & Company, P.C.,
independent certified public accountants.
-6-
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(with supplementary Information)
NOVEMBER 3, 1990
[LOGO]
GOLDSTEIN
GOLUB
KESSLER
& COMPANY PC
CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF GMN INTERNATIONAL
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOVEMBER 3, 1990
CONTENTS
Page
----
Independent Auditor's Report 1
Consolidated Financial Statement:
Balance Sheet 2
Statement of Operations and Accumulated Deficit 3
Statement of Cash Flows 4
Notes to Consolidated Financial Statements 5 - 16
Supplementary Information:
Independent Auditor's Report on Consolidated
Supplementary Information 17
Consolidated Statement of Operations Using the
First-In, First-Out Method of Inventory Valuation 18
Consolidated Cost of Goods Sold 19
Consolidated Packing, Shipping and Selling Expenses 20
Consolidated General and Administrative Expenses 20
Consolidating Balance Sheet 21 - 22
Consolidating Statement of Operations and Retained
Earnings (Accumulated Deficit) 23
Consolidating Cost of Goods Sold 24
Consolidating Packing, Shipping and Selling Expenses 25
Consolidating General and Administrative Expenses 25
<PAGE>
[Letterhead of GOLDSTEIN
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Roller Bearing Company of America, Inc.
We have audited the accompanying consolidated balance sheets of Roller Bearing
Company of America, Inc. and Subsidiaries as of November 3, 1990 and October 28,
1989, and the related consolidated statements of operations and accumulated
deficit and cash flows for the fifty-three and fifty-two-week periods then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 financial position of Roller Bearing
Company of America, Inc. and Subsidiaries as of November 3, 1990 and October 28,
1989, and the results of their operations and their cash flows for the
fifty-three and fifty-two-week periods then ended in conformity with generally
accepted accounting principles.
/s/ GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
December 21, 1990,
except for Note 11, as to
which the date is May 3, 1991
<PAGE>
ROLLER BEARING COMPANY OF AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
November 3, October 28,
1990 1989
------------ ------------
<S> <C> <C>
ASSETS (Note 5)
Current Assets:
Cash (Note 1) $ 105,000
Accounts receivable, less allowance for doubtful
accounts of $41,000 and $31,000, respectively 7,987,000 $ 5,320,000
Inventories (Notes 2 and 3) 12,389,000 8,417,000
Prepaid Expenses and other current assets (Note 11) 1,133,000 104,000
------------ ------------
Total current assets 21,614,000 13,841,000
Property, Plant and Equipment, less accumulated
depreciation of $4,020,000 and $2,214,000,
respectively (Notes 2 and 4) 19,190,000 10,576,000
Other Assets (Note 11) 787,000 484,000
------------ ------------
Total Assets $ 41,591,000 $ 24,901,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 5,294,000 $ 3,781,000
Loan payable (Note 5) 10,982,000 8,192,000
Current portion of long-term debt (Note 5) 2,271,000 679,000
Accrued expenses and other current liabilities 1,698,000 1,178,000
Due to seller (Notes 1 and 5) 562,000
Obligation for postretirement benefits,
current portion (Note 9) 27,000 23,000
------------ ------------
Total current liabilities 20,834,000 13,853,000
Long-term Debt, net of current portion (Note 5) 12,955,000 3,979,000
Subordinated Long-term Debt (Note 6) 4,929,000 3,934,000
Obligation for Postretirement Benefits, net of current portion (Note 9) 1,311,000 1,338,000
Deferred Income Taxes Payable (Note 12) 246,000 246,000
------------ ------------
Total liabilities 40,275,000 23,350,000
------------ ------------
Commitments and Contingency (Notes 5, 7, 8, 10 and 13)
Stockholders' Equity (Note 6):
Series A, nonvoting preferred stock - par value $.01; authorized 4,000
shares, issued and outstanding 945 shares with a redemption value of
$472,500 (Note 10) 10 10
Class A, voting common stock - par value $.01;
authorized 3,000 shares, issued and outstanding
1,835 shares 18 18
Class B, nonvoting Common stock - par value $.01;
authorized 3,000 shares, issued and outstanding
220 shares 2 2
Additional paid-in capital, including $90,000 and
$70,000 attributable to warrants, respectively 1,589,970 1,569,970
Accumulated deficit (274,000) (19,000)
------------ ------------
Stockholders' equity 1,316,000 1,551,000
------------ ------------
Total Liabilities and Stockholders' Equity $ 41,591,000 $ 24,901,000
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
- 2 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
For the For the
Fifty-three- Fifty-two
Week Period Week Period
Ended Ended
November 3, October 28,
1990 1989
------------ ------------
Net sales $ 43,031,000 $ 37,160,000
Cost of goods sold 32,274,000 25,416,000
------------ ------------
Gross profit 10,757,000 11,744,000
------------ ------------
Operating expenses:
Packing, shipping and selling 2,391,000 2,293,000
General and administrative 5,620,000 4,925,000
Management fee (Note 11) 271,000 150,000
------------ ------------
8,282,000 7,368,000
------------ ------------
Income from operations 2,475,000 4,376,000
------------ ------------
Interest expense, net of interest
income of $59,000 in 1990 (Note 11) 2,643,000 2,264,000
------------ ------------
Income (loss) before provision for income
taxes and extraordinary item (168,000) 2,112,000
Provision for income taxes (Note 12) 87,000 854,000
------------ ------------
Income (loss) before extraordinary item (255,000) 1,258,000
Extraordinary item - income tax benefits
arising from utilization of net
operating loss carryforwards 265,000
------------ ------------
Net income (loss) (255,000) 1,523,000
Accumulated deficit at beginning
of period (19,000) (1,542,000)
------------ ------------
Accumulated deficit at end of period $ (274,000) $ (19,000)
============ ============
See Notes to Consolidated Financial Statements
- 3 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the
Fifty-three- Fifty-two
Week Period Week Period
Ended Ended
November 3, October 28,
1990 1989
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (255,000) $ 1,523,000
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 1,806,000 1,217,000
Gain on sale of property and equipment (38,000)
Amortization of subordinated debt discount 15,000 4,000
Provision for losses on accounts receivable 10,000
Provision for deferred income taxes 246,000
Changes in operating assets and liabilities
net of acquisition:
Increase in accounts receivable (1,341,000) (744,000)
Increase in inventories (808,000) (1,488,000)
Increase in prepaid expenses and other
current assets (1,029,000) (8,000)
Increase in other assets (303,000) (484,000)
Increase in accounts payable 818,000 1,362,000
Increase (decrease) in accrued expenses and
other current liabilities (280,000) 399,000
------------ -----------
Net cash provided by (used in)
operating activities (1,367,000) 1,989,000
------------ -----------
Cash flows from investing activities:
Purchases of property and equipment (3,164,000) (3,198,000)
Acquisition of business (5,599,000)
------------ -----------
Cash used in investing activities (8,763,000) (3,198,000)
------------ -----------
Cash flows from financing activities:
Net proceeds of loan payable 2,790,000 519,000
Proceeds from issuance of subordinated
long-term debt 1,000,000 4,200,000
Retirement of subordinated long-term debt (1,740,000)
Proceeds from long-term debt 7,545,000 1,277,000
Principal payments on obligation for
postretirement benefits (23,000) (21,000)
Principal payments of long-term debt (1,077,000) (3,026,000)
------------ -----------
Net cash provided by financing activities 10,235,000 1,209,000
------------ -----------
Net increase in cash and cash at end of period $ 105,000 $ -0-
============ ===========
</TABLE>
See Notes to Consolidated Financial Statements
- 4 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 1990
Note 1 - Acquisitions:
On June 29, 1990, ITI Acquisition, Inc. (the "Purchaser"), a newly formed
and inactive corporation whose name has been changed to Industrial Tectonics
Bearings Corporation ("ITB") and a wholly owned subsidiary of Roller Bearing
Company of America, Inc. ("RBC"), entered into an asset purchase agreement (the
"Agreement") to acquire certain assets and assume certain liabilities of the
Bearing Division of Industrial Tectonics, Inc. (the "Seller"). The cost of the
acquisition under the Agreement amounted to approximately $10,361,000 (including
$100,000 held in escrow to cover ITB's liability for environmental matters, as
defined in the Agreement) plus approximately $800,000 of acquisition costs. The
transaction has been accounted for as a purchase using the acquisition date of
July 16, 1990 (date of closing). The excess of the purchase price over the book
value of net assets acquired amounted to approximately $1,023,000, which amount
has been allocated to property, plant and equipment.
This transaction was financed with a $5,000,000 term loan from a bank and
a $4,100,000 promissory note to the Seller (see Note 5).
On October 27, 1989, RBC Fineblanking, Inc. ("RBCF"), a newly formed
Connecticut corporation (incorporated on October 25, 1989), acquired certain
property and equipment of Mitral Corporation. The cost of the acquired assets
amounted to approximately $675,000. The transaction was accounted for as a
purchase.
The consolidated statement of operations and accumulated deficit includes
the operating results of RBCF for the fifty-three-week period ended November 3,
1990 and of ITB from the date of closing.
Note 2 - Principal Business Activity and Significant Accounting Policies:
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts of
RBC and its wholly owned subsidiaries ITB and RBCF (collectively referred to as
the "Company"). All material intercompany accounts and transactions have been
eliminated in consolidation.
- 5 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 1990
Note 2 - Principal Business Activity and Significant Accounting Policies
(continued):
Principal Business Activity:
The Company is engaged in the manufacture and sale of roller bearing
components and assembled parts, and in the design, manufacture and sale of
high-precision roller and ball bearings.
Fiscal Year:
The Company reports its operations based on a fifty-two or
fifty-three-week period ending on the Saturday closest to October 31.
Inventories:
Inventories are stated at the lower of cost, determined by the last-in,
first-out ("LIFO") method, or market. (See Note 3 for the effect on the
financial statements.)
Revenue Recognition:
Sales are recorded when products are shipped. For sales under fixed-price
contracts a provision for anticipated losses is made in the period in which they
first become determinable.
Depreciation:
Depreciation of property, plant and equipment is being provided for by the
straight-line method over the estimated useful lives of the respective assets.
Income Taxes:
The Company files a consolidated federal income tax return.
Deferred income taxes represent the tax effect of timing differences for
financial reporting and income tax purposes. The principal timing differences
relate to the use of accelerated depreciation methods in connection with the
preparation of the Company's income tax returns and depreciation provided for in
accordance with the Company's depreciation policy for financial statement
purposes (see Note 12).
- 6 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 1990
Note 3 - Inventories:
The components of inventories on a first-in, first-out basis ("FIFO") are
as follows:
November 3, October 28,
1990 1989
----------- ----------
Raw materials $ 1,786,000 $1,780,000
Work-in-process 5,628,000 1,548,000
Finished goods 8,128,000 5,966,000
----------- ----------
15,542,000 9,294,000
Less adjustment to reduce
inventories to LIFO 2,178,000 877,000
----------- ----------
13,364,000 8,417,000
Less progress billings 975,000
----------- ----------
$12,389,000 $8,417,000
=========== ==========
For inventory which will eventually be resold to the United States
government, on which the Company has received progress payments, the United
States has a security interest in certain assets, as defined in each purchase
order, relating to this inventory.
The Company uses the LIFO method of determining the cost of its
inventories. The Company believes the LIFO method will reduce the effect of
future inflationary cost increases in inventories and thus match current costs
with current revenue.
If inventories were valued using the FIFO method, inventories would have
been $2,178,000 and $877,000 higher at November 3, 1990 and October 28, 1989,
respectively, and net income would have been $989,000 and $71,000 higher for the
periods then ended, respectively.
At November 3, 1990 and October 28, 1989, the accounting basis of LIFO
inventories was higher than the tax basis by approximately $862,000 and
$560,000, respectively, as a result of applying the provisions of Accounting
Principles Board Opinion No. 16.
- 7 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 1990
Note 4 - Property, Plant and Equipment:
Property, plant and equipment, which is stated at cost, consists of the
following:
November 3, October 26, Depreciation
1990 1989 Period
----------- ----------- ------------
Land $ 2,772,000 $ 408,000
Building and
improvements 4,268,000 1,987,000 30 years
Machinery and
equipment 15,741,000 10,080,000 7 years
Computer and office
equipment 429,000 315,000 7 years
----------- -----------
$23,210,000 $12,790,000
=========== ===========
Machinery and equipment includes assets acquired under capital leases in
the aggregate amount of $1,201,000 net of accumulated depreciation of $191,000
at November 3, 1990.
Note 5 - Loan Payable and Long-term Debt:
The Company has a credit facility agreement, which was amended on July 16,
1990, which provides for borrowings under term loans, capital expenditure
advances and a revolving credit agreement, not to exceed $24,000,000 with
interest on all borrowings calculated at 1-1/2% - 2-1/2% per annum above the
lender's base rate. Under the revolving credit agreement, the Company borrowed
$10,982,000 and $8,192,000 at November 3, 1990 and October 28, 1989,
respectively, which is reflected as loan payable on the accompanying
consolidated balance sheet.
- 8 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 1990
Note 5 - Loans Payable and Long-term Debt (continued):
Long-term debt consists of the following:
November 3, October 28,
1990 1989
----------- ----------
Term loan (i) $ 2,721,000 $3,435,000
Term loan (ii) 4,923,000
Capital expenditure advances (iii) 2,341,000 506,000
Obligations under capital leases (iv) 999,000 690,000
Note payable - seller (v) 4,100,000
Due to related party (see Note 11) 242,000
Other 27,000
----------- ----------
15,226,000 4,658,000
Less current portion 2,271,000 679,000
----------- ----------
$12,955,000 $3,979,000
=========== ==========
(i) This term loan is payable in quarterly installments of $195,000, and
commencing January 31, 1992, $320,000, with a final payment due in October 1992
of $1,020,000. This loan bears interest at 1-1/2% above the bank's base rate.
(ii) This term loan is payable in quarterly installments of $177,500 with
a final payment due in October 1992 of $3,580,000. This loan bears interest at
2-1/2% above the bank's base rate.
(iii) The amended credit facility provides for capital expenditure
advances not to exceed $3,400,000. The agreement provides that the aggregate
principal amount advanced through April 30, 1991 will be payable in 23 monthly
installments, as defined, with a final installment for the remaining principal
balance due on October 31, 1992. This loan bears interest at 1-1/2% above the
bank's base rate.
(iv) The Company has acquired certain equipment under leases which have
been accounted for as capital leases. These items are included in property,
plant and equipment in the accompanying balance sheet. The minimum lease
payments have been capitalized using interest rates ranging from 12-1/2% to
15-1/2%. The balance is shown net of deferred interest of $274,000 and $163,000,
respectively.
(v) The note payable - seller is payable on July 16, 1995, with interest
payable semiannually commencing January 16, 1991. This subordinated loan bears
interest at the rate of 6% per annum for the period from July 16, 1990 to July
15, 1991, 9% per annum for the period from July 16, 1991 to July 15, 1992 and
12% per annum thereafter.
- 9 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 1990
Note 5 - Loans Payable and Long-term Debt (continued):
Aggregate maturities of long-term debt are as follows:
Fiscal year ending in
1991 $ 2,271,000
1992 8,313,000
1993 251,000
1994 268,000
1995 4,123,000
-----------
$15,226,000
===========
Borrowings under the credit facility are collateralized by substantially
all of the assets and the capital stock of the Company.
The credit facility, as amended, contains covenants that require
maintenance of certain amounts of working capital, tangible net worth and
earnings. It also restricts capital expenditures and requires maintenance of
certain ratios.
In addition, the Company is required to pay a contingency fee to the
lender. The fee is 1/2% of net sales for each year through 1990 in which net
sales do not exceed $30,000,000 and gross profit, adjusted for certain
depreciation and fringe benefits, does not exceed $11,700,000. At November 3,
1990 and October 28, 1989, no fee was recorded as the Company exceeded the above
requirements.
Interest paid amounted to approximately $2,600,000 and $2,343,000 for the
periods ended November 3, 1990 and October 28, 1989, respectively.
Note 6 - Subordinated Long-term Debt:
On August 14, 1989, the Company borrowed $4,000,000 through the issuance
of subordinated long-term debt from two entities, one of which is a related
party. On July 16, 1990, the Company borrowed an additional $1,000,000 from
these entities under the same terms. This debt bears interest at the rate of 14%
per annum. Interest is payable semiannually, with the principal payable on
August 14, 1994. At November 3, 1990, $1,645,000 was owed to the related party.
For the fifty-three-week period ended November 3, 1990, interest on the loan
from the related party amounted to approximately $199,000.
- 10 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 1990
Note 6 -.Subordinated Long-term Debt (continued):
The Company issued common stock purchase warrants in connection with the
subordinated long-term debt. The warrants entitle the holders to purchase, in
the aggregate, 107.2 shares of Class A common stock at an exercise price of $.01
per share. Such shares have been reserved for issuance. The warrants expire on
August 14, 1994 and contain antidilutive provisions. As of November 3, 1990,
these warrants have not been exercised.
Note 7 - Commitments:
The Company leases factory facilities under a noncancelable operating
lease, which expires in October 1991, for $250,000 per annum. The lease is
renewable thereafter, at the option of the Company, for up to two successive
one-year terms at a maximum rental of $250,000 per annum. The Company is
responsible for the payment of real estate taxes and certain operating costs in
connection with this lease.
The Company entered into a noncancelable operating lease on November 1,
1990 for office facilities, which expires in October 1995, for approximately
$175,000 per annum. The lease is renewable thereafter, at the option of the
Company, for an additional five-year term. The lease is subject to escalation
based upon increases in the Consumer Price Index.
The Company also has noncancelable operating leases for warehouse
facilities, transportation equipment and computer and office equipment, which
expire at various dates through October 30, 1993.
The aggregate future minimum rental commitments under these leases are as
follows:
Fiscal year ending in
1991 $ 619,000
1992 258,000
1993 198,000
1994 175,000
1995 175,000
----------
$1,425,000
==========
- 11 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 1990
Note 7 - Commitments (continued):
Rent expense charged to operations amounted to approximately $641,000 and
$543,000 for the periods ended November 3, 1990 and October 28, 1989,
respectively.
Note 8 - Pension Plans:
In 1987, the Company assumed two noncontributory defined benefit pension
plans covering union employees in its West Trenton, New Jersey, division ("Union
Plan") and all employees in its Hartsville, South Carolina, division
("Hartsville Plan"). During the period ended October 28, 1989, the Company
authorized the termination and the distribution of all the assets of the
Hartsville Plan. The termination amount was approximately $70,000 and is
recorded in the accompanying consolidated statement of operations and
accumulated deficit. The Company was obligated to make termination payments to
the plan and participants may be eligible for continuation of benefits under
insurance provided by the Pension Benefit Guaranty Corporation (a U.S.
government agency).
The Company annually contributed to the Union Plan an amount that is
actuarially determined to provide the plan with sufficient assets to meet future
benefit payment requirements. Plan assets are comprised primarily of U.S.
government securities and corporate bonds. The plan provides benefits of stated
amounts based on an employee's years of service.
Pension expense for this plan is comprised of the following:
For the Period Ended
November 3, October 28,
1990 1989
--------- ---------
Service cost benefits earned
during the period $ 78,000 $ 82,000
Interest cost 309,000 317,000
Actual return on plan assets (342,000) (364,000)
Net amortization and deferrals (6,000) (9,000)
--------- ---------
Total pension expense $ 39,000 $ 26,000
========= =========
- 12 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 1990
Note 8 - Pension Plans (continued):
The funded status of the Union Plan is as follows:
November 3, October 28,
1990 1989
----------- -----------
Plan assets $ 3,968,000 $ 3,993,000
Actuarial present value of projected
benefit obligation 4,191,000 4,001,000
----------- -----------
Plan assets less than projected
benefit obligation (223,000) (8,000)
Unrecognized net loss 38,000 35,000
Unrecognized prior service cost 325,000 228,000
Unrecognized net asset at transition -
amortized over a minimum of 15 years (230,000) (249,000)
----------- -----------
Prepaid (accrued) pension expense $ (90,000) $ 6,000
=========== ===========
The assumptions used in determining pension expense and funded status
information were as follows:
Discount rate 8%
Expected long-term rate of
return on assets 9%
Certain officers of the Company are the trustees of the plans.
Additionally, the Company has established salary reduction plans under
Section 401(k) of the Internal Revenue Code for all of its employees not covered
by a collective bargaining agreement. The plans are funded by participants
through employee contributions and by Company contributions equal to a
percentage of eligible employees' compensation. The Company contributions
charged to operations amounted to approximately $235,000 and $181,000 for the
periods ended November 3, 1990 and October 28, 1989, respectively.
Note 9 - Postretirement Health Care and Life Insurance Benefits:
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for substantially all former employees
who retired after attaining specified age and service requirements. At October
30, 1987, the
- 13 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 1990
Note 9 - Postretirement Health Care and Life Insurance Benefits (continued):
Company recorded the actuarially computed present value of the future benefits
payable to present retirees, which was estimated at June 30, 1987 (the latest
valuation date) to be $1,400,000. Accrued costs are funded annually and were
$23,000 and $21,000 for the periods ended November, 3, 1990 and October 28,
1989, respectively. Any liability for future retirees cannot presently be
determined.
Note 10 - Series A Preferred Stock:
There are 4,000 shares of $.01 par value Series A preferred stock
authorized, with 945 shares issued for $500 per share. These shares have no
voting privileges and, with respect to dividends, are cumulative at the rate of
$67.50 per share per annum. No dividends were paid during the periods ended
November 3, 1990 and October 28, 1989. Dividends in the amount of $191,363 are
in arrears at November 3, 1990. In the event of liquidation, the holders of each
share of Series A preferred stock shall be entitled to receive $500 per share,
plus any unpaid dividends. Additionally, the Company may, at any time, redeem
the whole or any part of the preferred stock in the amount of $500 per share
together with any unpaid dividends on such shares subject to restrictions
contained in the credit facility agreement.
Note 11 - Related Party Transactions:
In connection with the acquisition of ITB described in Note 1, the Company
paid approximately $160,000 of acquisition costs to certain stockholders and a
company affiliated with certain other stockholders.
Additionally, the Company entered into an arrangement whereby a company
affiliated with certain stockholders will provide management services to the
Company for a fee of $325,000 per annum. At November 3, 1990, $242,000 is owed
to this affiliated company, which amount is payable on November 1, 1991.
Accordingly, this amount is included in long-term debt (see Note 5).
Prepaid expenses and other current assets and other assets include
approximately $300,000 and $572,000, respectively, including accrued interest of
$59,000 due from an officer/
- 14 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 1990
Note 11 - Related Party Transactions (continued):
stockholder of the Company. Repayment terms are $50,000 per annum with a final
payment of principal and accrued interest on December 26, 1994. Interest is
calculated at a bank's prime rate, and is payable annually. For the period ended
November 3, 1990, the Company recorded interest income of approximately $59,000.
During April and May 1991, the officer/stockholder repaid the accrued interest
and a portion of the principal due.
Note 12 - Provision for Income Taxes:
The provision for income taxes consists of the following:
For the Period Ended
---------------------------
November 3, October 28,
1990 1989
----------- -----------
Federal:
Current - alternative
minimum tax $ 87,000 $272,000
Deferred 246,000
Charge in lieu of
income taxes 200,000
-------- --------
87,000 718,000
State 136,000
-------- --------
$ 87,000 $854,000
======== ========
The Tax Reform Act of 1986 enacted an alternative minimum tax system for
corporations, generally effective for taxable years beginning after December 31,
1986. The alternative minimum tax is imposed at a 20% rate on the corporation's
alternative minimum taxable income, which is determined by making statutory
adjustments to the corporation's regular taxable income. For the periods ended
November 3, 1990 and October 28, 1989, $87,000 and $272,000, respectively, of
income taxes currently payable are calculated pursuant to the alternative
minimum tax. This amount will be carried forward and allowed as a credit against
regular income tax in the event the regular income tax exceeds the alternative
minimum tax in future years.
For financial reporting purposes for the period ended October 28, 1989,
the income tax benefits attributable to the utilization of net operating losses
has been reflected as an extraordinary item.
- 15 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 1990
Note 12 - Provision for Income Taxes (continued):
The Company paid income taxes in the amount of $186,000 and $512,300
during the periods ended November 3, 1990 and October 28, 1989, respectively.
At November 3, 1990, the Company has approximately $1,250,000 of net
operating loss carryforwards available for regular income tax purposes to offset
future taxable income through 2005.
Note 13 - Litigation:
The Company is a defendant in litigation incidental to its operations.
Based on the opinion of management, resolution of this litigation will not have
a material impact on the financial position of the Company.
- 16 -
<PAGE>
[LOGO]
INDEPENDENT AUDITOR'S REPORT ON
CONSOLIDATED SUPPLEMENTARY INFORMATION
To the Board of Directors
Roller Bearing Company of America, Inc.
We have audited the basic consolidated financial statements of Roller Bearing
Company of America, Inc. and Subsidiaries for the fifty-three and fifty-two-week
periods ended November 3, 1990 and October 28, 1989, respectively, and those
statements, together with our opinion thereon, are presented in the preceding
section of this report. Our audits were made primarily for the purpose of
formulating an opinion on those financial statements. The consolidated
supplementary information, as listed in the table of contents, is the
responsibility of management and, although not considered necessary for a fair
presentation of financial position, results of operations and cash flows, is
presented for additional analysis and has been subjected to the auditing
procedures applied in the audits of the basic financial statements. In our
opinion, the consolidated supplementary information is fairly stated, in all
material respects, in relation to the basic consolidated financial statements
taken as a whole.
/s/ GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
December 21, 1990,
except for Note 11, as to
which the date is May 3, 1991
<PAGE>
ROLLER BEARING COMPANY OF AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS USING THE
FIRST-IN, FIRST-OUT METHOD OF INVENTORY VALUATION
For the For the
Fifty-three- Fifty-two-
Week Period Week Period
Ended Ended
November 3, October 28,
1990(1) 1989
----------- -----------
Net sales $43,031,000 $37,160,000
Cost of goods sold 30,973,000 25,313,000
----------- -----------
Gross profit 12,058,000 11,847,000
Operating expenses:
Packing, shipping and selling 2,391,000 2,293,000
General and administrative 5,620,000 4,925,000
Management fee 271,000 150,000
----------- -----------
8,282,000 7,368,000
----------- -----------
Income from operations 3,776,000 4,479,000
----------- -----------
Interest expense, net of interest
income of $59,000 2,643,000 2,264,000
----------- -----------
Income before provision for income
taxes $ 1,133,000 $ 2,215,000
=========== ===========
(1) Includes the operating results of RBCF for the fifty-three weeks ended
November 3, 1990 and the operating results of ITB for the period from July 16,
1990 to November 3, 1990.
See Notes to Consolidated Financial Statements
- 18 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED SUPPLEMENTARY INFORMATION
For the For the
Fifty-three- Fifty-two-
Week Period Week Period
Ended Ended
November 3, October 28,
1990(1) 1989
----------- -----------
Cost of goods sold:
Beginning inventory $ 8,417,000 $ 6,929,000
Raw material purchases 6,899,000 6,062,000
Inventory acquired 4,557,000
Labor 10,123,000 8,063,000
Fringe benefits 2,856,000 2,039,000
Parts purchased 1,939,000 2,525,000
Supplies 2,623,000 1,845,000
Subcontracting 2,103,000 2,324,000
Repairs 991,000 560,000
Freight-in 337,000 176,000
Miscellaneous 238,000 116,000
Property taxes 172,000 174,000
Fixed expenses:
Depreciation 1,806,000 1,217,000
Utilities 1,233,000 978,000
Salaries 913,000 493,000
Rent 431,000 332,000
----------- -----------
45,638,000 33,833,000
Less ending inventory 13,364,000 8,417,000
----------- -----------
Cost of goods sold $32,274,000 $25,416,000
=========== ===========
(1) Includes the operating results of RBCF for the fifty-three weeks ended
November 3, 1990 and the operating results of ITB for the period from July 16,
1990 to November 3, 1990.
See Notes to Consolidated Financial Statements
- 19 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED SUPPLEMENTARY INFORMATION
For the For the
Fifty-three- Fifty-two-
Week Period Week Period
Ended Ended
November 3, October 28,
1990(1) 1989
----------- -----------
Packing, shipping and selling expenses:
Salaries $1,176,000 $1,023,000
Fringe benefits 120,000 100,000
Office and packing supplies 278,000 411,000
Freight on sales 222,000 226,000
Commissions 97,000 176,000
Telephone 44,000 86,000
Travel and entertainment 251,000 127,000
Advertising 110,000 61,000
Rent 34,000 62,000
Miscellaneous 59,000 21,000
---------- ----------
$2,391,000 $2,293,000
========== ==========
General and administrative expenses:
Salaries $2,447,000 $2,114,000
Fringe benefits 918,000 770,000
Insurance 460,000 572,000
Professional fees 521,000 325,000
Temporary help and hiring 7,000 18,000
Travel and entertainment 311,000 285,000
Miscellaneous 235,000 259,000
Rentals 176,000 149,000
Supplies 150,000 184,000
Directors' fees 22,000 15,000
Relocation costs 136,000 71,000
Telephone 165,000 109,000
Repairs and maintenance 61,000 33,000
Dues and subscriptions 1,000 21,000
Bad debt expense 10,000
---------- ----------
$5,620,000 $4,925,000
========== ==========
(1) Includes the operating results of RBCF for the fifty-three weeks ended
November 3, 1990 and the operating results of ITB for the period from July 16,
1990 to November 3, 1990.
See Notes to Consolidated Financial Statements
- 20 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA INC. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
CONSOLIDATING BALANCE SHEET
NOVEMBER 3, 1990
<TABLE>
<CAPTION>
Roller
Bearing
Company of Roller RBC Industrial
America, Bearing Fine- Tectonics
Inc. and Company of blanking, Bearings
Subsidiaries Eliminations America. Inc. Inc. Corporation
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 105,000 $ 1,000 $ 104,000
Accounts receivable - net 7,987,000 $ (70,000) $ 5,648,000 123,000 2,286,000
Inventories 12,389,000 9,062,000 113,000 3,214,000
Prepaid expenses and other current
assets 1,133,000 1,071,000 62,000
Due from subsidiaries (1,837,000) 1,837,000
------------ ------------ ------------ ------------ ------------
Total current assets 21,614,000 (1,907,000) 17,618,000 237,000 5,666,000
Property, Plant and Equipment - net 19,190,000 11,185,000 858,000 7,147,000
Investment in Subsidiaries (1,001,000) 1,001,000
Other Assets 787,000 773,000 14,000
------------ ------------ ------------ ------------ ------------
Total Assets $ 41,591,000 $ 2,908,000) $ 30,577,000 $ 1,109,000 $ 12,813,000
============ ============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
- 21 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA INC. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
CONSOLIDATING BALANCE SHEET
(continued)
NOVEMBER 3, 1990
<TABLE>
<CAPTION>
Roller
Bearing
Company of Roller RBC Industrial
America, Bearing Fine- Tectonics
Inc. and Company of blanking, Bearings
Subsidiaries Eliminations America. Inc. Inc. Corporation
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,294,000 $ (70,000) $ 4,577,000 $ 24,000 $ 763,000
Loan payable 10,982,000 10,982,000
Current portion of long-term debt 2,271,000 1,561,000 710,000
Accrued expenses and other current
liabilities 1,698,000 1,065,000 25,000 608,000
Due to seller 562,000 562,000
Obligation for postretirement
benefits - current portion 27,000 27,000
Due to parent (1,837,000) 1,060,000 777,000
------------ ------------ ------------ ------------ ------------
Total current liabilities 20,834,000 (1,907,000) 18,212,000 1,109,000 3,420,000
Long-term Debt - net 12,955,000 4,742,000 8,213,000
Subordinated Long-term Debt 4,929,000 4,929,000
Obligation for Postretirement
Benefits - net 1,311,000 1,311,000
Deferred Income Taxes Payable 246,000 246,000
------------ ------------ ------------ ------------ ------------
Total liabilities 40,275,000 (1,907,000) 29,440,000 1,109,000 11,633,000
------------ ------------ ------------ ------------ ------------
Stockholders' Equity:
Preferred stock 10 10
Common stock 20 (1,001) 20 1,000 1
Additional paid-in capital 1,589,970 (999,999) 1,589,970 999,999
Retained earnings (accumilated deficit) (274,000) (453,000) (1,000) 180,000
------------ ------------ ------------ ------------ ------------
Stockholders' equity 1,316,000 (1,001,000) 1,137,000 - 0 - 1,180,000
------------ ------------ ------------ ------------ ------------
Total Liabilities and
Stockholders' Equity $ 41,591,000 $ (2,908,000) $ 30,577,000 $ 1,109,000 $ 12,813,000
============ ============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
- 22 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF OPERATIONS AND RETAINED
EARNINGS (ACCUMULATED DEFICIT)
FOR THE FIFTY-THREE-WEEK PERIOD ENDED NOVEMBER 3, 1990
<TABLE>
<CAPTION>
Roller
Bearing
Company of Roller RBC Industrial
America, Bearing Fine- Tectonics
Inc. and Company of blanking, Bearings
Subsidiaries Eliminations America. Inc. Inc. Corporation
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 43,031,000 $ (350,000) $ 38,358,000 $ 1,215,000 $ 3,808,000
Cost of goods sold 32,274,000 (350,000) 28,751,000 1,115,000 2,758,000
------------ ------------ ------------ ------------ ------------
Gross profit 10,757,000 9,607,000 100,000 1,050,000
------------ ------------ ------------ ------------
Operating expenses:
Packing, shipping and selling 2,391,000 2,308,000 11,000 72,000
General and administrative 5,620,000 5,182,000 438,000
Management fee 271,000 271,000
------------ ------------ ------------ ------------
8,282,000 7,761,000 11,000 510,000
------------ ------------ ------------ ------------
Income from operations 2,475,000 1,846,000 89,000 540,000
Interest expense, net 2,643,000 2,299,000 81,000 263,000
------------ ------------ ------------ ------------
Income (loss) before provision for
income taxes (168,000) (453,000) 8,000 277,000
Provision (benefit) for income taxes 87,000 (19,000) 9,000 97,000
------------ ------------ ------------ ------------
Net income (loss) (255,000) (434,000) (1,000) 180,000
Accumulated deficit at beginning
of period (19,000) (19,000)
------------ ------------ ------------ ------------ ------------
Retained earnings (accumulated deficit)
at end of period $ (274,000) $-0- $ (453,000) $ (1,000) $ 180,000
============ ============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
- 23 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
CONSOLIDATING COST OF GOODS SOLD
FOR THE FIFTY-THREE-WEEK PERIOD ENDED NOVEMBER 3, 1990
<TABLE>
<CAPTION>
Roller
Bearing
Company of Roller RBC Industrial
America, Bearing Fine- Tectonics
Inc. and Company of blanking, Bearings
Subsidiaries Eliminations America. Inc. Inc. Corporation
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Beginning inventory $ 8,417,000 $ 8,417,000
Raw material purchases 6,899,000 5,996,000 $ 268,000 $ 635,000
Inventory acquired 4,557,000 4,557,000
Labor 10,123,000 8,869,000 396,000 858,000
Fringe benefits 2,856,000 2,494,000 59,000 303,000
Parts purchased 1,939,000 1,939,000
Supplies 2,623,000 2,471,000 79,000 73,000
Subcontracting 2,103,000 $ (350,000) 2,371,000 82,000
Repairs 991,000 867,000 46,000 78,000
Freight-in 337,000 337,000
Miscellaneous 238,000 87,000 53,000 98,000
Property taxes 172,000 172,000
Fixed expenses:
Depreciation 1,806,000
1,502,000 136,000 168,000
Utilities 1,233,000 1,053,000 37,000 143,000
Salaries 913,000 913,000
Rent 431,000 325,000 72,000 34,000
------------ ------------ ------------ ------------ ------------
45,638,000 (350,000) 37,813,000 1,228,000 6,947,000
Less ending inventory 13,364,000 9,062,000 113,000 4,189,000
------------ ------------ ------------ ------------ ------------
Cost of goods sold $ 32,274,000 $ (350,000) $ 28,751,000 $ 1,115,000 $ 2,758,000
============ ============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
- 24 -
<PAGE>
ROLLER BEARING COMPANY OF AMERICA INC, AND SUBSIDIARIES
CONSOLIDATING SUPPLEMENTARY INFORMATION
FOR THE FIFTY-THREE-WEEK PERIOD ENDED NOVEMBER 3, 1990
<TABLE>
<CAPTION>
Roller
Bearing
Company of Roller RBC Industrial
America, Bearing Fine- Tectonics
Inc. and Company of blanking, Bearings
Subsidiaries Eliminations America. Inc. Inc. Corporation
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Packing, shipping and selling expenses:
Salaries $ 1,176,000 $ 1,136,000 $ 40,000
Fringe benefits 120,000 107,000 13,000
Office and packing supplies 278,000 274,000 4,000
Freight on sales 222,000 222,000
Commissions 97,000 88,000 $ 9,000
Telephone 44,000 44,000
Travel and entertainment 251,000 243,000 8,000
Advertising 110,000 108,000 2,000
Rent 34,000 34,000
Miscellaneous 59,000 52,000 7,000
------------ ------------ ------------ ------------
$ 2,391,000 $ 2,308,000 $ 11,000 $ 72,000
============ ============ ============ ============
General and administrative expenses:
Salaries $ 2,447,000 $ 2,359,000 $ 88,000
Fringe benefits 918,000 950,000 (32,000)
Insurance 460,000 460,000
Professional fees 521,000 434,000 87,000
Temporary help and hiring 7,000 7,000
Travel and entertainment 311,000 300,000 11,000
Miscellaneous 235,000 229,000 6,000
Rentals 176,000 176,000
Supplies 150,000 128,000 22,000
Directors' fees 22,000 22,000
Relocation costs 136,000 136,000
Telephone 165,000 154,000 11,000
Repairs and maintenance 61,000 60,000 1,000
Dues and subscriptions 1,000 1,000
Bad debt expense 10,000 10,000
Allocated expenses (226,000) 226,000
------------ ------------ ------------
$ 5,620,000 $ 5,182,000 $ 438,000
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
- 25 -
<PAGE>
Schedule 3.2(f) - Absence of Undisclosed Liabilities
A. Aetna Insurance and RBC are currently in discussions regarding the
year-end premium due under RBC's medical insurance split-funded plan with
Aetna for the year ended June 30, 1991.
-7-
<PAGE>
Schedule 3.2(g) - Absence of Changes
(i) Operations in Ordinary Course
1. Immediately prior to the Closing of the transaction, RBCF will be
merged with and into RBC and following such merger, RBCF will cease
to exist as a separate legal entity. In connection therewith,
certain equipment will be moved from RBCF in Connecticut to RBC's
plant in New Jersey. Charges associated with such move are expected
to total approximately $45,000.
2. A routine audit relating to payment by RBC of state sales tax was
recently completed by the State of New Jersey. As a result, RBC
agreed to pay approximately $15,000 in additional sales tax.
(ii) Material Changes, etc.
1. RBC is aware that modifications to U.S. Government defense
appropriations and related programs, including, without limitation,
the Seawolf Submarine Program (Program #SSN2l), are under review by
the Department of Defense and the U.S. Congress. Such modifications
may decrease the aggregate amount of U.S. Government spending on
defense related programs, including the Seawolf Program; however, it
is impossible to predict which programs will be affected and
therefore, what effect, if any, such modifications will have on RBC.
(iii) Damages, etc.
None.
(iv) Dividends, etc.
None.
(v) Borrowed Funds, etc.
None.
(vi) Encumbrances
None.
-8-
<PAGE>
(vii) Liabilities, etc.
1. RBC has entered into an agreement with J&H Machine Tools, Inc. for
the purchase of two Mori Seiki Turning Centers. The aggregate amount
due under such agreement is $341,766.40.
2. RBC has entered into an agreement with Carolina Handling, Inc., for
the purchase of a Side Loading Fork Lift Truck. The aggregate amount
due under such agreement is $29,600.
3. RBC has authorized BCM Engineers ("BCM") to perform certain
environmental services to ensure that RBC will successfully meet the
compliance deadline schedules submitted to the Ewing-Lawrence
Sewerage Authority for compliance with the effluent discharge
regulations at the West Trenton plant. The aggregate amount accrued
under such authorization to date is approximately $35,000, of which
$32,000 has already been paid. An additional $10,000 may have to be
spent in the future to complete such project.
4. RBC leased additional office equipment totalling $3,179.94 per month
pursuant to the Master Lease Agreement dated as of August 26, 1982,
between RBC and Comdisco, Inc. The aggregate amount due under such
agreement is $9,735.20 per month.
5. Item (i)(l) and (2) on this Schedule are incorporated herein in
their entirety by reference.
6. RBC has determined that it will incur certain costs associated with
closing a lagoon on its South Carolina property.
7. Since November 2, 1991, RBC has incurred approximately $4,700 in
legal fees it agreed to pay on behalf of Fred Roman in connection
with the matter disclosed in item A of Schedule 3.2(k) pursuant to
the agreement referenced in item C of Schedule 3.2.
8. On March 31, 1992, the Stockholders of RBC authorized a bonus pool
for officers of RBC in the aggregate amount of $1,000,000, with
respect to services rendererd prior to such date, and approved the
payment of bonuses from such pool pursuant to Section 280G(b)(5) of
the Internal Revenue Code of 1996, as amended.
-9-
<PAGE>
(viii) Transactions with Stockholders and Affiliates
1. Items (B) and (C) on Schedule 3.2(c) are incorporated herein by
reference in their entirety.
2. On November 30, 1991, RBC entered into a Stock Purchase Agreement
with Hal Macsata, Bitrix Associates C.V., and Columbus Holdings
Limited pursuant to which RBC agreed to exchange 60 shares of Class
A Common Stock for 60 shares of Class B Common Stock held by Mr.
Macsata, of which 45 and 15 shares of Class B Common Stock were
purchased by Mr. Macsata from Bitrix Associates C.V. and Columbus
Holdings Limited, respectively.
3. On January 31, 1992, RBC entered into a Stock Purchase Agreement
with Fred Morlok, Bitrix Associates C.V. and Columbus Holdings
Limited pursuant to which RBC agreed to exchange 60 shares of Class
A Common Stock for 60 shares of Class B Common Stock held by Mr.
Morlok, of which 45 and 15 shares of Class B Common Stock were
purchased by Mr. Morlok from Bitrix Associates C.V. and Columbus
Holdings Limited, respectively.
4. On February 7, 1992, RBC entered into the First Amendment to Stock
Purchase Agreement with Mr. Morlok, Bitrix Associates C.V. and
Columbus Holdings Limited.
5. On February 11, 1992, Gary Holmes and RBC entered into a Correction
Agreement pursuant to which Mr. Holmes delivered 55 shares of Class
A Common Stock to RBC, without consideration therefor, to correct a
mistake in the number of shares of Class A Common Stock issued to
Mr. Holmes made at the time Mr. Holmes was originally issued shares
of Class A Common Stock by RBC.
(ix) Bonuses, etc.
1. Item 8 of Schedule 3.2(g)(vii) is hereby incorporated herein in its
entirety by reference.
(x) Severance, etc.
1. Fred Roman, a salesman, has been terminated effective as of February
24, 1992, and will receive severance payments totalling
approximately $13,000 through May, 1992.
-10-
<PAGE>
2. RBC has agreed to pay the employees of RBCF who are being terminated
as a result of the cessation of RBCF's operations in Connecticut one
month's severance pay. The total cost of such payments is expected
to total approximately $7,500 in severance payments and $4,000 in
accrued vacation payments, all of which has been accrued on the
books of RBC.
(xi) Accounting Changes
None.
(xii) Capital Expenditures Greater than $25,000
1. All of the items on (vii) on this Schedule are incorporated hereby
in their entirety by reference.
(xiii) Defaults, etc.
None.
(xiv) Repayment of Indebtedness
None.
(xv) Employment Agreement
1. RBC entered into a consulting agreement with Ray Holtman pursuant to
which RBC will pay Mr. Holtman $6,667 a month. Mr. Holtman will
perform master scheduling services for RBC's plants in New Jersey
and South Carolina. RBC has extended an offer of employment to Mr.
Holtman at an annual salary of $80,000 to perform such services.
(xvi) Contracts, etc. Other than Ordinary Course
None.
-11-
<PAGE>
Schedule 3.2(h) - Title to Assets, Properties
and Rights and Related Matters
A. Encumbrances
1. All of RBC's real property is subject to a mortgage pursuant to the
Citicorp Loan Agreement. The Citicorp Loan will be paid in full at
Closing.
2. See attached list of Encumbrances from the title insurance policies
for the real property listed below.
B. Real Property Owned
1. All that certain piece, parcel or tract of land, together with the
buildings and improvements thereon, situate, lying and being South
of Hartsville, Darlington County, State of Carolina, containing
73.58 acres, more or less, designated as Tract B, as reflected on a
plat prepared by Jack B. Epperly, dated October 13, 1987, and
recorded in the Office of the Clerk of Court for Darlington County
in Plat Book 115 at page 17; said tract of land has the metes,
bounds and measurements as are reflected on said plat and said plat
is incorporated herein and made a part hereof.
2. Those portions of the 348 Acre Tract of Land in the County of Los
Angeles, State of California, allotted to Maria De Los Reyes
Dominguez, by Decree of Partition of a part of Rancho San Pedro, as
shown on the map filed in Los Angeles County Superior Court Case No.
3284, also shown on Licensed Surveyor's Map filed in Book 71 page 31
of record of surveys, in the office of the County Recorder of said
County described on Schedule 1 attached to the deed.
C. Real Property Leased
1. Lease dated as of March 27, 1991, between Walnut Realty, Ltd. and
RBC with respect to an office and warehouse located at 2974
Congressman Lane, Dallas, Texas.
2. Lease dated as of June 12, 1990, between David Henderson and RBC of
South Carolina with respect to an office located at 113 Pinehurst
East, Hartsville, S.C.
3. Leased dated as of August 25, 1989, between Rick Mantz and RBC with
respect to property located at Route 5, Box 381, Hartsville, S.C.
-12-
<PAGE>
4. Lease dated as of June 5, 1989, between Pedigreed Properties and RBC
with respect to a warehouse located at Fourth Street and Laurens
Avenue, Building 9, Hartsville, S.C.
5. Lease dated as of October 8, 1990, between MDC Newtown Partnership
and RBC with respect to office space located at 140 Terry Drive,
Suite 100, Renaissance Place, Newtown, PA.
6. Lease dated as of March 6, 1990, between J.T. MacDermid and RBCF
with respect to factory space located at the J.T. MacDermid Group
Building, 31 Harwinton Avenue, Plymouth, CT. RBC has given notice to
terminate this lease and vacate the property effective as of March
31, 1992.
7. Lease dated as of October 30, 1987, between General Sullivan Group,
Inc. and RBC Holdings Corp. with respect to a manufacturing plant
comprising 135,000 square feet located in Ewing, NJ.
8. Lease dated June 10, 1985, between Elmhurst Countryside Associates
("Elmhurst") and RBC, which lease had been assigned pursuant to the
Assignment and Assumption dated October 30, 1987 between General
Sullivan Group, Inc. and RBC Holdings Corp. (now known as RBC), and
consented to by Elmhurst pursuant to a Consent Letter dated October
15, 1987. The Elmhurst lease has expired but RBC continues to make
payments and abide by the terms of such expired lease.
-13-
<PAGE>
South Carolina Property
Schedule B
- --------------------------------------------------------------------------------
Policy No. 0 025647 (N23-87968-42) (L 489590)
- --------------------------------------------------------------------------------
This policy does not insure, against loss or damage by reason of the following:
Standard Exceptions:
(b) Easements, or claims of easements, not shown by the public records.
Special Exceptions:
1. Taxes for 1987 real estate owed to Darlington County covering 44.64 acres
(according to their records), with amount due in the sum of $97.80 and due
and payable by 1/15/88.
Taxes for 1987 real estate owed to South Carolina Tax Commission covering
30 acres and one building, in the sum of $13,907.71, and due and payable
by 1/15/88.
2. Easement given in favor of Carolina Power and Light company recorded in
Book 526 at page 611.
3. Possible Easement to Carolina Power and Light company given by S. M.
Woodham, recorded in Book 105 at page 565. (This easement does not
specifically state the acreage, but this easement is in the area where the
property is located.)
4. Exact acreage is not insured.
- --------------------------------------------------------------------------------
<PAGE>
California Property
ORDER NO. 4084370-39
ALTA OWNER'S POLICY (10-21-87)
OWNERS POLICY
SCHEDULE B
EXCEPTIONS FROM COVERAGE
THIS POLICY DOES NOT INSURE AGAINST LOSS OR DAMAGE (AND THE COMPANY WILL
NOT PAY COSTS, ATTORNEYS' FEES OR EXPENSES) WHICH ARISE BY REASON OF:
A. PROPERTY TAXES, INCLUDING ANY ASSESSMENTS COLLECTED WITH TAXES, TO BE
LEVIED FOR THE FISCAL YEAR 1990 - 1991 WHICH ARE A LIEN NOT YET PAYABLE
B. SUPPLEMENTAL ASSESSMENTS OF PROPERTY TAXES, IF ANY, MADE PURSUANT TO THE
PROVISIONS OF PART 0.5, CHAPTER 3.5 (COMMENCING WITH SECTION 75) OF THE
CALIFORNIA REVENUE AND TAXATION CODE. AS A RESULT OF THE TRANSFER OF TITLE
TO THE VESTEE NAMED IN SCHEDULE A.
C. SUPPLEMENTAL OR ESCAPED ASSESSMENTS OF PROPERTY TAXES, IF ANY, MADE
PURSUANT TO PART 0.5, CHAPTER 3.5 OR PART 2, CHAPTER 3, ARTICLES 3 AND 4,
RESPECTIVELY, OF THE CALIFORNIA REVENUE AND TAXATION CODE AS A RESULT OF
CHANGES IN OWNERSHIP OR NEW CONSTRUCTION OCCURRING PRIOR TO DATE OF
POLICY.
1. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS
SET FORTH IN A DOCUMENT
GRANTED TO: SOUTHERN CALIFORNIA EDISON COMPANY, A CORPORATION
PURPOSE: POLES
RECORDED: JANUARY 31, 1957 AS INSTRUMENT NO. 3402 IN BOOK 53526
PAGE 182, OFFICIAL RECORDS
AFFECTS: OVER 2 STRIPS OF LAND EACH 10 FEET IN WIDTH, THE CENTER
LINES OF SAID STRIPS ARE DESCRIBED AS FOLLOWS:
STRIP NO. 1: BEGINNING AT THE NORTHWESTERLY CORNER OF PARCEL NO. 1 AS
SHOWN UPON A RECORD OF SURVEY FILED IN BOOK 71 PAGE 31 OF RECORD OF
SURVEYS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, THENCE SOUTH
87 DEGREES 58 MINUTES 07 SECONDS WEST 100.15 FEET TO THE WESTERLY LINE OF
SANTA FE AVENUE, AS NOW ESTABLISHED; THENCE SOUTHERLY ALONG SAID WESTERLY
STREET LINE, A DISTANCE OF 880.49 FEET; THENCE NORTH 81 DEGREES 51 MINUTES
O8 SECONDS WEST 203 FEET TO THE TRUE POINT OF BEGINNING OF THIS
DESCRIPTION; SAID POINT SHALL HEREINAFTER BE REFERRED TO AS POINT "A";
THENCE FROM SAID POINT OF BEGINNING, NORTH 81 DEGREES 51 MINUTES 08
SECONDS WEST, A DISTANCE OF 340 FEET TO A POINT WHICH IS DISTANT SOUTH 81
DEGREES 51 MINUTES EAST 16 FEET FROM THE EASTERLY LINE OF THAT CERTAIN
LAND CONVEYED TO THE LOS ANGELES COUNTY FLOOD CONTROL DISTRICT BY DEED
RECORDED IN BOOK 18477 PAGE 151
PAGE 4
<PAGE>
ORDER NO. 4084370-39
OF OFFICIAL RECORDS OF SAID COUNTY; THENCE NORTH 08 DEGREES 08 MINUTES 52
SECONDS EAST, PARALLEL WITH SAID EASTERLY LINE, A DISTANCE OF 184 FEET.
STRIP NO. 2: BEGINNING AT HEREINBEFORE MENTIONED POINT A', THENCE NORTH 08
DEGREES 08 MINUTES 52 SECONDS EAST 40 FEET; THENCE SOUTH 81 DEGREES 51
MINUTES 08 SECONDS EAST 14 FEET.
ALSO A STRIP OF LAND 2 FEET IN WIDTH LYING WITHIN SAID LAND THE CENTER
LINE OF WHICH IS DESCRIBED AS FOLLOWS:
BEGINNING AT HEREINBEFORE MENTIONED POINT "A"; THENCE SOUTH 81 DEGREES 51
MINUTES 08 SECONDS EAST 32 FEET.
2. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS
SET FORTH IN A DOCUMENT
GRANTED TO: COUNTY SANITATION DISTRICT NO. 2 OF LOS ANGELES COUNTY
PURPOSE: SEWER PIPE LINE
RECORDED: MARCH 16, 1951, IN BOOK 35822 PAGE 387, OFFICIAL RECORDS
AFFECTS: THAT PORTION OF SAID LAND WITHIN A STRIP OF LAND 15 FEET
IN WIDTH, LYING EASTERLY AND NORTHERLY OF AND ADJOINING
THE FOLLOWING DESCRIBED LINE:
BEGINNING AT THE INTERSECTION OF THE NORTHERLY LINE OF SAID MARIA DE LOS
REYES DOMINGUEZ 348 ACRE ALLOTMENT WITH THE EASTERLY LINE OF THAT CERTAIN
EASEMENT CONVEYED TO LOS ANGELES COUNTY FLOOD CONTROL DISTRICT, RECORDED
IN BOOK 18477 PAGE 151 OF OFFICIAL RECORDS; THENCE SOUTHERLY AND EASTERLY
ALONG THE SAID LAST MENTIONED LINE TO THE CENTER LINE OF AN EASEMENT (25
FEET WIDE).
3. ANY LOSS OR DAMAGE ON ACCOUNT OF THE FACT THAT UNDER EITHER THE FEDERAL
BANKRUPTCY CODE OR SIMILAR STATE INSOLVENCY OR CREDITORS RIGHTS LAWS,
TITLE TO THE INSURED REAL ESTATE IS ATTACKED ON THE GROUND THAT THE
TRANSFER OF THE INSURED REAL ESTATE TO THE INSURED WAS A FRAUDULENT
CONVEYANCE.
4. WATER RIGHTS, CLAIMS OR TITLE TO WATER.
5. ANY RIGHTS, INTERESTS, OR CLAIMS WHICH MAY EXIST OR ARISE BY REASON OF THE
FOLLOWING FACTS SHOWN ON A SURVEY PLAT ENTITLED "PRELIMINARY SURVEY FOR
L.I.T.I. ASSOCIATES, INC., "DATED * PREPARED BY: GRIMES SURVEYING &
MAPPING, DAVID F. GRIMES L. S. 3774. May 19, 1990, as revised July 3, 1990
and July 10, 1990
A. FOOTINGS OF A CONCRETE BUILDING LOCATED ON THE LAND ADJACENT TO THE
SOUTH MAY EXTEND ONTO SAID LAND.
B. EDGE OF PAVEMENT LOCATED ON SAID LAND EXTENDS ONTO LAND ADJACENT TO THE
SOUTH BY 0.2 FEET.
C. A METAL STRUCTURE SITUATED ON THE LAND ADJACENT ON THE SOUTH EXTENDS
ONTO SAID LAND A MAXIMUM OF 0.3 FEET.
PAGE 5
<PAGE>
ORDER NO. 4084370-39
D. A BLOCK. WALL AND CHAIN LINK FENCE ARE LOCATED NORTH OF THE SOUTHERLY LINE.
E. A FIRE HYDRANT WITH GUARD POSTS IS LOCATED SOUTH OF THE BUILDING LOCATED ON
SAID LAND.
F. THE WEST FACE OF A BLOCK WALL ALONG THE WESTERLY PROPERTY LINE IS LOCATED A
MAXIMUM OF 0.55 FEET EASTERLY OF SAID LINE.
G. AN AUXILIARY POLE AND ANCHOR CABLE IS LOCATED OUTSIDE OF THE EASEMENT
RECORDED.
H. A FIRE HYDRANT WITH GUARD POSTS EXISTS NEAR THE WEST PROPERTY LINE.
I. OVERHEAD TENSOR CABLES EXTEND FROM A POWER POLE LOCATED ALONG THE WESTERLY
PROPERTY LINE OVER THE BUILDING LOCATED ON SAID LAND IN A NORTHEASTERLY
DIRECTION TO A POWER POLE LOCATED ON THE NORTHWESTERLY PROPERTY LINE.
J. A DRAIN GRATE WITH AN UNDERGROUND PIPE THAT EXTEND ONTO THE LAND ADJACENT TO
THE WEST IS LOCATED NEAR THE WESTERLY PROPERTY LINE.
K. A SEWER MANHOLE IS LOCATED IN THE NORTHWEST PORTION OF SAID LAND.
L. THE NORTH FACE OF A BLOCK WALL IN THE NORTHWEST CORNER OF SAID LAND IS
LOCATED A MAXIMUM OF 0.47 FEET SOUTHERLY OF THE NORTHWEST PROPERTY LINE.
M. A CHAIN LINK FENCE ALONG THE NORTHWEST PROPERTY LINE IS LOCATED PARTLY ON
SAID LAND AND PARTLY ON THE LAND ADJACENT TO THE NORTHWEST.
N. POLES AND POLELINES ARE LOCATED ALONG THE NORTHWEST PROPERTY LINE.
O. A CONCRETE SLAB WITH VAULT IS LOCATED ON THE NORTHEAST CORNER OF SAID LAND.
P. A GAS METER AND SPRINKLER BOX ARE LOCATED ON THE NORTH FACE OF THE BUILDING
LOCATED ON SAID LAND NEAR A CONCRETE SLAB.
Q. A FIRE DEPARTMENT CONNECTOR AND CONCRETE SLAB AND VAULT ARE LOCATED NEAR THE
SOUTHEAST CORNER.
R. A CONCRETE GUTTER DRAINS RUNOFF WATER INTO THE SANTA FE AVENUE RIGHT OF WAY.
S. A ONE STORY METAL BUILDING EXTENDS ONTO THE EASEMENT RECORDED JANUARY 31,
1957 AS INSTRUMENT NO. 3402 BOOK 53526 PAGE 182, OFFICIAL RECORDS AND A
TRANSFORMER AND CONCRETE PAD ARE LOCATED NORTH AND EAST AND OUT OF THE LIMITS
OF SAID EASEMENT.
T. A CONCRETE SLAB WITH METAL ROOF LOCATED IN THE SOUTHWEST CORNER OF SAID
LAND EXTENDS ONTO THE EASEMENT RECORDED MARCH 16, 1951 IN BOOK 35822 PAGE 367
OFFICIAL RECORDS.
PAGE 6
<PAGE>
ORDER NO. 4084370-39
6. A DEED OF TRUST TO SECURE AN INDEBTEDNESS IN THE AMOUNT SHOWN BELOW, AND
ANY OTHER OBLIGATIONS SECURED THEREBY:
AMOUNT: $5,000,000.00
DATED: JULY 16, 1990
TRUSTOR: ITI ACQUISITION, INC.
TRUSTEE: CONTINENTAL LAWYERS TITLE COMPANY
BENEFICIARY: CITICORP NORTH AMERICA, INC.
RECORDED: JULY 25, 1990 AS INSTRUMENT NO.
90-1292474, OFFICIAL RECORDS
7. A FINANCING STATEMENT FILED IN THE OFFICE OF THE COUNTY RECORDER, SHOWING
DEBTOR: INDUSTRIAL TECTONICS BEARINGS CORPORATION
SECURED PARTY: CITICORP NORTH AMERICA, INC.
RECORDED: JULY 25, 1990, AS INSTRUMENT NO.
90-1292475, OFFICIAL RECORDS
PROPERTY COVERED: SAID LAND
8. A FINANCING STATEMENT FILED IN THE OFFICE OF THE COUNTY RECORDER, SHOWING
DEBTOR: INDUSTRIAL TECTONICS BEARINGS CORPORATION
SECURED PARTY: CITICORP NORTH AMERICA, INC.
RECORDED: JULY 25, 1990, AS INSTRUMENT NO.
90-1292476, OFFICIAL RECORDS
PROPERTY COVERED: SAID LAND
9. A FINANCING STATEMENT FILED IN THE OFFICE OF THE COUNTY RECORDER, SHOWING
DEBTOR: ITI ACQUISITION, INC.
SECURED PARTY: CITICORP NORTH AMERICA, INC.
RECORDED: JULY 25, 1990, AS INSTRUMENT NO.
90-1292477, OFFICIAL RECORDS
PROPERTY COVERED: SAID LAND
10. A FINANCING STATEMENT FILED IN THE OFFICE OF THE COUNTY RECORDER, SHOWING
DEBTOR: ITI ACQUISITION, INC.
SECURED PARTY: CITICORP NORTH AMERICA, INC.
RECORDED: JULY 25, 1990, AS INSTRUMENT NO.
90-1292478, OFFICIAL RECORDS
PROPERTY COVERED: SAID LAND
ENDORSEMENTS:
THE FOLLOWING ENDORSEMENTS ARE ATTACHED TO AND MADE A PART OF THIS POLICY:
103.7
103.3
116.1
116.4
103.5
100.29
PAGE 7
<PAGE>
[Map Omitted]
<PAGE>
Schedule 3.2(i) - Agreements
A. Agreements
(i) Collective Bargaining Agreements
1. Agreement dated September 1, 1988, between RBC and
International Union, United Auto Workers, Local #502 ("Local
502"), extended from September 1, 1991, through August 31,
1992.
2. Retirement Plan Agreement dated September 1, 1988, between RBC
and Local 502, extended from September 1, 1991, through August
31, 1992.
(ii) Contract with or Commitment
1. Management Agreement dated as of October 29, 1987, between RBC
and Overseas Partners, Inc. ("OPI") pursuant to which RBC pays
OPI $250,000 annually.
2. Management Agreement dated as of November 1, 1991, between ITB
and OPI pursuant to which ITB pays OPI $75,000 annually.
3. Agreement dated September 1, 1988, between RBC and George
Kilborne providing for the payment of an annual aggregate
directors fee of $24,000 to Mr. Kilborne.
4. Consulting Agreement between RBC and Noble Lowndes Johnson
("NLJ") providing for NLJ to perform ongoing consulting
services regarding medical insurance and related matters.
5. Item (xiii)(1) on Schedule 3.2(g) is incorporated herein in
its entirety by reference.
(iii) Benefits to any Officer or Employee
(Active) Employee Insurance Schedule
Type Carrier Monthly Costs
---- ------- -------------
1. Dental (Shop) Unity (Trenton) $ 2,940.38
(Office) Delta (Excluding $ 2,736.l5
S.C.)
2. Prescription Drug Travellers $26,490.58
3. Executive Life Federal Kemper 1,500.00
4. Executive Great West 2,416.67
Disability
-14-
<PAGE>
Type Carrier Monthly Costs
---- ------- -------------
5. Life Insurance Great West 6,803.63 (premium
to be
reduced approx.
50%)
6. Medical U.S. Healthcare 26,205.90
(HMO PA/NJ)
Medigroup 15,876.51
Aetna 116,335.00
7. Medical (ITB) FHP 30,100.00
8. Pension Shop (Trenton 4,082.75
active portion)
9. 401K -Salaried & S.C. 23,400.00
-ITB 7,700.00
10. Short Term Liberty Mutual 850.00
Disability (S.C. only)
11. Performance Bonus
- RBC has occasionally paid a discretionary year-end performance
bonus based on operating income, individual contributions and other
factors to approximately twenty key employees.
12. Productivity Bonus
- RBC and ITB pay productivity bonuses to certain of their
respective employees.
-productivity bonuses at the West Trenton plant are paid per
contract and are based on sales output per hour.
- productivity bonuses at the Hartsville, S.C. plant are based
on sales output per hour.
- productivity bonuses at ITB are based on shipments and a
gross margin goal.
13. Gainsharing
- RBC implemented a gainsharing plan three years ago whereby
quarterly distributions were made to all employees if certain budget
cash flow targets were met. However, only two payments were ever
made.
14. Additional Medical Coverage for senior management
15. Retiree Medical Benefits
o Medicare (Part B) Reimbursement - $ 5,063.07
o prescription Drug ($2.00 Co-pay) - 12,109.18
o Medical (365 Day Basic Hospital - 30,272.68
Surgical plus Major Medical to $250M
for retirees under age 65)
-15-
<PAGE>
o SC medical retirees (70 Day Basic 1,066.89
Major Medical to $50M for retirees
under age 65)
16. Other obligations
o Retirees (Trenton & SC)
Life Insurance 723.62
Pension (Trenton) 5,500.42
(iv) Material indentures, loans, etc.
1. Loans
a. The following loans are outstanding pursuant to the Citicorp
Loan Agreement, as amended by the First Amendment dated June
13, 1988, Second Amendment dated August 14, 1989, Third
Amendment dated April 16, 1990, and the Fourth Amendment dated
July 16, 1990:
Lender Type Principal Amount
------ ---- ----------------
(i) Citicorp Revolver $12,445,000.00
(ii) Citicorp Capital 1,776,000.00
Expenditure
Term Loan
(iii) Citicorp Term Loan A 1,941,000.00
(iv) Citicorp Term Loan C 4,113,000.00
b. The following loans are outstanding pursuant to the
Subordinated Loan Agreement dated August 14, 1989, among RBC,
Bitrix Associates C.V. and Overland Trust Bank:
Lender Type Principal Amount
------ ---- ----------------
(i) Overland Mezzanine Loan $3,353,500.00
Trust
(ii) Bitrix Mezzanine Loan 1,646,500.00
c. The following loan is outstanding pursuant to the Asset
Purchase Agreement dated as of June 29, 1990, among Industrial
Tectonics, Inc., Axel Johnson, Inc. ("Axel Johnson"), ITI
Acquisition, Inc. and RBC:
Lender Type Principal Amount
------ ---- ----------------
(1) Axel Johnson Term Loan $4,100,000.00
-16-
<PAGE>
2. Equipment Financing Agreements
Agreement Principal Amount
--------- ----------------
a. Master Lease Agreement between Comdisco, $478,946.54
Inc. and RBC dated August 26, 1982, for
the lease of an IBM computer, other office
equipment and software business systems.
b. Agreement between Software 2000, Sun Financial $ 70,000.00
Group, Inc. ("SFGI") and RBC dated June 25, 1990,
pursuant to Master Lease Agreement dated April 28,
1990 (the "Master Lease Agreement") between RBC and
SFGI, for the license of computer software from
Software 2000.
c. Agreement between SFGI and RBC for the $149,112.11
lease of a Mayano turning center.
d. Agreement between Concord Commercial $701,151.30
Corporation ("CCC") and RBC dated March
14, 1989, for the lease of operating
machinery from Mazak Corporation ("MC").
e. Agreement between CIT Group/Equipment $593,577.00
Financing and RBC dated June 18, 1991, for
the lease of operating machinery from MC.
f. Agreement between Advante Leasing and RBC $ 22,500.00
for the lease of scales and an air
compressor.
-17-
<PAGE>
g. Purchase Agreement dated April 18, 1989, $ 9,750.00
between Modern Handling Equipment Co. and
RBC for the purchase of a Hyster fork lift
truck.
(v) Contract or Commitment for Capital Expenditures
1. The items listed on Schedule 3.2(f) are incorporated herein by
reference in their entirety.
(vi) Material Leases, Subleases or Other Agreements Regarding Real
Property
1. The items listed on Schedule 3.2(h)(C) are incorporated herein
by reference in their entirety.
(vii) Guaranty of Obligations
1. RBC has guaranteed the obligations of RBCF and ITB under the
Citicorp Loan Agreement, which guarantees will be terminated
when the Citicorp Loan is paid in full at the Closing.
(viii) Agreement Which Materially Restricts
None.
(ix) Licensing Agreement
None.
(x) Agreement or Arrangement for Sale
None
(xi) Vendors Receiving Total Payments Greater Than $50,000 Per Year
<TABLE>
<CAPTION>
Vendor Name Dollar Value Subject Matter
----------- ------------ --------------
<S> <C> <C>
A. RBC
1. Specialty Rigs $1,700,000 Raw materials for helicopter
bearings
2. Timken Co. 1,000,000 Raw materials for commercial
products
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
Vendor Name Dollar Value Subject Matter
----------- ------------ --------------
<S> <C> <C>
3. Sullivan Steel Services 500,000 Raw materials for commercial
products
4. Public Service Electric & Gas Co. 324,000 Power for Trenton Plant
5. Universal Bearings 240,000 Component parts purchases-
rollers
6. Norton Co. 182,000 Grinding wheels
7. Ovako Steel 180,000 Raw materials for commercial
products
8. Carolina Power & Lght 152,000 Power for Hartsvlle plant
9. Rock Industrial Services, Inc. 138,000 Sub-contractors, machine shop
service
10. Brenner Tool & Die 135,000 Tools for Trenton plant
11. Carpenter Technology Corp. 109,000 Tool steel
12. Miller Bearing Co., Inc. 105,000 Component parts purchases
13. Superior Plating Co. 95,000 Sub-contractor for plating
14. Kennametal Inc. 89,000 Tooling for Hartsville and
Trenton Plants
15. Summit Corporation of America 85,000 Silver plating
16. International Seal & Packaging 59,000 Component parts purchases
17. Edgewater Steel 58,000 Tool steel
18. Spartan Filtering Systems 54,000 Sub-contractor, machine shop
service
19. ETEO Mfg. Co. 53,000 Sub-contractor, machine shop
service
B. ITB
20. Advanced Precision Industries Inc. 213,429.03 Subcontractor, machine shop
service
21. Beacon Tool Co., Inc. 52,813.00 Sub-contractor, machine shop
service
22. Coulter Steel & Forge Co. 57,844.95 Raw materials
23. Crucible Specialty Metals 117,365.72 Raw materials
24. Earle M. Jorgensen Co. 108,874.48 Raw materials
25. FHP, inc. 438,659.53 Medical insurance
26. Golden State Engineering, Inc. 224,220.84 Sub-contractor, machine shop
service
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
Vendor Name Dollar Value Subject Matter
----------- ------------ --------------
<S> <C> <C>
27. Industrial Tectonic Inc. 75,805.60 Purchased parts
28. JK Engineering Co. 114,650.20 Sub-contractor, machine shop
service
29. JPM Company, Inc. 108,944.72 Purchased parts
30. Ladish Co., Inc. 101,898.00 Sub-contracting press
31. Los Angeles County 132,281.30 Taxes
32. MRC Bearings 60,596.80 Purchased parts
33. Peak Technical Services, Inc. 60,764.66 Temporary employees
34. Pye & Hogan 95,500.00 Sub-contractor grinding
35. Salem Tech Service, Inc. 74,608.80 Temporary employees
36. Southern California Edison Co. 387,037.69 Electricity
37. Stoody Company 105,400.00 Purchased parts
38. Storm Forge 78,424.70 Purchased parts
39. Teledyne Powder Alloys 280,918.95 Purchased parts
40. The Timken Company 50,921.58 Raw materials
41. Vermont Rebuild Incorporated 58,342.10 Outside service maintenance
42. Werner Precision Machine Corp. 76,457.34 Sub-contractor, machine shop
service
43. Wetmore Cutting Tools 85,437.89 Supplies
44. Winstead Precision Ball Company 53,622.47 Purchased parts
45. Items (5), (6) and (7) on Schedule
3.2(h)(C) are incorporated herein in
their entirety by reference.
46. Certain of the business insurance
policies have premiums in excess of
$50,000 a year. See Schedule 3.2(q).
47. Items (iv)(2)(a), (c), (d) and (e)
on this Schedule are incorporated
herein in their entirety by
reference.
48. Item (vii)(1) on Schedule 3.2(g)
is incorporated herein in its
entirety by reference.
</TABLE>
(xii) Distributor, etc. Agreements
1. Agreement between Sommerfeldt and Co. and RBC dated October 9,
1989 (exclusive sales agent for lower peninsula of Michigan).
-20-
<PAGE>
2. Agreement between Rotoprecision Inc. and Industrial Tectonics,
Inc. dated November 12, 1986 (exclusive sales agent and
representative in Canada).
(xiii) Contracts Requiring Consent to Purchase or Transfer
1. All of the items listed on Schedules 3.2(h)(C) and 3.2(i)(iv)
are incorporated herein by reference in their entirety.
2. All of the contracts listed on Schedule 3.2(i)(xv) may require
the consent of the U.S. Government to transfer such contracts
pursuant to the Anti-Assignment Act, 41 U.S.C. ss.15 and 48
C.F.R. 42.1204.
3. Lease Agreement dated July 20, 1989, between Advante Leasing
Corp. and RBC for the lease of an AT&T printer.
4. Lease Agreements dated July 6, 1989 and April 6, 1989,
respectively, between Bell Atlantic Tricon Leasing and RBC for
lease of a Canon fax machine and UPS Shipping System,
respectively.
5. Lease Agreement dated April 25, 1989, between Vanguard
Financial Service Corp. and RBC for lease of a postal parcel
shipping system.
6. Lease Agreements dated August 31, 1987 and January 15, 1988,
between US Fleet Leasing and RBC for the lease of certain
automobiles.
7. Lease Agreement dated April 28, 1990, between Bell Atlanticom
and RBC for the lease of a voice mail system.
8. Lease Agreement dated July 18, 1988, between IBM and ITI for
the lease of certain software and hardware.
9. Item (C)(4) on Schedule 3.2(b) is incorporated herein in its
entirety by reference.
(xiv) Loss Contracts
None.
(xv) U.S. Governmental Contracts
-21-
<PAGE>
1. Agreement dated August 31, 1990, between RBC and U.S. Army
Aviation Systems Command (No. DAAJ09-90-C-1058).
2. Agreement dated April 27, 1990, between RBC and U.S. Army
Aviation Systems Command (No. DAAJ09-90-C-0507).
3. Agreement dated April 30, 1990, between RBC and U.S. Army
Aviation Systems Command (No. DAAJ09-90-C-05l0).
4. Agreement dated October 22, 1991, between RBC and Defense
Industrial Supply Center (No. DLA500-92-C-1208).
5. Agreement dated December 11, 1991, between RBC and Naval Air
Station Point Magy. Ca. (No. N0429A-92-M-1407).
6. Agreement dated January 23, 1992, between RBC and Defense
Industrial Supply Center (DLA500-92-M-9195).
7. Agreement dated December 19, 1991, between RBC and Aviation
Supply Office (N00383-92-C-N022).
8. Agreement dated February 14, 1992, between RBC and Defense
Industrial Supply Center (DLA500-92-C-1246).
9. Agreement dated February 27, 1992, between RBC and Defense
Industrial Supply Center (DLA500-92-C-0339).
10 See attached Addendum I listing purchase orders relating to
Boeing Vertol Orders as of February 27, 1992.
11. Agreement dated October 28, 1991, between ITB and Department
of the Navy (N00383-92-C-H005).
12. Agreement dated January 31, 1999, between ITB and Department
of the Navy (N00383-89-C-3628).
13. Agreement dated March 25, 1991, between ITB and Department of
the Navy (N00383-91-C-5335).
14. Agreement dated August 6, 1991, between ITB and Department of
the Air Force (F41608-91-C-1587).
-22-
<PAGE>
15. Agreement dated February 18, 1992, between ITB and Defense
Industrial Supply Center (DLA500-92-MCB23).
B. Defaults
1. Novations were not obtained at the time RBC acquired ITB
pursuant to the Anti-Assignment Act, 41 U.S.C. ss.15 and 48
C.F.R. 42.1204, with respect to certain contracts between ITB
and certain agencies of the U.S. Government, although ITB
submitted novation agreements to such agencies for signature.
Such contracts have continued to be performed by ITB and the
parties thereto.
C. Non-Ordinary Course Agreements
1. RBC executed a letter agreement dated June 27, 1991, agreeing
to pay the legal fees of Fred Roman in connection with the
matter described in item A of Schedule 3.2(k), for so long as
Mr. Roman remained employed with RBC. Mr. Roman's employment
was terminated on February 24, 1992; however, RBC has orally
agreed to continue to pay such fees and expects that the
matter will soon be settled.
-23-
<PAGE>
Addendum I
BOEING VERTOL ORDERS AS OF 2/27/92
F/N P.O. NC. P.O. QUA. P.O. VALUE
107R2580-1 AAZ125 17 17119.34
A02RS253-1 AAZ196 1 1906.44
ABU218 25 47661.00
A02RS253-2 ABN176 60 82631.40
114R2131-1 AAZ139 40 42295.20
AAZ181 120 56684.40
AAZ182 3 1417.11
ABN199 24 25377.12
ABU227 30 74007.00
ABY356 48 50754.24
ABY372 160 85026.60
ABY374 18 8502.66
ABY375 120 56684.40
114R2130-2 AAZ139 50 41996.00
AAZ149 120 74301.60
AAZ150 114 70586.52
AAZ151 3 1857.34
AAZ152 20 12383.60
AAZ158 60 37150.80
ABN196 24 51769.92
ABY357 30 40157.70
ABY372 180 120258.00
114R5214-6 AAZ153 150 297432.00
AAZ154 24 47589.12
AAZ155 6 11897.28
AAZ156 114 226048.32
AAZ157 4 7931.52
AAZ163 120 237945.60
AAZ191 1 1999.63
AAZ199 5 32462.90
MAA300 100 211970.00
ABU230 96 181237.44
ABU231 10 37430.60
ABY356 140 259263.20
ABY372 180 331390.80
114RS214-5 ABU209 90 180236.70
ABU224 105 198030.00
ABU265 60 116720.40
ABY356 160 291868.80
ABY372 174 316697.40
AAZ114 114 207491.40
AAZ115 24 43682.40
AAZ116 40 72804.00
AAZ141 2 3640.20
<PAGE>
114RS225-1 AAZ122 348 270980.64
AAZ123 12 9344.16
AAZ124 12 9344.16
AAZ138 114 105626.70
AAZ149 54 42048.72
ABU295 300 233604.00
ABY372 180 166779.00
114RS226-1 AAZ138 114 103654.50
ABY372 180 163665.00
R.A. RODRIGUEZ
A0ZRS251-1 1652501 71 108176.31
<PAGE>
Schedule 3.2(j) - Compliance: Governmental Authorization
A. None
-24-
<PAGE>
Schedule 3.2(k) - Litigation, Etc.
A. McGill v. Fred Roman - Fred Roman, a former salesman for McGill, a
division of Emerson Electric, hired by RBC, was sued by McGill alleging a
violation of the non-compete clause in Roman's employment contract. RBC is
not a party to the litigation. Mr. Roman was terminated by RBC on February
24, 1992.
B. Wells Fargo - Guard at Trenton plant injured 12/89. Subrogation claim,
totalling $1,275.
C. Wanda Foreman V. RBC - Former employee asserted a civil rights claim
against RBC. Pre-trial hearing was held in 1988 and since that time no
further action has taken place. RBC believes that for all practical
purposes the suit has been dropped.
D. Jose J. Rubiano - ITB Workman compensation claim - no reserve established.
E. Douglas Large - Trenton shop workman compensation claim - reserve in the
amount of $6,500 has been set aside by RBC's workmen's compensation
insurance carrier, New Jersey Manufacturers Insurance Company ("NJMIC").
F. Robert Talec - Trenton shop workman compensation claim - reserve in the
amount of $5,400 has been set aside by NJMIC.
G. Andrezej Staniec - Trenton shop workman compensation claim - reserve to be
obtained by RBC from NJMIC.
H. Zbigniew Pietranik - Trenton shop workman compensation claim - reserve to
be obtained by RBC from NJMIC.
I. Kwang Everett - Trenton shop workman compensation claim - reserve in the
amount of $7,946 has been set aside by NJMIC.
J. Dong Choi - Trenton shop workman compensation claim - reserve in the
amount of $4,155 has been set aside by NJMIC.
K. Michael Kovacs - Trenton Shop workman compensation claim - reserve in the
amount of $6,800 has been set aside by NJMIC.
L. George Bergner - Trenton shop workman compensation claim - reserve in the
amount of $18,381 has been set aside by NJMIC.
-25-
<PAGE>
M. Forklifts, Inc. v. RBC - Forklifts, Inc. has made certain claims against
RBC. Total claims plus legal fees are expected to total $3,500.
-26-
<PAGE>
Schedule 3.2(1) - Tax
A. Item (i)(2) on Schedule 3.2(g) is incorporated herein in its entirety by
reference.
-27-
<PAGE>
Schedule 3.2(m) - ERISA
A. Material Employee Plans
1. The items listed on Schedule See 3.2(i)(A)(iii) are hereby
incorporated herein by reference in their entirety.
B. Section 401 Plans
1. Fidelity Management and Research Co., has received a Letter of
Determination from the Internal Revenue Service ("IRS") for the
Prototype Master Plan for RBC's 401(k) Plan.
2. ITB's 401(k) plan does not presently have a Letter of Determination
from the IRS.
3. RBC and ITB plan to file applications with the IRS in 1992 for new
Letters of Determination for their respective 401(k) plans.
C. RBC and ITB are not parties to any Multiemployer Plan.
D. Item B of Schedule 3.2(g)(vii) is hereby incorporated herein in its
entirety by reference.
-28-
<PAGE>
Schedule 3.2(n) - Environmental Reports
A. Environmental Site Assessment Report for West Trenton, New Jersey,
dated December 1991 prepared by The Earth Technology Corporation;
B. Letter and drawings from The Earth Technology Corporation, dated
January 29, 1992;
C. Draft letter from John Emling of Roller Bearing Company of America to
Sharon Sorokin (undated);
D. Letter from The Earth Technology Corporation to Sharon Sorokin dated
December 10, 1991;
K. Letter from The Earth Technology Corporation to Sharon Sorokin, dated
December 20, 1991;
F. All documents in New Jersey ECRA Case No. 85396;
G. Updated Environmental Audit at the Industrial Tectonics Facility,
Rancho Dominguez, California, dated March 19, 1992 prepared by Metcalf & Eddy;
H. Industrial Tectonics Site Visit Notes of Metcalf & Eddy (undated);
I. Work Plan for Site Investigation, Former Industrial Tectonics Facility,
18301 South Santa Fe Avenue, Rancho Dominguez, California, dated August, 1990
prepared by ENSR Consulting and Engineering;
J. Environmental Audit at Industrial Tectonics Site, Rancho Dominguez,
California, dated June, 1990 prepared by Metcalf & Eddy;
K. Site Assessment Report, Industrial Tectonics Facility, 18301 South
Santa Fe Avenue, Rancho Dominguez, California dated November, 1990, prepared by
ENSR Consulting and Engineering;
L. Preliminary General Discussion of Potential Remedial Actions and
Associated Costs, Industrial Tectonics Facility, Rancho Dominguez, California,
prepared by Metcalf & Eddy;
M. Letter from Thomas King at Industrial Tectonics Bearings Corporation to
Sharon Sorokin, dated January 7, 1992;
N. Letter from Hygienetics/GCL to Peter Askey (Roller Bearing Company of
America) and William Reynolds (Axel Johnson, Inc.) dated March 6, 1992 with
attachments;
-29-
<PAGE>
O. Letter from Hygienetics/GSL to Peter Askey (Roller Bearing Company of
America) and William Reynolds (Axel Johnson, Inc.) dated March 12, 1992 with
attachments;
P. Letter from South Carolina Department of Health and Environmental
Control ("SCDHEC") dated August 13, 1987;
Q. Letter from ERT to Gary Holmes dated October 23, 1987;
R. Letter from Robert Zavatkay of Roller Bearing Company of America, dated
January 3, 1992;
S. Preliminary Environmental Site Assessment of the Roller Bearing Company
of South Carolina Facility at Hartsville, South Carolina, dated September 30,
1987 prepared by ERT;
T. Site Screening Investigation, Roller Bearing Corporation of South
Carolina, dated June 22, 1990 prepared by Bureau of Solid Waste and Hazardous
Waste Management of SCDHEC and transmittal letter dated July 19, 1991;
U. Letter from L.E. Stegner of Roller Bearing Company of America to Harvey
Daniels at SCDHEC, dated July 31, 1991;
V. Due Diligence Update for Roller Bearing Company of America Site in
Hartsville, South Carolina, dated December 6, 1991 prepared by ENSR Consulting
and Engineering;
W. Draft Letter from ENSR Consulting and Engineering to Sharon Sorokin,
dated January 16, 1992;
X. Letter from Chuck Holmes of Roller Bearing Company of America to Sharon
Sorokin, dated January 7, 1992;
y. Phase I Environmental Site Assessment, a Leased Portion of 31 Harwinton
Avenue, Plymouth, Connecticut, dated December, 1991 prepared by Environmental
Risk Limited;
Z. All documents of public record relating to any of the Company Property
other than those documents for which a court order or Freedom of Information Act
request or similar request under a state or local statute or ordinance is
required for release;
AA. All documents, studies, reports, audits and analyses commissioned,
obtained or reviewed by Buyer relating to the Company Property.
-30-
<PAGE>
Schedule 3.2(o) - Intellectual Property
A. Patents Number Issued
------- ------ ------
Combination Seal and 4,113,327 9/21/78
Thrust Washer for
Anti-Friction
Bearings
Method of Making 4,161,055 7/17/79
Self-Aligning
Spherical Bushing
Sealed Self-Aligning 4,080,013 3/21/78
Spherical Bushing
Locking Device for 4,185,539 1/29/80
Hydraulic Actuator
Self-Aligning Bushing 4,109,976 8/29/78
Self-Aligning Spherical 4,765,757 8/23/88
Bushing Means
Cam Follower Assembly Investigating
Lined Split Plastic Investigating
Cage
Split-Inner-Ring 4,334,720 6/15/82
Ball Bearing with
Lubrication Structure
Ball Bearing Retention 4,019,791 4/26/77
Construction
B. Trademarks:
Trademark Owner Country Number Certificate
--------- ----- ------- ------ -----------
Pitchlign RBC Germany 678,170 On Hand
Pitchlign RBC Canada 100,105 On Hand
Pitchlign RBC Australia A119101 On Hand
Pitchlign RBC Italy 313498
Pitchlign RBC Japan 1445060 On Hand
Pitchlign RBC France 1097578 On Hand
Pitchlign RBC USA Investigating
Wicklube RBC USA Investigating
Glide-A-Seal RBC USA 1,107,055 On Hand
Planelign RBC USA 786,377 On Hand
RBC RBC Canada 154,239 On Hand
RBC RBC Japan 797,349
RBC RBC USA 586,678 On Hand
Roller Block RBC USA Investigating
Orange RBC USA Investigating
Quadlube RBC USA Investigating
RBC Roller RBC USA Investigating
Helisphere ITB USA 741,578 On Hand
Kylosphere ITB USA 873,754
Rolltact ITB USA 838,763
Cam-Centric RBC USA 1,562,046
-31-
<PAGE>
C. Encumbrances
1. RBC and ITB have each granted a security interest in all of their
intellectual property to Citicorp pursuant to the Citicorp Loan
Agreement, which will be paid in full at the closing.
-32-
<PAGE>
Schedule 3.2(p) - Labor Relations; Employees
A. None
-33-
<PAGE>
Schedule 3.2(a) - Insurance
A. See Business Insurance Schedule attached hereto.
-34-
<PAGE>
BUSINESS INSURANCE SCHEDULE
<TABLE>
<CAPTION>
Type Coverage Carrier Policy # Period Premium
- ---- -------- ------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
GCL/Products $1,000,000 Liberty Mutual LG1-13-060188-151 1/1/92-1/1/93 $131,187
Umbrella/Products 15,000,000 Liberty Mutual LE1-060188-181 1/1/92-1/1/93 47,200
Umbrella/Liability 5,000,000 Fireman's Fund XXK-000-3150-3089 1/1/92-1/1/93 5,000
Aviation Products 50,000,000 National Union AP479-6179 2/8/92-2/8/93 101,500
Property/BI Fire Arkwright 250-376 2/1/90-2/1/93 89,031
Company Plane 10,000,000 U.S. Fire 650-AP-II-148927-2 7/22/91-7/22/92 2,166
(Liability)
Comprehensive Crime Bond 200,000 INA JO1790067 6/30/91-6/30/92 1,793
Business Travel Accident Policy 100,000 INA ABL-65-33-72 3/21/91-3/21/92 1,538
Welfare and Pension Plan Bond 1,600,000 INA J01822317 6/30/91-6/30/92 226
Flood Policy (ITB) Hobbs Group FL2032435659 8/14/91-8/14/92 660
Workman's Comp NJM W15388-2-91 10/31/91-10/31/92 197,516*
Liberty Mutual WC2-131-060188-141 1/1/92-1/1/93 156,254
Liberty Mutual WC2-131-060188-201 1/1/92-1/1/93 181,115
Automobiles Liberty Mutual ASI-131-060188-161 1/1/92-1/1/93 7,741
Liberty Mutual ASI-131-060188-091 1/1/92-1/1/93 21,326
Liberty Mutual ASI-131-060188-171 1/1/92-1/1/93 984
Liberty Mutual ASI-131-060188-111 1/1/92-1/1/93 12,050
</TABLE>
Above coverages include all locations as applicable.
- ----------
* Net of dividend.
-35-
<PAGE>
Schedule 3.2(t) - Depositions, Powers of Attorney
(i) Bank Names, etc.
A. RBC
NEW JERSEY NATIONAL
Type of Account Account Number Signatories
--------------- -------------- -----------
Operating 320-7868 Gary Holmes, Hal
Macsata, John Wnuk
Executive 606-1609 Gary Holmes, Hal
Macsata, John Wnuk
Payroll 320-7879 Gary Holmes, Hal
Macsata, John Wnuk
Petty Cash 322-1937 John Emling, George
Sobochek, Nancy
Hamcherick
NORTH CAROLINA
NATIONAL BANK
Payroll 758-429-716 Gary Holmes, Hal
Macsata, Chuck
Holmes, Emanuele
Costa
Petty Cash 758-432-423 Gary Holmes, Bobby
MacFarland, Hal
Macsata
CONNECTICUT NATIONAL BANK
Payroll 6612-6397 Gary Holmes, Hal
Macsata, Bob
Zavatkay
Petty Cash 6515-1896 Bob Zavatkay, Hal
Macsata
CITICORP
Revolving Hal Macsata, John
Credit Account Wnuk, Gillian
Persaud, George
Dowbnia, Sandy
Taylor
-36-
<PAGE>
Blocked 01926-04512 J. Gallagher, S.
Goetschius, C.
Torello, Garvin, S.
Fisher
B. ITB
BANK OF AMERICA
Type of Account Account Number Signatories
--------------- -------------- -----------
General 01928-04511 Mike Hartnett, Ed
Trainer, M.L.
Jarosh, Hal Macsata,
S.L. Wang
Payroll 01923-04509 Mike Hartnett, Ed
Trainer, M.L.
Jarosh, Hal Macsata,
S.L. Wang
(ii) Powers of Attorney
None.
-37-
<PAGE>
Schedule 4.1(b) - Authority (Buyer)
None.
-38-
<PAGE>
Schedule 4.1(e) - Balance Sheet of Buyer
See Exhibit A attached hereto.
-39-
<PAGE>
Schedule 4.1(f) - Brokers' or Finders' Fees
1. William E. Myers.
-40-
CONFIDENTIAL
EXECUTION COPY
AGREEMENT OF MERGER dated as of March 31, 1992,
between ROLLER BEARING ACQUISITION COMPANY, INC., a
Delaware corporation (the "Acquisition Corporation"),
and ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware
corporation (the "Company").
The respective Boards of Directors of each of the Acquisition Corporation
and the Company have, by resolutions duly adopted, approved and adopted this
Agreement, the Agreement and Plan of Reorganization dated the date hereof (the
"Reorganization Agreement"), among the Company, Roller Bearing Holding Company,
Inc., a Delaware corporation (the "Buyer"), the Acquisition Corporation, which
is a wholly-owned subsidiary of the Buyer, and the Stockholders (as defined in
the Reorganization Agreement), and the proposed merger of the Acquisition
Corporation with and into the Company in accordance with this Agreement, the
Reorganization Agreement and the Delaware General Corporation Law (the "Delaware
Statute"), whereby, among other things, the holders of issued and outstanding
shares of the Class A Common Stock, $.0l par value (the "Class A Common Stock"),
the Class B Common Stock, $.01 par value (the "Class B Common Stock"; and the
Class A Common Stock and the Class B Common Stock being collectively referred to
herein as the "Company Common Stock") and the Series A Preferred Stock, $.01 par
value (the "Company Preferred Stock"), of the Company will receive cash and
shares of the Buyer's Preferred Stock (as defined herein) therefor in the manner
set forth in this Agreement and the Reorganization Agreement, upon the terms and
subject to the conditions set forth in this Agreement and the Reorganization
Agreement. All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Reorganization Agreement.
NOW, THEREFORE, in consideration of the mutual benefits to be derived from
this Agreement and the Reorganization Agreement, the parties hereto agree as
follows:
ARTICLE I
GENERAL
1.1. The Merger. In accordance with the provisions of this Agreement, the
Reorganization Agreement and the Delaware Statute, the Acquisition Corporation
shall be merged with and into the Company (the "Merger"), which, at and after
the Effective Time (as hereinafter defined), shall be and is sometimes referred
to herein as the "Surviving Corporation". The Acquisi-
<PAGE>
tion Corporation and the Company are sometimes collectively referred to herein
as the "Constituent Corporations".
1.2. The Effective Time of the Merger. The Merger shall become effective
upon the filing of the Certificate of Merger (as defined in Article IV hereof)
with the Secretary of State of the State of Delaware, in accordance with Article
IV hereof. The date and time when the Merger shall become effective as aforesaid
is herein referred to as the "Effective Time".
1.3. Effect of Merger. (a) At the Effective Time, the separate existence
of the Acquisition Corporation shall cease and the Acquisition Corporation shall
be merged with and into the Surviving Corporation, possessing all of the rights,
privileges, powers and franchises, as well of a public as of a private nature,
and being subject to all of the restrictions, disabilities and duties of each of
the Constituent Corporations.
(b) At the Effective Time, all and singular, the rights, privileges,
powers and franchises of each of the Constituent Corporations, and all property,
real, personal and mixed, and all debts due to any of the Constituent
Corporations on whatever account, as well for stock subscriptions as all other
things in action or belonging to each of the Constituent Corporations shall be
vested in the Surviving Corporation; and all property, rights, privileges,
powers and franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of the
several and respective Constituent Corporations, and the title to any real
estate vested by deed or otherwise, under the laws of the State of Delaware in
either of the Constituent Corporations, shall not revert or be in any way
impaired by reason of the Delaware Statute; but all rights of creditors and all
liens upon any property of either of the Constituent Corporations shall be
preserved unimpaired, and all debts, liabilities and duties of the respective
Constituent Corporations shall thenceforth attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
1.4. Charter and By-Laws of Surviving Corporation. Immediately following
the Effective Time, (a) the Certificate of Incorporation of the Company shall be
the Certificate of Incorporation of the Surviving Corporation until altered,
amended or repealed as provided in the Delaware Statute, (b) the by-laws of the
Company shall become the by-laws of the Surviving Corporation until altered,
amended or repealed as provided in the Delaware Statute, the Certificate of
Incorporation or such by-laws, (c) the directors of the Acquisition Corporation
shall become the directors of the Surviving Corporation and (d) the officers of
the Acquisition Corporation shall become the officers of the Surviving
Corporation.
-2-
<PAGE>
1.5. Taking of Necessary Action; Further Assurances. Prior to the
Effective Time, and subject to the terms and conditions provided in the
Reorganization Agreement, the parties hereto shall take, or cause to be taken
(as the case may be), all such action as may be necessary or appropriate in
order to effectuate the Merger as provided in this Agreement as expeditiously as
reasonably practicable.
ARTICLE II
EFFECT OF MERGER ON CAPITAL STOCK AND OTHER SECURITIES
OF CONSTITUENT CORPORATIONS; ETC.
2.1. Effect of Merger on Securities. (a) The following terms shall have
the following respective meanings:
(i) "AC Common Stock" shall mean the Common Stock, $.01 par
value, of the Acquisition Corporation.
(ii) "Buyer's Common Stock" shall mean the Common Stock, $.01
par value, of the Buyer.
(iii) "Buyer's Preferred Stock" shall mean the Series A
Preferred Stock, $100 par value, of the Buyer.
(iv) "Cash Consideration" means the amount indicated as such
on Annex I hereto.
(v) "Per Common Share Preferred Stock Consideration" means the
number of shares of the Buyer's Preferred Stock indicated as the Per
Common Share Preferred Stock Consideration on Annex I hereto.
(vi) "Per Common Share Cash Consideration" means the amount
indicated as such on Annex I hereto.
(vii) "Per Preferred Share Cash Consideration" means the
amount indicated as such on Annex I hereto.
(b) The manner and basis of converting or exchanging the shares of
capital stock of each of the Constituent Corporations into or for cash or
securities of the Surviving Corporation or the Buyer shall be as follows:
(i) each share of AC Common Stock outstanding at the Effective
Time shall be converted into one share of Class A Common Stock of the
Surviving Corporation;
(ii) each share of Company Common Stock or Company Preferred
Stock outstanding at the Effective Time and owned directly or indirectly
by the Company or the Subsidiary or owned by the Buyer or the Acquisition
-3-
<PAGE>
Corporation or any other subsidiary of the Buyer shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
cancelled and no consideration shall be delivered in exchange therefor;
(iii) each share of Company Common Stock listed on Annex I
hereto shall, by virtue of the Merger and without any action on the part
of the holder thereof, cease to be outstanding and be converted into the
right to receive the Per Common Share Cash Consideration and the Per
Common Share Preferred Stock Consideration;
(iv) each share of Company Preferred Stock outstanding at the
Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, cease to be outstanding and be converted
into the right to receive the Per Preferred Share Cash Consideration; and
(v) each authorized but unissued share of capital stock of the
Company at the Effective Time shall be cancelled.
2.2. Exchange of Certificates; Delivery of Funds. At the Effective Time,
the Surviving Corporation shall deliver:
(a) with respect to the Company Common Stock then held by each
Stockholder, (i) a wire transfer of immediately available funds in an amount
equal to the Net Cash Amount set forth opposite such Stockholder's name on Annex
I and (ii) duly executed certificates representing that number of shares of the
Buyer's Preferred Stock set forth opposite such Stockholder's name on Annex I
hereto, against receipt by the Surviving Corporation of certificates
representing all shares of Company Common Stock held by such Stockholder
immediately prior to the Effective Time; and
(b) with respect to the Company Preferred Stock then held by each
Stockholder, a wire transfer of immediately available funds in an amount equal
to the Preferred Share Cash Consideration set forth opposite such Stockholder's
name on Annex I, against receipt by the Surviving Corporation of certificates
representing all shares of Company Preferred Stock held by such Stockholder
immediately prior to the Effective Time.
OPI shall receive and distribute the dollar amounts and shares of the
Buyer's Preferred Stock set forth in this Section 2.2 on behalf of the
Stockholders (and shall be held harmless by the Stockholders in connection
therewith).
-4-
<PAGE>
2.3. Deposit into Escrow. (a) As soon as practicable following the
Closing, the Stockholders (or OPI on behalf of the Stockholders) shall deposit
(i) into the Escrow Account (as defined in the Escrow Agreement) an aggregate of
$100,000, to be held and distributed in accordance with the terms of the Escrow
Agreement, and (ii) into the Escrow Deposit Box (as defined in the Escrow
Agreement) certificates representing in the aggregate 20,000 shares of the
Buyer's Preferred Stock (issued to the Stockholders in the Merger and, with
respect to certain Stockholders, pursuant to the Exchange Agreements or
otherwise), to be held and distributed in accordance with the terms of Section
8.2 of the Reorganization Agreement and the terms of the Escrow Agreement.
(b) As soon as practicable following the Closing, the Buyer shall
deposit $100,000 into the Escrow Account, to be held and disbursed in accordance
with the terms of the Escrow Agreement.
2.4. Exercise of Warrants and Exchange of Options. (a) Immediately prior
to the Effective Time, each of Bitrix Associates C.V. and Overland Trust Bank
shall exercise all warrants to purchase Company Common Stock then held by them.
(b) Immediately prior to the Effective Time, options to purchase
41.237, 15 and 5 shares of Company Common Stock from the Company, Bitrix and
Columbus, respectively, held by Michael Hartnett shall be cancelled in exchange
for shares of the Buyer's Common Stock and/or the Buyer's Preferred Stock.
2.5. After the Effective Time. At and after the Effective Time, the stock
transfer books of the Surviving Corporation shall be closed with respect to the
Company Common Stock and the Company Preferred Stock and there shall be no
further registration of transfers of Company Common Stock or Company Preferred
Stock thereafter on the records of the Surviving Corporation. If, after the
Effective Time, certificates formerly representing shares of Company Common
Stock or Company Preferred Stock are presented to the Surviving Corporation,
they shall be cancelled and exchanged for the consideration set forth in
Sections 2.1(b)(iii) and 2.1(b)(iv), respectively, hereof, as provided in, and
subject to, this Article II.
-5-
<PAGE>
ARTICLE III
TERMINATION
This Agreement may be terminated, and the Merger abandoned, by resolutions
of the Boards of Directors of the Constituent Corporations prior to the Merger
becoming effective, notwithstanding prior approval thereof by their respective
stockholders. In the event of the termination and abandonment of this Agreement
and the Merger, this Agreement shall become void and of no further effect
without any liability on the part of either Constituent Corporation or the
stockholders or the directors or officers in respect thereof.
ARTICLE IV
APPROVAL OF AGREEMENT;
FILING OF CERTIFICATE OF MERGER
The respective Board of Directors of each of the Constituent Corporations
have, by resolutions duly adopted, unanimously approved and adopted the Merger,
this Agreement and the Reorganization Agreement. The respective stockholders of
each of the Constituent Corporations have, by resolutions duly adopted, approved
and adopted the Merger, this Agreement and the Reorganization Agreement in
accordance with Section 251 of the Delaware Statute. Upon satisfaction of all
conditions of the Merger contained in Article V of the Reorganization Agreement
(or appropriate waiver thereof by the party or parties entitled to satisfaction
of such conditions or any of them) and execution and delivery of this Agreement,
the parties hereto shall cause a certificate of merger (the "Certificate of
Merger") substantially in the form attached as Exhibit hereto, to be executed
and filed with the Secretary of State of the State of Delaware in accordance
with Section 103 of the Delaware Statute and the Merger shall thereupon become
effective.
ARTICLE V
MISCELLANEOUS
5.1. Entire Agreement; Amendments. This Agreement, the Certificate of
Merger and the Reorganization Agreement and the other writings and agreements
referred to herein and therein or delivered pursuant thereto contain the entire
understanding of the parties with respect to the subject matter hereof. This
Agreement, the Certificate of Merger and the Reorganization Agreement and such
other writings and agreements referred to herein and therein supersede all prior
agreements and understandings between the parties with respect to the subject
matter hereof. To the extent permitted by applicable law, this
-6-
<PAGE>
Agreement and the Certificate of Merger may be amended by action taken by or on
behalf of the Boards of Directors of the Constituent Corporations at any time
before or after adoption of this Agreement by the stockholders of the
Constituent Corporations. This Agreement may be amended only by a written
instrument duly executed by the parties, and any condition to a party's
obligations hereunder may only be waived in writing by such party.
5.2. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.3. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by facsimile transmission, air courier or by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
If to the Acquisition Corporation, to:
Roller Bearing Acquisition Company, Inc.
1800 Century Park East, Suite 1000
Los Angeles, California 90067
Attention: Richard R. Crowell
Telecopy: (310) 277-5810
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Telecopy: (213) 229-7520
Attention: Terrance L. Carlson, Esq.; and
If to the Company, to:
Roller Bearing Company of America, Inc.
140 Terry Drive
P.O. Box 1237
Newtown, Pennsylvania 18490
Telecopy: (215) 579-4318
Attention: President
with a copy to:
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Telecopy: (212) 408-2420
Attention: Kenneth S. Siegel, Esq.;
-7-
<PAGE>
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such notice
or communication shall be deemed to have been received (a) in the case of
personal delivery or facsimile transmission, on the date of such delivery, (b)
in the case of air courier, on the next business day after the date when sent
and (c) in the case of mailing, on the third business day following the date on
which the piece of mail containing such communication was posted.
5.4. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
5.5. Governing Law. This Agreement shall be governed by and construed in
accordance with (a) the laws of the State of New York applicable to agreements
made and to be wholly performed within such State and (b) with respect to
corporate law governing the Merger, solely by the General Corporation Law of the
State of Delaware.
5.6. Gender. Any reference to the masculine gender shall be deemed to
include the feminine and neuter genders unless the context otherwise requires.
5.7. Parties in Interest. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the parties hereto and their respective
successors and assigns. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assigned by any party hereto
without the consent of the other party hereto.
-8-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf as of the day and year first above written.
ROLLER BEARING COMPANY
OF AMERICA, INC.
By: /s/Gary W. Holmes
----------------------------------
Gary W. Holmes
President and CEO
ATTEST:
/s/Emanuele Costa
- ----------------------------------
Emanuele Costa
Secretary
ROLLER BEARING ACQUISITION
COMPANY, INC.
By: /s/Michael J. Hartnett
----------------------------------
Name: Michael J. Hartnett
Title: President
ATTEST:
/s/Kurt B. Larson
- ----------------------------------
Name: Kurt B. Larson
Secretary
CONFIDENTIAL
ASSET SALE AGREEMENT
BY AND BETWEEN
IMO INDUSTRIES INC.
AND
ROLLER BEARING COMPANY OF AMERICA, INC.
Dated as of May 10, 1993
<PAGE>
Table of Contents
-----------------
Page
----
ARTICLE I. ASSETS TO BE ACQUIRED .................................. 1
1.1. Acquisition and Transfer of Assets ..................... 1
1.2. Excluded Assets ........................................ 4
1.3. Assumed Liabilities .................................... 5
1.4. Excluded Liabilities ................................... 6
1.5. Cancellation of Permits, Bonds
and Guarantees ....................................... 8
ARTICLE II. PURCHASE PRICE ......................................... 9
2.1. Purchase Price and Payment ............................. 9
2.2. Purchase Price Adjustment .............................. 9
2.3. Allocation of Purchase Price ........................... 11
ARTICLE III. THE CLOSING ............................................ 12
3.1. Closing Date ........................................... 12
3.2. Proceedings at Closing ................................. 12
3.3. Deliveries by the Seller to the Purchaser .............. 12
3.4. Deliveries by the Purchaser to the Seller .............. 13
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
OF THE SELLER .......................................... 14
4.1. Organization and Good Standing ......................... 14
4.2. Authorization of Agreement ............................. 14
4.3. Properties; Leases; Asset .............................. 15
4.4. Consents ............................................... 15
4.5. Financial Statement .................................... 15
4.6. Absence of Certain Developments ........................ 16
4.7. Intangible Property .................................... 17
4.8. Taxes .................................................. 17
4.9. Employees and Employee and Benefits .................... 17
4.10. Litigation ............................................. 19
4.11. Compliance with Law .................................... 20
4.12 Receivables ............................................ 20
4.13. Inventory .............................................. 20
4.14. Environmental Matters .................................. 20
4.15. Brokers ................................................ 21
4.16. Material Contracts and Bids ............................ 21
4.17. No Undisclosed Liabilities ............................. 22
(i)
<PAGE>
Page
----
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER .......................................... 22
5.1. Organization and Good Standing ......................... 22
5.2. Authorization of Agreement ............................. 22
5.3. Consents ............................................... 23
5.4. Availability of Funds .................................. 23
5.5. Litigation ............................................. 24
5.6. Brokers ................................................ 24
ARTICLE VI. COVENANTS OF THE SELLER ................................ 24
6.1. Cooperation ............................................ 24
6.2. Access to Documents; Opportunity
to Ask Questions ..................................... 24
6.3. Conduct of Business .................................... 25
6.4. Consents and Conditions; Assignment
of Assets ............................................ 27
6.5. Compliance with Connecticut Transfer Act
6.6 No Solicitation ........................................ 27
ARTICLE VII. COVENANTS OF THE PURCHASER ............................. 28
7.1. Cooperation ............................................ 28
7.2. Confidentiality ........................................ 28
7.3. Consents and Conditions ................................ 28
7.4. Permits, Bonds and Guarantees .......................... 29
ARTICLE VIII. COVENANTS RELATING TO EMPLOYMENT
AND EMPLOYEE MATTERS ................................... 29
8.1. Employees .............................................. 29
8.2. COBRA .................................................. 29
8.3. Union Plans ............................................ 30
8.4. Termination Obligations ................................ 31
8.5. Indemnification ........................................ 31
ARTICLE IX. CONDITIONS PRECEDENT TO THE PURCHASER'S
OBLIGATIONS ............................................ 31
9.1. Representations, Warranties and Covenants .............. 31
9.2. No Prohibition ......................................... 32
9.3. Opinion of the Seller's Counsel ........................ 32
9.4. Delivery of Documents .................................. 32
9.5. Lease. ................................................. 32
9.6. Absence of Material Adverse Effect ..................... 32
9.7. Approvals and Consents ................................. 32
(ii)
<PAGE>
Page
----
ARTICLE X. CONDITIONS PRECEDENT TO THE SELLER'S
OBLIGATIONS ............................................ 33
10.1. Representations, Warranties and Covenants .............. 33
10.2. No Prohibition ......................................... 33
10.3. Opinion of the Purchaser's Counsel ..................... 33
10.4. Delivery of Documents .................................. 34
10.5. Lease .................................................. 34
ARTICLE XI. ADDITIONAL POST-CLOSING COVENANTS ...................... 34
11.1. Further Assurances ..................................... 34
11.2. Public Announcements ................................... 36
11.3. Joint Post-Closing Covenant of the
Seller and the Purchaser ............................. 36
11.4. Books and Records; Personnel ........................... 37
ARTICLE XII. INDEMNIFICATION AND RELATED MATTERS .................... 38
12.1. Indemnification by the Seller .......................... 38
12.2. Indemnification by the Purchaser ....................... 39
12.3. Determination of Damages and
Related Matters ...................................... 39
12.4. Limitation on Indemnification
Liabilities Under Section 12.1(a) .................... 40
12.5. Survival of Representations,
Warranties and Covenants ............................. 40
12.6. Notice of Indemnification .............................. 40
12.7. Indemnification Procedure for
Third-Party Claims ................................... 41
12.8. Arbitration of Disputes Relating
to Indemnification ................................... 42
12.9. Exclusive Remedy ....................................... 44
ARTICLE XIII. TERMINATION ............................................ 44
13.1. Termination ............................................ 45
13.2. Liabilities After Termination. ......................... 45
ARTICLE XIV. MISCELLANEOUS .......................................... 45
14.1. Certain Definitions .................................... 45
14.2. Prorations ............................................. 51
14.3. Waiver of Compliance with Bulk
Transfer Laws ........................................ 52
14.4. Entire Agreement ....................................... 52
14.5. Governing Law .......................................... 52
14.6. Transfer Taxes ......................................... 52
(iii)
<PAGE>
Page
----
14.7. Expenses ............................................... 53
14.8. Table of Contents and Headings ......................... 53
14.9. Notices ................................................ 53
14.10. Severability ........................................... 54
14.11. Binding Effect; No Assignment .......................... 54
14.12. Amendments ............................................. 55
14.13. Counterparts ........................................... 55
(iv)
<PAGE>
Exhibits and Schedules
Schedule 1.1(a) - - Equipment
Schedule 1.1(d) - - Patents and Patent Applications
Schedule 1.1(e) - - Trademarks and Copyrights
Schedule 1.1(h) - - Permits
Schedule 1.1(i) - - Included Contracts
Schedule 1.2(e) - - Excluded Contracts
Schedule 1.4(1) - - Excluded Obligations, Liabilities and
Indebtedness
Schedule 1.5(b) - - Bonds
Schedule 4.4 - - Consents
Schedule 4.5 - - Initial Balance Sheet
Schedule 4.6 - - Certain Business Developments
Schedule 4.7 - - Intangible Assets
Schedule 4.9(a) - - Employees and Employee Benefits
Schedule 4.9(b) (i) - - CB Employee Benefit Plans
Schedule 4.9(b) (ii) - - CB Benefit Arrangements
Schedule 4.9(b) (iii) - - Severance Arrangements
Schedule 4.9(c) - - CB Employee Benefit Plan Exceptions
Schedule 4.10 - - Litigations
Schedule 4.11 - - Compliance With Law
Schedule 4.13 - - Inventory
Schedule 4.14(a) - - Environmental Permits
Schedule 4.14(b) - - Non-Compliance with Environmental Laws
Schedule 4.14(c) - - Environmental Legal Proceedings
Schedule 4.16 - - Material Contracts
Schedule 14.1 - - Retirees
Schedule 14.2 - - Certain Employees
Exhibit A - - Intentionally Omitted
Exhibit B - - Lease Term Sheet
(v)
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ASSET SALE AGREEMENT
ASSET SALE AGREEMENT (the "Agreement"), dated as of May 10, 1993, by
and between Imo Industries Inc., a Delaware corporation (the "Seller"), and
Roller Bearing Company of America, Inc., a Delaware corporation (the
"Purchaser").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Seller, through its Heim Bearings division, is engaged
in the business of manufacturing, selling and distributing ball, spherical and
rod end bearings and related products (the "Business"); and
WHEREAS, the Purchaser desires to purchase, and the Seller desires
to sell, all of the assets and properties of the Seller employed in connection
with the Business (other than any real property and buildings), and, as part of
such purchase and sale, the Seller desires to assign, and the Purchaser desires
to assume, certain obligations and liabilities of the Business, subject, in each
case, to the exceptions, terms and conditions set forth herein; and
WHEREAS, certain capitalized terms used herein are defined in
Section 14.1 hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, and
upon the terms and subject to the conditions hereinafter set forth, the
Purchaser and the Seller hereby agree as follows:
ARTICLE I.
ASSETS TO BE ACQUIRED
1.1. Acquisition and Transfer of Assets. Upon the terms and subject
to the conditions hereinafter set forth, the Seller shall sell, assign,
transfer, convey and deliver to the Purchaser, and the Purchaser shall purchase,
acquire and accept from the Seller, all of the Seller's right, title and
interest in and to the Business, including, without limitation, in and to all of
the assets, properties, rights, contracts and claims, primarily related to or
used primarily in connection with the Business (except as otherwise set forth in
Section 1.2 hereof), wherever located, whether tangible or intangible, as the
same shall
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exist as of the Closing (such rights, title and interest in and to all such
assets, properties, rights, contracts and claims, being collectively referred to
herein as, the "Assets"). The Assets shall include, without limitation, all of
the Seller's rights, title and interest in and to the assets, properties,
rights, contracts and claims described in the following paragraphs (a) through
(n) but in each case, only to the extent primarily related to or used primarily
in connection with the Business; provided, however, that the Assets shall in any
event include all of the foregoing listed on the schedules referred to in
clauses (a) through (n) below:
(a) all furnishings, furniture, office and other supplies,
vehicles, spare parts, tools, dies, fuel, machinery, equipment and
other tangible personal property of any kind (collectively, the
"Equipment"), including, without limitation, all of the Equipment
listed on Schedule 1.1(a) hereto;
(b) all items of inventory notwithstanding how classified in
the financial records of the Seller, including, without limitation,
raw materials, work-in-process, finished goods, supplies, spare parts,
samples and stores (collectively the "Inventory");
(c) all accounts, accounts receivable and notes receivable
(whether short-term or long-term) from third parties or affiliated
entities and all deposits with third parties or affiliated entities,
together with any unpaid interest and fees accrued thereon from the
respective obligors and any security or collateral therefor,
including recoverable deposits and advances (collectively, the
"Accounts Receivable");
(d) (i) all patents and patent applications owned by the
Seller, all licenses to patents and patent applications to and from
third parties and all patents and patent applications in which the
Seller otherwise has rights, including, without limitation, those
listed in Schedule 1.1(d) hereto, (ii) research and development data
and results, manufacturing and other processes, trade secrets, know
how, inventions, mask work, designs, technology, proprietary data or
information, formulae, and manufacturing, engineering and other
technical information, whether owned by the Seller or licensed to the
Seller by third parties or affiliated entities, (iii) all notebooks,
records,
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reports and data relating thereto and (iv) all applications and
registrations for any of the foregoing (collectively, the assets
referred to in clauses (i) through (iv) are referred to herein as the
"Patent-Related Assets");
(e) all trademarks, trade names, service marks and
copyrights, any applications and registrations for any of the
foregoing listed on Schedule 1.1(e) hereto, and all computer programs,
software and data bases owned by the Seller, all licenses to and from
third parties or affiliated entities in respect of any of the
foregoing and each of the foregoing in which the Seller otherwise has
rights (collectively all of the foregoing assets, whether or not
listed on Schedule 1.1(e), together with the Patent-Related Assets,
are referred to herein as the "Intangible Assets");
(f) all marketing brochures and materials and other printed
and written materials relating to the Sellers' ownership of or
operation of the Business that the Seller is not required by law to
retain (of which the Seller may retain duplicates so long as the
confidentiality thereof is maintained by the Seller), and duplicates
of any such materials that the Seller is required by law to retain;
(g) all rights under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers,
contractors and other third parties or affiliated entities in
connection with the operation of the Business or affecting any of the
Assets;
(h) all Permits related to or used in connection with the
Business or the Assets, including, without limitation, the Permits
listed on Schedule 1.1(h) hereto held by the Seller (to the extent
permitted by applicable Law to be transferred);
(i) all Contracts including, without limitation, those
listed on Schedule 1.1(i) hereto;
(j) all deferred and prepaid charges, sums and fees, other
than in respect of taxes and insurance premiums;
(k) all Bids;
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(l) all of the Seller's rights, claims, credits, causes of
action or rights of set-off against third parties relating to the
Business or the Assets, whether liquidated or unliquidated, fixed or
contingent, including all claims under the Contracts;
(m) all books, records, files and papers related to the
Assets or the conduct of the Business; and
(n) all goodwill relating to the foregoing Assets.
1.2. Excluded Assets. Notwithstanding anything to the contrary
contained in Section 1.1 hereof, the Seller and the Purchaser expressly
understand and agree that the Seller is not hereunder selling, assigning,
transferring, conveying or delivering to the Purchaser the following assets,
properties, rights, contracts and claims (collectively, the "Excluded Assets"):
(a) cash, bank accounts, certificates of deposits, treasury
bills, treasury notes and marketable securities;
(b) except as otherwise specifically provided in Section 8.3
hereof with respect to the CB Employee Benefit Plans and CB Benefit
Arrangements assumed by the Purchaser, pension or other funded
employee benefit plan assets;
(c) any policy of insurance;
(d) except as set forth in Schedule 1.1(e) hereto, any of
the Seller's right, title or interest in or to any name, mark, trade
name or trademark, including, without limitation, any incorporating
"Imo" or "Imo Delaval" and all corporate symbols or logos
incorporating "Imo" or "Imo Delaval", either alone or in combination,
and any and all goodwill represented thereby and pertaining thereto;
(e) all Contracts that relate solely to the Excluded Assets
or the Excluded Liabilities;
(f) all prepaid insurance premiums and prepaid taxes
pertaining to the Business and all
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prepaid charges, sums and fees pertaining to any of the Excluded
Assets or the Excluded Liabilities;
(g) any of the Seller's right, title or interest in real
property and buildings located thereon, including, without limitation,
the office of the Business in Fairfield, Connecticut and any of the
fixtures attached thereto (including all environmental systems) and
any Permits relating to the ownership of the real property or the
buildings located thereon, including, without limitation, those
Permits relating to the occupancy of such buildings, but excluding
those Permits necessary for the operation of Business;
(h) any books, records or other data relating to the
Seller's ownership or operation of the Business not located on the
premises of the Business and which are part of the Seller's general
corporate books and records or required by applicable Law to be
retained by the Seller, provided, however, that copies of such books,
records or other data relating to the Business shall be furnished to
the Purchaser promptly upon reasonable written request;
(i) except as otherwise set forth in the last sentence of
Section 11.1 hereof, any of Seller's right, title and interest under
any Contracts, agreements, licenses, Permits, exemptions, franchises,
variances, waivers, consents, approvals or other authorizations or
arrangements that are not transferrable without consent (unless such
consent has been obtained); and
(j) any claims for refunds or rebates of any previously paid
taxes, levies or duties including, without limitation, the Customs
Receivable.
1.3. Assumed Liabilities. Effective as of the Closing, the Purchaser
shall assume and pay, perform and discharge all debts, claims, liabilities,
obligations, damages and expenses (collectively, the "Liabilities") of the
Seller of every kind and nature, whether known, unknown, contingent, absolute,
determined, indeterminable or otherwise on the Closing Date and whether incurred
or accruing prior to, on or after the Closing Date, to the extent primarily
relating to or arising primarily from the operation of the Business including,
without limitation, all claims against, and liabilities and obligations of, the
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Seller with respect to the Contracts being transferred to the Purchaser
hereunder (to the extent that such liabilities and obligations remain
unsatisfied or are required to be performed on or after the Closing Date) and
all such liabilities and obligations with respect to Employees and CB Retirees
as are specifically set forth in Article VIII hereof (collectively, the "Assumed
Liabilities").
1.4. Excluded Liabilites. Notwithstanding anything in Section 1.3
hereof to the contrary, the Seller and the Purchaser expressly understand and
agree that the Purchaser shall not assume or become liable for any of the
following Liabilities of the Seller (the "Excluded Liabilities"):
(a) any liability or obligation (whether presently in
existence or arising hereafter) of the Seller for any Taxes;
(b) except as provided in the Lease, any liability or
obligation arising out of any violation of any Environmental Law by
the Seller (including, without limitation, the items set forth in
Schedule 4.11) or arising out of the presence, transportation, storage
or disposal of Hazardous Substances, in each case to the extent such
violation existed, or such Hazardous Substances were present,
transported, stored or disposed of, on or prior to the Closing Date;
(c} any liability or obligation, whether presently in
existence or arising hereafter, that is not primarily attributable to,
or does not arise primarily out of the conduct of, the Business;
(d) any liability or obligation, whether presently in
existence or arising hereafter, relating to any of the Excluded
Assets;
(e) any liability or obligation, whether presently in
existence or arising hereafter, arising in connection with the
operation of the Business or the ownership of the Assets prior to the
Closing Date (whether based on occurrences prior to the Closing or
after the Closing), but only to the extent that the Seller or any of
its Affiliates is reimbursed for such liability or obligation under
any insurance policy or such liability or obligation is paid directly
to the Seller or any of its Affiliates pursuant to any
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<PAGE>
insurance policy; provided, however, that the Seller shall use all
reasonable efforts to obtain reimbursement of or payment for such
liability or obligation under any insurance policy pursuant to which
the Seller may be entitled to reimbursement or payment (which shall
not be interpreted as requiring the Seller to commence legal action
against any insurance carrier);
(f) any liability or obligation of the Seller to Employees,
former Employees (including the spouses and beneficiaries of such
individuals), and CB Retirees arising from the employment of any such
individual with the Seller or in connection with compensation or
benefits under any Employee Benefit Plan or Benefit Arrangement
provided by Seller, except as specifically provided in Article VIII
hereof;
(g) any liability or obligation of the Seller arising out of
(i) any threatened or pending litigation that is pending or threatened
as of the Closing Date, whether or not listed on any schedule hereto
or (ii) any negligent, reckless, tortious or unlawful action or
inaction of the Seller prior to the Closing Date, including, without
limitation, any of the foregoing in clause (i) or (ii) relating to the
Business or the Assets (it being understood that to the extent any
liability of the Purchaser results from the combined effect or
duration of actions or inactions on the part of each of the Seller and
the Purchaser, the apportionment of such liability shall be determined
pursuant to equitable principles of contribution);
(h) any liability or obligation arising out of defects in,
or damages to persons or property arising out of defects in, products
manufactured and sold by, or services rendered by, the Seller prior to
the Closing Date;
(i) (i) any current liability or obligation of the Seller
existing on the Closing Date that should have been accrued on the
Closing Balance Sheet or reflected in the notes thereto in accordance
with GAAP but that was not so accrued or reflected and (ii) any
non-current liability or obligation of the Seller existing on the
Closing Date that should have been accrued on the Initial Balance
Sheet or reflected in
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the notes thereto in accordance with GAAP but that was not so accrued
or reflected;
(j) any liability or obligation relating to workers'
compensation claims made by any employee of the Seller (whether filed
or presented before or after the Closing Date) in connection with any
claim arising as a result of any incidents or circumstances occurring
or in existence on or before the Closing Date, provided that with
respect to any claim that is solely stress related, any claim that is
solely other than a physical injury and any stress related or
non-physical component of a claim, such claim shall have been made or
presented to the Seller prior to the Closing Date and if not so made
or presented shall constitute an Assumed Liability;
(k) all of the obligations of the Seller under (i) the
letter agreement, dated November 16, 1992, between the Seller and
Larry Raffone (the "Raffone Agreement") and (ii) the letter
agreement, dated November 16, 1992, between the Seller and Mario di
Domenico (collectively with the Raffone Agreement, the "Letter
Agreements"); and
(l) any other obligation, liability or indebtedness of the
Seller described in Schedule 1.4(1) hereto.
1.5. Cancellation of Permits, Bonds and Guarantees.
(a) Subsequent to the Closing, to the extent permitted by
Law, the Seller shall have the right to cancel any Permit and any bond,
guarantee or undertaking by the Seller now applicable to the Business or the
Assets to the extent such is not assigned or transferred to the Purchaser
pursuant to Section 1.1 hereof. The failure of the Seller to cancel any Permit,
bond, guarantee or undertaking shall not affect the respective rights,
obligations, liabilities and indemnifications of the Seller by the Purchaser
under this Agreement. Notwithstanding the foregoing, the Seller shall provide
written notice to the Purchaser of the Seller's intention to cancel any such
Permit, bond, guaranty or undertaking and shall provide the Purchaser with the
reasonable opportunity to obtain a new Permit or replace any such bond, guaranty
or undertaking, prior to any cancellation thereof by the Seller.
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(b) The Purchaser shall assume, or promptly reimburse the Seller
for all costs associated with the assignment or transfer of all Permits related
to the Business and the costs of all bonds related to the Business, which are
set forth on Schedule 1.5(b) hereto and, in either case, cannot be cancelled for
as long as they remain outstanding.
ARTICLE II.
PURCHASE PRICE
2.1. Purchase Price and Payment. The consideration for the transfer
of the Assets and the Business to the Purchaser by the Seller shall be the
Purchaser's assumption of the Assumed Liabilities as provided in Section 1.3
hereof, plus the payment to the Seller of $6,000,000 (the "Purchase Price"),
subject to adjustment as provided in Section 2.2 hereof. Payment of the
$6,000,000 portion of the Purchase Price shall be in U.S. dollars, and shall be
made on the Closing Date by wire transfer of immediately available funds to the
account or accounts designated by the Seller.
2.2. Purchase Price Adjustment.
(a) As soon as practicable (but in no event later than 60
days) following the Closing Date, the Seller shall prepare and deliver
to the Purchaser a balance sheet for the Business as of the Closing
Date (the "Closing Balance Sheet"), which shall include a computation
of the Preliminary Working Capital Adjustment (as defined below). The
Closing Balance Sheet shall be prepared by the Seller on a basis
consistent with the Initial Balance Sheet in accordance with GAAP,
except as set forth in the notes thereto (which notes shall be
prepared on a basis consistent with the notes to the Initial Balance
Sheet) and that the Customs Receivable shall not be reflected as an
asset on the Initial Balance Sheet or the Closing Balance Sheet.
(b) The "Preliminary Working Capital Adjustment" shall equal
the amount of Working Capital reflected on the Initial Balance Sheet
minus the amount of Working Capital reflected on the Closing Balance
Sheet. As used herein, "Working Capital" for purposes of both the
Initial Balance Sheet and the Closing
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Balance Sheet shall mean the difference between the total current
assets (excluding any current assets that are Excluded Assets
including, without limitation, the Customs Receivable) of the Business
and the total current liabilities (excluding short-term borrowings and
any other current liabilities that are Excluded Liabilities) of the
Business, as reflected on the Initial Balance Sheet or the Closing
Balance Sheet, as the case may be.
(c) Following the Closing Date, the Purchaser shall afford
the Seller access to all books and records relating to the Business
and make available the assistance of any employees of the Purchaser
related to the Business, in each case as is necessary to enable the
Seller to prepare the Closing Balance Sheet and to calculate the
Preliminary Working Capital Adjustment, both of which shall be
certified by the Seller's Chief Financial Officer as having been
prepared and calculated in accordance with the terms of this
Agreement.
(d) The Purchaser shall have a period of 20 Business Days to
review the Closing Balance Sheet and the calculation of the
Preliminary Working Capital Adjustment following delivery of the
Closing Balance Sheet by the Seller. During such period, the Seller
shall afford the Purchaser access to any of its books, records and
work papers necessary to enable the Purchaser to review the Closing
Balance Sheet and the calculation of the Preliminary Working Capital
Adjustment. The Purchaser may dispute any amounts reflected in the
Preliminary Working Capital Adjustment by giving notice in writing to
the Seller specifying each of the disputed items and setting forth in
reasonable detail the basis for such dispute. Failure by the Purchaser
to dispute the amounts reflected in the Preliminary Working Capital
Adjustment within 20 Business Days of delivery of the Closing Balance
Sheet by the Seller shall be deemed an acquiescence therein by the
Purchaser. If within 30 days after delivery by the Purchaser to the
Seller of any notice of dispute, the Purchaser and the Seller are
unable to resolve all of such disputed items, then any remaining items
in dispute shall be submitted to Arthur Andersen & Co. (the
"Arbitrator"). The Arbitrator shall determine the remaining disputed
items and report to the Seller and the Purchaser upon such items. The
Arbitrator's
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decision shall be final, conclusive and binding on all parties. The
Purchaser and the Seller agree that judgment may be entered upon the
determination of the Arbitrator in any court having jurisdiction over
the party against whom such determination is to be enforced. The fees
and disbursements of the Arbitrator shall be borne equally by the
Purchaser and the Seller. The Preliminary Working Capital Adjustment
if undisputed or deemed undisputed or as revised in accordance with
the procedure outlined above shall be the "Final Working Capital
Adjustment."
(e) If the amount of the Final Working Capital Adjustment is
positive then the Purchase Price shall be decreased by such amount and
the Seller shall pay to the Purchaser, within five (5) Business Days
of the final determination thereof pursuant to the foregoing
provisions of this Section 2.2, an amount equal to the Final Working
Capital Adjustment in cash, with interest from the Closing Date until
paid, computed at the prime rate announced from time to time by
Bankers Trust Company, as in effect on the Closing Date.
(f) If the amount of the Final Working Capital Adjustment is
negative then the Purchase Price shall be increased by such amount and
the Purchaser shall pay to the Seller, within five (5) Business Days
of the final determination thereof pursuant to the foregoing
provisions of this Section 2.2, an amount equal to the Final Working
Capital Adjustment in cash, with interest from the Closing Date until
paid, computed at the prime rate announced from time to time by
Bankers Trust Company, as in effect on the Closing Date.
(g) The Purchaser and the Seller agree that the procedures
established by this Section 2.2 shall constitute the exclusive
procedures for determining the Preliminary Working Capital Adjustment
and the Final Working Capital Adjustment.
2.3. Allocation of Purchase Price. The Purchaser and the Seller
hereby agree that the Purchase Price of the Assets will be allocated in a
mutually acceptable manner within sixty (60) Business Days after the Closing
Date. Subject to the requirements of any applicable tax law, all tax returns and
reports filed by the Purchaser and the Seller shall be prepared consistently
with such allocation.
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In the event of any purchase price adjustment hereunder, the Purchaser and the
Seller agree to adjust such allocation to reflect such purchase price adjustment
and to file consistently any tax returns and reports required as a result of
such purchase price adjustment.
ARTICLE III.
THE CLOSING
3.1. Closing Date. The Closing shall take place at the offices of
Weil, Gotshal & Manges, 767 Fifth Avenue, York, New York at 10:00 A.M., not
later than the fifth Business Day following satisfaction of all of the
conditions precedent thereto set forth in this Agreement, or at such other place
and at such other time and date as may be mutually agreed upon by the Purchaser
and the Seller. In the event that by the date of the Closing the Seller is
unable to obtain the consents, waivers, approvals and authorizations required by
Section 10.6 hereof, the Closing shall be adjourned until the Seller obtains
such consents, waivers, approvals and authorizations. The date of the Closing is
referred to in this Agreement as the "Closing Date."
3.2. Proceedings at Closing. All proceedings to be taken and all
documents to be executed and delivered by the Seller in connection with the
consummation of the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to the Purchaser and its counsel. All
proceedings to be taken and all documents to be executed and delivered by the
Purchaser in connection with the consummation of the transactions contemplated
hereby shall be reasonably satisfactory in form and substance to the Seller and
its counsel. All proceedings to be taken and all documents to be executed and
delivered by all parties at the Closing shall be deemed to have been taken,
executed and delivered simultaneously, and no proceedings shall be deemed taken
nor any documents executed or delivered until all have been taken, executed and
delivered.
3.3. Deliveries by the Seller to the Purchaser. At the Closing, the
Seller shall deliver, or shall cause to be delivered, to the Purchaser the
following:
(a) executed assignments, patent assignments, trademark
assignments, bills of sale and/or
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certificates of title, in forms to be mutually agreed upon by
Purchaser and Seller, dated the Closing Date, transferring to the
Purchaser all of the Assets;
(b) the certificate referred to in Section 9.1(c) hereof
signed by the Chief Financial Officer and another duly authorized
senior executive officer of the Seller referred to in Section 9.1(c)
hereof;
(c) the opinions of counsel for the Seller referred to in
Section 9.3 hereof;
(d) a lease with respect to the office of the Business in
Fairfield, Connecticut having the terms set forth on Exhibit B hereto
(the "Lease"), signed by a duly authorized officer of the Seller;
(e) a receipt for the Purchase Price; and
(f) such other documents, certificates and agreements as the
Purchaser reasonably requests.
3.4. Deliveries by the Purchaser to the Seller. At the Closing, the
Purchaser shall deliver to the Seller the following:
(a) immediately available funds in the amount of the
Purchase Price, by wire transfer as provided in Section 2.1 hereof;
(b) the certificate referred to in Section 10.1(c) hereof
signed by the Chief Financial Officer and another duly authorized
senior executive officer of the Purchaser;
(c) the opinion of counsel for the Purchaser referred to in
Section 10.3 hereof;
(d) an executed assumption agreement, in a form to be
mutually agreed upon by Purchaser and Seller, dated the Closing Date,
pursuant to which the Purchaser assumes all of the Assumed
Liabilities;
(e) the Lease, signed by a duly authorized officer of the
Purchaser; and
(f) such other documents, certificates and agreements as the
Seller reasonably requests.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser as
follows:
4.1. Organization and Good Standing. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to carry
on its business (including, without limitation, the Business) as it is now being
conducted, and to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby.
4.2. Authorization of Agreement. The Seller has full corporate power
and authority to execute and deliver this Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement or to be
executed by the Seller in connection with the consummation of the transactions
contemplated by this Agreement (all such other agreements, documents,
instruments and certificates required to be executed by the Seller being
hereinafter referred to, collectively, as the "Seller Documents"), and to
perform fully its obligations hereunder and thereunder. The execution, delivery
and performance by the Seller of this Agreement and each of the Seller Documents
has been duly authorized by all necessary corporate action on the part of the
Seller. This Agreement has been, and each of the Seller Documents will be at or
prior to the Closing, duly executed and delivered by the Seller, and (assuming
the due authorization, execution and delivery by the other parties hereto and
thereto) this Agreement constitutes, and the Seller Documents when so executed
and delivered will constitute, legal, valid and binding obligations of the
Seller, enforceable against the Seller in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). None of the
execution and delivery by the Seller of this Agreement and the Seller Documents,
or the consummation of the transactions contemplated hereby or thereby, or
compliance by the Seller with any of the provisions hereof or thereof will (i)
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conflict with, or result in the breach of, any provision of the certificate of
incorporation or by-laws of the Seller, (ii) conflict with, violate, result in
the breach or termination of, or constitute a default under any Contract, Order
or Permit to which the Seller is a party or by which it or any of the Assets is
bound or subject, (iii) constitute a violation of any Law applicable to the
Seller, or (iv) result in the creation of any Lien (other than any Lien in favor
of the Purchaser) upon any of the Assets, except, in each case, for violations,
conflicts, breaches or defaults which in the aggregate would not materially
hinder or impair the transactions contemplated hereby or have a Material Adverse
Effect.
4.3. Properties; Leases; Assets.
(a) The Seller owns and has good and valid title to or, in the case
of leased properties, a good and valid leasehold interest in, all of the Assets,
including all such Assets reflected in the Financial Statement, except Assets
disposed of in the ordinary course of business after December 31, 1992. The
Seller holds title to each such Asset free and clear of all Liens other than
Permitted Exceptions.
(b) Except with respect to the real property of the Seller utilized
in the Business, the Assets to be transferred to the Purchaser on the Closing
Date comprise all of the assets necessary to operate the Business as presently
being conducted in all material respects.
4.4. Consents. No consent, waiver, approval, or authorization of, or
declaration, registration or filing with, or notification to, any Person or
Governmental Body is required on the part of the Seller in connection with the
execution and delivery by the Seller of this Agreement or the Seller Documents,
or the compliance by the Seller with any of the provisions hereof or thereof, or
the consummation of the transactions contemplated hereby or thereby, except (i)
as set forth on Schedule 4.4 hereto and (ii) consents, waivers, approvals,
Orders or Permits, if any, which the Purchaser is required to obtain.
4.5. Financial Statement. The Initial Balance Sheet of the Business
as of the month ended April 30, 1993, a copy of which is attached hereto as
Schedule 4.5 (the "Financial Statement"), has been prepared based on information
in the books and records of the Seller in accordance
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with GAAP except as set forth in the notes thereto and presents fairly the
financial position of the Business as at the date indicated.
4.6. Absence of Certain Developments. Except as set forth on
Schedule 4.6 hereto, since December 31, 1992 the Seller has operated the
Business in the ordinary course consistent with past practice and there has
arisen no event, condition or circumstance, or group of events, conditions or
circumstances that have resulted in, or could be reasonably expected to result
in, a Material Adverse Effect. Without limiting the generality of the foregoing,
except as set forth on Schedule 4.6 hereto, since December 31, 1992, there has
not been:
(a) other than in the ordinary course of business and in accordance
with past practice, any (i) increase in benefits payable or potentially payable
under any severance, continuation or termination pay policies or employment
agreements with any officer or employee of the Seller who is employed in
connection with the Business or who may otherwise become an employee of the
Purchaser following the Closing, (ii) increase in compensation, bonus or other
benefits payable or potentially payable to officers or employees of the Seller
who are employed in connection with the Business or who may otherwise become
employees of the Purchaser following the Closing, or (iii) change in the terms
of any bonus, pension, insurance, health or other employee benefit plan or
arrangement of the Seller with respect to any officer or employee who is
employed in connection with the Business or who may otherwise become an employee
of the Purchaser following the Closing;
(b) any loan to or guarantee or assumption of any loan or obligation
on behalf of any officer or employee of the Seller involved in the Business;
(c) any change by the Seller in its accounting principles, methods
or practices or in the manner it keeps its books and records; or
(d) any labor dispute (other than routine individual grievances) or
activity or proceeding by a labor union or representative thereof to organize
any employees of the Seller involved in the Business who were not subject to a
collective bargaining agreement at December 31, 1992, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to any such
employee.
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4.7. Intangible Property. The Intangible Assets set forth on
Schedules 1.1(d) and 1.1(e) constitute all of the registered patents,
trademarks, trade names, service marks and copyrights, and all applications
therefor relating to any of the foregoing, used in connection with, or necessary
for the operation of, the Business, except for any name, mark, trade name or
trade mark incorporating "IMO" or "IMO Delaval." Except as set forth on Schedule
4.7 hereto, each of the Intangible Assets listed on Schedule 1.1(d) or 1.1(e) as
being owned by the Seller is owned by the Seller free and clear of any and all
Liens (other than Permitted Exceptions) and, to the knowledge of the Seller, no
other Person has any claim of ownership with respect thereto. The Seller has
adequate licenses or other valid rights to use all of the Intangible Assets
which it does not own and which are material to the conduct of the Business as
presently conducted, and such licenses and rights are included in the Assets. To
the Seller's knowledge, the Seller's use of the foregoing Intangible Assets does
not conflict with, infringe upon, violate or interfere with any intellectual
property rights of any other Person. Except as set forth on Schedule 4.7, there
are not and have not been any legal Proceedings involving any of the Intangible
Assets nor, to the Seller's knowledge, is any such action or proceeding
threatened.
4.8. Taxes. None of the Assets is tax-exempt use property within the
meaning of Section 168(h) of the Code. None of the Assets is property that is or
will be required to be treated as being owned by another person pursuant to the
provisions of Section 168(f) (8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986.
4.9. Employees and Employee Benefits.
(a) Except as set forth on Schedule 4.9(a) hereto, (i) the Seller is
not delinquent in any material payments to any of its Employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them through Closing Date or amounts required to be reimbursed to
such Employees; (ii) the Seller is not a party to any collective bargaining
agreement applicable to the Employees; (iii) none of the Employees is
represented by any labor organization; (iv) there is no unfair labor practice
complaint against the Seller pending before the National Labor Relations Board
or any comparable state, local or foreign agency and neither any grievance which
might have a Material Adverse Effect nor any
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arbitration proceeding arising out of or under any collective
bargaining agreement is currently pending; (v) there is no labor strike, work
stoppage or slowdown actually occurring or, to the knowledge of the Seller,
threatened against or directly affecting the operations of the Business which
would have a Material Adverse Effect.
(b) Schedule 4.9(b) (i) hereto lists each CB Employee Benefit Plan.
Schedule 4.9(b) (ii) hereto lists each CB Benefit Arrangement. Schedule 4.9(b)
(iii) hereto lists each Severance Arrangement.
(c) Except as set forth on Schedule 4.9(c) hereto:
(i) all CB Employee Benefit Plans intended to be qualified under
Section 401 of the Code have received favorable determinations from the Internal
Revenue Service, and to the best knowledge of the Seller, nothing has occurred
since such determinations to affect adversely such determinations, and true and
correct copies of such plans and determination letters have been delivered to
the Purchaser;
(ii) no CB Employee Benefit Plans which constitute "employee
welfare benefit plans," as defined in Section 3(1) of ERISA, are funded through
trusts under Section 501(c) of the Code;
(iii) no CB Employee Benefit Plan has participated in, engaged
in or been a party to any "prohibited transaction" (as defined in ERISA or the
Code), and neither the Seller nor any of its ERISA Affiliates has incurred, or
is reasonably expected to incur, any liability for taxes under Code Section
4975, with respect to any CB Employee Benefit Plan;
(iv) other than normal claims for benefits, there is no material
claim, pending or threatened, involving any CB Employee Benefit Plan or CB
Benefit Arrangement by any person against such plan or arrangement, or the
Seller or any ERISA Affiliate, nor to the knowledge of the Seller is there any
reasonable basis to anticipate any such claim; there is no material violation of
any reporting or disclosure requirement imposed by ERISA or the Code with
respect to any CB Employee Benefit Plan. True and correct copies of the most
recent annual report on IRS Form 5500 (including attachments, exhibits,
schedules, actuarial
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report and audited financial statement) for each CB Employee
Benefit Plan have been delivered to the Purchaser. These reports and related
exhibits and attachments accurately described the assets and liabilities of each
such plan as of the date thereof and since the date of such annual reports there
has been no material adverse change in the funding status of any funded CB
Employee Benefit Plan; and
(v) no CB Employee Benefit Plan which is an employee pension
benefit plan, as defined in Section 3(2) of ERISA, has incurred an "accumulated
funding deficiency" (within the meaning of Section 412(a) of the Code) whether
or not waived. Except as disclosed in Schedule 4.9(c) hereto, no "reportable
event" within the meaning of Section 4043(b) of ERISA (to the extent that the
reporting of such events to the Pension Benefit Guaranty Corporation ("PBGC")
within 30 days of the occurrence has not been waived) with respect to any such
pension plan has occurred and is continuing or is reasonably expected to occur.
No termination liability to the PBGC has been or is expected to be incurred with
respect to any such pension plan, and no conditions or events have occurred that
present significant risk of termination by the PBGC.
(d) Neither the Seller nor any of its ERISA Affiliates have at any
time during the six (6) years immediately prior to the Closing Date sponsored,
maintained or contributed to or incurred an obligation to contribute to any
"multiemployer plan", as defined in Sections 3(37) and 4001(a)(3) of ERISA.
(e) With respect to each CB Employee Benefit Plan and CB Benefit
Arrangement, all contributions to or payments under any such plan which were
required to be paid as of the Closing Date have been paid by the Seller and all
amounts accrued to date under such plans as liabilities of the Seller which have
not been paid because they are not yet due under applicable law have been
properly recorded on the books of the Seller, as reflected on the Closing
Balance Sheet.
4.10. Litigation. Except as set forth on Schedule 4.10 hereto, there
is no Legal Proceeding pending or, to the knowledge of the Seller, threatened
(i) against or initiated by the Seller in connection with the operation of the
Business or ownership of the Assets; (ii) that seeks to enjoin or obtain damages
in respect of the consummation of the transactions contemplated by this
Agreement or the
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Seller Documents; or (iii) that questions the validity of this Agreement, any
of the Seller Documents or any action taken or to be taken by the Seller in
connection with the consummation of the transactions contemplated hereby or
thereby.
4.11. Compliance with Law. Except as set forth on Schedule 4.11
hereto or on another Schedule hereto, the Business has been and is being
conducted, and the uses to which the Assets have been and are being put, have
been and are in compliance in all material respects with all applicable Laws,
Orders and Permits. Except as set forth on Schedule 4.11 hereto, the Seller has
neither received, nor knows of the issuance of, any notice of any such violation
or alleged violation.
4.12. Receivables. All of the accounts and accounts receivable
reflected on the Initial Balance Sheet, and all accounts and accounts receivable
arising subsequent to the date thereof, have arisen from bona fide transactions
in the ordinary course of business consistent with past practice.
4.13. Inventory. Subject to any reserve therefor that may be set
forth in the Financial Statement or set forth in Schedule 4.13 hereto, all of
the Inventory: (a) has been acquired or manufactured in the ordinary course of
business, consistent with past practice; (b) is of a quality useable in the
ordinary course of business (including processing into merchantable finished
inventories for sale in the ordinary course of business) free of any material
defect or deficiency; (c) is in merchantable and undamaged condition in all
material respects; and (d) is not obsolete.
4.14. Environmental Matters. (a) The Seller has obtained all
approvals, authorizations, certificates, consents, licenses, orders and permits
or other similar authorizations of all Governmental Bodies, or from any other
person, that are required under any Environmental Law and relate to the Business
or the Assets. Schedule 4.14(a) sets forth all permits, licenses and other
authorizations issued under any Environmental Law to the Seller relating to the
Business or the Assets.
(b) Except as set forth on Schedule 4.14(b), the Seller is in
compliance in all material respects with all terms and conditions of all
approvals, authorizations,
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certificates, consents, licenses, orders and permits or other similar
authorizations of all Governmental Bodies and all other persons required under
all Environmental Laws and used in the Business or that relate to the Assets,
and is also in compliance in all material respects with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws.
(c) Except as set forth in Schedule 4.14(c), there is no pending
or, to the Seller's knowledge, threatened, Legal Proceeding, citation or notice
of violation under any Environmental Law relating to the Business or any of the
Assets.
4.15. Brokers. Other than Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), no person has acted directly or indirectly as a broker, finder or
financial advisor for the Seller in connection with the negotiations relating to
or the transactions contemplated by this Agreement and no Person other than
Morgan Stanley is entitled to any fee, commission or like payment in respect
thereof based in any way on any agreement, arrangement or understanding made by
or on behalf of the Seller. The Seller acknowledges that it is responsible for
the payment of the fees of Morgan Stanley in connection with the transactions
contemplated by this Agreement.
4.16. Material Contracts and Bids.
(a) Schedule 4.16 hereto contains a true and correct list of each
oral or written contract, agreement, commitment or obligation with respect to
the Assets or the Business to which the Seller is a party, other than all
purchase orders entered into in the ordinary course of business, which is being
assigned to the Purchaser hereunder and which involves the payment to or from
the Seller of amounts in excess of $25,000 per year or the loss of which could
result in a Material Adverse Effect (collectively, the "Material Contracts").
(b) Except as disclosed in Schedule 4.16, each Contract constitutes
the legal, valid and binding obligation of the Seller and, to the Seller's
knowledge, each other party thereto, enforceable against the Seller in
accordance with each Contract's terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors'
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rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity) and except to the extent that rights to
indemnification and contribution under any Contract may be limited by federal or
state securities laws or public policy relating thereto. The Seller has no
knowledge of any other party to any Contract being in default or having failed
to perform any material obligation thereunder.
4.17. No Undisclosed Liabilities. Except as set forth on any
schedule hereto and for liabilities incurred in the ordinary course of business
and consistent with past practices, since the date of the Financial Statement,
the Seller has not incurred any material liability or obligation (whether
accrued, absolute, contingent or otherwise), and whether due or to become due,
of a nature required by GAAP to be reflected on a corporate balance sheet or
disclosed in the notes thereto.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller that:
5.1. Organization and Good Standing. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite corporate power and authority to carry
on its business as it is now being conducted, and to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby.
5.2. Authorization of Agreement. The Purchaser has full corporate
power and authority to execute and deliver this Agreement and each other
agreement, document, instrument or certificate contemplated by this Agreement or
to be executed by it in connection with the consummation of the transactions
contemplated by this Agreement (all such other agreements, documents,
instruments and certificates required to be executed by the Purchaser being
hereinafter referred to, collectively, as the "Purchaser Documents") and
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to perform fully its respective obligations hereunder and thereunder. The
execution, delivery and performance by the Purchaser of this Agreement and each
Purchaser Document has been duly authorized by all necessary corporate action on
the part of the Purchaser. This Agreement has been, and the Purchaser Documents
will be at or prior to the Closing, duly executed and delivered by the Purchaser
and (assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and the Purchaser Documents when
so executed and delivered will constitute, legal, valid and binding obligations
of the Purchaser, enforceable against it in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). None of the
execution and delivery by the Purchaser of this Agreement and the Purchaser
Documents, or the consummation of the transactions contemplated hereby or
thereby, or compliance by the Purchaser with any of the provisions hereof or
thereof, will (i) conflict with, or result in the breach of, any provision of
the certificate of incorporation or by-laws of the Purchaser, (ii) conflict
with, violate, result in the breach termination of, or constitute a default
under any contract or Order to which the Purchaser is a party or by which it or
any of its respective properties or assets is bound or subject, or (iii)
constitute a violation of any Law applicable to the Purchaser, except, in each
case, for violations, conflicts, breaches or defaults which individually or in
the aggregate would not materially hinder or impair the transactions
contemplated hereby.
5.3. Consents. No consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of the Purchaser in connection with
the execution and delivery of this Agreement or the Purchaser Documents or the
compliance by the Purchaser with any of the provisions hereof or thereof, except
consents, waivers, approvals, Orders or Permits, if any, which the Seller is
required to obtain pursuant to Section 4.4 hereof.
5.4. Availability of Funds. The Purchaser has available sufficient
funds or commitments from lending institutions for such funds to enable it to
consummate the transactions contemplated by this Agreement.
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5.5. Litigation. There is no Legal Proceeding pending or, to the
knowledge of the Purchaser, threatened, that seeks to enjoin or obtain damages
in respect of the consummation of the transactions contemplated by this
Agreement or that questions the validity of this Agreement, the Purchaser
Documents or any action taken or to be taken by the Purchaser in connection with
the consummation of the transactions contemplated hereby or thereby.
5.6. Brokers. Other than Aurora Capital Partners L.P. ("Aurora"), no
Person has acted directly or indirectly as a broker, finder or financial advisor
for the Purchaser in connection with the negotiations relating to or the
transactions contemplated by this Agreement and no Person is entitled to any fee
or commission or like payment in respect thereof based in any way on
agreements, arrangements or understandings made by or on behalf of the
Purchaser. The Purchaser acknowledges that it is responsible for the payment of
the fees of Aurora in connection with the transactions contemplated by this
Agreement.
ARTICLE VI.
COVENANTS OF THE SELLER
From and after the date hereof and until the Closing, the Seller
hereby covenants and agrees with the Purchaser that:
6.1. Cooperation. The Seller shall use its best efforts to cause the
consummation of the transactions contemplated hereby in accordance with the
terms and conditions hereof, including, without limitation, cooperating with the
Purchaser to obtain novations for all government contracts to be transferred
hereunder.
6.2. Access to Documents; Opportunity to Ask questions. The Seller
shall provide the Purchaser with such information as the Purchaser from time to
time reasonably may request with respect to the Business, and shall permit the
Purchaser and any of its directors, officers, employees, counsel,
representatives, accountants and auditors (collectively, the "Purchaser
Representatives") reasonable access, during normal business hours and upon
reasonable prior notice, to the properties, corporate records and books of
accounts of the Business, as the Purchaser from time to time reasonably may
request;
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provided, however, that the Seller shall not be obligated to provide the
Purchaser with any information the provision of which may be prohibited by law
or contractual obligation. No disclosure by the Seller whatsoever during any
investigation by the Purchaser shall constitute an enlargement of or additional
warranty or representation of the Seller beyond those expressly set forth in
this Agreement. All information and access obtained by the Purchaser in
connection with the transactions contemplated by this Agreement shall be subject
to the terms and conditions of the letter agreement relating to confidentiality,
dated as of December 7, 1992, between the Seller and the Purchaser (the
"Confidentiality Agreement").
6.3. Conduct of Business.
(a) Except as otherwise may be contemplated by this Agreement,
required by any of the documents listed in the Schedules hereto or as the
Purchaser otherwise may consent to in writing (which consent shall not be
unreasonably withheld), the Seller shall cause the Business to be operated, and
the Assets to be used and maintained, in the ordinary course consistent with
past practice and use all reasonable efforts consistent with past practice to
(i) preserve present business operations, organization and goodwill of the
Business, (ii) keep available the services of present employees of the Business,
(iii) preserve present relationships with persons having business dealing(s)
with the Business, (iv) maintain all of the assets and properties of the
Business in their current condition, normal wear and tear excepted, (v) maintain
insurance in such amounts and of such kinds as is comparable to that in effect
on the date hereof (with insurers of substantially the same or better financial
condition), (vi) comply with all Laws; (vii) file all foreign, federal, state
and local tax returns applicable to the Business or the Assets required to be
filed and make timely payment of all applicable Taxes when due, (viii) notify
the Purchaser in writing of any action, event, condition or circumstance, or
group of actions, events, conditions or circumstances, relating to the Business
or the Assets, or to the Seller's knowledge, any other person, that results in,
or could reasonably be expected to result in, a Material Adverse Effect, other
than changes in general economic conditions or in the bearings business in
general, such notification to be provided to the Purchaser by the Seller
promptly after the occurrence of any such action, event, condition or
circumstance, or group thereof, and (ix) if related in any way to the Business
or the Assets, notify
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the Purchaser in writing of the commencement of any Legal Proceedings by or
against the Seller, or upon the Seller's becoming aware of any threat, claim,
action, suit, inquiry, proceeding, notice of violation, demand letter, subpoena,
government audit or disallowance that could reasonably be expected to result in
a Legal Proceeding, such notification to be provided to the Purchaser by the
Seller promptly after such commencement or after the Seller's becoming aware
thereof.
(b) Except as otherwise may be contemplated by this Agreement,
required by any of the documents listed in the Schedules hereto or as the
Purchaser otherwise may consent to in writing (which consent shall not be
unreasonably withheld), the Seller shall not do any of the following:
(i) (A) increase the rate of compensation payable or to
become payable to any of the employees or agents of the Business other
than in the ordinary course of business, (B) amend in any material
respect any bonus, stock option, stock purchase, profit-sharing,
deferred compensation, pension, retirement or other similar plan or
arrangement to or in respect of any such employee or agent, other than
as may be required to maintain compliance with ERISA and/or the Code
or (C) enter into any new, or amend in any material respect any
existing, employment, severance or consulting agreement, sales agency,
or other Contract with respect to the performance of personal services
for the Business, other than as may be required to maintain compliance
with ERISA and/or the Code;
(ii) (A) incur or become subject to, or agree to incur or
become subject to, any material obligation or liability (contingent or
otherwise) relating to the Business, except (x) normal trade or
business obligations (including Contracts) incurred in the ordinary
course of business and consistent with past practice and (y) existing
obligations under Contracts listed on any Schedule to this Agreement,
(B) sell, assign, transfer, convey, lease or otherwise dispose of any
of the Assets (other than inventory of the Business in the ordinary
course of business consistent with past practice), (C) cancel or
compromise any material debt or claim or waive or release any material
right relating to the Business or
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the Assets, except for adjustments or settlements made in the ordinary
course of business consistent with past practice, (D) acquire any
material assets relating to the Business other than in the ordinary
course of business, (E) mortgage, pledge or encumber (or permit to be
encumbered) any of the Assets or permit the Assets to become subject
to any Lien, except for (1) liens on certain Assets of the Business in
connection with the restructuring of the Seller's senior indebtedness
(which the Seller covenants and agrees to have removed on or prior to
the Closing Date), (2) liens for Taxes not due and (3) mechanics'
liens being disputed by the Seller in good faith and by appropriate
proceedings, (F) amend, modify or terminate any Contract, except for
amendments or modifications to (or scheduled expirations of) sales or
supply contracts that do not materially and adversely affect the
benefits available to the Business thereunder, or (G) alter the manner
of keeping its books, accounts or records or the accounting practices
therein reflected.
6.4. Consents and Conditions; Assignment of Assets. The Seller shall
use its best efforts to obtain all approvals, consents or waivers from Persons
other than Governmental Bodies (provided that the Seller and the Purchaser shall
use their best efforts to obtain the consent of all Governmental Bodies to the
assignment to the Purchaser of the Permits set forth on Schedule 4.4 hereof)
necessary to assign to the Purchaser all of the Seller's interest in the Assets
or any claim, right or benefit arising thereunder or resulting therefrom (each,
an "Interest") as soon as practicable; provided, however, that in no event
shall the Seller be obligated to pay any consideration therefor to the third
party from whom such approval, consent or waiver is requested or release any
right, benefit or claim in order to obtain such approval, consent or waiver.
6.5. Compliance with Connecticut Transfer Act. The Seller shall
comply with the Connecticut Transfer Act, Connecticut General Statutes Section
22a-134 et seq and file a Form III with the Commissioner of Environmental
Protection prior to the Closing. In accordance with Connecticut General Statutes
Section 22a-134e, the Purchaser shall pay all applicable fees at the time of the
filing of the Form III.
6.6. No Solicitation. Between the date hereof and the earlier to
occur of the Closing Date or the termination
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of this Agreement, neither the Seller nor any of its Affiliates, directors,
officers, employees, representatives or agents shall solicit, encourage or
consider any other acquisition proposal (including by way of furnishing any
information concerning all or a portion of the Business or the Assets);
provided, however, that the Seller may consider another acquisition proposal
(including by way of furnishing any information concerning all or a portion of
the Business or the Assets) if the failure to do so would cause the Seller, its
officers or directors to breach their fiduciary duties under applicable Law. As
used in this Section 6.6, the phrase "acquisition proposal" means a proposal for
the acquisition of all or a portion of the Business or the Assets.
ARTICLE VII.
COVENANTS OF THE PURCHASER
From and after the date hereof, and until the Closing Date, the
Purchaser hereby covenants and agrees with the Seller that:
7.1. Cooperation. The Purchaser shall use its best efforts to cause
the consummation of the transactions contemplated hereby in accordance with the
terms and conditions hereof, including, without limitation, cooperating with the
Seller to obtain novations for all government contracts to be transferred
hereunder.
7.2. Confidentiality. The Purchaser and Aurora shall comply with
the terms of the Confidentiality Agreement.
7.3. Consents and Conditions. The Purchaser shall use its best
efforts to obtain all approvals, consents or waivers from Persons other than
Governmental Bodies necessary to assign to the Purchaser all of the Seller's
interest in the Assets or any claim, right or benefit arising thereunder or
resulting therefrom as soon as practicable; provided, however, that in no event
shall the Purchaser be obligated to pay any consideration therefor to the third
party from whom such approval, consent or waiver is requested or release any
right, benefit or claim in order to obtain such approval, consent or waiver.
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7.4. Permits, Bonds and Guarantees. The Purchaser shall use its best
efforts to obtain as of the Closing all Permits required by any Governmental
Body with respect to the Purchaser's operation of the Business or the
Purchaser's ownership or operation of the Assets (including all such Permits
required under Environmental Laws) without any guaranty or liability of the
Seller with respect thereto; provided, however, that, as provided in Section 1.1
hereof, the Seller shall assign, transfer or convey to the Purchaser at the
Closing those Permits described in one or more Schedules hereto that are held by
the Seller in connection with the Business and that can be assigned without
having to obtain the consent of any Governmental Body with respect thereto or
for which such consent is obtained.
ARTICLE VIII.
COVENANTS RELATING TO EMPLOYMENT AND EMPLOYEE MATTERS
8.1. Employees.
(a) The Purchaser shall offer employment as of the Closing Date
to each Employee who is not a CB Employee on terms and conditions of employment
substantially similar to those the Purchaser provides to similarly situated
employees on the Business Day immediately preceding the Closing Date; provided,
however, that such Employees shall not be third party beneficiaries of this
Agreement. The Purchaser shall offer each CB Employee employment under terms and
conditions provided in the collective bargaining agreement applicable to each
such CB Employee. The Purchaser agrees to assume all of the rights and
obligations of the Seller under all collective bargaining agreements applicable
to the CB Employees and the CB Retirees and which are in effect on the Business
Day immediately preceding the Closing Date.
(b) Upon the reasonable request of the Purchaser, the Seller
shall provide to the Purchaser a statement of all accrued compensation and
benefits of Employees under the Seller's Employee Benefit Plans, Benefit
Arrangements and Severance Arrangements as of the Closing Date.
8.2. COBRA. Except as provided in the following sentence, the Seller
agrees that, with respect to group
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health plans sponsored by it prior to the Closing Date, it shall be liable for
compliance with the continuation coverage provisions of Sections 601 through 608
of ERISA imposed as the result of a "qualifying event" (as that term is defined
in ERISA Section 603 and Code Section 4980B(f) (3)) that occurs prior to the
Closing Date with respect to any CB Employee or CB Retiree and that occurs prior
to or on the Closing Date with respect to any other Employee or former Employee,
(including the spouse and beneficiaries of any such individual) provided that
the Purchaser shall reimburse the Seller for the administrative costs of
providing such coverage with respect to a qualifying event occurring on the
Closing Date that are not paid by the Employee. The Purchaser agrees that it
shall be liable for compliance with the continuation coverage provisions of
Sections 601 through 608 of ERISA (i) imposed as the result of a qualifying
event that occurs on or after the Closing Date with respect to any CB Employee
or CB Retiree or (ii) imposed for any period extending beyond the Closing Date
with respect to a qualifying event which occurred prior to the Closing Date with
respect to any CB Employee or CB Retiree, provided that with respect to (ii)
hereof the Seller (or the plan administrator appointed by it) has met all
relevant notice requirements under Section 606 of ERISA or Section 4980B(f) (6)
of the Code pertaining to any "covered employee" or "qualified beneficiary" (as
such terms are defined in Section 607 of ERISA and Sections 4980B(f) and (g) of
the Code) affected by such qualifying event.
8.3. Union Plans. Effective on and after the Closing, the Purchaser
shall assume the sponsorship of each CB Employee Benefit Plan and CB Benefit
Arrangement provided for under the collective bargaining agreements applicable
to the Business, but shall be permitted to amend or terminate any of such plans
at any time after the Closing in accordance with the terms of such plans with
respect to amendment or termination thereof and in accordance with any
applicable duty to bargain with its employees' bargaining representatives. The
Seller agrees that it will adopt such resolutions and undertake such other
actions as may be necessary or appropriate to transfer sponsorship of such plans
to the Purchaser, including, but not limited to the orderly transfer of assets
of all funded CB Employee Benefit Plans and CB Benefit Arrangements to the
successor fiduciaries of such plans as soon as practicable after the Closing
Date, and Purchaser shall adopt appropriate resolutions assuming sponsorship of
such plans.
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8.4. Termination Obligations. From and after the Closing Date, the
Purchaser shall be liable for all payments that may be required to be made under
any Severance Arrangement, other than any payments made under the Letter
Agreements.
8.5. Indemnification. The Purchaser shall indemnify the Seller from
any liability, loss, damage or expense the Seller may incur (including
reasonable attorneys' fees) with respect to any claims of Employees (i) arising
out of their employment with the Purchaser, (ii) under any Law relating to the
termination, whether constructive or actual, of such Employee's employment
arising on or after the Closing Date, except as provided in Section 8.2 hereof
concerning COBRA obligations, (iii) arising out of or in connection with
post-retirement welfare benefits for CB Retirees or (iv) in connection with
Liabilities assumed by the Purchaser under this Article VIII.
ARTICLE IX.
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
The obligation of the Purchaser to consummate the purchase of the
Assets and the assumption of the Assumed Liabilities on the Closing Date is, at
the option of the Purchaser, subject to the satisfaction of the following
conditions:
9.1. Representations, Warranties and Covenants.
(a) Each of the representations and warranties of the Seller
contained herein shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as though the same had been made
on and as of the Closing Date, it being understood that to the extent that such
representations and warranties were made as of a specified date the same shall
continue on the Closing Date to be true and correct in all material respects as
of the specified date.
(b) The Seller shall have performed and complied, in all
material respects, with the covenants and provisions of this Agreement required
to be performed or complied with by it at or prior to the Closing Date.
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(c) The Purchaser shall have received a certificate of the
Seller, dated as of the Closing Date and signed by the Chief Financial Officer
and another duly authorized senior executive officer of the Seller, certifying
as to the fulfillment of the conditions set forth in this Section 9.1.
9.2. No Prohibition. No Law or Order of any Governmental Body shall
be in effect which prohibits the Purchaser or the Seller from consummating the
transactions contemplated hereby or would be violated as a result of such
consummation.
9.3. Opinion of the Seller's Counsel. The Purchaser shall have
received an opinion or opinions of counsel for the Seller, dated the Closing
Date, in a form reasonably acceptable to the Purchaser.
9.4. Delivery of Documents. The Seller shall have executed and
delivered to the Purchaser at the Closing a bill of sale, certificates of title,
an assignment and assumption agreement, a patent, application, trademark
information and assignment agreement and such other documents as shall
reasonably be requested by the Purchaser to transfer the Assets and otherwise
consummate the transactions contemplated by this Agreement.
9.5. Lease. The Seller shall have executed and delivered to the
Purchaser the Lease.
9.6. Absence of Material Adverse Effect. There shall not have
occurred between the date hereof and the Closing Date any Material Adverse
Effect, regardless whether such Material Adverse Effect is the result of a
single occurrence, condition or circumstance, or group of occurrences,
conditions and circumstances.
9.7 Approvals and Consents. All Permits of all Governmental Bodies
and all consents of all other Persons shall have been obtained (a) as are
necessary to consummate the transactions contemplated hereby and for the
Purchaser to receive the benefits contemplated by this Agreement and (b) where
the failure to obtain any of the foregoing, whether alone or in the aggregate,
could result in a Material Adverse Effect.
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ARTICLE X.
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS
The obligation of the Seller to consummate the sale, transfer and
assignment to the Purchaser of the Assets and the assignment of the Assumed
Liabilities on the Closing Date is, at the option of the Seller, subject to the
satisfaction of the following conditions.
10.1. Representations, Warranties and Covenants.
(a) Each of the representations and warranties of the
Purchaser contained herein shall be true and correct in all material
respects as of the Closing Date with the same force and effect as
though the same had been made on and as of the Closing Date, it being
understood that to the extent that such representations and warranties
were made as of a specified date the same shall continue on the
Closing Date to be true and correct in all material respects as of the
specified date.
(b) The Purchaser shall have performed and complied in all
material respects with the covenants and provisions in this Agreement
required herein to be performed or complied with by them at or prior
to the Closing Date.
(c) The Seller shall have received a certificate of the
Purchaser, dated as of the Closing Date and signed by the Chief
Financial Officer and another duly authorized senior executive officer
of the Purchaser, certifying as to the fulfillment of the conditions
set forth in this Section 10.1.
10.2. No Prohibition. No Law or Order of any Governmental Body shall
be in effect which prohibits the Seller or the Purchaser from consummating the
transactions contemplated hereby or would be violated as a result of such
consummation.
10.3. Opinion of the Purchaser's Counsel. The Seller shall have
received an opinion or opinions of counsel for the Purchaser, dated the Closing
Date, in a form reasonably acceptable to the Seller.
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10.4. Delivery of Documents. The Purchaser shall have executed and
delivered to the Seller at the Closing an assignment and assumption agreement.
10.5. Lease. The Purchaser shall have executed and delivered to the
Seller the Lease.
ARTICLE XI.
ADDITIONAL POST-CLOSING COVENANTS
11.1. Further Assurances.
(a) From time to time after the Closing Date, each of the
Seller and the Purchaser shall, at its sole cost and expense, at the
reasonable request of the Purchaser, execute and deliver such other
and further instruments of sale, assignment, assumption, transfer and
conveyance and take such other and further actions as the Purchaser
may reasonably request in order to vest in the Purchaser and put the
Purchaser in possession of the Assets and to transfer to the Purchaser
any Contracts and rights of the Seller relating to the Assets and
assure to the Purchaser the benefits thereof, and, at the reasonable
request of the Seller, to give effect to the Purchaser's assumption of
the Assumed Liabilities.
(b) Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to
assign any Asset, Permit or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment thereof,
without the consent of a Governmental Body or other third party
thereto, would constitute a breach or other contravention thereof, be
ineffective with respect to any party thereto or in any way adversely
affect the rights of the Purchaser.
(c) With respect to any Contract or any claim, right or
benefit arising thereunder or resulting therefrom, promptly after the
date hereof, to the extent reasonably requested by the Purchaser, the
Purchaser and the Seller will use their respective best efforts to
obtain the written consent of the other parties to any such Contract
for the assignment thereof to the Purchaser, or written confirmation
from such
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parties reasonably satisfactory in form and substance to the Purchaser
confirming that such consent is not required; provided, however, that the Seller
shall not be obligated to pay any consideration for obtaining any such consent
unless the Purchaser in writing requests the Seller to pay such consideration
and agrees to reimburse the Seller for any such payment. If such consent, waiver
or confirmation is not obtained, the Seller and the Purchaser will cooperate in
an arrangement reasonably satisfactory to the Purchaser under which the
Purchaser would obtain, to the extent practicable, the claims, rights and
benefits and assume the corresponding obligations thereunder in accordance with
this Agreement, including subcontracting, sub-licensing or sub-leasing to the
Purchaser, or under which the Seller would enforce for the benefit of the
Purchaser, with the Purchaser assuming the Seller's obligations thereunder, any
and all claims, rights and benefits of the Seller against the third party
thereto. The Seller will promptly pay to the Purchaser when received all monies
received by the Seller under any such Contract or claim, right or benefit. The
Purchaser shall indemnify the Seller with respect to any of the obligations
assumed by the Purchaser under any such Contract, claim, right or benefit.
(d) To the extent any of the approvals, consents or waivers
of any Governmental Body referred to in Section 9.7 hereof has not
been obtained by the Seller as of the Closing and the Purchaser
nevertheless elects to close the transactions contemplated hereby, the
Seller's only obligation with respect thereto shall be to use its
reasonable efforts to do the following:
(i) cooperate with the Purchaser in any reasonable
and lawful arrangements designed to provide the benefits of
such Interest to the Purchaser as long as the Purchaser
cooperates in all material respects with the Seller in such
arrangements and promptly reimburses the Seller for all
payments, charges or other liabilities made or suffered by
the Seller in connection therewith; and
(ii) enforce, at the request of the Purchaser and
at the expense and for the account of the Purchaser, any and
all rights of the Seller arising from such Interest against
such issuer or
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grantor thereof or the other party or parties thereto
(including the right to elect to terminate such Interest in
accordance with the terms thereof upon the written request
of the Purchaser).
To the extent that the Seller enters into lawful arrangements designed
to provide the benefits of any Interest as set forth above, such
Interest shall be deemed an Asset.
11.2. Public Announcements. Neither the Seller (nor any of its
Affiliates) nor the Purchaser (nor any of its Affiliates) shall make any public
statement, including, without limitation, any press release, with respect to
this Agreement and the transactions contemplated hereby, without the prior
written consent of the other party (which consent may not be unreasonably
withheld), except as may be required by Law.
11.3. Joint Post-Closing Covenant of the Seller and the Purchaser.
The Seller and the Purchaser jointly covenant and agree that, from and after the
Closing Date, the Seller and the Purchaser will cooperate with each other in
defending or prosecuting any action, suit, proceeding, investigation or audit of
the other relating to (a) the preparation and audit of the Seller's and the
Purchaser's tax returns for all periods up to and including the Closing Date,
and (b) any audit of the Purchaser and/or the Seller with respect to the sales,
transfer and similar taxes imposed by the laws of any state, relating to the
transactions contemplated by this Agreement. In furtherance hereof, the
Purchaser and the Seller further covenant and agree to respond to all reasonable
inquiries related to such matters and to provide, to the extent possible,
substantiation of transactions and to make available and furnish appropriate
documents and personnel in connection therewith.
11.4. Books and Records; Personnel. For a period of six (6) years
after the Closing Date (or such longer period as may be required by any
Governmental Body or ongoing Legal Proceeding):
(a) Neither party hereto shall dispose of or destroy any of
the business records and files relating to the Business. If either
party wishes to dispose of or destroy such records and files after
that time, it shall first give thirty (30) days' prior written notice
to the other party and such other party shall have the
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right, at its option and expense, upon prior written notice to the
first party within such thirty (30) day period, to take possession of
the records and files within sixty (60) days after the date of such
other party's notice to the first party.
(b) Each party hereto shall allow the other party and its
Representatives access to all business records and files relating to
the Business, during regular business hours and upon reasonable notice
at the Purchaser's or the Seller's, as the case may be, principal
place of business or at any location where such records are stored,
and each party shall have the right, at its own expense, to make
copies of any such records and files; provided, however, that any such
access or copying shall be had or done in such a manner so as not to
interfere with the normal conduct of the Purchaser's or the Seller's,
as the case may be, business or operations.
(c) Each party hereto shall make available to the other
party, upon written request and at such other party's expense (i)
personnel to assist the other party in locating and obtaining records
and files maintained by such first party and (ii) as regards the
Purchaser, any of the Purchaser's personnel previously in the Seller's
employ whose assistance or participation is reasonably required by the
Seller in anticipation of, or preparation for, existing or future
litigation, arbitration, administrative proceeding, tax return
preparation or other matters in which the Seller or any of its
affiliates is involved and which is related to the Business.
(d) Each party hereto hereby agrees to keep the information
given to it by the other party pursuant to this Section 11.4
confidential and will not (except as required by applicable law,
regulation or legal process, and only after compliance with this
Section 11.4(d)), without the other party's prior written consent,
disclose any such information to any third party other than such first
party's attorneys, accountants, other representatives or agents
(collectively, the "Representatives") who need to know such
information for reasonable business purposes of such first party;
provided, however, that such first party shall be responsible for any
such person's maintaining the confidentiality of such information.
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In the event that such first party or any of the Representatives are
requested pursuant to, or required by, applicable law, regulation or
legal process to disclose any of such information, such first party
will notify the other party promptly thereof so that the other party
may seek a protective order or other appropriate remedy or, in the
other party's sole discretion, waive compliance with the terms of this
Section 11.4(d); provided, however, that in the event that no such
protective order or other remedy is obtained, or that the other party
waives compliance with the terms of this Section 11.4(d), the first
party will furnish only the portion of such information which the
first party is advised by counsel is legally required and will
exercise all reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded such information.
ARTICLE XII.
INDEMNIFICATION AND RELATED MATTERS
12.1. Indemnification by the Seller. From and after the Closing
Date, the Seller and its successors and assigns (such entities being
collectively hereinafter referred to for purposes of this Article XII as the
"Seller") shall indemnify and hold the Purchaser and its successors, assigns and
Affiliates harmless to the extent provided in this Article XII from and against
any and all Damages resulting from or arising out of the following:
(a) the failure of any of the Seller's representations and
warranties contained in this Agreement to have been true when made and
as of the Closing Date, it being understood that to the extent that
any of such representations and warranties were made as of a specified
date the same shall apply only to the failure of such representation
or warranty to be true as of such specified date;
(b) the failure of the Seller to comply in all material
respects with any of the covenants contained in this Agreement which
are required to be performed by the Seller;
(c) the Excluded Liabilities; and
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(d) the failure to comply with any bulk sales or bulk
transfer laws in connection with the transactions contemplated hereby;
provided, however, that nothing herein shall relieve the Purchaser of
any obligation with respect to the Assumed Liabilities.
12.2. Indemnification by the Purchaser. From and after the Closing
Date, the Purchaser and its successors and assigns (such entities being
collectively hereinafter referred to for purposes of this Article XII as the
"Purchaser") shall indemnify and hold the Seller and its successors, assigns and
Affiliates harmless to the extent provided in this Article XII from and against
any and all Damages resulting from or arising out of the following:
(a) the failure of any of the Purchaser's representations
and warranties contained in this Agreement to have been true when made
and as of the Closing Date, it being understood that to the extent
that any of such representations and warranties were made as of a
specified date the same shall apply only to the failure of such
representation or warranty to be true as of such specified date;
(b) the failure of the Purchaser to comply in all material
respects with any of the covenants contained in this Agreement which
are required to be performed by the Purchaser;
(c) the Assumed Liabilities;
(d) the Purchaser's operation of the Business or ownership
of the Assets on or after the Closing Date; and
(e) any workers' compensation claims made by any employee of
Seller in connection with any claim arising as a result of any
incidents or circumstances occurring or in existence on or before the
Closing Date to the extent the aggregate amount of all such claims
does not exceed $100,000.
12.3. Determination of Damages and Related Matters. In calculating any
amount payable to the Purchaser pursuant to Section 12.1 or payable to the
Seller pursuant to Section 12.2, the Seller or the Purchaser, as the case may
be, shall receive credit for (i) any tax benefit allowable as a result of the
facts giving rise to the claim for
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indemnification, and (ii) any insurance recoveries, and no amount shall be
included for the Purchaser's or the Seller's, as the case may be, special,
consequential or punitive damages. The Seller and the Purchaser agree that,
except as specifically set forth in this Agreement, neither party (including its
representatives) has made or shall have liability for any representation or
warranty, express or implied, in connection with the transactions contemplated
by this Agreement, including in the case of the Seller and its representatives
any representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding the Business.
12.4. Limitation on Indemnification Liabilities Under Section 12.1(a).
The indemnifications in favor of the Purchaser contained in Section 12.1(a)
hereof (a) shall not be effective until the aggregate dollar amount of all
Damages exceeds $100,000 (the "Threshold Amount"), and then only to the extent
such aggregate amount exceeds the Threshold Amount, and (b) shall terminate once
the dollar amount of all Damages indemnified against under such Section
aggregates 67 percent of the Purchase Price. Neither the requirement that
Damages exceed the Threshold Amount nor the aggregate limit on indemnification
obligations of the Seller referred to in this Section 12.4 shall apply with
respect to the indemnification obligations of the Seller under Section 12.1(b),
(c) or (d).
12.5. Survival of Representations, Warranties and Covenants. The
parties hereto agree that the indemnification obligations of the Seller under
Section 12.1(a) hereof and the Purchaser under Section 12.2(a) hereof with
respect to the representations and warranties made in this Agreement shall
survive for one year after the Closing Date; provided, however, that the
representations and warranties set forth in Sections 4.1, 4.2, 4.8, 4.9 and 4.14
hereof shall survive until expiration of the applicable statutes of limitation.
All other indemnification obligations of the parties shall survive until
expiration of all applicable statutes of limitation.
12.6. Notice of Indemnification. In the event any legal proceeding
shall be threatened or instituted or any claim or demand shall be asserted by
any person in respect of which payment may be sought by one party hereto from
the other party under the provisions of this Article XII or for breach of any of
the representations and warranties set forth herein, the party seeking
indemnification
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(the "Indemnitee") shall promptly cause written notice of the assertion of
any such claim of which it has knowledge which is covered by this indemnity to
be forwarded to the other party (the "Indemnitor"), which notice must be
received by the Indemnitor no later than thirty (30) days after the expiration
of the one year period described above in Section 12.5 (except for
indemnification pertaining to representations, covenants and agreements referred
to in Section 12.5 hereof as to which such one year limitation is not
applicable). Any notice of a claim by reason of any of the representations,
warranties or covenants contained in this Agreement shall state specifically the
representation, warranty or covenant with respect to which the claim is made,
the facts giving rise to an alleged basis for the claim, and the amount of the
liability asserted against the Indemnitor by reason of the claim.
Notwithstanding the foregoing, the failure of either the Purchaser or the Seller
to give notice of any claim for indemnification in accordance with the foregoing
provision shall not adversely affect such party's right to indemnity hereunder
except to the extent that such failure adversely affects the right of the
Indemnitor to assert any reasonable defense to such claim. The Indemnitor shall
have thirty (30) Business Days following its receipt of such notice either (y)
to acquiesce in such claim by giving the Indemnitee written notice of such
acquiescence or (z) to object to the claim by giving Indemnitee written notice
of the objection. If the Indemnitor does not object within such thirty (30)
Business Days, the Indemnitee shall be entitled to be indemnified for all
Damages reasonably and proximately incurred by Indemnitee in respect of such
claim. If the Indemnitor objects to such claim in a timely manner, and the
Indemnitee and the Indemnitor are unable to resolve their dispute within ten
(10) Business Days following such objection (or such additional period of time
as may be mutually agreed to by such parties), the claim shall be submitted
immediately to arbitration pursuant to Section 12.8.
12.7. Indemnification Procedure for Third-Party Claims. In connection
with any claim that may give rise to indemnity under this Article XII resulting
from or arising out of any claim or proceeding by a person that is not a party
hereto, the Indemnitor (unless the Indemnitee elects not to seek indemnity
hereunder for such claim) may, upon written notice to the Indemnitee, assume the
defense of any such claim or proceeding if the Indemnitor acknowledges to the
Indemnitee its right to indemnity pursuant hereto in respect of such claim (as
such claim may have been modified
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through written agreement of the parties or arbitration hereunder). If the
Indemnitor assumes the defense of any such claim or proceeding, the Indemnitor
shall select counsel reasonably acceptable to the Indemnitee to conduct the
defense of such claim or proceeding, shall take all steps necessary in the
defense or settlement thereof and shall at all times diligently and promptly
pursue the resolution thereof. If the Indemnitor shall have assumed the defense
of any claim or proceeding in accordance with this Section 12.7, the Indemnitor
shall be authorized to consent to a settlement of, or the entry of any judgment
arising from, any such claim or proceeding, without the prior written consent of
the Indemnitee; provided, however, that the Indemnitor shall pay or cause to be
paid all amounts arising out of such settlement or judgment concurrently with
the effectiveness thereof; provided further, that the Indemnitor shall not be
authorized to encumber any of the assets of the Indemnitee or to agree to any
restriction that would apply to the Indemnitee or to its conduct of business;
and provided further, that a condition to any such settlement shall be a
complete release of the Indemnitee with respect to such claim. The Indemnitee
shall be entitled to participate in (but not control) the defense of any such
action with its own counsel at its own expense. Each Indemnitee shall, and shall
cause each of each Affiliates, officers, employees, consultants and agents to,
cooperate fully with the Indemnitor in the defense of any claim or proceeding
being defended by the Indemnitor pursuant to this Section 12.7. If the
Indemnitor does not assume the defense of any claim or proceeding resulting
therefrom in accordance with the terms of this Section 12.7, the Indemnitee may
defend against such claim or proceeding in such manner as it may deem
appropriate including settling such claim or proceeding after giving notice of
the same to the Indemnitor, on such terms as the Indemnitee may deem
appropriate. If the Indemnitor seeks to question the manner in which the
Indemnitee defended such claim or proceeding or the amount of or nature of any
such settlement, the Indemnitor shall have the burden of proof by a
preponderance of the evidence that such Indemnitee did not defend such claim or
proceeding in a reasonably prudent manner.
12.8. Arbitration of Disputes Relating to Indemnification.
(a) Any dispute with respect to any claim for indemnification under
this Article XII shall be resolved by one arbitrator in accordance with the
procedures set forth
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in this Section 12.8. Within ten (10) Business Days after expiration of the ten
(10) Business Day period referred to in Section 12.6, the Seller and the
Purchaser shall designate a mutually acceptable arbitrator who is a retired or
former judge of any appellate court of the State of New York, any United States
appellate court or the United States District Court for any New York district
who is, in any such case, not affiliated with any party in interest to such
arbitration and who has substantial professional experience with regard to
corporate legal matters. If the parties hereto are unable to agree upon such
arbitrator within such ten (10) Business Day period, the arbitrator shall be
appointed by the American Arbitration Association as soon as practicable and
shall be a retired or former judge of any appellate court of the State of New
York, any United States appellate court or the United States district court for
any New York district who is, in any such case, not affiliated with any party in
interest in such arbitration and who has substantial professional experience
with regard to corporate legal matters.
(b) The arbitrator shall consider the dispute at issue in New York
City, New York, at a mutually agreed upon time within thirty (30) days (or such
longer period as may be acceptable in writing to the parties to such
arbitration) of the designation of the arbitrator. The arbitration proceeding
shall be held in accordance with the rules for the arbitration of commercial
disputes promulgated by the American Arbitration Association in effect on the
date of the initial request by the party seeking indemnification and shall
include an opportunity for the parties to conduct discovery in advance of the
proceeding. Notwithstanding the foregoing, the Purchaser and the Seller agree
that they will attempt, and they intend that they and the arbitrator should use
their best efforts in that attempt, to conclude the arbitration proceeding and
have a final decision from the arbitrator within ninety (90) days from the date
of selection of the arbitrator; provided, however, that the arbitrator shall be
entitled to extend such 90-day period one or more times to the extent necessary
for such arbitrator to place a dollar value on any claim that may be
unliquidated. The arbitrator shall immediately deliver his or her written
decision with respect to the dispute to each of the parties, who shall promptly
act in accordance therewith. The Purchaser and the Seller each agrees that any
decision of the arbitrator shall be final, conclusive and binding, and that it
will not contest any action by any other party thereto in accordance with the
decision of the
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arbitrator. It is specifically understood and agreed that any party may enforce
any award rendered pursuant to the arbitration provisions of this Section 12.8
by bringing suit in any court of competent jurisdiction.
(c) All fees, costs and expenses (including reasonable attorneys'
fees and expenses) incurred by the party that prevails in any such arbitration
commenced pursuant to this Section 12.8 or any judicial action or proceeding
seeking to enforce the agreement to arbitrate disputes as set forth in this
Section 12.8 or seeking to enforce any order or award of any arbitration
commenced pursuant to this Section 12.8 in such manner as the arbitrator or the
court in such judicial action, as the case may be, may determine to be
appropriate under the circumstances. All costs and expenses attributable to the
arbitrator shall be allocated among the parties to the arbitration in such
manner as the arbitrator shall determine to be appropriate under the
circumstances.
12.9. Exclusive Remedy. The exclusive remedy available to a party
hereto in respect of the matters covered by Section 12.1 or Section 12.2 hereof
shall be to proceed in the manner and subject to the limitations contained in
this Article XII.
ARTICLE XIII.
TERMINATION
13.1. Termination. This Agreement may be terminated:
(a) by the written agreement of the Purchaser and the
Seller;
(b) by either the Purchaser or the Seller if there shall be
in effect a non-appealable order of a court of competent jurisdiction
permanently prohibiting the consummation of the transactions
contemplated hereby; and
(c) by either the Purchaser or the Seller if the Closing
shall not have occurred on or before June 30, 1993 provided that such
date shall be extended to July 31, 1993 to the extent necessary to
obtain approval of the Connecticut Department of Environmental
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Protection of the transfer of Permit No. SPOOll7O relating to the
treatment and discharge of waste water as specified on Schedule 4.4.
13.2. Liabilities After Termination. Upon any termination of this
Agreement pursuant to Section 13.1 above, no party hereto shall thereafter have
any further liability or obligation hereunder other than the Purchaser's
obligations pursuant to Section 7.2 hereof, but no such termination shall
relieve either party hereto of any liability to the other party hereto for any
breach of this Agreement prior to the date of such termination.
ARTICLE XIV.
MISCELLANEOUS
14.1. Certain Definitions. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Accounts Receivable" has the meaning set forth in Section 1.1(c)
hereof.
"Affiliate" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such other Person.
"Assets" has the meaning set forth in Section 1.1 hereof.
"Assumed Liabilities" has the meaning set forth in Section 1.3.
"Benefit Arrangement" means each employment or severance contract or
arrangement providing for insurance coverage, severance, termination, vacation
pay or similar coverage and all written compensation policies and practices
maintained by the Seller or any ERISA Affiliate covering any Employee or former
Employee of the Business that is not an Employee Benefit Plan.
"Bid" means any quotation, bid or proposal made by the Seller that
if accepted or awarded would lead to a Contract with any Person for the design,
manufacture and
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sale of products or the provision of services by or to the Business or with
respect to any Asset.
"Business" has the meaning set forth in the recitals hereof.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are authorized or required
by law to close.
"CB Benefit Arrangement" means each Benefit Arrangement covering any
CB Employee or CB Retiree.
"CB Employee Benefit Plan" means each Employee Benefit Plan covering
any CB Employee or CB Retiree.
"CB Employees" means Employees who are covered by a collective
bargaining agreement.
"CB Retirees" means former Employees of the Business who were
employed pursuant to a collective bargaining agreement and their spouses and
beneficiaries with a right to receive post-retirement welfare benefits from the
Seller and listed on Schedule 14.1 hereto.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Closing Balance Sheet" has the meaning set forth in Section 2.2(a)
hereof.
"Closing Date" has the meaning set forth in Section 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" has the meaning set forth in Section 6.2
hereof.
"Contract" means any contract, agreement, indenture, note, bond,
loan, instrument, lease, conditional sale contract, mortgage, license,
franchise, insurance policy, commitment or other arrangement or agreement,
whether written or oral, relating to the Business or any of the other Assets.
46
<PAGE>
"Customs Receivable" means that certain receivable in the amount of
$509,394 in respect of a refund of customs duties related to the Business.
"Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement, including
(y) interest on cash disbursements at a rate per annum equal to the prime rate
of Bankers Trust Company plus two percent (2%) from the date each such cash
disbursement is made until the Person incurring the same shall have been
indemnified in respect thereof and (z) reasonable costs, fees and expenses of
attorneys, experts, accountants, appraisers, consultants, witnesses,
investigators and any other agents of such person.
"Employee Benefit Plan" means each employee benefit plan, as defined
in Section 3(3) of ERISA, that is sponsored or contributed to by Seller or any
ERISA Affiliate and which covers any Employee or former Employee of the
Business.
"Employees" means all persons employed in the Business on the day
immediately prior to the Closing Date, including any persons on layoff,
disability, sick leave or leave of absence from the Business.
"Environmental Laws" means all Laws which exist on the Closing Date
relating to the protection of human health, safety or the environment including:
(i) all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, ground water or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances, chemical substances,
pollutants, contaminants or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature; and (ii) all requirements pertaining to the
protection of the health and safety of employees or the public.
"Equipment" has the meaning set forth in Section 1.1(a) hereof.
47
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means any entity that, as of the relevant
measuring date under ERISA, is a member of a controlled group of corporations or
under common control with Seller within the meaning of Section 414 of the Code.
"Excluded Assets" has the meaning set forth in Section 1.2 hereof.
"Excluded Liabilities" has the meaning set forth in Section 1.4
hereof.
"Final Working Capital Adjustment" has the meaning set forth in
Section 2.2(d) hereof.
"Financial Statement" has the meaning set forth in Section 4.5
hereof.
"GAAP" means generally accepted accounting principles in the United
States consistently applied. Unless otherwise specified in this Agreement, all
accounting terms shall have the meanings ascribed to such terms by GAAP.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency or instrumentality thereof, or any court
or arbitrator (public or private).
"Hazardous Substance" means any chemical substance: (i) the presence
of which requires investigation or remediation under any Law; (ii) that is
defined as a "hazardous waste" or "hazardous substance" under any Law; (iii)
that is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic or mutagenic or otherwise hazardous and is regulated by any
Governmental Body having or asserting jurisdiction over the Business or any of
the Assets; (iv) the presence of which causes a nuisance to adjacent properties
or poses a hazard to the health or safety or any Person; (v) the presence of
which on adjacent properties constitutes a trespass by the Seller; or (vi)
without limitation, that contains gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenyls ("PCBs") or asbestos.
48
<PAGE>
"Indemnitee" has the meaning set forth in Section 12.6 hereof.
"Indemnitor" has the meaning set forth in Section 12.6 hereof.
"Initial Balance Sheet" means the balance sheet of the Business at
April 30, 1993 attached hereto as Schedule 4.5.
"Intangible Assets" has the meaning set forth in Section 1.1(e)
hereof.
"Interest" has the meaning set forth in Section 6.4 hereof.
"Inventory" has the meaning set forth in Section 1.1(c) hereof.
"Knowledge" or "knowledge" means, with respect to the Seller, the
actual knowledge (after due inquiry) of the officers and directors of the Seller
and its Affiliates, and the employees of the Seller set forth on Schedule 14.2,
and with respect to the Purchaser, the actual knowledge of the officers and
directors of the Purchaser and its Affiliates.
"Law" means any federal, state, local or foreign law (including
common law), statute, code, ordinance, rule, regulation or other requirement or
guideline.
"Lease" has the meaning set forth in Section 3.3(d) hereof.
"Legal Proceeding" means any judicial, administrative or arbitral
action, suit, proceeding (public or private), claim or governmental proceeding.
"Liabilities" has the meaning set forth in Section 1.3 hereof.
"Lien" means any lien, pledge, mortgage, deed of trust, security
interest, claim, lease, charge, option, right of first refusal, easement, or
other real estate declaration, covenant, condition, restriction or servitude,
transfer restriction under any shareholder or similar agreement, encumbrance or
any other restriction or limitation whatsoever.
49
<PAGE>
"Material Adverse Effect" means any material adverse change in, or
effect on, or any effect that results in a material adverse change in, the
operations, affairs, financial condition, results of operations, Assets,
Liabilities or any other aspect of the Business.
"Material Contracts" has the meaning set forth in Section 4.16(a)
hereof.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"Parent" has the meaning set forth in the recitals hereof.
"Patent-Related Assets" has the meaning set forth in Section 1.1(d)
hereof.
"Permit" means any written approval, waiver, authorization, consent,
franchise, license, permit or certificate by, or any filing with, any
Governmental Body.
"Permitted Exceptions" means (i) statutory Liens for current taxes,
assessments or other governmental charges not yet delinquent or the amount or
validity of which is being contested in good faith by appropriate proceedings;
(ii) mechanics', carriers', workers', repairers' and similar Liens arising or
incurred in the ordinary course of business that are not in the aggregate
material to the Business or the Assets; (iii) zoning, entitlement and other land
use and environmental regulations by Governmental Bodies, provided that such
regulations have not been violated; (iv) Liens arising out of a failure to
comply with the provisions of any bulk transfer laws of any jurisdiction; and
(v) such other imperfections in title, charges, easements, restrictions and
encumbrances which do not in the aggregate have a Material Adverse Effect.
"Person" or "person" means any individual, corporation, partnership,
firm, joint venture, association, joint-stock company, trust, unincorporated
organization or Governmental Body.
"Preliminary Working Capital Adjustment" has the meaning set forth
in Section 2.2(b) hereof.
"Purchase Price" has the meaning set forth in Section 2.1 hereof.
50
<PAGE>
"Purchaser" has the meaning set forth in the recitals hereof.
"Purchaser Documents" has the meaning set forth in Section 5.2
hereof.
"Representatives" has the meaning set forth in Section 11.4(d)
hereof.
"Purchaser Representatives" has the meaning set forth in Section 6.2
hereof.
"Seller" has the meaning set forth in the recitals hereof.
"Seller Documents" has the meaning set forth in Section 4.2 hereof.
"Severance Arrangement" means each termination, severance or similar
plan, policy or arrangement of the Seller concerning Employees.
"Taxes" means all federal, state, municipal, local or foreign taxes,
assessments, additions to tax, interest, penalties, deficiencies, duties, fines,
fees, withholding tax obligations, trust fund taxes and other governmental
charges or impositions of any kind or description, whether measured by
properties, assets, wages, payroll, purchases, value added, payments, sales,
use, business, capital stock, surplus or income, arising out of or in connection
with the operation and ownership of the Business and the Assets by the Seller or
otherwise.
"Threshold Amount" has the meaning set forth in Section 12.4 hereof.
"Working Capital" has the meaning set forth in Section 2.2(b)
hereof.
14.2. Prorations. The Purchaser and the Seller hereby agree as
follows with regard to prorations applicable to the consummation of the
transactions contemplated hereby. The parties agree that all operational
expenses incurred directly in the operation of the Business, including, without
limitation, utility bills, the expense of supplies, the expense of fuel, and the
like, shall be prorated between the parties as of the Closing Date, and as of
such date
51
<PAGE>
shall become the obligation and responsibility of the Purchaser. Prorations
which are to be effected on the Closing Date shall be made on the Closing Date
or, if such prorations cannot reasonably be made as of the Closing Date, as soon
thereafter as possible and "as of" the Closing Date. In addition, all pre-paid
expenses shall be prorated between the parties as of the Closing Date. The
Purchaser, as of the Closing Date, shall pay such amounts as may be required to
replace all deposits held with the suppliers of utilities to the Business, and
to assist the Seller as may be reasonably required in obtaining a return of such
deposits put in place by the Seller as of the Closing Date.
All personal property taxes and special and general assessments
relating to the Assets shall be prorated by the parties as of the Closing Date,
and all such taxes applicable to periods of time prior to the Closing Date shall
be the sole obligation, responsibility and expense of the Seller, and shall be
paid by the Seller. All such assessments and taxes applicable to periods
following the Closing Date shall be the sole obligation, responsibility and
expense of the Purchaser.
14.3. Waiver of Compliance with Bulk Transfer Laws. The Purchaser
hereby waives compliance by the Seller with the provisions of the bulk transfer
laws of any jurisdiction in connection with the transactions contemplated by
this Agreement.
14.4. Entire Agreement. This Agreement (with its Schedules and
Exhibits) contains, and is intended as, a complete statement of all of the terms
and the arrangements between the parties hereto with respect to the matters
provided for herein, and supersedes any and all previous agreements and
understandings between the parties hereto with respect to those matters.
14.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without reference
to choice or conflict of law principles.
14.6. Transfer Taxes. The Purchaser and the Seller shall equally
share in the cost of (A) all transfer and documentary taxes and fees imposed
with respect to instruments of conveyance in the transaction contemplated hereby
and (B) all sales, use, gains, excise and other transfer or similar taxes on the
transfer of the Assets
52
<PAGE>
contemplated hereunder (not including any tax determined by the overall net
income of the Seller). The Purchaser or the Seller, as the case may be, shall
execute and deliver to the other at the Closing any certificates or other
documents as the other may reasonably request to perfect any exemption from any
such transfer, documentary, sales, gains, excise or use tax.
14.7. Expenses. Each of the parties hereto shall bear its own
expenses (including, without limitation, fees and disbursements of its counsel,
accountants and other experts), incurred by it in connection with the
preparation, negotiation, execution, delivery and performance of this Agreement,
each of the other documents and instruments executed in connection with or
contemplated by this Agreement and the consummation of the transactions
contemplated hereby and thereby.
14.8. Table of Contents and Headings. The table of contents and
section headings of this Agreement are for reference purposes only and are to be
given no effect in the construction or interpretation of this Agreement.
14.9. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally or four days after being mailed by registered mail, return receipt
requested, to a party at the following address (or to such other address as such
party may have specified by notice given to the other party pursuant to this
provision):
If to the Seller, to:
Imo Industries Inc.
3450 Princeton Pike
Lawrenceville, New Jersey 08648
Telephone: (609) 896-7600
Facsimile: (609) 896-7688
Attention: Thomas J. Bird; Senior Vice President
and General Counsel
with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
53
<PAGE>
Attention: Stephen M. Besen, Esq.
If to the Purchaser, to:
Roller Bearing Company of America, Inc.
P.O. Box 1237
140 Terry Drive, Suite 100
Newtown, Pennsylvania 18940-0870
Telephone: 215-579-4300
Facsimile: 215-579-4381
Attention: Michael Hartnett, President
with a copy to:
Aurora Capital Partners L.P.
1800 Century Park East
10th Floor
Los Angeles, California 90067
Telephone: 310-551-0101
Facsimile: 310-277-5591
Attention: Richard Roeder
and a copy to:
Gibson, Dunn & Crutcher
2029 Century Park East
Los Angeles, California 90067
Telephone: 310-552-8500
Facsimile: 310-277-5827
Attention: Kenneth R. Lamb, Esq.
14.10. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validly or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
14.11. Binding Effect; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns. Nothing in this Agreement shall create or be deemed to
create any third party beneficiary rights in any person or entity not party to
this Agreement. No assignment of this Agreement or of any rights or obligations
hereunder may be made by any party (by operation of law or otherwise) without
the prior written consent of each of the other parties hereto and any attempted
assignment without such required
54
<PAGE>
consents shall be void; provided, however, that the Purchaser shall, without the
Seller's consent, be entitled to assign this Agreement to any Person that shall
merge with the Purchaser and be the survivor of such merger, or shall acquire
all or substantially all of the assets of the Purchaser.
14.12. Amendments. This Agreement may be amended, supplemented or
modified, and any provision hereof may be waived, only pursuant to a written
instrument making specific reference to this Agreement signed by each of the
parties hereto.
14.13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Asset Sale
Agreement as of the date and year first above written.
IMO INDUSTRIES INC.
By: /s/ Thomas J. Bird
----------------------------------------
Name: Thomas J. Bird
Title: Senior Vice President and
General Counsel
ROLLER BEARING COMPANY OF AMERICA, INC.
By: /s/ Richard K. Roeder
---------------------------------------
Name: Richard K. Roeder
Title: An Authorized Officer
55
<PAGE>
EXHIBIT B
---------
TERMS OF REAL PROPERTY LEASE
1. The annual rental payment for the Fairfield, Connecticut property shall be
not less than $5.00 per square foot and not greater than $6.00 per square foot
with the exact amount to be agreed by Purchaser and Seller.
2. The lease shall be on a "triple net" basis.
3. The lease shall provide that Purchaser shall indemnify Seller for violations
by the Purchaser of Environmental Laws arising or occurring after the Closing
Date and during the lease period.
4. All other terms of the lease shall be as agreed by Purchaser and Seller;
provided that Purchaser and Seller agree that such terms shall be in accordance
with current market practice in the area.
<PAGE>
Schedule 1.1(a)
---------------
Equipment
See Attached List
<PAGE>
<PAGES 707 TO 730 ILLEGIBLE>
<PAGE>
SCHEDULE 1.1(d)
PATENTS AND PATENT APPLICATIONS
I. PATENTS AND PATENT APPLICATIONS
See Attached List
<PAGE>
HEIM U.S. PATENTS AND APPLICATIONS
Patent/ Title Patent Date
Application #
- --------------------------------------------------------------------------------
4,894,897 Linear Bearing Assembly 1-23-90
5,087,131 Three Piece Rod End 2-11-92
3,915,518 Self-Adjusting Spherical Bearing 10-28-75
Assembly
3,932,008 Bearing Having a Self-Lubricating 1-13-76
Liner and Method for Making
3,932,771 Control for Three-Phase A.C. Motor 1-13-76
3,934,954 Spherical Bearing with Slotted Key 1-27-76
3,940,836 Method of Manufacturing a Spherical 3-2-65
Bearing
3,960,416 Spherical Bearing Having Adjustable 6-1-76
Key
3,969,803 Method of Manufacturing Spherical 7-20-76
Bearings
3,989,321 Spherical Bearing Assembly with Spring 11-2-76
Biased Segmented Inner Race Member
3,989,320 Self-Aligning Bearing with 11-2-76
Preloading Braking Member
3,989,322 Spherical Bearing Assembly 11-2-76
3,992,066 Spherical Bearing and Parts Therefor 11-16-76
3,993,369 Bearing Assembly with Deformable 11-23-76
Inner Member
3,998,504 Keyed Bearing with Inserts 12-21-76
4,005,514 Spherical Bearing Assembly 2-1-77
4,024,616 Self-Aligning Bearing with a 5-24-77
Split Inner Member
4,030,783 Self-Adjusting Spherical Bearing 6-21-77
<PAGE>
Heim U. S. Patents, page 2
4,038,733 Method of Manufacturing a Self- 8-2-77
Aligning Bearing with a Deformable
Inner Member
4,053,190 Self-Aligning Bearing with a Split 10-11-77
Inner Member
4,059,317 Spherical Bearing with Slotted Key 11-22-77
4,076,343 Spherical Bearing Assembly with 2-28-77
Insert Member
4,077,681 Self-Adjusting Bearing 3-7-78
4,079,490 Method of Manufacturing Bearing 3-21-78
4,080,233 Method of Making a Self-Lubricating 3-21-78
Bearing
4,111,499 Bearing Assembly and Liner 9-5-78
4,139,245 Vibration Damping in Machine 2-13-79
Element Bearings
4,196,503 Self-Aligning Bearing with 4-8-80
Preloading Braking Member
4,202,052 Method of Manufacturing Spherical 5-13-80
Bearings and Parts Therefor
4,242,784 Method of Manufacturing a Spherical 1-6-81
Bearing
4,251,122 Self-Adjusting Bearing Assembly 2-17-81
4,277,118 Bearings with Felted Telfon Liners 7-7-81
4,335,924 Wear Resistant Bearing 6-22-82
4,584,748 Leading Balls through Resilient 4-29-86
Gages in Linear Bearings
and Material Handling Chain
4,674,164 Bearings with Felted Teflon Liners 6-23-87
and Method for Making Same
<PAGE>
HEIM FOREIGN PATENTS AND APPLICATIONS
Patent/
Application # Name Effective
- --------------------------------------------------------------------------------
CANADA
- ------
981,734 Ball Bearing Assembly 1-13-76/93
994,401 Anti-Friction Ball Bearing 8-3-76/93
Assembly
996,985 Anti-Friction Ball Bearing Assembly 9-14-76/93
999,908 Preloaded Anti-Friction 11-16-76/93
Bearing Assembly
1,010,097 Anti-Friction Ball Bearing 5-10-77/94
Assembly
1,010,098 Anti-Friction Ball Bearing 5-10-77/94
Assembly
1,010,099 Anti-Friction Ball Bearing 5-10-77/94
Assembly
1,014,339 Method for Manufacturing 7-26-77/94
Spherical Bearing Assemblies
1,015,388 Linear Bearing 8-9-77/94
1,018,227 Ball Bearing Assembly 9-27-77/94
1,025,919 Bearing Having a Self-Lubricating 2-7-78/95
Liner & Method of Making Same
1,038,434 Anti-Friction Ball Bearing 9-12-78/95
Assembly
1,154,744 Bearings with Felted Teflon 10-4-83/00
Liners & Method for Making Same
1,162,394 Method of Manufacturing a 2-21-04/01
Spherical Bearing
<PAGE>
Heim Foreign Patents & Applications, page 2
FRANCE
- ------
71.28300 Self-Aligning Bearing 8-2-71/91
72.32009 Ball Bearing Assembly 9-8-72/92
72.25769 Ball Bearing Assembly 7-13-73/93
GREAT BRITAIN
- -------------
1,349,008 Self-Aligning Bearing 6-2-71/91
1,370,730 Ball Bearing Assembly 8-30-72/92
1,421,249 Ball Bearing Assembly 6-6-73/93
1,426,950 Spherical Bearing Assembly 12-31-72/93
1,477,010 Anti-Friction Ball Bearing 8-19-74/94
Assembly
1,485,019 Self-Adjusting Bearing 11-12-74/94
ITALY
- -----
986,169 Rod End Bearing Assembly 6-14-73/93
989,741 Ball Bearing Assembly 7-4-73/93
<PAGE>
Heim Foreign Patents & Applications, page 3
SWITZERLAND
- -----------
546,898 Self-Aligning Bearing 7-12-71/91
567,669 Ball Bearing Assembly 7-13-73/93
586,357 Self-Adjusting Bearing 1-15-75/95
639,731 Bearings with Felted Teflon 3-6-79/99
Liners
<PAGE>
Schedule 1.1(e)
Trademarks and Copyrights
I. TRADEMARKS
----------
Title Renewal Date
----- ------------
See Attached List
II. COPYRIGHTS
----------
NONE
III. LICENSE AGREEMENTS
------------------
1. Schaublin, S.A.
Delemont, Switzerland
Licensed to manufacture metric bearings using Heim manufacturing
techniques
2. Boeing Airplance Company
Seattle, WA
Grantor of license to Heim for use of patented method of sealing
spherical bearings.
<PAGE>
HEIM U.S. TRADEMARK REGISTRATIONS
---------------------------------
RENEWAL
MARK REGISTRATION NO. REGISTERED DUE
- --------------------------------------------------------------------------------
SPHERCO 587,687 1954 1994
UNIFLON 782,796 1965 2005
UNILINK 783,990 1965 2005
UNILIN 985,883 1974 1994
UNIFLON 1,061,529 1977 1997
UNIBAL 1,131,200 1980 2000
HEIM INCOM INTER-
NATIONAL INC. 1,264,009 1984 2004
HEIM 1,291,853 1984 2004
<PAGE>
HEIM FOREIGN TRADEMARK REGISTRATIONS
------------------------------------
COUNTRY REGISTRATION # RENEWAL DATE
- --------------------------------------------------------------------------------
SPHERCO
- --------
Australia A250.518 1992
Austria 72.009 1992
Bangledesh 2003 1995
Benelux 104,468 1990
Brazil 612,538 1995
Canada 129,756 1993
Chili 182,333 1991
Denmark 755/1973 1993
Denmark 1566/1973 1993
Finland 64392 renewal pending
France 839,626 renewal pending
Germany 905,035 1991
Great Britain 978,034 1992
Italy 270,213 1991
Japan 1089787 1995
Japan 1089788 1995
Mexico 170,121 renewal pending
Norway 85;644 1992
Philippines 20553 1993
Portugal 175,411 1997
Spain 550,951 1996
Switzerland 156,885 1991
<PAGE>
Heim Foreign Trademark Registrations, page 2
UNIBAL
- ------
Australia 113,767 1995
Austria 37,648 1992
Brazil 1232/0650051 renewal pending
Canada 163,677 1999
Denmark 1230/1954 1994
France 1,045,766 1998
Germany 1,087,709 1994
Great Britain 716,965 1988
Ireland 55758 1995
Italy 311,894 1993
Japan 452,189 1994
New Zealand 53,218 1988
Norway 49560 1997
Portugal 143,163 1997
Spain 315,641 1998
Sweden 77908 2001
So. Africa 1157/53/1 1997
Switzerland 147,328 1993
<PAGE>
Heim Foreign Trademark Registrations, page 3
UNIFLON
- -------
Australia A213,126 1988
Canada 163,796 1999
France 1062364 1988
Germany 852,506 renewal pending
Great Britain 916,703 1988
Ireland 72,402 1988
Italy 226,101 renewal pending
New Zealand 84,865 1988
New Zealand 87,308 1989
So. Africa 68.1283 1988
Switzerland 231,295 renewal pending
UNILINK
- -------
Australia A226,209 1990
Canada 167,399 2000
Ireland 75.923 1990
Switzerland 237,403 1989
<PAGE>
SCHEDULE 1.1(h)
PERMITS
1. State Discharge Permit Number SP0001170
Issued October 2, 1989
Expires October 2, 1994
2. Air Compliance Permit No. 0014
No expiration date
3. Air Compliance Permit No. 0015
No expiration date
4. General Permit for the Discharge of
Stormwater Associated with Industrial Activity
Issued October 1, 1992
(Registration November 19, 1992)
5. Registration of underground storage tanks A1R1 and F6R1
in accordance with the Underground Storage Facilities
Program of the Department of Environmental Protection
of the State of Connecticut (Registration form dated
December 18, 1992)
6. Hazardous Waste Number -- EPA ID# CTD 001162122
7. NPDES Permit No. CT0022560 (Expired)
8. General Permit for the Discharge of Minor Tumbling and
Cleaning of Parts Wastewater
Issued June 11, 1992
Expires June 11, 2002
Registration to be filed (coverage commences upon
approval of registration)
9. General Permit for the Discharge of Minor Boiler
Blowdown Wastewaters
Issued June 11, 1992
Expires June 11, 2002
Automatic coverage
10. General Permit for the Discharge of Minor Non-Contact
Cooling Water
Issued June 11, 1992
Expires June 11, 2002
Automatic coverage
<PAGE>
11. General Permit for the Discharge of Domestic Sewage
Issued June 11, 1992
Expires June 11, 2002
Automatic Coverage
2
<PAGE>
SCHEDULE 1.1(i)
INCLUDED CONTRACTS
For a description of certain contracts with Governmental agencies see Schedule
4.4. Although such contracts constitute ordinary course purchase orders they
will require novation agreements.
Purchase Order No. 62089
Bird Environmental Technologies Inc.
126 Monroe Turnpike
Trumbull, CT 06611 $22,186.00/yr.
<PAGE>
SCHEDULE 1.2(e)
EXCLUDED CONTRACTS
NONE
<PAGE>
SCHEDULE 1.4(l)
---------------
EXCLUDED OBLIGATIONS, LIABILITIES AND INDEBTEDNESS
1. CT DEP Order No. HM-715
2. Stipulated judgment of $45,000.00 in settlement of certain environmental
claims pending pursuant to Timothy R.E. Keeney, Commissioner of Department
of Environmental Protection v. IMO Corporation d/b/a Heim Bearings,
CV91-0505295S, Judicial District of Hartford-New Britain at Hartford.
3. See item 3 on Schedule 4.14(c).
<PAGE>
Schedule 1.5(b)
---------------
Bonds
None
<PAGE>
SCHEDULE 4.4
CONSENTS
1. GOVERNMENT CONTRACTS REQUIRING NOVATION AGREEMENTS:
Contract No. Buying Activity Contract Value Remaining Value
------------ --------------- -------------- ---------------
DLA460-93-M-J974 DISC $3,163.09 $3,163.09
DLA500-92-M-DC45 DISC 1,763.65 201.56
DLA500-92-M-RA44 DISC 2,342.00 2,342.00
DLA500-92-M-UD65 DISC 13,877.60 13,877.60
DLA500-92-M-UF63 DISC 3,029.40 3,029.40
DLA500-92-M-UJ67 DISC 2,203.50 2,203.50
DLA500-92-M-UM79 DISC 7,442.75 7,442.75
DLA500-92-M-UUS2 DISC 17,050.65 17,050.65
DLA500-92-M-UW34 DISC 2,771.00 2,771.05
DLA500-92-M-VC21 DISC 1,280.50 1,280.60
DLA500-92-M-VM22 DISC 1,055.75 1,055.75
DLA500-92-M-WB74 DISC 1,688.00 742.72
DLA500-92-M-A946 DISC 2,249.25 2,249.25
DLA500-93-M-B058 C0MPLETE (1 PIECE 0PEN, WAS ERR0R)
DLA500-93-M-D144 DISC 2,173.80 2,173.80
DLA500-93-M-E672 DISC 799.00 799.00
DLA500-93-M-F573 DISC 4,264.00 4,264.00
DLA500-93-M-H656 DISC 2,032.00 2,032.00
DLA500-93-M-J403 DISC 24,843.00 24,843.00
DLA500-93-M-R757 DISC 903.84 903.84
<PAGE>
Contract No. Buying Activity Contract Value Remaining Value
------------ --------------- -------------- ---------------
DLA500-93-M-T903 DISC 4,759.20 4,759.20
DLA500-93-M-U802 DISC 7,750.00 7,750.00
DLA500-93-M-0341 DISC 1,809.20 1,809.20
DLA500-93-M-5720 DISC 3,532.30 3,532.30
DLA500-93-M-5888 DISC 1,488.06 1,322.72
DLA500-93-M-7978 DISC 4,342.50 4,342.50
DLA500-93-W-3121 DISC 6,200.75 6,200.75
F046069-93-M-0723 McCLELLAN AFB 3,086.75 3,086.75
F41608-92-M-3711 KELLY AFB 23,347.35 23,347.35
F41608-92-M-0293 KELLY AFB 3,150.84 3,150.84
F42610-93-M-0070 KELLY AFB 9,544.00 9,544.50
F4608-93-M-0692 A.S.0. 6,405.00 6,405.00
N00383-92-C-V311 A.S.0. 2,805.81 2,805.81
N00383-93-P-R634 A.S.0. 2,040.35 2,040.35
N00383-93-P-R649 A.S.0. 13,803.00 13,803.00
N00163-91-M-2251 DISC 6,456.00 193.68
DLA500-92-M-WG69 DISC 2,781.03 2,781.03
DLA500-93-M-F471 DISC 920.50 920.50
N00181-93-M-N707 SHIPPED
N00421-93-M-2825 NAVAL AIR WARFARE 567.00 567.00
2
<PAGE>
DISC, 700 Robbins Ave., Philadelphia, PA 19111-5096
McClellan AFB, CA 95652-1060 (Dept. of the Air Force, SALC/PKXO)
Kelly AFB, TX 78241-500 (Dept. of the Air Force, Dir. Of Contracting, San
Antonio Air Logistics Center, Buyer: Tarin M./LAFKA, 512-925-6961)
Kelly AFB, Buyer: Maclane, G./LPKD
Hill AFB, Utah 84056-5000 Dept. of the Air Force, Dir. Of Contracting, Bldg.
1258, Ogden Air Logistics Cnter, Buyer: Kathy Stahler/LMKR
Kelly AFB, Buyer: C/Cuellar/LPKD
A.S.O., 700 Robbins Ave., Philadelphia, PA 19111-5098
Procurement Naval Air Warfare Center, Patuxent River, MD 20670-5304 Buyer:
D. Leishear, PR. 12.10.
2. Approval by the Connecticut Department of Environmental Protection of the
transfer by IMO Industries Inc. to Roller Bearing Company of America, Inc.
of State Discharge Permit, Permit No. SP0001170 for the treatment and
discharge of groundwater contamination wastewater.
3
<PAGE>
Schedule 4.5
------------
Initial Balance Sheet
See attached
<PAGE>
Schedule 4.5
Page 1 of 2
INITIAL BALANCE SHEET
Heim Bearings
April 30, l993
(Dollars in Thousands)
ASSETS
CURRENT ASSETS
Cash $0
Trade accounts and notes receivable - Net (1) 2,421
Inventories - Net 6,209
Prepaid expenses and other current assets 6
Inter-company accounts 69
-------
TOTAL CURRENT ASSETS 8,705
PROPERTY, PLANT AND EQUIPMENT - NET 2,301
-------
TOTAL ASSETS $11,006
=======
LIABILITIES & DIVISION INVESTMENT
CURRENT LIABILITIES
Trade accounts payable $762
Payroll and other related items 271
Other accrued expenses 476
Customer advance payments 74
-------
TOTAL CURRENT LIABILITIES 1,583
DIVISION INVESTMENT (1) 9,423
TOTAL LIABILITIES - DIVISION INVESTMENT -------
$11,006
=======
- ----------------------
See Accompanying Note
(1) Trade Receivables and Division Investment have been reduced to reflect the
exclusion of duty related receivables.
<PAGE>
Schedule 4.5
Page 2 of 2
NOTE TO INITIAL BALANCE SHEET
Heim Bearings
April 30, 1993
Liabilities required for a GAAP presentation not included in the accompanying
balance sheet:
FAS 106 Liabilities
Non-Union Active $209
Non-Union Retirees 137
------
Total Salaried 346
Union Active 526
Union Retirees 457
------
Total Union 983
TOTAL FAS 106 LIABILITY (1) 1,329
Union Pension
Assets 4,240
Accrued Liability 4,056
------
Net Pension Assets (2) 184
Medical Run Out Costs
Active Salaried 19
Active Union 0
Non-Union Retirees & Disabled 5
Retired Union 25
------
TOTAL 49
Workers Compensation Unfunded Reserves 378
------
TOTAL NET LIABILITIES $1,572
======
(1) Based on actuarial Report as of 1/1/92,
prepared November 1992.
(2) Based on recent actuarial estimates as of 12/31/92.
<PAGE>
SCHEDULE 4.6
------------
Certain Business Developments
A. Employment Agreements
---------------------
1. Letter Agreement, dated November 16, 1992, between IMO Industries Inc.
and Lawrence A. Raffone, regarding ongoing employment with IMO Industries Inc.
2. Letter Agreement, dated November 16, 1992, between IMO Industries Inc.
and Mario Di Domenico, regarding ongoing employment with IMO Industries Inc.
B. Severance Arrangements
----------------------
For a description of severance arrangements see Schedule 4.9(b) (iii).
C. From January 1, 1993 through and including April 30, 1993, the Business
has incurred aggregate net losses (before interest and taxes) of approximately
$424,000.
D. From January 1, 1993 through and including April 30, 1993, the Business
had net bookings of approximately $3,836,000 as compared to net bookings of
approximately $5,586,000 for the same period in 1992.
<PAGE>
Schedule 4.7
------------
Intangible Assets
None
<PAGE>
Schedule 4.9(a)
---------------
Employees and Employee Benefits
Collective Bargaining Agreement
- -------------------------------
1. BY AND BETWEEN THE HEIM BEARINGS DIVISION OF IMO INDUSTRIES INC. and
International Union, United Automobile, Aerospace and Agricultural Implement
Workers of America, U.A.W. and Amalgamated Local 376 U.A.W.
Effective February 1, 1992 - January 31, 1995
2. See Schedule 4.10
<PAGE>
Schedule 4.9(b)(i)
------------------
CB Employment Benefit Plan
1. See terms of Collective Bargaining Agreement, set forth in Schedule
4.9(a).
2. Plan 047 Hourly Payroll Retirement Plan, Imo Industries Inc., Heim
Division
3. Plan 543 Imo Industries Inc., Business Travel Accident Insurance Plan
4. Plan 816* Imo Industries Inc. Premium Conversion Plan; Program of
Insurance Benefits for Hourly employees - Heim Division
5. Plan 576 Imo Industries Inc., Severance Plan - Imo Union
6. Plan 582 Imo Industries Inc., HMO Plan for hourly employees
* Plan 816 covers; Life Insurance, ADED, SIBI, short term,
disability and vision care
<PAGE>
Schedule 4.9 (b)(ii)
--------------------
CB Benefit Arrangements
1. See terms of the Collective Bargaining Agreement, set forth in Schedule
4.9(a).
The following list corresponds to the Blue Section of the Collective
Bargaining Agreement.
2. Paid sick and/or leave allowance (Article 20, Section 1)
3. Educational Assistance (Article 22, Section 9)
4. Bereavement Pay (Article 14, Section 1 and 2)
5. Jury Duty (Article 15, Section 1 and 2)
6. Apprenticeship Program (Article 22)
7. Retiree Medical Medicare Part B Reimbursement (Article 23, Section 8)
<PAGE>
SCHEDULE 4.9(b) (iii)
SEVERANCE ARRANGEMENTS
1 See terms of Collective Bargaining Agreement, set forth in Schedule 4.9(a)
2. See IMO Corporate Standard Practice No. 328 "Separations of Employment --
Salaried and Non-Union Hourly Employees"
3. Letter Agreement, dated November 16, 1992, between IMO Industries Inc. and
Lawrence A. Raffone, regarding termination of employment with IMO
Industries Inc.
4. Letter Agreement, dated November 16, 1992, between IMO Industries Inc. and
Mario Di Domenico, regarding termination of employment with IMO Industries
Inc.
<PAGE>
Schedule 4.9(c)
---------------
CB Employee Benefit Plan Exceptions
None
<PAGE>
Schedule 4.10
-------------
Litigations
Whitley V. Heim, Case No. 9320283 Discrimination claim filed with the
Connecticut Commission of Human Rights and Opportunities.
See Schedule 4.14(c)
<PAGE>
SCHEDULE 4.11
COMPLIANCE WITH LAW
1. See Schedule 1.4(1).
2. Seller and/or Seller's predecessor in title, Incom International
Inc. may have been required to comply with the Connecticut Transfer Act,
Connecticut General Statutes Section 22a-134 et seq. and to have filed an
appropriate form with the Commissioner of Environmental Protection in
connection (a) with Seller's stock purchase of Incom International Inc.
and of the purchase of the Business and premises relating thereto on
December 31, 1987 and (b) with Seller's merger with Incom International
Inc. in December, 1986. The Connecticut Department of Environmental
Protection ("DEP") is aware that no form was filed at the time of Seller's
purchase of the Business. On November 13, 1992, Seller indicated to DEP
that a Form III would be filed in the near future.
On a no names basis, Seller's environmental counsel contacted DEP,
and DEP expressed the view that a filing at the time of Seller's sale of
the Assets may be acceptable in lieu of filing a Form III for the earlier
transaction(s) and that no further filings would be required. However,
there can be no assurance that the DEP will not take any action regarding
this matter.
3. On June 11, 1992, the Connecticut Department of Environmental
Protection issued a number of General Permits applicable to the Business.
See, Schedule 1.1(h). Prior to that date, Seller had applied for, but not
received, permits pursuant to Connecticut General Statutes Section 22a-430
for various wastewater discharges relating to the Business. Upon issuance
of the General Permits, Seller was required to file a registration for the
General Permit for the Discharge of Minor Tumbling and Cleaning of Parts
Wastewater. No registration for the other permits were required and Seller
was provided with automatic coverage under these other General Permits.
The registration for the Minor Tumbling and Cleaning of Parts Wastewater
General Permit is expected to be filed in the near future.
<PAGE>
Said General Permits also contain a number of terms and conditions
concerning treatment and control, effluent limitations, monitoring,
reporting and recordkeeping. Seller is currently taking the necessary
actions to come within full compliance with the terms and conditions of
such General Permits.
4. According to Bird Environmental Technologies, Inc., the Business'
environmental consultant, MW-24 (a well located on the Business' premises)
was recently tested and the laboratory analysis indicated the presence of
elevated levels of volatile organic compounds ("VOCS") in the well. The
Business is contemplating ways to remediate this condition, including
conducting an additional investigation to confirm the source of the
contamination and installing a pumping system for the removal and
treatment of the VOC-containing groundwater.
5. On or about November 19, 1992, IMO Industries Inc. filed a
registration form with the Connecticut Department of Environmental
Protection for a Stormwater General Permit (see item 4 of Schedule
1.4(h)), and such permit required the preparation and certification of a
Stormwater Pollution Plan by April 1, 1993. IMO completed such plan on May
6, 1993. Pursuant to the permit, the plan was not required to be filed
with the Connecticut DEP but was required to retained on site at the
Business' premises.
2
<PAGE>
Schedule 4.13
-------------
Inventory
None
<PAGE>
Schedule 4.14(a)
----------------
Environmental Permits
See Schedule 1.1(h) for a list of environmental permits, licenses and
authorizations relating to the Business and the Assets.
<PAGE>
Schedule 4.l4 (b)
-----------------
Non-Compliance with Environmental Laws
1. See items 2, 3, 4 and 5 of Schedule 4.11.
2. See item 2 of Schedule 4.4.
3. See Schedule 1.4(1).
<PAGE>
Schedule 4.14(c)
----------------
Environmental Legal Proceedings
1. See Schedule 1.4(1).
2. See items 2, 3, 4 and 5 of Schedule 4.11.
3. In June 1992, IMO Industries Inc. was notified by the U.S. EPA that it
was a potentially responsible party ("PRP") at the Solvents Recovery Services of
New England Superfund Site in Southington, Connecticut. According to the U.S.
EPA, as of June 1992, IMO's generator ranking was 738 with its percentage of its
waste volume total at 0.00196%.
<PAGE>
Schedule 4.16
-------------
Material Contracts
For a discussion of certain contracts with Government agencies see Schedule 4.4.
Although these contracts constitute ordinary course purchase orders they will
require novation agreements.
<PAGE>
Schedule 14.1
-------------
CB Retirees
See attached listings
<PAGE>
Division Name: HEIM BEARINGS
RETIRIED EMPLOYEE ENROLLMENT - UNION EMPLOYEES
AS OF: APRIL 1, 1993
<TABLE>
<CAPTION>
Date of
ZIP SOC SEC Birth DATE
Name CODE Sex Number MO/DY/ YR AGE RETIRED
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lavoie, herve 02777 M ###-##-#### 5/11/07 7 85 9/10/71
Grauer, Albert 06770 M ###-##-#### 2/11/08 8 84 4/1/73
Halpern, Irving 06854 M ###-##-#### 10/21/08 8 84 11/1/73
Doeorad, Adas 33135 M ###-##-#### 12/24/09 9 83 1/1/75
Recklet, Edward 06430 M ###-##-#### 6/20/10 10 82 7/1/80
Renkavinsky, John 06605 M ###-##-#### 2/3/10 10 82 2/4/76
Tines, Joseph 12157 M ###-##-#### 8/23/10 10 82 8/1/73
Mitov, Constantia BELGM M ###-##-#### 1/13/11 11 81 8/1/74
Kent, Robert P. 06612 M ###-##-#### 1/18/12 12 80 2/1/77
Arroyo, Luciano v. PR M ###-##-#### 11/2/14 14 78 2/1/78
Vlasic Sr., Louis v. 06606 M ###-##-#### 6/2/14 14 78 7/31/80
Roda, Jaciato D. 33682 M ###-##-#### 6/12/15 15 77 4/30/83
Shields, James 06430 M ###-##-#### 7/2/15 15 77 7/30/78
Borrago, Manauel F. 33068 M ###-##-#### 12/8/16 16 76 8/1/83
Corallo, John 06611 M ###-##-#### 4/8/16 16 76 7/30/78
Kovacs, Michael 06430 M ###-##-#### 8/15/17 17 75 2/4/84
Rios, Ramon 33068 M ###-##-#### 7/31/17 17 75 6/30/83
Nagy, William J. 06430 M ###-##-#### 4/20/18 18 74 7/17/83
Miller, George S. 06430 M ###-##-#### 2/22/19 19 73 6/1/73
Butryacwicz, Stanislaw 06610 M ###-##-#### 5/11/20 20 72 7/31/87
Morvat, Ivan 06430 M ###-##-#### 6/14/20 20 72 6/17/85
Reyes, Luis 32606 M ###-##-#### 11/6/20 20 72 5/30/86
Baglia, Samuel C. 18407 M ###-##-#### 8/15/21 21 71 8/15/86
Castro, Venancio 33013 M ###-##-#### 4/17/21 21 71 4/30/82
Goncalves, Manuel PRTGL M ###-##-#### 8/31/21 21 71 6/30/82
Bahr, Jose 06606 M ###-##-#### 5/15/22 22 70 12/31/88
Kurbus, Armin 06430 M ###-##-#### 2/17/22 22 70 7/1/90
ORZSULAK, HENRY 06606 M ###-##-#### 3/25/22 22 70 3/31/89
Juhasz, Istvan 06460 M ###-##-#### 10/2/23 23 69 4/30/86
Kristie, Edward 06611 M ###-##-#### 2/15/23 23 69 3/1/89
Fraioli, Mariano 06497 M ###-##-#### 1/12/24 24 68 1/1/86
Giuseppe, Ismolo 06611 M ###-##-#### 3/6/24 24 68 3/31/89
Roseto, Idalberto 06611 M ###-##-#### 9/28/24 24 68 10/1/90
Bodaar, Frank L. 06605 M ###-##-#### 1/11/25 25 67 12/15/77
MARTI, ROLANDO 06606 M ###-##-#### 4/04/25 25 67 12/15/77
Suarez, Leosides 06608 M ###-##-#### 4/22/25 25 67 8/1/90
Young, John 06460 M ###-##-#### 3/7/25 25 67 3/1/90
LADRA, FRANK M ###-##-#### 2/27/26 26 66 3/1/91
Veranes, Mariano 06608 M ###-##-#### 12/05/26 26 66 1/1/92
PINTO, HERMINIO 06605 M ###-##-#### 1/20/27 27 65 6/30/92
</TABLE>
<PAGE>
Division Name: HEIM BEARINGS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Novak, Ivan 06418 M ###-##-#### 2/10/28 28 64 10/1/91
SOVA, EUGENE 06460 M ###-##-#### 7/16/28 28 64 12/1/92
Thibault, Paul 06610 M ###-##-#### 2/11/28 28 64 8/1/90
GAAL, LASZLO 06430 M ###-##-#### 12/23/29 29 63 10/22/64
Magliocco, Quirino 06611 M ###-##-#### 6/7/29 29 63 9/21/83
ROSA, ANICETO 06605 M ###-##-#### 4/30/29 29 63 05/1/92
ZADRAVECZ, JAMES 06430 M ###-##-#### 7/4/30 30 62 09/1/92
Risac, Drago 06497 M ###-##-#### 3/5/34 34 58 2/1/84
Ferguson, Nanine 05465 F ###-##-#### 12/31/05 5 87 9/1/70
MIDALGO, L. 33135 F ###-##-#### 10/10/05 5 87 3/1/77
Roberts, Laura 06497 F ###-##-#### 2/28/08 8 84 8/1/73
Gomez, Juana 06604 F ###-##-#### 5/21/11 11 81 8/1/73
Suaila, Elena 06611 F ###-##-#### 9/4/11 11 81 3/12/70
Murkette, Helen R. 06484 F ###-##-#### 9/1/12 12 80 6/1/81
Gaitter, Anna M. 06430 F ###-##-#### 6/1/14 14 78 7/1/79
Liepertz, Vera S. 06018 F ###-##-#### 9/4/14 14 78 9/28/79
Rios, Petra 33068 F ###-##-#### 4/10/14 14 78 6/30/83
Corallo, Jeanie 06611 F ###-##-#### 6/28/16 16 76 8/1/78
Delvalle, Emma 33135 F ###-##-#### 12/16/17 17 75 3/1/83
Augustyn, Maria 06605 F ###-##-#### 10/16/18 18 74 5/1/85
Gesualdi, Amelia 06606 F ###-##-#### 3/22/18 18 74 4/1/83
Milious, Dorothy 06605 F ###-##-#### 12/14/19 18 74 2/29/84
Subic, Helen 06604 F ###-##-#### 10/30/18 18 74 10/28/76
Brown, Rosanna 06607 F ###-##-#### 9/2/19 19 73 2/16/83
Juhasz, Anna 06460 F ###-##-#### 8/29/20 20 72 2/7/85
Walter, Elisabeth 06430 F ###-##-#### 4/30/20 20 72 4/30/83
Borrego, Consuelo 33068 F ###-##-#### 1/2/21 21 71 5/31/83
Mzynski, Theresa M. 06405 F ###-##-#### 9/28/21 21 71 1/31/85
Notar, Loida 06606 F ###-##-#### 5/29/21 21 71 6/1/87
Pedrayes, Misa 06611 F ###-##-#### 1/1/21 21 71 4/30/86
Belovich, Leopoldine 06430 F ###-##-#### 8/18/22 22 70 3/31/89
Pucko, Ana 06430 F ###-##-#### 7/9/22 22 70 12/1/87
Delaney, Thora M. 06430 F ###-##-#### 6/23/23 23 69 7/22/88
Nagy, Elizabeth 06430 F ###-##-#### 3/25/23 23 69 8/1/83
Olivera, Maria 06605 F ###-##-#### 8/3/23 23 69 1/1/92
Krattamaker, Ana 06606 F ###-##-#### 2/20/24 24 68 4/1/88
Skoczylas, Antoni 34287 F ###-##-#### 6/13/24 24 68 7/1/89
Castro, Edisia 33013 F ###-##-#### 3/6/25 25 67 4/30/88
Rodriguez, Marina 06610 F ###-##-#### 3/3/25 25 67 8/1/90
Weglenski, Jadwiga 06497 F ###-##-#### 5/27/25 25 67 2/1/92
ROUDI, JUSTINA 06604 F ###-##-#### 10/27/27 27 65 11/1/92
GERENCIR, MARGOT 06605 F ###-##-#### 3/23/28 28 64 4/1/91
Skoczylas, Brenislawa 33596 F ###-##-#### 9/27/28 28 64 12/18/86
Bot, Irene 34287 F ###-##-#### 11/20/31 31 61 8/31/87
Baglia, Micholena 06430 F ###-##-#### 2/14/88 88 4 3/29/80
</TABLE>
<PAGE>
Terminated Vested
ANNUAL SERVICE DATA
FOR THE HEIM UNIVERSAL CORPORATION HOURLY EMPLOYEES PENSION PLAN OF
IMO INDUSTRIES INC. AS OF JANUARY 1, 1993
INACTIVES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SOCIAL DATE MONTHLY BENEFIT FORM ----SPOUSE'S INFORMATION--- STATUS
SECURITY OF BENEFIT START OF DATE OF MONTHLY THIS
NUMBER NAME SEX BIRTH AMOUNT DATE BENEFIT BIRTH SEX BENEFIT YEAR COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
###-##-#### AUGUSTYN, E M 07/02/45 84.75 07/01/10 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### BATISTA, E F 07/06/38 144.30 07/01/03 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### CAJIGAS, F M 05/09/52 64.13 05/01/17 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### DEALMEIDA, J M 12/10/35 244.50 12/01/00 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### DESOUSA, C F 04/23/50 142.10 04/01/15 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### FOMBELLIDA, J M 09/11/38 279.00 09/01/03 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### GONZALEZ, R M 10/19/53 111.80 10/01/16 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### GROTTI, A M 08/16/20 114.75 08/01/93 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### GUSAITES, A M 02/24/48 47.25 02/01/13 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### HIDALGO, J M 11/23/48 82.50 11/01/13 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### KARADIMOS, B M 10/01/39 138.75 10/01/96 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### KUCZO, M F 09/13/34 309.35 09/01/99 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### MATKO, J M 04/23/44 49.58 04/01/09 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### MIRANDA, J B M 07/15/51 213.75 07/01/16 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### HAVAS, V M 07/19/30 113.75 07/01/03 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### NEWBERRY, A F 07/24/52 149.35 07/01/17 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### PEET, E M 04/21/58 115.70 04/01/23 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### PIERCE, R M 03/03/57 135.45 03/01/22 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### UGALDE, M F 10/11/46 127.50 10/01/11 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### VAZQUEZ, A F 02/01/36 62.40 02/01/01 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### VUKOVIC, M M 11/23/42 94.00 11/01/07 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### WARD, N M 11/30/34 126.50 11/01/99 LIFE 11
- ------------------------------------------------------------------------------------------------------------------------------------
2,953.16 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
COUNT= 22
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Disability
ANNUAL SERVICE DATA
FOR THE HEIM UNIVERSAL CORPORATION HOURLY EMPLOYEES PENSION PLAN OF
IMO INDUSTRIES INC. AS OF JANUARY 1, 1992
INACTIVES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SOCIAL DATE MONTHLY BENEFIT FORM ----SPOUSE'S INFORMATION--- STATUS
SECURITY OF BENEFIT START OF DATE OF MONTHLY THIS
NUMBER NAME SEX BIRTH AMOUNT DATE BENEFIT BIRTH SEX BENEFIT YEAR COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
###-##-#### HERNANDEZ, S F 11/28/29 100.00 10/01/06 LIFE 13
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### KARADIMOS, G F 07/01/35 118.75 09/01/87 LIFE 13
- ------------------------------------------------------------------------------------------------------------------------------------
218.75 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
COUNT= 2
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Survivors
ANNUAL SERVICE DATA
FOR THE HEIM UNIVERSAL CORPORATION HOURLY EMPLOYEES PENSION PLAN OF
IMO INDUSTRIES INC. AS OF JANUARY 1, 1992
INACTIVES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SOCIAL DATE MONTHLY BENEFIT FORM ----SPOUSE'S INFORMATION--- STATUS
SECURITY OF BENEFIT START OF DATE OF MONTHLY THIS
NUMBER NAME SEX BIRTH AMOUNT DATE BENEFIT BIRTH SEX BENEFIT YEAR COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
###-##-#### ARMENGOL, E M 03/07/24 70.69 03/01/81 55JS 04/19/30 F 38.88 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### BENNICI, C F 09/08/24 137.75 05/01/85 55JS 09/08/21 M 75.76 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### BLAIS, F A M 07/18/11 64.78 09/01/75 55JS 10/19/14 F 35.63 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### BODIE, I M 05/07/18 328.75 11/01/78 55JS 10/16/13 F 180.81 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### DELANEY, J M 05/01/21 222.85 01/01/85 55JS 05/01/24 F 122.57 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### DELORME, R M 08/01/21 108.33 08/01/81 55JS 12/30/25 F 59.58 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### FERRANTE, LOUIS M 09/08/21 141.11 10/01/83 55JS 10/31/33 F 77.61 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### HIDALGO, A M 04/27/11 169.17 03/01/77 55JS 10/10/05 F 93.04 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### HOVANEC, J M 01/14/26 175.57 10/01/89 55JS 06/13/30 F 96.56 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### LIBERAIDRE, A M 04/15/20 100.30 05/01/85 55JS 09/16/21 F 55.17 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### ORAZULAK, W M 03/24/22 138.65 04/01/89 55JS 03/25/25 F 76.26 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### PECK, M F 07/26/08 57.16 08/01/73 55JS 05/06/11 F 31.44 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### POMEROY, R M 08/25/94 77.91 09/01/51 55JS 03/03/96 F 42.85 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### POMPA, D M 10/01/21 69.64 06/01/80 55JS 05/26/23 F 38.30 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### RODRIGUEZ, G M 04/16/17 77.58 01/01/80 55JS 11/21/22 F 42.67 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### SCIPPA, A F 01/05/07 183.75 04/01/74 55JS 07/21/10 F 101.06 18
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### VERDOCK, J M 04/05/18 258.36 10/01/79 55JS 07/01/12 F 142.10 18
- ------------------------------------------------------------------------------------------------------------------------------------
2,382.35 1,310.29
- ------------------------------------------------------------------------------------------------------------------------------------
COUNT= 17
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Vested Transfers
ANNUAL SERVICE DATA
FOR THE HEIM UNIVERSAL CORPORATION HOURLY EMPLOYEES PENSION PLAN OF
IMO INDUSTRIES INC. AS OF JANUARY 1, 1992
INACTIVES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SOCIAL DATE MONTHLY BENEFIT FORM ----SPOUSE'S INFORMATION--- STATUS
SECURITY OF BENEFIT START OF DATE OF MONTHLY THIS
NUMBER NAME SEX BIRTH AMOUNT DATE BENEFIT BIRTH SEX BENEFIT YEAR COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
###-##-#### COPPOLA, P M 10/20/28 1.00 10/01/93 LIFE 15
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### DARLING, J F 11/25/50 59.38 11/01/15 LIFE 15
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### DECARVALHO, N M M 12/01/43 51.85 12/01/08 LIFE 15
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### DUPONT, V M 11/22/29 94.05 11/01/94 LIFE 15
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### GARCES, M F 11/09/57 72.45 11/01/22 LIFE 15
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### GONCALVES, J M 02/15/55 44.33 02/01/20 LIFE 15
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### HERNANDEZ, F M 07/25/53 5.54 07/01/18 LIFE 15
- ------------------------------------------------------------------------------------------------------------------------------------
###-##-#### NASTAGIA, M M 05/02/47 21.38 05/01/12 LIFE 15
- ------------------------------------------------------------------------------------------------------------------------------------
349.98 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
COUNT= 8
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule 14.2
Certain Employees
1. Larry A. Raffone
2. Mario DiDomenico
3. Manuel deCarvalho
=============================
DRAFT -- 9/27/97 6:11 AM
=============================
ASSET PURCHASE AGREEMENT
By and Among
BPP ACQUISITION CORPORATION
BEAVER PRECISION PRODUCTS, INC.
ROLLER BEARING COMPANY OF AMERICA, INC.
and
LLOYD J. BARETZ
Dated as of October 18, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS...................................................1
1.01. Definitions.........................................................1
ARTICLE II. TRANSFER OF ASSETS............................................6
2.01. Transfer of Assets by Seller........................................6
2.02. Excluded Assets.....................................................8
2.03. Assumption of Liabilities...........................................8
2.04. Excluded Liabilities................................................8
2.05. Assignment of Contracts and Rights..................................8
2.06. Closing.............................................................9
2.07. Purchase Price Allocation...........................................9
2.08. Determination of Selected Accounts Receivable, Trade Payables and
Inventory...........................................................9
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER......................9
3.01. Corporate Existence and Power.......................................9
3.02. Authorization......................................................10
3.03. Subsidiaries.......................................................10
3.04. Governmental Authorization.........................................10
3.05. Non-Contravention..................................................10
3.06. Balance Sheets; Undisclosed........................................10
3.07. Absence of Certain Changes.........................................11
3.08. Properties; Leases; Tangible Assets................................12
3.09. Sufficiency of and Title to the Transferred Assets.................13
3.10. Affiliates.........................................................14
3.11. No Undisclosed Liabilities.........................................14
3.12. Litigation.........................................................14
3.13. Contracts..........................................................14
3.14. Permits; Required Consents.........................................15
3.15. Compliance with Applicable Laws....................................16
3.16. Employment Agreements; Change in Control; and Employee Benefits....16
3.17. Labor and Employment Matters.......................................18
3.18. Intellectual Property..............................................19
3.19. Advisory Fees......................................................20
3.20. Environmental Compliance...........................................20
3.21. Insurance..........................................................20
3.22. Tax Matters........................................................21
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER AND RBC..............21
i
<PAGE>
4.01. Organization and Existence.........................................21
4.02. Corporate Authorization............................................22
4.03. Governmental Authorization.........................................22
4.04. Non-Contravention..................................................22
4.05. Advisory Fees......................................................22
4.06. Litigation.........................................................22
ARTICLE V. COVENANTS OF SELLER..........................................22
5.01. Conduct of the Business; Distributions.............................22
5.02. Access to Information..............................................24
5.03. Compliance with Terms of Required Governmental Approvals and
Required Contractual Consents......................................25
5.04. Maintenance of Insurance Policies..................................25
5.05. Confidentiality....................................................25
5.06. Taxes..............................................................26
5.07. Use of Name; Obtaining of Trademark................................26
5.08. Intentionally Omitted..............................................27
5.09. Collection of Selected Accounts Receivable.........................27
5.10. Compliance with Bulk Sales Laws....................................27
5.11. Notice of Third Party Interest.....................................27
5.12. Reconveyance Fee...................................................27
ARTICLE VI. COVENANTS OF BUYER...........................................27
6.01. Confidentiality....................................................27
6.02. Collection of Accounts Receivable..................................28
6.03. No Solicitation of Employees.......................................28
ARTICLE VII. COVENANTS OF ALL PARTIES.....................................29
7.01. Further Assurances.................................................29
7.02. Certain Filings....................................................29
7.03. Public Announcements...............................................29
7.04. Administration of Accounts.........................................30
ARTICLE VIII. CONDITIONS TO CLOSING........................................30
8.01. Conditions to Obligation of Buyer..................................30
8.02. Conditions to Obligation of Seller.................................34
ARTICLE IX. INDEMNIFICATION..............................................36
9.01. Agreement to Indemnify.............................................36
9.02. Survival of Representation and Warranties..........................36
9.03. Claims for Indemnification.........................................37
ii
<PAGE>
9.04. Defense of Claims..................................................37
ARTICLE X. TERMINATION..................................................39
10.01.Grounds for Termination............................................39
10.02.Effect of Termination..............................................39
ARTICLE XI. MISCELLANEOUS................................................39
11.01.Notices............................................................39
11.02.Amendments; No Waivers.............................................41
11.03.Expenses...........................................................41
11.04.Successors and Assigns.............................................41
11.05.Governing Law......................................................41
11.06.Counterparts; Effectiveness........................................41
11.07.Entire Agreement...................................................41
11.08.Captions...........................................................42
11.09.Severability.......................................................42
11.10.Construction.......................................................42
11.11.Cumulative Remedies................................................42
11.12.Third Party Beneficiaries..........................................42
Index of Other Defined Terms. In addition to those terms defined in
Section 1.01 below, the following terms shall have the respective meanings given
thereto in the sections indicated below:
Defined Term Section
"1995 Balance Sheet" 3.06(a)
"Approval Hearing" 8.01(u)(ii)
"Approval Order" 8.01(u)(ii)
"Assumed Liabilities" 2.03
"Balance Sheets 3.06(a)
"Bankruptcy Court" 8.01(u)
"Business" Recitals
"Buyer Indemnitees" 9.01(a)
"Buyer" Preamble
"Closing Date" 2.06(a)
"Closing" 2.06(a)
"Contracts" 2.01(d)
"Distributions" 3.07(h)
"Encumbrances" 3.08(a)
"Equipment" 2.01(b)
"Equity Securities" 5.01(b)
"Excluded Assets" 2.02
"Excluded Environmental Liabilities" 2.04(c)
iii
<PAGE>
"Excluded Liabilities" 2.04
"Financial Statements" 3.06(a)
"Insurance Policies" 3.21
"Intellectual Property Rights" 3.18(a)
"Inventory" 2.01(c)
"Leased Real Property" 3.08(a)
"Leases" 3.08(b)
"Lien Escrow Agreement" 8.01(r)
"LJB" Preamble
"Permits" 3.14(a)
"Personal Property Leases" 3.08(b)
"Petition" 8.01(u)
"Petition Date" 8.01(u)
"Procedures Order" 8.01(u)
"Proceedings" 3.12
"Purchase Price" 2.06(b)
"RBC" Preamble
"Real Property Leases" 3.08(b)
"Required Consents" 3.14(b)
"Required Contractual Consent" 3.14(b)
"Required Governmental Approval" 3.14(b)
"Retained Accounts Receivable" 6.02
"Scheduled Contracts" 3.13(a)
"Selected Accounts Receivable" 2.01(e)
"Seller Indemnitee" 9.01(d)
"Seller" Preamble
"Subsequent Material Contract" 5.01(b)(iv)
"Transferred Assets" 2.01
EXHIBITS
EXHIBIT A Balance Sheets
EXHIBIT B Form of Harris and Sanwa Side Letter Agreement
EXHIBIT C Form of Non-Competition Agreement
EXHIBIT D Form of Opinion of Schuyler, Roche & Zwirner
EXHIBIT E Form of Services Support Agreement
EXHIBIT F Form of Supply and Service Agreement
EXHIBIT G Form of Lien Escrow Agreement
EXHIBIT H Form of Technical Support Agreement
EXHIBIT I Form of Opinion of Gibson, Dunn & Crutcher LLP
EXHIBIT J Form of Opinion of Adelman, Gettleman, Merens, Berish &
Carter, Ltd.
iv
<PAGE>
SCHEDULES
Schedule 1.01 Permitted Liens
Schedule 2.01 Equipment
Schedule 2.02 Excluded Assets
Schedule 3.01 Qualification to do Business
Schedule 3.03 Subsidiaries
Schedule 3.04 Governmental Authorizations
Schedule 3.07 Absence of Certain Changes
Schedule 3.08(a) Leased Real Property
Schedule 3.08(c) Leases
Schedule 3.08(d) Land-Use Compliance
Schedule 3.10(a) Affiliate Interests
Schedule 3.10(b) Affiliate Agreements
Schedule 3.11 No Undisclosed Liabilities
Schedule 3.12 Litigation
Schedule 3.13(a) Scheduled Contracts
Schedule 3.13(b) Non-Binding Scheduled Contracts
Schedule 3.13(c) Primary Customers and Suppliers
Schedule 3.14(a) Permits
Schedule 3.14(b) Required Consents
Schedule 3.15 Compliance with Applicable Laws
Schedule 3.16(a) Employment Agreements
Schedule 3.16(b) Benefit Plans and Arrangements
Schedule 3.16(f) Prohibited Transactions
Schedule 3.16(g) Benefit Plan Claims
Schedule 3.16(i) ERISA Compliance
Schedule 3.16(j) Group Health Plan Compliance
Schedule 3.17 Labor and Employment Matters
Schedule 3.18(a) Intellectual Property
Schedule 3.18(b) Proceedings Applicable to Intellectual Property
Schedule 3.18(c) Ownership of Intellectual Property Rights
Schedule 3.20(a) Environmental Permits
Schedule 3.20(b) Environmental Compliance
Schedule 3.20(c) Continuing Compliance with Environmental Laws
Schedule 3.21 Insurance Policies
Schedule 3.22 Tax Matters
Schedule 6.02 Selected Retained Accounts Receivable Customers
v
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT dated as of October 18, 1996 is by and
among BPP Acquisition Corporation, a Delaware corporation ("Buyer"), Beaver
Precision Products, Inc., an Illinois corporation ("Seller"), Roller Bearing
Company of America, Inc., a Delaware corporation ("RBC"), and Lloyd J. Baretz,
an individual ("LJB").
R E C I T A L S
A. Among other things, Seller is engaged in the business of
designing, manufacturing, repairing, overhauling and/or selling ball screws and
splines for commercial or industrial use other than aerospace and military use
(the "Business"); and
B. Seller desires to sell and transfer to Buyer all of its assets
related to the Business in consideration for the delivery by Buyer to Seller of
the Purchase Price (as defined herein).
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows.
ARTICLE I.
DEFINITIONS
1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such other Person.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, policy, guidance, order, writ, injunction,
directive, judgment, decree or other requirement of any Governmental Authority
(including any Environmental Law) applicable to such Person or any of its
Affiliates or Plan Affiliates or any of their respective properties, assets,
officers, directors, employees, consultants or agents (in connection with such
officer's, director's, employee's, consultant's or agent's activities on behalf
of such Person or any of its Affiliates or Plan Affiliates).
"Associate" or "Associated With" means, when used to indicate a
relationship with any Person, (a) any other Person of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of ten
percent (10%) or more of any class of equity securities issued by such other
Person, (b) any trust or other estate in which such Person has a substantial
1
<PAGE>
beneficial interest or as to which such Person serves as trustee or in a similar
fiduciary capacity, and (c) any relative or spouse of such Person, or any
relative of such spouse who has the same home as such Person or who is a
director or officer of such Person or any Affiliate thereof.
"Benefit Arrangement" means any material benefit arrangement that is
not an Employee Benefit Plan, including, without limitation, (i) each employment
or consulting agreement, (ii) each arrangement providing for insurance coverage
or workers' compensation benefits, (iii) each incentive bonus or deferred bonus
arrangement, (iv) each arrangement providing termination allowance, severance or
similar benefits, (v) each equity compensation plan, (vi) each deferred
compensation plan and (vii) each compensation policy and practice maintained by
Seller or any ERISA Affiliate of Seller covering the employees, former
employees, directors and former directors of Seller and the beneficiaries of any
of them.
"Benefit Plan" means an Employee Benefit Plan or Benefit
Arrangement.
"Business Day" means a day other than a Saturday, Sunday or other
day on which national banking institutions are authorized or required by law to
close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement net of
insurance proceeds actually received, including without limitation (i) interest
on cash disbursements in respect of any of the foregoing at the Reference Rate
in effect from time to time, compounded quarterly, from the date each such cash
disbursement is made until the Person incurring the same shall have been
indemnified in respect thereof and (ii) reasonable costs, fees and expenses of
attorneys, accountants and other agents of such Person.
"Employee Benefit Plan" means any employee benefit plan, as defined
in Section 3(3) of ERISA, that is sponsored or contributed to by Seller or any
ERISA Affiliate thereof covering employees or former employees of Seller.
"Employee Pension Benefit Plan" means any employee pension benefit
plan, as defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA,
including a Multiemployer Plan.
"Environmental Laws" means all Applicable Laws relating to the
protection of human health or the environment including, without limitation, (i)
all Applicable Laws pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of Hazardous Substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, (ii) all Applicable
Laws relating to the anufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature; and (iii) the
2
<PAGE>
Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), the Clean Air Act, the
Water Pollution Control Act, the Safe Drinking Water Act, the Toxic Substance
Control Act ("TSCA") and all requirements promulgated pursuant to any of these
or analogous state or local statutes.
"Environmental Liabilities" means Liabilities of a Person that arise
under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" of any Person means any other Person that,
together with such Person as of the relevant measuring date under ERISA, was or
is required to be treated as a single employer under Section 414 of the Code.
"Escrow Agent" means a state or nationally chartered bank with
unrestricted surplus of at least $250,000,000 selected by Buyer to act as escrow
agent under the Lien Escrow Agreement.
"GAAP" means generally accepted accounting principles in the United
States applied on a consistent basis.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"Group Health Plan" means any group health plan, as defined in
Section 5000(b)(1) of the Code.
"Hazardous Substance" means any substance or material: (i) the
presence of which requires investigation or remediation under any Applicable
Law; or (ii) the generation, storage, treatment, transportation, disposal,
remediation, removal, handling or management of which is regulated by any
Environmental Law; or (iii) that is defined as a "hazardous waste" or "hazardous
substance" under any Applicable Law; or (iv) that is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic or mutagenic or
otherwise hazardous and is regulated by any Governmental Authority having or
asserting jurisdiction over the Business or any of the Transferred Assets; or
(v) the presence of which poses a hazard to the health or safety of Persons; or
(vi) the presence of which constitutes a nuisance, trespass or other tortious
condition for which Seller could be or is alleged to be liable; or (vii) without
limitation, that contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenols (PCBs) or asbestos.
3
<PAGE>
"Indemnification Limit" as of any given date means the positive
amount, if any, equal to (i) $2,000,000 minus (ii) all amounts paid by Seller
and LJB prior to such date pursuant to Section 9.01(a).
"Indemnifying Party" means: (1) Seller or LJB when any Buyer
Indemnitee is asserting a claim under Section 9.01(a) or (2) Buyer or RBC when
any Seller Indemnitee is asserting a claim under Section 9.01(b).
"Indemnitee" means: (1) each of Buyer, RBC and their respective
Affiliates with respect to any claim for which Seller is an Indemnifying Party
under Section 9.01(a); or (2) Seller, LJB and their Affiliates with respect to
claims for which Buyer is an Indemnifying Party under Section 9.01(b).
"IRS" means the Internal Revenue Service.
"Knowledge" means, with respect to any Person, all things known to,
or which should be known after reasonable inquiry by, such Person, if an
individual, or if a corporation, the executive officers and directors of such
corporation.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, whether or
not the same is required to be accrued on the financial statements of such
Person and whether or not the same is disclosed on any schedule to this
Agreement.
"Lien" means, with respect to any asset, any mortgage, title defect
or objection, lien, pledge, charge, security interest, hypothecation,
restriction, Encumbrance, interest, claim or charge of any kind in respect of
such asset.
"Material Adverse Effect" means a change in, or effect on, the
operations, affairs, prospects, financial condition, results of operations,
assets, Liabilities, reserves or any other aspect of the Business or Seller that
results in a material adverse effect on, or a material adverse change in, the
Transferred Assets taken as a whole, or a material adverse effect on the
Business taken as a whole, including, but not limited to, the following: (i) a
decline of 15% or more in the aggregate dollar amount of purchase orders
received by Seller in the 30 days immediately preceding the Closing Date as
compared to the aggregate dollar amount of purchase orders received by Seller in
the corresponding one-month period of the prior year; (ii) any decline in
Seller's Working Capital as of the Closing Date as compared to Seller's Working
Capital on the corresponding date in the prior year; (iii) any decline in
Seller's backlog of orders relating to the Business resulting in such backlog
amounting to less than $850,000; or (iv) any failure to timely pay Seller's
payroll or Taxes.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 3(37) and 4001(a)(3) of ERISA.
4
<PAGE>
"Permitted Liens" means (i) Liens securing the repayment of Assumed
Liabilities and (ii) Liens set forth on Schedule 1.01.
"Person" means an individual, corporation, partnership, joint
venture, association, trust, estate or other entity or organization, including a
Governmental Authority.
"Plan Affiliate" means, with respect to any Person, any employee
benefit plan or arrangement sponsored by, maintained by or contributed to by
such Person, and with respect to any employee benefit plan or arrangement, any
Person sponsoring, maintaining or contributing to such plan or arrangement.
"Prohibited Transaction" means a transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA, respectively.
"Reference Rate" means the per annum rate of interest publicly
announced from time to time by Bank of America, N.T. & S.A. as its prime rate
(or reference rate). Any change in the Reference Rate shall take effect at the
opening of business on the day specified in the public announcement of such
change.
"Subsidiary" means, with respect to any Person, (i) any corporation
as to which more than 10% of the outstanding stock having ordinary voting rights
or power (and excluding stock having voting rights only upon the occurrence of a
contingency unless and until such contingency occurs and such rights may be
exercised) is owned or controlled, directly or indirectly, by such Person and/or
by one or more of such Person's Subsidiaries, and (ii) any partnership, joint
venture or other similar relationship between such Person (or any Subsidiary
thereof) and any other Person (whether pursuant to a written agreement or
otherwise).
"Tax" means all taxes imposed of any nature including federal,
state, local or foreign net income tax, alternative or add-on minimum tax,
profits or excess profits tax, franchise tax, gross income, adjusted gross
income or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax, FICA or FUTA), real or personal property
tax or ad valorem tax, sales or use tax, excise tax, stamp tax or duty, any
withholding or back up withholding tax, value added tax, severance tax,
prohibited transaction tax, premiums tax, occupation tax, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental authority (domestic or foreign) responsible for the imposition of
any such tax.
"Tax Return" means all returns, reports, forms or other information
required to be filed with respect to any Tax.
"Trade Payables" means the trade accounts payable relating to the
Business that arise in the ordinary course of business and are outstanding as of
the Closing Date.
"Working Capital" means the remainder of (i) Seller's total current
assets minus current assets that are Excluded Assets minus (ii) Seller's total
current liabilities minus current
5
<PAGE>
liabilities that are Excluded Liabilities, with each of the above calculated in
accordance with GAAP.
ARTICLE II.
TRANSFER OF ASSETS
2.01. Transfer of Assets by Seller. Upon the terms and subject to
the conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Buyer agrees to purchase from Seller
and Seller agrees to sell, assign, convey and transfer to Buyer at the Closing,
free and clear of all Liens, other than Permitted Liens, all the assets,
properties, rights, licenses, permits, contracts, causes of action and claims of
every kind and description as the same shall exist on the Closing Date (other
than the Excluded Assets), wherever located, whether tangible or intangible,
real, personal or mixed, that are used, owned by, leased by or in the possession
of Seller in connection with the Business, whether or not reflected on the books
and records of Seller, including all assets shown on the 1995 Balance Sheet and
not disposed of in the ordinary course of business or as permitted by this
Agreement prior to the Closing Date (the collective assets, properties, rights,
licenses, permits, contracts, causes of action and claims in connection with the
Business to be transferred to Buyer by Seller pursuant hereto are referred to
collectively herein as the "Transferred Assets") and including without
limitation all right, title and interest of Seller in, to and under the
following, to the extent used, owned by, leased by or in the possession of
Seller to the extent that such assets are used in or relate to or are generated
by the Business:
(a) all real property and leases, capitalized or operating,
of, and other interests in, real property of Seller, in each case together with
all buildings, fixtures and improvements erected thereon and appurtenances
thereto;
(b) all machinery, equipment (including, but not limited to,
tools and dies), furniture, office equipment, computer equipment (including all
hardware and software), communications equipment, vehicles, storage tanks, spare
and replacement parts, fuel and other tangible property (and interests in any of
the foregoing) of Seller set forth on Schedule 2.01 ("Equipment");
(c) all items of inventory notwithstanding how classified in
the financial records of Seller, including all raw materials, work-in-process,
inventory in transit, finished goods, supplies, spare parts, samples, cores and
stores (collectively, the "Inventory");
(d) all contracts (including, but not limited to, contracts
for the sale of goods), agreements, options, leases, licenses, sales and
purchase orders, commitments and other instruments of any kind, whether written
or oral, to which Seller is a party, including the Scheduled Contracts and the
Subsequent Material Contracts (collectively, the "Contracts");
(e) all accounts, accounts receivable and notes receivable,
together with any unpaid interest or fees accrued thereon or other amounts due
with respect thereto, of Seller, and any security or collateral therefor,
including recoverable advances and deposits,
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which are outstanding as of the Closing Date not more than 90 days from the date
of invoices relating thereto, as selected by Buyer on the Closing Date (the
"Selected Accounts Receivable");
(f) all prepaid charges and expenses of Seller (including any
such charges and expenses with respect to ad valorem taxes, leases and rentals
and utilities) with respect to Seller's Peoria, Illinois facility;
(g) all rights of Seller under any insurance policy;
(h) all of Seller's rights, claims, credits, causes of action
or rights of set-off against third parties relating to the Business or the
Transferred Assets, whether liquidated or unliquidated, fixed or contingent,
including claims pursuant to all warranties, representations and guarantees made
by suppliers, manufacturers, contractors and other third parties in connection
with products or services purchased by or furnished to Seller affecting any of
the Transferred Assets;
(i) all of Seller's Intellectual Property Rights, including,
without limitation, all of Seller's patents, copyrights, trademarks, trade
names, service marks, service names, logos, part numbers, designs, know-how,
processes, trade secrets, inventions, and other proprietary data, including, but
not limited to, the right to use the name "Beaver Ball Screws" for the purpose
of conducting any lawful business other than the military and aerospace business
of Seller;
(j) all transferable franchises, licenses, permits or other
authorizations, including, without limitation, those issued or granted by any
Governmental Authority that are owned by, granted to or held or used by Seller
in connection with the Business, whether or not actually utilized by Seller;
(k) all books, records, files and papers of Seller, whether in
hard copy or computer format, including bank account records, books of account,
invoices, engineering information, sales and promotional literature, manuals and
data, sales and purchase correspondence, lists of present and former suppliers,
personnel and employment records of present and former employees, and
documentation developed or used for accounting, marketing, engineering,
manufacturing or any other purpose related to the conduct of the Business;
(l) all lists of present customers and lists of former
customers; and
(m) all goodwill associated with the Business or the
Transferred Assets.
Without limiting the foregoing, except as specifically provided in Section 2.02,
the Transferred Assets shall include (i) all other assets and properties of
Seller that exist on the Closing Date, whether tangible or intangible, real or
personal, that are located at Seller's Walterboro, South Carolina facility or
its Peoria, Illinois refurbishment plant and (ii) all other assets and
properties of Seller relating to the Business that exist on the Closing Date,
whether tangible or intangible,
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real or personal, that are located at Seller's Troy, Michigan facility. Those
tangible Transferred Assets located in Michigan will be used or consumed in
industrial processing.
2.02. Excluded Assets. Buyer expressly understands and agrees that
the assets and properties set forth on Schedule 2.02 (the "Excluded Assets")
shall be excluded from the Transferred Assets and shall be retained by Seller.
2.03. Assumption of Liabilities. Upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Buyer agrees, effective at the time
of Closing, to assume and in due course perform, pay and discharge all Trade
Payables (the "Assumed Liabilities"). No Liability that is the subject of a
Permitted Lien shall be an Assumed Liability unless such Liability is a Trade
Payable.
2.04. Excluded Liabilities. Buyer does not hereby assume, and shall
not at any time hereafter (including on or after the Closing Date) become liable
for, any of the Liabilities, including, without limitation, the Environmental
Liabilities, of Seller or any of its Affiliates or any Plan Affiliate of any of
the foregoing other than the Assumed Liabilities (the "Excluded Liabilities").
2.05. Assignment of Contracts and Rights.
(a) With respect to any Contract and any claim, right or
benefit arising thereunder or resulting therefrom that constitute Transferred
Assets, promptly after the date hereof, to the extent requested by Buyer, Seller
will use its best efforts to obtain the written consent of the other parties to
any such Contract to the assignment thereof to Buyer or written confirmation
from such parties reasonably satisfactory in form and substance to Buyer
confirming that such consent is not required.
(b) If (i) such consent, waiver or confirmation is not
obtained with respect to any such Contract and (ii) notwithstanding the
provisions of Section 8.01(c), Buyer shall elect to consummate the Closing,
Seller and Buyer shall cooperate in an arrangement reasonably satisfactory to
Buyer and Seller under which Buyer would obtain, to the extent practicable, the
claims, rights and benefits and assume the corresponding obligations thereunder
in accordance with this Agreement, including subcontracting, sub-licensing or
sub-leasing to Buyer, or under which Seller would enforce for the benefit of
Buyer, with Buyer assuming Seller's obligations, any and all claims, rights and
benefits of Seller against a third party thereto. Seller will promptly pay to
Buyer when received all monies received by Seller under any Transferred Asset or
any claim, right or benefit arising thereunder not transferred to Buyer pursuant
to this Section 2.05.
2.06. Closing.
(a) Subject to Article VIII and the other terms and
conditions of this Agreement, the closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Schuyler,
Roche & Zwirner, One Prudential Plaza, Suite 3800, 130
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East Randolph Drive, Chicago, Illinois on October 30, 1996 or such other date as
to which Buyer and Seller may agree (the "Closing Date").
(b) At the Closing Buyer shall pay and deliver the
Purchase Price in cash to the Escrow Agent pursuant to the Lien Escrow
Agreement. As used herein, "Purchase Price" means $2,733,000 plus (i) the sum of
(x) the value of the Inventory as of the Closing Date and (y) the amount of the
Selected Accounts Receivable as of the Closing Date plus (ii) the amount, if
any, by which the Trade Payables as of the Closing Date are less than $322,000
or minus (iii) the amount, if any, by which the Trade Payables as of the Closing
Date are greater than $322,000.
(c) Seller shall deliver to Buyer such bills of sale,
certificates of title, endorsements, consents, assignments and other good and
sufficient instruments of conveyance and assignment (which in the case of
Intellectual Property Rights, shall be documents immediately recordable in the
respective countries of origin) of such rights as the parties and their
respective counsel shall deem reasonably necessary or appropriate to vest in
Buyer all of Seller's right, title and interest in, to and under the Transferred
Assets.
2.07. Purchase Price Allocation. Within 120 days after the Closing
Date, Buyer and Seller shall agree upon the final allocation of the Purchase
Price among the Transferred Assets for purposes of complying with Section 1060
of the Code and making any required filings under state or local law and shall
set forth such allocation on a statement (the "Allocation Statement"). After the
Closing, from time to time, Buyer and Seller shall agree upon revisions to the
Allocation Statement for tax purposes. Buyer and Seller shall report the tax
consequences of the transactions contemplated by this Agreement in a manner
consistent with the Allocation Statement, as it may be revised from time to
time, and shall not take any position inconsistent therewith.
2.08. Determination of Selected Accounts Receivable, Trade Payables
and Inventory. For the purposes of determining the Purchase Price, immediately
prior to the Closing Date (i) Seller's accountants and Buyer's accountants shall
jointly determine the amount of the Selected Accounts Receivable as of the
Closing Date and the amount of Trade Payables as of the Closing Date and (ii)
Ernst & Young LLP shall conduct an inventory to determine the value of the
Inventory as of the Closing Date.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and LJB jointly and severally represent and warrant to Buyer
as follows:
3.01. Corporate Existence and Power. Seller is a corporation duly
organized and validly existing and in good standing under the laws of the state
of its incorporation, and has all corporate power and all governmental licenses,
authorizations, consents and approvals required to carry on the Business as now
conducted and to own and operate the Transferred Assets as now owned and
operated. Seller is not required to be qualified to conduct the Business
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in any state other than the states set forth in Schedule 3.01, in which states
Seller is duly qualified to do business and is in good standing.
3.02. Authorization. The execution, delivery and performance by
Seller and LJB of this Agreement and the consummation by Seller and LJB of the
transactions contemplated hereby are within Seller's corporate powers and LJB's
personal power and have been duly authorized by all necessary corporate action
on the part of Seller, including the affirmative vote of the holders of a
majority of the outstanding capital stock of Seller. This Agreement has been
duly and validly executed by Seller and LJB and constitutes the legal, valid and
binding agreement of Seller and LJB, jointly and severally enforceable against
each of Seller and LJB in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and subject to general principles of
equity.
3.03. Subsidiaries. Except as set forth on Schedule 3.03, Seller
does not have any Subsidiaries.
3.04. Governmental Authorization. The execution, delivery and
performance by Seller and LJB of this Agreement require no action by, consent or
approval of, or filing with, any Governmental Authority other than any actions,
consents, approvals or filings otherwise expressly referred to in this Agreement
or set forth on Schedule 3.04 or 3.14(b). There are no facts relating to the
identity or circumstances of Seller that would prevent or materially delay
obtaining any of the Required Consents.
3.05. Non-Contravention. The execution, delivery and performance by
Seller and LJB of this Agreement do not and will not (a) contravene or conflict
with the Articles of Incorporation or Bylaws of Seller, true and correct copies
of which have been delivered to Buyer by Seller, (b) assuming receipt of the
Required Consents, contravene or conflict with or constitute a violation of any
provision of any Applicable Law binding upon or applicable to Seller or LJB, the
Business or any of the Transferred Assets, (c) assuming receipt of the Required
Consents, constitute a default under or give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to which Seller or
LJB is entitled under, any material Contract or any Permit or similar
authorization relating to Seller or LJB or by which any of the Transferred
Assets may be bound, or (d) result in the creation or imposition of any Lien on
any Transferred Asset, other than Permitted Liens.
3.06. Balance Sheets; Undisclosed Liabilities.
(a) Attached hereto as Exhibit A are true and complete copies
of the balance sheet of Seller as of December 31, 1995 (the "1995 Balance
Sheet") and the balance sheet of Seller as of September 30, 1996 (collectively,
the "Balance Sheets").
(b) Each of the Balance Sheets (i) has been prepared based on
the books and records of Seller in accordance with Seller's normal accounting
practices, consistently applied with past practice and with each other, which
practices constitute sound accounting principles, and presents fairly the
financial condition of Seller as of the date indicated,
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(ii) contains and reflects all necessary adjustments and accruals for a fair
presentation of its financial condition as of the date indicated, (iii) contains
and reflects adequate provisions for all reasonably anticipated liabilities for
all taxes, federal, state, local or foreign, with respect to the period then
ended and all prior periods, and (iv) with respect to contracts and commitments
for the sale of goods or the provision of services by Seller, contains and
reflects adequate reserves for all reasonably anticipated losses and costs and
expenses in excess of expected receipts.
3.07. Absence of Certain Changes. Except as set forth on Schedule
3.07, since the date of the 1995 Balance Sheet, the Business has been conducted
in the ordinary course, and there has not been:
(a) any event, occurrence, development or state of
circumstances or facts or change in the Transferred Assets or the Business
(including any damage, destruction or other casualty loss, but excluding any
event, occurrence, development or state of circumstances or facts or change
resulting from changes in general economic conditions) affecting the Business or
any Transferred Assets that has had or that may be reasonably expected to have,
either alone or together with all such events, occurrences, developments, states
of circumstances or facts or changes, a Material Adverse Effect;
(b) (i) any change in any Liability other than in the ordinary
course of business, or (ii) any incurrence of any Liability by Seller in
connection with the Business, any of the Transferred Assets or otherwise, other
than in the ordinary course of business;
(c) any transaction or commitment made, or any Contract
entered into, by Seller (including the acquisition or disposition of any
Transferred Assets), or any waiver, amendment, termination or cancellation of
any Contract by Seller, or any relinquishment of any rights thereunder by
Seller, or of any other right or debt owed to Seller, to the extent that any of
the foregoing relate to the Business, other than in each such case actions taken
in the ordinary course of business consistent with past practice;
(d) any (i) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any person employed by Seller in connection with the Business,
(ii) increase in benefits payable or potentially payable under any severance,
continuation or termination pay policies or employment agreements with any
person employed by Seller in connection with the Business, (iii) increase in
compensation, bonus or other benefits payable or potentially payable to any
person employed by Seller in connection with the Business, (iv) change in the
terms of any bonus, pension, insurance, health or other Benefit Plan of Seller
relating to the Business, or (v) representation of Seller to any employee or
former employee of Seller that Buyer would assume, continue to maintain or
implement any Benefit Plan after the Closing Date;
(e) any change by Seller in its accounting principles, methods
or practices or in the manner it keeps its books and records or any change by
Seller of its current practices with regards to sales, receivables, payables or
accrued expenses that would affect the timing of collection of receivables or
the payment of payables;
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(f) the entering into of any Contract or other arrangement
between Seller and any officer, director, stockholder or Affiliate of Seller of
any of their respective Affiliates or Associates with respect to the Business;
or
(g) any labor dispute (other than routine individual
grievances), or any activity or proceeding by a labor union or representative
thereof to organize any persons employed by Seller in connection with the
Business, who were not subject to a collective bargaining agreement as of the
date of the 1995 Balance Sheet, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to any such employees.
3.08. Properties; Leases; Tangible Assets.
(a) Seller does not own any real property and does not have a
leasehold interest in any real property used in the conduct of the Business
other than the real property identified on Schedule 3.08(a) (the "Leased Real
Property"), which constitutes all of the real property used in the Business.
Seller has a good, valid and enforceable leasehold interest in the Leased Real
Property and the property subject to the Personal Property Leases and has good
and valid title to its other tangible assets and as of the Closing Buyer shall
succeed to such interest. Seller holds title to each such property and asset
free and clear of all Liens, adverse claims, easements, rights of way,
servitudes, zoning or building restrictions, or any other rights of others or
other adverse interests of any kind, including chattel mortgages, conditional
sales contracts, collateral security arrangements and other title or interest
retention arrangements (collectively, "Encumbrances"), except the Leases,
Permitted Liens or Liens that will be released on or prior to the Closing Date.
(b) All tangible properties and assets (other than inventory)
included in the Transferred Assets are in all material respects structurally
sound and are in good operating condition and repair and are adequate for the
uses to which they are put, and no properties or assets necessary for the
conduct of the Business in substantially the same manner as the Business has
heretofore been conducted are in need of replacement, maintenance or repair
except for routine and not materially deferred replacement, maintenance and
repair.
(c) Schedule 3.08(c) sets forth a true and complete list of
all personal property leases or licenses (i) to which Seller is a party or by
which Seller is bound that relate to the Business and (ii) that provide for
annual payments by Seller in excess of $10,000 or that contain other affirmative
material obligations that cannot be terminated by Seller within 30 days (the
"Personal Property Leases") and all leases or licenses of Leased Real Property
that provide for annual payments by Seller in excess of $10,000 or that cannot
be terminated by Seller within 30 days (the "Real Property Leases" and
collectively with the Personal Property Leases, the "Leases") entered into in
connection with the Business. With respect to the Leases, except as set forth on
Schedule 3.08(c), there exist no defaults by Seller, or, to the Knowledge of
Seller, any default or threatened default by any lessor or third party
thereunder, that has affected or could reasonably be expected to affect the
rights and privileges thereunder of Seller, and there has not been any failure
to perform any covenant or agreement which constitutes an event of default (with
the giving of notice or passage of time or otherwise) pursuant to any Lease.
Assuming the
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Required Consents are obtained, all Leases to which Seller is a party with
non-Affiliates or by which it is bound may be assigned, transferred and conveyed
to Buyer without default, penalty or modification thereof.
(d) Except as disclosed in Schedule 3.08(d) or Schedule
3.20(c), the current use and operation of all Leased Real Property is in
compliance with all Applicable Laws (including without limitation laws relating
to zoning and land use) and public and private covenants and restrictions, and
Seller has not received any notice of non-compliance with any Applicable Laws.
(e) Except as disclosed Schedule 3.08(d) or Schedule 3.20(c),
there are no zoning or other land-use regulation proceedings or, to Seller's
Knowledge, any proposed change in any Applicable Laws, which could detrimentally
affect the use or operation of any Leased Real Property, nor has Seller received
notice of any special assessment proceedings affecting the Leased Real Property,
or applied for any change to the zoning or land use status of the Leased Real
Property.
(f) Except as disclosed in Schedule 3.08(d) or Schedule
3.20(c), all water, sewer, gas, electric, telephone and drainage facilities and
all other utilities required by law or for the normal use and operation of the
Leased Real Property are (i) installed to the property lines of each Leased Real
Property, (ii) in compliance with all Applicable Laws, (iii) adequate to service
the Leased Real Property as improved and to permit full compliance with all
Applicable Laws and normal usage of each Leased Real Property and (iv) connected
to each Leased Real Property by means of one or more public or private easements
extending from the Leased Real Property to one or more public streets, public
rights-of-way or utility facilities.
(g) Seller has obtained all licenses, permits, approvals,
easements and rights of way (and all such items are currently in full force and
effect) required from any Governmental Authority having jurisdiction over each
Leased Real Property or from private parties for the current use and operation
of each Leased Real Property.
(h) Each item in the Inventory is free from defect in
workmanship and material, is merchantable and is suitable for its intended
purpose. The tools, dies, machinery and other equipment used to manufacture
finished Inventory items are capable of manufacturing such items free of defect.
3.09. Sufficiency of and Title to the Transferred Assets. Upon
consummation of the transactions contemplated by this Agreement, Seller will
have sold, assigned, transferred and conveyed to Buyer all of the Transferred
Assets free and clear of all Liens other than the Leases or Permitted Liens,
which Transferred Assets constitute all of the properties and assets now held or
employed by Seller in connection with the Business (other than the Excluded
Assets). The Business is a going concern, and, with the transfer of the
Transferred Assets to Buyer pursuant to this Agreement, Buyer will have all
assets necessary to operate the Business as a going concern with all operations
of the Business unimpaired in any material respect immediately after the
Closing.
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3.10. Affiliates.
(a) Except as set forth in Schedule 3.10(a), neither Seller
nor any shareholder, officer or director of Seller (or any immediate family
member of any such shareholder, officer or director) now has or at any time
subsequent to December 31, 1994, had, either directly or indirectly, an equity
or debt interest in any Person which furnishes or sells or during such period
furnished or sold services or products to Seller or purchases or during such
period purchased from Seller any goods or services, or otherwise does or during
such period did business with Seller of a material nature or amount; provided,
however, that neither Seller, nor any shareholder of Seller nor any of Seller's
officers and directors or other Affiliates shall be deemed to have such an
interest solely by virtue of the ownership of less than five percent (5%) of the
outstanding voting stock or debt securities of any publicly held company, the
stock or debt securities of which are traded on a national stock exchange or
quoted on the National Association of Securities Dealers Automated Quotation
System; or
(b) Except as set forth in Schedule 3.10(b), no shareholder,
officer or director of Seller (or any immediate family member of any such
shareholder, officer or director) now is or at any time subsequent to December
31, 1994, was, a party to any contract, commitment or agreement to which Seller
is or during such period was a party or under which Seller is or was obligated
or bound or to which any of its properties may be or may have been subject.
3.11. No Undisclosed Liabilities. Except (i) for Liabilities set
forth on the 1995 Balance Sheet, (ii) for Liabilities incurred in the ordinary
course of business since December 31, 1995, or (iii) as set forth on Schedule
3.11, there are no Liabilities of Seller individually or collectively that
exceed $200,000.
3.12. Litigation. Except as disclosed on Schedule 3.12, (i) there
are no actions, suits, hearings, arbitrations, proceedings (public or private)
or governmental investigations that have been brought by or against any
Governmental Authority or any other Person (collectively, "Proceedings") pending
or, to Seller's Knowledge, threatened, against or affecting Seller, the Business
or any of the Transferred Assets or which seek to enjoin or rescind the
transactions contemplated by this Agreement or otherwise prevent Seller from
complying with the terms and provisions of this Agreement; (ii) there are no
existing orders, judgments or decrees of any Governmental Authority or any legal
tribunal affecting any of the Transferred Assets or the Business; and (iii) to
Seller's Knowledge, there are no events, occurrences, developments, states of
circumstances or facts or changes that could give rise to any Liability that may
be reasonably expected to have a Material Adverse Effect.
3.13. Contracts.
(a) Schedule 3.13(a) sets forth a complete list of the
following contracts, commitments and obligations (whether written or oral) of
Seller that relate to the Business (collectively with the Leases and the
Employment Agreements, the "Scheduled Contracts"):
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(i) each Contract between Seller and (A) any supplier of
services or products to Seller whose dollar volume of sales to Seller
exceeded $10,000 in 1995, and (B) any Person in which the aggregate
payments made to Seller under such Contract exceeded $10,000 in 1995;
(ii) each other agreement or arrangement of Seller that (y)
requires the payment or incurrence of Liabilities or the rendering of
services by Seller, subsequent to the date of this Agreement of more than
$10,000 and (z) cannot be terminated by Seller within 30 days;
(iii) all Contracts relating to, and evidences of or
guarantees of, or providing security for, indebtedness for borrowed money
or the deferred purchase price of property (whether incurred, assumed,
guaranteed or secured by any asset);
(iv) to the extent that any of the following provide for
annual payments by Seller in excess of $10,000 and cannot be terminated by
Seller within 30 days, all license, distribution, commission, marketing,
agent, franchise, technical assistance or similar agreements relating to
or providing for the marketing and/or sale of the products or services to
which Seller is a party or by which Seller is otherwise bound; and
(v) all other contracts, commitments and obligations that are
not in the ordinary course of the Business.
(b) Except as disclosed in Schedule 3.13(b), each Scheduled
Contract and Subsequent Material Contract relating to the Business or any of the
Transferred Assets is a legal, valid and binding obligation of Seller and, to
the Knowledge of Seller, each other party thereto, enforceable (except to the
extent such enforceability may be limited by bankruptcy, equity and creditors'
rights generally) against Seller and, to the Knowledge of Seller, each such
other party in accordance with its terms, and neither Seller nor, to the
Knowledge of Seller, any other party thereto is in material default or has
failed to perform any material obligation thereunder. Complete and correct
copies of each Scheduled Contract have been delivered to Buyer.
(c) Schedule 3.13(c) sets forth a list (by name, address and
persons to contact) of the 10 largest customers of and the five primary vendors
providing services to Seller for each of the 12-month periods ended December 31,
1994 and 1995 and the nine-month period ended September 30, 1996 together with
the approximate dollar amount of sales or services provided to Seller during
said periods and a summary description of the services provided by such vendors.
3.14. Permits; Required Consents.
(a) Schedule 3.14(a) sets forth all material approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities (and all other Persons)
necessary for the operation of the Transferred
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Assets or the Business in substantially the same manner as currently operated or
affecting or relating in any way to the Business (the "Permits").
(b) Schedule 3.14(b) lists (i) each governmental or other
registration, filing, application, notice, transfer, consent, approval, order,
qualification and waiver (each, a "Required Governmental Approval") required
under Applicable Law to be obtained by Seller by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the loss of any material Permit or otherwise, and (ii) each
Scheduled Contract with respect to which the consent of the other party or
parties thereto must be obtained by Seller by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the invalidity of the transfer of such Contract, the termination
thereof, a breach or default thereunder or any other change or modification to
the terms thereof (each, a "Required Contractual Consent" and collectively with
the Required Governmental Approvals, the "Required Consents"). Except as set
forth in Schedule 3.14(a) or (b) each Permit is valid and in full force and
effect in all material respects and, assuming the related Required Consents have
been obtained prior to the Closing Date, are or will be transferable by Seller,
and assuming the related Required Consents have been obtained prior to the
Closing Date, none of the Permits will be terminated or become terminable or
impaired in any material respect as a result of the transactions contemplated
hereby.
3.15. Compliance with Applicable Laws. Except as set forth in
Schedule 3.15, the operation of the Business by Seller and the condition of the
Transferred Assets have not violated or infringed, and do not violate or
infringe, any material Applicable Law, or any order, writ, injunction or decree
of any Governmental Authority.
3.16 Employment Agreements; Change in Control; and Employee
Benefits.
(a) Except as set forth on Schedule 3.16(a), there are no
employment, consulting, severance pay, continuation pay, termination pay or
indemnification agreements or other similar agreements of any nature whatsoever
(collectively, "Employment Agreements") between Seller, on the one hand, and any
current or former stockholder, officer, director, employee or Affiliate of
Seller or any of their respective Associates or any consultant or agent of
Seller, on the other hand, that are currently in effect and relate to the
Business. Except as set forth on Schedule 3.16(a), there are no Employment
Agreements or any other similar agreements to which Seller is a party under
which the transactions contemplated by this Agreement (i) will require any
payment by Seller, Buyer, or any consent or waiver from any stockholder,
officer, director, employee or Affiliate of Seller or any of their respective
Associates or any consultant or agent of Seller, or Buyer, or (ii) will result
in any change in the nature of any rights of any stockholder, officer, director,
employee or Affiliate of Seller or any of their respective Associates or any
consultant or agent of Seller under any such Employment Agreement or other
similar agreement.
(b) Schedule 3.16(b) sets forth all Benefit Plans and Benefit
Arrangements of Seller. Seller has made true and correct copies of all governing
instruments
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and related agreements pertaining to such Benefit Plans and Benefit Arrangements
available to Buyer. Seller has made available to Buyer a copy of (i) the three
most recently filed Federal Form 5500 series and accountant's opinion, if
applicable, for each Employee Benefit Plan.
(c) The funding method used in connection with each Employee
Pension Benefit Plan subject to the minimum funding requirements of ERISA is
acceptable and the actuarial assumptions used in connection with funding each
such plan are reasonable. No accumulated funding deficiency, as defined in Code
Section 412 has been incurred with respect to any plan year, whether or not
waived. Except as set forth on Schedule 3.16(i), Seller has not failed to pay
when due any required installment, within the meaning of Code Section 412(m),
with respect to any Employee Pension Benefit Plan. There has been no reportable
event, within the meaning of ERISA Section 4043(b) with respect to any Employee
Pension Benefit Plan. Except as set forth on Schedule 3.16(i), no proceeding has
ever been commenced by the Pension Benefit Guaranty Corporation to terminate any
such plan, and no condition exists and no event has occurred that could
reasonably constitute grounds for the termination of any such plan by the
Pension Benefit Guaranty Corporation.
(d) Neither Seller nor any ERISA Affiliates of Seller sponsors
or has ever sponsored, maintained, contributed to, or incurred an obligation to
contribute to any Multiemployer Plan.
(e) No individual shall accrue or receive additional benefits,
service or accelerated rights to payments of benefits under any Benefit Plan,
including the right to receive any parachute payment, as defined in Section 280G
of the Code, or become entitled to severance, termination allowance or similar
payments as a direct result of the transactions contemplated by this Agreement.
(f) Except as set forth on Schedule 3.16(f), no Employee
Benefit Plan has participated in, engaged in or been a party to any non-exempt
Prohibited Transaction, and neither Seller nor any ERISA Affiliates of Seller
has had asserted against it any claim for taxes under Chapter 43 of Subtitle D
of the Code and Sections 5000 of the Code, or for penalties under ERISA Section
502(c), (i) or (l), with respect to any Employee Benefit Plan nor, to the
Knowledge of Seller, is there a basis for any such claim. Except as set forth on
Schedule 3.16(f), no officer, director or employee of Seller has committed a
material breach of any responsibility or obligation imposed upon fiduciaries by
Title I of ERISA with respect to any Employee Benefit Plan.
(g) Except as set forth on Schedule 3.16(g), other than
routine claims for benefits, there is no claim pending or to the Knowledge of
Seller threatened, involving any Benefit Plan by any Person against such plan or
Seller or any ERISA Affiliate. Except as set forth on Schedule 3.16(g), there is
no pending or to the Knowledge of Seller threatened proceeding involving any
Employee Benefit Plan before the IRS, the United States Department of Labor or
any other Governmental Authority.
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(h) Except as set forth on Schedule 3.16(g), there is no
violation of any reporting or disclosure requirement imposed by ERISA or the
Code with respect to any Benefit Plan.
(i) Except as set forth on Schedule 3.16(i), each Benefit Plan
has at all times prior hereto been maintained in all material respects, by its
terms and in operation, in accordance with ERISA and the Code including, but not
limited to, all applicable reporting and disclosure requirements. Each Employee
Pension Benefit Plan intended to be a qualified plan under Code Section 401(a)
has received a favorable determination letter to that effect from the Internal
Revenue Service, and nothing has occurred since such determination that would
adversely affect such plan's qualified status. Except as set forth on Schedule
3.16(i), Seller and each ERISA Affiliate have made full and timely payment of
all amounts required to be contributed under the terms of each Benefit Plan and
Applicable Law or required to be paid as expenses under such Benefit Plan, and
Seller and each ERISA Affiliates shall continue to do so through the Closing.
(j) With respect to any Group Health Plans maintained by
Seller or its ERISA Affiliate, whether or not for the benefit of Seller and its
ERISA Affiliate, Seller and its ERISA Affiliates have complied in all material
respects with the provisions of Part 6 of Title I of ERISA and Section 4980B of
the Code. Except as set forth in Schedule 3.16(j), Seller is not obligated to
provide health care benefits of any kind to its retired employees pursuant to
any Employee Benefit Plan, including without limitation any Group Health Plan,
or pursuant to any agreement or understanding.
3.17 Labor and Employment Matters.
(a) Except as set forth on Schedule 3.17, no collective
bargaining agreement exists that is binding on Seller and relates to Employees
of the Business and, except as described on Schedule 3.17, no petition has been
filed or proceedings instituted by an employee of the Business or group of
employees of the Business with any labor relations board seeking recognition of
a bargaining representative. Schedule 3.17 describes any organizational effort
currently being made or threatened by or on behalf of any labor union to
organize any employees of the Business .
(b) Except as set forth on Schedule 3.17, (i) there is no
labor strike, dispute, slow down or stoppage pending or, to Seller's Knowledge,
threatened against or directly affecting the Business, (ii) no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement relating to the Business is pending, and no claims therefor exist; and
(iii) neither Seller, nor of its Affiliates has received any notice or has any
Knowledge of any threatened labor or civil rights dispute, controversy or
grievance or any other unfair labor practice proceeding or breach of contract
claim or action with respect to claims of, or obligations to, any employee or
group of employees of the Business.
(c) If required under the Workers Adjustment and Retraining
Notification Act or other applicable state law regulating plant closing or mass
layoffs, Seller and
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its Affiliates have timely caused there to be filed or distributed, as
appropriate, all required filings and notices with respect to employment losses
occurring through the Closing Date.
(d) Seller and its Affiliates have complied and are currently
complying, in respect of all employees of the Business, with all Applicable Laws
respecting employment and employment practices and the protection of the health
and safety of employees, from whatever source such law may be derived,
including, without limitation, statutes, ordinances, laws, rules, regulations,
policies, standards, judicial or administrative precedents, judgments, orders,
decrees, awards, citations, licenses, official interpretations and guidelines.
(e) All individuals who are performing or have performed
services for Seller, or any Affiliate thereof and are or were classified by
Seller or any Affiliate as "independent contractors" qualify for such
classification under Section 530 of the Revenue Act of 1978 or Section 1706 of
the Tax Reform Act of 1986, as applicable, except for such instances which are
not, in the aggregate, material.
3.18. Intellectual Property.
(a) Schedule 3.18(a) sets forth a complete and correct list of
each patent, patent application and docketed invention, trademark, trade name,
trademark or tradename registration, logo, product number or application,
copyright or copyright registration or application for copyright registration,
and each license or licensing agreement for any of the foregoing relating to any
Transferred Asset or relating to the Business (the "Intellectual Property
Rights").
(b) Except as disclosed in Schedule 3.18(b), Seller has not
during the three years preceding the date of this Agreement been a party to any
Proceeding, nor to the Knowledge of Seller is any Proceeding threatened as to
which there is a reasonable possibility of a determination adverse to Seller
that involved or may involve a claim of infringement by any Person (including
any Governmental Authority) of any Intellectual Property Right. Except as
disclosed in Schedule 3.18(b), no Intellectual Property Right is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
use thereof by Seller, or restricting the licensing thereof by Seller to any
Person. The use of the Intellectual Property Rights does not conflict with,
infringe upon or violate any patent, patent license, patent application,
trademark, tradename, trademark or tradename registration, copyright, copyright
registration, service mark, brand mark or brand name or any pending application
relating thereto, or any trade secret, know-how, programs or processes, or any
similar rights, of any Person.
(c) Except as set forth in Schedule 3.18(c), Seller either
owns the entire right, title and interest in, to and under, or, to Seller's
knowledge, has acquired in connection with the acquisition of Equipment or
Inventory an implied license to use, any and all inventions, processes, computer
programs, know-how, formulae, trade secrets, patents, chip designs, mask works,
trademarks, tradenames, brand names and copyrights which are necessary for the
conduct of the Business in the manner that the Business has heretofore been
conducted. No other inventions, processes, computer programs, know-how,
formulae, trade secrets, patents, chip designs, mask works, trademarks,
tradenames, brand names, copyrights, licenses or
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applications for any of the foregoing are necessary for the unimpaired continued
operation of the Business in the manner that such business has heretofore been
conducted.
3.19. Advisory Fees. There is no investment banker, broker, finder
or other intermediary or advisor that has been retained by or is authorized to
act on behalf of Seller or its Affiliates who might be entitled to any fee,
commission or reimbursement of expenses from Buyer or any of its Affiliates or
any of their respective Associates upon consummation of the transactions
contemplated by this Agreement.
3.20. Environmental Compliance.
(a) Except as disclosed in Schedule 3.20(a), Seller has
obtained all approvals, authorizations, certificates, consents, licenses, orders
and permits or other similar authorizations of all Governmental Authorities, or
from any other Person, that are required under any Environmental Law in
connection with the operation of the Business. Schedule 3.20(a) sets forth all
permits, licenses and other authorizations issued under any Environmental Law to
Seller relating to the Business or the Transferred Assets.
(b) Except as disclosed in Schedule 3.20(b), Seller is in
compliance in all respects with all terms and conditions of all approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities (and all other Persons)
required under all Environmental Laws and used in the Business or that relate to
the Transferred Assets, and is also in compliance in all respects with all other
limitations, restrictions, conditions, standards, requirements, schedules and
timetables required or imposed under all Environmental Laws in connection with
the operation of the Business.
(c) Except as disclosed in Schedule 3.20(c), there are no past
or present events, conditions, circumstances, activities, practices, incidents,
actions, omissions or plans relating to or in any way affecting Seller, the
Business or the Transferred Assets that may interfere with or prevent continued
compliance with any Environmental Law by Buyer after the Closing, or that may
give rise to any Environmental Liability, or otherwise form the basis of any
claim, action, demand, suit, Proceeding, hearing, study or investigation (i)
under any Environmental Law, (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any Hazardous Substance, or (iii)
resulting from exposure to workplace hazards.
(d) Seller has delivered to Buyer all environmental studies
and reports known to Seller relating to the Business or the Transferred Assets.
3.21. Insurance. Schedule 3.21 sets forth a complete and correct
list of all insurance policies of any kind or nature whatsoever currently in
force or in force at any time subsequent to December 31, 1995 with respect to
the Business (the "Insurance Policies"), including all "occurrence based"
liability policies regardless of the periods to which they relate. For each
Insurance Policy, Schedule 3.21 indicates the type of coverage, the name of the
insureds, the insurer, the premium, the expiration date, the period to which it
relates, the
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deductibles and loss retention amounts and the amounts of coverage. The
Insurance Policies described as currently in effect are in full force and effect
and are valid, outstanding and enforceable, and all premiums due thereon have
been paid in full.
3.22. Tax Matters. Except as set forth on Schedule 3.22:
(a) Seller has timely filed all Tax Returns required to have
been filed by it, and has timely paid all Taxes due to any taxing authority with
respect to all taxable periods ending on or prior to the Closing Date, or
otherwise attributable to all periods prior to the Closing Date. All taxes
payable by Seller with respect to all taxable periods ending on or prior to the
Closing Date have been provided for, and all Returns are true, correct, and
complete in all respects. Seller is currently not the beneficiary of any
extension of time within which to file any Tax Return.
(b) Seller has not received notice that the IRS or any other
taxing authority has asserted against Seller any deficiency in Taxes or claim
for additional Taxes in connection with any tax period. There are no liens for
Taxes on any of the Transferred Assets, except for liens arising from Taxes
which are due but not yet payable.
(c) Seller has withheld and paid over all Taxes required to
have been withheld and paid over in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party;
(d) Seller has not been included in any consolidated, combined
or unitary Tax Return provided for under the laws of the United States, any
state or locality with respect to Taxes for any taxable period for which the
statute of limitations has not expired.
(e) Seller does not have any unpaid liability for Taxes under
Sections 1363(d), 1374, or 1375 of the Code (or any successor or predecessor
provision) or any similar provision of state or local law for any period on or
prior to or including the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND RBC
Buyer and RBC hereby jointly and severally represent and warrant to
Seller and LJB that:
4.01. Organization and Existence. Each of Buyer and RBC is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all corporate power and authority to enter
into this Agreement and consummate the transactions contemplated hereby. Each of
Buyer and RBC is duly qualified to do business as a foreign corporation in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary to carry on its
business as now
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conducted, except for those jurisdictions where the failure to be so qualified
has not been, and may not reasonably be expected to be, material.
4.02. Corporate Authorization. The execution, delivery and
performance by each of Buyer and RBC of this Agreement and the consummation by
each of Buyer and RBC of the transactions contemplated hereby are within their
respective corporate powers and have been duly authorized by all necessary
corporate action on the part of Buyer and RBC, subject to the receipt of
approval by their respective Boards of Directors. This Agreement constitutes a
legal, valid and binding agreement of each of Buyer and RBC, enforceable in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to general principles of equity.
4.03. Governmental Authorization. The execution, delivery and
performance by each of Buyer and RBC of this Agreement require no action by,
consent or approval of, or filing with, any Governmental Authority other than as
set forth in this Agreement.
4.04. Non-Contravention. The execution, delivery and performance by
each of Buyer and RBC of this Agreement do not (a) contravene or conflict with
the Certificate of Incorporation or Bylaws of Buyer or RBC, or (b) contravene or
conflict with or constitute a violation of any provision of any Applicable Law
binding upon or applicable to Buyer or RBC.
4.05. Advisory Fees. Except for W.E. Myers & Company and Aurora
Capital Partners L.P. (whose fees and expenses will be paid by Buyer or RBC),
there is no investment banker, broker, finder or other intermediary or advisor
that has been retained by or is authorized to act on behalf of Buyer who might
be entitled to any fee, commission or reimbursement of expenses from Seller or
any of its respective Affiliates upon consummation of the transactions
contemplated by this Agreement.
4.06. Litigation. There is no Proceeding pending against, or to the
Knowledge of Buyer or RBC, threatened against or affecting, Buyer or RBC before
any court or arbitrators or any governmental body, agency or official that in
any matter challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF SELLER
5.01. Conduct of the Business; Distributions. From the date hereof
until the Closing Date, Seller shall conduct the Business in the ordinary course
and in substantially the same manner as it has prior to the date of this
Agreement and agrees, with respect to the Business and other than in the
ordinary course of business, not to enter into any material agreements or take
any other significant actions without the prior written consent of Buyer, which
shall not be unreasonably withheld. Seller shall use its reasonable efforts to
preserve intact the Transferred Assets, the Business and the business
organizations and relationships and goodwill of Seller with third parties with
respect to the Business and keep available the services
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of the present employees, agents and other personnel of Seller with respect to
the Business. Without limiting the generality of the preceding sentence and
except as otherwise expressly provided in this Agreement, from the date hereof
until the Closing Date:
(a) Seller will:
(i) (A) maintain the Transferred Assets in the ordinary
course of business consistent with past practice in good operating order
and condition, reasonable wear and tear excepted, (B) promptly repair,
restore or replace any Transferred Assets in the ordinary course of
business consistent with past practice, (C) upon any damage, destruction
or loss to any of the Transferred Assets, apply any and all insurance
proceeds received with respect thereto to the prompt repair, replacement
and restoration thereof to the condition of the Transferred Assets before
such event, (D) use its best efforts to obtain, prior to the Closing Date,
all Required Consents, and (E) take all actions necessary to be in
compliance with, and to maintain the effectiveness of, all material
Permits;
(ii) comply with all material Applicable Laws;
(iii) file all foreign, Federal, state and local Tax
Returns required to be filed and make timely payment of all applicable
Taxes when due;
(iv) promptly notify Buyer in writing of (A) any action,
event, condition or circumstance, or group of actions, events, conditions
or circumstances, that results in, or could reasonably be expected to
result in, a Material Adverse Effect, other than changes in general
economic conditions, (B) the commencement of any Proceeding by or against
Seller, or Seller becoming aware of any threat, claim, action, suit,
inquiry, proceeding, notice of violation, demand letter, subpoena,
government audit or disallowance that could reasonably be expected to
result in a Proceeding, and (C) the occurrence of any breach by Seller or
LJB of any representation or warranty, or any covenant or agreement,
contained in this Agreement.
(b) without Buyer's prior consent, Seller will not and will
not agree to, and LJB will cause Seller not to:
(i) purchase or otherwise acquire assets with respect to
the Business from any other Person other than in the ordinary course of
the Business;
(ii) sell, assign, lease, license, transfer or otherwise
dispose of, or mortgage, pledge or encumber (other than with Permitted
Liens), any of the Transferred Assets, including Leased Real Property,
except in the ordinary course of the Business;
(iii) amend or modify in any material respect or
terminate any Scheduled Contract or any other Contract entered into by
Seller after the date hereof which, if in existence on the date hereof,
would be required to be set forth in the Schedule 3.13(a) as a Scheduled
Contract (each, a "Subsequent Material Contract");
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(iv) except in the ordinary course of Seller's Business,
waive, cancel or take any other action materially impairing any of its
rights relating to the Business;
(v) make or commit to make any capital expenditure, or
group of related capital expenditures with respect to the Business in
excess of $10,000, other than (A) capital expenditures set forth on
Schedule 5.01(b) and (B) capital expenditures expressly required under any
Scheduled Contract;
(vi) enter into or commit or propose to enter into any
Subsequent Material Contract;
(vii) with respect to the Business, (A) increase the
rate or terms of compensation payable or to become payable to its
employees except in the ordinary course of business, (B) pay or agree to
pay any pension, retirement allowance or other employee benefit not
provided for by any Employee Plan, Benefit Arrangement or Employment
Agreement set forth in the Schedules hereto, (C) commit itself to any
additional pension, profit sharing, bonus, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, continuation pay, termination pay,
retirement or other employee benefit plan, agreement or arrangement, or
increase the rate or terms of any Employee Plan or Benefit Arrangement,
(D) enter into any employment agreement with or for the benefit of any
Person, or (E) increase the rate of compensation under or otherwise change
the terms of any Employment Agreement set forth in Schedule 3.16(a);
(viii) make any change in its accounting methods or in
the manner of keeping its books and records or any change in its current
practices with respect to sales, receivables, payables or accrued
expenses; or
(ix) move any of the Transferred Assets between or among
any of Seller's facilities.
5.02. Access to Information. Subject to compliance with Applicable
Laws, from the date hereof until the Closing Date, Seller will promptly: (a)
give Buyer and its counsel, financial advisors, auditors and other authorized
representatives reasonable access to the offices, properties, books and records
relating to the Business and the Transferred Assets upon reasonable prior
notice, (b) furnish to Buyer and its counsel, financial advisors, auditors and
other authorized representatives such information relating to the Business or
the Transferred Assets as Buyer may reasonably request and (c) instruct the
directors, officers, employees, counsel, auditors and financial advisors of
Seller to cooperate with Buyer and its counsel, financial advisors, auditors and
other authorized representatives in their investigation of the Business and the
Transferred Assets. Such investigation shall include, but shall not be limited
to:
(i) A business and financial performance review of the
Business;
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(ii) A review of the financial statements and tax
returns of Seller;
(iii) An environmental review as to the presence and
nature of any hazardous materials in or on any real property owned or
leased by Seller; and
(iv) A standard legal due diligence examination relating
to Seller and the Business.
5.03. Compliance with Terms of Required Governmental Approvals and
Required Contractual Consents. On and after the Closing Date, Seller shall
comply at its own expense with all conditions and requirements affecting Seller
set forth in (a) all Required Governmental Approvals as necessary to keep the
same in full force and effect assuming continued compliance with the terms
thereof by Buyer and (b) all Required Contractual Consents as necessary to keep
the same effective and enforceable against the Persons giving such Required
Contractual Consents assuming continued compliance with the terms thereof by
Buyer.
5.04. Maintenance of Insurance Policies. On and after the date
hereof (including after the Closing Date), Seller shall not take or fail to take
any action if such action or inaction, as the case may be, would adversely
affect the applicability of any insurance in effect on the date hereof that
covers all or any part of the Transferred Assets or the Business with respect to
the period of time ending on the Closing Date. Notwithstanding the foregoing,
Seller shall not have any obligation to make any monetary payment to maintain
the effectiveness of any such insurance policy after the Closing Date.
5.05. Confidentiality.
(a) Seller and LJB will, and will cause their representatives
to, treat any data and information obtained with respect to Buyer or any of its
Affiliates from any representative, officer, director, or employee of Buyer, or
from any books or records of Buyer in connection with this Agreement,
confidentially and with commercially reasonable care and discretion, and will
not disclose any such information to third parties; provided, however, that the
foregoing shall not apply to (i) information in the public domain or that
becomes public through disclosure by any party other than Seller or its
Affiliates or representatives, so long as such other party is not in breach of a
confidentiality obligation, (ii) information that may be required to be
disclosed by Applicable Law or (iii) information required to be disclosed to
obtain any Required Consents.
(b) In the event that the Closing fails to take place and this
Agreement is terminated, Seller and LJB, upon the written request of Buyer,
will, and will cause their representatives to, promptly deliver to Buyer any and
all documents or other materials furnished by Buyer or any of its Affiliates to
Seller or LJB in connection with this Agreement without retaining any copy
thereof. In the event of such request, all other documents, whether analyses,
compilations or studies, that contain or otherwise reflect the information
furnished by Buyer to Seller or LJB, shall be destroyed by Seller or shall be
returned to Buyer, and Seller shall confirm to Buyer in writing that all such
materials have been returned or destroyed. No failure or delay by Buyer in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof,
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nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege hereunder.
(c) The parties hereto recognize and agree that in the event
of a breach of this Section 5.05, money damages would not be an adequate remedy
to Buyer or its Affiliates for such breach and, even if money damages were
adequate, it would be impossible to ascertain or measure with any degree of
accuracy the damages sustained therefrom. Accordingly, if there should be a
breach or threatened breach of any of the provisions of this Section 5.05, Buyer
and its Affiliates shall be entitled to an injunction restraining Seller and LJB
from any breach without showing or proving actual damage sustained by Buyer or
its Affiliates, as the case may be. Nothing in the preceding sentence shall
limit or otherwise affect any remedies that Buyer may otherwise have under
Applicable Law.
5.06. Taxes.
(a) All sales, value added, use, transfer, registration, stamp
and similar Taxes imposed in connection with the sale of the Transferred Assets
shall be borne by Seller.
(b) Seller agrees that no new elections with respect to Taxes
or any changes in current elections with respect to Taxes affecting the
Transferred Assets shall be made after the date of this Agreement without the
prior written consent of Buyer.
(c) Seller shall (i) provide Buyer with such assistance as may
reasonably be requested in connection with the preparation of any Tax Return and
the conduct of any audit or other examination by any taxing authority or in
connection with judicial or administrative proceedings relating to any liability
for Taxes, (ii) retain and provide Buyer with all records or other information
that may be relevant to the preparation of any Tax Returns, or the conduct of
any audit or examination, or other Tax Proceeding. Seller shall retain all
relevant documents, including prior year's Tax Returns, supporting work
schedules and other records or information that may be relevant to such returns
and shall not destroy or otherwise dispose of any such records without the prior
written consent of Buyer. Notwithstanding the foregoing, Seller shall have no
obligation to obtain records that exist as of the date hereof but that were not
under Seller's dominion and control prior to the date hereof.
(d) Seller shall provide Buyer with all tax clearance
certificates or similar documents that may be required by any state or local
taxing authority in order to relieve Buyer of any obligations to withhold any
portion of the Purchase Price.
(e) Pursuant to Section 1445(b)(2) of the Code, Seller shall
furnish Buyer an affidavit, stating under penalty of perjury Seller's United
States taxpayer identification number and that Seller is not a foreign person.
5.07. Use of Name; Obtaining of Trademark. From and after the
Closing, Seller shall not use the name "Beaver Ball Screws" in any context.
Following the Closing, Buyer intends to make application for a trademark
registration of the name "Beaver Ball Screws" for use in connection with the
Business. Seller shall take any and all actions and execute and
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deliver any and all documents reasonably necessary to assist Buyer in obtaining
such trademark registration if and to the extent that Buyer would otherwise be
unsuccessful due to the existence of any similar registered trademark of Seller.
If, notwithstanding Seller's best efforts pursuant to the preceding sentence,
Buyer is unable to obtain a trademark registration of the name "Beaver Ball
Screws," then (i) Buyer shall have a license in perpetuity to use the name
"Beaver Ball Screws" without payment of royalties or fees and (ii) Seller, at
Buyer's request and expense, will prosecute from time to time all actions
against other Persons for infringements against or improper usage of the name
"Beaver Ball Screws."
5.08. Intentionally Omitted.
5.09. Collection of Selected Accounts Receivable. If Seller receives
partial or full payment of any Selected Accounts Receivable after the Closing
Date, such payment shall be paid promptly to Buyer. Seller shall use its
reasonable best efforts to enter into an agreement with Sanwa Business Credit
Corporation in the form attached hereto as Exhibit B.
5.10. Compliance With Bulk Sales Laws. Seller shall comply prior to
the Closing Date with all applicable provisions of Article 6 of the Uniform
Commercial Code as adopted in the States of South Carolina and Michigan relating
to bulk sales.
5.11. Notice of Third Party Interest. Seller shall promptly
communicate to Buyer the fact that Seller or LJB has received any proposal or
inquiry regarding the purchase or acquisition of all or substantially all of the
Transferred Assets or the Business or a merger, consolidation or other business
combination or arrangement pursuant to which any other Person would directly or
indirectly acquire the Transferred Assets or the Business or any substantial
equity interest therein.
5.12. Reconveyance Fee. If Buyer reconveys the Transferred Assets to
Seller pursuant to the Lien Escrow Agreement, LJB shall pay to Buyer a fee of
$250,000 in cash within three business days after such reconveyance.
ARTICLE VI
COVENANTS OF BUYER
6.01. Confidentiality.
(a) Buyer will, and will cause its representatives to, treat
any data and information obtained with respect to Seller from any
representative, officer, director or employee of Seller, or from any books or
records of Seller in connection with this Agreement, confidentially and with
commercially reasonable care and discretion, and will not disclose any such
information to third parties; provided, however, that the foregoing shall not
apply to (i) information in the public domain or that becomes public through
disclosure by any party other than Buyer, or its Affiliates or representatives,
so long as such other party is not in breach of a confidentiality obligation,
(ii) information that may be required to be disclosed by Applicable Law, (iii)
information required to be disclosed to obtain any Required Consents;
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(iv) any information that is disclosed by Buyer or its Affiliates to any of
their actual or prospective lenders or investors in connection with financing
the transactions contemplated by this Agreement; or (v) any information that is
disclosed by Buyer after the Closing shall have occurred; provided, however,
that in the event the Closing has occurred, this Section 6.01(a) shall cease to
be effective with respect to any data and information obtained with respect to
the Transferred Assets or the Business.
(b) In the event that the Closing fails to take place and this
Agreement is terminated, Buyer, upon the written request of Seller, will, and
will cause its representatives to, promptly deliver to Seller any and all
documents or other materials furnished by Seller to Buyer in connection with
this Agreement without retaining any copy thereof. In event of such request, all
other documents, whether analyses, compilations or studies, that contain or
otherwise reflect the information furnished by Seller to Buyer, shall be
destroyed by Buyer or shall be returned to Seller, and Buyer shall confirm to
Seller in writing that all such materials have been returned or destroyed. No
failure or delay by Seller in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
right, power or privilege hereunder.
(c) The parties hereto recognize and agree that in the event
of a breach of this Section 6.01, money damages would not be an adequate remedy
to Seller for such breach and, even if money damages were adequate, it would be
impossible to ascertain or measure with any degree of accuracy the damages
sustained by Seller therefrom. Accordingly, if there should be a breach or
threatened breach of any of the provisions of this Section 6.01, Seller shall be
entitled to an injunction restraining Buyer from any breach without showing or
proving actual damage sustained by Seller. Nothing in the preceding sentence
shall limit or otherwise affect any remedies that Seller may otherwise have
under Applicable Law.
6.02. Collection of Accounts Receivable. During the 90-day period
immediately following the Closing Date, Buyer shall use it reasonable best
efforts to collect on behalf of Seller all accounts receivable relating to the
Business that are not Selected Accounts Receivable (the "Retained Accounts
Receivable"); provided, however, that Buyer shall not be required to institute
legal action to collect any Retained Accounts Receivables. Any amount collected
by Buyer with respect to the Retained Accounts Receivable will be promptly paid
to Seller. Seller shall take no action to collect Retained Accounts Receivable
from the customers listed on Schedule 6.02 during the 90-day period without the
prior written consent of Buyer.
6.03. No Solicitation of Employees. Prior to the Closing Buyer shall
not solicit any employee of the Business to become an employee of Buyer other
than any offer of employment that is conditioned upon Buyer acquiring the
Transferred Assets.
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ARTICLE VII
COVENANTS OF ALL PARTIES
7.01. Further Assurances. Subject to the terms and conditions of
this Agreement, each party will use all reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary or
desirable under Applicable Law and this Agreement to consummate the transactions
contemplated by this Agreement. Buyer and Seller agree to execute and deliver
such other documents, certificates, agreements and other writings and to take
such other actions as may be reasonably necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by this
Agreement. Following the Closing, Buyer shall make the employees and records of
Seller reasonably available to Seller, at no charge to Seller other than for out
of pocket expenses incurred by Buyer for items such as photocopying or travel,
for the purposes of providing accounting information reasonably required by
Seller, providing testimony or information in connection with any legal
proceeding or for any other appropriate purpose arising out of Seller's
ownership and operation of the Business.
7.02. Certain Filings. The parties hereto shall cooperate with one
another in determining whether any action by or in respect of, or filing with,
any Governmental Authority is required or reasonably appropriate, or any action,
consent, approval or waiver from any party to any Contract is required or
reasonably appropriate, in connection with the consummation of the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement, in taking such actions or making any such filings, the parties hereto
shall furnish information required in connection therewith and seek timely to
obtain any such actions, consents, approvals or waivers.
7.03. Public Announcements. Up to (and including) the Closing Date,
the parties agree that they shall not make any disclosures with respect to this
Agreement or the transactions contemplated hereby or cause to be publicized in
any manner whatsoever by way of interview, responses to questions or inquiries,
press releases or otherwise any aspect of this Agreement or the transactions
contemplated hereby without prior written notice to and approval of the other
parties hereto, unless the party proposing disclosure reasonably concludes that
such release of information is required by Applicable Law and the parties hereto
cannot reach agreement upon a mutually acceptable form of release prior to the
time that such release of information is required by Applicable law.
Notwithstanding the foregoing, the parties may, on a confidential basis (except
in the case of clause (iv) below), advise and release information regarding the
existence and content of this Agreement or the transactions contemplated hereby
to (i) their respective Affiliates or any of their agents, accountants,
attorneys and prospective lenders or investors in connection with or related to
the transactions contemplated by this Agreement, including without limitation
the financing of such transactions, (ii) Sanwa Business Credit Corporation,
(iii) Dana Corporation, (iv) any other secured creditor of Seller for the
purposes of obtaining the release of such creditor's Lien, (v) such Persons as
are necessary in order for Seller to satisfy its obligation under Section 5.10,
(vi) such Persons as are necessary to
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obtain all Required Governmental Approvals and Required Contractual Consents and
(vii) such Persons as are necessary for Buyer to obtain all Permits.
7.04. Administration of Accounts. All payments and reimbursements
made in the ordinary course by any third party in the name of or to Seller or
any Affiliate thereof in connection with or arising out of the Transferred
Assets, the Business or the Assumed Liabilities after the Closing Date shall be
held by Seller or such Affiliate in trust for the benefit of Buyer and,
immediately upon receipt by Seller or any such Affiliate of any such payment or
reimbursement, Seller shall pay, or cause to be paid, over to Buyer the amount
of such payment or reimbursement without right of set off. All payments and
reimbursements made in the ordinary course by any third party in the name of or
to Buyer or any Affiliate thereof in connection with or arising out of the
Excluded Assets or the Excluded Liabilities after the Closing Date shall be held
by Buyer or such Affiliate in trust for the benefit of Seller and, immediately
upon receipt by Buyer or any such Affiliate of any such payment or
reimbursement, Buyer shall pay, or cause to be paid, over to Seller the amount
of such payment or reimbursement without right of set off.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions contemplated hereby is subject to the satisfaction
of each of the following conditions:
(a) (i) Seller and LJB shall have performed and satisfied in
all material respects each of their material obligations hereunder required to
be performed and satisfied on or prior to the Closing Date, (ii) each of the
representations and warranties of Seller and LJB contained in this Agreement
shall have been true and correct in all material respects when made and shall
contain no misstatement or omission that would make any such representation or
warranty materially misleading when made and shall be true and correct in all
material respects, and shall not contain any misstatement or omission that would
make any such representation or warranty materially misleading, at and as of the
Closing Date with the same force and effect as if made as of the Closing Date
and (iii) Buyer shall have received certificates signed by a duly authorized
executive officer of Seller to the foregoing effect and to the effect that to
the Knowledge of such officer the conditions specified within this Section 8.01
have been satisfied.
(b) All Required Governmental Approvals for the transactions
contemplated by this Agreement shall have been obtained without the imposition
of any conditions that are or would become applicable to the Business, the
Transferred Assets or Buyer (or any of its Affiliates) after the Closing that
Buyer in good faith reasonably determines would be materially burdensome upon
the Business, the Transferred Assets or Buyer (or any of its Affiliates) or
their respective businesses substantially as such businesses have been conducted
prior to the Closing Date or as said businesses, as of the date hereof, would be
reasonably
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expected to be conducted after the Closing Date. All such Required Governmental
Approvals shall be in effect, and no Proceedings shall have been instituted or
threatened by any Governmental Authority with respect thereto as to which, in
Buyer's good faith opinion, there is a material risk of a determination that
would terminate the effectiveness of, or otherwise materially and adversely
modify the terms of, any such Required Governmental Approval; all applicable
waiting periods with respect to such Required Governmental Approvals shall have
expired; and all conditions and requirements prescribed by Applicable Law or by
such Required Governmental Approvals to be satisfied on or prior to the Closing
Date shall have been satisfied to the extent necessary such that all such
Required Governmental Approvals are, and will remain, in full force and effect
assuming continued compliance with the terms thereof after the Closing.
(c) All Required Contractual Consents shall have been obtained
without the imposition of any conditions that are or would become applicable to
the Business, the Transferred Assets, Buyer or any of its Affiliates after the
Closing that Buyer in good faith determines would be materially burdensome upon
the Business, the Transferred Assets, Buyer or any of its Affiliates or their
respective businesses substantially as such businesses have been conducted prior
to the Closing Date or as said businesses, as of the date hereof, would be
reasonably expected to be conducted after the Closing Date. All such Required
Contractual Consents (and with respect to the Subsequent Material Contracts,
such other consents as may be required) shall be in effect. All conditions and
requirements prescribed by any Required Contractual Consent (or any such other
consent) to be satisfied on or prior to the Closing Date shall have been
satisfied to the extent necessary such that all such Required Contractual
Consents (and all such other consents) are effective and enforceable, and will
remain effective and enforceable against the Persons giving such Required
Contractual Consents (and such other consents) assuming continued compliance
with the terms thereof.
(d) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law. No temporary
restraining order, preliminary or permanent injunction, cease and desist order
or other order issued by any court of competent jurisdiction or any competent
Governmental Authority or any other legal restraint or prohibition preventing
the transfer and exchange contemplated hereby or the consummation of the
Closing, or imposing Damages in respect thereto, shall be in effect, and there
shall be no pending or threatened actions or proceedings by any Governmental
Authority (or determinations by any Governmental Authority) or by any other
Person (i) challenging or in any manner seeking to restrict or prohibit the
transfer and exchange contemplated hereby or the consummation of the Closing, or
to impose conditions that Buyer in good faith determines would be materially
burdensome upon the Business, the Transferred Assets, Buyer or any of its
Affiliates or their respective businesses substantially as such businesses have
been conducted prior to the Closing Date or as said businesses, as of the date
hereof, would be reasonably expected to be conducted after the Closing Date.
(e) Since the date hereof, there shall not have been any
event, occurrence, development or state of circumstances or facts or change in
the Transferred Assets or the Business (including any damage, destruction or
other casualty loss, but excluding any
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event, occurrence, development or state of circumstances or facts or change
resulting from changes in general economic conditions) affecting the Business or
any Transferred Asset that has had or that may be reasonably expected to have,
either alone or together with all other such events, occurrences, developments,
states of circumstances or facts or changes, a Material Adverse Effect.
(f) Each of Seller and LJB shall have executed and delivered
to Buyer a Non-Competition Agreement in the form attached hereto as Exhibit C.
(g) Buyer shall have received an opinion of counsel from
Schuyler, Roche & Zwirner in substantially the form attached hereto as Exhibit
D.
(h) Buyer shall be reasonably satisfied that there has been no
material degradation of the Transferred Assets since the completion by Buyer of
its inspection of the Transferred Assets.
(i) Buyer shall have completed its customary due diligence as
contemplated by Section 5.02(c) and Buyer shall be satisfied, in its reasonable
judgment, with both the quantity and the substance of the information provided
to it.
(j) Harris Bank & Trust and Sanwa Business Credit Corporation
shall have executed and delivered a side letter agreement in substantially the
form attached hereto as Exhibit B.
(k) Seller shall have executed and delivered a services
support agreement in substantially the form attached hereto as Exhibit E.
(l) Dana Corporation shall have executed and delivered (i) a
lease for the facility in Walterboro, South Carolina, (ii) an environmental
indemnification agreement relating to the facility in Walterboro, South Carolina
and (iii) a sales and supply agreement relating to the Business, each containing
terms reasonably acceptable to Buyer.
(m) The applicable provisions of any statutory provision
applicable to the transactions contemplated by this Agreement in the states of
Illinois, Michigan and South Carolina, including, without limitation, Article 6
of the Uniform Commercial Code as adopted in the States of South Carolina and
Michigan relating to bulk sales with respect to the sale of the Transferred
Assets, shall have been complied with to the satisfaction of Buyer.
(n) No Liens of any third party shall encumber any of the
Transferred Assets, except Permitted Liens and Liens that will be released upon
the filing of Uniform Commercial Code termination statements deposited with the
Escrow Agent pursuant to the Lien Escrow Agreement.
(o) There shall not exist any pending or threatened litigation
(excluding any litigation set forth on Schedule 3.12), claims, assessments, or
other loss contingencies against or otherwise affecting the Business or any of
the Transferred Assets
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seeking damages in excess of $50,000, or relief materially interfering with the
Business or the Transferred Assets.
(p) Seller shall have executed and delivered a supply and
service agreement in substantially the form attached hereto as Exhibit F.
(q) If a petition under title 11 of the United States Code is
filed by or against Seller (a "Petition") prior to the Closing (whether or not
an order for relief has been entered), Buyer's obligations hereunder are
conditioned on the following:
(i) The entry of an order (the "Procedures Order") by
the Bankruptcy Court in which the Petition is filed (the "Bankruptcy
Court"), no later than 15 days following the date on which the Petition is
filed (the "Petition Date") establishing the procedures for the obtaining
of the Approval Order. The Procedures Order shall be in form and substance
acceptable to Buyer and if the Procedures Order permits Persons other than
Buyer to bid for all or any portion of the Transferred Assets, the
obligations of Buyer are conditioned on the Procedures Order providing:
(A) All bids shall be for not less than all of the
Transferred Assets;
(B) Buyer shall be deemed to have made the opening
bid in the amount set forth in this Agreement and providing that
except for the cash portion of the Purchase Price, all bids shall be
on the terms and conditions of this Agreement;
(C) All prospective bidders (including Buyer)
shall, not less than 10 days before the Approval Hearing, qualify as
a bidder by posting with Seller (or with the trustee in bankruptcy
if one has been appointed) cash, letters of credit, certificates of
deposit or other financial instruments, in amounts at least equal to
the amount to be bid, in form and substance sufficient to establish
the ability of such bidders to consummate the transactions
contemplated by this Agreement within the time specified in this
Agreement;
(D) Permitting only persons who have qualified to
bid;
(E) Specifying the initial overbid shall be not
less than $500,000 with bidding increments of $100,000 thereafter,
and requiring that a non-refundable deposit in the amount bid be
tendered to Seller at the Approval Hearing; and
(F) If the Bankruptcy Court enters its order
approving any sale of the Purchased Assets, other than to Buyer in
accordance with this Agreement, Seller shall (whether or not a sale
to such Person is consummated) pay to Buyer within 10 days of entry
of such order, a fee in the amount of $500,000 to compensate and
reimburse Buyer for its management time, costs and
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expenses incurred in entering into this Agreement, with such fee
having priority over all other liens, claims and expenses relating
to the Transferred Assets.
(ii) The giving of notice by Seller, no later than 20
days following the Petition Date, to all creditors, parties in interest,
Persons requesting special notice and Persons entitled to notice under
applicable law and rules, of the hearing (the "Approval Hearing") to
consider the motion by Seller for an order of the Bankruptcy Court, and
such portions of the Procedures Order as the Bankruptcy Court may direct,
which notice shall be in form and substance acceptable to Buyer, and which
motion requests the entry of an order in form and substance acceptable to
Buyer providing:(x) for the assumption of this Agreement, (y) authorizing
the transactions contemplated by this Agreement, including, without
limitation, the sale of the Transferred Assets to Buyer pursuant to
Sections 363 and 365 of the U.S. Bankruptcy Code free and clear of all
Liens other than Permitted Liens, and (z) finding the Buyer is acting in
good faith within the meaning of Section 363(m) of the U.S. Bankruptcy
Code ( the "Approval Order");
(iii) The entry no later than 50 days following the
Petition Date of the Approval Order as a final and non-appealable order
unless the requirement of finality is waived by Buyer;
(iv) The enforcement of the Approval Order not being
stayed by order of any court;
(v) The consummation of the transactions contemplated by
this Agreement no later than 55 days following the Petition Date.
(r) Seller shall have executed a Lien Escrow Agreement in
substantially the form attached hereto as Exhibit G (the "Lien Escrow
Agreement").
(s) Seller shall have executed and delivered a technical
support agreement in substantially the form attached hereto as Exhibit H.
(t) The Boards of Directors of Buyer and RBC shall have
approved this Agreement and the transactions contemplated hereby.
8.02. Conditions to Obligation of Seller. The obligation of Seller
to consummate the transactions contemplated hereby is subject to the
satisfaction of each of the following conditions:
(a) (i) Buyer shall have performed and satisfied in all
material respects each of its material obligations hereunder required to be
performed and satisfied by it on or prior to the Closing Date, and the aggregate
effect of all failures to perform or satisfy all obligations of Buyer on or
prior to the Closing Date shall not be materially adverse to Seller; (ii) the
representations and warranties of Buyer contained in this Agreement shall be
true, complete and accurate in all material respects at and as of the Closing
Date, as if made at and as of such date and (iii) Seller shall have received a
certificate signed by a duly authorized executive officer of
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Buyer to the foregoing effect and to the effect that to such officer's Knowledge
the conditions specified within this Section 8.02 have been satisfied.
(b) All material Required Governmental Approvals for the
transactions contemplated by this Agreement shall have been obtained without the
imposition of any conditions that are or would become applicable to Seller or
any of its Affiliates after the Closing that Seller in good faith reasonably
determines would be materially burdensome upon such Seller or any such
Affiliate. All such Required Governmental Approvals shall be in effect, and no
Proceedings shall have been instituted or threatened by any Governmental
Authority with respect thereto as to which, in Seller's good faith opinion,
there is a material risk of a determination that would terminate the
effectiveness of, or otherwise materially and adversely modify the terms of, any
such Required Governmental Approval. All applicable waiting periods with respect
to such Required Governmental Approvals shall have expired, and all conditions
and requirements prescribed by Applicable Law or by such Required Governmental
Approvals to be satisfied on or prior to the Closing Date shall have been
satisfied to the extent necessary such that all such Required Governmental
Approvals are, and will remain, in full force and effect assuming continued
compliance with the terms thereof after the Closing.
(c) All Required Contractual Consents shall have been obtained
without the imposition of any conditions that are or would become applicable to
Seller or any of its Affiliates after the Closing that Seller in good faith
reasonably determines would be materially burdensome upon Seller or any such
Affiliate. All such Required Contractual Consents (and with respect to the
Subsequent Material Contracts, such other consents) shall be in effect, and no
Proceeding shall have been instituted or threatened with respect thereto that,
in Seller's good faith judgment, creates a material risk that any material
Liability will be imposed on Seller. All conditions and requirements prescribed
by any required Contractual Consent (or any such other consent) to be satisfied
on or prior to the Closing Date shall have been satisfied to the extent
necessary such that no material Liability will be imposed on Seller.
(d) The sale and transfer contemplated by this Agreement and
the consummation of the Closing shall not violate any Applicable Law. No
temporary restraining order, preliminary or permanent injunction, cease and
desist order or other order issued by any court of competent jurisdiction or any
competent Governmental Authority or any other legal restraint or prohibition
preventing the transfer and exchange contemplated hereby or the consummation of
the Closing, or imposing Damages in respect thereto, shall be in effect, and
there shall be no pending or threatened actions or proceedings by any
Governmental Authority (or determinations by any Governmental Authority) or by
any other Person challenging or in any manner seeking to restrict or prohibit
the transfer and exchange contemplated hereby or the consummation of the
Closing.
(e) Seller shall have received opinions of counsel from
Gibson, Dunn & Crutcher LLP and Adelman, Gettleman, Merens, Berish & Carter Ltd.
in substantially the forms attached hereto as Exhibit I and J, respectively.
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ARTICLE IX
INDEMNIFICATION
9.01. Agreement to Indemnify.
(a) Subject to the limitations provided herein, Buyer, RBC and
their respective Affiliates (collectively, the "Buyer Indemnitees") shall each
be indemnified and held harmless to the extent set forth in this Article IX on a
joint and several basis by Seller and LJB in respect of any Damages reasonably
and proximately incurred by any Buyer Indemnitee (i) as a result of any
inaccuracy or misrepresentation in or breach of or failure to perform any
representation, warranty, covenant, agreement or obligation of Seller or LJB in
this Agreement or (ii) in connection with any Excluded Liability, including,
without limitation, all liability relating to Seller's pension plan for hourly
employees and all Environmental Liabilities. The aggregate liability of Seller
and LJB collectively under this Section 9.01(a) shall not exceed the
Indemnification Limit, except in the case of Damages due to Seller's or LJB's
fraud or willful misconduct.
(b) Seller, LJB and their Affiliates (collectively the "Seller
Indemnitees") shall each be indemnified and held harmless to the extent set
forth in this Article IX on a joint and several basis by Buyer and RBC in
respect of any and all Damages reasonably and proximately incurred by any Seller
Indemnitee as a result of (i) any inaccuracy or misrepresentation in or breach
of or failure to perform any representation, warranty, covenant, agreement or
obligation of Buyer or RBC in this Agreement; (ii) the Assumed Liabilities; or
(iii) Buyer's conduct of the Business after the Closing.
(c) Notwithstanding Section 9.01(a), Seller and LJB shall not
be liable as Indemnifying Parties until all claims by the Buyer Indemnitees for
indemnification, other than claims referred to in the proviso to this sentence,
exceed $25,000 in the aggregate, and thereafter Seller and LJB shall be liable,
subject to the other limitations provided for elsewhere in this Agreement, for
all indemnification claims except the first $25,000 of claims arising after the
Closing Date; provided, however, that Seller and LJB shall be liable, subject to
the other limitations provided for elsewhere in this Agreement, for all claims
by the Buyer Indemnitees arising out of (i) the fraud or willful misconduct of
Seller or LJB or (ii) any Lien that does not constitute a Permitted Lien.
9.02. Survival of Representation and Warranties.
(a) Except as hereinafter provided in this Section 9.02, all
representations and warranties of each Indemnifying Party contained herein and
all claims of any Indemnitee in respect of any inaccuracy or misrepresentation
in or breach of any representation or warranty of any Indemnifying Party
contained in this Agreement, shall be deemed to have been remade at the Closing
and shall survive the Closing and shall expire on the first anniversary of the
Closing Date.
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(b) Notwithstanding Section 9.02(a) the representations and
warranties of Seller and LJB shall survive the Closing Date until the expiration
of any applicable statute of limitations, including extensions thereof, with
respect to: (i) the inaccuracy or misrepresentation in or breach of any
representation or warranty made by Seller or LJB in this Agreement arising out
of fraud or willful misconduct; and (ii) any inaccuracy or misrepresentation in
or breach of any representation or warranty made in Sections 3.01, 3.02, 3.19,
3.20 and 3.22 regardless of whether such inaccuracy or misrepresentation or
breach arises out of fraud or willful misconduct.
(c) Notwithstanding Section 9.02(a), each of the following
representations and warranties of Buyer and RBC shall survive the Closing Date
until the expiration of any applicable statute of limitations, including
extensions thereof, with respect to: any inaccuracy or misrepresentation in or
breach of any representation or warranty made by Buyer or RBC in this Agreement
arising out of fraud or willful misconduct.
9.03. Claims for Indemnification. If any Indemnitee shall believe
that such Indemnitee is entitled to indemnification pursuant to this Article IX
in respect of any Damages, such Indemnitee shall give the appropriate
Indemnifying Party prompt written notice thereof. Any such notice shall set
forth in reasonable detail and to the extent then known the basis for such claim
for indemnification. The failure of such Indemnitee to give notice of any claim
for indemnification promptly shall not adversely affect such Indemnitee's right
to indemnity hereunder unless such Indemnifying Party would have the right to
defend against such claim pursuant to Section 9.04(b) and then only to the
extent that such failure materially adversely affects the right of the
Indemnifying Party to assert any reasonable defense to such claim.
9.04. Defense of Claims.
(a) In connection with any claim which may give rise to
indemnity under this Article IX resulting from or arising out of any claim or
Proceeding brought by a third party against an Indemnitee by a Person that is
not a party hereto, the Indemnifying Party may, subject to Section 9.04(b),
assume the defense of any such claim or Proceeding, upon written notice to the
relevant Indemnitee, if all Indemnifying Parties with respect to such claim or
Proceeding jointly acknowledge to the Indemnitee its right to indemnity pursuant
hereto in respect of the entirety of such claim (as such claim may have been
modified through written agreement of the parties or arbitration hereunder) and
provides assurances, reasonably satisfactory to such Indemnitee, that the
Indemnifying Parties will be financially able to satisfy such claim in full
(subject to the Indemnification Limit) if such claim or Proceeding is decided
adversely. If the Indemnifying Parties assume the defense of any such claim or
Proceeding, the Indemnifying Parties shall select counsel reasonably acceptable
to such Indemnitee to conduct the defense of such claim or Proceeding, shall
take all steps necessary in the defense or settlement thereof and shall at all
times diligently and promptly pursue the resolution thereof. If the Indemnifying
Parties shall have assumed the defense of any claim or Proceeding in accordance
with this Section 9.04, the Indemnifying Parties shall be authorized to consent
to a settlement of, or the entry of any judgment arising from, any such claim or
Proceeding, without the prior written consent of such Indemnitee; provided,
however, that the Indemnifying Parties
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shall pay or cause to be paid all amounts arising out of such settlement or
judgment concurrently with the effectiveness thereof; provided, further, that
the Indemnifying Parties shall not be authorized to encumber any of the assets
of any Indemnitee or to agree to any restriction that would apply to any
Indemnitee or to its conduct of business; and provided, further, that a
condition to any such settlement shall be a complete release of such Indemnitee
and its Affiliates, officers, employees, consultants and agents with respect to
such claim. Subject to Section 9.04(b), such Indemnitee shall be entitled to
participate in (but not control) the defense of any such action, with its own
counsel and at its own expense. Notwithstanding the preceding sentence, an
Indemnitee shall have the right to conduct the defense of any claim or
Proceeding until such time as the Indemnifying Parties assume the defense
thereof in accordance with the terms hereof, provided that such Indemnitee may
not (i) take any action that would materially adversely affect the right of the
Indemnifying Parties to assert any reasonable defense or (ii) settle such claim
or Proceeding without the written consent of the Indemnifying Parties, which
consent may not be unreasonably withheld. Each Indemnitee shall, and shall cause
each of its Affiliates, officers, employees, consultants and agents to,
cooperate fully with the Indemnifying Parties in the defense of any claim or
Proceeding being defended by the Indemnifying Parties pursuant to this Section
9.04. If the Indemnifying Parties do not assume the defense of any claim or
Proceeding resulting therefrom in accordance with the terms of this Section
9.04(a), such Indemnitee may defend against such claim or Proceeding.
(b) Notwithstanding Section 9.04(a), the Indemnifying Parties
may not assume the defense of any claim or Proceeding and the Indemnitee may
assume such defense if (i) in the reasonable opinion of the Indemnitee there are
one or more legal defenses available to the Indemnitee that conflict with those
available to an Indemnifying Party, (ii) the maximum damages sought in such
claim or Proceeding exceed the Indemnification Limit then in effect by more than
100% or (iii) the Indemnitee elects not to seek indemnification hereunder for
such claim. If the Indemnitee assumes defense of any such claim or Proceeding
(except a claim or Proceeding the defense of which is assumed pursuant to clause
(iii)), (A) the Indemnifying Parties may participate in, but not control, the
defense of such claim or Proceeding, and (B) if the Indemnitee receives a
settlement proposal from the Person asserting such claim or instituting such
Proceeding and is notified by an Indemnifying Party that such Indemnifying Party
wants to accept such settlement proposal, the liability of the Indemnifying
Parties with respect to such claim or Proceeding shall equal the lesser of (x)
the amount offered in such settlement proposal, (y) the amount of actual Damages
of the Indemnitee with respect to such claim or Proceeding or (z) the
Indemnification Limit then in effect.
(c) If the Indemnitee elects to defend any claim or Proceeding
pursuant to the last sentence of Section 9.04(a) or pursuant to Section 9.04(b),
the Indemnitee shall conduct such defense in such manner as it shall deem
appropriate, including settling such claim or Proceeding after giving notice of
the same to the Indemnifying Parties, on such terms as such Indemnitee shall
deem appropriate. Each Indemnifying Party shall, and shall cause each of its
Affiliates, officers, employees, consultants and agents to, cooperate fully with
the Indemnitee in the defense of such claim or Proceeding. If the Indemnifying
Parties seek to question the manner in which such Indemnitee defended such claim
or Proceeding or the amount of or nature of any such settlement, the
Indemnifying Parties shall have the burden to prove by a
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preponderance of the evidence that such Indemnitee did not defend such claim or
Proceeding in a reasonably prudent manner.
ARTICLE X
TERMINATION
10.01. Grounds for Termination. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual written agreement of all of the parties hereto;
(b) by Buyer or by Seller, if the Closing shall not have been
consummated by December 31, 1996 (the "Outside Date") as each of Buyer and
Seller acknowledge that time is of the essence; provided, however, that a party
may not terminate this Agreement pursuant to this clause (b) if the Closing
shall not have been consummated within such time period by reason of the failure
of such party or any of its Affiliates to perform in all material respects any
of its or their respective covenants or agreements contained in this Agreement;
and
(c) by any party hereto if any Federal, state or foreign law
or regulation thereunder shall hereafter be enacted or become applicable that
makes the transactions contemplated hereby or the consummation of the Closing
illegal or otherwise prohibited, or if any judgment, injunction, order or decree
enjoining either party hereto from consummating the transactions contemplated
hereby is entered, and such judgment, injunction, order or decree shall become
final and nonappealable.
The party desiring to terminate this Agreement pursuant to clause
(b) or (c) shall give written notice of such termination to the other party.
10.02. Effect of Termination. If this Agreement is terminated as
permitted by Section 10.01, such termination shall be without liability of any
party to any other party to this Agreement; provided, however, that if such
termination shall result from the breach by any party of its representations,
warranties or covenants contained in this Agreement, such party shall be fully
liable for any and all Damages incurred or suffered by the other parties as a
result of such failure or breach notwithstanding such termination. The
provisions of Sections 5.05, 6.01, 10.02, 11.03, 11.05 11.07, 11.08, 11.10 and
11.12 shall survive any termination of this Agreement pursuant to Article X.
ARTICLE XI.
MISCELLANEOUS
11.01. Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) if
personally delivered, when so
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delivered, (ii) if mailed, two Business Days after having been sent by
registered or certified mail, return receipt requested, postage prepaid and
addressed to the intended recipient as set forth below, (iii) if given by telex
or telecopier, once such notice or other communication is transmitted to the
telex or telecopier number specified below and the appropriate answer back or
telephonic confirmation is received, provided that such notice or other
communication is promptly thereafter mailed in accordance with the provisions of
clause (ii) above or (iv) if sent through an overnight delivery service in
circumstances to which such service guarantees next day delivery, the day
following being so sent:
If to Seller or LJB:
Lloyd J. Baretz
676 North Michigan Avenue
Suite 3000
Chicago, IL 60611
Telecopier No.: (312) 943-8265
with a copy to:
Schuyler, Roche & Zwirner
130 East Randolph Street
Suite 3800
Chicago, IL 60601
Attn: Frank Zaffere, Esq.
Telecopier No.: (312) 565-8300
If to Buyer:
BPP Acquisition Corporation
c/o Roller Bearing Company of America, Inc.
60 Round Hill Road
Fairfield, CT 06430
Attn: Mr. Michael S. Gostomski
Telecopier No: (203) 256-0775
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue, Suite 5018
Los Angeles, California 90071
Attn: Bruce D. Meyer, Esq.
Telecopier No: 213-229-7520
Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until
40
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it actually is received by the individual for whom it is intended. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
11.02. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the case
of an amendment, by all parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No waiver by a party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent occurrence. No failure or delay by a party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
11.03. Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
11.04. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. No party hereto may assign either this Agreement or any
of its rights, interests or obligations hereunder without the prior written
approval of each other party, which approval shall not be unreasonably withheld.
11.05. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws (without reference to choice
or conflict of laws) of the State of Illiniois.
11.06. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other parties hereto.
11.07. Entire Agreement. This Agreement (including the Schedules and
Exhibits referred to herein which are hereby incorporated by reference)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement. Neither this Agreement nor any provision
41
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hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
11.08. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
11.09. Severability. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.
11.10. Construction.
(a) 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 shall be applied against either party. Any reference
to any Applicable Law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. Whenever required
by the context, any gender shall include any other gender, the singular shall
include the plural and the plural shall include the singular. The words
"herein," "hereof," "hereunder," and words of similar import refer to the
Agreement as a whole and not to a particular section. Whenever the word
"including" is used in this Agreement, it shall be deemed to mean "including,
without limitation," "including, but not limited to" or other words of similar
import such that the items following the word "including" shall be deemed to be
a list by way of illustration only and shall not be deemed to be an exhaustive
list of applicable items in the context thereof.
(b) The parties hereto intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) that the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
11.11. Cumulative Remedies. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
11.12. Third Party Beneficiaries. No provision of this Agreement
shall create any third party beneficiary rights in any Person, including any
employee of Buyer or employee or former employee of Seller or any Affiliate
thereof (including any beneficiary or dependent thereof).
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
SELLER:
BEAVER PRECISION PRODUCTS, INC.
By:
-----------------------------------
Name:
Title:
LJB:
--------------------------------------
Lloyd J. Baretz
BUYER:
BPP ACQUISITION CORPORATION
By:
-----------------------------------
Name:
Title:
RBC:
ROLLER BEARING COMPANY OF AMERICA, INC.
By:
-----------------------------------
Name:
Title:
43
<PAGE>
SCHEDULE 2.02
EXCLUDED ASSETS
(a) all books, records, files and papers, whether in hard copy or
computer format, that Seller or any of its Affiliates shall be required to
retain pursuant to Applicable Law (provided, that copies thereof shall be
delivered to Buyer to the extent that the relate to the Business);
(b) all rights of Seller under this Agreement and the agreements and
instruments delivered to Seller by Buyer pursuant to this Agreement;
(c) any asset of Seller that would constitute a Transferred Asset
(if owned by Seller on the Closing Date) that is conveyed or otherwise disposed
of during the period from the date hereof until the Closing Date (i) in the
ordinary course of business and not in violation of the terms of this Agreement
or (ii) as otherwise expressly permitted by the terms of this Agreement;
(d) any cash on hand of Seller or Deposits by Seller with financial
institutions;
(e) any tangible personal property of Seller (including, without
limitation, Inventory) that is located at Seller's Troy, Michigan facility
except any assets listed on Schedule 2.01;
(f) any assets of Seller that are not used in, relate to or
generated by the Business;
(g) any accounts receivable of Seller that do not constitute
Selected Accounts Receivable; and
(h) the leases between Dana Corporation, as lessor, and Seller, as
lessee, relating to Seller's Walterboro, South Carolina and Troy, Michigan
facilities.
1
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DRAFT -- 9/27/97 6:11 AM
===============================
ASSET PURCHASE AGREEMENT
By and Among
SKF USA INC.,
RBC NICE BEARINGS, INC.,
and
ROLLER BEARING COMPANY OF AMERICA, INC.
Dated as of February 28, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS........................................................1
1.01. Definitions......................................................1
ARTICLE II. TRANSFER OF ASSETS..............................................5
2.01. Transfer of Assets by Seller.....................................5
2.02. Excluded Assets..................................................7
2.03. Assumption of Liabilities........................................7
2.04. Excluded Liabilities.............................................7
2.05 Assignment of Contracts and Rights...............................9
2.06. Closing..........................................................9
2.07. First Anniversary Payments.......................................10
2.08. 1/31/97 Balance Sheet............................................10
2.09. Post-Closing Purchase Price Adjustment...........................10
2.10. Accounting Expenses..............................................11
2.11. Purchase Price Allocation........................................11
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER.......................11
3.01. Existence and Power..............................................11
3.02. Authorization....................................................11
3.03. Intentionally omitted............................................12
3.04. Governmental Authorization.......................................12
3.05. Non-Contravention................................................12
3.06. Financial Statements; Undisclosed Liabilities....................12
3.07. Absence of Certain Changes.......................................13
3.08. Properties; Leases; Tangible Assets..............................14
3.09. Sufficiency of and Title to the Transferred Assets...............15
3.10. Affiliates.......................................................15
3.11. Inventory........................................................15
3.12. Litigation.......................................................16
3.13. Contracts........................................................16
3.14. Permits; Required Consents.......................................17
3.15. Compliance with Applicable Laws..................................17
3.16. Employment Agreements; Change in Control; and Employee Benefits..18
3.17. Labor and Employment Matters.....................................19
3.18. Intellectual Property............................................19
3.19. Advisory Fees....................................................20
3.20. Environmental Compliance.........................................20
3.21. Tax Matters......................................................21
3.22. Insurance........................................................21
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3.23. Material Disclosures.............................................21
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER.........................22
4.01. Organization and Existence.......................................22
4.02. Corporate Authorization..........................................22
4.03. Governmental Authorization.......................................22
4.04. Non-Contravention................................................22
4.05. Advisory Fees....................................................22
4.06. Litigation.......................................................22
ARTICLE V. COVENANTS OF SELLER..............................................23
5.01. Conduct of the Business..........................................23
5.02. Access to Information............................................24
5.03. Compliance with Terms of Required Governmental Approvals and
Required Contractual Consents..................................25
5.04. Maintenance of Insurance Policies................................25
5.05. Confidentiality..................................................25
5.06. Taxes............................................................26
5.07. Accounts Receivable and Accounts Payable.........................27
5.08. Oil/Water Separator Replacement or Repair........................27
5.09. Supply of Steel from Ovako.......................................27
ARTICLE VI. COVENANTS OF BUYER...............................................28
6.01. Confidentiality..................................................28
6.02. Worker's Compensation Reimbursement..............................29
6.03. Sales and Use Tax Permits........................................29
ARTICLE VII. COVENANTS OF ALL PARTIES.........................................29
7.01. Further Assurances...............................................29
7.02. Certain Filings..................................................29
7.03. Public Announcements.............................................30
7.04. Administration of Accounts.......................................30
7.05. Intentionally omitted............................................30
7.06. Bulk Sales Laws..................................................30
7.07. Employees and Employee Benefit Matters...........................30
7.08. Trademark License................................................35
ARTICLE VIII. CONDITIONS TO CLOSING.........................................36
8.01. Conditions to Obligation of Buyer................................36
8.02. Conditions to Obligation of Seller...............................38
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ARTICLE IX. INDEMNIFICATION.................................................40
9.01. Agreement to Indemnify...........................................40
9.02. Survival of Representations and Warranties and Covenants.........40
9.03. Claims for Indemnification.......................................41
9.04. Defense of Claims................................................42
ARTICLE X. TERMINATION......................................................43
10.01. Grounds for Termination.........................................43
10.02. Effect of Termination...........................................44
ARTICLE XI. MISCELLANEOUS...................................................44
11.01. Notices.........................................................44
11.02. Amendments; No Waivers..........................................45
11.03. Expenses........................................................46
11.04. Successors and Assigns..........................................46
11.05. Governing Law...................................................46
11.06. Counterparts; Effectiveness.....................................46
11.07. Entire Agreement................................................46
11.08. Captions........................................................46
11.09. Severability....................................................46
11.10. Construction....................................................47
11.11. Arbitration of Claims...........................................47
11.13. Cumulative Remedies.............................................48
11.14. Third Party Beneficiaries.......................................48
Index of Other Defined Terms. In addition to those terms defined in
Section 1.01 below, the following terms shall have the respective meanings given
thereto in the sections indicated below:
Defined Term Section
"1995 Balance Sheet".................... 3.06(a)
"1/31/97 Sheet"......................... 2.08
"Agreement"............................. Preamble
"Assumed Liabilities"................... 2.03
"Annual Financials"..................... 3.06(a)
"Business".............................. Recitals
"Buyer"................................. Preamble
"Buyer Indemnitees"..................... 9.01(a)
"Closing"............................... 2.06(a)
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"Closing Date".......................... 2.06(a)
"Contracts"............................. 2.01(d)
"Equipment"............................. 2.01(b)
"Excluded Assets"....................... 2.02
"Excluded Environmental Liabilities".... 2.04(c)
"Excluded Liabilities".................. 2.04
"Extent of License" 7.08(c)
"First Choice".......................... 2.08
"Goods"................................. 7.08(a)
"Grant" 7.08(a)
"Indemnity" 7.08(e)
"Insurance Policies".................... 3.22
"Intellectual Property Rights".......... 3.18(a)
"Inventory"............................. 2.01(c)
"Leases"................................ 3.08(b)
"Leased Real Property".................. 3.08(a)
"Maintenance of Trademark" 7.08(d)
"Net Transferred Asset Value"........... 2.09(a)
"Nice".................................. Recitals
"Ovako"................................. 5.09
"Overpayment"........................... 2.09(b)
"Permits"............................... 3.14(a)
"Personal Property Leases".............. 3.08(b)
"Proceedings"........................... 3.12
"Proposed 1/31/97 Balance Sheet"........ 2.08
"RBC"................................... Preamble
"Real Property Leases".................. 3.08(b)
"Required Consents"..................... 3.14(b)
"Required Contractual Consent".......... 3.14(b)
"Required Governmental Approval"........ 3.14(b)
"Scheduled Contracts"................... 3.13(a)
"Selected Firm"......................... 2.08
"Seller"................................ Preamble
"Seller Indemnitees".................... 9.01(b)
"Subsequent Material Contract".......... 5.01(b)(iv)
"Term".................................. 7.08(b)
"Territory"............................. 7.08(a)
"Trademark"............................. 7.08(a)
"Transferred Assets".................... 2.01
"Unpaid Balance"........................ 2.09(a)
"Workpapers"............................ 2.08
EXHIBITS
iv
<PAGE>
EXHIBIT A Seller's Financials
EXHIBIT B Form of Sales and Supply Agreement
EXHIBIT C Interim Services Agreement
EXHIBIT D Form of Opinion of Allen G. Belenson, Esq.
EXHIBIT E Form of Opinion of Gibson, Dunn & Crutcher LLP
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SCHEDULES
Schedule 1.01 Permitted Liens
Schedule 2.01 Specified Equipment
Schedule 2.02 Excluded Assets
Schedule 2.03 Assumed Liabilities
Schedule 2.04(g) Certain Excluded Liabilities
Schedule 2.06(b) 12/31/96 Net Transferred Asset Value
Schedule 3.04 Governmental Authorizations
Schedule 3.06(b) Accounting Differences
Schedule 3.06(c) No Undisclosed Liabilities
Schedule 3.07 Absence of Certain Changes
Schedule 3.08(a) Real Property
Schedule 3.08(b) Leases
Schedule 3.10 Affiliates
Schedule 3.11 Inventories
Schedule 3.12(a) Litigation
Schedule 3.13(a) Scheduled Contracts
Schedule 3.13(b) Non-Binding Scheduled Contracts
Schedule 3.13(c) Primary Customers and Suppliers
Schedule 3.14(a) Permits
Schedule 3.14(b) Required Consents
Schedule 3.15 Compliance with Applicable Laws
Schedule 3.16(a) Benefit Plans of Seller
Schedule 3.16(b) Additional Benefits
Schedule 3.16(f) Retiree Benefits
Schedule 3.17(a) Labor and Employment Matters
Schedule 3.17(e) Worker's Compensation Matters
Schedule 3.18(a) Intellectual Property Rights
Schedule 3.18(b) Proceedings Applicable to Intellectual Property
Schedule 3.18(c) Ownership of Intellectual Property Rights
Schedule 3.20(a) Environmental Permits
Schedule 3.20(b) Environmental Compliance
Schedule 3.20(c) Continuing Compliance with Environmental Laws
Schedule 3.21 Tax Matters
Schedule 3.22 Insurance Policies
Schedule 5.01(b) Capital Expenditures
Schedule 5.08 Oil/Water Separator Repair Procedures
Schedule 7.07(b) Present Value Calculation Assumptions
vi
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") dated as of
February 28, 1997 is by and among SKF USA INC., a Delaware corporation
("Seller"), RBC NICE BEARINGS, INC., a Delaware corporation ("Buyer") and a
wholly-owned subsidiary of RBC (as defined below), and ROLLER BEARING COMPANY OF
AMERICA, INC., a Delaware corporation ("RBC").
R E C I T A L S
WHEREAS, Seller, through Nice Specialty Bearings Division, a
division of Seller ("Nice") is engaged in the design, development, manufacture,
assembly and sale of inch dimension, single row deep groove ball bearings of a
grade of ABEC-1 or less and having an outside diameter of four inches or less
(the "Business"); and
WHEREAS, Seller desires to sell and transfer to Buyer substantially
all of its assets related to the Business in consideration for the delivery by
Buyer to Seller of the Purchase Price (as defined herein) and on the terms and
conditions set forth herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows.
ARTICLE I.
DEFINITIONS
1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such other Person.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Authority (including any Environmental
Law) applicable to such Person or any of its Affiliates or Plan Affiliates or
any of their respective properties, assets, officers, directors, employees,
consultants or agents (in connection with such officer's, director's,
employee's, consultant's or agent's activities on behalf of such Person or any
of its Affiliates or ERISA Affiliates).
"Benefit Arrangement" means any material benefit arrangement, other
than an Employee Benefit Plan, maintained by Seller or any ERISA Affiliate that
covers the employees,
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former employees, directors, or former directors of Seller and their
beneficiaries with respect to Nice; such term shall include, without limitation,
the following to the extent material: (i) each employment or consulting
agreement; (ii) each arrangement providing for insurance coverage or workers'
compensation benefits; (iii) each incentive bonus or deferred bonus arrangement;
(iv) each arrangement providing termination allowance, severance or similar
benefits; (v) each equity compensation plan; (vi) each deferred compensation
plan; and (vii) each compensation policy and practice.
"Benefit Plan" means an Employee Benefit Plan or Benefit
Arrangement.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in Los Angeles, California are authorized or
required by law to close.
"Buyer's Auditors" means the independent certified public
accountants retained by Buyer.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contracts" means all contracts, agreements, options, leases,
licenses, sales and purchase order, commitments and other instruments of any
kind, whether written or oral, to which Seller is a party on the Closing Date,
including the Scheduled Contracts and the Subsequent Material Contracts.
"Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement net of
insurance proceeds actually received, including without limitation (i) interest
on cash disbursements in respect of any of the foregoing at the per annum rate
of interest publicly announced from time to time by Bank of America, N.T. & S.A.
as its prime rate (or reference rate) in effect from time to time, compounded
quarterly, from the date each such cash disbursement is made until the Person
incurring the same shall have been indemnified in respect thereof and (ii)
reasonable costs, fees and expenses of attorneys, accountants and other agents
of such Person. Any change in the rate referred to in clause (i) above shall
take effect at the opening of business on the day specified in the public
announcement of such change. Without limiting the generality of the foregoing,
Damages of a Person shall include any amounts paid by such Person pursuant to
any indemnification arrangement.
"Employee" means any Person employed by Seller in connection with
the Business.
"Employee Benefit Plan" means any employee benefit plan, as defined
in Section 3(3) of ERISA, sponsored or contributed to by Seller or any ERISA
Affiliate thereof that covers employees or former employees of Seller with
respect to Nice.
"Environmental Laws" means all Applicable Laws relating to Hazardous
Substances, occupational health and safety, or the environment including,
without limitation,
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(i) all Applicable Laws pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, (ii) all
Applicable Laws relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature; and (iii) the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), the Clean Air Act, the
Water Pollution Control Act, the Safe Drinking Water Act, the Toxic Substance
Control Act ("TSCA") and all requirements promulgated pursuant to any of these
or analogous state or local statutes.
"Environmental Liabilities" means Liabilities of a Person that arise
in connection with any proceeding, claim, lawsuit, complaint, citation, inquiry,
demand, notice or action which was or is brought or issued by any Governmental
Authority or by a third party pursuant to or under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" of any Person means any other Person that,
together with such Person as of the relevant measuring date under ERISA, was or
is required to be treated as a single employer under Section 414 of the Code.
"GAAP" means generally accepted accounting principles in the United
States applied on a consistent basis.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"Group Health Plan" means any group health plan, as defined in
Section 5000(b)(1) of the Code sponsored or contributed to by Seller or any
ERISA Affiliate that covers employees or former employees of Seller with respect
to Nice.
"Hazardous Substance" means any substance or material: (i) the
presence of which requires investigation or remediation under any Applicable
Law; or (ii) the generation, storage, treatment, transportation, disposal,
remediation, removal, handling or management of which is regulated by any
Environmental Law; or (iii) that is defined as a "hazardous waste" or "hazardous
substance" under any Applicable Law; or (iv) that is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic or mutagenic or
otherwise hazardous and is regulated by any Governmental Authority having or
asserting jurisdiction over the Business or any of the Transferred Assets; or
(v) the presence of which constitutes a nuisance, trespass or
3
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other tortious condition; or (vi) the presence of which on adjacent properties
constitutes a trespass by Seller in relation to the Business; or (vii) without
limitation, that contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenols (PCBs) or asbestos.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Indemnifying Party" means: (1) Seller when any Buyer or RBC
Indemnitee is asserting a claim under Sections 9.01(a) or 11.11 or (2) Buyer or
RBC jointly or severally when any Seller Indemnitee is asserting a claim under
Sections 9.01(b) or 11.11.
"Indemnitee" means: (1) each of Buyer, RBC and their Affiliates with
respect to any claim for which Seller is an Indemnifying Party under Sections
9.01(a) or 11.11; or (2) Seller and its Affiliates with respect to claims for
which Buyer or RBC is an Indemnifying Party under Sections 9.01(b) or 11.11.
"IRS" means the Internal Revenue Service.
"Knowledge" means, with respect to any corporation, all things known
to the executive officers of such corporation.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise and whether
or not the same is required to be accrued on the financial statements of such
Person and whether or not the same appears on any Schedule to this Agreement.
"Lien" means, with respect to any asset, any mortgage, title defect
or objection, lien, pledge, charge, security interest, hypothecation,
restriction, encumbrance or charge of any kind in respect of such asset.
"Material Adverse Effect" means a change in, or effect on, the
operations, affairs, prospects, financial condition, results of operations,
assets, Liabilities, reserves or any other aspect of the Business that results
in a material adverse effect on, or a material adverse change in, the
Transferred Assets taken as a whole, or a material adverse effect on the
Business taken as a whole.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 3(37) and 4001(a)(3) of ERISA.
"Permitted Liens" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested in good faith by appropriate
proceedings; (ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons and other Liens
imposed by Applicable Law incurred in the ordinary course of business for sums
not yet
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delinquent or being contested in good faith; (iii) Liens relating to deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or to
secure the performance of leases, trade contracts or other similar agreements;
and (iv) other Liens set forth on Schedule 1.01 hereto. Notwithstanding the
foregoing, the following shall not be Permitted Liens: (a) any Lien arising
under the Code or ERISA with respect to the operation, termination, restoration
or funding of any Benefit Plan sponsored by, maintained by or contributed to by
Seller or any of its ERISA Affiliates or arising in connection with any excise
tax or penalty tax with respect to such Benefit Plan and (b) any Lien arising
under clause (i) or (ii) above that is the subject of a contest except and to
the extent that the Taxes or sums in questions have been reserved for on the
1995 Balance Sheet.
"Person" means an individual, corporation, partnership, association,
trust, estate or other entity or organization, including a Governmental
Authority.
"Product" means any ball bearing or other product sold in the
ordinary course of the Business.
"Prohibited Transaction" means a transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA, respectively.
"Purchase Price" means the sum of the amounts paid pursuant to
Sections 2.06(b) and 2.07 plus the Unpaid Balance or minus the Overpayment, as
the case may be.
"Seller's Auditors" means the independent certified public
accountants retained by Seller.
"Tax" means all taxes imposed of any nature including federal,
state, local or foreign net income tax, alternative or add-on minimum tax,
profits or excess profits tax, franchise tax, gross income, adjusted gross
income or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax, FICA or FUTA), real or personal property
tax or ad valorem tax, sales or use tax, excise tax, stamp tax or duty, any
withholding or back up withholding tax, value added tax, severance tax,
prohibited transaction tax, premiums tax, occupation tax, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental authority (domestic or foreign) responsible for the imposition of
any such tax.
"Tax Return" means all returns, reports, forms or other information
required to be filed with respect to any Tax.
ARTICLE II.
TRANSFER OF ASSETS
2.01. Transfer of Assets by Seller. Upon the terms and subject to
the conditions of this Agreement and in reliance upon the representations,
warranties and
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agreements herein set forth, Buyer agrees to purchase from Seller and Seller
agrees to sell or cause to be sold to Buyer at the Closing, free and clear of
all Liens, other than Permitted Liens, all the assets, properties, rights,
licenses, permits, contracts, causes of action and claims, of every kind and
description as the same shall exist on the Closing Date (other than the Excluded
Assets), wherever located, whether tangible or intangible, real, personal or
mixed, that are used, owned by, leased by or in the possession of Seller in
connection with the Business, whether or not reflected on the books and records
of Seller, including all assets shown on the 1995 Balance Sheet and not disposed
of in the ordinary course of business or as permitted by this Agreement prior to
the Closing Date (the collective assets, properties, rights, licenses, permits,
contracts, causes of action and claims in connection with the Business to be
transferred to Buyer by Seller pursuant hereto are referred to collectively
herein as the "Transferred Assets") and including without limitation all right,
title and interest of Seller in, to and under the following, to the extent used,
owned by, leased by or in the possession of Seller in connection with the
Business at the time of Closing:
(a) all real property and leases, capitalized or operating,
of, and other interests in, real property of Seller, in each case together with
all buildings, fixtures and improvements erected thereon and appurtenances
thereto;
(b) all machinery, equipment, furniture, office equipment,
computer equipment (including all hardware and software), communications
equipment, vehicles, storage tanks, spare and replacement parts, fuel and other
tangible property (and interests in any of the foregoing) of Seller
("Equipment") including, without limitation, the Equipment set forth on Schedule
2.01 hereto;
(c) all items of inventory notwithstanding how classified in
the financial records of Seller, including all raw materials, purchased parts,
work-in-process, finished goods, supplies, spare parts and samples
(collectively, the "Inventory");
(d) all contracts, agreements, options, leases, licenses,
sales and purchase orders, commitments and other instruments of any kind,
whether written or oral, to which Seller is a party on the Closing Date,
including the Scheduled Contracts and the Subsequent Material Contracts
(collectively, the "Contracts");
(e) all accounts receivable and notes receivable, together
with any unpaid interest or fees accrued thereon or other amounts due with
respect thereto, of Seller, and any security or collateral therefor, including
recoverable advances and deposits;
(f) all prepaid charges and expenses of Seller, including any
such charges and expenses with respect to ad valorem taxes, leases and rentals
and utilities;
(g) all rights of Seller under any insurance policy;
(h) all of Seller's rights, claims, credits, causes of action
or rights of set-off against third parties relating to the Business or the
Transferred Assets, whether liquidated or unliquidated, fixed or contingent,
including claims pursuant to all warranties, representations
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and guarantees made by suppliers, manufacturers, contractors and other third
parties in connection with products or services purchased by or furnished to
Seller affecting any of the Transferred Assets;
(i) all of Seller's patents, copyrights, trademarks, trade
names, service marks, service names, designs, know-how, processes, trade
secrets, inventions, and other proprietary data;
(j) all transferable franchises, licenses, permits or other
authorizations issued or granted by any Governmental Authority that are owned
by, granted to or held or used by Seller in connection with the Business,
whether or not actually utilized by Seller;
(k) all books, records, files and papers of Seller, whether in
hard copy or computer format, including books of account, invoices, engineering
information, sales and promotional literature, manuals and data, sales and
purchase correspondence, lists of present and former suppliers, personnel and
employment records of present and former employees, and documentation developed
or used for accounting, marketing, engineering, manufacturing or any other
purpose related to the conduct of the Business at any time prior to the Closing;
(l) all lists of present customers and lists of former
customers;
(m) all goodwill associated with the Business or the
Transferred Assets;
(n) all product designations used in Seller's catalog with
respect to the Products; and
(o) except as specifically provided in Section 2.02, all other
assets and properties of Seller that exist on the Closing Date and are used in
connection with the Business, whether tangible or intangible, real or personal.
2.02. Excluded Assets. Buyer expressly understands and agrees
that the assets and properties set forth on Schedule 2.02 (the "Excluded
Assets") shall be excluded from the Transferred Assets and shall be retained
by Seller.
2.03. Assumption of Liabilities. Upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Buyer agrees, effective at the time
of Closing, to assume and in due course perform, pay and discharge all the
Liabilities set forth on Schedule 2.03 (the "Assumed Liabilities").
2.04. Excluded Liabilities. Buyer does not hereby assume, and shall
not at any time hereafter (including on or after the Closing Date) become liable
for, any of the Liabilities of Seller or any of its Affiliates or any ERISA
Affiliate of any of the foregoing other than the Assumed Liabilities (the
"Excluded Liabilities"). The Excluded Liabilities shall include, without
limitation, the following Liabilities:
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(a) any Liability of any of Seller or any of its Affiliates or
any ERISA Affiliate of any of the foregoing whether currently in existence or
arising hereafter that is not attributable to, or that does not arise out of the
conduct of, the Business;
(b) any Liability whether presently in existence or arising
hereafter relating to an Excluded Asset;
(c) any Environmental Liability relating to the Business or
the Transferred Assets, whether presently in existence or arising hereafter
except Environmental Liabilities arising out of actions or inaction of Buyer
after the Closing Date (collectively, the "Excluded Environmental Liabilities");
(d) any Liability whether currently in existence or arising
hereafter relating to fees, commissions or expenses owed to any broker, finder,
investment banker, attorney or other intermediary or advisor employed by Seller
or any of its Affiliates or their respective ERISA Affiliates in connection with
the transactions contemplated hereby or otherwise;
(e) any Liability the existence of which constitutes a breach
of any representation or warranty hereunder;
(f) any contingent Liabilities of Seller related to any
transactions by Seller prior to the date hereof except Liabilities that Buyer
has expressly agreed to assume pursuant to the terms of this Agreement;
(g) any Liability related to indebtedness of Seller for
borrowed money or capitalized leases, or the guarantee by Seller of the
indebtedness of any other Person, except as set forth on Schedule 2.04(g);
(h) any Liability of Seller arising under this Agreement;
(i) with respect to Products manufactured on or prior to the
Closing Date, any Liability arising out of, resulting from, or relating to
claims seeking return, replacement, and/or repair of such Products pursuant
either to (1) express product warranties extended by Seller prior to the Closing
Date or by Buyer after the Closing Date (provided that Buyer's warranties are no
more expansive than the warranties extended by Seller prior to the Closing Date)
or (2) product warranties or obligations implied or provided by Applicable Law,
except where such Liability constitutes an Assumed Liability under clause(c) of
Schedule 2.03; and
(j) with respect to Products manufactured on or prior to the
Closing Date, any Liability arising out of, resulting from, or relating to
product liability claims.
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2.05. Assignment of Contracts and Rights.
(a) With respect to any material Contract and any claim, right
or benefit arising thereunder or resulting therefrom that constitute Transferred
Assets, promptly after the date hereof, to the extent requested by Buyer, Seller
will use reasonable efforts to obtain the written consent of the other parties
to any such Contract to the assignment thereof to Buyer or written confirmation
from such parties reasonably satisfactory in form and substance to Buyer
confirming that such consent is not required.
(b) If such consent, waiver or confirmation is not obtained
with respect to any such Contract and notwithstanding the provisions of Section
8.01(c) Buyer elects to consummate the Closing, Seller and Buyer shall cooperate
in an arrangement reasonably satisfactory to Buyer and Seller under which Buyer
would obtain, to the extent practicable, the claims, rights and benefits and
assume the corresponding obligations thereunder in accordance with this
Agreement, including subcontracting, sub-licensing or sub-leasing to Buyer, or
under which Seller would enforce for the benefit of Buyer, with Buyer assuming
Seller's obligations, any and all claims, rights and benefits of Seller against
a third party thereto. Seller will promptly pay to Buyer when received all
monies received by Seller under any Transferred Asset or any claim, right or
benefit arising thereunder not transferred to Buyer pursuant to this Section
2.05(b).
2.06. Closing.
(a) The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Gibson, Dunn &
Crutcher, 200 Park Avenue, New York, New York on February 24, 1997 or such other
date as to which Buyer and Seller may agree (the "Closing Date").
Notwithstanding the foregoing, pursuant to Section 10.01(f) Seller or Buyer may
terminate this Agreement if the Closing shall not have been consummated by the
Outside Date.
(b) At the Closing, Buyer shall pay to Seller $5,960,411,
computed as shown on Schedule 2.06(b), in cash by wire transfer of immediately
available funds to a bank account or bank accounts designated in writing by
Seller prior to the Closing.
(c) Seller shall deliver to Buyer such bills of sale,
certificates of title, endorsements, consents, assignments and other good and
sufficient instruments of conveyance and assignment (which in the case of
Intellectual Property Rights, shall be documents immediately recordable in the
respective countries of origin) of such rights as the parties and their
respective counsel shall deem reasonably necessary or appropriate to vest in
Buyer all of Seller's right, title and interest in, to and under the Transferred
Assets.
2.07. First Anniversary Payments. As part of the Purchase Price,
Buyer shall pay to Seller $841,000, on the first anniversary of the date hereof,
in cash by wire transfer of immediately available funds to a bank account or
bank accounts designated in writing by Seller prior to the due date thereof.
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2.08. 1/31/97 Balance Sheet. Within 30 days after the Closing Date,
Seller will prepare and present to Buyer a balance sheet (the "Proposed 1/31/97
Balance Sheet") setting forth as of January 31, 1997 the book value of the
Transferred Assets and the Assumed Liabilities. The Proposed 1/31/97 Balance
Sheet shall be prepared so that it presents fairly the book value of the
Transferred Assets and Assumed Liabilities in accordance with GAAP (or on a
basis consistent with prior practices of Seller with the disclosure that such
practice is not GAAP) using practices and procedures consistent with the
preparation of the 1995 Balance Sheet. Seller's Auditors shall perform selected
procedures as agreed to by Buyer and Seller with respect to the Proposed 1/31/97
Balance Sheet (the "Agreed Upon Procedures"). Buyer and Buyer's Auditors shall
have the right to review and copy, promptly upon request, the workpapers of
Seller's Auditors (the "Workpapers") utilized in performing the Agreed Upon
Procedures with respect to the Proposed 1/31/97 Balance Sheet. The Proposed
1/31/97 Balance Sheet shall be binding upon the parties to this Agreement unless
Buyer gives written notice of disagreement with any of said values or amounts to
Seller within 15 days after its receipt of the Proposed 1/31/97 Balance Sheet
and the Workpapers, specifying in reasonable detail the nature and extent of
such disagreement. If Buyer and Seller mutually agree upon the Proposed 1/31/97
Balance Sheet within 30 days after Buyer's receipt of notice of disagreement
from Seller, such agreement shall be binding upon the parties to this Agreement.
If Buyer and Seller are unable to resolve any such disagreement within such
period, the disagreement shall be referred for final determination to Price
Waterhouse & Company LLC (the "First Choice") or, if such firm is not available,
such other independent accounting firm of national reputation selected by the
mutual agreement of Buyer and Seller (the "Selected Firm"), and the resolution
of that disagreement and the Proposed 1/31/97 Balance Sheet, as adjusted as a
result of such resolution, shall be final and binding upon the parties hereto
for purposes of this Agreement. If Buyer and Seller cannot agree on the Selected
Firm, it shall be chosen by the First Choice and shall be a nationally
recognized firm. The Proposed 1/31/97 Balance Sheet as finally determined is the
"1/31/97 Balance Sheet."
2.09. Post-Closing Purchase Price Adjustment.
(a) If $6,801,411 is less than the book value of the
Transferred Assets as of January 31, 1997 net of the total amount of the Assumed
Liabilities as of January 31, 1997, as determined from the 1/31/97 Balance Sheet
with applicable adjustments thereto of the type described in Schedule 2.06(b)
plus the sum of $500,000 (the "Net Transferred Asset Value") (such deficit being
referred to herein as the "Unpaid Balance"), then, within five Business Days
after the final determination of the 1/31/97 Balance Sheet, Buyer shall deliver
to Seller such Unpaid Balance in cash in immediately available funds by wire
transfer to a bank account or bank accounts designated in writing by Seller
prior to the due date thereof.
(b) If $6,801,411 is greater than the Net Transferred Asset
Value (such excess being referred to herein as the "Overpayment"), then, within
five Business Days after the final determination of the 1/31/97 Balance Sheet,
Seller shall deliver to Buyer such Overpayment in cash in immediately available
funds by wire transfer to a bank account or bank accounts designated in writing
by Buyer prior to the due date thereof.
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2.10. Accounting Expenses. The fees and disbursements of Seller's
Auditors shall be paid by Seller and the fees and disbursements of Buyer's
Auditors shall be paid by Buyer. The fees and disbursements of the First Choice
or the Selected Firm, as the case may be, shall be paid by Buyer and Seller as
the First Choice or the Selected Firm, as the case may be, shall determine based
upon its assessment of the relative merits of the positions taken by each in any
disagreement presented to such firm.
2.11. Purchase Price Allocation. Within 120 days after the Closing
Date, Buyer and Seller shall agree upon the final allocation of the Purchase
Price among the Transferred Assets for purposes of complying with Section 1060
of the Code and making any required filings under state or local law and shall
set forth such allocation on a statement (the "Allocation Statement"). After the
Closing, from time to time, Buyer and Seller shall agree upon revisions to the
Allocation Statement for tax purposes. Buyer and Seller shall report the tax
consequences of the transactions contemplated by this Agreement in a manner
consistent with the Allocation Statement, as it may be revised from time to
time, and shall not take any position inconsistent therewith.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated herein, Seller represents and warrants
to Buyer as follows:
3.01. Existence and Power.
(a) Seller is a corporation duly organized and validly
existing and in good standing under the laws of the State of Delaware and has
all corporate power and all governmental licenses, authorizations, consents and
approvals required to carry on the Business as now conducted and to own and
operate the Business as now owned and operated, except for those instances
where, in the aggregate, the failure to have such licenses, authorizations,
consents and approvals is not, and is not reasonably expected to have a Material
Adverse Effect. Seller is qualified to conduct business in each jurisdiction
where the nature of its activities in connection with the conduct of the
Business requires it to be so qualified. Seller is in good standing in each
state where it is qualified, except for those jurisdictions where in the
aggregate the failure to be so is not, and is not reasonably expected to have a
Material Adverse Effect.
3.02. Authorization. The execution, delivery and performance by
Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby are within Seller's corporate powers and have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement has been duly and validly executed by Seller and constitutes the
legal, valid and binding agreement of Seller, enforceable against Seller in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to general principles of equity.
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3.03. [Intentionally omitted.]
3.04. Governmental Authorization. The execution, delivery and
performance by Seller of this Agreement require no action by, consent or
approval of, or filing with, any Governmental Authority other than (a)
compliance with any applicable requirements of the HSR Act and (b) any actions,
consents, approvals or filings otherwise expressly referred to in this Agreement
or set forth on Schedule 3.04 or 3.14(b). To the Knowledge of Seller, there are
no facts relating to the identity or circumstances of Seller that would prevent
or materially delay obtaining any of the Required Consents.
3.05. Non-Contravention. The execution, delivery and performance by
Seller of this Agreement do not and will not (a) contravene or conflict with the
Articles of Incorporation or Bylaws of Seller, true and correct copies of which
have been delivered to Buyer by Seller, (b) assuming receipt of the Required
Consents, contravene or conflict with or constitute a violation of any provision
of any Applicable Law binding upon or applicable to Seller, the Business or any
of the Transferred Assets, (c) assuming receipt of the Required Consents,
constitute a default under or give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to which Seller is
entitled under, any material Contract or any Permit or similar authorization
relating to the Business or included in any of the Transferred Assets or by
which any of the Transferred Assets may be bound, or (d) result in the creation
or imposition of any Lien on any Transferred Asset, other than Permitted Liens.
3.06. Financial Statements; Undisclosed Liabilities.
(a) Attached hereto as Exhibit A are true and complete copies
of the unaudited balance sheet of Nice as at December 31, 1995 (the "1995
Balance Sheet") and the related unaudited statements of income and statements of
cash flows and changes in the home-office account for the years ended December
31, 1993, 1994 and 1995 (collectively, the "Annual Financials") and the related
unaudited statements of income and statements of cash flows and changes in the
home-office account for the fiscal quarters ended March 31, June 30, and
September 30, 1996 (collectively, the "Interim Financials and, together with the
Annual Financials, the "Financials").
(b) The Financials (i) have been prepared based on the books
and records of Nice in accordance with the normal accounting practices of Nice
and Seller, consistent with past practice and with each other, and present
fairly the financial condition, results of operations and statements of cash
flow of Nice as of the dates indicated or the periods indicated; and (ii) with
respect to contracts and commitments for the sale of goods or the provision of
services by Nice, contain and reflect adequate reserves for all reasonably
anticipated material losses and costs and expenses in excess of expected
receipts. Any differences between GAAP and Seller's accounting practices, as
well as the estimated magnitude of such impact on the Financials resulting from
such differences, are set forth on Schedule 3.06(b)
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(c) Except as set forth on Schedule 3.06(c), there are no
material Liabilities relating to Nice other than:
(i) any Liability accrued as a Liability on the 1995
Balance Sheet; and
(ii) Liabilities specifically disclosed and identified
as such in the schedules to this Agreement.
3.07. Absence of Certain Changes. Except as set forth on
Schedule 3.07, since the date of the 1995 Balance Sheet, the Business has
been conducted in the ordinary course, and none of the following events has
occurred with respect to the Business:
(a) any event, occurrence, development or state of
circumstances or facts or change in the Transferred Assets or the Business
(including any damage, destruction or other casualty loss, but excluding any
event, occurrence, development or state of circumstances or facts or change
resulting from changes in general economic conditions) affecting the Business or
any Transferred Assets that has had or that may be reasonably expected to have,
either alone or together with all such events, occurrences, developments, states
of circumstances or facts or changes, a Material Adverse Effect;
(b) (i) any incurrence, assumption or guarantee of any
indebtedness for borrowed money by Seller in connection with the Business or any
of the Transferred Assets, (ii) any incurrence of any Liability relating to a
documentary or standby letter of credit by Seller in connection with the
Business or any of the Transferred Assets, or (iii) any change in any Liability
of Nice other than in the ordinary course of business, or (iv) any incurrence of
any other Liability by Seller in connection with the Business or any of the
Transferred Assets, other than in the ordinary course of business;
(c) any creation, assumption or sufferance of the
existence of any Lien on any Transferred Asset, other than Permitted Liens;
(d) any transaction or commitment made, or any Contract
entered into, by Seller (including the acquisition or disposition of any
Transferred Assets), or any waiver, amendment, termination or cancellation of
any Contract by Seller, or any relinquishment of any rights thereunder by
Seller, or of any other right or debt owed to Seller, other than in each such
case actions taken in the ordinary course of business consistent with past
practice;
(e) except for actions taken in the ordinary course of
business consistent with the past practice of Seller that are not, in the
aggregate, material to the Business, any (i) grant of any severance,
continuation or termination pay to any Employee, (ii) entering into of any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any Employee, (iii) increase in benefits
payable or potentially payable under any severance, continuation or termination
pay policies or employment agreements with any Employee, (iv) increase in
compensation, bonus or other benefits payable or potentially payable to any
Employee, (v) change in the terms of any bonus, pension,
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insurance, health or other Benefit Plan of Seller, or (vi) representation of
Seller to any Employee that Buyer would assume, continue to maintain or
implement any Benefit Plan after the Closing Date;
(f) any loan to or guarantee or assumption of any loan or
obligation on behalf of any Employee, except travel advances occurring in the
ordinary course of business consistent with past practice;
(g) any material change by Seller in its accounting
principles, methods or practices or in the manner it keeps its books and records
or any material change by Seller of its current practices with regards to sales,
receivables, payables or accrued expenses that would affect the timing of
collection of receivables or the payment of payables;
(h) the entering into of any Contract or other arrangement
between Seller and any officer, director, stockholder or Affiliate of Seller or
any of their respective Affiliates, to the extent any such Contract or other
arrangement relates to the conduct of the Business; or
(i) any payment, discharge or satisfaction of any Liabilities
of Seller, other than payments, discharges or satisfactions in the ordinary
course of business.
3.08. Properties; Leases; Tangible Assets.
(a) Schedule 3.08(a) sets forth a true and complete list of
all real property owned by Seller in connection with the Business (the "Owned
Real Property) such list setting forth the location of each parcel of Owned Real
Property, the record owner thereof, the acreage and a brief description of the
nature of the activities of Seller on such Owned Real Property. Seller has a
good and valid title to, or in the case of leasehold properties or properties
held under license and identified on Schedule 3.08(a) (the "Leased Real
Property" and, collectively with the Owned Real Property, the "Real Property"),
a good and valid leasehold or license interest in, all of the Real Property,
which constitutes all of the real property used in the Business.
(b) Schedule 3.08(b) sets forth a true and complete list of
all personal property leases or licenses (i) to which Seller is a party or by
which Seller is bound, (ii) that are related to the Business and (iii) that
provide for annual payments by Seller in excess of $10,000 or that contain other
affirmative material obligations that cannot be terminated by Seller within 30
days (the "Personal Property Leases") and all leases or licenses of Leased Real
Property that provide for annual payments by Seller in excess of $10,000 or that
cannot be terminated by Seller within 30 days (the "Real Property Leases" and
collectively with the Personal Property Leases, the "Leases") entered into in
connection with the Business. With respect to the Leases, except as set forth on
Schedule 3.08(b), there exist no defaults by Seller, or, to the Knowledge of
Seller, any default or threatened default by any lessor or third party
thereunder, that has affected or could reasonably be expected to materially
affect the rights and privileges thereunder of Seller. Except as set forth on
Schedule 3.08(b), assuming the Required Consents are obtained,
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all Leases to which a Seller is a party with non-Affiliates or by which it is
bound may be assigned, transferred and conveyed to Buyer without default,
penalty or modification thereof.
(c) Except as disclosed in 3.08(c) or Schedule 3.20(c), Seller
has not received notice of any pending zoning or other land-use regulation
proceedings or any proposed change in any Applicable Laws that could reasonably
be expected to materially and detrimentally affect the use or operation of the
Real Property, nor has Seller received notice of any special assessment
proceedings affecting the Real Property, or applied for any change to the zoning
or land use status of the Real Property.
3.09. Sufficiency of and Title to the Transferred Assets. Seller has
the right to sell, assign, transfer and convey, and upon consummation of the
transactions contemplated by this Agreement, will have sold, assigned,
transferred and conveyed, to Buyer all of the Transferred Assets free and clear
of all Liens, except for Permitted Liens, which Transferred Assets constitute
all of the properties and assets now held or employed by Seller in connection
with the Business (other than the Excluded Assets). Except for the services
performed for Nice by the SKF Shared Services Center, the SKF Data Center and
the SKF Corporate Headquarters Group, all of which have been disclosed to Buyer,
the Business is a going concern, and, with the transfer of the Transferred
Assets to Buyer pursuant to this Agreement, Buyer will have all assets necessary
to operate the Business as a going concern with all operations of the Business
unimpaired in any material respect immediately after the Closing.
3.10. Affiliates. Except as set forth in Schedule 3.10, neither
Seller nor any principal stockholder of Seller or any officers or directors
of Seller (or any immediate family member of any such officer or director):
(a) now has or at any time subsequent to December 31, 1993, had,
either directly or indirectly, an equity or debt interest in any Person which
furnishes or sells or during such period furnished or sold services or products
to Seller relating to Nice or purchases or during such period purchased from
Seller any goods or services relating to Nice, or otherwise does or during such
period did business with Seller relating to Nice of a material nature or amount;
provided, however, that neither Seller, nor any stockholder of Seller nor any of
Seller's officers and directors or other Affiliates shall be deemed to have such
an interest solely by virtue of the ownership of less than five percent (5%) of
the outstanding voting stock or debt securities of any publicly held company,
the stock or debt securities of which are traded on a national stock exchange or
quoted on the National Association of Securities Dealers Automated Quotation
System; or
(b) now is or at any time subsequent to December 31, 1993, was, a
party to any contract, commitment or agreement relating to the Business to which
Seller is or during such period was a party or under which Seller is or was
obligated or bound or to which any of their respective properties may be or may
have been subject, other than through Seller.
3.11. Inventory. Subject to any reserve therefor that is included in
the 1995 Balance Sheet and except as disclosed in Schedule 3.11, the Inventory
(a) has been acquired or manufactured in the ordinary course of business, in
accordance with Seller's normal inventory
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practices; (b) is of a quality usable (including processing into merchantable
finished inventories for sale in the ordinary course of business), free of any
material defect or deficiency in design, material or workmanship; (c) is in
merchantable and undamaged condition and meets customer specifications; and (d)
is not obsolete.
3.12. Litigation. Except as disclosed on Schedule 3.12, (i) there
are no actions, suits, hearings, arbitrations, proceedings (public or private)
or governmental investigations that have been brought by or against any
Governmental Authority or any other Person (collectively, "Proceedings") pending
or, to Seller's Knowledge, threatened, against or affecting the Business or any
of the Transferred Assets or which seek to enjoin or rescind the transactions
contemplated by this Agreement or otherwise prevent Seller from complying with
the terms and provisions of this Agreement; and (ii) there are no existing
orders, judgments or decrees of any Governmental Authority affecting any of the
Transferred Assets or the Business.
3.13. Contracts.
(a) Schedule 3.13(a) sets forth a complete list of the
following contracts, commitments and obligations (whether written or oral) of
Seller that are in connection with the Business (collectively with the Leases
and the Employment Agreements, the "Scheduled Contracts"):
(i) each Contract between Seller and (A) each present or
former Nice Employee, (B) any supplier of services or products to Seller
whose dollar volume of sales to Seller exceeded $25,000 in 1995, and (C)
any Person in which the aggregate payments made or to be made to Seller
under such Contract exceeded $25,000 in 1995;
(ii) each other agreement or arrangement of Seller that
(y) requires the payment or incurrence of Liabilities or the rendering of
services by Seller, subsequent to the date of this Agreement of more than
$25,000 and (z) cannot be terminated by Seller within 30 days;
(iii) all Contracts relating to, and evidences of or
guarantees of, or providing security for, indebtedness for borrowed money
or the deferred purchase price of property (whether incurred, assumed,
guaranteed or secured by any asset);
(iv) all partnership, joint venture or other similar
Contracts, arrangements or agreements;
(v) to the extent that any of the following provide for
annual payments by Seller in excess of $25,000 and cannot be terminated by
Seller within 30 days, all license, distribution, commission, marketing,
agent, franchise, technical assistance or similar agreements relating to
or providing for the marketing and/or sale of the products or services to
which Seller is a party or by which Seller is otherwise bound; and
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(vi) all other contracts, commitments and obligations
that are not in the ordinary course of the Business.
(b) Except as disclosed in Schedule 3.13(b), each Scheduled
Contract and Subsequent Material Contract is a legal, valid and binding
obligation of Seller and, to the Knowledge of Seller, each other party thereto,
enforceable (except to the extent such enforceability may be limited by
bankruptcy, equity and creditors' rights generally) against Seller and, to the
Knowledge of Seller, each such other party in accordance with its terms, and
neither Seller nor, to the Knowledge of Seller, any other party thereto is in
material default or has failed to perform any material obligation thereunder.
Complete and correct copies of each Scheduled Contract have been delivered to
Buyer.
(c) Schedule 3.13(c) sets forth a list (by name, address and
persons to contact) of the 10 largest customers of the Business for each of the
12-month periods ended December 31, 1995 and 1996, and the five primary vendors
providing services to the Business for the 12-month period ended December 31,
1996 together with the approximate dollar amount of sales or services provided
to Seller during said period and a summary description of the services provided
by such vendors.
3.14. Permits; Required Consents.
(a) Schedule 3.14(a) sets forth all material approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities and all other Persons
necessary for the operation of the Transferred Assets or the Business in
substantially the same manner as currently operated or affecting or relating in
any way to the Business (the "Permits").
(b) Schedule 3.14(b) lists (i) each governmental or other
registration, filing, application, notice, transfer, consent, approval, order,
qualification and waiver (each, a "Required Governmental Approval") required
under Applicable Law to be obtained by Seller by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the loss of any material Permit or otherwise, and (ii) each
Scheduled Contract with respect to which the consent of the other party or
parties thereto must be obtained by Seller by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the invalidity of the transfer of such Contract, the termination
thereof, a breach or default thereunder or any other change or modification to
the terms thereof (each, a "Required Contractual Consent" and collectively with
the Required Governmental Approvals, the "Required Consents"). Except as set
forth in Schedule 3.14(a) or (b) each Permit is valid and in full force and
effect in all material respects and, assuming the related Required Consents have
been obtained prior to the Closing Date, are or will be transferable by Seller,
and assuming the related Required Consents have been obtained prior to the
Closing Date, none of the Permits will be terminated or become terminable or
impaired in any material respect as a result of the transactions contemplated
hereby.
3.15. Compliance with Applicable Laws. Except as set forth in
Schedule 3.15, the operation of the Business by Seller and the condition of the
Transferred
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Assets have not violated or infringed, and do not violate or
infringe, any material Applicable Law, or any order, writ, injunction or decree
of any Governmental Authority.
3.16. Employment Agreements; Change in Control; and Employee
Benefits.
(a) Schedule 3.16(a) sets forth all Benefit Plans. Seller has
made true and correct copies of all governing instruments and related agreements
pertaining to such Benefit Plans available to Buyer.
(b) Except as set forth on Schedule 3.16(b) no individual
shall accrue or receive additional benefits, service or accelerated rights to
payments of benefits under any Benefit Plan, including the right to receive any
parachute payment, as defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a direct result of the
transactions contemplated by this Agreement.
(c) No Employee Benefit Plan has participated in, engaged in
or been a party to any non-exempt Prohibited Transaction, and neither Seller nor
any ERISA Affiliates of Seller has pending, or to any of its Knowledge
threatened, against it any claim for taxes under Chapter 43 of Subtitle D of the
Code and Sections 5000 of the Code, or for penalties under ERISA Section 502(c),
(i) or (l), with respect to any Employee Benefit Plan nor, to the Knowledge of
Seller, is there a basis for any such claim. No officer, director or employee of
Seller has committed a material breach of any responsibility or obligation
imposed upon fiduciaries by Title I of ERISA with respect to any Employee
Benefit Plan.
(d) There is no material claim pending or to the Knowledge of
Seller threatened, involving any Benefit Plan by any Person against such plan or
Seller or any ERISA Affiliate with respect to Nice. There is no pending or to
the Knowledge of Seller threatened proceeding involving any Employee Benefit
Plan before the IRS, the United States Department of Labor or any other
Governmental Authority.
(e) Each Benefit Plan has been maintained in all material
respects, by its terms and in operation, in accordance with ERISA and the Code
including, but not limited to, all applicable reporting and disclosure
requirements. Seller and each ERISA Affiliate have made full and timely payment
of all amounts required to be contributed under the terms of each Benefit Plan
and Applicable Law or required to be paid as expenses under such Benefit Plan,
and Seller and each ERISA Affiliate shall continue to do so through the Closing.
(f) With respect to any Group Health Plans maintained by
Seller or its ERISA Affiliates, Seller and its ERISA Affiliates have complied in
all material respects with the provisions of Part 6 Subtitle B of Title I of
ERISA and Section 4980B of the Code. Except as set forth on Schedule 3.16(f),
Seller is not obligated to provide health care benefits of any kind to its
retired employees pursuant to any Employee Benefit Plan, including without
limitation any Group Health Plan, or pursuant to any agreement or understanding.
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3.17. Labor and Employment Matters.
(a) Except as set forth on Schedule 3.17(a), with respect to
the Business, no collective bargaining agreement exists that is binding on
Seller and, except as described on Schedule 3.17(a), no petition has been filed
or proceedings instituted by an employee or group of employees with any labor
relations board seeking recognition of a bargaining representative. Schedule
3.17(a) describes any organizational effort related to the Business currently
being made or, to Seller's Knowledge, threatened by or on behalf of any labor
union to organize any employees of Nice.
(b) Except as set forth on Schedule 3.17(a), with respect to
the Business, (i) there is no labor strike, dispute, slow down or stoppage
pending or, to Seller's Knowledge, threatened against or directly affecting the
Business, (ii) no grievance or arbitration proceeding arising out of or under
any collective bargaining agreement is pending, and no claims therefor exist;
and (iii) neither Seller, nor of its Affiliates has received any notice or has
any Knowledge of any threatened labor or civil rights dispute, controversy or
grievance or any other unfair labor practice proceeding or breach of contract
claim or action with respect to claims of, or obligations to, any employee or
group of employees of Nice.
(c) With respect to the Business, Seller has complied and is
currently complying, in all material respects, in respect of all employees of
Nice, with all Applicable Laws respecting employment and employment practices
and the protection of the health and safety of employees.
(d) With respect to the Business, all individuals who are
performing or have performed services for Seller, or any Affiliate thereof and
are or were classified by Seller or any Affiliate as "independent contractors"
qualify for such classification under Section 530 of the Revenue Act of 1978 or
Section 1706 of the Tax Reform Act of 1986, as applicable, except for such
instances which are not, in the aggregate, material.
(e) Schedule 3.17(e) sets forth all Employees of Nice
receiving or seeking worker's compensation benefits, as well as the following
for each such Employee: (i) brief description of the injury; (ii) weekly
compensation; (iii) estimated benefit period; and (iv) estimate of medical and
other expenses payable.
3.18. Intellectual Property.
(a) Schedule 3.18(a) sets forth a complete and correct list of
each patent, patent application and docketed invention, trademark, trade name,
trademark or trade name registration or application, copyright or copyright
registration or application for copyright registration, and each license or
licensing agreement for any of the foregoing relating to any Transferred Asset
or held by Seller with respect to the Business (the "Intellectual Property
Rights").
(b) Except as disclosed in Schedule 3.18(b), Seller has not
during the three years preceding the date of this Agreement been a party to any
Proceeding, nor to the
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Knowledge of Seller is any Proceeding threatened as to which there is a
reasonable possibility of a determination adverse to Seller that involved or may
involve a claim of infringement by any Person (including any Governmental
Authority) of any Intellectual Property Right. Except as disclosed in Schedule
3.18(b), no Intellectual Property Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof by
Seller, or restricting the licensing thereof by Seller to any Person. The use of
the Intellectual Property Rights does not conflict with, infringe upon or
violate any patent, patent license, patent application, trademark, trade name,
trademark or trade name registration, copyright, copyright registration, service
mark, brand mark or brand name or any pending application relating thereto, or
any trade secret, know-how, programs or processes, or any similar rights, of any
Person.
(c) Except as set forth in Schedule 3.18(c), Seller either
owns the entire right, title and interest in, to and under, or has the legally
enforceable right to use all Transferred Assets.
3.19. Advisory Fees. Except for Rothschild & Company (whose fees and
expenses will be paid by Seller), there is no investment banker, broker, finder
or other intermediary or advisor that has been retained by or is authorized to
act on behalf of Seller or its Affiliates who might be entitled to any fee,
commission or reimbursement of expenses from Buyer or any of its Affiliates upon
consummation of the transactions contemplated by this Agreement.
3.20. Environmental Compliance.
(a) Except as disclosed in Schedule 3.20(a), Seller has
obtained all material approvals, authorizations, certificates, consents,
licenses, orders and permits or other similar authorizations of all Governmental
Authorities, or from any other Person, that are required with respect to the
Business or the Transferred Assets under any Environmental Law. Schedule 3.20(a)
sets forth all permits, licenses and other authorizations issued under any
Environmental Law to Seller relating to the Business or the Transferred Assets.
(b) Except as disclosed in Schedule 3.20(b), Seller is in
compliance in all material respects with all terms and conditions of all
approvals, authorizations, certificates, consents, licenses, orders and permits
or other similar authorizations of all Governmental Authorities (and all other
Persons) required under any Environmental Law that is applicable to the Business
or that relate to the Transferred Assets, and is also in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, requirements, schedules and timetables required or imposed under all
Environmental Laws.
(c) Except as disclosed in Schedule 3.20(c), there are no past
or present events, conditions, circumstances, activities, practices, incidents,
actions, omissions or plans relating to or in any way affecting the Business or
the Transferred Assets that could reasonably be expected to prevent, or make
materially more expensive, continued compliance with any Environmental Law by
Buyer after the Closing, or that may give rise to any Environmental Liability,
or otherwise form the basis of any claim, action, demand, suit, Proceeding,
hearing, study or investigation (i) under any Environmental Law, (ii) based on
or
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related to the manufacture, processing, distribution, use, treatment, storage
(including without limitation underground storage tanks), disposal, transport or
handling, or the emission, discharge, release or threatened release of any
Hazardous Substance, or (iii) resulting from exposure to workplace hazards.
3.21. Tax Matters.
Except as set forth on Schedule 3.21:
(a) Seller has timely filed all Tax Returns required to have
been filed by it, and has paid or accrued all Taxes due to any taxing authority
with respect to all taxable periods ending on or prior to the Closing Date, or
otherwise attributable to all periods prior to the Closing Date; and all such
Tax Returns are true, correct and complete in all respects. Seller is not
currently the beneficiary of any extension of time within which to file any Tax
Return.
(b) Seller has not received notice that the IRS or any other
taxing authority has asserted against Seller any deficiency in Taxes or claim
for additional Taxes in connection with any tax period. Except for liens arising
from Taxes which are due but not yet payable, there are no liens for Taxes on
any of Seller's assets.
(c) Seller has withheld and paid over all Taxes required to
have been withheld and paid over in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party;
and
(d) Seller has not been included in any consolidated, combined
or unitary Tax Return provided for under the laws of the United States, any
state or locality with respect to Taxes for any taxable period for which the
statute of limitations has not expired.
3.22. Insurance. Schedule 3.22 sets forth a complete and correct
list of all material insurance policies of any kind currently in force with
respect to the Business (the "Insurance Policies"), including all "occurrence
based" liability policies regardless of the periods to which they relate.
Schedule 3.22 sets forth for each Insurance Policy the type of coverage, the
name of the insureds, the insurer, the premium, the expiration date, the period
to which it relates, the deductibles and loss retention amounts and the amounts
of coverage.
3.23. Material Disclosures. No statement, representation or warranty
made by Seller in this Agreement or in any certificate, statement, list,
schedule or other document furnished or to be furnished to the Buyer hereunder
contains, or when so furnished will contain, any untrue statement of a material
fact, or fails to state, or when so furnished will fail to state, a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made, not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND RBC
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Buyer and RBC hereby jointly
and severally represent and warrant to Seller that:
4.01. Organization and Existence. Each of Buyer and RBC is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all corporate power and authority to enter
into this Agreement and consummate the transactions contemplated hereby. Each of
Buyer and RBC is duly qualified to do business as a foreign corporation in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary to carry on its
business as now conducted, except for those jurisdictions where the failure to
be so qualified has not been, and may not reasonably be expected to be,
material.
4.02. Corporate Authorization. The execution, delivery and
performance by each of Buyer and RBC of this Agreement and the consummation by
each of Buyer and RBC of the transactions contemplated hereby are within the
corporate powers of each of Buyer and RBC and have been duly authorized by all
necessary corporate action on the part of each of Buyer and RBC. This Agreement
constitutes a legal, valid and binding agreement of each of Buyer and RBC,
enforceable in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and subject to general principles of equity.
4.03. Governmental Authorization. The execution, delivery and
performance by each of Buyer and RBC of this Agreement require no action by,
consent or approval of, or filing with, any Governmental Authority other than as
set forth in this Agreement.
4.04. Non-Contravention. The execution, delivery and performance by
each of Buyer and RBC of this Agreement does not (a) contravene or conflict with
the Certificate of Incorporation or Bylaws of Buyer or RBC, or (b) assuming
compliance with the matters referred to in Section 4.03, contravene or conflict
with or constitute a violation of any provision of any Applicable Law binding
upon or applicable to Buyer or RBC.
4.05. Advisory Fees. Except for Aurora Capital Partners L.P. (whose
fees and expenses will be paid by Buyer), there is no investment banker, broker,
finder or other intermediary or advisor that has been retained by or is
authorized to act on behalf of Buyer or RBC who might be entitled to any fee,
commission or reimbursement of expenses from Seller or any of its Affiliates
upon consummation of the transactions contemplated by this Agreement.
4.06. Litigation. There is no Proceeding pending against, or to the
Knowledge of Buyer or RBC, threatened against or affecting, Buyer or RBC before
any court or arbitrators or any governmental body, agency or official that in
any matter challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
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ARTICLE V
COVENANTS OF SELLER
5.01. Conduct of the Business. From the date hereof until the
Closing Date, Seller shall conduct the Business in the ordinary course and in
substantially the same manner as it has prior to the date of this Agreement and
agrees, with respect to the Business and other than in the ordinary course of
business, not to enter into any material agreements or take any other
significant actions without the prior written consent of Buyer, which shall not
be unreasonably withheld or delayed. Seller shall use its reasonable efforts to
preserve intact the Transferred Assets, the Business and the business
organizations and relationships and goodwill of Seller with third parties and
keep available the services of the present officers, employees, agents and other
personnel of Seller relating to the Business. Without limiting the generality of
this Section 5.01(a) and except as otherwise expressly provided in this
Agreement, from the date hereof until the Closing Date:
(a) Seller will:
(i) (A) maintain the Transferred Assets in the ordinary
course of business consistent with past practice in operating order and at
least the condition in effect as of the date hereof, reasonable wear and
tear excepted, (B) promptly repair, restore or replace any Transferred
Assets in use on the date hereof except Transferred Assets sold in the
ordinary course of business consistent with past practice, (C) upon any
damage, destruction or loss to any of the Transferred Assets, apply any
and all insurance proceeds received with respect thereto to the prompt
repair, replacement and restoration thereof to the condition of the
Transferred Assets before such event, (D) use its reasonable efforts to
obtain, prior to the Closing Date, all Required Consents, and (E) take all
actions necessary to be in compliance with, and to maintain the
effectiveness of, all material Permits;
(ii) comply with all material Applicable Laws;
(iii) promptly notify Buyer in writing of (A) any action,
event, condition or circumstance, or group of actions, events, conditions
or circumstances, that results in, or could reasonably be expected to
result in, a Material Adverse Effect, other than changes in general
economic conditions, (B) the commencement of any Proceeding by or against
Seller, or Seller becoming aware of any threat, claim, action, suit,
inquiry, proceeding, notice of violation, demand letter, subpoena,
government audit or disallowance that could reasonably be expected to
result in a Proceeding, and (C) the occurrence of any breach by Seller of
any representation or warranty, or any covenant or agreement, contained in
this Agreement.
(b) without Buyer's prior consent (which shall not
unreasonably be withheld or delayed), Seller will not and will not agree to:
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(i) purchase or otherwise acquire assets that would
constitute Transferred Assets other than in the ordinary course of the
Business;
(ii) sell, assign, lease, license, transfer or otherwise
dispose of, or mortgage, pledge or encumber (other than with Permitted
Liens), any of the Transferred Assets except (A) pursuant to existing
obligations of Seller as set forth in Schedule 3.08 or (B) in the ordinary
course of the Business;
(iii) enter any agreement or arrangement that requires
or allows payment, acceleration of payment or incurrence of Liabilities
relating to the Business, or the rendering of services by Seller outside
the ordinary course of the Business;
(iv) amend or modify in any material respect or
terminate any Scheduled Contract or any other Contract entered into by
Seller after the date hereof which, if in existence on the date hereof,
would be required to be set forth in the Schedule 3.13(a) as a Scheduled
Contract (each, a "Subsequent Material Contract");
(v) make or commit to make any capital expenditure, or
group of related capital expenditures relating to the Business, in excess
of $25,000, other than (A) capital expenditures set forth on Schedule
5.01(b) and (B) capital expenditures expressly required under any
Scheduled Contract;
(vi) enter into or commit or propose to enter into any
Subsequent Material Contract; and
(vii) (A) increase the rate or terms of compensation
payable or to become payable to any Employee except in the ordinary course
of business, (B) pay or agree to pay any pension, retirement allowance or
other employee benefit to an Employee not provided for by any Employee
Plan, Benefit Arrangement or Employment Agreement set forth in the
Schedules hereto, (C) commit itself to any additional pension, profit
sharing, bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay,
continuation pay, termination pay, retirement or other employee benefit
plan, agreement or arrangement for Employees, or increase the rate or
terms of any Employee Plan or Benefit Arrangement, (D) enter into any
employment agreement with or for the benefit of any Employee, or (E)
increase the rate of compensation under or otherwise change the terms of
any Employment Agreement set forth in Schedule 3.16(a).
5.02. Access to Information. Subject to compliance with Applicable
Laws, from the date hereof until the Closing Date, Seller will promptly: (a)
give Buyer and its counsel, financial advisors, auditors and other authorized
representatives reasonable access to the offices, properties, books and records
relating to the Business and the Transferred Assets upon reasonable prior
notice, (b) furnish to Buyer and its counsel, financial advisors, auditors and
other authorized representatives such information relating to the Business or
the Transferred Assets as Buyer may reasonably request and (c) instruct the
directors, officers, employees, counsel, auditors and financial advisors of
Seller to cooperate with Buyer and its counsel,
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financial advisors, auditors and other authorized representatives in their
investigation of the Business and the Transferred Assets. Such investigation
shall include, but shall not be limited to:
(i) A review of the business and operations of the Business;
(ii) A review of the financial statements and related work
papers and tax returns and any tax audits, other Governmental
Authority audits or internal audits of Seller;
(iii) An environmental review as to the presence and nature of
any hazardous materials in or on any of the Real Property; and
(iv) A standard legal due diligence examination relating to
Seller and the Business.
5.03. Compliance with Terms of Required Governmental Approvals and
Required Contractual Consents. On and after the Closing Date, Seller shall
comply at its own expense with all conditions and requirements affecting Seller
set forth in (a) all Required Governmental Approvals as necessary to keep the
same in full force and effect assuming continued compliance with the terms
thereof by Buyer and (b) all Required Contractual Consents as necessary to keep
the same effective and enforceable against the Persons giving such Required
Contractual Consents assuming continued compliance with the terms thereof by
Buyer.
5.04. Maintenance of Insurance Policies. On and after the date
hereof (including after the Closing Date), Seller shall not take or fail to take
any action if such action or inaction, as the case may be, would adversely
affect the applicability of any insurance in effect on the date hereof that
covers all or any part of the Transferred Assets or the Business with respect to
the period of time ending on the Closing Date. Notwithstanding the foregoing,
Seller shall not have any obligation to make any monetary payment to maintain
the effectiveness of any such insurance policy after the Closing Date.
5.05. Confidentiality.
(a) Seller will, and will cause their representatives to,
treat any data and information obtained with respect to Buyer, RBC or any of
their Affiliates from any representative, officer, director, or employee of
Buyer or RBC, or from any books or records of Buyer or RBC in connection with
this Agreement, confidentially and with commercially reasonable care and
discretion, and will not disclose any such information to third parties;
provided, however, that the foregoing shall not apply to (i) information in the
public domain or that becomes public through disclosure by any party other than
Seller or its Affiliates or representatives, so long as such other party is not
in breach of a confidentiality obligation, (ii) information that may be required
to be disclosed by Applicable Law or (iii) information required to be disclosed
to obtain any Required Consents.
(b) In the event that the Closing fails to take place and this
Agreement is terminated, Seller, upon the written request of Buyer or RBC, will,
and will cause its
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representatives to, promptly deliver to Buyer or RBC any and all documents or
other materials furnished by Buyer or RBC or any of their Affiliates to Seller
in connection with this Agreement without retaining any copy thereof. In the
event of such request, all other documents, whether analyses, compilations or
studies, that contain or otherwise reflect the information furnished by Buyer or
RBC to Seller, shall be destroyed by Seller or shall be returned to Buyer or
RBC, and Seller shall confirm to Buyer in writing that all such materials have
been returned or destroyed. No failure or delay by Buyer or RBC in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege hereunder.
(c) The parties hereto recognize and agree that in the event
of a breach of this Section 5.05, money damages would not be an adequate remedy
to Buyer, RBC or their Affiliates for such breach and, even if money damages
were adequate, it would be impossible to ascertain or measure with any degree of
accuracy the damages sustained therefrom. Accordingly, if there should be a
breach or threatened breach of provisions of this Section 5.05, Buyer, RBC and
their Affiliates shall be entitled to an injunction restraining Seller from any
breach without showing or proving actual damage sustained by Buyer, RBC or their
Affiliates, as the case may be. Nothing in the preceding sentence shall limit or
otherwise affect any remedies that Buyer, RBC and their Affiliates may otherwise
have under Applicable Law.
5.06. Taxes.
(a) All sales, value added and use Taxes imposed in connection
with the sale of the Transferred Assets shall be borne by Buyer. Real property
transfer Taxes imposed in connection with the sale of the Transferred Assets
shall be borne equally by Buyer and Seller.
(b) Seller agrees that no new elections with respect to Taxes
or any changes in current elections with respect to Taxes affecting the
Transferred Assets shall be made after the date of this Agreement without the
prior written consent of Buyer.
(c) The Buyer and Seller shall (i) provide to each other such
assistance as may reasonably be requested in connection with the preparation of
any Tax Return relating to the Business and the conduct of any audit or other
examination by any taxing authority or in connection with judicial or
administrative proceedings relating to any liability for Taxes relating to the
Business, (ii) retain all records or other information that may be relevant to
the preparation of any Tax Returns relating to the Business, or the conduct of
any audit or examination, or other tax proceeding relating to the Business, and
(iii) retain all relevant documents, including prior year's Tax Returns relating
to the Business, supporting work schedules and other records or information that
may be relevant to such returns and shall not destroy or otherwise dispose of
any such records without the prior written consent of the other party.
(d) Seller shall provide Buyer with a FIRPTA certificate or
similar document in order to relieve Buyer of any obligations to withhold any
portion of the Purchase Price.
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(e) Pursuant to Section 1445(b)(2) of the Code, Seller shall
furnish Buyer an affidavit, stating under penalty of perjury Seller's United
States taxpayer identification number and that Seller is not a foreign person.
5.07 Accounts Receivable and Accounts Payable.
(a) From and after the Closing Date, Seller shall (i) pay or
cause to be paid all accounts payable that constitute Assumed Liabilities, to
the extent that Seller receives invoices for such payables, and (ii) collect or
cause to be collected all accounts receivable that constitute Transferred
Assets, to the extent that Seller has sent invoices for such receivables to the
payor. Such payments shall be made in a timely manner and such collections shall
be made in accordance with past practices and in no event in other than a
commercially reasonable manner.
(b) Within three days after the end of each month, Seller
shall deliver to Buyer a statement setting forth the accounts payable paid by
Seller and the accounts receivable collected by Seller during such month
pursuant to Section 5.07(a). If the receivables collected exceed the payables
paid, Seller shall include with the statement a check in the amount of such
excess. If the receivables collected are less than the payables paid, Buyer
shall, within three days after its receipt of the statement, deliver to Seller a
check in the amount of such shortfall.
5.08 Oil/Water Separator Replacement or Repair. Within 45 days of
the Closing Date, Seller shall undertake, at Seller's sole expense, to replace
or repair the oil/water separator located outside the Southeastern wall of the
Nice facility in Kulpsville, Pennsylvania. Such repairs shall be undertaken
pursuant to the repair plan referenced in Schedule 5.08 to this Agreement, which
repair plan has been approved by Buyer. Should the repairs described in the plan
referenced in Schedule 5.08 be inadequate to prevent leakage to the subsurface,
Seller shall, at its sole expense, make additional repairs or, if required,
replace the oil/water separator. Any releases of Hazardous Substances from such
oil/water separator occurring prior to Seller's replacement or repair of this
equipment shall not be considered to have arisen out of "actions or inaction of
Buyer after the Closing Date" for purposes of Section 2.04(c) of this Agreement.
5.09. Supply of Steel from Ovako. Seller covenants and agrees that,
for a period commencing on the Closing Date and ending on the second anniversary
thereof, it will cause its affiliate, Ovako Steel, Inc. ("Ovako"), to continue
to sell to Buyer the types of steel products that Ovako has supplied to Nice
prior to the date hereof on terms and conditions similar to the terms and
conditions governing transactions between Ovako and Seller in respect of such or
similar types of steel that are prevailing at the time such sales transactions
are entered into between Ovako and Buyer.
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ARTICLE VI
COVENANTS OF BUYER AND RBC
6.01. Confidentiality.
(a) Buyer and RBC will, and will cause their representatives
to, treat any data and information obtained with respect to Seller from any
representative, officer, director or employee of Seller, or from any books or
records of Seller in connection with this Agreement, confidentially and with
commercially reasonable care and discretion, and will not disclose any such
information to third parties; provided, however, that the foregoing shall not
apply to (i) information in the public domain or that becomes public through
disclosure by any party other than Buyer or RBC or their Affiliates or
representatives, so long as such other party is not in breach of a
confidentiality obligation, (ii) information that may be acquired to be
disclosed by Applicable Law, (iii) information required to be disclosed to
obtain any Required Consents; (iv) any information that is disclosed by Buyer or
RBC or their Affiliates to any of their actual or prospective lenders or
investors in connection with financing the transactions contemplated by this
Agreement; or (v) any information that is disclosed by Buyer or RBC after the
Closing shall have occurred; provided, however, that in the event the Closing
has occurred, this Section 6.01(a) shall cease to be effective with respect to
any data and information obtained with respect to the Business.
(b) In the event that the Closing fails to take place and this
Agreement is terminated, Buyer and RBC, upon the written request of Seller,
will, and will cause their representatives to, promptly deliver to Seller any
and all documents or other materials furnished by Seller to Buyer or RBC in
connection with this Agreement without retaining any copy thereof. In event of
such request, all other documents, whether analyses, compilations or studies,
that contain or otherwise reflect the information furnished by Seller to Buyer
or RBC, shall be destroyed by Buyer or RBC or shall be returned to Seller, and
Buyer and RBC shall confirm to Seller in writing that all such materials have
been returned or destroyed. No failure or delay by Seller in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
(c) The parties hereto recognize and agree that in the event
of a breach of this Section 6.01, money damages would not be an adequate remedy
to Seller for such breach and, even if money damages were adequate, it would be
impossible to ascertain or measure with any degree of accuracy the damages
sustained by Seller therefrom. Accordingly, if there should be a breach or
threatened breach of provisions of this Section 6.01, Seller shall be entitled
to an injunction restraining Buyer or RBC from any breach without showing or
proving actual damage sustained by Seller. Nothing in the preceding sentence
shall limit or otherwise affect any remedies that Seller may otherwise have
under Applicable Law.
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6.02. Worker's Compensation Reimbursement. Buyer shall reimburse
Seller for any worker's compensation benefits paid by Seller after the Closing
Date to any Nice Employee (a) identified on Schedule 3.17(e) with respect to the
injury set forth on such schedule or (b) with respect to any injury incurred but
not reported as of the Closing Date, provided that Buyer shall have no
obligation to reimburse Seller for (i) the first $1,500,000 of such benefits
paid by Seller after the Closing Date and (ii) any benefits that are not
documented consistent with past practices. In calculating the amount of benefits
paid by Seller pursuant to clause (i) of the preceding sentence, the amount paid
shall be reduced by any reimbursement payments received by Seller from any
insurance. Buyer shall be entitled to receive copies of all documents relating
to all worker's compensation claims that are subject to this Section 6.02.
6.03. Sales and Use Tax Permits. Prior to the Closing, Buyer shall
obtain such sales and use tax permits as are required by Applicable Law and
shall provide Seller with valid sales/use tax exemption certificates covering
the inventory and manufacturing equipment included among the Transferred Assets.
ARTICLE VII
COVENANTS OF ALL PARTIES
7.01. Further Assurances. Subject to the terms and conditions of
this Agreement, each party will use all reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary or
desirable under Applicable Law to consummate the transactions contemplated by
this Agreement. Buyer, RBC and Seller agree to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be reasonably necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
Following the Closing, Buyer shall make the employees and records of Nice
reasonably available to Seller during normal business hours, at no charge to
Seller other than for out of pocket expenses incurred by Buyer for items such as
photocopying or travel, for the purposes of providing accounting information
reasonably required by Seller, providing testimony or information in connection
with any legal proceeding or for any other appropriate purpose arising out of
Seller's ownership and operation of the Business.
7.02. Certain Filings. The parties hereto shall cooperate with one
another in determining whether any action by or in respect of, or filing with,
any Governmental Authority is required or reasonably appropriate, or any action,
consent, approval or waiver from any party to any Contract is required or
reasonably appropriate, in connection with the consummation of the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement, in taking such actions or making any such filings, the parties hereto
shall furnish information required in connection therewith and seek timely to
obtain any such actions, consents, approvals or waivers. Without limiting the
foregoing, the parties hereto shall each promptly complete and file all reports
and forms, and respond to all requests or further requests for additional
information, if any, as may be required or authorized under the HSR Act.
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7.03. Public Announcements. Up to (and including) the Closing Date,
the parties agree that they will not make any disclosure with respect to this
Agreement or the transactions contemplated hereby or cause to be publicized in
any manner whatsoever by way of interviews, responses to questions or inquiries,
press releases or otherwise any aspect of this Agreement or the transactions
contemplated hereby without prior written notice to and approval of the other
parties hereto, unless such party reasonably concludes that such release of
information is required by applicable law or stock exchange regulations, and the
parties hereto cannot reach agreement upon a mutually acceptable form of
release. Notwithstanding the foregoing, the parties hereto may, on a
confidential basis, advise their respective agents, accountants, attorneys and
financing sources with respect to the contents of this Agreement and the
transactions contemplated hereby.
7.04. Administration of Accounts. All payments and reimbursements
made in the ordinary course by any third party in the name of or to Seller or
any Affiliate thereof in connection with or arising out of the Transferred
Assets, the Business or the Assumed Liabilities after the Closing Date shall be
held by Seller or such Affiliate in trust for the benefit of Buyer and,
immediately upon receipt by Seller or any such Affiliate of any such payment or
reimbursement, Seller shall pay, or cause to be paid, over to Buyer the amount
of such payment or reimbursement without right of set off.
7.05. [Intentionally omitted.]
7.06. Bulk Sales Laws. Buyer waives compliance by Seller with the
provisions of (i) Pennsylvania's Department of Revenue Bulk Sales ten-day
written notification requirement and (ii) all applicable provisions of Article 6
of the Uniform Commercial Code as adopted in any state relating to bulk sales.
Seller shall indemnify Buyer for any taxes owed to the Commonwealth of
Pennsylvania arising out of Seller's failure to comply with the notification
requirement referred to in the preceding sentence. It is understood and agreed
that nothing contained in this Section 7.06 is intended to relieve Buyer of its
obligations described in Section 5.06(a).
7.07. Employees and Employee Benefit Matters.
(a) Effective as of the Closing, each employee of the Business
who is actively employed in the Business on the Closing and not on layoff, leave
of absence, workman's compensation leave or any other leave other than normal
vacation will cease to be an employee of Seller and will become an employee of
Buyer ("Transferred Employee"). Seller will neither employ nor offer employment
to any Transferred Employee during the eighteen (18) month period following the
Closing without the prior written consent of Buyer. Any employee of the Business
at the Closing who is not a Transferred Employee at such time by reason of not
being actively employed in the Business will cease to be an employee of Seller
and will become an employee of Buyer effective as of the date he or she returns
to the Business from layoff or leave, as the case may be, and such employee
shall become a Transferred Employee effective as of such date.
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(b) Seller currently maintains the following pension plans
covering employees of the Business: the Pension Plan for Salaried Employees of
SKF USA Inc. (the "Salaried Plan") covering designated salaried and other
employees of Seller, including salaried employees of the Business, and the
Pension Plan for Hourly Employees of SKF USA Inc. ("Seller's Union Plan")
covering hourly employees of the Business who are represented by the Union.
(i) With respect to the Salaried Plan:
(1) Within thirty (30) days after, and effective
as of, the Closing, Seller shall execute such amendments to the Salaried Plan as
are necessary to provide that: (i) any individual, including a Transferred
Employee, who is an employee of the Business immediately prior to the Closing
and who is covered by the Salaried Plan (a "Salaried Plan Employee") shall cease
to be covered by the Salaried Plan as of the Closing except as to benefits
accrued prior to the Closing; and (ii) the accrued benefit under the Salaried
Plan of any Salaried Plan Employee shall become fully vested as of the Closing.
To the extent permitted by law, each Salaried Plan Employee shall be deemed to
have terminated employment with the Seller as of the Closing for purposes of the
Salaried Plan, and the vested accrued benefit of each such Employee shall
thereafter be distributable in accordance with the terms of the Salaried Plan.
(2) There shall be no transfer of assets or
liabilities of the Salaried Plan to any retirement plan maintained by Buyer;
neither Buyer nor any of its affiliates shall become a sponsor of, or otherwise
maintain, the Salaried Plan; and Buyer acknowledges that neither Buyer nor any
of its affiliates shall have any right, title, or interest in any of the assets
of the Salaried Plan.
(ii) With respect to Seller's Union Plan:
(1) Within thirty (30) days after, and effective
as of, the Closing, Seller shall execute such amendments to Seller's Union Plan
as are necessary to provide that any Transferred Employee who is covered by
Seller's Union Plan (a "Union Plan Employee") and any other individual who is an
employee of the Business immediately prior to the Closing and who is covered by
Seller's Union Plan shall cease to be covered by Seller's Union Plan as of the
Closing, except (to the extent required by Section 7.07(b)(ii)(5) or not
inconsistent with Section 7.07(b)(ii)(3)) as to benefits accrued prior to the
Closing.
(2) As soon as practicable after (and no later
than 30 days after), and effective as of, the Closing, Buyer shall establish a
defined benefit pension plan and trust ("Buyer's Union Plan") for the benefit of
the Union Plan Employees, which shall be intended to qualify and to be exempt
from tax under sections 401(a) and 501(a) of the Code, and Buyer shall apply to
the Internal Revenue Service for a determination letter with respect thereto.
Buyer's Union Plan shall cover the Union Plan Employees as of the Closing or, in
the case of any Union Plan Employee who becomes a Transferred Employee after the
Closing by reason of the last sentence of Section 7.07(a), as of the date such
employee becomes a Transferred Employee, and shall provide such participants
with benefits substantially similar to those provided by Seller's Union Plan.
Buyer's Union Plan shall provide the Union Plan
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Employees full credit for eligibility, vesting, and (except with respect to any
of such employees who make the election described in Section 7.07(b)(ii)(5))
benefit accrual purposes with respect to all service with Seller to the extent
such service was credited under the terms of Seller's Union Plan.
(3) As soon as practicable following Seller's
receipt of written evidence of the adoption of Buyer's Union Plan and of a copy
of a favorable determination letter issued by the Internal Revenue Service with
respect to Buyer's Union Plan, and except as otherwise provided in Section
7.07(b)(ii)(5), Seller shall direct the trustees of Seller's Union Plan to
transfer from the trust under Seller's Union Plan to the trust under Buyer's
Union Plan an amount which shall be determined by a certified actuary designated
by the Seller ("Seller's Actuary") and reasonably acceptable to an actuary
designated by the Buyer ("Buyer's Actuary") equal to: (i) the present value of
all accrued benefits, including ancillary benefits, under Seller's Union Plan as
of the Closing with respect to the Union Plan Employees (other than those making
the election described in Section 7.07(b)(ii)(5)); plus (ii) interest accrued
from the Closing to the date of transfer on the amount described in clause (i),
at a rate equal to 7 1/2 percent per annum, from the Closing to the date of
transfer; less (iii) the amount of any benefit payments made to the Union Plan
Employees (other than those making the election described in Section
7.07(b)(ii)(5)) from Seller's Union Plan after the Closing and prior to the date
of the transfer to Buyer's Union Plan, adjusted (as the interest rate described
in clause (ii) above) to reflect the time of such payments, and reasonable
administrative costs and expenses incurred during such period. The calculation
of the present value of the benefits described in clause (i) above shall be
determined using assumptions described on Schedule 7.07(b). Notwithstanding any
other provision in this Section 7.07(b)(ii)(3), the amount of assets to be
transferred pursuant to this Section 7.07(b)(ii)(3), shall satisfy the
requirements of section 414(1) of the Code and section 208 of the Employee
Retirement Income Security Act of 1974.
(4) At the time of transfer of the amount set
forth in Section 7.07(b)(ii)(3) and except as otherwise provided in Section
7.07(b)(ii)(5), Buyer and Buyer's Union Plan shall assume all liabilities for
all accrued benefits, including all ancillary benefits, under Seller's Union
Plan in respect of the Union Plan Employees, and Seller and Seller's Union Plan
shall be relieved of all liabilities for such benefits, including any liability
under any collective bargaining agreement to provide such benefits. Upon the
transfer of assets in accordance with Section 7.07(b)(ii)(3), Buyer agrees to
indemnify and hold harmless Seller, its officers, directors, employees, agents,
and affiliates from and against any and all costs, damages, losses, expenses, or
other liabilities arising out of or related to Buyer's obligations under this
Section 7.07(b)(ii) or Buyer's Union Plan, including benefits accrued by the
Union Plan Employees prior to the Closing which are to be provided by Buyer's
Union Plan; provided, however, that Buyer shall not indemnify or hold harmless
such parties with respect to any costs, damages, losses, expenses, or other
liabilities that result, directly or indirectly, from violations of law by such
parties which occurred prior to the Closing.
(5) Notwithstanding any other provision of this
Section 7.07(b)(ii) to the contrary, there shall be no transfer under this
Section 7.07(b)(ii) of any assets or liabilities with respect to the vested
accrued benefit of any of the Union Plan
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Employees who are eligible for retirement benefits as of the Closing Date under
Seller's Union Plan and who so elect by notifying Seller in writing within 30
days after the Closing. To the extent permitted by Applicable Law, each such
employee shall be deemed to have terminated employment with the Seller as of the
Closing for purposes of Seller's Union Plan, and his vested accrued benefit
shall thereafter be distributable in accordance with the terms of Seller's Union
Plan.
(6) Seller and Buyer shall provide each other with
such records and information as may be necessary or appropriate to carry out
their obligations under this Section 7.07(b)(ii) or for the purposes of
administering Buyer's Union Plan (including, without limitation, schedules of
the Union Plan Employees and their service credits and accrued benefits under
the Seller's Union Plan), and they shall cooperate in the filing of documents
required in connection with the transfer of assets and liabilities described
herein. Notwithstanding anything contained herein to the contrary, no such
transfer shall take place until the 31st day following the filing of any Form
5310-A required in connection therewith.
(c) Seller currently maintains the Pre-Tax Accumulation of
Capital for Employees Plan ("Seller's 401(k) Plan") for its eligible employees,
including eligible employees of the Business. With respect to Seller's 401(k)
Plan:
(i) Within thirty (30) days after, and effective as of,
the Closing, Seller shall execute such amendments to Seller's 401(k) Plan as are
necessary to provide that: (1) any individual, including a Transferred Employee,
who is an employee of the Business immediately prior to the Closing and who is
covered by Seller's 401(k) Plan (a "401(k) Plan Employee") shall cease to be
covered by Seller's 401(k) Plan as of the Closing except as to benefits accrued
with respect to periods prior to the Closing; and (2) the accrued benefit under
Seller's 401(k) Plan of any 401(k) Plan Employee shall, to the extent permitted
by Applicable Law, be distributable to such employee after the Closing in
accordance with Code section 401(k)(10) and Treas. Reg. ss.ss.
1.401(k)-1(d)(1)(iv) and 1.401(k)-1(d)(4).
(ii) Buyer's 401(k) Plan shall accept a direct
rollover of any amount distributable from Seller's 401(k) Plan to any 401(k)
Plan Employee who becomes an employee of Buyer at or after the Closing and who
elects to have such direct rollover made in accordance with the provisions of
Seller's 401(k) Plan and applicable law.
(iii) Except as otherwise specifically provided in
this Section 7.07(c), there shall be no transfer of assets or liabilities of
Seller's 401(k) Plan to any retirement plan maintained by Buyer; neither Buyer
nor any of its affiliates shall become a sponsor of, or otherwise maintain,
Seller's 401(k) Plan; and Buyer acknowledges that neither Buyer nor any of its
affiliates shall have any right, title, or interest in any of the assets of
Seller's 401(k) Plan.
(d) Seller will provide former salaried and hourly employees
of the Business who retire prior to the Closing with medical benefit coverage
under Seller's applicable retiree medical benefit plans, which plan shall be the
secondary payor with respect to any plan,
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arrangement, or agreement under which such an individual may be covered pursuant
to Section 7.07(e)(ii), 7.07(f)(ii), or 7.07(f)(iii).
(e) With respect to salaried employees of the Business:
(i) As of the Closing, Buyer will provide salaried
Transferred Employees (other than those described in Section 7.07(d)) with
medical benefit coverage under Buyer's standard medical benefit plan for its
salaried employees; provided that after the Closing, Buyer shall otherwise have
no obligation to provide such employees with any level of medical benefit
coverage.
(ii) Buyer will not provide medical benefit coverage to
any salaried employee of the Business described in Section 7.07(d) who has again
become an employee of the Business at or after the Closing except as
specifically provided by agreement between Buyer and such employee.
(f) With respect to hourly employees of the Business:
(i) As of the Closing, Buyer will provide hourly
Transferred Employees (other than those described in Section 7.07(d)) with
medical benefit coverage pursuant to the terms of the Union Contract under a
medical benefit plan or plans established or maintained by Buyer.
(ii) Buyer will provide an hourly employee of the
Business described in Section 7.07(d) who has again become an employee of the
Business at or after the Closing with medical benefit coverage pursuant to the
terms of the Union Contract (subject to any modification thereof as agreed to by
Buyer and the Union).
(iii) Buyer will provide hourly Transferred Employees
who retire at or after the Closing with retiree medical benefit coverage
pursuant to the terms of the union contract applicable to such hourly employees
at the time of their retirement under a retiree medical benefit plan or plans
established or maintained by Buyer. The amount of Seller's liability for such
coverage attributable to the period prior to the Closing (which amount shall
reduce the purchase price under this Agreement) shall be $226,496.
(g) Except as otherwise specifically provided in this
Sections 7.07(d)-(f), each party reserves the right to change its employee and
retiree medical benefits plans in the future when and as it deems appropriate.
(h) Seller will provide former employees of the Business who
retire prior to the Closing with life insurance coverage under Seller's retiree
life insurance benefit plans.
(i) As of the Closing, Buyer will provide salaried
Transferred Employees with coverage under Buyer's standard life insurance
benefit plans for its salaried
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employees; provided that after the Closing, Buyer shall otherwise have no
obligation to provide such employees with any level of life insurance benefits.
(j) Buyer will provide hourly Transferred Employees with life
insurance coverage pursuant to the terms of the Union Contract under a life
insurance plan or plans established or maintained by Buyer.
(k) Except as otherwise provided in Sections 7.07(h)-(j),
each party reserves the right to change its employee and retiree life insurance
plans in the future when and as it seems appropriate.
(l) As of the Closing, Buyer will provide salaried
Transferred Employees with coverage under Buyer's standard vacation benefit plan
for its salaried employees (provided that the eligibility for vacation benefits
shall be determined solely under the terms of Buyer's vacation benefit plan for
such employees). Seller will have no obligation to make any payment to such
employees after the Closing with respect to any vacation pay entitlement.
(m) As of the Closing, Buyer will assume all obligations of
Seller to hourly Transferred Employees for accrued vacation under the Union
Contract. Seller will have no obligation to make any payment to such employees
after the Closing with respect to any vacation pay entitlement.
(n) Seller will bear the entire cost and expense of any
severance payments payable under the terms of any applicable severance plan
maintained by Seller to employees of the Business whose employment with the
Business is terminated by Seller before the Closing even if such employees
thereafter become employees of Buyer. Buyer will bear the entire cost and
expense of severance payments payable to employees of the Business whose
employment with the Business is terminated by Buyer at or after the Closing, and
such payments are to be paid and determined solely in accordance with Buyer's
severance plan or policy.
(o) Between the date hereof and the Closing, the parties will
negotiate in good faith their respective obligations to employees of the
Business under other employee benefit plans maintained by Seller and by Buyer.
7.08. Trademark License.
(a) Grant. Buyer hereby grants to Seller the exclusive and
nontransferable right and license to use the trademark "NICE" (the "Trademark")
in all countries of the world except the United States, Canada and Mexico (the
"Territory") in connection with the manufacture, use and sale of antifriction
bearings (the "Goods").
(b) Term. The license granted shall remain in full force until
the termination or expiration of the Sales and Supply Agreement referred to in
Section 8.01(g).
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(c) Extent of License. The right granted in Section 7.08(a)
shall not be transferable without the consent of Buyer, provided, however, that
Seller shall have the right to use the Trademark and to sublicense its use to
Seller's affiliates in the Territory.
(d) Maintenance of Trademark. Buyer shall have no obligation
to register or maintain the Trademark in the Territory.
(e) Indemnity. Except for Goods manufactured by or for Buyer
and sold to Seller pursuant to the Sales and Supply Agreement referred to in
Section 8.01(g), which shall be governed by the terms of such agreement, Buyer
assumes no liability to Seller or to third parties with respect to the
performance characteristics of the Goods manufactured or sold by Seller under
the Trademark or arising out of the use of the Trademark in the Territory and
Seller hereby indemnifies and holds harmless Buyer against all losses, damage
and expenses, including attorneys' fees, incurred as a result of or related to
claims arising out of the manufacture or sale of the Goods or the use of the
Trademark (including, without limitation, any losses, damages and expenses that
Buyer may incur in connection with any claims that the Trademark infringes
another trademark in the Territory).
(f) Seller acknowledges Buyer's exclusive right, title, and
interest in and to the Trademark and will not at any time do or cause to be done
any act contesting or in any way impairing or tending to impair any part of such
title, title and interest. Upon termination or expiration of the Sales and
Supply Agreement, Seller will cease and desist from all use of the Trademark in
any way. Buyer reserves the right, for itself and its affiliates, to use the
Trademark both inside and outside the Territory.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions contemplated hereby is subject to the satisfaction
of each of the following conditions:
(a) (i) Seller shall have performed and satisfied in all
material respects each of its material obligations hereunder required to be
performed and satisfied by it on or prior to the Closing Date, (ii) each of the
representations and warranties of Seller contained in this Agreement shall have
been true and correct in all material respects when made and shall contain no
misstatement or omission that would make any such representation or warranty
materially misleading when made and shall be true and correct in all material
respects, and shall not contain any misstatement or omission that would make any
such representation or warranty materially misleading, at and as of the Closing
Date with the same force and effect as if made as of the Closing Date and (iii)
Buyer shall have received certificates signed by a duly authorized executive
officer of Seller to the foregoing effect and to the effect that to the
Knowledge of such officer the conditions specified within this Section 8.01 have
been satisfied.
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(b) All material Required Governmental Approvals for the
transactions contemplated by this Agreement shall have been obtained without the
imposition of any conditions that are or would become applicable to the
Business, the Transferred Assets or Buyer (or any of its Affiliates) after the
Closing that Buyer in good faith reasonably determines would be materially
burdensome upon the Business, the Transferred Assets or Buyer (or any of its
Affiliates) or their respective businesses substantially as such businesses have
been conducted prior to the Closing Date or as said businesses, as of the date
hereof, would be reasonably expected to be conducted after the Closing Date. All
such Required Governmental Approvals shall be in effect, and no Proceedings
shall have been instituted or threatened by any Governmental Authority with
respect thereto as to which, in Buyer's good faith opinion, there is a material
risk of a determination that would terminate the effectiveness of, or otherwise
materially and adversely modify the terms of, any such Required Governmental
Approval; all applicable waiting periods with respect to such Required
Governmental Approvals shall have expired; and all conditions and requirements
prescribed by Applicable Law or by such Required Governmental Approvals to be
satisfied on or prior to the Closing Date shall have been satisfied to the
extent necessary such that all such Required Governmental Approvals are, and
will remain, in full force and effect assuming continued compliance with the
terms thereof after the Closing.
(c) All material Required Contractual Consents shall have been
obtained without the imposition of any conditions that are or would become
applicable to the Business, the Transferred Assets, Buyer or any of its
Affiliates after the Closing that Buyer in good faith determines would be
materially burdensome upon the Business, the Transferred Assets, Buyer or any of
its Affiliates or their respective businesses substantially as such businesses
have been conducted prior to the Closing Date or as said businesses, as of the
date hereof, would be reasonably expected to be conducted after the Closing
Date. All such Required Contractual Consents (and with respect to the Subsequent
Material Contracts, such other consents as may be required) shall be in effect.
All conditions and requirements prescribed by any Required Contractual Consent
(or any such other consent) to be satisfied on or prior to the Closing Date
shall have been satisfied to the extent necessary such that all such Required
Contractual Consents (and all such other consents) are effective and
enforceable, and will remain effective and enforceable against the Persons
giving such Required Contractual Consents (and such other consents) assuming
continued compliance with the terms thereof.
(d) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any material Applicable Law. No
temporary restraining order, preliminary or permanent injunction, cease and
desist order or other order issued by any court of competent jurisdiction or any
competent Governmental Authority or any other legal restraint or prohibition
preventing the transfer and exchange contemplated hereby or the consummation of
the Closing, or imposing Damages in respect thereto, shall be in effect, and
there shall be no pending or threatened actions or proceedings by any
Governmental Authority (or determinations by any Governmental Authority) or by
any other Person (i) challenging or in any manner seeking to restrict or
prohibit the transfer and exchange contemplated hereby or the consummation of
the Closing, or to impose conditions that Buyer in good faith determines would
be materially burdensome upon the Business, the Transferred Assets, Buyer or any
of its
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Affiliates or their respective businesses substantially as such businesses have
been conducted prior to the Closing Date or as said businesses, as of the date
hereof, would be reasonably expected to be conducted after the Closing Date.
(e) Since the date hereof, there shall not have been any
event, occurrence, development or state of circumstances or facts or change in
the Transferred Assets or the Business (including any damage, destruction or
other casualty loss, but excluding any event, occurrence, development or state
of circumstances or facts or change resulting from changes in general economic
conditions) affecting the Business or any Transferred Asset that has had or that
may be reasonably expected to have, either alone or together with all such
events, occurrences, developments, states of circumstances or facts or changes,
a Material Adverse Effect.
(f) Seller shall have executed and delivered to Buyer a Sales
and Supply Agreement in the form attached hereto as Exhibit B.
(g) Seller shall have executed and delivered to Buyer an
Interim Services Agreement in the form attached as Exhibit C.
(h) Buyer shall have received an opinion of counsel from Allen
G. Belenson, Esq. in the form attached hereto as Exhibit D.
(i) Buyer shall be reasonably satisfied that there has been no
material degradation of the Transferred Assets since the completion by Buyer of
its inspection of the Transferred Assets.
(j) Buyer shall have completed its customary due diligence as
contemplated by Section 5.02 and Buyer shall be satisfied, in its reasonable
judgment, with both the quantity and the substance of the information provided
to it.
(k) Seller shall have executed and delivered a bill of sale,
grant deed and such other documents of assignment, transfer and conveyance as
Buyer shall reasonably request to transfer all right, title and interest of
Seller in and to the Transferred Assets to Buyer.
8.02. Conditions to Obligation of Seller. The obligation of
Seller to consummate the transactions contemplated hereby is subject to the
satisfaction of each of the following conditions:
(a) (i) Buyer shall have performed and satisfied in all
material respects each of its material obligations hereunder required to be
performed and satisfied by it on or prior to the Closing Date, and the aggregate
effect of all failures to perform or satisfy all obligations of Buyer on or
prior to the Closing Date shall not be materially adverse to Seller; (ii) the
representations and warranties of Buyer contained in this Agreement shall be
true, complete and accurate in all material respects at and as of the Closing
Date, as if made at and as of such date and (iii) Seller shall have received a
certificate signed by a duly authorized executive officer of
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Buyer to the foregoing effect and to the effect that to such officer's Knowledge
the conditions specified within this Section 8.02 have been satisfied.
(b) All material Required Governmental Approvals for the
transactions contemplated by this Agreement shall have been obtained without the
imposition of any conditions that are or would become applicable to Seller or
any of its Affiliates after the Closing that Seller in good faith reasonably
determines would be materially burdensome upon such Person. All such Required
Governmental Approvals shall be in effect, and no Proceedings shall have been
instituted or threatened by any Governmental Authority with respect thereto as
to which, in Seller's good faith opinion, there is a material risk of a
determination that would terminate the effectiveness of, or otherwise materially
and adversely modify the terms of, any such Required Governmental Approval. All
applicable waiting periods with respect to such Required Governmental Approvals
shall have expired, and all conditions and requirements prescribed by Applicable
Law or by such Required Governmental Approvals to be satisfied on or prior to
the Closing Date shall have been satisfied to the extent necessary such that all
such Required Governmental Approvals are, and will remain, in full force and
effect assuming continued compliance with the terms thereof after the Closing.
(c) All material Required Contractual Consents shall have been
obtained without the imposition of any conditions that are or would become
applicable to Seller. All such Required Contractual Consents (and with respect
to the Subsequent Material Contracts, such other consents) shall be in effect,
and no Proceeding shall have been instituted or threatened with respect thereto
that, in Seller's good faith judgment, creates a material risk that any material
Liability will be imposed on Seller. All conditions and requirements prescribed
by any such Required Contractual Consent (or any such other consent) to be
satisfied on or prior to the Closing Date shall have been satisfied to the
extent necessary such that no material Liability will be imposed on Seller.
(d) The sale and transfer contemplated by this Agreement and
the consummation of the Closing shall not violate any Applicable Law. No
temporary restraining order, preliminary or permanent injunction, cease and
desist order or other order issued by any court of competent jurisdiction or any
competent Governmental Authority or any other legal restraint or prohibition
preventing the transfer and exchange contemplated hereby or the consummation of
the Closing, or imposing Damages in respect thereto, shall be in effect, and
there shall be no pending or threatened actions or proceedings by any
Governmental Authority (or determinations by any Governmental Authority) or by
any other Person challenging or in any manner seeking to restrict or prohibit
the transfer and exchange contemplated hereby or the consummation of the
Closing.
(e) Seller shall have received an opinion of counsel from
Gibson, Dunn & Crutcher LLP in the form attached hereto as Exhibit E.
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ARTICLE IX
INDEMNIFICATION
9.01. Agreement to Indemnify.
(a) Subject to the limitations provided herein, Buyer, RBC and
their Affiliates (collectively, the "Buyer Indemnitees") shall each be
indemnified and held harmless to the extent set forth in this Article IX by
Seller in respect of any Damages reasonably and proximately incurred by any
Buyer Indemnitee (i) as a result of any inaccuracy or misrepresentation in or
breach of or failure to perform any representation, warranty, covenant,
agreement or obligation of Seller in this Agreement or (ii) in connection with
any Excluded Liability, provided that in connection with any Environmental
Liability, Buyer Indemnitees shall include any party acquiring title directly
from Buyer of some or all of that portion of the Owned Real Property consisting
of unimproved land located on the Gehman Road side of the existing factory
facility. Notwithstanding the foregoing, Seller shall not be liable as an
Indemnifying Party until all claims by the Buyer Indemnitees for indemnification
exceed $100,000 in the aggregate, and thereafter Seller shall be liable, subject
to the other limitations provided for elsewhere in this Agreement, for all
indemnification claims arising after the Closing Date; provided, however, that
Seller shall be liable, subject to the other limitations provided for elsewhere
in this Agreement, for all claims by the Buyer Indemnitees, regardless of
amount, arising out of (i) the fraud or willful misconduct of Seller or (ii) any
Lien that does not constitute a Permitted Lien. The aggregate liability of
Seller collectively under this Section 9.01(a) of this Agreement shall not
exceed $3,000,000, provided, however, that there shall be no limit on the
aggregate liability of Seller for Damages incurred by Buyer in connection with:
(1) Seller's fraud or willful misconduct; or (2) any Environmental Liability.
(b) Seller and its Affiliates (collectively the "Seller
Indemnitees") shall each be indemnified and held harmless to the extent set
forth in this Article IX by Buyer and RBC in respect of any and all Damages
reasonably and proximately incurred by any Seller Indemnitee as a result of (i)
any inaccuracy or misrepresentation in or breach of or failure to perform any
representation, warranty, covenant, agreement or obligation of Buyer or RBC in
this Agreement, (ii) failure of Buyer or RBC to pay and discharge the Assumed
Liabilities or (iii) conduct of the Business after the Closing.
9.02. Survival of Representations and Warranties and Covenants.
(a) The representations and warranties contained in this
Agreement shall survive as follows:
(i) Except as otherwise provided in Section 9.02(a)(ii),
(iii) or (iv), all representations and warranties shall expire on the
first anniversary of the Closing Date.
(ii) Notwithstanding Section 9.02(a)(i) the
representations and warranties of Seller as an Indemnifying Party shall
survive the Closing Date until the
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expiration of any applicable statute of limitations, including extensions
thereof, with respect to: (1) the inaccuracy or misrepresentation in or
breach of any representation or warranty made by Seller in this Agreement
arising out of fraud or willful misconduct; and (2) any inaccuracy or
misrepresentation in or breach of any representation or warranty made in
Sections 3.15, 3.20 and 3.21 regardless of whether such inaccuracy or
misrepresentation or breach arises out of fraud or willful misconduct.
(iii) Notwithstanding Section 9.02(a)(i), the
representations and warranties of Buyer and RBC as Indemnifying Parties
shall survive the Closing Date until the expiration of the applicable
statute of limitations, including extensions thereof, with respect to any
inaccuracy or misrepresentation in or breach of any representation or
warranty made by Buyer or RBC in this Agreement arising out of fraud or
willful misconduct.
(iv) Notwithstanding Section 9.02(a)(i), the
representations and warranties of Seller set forth in Sections 3.01, 3.02,
3.04, 3.05, 3.09, 3.12 and 3.14 shall survive without expiration.
Any cause of action for breach of a representation or warranty contained herein
shall expire and terminate unless the party claiming that such breach occurred
delivers to the other party written notice and a reasonably detailed explanation
of the alleged breach on or before 5:00 P.M., eastern time, on the date on which
such representation or warranty expires pursuant to this Section 9.02(a).
(b) The covenants contained in this Agreement shall survive
without expiration unless otherwise expressly provided in such covenant.
9.03. Claims for Indemnification. If any Indemnitee shall believe
that such Indemnitee is entitled to indemnification pursuant to this Article IX
in respect of any Damages, such Indemnitee shall give the appropriate
Indemnifying Party prompt written notice thereof. Any such notice shall set
forth in reasonable detail and to the extent then known the basis for such claim
for indemnification. The failure of such Indemnitee to give notice of any claim
for indemnification promptly shall not adversely affect such Indemnitee's right
to indemnity hereunder except to the extent that such failure materially
adversely affects the right of the Indemnifying Party to assert any reasonable
defense to such claim. Each such claim for indemnity shall expressly state that
the Indemnifying Party shall have only the ten (10) Business Day period referred
to in the next sentence to dispute or deny such claim. The Indemnifying Party
shall have ten (10) Business Days following its receipt of such notice either
(a) to acquiesce in such claim by giving such Indemnitee written notice of such
acquiescence or (b) to object to the claim by giving such Indemnitee written
notice of the objection. If the Indemnifying Party does not object thereto
within such ten (10) Business Day period, such Indemnitee shall be entitled to
be indemnified for all Damages reasonably and proximately incurred by such
Indemnitee in respect of such claim. If the Indemnifying Party objects to such
claim in a timely manner, and such Indemnitee and the Indemnifying Party are
unable to resolve their dispute within ten (10) Business Days following such
objection (or such additional period
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of time as may be mutually agreed to by such Persons), the claim shall be
submitted immediately to arbitration pursuant to Section 11.12.
9.04. Defense of Claims.
(a) In connection with any claim which may give rise to
indemnity under this Article IX resulting from or arising out of any claim or
Proceeding against an Indemnitee by a Person that is not a party hereto, the
Indemnifying Party may, subject to Section 9.04(b), assume the defense of any
such claim or Proceeding (unless such Indemnitee elects not to seek indemnity
hereunder for such claim), upon written notice to the relevant Indemnitee, if
all Indemnifying Parties with respect to such claim or Proceeding jointly
acknowledge to the Indemnitee its right to indemnity pursuant hereto in respect
of the entirety of such claim (as such claim may have been modified through
written agreement of the parties or arbitration hereunder) and provides
assurances, reasonably satisfactory to such Indemnitee, that the Indemnifying
Parties will be financially able to satisfy such claim in full if such claim or
Proceeding is decided adversely. If the Indemnifying Parties assume the defense
of any such claim or Proceeding, the Indemnifying Parties shall select counsel
reasonably acceptable to such Indemnitee to conduct the defense of such claim or
Proceeding, shall take all steps necessary in the defense or settlement thereof
and shall at all times diligently and promptly pursue the resolution thereof. If
the Indemnifying Parties shall have assumed the defense of any claim or
Proceeding in accordance with this Section 9.04, the Indemnifying Parties shall
be authorized to consent to a settlement of, or the entry of any judgment
arising from, any such claim or Proceeding, without the prior written consent of
such Indemnitee; provided, however, that the Indemnifying Parties shall pay or
cause to be paid all amounts arising out of such settlement or judgment
concurrently with the effectiveness thereof; provided, further, that the
Indemnifying Parties shall not be authorized to encumber any of the assets of
any Indemnitee or to agree to any restriction that would apply to any Indemnitee
or to its conduct of business; and provided, further, that a condition to any
such settlement shall be a complete release of such Indemnitee and its
Affiliates, officers, employees, consultants and agents with respect to such
claim. Subject to Section 9.04(b), such Indemnitee shall be entitled to
participate in (but not control) the defense of any such action, with its own
counsel and at its own expense and the Indemnifying Parties shall provide such
Indemnitee with reasonable access to all materials relating to the defense of
the action and otherwise cooperate with such Indemnitee and its counsel in
connection with the Indemnitee's participation in such defense. Each Indemnitee
shall, and shall cause each of its Affiliates, officers, employees, consultants
and agents to, cooperate fully with the Indemnifying Parties in the defense of
any claim or Proceeding being defended by the Indemnifying Parties pursuant to
this Section 9.04. If the Indemnifying Parties do not assume the defense of any
claim or Proceeding resulting therefrom in accordance with the terms of this
Section 9.04(a), such Indemnitee may defend against such claim or Proceeding.
(b) Notwithstanding Section 9.04(a), the Indemnifying Parties
may not assume the defense of any claim or Proceeding and the Indemnitee may at
its own cost and expense assume such defense if, in the reasonable opinion of
the Indemnitee, (i) such claim or Proceeding involves an issue or matter that,
if determined adversely to the Indemnitee, is likely to have a material adverse
effect on the business, operations, assets, properties or prospects of
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the Indemnitee, or (ii) there is one or more legal defenses available to the
Indemnitee that conflict with those available to an Indemnifying Party. If the
Indemnitee assumes defense of any such claim or Proceeding, (A) the Indemnifying
Parties may participate in, but not control, the defense of such claim or
Proceeding, and (B) if the Indemnitee receives a settlement proposal from the
Person asserting such claim or instituting such Proceeding and is notified by an
Indemnifying Party that such Indemnifying Party wants to accept such settlement
proposal, the liability of the Indemnifying Parties with respect to such claim
or Proceeding shall equal the lesser of (x) the amount offered in such
settlement proposal, (y) the amount of actual Damages of the Indemnitee with
respect to such claim or Proceeding or (z) the maximum liability of the
Indemnifying Parties pursuant to Section 9.01(a).
(c) If the Indemnitee elects to defend any claim or Proceeding
pursuant to the last sentence of Section 9.04(a) or pursuant to Section 9.04(b),
the Indemnitee shall conduct such defense in such manner as it shall deem
appropriate, including settling such claim or Proceeding after giving notice of
the same to the Indemnifying Parties, on such terms as such Indemnitee shall
deem appropriate. If the Indemnifying Parties seek to question the manner in
which such Indemnitee defended such claim or Proceeding or the amount of or
nature of any such settlement, the Indemnifying Parties shall have the burden to
prove by a preponderance of the evidence that such Indemnitee did not defend
such claim or Proceeding in a reasonably prudent manner.
ARTICLE X
TERMINATION
10.01. Grounds for Termination.
(a) This Agreement may be terminated at any time prior to the
Closing under the following circumstances:
(i) by mutual written agreement of all of the parties
hereto;
(ii) by either party if the other party has breached any
of its representations or warranties contained herein or materially
defaulted in the performance of any of its covenants or agreements
contained herein and such breach or default is not curable prior to the
Outside Date;
(iii) by Buyer or by Seller, if the Closing shall not
have been consummated by February 28, 1997 (the "Outside Date"); provided,
however, that neither Buyer nor Seller may terminate this Agreement
pursuant to this Section 10.01(a)(iii) if the Closing shall not have been
consummated within such time period by reason of the failure of such party
or any of its Affiliates to perform in all material respects any of its or
their respective covenants or agreements contained in this Agreement.
The party desiring to terminate this Agreement pursuant to Section 10.01(a)(ii)
or (iii) shall give written notice of such termination to the other party.
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(b) This Agreement shall automatically terminate if any
Federal, state or foreign law or regulation thereunder shall hereafter be
enacted or become applicable that makes the transactions contemplated hereby or
the consummation of the Closing illegal or otherwise prohibited, or if any
judgment, injunction, order or decree enjoining either party hereto from
consummating the transactions contemplated hereby is entered, and such judgment,
injunction, order or decree shall become final and nonappealable.
10.02. Effect of Termination. If this Agreement is terminated as
permitted by Section 10.01, such termination shall be without liability of any
party to any other party to this Agreement; provided, however, that if such
termination shall result from the breach by any party of its representations,
warranties or covenants contained in this Agreement, such party shall be fully
liable for any and all Damages incurred or suffered by the other parties as a
result of such failure or breach notwithstanding such termination. The
provisions of Sections 5.05, 6.01, 10.02, 11.03, 11.05 11.07, 11.08, 11.10,
11.11 and 11.13 shall survive any termination of this Agreement pursuant to this
Article X.
ARTICLE XI
MISCELLANEOUS
11.01. Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) if
personally delivered, when so delivered, (ii) if mailed, two Business Days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below,
(iii) if given by telex or telecopier, once such notice or other communication
is transmitted to the telex or telecopier number specified below and the
appropriate answer back or telephonic confirmation is received, provided that
such notice or other communication is promptly thereafter mailed in accordance
with the provisions of clause (ii) above or (iv) if sent through an overnight
delivery service in circumstances to which such service guarantees next day
delivery, the day following being so sent:
If to Seller:
SKF USA Inc.
1100 First Avenue
King of Prussia, PA 19406
Attn: President
Telecopier No.: (610) 265-0404
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with a copy to:
SKF USA Inc.
1100 First Avenue
King of Prussia, PA 19406
Attn: Secretary and General Counsel
Telecopier No.: (610) 265-0404
If to Buyer:
RBC Nice Bearings, Inc.
c/o Roller Bearing Company of America
60 Round Hill Road
Fairfield, Connecticut 06430
Attn: Michael Gostomski
Telecopier No: (203) 256-0775
with a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue, Suite 5018
Los Angeles, California 90071
Attn: Bruce D. Meyer, Esq.
Telecopier No: 213-229-7520
Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
individual for whom it is intended. Any party may change the address to which
notices, requests, demands, claims and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
11.02. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the case
of an amendment, by all parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No waiver by a party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent occurrence. No failure or delay by a party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further
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exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
11.03. Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
11.04. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. No party hereto may assign either this Agreement or any
of its rights, interests or obligations hereunder without the prior written
approval of each other party, which approval shall not be unreasonably withheld.
11.05. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws (without reference to choice
or conflict of laws) of the Commonwealth of Pennsylvania.
11.06. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other parties hereto.
11.07. Entire Agreement. This Agreement (including the Schedules and
Exhibits referred to herein which are hereby incorporated by reference)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
11.08. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
11.09. Severability. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.
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11.10. Construction.
(a) 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 shall be applied against either party. Any reference
to any Applicable Law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. Whenever required
by the context, any gender shall include any other gender, the singular shall
include the plural and the plural shall include the singular. The words
"herein," "hereof," "hereunder," and words of similar import refer to the
Agreement as a whole and not to a particular section. Whenever the word
"including" is used in this Agreement, it shall be deemed to mean "including,
without limitation," "including, but not limited to" or other words of similar
import such that the items following the word "including" shall be deemed to be
a list by way of illustration only and shall not be deemed to be an exhaustive
list of applicable items in the context thereof.
(b) The parties hereto intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) that the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
11.11. Arbitration of Claims.
(a) Except as otherwise provided elsewhere in this Agreement,
any dispute or difference between or among the parties arising out of this
Agreement or the transactions contemplated hereby, including without limitation
any dispute between an Indemnitee and any Indemnifying Party under Article IX,
which the parties are unable to resolve themselves shall be submitted to and
resolved by arbitration as herein provided. Within ten (10) Business Days after
expiration of the ten (10) Business Day period referred to in Section 9.03 or
within such other time period as the parties may agree, the Indemnitee and the
Indemnifying Party shall each designate one arbitrator. Within ten (10) Business
Days after the appointment of the two arbitrators, the two arbitrators shall
designate a third arbitrator mutually acceptable to them who shall be a
certified public accountant not affiliated with any party in interest to such
arbitration and the two arbitrators chosen by the Indemnitees and Indemnifying
Party shall each be a retired or former judge of any appellate court of the
State of Delaware, any United States appellate court or the United States
District Court for any Delaware District who is not affiliated with any party in
interest to such arbitration and who has substantial professional experience
with regard to corporate legal matters. If the arbitrator chosen by the
Indemnitee and the arbitrator chosen by the Indemnifying Party fail to agree
upon the third arbitrator within such ten (10) Business Day period, the third
arbitrator shall be appointed by the American Arbitration Association as soon as
practicable and shall be a certified public accountant who is not affiliated
with any party in interest to such arbitration and who has substantial
professional experience with regard to corporate legal matters.
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(b) The three arbitrators shall consider the dispute at issue
at Philadelphia, Pennsylvania at a mutually agreed upon time within thirty (30)
days (or such longer period as may be acceptable to the Indemnitee and the
Indemnifying Party) of the designation of the arbitrators. The arbitrator shall
not have the authority to modify any term or provision of this Agreement. The
arbitration proceeding shall be held in accordance with the rules for commercial
arbitration of the American Arbitration Association in effect on the date of the
initial request by the Indemnitee or Indemnifying Party, as the case may be,
that gave rise to the dispute to be arbitrated (as such rules are modified by
the terms of this Agreement or may be further modified by mutual agreement of
the Indemnitee and Indemnifying Party) and shall include an opportunity for the
parties to conduct discovery in advance of the proceeding, which discovery may
be limited by rules established by the arbitrators. Notwithstanding the
foregoing, the Indemnitee and Indemnifying Party agree that they will attempt,
and they intend that they and the arbitrators should use their best efforts in
that attempt, to conclude the arbitration proceeding and have a final decision
from the arbitrators within ninety (90) days from the date of selection of the
arbitrators; provided, however, that the arbitrators shall be entitled to extend
such 90-day period one or more times to the extent necessary for such
arbitrators to place a dollar value on any claim that may be unliquidated. The
arbitrators shall immediately deliver a written decision with respect to the
dispute to each of the parties, who shall promptly act in accordance therewith.
Each Indemnitee and Indemnifying Party to such arbitration agrees that any
decision of the arbitrators shall be final, conclusive and binding, absent fraud
or manifest error, and that they will not contest any action by any other party
thereto in accordance with a decision of the arbitrators, except if such factors
are present. It is specifically understood and agreed that any party may enforce
any award rendered pursuant to the arbitration provisions of this Section 11.11
by bringing suit in any court of competent jurisdiction.
(c) All fees, costs and expenses (including attorneys' fees
and expenses) incurred by the party that prevails in any such arbitration
commenced pursuant to this Section 11.11 or any judicial action or proceeding
seeking to enforce the agreement to arbitrate disputes as set forth in this
Section 11.11 or seeking to enforce any order or award of any arbitration
commenced pursuant to this Section 11.11 may be assessed against the party or
parties that do not prevail in such arbitration in such manner as the
arbitrators or the court in such judicial action, as the case may be, may
determine to be appropriate under the circumstances. All costs and expenses
attributable to the arbitrators shall be allocated among the parties to the
arbitration in such manner as the arbitrators shall determine to be appropriate
under the circumstances.
11.13. Cumulative Remedies. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
11.14. Third Party Beneficiaries. No provision of this Agreement
shall create any third party beneficiary rights in any Person, including any
employee of Buyer or employee or former employee of Seller or any Affiliate
thereof (including any beneficiary or dependent thereof).
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
SELLER:
SKF USA INC.
By:___________________________________
Name:
Title:
BUYER:
RBC NICE BEARINGS, INC.
By:___________________________________
Name:
Title:
RBC:
ROLLER BEARING COMPANY OF AMERICA, INC.
By:___________________________________
Name:
Title:
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SCHEDULE 2.03
ASSUMED LIABILITIES
(a) The following Liabilities of Seller arising in the ordinary
course of the Business prior to the Closing Date:
o Current trade payables (including payables booked after
the Closing Date and incurred to purchase or maintain
Transferred Assets); and
o Accrued expenses.
(b) All Liabilities and obligations of Seller arising after the
Closing under Contracts included in the Transferred Assets.
(c) All Liabilities and obligations described in Section 2.04(i) but
only to the extent that such Liabilities do not exceed $150,000 in the
aggregate.
(d) All Liabilities and obligations arising out of the use and
ownership of the Transferred Assets by Buyer after the Closing or by conduct of
the Business by Buyer after the Closing except to the extent that such
Liabilities and obligations are listed as Excluded Liabilities under any of
clauses (a) through (j) of Section 2.04.
1
BUSINESS PROPERTY LEASE
THIS BUSINESS PROPERTY LEASE ("Lease") is made and entered into on October
30, 1996 by and between DANA CORPORATION ("Landlord"), a Virginia Corporation,
and BPP ACQUISITION CORPORATION ("Tenant"), a Delaware Corporation.
1. Leased Premises. Landlord hereby demises and leases to Tenant, and
Tenant hereby takes and leases from Landlord, the real property and related
improvements, together with fixtures and other personal property attached to the
real property and improvements, located at 530 Recold Road, Walterboro, South
Carolina and legally described on Exhibit A ("Premises").
2. Term. The term of this Lease ("Term") shall be for a period commencing
on November 1, 1996 ("Commencement Date") and terminating on July 31, 1997;
provided, however, that the Term shall automatically renew for successive
renewal terms of 1 month each (each an "Extended Term") unless either party
provides at least 4 months prior written notice of its election (which election
shall be irrevocable) to terminate the Lease. Each party hereto agrees that,
during the Extended Term, it shall require 4 months notice to terminate the
Term. Except for the length of each Extended Term (which shall be 1 month), each
Extended Term shall be on the same terms and conditions as the original Term.
3. Use of Premises. The Premises shall be used and occupied in a safe,
careful and proper manner as a manufacturing, warehousing and distribution
facility and for offices and other related uses and purposes, and for other
lawful purposes that are not inherently hazardous; provided, however, that
Tenant shall not warehouse or store any Regulated Materials (hereinafter
defined) on the Premises without Landlord's consent. Tenant shall not use the
Premises for any unlawful purpose or illegal activities.
4. Rent.
(a) Rent. Tenant shall pay rent, Two and 00/100 Dollars ($2.00) per
rentable square foot of the improvements on the Premises per annum, which rent
shall be payable in 12 equal monthly installments on the first day of each
calendar month in advance. For these purposes, the improvements on the Premises
shall be deemed to consist of the lesser of the actual number of rentable square
feet thereon or 40,000 square feet.
(b) Additional Rent. All additional amounts, fees, taxes, costs and
charges that Tenant may be required to pay under the terms of this Lease, as
more specifically set forth below, are referred to herein as "Additional Rent"
(as used herein, "Rent" means the Base Rent and Additional Rent).
(c) Payment of Rent. All Rent payable by Tenant shall be paid
without prior demand, deduction, offset or counter-claim of
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any kind or nature whatsoever except as specifically provided herein. Rent shall
be paid to Dana Corporation at 4500 Dorr Street, P.O. Box 1000, Toledo, OH
43697, Attn: Office of the Treasurer.
(d) Delinquent Rent. If (i) any Rent payable to Landlord is not paid
within Fifteen (15) days of the due date, or (ii) any check from Tenant is
dishonored, Tenant shall pay a late charge equal to five percent (5%) of the
amount due and, in addition, all unpaid amounts shall accrue interest from the
due date until the date Landlord receives payment at the rate of ten percent
(10%) per year or the highest rate permitted by law, whichever is less. The
grace period provided herein is strictly related to the damages for a late
payment, and in no way modifies or stays Tenant's obligation to pay Rent in a
timely fashion.
5. Taxes
(a) Real Estate Taxes. Tenant shall pay all real estate taxes and
installments of assessments ("Real Estate Taxes") for the Premises, other than
taxes and assessments triggered by a change in ownership.
(b) Other Impositions. Tenant shall pay all taxes, assessments,
licenses, fees and other charges of any kind or nature that may be assessed,
levied or imposed upon the Personal Property (hereinafter defined) of the
Tenant; the rent and income received by Tenant; or the use or occupation of the
Premises by Tenant.
6. Utilities. Tenant shall pay all charges for all utility service
supplied to the Premises during the Term, including, but not limited to, water,
sewer, electrical, gas, telephone and cable television service and any charges
for installing, connecting or modifying any such utility service.
7. Insurance.
(a) Casualty Insurance.
(i) Tenant shall keep the Premises insured against loss or
damage by fire, lightning, windstorm, explosion and all other extended coverage
risks ordinarily insured against by standard policies of insurance in
commercially reasonable amounts.
(ii) Tenant shall keep all of Tenant's lease-hold
improvements, machinery, equipment, fixtures, trade fixtures, inventory and
other personal property of any kind or nature (collectively, "Personal
Property") insured against loss or damage by fire, lightning, windstorm,
explosion and all other extended coverage risks ordinarily insured against by
standard policies of insurance in an amount equal to the full replacement value
thereof.
(b) Liability Insurance. Tenant shall obtain and maintain at all
times during the Lease Term commercial general
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liability insurance coverage with a combined single limit of not less than One
Million and 00/100 Dollars ($1,000,000.00)
(c) General Requirements.
(i) Under each policy of insurance to be provided by Tenant
(other than that required by paragraph (a)(ii), above), the Tenant shall be the
"named insured" and the Landlord and any mortgagee of the Premises of which
Tenant has sufficient advance notice shall, to the extent practicable, be named
as "additional insureds" or "loss payees". Each such policy (other than that
required by paragraphs (a)(ii) or (b), above) shall provide that the proceeds
thereof shall be payable to Landlord, Tenant and any mortgagee as their
respective interests may appear.
(ii) Each policy of insurance to be provided by Tenant shall,
to the extent obtainable without additional charge, provide that any loss shall
be payable to the Landlord or any mortgagee, notwithstanding any act of
negligence or breach or warranty of Tenant which might otherwise result in a
forfeiture of said insurance.
(iii) Each policy of insurance to be provided by Tenant shall
be in a form reasonably satisfactory to Landlord and shall be written with
insurance companies that are qualified to do business in South Carolina and that
are reasonably satisfactory to Landlord and any mortgagee.
(iv) Tenant shall cause the insurance companies issuing such
policies to forward to Landlord certificates of insurance evidencing compliance
with this Lease on the Commencement Date and, with respect to renewal policies,
prior to the expiration of the existing policy. Each such policy shall provide
that it will not be canceled or modified unless the insurer gives (and not
merely endeavors to give) notice to Landlord at least thirty (30) days in
advance.
(d) Waiver of Subrogation. To the extent permitted by their
respective insurers, Landlord and Tenant release each other from any and all
liability to the other or anyone claiming through or under them by way of
subrogation or otherwise for any loss or damage to the Premises suffered by or
caused by any of the perils covered by any fire and extended coverage insurance
policy to the extent of such insurance, notwithstanding the fact that such peril
shall have been caused by the fault or negligence of the other party. Each party
shall seek to obtain any endorsements necessary to comply with this provision.
8. Condition of Premises; Maintenance Repair and Replacement.
(a) Landlord's Responsibilities. Neither Landlord nor Tenant shall
have any responsibility to maintain, repair or replace any structural
components, exterior walls and the roof of the
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Premises, or to make any Capital Improvements (hereinafter defined).
(b) Tenant's Responsibilities. Tenant shall, at Tenant's expense,
clean, maintain the interior non-structural components of the Premises,
excluding the walls, roof and building systems in a manner consistent with their
condition on the Commencement Date, ordinary wear and tear, and damage caused by
casualty or condemnation, excepted; provided that, without limiting the
generality of the foregoing, Tenant shall have no responsibility for matters
which require the making of a capital expenditure ("Capital Improvements").
9. Alterations and Improvements. Tenant may not make alterations,
additions or improvements to the Premises without Landlord's written consent,
which consent shall not be unreasonably withheld; provided that no consent shall
be required for non-structural alterations which do not affect the exterior
appearance of the Premises or reduce the square footage thereof. All
alterations, modifications, additions and improvements made by Tenant shall be
performed in a good and workmanlike manner and in accordance with all applicable
Laws. All alterations, additions or improvements shall become the property of
Landlord and shall remain with the Premises upon the termination of this Lease
unless Tenant can and does remove all such alterations, additions and
improvements at Tenant's expense prior to the expiration of the Term, in which
case Tenant shall repair all damage caused by such removal. In no event shall
Landlord have any rights to or interest in Tenant's trade fixtures, and Landlord
agrees to execute and deliver any reasonable landlord's waiver as may be
required by the lessor or financer of any such trade fixtures.
10. Signs. Tenant shall have the right to erect, at Tenant's expense, an
appropriate identification sign at the Premises in a location and of a design
approved in advance by Landlord. All such signs shall comply with all applicable
Laws. Prior to the expiration of the Term, Tenant shall remove any signs at
Tenant's expense and repair any damage caused by such signs.
11. Assignment and Subleasing. Tenant may not assign, other than to an
affiliate of Tenant, or transfer this Lease or any interest therein or sublet
the Premises or any part thereof without the written consent of the Landlord,
which consent shall not be unreasonably withheld.
12. Further Agreements. Tenant shall:
(a) not commit or suffer waste on the Premises;
(b) fully comply with and obey all laws, statutes, ordinances,
regulations, rules, orders, decrees, judgments, policies, actions or directives
of any local, state or federal government authority or the common law
(collectively, "Laws") in any way affecting the Premises or the use thereof or
this Lease,
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except that Tenant shall have no responsibility for non-compliance and
conditions existing as of the date hereof ("Existing Conditions"), and for
compliance with the Americans With Disabilities Act ("ADA:");
(c) keep the Premises free from all liens of any kind or nature,
including but not limited to, mechanic's liens, tax liens and judgment liens;
and
(d) permit the Landlord and its agents to enter upon the Premises to
examine the condition thereof and perform any necessary repairs, maintenance or
replacements with reasonable prior notice.
13. Damage to Premises. If the Premises is damaged by fire or other
casualty and is rendered wholly or partially untenantable such that it is not
practical for Tenant to continue to conduct its business on the Premises, Tenant
shall have the right to terminate this Lease effective as of the date of the
damage by giving Landlord written notice within fifteen (15) business days after
the occurrence of the damage. If Tenant does not elect to terminate this Lease,
then Landlord shall repair or restore the Premises to a good and tenantable
condition within a reasonable period of time after such damage; provided that if
such restoration is not complete within six (6) months of the time of damage,
Tenant shall have the further right to terminate this Lease. All insurance
proceeds payable as a result of such casualty shall be paid to Landlord. If
Tenant does not terminate this Lease and Landlord repairs and restores the
Premises, this Lease shall continue in full force and effect, subject to the
foregoing, but the Base Rent shall be reduced by a percentage equal to the
percentage of the Premises rendered untenantable from the date of the damage
until the Premises is again fully tenantable.
Landlord shall not be required to repair any injury or damage to, or
make any repairs or replacements of, Tenant's Personal Property.
14. Eminent Domain. If the entire Premises is taken for any public or
quasi-public use, under any statute or by right of eminent domain, or if any
part of the Premises is taken and the part not taken is insufficient for the
reasonable operation of Tenant's business, then this Lease shall terminate on
the date when possession is required for the public use, and the Base Rent shall
be prorated and paid to such date.
If only part of the Premises is so taken and the part not taken is
sufficient for the reasonable operation of Tenant's business (if the part not
taken is not, in Tenant's opinion, sufficient for such, Tenant may terminate
this Lease), this Lease shall remain unaffected except that (a) the Base Rent
payable hereunder shall be reduced by a percentage determined by the Landlord
that is reasonable and equitable based upon the value of the portion taken in
relation to the Premises a upon the value of the portion taken in relation to
the Premises as a whole and the
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effect upon Tenant's operations, and (b) Landlord shall restore that part of the
Premises not taken to as near its former condition as the circumstances will
permit.
In case of any such taking, whether of all or any part of the
Premises and regardless of whether this Lease survives, the Tenant shall not be
entitled to receive any portion of the award; provided, however, that the Tenant
shall be, and the Landlord shall not be, entitled to any portion of the award
made to the Tenant for trade fixtures, relocation expenses, severance damages or
loss of business.
15. Environmental Contamination.
(a) Tenant shall not violate and shall, at its sole cost and
expense, fully comply with, all applicable Laws relating to the protection of
human health or the environment or the use, generation, storage or disposal of
Regulated Materials (hereinafter defined) on, in, around, under or from the
Premises, including but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act; the Resource Conservation and Recovery
Act; the Toxic Substances Control Act; the Clean Air Act; the Federal Water
Pollution Control Act of 1972; analogous South Carolina statutes; or any
amendments or extensions of the foregoing or the regulations promulgated
thereunder (collectively, "Environmental Laws"); provided that Tenant shall have
no liability for violations thereof caused by Existing Conditions.
(b) "Regulated Material" means any substance:
(i) the presence of which requires investigation or
remediation under any Laws: or
(ii) which is or becomes defined as a solid waste, hazardous
waste, hazardous substance, toxic waste, toxic substance, pollutant, or
contaminant under any Laws; or
(iii) the presence of which on the Premises causes or
threatens to cause a nuisance upon the Premises or to the adjacent properties,
or poses or threatens to pose a hazard to the health or safety of persons on or
about the Premises; or
(iv) which contains petroleum, including crude oil or any
fraction thereof; or
(v) which contained polychlorinated bipheyols (PCBs),
asbestos, or urea formaldehyde foam insulation.
16. Defaults. It shall be a Default ("Default") under this Lease if:
(a) Tenant fails to pay any Rent within ten (10) days of the date
that Tenant receives written notice that it has not paid Rent when due;
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(b) Tenant fails to perform or observe any other term, agreement,
obligation or condition of this Lease within thirty (30) days after receipt of
notice from Landlord of such failure, unless such failure cannot be cured within
the 30-day period, in which case Tenant shall have begun to cure the failure
within the 30-day period and proceeded with diligence and good faith to
accomplish the cure.
(c) Tenant abandons the Premises or any material portion thereof and
leaves the same abandoned for a Period of ninety (90) days or more.
(d) A voluntary or involuntary petition in bankruptcy is filed by,
for or against the Tenant; Tenant makes an assignment for the benefit of
creditors or enters into an agreement whereby control of its business is lost to
a committee of creditors; Tenant becomes insolvent or acknowledges in writing
that Tenant is generally unable to pay debts as they become due; Tenant's
interest hereunder is subject to attachment, execution or other judicial levy;
Tenant seeks an arrangement under Chapter 11 of the United states Bankruptcy
Code or any other relief under applicable bankruptcy laws; or a receiver or
similar officer is appointed to take possession of Tenant's property and is not
discharged within sixty (60) days after such appointment.
17. Remedies.
(a) Upon the occurrence of a Default, Landlord shall have the option
to terminate all right of Tenant to occupy the Premises and shall have the right
to re-enter the Premises immediately. Thereafter, all right of Tenant to occupy
the Premises shall end and Landlord shall have the right to repossess the
Premises and to expel and remove Tenant and every other person occupying the
Premises. Neither the termination of the right of Tenant to occupy the Premises
nor such re-entry shall relieve Tenant from its obligation to pay Rent and to
perform and observe all the terms, covenants and conditions of this Lease on the
part of Tenant to be performed and observed provided, that Landlord shall use
commercially reasonable efforts to relet the Premises or any part thereof for
the account of Tenant to any person, firm or corporation, other than Tenant, for
such rent, for such time and upon such terms as Landlord shall reasonably
determine. Landlord shall not be required to observe any instruction given by
Tenant about such reletting. In any such case, Landlord may make such repairs
and perform such maintenance to the Premises as it necessary to keep the
Premises in the same condition as on the Commencement Date, reasonable wear and
tear excepted, and Tenant shall, on demand, pay the costs thereof, together with
Landlord's expense of reletting. If the rent collected by Landlord upon any such
reletting for Tenant's account is not sufficient to pay monthly the full amount
due under this Lease, Tenant shall pay to Landlord the amount of each monthly
deficiency upon demand.
(b) In addition to its other rights hereunder, Landlord
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shall have the right to elect, at any time after the occurrence of a Default, or
at any time after Landlord has terminated Tenant's right to possession only, to
cancel and terminate this Lease by serving written notice on Tenant of such
election, and to pursue any and all rights and remedies at law or in equity that
may be available to Landlord.
(c) No receipt of money by Landlord from Tenant or from any other
party after Default, after notice of a Default, after the termination of this
Lease, after the commencement of any suit, or after final judgment for
possession of the Premises, shall reinstate, continue or extend the term of this
Lease or affect any notice, demand or suit.
(d) If Tenant fails to perform or keep any of Tenant's agreements or
obligations, regardless of whether such failure would constitute a Default
hereunder, Landlord shall have the option to cure such failure or perform such
agreement or obligation for the account of and at the expense of Tenant upon
notice, either written or oral, to the Tenant; provided, however, that no such
notice shall be required for emergency repairs. Tenant shall pay the expenses of
any such cure immediately upon demand.
(e) Nothing contained herein shall be construed to adversely affect
the right of Landlord to indemnification for any liability of Tenant arising
prior to termination of this Lease, to the extent such indemnification is
specifically provided for herein. All indemnifications contained herein shall
survive the termination of this Lease for any reason whatsoever, including
expiration of the Term. No right or remedy contained herein shall be exclusive
of any other right or remedy granted or conferred upon Landlord under any Law as
each and every such right and remedy shall be cumulative.
(f) The waiver by Landlord of any breach or any Default shall not be
deemed to be a waiver of any subsequent breach or Default, and any delay or
omission by Landlord in exercising any right or power in the event of any breach
or Default by the Tenant shall not impair any such right or power or be
construed to be a waiver. Landlord's acceptance of Rent shall not be deemed to
be a waiver of any existing breach or Default by Tenant, other than the failure
of the Tenant to pay the particular Rent so accepted.
18. Surrender. Tenant shall surrender and deliver up the Premises at the
end of the Term in as good order and condition as on the Commencement Date of
this Lease, reasonable use and wear and tear, and alterations, excepted. Tenant
shall, prior to surrender of the Premises, repair at its cost any damage or
conditions caused to the Premises by removal of any of Tenant's Personal
Property. If Tenant fails to remove any Personal Property within ten (10) days
of the expiration of the Lease Term, Landlord shall have the right to remove the
Personal Property and store it, at Tenant's expense, in a location and manner
determined by Landlord. Tenant shall pay the full cost of removal and storage
immediately upon
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demand from Landlord.
19. Holding Over. Unless otherwise agreed to in writing by Landlord and
Tenant, if Tenant retains possession of the Premises, or any part thereof, after
the termination of the Term, then Tenant shall be deemed to be in default
hereunder and Landlord shall have any and all remedies provided for in this
Lease and at law or in equity; and in addition thereto, Tenant shall pay Rent to
Landlord in the amount of one hundred twenty five percent (125%) of the Rent
then in effect per month for the time Tenant remains in possession, payable in
advance on the same day of the month on which Tenant paid Rent during the Term.
The provisions of this section do not exclude Landlord's right of re-entry or
any other right hereunder. No such holding over shall be deemed to constitute a
renewal or extension of the Term hereof.
20. INTENTIONALLY OMITTED.
21. Brokers. Landlord and Tenant each warrant and represent that there was
no broker or agent instrumental in introducing Landlord or Tenant, respectively,
to the within transaction or in consummating this Lease.
22. Subordination: Estoppel Certificate: Attornment. Landlord reserves the
right to subject and subordinate this Lease at all times to the lien of any
mortgage or mortgages now or hereafter place upon Landlord's interest in the
Premises, provided, however, that as a condition precedent to such
subordination, Tenant must first have received a non-disturbance agreement
reasonably satisfactory to it (an "NDA"). In the event of any foreclosure of any
such mortgage, Tenant shall attorn to the purchaser at the foreclosure sale,
provided that such purchaser provides Tenant with an NDA. Subject to the
foregoing NDA qualification, Tenant shall execute and deliver, within seven (7)
days after written request by the Landlord such further instrument or
instruments evidencing Tenant's subordination and attornment and containing such
terms and conditions as may be requested by Landlord or any mortgagee.
Tenant agrees, within seven (7) days after written request by
Landlord, to execute and deliver to and in favor of Landlord to execute and
deliver to and in favor of Landlord and any mortgagee or purchaser of the
Premises, an estoppel certificate stating (a) whether this Lease is in full
force and effect, (b) whether this Lease has been modified or amended and, if
so, identifying and describing any such modification or amendment, (c) the date
to which the Rent has been paid, (d) whether Tenant knows of any default on the
part of Landlord or has any claim against Landlord and, if so, specifying the
nature of such default or claim, and (e) such other matters as may be reasonably
requested by Landlord. Landlord shall provide a similar estoppel certificate
within seven (7) days after written request by Tenant.
23. INTENTIONALLY OMITTED.
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24. Advertisement of Premises. Landlord or Landlord's agents shall have
the right to enter the Premises at all reasonable times (without interference
with Tenant's operations) for the purpose of exhibiting the same to others and
to place "for sale" or "for rent" notices or signs on the Premises.
25. Notices. All notices or other communications required or permitted by
this Lease shall be in writing and shall be delivered personally, by nationally
recognized overnight courier or by certified mail, return receipt requested,
postage prepaid, to the following addresses or to such other addresses as the
parties may designate in writing:
Landlord: Dana Corporation
4500 Dorr Street
Toledo, OH 43697
Attn: Legal Department
Tenant: BPP Acquisition Corporation
60 Round Hill Road
Fairfield, CT 06430
Attn: Michael S. Gostomski
All notices shall be deemed to be given upon the earlier of actual receipt or
two (2) days after deposit in an approved receptacle of the overnight courier or
the United States mail, as the case may be.
26. Recording. This Lease shall not be recorded. At Tenant's or Landlord's
option, or if required by law, Tenant and Landlord shall execute a short from or
memorandum of this Lease, which may be recorded at expense of the requesting
party or the party required by law to record the memorandum.
27. Severability. If any terms or provision of this Lease is held invalid
or unenforceable by a court of competent jurisdiction, such holding shall not
affect the remainder of this Lease and the same shall remain in full force and
effect unless such holding substantially deprives Tenant of the use of the
Premises or deprives Landlord of any Rent, in which event this Lease shall
terminate at the election of Tenant or Landlord, as the case may be.
28. Captions. The captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
Lease or the intent of any provision thereof.
29. Successors and Assigns. This Lease shall inure to the benefit of and
be binding upon heirs, personal representatives, successor and permitted assigns
of the parties hereto.
30. Construction. This Lease shall be construed under the laws of the
state where the Premises is located.
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31. Time of the Essence. Time is of the essence in the performance of this
Lease.
32. Authority. Each individual executing this Lease represents and
warrants that he is duly authorized to execute and deliver this Lease and that
this Lease is binding upon the partnership, corporation or individual, as the
case may be, in accordance with its terms.
33. Incorporation by Reference. All exhibits attached hereto are hereby
incorporated by reference and made a part hereof.
34. Entire Agreement. This Lease contains the entire agreement between the
parties hereto and may not be modified in any manner expect by an instrument in
writing executed by the parties or their respective successors in interest. This
Lease supersedes all previous understandings, agreements, letters and leases
between the parties.
35. Counterparts. This Lease may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
be but one and the same document.
IN WITNESS WHERE OF, Landlord and Tenant have executed this Lease as of
the date set forth above.
Signed and acknowledged
in the presence of:
DANA CORPORATION
By:____________________________
Its:____________________________
BPP ACQUISITION CORPORATION
By:__________________
Michael S. Gostomski
Executive Vice President
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Exhibit A
Legal Description of the Premises
All that piece, parcel or tract of land situate, lying and being in the
Industrial Area of lands formerly of Walterboro Army Airbase in the County of
Colleton and State of South Carolina, measuring and containing twelve and
two-hundredths (12.02) acres, more or less, and shown on a plat made by W. Gene
Whetsell, Registered Land Surveyor, dated May 6, 1981 and measuring six hundred
twenty-nine and sixty-three hundredths (629.63') Feet on the Northwestern line
and bounded Northwest by Recold Road, measuring five hundred eighty-four and
seven-tenths (584.7') Feet on the Northeastern line and bounded on the Northeast
by Lot-s-A on the aforesaid plat; Measuring on the Southeastern line five
hundred forty-eight (548') Feet along Lot 4-A on said plat and four hundred
seventy-five and one-tenth (475.1') Feet along Lot 5-A and Right-of-Way of South
Carolina Electric & Gas Company; and measuring six hundred seventy-six and
three-tenths )673.3') Feet on the southwester line along the center line of the
Right-of-Way Easement of South Carolina Electric & Gas Company, the
North-eastern one-half of said Right-of-Way Easement of South Carolina Electric
& Gas Company being included within the boundaries of said twelve and
two-hundredths (12.02) acres as shown on the aforesaid plat of W. Gene Whetsell,
Registered Land Surveyor.
12
CONFIDENTIAL
This Lease, dated the 11th day of July 1995 Between GENERAL SULLIVAN GROUP,
INC., having a mailing address at Sullivan Way, P.O. Box 7509, West Trenton, New
Jersey 08628 hereinafter referred to as the Landlord, and
Parties
RBC BEARINGS, having a mailing address at P.O. Box 1237, Newtown, PA 18940-0860
hereinafter referred to as the Tenant, WITNESSETH: That the Landlord hereby
demises and leases unto the Tenant, and the Tenant hereby hires and takes from
the Landlord for the term and upon the rentals hereinafter specified, the
premises described as follows situated in the Township of Ewing County of Mercer
and State of New Jersey, being a portion of the building (hereinafter referred
to as the "Facility") located on Sullivan Way which is referred to as Lot 3,
Block 341.01 on page 5 of the Ewing Township Tax Map, which demised premises is
illustrated on Schedule A attached hereto and made a part hereof.
Premises
Term
The term of this demise shall be for five (5) years beginning August 1, 1995 and
ending July 31, 2000.
Rent
The rent for the demised term shall be One Million, One Hundred Fifty-seven
Thousand, Seven Hundred Dol1ars ($1,157,700.00), which shall accrue at the
yearly rate of Two Hundred Thirty-one Thousand, Five Hundred Forty Dollars
($231,540.00)
Payment of Rent
The said rent is to be payable monthly in advance on the first day of each
calendar month for the term hereof, in instalments of Nineteen Thousand, Two
Hundred Ninety-five and 00/100 Dollars ($19,295.00), plus additional rent as
hereinbelow described,
at the office of the Landlord
or as may be otherwise directed by the Landlord in writing.
THE ABOVE LETTING IS UPON THE FOLLOWING CONDITIONS:
Peaceful
Possession
First.--The Landlord covenants that the Tenant, on paying the said rental and
performing the covenants and condition in this lease contained, shall and may
peaceably and quietly have, hold and enjoy the demised premises for the term
aforesaid.
Purpose
Second.--The Tenant covenants and agrees to use the demised premises as a
manufacturing plant, for storage and offices, and shipping and receiving goods,
wares and merchandise, and other related uses consistent with existing zoning
and other ordinances.
and agrees not to use or permit the premises to be used for any other purpose
without the prior written consent of the Landlord endorsed hereon.
Default in Pay-
ment of Rent
Abandonment
of Premises
Re-entry and
Reletting by
Landlord
Tenant Liable
for Deficiency
Lien of
Landlord to
Secure
Performance
Attorney's Fees
Third.--The Tenant shall, without any previous demand therefor, pay to the
Landlord, or its agent, the said rent at the times and in the manner above
provided. In the event of the non-payment of said rent, or any instalment
thereof, at the times and in the manner above provided, and if the same shall
remain in default for ten days after becoming due, or if the Tenant shall be
dispossessed for non-payment of rent, or if the leased premises shall be
deserted or vacated, the Landlord or its agents shall have the right to and may
enter the said premises as the agent of the Tenant, (2) without being liable for
any prosecution or damages therefor, and may relet the premises as the agent of
the Tenant, and receive the rent therefor, upon such terms as shall be
satisfactory to the Landlord, and all rights of the Tenant to repossess the
premises under this lease shall be forfeited. Such re-entry by the Landlord
shall not operate to release the Tenant from any rent to be paid or covenants to
be performed hereunder during the full term of this lease. For the purpose of
reletting, the Landlord shall be authorized to make such repairs or alterations
in or to the leased premises as may be necessary to place the same in good order
and condition. The Tenant shall be liable to the Landlord for the cost of such
repairs or alterations, and all expenses of such reletting. If the sum realized
or to be realized from the reletting is insufficient to satisfy the monthly or
term rent provided in this lease, the Landlord, at its option, may require the
Tenant to pay such deficiency month by month, or may hold the Tenant in advance
for the entire deficiency to be realized during the term of the reletting. The
Tenant shall not be entitled to any surplus accruing as a result of the
reletting. The Landlord is hereby granted a lien, in addition to any statutory
lien or right to distrain that may exist, on all personal property of the Tenant
in or upon the demised premises, to secure payment of the rent and performance
of the convenants and conditions of this lease. The Landlord shall have the
right, as agent of the Tenant, to take possession of any furniture, fixtures or
other personal property of the Tenant found in or about the premises, and sell
the same at public or private sale and to apply the proceeds thereof to the
payment of any monies becoming due under this lease, the Tenant hereby waiving
the benefit of all laws exempting property from execution, levy and sale on
distress or judgment. The Tenant agrees to pay, as additional rent, all
attorney's fees and other expenses incurred by the Landlord in enforcing any of
the obligations under this lease.(3)
Sub-letting and
Assignment
Fourth.--The Tenant shall not sub-let the demised premises nor any portion
thereof, nor shall this lease be assigned by the Tenant without the prior
written consent of the Landlord endorsed hereon.
Condition of
Premises,
Repairs
Fifth.--The Tenant has examined the demised premises, and accepts them in
their present condition (except as otherwise expressly provided herein) and
without any representations on the part of the Landlord or its agents as to the
present or future condition of the said premises. The Tenant shall keep the
demised premises in good condition, and shall redecorate, paint and renovate the
said premises as may be necessary to keep them in repair and good appearance.
The Tenant shall quit and surrender the premises at the end of the demised term
in as good condition as the reasonable use thereof will permit. The Tenant shall
not make any alterations, additions, or improvements to said premises without
the
<PAGE>
Alterations and
Improvements
Sanitation,
Inflammable
Materials
Sidewalks
prior written consent of the Landlord. All erections, alterations, additions and
improvements, whether temporary or permanent in character, which may be made
upon the premises either by the Landlord or the Tenant, except furniture or
movable trade fixtures installed at the expense of the Tenant, shall be the
property of the Landlord and shall remain upon and be surrendered with the
premises as a part thereof at the termination of this Lease, without
compensation to the Tenant. The Tenant further agrees to keep said premises and
all parts thereof in a clean and sanitary condition and free from trash,
inflammable material and other objectionable matter. If this lease covers
premises, all or a part of which are on the ground floor, the Tenant further
agrees to keep the sidewalks in front of such ground floor portion of the
demised premises clean and free of obstructions, snow and ice.
Mechanics'
Liens
Sixth.--In the event that any mechanics' lien is filed against the
premises as a result of alterations, additions or improvements made by the
Tenant, the Landlord, at its option, after thirty days' notice to the Tenant,
may pay the said lien, without inquiring into the validity thereof, and the
Tenant shall forthwith reimburse the Landlord the total expense incurred by the
Landlord in discharging the said lien, as additional rent hereunder.
Glass
Seventh.--The Tenant agrees to replace at the Tenant's expense any and all
glass which may become broken in and on the demised premises.
Liability of
Landlord
Eighth.--The Landlord shall not be responsible for the loss of or damage
to property, or injury to persons, occurring in or about the demised premises,
by reason of any existing or future condition, defect, matter or thing in said
demised premises or the property of which the premises are a part, or for the
acts, omissions or negligence of other persons or tenants in and about the said
property. The Tenant agrees to indemnify and save the Landlord harmless from all
claims and liability for losses of or damage to property, or injuries to persons
occurring in or about the demised premises.
Services and
Utilities
Ninth.--Utilities and services furnished to the demised premises for the
benefit of the Tenant shall be provided and paid for as follows: water by the
Tenant; gas by the Tenant; electricity by the Tenant; heat by the Tenant;
refrigeration by the Tenant; hot water by the _____________. In addition to the
foregoing utilities, all other utilities for the entire Facility (defined in the
Rider attached hereto) of which the demised premises is a part, shall be paid
for by the Tenant including but not limited to oil, sewer, fire protection, snow
removal, lawn maintenance and Tenant's trash removal. The Landlord shall not be
liable for any interruption or delay in any of the above services for any
reason.
Right to Inspect
and Exhibit
Tenth.--The Landlord, or its agents, shall have the right to enter the
demised premises at reasonable hours in the day or night to examine the same, or
to run telephone or other wires, or to make such repairs, additions or
alterations as it shall deem necessary for the safety, preservation or
restoration of the improvements, or for the safety or convenience of the
occupants or users thereof (there being no obligation, however, on the part of
the Landlord to make any such repairs, additions or alterations), or to exhibit
the same to prospective purchasers and put upon the premises a suitable "For
Sale" sign. For three months prior to the expiration of the demised term, the
Landlord, or its agents, may similarly exhibit the premises to prospective
tenants, and may place the usual "To Let" signs thereon.
Damage by Fire,
Explosion,
The Elements or
Otherwise
Eleventh.--In the event of the destruction of the demised premises or the
building containing the said premises by fire, explosion, the elements or
otherwise during the term hereby created, or previous thereto, or such partial
destruction thereof as to render the premises wholly untenantable or unfit for
occupancy, or should the demised premises be so badly injured that the same
cannot be repaired within 4 days from the happening of such injury, then and in
such case the term hereby created shall, at the option of the Landlord, cease
and become null and void from the date of such damage or destruction, and the
Tenant shall immediately surrender said premises and all the Tenant's interest
therein to the Landlord, and shall pay rent only to the time of such surrender,
in which event the Landlord may re-enter and re-possess the premises thus
discharged from this lease and may remove all parties therefrom. Should the
demised premises be rendered untenantable and unfit for occupancy, but yet be
repairable within 5 days from the happening of said injury, the Landlord may
enter and repair the same with reasonable speed, and the rent shall not accrue
after said injury or while repairs are being made, but shall recommence
immediately after said repairs shall be completed. But if the premises shall be
so slightly injured as not to be rendered untenantable and unfit for occupancy,
then the Landlord agrees to repair the same with reasonable promptness and in
that case the rent accrued and accruing shall not cease or determine. The Tenant
shall immediately notify the Landlord in case of fire or other damage to the
premises.
Observation
of Laws,
Ordinances,
Rules and
Regulations
Twelfth.--The Tenant agrees to observe and comply with all laws,
ordinances, rules and regulations of the Federal, State, County and Municipal
authorities applicable to the business to be conducted by the Tenant in the
demised premises. The Tenant agrees not to do or permit anything to be done in
said premises, or keep anything therein, which will increase the rate of fire
insurance premiums on the improvements or any part thereof, or on property kept
therein, or which will obstruct or interfere with the rights of other tenants,
or conflict with the regulations of the Fire Department or with any insurance
policy upon said improvements or any part thereof. In the event of any increase
in insurance premiums resulting from the Tenant's occupancy of the premises, or
from any act or omission on the part of the Tenant, the Tenant agrees to pay
said increase in insurance premiums on the improvements or contents thereof as
additional rent.
Signs
Thirteenth.--No sign, advertisement or notice shall be affixed to or
placed upon any part of the demised premises by the Tenant, except in such
manner, and of such size, design and color as shall be approved in advance in
writing by the Landlord, which approval shall not be unreasonably withheld or
delayed.
Subordination
to Mortgages and Deeds
of Trust
Fourteenth.--This lease is subject and is hereby subordinated to all
present and future mortgages, deeds of trust and other encumbrances affecting
the demised premises or the property of which said premises are a part. The
Tenant agrees to execute, at no expense to the Landlord, any instrument which
may be deemed necessary or desirable by the Landlord to further effect the
subordination of this lease to any such mortgage, deed of trust or
encumbrance.(6)
Sale of
Premises
Rules and
Regulations of
Landlord
Sixteenth.--The rules and regulations regarding the demised premises,
affixed to this lease, if any, as well as any other and further reasonable rules
and regulations which shall be made by the Landlord, shall be observed by the
Tenant and by the Tenant's employees, agents and customers. The Landlord
reserves the right to rescind any presently existing rules applicable to the
demised premises, and to make such other and further reasonable rules and
regulations as, in its judgment, may from time to time be desirable for the
safety, care and cleanliness of the premises, and for the preservation of good
order therein, which rules, when so made and notice thereof given to the Tenant,
shall have the same force and effect as if originally made a part of this lease.
Such other and further rules shall not, however be inconsistent with the proper
and rightful enjoyment by the Tenant of the demised premises.
Violation of
Covenants,
Forfeiture of
Lease. Re-entry
by Landlord
Non-waiver
of Breach
Seventeenth.--In case of violation by the Tenant of any of the covenants,
agreements and conditions of this lease, or of the rules and regulations now or
hereafter to be reasonably established by the Landlord, and upon failure to
discontinue such violation within 7 days after notice thereof given to the
Tenant, this lease shall thenceforth, at the option of the Landlord, become null
and void, and the Landlord may re-enter without further notice or demand. The
rent in such case shall become due, be apportioned and paid on and up to the day
of such re-entry, and the Tenant shall be liable for all loss or damage
resulting from such violation as aforesaid. No waiver by the Landlord of any
violation or breach of condition by the Tenant shall constitute or be construed
as a waiver of any other violation or breach of condition, nor shall lapse of
time after breach of condition by the Tenant before the Landlord shall exercise
its option under this paragraph operate to defeat the right of the Landlord to
declare this lease null and void and to re-enter upon the demised premises after
the said breach or violation.
<PAGE>
Notices
Eighteenth.--All notices and demands, legal or otherwise, incidental to
this lease, or the occupation of the demised premises, shall be in writing. If
the Landlord or its agent desires to give or serve upon the Tenant any notice or
demand, it shall be sufficient to send a copy thereof by registered (8)mail,
addressed to the Tenant at the demised premises, or to leave a copy thereof with
a person of suitable age found on the premises, or to post a copy thereof upon
the door to said premises. Notices from the Tenant to the Landlord shall be sent
by registered mail (9) or delivered to the Landlord at the place hereinbefore
designated for the payment of rent, or to such party or place as the Landlord
may from time to time designate in writing.
Bankruptcy,
Insolvency,
Assignment for
Benefit of
Creditors
Nineteenth.--It is further agreed that if at any time during the term of
this lease the Tenant shall make any assignment for the benefit of creditors, or
be decreed insolvent or bankrupt according to law, or if a receiver shall be
appointed for the Tenant, then the Landlord may, at its option, terminate this
lease, exercise of such option to be evidenced by notice to that effect served
upon the assignee, receiver, trustee or other person in charge of the
liquidation of the property of the Tenant or the Tenant's estate, but such
termination shall not release or discharge any payment of rent payable hereunder
and then accrued, or any liability then accrued by reason of any agreement or
covenant herein contained on the part of the Tenant, or the Tenant's legal
representatives.
Holding Over
by Tenant
Twentieth.--In the event that the Tenant shall remain in the demised
premises after the expiration of the term of this lease without having executed
a new written lease with the Landlord, such holding over shall not constitute a
renewal or extension of this lease. The Landlord may, at its option, elect to
treat the Tenant as one who has not removed at the end of his term, and
thereupon be entitled to all the remedies against the Tenant provided by law in
that situation, or the Landlord may elect, at its option, to construe such
holding over as a tenancy from month to month, subject to all the terms and
conditions of this lease, except as to duration thereof, and in that event the
Tenant shall pay monthly rent in advance at the rate provided herein as
effective during the last month of the demised term.
Eminent
Domain,
Condemnation
Twenty-first.--If the property or any part thereof wherein the demised
premises are located shall be taken by public or quasi-public authority under
any power of eminent domain or condemnation, this lease, at the option of the
Landlord, shall forthwith terminate and the Tenant shall have no claim or
interest in or to any award of damages for such taking.(10)
Security
Twenty-second.--The Tenant has this day deposited with the Landlord the
sum of $ -0- as security for the full and faithful performance by the Tenant of
all the terms, covenants and conditions of this lease upon the Tenant's part to
be performed, which said sum shall be returned to the Tenant after the time
fixed as the expiration of the term herein, provided the Tenant has fully and
faithfully carried out all of said terms, covenants and conditions on Tenant's
part to be performed. In the event of a bona fide sale, subject to this lease,
the Landlord shall have the right to transfer the security to the vendee for the
benefit of the Tenant and the Landlord shall be considered released by the
Tenant from all liability for the return of such security; and the Tenant agrees
to look to the new Landlord solely for the return of the said security, and it
is agreed that this shall apply to every transfer or assignment made of the
security to a new Landlord. The security deposited under this lease shall not be
mortgaged, assigned or encumbered by the Tenant without the written consent of
the Landlord.
Arbitration
Twenty-third.--Any dispute arising under this lease shall be settled by
arbitration. Then Landlord and Tenant shall each choose an arbitrator, and the
two arbitrators thus chosen shall select a third arbitrator. The findings and
award of the three arbitrators thus chosen shall be final and binding on the
parties hereto.
Delivery of
Lease
Twenty-fourth.--No rights are to be conferred upon the Tenant until this
lease has been signed by the Landlord, and an executed copy of the lease has
been delivered to the Tenant.
Lease
Provisions Not
Exclusive
Twenty-fifth.--The foregoing rights and remedies are not intended to be
exclusive but as additional to all rights, and remedies the Landlord would
otherwise have by law.
Lease Binding
on Heirs,
Successors, Etc.
Twenty-sixth.--All of the terms, covenants and conditions of this lease
shall inure to the benefit of and be binding upon the respective heirs,
executors, administrators, successors and assigns of the parties hereto.
However, in the event of the death of the Tenant, if an individual, the Landlord
may, at its option, terminate this lease by notifying the executor or
administrator of the Tenant at the demised premises.
Twenty-seventh.--This lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on
part of Tenant to be performed shall in nowise be affected, impaired or excused
because Landlord is unable to supply or is delayed in supplying any service
expressly or impliedly to be supplied or is unable to make, or is delayed in
making any repairs, additions, alterations or decorations or is unable to supply
or is delayed in supplying any equipment or fixtures if Landlord is prevented or
delayed from so doing by reason of governmental preemption in connection with
the National Emergency declared by the President of the United States or in
connection with any rule, order or regulation of any department or subdivision
thereof of any governmental agency or by reason of the conditions of supply and
demand which have been or are affected by the war.
Twenty-eighth.--This instrument may not be changed orally.
This Lease is continued on a Rider and Footnote Addendum, both of which are
attached hereto and made a part hereof.
IN WITNESS WHEREOF, the said Parties have hereunto set their hands and
seals the day and year first above written.
GENERAL SULLIVAN GROUP, INC.
WITNESS: By: /S/ [ILLEGIBLE]
-------------------------(SEAL)
Landlord
/S/ [ILLEGIBLE] By [ILLEGIBLE]
- ----------------------------- ------------------------------
RBC BEARINGS
/S/ [ILLEGIBLE] By:
- ----------------------------- -------------------------(SEAL)
Tenant
<PAGE>
RIDER TO LEASE AGREEMENT
BETWEEN
GENERAL SULLIVAN GROUP, INC., AS LANDLORD
AND
RBC BEARINGS, AS TENANT
DATED JULY 11, 1995
-------------------------------------------
Twenty-ninth.--The demised premises is the cross-hatched areas shown on the
annexed Schedules "A-1", "A-2" and "A-3".
Thirtieth.--Tenant shall leave the demised premises broom-clean and shall remove
all machinery and equipment, repairing any resulting voids in the floors or
walls; provided that Tenant shall have no responsibility to repair the floors or
walls of any structure which Landlord intends to demolish, and Landlord agrees
to respond promptly in writing with respect to such intention at Tenant's
request. Landlord shall pay for any major structural repairs to exterior walls
and roofs. The Landlord and Tenant agree that the improvements listed below
(hereinafter referred to as the "Improvements") will be made to the building
located on Sullivan Way in Ewing Township which includes the demised premises
(hereinafter referred to as the "Facility"). The Landlord will be responsible
for having the Improvements completed and will obtain financing for them, but
the cost of the Improvements will be the responsibility of the Tenant to the
extent provided below, which cost will be paid monthly by the Tenant as
additional rent. These monthly payments will include principle based on the
fixed amortization periods described below, plus interest as charged by the
lender which has provided the financing for the Improvements to the Landlord.
The period over which the various Improvements will be amortized is set forth in
the table below, together with the current estimate of the cost. The Tenant
acknowledges and agrees that the current estimate of the cost may change before
it is finalized. The Tenant further agrees to pay the actual cost of the
Improvements, plus interest, to the extent that such costs are amortized during
the Term of the lease and any extensions thereof.
Amortization
Improvement (In Months) Total Cost
- ----------- ------------ ----------
Corporate and Plant Offices 60 $364,900
(Items 1, 2, 5, 6, 7, 9)
Painting (Item 8) 60 27,500
Lighting (Item 4) 120 125,000
Office HVAC (Item 3) 120 130,000
Resurface Parking Lot (Item 10) 96 55,850
--------
$703,250
The lease will start at the same time the payment for the improvements are
completed. No payment for improvements shall be made until the improvement is
completed.
<PAGE>
The nature and scope of the Improvements which the Landlord has agreed to make
pursuant to this paragraph are more specifically described in the Items
referenced above which appear on the proposal dated June 19, 1995 which is
attached hereto as Exhibit "A" and made a part hereof. (The parties acknowledge
that the proposal does not include replacing the plant doors, and that the
Landlord may determine to use a contractor other than the one who prepared the
proposal.) Based upon the figures in the above table (but subject to adjustment
as hereinabove provided), the specific amount that the Tenant will pay towards
the Improvements is $9,246.77 per month plus the amount of interest charged to
the Landlord by its lender for the 60 month term of the lease. (If, for example,
the calculation was based upon today's prime rate and level loan amortization,
this would translate into a monthly payment of principal and interest of
$11,517.59. If the lease is extended beyond the initial 60 month term, the
payments for the Improvements (subject to adjustment as hereinabove provided)
would be $25,707 plus interest through the 96th month. If the lease is extended
beyond the 96th month to a term of up to 120 months, the payments for months 96
through 120 would be $2,125(subject to adjustment as hereinabove provided) plus
interest. Anything herein to the contrary not withstanding, the pricing of the
Improvements' amortization described above is intended solely to demonstrate the
method in which the Landlord's expense in providing the Improvements will be
liquidated. The term of this lease remains at five years, subject to the
Tenant's option to extend contained in paragraph Forty-Fifth below, and subject
further to the Tenant's option to terminate as described in paragraph
Thirty-sixth below.
In addition to the above-identified improvements, the Landlord may choose (but
shall not be obligated to) replace the heating system in the Facility. In that
event, the amount of the reduction in the Tenant's energy costs associated with
such replacement shall be paid to the Landlord on a monthly basis.
Thirty-first.--Subject to the requirement that the Landlord and tenants
other than the Tenant remove their own industrial waste as provided for in
paragraph Thirty-third, Tenant agrees to provide at its sole cost and expense
all utilities and services to the Facility, and not just those utilities
required for the demised premises. The utilities for which the Tenant shall be
responsible include but are not limited to the cost of electricity, gas, oil,
water, sewer, fire protection, snow removal, lawn maintenance and Tenant trash
removal. In addition, the Tenant further agrees to be responsible for the
routine maintenance of any heating and Tenant air conditioning apparatus, in all
instances for the entire Facility including the areas retained by Landlord. In
the event that the Landlord chooses in its sole discretion to replace air
conditioning apparatus in the Facility, the Tenant's maintenance obligation for
such new equipment shall be limited to normal maintenance including, by way of
illustration and not of limitation, filter replacement. If new air conditioning
apparatus is purchased by the Landlord, it will
- 2 -
<PAGE>
be covered by the manufacturer's warranty and the Landlord will be responsible
for enforcing that warranty. Anything herein to the contrary notwithstanding,
however, in the event that the Landlord increases the intensity of its
operations by, for example, adding DeMaris Steel's operations to the Facility,
the Landlord will reimburse the Tenant for the cost of the increased utilities
usage.
Thirty-second.--Tenant agrees to maintain fire and security protective
service and supervisory service for the Facility at all times during the term of
this Lease. Tenant further agrees to pay for any routine service with respect to
the sprinkler system in the demised premises.
Thirty-third.--With respect to servicing of sanitary sewage, it is
understood and agreed that the Tenant shall assume this obligation for the
entire Facility and further agrees that it will give the Landlord the privilege
of using said facilities for its own use with respect to the demised premises;
provided, however, that the Landlord shall be responsible and hold harmless and
indemnify the Tenant for any discharges into the sanitary sewer by the Landlord,
by Landlord's lessees (other than the Tenant) or by anyone with the permission
of the Landlord, and Landlord shall inform Tenant of any such discharges in
violation of Tenant's industrial wastewater permit within 72 hours of Landlord's
becoming aware of same. The Landlord agrees that it will release any treated
wastewater from this process into sewer lines below the point of testing for the
Tenant. The Landlord will be solely responsible for the testing of this
discharge wastewater. Landlord and Tenant will each bear the responsibility for
the cost of the removal and servicing of their own respective hazardous,
industrial, special production and municipal waste. Landlord and Tenant will
each hold harmless and indemnify the other for any liability with respect to
such removal and servicing. Notwithstanding the provisions of paragraph Ninth of
this Lease, in the event that the Landlord increases operations at the facility
such as through the addition of new tenants, the Landlord will reimburse the
Tenant for the additional usage resulting from such additional tenants.
Thirty-fourth.--(a) Tenant shall, at Tenant's own expense, comply with the
Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq., the regulations
promulgated thereunder and any amending and successor legislation and
regulations ("ISRA") that apply to Tenant. Any remedial action required to be
undertaken by the Tenant shall be limited to (i) contamination caused by the
Tenant's operations and activities in the demised premises, and (ii) portions of
the Facility not included within the demised premises which have been
contaminated by the Tenant's operations
- 3 -
<PAGE>
and activities. Further, the Tenant shall not have any obligations under this
Lease with respect to Damages, as that term is defined in paragraph 3 of that
certain Inventory Purchase and Indemnification Agreement dated March 16, 1992
between Roller Bearing Company of America, Inc. and General Sullivan Group, Inc.
against which the Tenant is indemnified and saved harmless under said Agreement.
The Landlord shall be responsible for remedial action required with respect to
(i) the portions of the Facility lying outside of the demised premises, as well
as (ii) contamination occurring within the demised premises which is the result
of the Landlord's operations and activities.
(b) The costs of preparing all required submissions to the DEP and
performing sampling shall be borne by the party who has triggered ISRA
compliance (the "Triggering Party"). These obligations, as distinguished from
the allocation of responsibility for remediation, shall extend to the entire
Facility. The party which has not triggered ISRA shall cooperate with the
Triggering Party by (i) executing properly completed and accurate documents
required to comply with ISRA at no cost to the Triggering Party; and (ii)
undertaking any other actions required to comply with ISRA so long as the cost
of those actions is borne by the Triggering Party.
(c) Provided this Lease is not previously cancelled or terminated by
either party or by operation of law, Tenant shall commence its ISRA submission
to the DEP in anticipation of the end of the lease term, no later than nine
months prior to the expiration of the lease term.
(d) Promptly upon the receipt or generation by either party or their
representatives of environmental documentation concerning the other, each party
shall deliver such environmental documentation to the other.
(e) Tenant shall notify Landlord, and Landlord shall notify Tenant
in advance of all meetings scheduled between Tenant or Landlord or their
representatives and NJDEP or any other environmental authority, and either party
or their representatives shall have the right, without the obligation, to attend
and participate in all such meetings.
(f) Should the Element or any other division of NJDEP or other
governmental authority determine that a remedial action workplan be prepared and
that remediation be undertaken because fill materials, or hazardous or toxic
substances, pollutants or wastes exist, or have been spilled, discharged or
placed in, on, or under or about the demised premises during the lease term,
which are the Tenant's responsibility under subparagraph Thirty-fourth (a)
above, Tenant shall, at Tenant's own expense, promptly prepare and submit a
remedial action workplan. Which plan if required shall be satisfactory to NJDEP,
and shall promptly implement the approved remedial action
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<PAGE>
workplan to the satisfaction of NJDEP. However, unless specifically otherwise
agreed in writing by the Landlord, in no event shall Tenant's remedial action
involve engineering or institutional controls, including without limitation
capping, deed notice, declaration of restriction or other institutional control
notice pursuant to P.L. 1993, c.139. Promptly upon completion of all required
investigatory and remedial activities, Tenant shall restore the affected areas
of the premises from any damage or condition caused by the work, including
without limitation closing, pursuant to law, any wells installed at the
premises. In the event the Landlord shall undertake remediation or investigatory
activities in the demised premises, the Landlord shall restore the affected
areas of the demised premises from any damage or condition caused by the work
including, without limitation, closing, pursuant to law, any wells installed at
the premises.
(g) If as a result of contamination defined under paragraph
Thirty-fourth, Tenant fails to obtain either: (i) an unconditional approval of
Tenant's negative declaration; or (ii) a no further action letter with respect
to Tenant's remedial action workplan; (collectively referred to as "ISRA
Clearance") from the Element prior to the expiration or earlier termination of
the lease term, then upon the expiration or earlier termination of the lease
term Landlord shall have the option either to consider the Lease as having ended
or to treat Tenant as a holdover tenant in possession of the premises. If
Landlord considers the Lease as having ended, then Tenant shall nevertheless be
obligated to promptly obtain ISRA Clearance. If Tenant's failure to obtain ISRA
Clearance has made the demised premises unrentable and to treat the Tenant as a
holdover tenant (such determination hereinafter referred to as a "Holdover
Determination"), then Tenant shall pay monthly to Landlord the regular and
additional monthly rent which Tenant would otherwise have paid, until such time
as Tenant obtains ISRA Clearance, and during the holdover period all of the
terms of this Lease shall remain in full force and effect. The Landlord agrees
that it will not make a Holdover Determination if the demised premises is
rentable. If the Tenant provides written notice to the Landlord that it disputes
the Landlord's Holdover Determination within ten business days of Tenant's
receipt thereof, the Tenant shall be entitled to seek arbitration on the issue
of whether the demised premises is rentable. Such arbitration shall be conducted
in Mercer County, New Jersey pursuant to the rules of the American Arbitration
Association. In the event that the Landlord and the Tenant are not able to agree
on a single arbitrator, each of the Landlord and the Tenant shall select their
own arbitrator, and those two arbitrators shall select a third. The
determination of the majority of the arbitrators selected shall be binding on
both parties.
(h) Tenant and Landlord shall permit each other and their agents,
servants and employees, including but not limited to legal counsel and
environmental consultants and
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<PAGE>
engineers, access to portions of the Facility under their respective control for
the purposes of environmental inspection and sampling during regular business
hours, or during other hours either by agreement of the parties or in the event
of any environmental emergency. Neither party shall restrict access, nor impose
any unreasonable conditions to access. In the event that an environmental
inspection shall include sampling and testing, each party shall use its best
efforts to avoid unreasonably interfering with the other's use of the premises,
and upon completion of sampling and testing shall, to the extent reasonably
practicable, repair and restore the affected areas of the premises from any
damage caused by the sampling and testing.
(i) Tenant shall indemnify, defend and hold harmless Landlord from
and against all claims, liabilities, losses, damages, penalties and costs,
foreseen or unforeseen, including without limitation counsel, engineering and
other professional or expert fees, which Landlord may incur resulting directly
or indirectly, wholly or partly from Tenant's action or non-action with regard
to Tenant's obligations under this paragraph. Landlord shall indemnify, defend
and hold harmless Tenant from and against all claims, liabilities, losses,
damages, penalties and costs, foreseen or unforeseen, including without
limitation counsel, engineering and other professional or expert fees, which
Tenant may incur resulting directly or indirectly, wholly or partly from
Landlord's action or non-action with regard to Landlord's obligations under this
paragraph.
(j) This paragraph shall survive the expiration or earlier
termination of this Lease.
Thirty-fifth.--Tenant shall have the sole use of the hazardous waste
detention bunker located adjacent to the heater tank farm on the east side of
the Facility, said use to be at Tenant's sole risk. Tenant shall indemnify and
save the Landlord harmless from all claims and liability arising from or related
to Tenant's use of the aforementioned bunker, including reasonable attorneys'
fees and legal costs. Said bunker shall be considered to be part of the demised
premises.
Thirty-sixth.--At any time after the 34th month of the term of this Lease
the Tenant shall have the right to terminate this Lease by providing the
Landlord with a minimum of nine month's written notice. In no event shall this
Lease be terminated any sooner than 43 months after it commences. If the Tenant
chooses to terminate this Lease in accordance with this paragraph, the Tenant
shall pay to the Landlord upon the effective date of such termination,
cancellation charges equal to 30% of the remaining rent due under the Lease and
30% of the additional rent representing real estate taxes on the demised
premises for the balance of the term of the Lease. In addition to the aforesaid
termination charges, the Tenant shall also pay the balance of its share of the
actual cost of the improvements identified in paragraph Thirtieth.
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<PAGE>
Thirty-seventh.--Tenant agrees to hold the Landlord harmless for claims
arising out of the Tenant's use of the demised premises, and agrees that
insurance covering the Tenant's liability shall be maintained throughout the
life of the Lease or a renewal thereof, with a certificate of insurance
furnished to the Landlord from time to time by the Tenant indicating the limit
applying to each person and to each accident for bodily injury liability, limit
applying to each accident and the aggregate limit applying to property damage
liability, which limits shall be no less than $1 Million. Tenant shall maintain
at its sole cost fire and hazard insurance covering the Facility, in the amount
of $3.5 Million or such other amount as may be mutually agreed by the parties to
reflect a changed value, and shall cause Landlord to be added to said insurance
as a named insured. Tenant shall deliver certificates of such insurance coverage
to Landlord upon request.
Thirty-eighth. - Tenant agrees that, in addition to the annual rental, as
additional rent it shall assume and pay all real estate taxes and sewer rents on
the entire property, including any future increases thereof. The Landlord will
reimburse the Tenant for that portion of the real estate taxes imposed with
respect to the Facility which are not occupied by the Tenant. It is anticipated
that the Landlord's reimbursement to the Tenant will amount to 34.62% of the
total amount of taxes imposed on the Facility. Tenant shall have the right to
contest, at its own expense, before the appropriate tribunals and authorities,
any real estate tax or assessment, levied, assessed or imposed on the demised
premises during the term of this Lease. Landlord, at no expense to it, shall
cooperate with Tenant in such contest. From any refund obtained by Tenant,
Tenant may deduct and retain the costs and expenses of such proceeding and the
balance of such refund, to the extent of Tenant's payment for or liability for
taxes for the years concerned, shall belong to and be the sole property of
Tenant. Any excess real estate taxes which shall be paid by Tenant hereunder
shall be adjusted and pro-rated at the expiration of the term hereof in the
event that the then current tax year and the expiration of the term hereof do no
coincide. If any increase in real estate taxes occurs as a result of an action
made by Landlord, i.e. sale of the building, then the Landlord shall be
responsible for any resulting increase of the taxes.
Thirty-ninth.--It is understood and agreed by and between the parties
hereto that Landlord shall have the right to assign the proceeds of this Lease
for its financial purposes.
Fortieth.--Tenant shall be solely responsible for any claims or
liabilities resulting from discharges or emissions by Tenant, and Tenant shall
hold harmless and indemnify Landlord against any claim arising therefrom. With
respect only to the relationship between Landlord and Tenant, Landlord shall be
solely responsible for any claims or liabilities resulting from discharges or
emissions by anyone other than Tenant (including the Landlord and other parties
utilizing the Facility), and
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<PAGE>
Landlord shall hold harmless and indemnify Tenant against any
claims arising therefrom.
Forty-first.--Tenant hereby grants the right to the Landlord to construct
and lay a water line from a fire plug presently existing adjacent to the demised
premises to the premises now or formerly occupied by the Winner Manufacturing
Co., Inc., or to any future building that may be erected on the Landlord's
premises, for the period of the duration of the Lease, at Landlord's sole cost
and expense.
Forty-second.--All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered by hand or mailed, certified or registered mail with
postage prepaid:
(a) If to Landlord, to:
General Sullivan Group, Inc.
Sullivan Way, P.O. Box 7367
West Trenton, New Jersey 08628
Attention: William F. Trainer
With a copy to
Fox, Rothschild, O'Brien & Frankel
997 Lenox Drive
Lawrenceville, NJ 08648-2311
Attention: Phillip E. Griffin, Esq.
or to such other person or address as Landlord shall furnish Tenant in writing.
(b) If to Tenant, to:
RBC Bearings
P.O. Box 1237
Newtown, PA 18940-0870
Attention: Michael Gostomski,
Executive Vice President
or to such other person or address as Tenant shall furnish Landlord in writing.
Forty-third.--Landlord shall at any time and from time to time upon not
less than ten day's prior notice from Tenant, execute, acknowledge and deliver
to Tenant a statement in writing setting for the commencement date, the
termination date and the rent under this Lease and certifying (i) that this
Lease is unmodified and in full force and effect (or if there has been any
modification, that the same is in full force and effect as modified and stating
the modification), (ii) the dates to which the rent has been paid in advance if
any, (iii) whether or not
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<PAGE>
the knowledge of Landlord, Tenant is in default in performance of any of its
obligations under this Lease and, if so, specifying each such default of which
Landlord may have knowledge, (iv) whether Landlord has made any claims against
Tenant under this Lease and, (v) whether there exist any offsets or defenses
against enforcement of any of the terms of this Lease upon the part of Landlord
to be performed, and if so, specifying the same, and (v) such further
information with respect to this Lease or the premises as Tenant may reasonably
request, it being intended that such statement delivered pursuant hereto, shall
be binding upon Landlord and may be relied upon by Tenant, by any lessee or
prospective lender to Tenant. The failure to deliver such statement within such
time shall be conclusive upon Landlord that this Lease is in full force and
effect without modification, and except as may be represented by Tenant, there
are no uncured defaults by Tenant.
Forty-fourth.--Landlord hereby gives Tenant the right to place a mortgage
on the leasehold estate during the lease term and any renewal thereof, and
Landlord agrees to execute any document that Tenant's lender may reasonably
require.
Forty-fifth.--The Tenant shall have the option to extend the term of this
lease for one two-year period upon the same terms and conditions as are herein
provided, except that the base rent shall be increased in proportion to the
increase in the Consumer Price Index as more fully described below, and the
Tenant shall be obligated to make certain additional payments in connection with
the Improvements described in paragraph Thirtieth, also described below.
The base annual rent payable under this Lease during the two year
renewal term shall equal the initial annual rent of $231,540.00 multiplied by a
fraction, the numerator of which is the Consumer Price Index for Urban Wage
Earners and Clerical Workers for the Philadelphia--New Jersey Area (hereinafter
referred to as the "CPI") for the month of July in the year 2000 and the
denominator of which shall be the CPI for the month of August, 1995. The new
annual rent, which is the product of the initial annual rent multiplied by said
fraction, shall be paid in 12 equal monthly installments on the first day of
each and every month during the two year option period, together with all
additional rent and other payments herein provided for.
During the two year option period, the Tenant shall also continue to
pay in each year the annual amounts which had previously been paid by Tenant as
the Tenant's share of the Improvements described in paragraph Thirtieth.
Tenant's option to extend the term of this Lease for the two year
option period provided for in this paragraph shall be exercised by the Tenant
giving written notice in the manner provided for in this Agreement at least nine
months
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<PAGE>
prior to the expiration of the initial five year term of this Lease. It shall be
a condition precedent to the exercise of this option that at the time of the
exercise thereof, the Tenant shall not be in default under this Lease.
Forty-sixth.--All exhibits to this Lease any and all rider and footnote
provisions attached to this Lease are hereby incorporated into this Lease. If
any provision contained in any rider hereto is inconsistent or in conflict with
any printed provision of this Lease, the provision contained in such rider shall
supersede said printed provision and shall control.
Forty-seventh.--All consents and approvals required under this Lease by
either party shall not be unreasonably withheld or delayed.
Forty-eighth.--Tenant shall repair and maintain the parking areas at
Tenant's own cost and expense.
Forty-ninth.--Nothing in this Lease is intended to abrogate or otherwise
diminish the force or effect of the indemnification contained in the Inventory,
Purchase and Indemnification Agreement more fully described in paragraph
Thirty-fourth. Rather, Tenant and Landlord intend that the indemnification shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year above written.
ATTEST: GENERAL SULLIVAN GROUP, INC.
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ----------------------- By:--------------------------
Chairman
ATTEST: RBC BEARINGS
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ----------------------- By:---------------------------
- 10 -
<PAGE>
[TEXT ILLEGIBLE]
Please consider this proposal dated June 19, 1995 for renovation of Roller
Bearing Corporate Offices as per prints dated 5/1/95.
1. Demolition and removal of old piping. ................ $ 39,000.
2. Construct new corporate and plant offices
including: Block work, metal studs,
drywall, doors, windows and trim. ................... 210,500.
3. A/C and heat, corporate and plant offices only......... 130,000.
4. Electric work, corporate and plant offices,
including: Lighting, receptacles,
emergency lighting, transformers and panels. ....... 125,000.
5. Plumbing for corporate and plant offices,
cafeteria and lunchroom, and water fountains. ....... 53,000.
6. Sprinkler system. Relocation of Main and Heads
in corporate and plant offices. ..................... 38,000.
7. Floor Covering. ....................................... 26,400.
8. Paint and Stain. ...................................... 27,500.
9. Concrete work on first floor. Remove wood block
floor. Dispose by others. Pour 3" concrete.
4000 psi, secure pour to existing floor. ............ 32,000.
10. Pave parking lot main entrance, ...................... 55,860.
-------------
TOTAL OF ABOVE $ 737,250.
Acceptance of Proposal -- The above prices, specifications and conditions are
satisfactory and are hereby accepted. You are authorized to do the work as
specified. Payment will be made as outlined above.
Signature ------------------
Date of Acceptance:
------------------------- Signature
-----------------
Exhibit "A"
<PAGE>
Schedule "A"
[FLOOR PLAN]
- Main Floor
- RBC (Cross hatch)
Schedule
A-1
<PAGE>
-RBC Office, 2nd Floor
[FLOOR PLAN]
Schedule
A-2
<PAGE>
[Drawing showing location of RBC building at Sullivan Way]
Schedule
A-3
<PAGE>
FOOTNOTE ADDENDUM TO LEASE AGREEMENT
BETWEEN
GENERAL SULLIVAN GROUP, INC., AS LANDLORD
AND
RBC BEARINGS, AS TENANT
DATED JULY 11,1995
-----------------------------------------------
This Addendum contains footnotes to the Lease Agreement (the "Lease")
between General Sullivan Group, Inc., as Landlord, and RBC Bearings, as Tenant.
1. Notwithstanding the term described on the first page of the preprinted
form of the Lease, the term of the Lease will commence on the first day of the
month immediately following the completion of the improvements, and continue for
a period of five years from that commencement date. The Tenant also shall have
the option to extend the term of the Lease for two years as more fully described
in paragraph Forty-fifth of the Rider to Lease Agreement.
2. Pursuant to operation of law
3. Nothing in this paragraph Third shall be construed as a waiver by the
Tenant of any statutory or common law obligation of the Landlord to mitigate
damages.
4. One Hundred Fifty (150)
5. One Hundred Fifty (150)
6. The subordination provided for hereunder by the Tenant to any future
mortgagees is conditioned on receipt by the Tenant from the mortgagees of a
non-disturbance agreement executed by such mortgagee substantially similar in
substance to that attached hereto as Exhibit B and made a part hereof.
7. Twenty (20)
8. or certified
9. or certified
10. Nothing contained herein shall preclude the Tenant from prosecuting
any claim directly against the condemning authority in such condemnation
proceedings for loss of business, or depreciation to, damage to, or cost of
removal of, or for the value of stock, trade fixtures, furniture, and other
personal property belonging to the Tenant; provided, however, that no such claim
shall diminish or otherwise adversely affect the Landlord's award or the award
of any mortgagee.
ATTEST: GENERAL SULLIVAN GROUP, INC.
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- -------------------------------- -----------------------------
ATTEST: RBC BEARINGS
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- -------------------------------- -----------------------------
<PAGE>
GUARANTY
In consideration of the execution of the within lease by the Landlord, at
the request of the undersigned and in reliance of this guaranty, the undersigned
hereby guarantees unto the Landlord, its successors and assigns, the prompt
payment of all rent and the performance of all of the terms, covenants and
conditions provided in said lease, hereby waiving all notice of default, and
consenting to any extensions of time or changes in the manner of payment of
performance of any of the terms and conditions of the said lease the Landlord
may grant the Tenant, and further consenting to the assignment and the
successive assignments of the said lease, and any modifications thereof,
including the sub-letting and changing of the use of the demised premises, all
without notice to the undersigned. The undersigned agrees to pay the Landlord
all expenses incurred in enforcing the obligations of the Tenant under the
within lease and in enforcing this guaranty.
Witness:
---------------------- ---------------------------(SEAL)
---------------------- ---------------------------(SEAL)
Date:
----------------------
Lease
-----------------------------------
GENERAL SULLIVAN GROUP, INC.
Landlord
to
RBC BEARINGS
Tenant
=====================================
Premises leased:
From:...............................
To:.................................
ASSIGNMENT AND ACCEPTANCE OF ASSIGNMENT
For value received the undersigned Tenant hereby assigns all of said Tenant's
right, title and interest in and to the within lease from and after unto
heirs, successors and assigns, the demised premises to be used and occupied for
and for no other purpose, it being expressly agreed that this assignment shall
not in any manner relieve the undersigned assignor from liability upon any of
the covenants of this lease.
Witness:
---------------------- ---------------------------(SEAL)
---------------------- ---------------------------(SEAL)
Date:
----------------------
In consideration of the above assignment and the written consent of the
Landlord thereto, the undersigned assignee, hereby assumes and agrees from and
after to make all payments and to perform all covenants and conditions
provided in the within lease by the Tenant therein to be made and performed.
Witness:
---------------------- ---------------------------(SEAL)
---------------------- ---------------------------(SEAL)
Date:
----------------------
CONSENT TO ASSIGNMENT
The undersigned Landlord hereby consents to the assignment of the within
lease to _______ on the express conditions that the original Tenant
, the assignor, herein, shall remain liable for the prompt
payment of the rent and the performance of the convenants provided in the said
lease by the Tenant to be made and performed, and that no further assignment of
said lease or sub-letting of any part of the premises thereby demised shall be
made without the prior written consent of the undersigned Landlord.
---------------------------
Landlord
Date: ---------------------- By
---------------------------
CONFIDENTIAL
LEASE
THIS INDENTURE OF LEASE, made this 12th day of March, 1996, by and between
INDUSTRIAL DEVELOPMENT GROUP, a general partnership with an office at Mattoon
Road, Waterbury, Connecticut, acting by ROGER N. DEVINO, its partner,
hereinafter referred to as "LANDLORD", and ROLLER BEARING COMPANY OF AMERICA,
INC., a Delaware corporation with a principal place of business at 60 Round Hill
Road, Fairfield, Connecticut 06430 hereinafter referred to as "TENANT". (the
above Tenant, if more than one, shall be jointly and severally liable for all
obligations in this lease).
W I T N E S S E T H:
ARTICLE I
DEMISED PREMISES
1.1 That in consideration of the rents and covenants herein provided and
contained on the part of the Tenant to be paid, performed and observed, the
Landlord does hereby demise and lease unto the Tenant approximately 7,000 square
feet of floor space in a commercial building containing a total of 10,500 square
feet of floor space located at 2066 Thomaston Avenue in the City of Waterbury,
County of New Haven and State of Connecticut. Said building is located on
premises described in Exhibit A attached hereto and made a part hereof and the
location of the demised premises is outlined in red on said Exhibit A (and shown
as Space A). The foregoing premises are hereinafter sometimes referred to as the
"Demised Premises".
1.2 The Tenant shall have the right to use the parking areas designated by
the Landlord in common with other tenants. Said parking areas shall only be used
for the limited purpose of
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CONFIDENTIAL
parking the registered motor vehicles of the Tenant and its employees and
customers during business hours and shall not be used for storage of motor
vehicles or any other property.
1.3 a) The Tenant will not sublet the premises or any part thereof nor
will said Tenant assign this Lease or any interest herein or transfer possession
or occupancy of said premises without the prior written consent of the Landlord,
nor shall any subletting or assignment hereof be affected by operation of law or
otherwise than by prior written consent of the Landlord, nor shall any sublessee
or assignee to this Lease occupy or utilize at any time the Premises for
purposes other than that specified as allowable in ARTICLE VI 6.1 of this Lease
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, provided, however, that the Tenant shall at all time
remain liable for the payment of the rents and the fulfillment of the covenants
of said Lease.
b) If there is any assignment of this Lease by Tenant or a subletting of
the whole of the premises by Tenant at a rent which, in either case, exceeds the
rent payable hereunder by Tenant, or if there is a subletting of a portion of
the Premises by Tenant at a rent in excess of the subleased portion's pro rata
share of the rent payable hereunder by Tenant, then Tenant shall pay to
Landlord, as additional rent, forthwith upon Tenant's receipt of each
installment of any such excess rent, fifty (50%) percent of any such excess
rent. The provisions of this paragraph shall apply to each and every assignment
of the Lease and each and every subletting of all or a portion of the Demised
Premises, to any other person, firm or entity, in each case on the terms and
conditions set forth herein. It is understood and
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<PAGE>
CONFIDENTIAL
agreed that the provisions for payment of excess rent to Landlord shall not
apply to an assignment or subletting of the whole Premises to any subsidiary or
affiliate of Tenant in which Tenant has a fifty (50%) percent or greater
ownership interest. Each request by Tenant for permission to assign this Lease,
or to sublet the whole or any part of the Premises shall be accompanied by a
warranty by Tenant as to the amount of rent to be paid to Tenant by the proposed
assignee, or sublessee. For the purposes of this Section 1.3, the term "rent"
shall mean all base rent, additional rent or other payments and/or consideration
payable by one party to another for the use and occupancy of all or a portion of
the Premises.
ARTICLE II
TERM OF LEASE AND OPTION TO RENEW
2.1 The term of this Lease shall be for a period of five (5) years
beginning on the 1st day of April, 1996 and ending on the 31st day of March,
2001.
2.2 If the premises are ready for occupancy prior to April 1, 1996, the
Tenant nay occupy the premises prior to said date and shall pay to Landlord a
proportionate amount of rent, in advance, for said period based on a per diem
rate of $87.50. During said early occupancy, the Tenant agrees to be bound by
all of the terms of the within Lease.
2.3 If the Premises are not ready for occupancy by April 1, 1996, then the
Tenant shall be given a credit against his rent in the amount of $87.50 per day
for every day that occupancy is delayed past April 1, 1996. Landlord shall be in
no way liable to Tenant for damages of any nature for failure to deliver
occupancy by April 1, 1996. However, if Landlord cannot deliver
3
<PAGE>
CONFIDENTIAL
occupancy by April 30, 1996, then Tenant may, at its option, elect to terminate
this Lease upon written notice to the Landlord by certified mail, return receipt
requested.
2.4 The Tenant shall have the option to renew its Lease for an additional
five (5) year period commencing April 1, 2001, and ending March 31, 2006 upon
the same terms and conditions, except for the basic annual rent which shall be
computed as set forth in paragraph 3.1 B herein. Tenant shall exercise said
option by giving the Landlord notice of its intention to do so by certified
mail, return receipt requested, not later than October 1, 2000.
ARTICLE III
RENT AND SECURITY DEPOSIT
3.1 Tenant agrees to pay to Landlord at the offices of the Landlord, or at
such other place designated by Landlord, without any prior demand therefore, and
without any deduction or set-off whatsoever, an annual rental during the term of
this Lease and any option period as follows:
A.i. During the period of April 1, 1996 to March 31, 1997 an annual rental
of $31,500.00 payable in equal monthly installments of $2,625.00, in advance, on
the first day of each month during said period;
ii. During the period of April 1, 1997 to March 31, 1998, an annual rental
of $33,250.00 payable in equal monthly installments of $2,770.83, in advance, on
the first day of each month during said period;
iii. During the period of April 1, 1998 to March 31, 1999, an annual
rental of $33,250.00 payable in equal monthly installments of $2,770.83, in
advance, on the first day of each month during said period;
4
<PAGE>
CONFIDENTIAL
iv. During the period of April 1, 1999 to March 31, 2000, an annual rental
of $35,000.00 payable in equal monthly installments of $2,916.67, in advance, on
the first day of each month during said period;
v. During the period of April 1, 2000 to March 31, 2001, an annual rental
of $36,750.00 payable in equal monthly installments of $3,062.50, in advance, on
the first day of each month during said period.
B.i. During the Option Period of April 1, 2001 to March 31, 2002, an
annual rental of $36,750.00, payable in equal monthly installments of $3,062.50,
in advance, on the first day of each month during said period;
ii. During the Option Period of April 1, 2002 to March 31, 2003, an annual
rental of $38,500.00, payable in equal monthly installments of $3,208.33, in
advance, on the first day of each month during said period;
iii. During the Option Period of April 1, 2003 to March 31, 2004, an
annual rental of $38,500.00, payable in equal monthly installments of $3,208.33,
in advance, on the first day of each month during said period;
iv. During the Option Period of April 1, 2004 to March 31, 2005, an annual
rental of $40,250.00, payable in equal monthly installments of $3,354.17, in
advance, on the first day of each month during said period;
v. During the Option Period of April 1, 2005 to March 31, 2006, an annual
rental of $40,250.00, payable in equal monthly installments of $3,354.17, in
advance, on the first day of each month during said period.
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CONFIDENTIAL
3.2 The Tenant shall pay as additional rent any money required to be paid
pursuant to ARTICLE IV, V, VI, VII, VIII, AND IX and all other sums of money or
charges required to be paid by Tenant under this Lease, whether or not the same
be designated "additional rent". If such amounts or charges are not paid at the
time provided in this Lease, they shall nevertheless, if not paid when due, be
collectibles as additional rent with the next installment of rent thereafter
falling due hereunder, but nothing herein contained shall be deemed to suspend
or delay the payment of any amount of money or charge at the time the same
becomes due and payable hereunder or limit any other remedy of the Landlord.
3.3 If Tenant shall fail to pay, when the same is due and payable or
within the ten (10) days thereafter, any rent or any additional rent, or amounts
or charges of the character described in Section 3.2 hereof, Tenant shall pay to
Landlord a late charge equal to ten percent (10%) of any such late payment.
3.4 Tenant has this day deposited the sum of Five Thousand Two Hundred
Fifty and 00/100 ($5,250.00) Dollars upon execution of this Lease to secure the
faithful performance of all of the terms and conditions of this Lease. If the
Tenant shall comply with all the terms, conditions and obligations of this
Lease, such deposit will be returned to the Tenant at the termination of this
Lease, without interest. In the event of the Tenant's default hereunder such
deposit may be applied by the Landlord toward reduction of any damages without
barring the Landlord, in any manner whatsoever, from other or additional legal,
or equitable course. Such deposit shall not be construed as constituting
liquidated damages. It is understood and agreed that the Landlord shall always
have the right, at its option, to
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apply said deposit, or from time to time such one or more parts or portions
thereof or part or portion thereof not previously applied, to late charges and
to the curing of any default that may then exist, without prejudice to any other
remedy or remedies which the Landlord may have on account thereof; prior to any
such application Landlord shall give written notice to Tenant stating the nature
of such default and Tenant shall then have thirty (30) days time in which to
cure same. Tenant hereby agrees not to look to the Landlord's mortgage, as
mortgagee, mortgagee in possession, or successor in title to the property, for
accountability for any security deposit required by Landlord hereunder unless
said sums have actually been received by said mortgagee as security for Tenant's
performance of the Lease.
ARTICLE IV
REAL ESTATE TAXES
4.1 The Tenant shall pay as additional rent to the Landlord a sum equal to
its proportionate share of the real estate taxes assessed against and
attributable to the building and land constituting the premises described in
exhibit A annexed hereto. It is agreed that the Tenant's proportionate share of
any such taxes shall be based on a fraction, the numerator of which shall be the
square footage of the Demised Premises which is agreed to be 7,000 square feet,
and the denominator of which shall be the total square footage of the buildings
which comprise Lot 9 which the Landlord represents to be 16,800 square feet.
Tenant shall also pay all taxes assessed on improvements made in or about the
Demised Premises by Tenant. Landlord, upon receipt of tax bills from the taxing
authority, shall present such bills to Tenant and Tenant shall pay its
proportionate share of such bills to
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Landlord within twenty (20) days of Tenants receipt of such bills. If Tenant
fails to make any such payment of taxes to Landlord within said twenty (20)
days, then for the remainder of the term and any extension terms of this Lease
Tenant shall pay to Landlord monthly, on the first day of each month during the
term of this Lease and any extension thereof, an amount equal to 1/12 of its
share of the real estate taxes as provided above. Landlord shall hold said funds
for the benefit of the Tenant and use them to pay such taxes as they fall due.
If said funds are insufficient to pay the Tenant's share of the taxes when due,
the Landlord shall bill the Tenant for the difference and Tenant shall make
payment to Landlord within thirty (30) days after receipt of said bill. If said
funds are in excess of the taxes due, then Landlord shall return the unused
portion of said funds to the Tenant within thirty (30) days after the taxes
become due, except that if the Tenant is in default in the payment of rent as
provided for herein, Landlord may apply said unused funds to the payment of said
rent. Tax bills shall be sufficient evidence of the amount of such taxes and
shall be used for the calculation of the amount to be paid by the Tenant. "Real
Estate Taxes" shall mean all taxes or assessments and governmental charges
whether federal, state, county, or municipal which are levied or charged against
real estate or rent, or on the right or privilege of leasing real estate or
collecting rent and any other taxes and assessments attributable to the premises
herein leased or its operation, excluding federal, state or other income taxes,
and federal and/or state succession or inheritance taxes. If any payment for
taxes shall be due for any tax year in which said Lease shall be in force and
effect for less than a full tax year,
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such payment shall be prorated so the amount payable by Tenant shall be based on
the actual number of months that said Lease shall be in force and effect during
such tax year. It is further agreed and understood that if Tenant shall qualify
for any city and/or state real estate tax exemptions, which exemptions may be
available to manufacturers, the benefit of said exemption shall be applied
directly to the Tenant's portion of the taxes due pursuant to this paragraph. If
the Tenant does not qualify for any such exemptions, but another tenant in the
building does so qualify, then Tenant shall receive no benefit from the reduced
taxes, but shall pay its full share as if no exemption had been granted.
ARTICLE V
COMPLIANCE WITH ENVIRONMENTAL LAWS, FIRE CODES AND
OTHER LAWS
5.1 Laws in General. The Tenant, at its sole expense, shall comply with
all laws, orders, and regulations of federal, state, and municipal authorities,
and with any direction of any public officer, pursuant to law, which shall
impose any duty upon the Landlord or the Tenant with respect to the leased
property, including, but not limited to, such as relate to the venting of
noxious odors and fumes, cleanliness, safety, occupation and use of said
premises and the nature, character and manner of operation of the business
conducted in or at the Demised Premises, provided that such compliance relates
solely to the conduct of Tenants business at the Demised Premises. The Tenant,
at its sole expense, shall obtain all licenses or permits which may be required
for the conduct of its business within the terms of this Lease, or for the
making of repairs, alterations,
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improvements, or additions, and the Landlord, where necessary, will join the
Tenant in applying for all such permits or licenses.
5.2 (a) Environmental Laws. Landlord represents that as of the date
hereof, the Landlord and the property containing the Demised Premises are not in
violation of any local, state or federal rule or regulation concerning the
handling and disposal of oil or petroleum or chemical liquid or solid, liquid or
gaseous products, or hazardous waste or concerning air, water or noise
pollution. Landlord shall hold Tenant harmless from any claim by any local,
state or federal agency or any other party for violation of any such rule or
regulation which occurred prior to Tenants occupancy of the Demised Premises.
(b) Tenant shall comply with all local, state and federal regulations
concerning the storage, handling and disposal of oil or petroleum or chemical
liquid or solid, liquid or gaseous products, or hazardous waste and air, water
and noise pollution used in the conduct of Tenants business at the Demised
Premises. Tenant hereby agrees not to handle, store, or dispose of any hazardous
or toxic waste or substance upon the premises in a manner which is prohibited by
any federal, state or local statutes, ordinances, or regulations. Tenant hereby
covenants to indemnify and hold Landlord, its successors and assigns, harmless
from any loss, damage, claims, costs, liabilities or cleanup costs arising out
of Tenant's use handling, storage or disposal of any such hazardous or toxic
wastes or substances on the premises, including all such losses due to claims
made by the Department of Environmental Protection of the State of Connecticut,
(DEP) Environmental Protection Agency of the
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Federal Government (EPA), other governmental agencies, or private third parties.
(c) If Tenant intends to produce, store, or create, on the Demised
Premises, any oil or petroleum or chemical liquid or solid, liquid or gaseous
products, or any other substance defined as hazardous waste by state statute
and/or the Department of Environmental Protection of the State of Connecticut
(DEP), or by federal statute and/or the Environmental Protection Agency of the
Federal Government (EPA), and if required by law or governmental agency it will
submit a plan to said agency or agencies and if so required to the Landlord,
prior to such use of the Demised Premises, for the safe handling, storage and
use and removal of any such substance. If a permit is required by the DEP or EPA
for the use, storage and/or removal of such substance, Tenant must obtain such
permit and submit a copy to Landlord prior to such use of the Demised Premises.
(d) If there is a "spill", as that term is defined in Section 22a-452c of
the Connecticut General Statutes, caused solely by the Tenant, its agents,
employees or business invitees, of any substance set forth in paragraph (b)
above, such "spill" shall be immediately reported by Tenant to the Landlord and
if the material spilled poses a threat to human health or the environment to the
DEP and, if required, to the EPA. Tenant shall take immediate remedial action to
contain and clean up such "Spill" and shall be solely responsible for all costs
of remedial action including, but not limited to, the cost of professional
environmental studies and reports, attorney's fees, clean up, soil removal,
monitoring costs, fines and penalties.
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(e) If Tenant does not take appropriate and timely remedial action to
contain and clean up such "spill", or if Landlord is ordered by the DEP or EPA
to take remedial action to contain and clean up such "spill", Landlord may take
all necessary remedial action to contain and clean up such spill, and Tenant
shall reimburse Landlord for all reasonable costs of such remedial action,
including, but not limited to, the cost of professional environmental studies,
attorney's fees, soil removal, clean up, monitoring costs, fines and penalties,
and interest from the date Landlord incurs each expense until such expense is
paid by Tenant at the rate of twelve percent (12%) per annum.
(f) At the conclusion of the term of this lease or any modifications or
extensions thereof, or upon Landlord's sale of the Demised Premises to a third
party, Tenant shall, upon Landlord's request, submit a written statement to the
Landlord which shall provide that, to the best of Tenant's knowledge: (1) there
has been no discharge, spillage (including a "spill" as defined in Section
22a-452c of the Connecticut General Statutes), uncontrolled loss, seepage or
filtration of hazardous waste, toxic waste and/or biomedical waste (the
foregoing collectively a "Release") within or from the Demised Premises or
within or from that portion of the property where the Demised Premises is
located and to which the Tenant has a right of access under this Lease
(collectively for the purposes hereof the "Premises"), (2) Release(s) within or
from the Premises have been remediated and such remediation has been approved by
the Commissioner of the Connecticut Department of Environmental Protection (the
"Commissioner") in writing, (3) one or more Licensed
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Environmental Professionals ("LEPs") approved by the Commissioner have verified
the remediation of any contamination and/or pollution caused by Release(s) at
the Premises in accordance with the provisions of P.A. 95-183 or (4) all
contamination and/or pollution caused by Release(s) at the Premises has not been
remediated to the satisfaction of the Commissioner of verified by a LEP.
Provided that there has been no Release as stated in 5.2(f) (1), the Landlord
shall be responsible for complying with all provisions of, the Connecticut
Transfer Act, C.G.S. 22a-134 -22a-134e, as amended (the "Act") including, but
not limited to, preparation of forms and supporting documents, filing of forms
and supporting documents and payment of filing fees should the Act apply to the
Landlord's sale or other act with regard to the ownership of or use of the
Premises. If there has been a Release resulting from the act or negligence of
the Tenant, its agents, employees or business invitees, then Tenant shall be
responsible for complying with all provisions of the Connecticut Transfer Act,
C.G.S. 22a-134 - 22a-134e, as amended (the "Act") including, but not limited to,
preparation of forms and supporting documents, filing of forms and supporting
documents and payment of filing fees should the Act apply to the Landlord's sale
or other act with regard to the ownership of or use of the Premises.
5.3 The Landlord represents that the Demises Premises is in conformance
with applicable fire codes or will be in conformance with applicable fire codes
on the date that Tenant takes occupancy. If, because of the nature of Tenant's
operations, the Landlord is required by the fire codes to make modifications or
additions to the sprinkler system, fire walls, exits, fire
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escapes or any other fire prevention system, then Tenant agrees to pay for any
such modification or addition as additional rent.
ARTICLE VI
USE OF PREMISES
6.1 Tenant covenants and agrees that throughout the term of the Lease the
Demised Premises will be used only for machining of bearing components or other
power transmission components, electrical heat treating, assembly, packaging,
shipping, warehousing and research and development of processes related to power
transmission products, and SHALL NOT be used for i) any electrical or chemical
plating processes or ii) any chemical treating or finishing processes.
6.2 Tenant covenants and agrees that throughout the term of this Lease and
any extension or renewal thereof:
(a) It will not overload, damage or deface the premises;
(b) It will conform to all reasonable rules which Landlord may make from
time to time relative to the operation and use of the property;
(c) It will vent all noxious and hazardous odors and fumes from its
operations, maintain humidity controls, maintain noise levels, and provide safe
procedures for the handling and storage of chemicals and other hazardous
materials in such a manner so as not to affect or interfere with other tenants
in the building, or occupants of other properties adjacent to or within close
proximity of the building, and in such a manner so as not to cause damage to the
building, the building lot upon which the building is located, and neighboring
properties. If the Tenant fails to comply with this provision, the Landlord may
install said ventilation or other controls and charge the Tenant the
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reasonable costs thereof which the Tenant agrees to pay as additional rent, or
at the Landlord's election, the Landlord may terminate this Lease upon thirty
(30) days written notice to the Tenant.
(d) it will place all of its rubbish and waste in the area designated by
the Landlord, and it shall be responsible for the costs of the removal of said
rubbish;
(e) It will not place any sign upon the premises without first submitting
the design and proposed location of the sign to the Landlord and receiving
written approval from Landlord of such design and location. Such signage shall
conform to the specifications contained in Exhibit C attached hereto.
ARTICLE VII
MAINTENANCE, REPAIRS AND ALTERATIONS
7.1 Tenant represents that it has examined the Demised Premises as they
now exist. The Landlord agrees to turn the premises over to the Tenant in a
"broom clean" condition and further agrees to make the improvements listed on
Exhibit B, if any, within thirty (30) days of occupancy, and Tenant accepts the
premises in their present condition except as herein specifically stated and the
Landlord and/or its agents makes no representations as to their present or
future condition.
7.2 Tenant may make such interior alterations or improvements in and to
the Demised Premises, at its own cost, as it may deem desirable for its use,
thereof, except no alteration shall be made that modifies the basic building
structure without the written approval of Landlord, which approval shall not be
unreasonably withheld. All repairs and alterations shall be of quality at least
equal to the original construction. At the
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termination of this Lease, except for casualty losses insured against, or losses
occasioned by floods, earthquakes, wars, acts of God, or other losses over which
Tenant has no control, Tenant shall deliver the Demised Premises to Landlord in
good condition and repair, allowance being made for ordinary wear, tear and
obsolescence. In addition, all of said alterations or improvements shall remain
the property of Landlord. However, should the Landlord elect that such
alterations or improvements be removed by Tenant, then Tenant agrees to remove
same at Tenant's sole expense and to restore the premises to the condition it
was in at the commencement of this Lease. If Tenant shall fail to remove same,
then Landlord shall cause same to be removed and Tenant agrees to reimburse the
Landlord for the cost of such removal, together with any and all damages which
Landlord may suffer by reason of Tenant's failure to remove same.
7.3 The Tenant agrees to maintain and repair the interior of the building,
including but not limited to, the interior walls and partitions, and all of the
mechanical systems including the heating, air conditioning, plumbing and
electrical systems (Landlord warrants the furnace and the heat pump to be free
of defects for a period of six (6) months from date of occupancy). Tenant shall
also maintain and repair both the interior and exterior of all doors, including
overhead doors, located within the Demised Premises. Tenant shall provide and
maintain an adequate number of fire extinguishers in the Demised Premises in
order to comply with local fire codes.
7.4 Landlord shall be responsible for exterior structural repairs
including the roof, foundation and exterior walls, provided, however, that
Tenant shall be responsible for all non-
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structural as well as structural repairs to the exterior walls, foundation and
roof that result from damage caused by the negligence or misuse of the Tenant,
its agents, servants, employees and its business invitees.
7.5 Landlord shall provide for the maintenance and repair and lighting of
the designated receiving and parking areas including, but not limited to,
lighting, repairs, removal of dirt and debris and lawn mowing and maintenance to
lawns and shrubbery. Tenant shall pay to Landlord its proportionate share of the
cost of said maintenance and repairs (other than capital improvements) based on
a fraction, the numerator of which shall be 7,000 and the denominator of which
shall be 16,800.
Landlord shall present Tenant with a bill for such maintenance and repairs
on the first day following the performance of such maintenance and repairs and
Tenant shall pay said bill within thirty (30) days of its receipt. Provided that
the area of Demised Premises does not exceed 7,000 square feet, Tenants
responsibility for payment of expenses under this section 7.5 shall be limited
to a maximum combined amount per year in accordance with the following schedule:
Years 1-5 Maximum $2,800.00 per year
Option Years 6-10 Maximum $3,500.00 per year
7.6 Landlord shall be responsible for the snow plowing and/or sanding of
the entire paved parking area to the building and the driveways leading thereto
whenever there is an accumulation of two (2) or more inches of snow. Tenant
shall pay to Landlord its proportionate share of the cost of said snow removal
and/or sanding based on a fraction, the numerator of
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which shall be 7,000 and the denominator of which shall be 16,800.
Landlord shall present Tenant with a bill for such snow plowing and/or
sanding on the first day of each month following such snow plowing and Tenant
shall pay said bill within thirty (30) days of its receipt.
Provided that the area of Demised Premises does not exceed 7,000 square
feet, Tenants responsibility for payment of above expenses in this section 7.6
shall be limited to a maximum combined amount per year in accordance with the
following schedule:
Years 1-5 Maximum $6,300.00 per year
Option Years 6-10 Maximum $7,900.00 per year
Tenant shall be responsible for snow removal and sanding of any walkways
or stairways which abut and/or are used for ingress and egress to the Demised
Premises.
7.7 The Tenant further covenants and agrees to replace all broken glass on
the Demised Premises during the term of this Lease or any month-to-month
extension thereof at its own expense.
ARTICLE VIII
UTILITIES
8.1 (a) Tenant agrees to pay all charges for electricity, water, sewer,
telephone, fire service line charges, sprinkler alarm monitory charges and any
other utilities used by the Demised Premises.
(b) Separate meters for electricity shall be provided and installed by
Landlord. Tenant shall pay to Landlord its proportionate share of the total
water used by the entire Building based upon a fraction, the numerator of which
shall be
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7,000 and the denominator of which shall be 10,500. Landlord shall present
Tenant with a bill for such water charges on the first day of the month
following the receipt by Landlord of a water bill from the City or other
provider, and Tenant shall pay said bill within thirty (30) days of its receipt.
Provided, however, if Landlord determines, in its sole discretion, that Tenant's
water use, because of the nature of its operations, exceeds the average water
use of other tenants in the Building, then Landlord reserves the right to
install a meter in the Demised Premises and Tenant shall be billed for water
based on actual use.
8.2 The parties hereto recognize that the Demised Premises and the
remainder of the building are heated by separate oil fired furnaces supplied by
one (1) oil tank. The Landlord shall provide a meter in the Demised Premises
which shall indicate the amount of oil consumed therein. Landlord and Tenant
shall read said meter at the end of each month and bill the Tenant for the
amount of oil consumed at the rate billed to the Landlord by Landlords fuel
supplier which rate shall be equivalent to the going rate charged by Landlords
fuel supplier to its commercial customers with equivalent oil storage tanks.
Tenant shall pay said amount to Landlord within thirty (30) days from the
receipt of said bill. Tenant shall maintain a temperature within the entire
Demised Premises of at least 50 degrees Fahrenheit in order to prevent freezing
of pipes and plumbing located therein.
8.3 Landlord shall not be liable in damages or otherwise for any failure
to furnish or interruption of the services of heat or any utility consumed or
used in the Demised Premises,
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provided that such failure is beyond the reasonable control of Landlord and not
due to Landlord's negligence.
ARTICLE IX
INDEMNITY AND INSURANCE
9.1 The Tenant shall pay, as additional rent, its proportionate share of
the Landlord's total insurance premium on the entire building for fire,
lighting, extended coverage, all loss of a direct physical nature, loss of
rental income, and legal liability coverage as it pertains to the premises and
its appurtenances. It is agreed that the Tenant's proportionate share of such
premium shall be based on a fraction, the numerator of which shall be the square
footage of the Demised Premises which is agreed to be 7,000 square feet, and the
denominator of which shall be the total square footage of the building which is
agreed to be 10,500 square feet. Tenant shall pay to Landlord monthly, on the
first day of each month during the term of this Lease and any extension thereof,
an amount equal to 1/12 of its share of the insurance premiums as provided
above. Landlord shall hold said funds for the benefit of the Tenant and use them
to pay such insurance premiums as they fall due. If said funds are insufficient
to pay the Tenant's share of the insurance premiums when due, then Landlord
shall bill the Tenant for the difference and the Tenant shall make payment to
Landlord within thirty (30) days after receipt of said bill. If said funds are
in excess of the insurance premiums due, then Landlord shall return the unused
portion of said funds to the Tenant within thirty (30) days after the insurance
premiums become due, except that if the Tenant is in default in the payment of
rent as provided for herein, Landlord may apply said unused funds to the
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payment of said rent. The premium bill submitted by Landlord's insurance company
shall be sufficient evidence of the amount of premium due and owing. Tenant
further agrees that if a determination is made by the Landlord's fire insurance
carrier that the Tenant is storing materials on the premises or performing
certain manufacturing processes or procedures on the premises which increase the
risk of loss, and said insurance company thereby increases the total insurance
premium for the entire building over and above that premium which the Landlord
would have paid had there been no such materials stored or manufacturing
procedures or processes performed, then Tenant shall pay to Landlord, in
addition to his proportionate share of said premium as aforesaid, the total
amount of said increased insurance premium. If the increased insurance premium
is attributable to more than one tenant in the building, then the increase shall
be apportioned between said tenants in accordance with a formula to be supplied
by the Landlord's insurance carrier.
9.2 Tenant covenants and agrees to assume exclusive control of the Demised
Premises, and all tort liabilities incident to the control or leasing thereof,
and to save Landlord harmless from all claims or damages arising on account of
any injury or damage to any person or property on said Demised Premises, or
otherwise resulting from the use and maintenance and occupancy of the Demised
Premises or anything or facility kept or used thereon, Landlord shall be saved
harmless by Tenant from any liability on account of any accident or injury to
Tenant, or to any of Tenant's servants, employees, agents, visitors, or
licensees, or to any person or persons in or about the said premises. In case
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Landlord shall, without fault on its part, be made a party to any litigation
commenced by or against Tenant, then Tenant shall protect and hold Landlord
harmless and shall pay all costs, expenses and reasonable attorney's fees
incurred or paid by Landlord in connection with such litigation.
9.3 Tenant covenants and agrees that it will obtain and maintain during
the term of this Lease, at its own expense, general comprehensive public
liability insurance with responsible companies qualified to do business in
Connecticut which shall insure Landlord its agents, employees and business
invitees, as well as Tenant, against i) all claims for injuries to persons or
for death occurring in or about the Demised Premises, in the amount of at least
One Million Dollars ($1,000,000.00), and ii) against all claims for damages to
or loss of property occurring in or about the Demised Premises, including fire
damage/legal liability limit coverage, in the amount of at least Five Hundred
Thousand Dollars ($500,000.00). Tenant agrees to furnish Landlord with Policies
or certificates of such insurance prior to the commencement of the term hereof
and each renewal policy or certificate thereof at least ten (10) days prior to
the expiration of the policy it renews. Each such policy shall be noncancellable
with respect to the Landlord's interest without at least ten (10) days prior
written notice to the Landlord.
9.4 Tenant agrees that it will, at its own cost and expense, keep its own
fixtures, merchandise and equipment adequately insured during the term hereof
against losses or damage by fire, with the usual extended coverage endorsements.
9.5 Landlord shall not be liable for any damage to the Demised Premises,
or to any property of the Tenant or of any
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other person thereon, from water, rain, snow, ice, sewage, steam, gas or
electricity which may leak into or issue or flow from any part of said building
of which the Demised Premises are part, or from the bursting, breaking,
obstruction, leaking or any defect of any of the pipes or plumbing, appliances,
or from electric wiring or other fixtures in said building or from the condition
of said premises or building or any part thereof, or from the street or
subsurface, except such damage or injury as may be caused by the negligent act
or omission on the part of the Landlord, its agents, servants or employees.
Landlord represents that, to its knowledge, the existing heating, air
conditioning, plumbing and electrical systems are, in both the Demised Premises
and the building containing said Premises and as of the date of execution of the
Lease herein, in compliance with the applicable provisions of the State of
Connecticut Basic Building Code which was in effect on May 16, 1985 when the
Certificate of Occupancy for said building was issued by the City of Waterbury.
9.6 Landlord and Tenant each hereby waive such causes of action either may
have or acquire against the other which are occasioned by the negligence of
either of them or their employees or agents resulting in the destruction of or
damage to real or personal property belonging to the other and located on the
premises of which the Demised Premises are a part and which are caused by fire
and/or the hazards normally insured against in an Extended Coverage Endorsement
to a Standard Fire Insurance Policy approved in the State of Connecticut. Each
party to this agreement further agrees to cause any insurance policy covering
destruction of or damage to such real or personal property from fire and/or the
hazards covered under the aforementioned extended
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coverage endorsement to contain a waiver of subrogation clause or endorsement
under which the insurance company waives its right of subrogation against either
party to this agreement in case of destruction of or damage to the
aforementioned real or personal property of either such party.
ARTICLE X
SUBORDINATION, ATTORNMENT, ESTOPPEL CERTIFICATES
10.1 Subordination. Tenant agrees that this Lease is subject and
subordinate to the lien of any mortgage now on or which at any time may be made
a lien upon the Demised Premises or any part thereof. This subordination
provision shall be self-operative and no further instrument of subordination
shall be required. Tenant agrees to execute and deliver, upon request, such
further instrument or instruments confirming this subordination as shall be
desired by Landlord or by any Mortgagee or proposed mortgagee and Tenant hereby
constitutes and appoints Landlord as Tenant's attorney-in-fact to execute any
such instrument or instruments.
10.2 Attornment. In the event any proceedings are brought for foreclosure
of, or in the event of exercising of the power of sale under, any mortgage deed
to secure debt given by Landlord and covering the Demised Premises, Tenant shall
attorn to the Purchaser upon any such foreclosure or sale and recognize such
purchaser as the owner and landlord under this Lease, provided such owner, as
landlord, shall recognize Tenant's rights to continue to occupy the Demised
Premises and exercise and enjoy all of its rights hereunder so long as Tenant
complies with the terms and provisions of this Lease and further provided any
such
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purchaser shall be deemed to assume and agree to perform the duties of the
Landlord hereunder.
10.3 Estoppel Certificates. Tenant agrees, at any time and from time to
time upon not less than five (5) days prior written notice by Landlord, to
execute, acknowledge and deliver to Landlord a statement in writing (i)
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications the nature of same), (ii) stating the dates to
which the Minimum Annual Rent and Additional Rent have been paid by Tenant,
(iii) stating whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or condition contained in
this Lease, and, if so, specifying each such default of which Tenant may have
knowledge, (iv) stating the address to which notice to Tenant should be
sent, (v) stating such other facts as Landlord's Lender or Purchaser may
reasonably require. Any such statement delivered pursuant hereto may be relied
upon by an owner of the Demised Premises, any mortgagee of the Demised Premises,
or any prospective assignee of any such mortgagee.
10.4 Non-Disturbance Agreement. Landlord shall use its best efforts to
obtain, from future mortgage lenders for the Premises, a non-disturbance
agreement to the benefit of Tenant.
ARTICLE XI
DAMAGE BY FIRE OR OTHER CASUALTY
11.1 In the event the Demised Premises shall be destroyed or so damaged by
fire or other casualty so as to render the Demised Premises wholly untenantable,
Landlord, at its option, shall (a) restore and repair such damage to the Demised
Premises in which event the basic monthly rent shall abate on a per diem
25
<PAGE>
thirty (30) day month basis during the period of restoration; or (b) terminate
this lease or any renewal thereof by giving written notice to Tenant thirty (30)
days after such fire or casualty, and the rent shall terminate as of the day of
such fire or casualty. In the event the leased premises shall be destroyed or so
damaged but are not thereby rendered wholly untenantable, Landlord shall restore
the leased premises within ninety (90) days of the date of such fire or other
casualty, and while such damage is being repaired, the basic monthly rent shall
be reduced by an amount which bears the same ratio to the monthly rent that the
floor area rendered untenantable bears to the total floor area of the Demised
Premises; if the amount of damage or destruction is such that Tenant cannot
reasonably operate its business at the Premises, then the full rent shall abate
during said period of restoration.
In the event the Demised Premises shall be destroyed or so damaged by fire
or other casualty so as to render the Premises wholly untenantable, and such
destruction or damage occurs during the last year of the term of this Lease or
the last year of any option period hereunder, and such damage or destruction
cannot be repaired within ninety (90) days of the date of such damage or
destruction, then Tenant may elect to terminate this Lease by giving written
notice to Landlord.
ARTICLE XII
EMINENT DOMAIN
12.1 In the event that the whole of Demised Premises shall be taken under
the power of eminent domain, this Lease shall thereupon terminate as of the date
of the taking of the Premises by the condemning authority. In the event that a
portion of the
26
<PAGE>
floor area of the Demised Premises shall be taken under the power of eminent
domain and the portion not so taken will not be reasonably adequate for the
operation of Tenant's business notwithstanding Tenant's performance or
restoration as hereinafter provided, this Lease shall thereupon terminate as of
the date possession of said portion is taken. In the event of any taking under
the power of eminent domain which does not terminate this Lease as aforesaid,
all of the provisions of this Lease shall remain in full force and effect,
except that the basic rent shall be reduced in the same proportion that the
amount of floor area of the Demised Premises taken bears to the total floor area
of the Demised Premises immediately prior to such taking, and Landlord shall at
Landlord's own cost and expense, restore such part of the Demised Premises as is
not taken to as near its former condition as the circumstances will permit and
Tenant shall do likewise with respect to all exterior signs, trade fixtures,
equipment, display cases, furniture, furnishings and other installations of
Tenant.
All damages awarded for any such taking under the power of eminent domain,
whether for the whole or a part of the Demised Premises, shall belong to and be
the property of the Landlord, whether such damages shall be awarded as
compensation for diminution in value of the leasehold or for the fee of the
Demised Premises, provided, however, that Landlord shall not be entitled to any
award made to Tenant for loss of or damage to Tenant's trade fixtures and
removable personal property or for damages to improvements made by Tenant with
approval of Landlord during the term of this Lease and any extension thereof or
for damages for cessation interruption of Tenant's business.
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If this Lease is terminated as provided in this Article XII, all rent
shall be paid up to the date that possession is taken by public authority, and
Landlord shall make an equitable refund of any rent paid by Tenant in advance
and not yet earned. A voluntary sale by Landlord to any public or quasipublic
body, agency or person, corporate or otherwise, having the power of eminent
domain, either under threat of condemnation or while condemnation proceedings
are pending, shall be deemed to be a taking by eminent domain for the purpose of
this Article XII.
ARTICLE XIII
DEFAULT OF THE TENANT
13.1 (a) If Tenant shall default in the performance or observance of any
of the covenants, agreements, terms, provisions or conditions contained herein
and on its part to be performed or observed for a period of thirty (30) days
after written notice from the Landlord specifying such default, or (b) if Tenant
is in default in payment of rents for a period of (10) days, or (c) if any
assignment shall be made by Tenant for the benefit of creditors, or Tenant
becomes involved in any proceedings as a Debtor under the bankruptcy laws of the
United States in effect at the time of default, or (d) if Tenant's leasehold
interest shall be taken on execution, then and in any of such cases, Landlord
and the agents and servants of Landlord lawfully may, in addition to and not in
derogation of any remedies for any preceding breach of covenant, immediately or
at any time thereafter and without prior demand or statutory notice to quit,
commence an action or Summary Process to evict Tenant from the Premises, without
prejudice to any remedies which might otherwise
28
<PAGE>
be used for arrears of rent or preceding breach of covenant. Tenant hereby
waives the statutory Notice to Quit, and Tenant covenants and agrees that in the
case of such termination, or termination under statute by reason of default on
Tenant's part, Tenant will, at the election of the Landlord:
(i) pay to Landlord in equal monthly installments, in advance, sums equal
to the aggregate rent herein provided for or, if the Demised Premises have
been relet to a new tenant, a lump sum equal to the excess of the
aggregate rent herein provided for over the sums to be received by
Landlord as stated in the lease to the new tenant, such sums being payable
as liquidated damages for the unexpired term hereof; or
(ii) pay to Landlord as damages a sum which at the time of such
termination or at the time to which installments of liquidated damages
shall have been paid represents the amount by which the then rental value
of the Demised Premises is less than the aggregate rent herein provided
for the residue of the term; or
(iii) indemnify Landlord against loss of the aggregate rent herein
provided for from the time of such termination or from the time to which
installments of liquidated damages shall have been paid to the expiration
of the term hereof as above set forth.
For the purpose of this Article, the phrase "aggregate rent", as
used herein, shall include the fixed annual rent and all additional rents
and charges payable hereunder, including reasonable attorney's fees
incurred by Landlord in
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<PAGE>
enforcing its rights hereunder and include interest on all unpaid sums at
the rate of twelve percent (12%) per annum, from the date of default to
the date of payment.
In the event of a default by the Tenant as above provided, if
Landlord shall elect not to terminate this Lease, it may relet the Demised
Premises or any part or parts thereof, either in the name of Landlord or
Tenant, for a term or terms which may, at Landlord's option, extend beyond
the balance of the term of this Lease, and Tenant agrees that in the event
of such reletting to a new tenant, Tenant shall pay Landlord any
deficiency between the aggregate rent hereby reserved and covenanted to be
paid and the net amount of the rents set forth in the lease to the new
tenant, on such reletting, as well as any expense incurred by Landlord in
such reletting including, but not limited to, attorney fees, broker's fees
and expenses of remodeling and putting the Demised Premises in good order
and preparing the same for rerental. Such deficiency shall be paid by
Tenant to Landlord upon delivery to Tenant of a copy of the lease to the
new tenant along with an itemization of the balance due and owing.
13.2 Any and all rights and remedies which Landlord may have under this
Lease and at law and in equity shall be cumulative and shall not be deemed
inconsistent with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted by law.
13.3 Landlord shall not be deemed in default in the performance of any of
its obligations hereunder unless it shall fail to perform such obligations and
such failure shall continue
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for a period of thirty (30) days or such additional time as is reasonably
required to correct any such default after written notice has been given by
Tenant to Landlord specifying the nature of Landlord's alleged default.
13.4 If either party brings an action against the other party to enforce
the terms of this agreement, the losing party shall pay the prevailing party's
attorneys fees.
ARTICLE XIV
HOLDING OVER
14.1 Tenant shall vacate the Demised Premises on the Expiration Date of
the Lease term, or on any other termination of this Lease. If Tenant holds
possession of the Demised Premises after the Expiration Date or any other
termination of this Lease, Landlord shall have the option, exercisable in
writing thirty (30) days after the date of termination as aforesaid, to treat
Tenant as a Tenant at Sufferance, or as a tenant by the month. If Landlord fails
to make such election, then the Tenant shall be deemed a tenant by the month,
commencing with the first day after the termination of the Lease at DOUBLE the
Basic Monthly Rent paid during the last month of the term, and upon all the
other terms of this Lease, including the provision of this paragraph. Said
holdover term shall terminate upon thirty (30) days notice from one party to the
other. Nothing contained herein shall be construed within said thirty (30) days
after the date of Lease termination as aforesaid as a consent by Landlord to the
occupancy or possession of the Demised Premises by Tenant after the termination
of the Lease, and Landlord, upon said termination, if Landlord elects to treat
Tenant as a Tenant at Sufferance, shall be entitled to the benefit of all rights
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<PAGE>
conferred upon Landlord by statute or a common law relating to the speedy
recovery of the possession of the Demised Premises. In addition, Tenant shall be
liable to Landlord for all damages suffered by Landlord as a result of Tenant's
failure to vacate the Demised Premises at the end of the Lease term, or at the
end of the holdover term, including, but not limited to,
a. all economic losses of Landlord resulting from Landlord's inability to
deliver possession of the premises to a new tenant, including damages resulting
from the cancellation or termination by said new tenant of its lease with the
Landlord;
b. all economic losses of Landlord resulting from the Landlord's inability
to deliver possession of the Demised Premises to a bona-fide purchaser of the
Demised Premises pursuant to the terms of a contract of sale.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 Waiver. Failure of Landlord to complain of any act or omission on the
part of the Tenant, no matter how long the same may continue, shall not be
deemed to be a waiver by Landlord of any of its rights hereunder. No waiver by
Landlord at any time, express or implied, of any breach of any provision of this
Lease shall be deemed a waiver of a breach of any other provision of this lease
or a consent to any subsequent breach of the same or any other provision. If any
action by Tenant shall require Landlord's consent or approval, Landlord's
consent to or approval of such action on any one occasion shall not be deemed a
consent to or an approval of said action on any subsequent occasion or a consent
to or approval of any other action on the same or any subsequent occasion. No
payment by Tenant or acceptance by
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Landlord of a lesser amount than shall be due from Tenant to Landlord shall be
deemed to be anything but payment on account, and the acceptance by Landlord of
a check for a lesser amount with an endorsement or statement thereon or upon a
letter accompanying said check that said lesser amount is payment in full shall
not be deemed an accord and satisfaction, and Landlord may accept said check
without prejudice to receive the balance due or pursue any other remedy. Any and
all rights and remedies which Landlord may have under this Lease or by operation
of law, either at law or in equity, upon any breach, shall be distinct, separate
and cumulative and shall not be deemed inconsistent with each other and no one
of them, whether exercised by Landlord or not, shall be deemed to be in
exclusion of any other; and any two or more or all of such rights and remedies
may be exercised at the same time.
15.2 Partial Invalidity. If any term, covenant or condition of this Lease
or the application thereof to any person or circumstance shall, to any extent,
be invalid or unenforceable, the remainder of this Lease, or the application of
such term, covenant or condition to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby and
each term, covenant or condition of this Lease shall be valid and be enforced to
the fullest extent permitted by law.
15.3 Recording. Notice of this Lease may be recorded in the Town clerk's
office in the City of Waterbury, County of New Haven and State of Connecticut,
in accordance with the requirements of the applicable laws of the State of
Connecticut relating to leases. In the event this Lease is terminated,
33
<PAGE>
canceled, released or assigned before the expiration of the term, the Landlord
and Tenant shall, upon the request of either party, execute and deliver a
written instrument in form for recording setting forth such termination,
cancellation, release or assignment. The parties agree at the appropriate time
to execute and deliver an instrument in recordable form evidencing the
commencement date of the term hereunder.
15.4 Covenant of Landlord. Upon payment by the Tenant of the rents herein
provided, and upon the observance and performance of all the covenants, terms
and conditions on Tenant's part to be observed and performed, Tenant shall
peaceably and quietly hold and enjoy the Demised Premises for the term hereby
demised without hindrance or interruption by Landlord or any other person or
persons lawfully or equitably claiming by, through or under the Landlord,
subject, nevertheless, to the terms and conditions of this Lease.
15.5 Use of "Landlord" and "Tenant". All the provisions hereof are to be
construed as covenants and agreements as though the words imparting such
covenant and agreements were used in each separate provision and paragraph
hereof. The words "Landlord" and "Tenant" and the pronouns referring thereto, as
used in this Lease, shall mean, where the context requires or admits, the
persons named herein as Landlord and Tenant, respectively, and their respective
heirs, legal representatives, successors and assigns, irrespective of whether
singular or plural, masculine, feminine or neuter. It is agreed that the
agreements and conditions in this Lease contained on the part of Tenant to be
performed and observed shall be binding upon Tenant and its successors and
assigns and shall inure to the benefit of
34
<PAGE>
Landlord and its successors and assigns; and the agreements and conditions in
this Lease contained on the part of the Landlord to be performed and observed
shall be binding upon Landlord and its successors and assigns and shall inure to
the benefit of Tenant and its successors and assigns. Tenant agrees that at all
times on and after the Commencement Date of this Lease the sole liability for
performance of all Landlord's obligations hereunder shall be that of the owner
from time to time of the leased premises and that such liability with respect to
each owner shall exist only for breaches of Landlord's obligations committed
during the period of his ownership.
15.6 Entire Agreement. This instrument contains the entire and only
agreement between the parties, and no oral statements or representations or
prior written matter not contained in this instrument shall have any force or
effect. This Lease shall not be modified in any way except by a writing
subscribed by both parties.
15.7 Notices. All notices and other communications authorized or required
hereunder shall be in writing and shall be deemed to have been given by on the
date that the date that they are mailed by certified or registered mail, return
receipt requested, postage prepaid to the other party. The same shall be mailed
to Tenant at the Demised Premises or to such other person or at such other
address as Tenant may hereafter designate by written notice to Landlord; and the
same shall be mailed to Landlord at Mattoon Road, P.O. Box 1910, Waterbury, CT
06722, or to such other person or at such other address as Landlord may
hereafter designate by written notice to Tenant.
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<PAGE>
15.8 Access. Landlord shall have the right to enter the Demised Premises
during Tenant's business hours upon reasonable notice to Tenant for the purpose
of showing the Demised Premises to a prospective purchaser or tenant, and for
the purpose of inspecting the Demised Premises to insure the compliance with the
provisions of paragraphs 5.1, 5.2 and 6.2 above.
15.9 Mechanic's Liens. Tenant agrees immediately to discharge (either by
payment or by the filing of the necessary bond, or otherwise) any mechanic's,
materialmen's or other lien against the Premises and/or Landlord's interest
therein, which liens may arise out of any payment due for, or purported to be
due for, any labor, services, materials, supplies or equipment alleged to have
been furnished to or for Tenant in, upon or about the Premises. Failure to
discharge any such lien within fifteen (15) days from the date that Tenant
receives written notice of such lien from Landlord shall be considered a default
hereunder and Landlord shall have all rights upon default as are specified in
Article 13 above. Tenant acknowledges that Tenant is not an agent of the
Landlord and Tenant has no authority to contract for labor, services, materials,
supplies or equipment for Tenant's use in the Demised Premises as agent for
Landlord.
15.10 PREJUDGMENT REMEDY. THE PARTIES HERETO ACKNOWLEDGE THAT THIS IS A
"COMMERCIAL TRANSACTION" AS THAT TERM IS DEFINED IN CONNECTICUT GENERAL
STATUTES, CHAPTER 903a, SECTION 52-278(a), AS AMENDED, AND THAT THE TENANT
HEREBY EXPRESSLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS THAT IT MAY HAVE
UNDER SAID ACT OR OTHERWISE FOR NOTICE AND HEARING WITH RESPECT TO ANY
"PREJUDGMENT REMEDY", AS THAT TERM IS THEREIN DEFINED, AND THE TENANT HEREBY
SPECIFICALLY CONSENTS TO THE ISSUANCE OF ANY WRIT
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<PAGE>
FOR SUCH PREJUDGMENT REMEDY OR REMEDIES IN BEHALF OF SAID LANDLORD OR THE
SUCCESSORS OR ASSIGNS OF SAID LANDLORD, WITH RESPECT TO ANY LAWSUIT OR CAUSE OF
ACTION RELATING TO THIS LEASE AND/OR ANY CLAIMS INCIDENTAL HERETO, WITHOUT SAID
LANDLORD HAVING TO FIRST OBTAIN A COURT ORDER PERMITTING SAME, AS MIGHT
OTHERWISE BE REQUIRED UNDER SAID CHAPTER 903a.
15.11 Captions and Section Numbers. The captions, section numbers and
article numbers appearing in this Lease are inserted only as a matter of
convenience and in no way define, limit, construe, or describe the scope or
intent of such sections or articles of this Lease nor in any way affect this
Lease.
15.12 No Offer. The delivery of an unexecuted copy of this Lease shall not
be deemed an offer. No rights are to be conferred upon any party until this
Lease has been executed and delivered to each party.
15.13 Effective Date. This Lease shall be effective only when it is signed
by both the Landlord and Tenant. The Tenant's submission of a signed lease for
review by the Landlord does not give the Tenant any interest, right, or option
in the Leased Premises.
15.14 Review of Landlord's Records. The Tenant, upon five (5) days'
written notice to Landlord, shall have the right to inspect and review, at the
offices of the Landlord, all invoices, statements and bills from which their
assessments for taxes, insurance and common charges are derived.
15.15 Right of First Offer to Lease Adjacent Space. The remainder of the
space in the building in which the Demised Premises are located (2066 Thomaston
Avenue), consisting of approximately 3,500 square feet of space is currently
leased to
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Torrington Swager & Vaill End Forming Machinery Inc. (the "Torrington space")
through March 31, 1997 with an option to renew their lease for another term. If
Torrington does not renew their lease Landlord shall promptly notify Tenant in
writing as to the availability of the Torrington space, and Tenant shall have
thirty (30) days from receipt of said notice in which to notify Landlord that
Tenant will lease the Torrington space in addition to the 7,000 square foot
Demised Premises of the Lease herein. If Tenant does not notify Landlord within
the aforesaid thirty (30) day period, then Landlord shall be free to enter into
a lease agreement for the Torrington space with whatever other party it may
choose.
If Tenant elects to lease the Torrington space, Landlord and Tenant shall
execute an Amendment to Lease agreement which shall expand the Tenants
Demised Premises to include the Torrington space upon the same terms and
conditions as contained in the Lease herein except that
i) the amount of square footage of the Demised Premises, currently
shown as 7,000 in paragraphs 4.1, 7.5, 7.6, 8.1 and 9.1 of the Lease
herein shall be changed to 10,500;
ii) Landlord shall provide the following work to the Torrington space
within thirty (30) days of execution of the Amendment to Lease
agreement, at no charge to Tenant
a) create one or two 10' x 10' openings in the block demising
wall to connect both portions of the Premises,
b) paint all interior walls of the Torrington space,
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c) check lighting, heating, air-conditioning, plumbing and hot
water heater in Torrington space to make certain all are in
good working order;
iii) the term of lease for the Torrington space shall correspond with the
then-remaining term of the Lease herein for the 7,000 square foot
Premises, as well as any option term exercised by Tenant; and
iv) lease rates for the Torrington space shall be calculated using the
same rate per square foot as then in effect for the 7,000 square
foot Demised Premises, and thereafter shall change concurrently with
the rates for the 7,000 square foot Demised Premises.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals, and to a duplicate of the same tenor and date this 12th day of March,
1996.
Signed sealed and delivered INDUSTRIAL DEVELOPMENT GROUP in
the presence of
/s/[SIGNATURE ILLEGIBLE] By /s/Roger N. Devino
- ----------------------------- -----------------------------
Roger N. Devino,
/s/[SIGNATURE ILLEGIBLE] It's Partner
- -----------------------------
ROLLER BEARING COMPANY OF AMERICA, INC.
/s/[SIGNATURE ILLEGIBLE] By /s/Michael J. Hartnett
- ----------------------------- -----------------------------
It's
/s/[SIGNATURE ILLEGIBLE] Duly Authorized CEO
- -----------------------------
39
<PAGE>
STATE OF CONNECTICUT)
ss: Waterbury
COUNTY OF NEW HAVEN)
On this the 12th day March, 1996, before me, the undersigned officer,
personally appeared, ROGER N. DEVINO, known to me (or satisfactorily proven) to
be the person whose name is subscribed to the within instrument and acknowledged
that he executed the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand.
/s/[SIGNATURE ILLEGIBLE]
-----------------------------
Notary Public
Commissioner, Superior Ct.
My Commission Expires [ILLEGIBLE]
STATE OF CONNECTICUT)
ss: Waterbury
COUNTY OF NEW HAVEN)
On this the 12th day of March, 1996, before me, the undersigned officer,
personally appeared, Michael J. Hartnett, who acknowledged himself to be the CEO
of ROLLER BEARING COMPANY OF AMERICA, INC., a corporation, and that he as such
officer, being authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation by himself as
such officer.
IN WITNESS WHEREOF, I hereunto set my hand.
/s/[SIGNATURE ILLEGIBLE]
-----------------------------
Notary Public
Commissioner, Superior Court
40
<PAGE>
EXHIBIT B
I. IMPROVEMENTS to be provided by Landlord to Tenant at No Cost to Tenant.
A. Paint all interior sheetrock and block wall surfaces.
B. Replace carpet in front office area (approximately 400 square feet)
with choice from Landlord's selection. Shampoo all other carpet
area.
C. Check furnace, heat pump system, lighting, hot water heater and
plumbing to make certain all are in good working order.
D. Check weather-stripping on all exterior doors.
II. IMPROVEMENTS to be provided by Landlord to Tenant at Tenant's Cost.
None.
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[GRAPHIC OMITTED]
#2056 & #2066 THOMASTON AVENUE (LOT #9)
WATERBURY, CT
Note: Green hilite denotes
boundary of Lot #9
EXHIBIT A
<PAGE>
EXHIBIT B
I. IMPROVEMENTS to be provided by Landlord to Tenant at No Cost to Tenant.
A. Paint all interior sheetrock and block wall surfaces.
B. Replace carpet in front office area (approximately 400 square feet)
with choice from Landlord's selection. Shampoo all other carpet
area.
C. Check furnace, heat pump system, lighting, hot water heater and
plumbing to make certain all are in good working order.
D. Check weather-stripping on all exterior doors.
II. IMPROVEMENTS to be provided by Landlord to Tenant at Tenant's Cost.
None.
<PAGE>
===================
TYPICAL SIGN FORMAT
===================
[GRAPHIC OMITTED]
SIGNS TO BE 24" X 48" OVERALL. .040 DURANODIC BRONZE ALUMINUM
W/1" ALUMINUM TUBE FRAME STRUCTURE, & 1" PICTURE FRAME.
SIGNS TO BE FLUSH MOUNTED VIA HIDDEN ALUMINUM ANGLE
BRACKETS AS SHOWN.
MAXIMUM ALLOWABLE COPY AREA IS 18" X 44". COLOR FOR
GRAPHICS TO BE PMS 124 GOLD. WHERE LOGO IS NOT USED,
FRIZ QUADRATA TYPE STYLE SHOULD BE USED.
Note: Sign strips for marquis signs at Street--
Background = .040 Duranodic Bronze Aluminum.
Letters = PMS 124 gold or white.
Field measure marquis for strip sizes for each building.
EXHIBIT "C"
================================================================================
LETTER OF CREDIT AGREEMENT
between
ROLLER BEARING COMPANY OF AMERICA, INC.,
a Delaware corporation
and
HELLER FINANCIAL, INC.,
a Delaware corporation
dated as of September 1, 1994
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS
Section 1.1. Definitions ..................................................... 1
ARTICLE TWO
LETTER OF CREDIT
Section 2.1. Issuance of Letter of Credit ................................... 6
Section 2.2. Letter of Credit Drawings ...................................... 6
Section 2.3. Advances ....................................................... 6
Section 2.4. Fees ........................................................... 7
Section 2.5. Method of Payment; Etc. ........................................ 8
Section 2.6. Reduction and Termination ...................................... 8
Section 2.7. Reinstatement of the Amount of the Letter of Credit ............ 9
Section 2.8. Disbursement of Drawings ....................................... 9
Section 2.9. Interest; Computation of Interest .............................. 9
Section 2.10. Payment Due on Non-Business Day to be Made on Next
Business Day ................................................... 9
Section 2.11. Late Payments .................................................. 9
Section 2.12. Source of Funds ................................................10
Section 2.13. Security for Obligations .......................................10
Section 2.14. Replacement or Termination of Letter of Credit .................10
Section 2.15. Excess Interest ................................................10
ARTICLE THREE
CONDITIONS PRECEDENT
Section 3.1. Conditions Precedent to Issuance of Letter of Credit ............11
ARTICLE FOUR
COVENANTS
Section 4.1. Optional Redemption .............................................13
Section 4.2. Related Documents ...............................................14
Section 4.3. Offering Memorandum .............................................14
Section 4.4. Fiduciaries .....................................................14
Section 4.5. Bond Interest Rate ..............................................14
Section 4.6. Amortization ....................................................14
ARTICLE FIVE
DEFAULTS
Section 5.1. Events of Default ...............................................15
(i)
<PAGE>
Section 5.2. Remedies ........................................................16
ARTICLE SIX
MISCELLANEOUS
Section 6.1. No Deductions; Increased Costs .................................16
Section 6.2. Indemnity, Costs, Expenses and Taxes ...........................18
Section 6.3. Obligations Absolute ...........................................18
Section 6.4. Liability of Heller ............................................19
Section 6.5. Participants ...................................................19
Section 6.6. Survival of this Agreement .....................................19
Section 6.7. Modification of this Agreement .................................20
Section 6.8. Waiver of Rights by Heller .....................................20
Section 6.9. Severability ...................................................20
Section 6.10. Governing Law; Submission to Jurisdiction;
Waiver of Jury Trial ...........................................20
Section 6.11. Notices ........................................................21
Section 6.12. Survival of Representations and Obligations ....................23
Section 6.13. Taxes and Expenses .............................................23
Section 6.14. Headings .......................................................23
Section 6.15. Counterparts ...................................................23
Section 6.16. Relationship; Consents and Approvals ...........................23
Section 6.17. No Oral Agreements .............................................23
Section 6.18. Approval of Disbursement Requests ..............................24
Signatures ...................................................................25
Appendix I - Form of Letter of Credit
(ii)
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LETTER OF CREDIT AGREEMENT
Roller Bearing Company of America, Inc. Dated as of September 1, 1994
140 Terry Drive
Newtown, Pennsylvania 18940
Gentlemen:
The Company (such term and each other capitalized term used herein
having the meaning set forth in Article One hereof) desires to secure a source
of funds to be devoted exclusively to the payment by the Trustee, when and as
due, of the principal of and interest on the Bonds, and has applied to Heller
for issuance by Heller of the Letter of Credit in an Original Stated Amount of
$10,853,904.11. Further, Heller has been requested by the Company to provide a
liquidity facility with respect to the Bonds by extending credit to the Company
in the form of a Liquidity Drawing under the Letter of Credit. Heller has agreed
to issue such Letter of Credit in the following manner and subject to the
following terms and conditions. Accordingly, the Company and Heller hereby agree
as follows:
ARTICLE ONE
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement:
"Acceleration Drawing" - means a drawing under the Letter of Credit
resulting from the presentation of a certificate in the form of "Exhibit F" to
the Letter of Credit.
"Advance" - is defined in Section 2.3(a) hereof.
"Affiliate" - means any Person (i) owned or controlled by the
Company, (ii) under common ownership or control with the Company (collectively
(i) and (ii) are defined as "Related Entities"), (iii) which is a general
partner of or owns a controlling interest in or controls a Related Entity, (iv)
which is a partnership or joint venture in which the Company or any Related
Entity is a partner, (v) which is a trust for the benefit of the Company or any
Related Entity or affiliate thereof, or (vi) which is a joint venture,
corporation, partnership, trust or other entity which is directly or indirectly
controlled by the Company, a Related Entity or an affiliate thereof.
"Agreement" - means this Letter of Credit Agreement, as amended or
supplemented from time to time.
"Alternate Credit Facility" - is defined in the Indentures.
"Authorized Representative" - means the President, the Executive
Vice President or any other person designated by the Company to act on behalf of
the Company pursuant to a written instrument filed with Heller containing the
specimen signature of such person. Such instrument may designate an alternate or
alternates.
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"Available Amount" - is defined in the Letter of Credit.
"Base Rate" - is defined in the Credit Agreement.
"Bond Counsel" - means any attorney at law or firm of attorneys, of
nationally recognized standing in matters pertaining to the exclusion from gross
income of interest on bonds for federal income tax purposes issued by states and
political subdivisions and acceptable to Heller and duly admitted to practice
law before the highest court of any state of the United States of America or the
District of Columbia.
"Bond Documents" - means the Bonds, the Indentures, the Loan
Agreements, the Remarketing Agreement, the Placement Agreement, the Private
Placement Memorandum and all amendments and supplements to such documents
approved in writing by Heller.
"Bondholder" - means the registered owner of any Bond.
"Bonds" - means, collectively, the Series 1994A Bonds and the Series
1994B Bonds.
"Business Day" - is defined in the Letter of Credit.
"Cap Interest Rate" - means, subject to the provisions of Section
2.1(b) hereof, a rate per annum of 15%, calculated on the basis of a year of 365
days for the actual days elapsed.
"Closing Date" - means the date on which all conditions precedent
under Section 3.1 hereof have been met and on which the Letter of Credit is
issued.
"Code" - means the Internal Revenue Code of 1986, as amended.
"Company" - means Roller Bearing Company of America, Inc., a
Delaware corporation, and its successors and assigns.
"Company Bonds" - means (i) Bonds owned or held by the Company or
any Affiliate of the Company, or by the Trustee or the Tender Agent, or the
agent of either of them, for the account of the Company or any Affiliate of the
Company, including, but not limited to, Pledged Bonds, or (ii) Bonds which the
Company has notified the Trustee, or which the Trustee knows, were purchased by
another Person for the account of the Company or any Affiliate of the Company,
including, but not limited to, Pledged Bonds.
"Conversion Date" - means the date on which the interest rate on any
Bond is converted to an interest mode other than the Weekly Mode.
"Credit Agreement" - means the Amended and Restated Credit
Agreement, dated as of October 22, 1992, among the Company, Industrial Tectonics
Bearings Corporation, RBC Transport Dynamics Corporation and Heller, as from
time to time amended, restated or supplemented.
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"Credit Documents" - means this Agreement, the Letter of Credit, the
Pledge Agreement, the Loan Documents (as defined in the Credit Agreement) and
all other agreements, security agreements, assignments, letters of credit,
guaranties, instruments and/or documents now or hereafter executed and/or
delivered to Heller by the Company or any Affiliate relating to the Letter of
Credit, and all amendments and supplements to, and restatements of, such
documents.
"Determination of Taxability" - is defined in the Series 1994A
Indenture.
"Drawing" - means any Interest Drawing, Liquidity Drawing,
Redemption Drawing or Acceleration Drawing.
"Event of Default" - is defined in Section 5.1 hereof.
"Fees" - means fees payable by the Company pursuant to Section 2.4
hereof.
"Governmental Authority" - means the United States, the State of
South Carolina and any political subdivision thereof, and any agency,
department, commission, board, bureau or instrumentality of any of them which
exercises jurisdiction over the Company or the Project, construction with
respect thereto, the use of improvements with respect thereto or the
availability of ingress or egress thereto, or of gas, water, electricity or
sewage facilities therefor.
"Heller" - means Heller Financial, Inc., a Delaware corporation, and
its successors and assigns.
"Indebtedness" - is defined in the Credit Agreement.
"Indentures" - means, collectively, the Series 1994A Indenture and
the Series 1994B Indenture.
"Interest Drawing" - means a drawing under the Letter of Credit
resulting from the presentation of a certificate in the form of "Exhibit C" to
the Letter of Credit.
"Interest Payment Date" - is defined in the Indentures.
"Issuer" - means the South Carolina Jobs-Economic Development
Authority, a body corporate and politic and an agency of the State of South
Carolina, and its successors and assigns.
"Letter of Credit" - means the irrevocable transferable letter of
credit issued by Heller for the account of the Company in favor of the Trustee
for the benefit of the owners from time to time of the Bonds pursuant to this
Agreement in the form of Appendix I hereto with appropriate insertions, as from
time to time amended, restated or supplemented; the term "Letter of Credit"
shall mean and include all substitute irrevocable transferable letters of credit
delivered by Heller to the Trustee pursuant to the provisions of Section 2.6
hereof.
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"Liabilities" - means the Advances, the Fees, any and all
obligations of the Company to reimburse Heller for any Drawings under the Letter
of Credit, and all other indebtedness, liabilities and obligations of the
Company to Heller arising under or in relation to this Agreement.
"Lien" - is defined in the Credit Agreement.
"Liquidity Drawing" - means a drawing under the Letter of Credit
resulting from the presentation of a certificate in the form of "Exhibit E" to
the Letter of Credit.
"Loan Agreements" - means, collectively, the Series 1994A Loan
Agreement and the Series 1994B Loan Agreement.
"Original Stated Amount" - is defined in Section 2.1 hereof.
"Outstanding" - is defined in the Indentures.
"Person" - is defined in the Credit Agreement.
"Placement Agent" - means Stern Brothers & Co., as placement agent
under the Placement Agreement.
"Placement Agreement" - means the Bond Placement Agreement, dated
September 2, 1994, among the Issuer, the Company and the Placement Agent, as
from time to time amended, restated or supplemented.
"Pledge Agreement" - means the Pledge and Security Agreement, dated
as of September 1, 1994, among the Company, Heller and the Trustee, as from time
to time amended, restated or supplemented.
"Pledged Bonds" - means Bonds registered in the name of the Company,
held by the Trustee and pledged to Heller pursuant to the Indenture and the
Pledge Agreement.
"Potential Default" - means an event which but for the lapse of time
or the giving of notice, or both, would constitute an Event of Default.
"Private Placement Memorandum" - means the Private Placement
Memorandum, dated September 2, 1994, relating to the Bonds, as amended or
supplemented from time to time.
"Project" - is defined in the Loan Agreements.
"Property" - means any and all right, title and interest of any
Person in and to any and all property, whether real or personal, tangible or
intangible, including, but not limited to, cash and cash equivalents, and
wherever situated.
"Purchase Date" - means any date on which the Bonds are subject to
purchase pursuant to Section 301 or 302 of the Indentures.
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"Redemption Drawing" - means a drawing under the Letter of Credit
resulting from the presentation of a certificate in the form of "Exhibit D" to
the Letter of Credit.
"Remarketing Agent" - means Stern Brothers & Co., as remarketing
agent under the Indentures, and any successor remarketing agent.
"Remarketing Agreement" - means the Remarketing Agreement, dated as
of September 1, 1994, between the Remarketing Agent and the Company, as from
time to time amended, restated or supplemented.
"Series 1994A Bonds" - means the $7,700,000 aggregate principal
amount of the Issuer's Variable Rate Demand Industrial Development Revenue Bonds
(Roller Bearing Company of America, Inc. Project) Series 1994A issued pursuant
to the Series 1994A Indenture.
"Series 1994B Bonds" - means the $3,000,000 aggregate principal
amount of the Issuer's Variable Rate Demand Industrial Development Revenue Bonds
(Roller Bearing Company of America, Inc. Project) Series 1994B issued pursuant
to the Series 1994B Indenture.
"Series 1994A Indenture" - means the Trust Indenture, dated as of
September 1, 1994, relating to the Series 1994A Bonds, between the Issuer and
the Trustee, as amended and supplemented in accordance with the terms hereof and
thereof.
"Series 1994B Indenture" - means the Trust Indenture, dated as of
September 1, 1994, relating to the Series 1994B Bonds, between the Issuer and
the Trustee, as amended and supplemented in accordance with the terms hereof and
thereof.
"Series 1994A Loan Agreement" - means the Loan Agreement, dated as
of September 1, 1994, relating to the Series 1994A Bonds, between the Issuer and
the Company, as from time to time amended, restated or supplemented.
"Series 1994B Loan Agreement" - means the Loan Agreement, dated as
of September 1, 1994, relating to the Series 1994B Bonds, between the Issuer and
the Company, as from time to time amended, restated or supplemented.
"Stated Expiration Date" - means, subject to the provisions of
Section 2.1(b) hereof, September 15, 1999.
"Tender Agent" - means the Trustee, as Tender Agent under the
Indentures, and any successor tender agent.
"Termination Date" - means the earliest to occur of (i) the close of
Heller's business on the Stated Expiration Date; (ii) the date which is ten (10)
days following the Trustee's receipt of written notice from Heller of the
occurrence of an Event of Default and a direction to cause an acceleration or a
purchase in lieu of acceleration of all Outstanding Bonds pursuant to the
Indentures; (iii) the date on which all Bonds are paid or deemed paid under the
terms of the Indentures; (iv) the date on which the Bonds become secured by an
Alternate Credit Facility in accordance with the terms of the Indentures; or (v)
the earlier of (A) the date which
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is five (5) days after the Conversion Date, or (B) the date on which Heller
honors a Drawing under the Letter of Credit on or after the Conversion Date.
"Trustee" - means Mark Twain Bank, St. Louis, Missouri, as Trustee
under the Indentures, and any successor trustee thereunder.
"Trust Estate" - is defined in the Indentures.
"Weekly Mode" - is defined in the Indentures.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. Any capitalized terms used
herein which are not specifically defined herein shall have the same meaning
herein as in the Indentures. All references in this Agreement to times of day
shall be references to Chicago, Illinois time unless otherwise specifically
provided.
ARTICLE TWO
LETTER OF CREDIT
Section 2.1. Issuance of Letter of Credit. (a) Heller agrees to
issue on the Closing Date, upon the terms, and subject to the conditions, set
forth in this Agreement, the Letter of Credit substantially in the form of
Appendix I hereto. The Letter of Credit shall be effective on the Closing Date
and shall expire on the Stated Expiration Date. The Letter of Credit shall be in
the original stated amount of $10,853,904.11 (the "Original Stated Amount"),
which is the sum of (i) the principal amount of Bonds outstanding on the Closing
Date, plus (ii) interest on the Bonds at the Cap Interest Rate for a period of
35 days (based on a year consisting of 365 days).
(b) Heller reserves the right, in its sole and absolute discretion,
but does not undertake the obligation, upon written application of the Company
to extend the Stated Expiration Date or increase the Cap Interest Rate. In the
event of any such extension or increase, Heller shall notify the Trustee in
writing, and the Trustee shall be obligated to follow the procedure relating
thereto set forth in the Letter of Credit. Heller agrees to respond to each
completed application of the Company for an extension of the Stated Expiration
Date or an increase in the Cap Interest Rate within thirty (30) days of the
receipt thereof by Heller; failure by Heller to respond within such period shall
be deemed a rejection of the application.
Section 2.2. Letter of Credit Drawings. The Trustee is authorized to
make Drawings under the Letter of Credit in accordance with the terms thereof.
The Company hereby directs Heller to make payments under the Letter of Credit in
the manner therein provided.
Section 2.3. Advances. (a) Each amount paid upon a Drawing and not
reimbursed by the Company on the day the Drawing is paid by Heller shall
constitute an advance (individually an "Advance," and collectively "Advances")
to the Company by Heller on the date such Drawing is paid by Heller. Advances
shall bear interest and be payable in the manner provided herein. Heller shall
record on its books or records the amount of each Advance payable hereunder, all
payments of principal and interest thereon and the principal balance from
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time to time outstanding. The record thereof shown on such books or records
shall be prima facie evidence as to all such amounts outstanding hereunder;
provided, however, that the failure of Heller to record on its books or records
any of the foregoing shall not limit or otherwise affect the obligation of the
Company to repay all Advances payable hereunder together with accrued interest
thereon.
(b) Each Advance resulting from an Interest Drawing, a Redemption
Drawing or an Acceleration Drawing shall bear interest on the unpaid principal
amount thereof at the default rate set forth in Section 2.11 hereof. Each
Advance resulting from a Liquidity Drawing shall bear interest prior to an Event
of Default on the unpaid principal amount thereof at the Interest Rate set forth
in Section 2.9 hereof, and after an Event of Default has occurred, shall bear
interest at the default rate set forth in Section 2.11 hereof. Such interest
shall be payable monthly, in arrears, on the first day of each month to the
extent accrued and unpaid; interest on Advances incurred with respect to the
purchase of Pledged Bonds shall also be paid upon the remarketing of such
Pledged Bonds pursuant to Section 308 of the Indentures.
(c) The principal amount of each Advance resulting from an Interest
Drawing, a Redemption Drawing or an Acceleration Drawing under the Letter of
Credit shall be reimbursed by the Company on the same day as, and immediately
after, Heller pays the amount of such Drawing in accordance with the terms of
the Letter of Credit. The principal amount of each Advance resulting from a
Liquidity Drawing under the Letter of Credit shall be reimbursed by the Company
on the same day as, and immediately after, the remarketing of the Pledged Bonds
that result from such Drawing; in any event, the outstanding principal amount of
all Advances resulting from Liquidity Drawings and all unpaid accrued interest
thereon shall be due and payable on the Stated Expiration Date. Any amounts
outstanding hereunder may be prepaid at any time or from time to time without
premium or penalty.
(d) Pursuant to the Pledge Agreement, upon Heller's payment of each
Liquidity Drawing, there shall be available for delivery to Heller at the
principal corporate trust office of the Trustee, registered in the name of
Heller as pledgee, the Bonds purchased with such Liquidity Drawing. Heller shall
not transfer any Bonds purchased with the proceeds of a Liquidity Drawing until
the Letter of Credit has been reinstated in an amount equal to the Original
Purchase Price (as defined in the Letter of Credit) of such Bonds as provided in
Section 2.7 hereof. Unless otherwise instructed in writing by Heller, the
Trustee will hold all Pledged Bonds on behalf of Heller. To the extent Heller
actually receives payment in respect of principal of or interest on any Pledged
Bond, Heller shall credit such amounts so received first to the payment of
accrued interest on the Liabilities in the priority provided for under the terms
of Section 2.5 hereof and then to the payment of principal thereof.
Section 2.4. Fees. (a) The Company hereby agrees to pay, or cause to
be paid, to Heller on the Closing Date an issuance fee equal to 1.00% of the
Original Stated Amount of the Letter of Credit. The issuance fee shall be deemed
earned by Heller when paid by the Company, and shall not be subject to rebate,
refund or abatement thereafter.
(b) The Company also hereby agrees to pay, or cause to be paid, to
Heller on each March 1, June 1, September 1 and December 1 and on the Closing
Date, if other than a March 1, June 1, September 1, or December 1, in advance
(commencing on the Closing Date
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and ending on September 1, 1999, unless the Letter of Credit is terminated prior
thereto), one-fourth (1/4) of an annual letter of credit fee equal to the sum of
(i) 2.50% per annum of the Available Amount of the Letter of Credit on such
payment date (taking into account any reductions in the Available Amount of the
Letter of Credit scheduled to occur on such payment date), plus (ii) in the
event and for as long as Anchor National Life Insurance Company or its assignee
or participant ("Anchor") is the owner of a participation in the Letter of
Credit and the Liabilities under this Agreement, 1.50% per annum of Anchor's pro
rata share of the Available Amount of the Letter of Credit on such payment date
(taking into account any reductions in the Available Amount of the Letter of
Credit scheduled to occur on such payment date); provided that the initial
payment on the Closing Date and the last payment of the quarterly portion of
such annual fee shall be prorated for the actual number of days in such quarters
that the Letter of Credit is actually outstanding. Each quarterly payment of the
annual letter of credit fee shall be deemed earned by Heller when paid by the
Company, and shall not be subject to rebate, refund or abatement thereafter.
Section 2.5. Method of Payment; Etc. All payments to be made by the
Company under this Agreement shall be made in immediately available funds and
delivered to Heller by wire transfer, to Heller's account, ABA No. 0710-0001-3,
Account No. 55-00540, at The First National Bank of Chicago, One First National
Plaza, Chicago, Illinois 60670, Reference: Heller Financial, Inc. for the
benefit of Roller Bearing. All payments to be made by the Company under this
Agreement shall be made not later than 12:00 Noon, Chicago, Illinois time, on
the date when due. Payments for which immediately available funds are received
by Heller after 12:00 Noon, Chicago, Illinois time, on any day shall be deemed
to have been made on the next succeeding Business Day.
All payments made pursuant to the terms hereof shall, at Heller's
option, be applied first to the payment of any fees, expenses or other costs
that the Company is obligated to pay hereunder, second to interest on the unpaid
Liabilities at the Interest Rate (as defined in Section 2.9 hereof), and third
to reduce the unpaid principal amount of all Liabilities due hereunder. All
payments not made when due shall be subject to default interest at the times and
rate set forth in Section 2.11 hereof.
Section 2.6. Reduction and Termination. (a) The Available Amount of
the Letter of Credit may be reduced by the Trustee upon submission to Heller of
a certificate in the form of Exhibit D or G to the Letter of Credit, designating
the date (which shall be a Business Day) of such reduction and the amount of
such reduction (which shall be, with respect to the principal component of the
Letter of Credit, in an integral multiple of $100,000 or multiples of $5,000 in
excess thereof).
(b) If the Trustee shall partially reduce the Available Amount
pursuant to paragraph (a) above, Heller shall then have the right to require the
Trustee to simultaneously surrender the outstanding Letter of Credit to Heller
on the effective date of such partial reduction of the Available Amount and to
accept on such date, in substitution for the then outstanding Letter of Credit,
a substitute irrevocable transferable letter of credit, dated such date, for an
amount equal to the amount to which the Available Amount shall have been so
reduced, but otherwise having terms identical to the then outstanding Letter of
Credit. Alternatively, Heller in its sole discretion may elect to deliver to the
Trustee a Notice of Amendment to the Letter
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of Credit in the form of Exhibit H to the Letter of Credit, dated the effective
date of such partial reduction of the Available Amount of the Letter of Credit
and stating the amount to which the Available Amount has been reduced.
Section 2.7. Reinstatement of the Amount of the Letter of Credit.
(a) As set forth in the Letter of Credit, the Available Amount of the Letter of
Credit shall be reduced by an amount equal to the amount of any Drawing made
thereunder; provided, however, that the amount of any Interest Drawing less the
amount of the reduction in the Available Amount of the Letter of Credit
attributable to interest as specified in a certificate in the form of Exhibit D
or G to the Letter of Credit, will be automatically reinstated on the date of
such Drawing without further notice to any Person.
(b) Prior to the Conversion Date, in the event of the remarketing of
Bonds (or portions thereof in Authorized Denominations (as defined in the
Indenture)) previously purchased with the proceeds of a Liquidity Drawing and
upon receipt by Heller of an amount equal to the principal portion of the
Original Purchase Price (as defined in the Letter of Credit) of the Bonds so
remarketed plus all accrued interest thereon, Heller will reinstate the Letter
of Credit by an amount equal to the Original Purchase Price of such Bonds so
remarketed. Upon the receipt by Heller of amounts resulting in a reinstatement
as provided in this Section 2.7(b), Heller shall promptly provide the Trustee
and the Remarketing Agent with notice of such reinstatement in writing, by
telecopy or tested telex.
(c) The Company hereby irrevocably and unconditionally instructs
Heller to reinstate the Letter of Credit in accordance with paragraphs (a) and
(b) above and in accordance with the terms of the Letter of Credit.
Section 2.8. Disbursement of Drawings. The Company hereby directs
Heller to make payments under the Letter of Credit in the manner set forth
therein.
Section 2.9. Interest; Computation of Interest. (a) Amounts
outstanding hereunder from time to time shall bear interest prior to the date
due at a floating rate per annum (the "Interest Rate") equal to four percent
(4%) plus the Base Rate.
(b) All computations of interest, fees and charges payable by the
Company under this Agreement (including, but not limited to, interest payable
pursuant to Section 2.11 hereof) shall be made on the basis of 360 days and
actual days elapsed.
Section 2.10. Payment Due on Non-Business Day to be Made on Next
Business Day. If any sum becomes payable pursuant to this Agreement on a day
which is not a Business Day, the date for payment thereof shall be extended,
without penalty, to the next succeeding Business Day, and such extended time
shall be included in the computation of interest and fees.
Section 2.11. Late Payments. Upon the occurrence of an Event of
Default, Heller may collect interest on the entire unpaid principal amount of
all Liabilities from time to time outstanding at a per annum rate of interest
(the "default rate") equal to the sum of the
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Interest Rate plus three percent (3%) from and after the date of the occurrence
of such Event of Default for as long as such Event of Default continues.
Section 2.12. Source of Funds. All payments made by Heller pursuant
to the Letter of Credit shall be made from the funds of Heller and not with the
funds of any other Person (including, but not limited to, funds provided to
Heller by the Company pursuant to Section 2.3 hereof).
Section 2.13. Security for Obligations. In addition to any other
security for the obligations, covenants, warranties and representations of the
Company to Heller under, arising out of or in any way connected with the Letter
of Credit, this Agreement or the other Credit Documents, the Company hereby
grants, pledges and assigns to Heller a lien and security interest in the
Company's interest in the Trust Estate and all of the Company's right, title,
and interest in and to any and all funds now or hereafter on deposit in or
otherwise a part of any fund created under the Indentures (the "Funds
Collateral"); Heller hereby appoints, and the Company hereby consents to
Heller's appointment of, the Trustee as Heller's agent and bailee to perfect
Heller's pledge, assignment and security interest of and in such funds. The
Company shall, or shall cause the Trustee, forthwith after the execution and
delivery of this Agreement and thereafter from time to time to cause any
financing statements to be filed, registered and recorded in such manner and in
all places as may be required by law in order to fully perfect and protect any
lien and security interest created hereby and from time to time will perform or
cause to be performed any other act as provided by law and will execute or cause
to be executed any and all continuation statements and further instruments that
may be requested or required by Heller for such perfection and protection. The
Company will pay or cause the Trustee to pay all filing, registration and
recording fees incident to such filing, registration and recording, and all
expenses incident to the preparation, execution, and acknowledgment of such
instruments of further assurance and all federal or state fees and other similar
fees, duties, imposts, assessments and charges arising out of or in connection
with the execution and delivery of this Agreement and such instruments of
further assurance.
Section 2.14. Replacement or Termination of Letter of Credit. The
Company may replace or terminate the Letter of Credit at all times and on the
terms and conditions set forth herein and in the Indentures.
Section 2.15. Excess Interest. It is agreed that notwithstanding any
provision to the contrary in any of the Credit Documents, no such provision
shall require the payment or permit the collection of any amount in excess of
the maximum amount of interest permitted by applicable law to be charged for the
use or detention, or the forbearance in the collection, of all or any portion of
the Liabilities ("Excess Interest"). If any Excess Interest is provided for, or
is adjudicated to be provided for, in any of the Credit Documents, then in such
event to the fullest extent permitted by applicable law (a) the provisions of
this Section shall govern and control; (b) neither the Company nor any guarantor
or endorser shall be obligated to pay any Excess Interest; (c) any Excess
Interest that Heller may have received hereunder shall, at the option of Heller,
be (i) applied as a credit against the then outstanding principal amount due
hereunder, accrued and unpaid interest thereon (not to exceed the maximum amount
permitted by applicable law) and any of the other Liabilities, or all of the
foregoing, (ii) refunded to the payor thereof, or (iii) any combination of the
foregoing; (d) the Interest Rate shall be
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automatically subject to reduction to the maximum lawful rate allowed under
applicable usury laws, and each of the Credit Documents shall be deemed to have
been, and shall be, reformed and modified to reflect such reduction in the
Interest Rate; and (e) neither the Company nor any guarantor or endorser shall
have any action against Heller for any damages whatsoever arising out of the
payment or collection of any Excess Interest. In the event that any amount is
foregone by Heller pursuant to the foregoing provisions relating to Excess
Interest, then to the fullest extent permitted by applicable law the interest
rate applicable to amounts owed hereunder shall not thereafter be reduced below
the maximum rate permitted by applicable law until the total amount of interest
accrued hereunder less the amount of interest that would have accrued but for
this provision equals the amount so foregone as Excess Interest.
ARTICLE THREE
CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to Issuance of Letter of Credit. As
conditions precedent to the obligation of Heller to issue the Letter of Credit,
(a) the Company shall provide or cause to be provided to Heller on the Closing
Date, in form and substance satisfactory to Heller and its counsel:
(i) a written opinion or opinions of Gibson, Dunn & Crutcher,
counsel to the Company, dated the Closing Date;
(ii) a written opinion of Sinkler & Boyd, P.A., bond counsel, dated
the Closing Date;
(iii) a written opinion of Sinkler & Boyd, P.A., counsel to the
Issuer, dated the Closing Date, with respect to the due organization of
the Issuer, the power of the Issuer to enter into the transactions
contemplated by the Bond Documents, the due adoption of all proceedings of
the governing body of the Issuer, and the due authorization, execution,
delivery and enforceability of the Bond Documents to which the Issuer is a
party;
(iv) a copy of the certificate of incorporation of the Company,
certified as of a recent date by the Secretary of State of the State of
Delaware;
(v) a copy of the by-laws of the Company, certified by the Secretary
or an Assistant Secretary of the Company;
(vi) certificates of good standing with respect to the corporate and
tax status of the Company, certified as of a recent date by appropriate
officials of the States of Delaware and South Carolina;
(vii) certified copies of all corporate action taken by the Company
to authorize the execution, delivery and performance by the Company of
this Agreement, the Pledge Agreement and each Bond Document to which the
Company is a party, and such other corporate documents as Heller may
reasonably request;
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(viii) a certificate of a duly authorized officer of the Company as
to the incumbency, and setting forth a specimen signature, of each Person
who is to sign this Agreement, the Pledge Agreement and each Bond Document
to which the Company is a party on behalf of the Company;
(ix) an incumbency certificate, executed by an authorized officer of
the Issuer, which shall identify by name and title and bear the signature
of the officials of the Issuer authorized to sign those Bond Documents to
which the Issuer is a party and to effect the transactions under them;
Heller shall be entitled to rely on such incumbency certificate until
informed of any change in writing by the Issuer;
(x) a certificate of a duly authorized officer of the Company, dated
the Closing Date, stating, among other things, that no Event of Default
has occurred and is continuing, or would result from the issuance of the
Letter of Credit or the execution and delivery of this Agreement, the
Pledge Agreement or any Bond Document to which the Company is a party, and
no event has occurred and is continuing which would constitute an Event of
Default or Potential Default;
(xi) true and correct copies of all governmental approvals necessary
for the Issuer to enter into the Bond Documents to which the Issuer is a
party;
(xii) evidence that the Remarketing Agent has acknowledged and
accepted in writing its appointment as Remarketing Agent under the
Indentures and its duties and obligations thereunder, together with a
legal opinion of counsel to the Remarketing Agent;
(xiii) evidence that the Trustee has acknowledged and accepted in
writing its appointment as Trustee under the Indentures and its duties and
obligations thereunder, together with a legal opinion of counsel to the
Trustee;
(xiv) true and correct copies of the Bond Documents and all other
documents furnished in connection with the issuance and delivery of the
Bonds;
(xv) the following documents executed and delivered on behalf of the
parties thereto:
(A) Fourth Amendment, Acknowledgement and Consent to Amended
and Restated Credit Agreement,
(B) Pledge Agreement, and
(C) Second Amendment to Mortgage, Assignment of Rents,
Security Agreement, Financing Statement and Fixture Filing;
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(xvi) evidence of filing or simultaneous filing of completed Uniform
Commercial Code financing statements from the Company in such forms and in
such places as Heller shall require;
(xvii) written acknowledgment and acceptance by the Trustee of the
security interest granted to Heller pursuant to Section 2.13 hereof;
(xviii) any other items required as a condition precedent under the
terms of the Bond Documents to the closing of the transaction contemplated
by the Bond Documents;
(xix) an endorsement to Chicago Title Insurance Company Loan Policy
Number 9206901-61-2077 NBU; and
(xx) the receipt of such other documents, certificates and opinions
as Heller or its counsel may reasonably request;
(b) no law, regulation, ruling or other action of any Governmental
Authority or any political subdivision or authority therein or thereof shall be
in effect or shall have occurred, the effect of which would be to prevent Heller
from fulfilling its obligations under the Letter of Credit or under this
Agreement;
(c) all legal requirements provided herein incident to the
execution, delivery and performance of this Agreement, the Pledge Agreement and
the Bond Documents, and the transactions contemplated hereby and thereby, shall
be reasonably satisfactory to Heller and its counsel; and
(d) Heller and each of Banque Indosuez (New York Branch), Anchor
National Life Insurance Company, Household Commercial Financial Services, Inc.
and Mitsui Nevitt Capital Corporation shall have entered into a Lender Addition
Agreement (as defined in the Credit Agreement), or an amendment to such entity's
existing Lender Addition Agreement, in form and substance satisfactory to
Heller.
ARTICLE FOUR
COVENANTS
Section 4.1. Optional Redemption; Alternate Credit Facility. The
Company will not, without the prior written consent of Heller, cause an optional
redemption of the Bonds (except as required by Section 4.6 hereof), or the
delivery of an Alternate Credit Facility to secure the Bonds (except as required
by the Credit Agreement), pursuant to the Loan Agreements and the Indentures
unless the Company first (a) pays Heller all amounts due and owing Heller
hereunder at such time, and (b) provides Heller a minimum of thirty (30) days'
prior written notice. In no event shall the Company cause either (a) an optional
redemption of the Bonds in part (except as required by Section 4.6 hereof), or
(b) the delivery of an Alternate Credit Facility to replace the Letter of Credit
in part.
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Section 4.2. Related Documents. The Company will not amend or
consent to any amendment of any Bond Document without the prior written consent
of Heller.
Section 4.3. Offering Memorandum. The Company will not refer to
Heller in any offering memorandum (other than the Private Placement Memorandum)
or make any changes in reference to Heller in any revision of the Private
Placement Memorandum without the prior written consent of Heller.
Section 4.4. Fiduciaries. The Company will not remove or appoint any
Trustee, Tender Agent or Remarketing Agent for the Bonds without the prior
written consent of Heller.
Section 4.5. Bond Interest Rate. The Company will not elect an
interest option for the Bonds other than the Weekly Mode without the prior
written consent of Heller.
Section 4.6. Amortization. The Company will prepay the principal of
the Bonds in the following amounts and at the following times (provided that the
Company shall prepay all of the principal of the Series 1994B Bonds prior to
prepaying any of the principal of the Series 1994A Bonds):
(1) on September 1, 1998, the principal amount of $240,000;
(2) on September 1, 1999, the principal amount of $240,000;
(3) on September 1, 2000, the principal amount of $240,000;
(4) on September 1, 2001, the principal amount of $240,000;
(5) on September 1, 2002, the principal amount of $420,000;
(6) on September 1, 2003, the principal amount of $420,000;
(7) on September 1, 2004, the principal amount of $420,000;
(8) on September 1, 2005, the principal amount of $420,000;
(9) on September 1, 2006, the principal amount of $540,000;
(10) on September 1, 2007, the principal amount of $540,000;
(11) on September 1, 2008, the principal amount of $540,000;
(12) on September 1, 2009, the principal amount of $540,000;
(13) on September 1, 2010, the principal amount of $660,000;
(14) on September 1, 2011, the principal amount of $660,000;
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(15) on September 1, 2012, the principal amount of $660,000;
(16) on September 1, 2013, the principal amount of $660,000;
(17) on September 1, 2014, the principal amount of $815,000;
(18) on September 1, 2015, the principal amount of $815,000;
(19) on September 1, 2016, the principal amount of $815,000; and
(20) on September 1, 2017, the principal amount of $815,000.
The foregoing schedule shall be modified by the parties hereto to reflect any
mandatory redemption of the Bonds that results in a reduction in the principal
amount thereof.
ARTICLE FIVE
DEFAULTS
Section 5.1. Events of Default. If any of the following events shall
occur and be continuing, each such event shall be an "Event of Default":
(a) default in the due and punctual payment of any amount due
hereunder, which default continues for two (2) Business Days;
(b) any "event of default," "Event of Default," "default" or
"Default" shall have occurred under any Bond Document (as defined
respectively therein) after the expiration of any applicable cure or grace
period with respect thereto;
(c) an "Event of Default" shall have occurred under the Credit
Agreement;
(d) default in the due observance or performance of any covenant
contained in Article Four hereof;
(e) failure to observe or perform any other term, covenant or
agreement set forth in this Agreement and the continuation of such failure
for a period of thirty (30) days after written notice thereof from Heller;
provided, however, that if such failure cannot by its nature be cured
within thirty (30) days, and if an attempt to cure such failure is
commenced promptly after written notice thereof and is thereafter
diligently pursued (and then in all events such failure is cured within
sixty (60) days after the original notice thereof), no default shall be
deemed to exist hereunder during such period of diligent curing;
(f) any material provision of this Agreement, the Pledge Agreement
or any Bond Document shall cease to be valid and binding on the Company in
any material respect; or
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(g) the Company shall fail to replace the Letter of Credit, in
accordance with the terms of the Indentures and Loan Agreements, at least
thirty (30) days prior to the Stated Expiration Date.
Section 5.2. Remedies. Upon the occurrence of any Event of Default
Heller may exercise any one or more of the following rights and remedies in
addition to any other remedies herein or by law provided:
(a) by written notice to the Company, require that the Company
immediately pay to Heller in immediately available funds an amount equal
to the Available Amount of the Letter of Credit, any such amount to be
held uninvested (unless otherwise directed in writing by the Company with
specific investment directions, such direction to be accompanied by an
opinion of Bond Counsel (acceptable in form and substance to Heller) to
the effect that such directed investment will not adversely affect the
exclusion from gross income of interest on the Bonds for Federal or State
of South Carolina income tax purposes) by Heller as collateral security
for any and all indebtedness, obligations and liabilities of the Company
to Heller hereunder or under any other Credit Documents, whether now
existing or hereafter arising and whether due or contingent;
(b) declare the principal of and interest on the Liabilities owing
hereunder immediately due and payable, notwithstanding the provisions of
Section 2.3 hereof;
(c) give notice of the occurrence of an Event of Default to the
Trustee and instruct the Trustee to cause the acceleration, or purchase in
lieu of acceleration, at Heller's election, of the Bonds, thereby causing
the Letter of Credit to expire ten (10) days thereafter;
(d) direct the Trustee to exercise Heller's rights under the
Indentures and the Loan Agreements;
(e) exercise Heller's rights and remedies under the Credit
Documents; or
(f) pursue any other action available at law or in equity.
ARTICLE SIX
MISCELLANEOUS
Section 6.1. No Deductions; Increased Costs. (a) Except as otherwise
required by law, each payment by the Company to Heller under this Agreement or
any other Related Document shall be made without deduction, defense, set-off or
counterclaim, and without withholding for or on account of any present or future
taxes (other than overall net income taxes on the recipient imposed by reason of
any payment hereunder by any jurisdiction having authority over such recipient
or the transactions contemplated by this Agreement) imposed by or within the
jurisdiction in which the Company is domiciled, the Project is located, any
jurisdiction from which the Company makes any payment hereunder, or (in each
case) any political subdivision or taxing authority thereof or therein. If any
such withholding is so
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required, the Company shall make the withholding, pay the amount withheld to the
appropriate Governmental Authority before penalties attach thereto or interest
accrues thereon, and forthwith pay such additional amount as may be necessary to
ensure that the net amount actually received by Heller free and clear of such
taxes (including such taxes on such additional amount) is equal to the amount
which Heller would have received had such withholding not been made. If Heller
pays any amount in respect of any such taxes, penalties or interest, the Company
shall reimburse Heller for that payment on demand in the currency in which such
payment was made. If the Company pays any such taxes, penalties or interest, it
shall deliver official tax receipts evidencing that payment or certified copies
thereof to Heller on or before the thirtieth day after payment.
(b) If the Code or any newly adopted or changed law, treaty,
regulation, guideline or directive or any new or modified interpretation of any
of the foregoing by any authority or agency charged with the administration or
interpretation thereof or any fiscal, monetary or other authority having
jurisdiction over Heller or the transactions contemplated by this Agreement
(whether or not having the force of law) shall:
(i) limit the deductibility of interest on funds obtained by Heller
to pay any of its liabilities or subject Heller to any tax, duty, charge,
deduction or withholding on or with respect to payments relating to the
Bonds, the Letter of Credit or this Agreement, or any amount paid or to be
paid by Heller as the issuer of the Letter of Credit (other than any tax
measured by or based upon the overall net income of Heller imposed by any
jurisdiction having authority over Heller or the transactions contemplated
by this Agreement);
(ii) impose, modify, require, make or deem applicable to Heller any
reserve requirement, capital requirement, special deposit requirement,
insurance assessment or similar requirement against any assets held by,
deposits with or for the account of, or loans, letters of credit or
commitments by, an office of Heller in excess of such requirement on the
date of this Agreement;
(iii) change the basis of taxation of payments due Heller under this
Agreement or the Bonds (other than by a change in taxation of the overall
net income of Heller); or
(iv) impose upon Heller any other condition with respect to such
amount paid or payable to or by Heller or with respect to this Agreement,
the Letter of Credit, any other Related Document or the Bonds;
and the result of any of the foregoing is to increase the cost to Heller of
making any payment hereunder or under the Letter of Credit or of maintaining the
Letter of Credit, or to reduce the amount of any payment (whether of principal,
interest or otherwise) receivable by Heller, or to reduce the rate of return on
the capital of Heller or to require Heller to make any payment on or calculated
by reference to the gross amount of any sum received by it, in each case by an
amount which Heller in its reasonable judgment deems material, then:
(1) Heller shall promptly notify the Company in writing of such
event;
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(2) Heller shall promptly deliver to the Company a certificate
stating the change which has occurred or the reserve requirements or
capital requirements or other costs or conditions which have been imposed
on Heller or the request, direction or requirement with which it has
complied, together with the date thereof, the amount of such increased
cost, reduction or payment and a reasonably detailed description of the
way in which such amount has been calculated, and Heller's determination
of such amounts, absent fraud or manifest error, shall be conclusive; and
(3) the Company shall pay to Heller, from time to time as specified
by Heller, such an amount or amounts as will compensate Heller for such
additional cost, reduction or payment.
The protection of this Section 6.1(b) shall be available to Heller
regardless of any possible contention of invalidity or inapplicability of the
law, regulation or condition which has been imposed.
Section 6.2. Indemnity, Costs, Expenses and Taxes. The Company
agrees to indemnify and hold Heller harmless from and against, and to pay on
demand, any and all claims, damages, losses, liabilities, costs and expenses
whatsoever which Heller may incur or suffer by reason of or in connection with
the execution and delivery of this Agreement, the Letter of Credit, the Pledge
Agreement or any Bond Document, including, but not limited to, any and all
claims, damages, losses, liabilities, costs and expenses incurred or suffered by
Heller in connection with the issuance or sale of the Bonds, or any other
documents which may be delivered in connection with this Agreement or the Letter
of Credit, or in connection with any payment under the Letter of Credit,
including, without limitation, the reasonable fees, costs and expenses of
counsel for Heller with respect thereto and with respect to advising Heller as
to its rights and responsibilities under this Agreement, the Letter of Credit,
the Pledge Agreement and the Bond Documents and all fees, costs and expenses, if
any, in connection with the enforcement or defense of the rights of Heller in
connection with this Agreement, the Letter of Credit or any of the Related
Documents, or the collection of any moneys due under this Agreement or such
other documents which may be delivered in connection with this Agreement, the
Letter of Credit or any of the Related Documents; except, only if and to the
extent that any such claim, damage, loss, liability, cost or expense shall be
caused by Heller's failure to act in good faith or failure to examine documents
presented under the Letter of Credit with due care to determine whether they
comply with the terms of the Letter of Credit (it being understood that Heller
assumes no liability or responsibility for the genuineness, falsification or
effect of any document which appears on such examination to be regular on its
face). Promptly after receipt by Heller of notice of the commencement, or
threatened commencement, of any action subject to the indemnities contained in
this Section, Heller shall promptly notify the Company thereof, provided that
the failure to give such notice shall not relieve the Company from any liability
to Heller hereunder. The obligations of the Company under this Section 6.2 shall
survive payment of any Liabilities owed under this Agreement and the expiration
of the Letter of Credit.
Section 6.3. Obligations Absolute. The obligations of the Company
under this Agreement shall be absolute, unconditional and irrevocable, and shall
be paid strictly in accordance with the terms of this Agreement under all
circumstances.
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Section 6.4. Liability of Heller. The Company assumes all risks of
the acts or omissions of the Trustee, the Tender Agent, the Remarketing Agent,
the Placement Agent or any other agent of the Trustee and any transferee of the
Letter of Credit with respect to its use of the Letter of Credit. Neither Heller
nor any of its officers or directors shall be liable or responsible for: (a) the
use which may be made of the Letter of Credit or for any acts or omissions of
the Trustee and any transferee in connection therewith; (b) the validity or
genuineness of documents, or of any enforcement thereof, even if such documents
should in fact prove to be in any or all respects invalid, fraudulent or forged;
(c) payment by Heller against presentation of documents which do not strictly
comply with the terms of the Letter of Credit, including failure of any
documents to bear any reference or adequate reference to the Letter of Credit;
or (d) any other circumstances whatsoever in making or failing to make payment
under the Letter of Credit; provided, however, that the Company shall have a
claim against Heller, and Heller shall be liable to the Company, to the extent
of any direct compensatory, as opposed to consequential, damages suffered by the
Company which the Company proves were caused by Heller's failure to act in good
faith or failure to examine documents presented under the Letter of Credit with
due care to determine whether they strictly comply with the terms of the Letter
of Credit (it being understood that Heller assumes no liability or
responsibility for the genuineness, falsification or effect of any document
which appears on such examination to be regular on its face). Heller is hereby
expressly authorized and directed to honor any demand for payment which is made
under the Letter of Credit without regard to, and without any duty on its part
to inquire into the existence of, any disputes or controversies between or among
the Issuer, the Company, the Remarketing Agent, the Placement Agent, the
Trustee, the Tender Agent or any other Person or the respective rights, duties
or liabilities of any of them, or whether any facts or occurrences represented
in any of the documents presented under the Letter of Credit are true and
correct.
Section 6.5. Participants. Heller shall have the right to grant
participations (to be evidenced by one or more participation agreements or
certificates of participation, or in any other manner or form acceptable to
Heller) in the Letter of Credit and the Liabilities under this Agreement to one
or more other financial institutions, and such participants shall be entitled to
the benefits of this Agreement, including, without limitation, Sections 6.1 and
6.2 hereof, to the same extent as if they were direct parties hereto; provided,
however, that no such participation by any such participant shall in any way
affect the obligation of Heller under the Letter of Credit.
Section 6.6. Survival of this Agreement. All covenants, agreements,
representations and warranties made in this Agreement shall survive the issuance
by Heller of the Letter of Credit and shall continue in full force and effect so
long as the Letter of Credit shall be unexpired or any Liabilities shall be
outstanding and unpaid. Whenever in this Agreement Heller is referred to, such
reference shall be deemed to include the successors and assigns of Heller and
all covenants, promises and agreements by or on behalf of the Company which are
contained in this Agreement shall inure to the benefit of the successors and
assigns of Heller. The rights and duties of the Company, however, may not be
assigned or transferred, except as specifically provided in this Agreement or
with the prior written consent of Heller, and all obligations of the Company
hereunder shall continue in full force and effect notwithstanding any assignment
by the Company of any of its rights or obligations under any of the Bond
Documents or any entering into, or consent by the Company to, any supplement or
amendment
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to any of the Bond Documents. The provisions of Section 6.1 hereof and the
obligation of the Company to reimburse Heller pursuant to Sections 6.1, 6.2 and
6.13 hereof shall survive the payment of the Bonds and termination of this
Agreement.
Section 6.7. Modification of this Agreement. No amendment,
modification or waiver of any provision of this Agreement shall be effective
unless the same shall be in writing and signed by Heller, and no amendment,
modification or waiver of any provision of the Letter of Credit, and no consent
to any departure by the Company therefrom, shall in any event be effective
unless the same shall be in writing and signed by Heller. Any such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in the same, similar or other
circumstances.
Section 6.8. Waiver of Rights by Heller. No course of dealing or
failure or delay on the part of Heller in exercising any right, power or
privilege hereunder or under the Letter of Credit or this Agreement shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right or
privilege. The rights of Heller under the Letter of Credit and the rights of
Heller under this Agreement are cumulative and not exclusive of any rights or
remedies which Heller would otherwise have.
Section 6.9. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
Section 6.10. Governing Law; Submission to Jurisdiction; Waiver of
Jury Trial. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Illinois, without giving effect to conflict of
law principles. THE COMPANY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT. THIS
WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY THE COMPANY, AND THE
COMPANY ACKNOWLEDGES THAT NEITHER HELLER NOR ANY PERSON ACTING ON BEHALF OF
HELLER HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY
JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE COMPANY FURTHER
ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE
REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER
BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THE COMPANY FURTHER
ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF
THIS WAIVER PROVISION AND AS EVIDENCE OF THIS FACT SIGNS ITS INITIALS.
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[COMPANY'S INITIALS]
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Company's Initials
THE COMPANY, FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT
AND SUFFICIENCY OF WHICH HEREBY ARE ACKNOWLEDGED, AGREES THAT ALL ACTIONS OR
PROCEEDINGS ARISING DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT
OF, RELATED TO OR FROM THIS AGREEMENT SHALL BE LITIGATED, AT HELLER'S SOLE
DISCRETION AND ELECTION, ONLY IN COURTS HAVING A SITUS WITHIN THE COUNTY OF
COOK, STATE OF ILLINOIS. THE COMPANY HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID COUNTY AND
STATE. THE COMPANY HEREBY IRREVOCABLY APPOINTS AND DESIGNATES C/T CORPORATION
SYSTEM, WHOSE ADDRESS IS THE COMPANY, C/O C/T CORPORATION SYSTEM, 208 SOUTH
LASALLE STREET, CHICAGO, ILLINOIS 60604, OR ANY OTHER PARTY WHO HELLER MAY FROM
TIME TO TIME HEREAFTER DESIGNATE (AFTER GIVING THE COMPANY SEVEN (7) DAYS'
WRITTEN NOTICE THEREOF), AS ITS TRUE AND LAWFUL ATTORNEY-IN-FACT AND DULY
AUTHORIZED AGENT FOR SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH
PROCESS UPON SUCH PARTY SHALL CONSTITUTE PERSONAL SERVICE OF SUCH PROCESS UPON
THE COMPANY, PROVIDED THAT SUCH PARTY, WITHIN SEVEN (7) BUSINESS DAYS AFTER
RECEIPT OF ANY SUCH PROCESS, SHALL FORWARD THE SAME, BY CERTIFIED OR REGISTERED
MAIL, TOGETHER WITH ALL PAPERS AFFIXED THERETO, TO THE COMPANY AT ITS ADDRESS
SET FORTH ABOVE. THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR
CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY HELLER ON THIS
AGREEMENT IN ACCORDANCE WITH THIS PARAGRAPH.
[COMPANY'S INITIALS]
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Company's Initials
Section 6.11. Notices. Unless otherwise specifically provided
herein, any notice or other communication required or permitted to be given
hereunder shall be in writing addressed to the respective party as set forth
below, and may be personally served, telecopied or sent by overnight courier
service or United States mail, and shall be deemed to have been given: (a) if
delivered in person, when delivered; (b) if delivered by telecopy, on the date
of transmission if transmitted on a Business Day before 4:00 p.m. (Chicago,
Illinois time) or, if not, on the next succeeding Business Day; (c) if delivered
by overnight courier, two days after delivery to such courier properly
addressed; or (d) if by United States mail, four Business Days after deposit in
the United States mail, with postage prepaid and properly addressed. Notices
hereunder shall be effective when received and shall be addressed:
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If to Heller, to: Heller Financial, Inc.
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Portfolio Manager, Portfolio
Organization, Corporate Finance Group
Telephone: (312) 441-7500
Telecopier: (312)441-7367
With a copy to: Heller Financial, Inc.
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Legal Department, Portfolio
Organization, Corporate Finance Group
Telephone: (312) 441-7500
Telecopier: (312) 441-7367
If to Company, to: Roller Bearing Company of America, Inc.
140 Terry Drive
Newtown, Pennsylvania 18940
Attention: Executive Vice President
Telephone: (215) 579-4300
Telecopier: (215) 579-4318
With a copy to: Gibson, Dunn & Crutcher
2029 Century Park east, Suite 4000
Los Angeles, California 90067
Attention: Bruce D. Meyer, Esq.
Telephone: (310) 552-8686
Telecopier: (310) 277-5827
If to Issuer, to: South Carolina Jobs-Economic
Development Authority
1201 Main Street, Suite 1750
Columbia, South Carolina 29201
Attention: Executive Director
Telephone: (803) 737-0079
Telecopier: (803) 737-0016
If to the Trustee, to: Mark Twain Bank
8820 Ladue Road
St. Louis, Missouri 63124
Attention: Corporate Trust Division
Telephone: (314) 889-0753
Telecopier: (314) 889-0736
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If to the Remarketing Agent, to: Stern Brothers & Co.
8000 Maryland Avenue, Suite 1020
St. Louis, Missouri 63105
Attention: Terrence M. Finn
Telephone: (314) 727-5519
Telecopier: (314) 727-7313
Section 6.12. Survival of Representations and Obligations. All
representations and warranties of the Company contained in this Agreement shall
survive delivery of this Agreement and the transactions contemplated hereby.
Section 6.13. Taxes and Expenses. In addition to the amounts payable
by the Company pursuant to Section 6.1 hereof (and not in duplication thereof),
any taxes (excluding income taxes) payable or ruled payable by any governmental
authority in respect of this Agreement, the Letter of Credit or the Bonds shall
be paid by the Company, together with interest and penalties, if any; provided,
however, that the Company may conduct a reasonable contest of any such taxes
with the prior written consent of Heller. The Company shall reimburse Heller for
any and all out-of-pocket expenses and charges paid or incurred by Heller in
connection with the preparation, execution, delivery, administration and
enforcement (including fees and disbursements of Heller's counsel, which, in
other than an enforcement proceeding, shall be reasonable) of this Agreement,
the Letter of Credit, the Pledge Agreement and the Bond Documents and any
amendment hereto or thereto.
Section 6.14. Headings. The headings and captions in this Agreement
are for convenience of reference only and shall not define or limit the
provisions hereof.
Section 6.15. Counterparts. This Agreement may be executed in
counterpart signature pages, each of which shall constitute an original but all
taken together to constitute one instrument.
Section 6.16. Relationship; Consents and Approvals. The relationship
between Heller and the Company shall be that of creditor-debtor only. No term in
this Agreement or in the other Credit Documents, and no course of dealing
between Heller and the Company, shall be deemed to create any relationship of
agency, partnership or joint venture between Heller and any other party, or
create any fiduciary duty by Heller to any other party. All consents and
approvals to be given by Heller under the Related Documents shall be given,
notwithstanding anything therein to the contrary, in the sole discretion of
Heller.
Section 6.17. No Oral Agreements. THE COMPANY AND HELLER HEREBY
AFFIRM THAT (A) THIS AGREEMENT IS THE FINAL EXPRESSION OF THE LETTER OF CREDIT
AGREEMENT BETWEEN THE COMPANY AND HELLER, (B) THIS AGREEMENT MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY PRIOR OR CONTEMPORANEOUS ORAL LETTER OF CREDIT
AGREEMENT BETWEEN THE COMPANY AND HELLER, AND (C) NO UNWRITTEN ORAL LETTER OF
CREDIT AGREEMENT EXISTS BETWEEN THE COMPANY AND HELLER.
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<PAGE>
[COMPANY'S INITIALS] [HELLER'S INITIALS]
-------------------- -------------------
Company's Initials Heller's Initials
Section 6.18. Approval of Disbursement Requests. Heller agrees to
approve disbursement requests, tendered to Heller by the Company pursuant to
Article III of the Loan Agreements, within three (3) Business Days of their
tender: (1) to pay, or reimburse Heller for paying, principal of and interest on
the Bonds; and (2) for other uses authorized by the Bond Documents, if as of the
date of approval (a) no Event of Default exists hereunder, (b) no "Default"
exists under the Credit Agreement, (c) after giving effect to such disbursement,
the "Leverage Ratio" (as hereinafter defined) as of the date of approval does
not exceed the amount set forth below for such date:
Date of Disbursement Leverage Ratio
- -------------------- --------------
Closing Date through March 31, 1995 4.75
April 1, 1995 through March 31, 1996 4.25
April 1, 1996 through March 31, 1997 3.75
April 1, 1997 and thereafter 3.00, and
(d) three (3) Business Days prior to the requested disbursement date, Heller
shall have received a written notice from the Company showing the Company's
calculation of the Leverage Ratio as of the date of said notice (but after
giving effect to the requested disbursement) and containing the Company's
certification that the conditions specified herein have been, and as of the
disbursement date will be, satisfied. Heller shall have the right, in its sole
discretion, to waive any or all of the foregoing conditions.
For purposes of this Agreement, the term "Leverage Ratio" means, as
of any date, (a) "Adjusted Total Debt" (as hereinafter defined) as of such date
divided by (b) (i) "EBIDAT" (as defined in the Credit Agreement) for the
12-month period ending on the last day of the immediately preceding calendar
month for which Heller has received the financial statements required to be
delivered pursuant to Section 5.1(A) of the Credit Agreement, minus (ii)
"Capital Expenditures" (as defined in the Credit Agreement) of Holdings and its
Subsidiaries paid in cash during said 12-month period other than those Capital
Expenditures financed with proceeds of the Bonds.
For purposes of the foregoing paragraph, the term "Adjusted Total
Debt" means, as of any date, (a) the sum of the outstanding principal balances
of all "Loans" (as defined in the Credit Agreement) and all other Indebtedness
of the Company, "Holdings" and "ITB" (as such terms are defined in the Credit
Agreement), plus (b) the amount of "Lender Guaranty Reserve" (as defined in the
Credit Agreement), minus (c) to the extent included in (a) above, Indebtedness
to the Issuer under the Loan Agreements, plus (d) the sum of the amount of the
requested disbursement and all other disbursements theretofore made, including
disbursements made, or other costs and expenses paid from Bond proceeds at
closing, minus (e) prepayments of the Bonds made by the Company pursuant to
Section 4.6 hereof.
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<PAGE>
Please signify your agreement and acceptance of the foregoing by
executing this Agreement in the space provided below.
Very truly yours,
HELLER FINANCIAL, INC.
By: /s/ Karen L. Finnerty
--------------------------------
Assistant Vice President
Accepted and agreed to:
ROLLER BEARING COMPANY OF AMERICA, INC.
By: /s/ [ILLEGIBLE]
--------------------------------
CEO and Treasurer
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<PAGE>
APPENDIX I
FORM OF IRREVOCABLE TRANSFERABLE LETTER OF CREDIT
September 7,1994
**U.S. $10,853,904.l1**
MARK TWAIN BANK, as trustee (the
"Trustee") under two Trust Inden-
tures, each dated as of September
1, 1994, and each between the South
Carolina Jobs-Economic Development
Authority (the "Issuer") and the
Trustee (collectively, the "Indentures")
8820 Ladue Road
St. Louis, Missouri 63124
Attention: Corporate Trust Division
Ladies and Gentlemen:
We hereby establish in your favor as Trustee for the benefit of the
holders of the Bonds (as hereinafter defined) our Irrevocable Transferable
Letter of Credit No. 94-RBC01 for the account of Roller Bearing Company of
America, Inc., a Delaware corporation (the "Company"), whereby we hereby
irrevocably authorize you to draw on us from time to time, from and after the
date hereof to and including the earliest to occur of: (i) our close of business
on September 15, 1999 (the "Stated Expiration Date"), (ii) the date which is ten
(10) days following your receipt of written notice from us of the occurrence of
an Event of Default under the Letter of Credit Agreement, dated as of September
1, 1994 (the "Letter of Credit Agreement"), between the Company and us, and a
direction to cause the acceleration (or, at our option, a mandatory purchase in
lieu of acceleration) of all outstanding Bonds pursuant to the Indentures; (iii)
the date on which all Bonds are paid or deemed paid under the terms of the
Indentures; (iv) the date on which the Bonds become secured by an Alternate
Credit Facility (as defined in the Letter of Credit Agreement) in accordance
with the terms of the Indentures; or (v) the earlier of (A) the date which is
five (5) days after the Conversion Date (as defined in the Letter of Credit
Agreement), or (B) the date on which we honor a drawing under the Letter of
Credit on or after the Conversion Date (the earliest of such dates herein
referred to as the "Termination Date"), a maximum aggregate amount not exceeding
Ten Million Eight Hundred Fifty-Three Thousand Nine Hundred Four and Eleven
Hundredths United States Dollars (U.S. $10,853,904.11 - the "Original Stated
Amount") to pay principal of and interest on, or the purchase price of,
$7,700,000 of the Issuer's Variable Rate Demand Industrial Development Revenue
Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A (the
"Series 1994A Bonds"), and $3,000,000 of the Issuer's Variable Rate Demand
Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc.
Project) Series 1994B (the "Series 1994B Bonds" and, together with the Series
1994A Bonds, the "Bonds"), in accordance with the
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<PAGE>
terms hereof, said $10,853,904.11 having been initially calculated to be equal
to $10,700,000 (the original principal amount of the Bonds), plus $153,904.11
(35 days' accrued interest on the original principal amount of the Bonds at the
Cap Interest Rate applicable thereto (based on a year consisting of 365 days),
as defined in the Letter of Credit Agreement) available against the following
documents (the "Payment Documents") presented to Heller Financial, Inc.
("Heller") at our office at 500 West Monroe Street, 12th Floor, Chicago,
Illinois 60661 (or such other place as we may from time to time specify),
Attention: Portfolio Manager, Portfolio Organization, Corporate Finance Group
(or such other person as we may from time to time specify):
A certificate (with all blanks appropriately completed) (i) in the
form attached as Exhibit C hereto to pay interest on the Bonds, which drawing is
provided for under Section 508(b)(l) of each Indenture (an "Interest Drawing"),
(ii) in the form attached as Exhibit D hereto to pay the principal amount of and
interest on the Bonds in respect of any redemption of the Bonds as provided for
in Section 508(b)(3) of each Indenture (a "Redemption Drawing"), provided that
in the event the date of redemption coincides with an Interest Payment Date (as
defined in the Letter of Credit Agreement) the Redemption Drawing shall not
include any interest on the Bonds (which interest is payable pursuant to an
Interest Drawing), (iii) in the form attached as Exhibit E hereto, to allow the
Trustee, as Tender Agent, to pay the purchase price of Bonds on any Purchase
Date (as defined in the Letter of Credit Agreement) as provided for in Section
508(b)(4) or (5) of each Indenture to the extent Remarketing Proceeds (as
defined in the Indentures) are not otherwise available for such purpose (a
"Liquidity Drawing"), provided that in the event the Purchase Date coincides
with an Interest Payment Date, the Liquidity Drawing shall not include any
interest on the Bonds (which interest is payable pursuant to an Interest
Drawing), (iv) in the form of Exhibit F hereto to pay the principal of and, in
the event the date of acceleration does not coincide with a regularly scheduled
Interest Payment Date, interest in respect of any acceleration of the Bonds
pursuant to Section 508(b)(6) of each Indenture (an "Acceleration Drawing"),
stating therein that it is given by your duly authorized officer and dated the
date such certificate is presented hereunder. No drawings shall be made under
this Letter of Credit for Company Bonds (as defined in the Letter of Credit
Agreement). Any defined terms which are not expressly defined in this paragraph
shall have the same meaning herein as in the Indentures. For purposes of this
paragraph, the term "interest" shall be deemed to mean interest accruing on the
Bonds through the date set forth in the Indentures.
All drawings shall be made by presentation of each Payment Document
at our office at 500 West Monroe Street, 12th Floor, Chicago, Illinois 60661 as
aforesaid, or by telecopier (at telecopier number (312) 441-7367), Attention:
Portfolio Manager, Portfolio Organization, Corporate Finance Group, without
further need of documentation, including without need of the original of this
Letter of Credit, it being understood that each Payment Document so submitted is
to be the sole operative instrument of drawing. You shall use your best efforts
to give telephonic notice of a drawing to us at the foregoing address (telephone
number (312) 441-7500) on the Business Day preceding the day of such drawing
(but such notice shall not be a condition to drawing hereunder).
We agree to honor and pay the amount of any Interest, Redemption,
Liquidity or Acceleration Drawing if presented in strict compliance with all of
the terms and conditions of this Letter of Credit. If any such drawing, other
than a Liquidity Drawing, is presented in strict
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<PAGE>
compliance with all of the terms and conditions hereof prior to 12:00 Noon,
Chicago, Illinois time (1:00 P.M., New York City time), on a Business Day, we
will confirm to you the wire transfer of the amount specified, in immediately
available funds, and will notify you of the Federal Reserve Bank confirmation
number relating to such transfer, by 2:30 P.M., Chicago, Illinois time (3:30
P.M., New York City time), on the following Business Day. If any such drawing,
other than a Liquidity Drawing, is presented in strict compliance with all of
the terms and conditions hereof at or after 12:00 Noon, Chicago, Illinois time
(1:00 P.M., New York City time) and prior to 4:30 P.M., Chicago, Illinois time
(5:30 P.M., New York City time), on a Business Day, we will confirm to you the
wire transfer of the amount specified, in immediately available funds, and will
notify you of the Federal Reserve Bank confirmation number relating to such
transfer, by 4:00 P.M. Chicago, Illinois time (5:00 P.M., New York City time),
on the following Business Day. If a Liquidity Drawing is presented in strict
compliance with all of the terms and conditions hereof prior to 10:00 A.M.,
Chicago, Illinois time (11:00 A.M., New York City time), on a Business Day, we
will confirm to you the wire transfer of the amount specified, in immediately
available funds, and will notify you of the Federal Reserve Bank confirmation
number relating to such transfer, by 2:00 P.M., Chicago, Illinois time (3:00
P.M., New York City time), on the same Business Day. If a Liquidity Drawing is
presented in strict compliance with all of the terms and conditions hereof at or
after 10:00 A.M., Chicago, Illinois time (11:00 A.M., New York City time) and
prior to 4:30 P.M., Chicago, Illinois time (5:30 P.M., New York City time), on a
Business Day, we will confirm to you the wire transfer of the amount specified,
in immediately available funds, and will notify you of the Federal Reserve Bank
confirmation number relating to such transfer, by 1:00 P.M., Chicago, Illinois
time (2:00 P.M., New York City time), on the following Business Day. Any drawing
presented hereunder after 4:30 P.M., Chicago, Illinois time (5:30 P.M., New York
City time), on a Business Day shall be deemed to have been presented at 9:00
A.M., Chicago, Illinois time (10:00 A.M., New York City time), on the following
Business Day. Payments made hereunder pursuant to a drawing shall be made by
wire transfer to Mark Twain Bank, ABA Number 081003408 for credit to Trust
Division, Account Number 3613004595, Reference: Roller Bearing Company of
America, Inc., Attention: Trust Division, Telephone: (314) 889-0750 (or to such
other account number or address as the Trustee may from time to time designate).
"Business Day" means a day which is not (a) a Saturday, Sunday or any other day
on which banking institutions in New York, New York, or the city or cities in
which the principal corporate trust office of the Trustee, the Tender Agent (as
defined in the Indenture) or the Remarketing Agent (as defined in the Indenture)
is located, or in the City of Chicago, Illinois, are required or authorized by
law to close, or (b) other than a day on which the New York Stock Exchange is
closed.
The Available Amount (as hereinafter defined) of this Letter of
Credit will be reduced automatically by the amount of any drawing hereunder;
provided, however, that the amount of any Interest Drawing hereunder, less the
amount of the reduction in the Available Amount of this Letter of Credit
attributable to interest as specified in a certificate in the form of Exhibit D
or G hereto, shall be automatically reinstated immediately upon payment by us of
such drawing. After payment by us of a Liquidity Drawing, our obligation to
honor drawings under this Letter of Credit will be automatically reduced by an
amount equal to the Original Purchase Price of any Bonds (or portions thereof)
purchased pursuant to said drawing. In addition, prior to the Conversion Date,
in the event of the remarketing of the Bonds (or portions thereof in Authorized
Denominations, as defined in the Indenture) previously purchased with the
proceeds of a Liquidity Drawing, our obligation to honor drawings hereunder will
be
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<PAGE>
automatically reinstated concurrently upon our receipt, or receipt by the
Trustee or the Tender Agent on our behalf, of an amount equal to the principal
portion of the Original Purchase Price of such Bonds (or portion thereof) plus
all accrued interest thereon, and the amount of such reinstatement shall be
equal to the Original Purchase Price of such Bonds. "Original Purchase Price"
shall mean the principal amount of any Bond purchased with the proceeds of a
Liquidity Drawing plus the amount of accrued interest on such Bond paid with the
proceeds of a Liquidity Drawing (and not pursuant to an Interest Drawing) upon
such purchase.
Upon receipt by us of a certificate of the Trustee in the form of
Exhibit D or G hereto, the Letter of Credit will automatically and permanently
reduce the amount available to be drawn hereunder by the amount specified in
such certificate. Such reduction shall be effective as of the next Business Day
following the date of delivery of such certificate.
Upon any permanent reduction of the amounts available to be drawn
under this Letter of Credit, as provided herein, we may deliver to you a
substitute Letter of Credit in exchange for this Letter of Credit or an
amendment to this Letter of Credit substantially in the form of Exhibit H hereto
to reflect any such reduction. If we deliver to you such a substitute Letter of
Credit you shall simultaneously surrender to us for cancellation the Letter of
Credit then in your possession. The "Available Amount" shall mean the Original
Stated Amount less (i) the amount of all prior reductions pursuant to Interest,
Redemption, Liquidity or Acceleration Drawings, less (ii) the amount of any
reduction in the Available Amount of this Letter of Credit pursuant to a
reduction certificate in the form of Exhibit D or G hereto to the extent such
reduction is not already accounted for by a reduction in the Available Amount
pursuant to (i) above, plus (ii) the amount of all reinstatements as above
provided.
Prior to the Stated Expiration Date, we may extend the Stated
Expiration Date from time to time at the request of the Company by delivering to
you an amendment to this Letter of Credit in the form of Exhibit J hereto
designating the date to which the Stated Expiration Date is being extended. Each
such extension of the Stated Expiration Date shall become effective on the
Business Day following delivery of such amendment to you, and thereafter all
references in this Letter of Credit to the Stated Expiration Date shall be
deemed to be references to the date designated as such in such amendment. Any
date to which the Stated Expiration Date has been extended as herein provided
may be extended in a like manner.
Prior to the Stated Expiration Date, we may increase the amount of
the interest component of this Letter of Credit (by increasing the Cap Rate
applicable hereto) from time to time at the request of the Company by delivering
to you an amendment to this Letter of Credit in the form of Exhibit K hereto
designating the increased amount of the interest component of this Letter of
Credit. Each such increase in the amount of the interest component of this
Letter of Credit shall become effective on the Business Day following delivery
of such amendment to you, and thereafter all references in this Letter of Credit
to the amount of the interest component of this Letter of Credit shall be deemed
to be references to the increased amount designated as such in such amendment.
Any increase in the amount of the interest component of this Letter of Credit as
herein provided may be increased in a like manner.
Upon the Termination Date this Letter of Credit shall automatically
terminate and be delivered by you to us for cancellation.
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<PAGE>
This Letter of Credit is transferable in whole only to your
successor as Trustee. Any such transfer (including any successive transfer)
shall be effective upon receipt by us (which receipt shall be subsequently
confirmed in writing to the transferor and the transferee by us) of a signed
copy of the instrument effecting each such transfer signed by the transferor and
by the transferee in the form of Exhibit I hereto (which shall be conclusive
evidence of such transfer) and, in such case, the transferee instead of the
transferor shall, without the necessity of further action, be entitled to all
the benefits of and rights under this Letter of Credit in the transferor's
place; provided that, in such case, any certificates to be provided by you
hereunder shall be signed by one who states therein that he or she is a duly
authorized officer or agent of the transferee.
Communications with respect to this Letter of Credit shall be
addressed to us at Heller Financial, Inc., 500 West Monroe Street, 12th Floor,
Chicago, Illinois 60661, Attention: Portfolio Manager, Portfolio Organization,
Corporate Finance Group, specifically referring to the number of this Letter of
Credit.
This Letter of Credit shall be governed by, and construed in
accordance with, the laws of the State of Illinois, including, without
limitation, the Uniform Commercial Code as in effect in the State of Illinois.
All payments made by us hereunder shall be made with our funds and
not with the funds of any other person.
This Letter of Credit sets forth in full terms of our undertaking,
and such undertaking shall not in any way be modified or amended by reference to
any other document whatsoever.
HELLER FINANCIAL, INC.
By:
------------------------------
Assistant Vice President
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<PAGE>
EXHIBIT A
TO
HELLER FINANCIAL, INC.
LETTER OF CREDIT
NO. 94-RBC01
NOTICE OF CONVERSION DATE
Heller Financial, Inc.
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Portfolio Manager,
Portfolio Organization,
Corporate Finance Group
Dear Sirs:
Reference is hereby made to that certain Irrevocable Transferable
Letter of Credit No. 94-RBC01, dated September 7, 1994 (the "Letter of Credit"),
which has been established by you for the account of Roller Bearing Company of
America, Inc., a Delaware corporation, in favor of the Trustee.
The undersigned hereby certifies and confirms that the Conversion
Date has occurred on [insert date], and, accordingly, said Letter of Credit
shall terminate 5 days after such Conversion Date in accordance with its terms.
All capitalized terms used but not otherwise defined herein shall
have the same meaning as in the Letter of Credit and the Letter of Credit
Agreement (as defined in the Letter of Credit).
MARK TWAIN BANK,
as Trustee
By:
-----------------------------
Authorized Representative
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<PAGE>
EXHIBIT B
TO
HELLER FINANCIAL, INC.
LETTER OF CREDIT
NO. 94-RBC01
NOTICE OF TERMINATION
Heller Financial, Inc.
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Portfolio Manager,
Portfolio Organization,
Corporate Finance Group
Dear Sirs:
Reference is hereby made to that certain Irrevocable Transferable
Letter of Credit No. 94-RBC0l, dated September 7, 1994 (the "Letter of Credit"),
which has been established by you for the account of Roller Bearing Company of
America, Inc., a Delaware corporation, in favor of the Trustee.
The undersigned hereby certifies and confirms that [no Bonds remain
Outstanding within the meaning of the Indentures/all drawings required to be
made under the Indentures and available under the Letter of Credit have been
made and honored/an Alternate Credit Facility has been issued to replace the
Letter of Credit in accordance with the Indentures and the Letter of Credit
Agreement]*, and, accordingly, the Letter of Credit shall be terminated in
accordance with its terms and you shall have no further liability thereon.
All capitalized terms used but not otherwise defined herein shall
have the same meaning as in the Letter of Credit and the Letter of Credit
Agreement (as defined in the Letter of Credit).
MARK TWAIN BANK,
as Trustee
By:
-----------------------------
Authorized Representative
- ----------
* Insert appropriate statement.
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<PAGE>
EXHIBIT C
TO
HELLER FINANCIAL, INC.
LETTER OF CREDIT
NO. 94-RBC0l
INTEREST DRAWING CERTIFICATE
Heller Financial, Inc.
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Portfolio Manager,
Portfolio Organization,
Corporate Finance Group
The undersigned individual, a duly authorized officer of Mark Twain
Bank (the "Beneficiary"), hereby CERTIFIES on behalf of the Beneficiary as
follows with respect to (i) that certain Irrevocable Transferable Letter of
Credit No. 94-RBC0l, dated September 7, 1994 (the "Letter of Credit"), issued by
Heller Financial, Inc. ("Heller") in favor of the Beneficiary; (ii) those
certain Bonds; and (iii) those certain Indentures:
1. The Beneficiary is the Trustee under the Indentures.
2. The Beneficiary is entitled to make this drawing in the amount of
$[insert amount] under the Letter of Credit pursuant to the Indentures with
respect to the payment of interest due on all Bonds Outstanding on the Interest
Payment Date occurring on [insert date], other than Company Bonds.
3. (a) The amount of this drawing is equal to the amount required to
be drawn by the Trustee pursuant to Section 508(b)(1) of the Indentures.
(b) Of the amount stated in paragraph 2 above:
(i) $[insert amount] is demanded in respect of interest on the
Series 1994A Bonds (as defined in the Letter of Credit); and
(ii) $[insert amount] is demanded in respect of interest on
the Series 1994B Bonds (as defined in the Letter of Credit).
4. The amount of this drawing was computed in compliance with the
terms of the Indentures and, when added to the amount of any other drawing under
the Letter of Credit made simultaneously herewith, does not exceed the Available
Amount of the Letter of Credit.
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<PAGE>
5. The proceeds of this drawing will only be used to pay interest on
Bonds in a Weekly Mode.
All capitalized terms used but not otherwise defined herein shall
have the same meaning as in the Letter of Credit and the Letter of Credit
Agreement (as defined in the Letter of Credit).
IN WITNESS WHEREOF, this Certificate has been executed this ____ day
of _________, ____.
MARK TWAIN BANK,
as Trustee
By:
-----------------------------
Authorized Representative
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EXHIBIT D
TO
HELLER FINANCIAL, INC.
LETTER OF CREDIT
NO. 94-RBC01
REDEMPTION DRAWING AND REDUCTION CERTIFICATE
Heller Financial, Inc.
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Portfolio Manager,
Portfolio Organization,
Corporate Finance Group
The undersigned individual, a duly authorized officer of Mark Twain
Bank (the "Beneficiary"), hereby CERTIFIES on behalf of the Beneficiary as
follows with respect to (i) that certain Irrevocable Transferable Letter of
Credit No. 94-RBC01, dated September 7, 1994 (the "Letter of Credit"), issued by
Heller Financial, Inc. ("Heller") in favor of the Beneficiary; (ii) those
certain Bonds; and (iii) those certain Indentures:
1. The Beneficiary is the Trustee under the Indentures.
2. The Beneficiary is entitled to make this drawing in the amount of
$[insert amount] under the Letter of Credit pursuant to Section 508(b)(3) of the
Indentures.
3. (a) The amount of this drawing is equal to (i) the principal
amount of Bonds to be redeemed by the Issuer pursuant to Section [insert Section
number] of the Indentures on [insert date] (the "Redemption Date") other than
Company Bonds, plus (ii) interest accrued from the immediately preceding
Interest Payment Date to the Redemption Date, provided that in the event the
Redemption Date coincides with an Interest Payment Date this drawing shall not
include any accrued interest on such Bonds.
(b) Of the amount stated in paragraph 2 above:
(i) $[insert amount] is demanded in respect of the principal
amount of the Series 1994A Bonds;
(ii) $[insert amount] is demanded in respect of the principal
amount of the Series 1994B Bonds;
(iii) $[insert amount] is demanded in respect of interest on
such Series 1994A Bonds; and
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<PAGE>
(iv) $[insert amount] is demanded in respect of interest on
such Series 1994B Bonds.
4. The amount of the drawing made by this Certificate was computed
in compliance with the terms and conditions of the Indentures and, when added to
the amount of any other drawing under the Letter of Credit made simultaneously
herewith, does not exceed the Available Amount of the Letter of Credit.
5. Upon payment of the amount drawn hereunder, Heller is hereby
directed to permanently reduce the Available Amount of the Letter of Credit by
$[insert amount of reduction] and the Available Amount shall thereupon equal
$[insert new Available Amount].
6. Of the amount of the reduction stated in paragraph 5 above:
(i) $[insert amount] is attributable to the principal amount
of the Series 1994A Bonds redeemed;
(ii) $[insert amount] is attributable to the principal amount
of the Series 1994B Bonds redeemed;
(iii) $[insert amount] is attributable to interest on such
Series 1994A Bonds (i.e., [insert number of days] days' interest
thereon at the Cap Interest Rate); and
(iv) $[insert amount] is attributable to interest on such
Series 1994B Bonds (i.e., [insert number of days] days' interest
thereon at the Cap Interest Rate).
7. The amount of the reduction in the Available Amount of the Letter
of Credit has been computed in accordance with the provisions of the Letter of
Credit Agreement.
8. Following the reduction, the Available Amount of the Letter of
Credit shall be at least equal to the aggregate principal amount of the Bonds
Outstanding (to the extent such Bonds are not Company Bonds), plus interest
thereon at the Cap Interest Rate (as defined in the Letter of Credit Agreement)
applicable thereto for a period of 35 days (based on a year consisting of 365
days).
9. The proceeds of this drawing will only be used to pay principal
of and accrued interest on Bonds in a Weekly Mode.
[10. The Trustee, prior to giving notice of redemption to the
registered owners of the Bonds, received written evidence from Heller that
Heller has consented to such redemption.]*
All capitalized terms used but not otherwise defined herein shall
have the same meaning as in the Letter of Credit and the Letter of Credit
Agreement (as defined in the Letter of Credit).
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<PAGE>
IN WITNESS WHEREOF, this Certificate has been executed this
__________ day of __________, ______.
MARK TWAIN BANK,
as Trustee
By:
-----------------------------
Authorized Representative
- ----------
* To be included in a certificate only if Section 401(a) of the Indentures is
referenced in paragraph numbered 3 above.
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<PAGE>
EXHIBIT E
TO
HELLER FINANCIAL, INC.
LETTER OF CREDIT
NO. 94-RBC01
LIQUIDITY DRAWING CERTIFICATE
Heller Financial, Inc.
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Portfolio Manager,
Portfolio Organization,
Corporate Finance Group
The undersigned individual, a duly authorized officer of Mark Twain
Bank (the "Beneficiary") hereby CERTIFIES as follows with respect to (i) that
certain Irrevocable Transferable Letter of Credit No. 94-RBC01, dated September
7, 1994 (the "Letter of Credit"), issued by Heller Financial, Inc. ("Heller") in
favor of the Beneficiary; (ii) those certain Bonds; and (iii) those certain
Indentures:
1. The Beneficiary is the Tender Agent, acting as agent of the
Trustee under the Indentures.
2. The Beneficiary is entitled to make this drawing under the Letter
of Credit in the amount of $[insert amount] under the Letter of Credit pursuant
to Section 508(b)(4) or (5) with respect to the payment of the purchase price of
Bonds pursuant to Section 301 or 302 of the Indentures to be purchased on
[insert date] (the "Purchase Date"), which Bonds have not been remarketed as
provided in the Indentures or the purchase price of which has not been received
by the Tender Agent by 9:00 a.m. (Chicago, Illinois time) on said Purchase Date.
3. (a) The amount of this drawing is equal to (i) the principal
amount of Bonds to be purchased pursuant to the Indentures on the Purchase Date
other than Company Bonds, plus (ii) interest on such Bonds accrued from the
immediately preceding Interest Payment Date (or, if none, the date of the
issuance of the Bonds) to the Purchase Date (provided that in the event the
Purchase Date coincides with an Interest Payment Date this drawing shall not
include any interest on such Bonds), less (iii) the amount of proceeds from the
remarketing of such Bonds received by the Tender Agent from the Remarketing
Agent on or prior to the Purchase Date.
(b) Of the amount stated in paragraph 2 above:
-38-
<PAGE>
(i) $[insert amount] is demanded in respect of the principal
portion of the purchase price of the Series 1994A Bonds;
(ii) $[insert amount] is demanded in respect of the principal
portion of the purchase price of the Series 1994B Bonds;
(iii) $[insert amount] is demanded in respect of the interest
portion of the purchase price of such Series 1994A Bonds; and
(iv) $[insert amount] is demanded in respect of the interest
portion of the purchase price of such Series 1994B Bonds.
4. The amount of the drawing made by this Certificate was computed
in compliance with the terms and conditions of the Indentures and, when added to
the amount of any other drawing under the Letter of Credit made simultaneously
herewith, does not exceed the Available Amount of the Letter of Credit.
5. The Beneficiary will register or cause to be registered in the
name of Roller Bearing Company of America, Inc., a Delaware corporation, as
registered owner, and in the name of Heller, as pledgee, as provided in Section
307(d)(2) of the Indentures, upon payment of the amount drawn hereunder, Series
1994A Bonds and Series 1994B Bonds in the principal amount of the Series 1994A
Bonds and the Series 1994B Bonds, respectively, being purchased with the amounts
drawn hereunder and will deliver such Series 1994A Bonds and Series 1994B Bonds
to the Trustee in accordance with the Indentures.
6. The proceeds of this drawing will only be used to pay the
purchase price of Bonds in a Weekly Mode.
All capitalized terms used but not otherwise defined herein shall
have the same meaning as in the Letter of Credit and the Letter of Credit
Agreement (as defined in the Letter of Credit).
IN WITNESS WHEREOF, this Certificate has been executed this
_________ day of __________, _____.
MARK TWAIN BANK,
as Trustee
By:
----------------------------
Authorized Representative
-39-
<PAGE>
EXHIBIT F
TO
HELLER FINANCIAL, INC.
LETTER OF CREDIT
NO. 94-RBC01
ACCELERATION DRAWING CERTIFICATE
Heller Financial, Inc.
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Portfolio Manager,
Portfolio Organization,
Corporate Finance Group
The undersigned individual, a duly authorized officer of Mark Twain
Bank (the "Beneficiary"), hereby CERTIFIES on behalf of the Beneficiary as
follows with respect to (i) that certain Irrevocable Transferable Letter of
Credit No. 94-RBC01, dated September 7, 1994 (the "Letter of Credit"), issued by
Heller Financial, Inc. ("Heller") in favor of the Beneficiary; (ii) those
certain Bonds; and (iii) those certain Indentures:
1. The Beneficiary is the Trustee under the Indentures.
2. An Event of Default has occurred under subsection [insert
subsection number] of Section 801 of the Indentures and the Trustee has declared
the principal of and accrued interest on all Bonds to be immediately due and
payable. The Beneficiary is entitled to make this drawing in the amount of
$[insert amount] under the Letter of Credit pursuant to Section 508(b)(6) of the
Indentures in order to pay the principal of and interest on the Bonds due to an
acceleration thereof in accordance with Section 802 of the Indentures.
3. (a) The amount of this drawing is equal to (i) the principal
amount of the Bonds outstanding on [insert date of acceleration] (the
"Acceleration Date") other than Company Bonds, plus (ii) if the Acceleration
Date does not coincide with a regularly scheduled Interest Payment Date,
interest on such Bonds from the immediately preceding Interest Payment Date (or,
if none, the date of issuance of the Bonds) to the Acceleration Date.
(b) Of the amount stated in paragraph 2 above:
(i) $[insert amount] is demanded in respect of the principal
amount of the Series 1994A Bonds;
(ii) $[insert amount] is demanded in respect of the principal
amount of the Series 1994B Bonds;
-40-
<PAGE>
(iii) $[insert amount] is demanded in respect of interest on
such Series 1994A Bonds; and
(iv) $[insert amount] is demanded in respect of interest on
such Series 1994B Bonds.
4. The amount of this drawing was computed in compliance with the
terms and conditions of the Indentures and, when added to the amount of drawing
under the Letter of Credit made simultaneously herewith, does not exceed the
Available Amount of the Letter of Credit.
5. The proceeds of this drawing will only be used to pay principal
of and interest on Bonds in a Weekly Mode.
All capitalized terms used but not otherwise defined herein shall
have the same meaning as in the Letter of Credit and the Letter of Credit
Agreement (as defined in the Letter of Credit).
IN WITNESS WHEREOF, this Certificate has been executed this
_________ day of ___________ , _____.
MARK TWAIN BANK,
as Trustee
By:
---------------------------
Authorized Representative
-41-
<PAGE>
EXHIBIT G
TO
HELLER FINANCIAL, INC.
LETTER OF CREDIT
NO. 94-RBC01
REDUCTION CERTIFICATE
Heller Financial, Inc.
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Portfolio Manager,
Portfolio Organization,
Corporate Finance Group
The undersigned hereby CERTIFIES with respect to (i) that certain
Irrevocable Transferable Letter of Credit No. 94-RBC01, dated September 7, 1994
(the "Letter of Credit"), issued by Heller Financial, Inc. ("Heller") in favor
of the Beneficiary; (ii) those certain Bonds; and (iii) those certain
Indentures:
1. The Beneficiary is the Trustee under the Indentures.
2. Upon receipt by Heller of this Certificate, the Available Amount
shall be reduced by $[insert amount], and the Available Amount shall thereupon
equal $[insert amount]. $[insert amount] of said amount is attributable to
interest.
3. The amount of the reduction in the Available Amount of the Letter
of Credit has been computed in accordance with the provisions of the Letter of
Credit Agreement.
4. Following the reduction, the Available Amount of the Letter of
Credit shall equal the aggregate principal amount of the Bonds outstanding (to
the extent such Bonds are not Company Bonds), plus 35 days' interest on the
Bonds at the Cap Interest Rate, based upon a year consisting of 365 days.
All capitalized terms used but not otherwise defined herein shall
have the same meaning as in the Letter of Credit and the Letter of Credit
Agreement (as defined in the Letter of Credit).
-42-
<PAGE>
IN WITNESS WHEREOF, this Certificate has been executed this
_________ day of __________, ____.
MARK TWAIN BANK,
as Trustee
By:
-------------------------------
Authorized Representative
-43-
<PAGE>
EXHIBIT H
TO
HELLER FINANCIAL, INC.
LETTER OF CREDIT
NO. 94-RBC01
NOTICE OF AMENDMENT
(REDUCTION)
Mark Twain Bank
8820 Ladue Road
St. Louis, Missouri 63124
Attention: Corporate Trust Division
Dear Sirs:
Reference is made to that certain Irrevocable Transferable Letter of
Credit No. 94-RBC01, dated September 7, 1994 (the "Letter of Credit"),
established by us in your favor as Beneficiary. We hereby notify you that, in
accordance with the terms of the Letter of Credit and that certain Letter of
Credit Agreement, dated as of September 1, 1994, between Roller Bearing Company
of America, Inc., a Delaware corporation, and us, the Available Amount of the
Letter of Credit has been reduced to $[insert amount].
This letter should be attached to the Letter of Credit and made a
part thereof.
HELLER FINANCIAL, INC.
By:
------------------------------
Its:
-------------------------
-44-
<PAGE>
EXHIBIT I
TO
HELLER FINANCIAL, INC.
LETTER OF CREDIT
NO. 94-RBC01
TRANSFER CERTIFICATE
Heller Financial, Inc.
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Portfolio Manager,
Portfolio Organization,
Corporate Finance Group
Dear Sirs:
Reference is made to that certain Irrevocable Transferable Letter of
Credit No. 94-RBC01, dated September 7, 1994 (the "Letter of Credit"), which has
been established by you in favor of Mark Twain Bank.
The undersigned, a duly authorized officer or agent of Mark Twain
Bank has transferred and assigned (and hereby confirms to you said transfer and
assignment) all of its rights under and interest in said Letter of Credit to
[insert name of transferee], and confirms that Mark Twain Bank no longer has any
rights under or interest in said Letter of Credit.
Transferor and Transferee have indicated on the face of said Letter
of Credit that it has been transferred and assigned to Transferee.
The undersigned, a duly authorized officer or agent of the
Transferee hereby certifies that the Transferee is a duly authorized transferee
under the terms of said Letter of Credit and is accordingly entitled, upon
presentation of the documents called for therein, to receive payment thereunder.
MARK TWAIN BANK,
as Transferor
By:
----------------------------
Authorized Officer
--------------------------------
as Transferee
By:
----------------------------
Authorized Officer
-45-
<PAGE>
EXHIBIT J
TO
HELLER FINANCIAL, INC.
LETTER OF CREDIT
NO. 94-RBC01
NOTICE OF AMENDMENT
(STATED EXPIRATION DATE)
Mark Twain Bank
8820 Ladue Road
St. Louis, Missouri 63124
Attention: Corporate Trust Division
Dear Sirs:
Reference is made to that certain Irrevocable Transferable Letter of
Credit No. 94-RBC01, dated September 7, 1994 (the "Letter of Credit"),
established by us in your favor as Beneficiary. We hereby notify you that, in
accordance with the terms of the Letter of Credit and that certain Letter of
Credit Agreement, dated as of September 1, 1994, between Roller Bearing Company
of America, Inc., a Delaware corporation, and us, the Stated Expiration Date of
the Letter of Credit has been extended to [insert date].
This letter should be attached to the Letter of Credit and made a
part thereof.
HELLER FINANCIAL, INC.
By:
---------------------------
Its:
----------------------
-46-
<PAGE>
EXHIBIT K
TO
HELLER FINANCIAL, INC.
LETTER OF CREDIT
NO. 94-RBC01
NOTICE OF AMENDMENT
(INTEREST COMPONENT)
Mark Twain Bank
8820 Ladue Road
St. Louis, Missouri 63124
Attention: Corporate Trust Division
Dear Sirs:
Reference is made to that certain Irrevocable Transferable Letter of
Credit No. 94-RBC01, dated September 7,1994 (the "Letter of Credit"),
established by us in your favor as Beneficiary. We hereby notify you that, in
accordance with the terms of the Letter of Credit and that certain Letter of
Credit Agreement, dated as of September 1, 1994, between Roller Bearing Company
of America, Inc., a Delaware corporation, and us, the interest component of the
Letter of Credit has been increased to $[insert amount based on 35 days'
interest (365-day year) at the new Cap Rate].
This letter should be attached to the Letter of Credit and made a
part thereof.
HELLER FINANCIAL, INC.
By:
----------------------------
Its:
-----------------------
-47-
TERMINATION, RELEASE AND ENHANCEMENT
LETTER OF CREDIT DOCUMENTS CONTINUATION AGREEMENT
TERMINATION, RELEASE AND ENHANCEMENT LETTER OF CREDIT DOCUMENTS
CONTINUATION AGREEMENT, dated June 23, 1997 (this "Agreement"), by and between
HELLER FINANCIAL, INC., in its individual capacity ("Heller") and as agent (in
such capacity, the "Agent") for the Lenders that are a party to the Credit
Agreement referred to below, ROLLER BEARING COMPANY OF AMERICA, INC. ("RBC") and
INDUSTRIAL TECTONICS BEARING CORPORATION ("ITB" and, together with RBC,
collectively referred to herein as the "Borrowers" and individually as a
"Borrower"). Capitalized terms used herein without being defined herein shall
have the respective meanings provided therefor in the Credit Agreement referred
to below.
WITNESSETH:
WHEREAS, the Borrowers, the Agent and certain financial institutions
(collectively, the "Lenders") are parties to a Second Amended and Restated
Credit Agreement, dated as of September 22, 1995 (as amended to the date hereof,
the "Credit Agreement"), whereby the Lenders have made Loans and other financial
accommodations available to the Borrowers;
WHEREAS, the Loans and other financial accommodations made available by
the Lenders to the Borrowers are secured by all of the assets of the Borrowers
and of the Borrowers' Subsidiaries identified in the Security Documents, all of
such Security Documents being set forth on Schedule 1 hereto;
WHEREAS, an Irrevocable Transferable Letter of Credit dated September 7,
1994 in the face amount of $10,853,904.11 (the "Enhancement Letter of Credit")
was issued by Heller to Mark Twain Bank, as trustee (the "Trustee") under two
Trust Indentures, each dated as of September 1, 1994, and each between the South
Carolina Jobs - Economic Development Authority and the Trustee (the
"Indentures"), pursuant to the terms of a Letter of Credit Agreement dated
September 1, 1994 between RBC and Heller, as amended by a First Amendment to
Letter of Credit Agreement dated November 16, 1995 and a Second Amendment to
Letter of Credit Agreement of even date herewith (as so amended, the "Letter of
Credit Agreement");
WHEREAS, RBC's obligations to Heller under the Letter of Credit Agreement
are secured by a lien and security interest in RBC's interest in the "Trust
Estate" (as defined in the Indentures) and in the "Funds Collateral" (as defined
in the Letter of Credit Agreement);
WHEREAS, RBC's obligations to Heller under the Letter of Credit Agreement
are further secured pursuant to the terms of the Pledge and Security Agreement
dated September 1, 1994 among RBC, Heller and the Trustee (the "Letter of Credit
Pledge Agreement") (the Enhancement Letter of Credit, the Letter of Credit
Agreement, the Indentures, the Letter of Credit Pledge Agreement and all other
documents, instruments and agreements executed and
<PAGE>
delivered to or for the benefit of Heller in connection with the Enhancement
Letter of Credit are hereinafter collectively referred to as the "Enhancement
Letter of Credit Documents").
WHEREAS, pursuant to this Agreement the Borrowers (i) intend, in
accordance with the terms of the Credit Agreement, to (a) terminate the
Revolving Loan Commitment and the Term Loan Commitment in full, (b) prepay in
full the outstanding principal balance of the Loans, together with all accrued
interest thereon, through and including the date hereof, (c) pay all other
amounts due and owing to the Agent and the Lenders as of the date hereof under
the terms of the Credit Agreement and the other Loan Documents (other than the
Enhancement Letter of Credit Documents) (the Loan Documents, other than the
Enhancement Letter of Credit Documents, being referred to collectively as the
"Credit Agreement Loan Documents"), (d) terminate each Lender Letter of Credit
and Risk Participation Agreement and satisfy any outstanding Risk Participation
Liability with respect thereto and (e) terminate all security interests in favor
of the Agent in the assets of the Borrowers and their Subsidiaries that were
granted pursuant to the Credit Agreement Loan Documents, and (ii) shall set
forth the terms on which the Enhancement Letter of Credit Documents will remain
effective;
NOW, THEREFORE, for good and valuable consideration, the parties hereto
agree as follows:
Section 1. Repayment of Obligations. The Agent hereby acknowledges receipt
of payment in immediately available funds of $51,792,614.06, constituting as of
the date hereof (a) all the outstanding principal amount of, and interest
accrued on, the Loans pursuant to the Credit Agreement, (b) all outstanding Risk
Participation Liability and (c) all other amounts due and payable under the
Credit Agreement and the other Credit Agreement Loan Documents.
Section 2. Termination of Credit Agreement Loan Documents. The Agent and
the Borrowers hereby acknowledge and agree that the Credit Agreement, the Notes
and the other Credit Agreement Loan Documents are hereby terminated in the
entirety, except to the extent that the provisions contained therein are by
their terms stated to survive such termination. Promptly following the execution
and delivery of this Agreement, the Agent agrees to deliver for cancellation to
Borrowers each of the Notes identified on Schedule II hereto, which are all of
the promissory notes outstanding under the Credit Agreement.
Section 3. Termination of Commitments. The Agent and the Borrowers
acknowledge and agree that the Revolving Loan Commitment and the Term Loan
Commitment have been permanently terminated.
Section 4. Termination of Certain Liens. (a) The Agent hereby irrevocably
terminates in the entirety all of its right, title and interest in, to and under
the assets, business, properties, contracts and rights of the Borrowers granted,
pledged, mortgaged, conveyed, transferred or set over to the Agent as collateral
security for the obligations of the Borrowers under the Credit Agreement Loan
Documents with the exception of any such property which constitutes collateral
for RBC's obligations to Heller under Section 2.13 of the Letter of Credit
Agreement;
2
<PAGE>
(b) The Agent hereby delivers to RBC the pledged securities and promissory
note identified on Schedule III hereto (and the related stock powers, as
applicable).
(c) the Agent hereby delivers to RBC the Uniform Commercial Code Form
UCC-3 termination statements identified on Schedule IV with respect to each
Uniform Commercial Code financing statement that was filed pursuant to the
documents identified on Schedule I hereto. The Agent authorizes the Borrowers
and their agents to file such Uniform Commercial Code Form UCC-3 termination
statements in the appropriate jurisdictions.
(d) The Agent hereby delivers to RBC the mortgage discharges or releases
with respect to each of the mortgages identified on Schedule I hereto that were
provided pursuant to the Credit Agreement Loan Documents. The Agent authorizes
the Borrowers to file such mortgage discharges or release agreements in the
appropriate jurisdictions.
(e) The Agent hereby delivers to RBC the release agreements with respect
to all intellectual property collateral security agreements identified on
Schedule I that were provided pursuant to the Credit Agreement Loan Documents.
The Agent authorizes the Borrowers and their agents to file such release
agreements with the U.S. Patent and Trademark Office and the U.S. Copyright
Office.
Section 5. Termination of Lender Letters of Credit. The Agent and the
Borrowers hereby acknowledge that no Lender Letters of Credit or Risk
Participation Agreements are issued and outstanding on the date hereof.
Section 6. Further Assurances. The Agent hereby agrees to execute and
deliver to or on behalf the Borrowers, at the expense of the Borrowers, such
other instruments, notices, releases or certificates as any of them may
reasonably request from time to time to more fully effectuate the foregoing
provision of this Agreement.
Section 7. Costs and Expenses. The Borrowers agree, jointly and severally,
to reimburse the Agent for all of its reasonable costs and expenses (including
the reasonable fees and reasonable expenses of legal counsel) incurred in
connection with the preparation, execution, delivery, filing, recordation and
administration of this Agreement and other documents and instruments to be
delivered pursuant hereto.
Section 8. Enhancement Letter of Credit Documents. Notwithstanding the
other terms of this Agreement, the Enhancement Letter of Credit Documents are,
and shall continue to be, in full force and effect in accordance with their
terms from and after the termination of the Credit Agreement Loan Documents.
Section 9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
3
<PAGE>
Section 10. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which when executed and delivered will be
deemed to be an original and all of which counterparts of this Agreement taken
together will be deemed to be but one and the same instrument.
4
<PAGE>
IN WITNESS WHEREOF, the Agent and the Borrowers have caused this Agreement
to be duly executed by their respective duly authorized officers as of the date
and year first above written.
HELLER FINANCIAL, INC.,
individually and as Agent
By: /s/ Robert [ILLEGIBLE]
-------------------------------------
Name: Robert [ILLEGIBLE]
Title: AVP
ROLLER BEARING COMPANY OF
AMERICA, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
Name:
-----------------------------
Title:
----------------------------
INDUSTRIAL TECTONICS BEARING
CORPORATION
By: /s/ [ILLEGIBLE]
-------------------------------------
Name:
-----------------------------
Title:
----------------------------
5
<PAGE>
Schedule I
Security Documents
1. Holdings Guaranty dated March 31, 1992 by Roller Bearing Holding Company,
Inc. ("Holding") in favor of Heller Financial, Inc., as agent ("Agent").
2. Holdings Pledge Agreement dated March 31, 1992 by Holding in favor of
Agent.
3. Company Guaranty dated March 31, 1992 by Roller Bearing Company of
America, Inc. ("Company") in favor of Agent.
4. Company Security Agreement dated March 31, 1992 by Company in favor of
Agent.
5. Patent Security Agreement dated March 31, 1992 by Company in favor of
Agent.
6. Trademark Security Agreement dated March 31, 1992 by Company in favor of
Agent.
7. Company Pledge Agreement dated March 31, 1992 by Company in favor of
Agent.
8. Subsidiary Guaranty dated March 31, 1992 by Industrial Tectonics Bearing
Corporation ("ITBC") in favor of Agent.
9. Subsidiary Security Agreement dated March 31, 1992 by ITBC in favor of
Agent.
10. Patent Security Agreement dated March 31, 1992 by ITBC in favor of Agent.
11. Trademark Security Agreement dated March 31, 1992 by ITBC in favor of
Agent.
12. Subsidiary Guaranty dated October 26, 1992 by RBC Transport Dynamics
Corporation ("RBC") in favor of Agent.
13. Subsidiary Security Agreement dated October 26, 1992 by REC in favor of
Agent.
14. Copyright Security Agreement dated October 26, 1992 by RBC in favor of
Agent.
15. Trademark Security Agreement dated October 26, 1992 by RBC in favor of
Agent.
16. Patent Security Agreement dated October 26, 1992 by RBC in favor of Agent.
17. Mortgage, Assignment of Rents, Security Agreement, Financing Statement and
Fixture Filing dated March 31, 1992 by Company in favor of Agent
(Darlington County, South Carolina).
18. Assignment of Leases and Rents dated March 31, 1992 by Company in favor of
Agent Darlington County, South Carolina).
19. Deed of Trust, Assignment of Rents, Security Agreement, Financing
Statement and Fixture Filing dated March 31, 1992 by ITBC in favor of
Chicago Title Insurance Company, as Trustee for the benefit of Agent (Los
Angeles County, California).
20. Trademark Security Agreement dated August 12, 1993 by Company in favor of
Agent.
21. Patent Security Agreement dated August 12, 1993 by Company in favor of
Agent.
22. Open-End Mortgage Deed (Fee) dated June 28, 1996 by Company in favor of
Agent (Fairfield, Connecticut).
6
<PAGE>
23. Deed of Trust with Assignment of Rents dated February 20, 1996 by Company
in favor of Chicago Title Company, as Trustee for the benefit of Agent
(Santa Ana - Orange County, California).
24. Collateral Assignment of Lessee's Interest in Lease dated October 30, 1996
by BPP Acquisition Corporation, Inc. in favor of Agent.
25. Pledge Agreement dated October 30, 1996 by Company in favor of Agent.
26. Continuing Subsidiary Guaranty dated October 30, 1996 by Company and BPP
Acquisition Corporation ("BPP").
27. Subsidiary Security Agreement dated October 30, 1996 by BPP in favor of
Agent.
28. Trademark Security Agreement dated October 30, 1996 by BPP in favor of
Agent.
29. Patent Security Agreement dated October 30, 1996 by BPP in favor of Agent.
30. Copyright Security Agreement dated October 30, 1996 by BPP in favor of
Agent.
31. Assignment of Lien Escrow Agreement dated October 30, 1996 by BPP, Company
and Agent.
32. Subsidiary Security Agreement dated February 27, 1997 by RBC Nice
Bearings, Inc. ("Nice") in favor of Agent.
33. Continuing Subsidiary Guaranty dated February 27, 1997 by Nice in favor of
Agent.
34. Pledge Agreement dated February 27, 1997 by Company in favor of Agent.
35. Collateral Assignment dated February 27, 1997 by Nice and Company in favor
of Agent.
36. Trademark Security Agreement dated February 27, 1997 by Nice in favor of
Agent.
37. Copyright Security Agreement dated February 27, 1997 by Nice in favor of
Agent.
38. Patent Security Agreement dated February 27, 1997 by Nice in favor of
Agent.
7
<PAGE>
Schedule II
Notes
Lender Loan Amount
------ ---- ------
Bank of Scotland Term A $ 3,428,571
Bank of Scotland Revolver 8,571,429
The First National Bank of Boston Term A 1,996,160
The First National Bank of Boston Term B 1,659,308
The First National Bank of Boston Revolver 4,990,399
National Westminster Bank, PLC Term A 1,996,160
National Westminster Bank, PLC Term B 1,659,308
National Westminster Bank, PLC Revolver 4,990,399
Union Bank Term A 1,857,143
Union Bank Revolver 4,642,857
Massachusetts Mutual Life Insurance Term A 1,250,000
Company
Massachusetts Mutual Life Insurance Term B 3,750,000
Company
Massachusetts Mutual Life Insurance Revolver 1,000,000
Company
Wells Fargo Bank, N.A. Term A 1,996,160
Wells Fargo Bank, N.A. Term B 1,659,308
Wells Fargo Bank, N.A. Revolver 4,990,399
Heller Financial, Inc. Term A 2,225,806
Heller Financial, Inc. Term B 822,077
Heller Financial, Inc. Revolver 9,814,516
8
<PAGE>
Schedule III
Pledged Securities and Note
<TABLE>
<CAPTION>
No. of
Issuer Holder Certificate Shares
------ ------ ----------- ------
<S> <C> <C> <C>
Industrial Tectonics Bearings Corporation Roller Bearing Holding Company, 1 100
Inc.
Roller Bearing Company of America, Inc. Roller Bearing Holding Company, A-13 100
Inc.
RBC Transport Dynamics Corporation Roller Bearing Holding Company, 1 100
Inc.
BPP Acquisition Corporation Roller Bearing Holding Company, 1 10
Inc.
RBC Nice Bearing, Inc. Roller Bearing Holding Company, 1 10
Inc.
</TABLE>
$3,435,662.50 Subordinated Promissory Note of Roller Bearing Company of America,
Inc. dated March 31, 1992 payable to the order of Industrial Tectonics Bearings
Corporation.
9
<PAGE>
Schedule IV
UCC Termination Statements
see attached schedule
10
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement, dated as of September 1, 1994
(the "Agreement"), is made by and among Roller Bearing Company of America, Inc.,
a Delaware corporation (the "Company"), Heller Financial, Inc., a Delaware
corporation ("Heller"), and Mark Twain Bank, St. Louis, Missouri, a Missouri
banking corporation (the "Trustee"), as Trustee under two Trust Indentures, each
dated as of September 1, 1994 (collectively, the "Indentures"), and each between
the South Carolina Jobs-Economic Development Authority (the "Issuer") and the
Trustee.
RECITALS
A. The Company and Heller have entered into a Letter of Credit
Agreement, dated as of September 1, 1994 (the "Letter of Credit Agreement"),
pursuant to which Heller has agreed to issue the Letter of Credit (as defined in
the Letter of Credit Agreement) in favor of the Trustee for the account of the
Company.
B. It is a condition precedent under the Letter of Credit Agreement
to the obligation of Heller to issue the Letter of Credit that the Company and
the Trustee shall have executed and delivered this Agreement.
AGREEMENT
The Company and the Trustee each agree with Heller as follows:
Section 1. Defined Terms. Capitalized terms not defined herein shall
have the meanings ascribed to such terms in the Letter of Credit Agreement or,
if not inconsistent with the Letter of Credit Agreement, the Indentures.
Section 2. Pledge. The Company hereby pledges, assigns, transfers,
hypothecates and delivers to Heller all of its right, title and interest in, and
grants to Heller a first-priority Lien upon, (i) the Pledged Bonds as the same
may from time to time be delivered to or held by the Trustee as collateral agent
for Heller pursuant to Section 307(d) of the Indentures, and (ii) all proceeds
of the Pledged Bonds (collectively, the "Collateral"), all as collateral
security for the prompt and complete payment when due of all amounts payable by
the Company to Heller, and the prompt and complete performance of all other
obligations of the Company to Heller, whether now existing or hereafter arising,
under or in respect of the Letter of Credit Agreement, the Letter of Credit,
this Agreement and the Bond Documents (collectively, the "Liabilities"). The
Company hereby agrees that the Trustee shall act as the agent and bailee of
Heller for the purpose of perfecting the Lien of this Agreement and of holding
the Collateral for the benefit of Heller pursuant to the Indentures.
Section 3. Payments on Collateral. If, while this Agreement is in
effect, the Company shall become entitled to receive or shall receive any
interest or other payment in respect of the Collateral, the Company agrees to
accept the same as Heller's agent, to hold the
<PAGE>
same in trust on behalf of Heller and to deliver the same forthwith to Heller.
The Company instructs and authorizes the Trustee to hold and receive on Heller's
behalf and to deliver forthwith to Heller any payment received by it in respect
of the Collateral (including the proceeds of any remarketing of the Pledged
Bonds). All such payments in respect of the Collateral that are paid to Heller
shall be credited against the Liabilities as Heller may determine.
Section 4. Release of Pledged Bonds. Heller agrees to release from
the Lien of this Agreement Pledged Bonds if and only if Heller has given notice
to the Trustee of the reinstatement of the Letter of Credit in an amount equal
to the Original Purchase Price of the Pledged Bonds so released.
Section 5. Representations and Warranties. The Company represents
and warrants that: (a) on the date of delivery of the Pledged Bonds to or for
the benefit of Heller, to the Company's knowledge, no other Person shall have
any right, title or interest in and to the Pledged Bonds; (b) the Company has,
and on the date of delivery to or for the benefit of Heller of any of the
Pledged Bonds will have, full power, authority and legal right to pledge all of
its right, title and interest in and to the Pledged Bonds pursuant to this
Agreement; and (c) the pledge, assignment and delivery of the Pledged Bonds
pursuant to this Agreement will create a valid first Lien on, and a perfected
first-priority security interest in, all right, title and interest of the
Company in and to the Collateral, subject to no prior Lien on the Property or
assets of the Company that would include the Pledged Bonds. The Company makes
each of the representations and warranties in the Credit Agreement and the Bond
Documents, to the extent material, to and for the benefit of Heller as if the
same were set forth in full herein. Unless the Company shall have previously
advised Heller in writing that one or more of the above statements is no longer
true, the Company shall be deemed to have represented and warranted to Heller on
the date of each Liquidity Drawing under the Letter of Credit that the
statements contained herein are true and correct.
Section 6. Rights of Heller. Heller shall not be liable for any
failure to collect or realize upon all or any part of the Liabilities or any
collateral security (including the Collateral) or guaranty for the Liabilities,
or for any delay in so doing, and Heller shall be under no obligation to take
any action whatsoever with regard to the Liabilities or any such collateral
security or guaranty. If an Event of Default under the Letter of Credit
Agreement has occurred and is continuing, Heller may, without notice, exercise
all rights, privileges or options pertaining to any Pledged Bonds as if it were
the absolute owner of such Pledged Bonds, upon such terms and conditions as it
may determine, all without liability except to account for Property actually
received by it, but Heller shall have no duty to exercise any of those rights,
privileges or options, and shall not be responsible for any failure to do so or
delay in so doing.
Section 7. Remedies. In the event that any portion of the
Liabilities has been declared due and payable, to the fullest extent permitted
by applicable law Heller may, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of the
time and place of public or private sale) to or upon the Company or any other
Person (all and each of which demands, advertisements or notices are hereby
expressly waived), in its sole discretion (a) exercise any or all of its rights
and remedies under the Letter of Credit Agreement, the Letter of Credit, this
Agreement, the Credit Documents, the Bond
-2-
<PAGE>
Documents and any other instruments and agreements securing, evidencing or
relating to the Liabilities or under applicable law (including all of the rights
and remedies of a secured creditor under the Illinois Uniform Commercial Code or
the commercial code of any other applicable jurisdiction), (b) forthwith
collect, receive, appropriate and realize upon all or any part of the
Collateral, (c) forthwith sell, assign, give an option or options to purchase,
contract to sell or otherwise dispose of and deliver all or any part of the
Collateral in one or more parcels at public or private sale or sales, at any
exchange, broker's board or at any of Heller's offices or elsewhere, in a
commercially reasonable manner (subject to the provisions of Section 9 hereof),
upon such terms and conditions as it may deem advisable and at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk, with the right to Heller upon any such sale or sales, public
or private, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Company, which right or equity is
hereby expressly waived and released, or (d) take all or any combination of the
foregoing actions. After deducting all reasonable costs and expenses of every
kind incurred in taking any of the foregoing actions, or incidental to the care,
safekeeping or otherwise of any and all of the Collateral, or in any way
relating to the rights of Heller hereunder, including reasonable attorneys' fees
and legal expenses, after payment of all of the Liabilities in such order as
Heller may elect (the Company remaining liable for any deficiency remaining
unpaid after such application) and after payment by Heller of any other amount
required or permitted by any provision of law, Heller shall pay to the Company
the surplus, if any, of any amounts realized by Heller under this Section 7. To
the fullest extent permitted by applicable law, the Company agrees that Heller
need not give more than 10 days' notice of the time and place of any public sale
or of the time after which a private sale or other intended disposition is to
take place, and that such notice is reasonable notification of such matters. To
the fullest extent permitted by applicable law, no notification need be given to
the Company if it has signed after default a statement renouncing or modifying
any right to notification of sale or other intended disposition. To the fullest
extent permitted by applicable law, the Company further agrees to waive and
agrees not to assert any rights or privileges that it may acquire under Section
9-112 of the Illinois Uniform Commercial Code (or the equivalent section of the
Uniform Commercial Code of any other applicable jurisdiction), and the Company
shall be liable for the deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all amounts to which
Heller is entitled, including the fees and costs of any attorneys employed by
Heller to collect such deficiency.
Section 8. No Disposition. The Company agrees that it will not sell,
assign, transfer, exchange or otherwise dispose of, or grant any option with
respect to, the Collateral, and that it will not create, incur or permit to
exist any Lien with respect to all or any part of the Collateral, except for the
Lien of this Agreement.
Section 9. Sale of Collateral. (a) The Company recognizes that
Heller may be unable to effect a public sale of any or all of the Pledged Bonds
by reason of certain prohibitions contained in the Securities Act of 1933 and
applicable state securities laws, but may be compelled to resort to one or more
private sales to a restricted group of purchasers that will be obligated to
agree, among other things, to acquire such securities for their own account for
investment and not with a view to distribution or resale in a manner that would
violate Federal or state securities laws. The Company acknowledges and agrees
that any such private sale may result in prices and other terms less favorable
to the seller than if such sale were a public sale,
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<PAGE>
and, notwithstanding such circumstances, agrees that any such private sale shall
be deemed to have been made in a commercially reasonable manner. Heller shall be
under no obligation to delay a sale of any of the Pledged Bonds for the period
of time necessary to permit the Issuer to register such securities for public
sale under the Securities Act of 1933 or under applicable state securities laws,
even if the Issuer would agree to do so.
(b) The Company further agrees to do or cause to be done all such
other acts and things as may be necessary to make such sale or sales of all or
any part of the Pledged Bonds valid and binding and in compliance with any and
all applicable laws, rules, regulations, orders or decrees, all at the Company's
expense. The Company further agrees that a breach of any of the covenants
contained in this Section 9 will cause irreparable injury to Heller for which
Heller would have no adequate remedy at law in respect of such breach, and, as a
consequence, agrees that each and every covenant contained in this Section 9
shall be specifically enforceable against the Company, and the Company waives
and agrees not to assert any defenses against an action for specific performance
of such covenants except for a defense that no Event of Default has occurred
under the Letter of Credit Agreement.
Section 10. Further Assurances. The Company agrees that at any time
and from time to time upon the written request of Heller, the Company will
execute and deliver such further documents and do such further acts and things
as Heller may reasonably request in order to effect the purposes of this
Agreement.
Section 11. Collateral Agency Agreement. (a) Heller hereby appoints
the Trustee as agent and bailee for Heller on the terms and conditions of this
Section 11, and the Trustee hereby accepts such appointment and agrees with
Heller to act as agent without compensation separate from that provided to the
Trustee pursuant to the Indentures.
(b) The duties of the Trustee as agent under this Agreement shall he
as follows:
(i) the Trustee shall hold in trust for Heller all Pledged
Bonds purchased by the Trustee with drawings under the Letter Credit
pursuant to Section 301 or 302 of the Indentures, all proceeds
thereof and all other amounts held by the Trustee and payable to
Heller pursuant to the Indentures (collectively, the "Indenture
Collateral"); and
(ii) upon the remarketing of Pledged Bonds, the Trustee shall
deliver to Heller the proceeds of such remarketing and all other
amounts received by the Trustee and payable to Heller pursuant to
the Indentures.
(c) The Trustee shall not pledge, hypothecate, transfer or release
all or any part of the Collateral to any other Person or in any manner not in
accordance with this Section 11 without the prior written consent of Heller.
(d) The Trustee shall transfer the benefits or obligations of this
Agreement or the Indentures only with the prior written consent of Heller and
only if any such transferee shall
4-
<PAGE>
have agreed in writing to be bound by the terms and conditions of this Section
11 and the Indentures.
(e) Neither the Trustee nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Section 11 (except for its or such Person's own negligence
or willful misconduct). The Trustee undertakes to perform only such duties as
are expressly set forth herein. The Trustee may rely, and shall be protected in
acting or refraining from acting, upon any written notice, instruction or
request furnished to it hereunder and believed by it to be genuine and to have
been signed or presented by the proper party. The Trustee may consult with
counsel of its own choice and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel. Notwithstanding any provision to
the contrary contained herein, the Trustee shall not be relieved of liability
arising in connection with its own negligence or willful misconduct.
Section 12. Notices. Unless otherwise specifically provided herein,
any notice or other communication required or permitted to be given hereunder
shall be in writing addressed to the respective party as set forth below, and
may be personally served, telecopied or sent by overnight courier service or
United States mail, and shall be deemed to have been given: (a) if delivered in
person, when delivered; (b) if delivered by telecopy, on the date of
transmission if transmitted on a Business Day before 4:00 p.m. (Chicago,
Illinois time) or, if not, on the next succeeding Business Day; (c) if delivered
by overnight courier, two days after delivery to such courier properly
addressed; or (d) if by United States mail, four Business Days after deposit in
the United States mail, with postage prepaid and properly addressed. Notices
hereunder shall he effective when received and shall be addressed:
Party Address
----- -------
Company: Roller Bearing Company of America, Inc.
140 Terry Drive
Newtown, Pennsylvania 18940
Attention: Executive Vice President
Telephone: (215) 579-4300
Telecopier: (215) 579-4318
With a copy to: Gibson, Dunn & Crutcher
2029 Century Park east, Suite 4000
Los Angeles, California 90067
Attention: Bruce D. Meyer, Esq.
Telephone: (310) 552-8686
Telecopier: (310) 277-5827
-5-
<PAGE>
Heller: Heller Financial, Inc.
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Portfolio Manager, Portfolio
Organization, Corporate Finance Group
Telephone: (312) 441-7500
Telecopier: (312) 441-7367
With a copy to: Heller Financial, Inc.
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Legal Department, Portfolio
Organization, Corporate Finance Group
Telephone: (312) 441-7500
Telecopier: (312) 441-7367
Trustee: Mark Twain Bank
8820 Ladue Road
St. Louis, Missouri 63124
Attention: Corporate Trust Division
Telephone: (314) 889-0753
Telecopier: (314) 889-0736
Section 13. Amendments and Waiver. No amendment or waiver of any
provision of this Agreement or consent to any departure by the Company or the
Trustee from any such provision shall in any event be effective unless the same
shall be in writing and signed by Heller. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 14. No Waiver; Remedies. No failure on the part of Heller to
exercise, and no delay in exercising, any right under this Agreement shall
operate as a waiver of such right, and no single or partial exercise of any
right under this Agreement shall preclude any further exercise of such right or
the exercise of any other right. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law.
Section 15. Severability. Any provision of this Agreement that is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions of this Agreement or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.
Section 16. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of Illinois
without giving application to the choice-of-law principles thereof.
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<PAGE>
Section 17. Headings. Section headings in this Agreement are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
Section 18. Counterparts. This Agreement may be signed in any number
of counterpart copies, and all such copies shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the date first above written.
HELLER FINANCIAL, INC.
By: /s/ Karen L. Finnerty
-------------------------------------
Assistant Vice President
ROLLER BEARING COMPANY OF
AMERICA, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
CFO and Treasurer
MARK TWAIN BANK,
as Trustee
By: /s/ [ILLEGIBLE]
-------------------------------------
Vice President
-7-
CONFIDENTIAL
================================================================================
--------------
LOAN AGREEMENT
--------------
between
SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY
and
ROLLER BEARING COMPANY OF AMERICA, INC.
-----------------------
Relating to
$7,700,000
Variable Rate Demand
Industrial Development Revenue Bonds
(Roller Bearing Company of America, Inc. Project)
Series 1994A
-----------------------------
DATED AS OF SEPTEMBER 1, 1994
-----------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and is not intended
to define, limit or describe the scope or intent of any provisions of this Loan
Agreement).
Page
----
ARTICLE I DEFINITIONS, CONSTRUCTION AND CERTAIN GENERAL
PROVISIONS ................................................... 3
Section 1.1. Definitions ........................................... 3
Section 1.2. Rules of Interpretation ............................... 4
ARTICLE II REPRESENTATIONS .............................................. 5
Section 2.1. Representations by the Issuer ......................... 5
Section 2.2. Representations and Warranties by the Borrower ........ 5
Section 2.3. General Tax Representations, Warranties and
Covenants of Borrower ................................. 7
Section 2.4. Manufacturing Facilities .............................. 9
Section 2.5. Actions Under Section 144(a)(4) of the Code ........... 9
Section 2.6. Tax Exemption ......................................... 10
ARTICLE III THE LOAN; ISSUANCE OF THE BONDS ............................. 12
Section 3.1. Amount and Source of the Loan ......................... 12
Section 3.2. Possession and Use of the Project ..................... 12
Section 3.3. Termination of Prior Liens ............................ 12
Section 3.4. Disbursements from the Project Fund and the
Cost of Issuance Fund ................................. 12
Section 3.5. Investment of Fund Moneys ............................. 14
Section 3.6. Loan Payments ......................................... 14
Section 3.7. Additional Payments ................................... 15
ii
<PAGE>
Section 3.8. Obligations Unconditional ............................. 16
Section 3.9. Credit Facility ....................................... 16
Section 3.10. Alternate Credit Facility ............................. 16
Section 3.11. Issuance of Bonds ..................................... 16
Section 3.12. Borrower Required to Pay Costs in Event Project
Fund Insufficient ..................................... 16
Section 3.13. Completion Date ....................................... 17
ARTICLE IV OPERATION OF THE PROJECT ..................................... 18
Section 4.1. Operation of the Project ............................. 18
Section 4.2. Environmental Compliance ............................. 18
Section 4.3. Payment of Project Costs ............................. 18
Section 4.4. Deficiency of Project Fund ........................... 18
ARTICLE V MAINTENANCE; MODIFICATIONS; INSURANCE;
LEASE OR ASSIGNMENT OF PROJECT;
LOSS OR DAMAGE TO PROJECT ..................................... 19
Section 5.1. Maintenance of Project by Borrower ................... 19
Section 5.2. Sale or Lease of Project; Assignment of Loan
Agreement by Borrower ................................ 19
Section 5.3. Taxes, Assessments and Other Charges ................. 19
Section 5.4. Use of Project ....................................... 19
Section 5.5. Insurance Required ................................... 19
Section 5.6. Damage, Destruction, Condemnation or Loss of Title ... 19
Section 5.7. Remodeling and Improvements .......................... 22
Section 5.8. Equipment ............................................ 22
iii
<PAGE>
ARTICLE VI PARTICULAR COVENANTS ......................................... 23
Section 6.1. Access to the Project and Inspection; Operation
of the Project ....................................... 23
Section 6.2. Financial Statements ................................. 23
Section 6.3. Indemnification ...................................... 23
Section 6.4. Further Assurances and Corrective
Instruments .......................................... 24
Section 6.5. Litigation Notice .................................... 24
Section 6.6. Annual Certificate ................................... 24
ARTICLE VII ASSIGNMENT OF ISSUER'S RIGHTS UNDER LOAN
AGREEMENT ................................................... 26
Section 7.1. Assignment by the Issuer .............................. 26
Section 7.2. Restriction on Transfer of Issuer's Rights ............ 26
Section 7.3. Credit Enhancer's Remedial Rights ..................... 26
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES ............................ 27
Section 8.1. Events of Default Defined ............................. 27
Section 8.2. Remedies on Default ................................... 27
Section 8.3. No Remedy Exclusive ................................... 28
Section 8.4. Agreement to Pay Attorneys' Fees and Expenses ......... 29
Section 8.5. Issuer and Borrower to Give Notice of Default ......... 29
Section 8.6. Performance Of Borrower's Obligations ................. 29
Section 8.7. Remedial Rights Assigned to the Trustee ............... 29
Section 8.8. Credit Enhancer to Direct Trustee ..................... 29
ARTICLE IX PREPAYMENT AND ACCELERATION OF LOAN PAYMENTS ................. 31
Section 9.1. Prepayment at the Option of the Borrower .............. 31
Section 9.2. Optional Prepayment Upon Certain Events ............... 31
iv
<PAGE>
Section 9.3. Mandatory Prepayment Upon Determination
of Taxability ........................................ 31
Section 9.4. Mandatory Prepayment Upon Certain Defaults ........... 31
Section 9.5. Mandatory Prepayment From Amounts Remaining in Project
Fund ................................................. 31
Section 9.6. Right to Prepay at Any Time .......................... 31
Section 9.7. Notice of Prepayment ................................. 31
Section 9.8. Precedence of this Article ........................... 32
ARTICLE X MISCELLANEOUS ................................................. 33
Section 10.1. Authorized Representatives ........................... 33
Section 10.2. Term of Loan Agreement ............................... 33
Section 10.3. Notices .............................................. 33
Section 10.4. Performance Date Not a Business Day .................. 34
Section 10.5. Binding Effect ....................................... 34
Section 10.6. Amendments, Changes and Modifications ................ 34
Section 10.7. Execution in Counterparts ............................ 34
Section 10.8. No Pecuniary Liability ............................... 34
Section 10.9. Extent of Covenants of the Issuer; No Personal or
Pecuniary Liability .................................. 34
Section 10.10. Net Loan ............................................. 35
Section 10.11. Security Interests ................................... 35
Section 10.12. Complete Agreement ................................... 35
Section 10.13. Severability ......................................... 35
Section 10.14. Governing Law ........................................ 36
Section 10.15. Not a Limitation ..................................... 36
Section 10.16. Consent to Jurisdiction; Service of Process .......... 36
v
<PAGE>
EXHIBIT A ................................................................ A-1
EXHIBIT B ................................................................ B-1
EXHIBIT C ................................................................ C-1
vi
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of September 1, 1994 (this "Agreement" or
"Loan Agreement"), between the SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT
AUTHORITY, a body corporate and politic and an agency of the State of South
Carolina (the "Issuer"), and ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware
corporation (the "Borrower");
WITNESSETH:
WHEREAS, the Issuer, acting by and through its Board of Directors, is
authorized and empowered under and pursuant to the provisions of Title 41,
Chapter 43, Code of Laws of South Carolina 1976, as amended (the "Act"), to
acquire and cause to be acquired properties that are projects under the Act
through which the industrial, commercial, agricultural and recreational
development of the State of South Carolina (the "State") will be promoted and
trade developed by inducing business enterprises to locate in and remain in the
State and thus provide maximum opportunities for the creation and retention of
jobs and improvement of the standard of living of the citizens of the State; and
WHEREAS, the Issuer is further authorized by Section 41-43-100 of the Act
to issue revenue bonds payable by the Issuer solely from revenues and receipts
from any financing agreement between the Issuer and any business enterprise with
respect to such project and secured by a pledge of said revenues and receipts
and by an assignment of such financing agreement; and
WHEREAS, pursuant to the Act, the Issuer is authorized to issue its
Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing
Company of America, Inc. Project) Series 1994A in the principal amount of
$7,700,000 (the "Bonds") for the purpose of providing funds to construct or
purchase certain buildings, fixtures, machinery and equipment (the "Project") to
constitute an approximately 60,000 square foot expansion of an existing facility
for the manufacture of roller bearings in Darlington County, South Carolina
which is owned and operated by the Borrower; and
WHEREAS, the proceeds from the sale of the Bonds will be loaned to the
Borrower pursuant to the provisions of this Loan Agreement to enable the
Borrower to construct and purchase the Project; and
WHEREAS, the amount necessary to finance the costs of such construct and
purchase will require the issuance, sale and delivery of the Bonds, as
hereinafter provided; and
WHEREAS, to secure the payment of the principal of and interest on the
Bonds and the purchase price of Bonds tendered by the Owners thereof as provided
in the Trust Indenture of even date herewith (the "Indenture") between the
Issuer and Mark Twain Bank, as Trustee (the "Trustee"), the Borrower has caused
the Credit Enhancer (as defined in the Indenture) to issue its Credit Facility
(as defined in the Indenture) to the Trustee; and
WHEREAS, pursuant to the foregoing, the Issuer desires to loan the
proceeds of the Bonds to the Borrower and the Borrower desires to borrow the
proceeds of the Bonds from the Issuer, to be repaid by the Borrower and upon the
terms and conditions hereinafter set forth;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
representations, covenants and agreements herein contained, the Issuer and the
Borrower do hereby represent, covenant and agree as follows:
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<PAGE>
ARTICLE I
DEFINITIONS, CONSTRUCTION AND CERTAIN GENERAL PROVISIONS
Section 1.1. Definitions. All words and terms defined in Section 101 of
the Indenture shall have the same meaning in this Loan Agreement unless
otherwise defined herein. In addition to words and terms defined in the
Indenture or defined elsewhere in this Loan Agreement, the following words and
terms shall have the following meanings, unless some other meaning is plainly
intended:
"Additional Payments" means the Additional Payments described in Section
3.7 hereof.
"Borrower Documents" means this Loan Agreement, the Tax Agreement and the
Collateral Documents.
"Completion Date" means the date of completion of the Project and any
additions or improvements to the Project.
"Default" means any event or condition which constitutes, or with the
giving of any requisite notice or upon the passage of any requisite time period
or upon the occurrence of both would constitute, an Event of Default under this
Agreement or the Indenture.
"Event of Default" means any Event of Default as defined in Section 8.1
hereof.
"Full Insurable Value" means the actual replacement cost of the Project
without deduction for physical depreciation and exclusive of land, excavations,
footings, foundations and parking lots.
"Loan Payment Date" means an Interest Payment Date, Principal Payment Date
or any other date on which the principal of and interest on the Bonds is
payable.
"Loan Payments" means the Loan Payments described in Section 3.6 hereof.
"Loan Term" means the period from the effective date of this Loan
Agreement until the expiration hereof pursuant to Section 10.2 of this Loan
Agreement.
"Net Proceeds" means, when used with respect to any insurance or
condemnation award with respect to the Project, the title insurance or
condemnation award with respect to which that term is used remaining after the
payment of all expenses (including attorneys' fees and any expenses of the
Issuer or the Trustee) incurred in the collection of such gross proceeds. As
used in this definition the word "condemnation" shall have the meaning given to
it in Section 5.6 hereof.
"Permitted Encumbrances" shall have the meaning assigned to such term in
the Credit Agreement (as defined in the Letter of Credit Agreement).
"Project" means the manufacturing facilities generally described in
Exhibit A hereto, as provided for in this Loan Agreement.
-3-
<PAGE>
"Series 1994B Bonds" means the Issuer's $3,000,000 original principal
amount Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing
Company of America, Inc. Project) Series 1994B.
"Series 1994B Loan Agreement" means the Loan Agreement dated of even date
herewith between the Issuer and the Borrower, delivered with respect to the
Series 1994B Bonds, as amended, restated or supplemented.
"Unassigned Issuer's Rights" means the Issuer's rights to reimbursement
and payment of its costs and expenses and rebatable arbitrage under Sections
3.7(c) and (e), 8.4 and 8.6 hereof, its rights of access under Section 6.1
hereof, its rights to indemnification under Sections 4.5 and (6.3) hereof, its
rights to exemption from liability under Sections 10.8 and 10.9 hereof, its
rights to receive notices, reports and other statements and its rights to
consent to certain matters.
Section 1.2. Rules of Interpretation. (a) Words of the masculine gender
shall be deemed and construed to include correlative words of the feminine and
neuter genders.
(b) Unless the context shall otherwise indicate words importing the
singular number shall include the plural and vice versa, and words importing
person shall include firms, partnerships, associations, joint stock companies,
joint ventures, trusts, unincorporated organizations, limited liability
companies and corporations, including governmental entities, as well as natural
persons.
(c) The words "herein", "hereby", "hereunder", "hereof", "hereto",
"hereinbefore", "hereinafter" and other equivalent words refer to this Loan
Agreement and not solely to the particular article, section, paragraph or
subparagraph hereof in which such word is used.
(d) Reference herein to a particular article or a particular section shall
be construed to be a reference to the specified article or section hereof unless
the context or use clearly indicates another or different meaning or intent.
Reference herein to a schedule or an exhibit shall be construed to be a
reference to the specified schedule or exhibit hereto unless the context or use
clearly indicates another or different meaning or intent.
(e) Wherever an item or items are listed after the word "including", such
listing is not intended to be a listing that excludes items not listed.
(f) The table of contents, captions and headings in this Loan Agreement
are for convenience only and in no way define, limit or describe the scope or
intent of any provisions or sections of this Loan Agreement.
[End of Article I}
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<PAGE>
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations by the Issuer. The Issuer makes the following
representations as the basis for the undertakings on its part herein contained:
(a) The Issuer is a body politic and corporate and an agency of the State.
(b) The Issuer has lawful power and authority under the Act, acting
through its Board of Directors, to enter into the transactions contemplated by
this Loan Agreement and to carry out its obligations hereunder. By proper action
of the Board of Directors, the Issuer has been duly authorized to execute and
deliver this Loan Agreement, acting by and through its duly authorized officers.
(c) The issuance of the Bonds will further the public purposes of the Act.
(d) To finance the costs of constructing and purchasing the Project, the
Issuer proposes to issue the Bonds in the aggregate principal amount of
$7,700,000. The Bonds will bear interest at the rates and be scheduled to mature
as set forth in Article II of the Indenture and will be subject to purchase from
the Owners thereof in accordance with the provisions of Article III of the
Indenture and redemption prior to maturity in accordance with the provisions of
Article IV of the Indenture. The Bonds are to be issued under and secured by the
Indenture, pursuant to which the payments, revenues and receipts derived by the
Issuer pursuant to this Loan Agreement, other than Unassigned Issuer's Rights,
will be pledged and assigned to the Trustee as security for payment of the
principal of, premium, if any, and interest on the Bonds.
(e) To the best of its knowledge, no member of the governing body of the
Issuer or any other officer of the Issuer has any significant or conflicting
interest, financial, employment or otherwise, in the Borrower, the Project or in
the transactions contemplated hereby.
Section 2.2. Representations and Warranties by the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Delaware, has the power and
authority to own its properties and carry on its business as now being
conducted, and is duly qualified to do such business, and is in good standing,
wherever such qualification is required, including the State.
(b) The Borrower has the power and authority to execute and deliver the
Borrower Documents, and to carry out the transactions contemplated hereby and
thereby, and has duly authorized the execution, delivery and performance of each
of the foregoing.
(c) Neither the execution nor delivery of the Borrower Documents, nor the
consummation of the transactions contemplated hereby or thereby, nor the
fulfillment of or compliance with the terms and conditions hereof or thereof,
conflicts with or results in a breach of or will constitute a default under any
of the terms, conditions or provisions or any legal restriction of any agreement
or instrument to which the Borrower is now a party or by which it is bound, or
constitutes a default under any of the
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foregoing or violates any judgment, order, writ, injunction, decree, law, rule
or regulation to which it is subject.
(d) The Borrower is knowledgeable in the operation of manufacturing
facilities of the magnitude and nature of the Project.
(e) The Borrower is not presently under any cease or desist order or other
orders of a similar nature, temporary or permanent, of any federal or state
authority which would have the effect of preventing or hindering performance of
its duties hereunder, nor are there any proceedings presently in progress or to
its knowledge contemplated which would, if successful, lead to the issuance of
any such order.
(f) To the best of its knowledge, the Borrower has made, and will during
the term of this Agreement make, all filings which it is obligated to make with,
and has obtained, and will during the term of this Agreement obtain, all
approvals and consents which it is obligated to obtain from all federal, state
and local regulatory agencies having jurisdiction to the extent, if any,
required by applicable laws and regulations to be made or to be obtained in
connection with the Project, the execution and delivery by the Borrower of the
Borrower Documents, the transaction contemplated thereunder, and the performance
by the Borrower of its obligations thereunder.
(g) To the best of the Borrower's knowledge, except to the extent
disclosed to the Credit Enhancer, the operation and maintenance of the Project
does not conflict with any zoning, building, safety, health or environmental
quality or other law, ordinance, order, rule or regulation applicable thereto.
(h) The Borrower will keep and perform faithfully all of its duties,
obligations, covenants and undertakings contained herein and in the Borrower
Documents.
(i) The Borrower will execute and deliver such additional instruments and
perform such additional acts as may be necessary, in the opinion of the Issuer,
to carry out the intent hereof and of the Borrower Documents or to perfect or
give further assurances of any of the rights granted or provided for herein or
in the Borrower Documents.
(j) The Borrower agrees that during the Loan Term it will maintain its
existence, will not dissolve (other than a technical dissolution under State law
so long as the Borrower is immediately reconstituted) or otherwise dispose of
all or substantially all of its assets; provided that the Borrower may, without
violating the agreement contained in this paragraph, merge or consolidate with
another legal entity or sell or otherwise transfer to another legal entity all
or substantially all of its assets as an entirety and thereafter dissolve,
provided (i) that such merger, consolidation or transfer will not affect the
excludability of the interest on the Bonds from gross income for federal income
tax purposes; (ii) that if the successor or transferee legal entity is not the
Borrower, then such legal entity shall be a legal entity organized and existing
under the laws of one of the States of the United States of America and shall be
qualified to do business in the State; (iii) such successor or transferee entity
shall assume all of the obligations of the Borrower under the Borrower Documents
in which event the Borrower shall be released from its obligations under the
Borrower Documents; and (iv) the Credit Enhancer consents thereto in writing.
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(k) The Borrower will advise the Issuer, the Credit Enhancer and the
Trustee promptly in writing of the occurrence of any Default hereunder or any
event which, with the passage of time or service of notice, or both, would
constitute an Event of Default hereunder, specifying the nature and period of
existence of such event and the actions being taken or proposed to be taken with
respect thereto.
(l) Any certificate signed by an Authorized Borrower Representative and
delivered pursuant to this Loan Agreement or the Indenture shall be deemed a
representation and warranty of the Borrower as to the statement made therein.
(m) Concurrently with the execution of this Loan Agreement, the Borrower
will cause to be delivered to the Trustee, on behalf of the Issuer, the Credit
Facility and the Credit Facility shall be in full force and effect and shall
secure the payment of the principal and purchase price of, and interest on, the
Bonds.
(n) The Project is located wholly within Darlington County, South
Carolina.
(o) There is not now pending or, to the knowledge of the Borrower,
threatened, any suit, action or proceeding against or affecting the Borrower by
or before any court, arbitrator, administrator, administrative agency or other
governmental authority which, if decided adversely to the Borrower, would
materially and adversely affect the validity of any of the transactions
contemplated by this Loan Agreement or the Indenture, or impair the ability of
the Borrower to perform its obligations under this Loan Agreement or the
Indenture, or as contemplated hereby or thereby, nor, to the knowledge of the
Borrower, is there any basis therefor.
Section 2.3. General Tax Representations, Warranties and Covenants of
Borrower. The Borrower further represents, warrants and covenants as follows:
(a) No proceeds of the Bonds will be used, directly or indirectly, for the
acquisition of land (or an interest therein) to be used for farming purposes and
less than 25% of the proceeds of the Bonds will be used (directly or indirectly)
for the acquisition of land (or an interest therein) within the meaning of
Section 147(c) of the Code.
(b) Ninety-five percent (95%) or more of the expenditures for costs of the
Project made from proceeds of the Bonds are, for federal income tax purposes,
for land or depreciable property chargeable to the capital account of the
Project or would be so chargeable either with a proper election by the Borrower
under the Code or but for a proper election to deduct any such costs.
(c) Acquisition and construction of the Project, and each of the
components thereof, occurred subsequent to April 28, 1994, and no obligation
relating to the acquisition and construction of the Project (to be financed with
proceeds of the sale of the Bonds) was paid or incurred prior to such date. The
Project is expected to be placed in service on or about August 1, 1997.
(d) The Project is of the type authorized and permitted by the Act, and
the Project is substantially the same in all material respects to that described
in the notice of public hearing published in The Darlington News and Post on
June 1, 1994.
(e) During the period commencing 15 days before the date of sale of the
Bonds, neither the Borrower or any other "principal user" of the Project or any
"related person" (or group of "related
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persons" which includes the Borrower) has guaranteed, arranged, participated in,
assisted with, borrowed the proceeds of, or leased facilities financed by,
obligations issued under Section 144(a) of the Code by any state or local
governmental unit or any constituted authority empowered to issue obligations by
or on behalf of any state or local governmental unit other than the Issuer
("principal user" and "related person" as those terms are used in Section 144(a)
of the Code).
(f) During the period commencing on the date of sale of the Bonds and
ending 15 days thereafter, there will be no obligations issued under Section
144(a) of the Code which are guaranteed by the Borrower or any other "principal
user" of the Project or any "related person" (or group of "related persons"
which includes the Borrower) or which are issued with the assistance or
participation of, or by arrangement with, the Borrower or any other "principal
user" of the Project or any "related person" (or group of "related persons"
which includes the Borrower) without the written opinion of Sinkler & Boyd,
P.A., to the effect that the issuance of such obligations will not adversely
affect the exclusion from gross income of the interest paid on the Bonds for
purposes of federal income taxation; other than the Borrower or any other
"principal user" of the Project or any "related person" (or group of "related
persons" including the Borrower), no person has (i) guaranteed, arranged,
participated in, assisted with the issuance of, or paid any portion of the cost
of the issuance of, any of the Bonds, and (ii) provided any property or any
franchise, trademark or trade name (within the meaning of Section 1253 of the
Code) which is to be used in connection with the Project ("principal user" and
"related person" as those terms are used in Section 144(a) of the Code).
(g) The Bonds are not being issued as part of an issue the interest of
which is excludable from gross income for purposes of federal income taxation
under any other provision of law other than Section 144(a) of the Code.
(h) The issuance of the Bonds is not part of an issuance of tax-exempt
bonds which (1) will be sold (A) at substantially the same time or (B) pursuant
to the same plan of financing, and (2) are reasonably expected to be paid from
substantially the same source of funds, determined without regard to guarantees
from unrelated parties.
(i) For each "test-period beneficiary" (as defined in Section
144(a)(10)(D) of the Code) of the Project, the sum of (i) the aggregate
authorized face amount of the Bonds allocated in accordance with Section
144(a)(10)(C) of the Code to such beneficiary and (ii) the aggregate outstanding
principal amount of any other tax-exempt obligation described in Section
144(a)(10)(B)(ii) of the Code, wherever and whenever issued, allocated to such
beneficiary does not and will not exceed $40,000,000.
(j) There are no other issues of private activity bonds, as defined in
Section 141 of the Code, the proceeds of which have been or will be used with
respect to the "facilities," as defined in Section 144(a)(4)(B) of the Code,
located within the jurisdiction of the Issuer, the "principal user" of which is
the Borrower or a "related person" thereto ("principal user" and "related
person" being used in this Agreement as those terms are used in Section 144(a)
of the Code).
(k) The Borrower will assist the Issuer in filing all appropriate returns,
reports and attachments to income tax returns as of now or hereafter required by
the provisions of the Code, including without limitation the Information Return
for Private Activity Bond Issues (Form 8038) required under the Code.
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(l) The weighted average maturity of the Bonds, calculated in accordance
with the requirements of Section 147(b) of the Code, is not more than 23 years,
which is less than one hundred twenty percent (120%) of the remaining average
reasonably expected economic life of the Project, calculated in accordance with
the requirements of Section 147(b) of the Code.
(m) No proceeds of the Bonds shall be invested in federally insured
deposits or accounts except as part of a bona fide debt service fund or a
reasonably required reserve fund.
(n) The Borrower has not and will not sell, transfer or otherwise dispose
of the Project except as provided in this Loan Agreement.
(o) During the term of this Agreement, the operation and maintenance of
the Project will not conflict in any material respect with any zoning, building,
safety, health or environmental quality or other law, ordinance, rule, or
regulation applicable thereto. To the extent of any conflict, the Borrower will
use its best efforts to bring the zoning of the Project into compliance with the
intended uses of the Project.
(p) The Borrower hereby represents and warrants that (i) the
representations and warranties of the Borrower set forth in the Tax Agreement
are true and correct as of the of delivery of this Loan Agreement and (ii) the
Borrower expects to comply with the covenants and agreements set forth in the
Tax Agreement.
Section 2.4. Manufacturing Facilities. The Borrower represents, warrants
and covenants that the Project will be operated as a "manufacturing facility"
within the definition of Section 144(a)(12)(C) of the Code, which shall include
facilities which are directly related and ancillary thereto within the meaning
of the Code (the "Related and Ancillary Facilities"), provided that (i) such
Related and Ancillary Facilities shall be located on the same site as the
manufacturing facility, and (ii) not more than 25% of the net proceeds of the
Bonds may be used to provide the Related and Ancillary Facilities. In addition,
no more than a de minimis amount (within the meaning of the Code) of the
functions to be performed at any office space comprising the Project is not
directly related to the day-to-day operations at the manufacturing facility.
Section 2.5 Actions Under Section 144(a)(4) of the Code. The Issuer is
issuing the Bonds pursuant to an election made by it, at the Borrower's request,
under Section 144(a)(4) of the Code. In connection with that election, the
Borrower represents and covenants that:
(a) The sum of (i) the principal amount of the Bonds, (ii) the outstanding
face amount of prior issues, if any, described in Section 144(a)(2) of the Code
and (iii) the aggregate amount of capital expenditures with respect to
"facilities" as defined in Section 144(a)(4)(B) of the Code, other than those
financed or to be financed out of proceeds of the Bonds or any such prior issues
or those mentioned in Section 144(a)(4)(C) of the Code ("Capital Expenditures"),
made during the three-year period preceding the Issue Date, does not exceed
$10,000,000.
(b) During the three-year period following the Issue Date, the Borrower
does not intend to make or cause or permit to be made any capital expenditures
in an amount which would cause the interest on the Bonds to be included in the
gross income of the Owners for federal income tax purposes.
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(c) It will maintain records, listing by month, day, year and amount each
capital expenditure made since the Issue Date through and including the third
anniversary of the date of original delivery of the Bonds and upon any
Determination of Taxability will furnish those records to the Trustee.
(d) In the event, on account of a lease, sublease, management contract or
other agreement relating to the Project, or any portion thereof, permitted by
the terms hereof, any person other than the Borrower becomes a "principal user"
of the Project (within the meaning of Section 144(a) of the Code), the Borrower
shall promptly advise the Trustee of the identity of such person and furnish to
the Trustee a copy of such lease, sublease, management contract or other
agreement. In connection with any such lease, sublease, management contract or
other agreement, the Borrower will require by covenant that any lessee,
sublessee, manager or user who is a "principal user" of the Project and any
"related person" (within the meaning of Section 144(a) of the Code) thereto
shall comply with the covenants set forth in subsections (b) and (c) of this
Section as if those covenants were made herein by such lessee, sublessee,
manager, user or "related person" thereto.
Section 2.6. Tax Exemption. The Borrower hereby covenants, represents and
agrees as follows:
(a) that it will not direct the Trustee to make any investment or use of
the proceeds of any of the Bonds, which would cause any of the Bonds to be
"arbitrage bonds" within the meaning of Section 148 of the Code and the Tax
Regulations thereunder as the same may be applicable to the Bonds at the time of
such action, investment or use and that it shall take and cause the Issuer and
Trustee to take all actions required to comply with the provisions of Section
148 of the Code;
(b) that it will at all times do and perform all acts and things necessary
or desirable and within its reasonable control in order to assure that interest
paid on the Bonds shall, for the purposes of federal income taxation, not be
includable in the gross income of the Bondowners, except in the event that the
Bondowner is a "substantial user" of the Project or a "related person" (such
terms within the meaning of Section 147(a) of the Code);
(c) that it shall not take or omit to take, or permit to be taken on its
behalf, any actions which, if taken or omitted, would adversely affect the
excludability from the gross income of the Bondowners of interest paid on the
Bonds for federal income tax purposes, whether currently in effect or enacted
subsequent to the date of original delivery of the Bonds;
(d) in the event that, in accordance with Section 148(f) of the Code, any
rebate of earnings or profits on investment of any amounts constituting gross
proceeds of the Bonds shall be required to be made to the United States of
America in order to preserve the tax-exempt status of interest on the Bonds, it
shall make all rebatable arbitrage payments or cause them to be made in
installments at least once every five years as required by Section 148(f)(3) of
the Code and the provisions of the Tax Agreement; it being understood that in no
event shall the Issuer or the Trustee have any responsibility or liability for
the payment of any rebatable arbitrage, except as specifically provided in the
Tax Agreement and the Indenture, and that all responsibility and liability
therefor shall be vested in the Borrower; and
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(e) to take such action or actions as may be necessary in the opinion of
Bond Counsel to preserve or perfect the exclusion of interest on the Bond from
gross income for federal income tax purposes.
[End of Article II]
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ARTICLE III
THE LOAN; ISSUANCE OF THE BONDS
Section 3.1. Amount and Source of the Loan. The Issuer agrees to lend to
the Borrower, upon the terms and conditions herein and in the Indenture
specified, the net proceeds received by the Issuer from the sale of the Bonds
(the "Loan"), and to cause such proceeds to be deposited in accordance with the
Indenture.
Section 3.2. Possession and Use of the Project. The Issuer acknowledges
that as between the Issuer and the Borrower the Borrower shall be the sole legal
owner of the Project, and shall be entitled to sole and exclusive possession of
the Project.
Section 3.3. Termination of Prior Liens. Concurrently with the execution
of this Loan Agreement the Borrower shall make provisions for termination of all
liens and security interests incurred with respect to the Project except for
Permitted Encumbrances.
Section 3.4. Disbursements from the Project Fund and the Cost of Issuance
Fund.
(a) The Issuer has, in the Indenture, authorized and directed the Trustee,
provided no Event of Default has occurred and is continuing, to make
disbursements from the Project Fund and the Cost of Issuance Fund, to reimburse
the Borrower or any person designated by the Borrower for the following:
(i) Costs incurred directly or indirectly for or in connection with
the acquisition, construction, improvement, installation or equipping of
the Project including, but not limited to, those for preliminary planning
and studies, architectural, legal, engineering and supervisory services,
labor, services, materials, fixtures, and equipment;
(ii) Premiums attributable to all insurance required to be taken out
with respect to the Project, the premium on each surety bond, if any,
required with respect to work on the Project, and taxes, assessments and
other charges in respect of the Project, that may become due and payable;
(iii) Costs incurred directly or indirectly in seeking to enforce
any remedy against any contractor, subcontractor, materialman or other
agent in respect of any default under any contract relating to the
Project;
(iv) Financing, legal, accounting, printing and engraving fees,
charges and expenses, and all other such fees, charges and expenses
incurred in connection with the authorization, sale, issuance and delivery
of the Bonds and the preparation and delivery of this Loan Agreement and
related documents as long as such disbursements do not exceed two percent
(2%) of the proceeds of the Bonds pursuant to Section 147(g) of the Code;
(v) Any other incidental and necessary costs, expenses, fees and
charges relating to the acquisition, construction, improvement,
installation or equipping of the Project; title charges, surveys,
commitment fees, appraisal fees and recording fees; and
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(vi) The fees and expenses of the Trustee, Registrar, Tender Agent
and Paying Agent properly incurred in connection with the execution and
delivery of the Indenture and of the Credit Enhancer properly incurred in
connection with the issuance of the Credit Facility and the execution and
delivery of the Letter of Credit Agreement.
(b) Nothing contained herein permits or shall be construed to permit the
expenditure of any moneys in the Project Fund or the Cost of Issuance Fund for,
or in reimbursement of payments made for, the acquisition of motor vehicles,
costs of issuance of the Bonds to the extent such costs of issuance exceed 2% of
the net proceeds of the Bonds allocable to the Project within the meaning of
Section 147(g) of the Code, raw materials, small tools, supplies, inventory or
accounts receivable, or for provision of working capital, and no such
expenditure shall be made from the Project Fund or the Cost of Issuance Fund.
(c) All moneys in the Project Fund (including moneys earned thereon by
investment thereof) remaining after the completion of the acquisition,
construction, installation, equipment and improvement of the Project and
payment, or provision for payment, in full of the costs provided for in the
preceding subsections of this Section, then due and payable, shall as soon as
practicable be paid into the Revenue Fund to be used (i) for the redemption of
the Bonds, or a portion thereof, at the earliest possible date; provided that
amounts approved by the Borrower shall be retained by the Trustee in the Project
Fund for payment of such costs not then due and payable, or (ii) to acquire,
construct, install, improve and equip such additional real and personal property
in connection with the Project as are designated by an Authorized Borrower
Representative, the acquisition, construction, installation, improvement and
equipping of which will be such as is permitted under both the Act and the Code,
or (iii) for a combination of any or all of the foregoing as is provided in such
direction.
(d) Disbursements from the Project Fund for the items described in this
Section shall be in the amount of such items, but, for the purpose of
determining the amount of any such item which involves any contract providing
for the retention of a portion of the contract price, there shall initially be
deducted from such item the amount of any such retention, and, when such
retention becomes due and payable, such retention shall be added to the item.
All disbursements from the Project Fund for the items described in this Section
shall be made only upon the written order of an Authorized Borrower
Representative and the following conditions shall have been satisfied with
respect to such disbursement:
(A) There shall have been delivered to the Trustee and the
Credit Enhancer a certificate of an Authorized Borrower
Representative in the form of Exhibit B attached hereto certifying,
with respect to such disbursement, to the Credit Enhancer and the
Trustee (1) the specific items, amounts and payees thereof, (2) that
none of the items for which the disbursement is proposed to be made
formed the basis for any disbursement theretofore made from the
Project Fund, (3) that each item for which the disbursement is
proposed to be made is or was properly chargeable as a capital
expenditure in connection with the Project, (4) that the Borrower
has received from each payee appropriate waivers of any mechanics or
other liens (or thereby provided indemnification in lieu thereof)
and, upon the written request of the Trustee or the Credit Enhancer,
copies of such waivers and evidence of any such indemnification will
be included with the certificate, (5) that the items requested
qualify for such disbursement under the provisions of subsections
(i) through (iii) of Section 3.4(c), (6) that all construction on
the Project thereto performed is substantially in accordance with
any plans and specifications for such construction and all
applicable laws, rules, codes and regulations
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and (7) that payment of such disbursement will not result in less
than substantially all (at least ninety-five percent (95%)) of the
net proceeds of the Bonds (taking into account investment income
with respect thereto) being used to provide land or property subject
to the allowance for depreciation under Section 167 of the Code,
constituting the Project;
(B) There shall be in existence no Event of Default or
situation which, upon the giving of notice or the passage of time or
both would become an Event of Default; and
(C) The Credit Enhancer shall have approved the requested
disbursement from the Project Fund.
(e) The final disbursement from the Project Fund for the items described
in this Section shall include all amounts theretofore withheld as retainages as
hereinbefore set forth in this Section. The Credit Enhancer shall have no
obligation to cause its approval to be given to the written order of an
Authorized Borrower Representative for such final disbursement until the
conditions described in subsections (A) and (B) of Section 3.4(d) shall have
been satisfied with respect to such final disbursement.
(f) Should the Borrower be unable to request final disbursement from the
Project Fund as described above prior to a date which is three (3) years from
the Bond Issuance Date, such funds remaining in the Project Fund shall be
considered to be moneys remaining in the Project Fund after completion of the
Project and shall be paid into the Revenue Fund and expended as described in
Section 3.4(c) unless the Borrower delivers to the Trustee an opinion of Bond
Counsel that such treatment is not necessary to retain the tax-exempt status of
the Bonds.
(g) All disbursements from the Cost of Issuance Fund for the items
described above shall be made only upon the written order of an Authorized
Borrower Representative in substantially the form attached hereto as Exhibit B.
Section 3.5. Investment of Fund Moneys. Any moneys held as part of the
Funds under the Indenture shall be invested or reinvested by the Trustee as
provided in the Indenture. The Issuer and the Borrower each hereby covenants
that it shall cause that investment and reinvestment and the use of the proceeds
of the Bonds to be restricted in such manner and to such extent, if any, as may
be necessary, after taking into account reasonable expectations at the time of
delivery of and payment for the Bonds, so that the Bonds will not constitute
arbitrage bonds under Section 148 of the Code.
Section 3.6. Loan Payments. The Borrower shall pay the following amounts
to the Trustee, all as "Loan Payments" under this Loan Agreement:
(a) The Borrower covenants and agrees during the Loan Term to make Loan
Payments to the Trustee at its Principal Office, for the account of the Issuer,
for deposit in the Revenue Fund, in federal or other immediately available
funds, during normal business hours on or before 10:00 A.M., Trustee's local
time, on each Loan Payment Date, the amount of such payment being as follows:
(i) the amount of the principal, if any, of the Bonds due and
payable on such Loan Payment Date, whether at stated maturity, by
redemption prior to maturity or acceleration or otherwise;
(ii) the amount of interest on the Bonds due and payable on such
Loan Payment Date;
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(iii) the amount of redemption premium, if any, on the Bonds due and
payable on such Loan Payment Date; and
(iv) the purchase price of any Bonds required to be purchased on
such Loan Payment Date pursuant to Article III of the Indenture.
(b) The amounts received by the Trustee under the Credit Facility shall be
credited against the Loan Payment due on the applicable Loan Payment Date. Any
Loan Payment made by the Borrower and held by the Trustee in such event shall be
delivered to the Credit Enhancer in reimbursement of the amounts so received by
the Trustee under the Credit Facility, and any excess shall be returned to the
Borrower as an overpayment.
(c) Except for such interest of the Borrower as may hereafter arise
pursuant to Section 510 of the Indenture, the Borrower and the Issuer each
acknowledge that neither the Borrower nor the Issuer has any interest in the
Revenue Fund or the Debt Service Fund and any moneys deposited therein shall be
in the custody of and held by the Trustee in trust for the benefit of the
Bondowners and the Credit Enhancer.
Section 3.7. Additional Payments. The Borrower shall pay the following
amounts to the following persons, all as "Additional Payments" under this Loan
Agreement:
(a) To the Trustee, when due, all reasonable fees and charges for its
services rendered under the Indenture, this Loan Agreement and the Borrower
Documents, and all reasonable expenses (including without limitation reasonable
fees and charges of the Paying Agent, the Bond Registrar, counsel, accountant,
engineer or other person) incurred in the performance of the duties of the
Trustee under the Indenture, this Loan Agreement and the other Borrower
Documents, for which the Trustee and other persons are entitled to repayment or
reimbursement;
(b) To the Trustee, upon demand, an amount necessary to pay rebatable
arbitrage in accordance with the Tax Agreement and the Indenture.
(c) To the Issuer, upon demand, its regular administrative and issuance
fees and charges, if any, and all expenses (including without limitation
attorney's fees) incurred by the Issuer in relation to the transactions
contemplated by this Loan Agreement and the Indenture, which are not otherwise
to be paid by the Borrower under this Loan Agreement or the Indenture;
(d) To the appropriate Person, all taxes, assessments and charges required
to be paid pursuant to Section 5.3 hereof;
(e) To the appropriate Person, such payments as are required (i) as
payment for or reimbursement of any and all reasonable costs, expenses and
liabilities incurred by the Issuer, the Credit Enhancer or the Trustee or any of
them in satisfaction of any obligations of the Borrower hereunder and under the
other Borrower Documents that the Borrower does not perform, or incurred in the
defense of any action or proceeding with respect to the Project, this Loan
Agreement, the Indenture or the other Borrower Documents, or (ii) as
reimbursement for expenses paid, or as prepayment of expenses to be paid, by the
Issuer or the Trustee that are incurred as a result of a request by the Borrower
or for which the Borrower is liable under this Loan Agreement;
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(f) To the appropriate Person, any other amounts required to be paid by
the Borrower under this Loan Agreement; and
(g) All Costs of Issuance and fees, charges and expenses, including agent
and counsel fees, incurred in connection with the issuance of the Bonds, as and
when the same become due.
Any past due Additional Payments shall continue as an obligation of the
Borrower until they are paid and shall bear interest (except as may be otherwise
provided in the Collateral Documents with respect to obligations owed to the
Credit Enhancer) at the base rate of interest announced from time to time by the
Trustee for variable rate commercial loans plus two percent (2%) during the
period such Additional Payments remain unpaid.
Section 3.8. Obligations Unconditional. The obligations of the Borrower to
make Loan Payments and Additional Payments on or before the date the same become
due, and to perform all of its other obligations, covenants and agreements
hereunder shall be absolute and unconditional, and the Borrower shall make such
payments and perform such obligations without abatement, diminution or deduction
regardless of any cause or circumstances whatsoever including, without
limitation, any defense, set-off, recoupment or counterclaim which the Borrower
may have or assert against the Issuer, the Trustee or any other Person.
Section 3.9. Credit Facility. Concurrently with the issuance of the Bonds,
the Borrower shall cause the Credit Facility to be delivered to the Trustee to
induce the purchase of the Bonds by the original purchasers thereof. The
Borrower shall cause the Credit Facility or an Alternate Credit Facility to be
continuously maintained until all of the Bonds have been fully paid or their
payment provided for in accordance with Article XII of the Indenture.
Section 3.10. Alternate Credit Facility. The Borrower may (without penalty
or premium) provide and the Trustee shall accept any Alternate Credit Facility,
provided that any Alternate Credit Facility shall meet the requirements of
Section 706 of the Indenture and an opinion of counsel acceptable to the Trustee
has been delivered to the Trustee to substantially the same effect as the
opinion of counsel to the Credit Enhancer delivered in connection with the
issuance of the initial Credit Facility and, in addition, to the effect that the
exemption of the Bonds (or any securities evidenced thereby) from the
registration requirements of the Securities Act of 1933, as amended, shall not
be impaired by the substitution of such Alternate Letter of Credit or that the
applicable registration or qualification requirements of such Act have been
satisfied.
Section 3.11. Issuance of Bonds. In order to provide funds for the
construction and purchase of the Project, the Issuer agrees that it will issue,
sell and deliver the Bonds to the original purchasers thereof. The proceeds of
the sale of the Bonds shall be paid over to the Trustee for the account of the
Issuer in accordance with the Indenture.
Section 3.12. Borrower Required to Pay Costs in Event Project Fund
Insufficient. In the event that money in the Project Fund is not sufficient to
pay all costs of providing the Project, or providing improvements or additions
to the Project as contemplated in connection with the Bonds, the Borrower shall,
nonetheless, complete such improvements or additions and shall pay all costs of
such completion in full from its own funds. The Borrower shall not be entitled
to any reimbursement for such completion costs from the Issuer, the Credit
Enhancer or any Trustee, Registrar or Paying Agent, nor shall it be entitled to
any abatement, diminution or postponement of Loan Payments.
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Section 3.13. Completion Date. The Completion Date of the Project and all
additions or improvements to the Project shall be evidenced to the Issuer, the
Credit Enhancer and the Trustee by a certificate signed by an Authorized
Borrower Representative substantially in the form attached hereto as Exhibit C,
stating:
(a) the date on which the Project and the final additions or improvements
to the Project were substantially complete,
(b) that all other facilities necessary in connection with such additions
or improvements have been acquired, constructed, improved, installed and
equipped,
(c) that the Project and any such additions and improvements have been
completed in such a manner as to conform in all material respects with all
applicable zoning, planning, building, environmental and other similar
governmental regulations,
(d) that all costs of the Project or any such additions or improvements
then due and payable have been paid, and
(e) the amounts which the Trustee should retain in the Project Fund for
the payment of costs not yet due or the liability for which the Borrower is
contesting or which otherwise should be retained and the reasons such amounts
should be retained.
An Authorized Borrower Representative shall include with such certificate
a statement specifically describing all items of real property, personal
property and fixtures acquired and installed as part of the Project.
[End of Article III]
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ARTICLE IV
OPERATION OF THE PROJECT
Section 4.1. Operation of the Project. The Borrower represents, warrants,
covenants and agrees that it has obtained or shall obtain all necessary or
required permits, licenses, consents and approvals that are material for the
operation and maintenance of the Project and shall comply in all material
respects with all lawful requirements of any governmental body regarding the use
or condition of the Project, whether existing or later enacted, foreseen or
unforeseen or whether involving any change in governmental policy or requiring
structural or other changes to the Project and irrespective of the cost of so
complying.
Neither the Issuer, the Trustee or the Credit Enhancer, nor their
respective successors or assigns are the agents or representatives of the
Borrower, and the Borrower is not the agent of the Issuer, the Trustee or the
Credit Enhancer, and this Loan Agreement shall not be construed to make any of
the Issuer, the Trustee or the Credit Enhancer liable to materialmen,
contractors, subcontractors, craftsmen, laborers or others for goods or services
delivered by them in connection with the Project, or for debts or claims
accruing to the aforesaid parties against the Borrower. This Loan Agreement
shall not create any contractual relation either expressed or implied between
the Issuer, the Trustee or the Credit Enhancer and any materialmen, contractors,
subcontractors, craftsmen, laborers or any other person supplying any work,
labor or materials in connection with the Project.
Section 4.2. Environmental Compliance. The Borrower will comply in all
material respects with the environmental provisions of the Credit Documents, the
provisions of which (including relevant definitions) are incorporated herein by
this reference and constitute a part of this Agreement.
Section 4.3. Payment of Project Costs. The proceeds from the sale of the
Bonds shall be paid by the Trustee from the Project Fund in accordance with
Section 3.4 of this Agreement to provide for the payment of the Project costs.
Section 4.4. Deficiency of Project Fund. The Issuer makes no warranty,
either express or implied, that the amounts in the Project Fund shall be
sufficient to fully provide for the costs of the Project. The Borrower shall not
be entitled to any reimbursement for the payment of any such deficiency by the
Issuer, the Trustee, the Credit Enhancer or any Bondowner, nor shall it be
entitled to any diminution of any amounts otherwise payable under this Loan
Agreement.
[End of Article IV]
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ARTICLE V
MAINTENANCE; MODIFICATIONS; INSURANCE;
LEASE OR ASSIGNMENT OF PROJECT;
LOSS OR DAMAGE TO PROJECT
Section 5.1. Maintenance of Project by Borrower. The Borrower agrees that,
subject to the provisions of Sections 5.7 and 5.8 hereof, during the term of
this Agreement it will keep and maintain the Project in good condition, repair
and working order, ordinary wear and tear excepted, at its own cost, and will
make or cause to be made from time to time all necessary repairs thereto
(including external and structural repairs) and renewals and replacements
thereto.
Section 5.2. Sale or Lease of Project; Assignment of Loan Agreement by
Borrower. Subject to Section 2.2(j) hereof, and upon the written consent of the
Credit Enhancer and the delivery of an Opinion of Bond Counsel to the Trustee
and the Credit Enhancer that such action is permitted by the Borrower Documents
and the Act, and shall not adversely affect the exclusion from gross income for
federal income tax purposes of the interest on the Bonds, the Borrower may
assign, mortgage, pledge, sell, lease, grant a security interest in, or in any
other manner transfer, convey or dispose of the Project or any interest therein
or part thereof or assign any of its right, title and interest in, to and under
this Loan Agreement in accordance with the Borrower Documents; provided that no
such assignment with respect to this Loan Agreement shall be made unless a
corresponding assignment is made with respect to the Series 1994B Loan
Agreement.
Section 5.3. Taxes, Assessments and Other Charges. The Borrower shall pay
all taxes, assessments and charges of any kind whatsoever that may at any time
be lawfully assessed or levied against or with respect to the Project (including
any tax upon or with respect to the income or profits of the Issuer from the
Project that, if not paid, would become a charge on the payments to be made
under this Loan Agreement prior to or on a parity with the charge thereon
created by the Indenture and including ad valorem, sales and excise taxes,
assessments and charges upon the Borrower's interest in the Project), all
utility and other charges incurred in the operation, maintenance, use, occupancy
and upkeep of the Project and all assessments and charges lawfully made by any
governmental body for public improvements that may be secured by lien on the
Project.
Section 5.4. Use of Project. The Issuer will not take or cause the Trustee
to take any action (other than as provided herein or in the Indenture) to
interfere with the Borrower's interest in the Project or to interfere with
possession, custody, use and enjoyment of the Project.
Section 5.5. Insurance Required. The Borrower shall cause the Project to
be kept continuously insured against such risks as are customarily insured
against by companies conducting activities similar to those of the Borrower in
connection with the Project, and shall pay as the same become due all premiums
in respect thereof, all as provided in the Credit Documents.
Section 5.6. Damage, Destruction, Condemnation or Loss of Title. For as
long as Heller Financial, Inc. is the Credit Enhancer, all Net Proceeds shall be
applied in accordance with the terms and provisions of the Credit Agreement and
other Credit Documents; provided (i) in addition to the
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requirements set forth in the Credit Agreement and other Credit Documents, as a
condition to the use of such Net Proceeds for repair, reconstruction,
restoration, replacement and re-equipping of the Project, there shall be
delivered to the Trustee and the Credit Enhancer an Opinion of Bond Counsel that
such action shall not adversely affect the exclusion from gross income for
federal income tax purposes of the interest on the Bonds and, upon completion of
such action, any remaining balance not required for such repair, reconstruction,
restoration, replacement and re-equipping shall be deposited in the Revenue Fund
and applied in accordance with the provisions of the Indenture and (ii) in the
event the Net Proceeds are not used for such repair, reconstruction,
restoration, replacement and re-equipping, such Net Proceeds shall be used for
redemption of Bonds as set forth in Section 5.6(b) below.
The Borrower hereby agrees to apply the Net Proceeds of any award,
compensation, settlement, damages, compromise, voluntary conveyance or insurance
proceeds payable in connection with the pending or threatened condemnation or
taking, or sale under threat of condemnation or taking, of the Project or a
portion thereof for any public or quasipublic use (hereinafter referred to as a
"condemnation") or in connection with a deficiency or nonexistence of the
Borrower's title thereto or the lien or priority of the documents securing the
Borrower's obligations under the Letter of Credit Agreement to the Credit
Enhancer (hereinafter referred to as a "loss of title"). The Issuer and the
Trustee shall cooperate with the Borrower in the handling and conduct of any
prospective or pending condemnation proceedings with respect to the Project or
any portion thereof.
The Borrower shall notify the Issuer, the Credit Enhancer and the Trustee
immediately in the case of damage to or destruction of the Project or any
portion thereof resulting from fire or other casualty (hereinafter referred to
as a "casualty loss") or of a condemnation or loss of title.
In the event of a casualty loss, a condemnation or a loss of title for
which the Net Proceeds do not exceed $1,000,000, the Borrower shall, but only
with the prior written consent of the Credit Enhancer, which consent may not be
unreasonably withheld, forthwith repair, reconstruct, restore, replace and
improve the Project to substantially the same or an improved condition or
utility value as existed prior to such casualty loss or forthwith make such
replacements of or repairs or improvements to the Project or portions thereof
made necessary by such condemnation or loss of title. Such Net Proceeds shall be
paid directly to the Borrower and applied to the extent necessary to the payment
of the costs of such repair, reconstruction, restoration, replacement and
improvement. Any remaining balance not required for such purpose shall be paid
to the Trustee for deposit in the Revenue Fund to be used to redeem Bonds on the
earliest date for which notice of redemption can be given in accordance with
Article IV of the Indenture.
If such Net Proceeds exceed $1,000,000, or if such Net Proceeds do not
exceed such amount and the Credit Enhancer does not consent in writing to the
action described in the immediately preceding paragraph, such Net Proceeds shall
be paid to the Trustee for disbursement as hereinafter described and the
Borrower shall, with the prior written consent of the Credit Enhancer, elect one
of the following options by written notice delivered to the Trustee, the Credit
Enhancer and the Issuer within 30 days after the determination of the amount of
such Net Proceeds or 90 days after the occurrence of such casualty loss,
condemnation or loss of title, whichever occurs first:
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(a) Option A - Repairs and Improvements. Upon delivery of an Opinion of
Bond Counsel to the Trustee and the Credit Enhancer that such action shall not
adversely affect the exclusion from gross income for federal income tax purposes
of the interest on the Bonds, the Borrower may elect to use such Net Proceeds to
repair, reconstruct, restore, replace and re-equip the Project and, in such
event, such Net Proceeds shall be deposited in a separate account to be
established by the Trustee and, so long as no Event of Default exists, shall be
disbursed from time to time by the Trustee upon the request of the Borrower in
such manner as may be agreed to by the Credit Enhancer and the Trustee. Upon the
completion of such use, any remaining balance not required for such repair,
reconstruction, restoration, replacement and re-equipping shall be deposited in
the Revenue Fund and applied in accordance with the provisions of the Indenture.
(b) Option B - Redemption of Bonds. The Borrower may elect to have such
Net Proceeds deposited in the Revenue Fund; provided either (i) the Borrower
elects to prepay all Loan Payments pursuant to Section 9.2 hereof and cause all
the Bonds to be redeemed (without premium or penalty) in accordance with Section
402(d) of the Indenture at the earliest practical date, or (ii) the Borrower
elects to prepay Loan Payments pursuant to Section 9.2 hereof and cause part of
the Bonds to be redeemed (without premium or penalty) pursuant to Section 402(d)
of the Indenture and the property suffering such casualty loss, condemnation or
loss of title was not essential to the use of the Project in a manner that will
result in any of the representations or warranties respecting the Project and
the use of the proceeds of the Bonds being false, untrue, misleading or breached
and provided further that an expert appraiser retained by the Borrower and
reasonably acceptable to the Trustee delivers to the Trustee its written
opinion, appraisal or certificate showing that the ratio of the fair market
value at a foreclosure sale of the Project immediately prior to the occurrence
or discovery of such casualty loss, condemnation or loss of title to the
principal amount of the Bonds then Outstanding is no greater than the ratio of
the then current market value at a foreclosure sale of the Project to the
principal amount of the Bonds to be Outstanding after the application of such
Net Proceeds and any other moneys deposited in the Revenue Fund by the Borrower
for the redemption of Bonds.
In the event such Net Proceeds do not exceed $1,000,000 and the Credit
Enhancer consents in writing to the action described in the third paragraph of
this Section or the Borrower shall elect Option A, (i) the Borrower shall
complete the repair, reconstruction, restoration, replacement and re-equipping
of the Project free from all liens other than Permitted Encumbrances, whether or
not such Net Proceeds are sufficient to pay for the same; (ii) the Borrower
shall not be entitled to any reimbursement from the Issuer, the Trustee, the
Credit Enhancer or the Bondowners or any abatement or diminution of its
obligations hereunder by reason of any payments made by the Borrower for such
purpose in excess of the Net Proceeds; and (iii) all such repairs,
reconstructions, restorations, replacements and re-equipping shall be a part of
the Project and shall be subjected to the lien and security interest of the
Credit Documents and the Borrower shall take any actions which the Credit
Enhancer reasonably deems necessary or appropriate to so subject them to the
Credit Documents.
Notwithstanding anything herein to the contrary, if Heller Financial, Inc.
is no longer the Credit Enhancer, the Borrower shall have no obligation to
repair, reconstruct, restore, replace or re-equip the Project (unless such Net
Proceeds are made available to the Borrower for such purpose).
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Section 5.7. Remodeling and Improvements. The Borrower may remodel the
Project or make substitutions, additions, modifications or improvements thereto
from time to time as it, in its discretion, deems desirable, provided that (i)
any such remodeling, substitutions, additions, modifications or improvements do
not materially alter the character of the Project as an enterprise permitted by
the Act and (ii) the same will not adversely affect the exclusion from gross
income for federal taxation purposes of interest on the Bonds, as provided in an
Opinion of Bond Counsel addressed to the Issuer, the Trustee and the Credit
Enhancer. The cost of such remodeling, substitutions, additions, modifications
or improvements shall be paid by the Borrower.
Section 5.8. Equipment. The Borrower may from time to time substitute
machinery and equipment for any part of the Project, provided that (i) any such
substitutions do not materially alter the character of the Project as an
enterprise permitted by the Act and (ii) the same will not adversely affect the
exclusion from gross income for federal taxation purposes of interest on the
Bonds, as provided in an Opinion of Bond Counsel addressed to the Issuer, the
Trustee and the Credit Enhancer. Any such substituted machinery and equipment
shall become a part of the Project and be included under the terms of this
Agreement.
Provided that the same will not adversely affect the exclusion from gross
income for federal taxation purposes of interest on the Bonds, as provided in an
Opinion of Bond Counsel addressed to the Issuer, the Trustee and the Credit
Enhancer, the Borrower may also sell, scrap, trade-in or otherwise dispose of,
any machinery or equipment which is a part of the Project, without substitution
therefor so long as the removal of the machinery or equipment to be purchased or
otherwise disposed of will not materially alter the character of the Project as
an enterprise permitted by the Act.
[End of Article V]
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ARTICLE VI
PARTICULAR COVENANTS
Section 6.1. Access to the Project and Inspection; Operation of the
Project. The duly authorized agents of the Issuer, the Credit Enhancer and the
Trustee shall have the right, at all reasonable times upon the furnishing of
reasonable notice under the circumstances, to enter upon the Project and to
examine and inspect the Project, subject to any secrecy regulation or agreement
or national security law or regulation of the government of the United States of
America. The Borrower will execute, acknowledge and deliver all such further
documents and do all such other acts and things as may be necessary to grant to
the Issuer, the Credit Enhancer and the Trustee such right of entry. The duly
authorized agents of the Issuer, the Credit Enhancer and the Trustee shall also
be permitted, at all reasonable times upon reasonable notice under the
circumstances, to examine the books and records of the Borrower with respect to
the Project and the obligations of the Borrower hereunder.
Section 6.2. Financial Statements. The Borrower shall furnish the Credit
Enhancer and the Trustee with copies of its audited financial statements for
each of its fiscal years within 120 days after the end of the preceding fiscal
year accompanied by a certificate of the Authorized Borrower Representative
stating (i) that the information contained in such statements is materially true
and correct, and (ii) that, to the best of his knowledge after reasonable
investigation, no Default exists, and if there is such a Default, specifying the
nature and period of existence thereof and what action, if any, the Borrower is
taking or proposes to take with respect thereto.
Section 6.3. Indemnification. (a) The Borrower releases the Issuer and the
Trustee from, agrees that the Issuer and the Trustee shall not be liable for,
and indemnifies the Issuer and the Trustee against, all liabilities, losses,
damages (including reasonable attorneys' fees), causes of action, suits, claims,
costs and expenses, demands and judgments of any nature imposed upon or asserted
against the Issuer or the Trustee, on account of: (i) any loss or damage to
property or injury to or death of or loss by any Person that may he occasioned
by any cause whatsoever pertaining to the construction, maintenance, operation
and use of the Project; (ii) any breach or default on the part of the Borrower
in the performance of any covenant or agreement of the Borrower under this Loan
Agreement, the Borrower Documents or any related document, or arising from any
act or failure to act by the Borrower, or any of its agents, contractors,
servants, employees or licensees; (iii) violation by the Borrower or any
Affiliate of any law, ordinance or regulation affecting the ownership, occupancy
or use of the Project; (iv) the authorization, issuance and sale of the Bonds,
and the provision of any information furnished by the Borrower in connection
therewith concerning the Project or the Borrower or arising from (1) any errors
or omissions of any nature whatsoever such that the Bonds, when delivered to the
Bondowners, are not validly issued and binding obligations of the Issuer, or (2)
any fraud or misrepresentations or omissions contained in the proceedings of the
Issuer or the Trustee with respect to, or as a result of, materials furnished in
writing by the Borrower relating to the issuance of the Bonds which, if known to
the original purchaser of the Bonds, would reasonably be a material factor in
its decision to purchase the Bonds; (v) failure to pay rebatable arbitrage
pursuant to Section 3.7(b) hereof; and (vi) any claim or action or proceeding
with respect to the matters set forth in subsections (i), (ii), (iii), (iv) and
(v) above brought thereon; provided, however, that the Borrower does not hereby
release the Issuer or the Trustee from, or agree that either of them shall not
be liable for, or indemnify either of them against any liabilities, losses,
damages
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(including attorneys' fees), causes of action, suits, claims, costs and
expenses, demands and judgments of any nature imposed upon or asserted against
either of them on account of, with respect to the Issuer, its willful
misconduct, or, with respect to the Trustee, its negligence or willful
misconduct.
(b) The Borrower agrees to indemnify the Trustee for and to hold it
harmless against all liabilities, claims, costs and expenses incurred without
negligence or willful misconduct on the part of the Trustee, on account of any
action taken or omitted to be taken by the Trustee in accordance with the terms
of this Loan Agreement, the Bonds or the Indenture or any action taken at the
request of or with the consent of the Borrower, including the costs and expenses
of the Trustee in defending itself against any such claim, action or proceeding
brought in connection with the exercise or performance of any of its powers or
duties under this Loan Agreement, the Bonds or the Indenture.
(c) In case any action or proceeding is brought against the Issuer or the
Trustee in respect of which indemnity may be sought hereunder, the party seeking
indemnity promptly shall give notice of that action or proceeding to the
Borrower, and the Borrower upon receipt of that notice shall have the obligation
and the right to assume the defense of the action or proceeding; provided, that
failure of a party to give that notice shall not relieve the Borrower from any
of its obligations under this Section unless that failure prejudices the defense
of the action or proceeding by the Borrower. At its own expense, an indemnified
party may employ separate legal counsel and participate in (but not control) the
defense. The Borrower shall not be liable for any settlement without its
consent.
(d) The indemnification set forth above is intended to and shall include
the indemnification of all affected officials, directors, officers, staff and
employees of the Issuer, and the Trustee, respectively. That indemnification is
intended to and shall be enforceable by the Issuer to the full extent permitted
by law.
Section 6.4. Further Assurances and Corrective Instruments. Subject to the
Indenture, the Issuer and the Borrower from time to time will execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
Supplemental Loan Agreements and such further instruments as may reasonably be
required for correcting any inadequate or incorrect description of the Project
and for carrying out the intention or facilitating the performance of this Loan
Agreement.
Section 6.5. Litigation Notice. The Borrower shall give the Trustee and
the Credit Enhancer prompt notice of any action, suit or proceeding by it or
against it at law or in equity, or before any governmental instrumentality or
agency, or of any of the same which may be threatened, which, if adversely
determined, would materially impair the right of the Borrower to carry on the
business which is contemplated in connection with the Project, or would
materially and adversely affect its business, operations, properties, assets or
condition. Within five Business Days after the filing against the Borrower, and
prior to the filing by the Borrower, of a petition in bankruptcy, the Borrower
shall notify the Trustee and the Credit Enhancer in writing as to such
occurrence.
Section 6.6. Annual Certificate. The Borrower will furnish to the Issuer,
the Trustee and the Credit Enhancer, on or before September 1 of each year, a
certificate, signed by an Authorized Borrower Representative, stating that the
Borrower has made a review of its activities with respect to the Project during
the preceding calendar year for the purpose of determining whether or not the
Borrower has
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complied with all of the terms, provisions and conditions of the Borrower
Documents and that the Borrower has, to the best of its knowledge, kept,
observed, performed and fulfilled each and every covenant, provision and
condition of the Borrower Documents on its part to be performed and is not in
default, in the performance or observance of any of the terms, covenants,
provisions or conditions hereof. If the Borrower shall be in default such
certificate shall specify all such defaults and the nature thereof.
[End of Article VI]
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ARTICLE VII
ASSIGNMENT OF ISSUER'S RIGHTS UNDER LOAN AGREEMENT
Section 7.1. Assignment by the Issuer. The Issuer, by means of the
Indenture and as security for the payment of the principal of, purchase price
of, and redemption premium, if any, and interest on the Bonds, and the
obligations payable to the Credit Enhancer under the Letter of Credit Agreement,
will assign, pledge and grant a security interest in certain of its rights,
title and interests in, to and under this Loan Agreement, including Loan
Payments and Additional Payments and other revenues, moneys and receipts
received by it pursuant to this Loan Agreement, to the Trustee (reserving its
Unassigned Issuer's Rights).
Section 7.2. Restriction on Transfer of Issuer's Rights. The Issuer will
not sell, assign, transfer or convey its interests in this Loan Agreement except
pursuant to the Indenture.
Section 7.3. Credit Enhancer's Remedial Rights. The Issuer and the
Borrower hereby acknowledge and agree that should the Credit Enhancer exercise
certain of its remedial rights under the Credit Documents, the Credit Enhancer
(or an affiliate or designee thereof) may become successor in interest to the
Borrower hereunder. No such exercise of the Credit Enhancer's rights under the
Credit Documents, or succession of the Credit Enhancer (or an affiliate or
designee thereof) to the interest of the Borrower hereunder, shall require, as a
condition precedent, either (i) the further consent of the Issuer, the Trustee
or the Bondowners, or (ii) the acceleration of the Bonds (unless the Credit
Enhancer elects such in its sole discretion).
[End of Article VII]
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ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.1. Events of Default Defined. The term "Event of Default" shall
mean any one or more of the following events:
(a) Failure by the Borrower to make timely payment of any Loan Payment or
any Additional Payment when due.
(b) Failure by the Borrower to observe and perform any covenant, condition
or agreement on the part of the Borrower under this Loan Agreement or the
Indenture, other than as referred to in the preceding subparagraph (a) of this
Section, for a period of 60 days after written notice of such default has been
given to the Borrower and the Credit Enhancer by the Trustee during which time
such default is neither cured by the Borrower or the Credit Enhancer nor waived
in writing by the Credit Enhancer and the Trustee, provided that, if the failure
stated in the notice cannot be corrected within said 60-day period, the Credit
Enhancer and the Trustee may consent in writing to an extension of such time
prior to its expiration and the Credit Enhancer and the Trustee will not
unreasonably withhold their consent to such an extension if corrective action is
instituted by the Borrower or the Credit Enhancer within the 60-day period and
diligently pursued to completion and if such consent, in their judgment, does
not materially adversely affect the interests of the Bondowners.
(c) Any representation or warranty by the Borrower herein or in any
certificate or other instrument delivered under or pursuant to this Loan
Agreement or the Indenture or in connection with the financing of the Project
shall prove to have been false, incorrect, misleading or breached in any
material respect on the date when made, unless waived in writing by the Issuer,
the Credit Enhancer and the Trustee or cured by the Borrower or the Credit
Enhancer within 30 days after the discovery thereof and notice has been given to
the Borrower and the Credit Enhancer.
(d) The occurrence of an Act of Bankruptcy with respect to the Borrower.
(e) The occurrence of an Event of Default as defined in the Indenture.
(f) The occurrence of an Event of Default as defined in the Series 1994B
Loan Agreement.
Section 8.2. Remedies on Default. Subject to the provisions of Section 8.8
hereof, whenever any Event of Default shall have occurred and be continuing, the
Trustee, as the assignee of the Issuer, may take any one or more of the
following remedial steps; provided that if the principal of all Bonds then
Outstanding and the interest accrued thereon shall have been declared
immediately due and payable pursuant to the provisions of Section 802 of the
Indenture, all Loan Payments for the remainder of the Loan Term shall become
immediately due and payable without any further act or action on the part of the
Issuer or the Trustee and the Trustee may immediately proceed (subject to the
provisions of Section 8.8 hereof) to take any one or more of the remedial steps
set forth in subparagraph (b) of this Section:
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(a) By written notice to the Borrower (with a copy to the Credit Enhancer)
declare all Loan Payments to be immediately due and payable, together with
interest on overdue payments of principal and redemption premium, if any, and,
to the extent permitted by law, interest, at the rate or rates of interest
specified in the respective Bonds, without presentment, demand or protest, all
of which are expressly waived.
(b) Take whatever other action at law or in equity, including causing the
appointment of a receiver or receivers for the Borrower and/or its assets,
taking all actions necessary and appropriate to exercise or to cause the
exercise the rights and powers set forth herein or in the Indenture, as may
appear necessary or desirable to collect the amounts payable pursuant to this
Loan Agreement then due and thereafter to become due or to enforce the
performance and observance of any obligation, agreement or covenant of the
Borrower under this Loan Agreement or the Indenture.
In the enforcement of the remedies provided in this Section, the Trustee
may treat all expenses of enforcement, including reasonable legal, accounting
and advertising fees and expenses, as Additional Payments then due and payable
by the Borrower.
Any amount collected pursuant to action taken under this Section (other
than payments on the Credit Facility) shall be paid to the Trustee and applied,
first, to the payment of any costs, expenses and fees incurred by the Issuer or
the Trustee as a result of taking such action and, next, any balance shall be
used to satisfy any Loan Payments then due by payment into the Revenue Fund and
applied in accordance with the Indenture and, then, to satisfy any other
Additional Payments then due or to cure any other Event of Default.
Notwithstanding the foregoing, the Trustee shall not be obligated to take
any remedial action described in (b) above that in its opinion will or might
cause it to expend time or money or otherwise incur liability, unless and until
indemnity satisfactory to it has been furnished to the Trustee at no cost or
expense to the Trustee.
The provisions of this Section are subject to the limitation that the
annulment of a declaration that the Bonds are immediately due and payable shall
automatically constitute an annulment of any corresponding declaration made
pursuant to subparagraph (a) of this Section and a waiver and rescission of the
consequences of such declaration and of the Event of Default with respect to
which such declaration has been made, provided that no such waiver or rescission
shall extend to or affect any other or subsequent Default or impair any right
consequent thereon. In the event any covenant, condition or agreement contained
in this Loan Agreement shall be breached or any Event of Default shall have
occurred and such breach or Event of Default shall thereafter be waived by the
Trustee, such waiver shall be limited to such particular breach or Event of
Default.
Section 8.3. No Remedy Exclusive. Subject to the provisions of Section 8.8
hereof, no remedy herein conferred or reserved is intended to be exclusive of
any other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this Loan
Agreement or now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon Default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to
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time and as often as may be deemed expedient. In order to entitle the Trustee to
exercise any remedy reserved to it in this Article, it shall not be necessary to
give any notice, other than such notice as may be herein expressly required.
Section 8.4. Agreement to Pay Attorneys' Fees and Expenses. Subject to the
provisions of Section 3.7 hereof, in connection with any Event of Default by the
Borrower, if the Issuer or the Trustee employs attorneys or incurs other
expenses for the collection of amounts payable hereunder or the enforcement of
the performance or observance of any covenants or agreements on the part of the
Borrower herein contained, the Borrower agrees that it will, on demand therefor,
pay to the Issuer and the Trustee the reasonable fees of such attorneys and such
other reasonable expenses so incurred by the Issuer and the Trustee.
Section 8.5. Issuer and Borrower to Give Notice of Default. The Issuer,
the Trustee and the Borrower shall each, at the expense of the Borrower,
promptly give to the Credit Enhancer and the other listed parties written notice
of any Default of which the Issuer, the Trustee or the Borrower, as the case may
be, shall have actual knowledge or written notice, but the Issuer shall not be
liable for failing to give such notice.
Section 8.6. Performance Of Borrower's Obligations. If the Borrower shall
fail to keep or perform any of its obligations as provided in this Loan
Agreement in respect of (a) maintenance of insurance, (b) payments of taxes,
assessments and other charges, (c) repairs and maintenance of the Project, (d)
compliance with legal or insurance requirements, and (e) keeping the Project
free of all liens other than Permitted Encumbrances, or in the making of any
other payment or performance of any other obligation, then the Issuer, the
Credit Enhancer or the Trustee, may (but shall not be obligated so to do) upon
the continuance of such failure on the Borrower's part for 5 days after notice
of such failure is given to the Borrower and the other listed parties by the
Issuer, the Credit Enhancer or the Trustee, and without waiving or releasing the
Borrower from any obligation hereunder, as an additional but not exclusive
remedy, make any such payment or perform any such obligation, and all sums so
paid by the Issuer, the Credit Enhancer or the Trustee and all necessary
incidental costs and expenses incurred by the Issuer, the Credit Enhancer or the
Trustee in performing such obligations shall be deemed to be Additional Payments
or payments due under the Collateral Documents, as applicable, and shall be paid
to the Issuer, the Credit Enhancer or the Trustee on demand.
Section 8.7. Remedial Rights Assigned to the Trustee. Upon the execution
and delivery of the Indenture, the Issuer will thereby have assigned to the
Trustee all rights and remedies conferred upon or reserved to the Issuer by this
Loan Agreement, reserving only the Unassigned Issuer's Rights. Subject to the
provisions of Section 8.8 hereof, the Trustee shall have the exclusive right to
exercise such rights and remedies conferred upon or reserved to the Issuer by
this Loan Agreement in the same manner and to the same extent, but under the
limitations and conditions imposed thereby and hereby. The Trustee, the Credit
Enhancer and the Bondowners shall be deemed third party creditor beneficiaries
of all representations, warranties, covenants and agreements contained herein.
Section 8.8. Credit Enhancer to Direct Trustee. Any provision herein to
the contrary notwithstanding, unless an Event of Default described in
subparagraph (a), (b), (c) or (e)(i) of Section 801 of the Indenture, or an
Event of Default described in subparagraph (g) of said Section 801 as the
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same relates to a default described in subparagraphs (a), (b), (c) or (e)(i) of
Section 801 of the Series 1994B Indenture, shall have occurred and be
continuing, the Issuer shall (subject to the requirements of Section 901(1) of
the Indenture) exercise the remedies provided for hereunder only if and as
directed in writing by the Credit Enhancer and shall not waive any Event of
Default without the prior written consent of the Credit Enhancer; provided that
such direction shall not be otherwise than in accordance with the provisions of
law and of the Indenture.
[End of Article VIII]
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<PAGE>
ARTICLE IX
PREPAYMENT AND ACCELERATION OF LOAN PAYMENTS
Section 9.l. Prepayment at the Option of the Borrower. Upon the exercise
by the Borrower, with the prior written consent of the Credit Enhancer, of its
option to cause the Bonds or any portion thereof to be redeemed pursuant to
Section 401 of the Indenture, the Borrower shall prepay Loan Payments in whole
or in part at the times and at the prepayment prices sufficient to redeem all or
a corresponding portion of the Bonds then Outstanding in accordance with said
Section. At the written direction of the Borrower such prepayments shall be
applied to the redemption of the Bonds in whole or in part in accordance with
said Section.
Section 9.2. Optional Prepayment Upon Certain Events. Upon the occurrence
of any of the conditions or events set forth in Section 402(d) of the Indenture,
the Borrower shall have the option, with the prior written consent of the Credit
Enhancer, to prepay Loan Payments, in whole or in part at any time, at the time
and at the prepayment price sufficient to redeem all or a corresponding portion
of the Bonds then Outstanding in accordance with said Section.
Section 9.3. Mandatory Prepayment Upon Determination of Taxability. Upon
the occurrence of a Determination of Taxability, the Borrower shall prepay Loan
Payments in whole at the time and at the prepayment price sufficient to redeem
all of the Bonds then Outstanding in accordance with Section 402(a) of the
Indenture. The Borrower will promptly notify the Issuer, the Credit Enhancer and
the Trustee in writing of the occurrence and existence of any event or condition
which could result in mandatory prepayment under this Section.
Section 9.4. Mandatory Prepayment Upon Certain Defaults. Upon the
occurrence of any event set forth in Section 402(c) of the Indenture, the
Borrower shall prepay Loan Payments in whole at the time and at the prepayment
price sufficient to redeem all of the Bonds then Outstanding in accordance with
said Section.
Section 9.5. Mandatory Prepayment From Amounts Remaining in Project Fund.
Redemption of Bonds with proceeds derived under Section 3.4(c) hereof shall be
deemed a prepayment of the Loan Payments in the same amount as the amount of
Bonds redeemed. The Borrower shall pay or cause to be paid to the Trustee from
Available Moneys, at the time of a transfer from the Project Fund to the Revenue
Fund, such amount as is necessary to cause the transferred amount to equal an
Authorized Denomination.
Section 9.6. Right to Prepay at Any Time. The Borrower shall have the
option at any time to prepay all of the Loan Payments, Additional Payments and
other amounts it is required to pay hereunder by paying to the Trustee all such
sums as are sufficient to satisfy and discharge the Indenture and paying or
making provision for the payment of all other sums payable hereunder.
Section 9.7. Notice of Prepayment. To exercise an option granted by
Section 9.1, Section 9.2 or Section 9.6, the Borrower shall give written notice
to the Issuer, the Credit Enhancer and the Trustee which shall specify therein
the date upon which a prepayment of Loan Payments will be made, which date
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<PAGE>
shall be not less than 45 days from the date the notice is received by the
Trustee, and which shall contain the written consent of the Credit Enhancer. In
the Indenture, the Issuer has directed the Trustee to forthwith take all steps
(other than the payment of the money required to redeem the Bonds) necessary
under the applicable provisions of the Indenture to effect any redemption of the
then Outstanding Bonds, in whole, or inpart, pursuant to Section 402 of the
Indenture.
Section 9.8. Precedence of this Article. The rights, options and
obligations of the Borrower set forth in this Article may be exercised or shall
be fulfilled, as the case may be, whether or not a Default exists hereunder,
provided that such Default will not result in nonfulfillment of any condition to
the exercise of any such right or option and provided further that no amounts
payable pursuant to this Loan Agreement shall be prepaid in part during the
continuance of an Event of Default described in subparagraph (a) of Section 8.1
hereof.
[End of Article IX]
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<PAGE>
ARTICLE X
MISCELLANEOUS
Section 10.1. Authorized Representatives. Whenever under this Loan
Agreement the approval of the Issuer is required or the Issuer is required or
permitted to take some action, such approval shall be given or such action shall
be taken by an Authorized Issuer Representative, and the Borrower, the Credit
Enhancer and the Trustee shall be authorized to act on any such approval or
action. Any approval shall not be unreasonably withheld or delayed.
Whenever under this Loan Agreement the approval of the Borrower is
required or the Borrower is required or permitted to take some action, such
approval shall be given or such action shall be taken by an Authorized Borrower
Representative, and the Issuer, the Credit Enhancer and the Trustee shall be
authorized to act on any such approval or action.
Whenever under this Loan Agreement the approval of the Credit Enhancer is
required or the Credit Enhancer is required or permitted to take some action,
such approval shall be given or such action shall be taken by an authorized
Credit Enhancer representative, and the Issuer, the Borrower and the Trustee
shall be authorized to act on any such approval or action.
Section 10.2. Term of Loan Agreement. This Loan Agreement shall be
effective from and after its execution and delivery and shall continue in full
force and effect until the Bonds are deemed to be paid within the meaning of
Article XII of the Indenture and provision has been made for paying all other
sums payable by the Borrower to the Issuer, the Trustee, the Credit Enhancer and
the Paying Agent to the date of the retirement of the Bonds. All agreements,
covenants, representations and certifications by the Borrower as to all matters
affecting the status of the interest on the Bonds and the indemnifications
provided by Section 6.3 hereof shall survive the termination of this Loan
Agreement for 12 months unless a claim has been made and then such
indemnification shall continue with regard to that claim only.
Section 10.3. Notices. Except as otherwise provided herein, it shall be
sufficient service of any notice, request, complaint, demand or other paper
required by this Agreement to be given to or filed if the same shall be duly
mailed by first-class mail, postage pre-paid, certified or registered mail, or
sent by telegram, telecopy or telex or other similar communication, confirmed in
writing by first-class mail, postage pre-paid, certified or registered mail, or
sent by telegram, telecopy or telex or other similar communication, on the same
day, addressed as specified in Section 1302 of the Indenture. All notices given
by first-class mail, certified or registered mail, postage prepaid, as aforesaid
shall be deemed duly given as of the third day after they are so mailed; all
notices given by telegram, telecopy or telex or other similar communication
shall be deemed duly given as of the date the same are transmitted by such means
to the recipient thereof; provided, however, that any notice deemed to be given
on a date that is not a Business Day in the jurisdiction in which such notice is
delivered to the addressee thereof, shall not be deemed duly given until the
next succeeding Business Day; provided, further, that notices to the Trustee
shall be deemed given as of the date they are received by the Trustee. A
duplicate copy of each notice, certificate or other communication given
hereunder by either the Issuer or the Trustee to the other shall also be given
to the Borrower, the Remarketing Agent and the Credit Enhancer. In the event of
notice to any party other than the Issuer or the Trustee, a copy of the notice
shall be provided to the Borrower,
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<PAGE>
the Remarketing Agent and the Credit Enhancer. In addition, the Trustee shall
send to the Credit Enhancer, the Borrower, the Tender Agent and the Remarketing
Agent a copy of each notice sent to the Bondowners. The Issuer, the Trustee, the
Tender Agent, the Borrower, the Credit Enhancer and the Remarketing Agent may
from time to time designate, by notice given under the terms of the Indenture to
the others of such parties, such other address to which subsequent notices,
certificates or other communications shall be sent.
Section 10.4. Performance Date Not a Business Day. If the last day for
performance of any act or the exercising of any right, as provided in this Loan
Agreement, shall not be a Business Day, such payment may be made or act
performed or right exercised on the next succeeding Business Day.
Section 10.5. Binding Effect. This Loan Agreement shall inure to the
benefit of and shall be binding upon the Issuer, the Borrower and their
respective successors and assigns, subject to the provisions contained in
Section 5.2 hereof. The Issuer and the Borrower acknowledge that the Credit
Enhancer is a third-party beneficiary of those provisions herein which relate to
the making of payments or giving of notice to or consents by or following the
directions of or the performance of other acts to benefit it and all such
provisions shall be enforceable by the Credit Enhancer.
Section 10.6. Amendments, Changes and Modifications. Except as otherwise
provided in this Loan Agreement or in the Indenture, subsequent to the issuance
of Bonds and prior to all of the Bonds being deemed to be paid in accordance
with Article XII of the Indenture and provision being made for the payment of
all sums payable under the Indenture in accordance with Article XII thereof,
this Loan Agreement may not be effectively amended, changed, modified, altered
or terminated without the prior concurring written consent of the Trustee and
the Credit Enhancer, given in accordance with the Indenture.
Section 10.7. Execution in Counterparts. This Loan Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
Section 10.8. No Pecuniary Liability. No provision, representation,
covenant or agreement contained in this Loan Agreement or in the Indenture, the
Bonds, or any obligation herein or therein imposed upon the Issuer, or the
breach thereof, shall constitute or give rise to or impose upon the Issuer a
pecuniary liability (except to the extent of any loan repayments, revenues and
receipts derived by the Issuer pursuant to this Loan Agreement). No provision
hereof shall be construed to impose a charge against the general credit of the
Issuer or the State or the taxing powers of the State within the meaning of any
constitutional provision or statutory limitation, or any personal or pecuniary
liability upon any director, official or employee of the Issuer.
Section 10.9. Extent of Covenants of the Issuer; No Personal or Pecuniary
Liability. All covenants, obligations and agreements of the Issuer contained in
this Loan Agreement and the Indenture shall be effective to the extent
authorized and permitted by applicable law. No such covenant, obligation or
agreement shall be deemed to be a covenant, obligation or agreement of any
present or future member, officer, agent or employee of the Issuer in other than
his official capacity, and no official executing the Bonds shall be liable
personally on the Bonds or be subject to any personal liability or
accountability by
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<PAGE>
reason of the issuance thereof or by reason of the covenants, obligations or
agreements of the Issuer contained in this Loan Agreement or in the Indenture.
No provision, covenant or agreement contained in this Loan Agreement, the
Indenture or the Bonds, or any obligation herein or therein imposed upon the
Issuer, or the breach thereof, shall constitute or give rise to or impose upon
the Issuer a pecuniary liability or a charge.
Section 10.10. Net Loan. The parties hereto agree (a) that the payments of
Loan Payments are designed to provide the Issuer and the Trustee with moneys
adequate in amount to pay all principal of, purchase price of, and redemption
premium, if any, and interest accruing on the Bonds as the same become due and
payable, (b) that to the extent that the payments of Loan Payments are not
sufficient to provide the Issuer and the Trustee with funds sufficient for the
purposes aforesaid, subject to the provisions of Section 3.8 hereof, the
Borrower shall be obligated to pay, and it does hereby covenant and agree to
pay, upon demand therefor, as Additional Payments, such further moneys, in cash,
as may from time to time be required for such purposes, and (c) that if after
the principal of, and redemption premium, if any, and interest on the Bonds and
all costs incident to the payment of the Bonds have been paid in full the
Trustee or the Issuer holds unexpended funds received in accordance with the
terms hereof, such unexpended funds shall, after payment therefrom of all sums
then due and owing by the Borrower under the terms of this Loan Agreement, be
distributed in accordance with the Indenture.
Section 10.11. Security Interests. The Issuer and the Borrower agree to
enter into all instruments (including financing statements and statements of
continuation) necessary for perfection of and continuance of the perfection of
the security interests of the Issuer and the Trustee in the Project. The Trustee
shall file or cause to be filed all such instruments required to be so filed and
shall continue or cause to be continued the liens of such instruments for so
long as the Bonds shall be Outstanding.
Section 10.12. Complete Agreement. The Issuer and the Borrower understand
that oral agreements or commitments to loan money, extend credit or to forbear
from enforcing repayment of a debt including promises to extend or renew such
debt are not enforceable. To protect the Issuer and the Borrower from
misunderstanding or disappointment, any agreements the Issuer and the Borrower
reach covering such matters are contained in this Loan Agreement, which is the
complete and exclusive statement of the agreement between the Issuer and the
Borrower, except as the Issuer and the Borrower may later agree in writing
(subject to the provisions of Article XI of the Indenture) to modify this
Agreement.
Section 10.13. Severability. If any provision of this Loan Agreement, or
any covenant, stipulation, obligation, agreement, act or action, or part thereof
made, assumed, entered into or taken thereunder, or any application of such
provision, is for any reason held to be illegal or invalid, such illegality or
invalidity shall not affect any other provision of this Loan Agreement or any
other covenant, stipulation, obligation, agreement, act or action, or part
thereof, made, assumed, entered into, or taken, each of which shall be construed
and enforced as if such illegal or invalid portion were not contained herein.
Such illegality or invalidity of any application thereof shall not affect any
legal and valid application thereof, and each such provision, covenant,
stipulation, obligation, agreement, act or action, or part thereof, shall be
deemed to be effective, operative, made, entered into or taken in the manner and
to the full extent permitted by law.
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<PAGE>
Section 10.14. Governing Law. This Loan Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina.
Section 10.15. Not a Limitation. Nothing in this Loan Agreement contained
is intended to be (and nothing herein shall be construed to be) a limitation on
the obligations of the Borrower to the Credit Enhancer under the Credit
Documents.
Section 10.16. Consent to Jurisdiction: Service of Process.
(a) The Borrower hereby agrees and consents that any action or proceeding
arising out of or brought to enforce the provisions of this Loan Agreement or
any of the other Borrower Documents may be brought in any appropriate court in
the State or in any other court having jurisdiction over the subject matter, all
at the sole election of the Issuer or the Trustee, and by the execution of this
Loan Agreement, the Borrower irrevocably consents to the jurisdiction of each
such court.
(b) If for any reason the Borrower should become not qualified to do
business in the State, the Borrower hereby agrees to designate and appoint,
without power of revocation, an agent for service of process within the State,
as the agent for the Borrower upon whom may be served all process, pleadings,
notice, or other papers, which may be served upon the Borrower as a result of
any of the Borrower's obligations hereunder.
(c) The Borrower covenants that throughout the period during which any of
the Bonds remain outstanding, if a new agent for service or process within the
State is designated pursuant to the terms of subsection (b) of this section, the
Borrower will immediately file with the Issuer, the name and address of such new
agent and the date on which its appointment is to become effective.
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<PAGE>
IN WITNESS WHEREOF, the Issuer and the Borrower have caused this Loan
Agreement to be executed in their respective names.
SOUTH CAROLINA JOBS-ECONOMIC
DEVELOPMENT AUTHORITY
By: /s/ Robert L. Mobley
-------------------------------------
Chairman, Board of Directors
[SEAL]
ATTEST:
By: /s/ [ILLEGIBLE]
----------------------------
Executive Director
ROLLER BEARING COMPANY OF AMERICA,
INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
Its CFO and Treasurer
[SEAL]
- 37 -
<PAGE>
EXHIBIT A
DESCRIPTION OF PROJECT
Buildings, fixtures, machinery and equipment to constitute an
approximately 60,000 square foot expansion of an existing facility for the
manufacture of roller bearings in Darlington County, South Carolina.
A-1
<PAGE>
EXHIBIT B
Request No.__________ Date: ___________
WRITTEN REQUEST FOR DISBURSEMENT FROM
SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY
___________
________FUND
(ROLLER BEARING OF AMERICA, INC. PROJECT)
Series 1994A
To: Mark Twain Bank
Attention: Corporate Trust Department
as Trustee under the Trust Indenture, dated as of September 1, 1994,
between the South Carolina Jobs-Economic Development Authority, and said
Trustee
Pursuant to Section 3.4 of the Loan Agreement, dated as of September 1,
1994 (the "Loan Agreement"), between the South Carolina Jobs-Economic
Development Authority and Roller Bearing Company of America, Inc. (the
"Borrower"), the Borrower hereby requests payment from the ____ Fund in
accordance with this request and said Section 3.4 and hereby states and
certifies as follows:
1. The date and number of this request are as set forth above.
2. All terms in this request shall have and are used with the meanings
specified in the Loan Agreement.
3. The names of the persons, firms or corporations to whom the payments
requested hereby are due, the amounts to be paid and the description
of the obligation requested to be paid hereby are as set forth on
Attachment I hereto.
4. The conditions to disbursement set forth in Section 3.4(d) of the
Loan Agreement have been met and satisfied with respect to this
request.
5. With respect to this request, the Borrower hereby certifies as to
those items set forth in (2) through (7), inclusive, of Section
3.4(d)(A) of the Loan Agreement.
ROLLER BEARING COMPANY OF
AMERICA, INC.
By:
--------------------------------------
Authorized Borrower Representative
Consented to this ___ day of ____, 199__.
HELLER FINANCIAL, INC.
By:
------------------------------------
Authorized Signatory
<PAGE>
ATTACHMENT I
TO WRITTEN REQUEST FOR DISBURSEMENT FROM
SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY
___________
________FUND
(ROLLER BEARING COMPANY OF AMERICA, INC. PROJECT)
Series 1994A
REQUEST NO. ______ DATED __________ __, 19__.
_____________________________________
SCHEDULE OF PAYMENTS REQUESTED
General classification
and description of the
Payee Amount obligation to be paid
- ----- ------ ---------------------
<PAGE>
EXHIBIT C
COMPLETION CERTIFICATE
To: Mark Twain Bank, Trustee
and
South Carolina Jobs-Economic Development Authority, Issuer
and
Heller Financial Inc., Credit Enhancer
From: Authorized Borrower Representative
Subject: $7,700,000 South Carolina Jobs-Economic Development Authority Variable
Rate Demand Industrial Development Revenue Bonds Roller Bearing
Company of America, Inc. Project) Series 1994A
The undersigned hereby certifies in connection with the Project, financed
with the proceeds of the above-described Bonds issued by the South Carolina
Jobs-Economic Development Authority (the "Issuer") pursuant to the Trust
Indenture dated as of September 1, 1994 (the "Indenture") between the Issuer and
_________________________ (the "Trustee"), the proceeds of which have been
loaned to Roller Bearing Company of America, Inc. (the "Borrower") pursuant to
the Loan Agreement between the Borrower and the Issuer dated as of September 1,
1994 (the "Loan Agreement") (words capitalized herein have the meaning ascribed
to them in the Loan Agreement):
1. The acquisition, improvement, construction, installation and equipping
of the Project was substantially completed as of _________________,19__ the
"Completion Date").
2. All other facilities necessary in connection with the Project have been
acquired, constructed, improved, installed and equipped.
3. The Project has been completed in such manner as to conform with all
applicable zoning, planning, building, environmental, food handling and other
similar governmental regulations.
4. All costs of the Project have been paid in full except for those not
yet due and payable or being contested, which are described below and for which
money for payment thereof is being held and should be retained in the Project
Fund:
(a) Costs of the Project not yet due and payable:
Description Amount
----------- ------
C-1
<PAGE>
(b) Payments being contested:
Description Amount
----------- ------
5. The money in the Project Fund in excess of the total set forth in 4(a)
and (b) above represents the surplus proceeds of the Bonds and the Trustee under
the Indenture is hereby authorized and directed to deposit such money to the
Revenue Fund to be used to redeem the principal amount of outstanding Revenue
Bonds at the earliest possible time. Accompanying this Certificate (or otherwise
to be made available to the Trustee as follows:________________________________)
are Available Moneys sufficient to cause the amount to be deposited to equal an
Authorized Denomination.
6. Attached hereto is a statement of the Authorized Borrower
Representative listing and specifically describing all items of personal
property and fixtures acquired and installed as part of the Project.
This certificate is given without prejudice to any rights against third
parties which exist at the date hereof or which may subsequently come into
being.
ROLLER BEARING COMPANY OF
AMERICA, INC.
By:______________________________________
Authorized Borrower Representative
Date: _________________, 19__
C-2
CONFIDENTIAL
================================================================================
SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY
and
MARK TWAIN BANK,
as Trustee
-------------------------
TRUST INDENTURE
Dated as of September 1, 1994
-------------------------
Relating to
$7,700,000
Variable Rate Demand
Industrial Development Revenue Bonds
(Roller Bearing Company of America, Inc. Project)
Series 1994A
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION ...................... 4
Section 101. Definitions of Words and Terms .......................... 4
Section 102. Rules of Interpretation ................................. 15
ARTICLE II THE BONDS ............................................... 16
Section 201. Authorization, Issuance and Terms of Bonds .............. 16
Section 202. Nature of Obligations ................................... 17
Section 203. Interest Rates and Interest Payment Provisions .......... 17
Section 204. Changes in Interest Modes ............................... 19
Section 205. Execution, Authentication and Delivery of Bonds ......... 20
Section 206. Registration, Transfer and Exchange of Bonds ............ 21
Section 207. Temporary Bonds ......................................... 22
Section 208. Mutilated, Lost, Stolen, Destroyed or Undelivered Bonds . 22
Section 209. Cancellation and Destruction of Bonds Upon Payment ...... 23
Section 210. Limitation on Transfer and Exchange ..................... 23
ARTICLE III TENDER AND PURCHASE OF BONDS ............................ 25
Section 301. Optional Tender of Bonds During Weekly Mode or
Monthly Mode ............................................ 25
Section 302. Mandatory Tender of Bonds ............................... 26
Section 303. Irrevocability of Elections; Return of Improperly
Completed Documents ..................................... 27
Section 304. Notice of Principal Amount of Bonds Tendered ............ 28
Section 305. Remarketing of Tendered Bonds ........................... 28
Section 306. Notice of Principal Amount of Bonds Remarketed .......... 29
Section 307. Purchase of Tendered Bonds .............................. 29
Section 308. Remarketing of Pledged Bonds ............................ 30
Section 309. Purchase Fund ........................................... 31
Section 310. No Purchases or Sales After Certain Defaults ............ 31
Section 311. Remarketing Agent ....................................... 31
Section 312. Qualifications of Remarketing Agent ..................... 32
ARTICLE IV REDEMPTION OF BONDS ..................................... 33
Section 401. Optional Redemption ..................................... 33
Section 402. Mandatory and Extraordinary Redemption .................. 34
Section 403. Selection of Bonds to be Redeemed ....................... 35
Section 404. Notice of Redemption of Bonds in Weekly or Monthly Mode . 35
Section 405. Notice of Redemption of Bonds in Semiannual, Annual or
Multiyear Mode .......................................... 36
Section 406. Effect of Call for Redemption ........................... 37
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ARTICLE V REVENUES AND FUNDS ...................................... 38
Section 501. Creation of Funds and Accounts .......................... 38
Section 502. Initial Deposits ........................................ 38
Section 503. Project Fund ............................................ 38
Section 504. Costs of Issuance Fund .................................. 38
Section 505. Revenue Fund ............................................ 39
Section 506. Debt Service Fund ....................................... 40
Section 507. General Fund ............................................ 40
Section 508. Payments Under Credit Facility .......................... 41
Section 509. Deposits into and Application of Moneys in the
Rebate Fund ............................................. 42
Section 510. Final Balances .......................................... 43
Section 511. Non-Presentment of Bonds ................................ 43
ARTICLE VI DEPOSITARIES OF MONEYS, SECURITY FOR DEPOSITS ........... 44
Section 601. Moneys to be Held in Trust .............................. 44
Section 602. Investment of Moneys .................................... 44
Section 603. Manner of Investment .................................... 44
Section 604. Record Keeping .......................................... 45
ARTICLE VII PARTICULAR COVENANTS AND PROVISIONS ..................... 46
Section 701. Issuer to Issue Bonds and Execute Indenture ............. 46
Section 702. Performance of Covenants ................................ 46
Section 703. Instruments of Further Assurance ........................ 46
Section 704. Credit Facility ......................................... 46
Section 705. Enforcement of Credit Facility .......................... 46
Section 706. Alternate Credit Facility ............................... 47
Section 707. General Limitation on Issuer Obligations ................ 48
Section 708. Recording and Filing .................................... 48
Section 709. Possession and Inspection of Books and Documents ........ 48
Section 710. Rights and Duties Under Agreement and Credit Facility ... 48
Section 711. Tax Covenants ........................................... 48
ARTICLE VIII DEFAULT AND REMEDIES .................................... 50
Section 801. Events of Default ....................................... 50
Section 802. Acceleration; Mandatory Purchase ........................ 51
Section 803. Surrender of Possession of Trust Estate; Rights
and Duties of Trustee in Possession ..................... 52
Section 804. Appointment of Receivers in Event of Default ............ 52
Section 805. Exercise of Remedies by the Trustee ..................... 53
Section 806. Limitation on Exercise of Remedies by Bondowners ........ 53
Section 807. Right of Bondowners to Direct Proceedings ............... 54
Section 808. Application of Moneys in Event of Default ............... 54
Section 809. Remedies Cumulative ..................................... 56
Section 810. Delay or Omission Not Waiver ............................ 56
Section 811. Effect of Discontinuance of Proceedings ................. 56
Section 812. Waivers of Events of Default ............................ 56
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Section 813. Pledged Bonds ........................................... 57
ARTICLE IX THE TRUSTEE ............................................. 58
Section 901. Acceptance of Trusts .................................... 58
Section 902. Fees, Charges and Expenses of the Trustee ............... 61
Section 903. Notice to the Bondowners if Default Occurs .............. 61
Section 904. Intervention by the Trustee ............................. 62
Section 905. Successor Trustee Upon Merger, Consolidation or Sale .... 62
Section 906. Trustee Required; Eligibility ........................... 62
Section 907. Resignation of Trustee .................................. 63
Section 908. Removal of Trustee ...................................... 63
Section 909. Appointment of Successor Trustee ........................ 63
Section 910. Vesting of Trusts in Successor Trustee .................. 63
Section 911. Trust Estate May be Vested in Co-Trustee ................ 64
Section 912. Accounting .............................................. 64
Section 913. Paying Agents; Bond Registrar; Appointment and
Acceptance of Duties; Removal ........................... 64
Section 914. The Tender Agent ........................................ 65
Section 915. Notice to Rating Agency ................................. 66
Section 916. Right of Trustee to Pay Taxes and Other Charges ......... 66
ARTICLE X SUPPLEMENTAL INDENTURES ................................. 67
Section 1001. Supplemental Indentures Not Requiring Consent
of Bondowners ........................................... 67
Section 1002. Supplemental Indentures Requiring Consent of Bondowners . 68
Section 1003. Borrower's Consent to Supplemental Indentures ........... 69
Section 1004. Opinion of Bond Counsel ................................. 69
ARTICLE XI AMENDMENT OF AGREEMENT AND CREDIT FACILITY .............. 70
Section 1101. Amendments, Changes or Modifications to the
Agreement and Credit Facility Not Requiring
Consent of Bondowners ................................... 70
Section 1102. Amendments, Changes or Modifications to the Agreement
and Credit Facility Requiring Consent of Bondowners ..... 70
Section 1103. Opinion of Bond Counsel ................................. 71
ARTICLE XII SATISFACTION AND DISCHARGE OF INDENTURE ................. 72
Section 1201. Defeasance .............................................. 72
Section 1202. Satisfaction and Discharge of the Indenture ............. 73
Section 1203. When Refunding is Not Permitted ......................... 74
ARTICLE XIII MISCELLANEOUS PROVISIONS ................................ 75
Section 1301. Consents and Other Instruments by Bondowners ............ 75
Section 1302. Notices ................................................. 75
Section 1303. Limitation of Rights Under the Indenture ................ 77
Section 1304. Suspension of Mail Service .............................. 79
Section 1305. Business Days ........................................... 79
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Section 1306. Immunity of Officers, Employees and Members of Issuer ... 79
Section 1307. Credit Enhancer's Remedial Rights ....................... 79
Section 1308. Severability ............................................ 79
Section 1309. Complete Agreement ...................................... 80
Section 1310. Execution in Counterparts ............................... 80
Section 1311. Governing Law ........................................... 80
Exhibit A - Bond Form
Exhibit B - Investment Securities Collateral Requirement
Exhibit C - [Reserved.]
Exhibit D - Notice of Election to Tender/Retain Bonds
Exhibit E - Rate Adjustment Notice
Exhibit F - Interest Mode Adjustment Notice
Exhibit G - Notice of Alternate Credit Facility
Exhibit H - Representation Letter
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TRUST INDENTURE
THIS TRUST INDENTURE (the "Indenture"), made and entered into as of
September 1, 1994, by and between the SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT
AUTHORITY, a body corporate and politic and an agency of the State of South
Carolina (the "Issuer"), and Mark Twain Bank, a Missouri banking corporation
duly organized and existing and authorized to accept and execute trusts of the
character herein set out under the laws of the State of Missouri, and having its
principal corporate trust office located in St. Louis, Missouri, as Trustee (the
"Trustee");
WITNESSETH:
WHEREAS, the Issuer acting by and through its Board of Directors, is
authorized and empowered under and pursuant to the provisions of Tide 41,
Chapter 43, Code of Laws of South Carolina 1976, as amended (the "Act"), to
acquire and cause to be acquired properties that are projects under the Act
through which the industrial, commercial, agricultural and recreational
development of the State of South Carolina (the "State") will be promoted and
trade developed by inducing business enterprises to locate in and remain in the
State and thus provide maximum opportunities for the creation and retention of
jobs and improvement of the standard of living of the citizens of the State; and
WHEREAS, the Issuer is further authorized by Section 41A3-100 of the Act
to issue revenue bonds payable by the Issuer solely from revenues and receipts
from any financing agreement between the Issuer and any business enterprise with
respect to such project and secured by a pledge of said revenues and receipts
and by an assignment of such financing agreement; and
WHEREAS, pursuant to the Act, the Authority is authorized to issue its
Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing
Company of America, Inc. Project) Series 1994A in the original aggregate
principal amount of $7,700,000 (the "Bonds"), for the purpose of providing funds
to construct or purchase certain buildings, fixtures, machinery and equipment
("the Project") to constitute an approximately 60,000 square foot expansion of
an existing facility for the manufacture of roller bearings in Darlington
County, South Carolina which is owned and operated by Roller Bearing Company of
America, Inc., a Delaware corporation (the "Borrower"); and
WHEREAS, the Borrower intends to construct and purchase the Project; and
WHEREAS, the Borrower has requested that the Issuer issue the Bonds in
order to finance the construction and purchase of the Project; and
WHEREAS, the Board of Directors of the Issuer passed and approved a
Resolution on August 24, 1994, authorizing the Issuer to issue the Bonds
pursuant to this Indenture for the above purposes; and
WHEREAS, pursuant to such Resolution, the Issuer is authorized (i) to
execute and deliver this Indenture for the purpose of issuing and securing the
Bonds as hereinafter provided, and (ii) to enter into a Loan Agreement of even
date herewith (the "Agreement"), between the Issuer and the Borrower, under
which the Issuer will loan the proceeds of the Bonds to the Borrower in
accordance with the provisions of the Agreement to finance a portion of the
costs of the Project, in consideration of payments to be made by the Borrower to
the Trustee which are to be sufficient
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to pay the principal of, redemption premium, if any, and interest on the Bonds
as the same become due; and
WHEREAS, Heller Financial, Inc., a Delaware corporation (the "Credit
Enhancer"), has agreed to execute and deliver an irrevocable direct-pay letter
of credit (the "Credit Facility") in order to secure the timely payment of the
principal of and interest on the Bonds; and
WHEREAS, all things necessary to make the Bonds, when authenticated by the
Trustee and issued as in this Indenture provided, the valid, legal and binding
obligations of the Issuer, and to constitute this Indenture a valid, legal and
binding pledge and assignment of the property, rights, interests and revenues
herein made for the security of the payment of the principal of, redemption
premium, if any, and interest on the Bonds issued hereunder, have been done and
performed, and the execution and delivery of this Indenture and the execution
and issuance of the Bonds, subject to the terms hereof, have in all respects
been duly authorized and approved by the Issuer; and
WHEREAS, THE BONDS AND THE PREMIUM, IF ANY, AND INTEREST THEREON
(INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PREPAYMENT OR PURCHASE OF
THE BONDS) ARE LIMITED OBLIGATIONS OF THE ISSUER; THE PRINCIPAL OF, PREMIUM, IF
ANY, AND INTEREST ON THE BONDS (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH
ANY PURCHASE OF THE BONDS) ARE PAYABLE SOLELY FROM THE REVENUES OR MONEYS TO BE
RECEIVED IN CONNECTION WITH THE FINANCING OF THE PROJECT OR FROM ANY OTHER
MONEYS MADE AVAILABLE TO THE ISSUER FOR SUCH PURPOSE; NEITHER THE BONDS NOR THE
INTEREST THEREON (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PURCHASE
OF THE BONDS) SHALL EVER CONSTITUTE AN INDEBTEDNESS OR A CHARGE AGAINST THE
GENERAL CREDIT OF THE STATE, THE ISSUER, OR ANY OTHER PUBLIC BODY, OR OF THE
TAXING POWERS OF THE STATE WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY
LIMITATION AND SHALL NEVER CONSTITUTE OR GIVE RISE TO ANY PECUNIARY LIABILITY OF
THE STATE, THE ISSUER, OR ANY OTHER PUBLIC BODY; THE BONDS DO NOT CONSTITUTE AN
INDEBTEDNESS TO WHICH THE FAITH OR CREDIT OF THE STATE, THE ISSUER, OR ANY OTHER
PUBLIC BODY, OR TAXING POWER OF THE STATE, IS PLEDGED;
NOW THEREFORE, THIS INDENTURE WITNESSETH:
GRANTING CLAUSES
That the Issuer, in consideration of the premises, the acceptance by the
Trustee of the trusts hereby created, the purchase and acceptance of the Bonds
by the Owners thereof, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and in order to secure the
payment of the principal of, redemption premium, if any, and interest on the
Bonds according to their tenor and effect, to secure all obligations owed by the
Borrower to the Credit Enhancer under the Letter of Credit Agreement, and to
secure the performance and observance by the Issuer of all the covenants,
agreements and conditions herein and in the Bonds contained, does hereby
transfer, pledge and assign, without recourse, to the Trustee and its successors
and assigns in trust forever, and does hereby grant a security interest unto the
Trustee and its successors in trust and its assigns, in and to all and singular
the property described in paragraphs (a) and (b) below (said property being
herein referred to as the "Trust Estate"), to wit:
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(a) All right, tide and interest of the Issuer (including, but not limited
to, the right to enforce any of the terms thereof) in, to and under all Revenues
(as hereinafter defined) derived by the Issuer under and pursuant to and subject
to the provisions of the Agreement (but excluding the Unassigned Issuer's Rights
as defined in the Agreement and any payments made by the Borrower to meet the
rebate requirements of Section 148(f) of the Code) and the Credit Facility; and
(b) All other moneys and securities from time to time held by the Trustee
under the terms of this Indenture (excluding rebatable arbitrage, whether or not
held in the Rebate Fund, and amounts held in the Purchase Fund (as hereinafter
defined)), and any and all other property (real, personal or mixed) of every
kind and nature from time to time hereafter, by delivery or by writing of any
kind, pledged, assigned or transferred as and for additional security hereunder
by the Issuer, or by anyone in its behalf or with its written consent, to the
Trustee, which is hereby authorized to receive any and all such property at any
and all times and to hold and apply the same subject to the terms hereof.
TO HAVE AND TO HOLD, all and singular, the Trust Estate with all rights
and privileges hereby transferred, pledged, assigned and/or granted or agreed or
intended so to be, to the Trustee and its successors and assigns in trust
forever;
IN TRUST NEVERTHELESS, upon the terms and conditions herein set forth for
the equal and proportionate benefit, security and protection of all present and
future Owners of the Bonds Outstanding, without preference, priority or
distinction as to participation in the lien, benefit and protection hereof of
one Bond over or from the others, except as herein otherwise expressly provided
and on a subordinate basis thereto, to secure the obligations of the Borrower to
the Credit Enhancer;
PROVIDED, NEVERTHELESS, and these presents are upon the express condition,
that if the Issuer or its successors or assigns shall well and truly pay or
cause to be paid the principal of and premium, if any, on such Bonds with
interest, according to the provisions set forth in the Bonds, or shall provide
for the payment or redemption of such Bonds by depositing or causing to be
deposited with the Trustee the entire amount of funds or securities requisite
for payment or redemption thereof when and as authorized by the provisions of
Article XII hereof (it being understood that any payment with respect to the
principal of or interest on Bonds by the Borrower or any purchase of Bonds
pursuant to Article III hereof shall not be deemed payment or provision for
payment of principal of or interest on Bonds, except Bonds purchased and
cancelled by the Trustee, all such uncancelled Bonds to remain Outstanding
hereunder and principal of and interest thereon payable to the Owners thereof,
whether such Owners be the Credit Enhancer or persons to whom Bonds are
remarketed), and shall also pay or cause to be paid all other sums payable
hereunder by the Issuer and if all amounts due and owing to the Credit Enhancer
under the Letter of Credit Agreement shall have been paid in full, then these
presents and the estate and rights hereby granted shall cease, terminate and
become void, and thereupon the Trustee, on payment of its lawful charges and
disbursements then unpaid, on demand of the Issuer and upon the payment by the
Issuer of the cost and expenses thereof, shall duly execute, acknowledge and
deliver to the Issuer such instruments of satisfaction or release as may be
necessary or proper to discharge this Indenture of record, and if necessary
shall grant, reassign and deliver to the Issuer, with a copy to the Credit
Enhancer and the Borrower, all and singular the property, rights, privileges and
interests by it hereby granted, conveyed and assigned, and all substitutes
therefor, or any part thereof, not
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previously disposed of or released as herein provided; otherwise this Indenture
shall be and remain in full force;
THIS INDENTURE FURTHER WITNESSETH, and it is hereby expressly declared,
covenanted and agreed by and between the parties hereto, that all Bonds issued
and secured hereunder are to be issued, authenticated and delivered and that all
the Trust Estate is to be held and applied under, upon and subject to the terms,
conditions, stipulations, covenants, agreements, trusts, uses and purposes as
hereinafter expressed, and the Issuer does hereby agree and covenant with the
Trustee, for the benefit of the respective Owners from time to time of the Bonds
and the Credit Enhancer, as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 101. Definitions of Words and Terms. In addition to words and
terms elsewhere defined herein and therein, the following words and terms as
used in this Indenture and in the Agreement shall have the following meanings,
unless some other meaning is plainly intended:
"Accounts" means the accounts created pursuant to Section 501 hereof.
"Act" means Tide 41, Chapter 43, Code of Laws of South Carolina 1976, as
amended.
"Act of Bankruptcy" means, as to the Borrower, any of the following: (a)
the commencement by the Borrower of a voluntary case under the federal
bankruptcy laws, as now in effect or hereafter amended, or any other applicable
federal or state bankruptcy, insolvency or similar laws; (b) the filing of a
petition with a court having jurisdiction over the Borrower to commence an
involuntary case against the Borrower under the federal bankruptcy laws, as now
in effect or hereafter amended, or any other applicable federal or state
bankruptcy, insolvency or similar laws, and such petition is not discharged
within 60 days of the filing thereof; (c) the Borrower shall admit in writing
its inability to pay its debts generally as they become due; (d) a receiver,
trustee or liquidator of the Borrower shall be appointed in any proceeding
brought against the Borrower; (e) assignment by the Borrower of all or
substantially all of its assets for the benefit of its creditors; or (f) the
entry by the Borrower into an agreement of composition with its creditors, and,
as to the Issuer, the commencement by the Issuer of a voluntary case under the
federal bankruptcy laws, as now in effect or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or similar laws.
"Affiliated Party" or "Affiliate" means any Related Person as to a
particular Person, and any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified
Person. "Control", when used with respect to a particular Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of such Person whether through the
ownership of voting stock, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Agreement" or "Loan Agreement" means the Loan Agreement, including the
Exhibits attached thereto, dated as of the date of this Indenture, between the
Issuer and the Borrower, with
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respect to the Bonds, as such Agreement may be from time to time amended,
restated or supplemented in accordance with the provisions of Section 10.6 of
the Agreement and Article XI hereof.
"Alternate Credit Facility" means any alternate credit facility designated
and qualified as such and provided pursuant to Section 706 hereof no later than
the twenty-fifth (25th) day prior to the then applicable Termination Date.
"Alternate Credit Facility Date" means a Business Day on or prior to the
Termination Date on which the Borrower has complied with all requirements of
this Indenture, including Section 706 regarding the substitution of an Alternate
Credit Facility for the Credit Facility then in effect.
"Annual Mode" means an Interest Mode during which the interest rate on the
Bonds is determined at twelve month intervals, as provided in Section 203(e)
hereof.
"Authorized Borrower Representative" means either the Chief Financial
Officer or the Vice President of the Borrower, or such other official of the
Borrower at the time designated to act on behalf of the Borrower as evidenced by
written certificate furnished to the Issuer, the Credit Enhancer and the Trustee
containing the specimen signature of such person and signed on behalf of the
Borrower by its Chief Executive Office or its Chief Financial Officer. Such
certificate may designate an alternate or alternates, each of whom shall be
entitled to perform all duties of and exercise all powers of an Authorized
Borrower Representative.
"Authorized Denominations" means (i) in the case of Bonds in a Weekly Mode
or Monthly Mode, $100,000 and any integral multiple of $5,000 in excess thereof;
(ii) in the case of Bonds in a Semiannual Mode, Annual Mode or Multiyear Mode,
$5,000 or any integral multiple thereof, provided that if the Credit Facility is
not exempt from registration under the Securities Act of 1933, as amended, and
has not been registered thereunder then the Authorized Denomination shall be
$100,000 and any integral multiple of $5,000 in excess thereof; or (iii) in the
case of a Bond which is a Pledged Bond, $100,000 or any integral multiple of
$5,000 in excess thereof.
"Authorized Issuer Representative" means the Chairman of the Board of
Directors or the Executive Director of the Issuer, or such other person at the
time designated to act on behalf of the Issuer as evidenced by written
certificate furnished to the Borrower, the Credit Enhancer and the Trustee
containing the specimen signature of such person and signed on behalf of the
Issuer by its Executive Director. Such certificate may designate an alternate or
alternates, each of whom shall be entitled to perform all duties of and exercise
all powers of an Authorized Issuer Representative.
"Available Moneys" means (i) proceeds from the initial sale of the Bonds
by the Issuer that have not been commingled with other funds that do not
constitute Available Moneys and proceeds from the investment thereof; (ii)
moneys that have been paid to the Trustee pursuant to payments on the Credit
Facility and that have been held in the Credit Facility Account and not
commingled with other funds that do not constitute Available Moneys, and
proceeds from the investment thereof; and (iii) moneys with respect to which the
Trustee has received an unqualified opinion of nationally recognized counsel
expert on bankruptcy matters to the effect that payment of such proceeds to the
Owners would not constitute a voidable preference under Section 547 of the
United States Bankruptcy Code which could be recovered under Section 550(a) of
the Bankruptcy Code
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in the event of the filing of a petition thereunder by or against the Issuer,
the Borrower or any Affiliated Party of the Borrower.
"Available Moneys Account" means the account by that name in the Revenue
Fund created pursuant to Section 501 hereof.
"Bond" or "Bonds" means any bond or bonds authenticated and delivered
under and pursuant to this Indenture.
"Bond Counsel" means any attorney or firm of attorneys designated by the
Issuer and reasonably acceptable to the Borrower, the Trustee and the Credit
Enhancer having a national reputation for skill in connection with the
authorization and issuance of municipal obligations in the State and under
Sections 103 and 141-150 of the Code.
"Bond Issuance Date" means the date of initial issuance and delivery of
the Bonds.
"Bond Pledge Agreement" means the Pledge and Security Agreement dated as
of September 1, 1994, by and among the Borrower, the Trustee and the Credit
Enhancer, as amended, restated and supplemented from time to time.
"Bond Register" means the registration books of the Issuer kept by the
Trustee to evidence the registration and transfer of Bonds.
"Bond Registrar" means the Trustee when acting as such.
"Bondowner" or "Owner" or "Registered Owner" means the person in whose
name a Bond is registered on the Bond Register.
"Borrower" means Roller Bearing Company of America, Inc., a Delaware
corporation, and any successor or assign thereto permitted under the Agreement.
"Borrower Bonds" means (i) Bonds owned or held by the Borrower or any
Affiliate of the Borrower, or by the Trustee or the Tender Agent, or the agent
of either of them, for the account of the Borrower or any Affiliate of the
Borrower, including, but not limited to, Pledged Bonds, or (ii) Bonds which the
Borrower has notified the Trustee, or which the Trustee knows, were purchased by
another Person for the account of the Borrower or any Affiliate of the Borrower,
including, but not limited to, Pledged Bonds.
"Business Day" means a day which is not (a) a Saturday, Sunday or any
other day on which banking institutions in New York, New York, or the city or
cities in which the principal corporate trust office of the Trustee, and the
principal office of the Tender Agent, the Remarketing Agent or the Credit
Enhancer is located, are required or authorized to close or (b) a day on which
the New York Stock Exchange is closed.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to the Code and Sections of the Code include relevant
applicable regulations, temporary
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regulations and proposed regulations thereunder, and any successor provisions to
those Sections, regulations, temporary regulations or proposed regulations.
"Collateral Documents" means the Letter of Credit Agreement, the Bond
Pledge Agreement and any other document securing the obligations of the Borrower
to the Credit Enhancer in connection with the Letter of Credit Agreement, in
each case as the same may be amended, restated or supplemented from time to
time.
"Costs of Issuance Fund" means the fund by that name created in Section
501 hereof.
"Credit Enhancer" means initially Heller Financial, Inc., a Delaware
corporation, and any provider or providers of an Alternate Credit Facility.
"Credit Documents" means the documents described by said term in the
Letter of Credit Agreement, in each case as the same may be amended, restated or
supplemented from time to time.
"Credit Facility" means the letter of credit initially issued by Heller
Financial, Inc. and any Alternate Credit Facility issued by the Credit Enhancer
in addition to or in substitution therefor, as the same may be amended,
restated, supplemented, extended or renewed from time to time in accordance with
the Agreement and this Indenture.
"Credit Facility Account" means the account by that name created in
Section 501(c) of this Indenture.
"Debt Service Fund" means the fund by that name created in Section 501
hereof.
"Default" means any event or condition which constitutes, or with the
giving of any requisite notice or upon the passage of any requisite time period
or upon the occurrence of both, would constitute, an Event of Default under the
Agreement or this Indenture.
"Determination of Taxability" means (i) a determination by the
Commissioner or any District Director of the Internal Revenue Service, (ii) a
private ruling or Technical Advice Memorandum issued by the National Office of
the Internal Revenue Service in which the Borrower was afforded the opportunity
to participate, (iii) a determination by any court of competent jurisdiction, or
(iv) receipt by the Trustee, at the request of the Borrower, the Credit Enhancer
or any Bondowner, of an Opinion of Bond Counsel that the interest on the Bonds
is includable in gross income for federal income tax purposes of the Owners
thereof or any former Owner thereof, other than an Owner who is a "substantial
user" (as such term is defined in Section 147(a) of the Code) of the Project or
a Related Person; provided, however, that no such Determination of Taxability
under clause (i) or (iii) shall be deemed to have occurred if the Borrower has
been afforded the opportunity to contest such determination, has elected to
contest such determination in good faith and is proceeding with all applicable
dispatch to prosecute such contest until the earliest of (a) a final
determination from which no appeal may be taken with respect to such
determination, (b) abandonment of such appeal by the Borrower, or (c) one year
from the date of initial determination.
"Event of Default" means any event or occurrence as defined in Section 801
hereof.
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"Financial Institution" means any qualified institutional buyer, as that
term is defined from time to time in 17 C.F.R. ss.230.144A(a)(i) ("Rule 144A").
"Funds" means the funds created pursuant to Article V hereof.
"General Fund" means the fund by that name created in Section 501 hereof.
"Government Securities" means direct obligations of, or obligations the
payment of the principal of and interest on which are unconditionally guaranteed
by, the United States of America.
"Immediate Notice" means notice by telephone, telegram, telex, telecopier
or other telecommunication device to such phone numbers or addresses as are
specified in Section 1302 hereof or such other phone number or address as the
addressee shall have directed in writing, promptly followed by written notice by
first-class mail postage prepaid to such addresses.
"Indenture" means this Trust Indenture as originally executed by the
Issuer and the Trustee, as from time to time amended and supplemented by
Supplemental Indentures in accordance with the provisions of Article X of this
Indenture.
"Interest Mode" means a period of time relating to the frequency with
which the interest rate on the Bonds is determined pursuant to Section 203
hereof, which Interest Mode may be a Weekly Mode, a Monthly Mode, a Semiannual
Mode, an Annual Mode or a Multiyear Mode. Pledged Bonds bear interest at the
Pledged Bond Rate and are not subject to such Interest Mode descriptions.
"Interest Mode Adjustment Date" means a date on which the Interest Mode of
the Bonds is changed from one Interest Mode to a different Interest Mode, and
such date shall be an Interest Payment Date.
"Interest Mode Adjustment Notice" means the notice of a new Interest Mode
with respect to any Bonds in accordance with Section 204 hereof in substantially
the form of Exhibit F attached hereto.
"Interest Payment Date" means the date on which an interest installment is
required to be paid on the Bonds to the Owners thereof, (i) with respect to all
Bonds other than Pledged Bonds, (1) as to the first Interest Period, October 3,
1994; (2) as to any Weekly Mode or Monthly Mode, the first Business Day of each
month; (3) as to any Semiannual Mode, Annual Mode or Multiyear Mode, each March
1 and September 1, commencing with the first such March 1 or September 1
following the Interest Mode Adjustment Date, or the next succeeding Business Day
thereafter if any such March 1 or September 1 is not a Business Day; and (4) an
Interest Mode Adjustment Date; and (ii) with respect to Pledged Bonds, the first
Business Day of each calendar month and the date of sale of Pledged Bonds.
"Interest Period" means, with respect to the Bonds in any Interest Mode,
the period from and including each Interest Payment Date for such Interest Mode
to and including the day immediately preceding the following Interest Payment
Date for such Interest Mode, except that the first Interest Period shall be the
period from and including the date of original delivery of the Bonds to and
including the day immediately preceding the first Interest Payment Date for the
Bonds.
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"Investment Securities" means any of the following securities purchased in
accordance with Section 602 hereof, if and to the extent the same are at the
time legal for investment of the funds being invested:
(a) Government Securities;
(b) deposits which are fully insured by the Federal Deposit Insurance
Corporation ("FDIC") in one or more of the following institutions: banks with a
rating of A-1 or higher (including without limitation, the Trustee or any bank
affiliated with the Trustee) organized under the laws of the United States of
America or any state thereof;
(c) federal funds, unsecured certificates of deposit, time deposits and
bankers acceptances (having maturities of not more than 365 days) of any bank,
the short-term obligations of which are in the highest short-term rating
category of the Rating Agency (if the Bonds are rated by Standard & Poor's, such
category is A-I +);
(d) any shares in money market mutual funds provided such money market
funds are rated AAAm or AAAmG by the Rating Agency; and
(e) repurchase agreements with (A) any institution described in clause (b)
above or (B) any other entity that is under the jurisdiction of the Bankruptcy
Code, provided that, with respect to a repurchase agreement with such other
entity, the terms of such repurchase agreement shall be less than one year,
shall be with respect to Government Securities which meet the Investment
Securities Collateral Requirement and shall mature at least 30 days before the
time or times that such investments shall be needed for the purposes for which
they were deposited.
"Investment Securities Collateral Requirement" means Government Securities
which meet the requirements set forth in Exhibit B attached hereto and
incorporated herein by this reference.
"Investor's Representation Letter" means the Investor's Representation
Letter in substantially the form attached to this Indenture as Exhibit H.
"Issuer" means the South Carolina Jobs-Economic Development Authority, a
body corporate and politic and an agency of the State, or any body, agency or
instrumentality of the State succeeding to or charged with the powers, duties
and functions of the Issuer.
"Letter of Credit Agreement" means the Letter of Credit Agreement dated as
of the date of this Indenture, between the Borrower and the initial Credit
Enhancer, and any similar agreement between the Borrower and the Credit Enhancer
with respect to the issuance of an Alternate Credit Facility.
"Loan Payment Date" means the day established for a Loan Payment under the
Agreement.
"Loan Term" means the period from the date of initial delivery and
authentication of the Bonds until such time as the Bonds are no longer
Outstanding and all other amounts payable by the Borrower under the Agreement
and the Letter of Credit Agreement shall have been paid.
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"Mandatory Purchase Date" means each date designated by the Credit
Enhancer for purchase of the Bonds in accordance with the provisions of Section
302(d) of this Indenture.
"Maximum Rate" means the lesser of (i) 15% per annum or (ii) the rate
utilized in the Credit Facility for purposes of computing the interest component
thereof.
"Monthly Mode" means an Interest Mode during which the interest rate on
the Bonds is determined in monthly intervals as set forth in Section 203(d)
hereof.
"Moody's" means Moody's Investors Service, a corporation organized and
existing under the laws of the State of Delaware, and its successors and
assigns, and, if such corporation shall be dissolved or liquidated or shall no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized securities rating agency
designated by the Issuer, with the prior written approval of the Credit Enhancer
and the Borrower, by notice to the Trustee.
"Multiyear Mode" means an Interest Mode during which the interest rate on
the Bonds is determined at intervals of integral (greater than one) multiples of
twelve months, as provided in Section 203(e) hereof.
"New York Time" means the time on any given day in the City of New York,
New York, whether such time be Eastern Standard Time or Eastern Daylight Savings
Time.
"1933 Act" means the Securities Act of 1933, as amended.
"Nonpurpose Investments" means any investment property (as defined in
Section 148(b) of the Code) which is acquired with the gross proceeds of the
Bonds and which is not acquired to carry out the governmental purpose of the
Bonds.
"Notice of Election to Tender/Retain Bonds" means the Notice of Election
to Tender/Retain Bonds in substantially the form attached hereto as Exhibit D
delivered by a Bondowner to the Tender Agent (i) pursuant to Section 301 hereof
which contains a demand for the purchase of Bonds on the Tender Date, or (ii)
following receipt of a notice of a mandatory tender of Bonds as specified in
Section 302 hereof which contains an election to retain Bonds. "Notice of
Election to Tender Bonds" shall refer to those provisions of the Notice of
Election to Tender/Retain Bonds which relate to the election to tender Bonds as
hereinafter provided. "Notice of Election to Retain Bonds" shall refer to those
provisions of the Notice of Election to Tender/Retain Bonds which relate to the
election to retain Bonds.
"Opinion of Bond Counsel" means a written opinion of Bond Counsel
addressed to the Trustee, for the benefit of the Owners of the Bonds, and the
Credit Enhancer.
"Opinion of Counsel" means a written opinion of an attorney or firm of
attorneys addressed to the Trustee, for the benefit of the Owners of the Bonds
and the Credit Enhancer, who may (except as otherwise expressly provided in this
Indenture) be counsel to the Issuer, the Borrower, the Owners of the Bonds, the
Credit Enhancer or the Trustee, and who is acceptable to the Trustee and the
Credit Enhancer.
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"Outstanding when used with reference to Bonds, means, as of a particular
date, all Bonds theretofore authenticated and delivered under this Indenture
except:
(a) Bonds theretofore cancelled by the Trustee or delivered to the Trustee
for cancellation pursuant to Section 209 hereof;
(b) Bonds which are deemed to have been paid in accordance with Article
XII hereof;
(c) Bonds in exchange for or in lieu of which other Bonds have been
authenticated and delivered pursuant to Article II of this Indenture;
(d) Undelivered Bonds; and
(e) For purposes of any consent or other action to be taken by the Owner
of a specified percentage of Bonds under this Indenture or the Agreement, Bonds
owned or held for the account of the Issuer or Borrower Bonds. Notwithstanding
the foregoing, Bonds so owned which have been pledged in good faith shall not be
disregarded as aforesaid if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Bonds and that the
pledgee is not the Issuer, the Borrower or any Affiliated Party.
"Paying Agent" means the Tender Agent as to all Tendered Bonds, the
Trustee as to all other Bonds, and any other bank or trust institution organized
under the laws of any state of the United States of America or any national
banking association designated by this Indenture or any Supplemental Indenture
as paying agent for the Bonds at which the principal of, and redemption premium,
if any, and interest on, such Bonds shall be payable.
"Person" means an individual, a corporation, a partnership, an
association, a joint stock company, a joint venture, a trust, an unincorporated
organization, a limited liability company, or a government or any agency or
political subdivision thereof.
"Placement Date" means any date on which a Pledged Bond is purchased from
the Borrower by a Person designated by the Remarketing Agent pursuant to the
Remarketing Agreement or is sold by the Borrower.
"Plant" means the facility, including machinery and equipment, for the
manufacture of roller bearings in Darlington County, South Carolina, operated by
the Borrower.
"Pledged Bonds" means any Bonds purchased by the Borrower with payments
made on the Credit Facility, which Bonds are registered in the name of the
Borrower and held by the Trustee on behalf of the Credit Enhancer pursuant to
the terms of the Bond Pledge Agreement, until such time as such Bonds are sold
by the Borrower or by the Remarketing Agent.
"Pledged Bond Rate" means the rate of interest per annum payable with
respect to each Pledged Bond, which shall be equal to the Interest Rate set
forth in Section 2.9 of the Letter of Credit Agreement.
"Preliminary Rate" means Preliminary Rate as defined in Section 203(e)
hereof.
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"Principal Office" means, with respect to the Trustee and the Tender
Agent, its principal corporate trust office, initially 8820 Ladue Road, St.
Louis, Missouri 63124, Attention: Corporate Trust Division.
"Principal Payment Date" means the maturity date or redemption date
(including as a result of acceleration) of any Bond.
"Project" means the buildings, fixtures, machinery and equipment described
in Exhibit A to the Agreement, and all additions, modifications, improvements,
replacements and substitutions made to the Project pursuant to the Agreement, as
they may at any time exist.
"Project Fund" means the fund by that name created by Section 501 hereof.
"Project Purposes" means the costs of acquiring, constructing, installing
and equipping the Project.
"Purchase Fund" means the fund by that name created by Section 501 hereof.
"Rate Adjustment Date" means the date as of which the interest rate
determined for an Interest Mode shall be effective, which (i) during a Weekly
Mode shall be Thursday of each week (whether or not a Business Day); (ii) during
a Monthly Mode shall be the first calendar day of each month; (iii) during a
Semiannual Mode shall be the first calendar day of such Semiannual Mode which
shall be March 1 or September 1 and the first day following each six-month
period thereafter; and, (iv) during an Annual Mode or a Multiyear Mode shall be
the first calendar day of such Annual Mode or Multiyear Mode, which shall be
September 1, and thereafter the first calendar day following the completion of
the then current Annual Mode or Multiyear Mode. The initial Rate Adjustment Date
is September 15, 1994.
"Rate Adjustment Notice" means the Rate Adjustment Notice in substantially
the form of Exhibit E hereto to be mailed by the Trustee in accordance with
Section 203(e) hereof.
"Rate Determination Date" means no later than 4:00 P.M., New York Time, on
the Business Day immediately preceding a Rate Adjustment Date for a Weekly or a
Monthly Mode, and on the third (3rd) Business Day immediately preceding a Rate
Adjustment Date for a Semiannual Mode, Annual Mode or Multiyear Mode.
"Rate Period" means the period from a Rate Adjustment Date to, but not
including, the next Rate Adjustment Date.
"Rating Agency" means (collectively, as required) Moody's, if the Bonds
are then rated by Moody's, Standard & Poor's, if the Bonds are then rated by
Standard & Poor's, and any other national rating service which has outstanding
credit rating on the Bonds.
"Rebate Fund" means the fund by that name created in Section 501 hereof.
"Record Date" means, with respect to Bonds in a Semiannual Mode, an Annual
Mode or a Multiyear Mode, the fifteenth calendar day, whether or not a Business
Day, of the month preceding
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such Interest Payment Date, and, with respect to Bonds in a Weekly Mode or
Monthly Mode, the fifth calendar day, whether or not a Business Day, immediately
preceding such Interest Payment Date.
"Related Documents" means the Collateral Documents and the Credit
Documents.
"Related Person" means a "related person" within the meaning of Section
147 (a) of the Code.
"Remarketing Agent" means the remarketing agent at the time serving as
such under the Remarketing Agreement and designated as the Remarketing Agent for
purposes of this Indenture. The initial Remarketing Agent is Stem Brothers &
Co., St. Louis, Missouri.
"Remarketing Agreement" means the Remarketing Agreement dated as of
September 1,1994, between the Borrower and the Remarketing Agent or, if such
Remarketing Agreement shall be terminated, such other agreement, approved by the
Credit Enhancer, which may from time to time be entered into with any
Remarketing Agent with respect to the remarketing or placement of the Bonds.
"Remarketing Proceeds" means proceeds from the resale by the Remarketing
Agent of Bonds delivered for purchase pursuant to Section 301 or 302 hereof that
have not been commingled with other funds which do not constitute Remarketing
Proceeds, and proceeds from the investment thereof; provided that Remarketing
Proceeds cannot include any moneys provided by the Borrower, the Issuer, any
guarantor of the Bonds (excluding the issuer of the Credit Facility, but only
with respect to moneys provided pursuant to the Credit Facility), any Affiliated
Party of the foregoing, or any Person which is an "insider" of the Borrower or
any such guarantor within the meaning of Title 11 of the United States Code, as
amended.
"Resolution" means the resolution of the Board of Directors of the Issuer
authorizing the execution and delivery of the Agreement, this Indenture and the
issuance of the Bonds.
"Revenue Fund" means the fund by that name created in Section 501 hereof.
"Revenues" means the amounts pledged hereunder to the payment of principal
of, and premium, if any, and interest on the Bonds, consisting of the following:
(i) all income, revenues, proceeds and other amounts, to which the Issuer is
entitled, derived from the Borrower (except the Unassigned Issuer's Rights as
defined in the Agreement), including all scheduled payments under the Agreement,
payments received on the Credit Facility and all receipts of the Trustee
credited under the provisions of this Indenture against said amounts payable,
and (ii) moneys held in the Funds and Accounts, together with investment
earnings thereon, other than moneys in the Rebate Fund and rebatable arbitrage
not deposited therein and funds held for the payment of specific Bonds pursuant
to Section 510 hereof or amounts held in the Purchase Fund.
"Series 1994B Bonds" means the Issuer's $3,000,000 original principal
amount Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing
Company of America, Inc. Project) Series 1994B, issued pursuant to the Series
1994B Indenture.
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"Series 1994B Indenture" means the Indenture of Trust dated as of
September 1, 1994 between the Issuer and the Trustee, delivered with respect to
the Series 1994B Bonds.
"Semiannual Mode" means an Interest Mode during which the interest rate on
the Bonds is determined at six-month intervals as set forth in Section 203(e)
hereof.
"Standard & Poor's" means Standard & Poor's Ratings Group, A Division of
McGraw-Hill, Inc., a corporation organized and existing under the laws of the
State of New York, and its successors and assigns, and, if such corporation
shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, Standard & Poor's shall be deemed to refer to any
other nationally recognized securities rating agency designated by the Issuer,
with the prior written approval of the Credit Enhancer, by notice to the Trustee
and the Borrower.
"State" means the State of South Carolina.
"Supplemental Indenture" means any indenture supplemental or amendatory to
this Indenture entered into by the Issuer and the Trustee pursuant to Article X
of this Indenture.
"Tax Agreement" means the Tax Agreement dated of even date herewith
between the Borrower and the Issuer, delivered with respect to the Bonds, as the
same may be amended, restated or supplemented from time to time.
"Tender Agent" means initially the Trustee, and any successor tender agent
appointed pursuant to Section 914 hereof. The Tender Agent shall act as Paying
Agent as to Tendered Bonds.
"Tender Date" means (a) each date designated by a Bondowner for purchase
of any Bonds in accordance with the provisions of Section 301 hereof, and (b)
each date on which Bonds are required to be tendered in accordance with the
provisions of Section 302 hereof, including any Mandatory Purchase Date, whether
or not such Bonds are actually tendered.
"Tender Price" means 100% of the principal amount of any Bond tendered
pursuant to the provisions of Section 301 or Section 302 of this Indenture plus
interest accrued and unpaid thereon to, but not including, the Tender Date.
"Tendered Bonds" means (a) any Bonds tendered by a Bondowner for purchase
pursuant to Section 301 hereof, and (b) any Bonds required to be tendered for
purchase pursuant to Section 302 hereof, unless a proper waiver has been made by
the Owner of such Bonds, in each case whether or not such Bonds are actually
tendered.
"Termination Date" means (i) if the Credit Facility is not a letter of
credit, the maturity or expiration date of the Credit Facility or, if such day
is not a Business Day, the next preceding Business Day or (ii) if the Credit
Facility is a letter of credit, the last Interest Payment Date which is at least
five (5) days preceding the date on which the Credit Facility is to expire
pursuant to its terms, in each case including any extension of such maturity or
expiration date.
"Trust Estate" means the Trust Estate described in the granting clauses of
this Indenture.
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"Trustee" means Mark Twain Bank, a banking corporation duly organized and
existing under the laws of the State of Missouri, and its successor or
successors and any other association or corporation which at any time may be
substituted in its place pursuant to and at the time serving as trustee under
this Indenture.
"Unavailable Moneys Account" means the account by that name in the Revenue
Fund created pursuant to Section 501 of this Indenture.
"Undelivered Bonds" means Bonds which are deemed to have been tendered to
the Trustee or Tender Agent, as applicable, for purchase pursuant to Section 301
or 302 hereof but which have not been surrendered to the Trustee or Tender
Agent, as applicable.
"Weekly Mode" means an Interest Mode during which the interest rate on the
Bonds is determined in weekly intervals as set forth in Section 203(c) hereof.
"Written Request" with reference to the Issuer means a request in writing
signed by an Authorized Issuer Representative and with reference to the Borrower
means a request in writing signed by an Authorized Borrower Representative.
Section 102. Rules of Interpretation.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(a) Words of the masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders.
(b) Words importing the singular number shall include the plural and vice
versa and words importing person shall include firm's, associations and
corporations, including public bodies, as well as natural persons.
(c) The table of contents hereto and the headings and captions herein are
not a part of this document.
(d) Terms used in an accounting context and not otherwise defined shall
have the meaning ascribed to them by generally accepted principles of
accounting.
(e) Notwithstanding anything herein, in the Series 1994B Indenture or in
the Borrower Documents to the contrary, each of the "Borrower", the Credit
Enhancer", the "Paying Agent(s)", the "Remarketing Agent", the "Tender Agent"
and the "Trustee" (including, for such purpose, each co-trustee) shall, as
between the documents relating to the Bonds and the Series 1994B Bonds, be one
and the same Person.
[End of Article I]
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ARTICLE II
THE BONDS
Section 201. Authorization. Issuance and Terms of Bonds.
(a) Authorized Amount of Bonds. No Bonds may be issued under the
provisions of this Indenture except in accordance with this Article. The total
aggregate principal amount of the Bonds that may be issued hereunder and at any
time Outstanding is hereby expressly limited to $7,700,000.
(b) Title of Bonds. The Bonds authorized to be issued under this Indenture
shall be designated "Variable Rate Demand Industrial development Revenue Bonds
(Roller Bearing Company of America, Inc. Project) Series 1994A".
(c) Form of Bonds. The Bonds shall be substantially in the form set forth
in Exhibit A attached hereto, with such appropriate variations, omissions and
insertions as are permitted or required by this Indenture, and may have endorsed
thereon such legends or text as may be necessary or appropriate to conform to
any applicable rules and regulations of any governmental authority or any usage
or requirement of law with respect thereto.
(d) Denominations. The Bonds shall be issuable as fully registered Bonds
without coupons in Authorized Denominations only.
(e) Numbering. Unless the Issuer shall otherwise direct, the Bonds shall
be numbered from R-1 upward.
(f) Dating. The Bonds shall be dated as of the Bond Issuance Date, be
issuable in Authorized Denominations, and bear interest from the most recent
Interest Payment Date to which interest has been paid or for which due provision
has been made or if no Interest Payment Date has occurred therefor, the dated
date thereof.
(g) Maturity. The Bonds shall mature on September 1, 2017, subject to
optional and mandatory redemption as provided in Article IV hereof.
(h) Tender and Purchase of Bonds. The Bonds are subject to optional and
mandatory tender for purchase as provided in Article III hereof.
(i) Method and Place of Payment. Except as provided herein, the principal
of, and redemption premium, if any, and interest on the Bonds shall be payable
in any coin or currency of the United States of America which, at the respective
dates of payment thereof, is legal tender for the payment of public and private
debts, and such principal and premium, if any, shall be payable at the Principal
Office of the Trustee or at the office of any alternate Paying Agent, and, with
respect to the Tender Price, at the Principal Office of the Tender Agent, upon
presentation and surrender of such Bonds. Payment of interest on any Bond shall
be made by check or draft of the Trustee mailed to the person in whose name such
Bond is registered on the Bond Register as of the close of business of the
Trustee on the Record Date for such Interest Payment Date, except that
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interest not duly paid or provided for when due shall be payable to the person
in whose name such Bond is registered at the close of business on the Business
Day immediately preceding the date of payment of such defaulted interest. In the
case of an interest payment to any Owner of $1,000,000 or more in aggregate
principal amount of Bonds as of the commencement of business of the Trustee on
the Record Date for a particular Interest Payment Date or in the case of the
purchase from an Owner of $1,000,000 or more in aggregate principal amount of
Bonds on the Tender Date, payment of interest or the Tender Price, as
applicable, shall be made by wire transfer to such Owner upon written notice to
the Trustee from such Owner containing the wire transfer address (which shall be
in the continental United States) to which such Owner wishes to have such wire
directed and, with regard to interest payments, such written notice is given by
such Owner to the Trustee not less than fifteen (15) days prior to such Record
Date and regarding payment of the Tender Price, which written notice accompanies
such Owner's Notice of Election to Tender Bonds.
Section 202. Nature of Obligations.
(a) The Bonds and the interest thereon shall be limited obligations of the
Issuer payable solely from Bond proceeds, the Revenues and other moneys pledged
thereto and held by the Trustee as provided herein, and are secured by a
transfer, pledge and assignment of and a grant of a security interest in the
Trust Estate to the Trustee and in favor of the Owners of the Bonds, as provided
in this Indenture.
(b) The Bonds and the interest thereon do not constitute a debt or general
obligation of the Issuer, the State, or any political subdivision thereof, and
do not constitute an indebtedness or a charge against the general credit of the
State or the Issuer within the meaning of any constitutional or statutory
limitation or restriction. The Bonds are not payable in any manner by taxation.
(c) No recourse shall be had for the payment of the principal of, or
premium, if any, or interest on, any of the Bonds or for any claim based thereon
or upon any obligation, provision, covenant or agreement contained in this
Indenture contained, against any past, present or future director, trustee,
officer, official, employee or agent of the Issuer, or any director, trustee,
officer, official, employee or agent of any successor to the Issuer, as such,
either directly or through the Issuer or any successor to the Issuer, under any
rule of law or equity, statute or constitution or by the enforcement of any
assessment or penalty or otherwise, and all such liability of any such director,
trustee, officer, official, employee or agent as such is hereby expressly waived
and released as a condition of and in consideration for the execution of this
Indenture and the issuance of any of the Bonds. Neither the officers of the
Issuer nor any person executing the Bonds shall be personally liable on the
Bonds by reason of the issuance thereof.
Section 203. Interest Rates and Interest Payment Provisions.
(a) Calculation of Interest. Subject to the provisions of Section 802 (a)
hereof, the Bonds shall bear interest from and including the date thereof until
payment of the principal or redemption price thereof shall have been made or
provided for in accordance with the provisions hereof, whether at maturity, upon
redemption or otherwise. Anything herein to the contrary notwithstanding, in no
event shall the interest rate borne by the Bonds, other than Pledged Bonds, at
any time exceed the Maximum Rate. Subject to such limitation, the interest rates
on the Bonds
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shall be determined as provided in this Section. Interest accrued on the Bonds
during each Interest Period shall be paid on the next succeeding Interest
Payment Date and, while the Bonds are in a Weekly Mode or a Monthly Mode, shall
be computed on the basis of a year of 365 or 366 days, as appropriate, for the
actual number of days elapsed and, while the Bonds are in a Semiannual Mode, an
Annual Mode or a Multiyear Mode, shall be computed on the basis of a year of 360
days and twelve 30-day months. The Trustee shall calculate the amount of
interest to be paid on each Interest Payment Date, and the Remarketing Agent
shall confirm such interest amount calculation, and the Trustee shall notify the
Borrower and the Credit Enhancer of such amount by 10:00 a.m., New York Time, on
the Business Day next preceding each Interest Payment Date.
(b) Standard for Determination of Interest Rate. The Remarketing Agent
shall determine the interest rate for the Rate Period commencing with each Rate
Adjustment Date to be the lowest rate which, in the best judgment of the
Remarketing Agent, on the Rate Determination Date, would result in the market
value of such Bonds on the Rate Adjustment Date being equal to 100% of their
principal amount. In determining such interest rate, the Remarketing Agent shall
have due regard for general financial conditions and such other conditions as,
in the judgment of the Remarketing Agent, have a bearing on the interest rate on
the Bonds, including then prevailing market conditions, the yields at which
comparable securities are then being sold and the tender provisions applicable
thereto during the forthcoming Rate Period. Each determination of the interest
rate for the Bonds, as provided herein, shall be conclusive and binding upon the
Bondowners, the Issuer, the Borrower, the Tender Agent, the Remarketing Agent,
the Credit Enhancer and the Trustee. Upon request, the Remarketing Agent shall
give the Issuer, the Trustee, the Credit Enhancer, the Borrower, the Tender
Agent or any Bondowner Immediate Notice of the interest rate on the Bonds at any
time.
(c) Weekly Mode. The interest rate for Bonds in a Weekly Mode shall be
determined in the following manner. On each Rate Determination Date, the
Remarketing Agent shall determine the interest rate which such Bonds shall bear
during the Rate Period following such Rate Determination Date. The interest rate
so determined shall be effective on the Rate Adjustment Date. Promptly after
each Rate Determination Date, the Remarketing Agent shall give written notice of
the interest rate so set to the Trustee, the Credit Enhancer and the Borrower.
On each Interest Payment Date the Trustee shall mail to each Bondowner a written
statement showing the interest rates for such Bonds during the preceding
Interest Period.
(d) Monthly Mode. The interest rate for any Bonds in a Monthly Mode shall
be determined in the following manner. On each Rate Determination Date, the
Remarketing Agent shall determine the interest rate which such Bonds shall bear
during the Rate Period following such Rate Determination Date. The interest rate
so determined shall be effective on the Rate Adjustment Date. Promptly after
each Rate Determination Date, the Remarketing Agent shall give written notice of
the interest rate so set to the Borrower, the Credit Enhancer and the Trustee.
On each Interest Payment Date the Trustee shall mail to each Bondowner a written
statement showing the interest rates for such Bonds during the preceding
Interest Period.
(e) Semiannual Mode. Annual Mode or Multiyear Mode. The interest rate for
Bonds in a Semiannual Mode, an Annual Mode or a Multiyear Mode shall be
determined in the following manner. Not less than 30 days nor more than 35 days
before each Rate Adjustment Date, the Remarketing Agent shall determine the
interest rate (the "Preliminary Rate") which the Bonds would
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<PAGE>
bear if such day were a Rate Determination Date. The Remarketing Agent shall
give Immediate Notice of the Preliminary Rate to the Borrower, the Credit
Enhancer and the Trustee. The Trustee shall thereupon mail, not less than 25
days prior to the Rate Adjustment Date, to each Bondowner a Rate Adjustment
Notice in substantially the form attached hereto as Exhibit E. On the Rate
Determination Date the Remarketing Agent shall determine the interest rate which
each of such Bonds shall bear for each such Rate Period, which rate may be less
than, equal to or greater than the Preliminary Rate. By Immediate Notice on such
Rate Determination Date the Remarketing Agent shall give written notice of the
interest rate so set to the Borrower, the Credit Enhancer, the Tender Agent and
the Trustee, and the Trustee shall mail to all Bondowners written notice of the
interest rate so determined.
(f) Alternative Rate Calculation. If for any reason the interest rate for
the Bonds is not or cannot be established as provided in the preceding
paragraphs, or is held invalid or unenforceable by a court of law, all Bonds
shall immediately convert to a Weekly Mode, anything in this Indenture to the
contrary notwithstanding, and the interest rate shall be a rate equal to the
lesser of (i) 85% of the 90-day U.S. Treasury Bill rate, determined on the basis
of the average per annum rate at which 90-day U.S. Treasury Bills have been sold
on a bond-equivalent basis at the most recent U.S. Treasury auction preceding
the Rate Determination Date, or (ii) the Maximum Rate.
Pledged Bonds. Notwithstanding the above provisions of this Section 203
the Pledged Bonds shall bear interest at the Pledged Bond Rate during the period
that such Bonds are Pledged Bonds. The Credit Enhancer shall use its best
efforts to notify the Trustee on the Business Day preceding each Interest
Payment Date in respect of such a period of the Pledged Bond Rate in effect from
time to time during such period. The Credit Facility shall not be drawn on to
pay any Pledged Bond.
Section 204. Changes in Interest Modes.
(a) The Bonds shall initially be in a Weekly Mode. The Interest Mode for
the Bonds may be changed from time to time at the option of the Borrower, with
the prior written consent of the Credit Enhancer exercised as provided in this
Section to another Interest Mode selected by the Borrower, on an Interest
Payment Date on which the Bonds are subject to redemption pursuant to Section
401 hereof at a redemption price equal to the principal amount thereof, plus
accrued interest, without premium. The Borrower may exercise such option at any
time by giving written notice not more than 60 nor less than 45 days prior to
the Interest Mode Adjustment Date, to the Issuer, the Trustee, the Tender Agent,
the Remarketing Agent and the Credit Enhancer stating its election to convert
the Interest Mode for the Bonds to another Interest Mode, which notice shall
specify the new Interest Mode and the Interest Mode Adjustment Date. Such
Interest Mode Adjustment Date shall be a Rate Adjustment Date for the Bonds in
such new Interest Mode. Upon the exercise of such option by the Borrower and
upon the Trustee's receipt of the prior written consent of the Credit Enhancer
to the exercise of such option, the Trustee shall mail, not less than thirty
(30) days prior to the Interest Mode Adjustment Date, an Interest Mode
Adjustment Notice to each Owner of Bonds, and, in the event of a conversion to a
Weekly Mode or a Monthly Mode from any other Interest Mode, a Notice of Election
to Tender/Retain Bonds in substantially the form attached hereto as Exhibit D.
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(b) No change in the Interest Mode shall occur unless (i) the Trustee
shall have received, prior to sending the Interest Mode Adjustment Notice, an
Opinion of Bond Counsel stating that the change in the Interest Mode is
authorized and permitted by this Indenture and the Act and will not adversely
affect the exclusion of interest on the Bonds from gross income for federal
income tax purposes and such Opinion of Bond Counsel is confirmed as of the
Interest Mode Adjustment Date, and (ii) the Credit Enhancer shall have given its
prior written consent to the change in the Interest Mode and shall have fully
and timely made any payment due under the Credit Facility made in connection
with the related Interest Mode Adjustment Date pursuant to Section 508 hereof.
Further, no change from a Weekly Mode to any other Interest Mode may occur
unless a corresponding change in Interest Mode with respect to the Series 1994B
Bonds is made on the same date.
Section 205. Execution, Authentication and Delivery of Bonds.
(a) The Bonds shall be executed on behalf of the Issuer by the manual or
facsimile signature of the chairman of the Board of Directors of the Issuer and
attested by the manual or facsimile signature of its Executive Director,
Secretary or Assistant Secretary, and shall have the corporate seal of the
Issuer affixed thereto or imprinted thereon. In case any officer whose signature
or facsimile thereof appears on any Bonds shall cease to be such officer before
the delivery of such Bonds, such signature or facsimile thereof shall
nevertheless be valid and sufficient for all purposes, the same as if such
person had remained in office until delivery. Any Bond may be signed by such
persons who at the actual time of the execution of such Bond shall be the proper
officers to sign such Bond although at the date of such Bond such persons may
not have been such officers.
(b) The Bonds shall have endorsed thereon a Certificate of Authentication
substantially in the form set forth in Exhibit A hereto, which shall be manually
executed by the Trustee. No Bond shall be entitled to any security or benefit
under this Indenture or shall be valid or obligatory for any purpose unless and
until such Certificate of Authentication shall have been duly executed by the
Trustee. Such executed Certificate of Authentication upon any Bond shall be
conclusive evidence that such Bond has been duly authenticated and delivered
under this Indenture. The Certificate of Authentication on any Bond shall be
deemed to have been duly executed if signed by any authorized officer or
employee of the Trustee, but it shall not be necessary that the same officer or
employee sign the Certificate of Authentication on all of the Bonds that may be
issued hereunder at any one time.
(c) Prior to or simultaneously with the authentication and delivery of the
Bonds by the Trustee there shall be filed with the Trustee the following:
(1) A copy of the Resolution, certified by the Executive Director of
the Issuer.
(2) An original executed counterpart of this Indenture, the
Agreement and the Credit Facility.
(3) An Opinion of Bond Counsel, dated the date of initial delivery
of the Bonds, to the effect that the Bonds are valid and binding special
limited obligations of the Issuer and that interest on the Bonds is
excludable from gross income pursuant to the Code and is exempt from
income taxation in the State of South Carolina.
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(4) A request and authorization to the Trustee on behalf of the
Issuer, executed by an Authorized Issuer Representative, to authenticate
the Bonds and deliver said Bonds to the purchasers therein identified upon
payment to the Trustee, for the account of the Issuer, of the purchase
price thereof. The Trustee shall be entitled to rely conclusively upon
such request and authorization as to the names of the purchasers and the
amount of such purchase price.
(5) Evidence satisfactory to the Issuer, the Credit Enhancer and the
Trustee that the Bonds have been purchased by "qualified institutional
buyers" as defined in Rule 144A of the 1933 Act.
(6) Such other certificates, statements, receipts, documents and
Opinions of Counsel as the Trustee shall reasonably require for the
delivery of the Bonds.
(d) When the documents mentioned in paragraph (c) of this Section shall
have been filed with the Trustee, and when the Bonds shall have been executed
and authenticated as required by this Indenture, the Trustee shall deliver the
Bonds to or upon the order of the purchasers thereof, but only upon payment to
the Trustee of the purchase price of the Bonds. The proceeds of the sale of the
Bonds, including premium thereon, if any, shall be immediately paid over to the
Trustee, and the Trustee shall deposit and apply such proceeds as set forth in
Section 502 hereof.
Section 206. Registration, Transfer and Exchange of Bonds.
(a) The Trustee is hereby appointed Bond Registrar and as such shall keep
the Bond Register at its principal corporate trust office. No later than the
second Business Day following each Record Date, the Trustee shall send a copy of
the Bond Register to the Tender Agent by first-class mail.
(b) Any Bond may be transferred only upon the Bond Register upon surrender
thereof to the Trustee duly endorsed for transfer or accompanied by an
assignment duly executed by the registered Owner or such Owner's attorney or
legal representative in such form as shall be satisfactory to the Trustee.
Subject to Section 210 hereof, upon any such transfer, the Issuer shall execute
and the Trustee shall authenticate and deliver in exchange for such Bond a new
Bond or Bonds, registered in the name of the transferee, of any Authorized
Denomination.
(c) Any Bonds, upon surrender thereof at the principal corporate trust
office of the Trustee, together with an assignment duly executed by the Owner or
such Owner's attorney or legal representative in such form as shall be
satisfactory to the Trustee, may, at the option of the Owner thereof, be
exchanged for an equal aggregate principal amount of the Bonds, of any
Authorized Denomination.
(d) In all cases in which Bonds shall be exchanged or transferred
hereunder, the Issuer shall execute and the Trustee shall authenticate and
deliver at the earliest practicable time Bonds in accordance with the provisions
of this Indenture. All Bonds surrendered in any such exchange or transfer shall
forthwith be cancelled by the Trustee.
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(e) The Issuer or the Trustee may make a charge against each Bondowner
requesting a transfer or exchange of Bonds for every such transfer or exchange
of Bonds sufficient to reimburse it for any tax or other governmental charge
required to be paid with respect to such transfer or exchange, the cost of
printing, if any, each new Bond issued upon any transfer or exchange and the
reasonable expenses of the Issuer and the Trustee in connection therewith, and
such charge shall be paid before any such new Bond shall be delivered.
(f) At reasonable times and under reasonable regulations established by
the Trustee, the Bond Register may be inspected and copied by the Borrower, the
Issuer, the Credit Enhancer or the Owners (or a designated representative
thereof) of 10% or more in aggregate principal amount of Bonds then Outstanding,
such ownership and the authority of any such designated representative to be
evidenced to the satisfaction of the Trustee.
(g) The person in whose name any Bond shall be registered on the Bond
Register shall be deemed and regarded as the absolute Owner of such Bond for all
purposes, and payment of or on account of the principal of and redemption
premium, if any, and interest on any such Bond shall be made only to or upon the
order of the registered Owner thereof or such Owner's attorney or legal
representative (except that any such payments on Pledged Bonds shall be made to
the Credit Enhancer). All such payments shall be valid and effectual to satisfy
and discharge the liability upon such Bond, including the interest thereon, to
the extent of the sum or sums so paid.
Section 207. Temporary Bonds.
(a) Until definitive Bonds are ready for delivery, the Issuer may execute
and, upon request of the Issuer, the Trustee shall authenticate and deliver in
lieu of definitive Bonds, but subject to the same limitations and conditions as
definitive Bonds, temporary printed, engraved, lithographed or typewritten
Bonds.
(b) If temporary Bonds shall be issued, the Issuer shall cause the
definitive Bonds to be prepared and to be executed and delivered to the Trustee,
and the Trustee, upon presentation to it at its principal corporate trust office
of any temporary Bond shall cancel the same and authenticate and deliver in
exchange therefor, without charge to the Owner thereof, a definitive Bond or
Bonds in the same aggregate amount as the temporary Bond surrendered in
Authorized Denominations. Until so exchanged the temporary Bonds shall in all
respects be entitled to the same benefit and security of this Indenture as the
definitive Bonds to be issued and authenticated hereunder.
Section 208. Mutilated, Lost, Stolen, Destroyed or Undelivered Bonds. In
the event any Bond shall become mutilated, or be lost, stolen or destroyed, the
Issuer shall execute and the Trustee shall authenticate and deliver a new Bond
of like date and tenor as the Bond mutilated, lost, stolen or destroyed;
provided that, in the case of any mutilated Bond, such mutilated Bond shall
first be surrendered to the Trustee, and in the case of any lost, stolen or
destroyed Bond, there shall be first furnished to the Issuer and the Trustee
evidence of such loss, theft or destruction satisfactory to the Issuer and the
Trustee, together with indemnity satisfactory to them, the Borrower and the
Credit Enhancer. In the event any such Bond shall have matured or been called
for redemption, instead of issuing a substitute Bond the Issuer may pay or
authorize the payment of the same without surrender thereof. Upon the issuance
of any substitute Bond, the Issuer and
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the Trustee may require the payment of an amount by the Bondowner sufficient to
reimburse the Issuer and the Trustee for any tax or other governmental charge
that may be imposed in relation thereto and any other reasonable fees and
expenses incurred in connection therewith.
In the event that there are Undelivered Bonds, the Trustee shall
authenticate and deliver, with such delivery to occur at the Principal Office of
the Trustee to the new Owner or Owners thereof a new Bond or Bonds of like
amount in Authorized Denominations registered in the name of the new Owner or
Owners thereof. It shall be the duty of the Trustee to hold the moneys received
from the remarketing of a replacement Bond issued in place of an Undelivered
Bond, without liability for interest thereon, for the benefit of the former
Bondowner, who shall thereafter be restricted exclusively to such moneys for any
claim of whatever nature under this Indenture or with respect to the Undelivered
Bond and so long as the moneys held by the Trustee equal the full amount due on
such Bond on the tender date, whether from such remarketing or payment on the
Credit Facility, such Bond shall thereafter no longer be secured by this
Indenture or the Credit Facility (except for such moneys so held). Such moneys
shall be held by the Trustee in the Purchase Fund, along with any other monies
deposited in such Fund pursuant to said Section, and no moneys held in the
Purchase Fund shall be invested.
Section 209. Cancellation and Destruction of Bonds Upon Payment. All Bonds
which have been paid or redeemed or which the Trustee has purchased or which
have otherwise been surrendered to the Trustee under this Indenture, either at
or before maturity, shall be cancelled and destroyed by the Trustee immediately
upon the payment, redemption or purchase of such Bonds and the surrender thereof
to the Trustee. The Trustee shall execute a certificate in triplicate describing
the Bonds so cancelled and destroyed, and shall file executed counterparts of
such certificate with the Issuer, the Borrower and the Credit Enhancer. Bonds at
any time held by the Issuer shall be surrendered to the Trustee for cancellation
in accordance with the provisions of this Section.
Section 210. Limitation on Transfer and Exchange. The Bonds have not been
registered or qualified under the 1933 Act or the securities laws of any state.
Notwithstanding Section 206 hereof, so long as the Credit Facility secures the
Bonds, no transfer of any Bond shall be made unless such transfer is made in a
transaction which does not require registration or qualification under the 1933
Act or under any applicable state securities laws. The Trustee shall not
register any transfer or exchange of a Bond unless (i) such Bondholder's
prospective transferee delivers to the Trustee an investment letter
substantially in the form set forth as Exhibit H to this Indenture; or (ii) an
opinion of counsel in form and substance reasonably satisfactory to the Trustee
and the Credit Enhancer that such transfer or exchange is made in accordance
with an applicable exemption from the 1933 Act and applicable state securities
laws and such opinion is addressed to and delivered to the Trustee, the Borrower
and the Credit Enhancer; or (iii) such transferee is an Eligible Transferee (as
defined below) and the Remarketing Agent has delivered a certificate stating
that such transfer complies with the exemption from registration provided by
Rule 144A under the 1933 Act and any applicable state securities laws. As used
in this Section, an "Eligible Transferee" is an entity that appears on a list
provided by the Remarketing Agent and which has delivered an investment letter
to the Trustee substantially in the form set forth as Exhibit H to this
Indenture, provided, however, that such list and investment letter are dated as
of a date within the preceding twelve months. Any such holder desiring to effect
such transfer shall, and does hereby, agree to indemnify the Trustee, the
Borrower and the Credit Enhancer against any liability, cost or expense
(including attorneys' fees) that may result if the transfer is not so exempt, or
is not made in
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accordance with such federal and state laws. The provisions of this paragraph
shall not be applicable in the event that the Issuer, the Trustee, the Borrower
and the Credit Enhancer shall have received an opinion of counsel in form and
substance satisfactory to the Issuer, the Trustee and the Credit Enhancer that
the Bonds and the Credit Facility are exempt from registration under the 1933
Act and any applicable state securities laws.
[End of Article II]
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ARTICLE III
TENDER AND PURCHASE OF BONDS
Section 301. Optional Tender of Bonds During Weekly Mode or Monthly Mode.
(a) General. While the Bonds are in a Weekly Mode or Monthly Mode, the
Owner of any Bond shall have the right to have such Bond purchased in whole or
in part (which portion shall be in a principal amount equal to an Authorized
Denomination) on the dates specified in paragraph (b) below at the Tender Price.
An Owner's exercise of the option to have such Bond purchased is irrevocable and
binding on such Owner and cannot be withdrawn. If any Owner of Bonds shall fail
to deliver the Bonds described in such Owner's Notice of Election to Tender
Bonds in accordance with this Section 301 such Bonds shall constitute
Undelivered Bonds. Replacement Bonds shall be executed, authenticated and
delivered in the place of such Undelivered Bonds as provided in Section 208
hereof and such replacement Bonds may be offered and sold by the Remarketing
Agent in accordance with this Indenture and the Remarketing Agreement.
(b) Notice of Tender by Bondowners. Any Bond, or portion thereof, shall be
purchased on the Tender Date by the Tender Agent on the demand of the Owner
thereof, at the Tender Price, upon delivery to the Tender Agent on a Business
Day at its Principal Office of an irrevocable written notice in the form of the
Notice of Election to Tender Bonds which states (A) the principal amount and
number of such Bond (and the portion of such Bond to be purchased if less than
the full principal amount is to be purchased), the name and the address of such
Owner and the taxpayer identification number, if any, of such Owner and (B) that
such Bond, or portion thereof, is to be purchased on a day (which shall be the
Tender Date), which day will be a Business Day which is at least seven (7)
calendar days after the receipt by the Tender Agent of such Notice of Election
to Tender Bonds. Such Notice of Election to Tender Bonds shall be deemed
received on a Business Day if received by the Tender Agent no later than 3:00
p.m., New York Time, on such Business Day. Any Notice of Election to Tender
Bonds received by the Tender Agent after 3:00 p.m., New York Time, shall be
deemed received on the next succeeding Business Day.
Any Owner of Bonds who has demanded purchase of its Bond, or portion
thereof, as described in this Section 301 shall deliver such Bond (with an
appropriate transfer of registration form executed in blank, together with a
signature guaranty) (together with, in the case of any Bond with a specified
Tender Date prior to an Interest Payment Date and after the related Record Date,
a due-bill check in form satisfactory to the Tender Agent for interest due on
such Bond on such Interest Payment Date) to the Tender Agent at its Principal
Office prior to 10:30 A.M., New York Time, on the Tender Date specified in the
aforesaid written notice.
(c) Failure to Give Notice. Failure by the Tender Agent to redeliver a
Notice of Election to Tender Bonds or a Tendered Bond as provided in Section 303
hereof shall not extend the period for making elections, in any way change the
rights of the Owners of Bonds to elect to have their Bonds purchased pursuant to
this Section or in any way change the conditions which must be satisfied in
order for such election to be effective or for payment of the purchase price to
be made after an effective election.
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Section 302. Mandatory Tender of Bonds.
(a) On Termination Date or Interest Mode Adjustment Date. All Bonds are
required to be tendered to the Tender Agent for purchase on the Termination Date
or an Interest Mode Adjustment Date; provided, however, that there shall not be
so tendered on the Termination Date or the Interest Mode Adjustment Date, as
applicable, any Bonds, or portion thereof, which will be in Authorized
Denominations with respect to which the Owners thereof have delivered to the
Tender Agent by hand or by mail at its Principal Office a properly completed
Notice of Election to Retain Bonds, together with a signature guaranty, on or
prior to the fifth Business Day next preceding the Termination Date or the
Interest Mode Adjustment Date, as applicable, subject to the provisions of
Section 204(b) hereof (with respect to the Interest Mode Adjustment Date) and
Section 302(f) hereof (with respect to the Termination Date). Any Bondowner
required to tender Bonds under this subsection (a) shall tender its Bonds to the
Tender Agent for purchase at its Principal Office prior to 10:30 A.M., New York
Time, on the Termination Date or the Interest Mode Adjustment Date, as
applicable. The failure to tender Bonds on any such date is the equivalent of a
tender, and such Bonds shall be converted to Undelivered Bonds and replacement
Bonds shall be executed, authenticated and delivered in the place of such
Undelivered Bonds as provided in Section 208 hereof and such replacement Bonds
may be offered and sold by the Remarketing Agent in accordance with this
Indenture and the Remarketing Agreement, subject to the provisions of Section
204(b) and Section 302(f) hereof, as applicable.
(b) On Alternate Credit Facility Date. While the Bonds are in an Interest
Mode other than a Multiyear Mode, all Bonds are required to be tendered to the
Tender Agent for purchase on an Alternate Credit Facility Date; provided,
however, that there shall not be so tendered on the Alternate Credit Facility
Date any Bonds or portion thereof which will be in Authorized Denominations with
respect to which the Owners thereof have delivered to the Tender Agent by hand
or by mail at its Principal Office a properly completed Notice of Election to
Retain Bonds, together with a signature guaranty, on or prior to the fifth
Business Day next preceding the Alternate Credit Facility Date. Any Bondowner
required to tender Bonds under this subsection (b) shall tender its Bonds to the
Tender Agent for purchase at its Principal Office prior to 10:30 A.M., New York
Time, on the Alternate Credit Facility Date. The failure to tender Bonds on any
such date is the equivalent of a tender and such Bonds shall be converted to
Undelivered Bonds and replacement Bonds shall be executed, authenticated and
delivered in the place of such Undelivered Bonds as provided in Section 208
hereof and such Replacement Bonds may be offered and sold by the Remarketing
Agent in accordance with this Indenture and the Remarketing Agreement.
(c) On Rate Adjustment Date During Semiannual Mode. Annual Mode and
Multiyear Mode. While the Bonds are in a Semiannual Mode, Annual Mode or
Multiyear Mode, all Bonds are required to be tendered to the Tender Agent for
purchase on each Rate Adjustment Date; provided, however, that there shall not
be so tendered on any Rate Adjustment Date any Bonds or portion thereof which
will be in Authorized Denominations with respect to which the Owners thereof
have delivered to the Tender Agent by hand or by mail at its Principal Office a
properly completed Notice of Election to Retain Bonds, together with a signature
guaranty, on or prior to the fifth Business Day next preceding such Rate
Adjustment Date. Any Bondowner required to tender Bonds under this subsection
(c) shall tender Bonds to the Tender Agent for purchase at its Principal Office
prior to 10:30 A.M., New York Time, on the Rate Adjustment Date. The failure to
tender its Bonds on any such date is the equivalent of a tender and such Bonds
shall be converted to Undelivered Bonds
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and Replacement Bonds shall be executed, authenticated and delivered in the
place of such Undelivered Bonds as provided in Section 208 hereof and such
Replacement Bonds may be offered and sold by the Remarketing Agent in accordance
with this Indenture and the Remarketing Agreement.
(d) Mandatory Tender in Lieu of Acceleration on Default. Additionally, all
Bonds shall be subject to mandatory tender for purchase on the Mandatory
Purchase Date from the Bondowners by the Trustee for the account of the Credit
Enhancer, as set forth in Section 802(b) hereof in lieu of acceleration of the
Bonds as set forth in Section 802(a) hereof, and mandatory redemption of Bonds
as set forth in Section 402(c) and upon the occurrence of an Event of Default
under Section 801(e) hereof. Upon receipt of notice from the Credit Enhancer
directing the Trustee to purchase the Bonds and the establishment by the Trustee
of the Mandatory Purchase Date, which shall be a Business Day which is at least
three (3) and no more than ten (10) calendar days after the receipt by the
Trustee of such notice, the Trustee shall immediately request a payment under
the Credit Facility pursuant to Section 508 hereof in the amount required by
Section 802(b) to be received no later than 3:00 o'clock P.M., New York Time, on
the Mandatory Purchase Date, and shall also send notice to the Bondowners of the
mandatory purchase. On the Mandatory Purchase Date, the Tender Agent shall pay
to the Bondowners the purchase price for the Bonds, which shall be an amount
equal to 100% of the principal amount of any Bond tendered or deemed tendered
plus accrued and unpaid interest thereon to the Mandatory Purchase Date. Any
Bondowner required to tender Bonds under this subsection (d) shall tender its
Bonds to the Tender Agent for purchase at its Principal Office prior to 10:30
o'clock A.M., New York Time, on the Mandatory Purchase Date. The failure to
tender Bonds on any such date is the equivalent of a tender and such Bonds shall
be converted to Undelivered Bonds and replacement Bonds shall be executed,
authenticated and delivered in the place of such Undelivered Bonds as provided
in Section 208 hereof.
(e) Notice of Mandatory Tender. The Trustee shall give notice to
Bondowners of the mandatory tender for purchase of Bonds (i) on an Interest Mode
Adjustment Date in accordance with Section 204 hereof, (ii) on an Alternate
Credit Facility Date in accordance with Section 706 hereof, (iii) if the Bonds
are in a Multiyear Mode, Annual Mode or Semiannual Mode, on a Rate Adjustment
Date in accordance with Section 203(e) hereof, (iv) on the Termination Date not
less than 25 or more than 60 calendar days prior to such Termination Date and
(v) on the Mandatory Purchase Date in accordance with Section 302(d) hereof.
(f) Failure to Give Notice. Failure by the Trustee to give any notice as
provided in paragraph (e) of this Section, any defect therein or any failure by
any Bondowner to receive any such notice shall not in any way change such
Owner's obligation to tender the Bonds for purchase on any mandatory Tender
Date.
(g) No Remarketing. No Bond purchased on the Termination Date pursuant to
Section 302(a) shall be remarketed on any date on or prior to the delivery of an
Alternate Credit Facility. All Bonds transferred hereunder shall be in
compliance with the provisions of Section 210 hereof.
Section 303. Irrevocability of Elections: Return of Improperly Completed
Documents. The Tender Agent, to whom a Notice of Election to Tender Bonds or a
Notice of Election to Retain Bonds has been delivered, shall determine whether
such Notice has been properly completed and such determination shall be binding
on the Owner of such Bond. Any election by a Bondowner to
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exercise the option to have its Bond or Bonds purchased, or any election by a
Bondowner to retain its Bond or Bonds upon any mandatory Tender Date, shall be
irrevocable upon delivery to the Tender Agent of the Notice of Election to
Tender Bonds (together with, if required at the time of delivery of such notice,
the Tendered Bonds) or of the Notice of Election to Retain Bonds, as the case
may be. The Tender Agent shall promptly return any incomplete or improperly
completed Notice of Election to Tender Bonds (together with, if required, the
Tendered Bonds) or Notice of Election to Retain Bonds to the Person or Persons
submitting such documents.
Section 304. Notice of Principal Amount of Bonds Tendered. Promptly upon
its receipt of any Notice of Election to Tender Bonds pursuant to Section 301
hereof, the Tender Agent shall (i) verify the information contained in such
Notice against the Bondholder list provided to the Tender Agent by the Trustee,
which list shall be delivered by the Trustee to the Tender Agent no later than
the second Business Day prior to each Tender Date, (ii) verify that both the
Tendered Bonds and the Bonds retained by the Owner are in Authorized
Denominations, and (iii) give Immediate Notice to the Trustee, the Remarketing
Agent, the Credit Enhancer and the Borrower of its receipt of such Notice and
specifying the total principal amount of Bonds to be tendered for purchase on
the applicable Tender Date. Promptly after the requisite time by which Notices
of Election to Retain Bonds are required to be delivered pursuant to Section 302
hereof, the Tender Agent shall give Immediate Notice to the Trustee, the
Remarketing Agent, the Credit Enhancer and the Borrower of its receipt of such
Notices and specifying the total principal amount of Bonds required to be
tendered for purchase on the applicable Tender Date and the aggregate Tender
Price therefor. The written portion of such Immediate Notice given by the Tender
Agent shall include copies of such Notices of Election to Tender Bonds or
Notices of Election to Retain Bonds.
Section 305. Remarketing of Tendered Bonds. Pursuant to the terms hereof
and of the Remarketing Agreement, and upon receipt of notice from the Tender
Agent, specifying the principal amount of Tendered Bonds, as provided in Section
304 hereof, the Remarketing Agent shall exercise its best efforts to sell all of
such Tendered Bonds as provided in the Remarketing Agreement subject to the
provision of Section 210 hereof; provided, however, that the Remarketing Agent
shall not remarket any Bonds at a price below par plus accrued interest thereon.
The Remarketing Agent shall transfer, by wire transfer in immediately available
funds, an amount equal to the proceeds derived from such sale of Tendered Bonds
to the Tender Agent at or before 10:00 A.M., New York Time, on the Tender Date.
The Tender Agent shall immediately notify the Trustee in writing of any amount
received by the Tender Agent from the Remarketing Agent The Trustee shall
transfer from the Purchase Fund from the proceeds received from the Credit
Facility, by wire transfer in immediately available funds to the Tender Agent at
or before 4:00 P.M., New York Time, on the Tender Date, any additional-amount
needed by the Tender Agent to pay the full Tender Price on the Tender Date. The
Trustee shall, on the Tender Date, remit to the Credit Enhancer the remainder of
the funds in the Purchase Fund (other than any funds being held for the benefit
of former Owners of Undelivered Bonds) which were not transferred to the Tender
Agent on such Tender Date including all investment earnings thereon as soon
thereafter as available. The Tender Agent shall, on the Tender Date, remit to
the Credit Enhancer the amount (if any) by which the sum of the amounts
transferred to the Tender Agent by the Remarketing Agent and the amounts
transferred to the Tender Agent by the Trustee exceed the Tender Price of the
Tendered Bonds to the extent such funds are owed to the Credit Enhancer; and if
no funds are owed to the Credit Enhancer, such amount shall be remitted to the
Borrower.
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Section 306. Notice of Principal Amount of Bonds Remarketed.
(a) Prior to 10:00 A.M., New York Time, on the second Business Day
immediately preceding the Tender Date, or such later time as shall be agreed to
by the Tender Agent and the Credit Enhancer, the Remarketing Agent shall give
Immediate Notice to the Trustee, the Tender Agent, the Credit Enhancer and the
Borrower specifying the new interest rate, if any, to become effective as of
such Tender Date (if such Tender Date is a Rate Adjustment Date) and the
aggregate principal amount of Tendered Bonds which (i) have been remarketed
other than to the Issuer, the Borrower or any Affiliated Party of the Borrower
and the Tender Price therefor, (ii) have not been remarketed and the Tender
Price therefor, (iii) have been remarketed to the Issuer, the Borrower or any
Affiliated Party of the Borrower, and (iv) the amount of money, if any, to be
paid over to the Tender Agent by the Remarketing Agent on the Tender Date, which
amount shall be equal to the proceeds of the sale of the Tendered Bonds so
remarketed (other than the remarketing of Tendered Bonds to the Issuer, the
Borrower or any Affiliated Party of the Borrower). Proceeds of the sale of
Tendered Bonds to the Issuer, the Borrower or any Affiliated Party of the
Borrower shall be deposited and applied in accordance with Section 505(d)
hereof. Concurrently with the notice described in the second preceding sentence,
the Remarketing Agent shall also give the Trustee (with a copy to the Tender
Agent) instructions as to the registration and delivery, with such delivery to
occur at the Principal Office of the Tender Agent, to the Remarketing Agent of
any Tendered Bonds for whose purchase the Remarketing Agent will make a deposit
of funds with the Tender Agent on the Tender Date.
(b) Prior to 10:00 a.m., New York Time on the Business Day immediately
preceding the Tender Date, the Tender Agent shall give Immediate Notice to the
Trustee, the Borrower and the Credit Enhancer specifying the amount of proceeds
from the remarketing of tendered Bonds on deposit with the Tender Agent. The
Trustee shall make a demand for payment on the Credit Facility in accordance
with Section 508(b) hereof in an amount equal to the Tender Price of all
Tendered Bonds less the proceeds of the remarketing of Tendered Bonds then on
deposit with the Tender Agent. The Trustee shall cause the proceeds of the
payment under the Credit Facility to be delivered to the Tender Agent for
purchase of Tendered Bonds as described in Section 307 hereof.
Section 307. Purchase of Tendered Bonds.
(a) Tendered Bonds shall be purchased from the Owners thereof on the
Tender Date at the Tender Price which shall be payable solely from the following
sources in the order of priority listed:
(1) Remarketing Proceeds;
(2) proceeds of a payment under the Credit Facility to purchase such
Tendered Bonds;
(3) Available Moneys from any other source; and
(4) moneys from any other source.
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(b) On each Tender Date, all Bonds purchased out of Remarketing Proceeds
shall be delivered and registered as directed by the Remarketing Agent pursuant
to Section 306(a) hereof.
(c) The Tender Agent shall pay the Tender Price for each Tendered Bond
prior to the Tender Agent's close of business on the Tender Date only after
receipt of such Bond, properly endorsed in blank, together with a signature
guaranty (together with, in the case of any Bond with a specified Tender Date
prior to an Interest Payment Date and after the related Record Date, a due-bill
check in form satisfactory to the Tender Agent for interest due on such Bond on
such Interest Payment Date). Payment of the Tender Price of any Bond tendered
for purchase shall be made: (1) by check or draft mailed to the Owner thereof at
the Owner's address as it appears on the Bond Register or at such other address
as is furnished to the Tender Agent in writing by such Owner; or (2) in the case
of the purchase from an Owner of $1,000,000 or more in aggregate principal
amount of Bonds, by wire transfer to such Owner upon written notice from such
Owner containing the wire transfer address (which shall be in the continental
United States) to which such Owner wishes to have such wire directed which
written notice accompanies such Owner's Notice of Election to Tender Bonds.
(d) The Trustee shall take the following actions with respect to Tendered
Bonds: (1) with respect to Bonds which have been remarketed and for which the
Tender Agent has received payment, on the written advice of the Remarketing
Agent, authenticate said Bonds in the names of the purchasers thereof and in the
appropriate denominations, and deliver said Bonds to the Remarketing Agent upon
the Tender Agents receipt of payment therefor; (2) with respect to Tendered
Bonds which have not been remarketed and which are to be purchased by the
Borrower and pledged to the Credit Enhancer pursuant to the Bond Pledge
Agreement, register said Bonds as owned by the Borrower and pledged to the
Credit Enhancer and hold such Bonds as agent and bailee for the Credit Enhancer
in accordance with the terms of the Bond Pledge Agreement; and (3) with respect
to all Bonds which have been physically tendered, cancel such certificates.
Tendered Bonds which have been purchased by the Trustee on behalf of the
Borrower shall be registered in the name of the Borrower subject to the security
interest of the Credit Enhancer, and held on behalf of the Credit Enhancer.
(e) Notwithstanding anything in this Indenture to the contrary, the Tender
Agent shall pay the Tender Price with respect to an Undelivered Bond only upon
the actual receipt of such Bond, and such Tender Price shall be equal to the par
amount of such Bond plus accrued interest to the Tender Date. An Undelivered
Bond shall not be considered Outstanding pursuant to this Indenture and shall
not be secured by the Credit Facility.
Section 308. Remarketing of Pledged Bonds. When a purchaser for Pledged
Bonds is found, the Remarketing Agent will (a) give Immediate Notice prior to
10:00 A.M., New York Time, on the second Business Day next preceding the
Placement Date, or such earlier or later time as shall be agreed to by the
Credit Enhancer, the Trustee and the Borrower, to the Credit Enhancer, the
Borrower and the Trustee specifying the principal amount of Pledged Bonds to be
purchased, the purchase price thereof and the Placement Date on which such
purchase is to occur and (b) instruct the purchasers thereof to deliver an
amount (in immediately available funds) equal to the purchase price of such
Pledged Bonds to the Trustee by 10:30 A.M., New York Time, on the Placement Date
for the same day transfer to the Credit Enhancer. No Pledged Bonds shall be
released to new Owners unless the Trustee and the Tender Agent have received
written notice from the Credit
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Enhancer that the Credit Facility has been reinstated by an amount equal to the
principal of and interest portion of such Pledged Bonds and that the Credit
Enhancer has been reimbursed for the amount of the draw to purchase such Pledged
Bonds. The Pledged Bonds shall be purchased, subject to the provisions of
Section 210 hereof, from the Borrower on the Placement Date at a purchase price
equal to the principal amount thereof. In addition, until the purchase price
therefor is received by the Credit Enhancer, Bonds shall not be delivered to the
purchaser of Pledged Bonds and such Pledged Bonds to be so purchased shall
remain Pledged Bonds.
Section 309. Purchase Fund.
(a) The Purchase Fund has not been pledged or assigned under this
Indenture and is not subject to the lien created by this Indenture. Upon receipt
by the Tender Agent of the proceeds of a remarketing of Tendered Bonds (other
than Bonds remarketed to the Issuer, the Borrower or an Affiliated Party of the
Borrower, which will be placed in a separate trust account in the Purchase
Fund), the Tender Agent shall deposit such funds in a segregated escrow account
maintained by the Tender Agent and designated "Undelivered Bond Account" which
funds shall not be invested, and the Tender Agent shall not be liable to the
Issuer or the Borrower for any interest thereon, and any moneys shall be held
and applied as provided herein. The Trustee shall deposit moneys received from
the Credit Enhancer pursuant to a payment on the Credit Facility in accordance
with Section 508(b)(4) or (5) hereof in the Purchase Fund for application to the
Tender Price of the Tendered Bonds. Upon receipt by the Trustee of the proceeds
of the placement of Pledged Bonds on a Placement Date, the Trustee shall deposit
such moneys in the Purchase Fund for payment to the Credit Enhancer to the
extent such Pledged Bonds were purchased out of funds provided by the Credit
Facility and not reimbursed to the Credit Enhancer by the Borrower and,
thereafter, to the Borrower. Moneys from the remarketing of Tendered Bonds to
the Issuer, the Borrower or an Affiliated Party of the Borrower, shall be
applied solely to the purchase price of Pledged Bonds.
(b) On any Tender Date or Placement Date, the Trustee shall transfer on
the Bond Register ownership of all of the Tendered Bonds to the names of the
respective purchasers thereof. From and after such date, the principal of,
redemption premium, if any, and interest on such Bonds shall be payable solely
to such purchasers, their transferees or the successors thereto. The Owners of
Tendered Bonds immediately prior to a Tender Date with respect to which a Notice
of Election to Tender Bonds has been given pursuant to Section 301 hereof or a
Notice of Election to Retain Bonds has not been given pursuant to Section 302
hereof shall be entitled solely to payment of the Tender Price for such Bonds
upon delivery thereof to the Tender Agent as herein provided and shall not be
entitled to the payment of any principal, redemption premium, if any, or
interest thereon thereafter.
Section 310. No Sales After Certain Defaults. Notwithstanding any
provision of this Indenture to the contrary, there shall be no sales of Bonds
pursuant to this Article III if there shall have occurred and be continuing an
Event of Default described in Section 801 (a), (b), (c), (e) or (g) (except,
with respect to paragraph (g), a default under Section 801(d) or (f) of the
Series 1994B Indenture) hereof The Trustee shall give Immediate Notice to the
Paying Agent, the Remarketing Agent, the Tender Agent, the Credit Enhancer, the
Borrower and the Bondowners of (i) the occurrence and continuation of any of the
events set forth in the preceding sentence and that such event results in no
purchase or sales of Bonds being permitted pursuant to this Article III
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and (ii) the curing of any of such events and that in consequence purchases and
sales are again permitted pursuant to this Article III.
Section 311. Remarketing Agent. The Issuer, upon instructions from the
Borrower, with the written consent of the Credit Enhancer, or upon instructions
from the Credit Enhancer if an event of default under the Letter of Credit
Agreement exists, shall appoint the Remarketing Agent for the Bonds, subject to
the conditions set forth in Section 312 hereof. The Issuer hereby appoints Stern
Brothers & Co. as the initial Remarketing Agent. The Remarketing Agent shall
designate to the Trustee its principal office and signify its acceptance of the
duties and obligations imposed upon it hereunder by a written instrument of
acceptance or a remarketing agent agreement delivered to the Issuer, the
Borrower and the Credit Enhancer under which the Remarketing Agent will also
agree to keep such books and records as shall be consistent with prudent
industry practice and to make such books and records available for inspection by
the Issuer, the Trustee, the Tender Agent, the Borrower and the Credit Enhancer
at all reasonable times. The Borrower and the Remarketing Agent shall enter into
a Remarketing Agreement the terms of which shall be subject to the written
approval of the Credit Enhancer.
Section 312. Qualifications of Remarketing Agent. The Remarketing Agent
shall be a member of the National Association of Securities Dealers, Inc. and
shall meet such capitalization and/or credit requirements as are acceptable to
the Rating Agency, and authorized by law to perform all the duties imposed upon
it by this Indenture. The Remarketing Agent may at any time resign and be
discharged of the duties and obligations created by this Indenture by giving at
least 30 days' written notice to the Issuer, the Borrower, the Tender Agent, the
Trustee and the Credit Enhancer. The Remarketing Agent may be removed at any
time, without cause, upon at least 30 days' written notice to the Remarketing
Agent, at the direction of the Credit Enhancer or the Borrower by an instrument
signed by an Authorized Borrower Representative, with the written consent of the
Credit Enhancer, filed with the Trustee, the Credit Enhancer, the Tender Agent,
the Issuer and the Remarketing Agent. In no event shall the resignation or
removal of the Remarketing Agent be effective until a qualified successor has
accepted appointment as such.
In the event of the resignation or removal of the Remarketing Agent, the
Remarketing Agent shall pay over, assign and deliver any moneys and Bonds held
by it in such capacity to its successor. In the event that the Issuer shall fail
to appoint a replacement Remarketing Agent hereunder, the Credit Enhancer with
the written consent of the Borrower, or the Borrower with the written consent of
the Credit Enhancer, may do so.
[End of Article III]
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ARTICLE IV
REDEMPTION OF BONDS
Section 401. Optional Redemption.
(a) Optional Redemption of Bonds Not in Multiyear Mode. Bonds (other than
Bonds in a Multiyear Mode) shall be subject to redemption and payment prior to
maturity, at the option of the Issuer upon instructions from the Borrower with
the prior written consent of the Credit Enhancer, on any Interest Payment Date,
in whole or in part in Authorized Denominations, at the principal amount thereof
plus accrued interest to the redemption date, first, from proceeds of a payment
under the Credit Facility and, second, from other Available Moneys.
(b) Optional Redemption of Bonds in Multiyear Mode. The Bonds in a
Multiyear Mode shall be subject to redemption and payment prior to maturity, at
the option of the Issuer upon instructions from the Borrower with the prior
written consent of the Credit Enhancer, on any Interest Payment Date, in whole
or in part in Authorized Denominations, at the redemption prices (expressed as
percentages of the principal amount) set forth below, plus accrued interest to
the redemption date, first, from proceeds of a payment under the Credit Facility
and, second, from other Available Moneys as follows:
OPTIONAL REDEMPTION IN MULTIYEAR MODE
Length of Redemption Prices
Multiyear Mode as a Percentage of Call Protection
(In Years)* Principal Amounts Period*
-------------- ------------------ ---------------
Greater than 10 102% after 7 years 7 years
declining 1/2% per 12
months to 100%
Less than or equal 102% after 4 years 4 years
to 10 and greater declining 1/2% per 12
than 7 months to 100%
Less than or equal 102% after 3 years 3 years
to 7 and greater declining 1% per 12
than 5 months to 100%
Less than or equal 101% after 2 years 2 years
to 5 and greater declining 1/2% per 6
than 2 months to 100%
Less than or equal 100 1/2% after 1 year 1 year
to 2 and greater declining 1/2% per 6
than 1 months to 100%
- ----------
*Measured from and including the
first day of such Rate Period.
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<PAGE>
(c) Any provision herein to the contrary notwithstanding, no notice of the
redemption of Bonds pursuant to this Section 401 shall be given unless
sufficient Available Moneys are available and have been irrevocably deposited
into the Available Moneys Account or the Credit Facility Account of the Revenue
Fund with the Trustee, or if the Credit Enhancer commits to make a payment under
the Credit Facility to the Trustee pursuant to Section 508(b)(3) hereof.
Section 402. Mandatory and Extraordinary Redemption.
(a) Redemption Upon Determination of Taxability. The Bonds shall be
subject to mandatory redemption by the Issuer in whole on the earliest
practicable date for which notice can be given, if a Determination of Taxability
occurs, first, from proceeds of a payment under the Credit Facility, and,
second, from other Available Moneys at the principal amount thereof, without
premium, plus accrued interest to the redemption date.
(b) [Reserved.]
(c) Redemption Upon Letter of Credit Agreement Default. The Bonds shall be
subject to immediate mandatory redemption by the Issuer in whole in the event
the Trustee shall receive from the Credit Enhancer written notice of the
occurrence of an event of default under the Letter of Credit Agreement and
direction to accelerate the Bonds and irrevocable instructions to obtain a
payment under the Credit Facility in accordance with the terms of the Credit
Facility, first, from proceeds of a payment under the Credit Facility and,
second, from other Available Moneys at the principal amount thereof, without
premium, plus accrued interest to the date of redemption, and the Bonds shall
cease to bear interest on such date as is established by the Trustee, which
shall be a Business Day that is at least three and no more than ten calendar
days after receipt by the Trustee of said notice; provided that pursuant to
Section 802(b) hereof the Credit Enhancer may direct the purchase of Bonds in
such event in lieu of mandatory redemption. The receipt of such notice shall be
conclusive and binding upon the Trustee, the Issuer and the Bondholders as to
the occurrence of a default under the Letter of Credit Agreement.
(d) Redemption in Event of Condemnation. Deficiency of Title, Fire or
Other Casualty. The Bonds shall be subject to redemption by the Issuer, at the
option of and upon instructions from the Borrower with the prior written consent
of the Credit Enhancer, in whole or in part at any time on the earliest
practicable date for which notice can be given, upon the occurrence of a
condemnation, loss of title or casualty loss to the Project, first, from
proceeds of a payment under the Credit Facility, and second, from other
Available Moneys at the principal amount thereof, without premium, plus accrued
interest to the redemption date.
(e) [Reserved.]
(f) Redemption from Excess Moneys in Project Fund. The Bonds are subject
to mandatory redemption in part on the earliest practicable date after the
Completion Date for the Project as certified by the Borrower in accordance with
the Agreement, to the extent of excess moneys remaining in the Project Fund, at
the principal amount thereof, without premium, plus accrued interest to the
redemption date. If the amount of moneys remaining in the Project Fund is not
sufficient to redeem an Authorized Denomination of Bonds, the Borrower shall
arrange for the deposit with the Trustee of sufficient Available Moneys to
effect the redemption of a minimum Authorized Denomination of Bonds.
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<PAGE>
Section 403. Selection of Bonds to be Redeemed.
(a) Bonds shall be redeemed pursuant to Sections 401 and 402 only in
Authorized Denominations. When less than all of the Outstanding Bonds are to be
redeemed and paid prior to maturity pursuant to Section 401 or 402 hereof, such
Bonds or portions of Bonds to be redeemed shall be selected by the Trustee by
lot in Authorized Denominations in such equitable manner as it may determine;
provided that Bonds shall be redeemed in the following order of priority: (1)
Pledged Bonds; (2) Tendered Bonds that cannot be remarketed; and (3) any other
Bonds.
(b) In the case of a partial redemption of Bonds when Bonds of
denominations greater than the applicable Authorized Denominations are then
Outstanding, then for all purposes in connection with such redemption each unit
of face value of the applicable Authorized Denomination shall be treated as
though it was a separate Bond of the applicable Authorized Denomination. If one
or more, but not all, of the units of principal amount of the applicable
Authorized Denomination represented by any Bond are selected for redemption,
then upon notice of intention to redeem such unit or units, the Owner of such
Bond or such Owner's attorney or legal representative shall forthwith present
and surrender such Bond to the Trustee (i) for payment of the redemption price
(including the redemption premium, if any, and interest to the date fixed for
redemption) of the unit or units of principal amount called for redemption, and
(ii) for exchange, without charge to the Owner thereof, for a new Bond or Bonds
of the aggregate principal amount of the unredeemed portion of the principal
amount of such Bond. If the Owner of any such Bond of a denomination greater
than the applicable Authorized Denominations shall fail to present such Bond to
the Trustee for payment and exchange as aforesaid, said Bond shall,
nevertheless, become due and payable on the redemption date to the extent of the
unit or units of principal amount called for redemption and shall cease to
accrue interest on such amount.
(c) No Bond may be redeemed in part if the principal amount thereof to
remain outstanding following such partial redemption is not itself an Authorized
Denomination.
Section 404. Notice of Redemption of Bonds in Weekly or Monthly Mode.
Notice of the call of Bonds in the Weekly Mode or the Monthly Mode for any
redemption identifying the Bonds or portions thereof to be redeemed shall be
given by the Trustee, in the name of the Issuer, to the Remarketing Agent, the
Credit Enhancer, the Borrower and the Owner of each Bond to be redeemed at the
address shown on the Bond Register by mailing a copy of the redemption notice by
first-class mail, postage prepaid, at least 15 days and not more than 30 days
prior to the redemption date; provided, however, that failure to give such
notice by mailing as aforesaid to any Bondowner or any defect therein as to any
particular Bond shall not affect the validity of any proceedings for the
redemption of any other Bonds; and provided further that no such prior notice of
redemption is required for a redemption pursuant to Section 402(c) hereof. As
provided in Section 405 hereof, any notice of redemption shall state the date
and place of redemption, the numbers of the Bonds or portions of Bonds to be
redeemed (and in the case of the redemption of a portion of any Bond the
principal amount thereof being redeemed), the redemption prices and that
interest will cease to accrue from and after the redemption date. Following each
redemption of Bonds, the Trustee shall mail by first-class mail to the Borrower
and the Credit Enhancer a notice of the principal amount of Bonds redeemed.
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<PAGE>
Section 405. Notice of redemption of Bonds in Semiannual, Annual or
Multiyear Mode.
(a) Unless waived by any Owner of Bonds to be redeemed, official notice of
any redemption of Bonds in a Semiannual, Annual or Multiyear Mode shall be given
by the Trustee on behalf of the Issuer by mailing a copy of an official
redemption notice by first class mail, postage prepaid, at least 15 days and not
more than 30 days prior to the redemption date to the Remarketing Agent, the
Credit Enhancer and the Owner of the Bond or Bonds to be redeemed at the address
shown on the Bond Register or at such other address as is furnished in writing
by such Owner to the Trustee; provided, however, that failure to give such
notice by mailing as aforesaid to any Bondowner or any defect therein as to any
particular Bond shall not affect the validity of any proceedings for the
redemption of any other Bonds; and provided further that no such prior notice of
redemption is required for a redemption pursuant to Section 402(c) hereof. The
Trustee shall not give the notice described above with respect to redemption of
the Bonds pursuant to Section 401 (a) or (b) or Section 402(d) hereof without
the prior written consent of the Credit Enhancer.
(b) All official notices of redemption pursuant to this Section and
Section 404 hereof shall be dated and shall state:
(1) the redemption date,
(2) the redemption price,
(3) if less than all outstanding Bonds are to be redeemed, the
identification (and, in the case of partial redemption, the respective
principal amounts) of the Bonds to be redeemed,
(4) that on the redemption date the redemption price will become due
and payable upon each such Bond or portion thereof called for redemption,
and that interest thereon shall cease to accrue from and after said date,
and
(5) the place where such Bonds are to be surrendered for payment of
the redemption price, which place of payment shall be the Principal Office
of the Trustee.
(c) In addition to the foregoing notice, further notice pursuant to this
Section and Section 404 hereof shall be given by the Trustee on behalf of the
Issuer as set out below, but no defect in said further notice nor any failure to
give all or any portion of such further notice shall in any manner defeat the
effectiveness of a call for redemption if notice thereof is given as above
prescribed.
(1) Each further notice of redemption given hereunder shall contain
the information required above for an official notice of redemption plus
(i) the CUSIP numbers of all Bonds being redeemed; (ii) the date of issue
of the Bonds as originally issued; (ill) the rate of interest borne by
each Bond being redeemed; (iv) the maturity date of each Bond being
redeemed; and (v) any other descriptive information needed to identify
accurately the Bonds being redeemed.
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<PAGE>
(2) Each further notice of redemption shall be sent at least 35 days
before the redemption date by registered or certified mail or overnight
delivery service to Depository Trust Company, Midwest Securities Trust
Company, Pacific Securities Depository Trust Company and Philadelphia
Depository Trust Company and to one or more national information services
that disseminate notices of redemption of obligations such as the Bonds.
(d) With respect to all Bonds redeemed pursuant to this Indenture, upon
the payment of the redemption price of Bonds being redeemed, each check or other
transfer of funds issued for such purpose shall bear the CUSIP number
identifying, by issue and maturity, the Bonds being redeemed with the proceeds
of such check or other transfer.
(e) With respect to all Bonds redeemed pursuant to this Indenture,
following each redemption of Bonds, the Trustee shall mail by first-class mail
to the Credit Enhancer and the Borrower a notice of the principal amount of
Bonds redeemed.
Section 406. Effect of Call for Redemption. On or prior to the date fixed
for redemption, Available Moneys available solely for such redemption in
accordance with the requirements of Sections 401 and 402 hereof shall be
deposited with the Trustee to pay the principal of the Bonds called for
redemption and accrued interest thereon to the redemption date and the
redemption premium, if any, thereon. Upon the happening of the above conditions,
and notice having been given as provided in Section 404 or 405 hereof, as
applicable, the Bonds or the portions of the principal amount of Bonds thus
called for redemption shall cease to bear interest on the specified redemption
date, provided moneys (which must be Available Moneys when required by Section
401 or 402 hereof) sufficient for the payment of the redemption price of the
Bonds called for redemption are on deposit at the place of payment at the time
fixed for such redemption, and shall no longer be entitled to the protection,
benefit or security of this Indenture and shall not be deemed to be Outstanding
under the provisions of this Indenture.
[End of Article IV]
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<PAGE>
ARTICLE V
REVENUES AND FUNDS
Section 501. Creation of Funds and Accounts. The following Funds and
Accounts of the Issuer are hereby created and established with the Trustee:
(a) the Project Fund;
(b) the Costs of Issuance Fund;
(c) the Revenue Fund, consisting of the Unavailable Moneys Account, the
Available Moneys Account and the Credit Facility Account;
(d) the Debt Service Fund, consisting 9f the Interest Account, the
Principal Account and the Redemption Account;
(e) the General Fund;
(f) the Purchase Fund and the Undelivered Bond Account therein; and
(g) the Rebate Fund.
Each Fund and Account shall be maintained by the Trustee as a separate and
distinct trust fund or account to be held, managed, invested, disbursed and
administered as provided in this Indenture. All moneys deposited in the Funds
and Accounts shall be used solely for the purposes set forth in this Indenture.
The Trustee shall keep and maintain adequate records pertaining to each Fund and
Account and all disbursements therefrom.
Section 502. Initial Deposits. On the Bond Issuance Date, as shall be more
fully specified in a written request from the Issuer, the Trustee shall deposit
$7,546,000 from the proceeds received from the sale of the Bonds into the
Project Fund and $154,000 to the Costs of Issuance Fund.
Section 503. Project Fund.
(i) Moneys in the Project Fund shall be disbursed in accordance with
the provisions of the Agreement for Project Purposes as provided in the
Agreement.
(ii) The Trustee shall cause to be kept and maintained adequate
records pertaining to the Project Fund and all disbursements from such
Fund. If requested by the Issuer, the Credit Enhancer or the Borrower, the
Trustee shall file copies of the records pertaining to the Project Fund
and all disbursements from such fund with the Issuer, the Credit Enhancer
and the Borrow.
Section 504. Costs of Issuance Fund. The Trustee shall deposit into the
Costs of Issuance Fund the amount required by Section 502. Moneys in the Costs
of Issuance Fund shall be disbursed
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<PAGE>
from time to time for the payment of the costs of issuing the Bonds upon the
direction of the Borrower as evidenced by a requisition in the form of Exhibit B
to the Agreement executed by an Authorized Borrower Representative and approved
by the Credit Enhancer. Moneys in the Costs of Issuance Fund shall be expended
no later than 180 days after the Bond Issuance Date. Any moneys remaining
therein on such date shall be transferred to the General Fund and the Costs of
Issuance Fund shall be closed.
Section 505. Revenue Fund.
(a) The Trustee shall deposit into the Revenue Fund all Revenues (except
as otherwise provided in Section 509 hereof) and any other amounts received by
the Trustee which are subject to the lien and pledge of this Indenture, to the
extent not required to be deposited in other Funds and Accounts in accordance
with the terms of this Indenture. The Trustee shall first apply those moneys on
deposit in the Credit Facility Account which represent payments received with
respect to the Credit Facility and any earnings thereon and then, if needed,
investment earnings on Funds and Accounts (to the extent such moneys constitute
Available Moneys) on each Interest Payment Date and Principal Payment Date on
the Bonds, in the order of priority and for the purposes as follows:
(1) First, to the Interest Account of the Debt Service Fund, an
amount sufficient to pay the interest becoming due and payable on the
Bonds on such date;
(2) Second, to the Principal Account of the Debt Service Fund, an
amount sufficient to pay the principal of the Bonds maturing on such date,
if any; and
(3) Third, to the Redemption Account of the Debt Service Fund, the
balance of such moneys.
(b) Moneys in the Credit Facility Account remaining after the transfers
made pursuant to paragraph (a) above shall be returned to the Credit Enhancer as
a reimbursement of the amounts paid under the Credit Facility.
(c) The Trustee shall deposit into the Unavailable Moneys Account
principal, interest and premium payments made by the Borrower pursuant to
Section 3.6(a)(i), (ii), (iii) and (iv) of the Loan Agreement. Upon the Credit
Enhancer's payment to the Trustee under the Credit Facility pursuant to a
request under Section 508(b)(1), (2) or (3) hereof, the Trustee shall transfer
to the Credit Enhancer the amount on deposit in the Unavailable Moneys Account.
In the event of an Event of Default described in paragraphs (a), (b), (c), (e)
or (g) (except with respect to paragraph (g), a default under Section 801(d) or
(f) of the Series 1994B Indenture) of Section 801 hereof, any moneys on deposit
in the Unavailable Moneys Account which constitute Available Moneys shall be
transferred to the Available Moneys Account and applied in accordance with this
Indenture.
(d) The Trustee shall also deposit into the Unavailable Moneys Account
moneys to be applied to the purchase of Bonds pursuant to Section 307 hereof or
the redemption of Bonds, as provided in this Section, pursuant to Sections 401
and 402. When moneys deposited pursuant to the preceding sentence shall become
Available Moneys, such Available Moneys shall be transferred to the Available
Moneys Account. Moneys on deposit in the Available Moneys Account to be
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applied to the payment of the Bonds at maturity shall be transferred to the
Principal Account on the maturity date to pay the principal of the Bonds and to
the Interest Account to pay accrued interest. Moneys on deposit in the Available
Moneys Account to be applied to the redemption of Bonds pursuant to Sections 401
and 402 shall be transferred to the Redemption Account on the date fixed for
such redemption to the extent necessary to pay the premium, if any, on and
principal of the Bonds as the same shall become due and payable by such
redemption and to the Interest Account to pay accrued interest. Available Moneys
on deposit in the Available Moneys Account, to be applied to the purchase of
Bonds pursuant to Section 307, shall be transferred to the Purchase Fund on the
Tender Date to the extent necessary to pay the Tender Price of the Bonds as the
same shall become due and payable on such Tender Date. Any moneys remaining in
the Available Moneys Account following the redemption or purchase of Bonds with
respect to which such deposit was made shall first be applied to pay the Credit
Enhancer any amounts due and payable under the Letter of Credit Agreement and
thereafter shall be transferred to the General Fund.
Section 506. Debt Service Fund.
(a) The Trustee shall deposit into the Interest Account the amounts
required by Section 505 of this Indenture. Moneys on deposit in the Interest
Account shall be applied solely to pay the interest on the Bonds as the same
becomes due and payable. On each date fixed for redemption of the Bonds and on
each scheduled Interest Payment Date on the Bonds, the Trustee shall remit to
the respective Bondowners of such Bonds an amount from the Interest Account
sufficient to pay the interest on the Bonds becoming due and payable on such
date.
(b) The Trustee shall deposit into the Principal Account the amounts
required by Section 505 of this Indenture. Moneys on deposit in the Principal
Account shall be applied solely to pay the principal of the Bonds as the same
becomes due and payable at maturity. On each Principal Payment Date of the
Bonds, the Trustee shall set aside and hold in trust an amount from the
Principal Account sufficient to pay the principal of the Bonds becoming due and
payable on such date.
(c) The Trustee shall deposit into the Redemption Account the amounts
required by Section 505 of this Indenture. Moneys on deposit in the Redemption
Account shall be applied solely to pay the principal and premium, if any, on the
Bonds as the same become due and payable by redemption. On each date fixed for
such redemption, the Trustee shall set aside and hold in trust an amount from
the Redemption Account sufficient to pay the principal of and premium, if any,
on the Bonds becoming due and payable on such date.
Section 507. General Fund. The Trustee shall deposit into the General Fund
the amounts required by Sections 504 and 505, and all moneys deposited by the
Borrower with the Trustee as payment of the fees and expenses of the Trustee,
any Paying Agent, the Issuer and the Remarketing Agent. The Trustee shall apply
moneys on deposit in the General Fund solely for the following purposes, in the
following order of priority and in accordance with the following conditions:
(a) first, to the Trustee for the reasonable cost of ordinary expenses
incurred and ordinary services rendered, and to the Issuer for its actual
expenses incurred in connection with the administration of the Bond financing
for the Project, upon the Trustee's receipt of a statement that
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the amount indicated thereon is justly due and owing and has not been the
subject of another written request which has been paid;
(b) to the Trustee for the reasonable cost of extraordinary expenses
incurred and extraordinary services rendered if said extraordinary expenses and
extraordinary services are necessary and reasonable and are not occasioned by
the negligence or willful misconduct of the Trustee;
(c) to the Remarketing Agent, an amount equal to any amounts due and
payable under the Remarketing Agreement; and
(d) to the Credit Enhancer, an amount equal to any amounts due and payable
under the Letter of Credit Agreement.
Section 508. Payments Under Credit Facility.
(a) The Credit Facility shall be held by the Trustee. Payments on the
Credit Facility shall be made or requested in accordance with its terms
consistent with the provisions of this Indenture and the Agreement. Payments on
the Credit Facility (other than pursuant to subparagraphs (b)(4) and (5) of this
Section, which amount will be deposited into the Purchase Fund) shall be
deposited in the Credit Facility Account and applied by the Trustee in
accordance with Section 505.
(b) The Trustee shall request payments under the Credit Facility, in
accordance with and to the extent, if any, required by the terms thereof, in the
amounts and at such time as may be necessary to make timely payments of the
principal of and interest, but not premium, on the Bonds required to be made
from the Debt Service Fund. In accordance with the preceding sentence, the
Trustee shall request payments under the Credit Facility by presenting a
conforming request to the Credit Enhancer (to the extent, if any, required by
the terms of the Credit Facility) two (2) Business Days prior to the applicable
Interest Payment Date, Principal Payment Date or redemption date referenced in
subsections (1), (2) and (3) herein, and prior to 11:00 A.M., New York Time, on
the applicable Tender Date referenced in subsections (4) and (5) herein, in
order for moneys to be received in the amounts and at the times as follows:
(1) No later than 3:30 P.M., New York Time, one (1) Business Day
prior to each Interest Payment Date, an amount equal to interest due on
the Bonds on such Interest Payment Date;
(2) No later than 3:30 P.M., New York Time, one (1) Business Day
prior to each Principal Payment Date, an amount equal to the full
principal amount of the Bonds coming due on such Principal Payment Date
because of the maturity of the Bonds;
(3) No later than 3:30 P.M., New York Time, one (1) Business Day
prior to each date fixed for (A) the mandatory redemption of the Bonds
pursuant to Section 402 hereof, other than as provided in Section
508(b)(2) hereof, or (B) the optional redemption of the Bonds pursuant to
Section 401 hereof, in each case an amount which, when added to any
Available Moneys (other than payments under the Credit Facility) in excess
of the amount of the applicable redemption premium and then available for
such purpose, will be equal
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to the full principal amount plus accrued interest on the Bonds to be
redeemed (other than the amount owing as a redemption premium, if any);
(4) No later than 3:00 P.M., New York Time, on the Tender Date for
any Bonds in accordance with Section 301 hereof, an amount which, when
added to any other Remarketing Proceeds available for such purpose in the
Purchase Fund, is equal to the Tender Price of Bonds for which Notices of
Election to Tender Bonds have been timely received; and
(5) No later than 3:00 P.M., New York Time, on the Tender Date for
any Bonds in accordance with Section 302 hereof, an amount which, when
added to any other Remarketing Proceeds then available for such purpose in
the Purchase Fund, is equal to the Tender Price of all of the Bonds
required to be tendered on such date pursuant to Section 302 and for which
no Notices of Election to Retain Bonds have been received.
(6) Notwithstanding the provisions of this Section 508, pursuant to
Section 802 hereof, the Trustee shall immediately demand payment under the
Credit Facility upon any acceleration of the maturity of the Bonds, or
upon any direction by the Credit Enhancer to the Trustee to purchase the
Bonds for the Credit Enhancer's own account.
(c) No payments shall be made under the Credit Facility for the payment of
the principal of and interest on the Borrower Bonds.
(d) The Borrower shall be permitted to provide the Trustee with an
Alternate Credit Facility in accordance with the requirements of Section 706
hereof and Section 3.10 of the Agreement.
Section 509. Deposits into and Application of Moneys in the Rebate Fund.
(a) There shall be deposited in the Rebate Fund such amounts as are
required to be deposited therein pursuant to the Tax Agreement. Subject to the
payment provisions provided in subsection (b) below, all amounts on deposit at
any time in the Rebate Fund shall be held by the Trustee in trust, to the extent
required to pay rebatable arbitrage to the United States of America, and neither
the Borrower, the Issuer, the Credit Enhancer nor the Owner of any Bonds shall
have any rights in or claim to such money. All amounts held in the Rebate Fund
shall be governed by this Section and by the Tax Agreement (which is
incorporated herein by reference). The Issuer, the Credit Enhancer and the
Trustee shall be entitled to rely on the rebate calculations made by the
Borrower pursuant to the Tax Agreement and neither the Issuer, the Credit
Enhancer nor the Trustee shall be responsible for any loss or damage resulting
from any good faith action taken or omitted to be taken by the Issuer or the
Trustee in reliance upon such calculations.
(b) Pursuant to the Tax Agreement, the Trustee shall remit all rebate
installments and a final rebate payment to the United States. The Trustee shall
have no obligation to pay any amounts required to be rebated pursuant to this
Section and the Tax Agreement, other than from moneys held in the Funds and
Accounts created under this Indenture or from other moneys provided to it by the
Borrower or, at the discretion of the Credit Enhancer, by the Credit Enhancer.
Any moneys remaining in the Rebate Fund after redemption and payment of all of
the Bonds and
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payment and satisfaction of any rebatable arbitrage shall be withdrawn and paid
first, to the Credit Enhancer to the extent of any amounts remaining unpaid
under any of the Collateral Documents and, second, to the Borrower.
(c) Notwithstanding any other provision of this Indenture, including in
particular Article XII hereof, the obligation to pay rebatable arbitrage to the
United States and to comply with all other requirements of this Section and the
Tax Agreement shall survive the defeasance or payment in full of the Bonds.
(d) The Trustee shall provide an annual certification to the Credit
Enhancer as to the Borrower's compliance with the provisions of this Section.
Section 510. Final Balances. Upon the deposit with the Trustee of moneys
sufficient to pay all principal of, premium, if any, and interest on the Bonds,
and upon satisfaction of all claims against the Issuer hereunder, including all
fees, charges and expenses of the Trustee, the Issuer, the Remarketing Agent and
any Paying Agent which are properly due and payable hereunder, or upon the
making of adequate provisions for the payment of such amounts as permitted
hereby, all moneys remaining in all Funds and Accounts, except moneys necessary
to pay principal of, premium, if any, and interest on the Bonds, which moneys
shall be held by the Trustee and (after 5 years) paid to the Credit Enhancer or
the Borrower, as appropriate, pursuant to Section 511 hereof, and except moneys,
if any, set aside pursuant to Section 509 hereof, shall be remitted first, to
the Credit Enhancer to the extent of any amounts remaining unpaid under any of
the Collateral Documents and, second, to the Borrower.
Section 511. Non-Presentment of Bonds. In the event any Bond shall not be
presented for payment when the principal thereof becomes due, either (i) at
maturity or at the date fixed for redemption thereof, or (ii) on the Tender Date
therefor, if moneys sufficient to pay such Bond shall have been deposited in the
Debt Service Fund or, with respect to Bonds becoming due pursuant to clause
(ii), the Purchase Fund or the Undelivered Bond Account held by the Tender Agent
in accordance with Section 309 hereof, all liability of the Issuer to the holder
thereof for the payment of such Bond shall forthwith cease, terminate and be
completely discharged, and thereupon it shall be the duty of the Trustee or the
Tender Agent as applicable to hold such moneys, without liability for interest
thereon, for the benefit of the holder of such Bond who shall thereafter be
restricted exclusively to such moneys, for any claim of whatever nature of such
holder under this Indenture or on, or with respect to, said Bond.
Any moneys so deposited with and held by the Trustee not so applied to the
payment of Bonds within five (5) years after the date on which the same shall
have become due shall be paid by the Trustee or the Tender Agent first, to the
Credit Enhancer to the extent of any amounts remaining unpaid under any of the
Collateral Documents and second, to the Borrower, free from the trusts created
by this Indenture. Thereafter, Bondowners shall be entitled to look only to the
Borrower for payment, and then only to the extent of the amount so repaid to the
Credit Enhancer or to the Borrower by the Trustee or the Tender Agent. The
Credit Enhancer and the Borrower shall not be liable for any interest on the
sums paid to it pursuant to this Section and shall not be regarded as a trustee
of such money.
[End of Article V]
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ARTICLE VI
DEPOSITARIES OF MONEYS, SECURITY FOR DEPOSITS
AND INVESTMENT OF FUNDS
Section 601. Moneys to be Held in Trust. All moneys deposited with or paid
to the Trustee for the account of any Fund or Account under any provision of
this Indenture, and all moneys deposited with or paid to any Paying Agent under
any provision of this Indenture shall be held by the Trustee or Paying Agent in
trust and shall be applied only in accordance with the provisions of this
Indenture and, until used or applied as herein provided, shall constitute part
of the Trust Estate (except for the Purchase Fund, the Rebate Fund and the
rebatable arbitrage not deposited therein) and be subject to the lien, terms and
provisions hereof and shall not be commingled with any other funds of the
Issuer, the Credit Enhancer or the Borrower except as provided under Section 602
for investment purposes. Neither the Trustee nor any Paying Agent shall be under
any liability for interest on any moneys received hereunder except such as may
be agreed upon.
Section 602. Investment of Moneys.
(a) Moneys in all Funds and Accounts (except the Purchase Fund) shall be
continuously invested and reinvested by the Trustee at the written direction of
the Borrower (with the written consent of the Credit Enhancer) as provided in
this Section 602. Moneys in the Purchase Fund shall not be invested. Moneys on
deposit in all Funds and Accounts may be invested only in Investment Securities;
provided that (1) amounts received under the Credit Facility shall be invested
and reinvested by the Trustee only in Government Securities maturing on the
earlier of 30 days after the date on which such obligations are acquired or such
time or times as said money shall be needed for the purposes for which they were
deposited and (2) Available Moneys (other than payments under the Credit
Facility) to be applied in accordance with Section 505(d) shall be invested and
reinvested by the Trustee only in Government Securities maturing on the earlier
of 30 days after the date on which such obligations are acquired or such time or
times as said money shall be needed for the purposes for which they were
deposited; and provided, further, that the Borrower's direction to so invest
shall be received by 12:00 noon, New York Time, on the day prior to any such
investment. All such investments shall mature not later, nor, to the extent
reasonably practicable subject to the restrictions above, earlier, than the date
such moneys or investment proceeds are required for the purposes of the
respective Funds and Accounts.
(b) All investments shall constitute a part of the Fund or Account from
which the moneys used to acquire such investments have come. The Trustee shall
sell and reduce to cash a sufficient amount of investments in a Fund or Account
whenever the cash balance therein is insufficient to pay the amounts then
required to be paid therefrom. The Trustee may transfer investments from any
Fund or Account to any other Fund or Account in lieu of cash when required or
permitted by the provisions of this Indenture.
Section 603. Manner of Investment. All investments in Nonpurpose
Investments made pursuant to this Article shall be made at the fair market value
of such Nonpurpose Investments in accordance with Treasury Regulation Section
1.148-5(d)(6), and all sales of Nonpurpose Investments shall be at the fair
market value of such Nonpurpose Investments.
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Section 604. Record Keeping The Trustee shall maintain records designed to
show compliance with the provisions of this Article and with the provisions of
Article V for at least six (6) years after the payment of the Bonds.
[End of Article VI]
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ARTICLE VII
PARTICULAR COVENANTS AND PROVISIONS
Section 701. Issuer to Issue Bonds and Execute Indenture. The Issuer
covenants that it is duly authorized under the Act to execute and deliver this
Indenture, to issue the Bonds and to pledge and assign the Trust Estate in the
manner and to the extent herein set forth; that all action on its part for the
execution and delivery of this Indenture and the issuance of the Bonds has been
duly and effectively taken; and that the Bonds in the hands of the Owners
thereof are and will be valid and enforceable obligations of the Issuer
according to the import thereof.
Section 702. Performance of Covenants. The Issuer covenants that it will
faithfully perform, or cause to be performed, at all times any and all
covenants, undertakings, stipulations and provisions contained in this
Indenture, in the Bonds and in all proceedings pertaining thereto.
Section 703. Instruments of Further Assurance. The Issuer covenants that
it will do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, such Supplemental Indentures and such further acts,
instruments, financing statements and other documents as the Trustee may
reasonably require for the better assuring, transferring, pledging and assigning
to the Trustee, and granting a security interest unto the Trustee in and to the
Trust Estate and the other property and revenues herein described. The Agreement
and all other documents, instruments or policies of insurance required by the
Trustee shall be delivered to and held by the Trustee.
Section 704. Credit Facility. The Trustee shall hold and maintain the
Credit Facility for the benefit of the Bondowners until the Credit Facility
terminates or expires in accordance with its terms. The Trustee shall diligently
enforce all terms, covenants and conditions of the Credit Facility. If at any
time during the term of the Credit Facility any successor Trustee shall be
appointed and qualified under this Indenture, the resigning or removed Trustee
shall request that the Credit Enhancer transfer the Credit Facility to the
successor Trustee, to the extent such action is necessary, and shall comply with
the applicable provisions of the Credit Facility. If the resigning or removed
Trustee fails to make this request, the successor Trustee shall do so before
accepting appointment. On the Termination Date the Trustee shall immediately
surrender the Credit Facility then in effect to the Credit Enhancer unless an
event of default thereunder shall have occurred and is continuing.
Section 705. Enforcement of Credit Facility. The Trustee, for the benefit
of the Owners of Bonds, subject to the provisions of Section 901(1) hereof,
shall diligently enforce and take all reasonable steps, actions and proceedings
necessary for the enforcement of all terms, covenants and provisions of the
Credit Facility as contemplated herein and therein. The Trustee shall not
consent to or permit any amendment or modification of the Credit Facility which
would materially adversely affect the rights or interests of the Owners of
Bonds.
Any provisions herein requiring notice to or from the Credit Enhancer or
the consent of the Credit Enhancer prior to any action by the Trustee or the
Issuer shall have no force or effect (1) following the later of (i) the
Termination Date and (ii) the repayment of all amounts owed to the Credit
Enhancer pursuant to the Collateral Documents or (2) during any period an event
of default
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under the Credit Facility shall have occurred and is continuing, except with
respect to all rights accruing to the Credit Enhancer with respect to
unreimbursed draws on the Credit Facility.
Section 706. Alternate Credit Facility. An Alternate Credit Facility, in
substitution for the Credit Facility then in effect, may be provided prior to
any Termination Date if the Borrower shall give written notice not more than 60
nor less than 30 calendar days prior to the Alternate Credit Facility Date to
the Issuer, the Trustee, the Tender Agent, the Remarketing Agent, the Rating
Agency and the Credit Enhancer stating its election to provide an Alternate
Credit Facility. Any such Alternate Credit Facility must be either (a) an
irrevocable direct pay letter of credit, or (b) bond insurance contract, in both
cases constituting an unconditional and irrevocable commitment to pay principal
of and interest on the Bonds. If the Bonds are in any Interest Mode other than a
Multiyear Mode, the Alternate Credit Facility Date must be a Rate Adjustment
Date.
(a) Upon the exercise of such option by the Borrower, in the event the
Bonds are in any Interest Mode other than a Multiyear Mode, the Trustee shall
send to the Bondowners a Notice of Alternate Credit Facility in substantially
the form of Exhibit G not later than 20 calendar days prior to the Alternate
Credit Facility Date. The Trustee shall not accept such Alternate Credit
Facility unless the Trustee shall have received, (1) prior to sending the Notice
of Alternate Credit Facility (i) an Opinion of Bond Counsel stating that the
delivery of such Alternate Credit Facility to the Trustee is authorized under
this Indenture and the Act, complies with the terms hereof and will not
adversely affect the exclusion of interest on the Bonds from gross income for
federal income tax purposes, and (ii) a certificate from an Authorized Borrower
Representative and a written acknowledgment by the Credit Enhancer stating that
all amounts owing to the Credit Enhancer under the Collateral Documents have
been paid and that there are no Pledged Bonds outstanding, and (2) on or before
the Alternate Credit Facility Date a supplemental opinion of Bond Counsel
stating that the delivery of the Alternate Credit Facility is authorized under
this Indenture and the Act, complies with the terms hereof and will not
adversely affect the exclusion of interest on the Bonds from gross income for
federal income tax purposes.
(b) Upon the exercise of such option by the Borrower, in the event the
Bonds are in a Multiyear Mode, the Trustee shall send to the Bondowners a Notice
of Alternate Credit Facility in substantially the form of Exhibit G not later
than 20 calendar days prior to the Alternate Credit Facility Date. The Trustee
shall not accept such Alternate Credit Facility unless the Trustee shall have
received, (1) prior to sending the Notice of Alternate Credit Facility (i) an
Opinion of Bond Counsel stating that the delivery of such Alternate Credit
Facility to the Trustee is authorized under this Indenture and the Act, complies
with the terms hereof and will not adversely affect the exclusion of interest on
the Bonds from gross income for federal income tax purposes, (ii) written
evidence from the Rating Agency that the Bonds will be rated no lower than the
then existing ratings on the Bonds by the Rating Agency, and (iii) a certificate
from an Authorized Borrower Representative and a written acknowledgment by the
Credit Enhancer stating that all amounts owing to the Credit Enhancer under the
Collateral Documents have been paid and that there are no Pledged Bonds
outstanding, and (2) on or before the Alternate Credit Facility Date a
supplemental opinion of Bond Counsel stating that the delivery of the Alternate
Credit Facility is authorized under this Indenture and the Act, complies with
the terms hereof and will not adversely affect the exclusion of interest on the
Bonds from gross income for federal income tax purposes.
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Section 707. General Limitation on Issuer Obligations. ANY OTHER TERM OR
PROVISION OF THIS INDENTURE OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION WITH
THE TRANSACTION WHICH IS THE SUBJECT HEREOF TO THE CONTRARY NOTWITHSTANDING, THE
ISSUER SHALL NOT BE REQUIRED TO TAKE OR OMIT TO TAKE, OR REQUIRE ANY OTHER
PERSON OR ENTITY TO TAKE OR OMIT TO TAKE, ANY ACTION WHICH WOULD CAUSE IT OR ANY
PERSON OR ENTITY TO BE, OR RESULT IN IT OR ANY PERSON OR ENTITY BEING, IN
VIOLATION OF ANY LAW OF THE STATE.
Section 708. Recording and Filing. Subject to Section 901(c) hereof, the
Trustee shall use its best efforts to keep and file or cause to be kept and
filed all financing statements related to this Indenture and all supplements
hereto, the Agreement and all supplements thereto, the Credit Facility and all
supplements thereto and such other documents as may be necessary to be kept and
filed in such manner and in such places as may be required by law in order to
preserve and protect fully the security of the Owners and the rights of the
Trustee hereunder. In carrying out its duties under this Section, the Trustee
shall be entitled to rely on an opinion of its counsel specifying what actions
are required to comply with this Section.
Section 709. Possession and Inspection of Books and Documents. The Issuer
and the Trustee covenant and agree that all books and documents in their
possession relating to the Agreement and the Credit Facility and to the
distribution of proceeds thereof shall at all times be open to inspection by
such accountants or other agencies or persons as the Credit Enhancer or the
Borrower may from time to time designate.
Section 710. Rights and Duties Under Agreement and Credit Facility. The
Trustee hereby acknowledges and agrees to the terms, conditions, appointments
and agencies of the Agreement and the Credit Facility as they relate to it and
its participation in the transactions contemplated hereby and thereby. Subject
to the provisions of Section 901(1) hereof, the Trustee shall perform all
obligations and duties of the Issuer under the Agreement (and the Issuer hereby
appoints the Trustee as the Issuer's agent and attorney-in-fact for all such
purposes). The Trustee, as assignee hereunder, in its name or to the extent
permitted by law, in the name of the Issuer, may enforce all rights of the
Issuer (but only with the prior written consent of the Credit Enhancer unless
the Credit Enhancer is in default under the Credit Facility) and all obligations
of the Credit Enhancer and the Borrower under the Agreement and the Credit
Facility (and waive the same with the consent of the Credit Enhancer, except for
rights expressly granted to the Borrower) on behalf of the Bondowners whether or
not the Issuer is in default hereunder.
Section 711. Tax Covenants.
(a) The Issuer shall not use or knowingly permit the use of any proceeds
of the Bonds or any other funds of the Issuer, and the Trustee shall not use or
permit the use of any proceeds of the Bonds or any other funds of the Issuer
held by the Trustee, directly or indirectly, to acquire any securities or
obligations, and shall not use or permit the use of any amounts received by the
Issuer or Trustee with respect to the Agreement in any manner, and shall not
take or permit to be taken any other action or actions, which would cause any
Bond to be an "arbitrage bond" within the meaning of Section 148(a), or
"federally guaranteed" within the meaning of Section 149(b), of the Code. If at
any time the Issuer is of the opinion that for purposes of this subsection (a)
it is necessary to restrict or limit the yield on or change in any way the
investment of any moneys held
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by the Trustee under this Indenture, the Trustee shall take such action as may
be necessary in accordance with such instructions. The Issuer and the Trustee
shall be deemed in compliance with this Section to the extent they follow the
Tax Agreement or an Opinion of Bond Counsel with respect to the investment of
funds hereunder.
(B) The Trustee and the Issuer will not take any action or omit to take
any action or permit any action which is within its control to be taken or
omitted which would to its knowledge impair the exclusion of interest on the
Bonds from gross income for federal income tax purposes or the applicable
exemptions from taxation in the State.
(c) The Issuer and the Trustee shall at all times do and perform all acts
and things permitted by law and this Indenture which are necessary or desirable
in order to assure that interest paid on the Bonds will be excludable from gross
income for federal income tax purposes and to preserve the applicable exemptions
from taxation in the State and shall take no action that would result in such
interest not being excludable from gross income for federal income tax purposes.
[End of Article VII]
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ARTICLE VIII
DEFAULT AND REMEDIES
Section 801. Events of Default. If any one or more of the following events
occur, it is hereby defined as and declared to be and to constitute an "Event of
Default":
(a) default in the due and punctual payment of any interest on any Bond;
(b) default in the due and punctual payment of the principal of or
redemption premium, if any, on any Bond, whether at the stated maturity or
accelerated maturity thereof, or upon proceedings for redemption thereof or
otherwise;
(c) default in the payment of the Tender Price of any Tendered Bond (the
substance of which must be communicated by Immediate Notice by the Trustee to
the Credit Enhancer, the Borrower and the Issuer);
(d) the occurrence of an event of default under Article VIII of the
Agreement;
(e) the occurrence of either or both of the following:
(i) the Trustee has received written notice from the Credit
Enhancer, within the period provided for in the Credit
Facility, that the Credit Enhancer will not reinstate the
interest portion of the Credit Facility; or
(ii) the Trustee's receipt of written notice from the Credit
Enhancer that an "Event of Default" has occurred under the
Letter of Credit Agreement together with a direction from the
Credit Enhancer to the Trustee requiring either (A) the
acceleration of the Bonds pursuant to Section 802(a) or (B)
the mandatory purchase of the Bonds pursuant to Section 802(b)
hereof;
(f) default in the performance or observance of any other of the
covenants, agreements or conditions on the part of the Issuer in this Indenture
or in the Bonds contained, and the continuance thereof for a period of thirty
(30) days after written notice thereof shall have been given to the Issuer, the
Credit Enhancer and the Borrower by the Trustee, or to the Trustee, the Issuer,
the Credit Enhancer and the Borrower by the Owners of not less than twenty-five
percent (25%) in aggregate principal amount of Bonds then Outstanding; provided,
however, if any default shall be such that it cannot be corrected within such
30-day period, it shall not constitute an Event of Default if corrective action
is instituted by the Issuer or the Borrower within such period and diligently
pursued until the default is corrected; or
(g) the occurrence of an event of default pursuant to Article VIII of the
Series 1994B Trust Indenture.
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(h) The Trustee shall give Immediate Notice of any Event of Default to the
Issuer, the Borrower and the Credit Enhancer as promptly as practicable after
the occurrence of an Event of Default becomes known to the Trustee.
Section 802. Acceleration: Mandatory Purchase.
(a) If an Event of Default described in paragraph (a), (b), (c), (e)(i) or
(g) (except, with respect to paragraph (g), a default under Section 801(d),
(e)(ii) or (f) of the Series 1994B Indenture) of Section 801 hereof shall have
occurred and be continuing, the Trustee shall, by notice in writing delivered to
the Issuer, the Borrower and the Credit Enhancer, declare the principal of all
Bonds then Outstanding and the interest accrued thereon immediately due and
payable, and the Bonds shall cease to bear interest on such date; subject,
however, to subparagraph (b) hereof. The principal and interest shall thereupon
become due and payable on a date established by the Trustee, which date shall
not be more than ten (10) calendar days after such acceleration.
If an Event of Default described in paragraph (e)(ii) or (g) (but, with
respect to paragraph (g), only with respect to a default under Section
801(e)(ii) of the Series 1994B Indenture) of Section 801 hereof shall have
occurred and be continuing, the Trustee shall, by notice in writing delivered to
the Issuer, the Borrower and the Credit Enhancer, declare the principal of all
Bonds then Outstanding and the interest accrued thereon due and payable on such
date as the Trustee shall establish pursuant to Section 402(c) hereof, and the
Bonds shall cease to bear interest on such date; subject, however, to
subparagraph (b) hereof.
If an Event of Default described in paragraph (d), (f) or (g) (but, with
respect to paragraph (g), only with respect to a default under Section 801(d) or
(f) of the Series 1994B Indenture) of Section 801 hereof, shall have occurred
and be continuing, the Trustee, and may upon the written request of the Owners
of not less than 25% in aggregate principal amount of the Bonds then Outstanding
shall, but only with the prior written consent of the Credit Enhancer (unless
the Credit Enhancer is in default under the Credit Facility in which case no
such consent shall be required), by notice in writing delivered to the Issuer,
the Borrower and the Credit Enhancer declare the principal of all Bonds then
Outstanding and the interest accrued thereon immediately due and payable, and
such principal and interest shall thereupon become and be immediately due and
payable.
Upon any acceleration of the maturity of the Bonds hereunder, the Trustee
shall immediately demand payment under the Credit Facility to the extent
permitted by the terms thereof and pursue the remedies of the Trustee
thereunder.
If, at any time after such declaration, but before the Bonds shall have
matured by their terms, all overdue installments of principal of and interest on
the Bonds, together with the reasonable and proper expenses of the Trustee, and
all other sums then payable by the Issuer under this Indenture shall either be
paid or provision satisfactory to the Trustee shall be made for such payment,
then and in every such case the Trustee shall, but only with the approval of the
Credit Enhancer and the Owners of not less than a majority in aggregate
principal amount of the Bonds Outstanding, and upon the reinstatement of the
Credit Facility, rescind such declaration and annul such default in its
entirety. In such event, the Trustee shall rescind any declaration of
acceleration of the Loan Payments as provided in Section 8.2 of the Agreement.
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In case of any rescission, then and in every such case the Issuer, the
Trustee and the Bondowners shall be restored to their former positions, rights
and obligations hereunder, respectively, but no such rescission shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon.
(b) Mandatory Purchase. Upon the occurrence and continuance of an Event of
Default under paragraph (e)(ii) or (g) (but, with respect to paragraph (g), only
with respect to a default under Section 801(e)(ii) of the Series 1994B
Indenture) of Section 801 hereof, as provided in Section 302(d) hereof the
Credit Enhancer in its notice to the Trustee may direct the Trustee to purchase
the Bonds for the Credit Enhancer's own account, rather than to accelerate the
Bonds as provided in Section 802(a) hereof. In such case, the Trustee shall draw
upon the Credit Facility in accordance with the provisions of Section 302(d)
hereof to pay the purchase price for the Bonds, which shall be an amount equal
to the principal of all Outstanding Bonds and accrued interest thereon to the
Mandatory Purchase Date, and upon receipt of the proceeds of such draw, shall
immediately purchase the Bonds in accordance with Section 302 hereof.
Section 803. Surrender of Possession of Trust Estate: Rights and Duties of
Trustee in Possession. If an Event of Default shall have occurred and be
continuing, the Issuer, upon demand of the Trustee, shall forthwith surrender
the possession of, and it shall be lawful for the Trustee, by such officer or
agent as it may appoint, to take possession of all or any part of the Trust
Estate, together with the books, papers and accounts of the Issuer pertaining
thereto, and including the rights and the position of the Issuer under the
Agreement and to hold and manage the same and to collect, receive and sequester
the payments, revenues and receipts derived under the Agreement, and out of the
same and any moneys received from any receiver of any part thereof pay and set
up proper reserves for the payment of all proper costs and expenses of so
taking, holding and managing the same, including (i) reasonable compensation to
the Trustee, its agents and counsel, (ii) any reasonable charges of the Trustee
hereunder, and (iii) any taxes and assessments, and other charges, prior to the
lien of this Indenture which the Trustee may deem it wise to pay, and the
Trustee shall apply the remainder of the moneys so received in accordance with
Section 808. Whenever all that is due upon the Bonds shall have been paid and
all defaults made good and all payments pursuant to Section 509 hereof have been
made, the Trustee shall surrender possession of the Trust Estate to the Issuer,
its successors or assigns, the same right of entry, however, to exist upon any
subsequent Event of Default, subject to the provisions of Article V hereof.
While the Credit Facility is in force and effect, if no Bonds are outstanding,
the Trustee and the Issuer have been fully recompensed for all their costs and
expenses, the Credit Enhancer is not in default under the Credit Facility, and
any amounts remain unreimbursed with respect thereto, the Issuer shall
thereafter transfer possession of the Trust Estate to the Credit Enhancer.
While in possession of the Trust Estate, the Trustee shall render annually
(or more often if requested in writing) to the Issuer, the Borrower and the
Credit Enhancer a summarized statement of receipts and expenditures in
connection therewith.
Section 804. Appointment of Receivers in Event of Default. If an Event of
Default shall have occurred and be continuing, and upon the filing of a suit or
other commencement of judicial proceedings to enforce the rights of the Trustee
and of the Bondowners under this Indenture, the Trustee shall be entitled, with
the approval of the Credit Enhancer if the Credit Enhancer is not in
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default under the Credit Facility, as a matter of right, to the appointment of a
receiver or receivers of the Trust Estate and of the earnings, income, products
and profits thereof, pending such proceedings, with such powers as the court
making such appointment shall confer.
Section 805. Exercise of Remedies by the Trustee. If an Event of Default
shall have occurred and be continuing, the Trustee may, with the approval of the
Credit Enhancer if the Credit Enhancer is not in default under the Credit
Facility, pursue any available remedy at law or equity by suit, action, mandamus
or other proceeding to enforce the payment of the principal of and redemption
premium, if any, and interest on the Bonds then Outstanding, and to enforce and
compel the performance of the duties and obligations of the Issuer as herein set
forth.
If an Event of Default shall have occurred and be continuing, and if
requested so to do by the Credit Enhancer or by the Owners of not less than 25%
in aggregate principal amount of the Bonds then Outstanding and indemnified as
provided in paragraph (1) of Section 901, with the approval of the Credit
Enhancer if the Credit Enhancer is not in default under the Credit Facility, the
Trustee shall be obligated to exercise such one or more of the rights and powers
conferred by this Article as the Trustee, being advised by counsel, shall deem
most expedient in the interests of the Bondowners.
All rights of action under this Indenture or under any of the Bonds may be
enforced by the Trustee without the possession of any of the Bonds or the
production thereof in any trial or other proceedings relating thereto, and any
such suit or proceeding instituted by the Trustee shall be brought in its name
as Trustee without the necessity of joining as plaintiffs or defendants any
Bondowner, and any recovery or judgment shall, subject to Section 808, be for
the equal benefit of all the Owners of the Outstanding Bonds.
Section 806. Limitation on Exercise of Remedies by Bondowners. No
Bondowner shall have any right to institute any suit, action or proceeding in
equity or at law for the enforcement of this Indenture or for the execution of
any trust hereunder or for the appointment of a receiver or any other remedy
hereunder, unless:
(1) a default has occurred of which the Trustee has notice or is
deemed to have notice as provided in subparagraph (h} of Section 901, and
(2) such default shall have become an Event of Default, and
(3) the Owners of not less than 25% in aggregate principal amount of
the Bonds then Outstanding or the Credit Enhancer (with respect to an
Event of Default described in paragraph (e) or (g} (but, with respect to
paragraph (g), only with respect to a default under Section 801(e) of the
Series 1994B Indenture) of Section 801 hereof shall have made written
request to the Trustee, shall have offered it reasonable opportunity
either to proceed to exercise the powers hereinbefore granted or to
institute such action, suit or proceeding in its own name, and shall have
provided to the Trustee indemnity as provided in subparagraph (1) of
Section 901, and
(4) the Trustee shall thereafter fail or refuse to exercise the
powers herein granted or to institute such action, suit or proceeding in
its own name, and
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(5) the Credit Enhancer shall have consented thereto if the Credit
Enhancer is not in default under the Credit Facility;
and such notification, request and indemnity are hereby declared in every case,
at the option of the Trustee (with the exception of any duty to make demand on,
and proceed under, the Credit Facility, cause an acceleration of the Bonds or
make payments when due), to be conditions precedent to the execution of the
powers and trusts of this Indenture, and to any action or cause of action for
the enforcement of this Indenture, or for the appointment of a receiver or for
any other remedy hereunder, it being understood and intended that no one or more
Bondowners shall have any right in any manner whatsoever to affect, disturb or
prejudice this Indenture by such Bondowners action or to enforce any right
hereunder except in the manner herein provided, and that all proceedings at law
or in equity shall be instituted, had and maintained in the manner herein
provided and for the equal benefit of the Owners of all Bonds then Outstanding.
Nothing in this Indenture, however, shall affect or impair the right of any
Bondowner to payment of the principal of, and redemption premium, if any, and
interest on any Bond at and after its maturity or the obligation of the Issuer
to pay the principal of, and redemption premium, if any, and interest on each of
the Bonds to the respective Owners thereof at the time and place, from the
source and in the manner herein and in such Bond expressed.
Section 807. Right of Bondowners to Direct Proceedings. Any other
provision herein to the contrary notwithstanding, the Owners of a majority in
aggregate principal amount of the Bonds then Outstanding shall have the right,
at any time, with the approval of the Credit Enhancer if the Credit Enhancer is
not in default under the Credit Facility, by an instrument or instruments in
writing executed and delivered to the Trustee, to direct the time, method and
place of conducting all proceedings to be taken in connection with the
enforcement of this Indenture, or for the appointment of a receiver or any other
proceedings hereunder; provided that the Trustee shall have been provided
indemnity satisfactory to it in accordance with Section 901(1) hereof and
provided that such direction shall not be otherwise than in accordance with the
provisions of law and of this Indenture, and provided, further, that the Trustee
shall have the right to decline to follow any such direction if the Trustee in
good faith shall determine that the proceeding so directed would involve it in
personal liability.
Section 808. Application of Moneys in Event of Default. Upon an Event of
Default all moneys held or received by the Trustee pursuant to this Indenture,
the Agreement or the Credit Facility or pursuant to any right given or action
taken under this Article shall, after payment of the reasonable costs and
expenses of the proceedings resulting in the collection of such moneys, be
deposited in the Debt Service Fund (provided, however, Available Moneys shall be
used only for payment of principal or interest on the Bonds) and all moneys so
deposited in the Debt Service Fund shall be applied as follows:
(a) If the principal of all the Bonds shall not have become or shall not
have been declared due and payable, all such moneys shall be applied:
First -- To the payment to the persons entitled thereto of all
installments of interest then due and payable on the Bonds, other than the
Borrower Bonds, in the order in which such installments of interest became
due and payable, with interest thereon at the rate or rates specified in
the respective Bonds to the extent permitted by law, and, if the amount
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available shall not be sufficient to pay in full any particular
installment, then to the payment ratably, according to the amounts due on
such installment, to the persons entitled thereto, without any
discrimination or privilege;
Second -- To the payment to the persons entitled thereto of the
unpaid principal of and redemption premium, if any, on any of the Bonds,
other than Borrower Bonds, that shall have become due and payable (other
than Bonds called for redemption for the payment of which moneys or
securities are held pursuant to this Indenture), in the order of their due
date, with interest on such principal and redemption premium, if any, at
the rate or rates specified in the respective Bonds from the respective
dates upon which they became due and payable, and, if the amount available
shall not be sufficient to pay in full such principal and redemption
premium, if any, due on any particular date, together with such interest,
then to the payment ratably, according to the amounts of principal and
redemption premium, if any, due on such date, to the persons entitled
thereto without any discrimination or privilege;
Third -- To the payment to the Credit Enhancer, the unpaid principal
and interest due on the Pledged Bonds;
Fourth -- To the payment of the reasonable expenses, liabilities and
advances incurred or made by the Trustee;
Fifth -- To the Credit Enhancer any amounts due and owing under the
Collateral Documents;
Sixth -- To pay principal and interest on the Borrower Bonds; and
Seventh -- To the Borrower.
(b) If the principal of all the Bonds shall have become due or shall have
been declared due and payable, all such moneys shall be applied to the payment
of the principal, redemption premium, if any, and interest then due and unpaid
on all of the Bonds, with interest on such principal and redemption premium, if
any, and, to the extent permitted by law, on such interest, at the rate or rates
specified in the respective Bonds, without preference or priority of principal,
redemption premium or interest over principal, redemption premium or interest or
of any installment of interest over any other installment of interest or of any
Bond over any other Bond, ratably, according to the amounts due respectively for
principal, redemption premium, if any, and interest, to the persons entitled
thereto, without any discrimination or privilege; provided however principal of
and interest on Borrower Bonds shall only be paid after the amounts due the
Credit Enhancer under the Related Documents shall have been paid in full.
(c) If the principal of all the Bonds shall have been declared due and
payable, and if such declaration shall thereafter have been rescinded and
annulled under this Article then, subject to paragraph (b) of this Section, in
the event that the principal of all the Bonds shall later become due or be
declared due and payable, the moneys shall be applied in accordance with
paragraph (a) of this Section.
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Whenever moneys are to be applied pursuant to this Section, such moneys
shall be applied at such times and from time to time as the Trustee shall
determine, having due regard to the amount of such moneys available and which
may become available for such application in the future.
Whenever all of the Bonds and interest thereon have been paid under this
Section, and all expenses and charges of the Trustee have been paid, any balance
remaining in the Funds shall be paid first to the Credit Enhancer and second to
the Borrower as provided in Section 510.
Section 809. Remedies Cumulative. No remedy conferred by this Indenture
upon or reserved to the Trustee, to the Credit Enhancer or to the Bondowners is
intended to be exclusive of any other remedy, but each and every such remedy
shall be cumulative and shall be in addition to any other remedy given to the
Trustee, to the Credit Enhancer or to the Bondowners hereunder or now or
hereafter existing at law or in equity or by statute.
Section 810. Delay or Omission Not Waiver. No delay or omission to
exercise any right, power or remedy accruing upon any Event of Default shall
impair any such right, power or remedy or shall be construed to be a waiver of
any such Event of Default or acquiescence therein, and every such right, power
or remedy may be exercised from time to time and as often as may be deemed
expedient.
Section 811. Effect of Discontinuance of Proceeding. In case the Trustee
shall have proceeded to enforce any right under this Indenture by the
appointment of a receiver, by entry, or otherwise, and such proceedings shall
have been discontinued or abandoned for any reason, or shall have been
determined adversely, then and in every such case the Issuer, the Borrower, the
Trustee, the Credit Enhancer and the Bondowners shall, with the written consent
of the Credit Enhancer, be restored to their former positions and rights
hereunder, and all rights, remedies and powers of the Trustee shall continue as
if no such proceedings had been taken.
Section 812. Waivers of Events of Default. The Trustee shall waive any
Event of Default and its consequences and rescind any declaration of maturity of
principal upon the written request of the Owners of a majority in aggregate
principal amount of the Bonds then Outstanding; provided that there shall not be
waived without the written consent of the Owners of all the Bonds Outstanding
(a) any Event of Default in the payment of the principal of any Outstanding
Bonds at their maturity, upon the redemption (including as a result of
acceleration) or tender thereof, (b) any Event of Default under Section 801(e)
or (g) hereof (but, with respect to paragraph (g), only with respect to a
default under Section 801(e) of the Series 1994B Indenture) unless the Credit
Enhancer shall have given written notice to the Trustee that the Credit Facility
has been reinstated in full, or (c) any Event of Default in the payment when due
of the interest on any such Bonds unless, prior to such waiver or rescission,
all arrears of interest, with interest (to the extent permitted by law) at the
rate borne by the Bonds on overdue installments of interest in respect of which
such default shall have occurred, or all arrears of payments of principal when
due, as the case may be, and all expenses of the Trustee in connection with such
Event of Default shall have been paid or provided for; provided further that
there shall not be waived without the written consent of the Credit Enhancer any
Event of Default under Section 801(e)(ii) or (g) hereof (but, with respect to
paragraph (g), only with respect to a default under Section 801(e)(ii) of the
Series 1994B Indenture); and provided further that no Event of Default shall be
waived without the
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written consent of the Credit Enhancer if it has honored all its obligations
under the Credit Facility. In case of any such waiver or rescission, or in case
any proceeding taken by the Trustee on account of any such Event of Default
shall have been discontinued or abandoned or determined adversely, then and in
every such case the Issuer, the Borrower, the Trustee, the Bondowners and the
Credit Enhancer shall be restored to their former positions, rights and
obligations hereunder, respectively, but no such waiver or rescission shall
extend to any subsequent or other default, or impair any right consequent
thereon.
Section 813. Pledged Bonds. For the purposes of this Article VIII. Pledged
Bonds shall not be deemed Outstanding under this Indenture until the payment in
full of the principal of and interest on all other Bonds or the provision for
the payment thereof shall have been duly made. In the event any vote or consent
of the Bondowners is required hereunder, all Pledged Bonds shall be deemed
Outstanding for such purpose hereunder and the Credit Enhancer shall be deemed
the Owner thereof for purposes of voting or consenting thereto.
[End of Article VIII]
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ARTICLE IX
THE TRUSTEE
Section 901. Acceptance of Trusts. The Trustee hereby accepts the trusts
imposed upon it by this Indenture, and agrees to perform said trusts, but only
upon and subject to the following express terms and conditions:
(a) The Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into this
Indenture against the Trustee. Subject to the limitations on liability of the
Trustee contained in Section 901(1), in case an Event of Default shall have
occurred of which the Trustee is deemed hereunder to have knowledge (and which
has not been cured or waived), the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and shall use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's affairs.
(b) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or through agents, attorneys or
receivers. The Trustee shall be entitled to act upon the opinion or advice of
counsel in the exercise of reasonable care, who may be counsel to the Issuer,
the Credit Enhancer or the Borrower, concerning all matters of trusts hereof and
the duties hereunder, and may in all cases pay such reasonable compensation to
all such agents, attorneys and receivers as may reasonably be employed in
connection with the trusts hereof. The Trustee shall not be responsible for any
loss or damage resulting from any action or nonaction by it taken or omitted to
be taken in good faith in reliance upon such opinion or advice of counsel.
(c) The Trustee shall not be responsible for any recital herein or in the
Bonds (except with respect to the Certificate of Authentication of the Trustee
endorsed on the Bonds), or for the recording or rerecording, filing or refiling
of this Indenture or any security agreements or financing statements in
connection therewith (except with respect to the filing of continuation
statements), or for insuring the Project or collecting any insurance moneys or
taxes, or for the validity of the execution by the Issuer of this Indenture or
of any Supplemental Indentures or instruments of further assurance, or for the
sufficiency of the security for the Bonds. The Trustee shall not be responsible
or liable for any loss suffered in connection with any investment of funds made
by it in accordance with Article VI hereof.
(d) The Trustee shall not be accountable for the use of any Bonds
authenticated and delivered hereunder. The Trustee, in its individual or any
other capacity, may become the Owner or pledgee of Bonds with the same rights
which it would have if it were not Trustee.
(e) The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, affidavit, letter, telegram
or other paper or document provided for under this Indenture believed by it to
be genuine and correct and to have been signed, presented or sent by the proper
person or persons. Any action taken by the Trustee pursuant to and in accordance
with this Indenture upon the request or authority or consent of any person who,
at the time of making such
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request or giving such authority or consent is the Owner of any Bond, shall be
conclusive and binding upon all future Owners of the same Bond and upon Bonds
issued in exchange therefor or upon transfer or in place thereof.
(f) As to the existence or nonexistence of any fact or as to the
sufficiency or validity of any instrument, paper or proceeding, or whenever in
the administration of this Indenture the Trustee shall deem it desirable that a
matter be provided or established prior to taking, suffering or omitting any
action hereunder, the Trustee shall be entitled to rely upon a certificate
signed by an Authorized Issuer Representative as sufficient evidence of the
facts therein contained.
(g) The permissive right of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty, and the Trustee shall not be
answerable for other than its negligence or willful misconduct.
(h) The Trustee shall not be required to take notice or be deemed to have
notice of any Default hereunder except an Event of Default under Section 801(a),
(b), (c), (e) or (g) hereof (but, with respect to paragraph (g), only with
respect to a default under Section 801(a), (b), (c) or (e) of the Series 1994B
Indenture), or failure by the Issuer to cause to be made any of the payments to
the Trustee required to be made in Article V hereof, unless the Trustee shall be
specifically notified in writing of such Default by the Issuer, the Credit
Enhancer or the Owners of at least 25% in aggregate principal amount of all
Bonds then Outstanding. All notices or other instruments required by this
Indenture to be delivered to the Trustee shall be delivered at the Principal
Office of the Trustee, and, in the absence of such notice so delivered, the
Trustee may conclusively assume there is no Default except as aforesaid. The
Trustee shall notify the Credit Enhancer and the Borrower of any Default known
to the Trustee that has not yet become a matured Event of Default.
(i) At any and all reasonable times the Trustee and its duly authorized
agents, attorneys, experts, engineers, accountants and representatives shall
have the right, but shall not be required, to inspect the Project, including all
books, papers and records of the Issuer pertaining to the Project, the loan made
pursuant to the Agreement and the Bonds, and to take such memoranda from and in
regard thereto as may be desired.
(j) The Trustee shall not be required to give any bond or surety in
respect of the execution of its trusts and powers hereunder or otherwise in
respect of the Project.
(k) The Trustee shall have the right, but shall not be required, to
demand, in respect of the authentication of any Bonds, the withdrawal of any
cash, the release of any property, or any action whatsoever within the purview
of this Indenture, any showings, certificates, opinions, appraisals or other
information, or corporate or partnership action or evidence thereof, in addition
to that by the terms hereof required, as a condition of such action by the
Trustee as are deemed desirable for the purpose of establishing the right of the
Issuer to the authentication of any Bonds, the withdrawal of any cash, the
release of any property or the taking of any other action by the Trustee.
(l) Before taking any action under this Indenture, the Trustee may require
that satisfactory indemnity be furnished to it for the reimbursement of all
costs and expenses to which it may be put and to protect it against all
liability, except liability which is adjudicated to have
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resulted from its negligence or willful misconduct by reason of any action so
taken. Notwithstanding the foregoing, the Trustee shall be required, without
indemnity, to make drawings on the Credit Facility, to pay the principal and
purchase price of, and premium, if any and interest on the Bonds from moneys
available in the Funds and Accounts hereunder, to accelerate the maturity of the
Bonds pursuant to Section 802(a) or to call the Bonds for mandatory purchase
pursuant to Section 802(b) and, upon the acceleration of the maturity of the
Bonds or the mandatory purchase of the Bonds, to immediately demand payment
under the Credit Facility to the extent permitted by the terms thereof and
pursue the remedies of the Trustee thereunder.
(in) All moneys received by the Trustee shall, until used, applied or
invested as herein provided, be held in trust for the purposes for which they
were received but need not be segregated from other funds, except to the extent
required by law or this Indenture. The Trustee shall be under no liability for
interest on any moneys received hereunder, except such as may be agreed upon.
(n) Notwithstanding the effective date of this Indenture or anything to
the contrary in this Indenture, the Trustee shall have no liability or
responsibility for any act or event relating to this Indenture which occurs
prior to the date the Trustee formally executes this Indenture and commences
acting as Trustee hereunder.
(o) No provision of this Indenture shall be deemed to require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of its rights
or powers, if the Trustee shall have reasonable grounds for believing that
repayment of such funds or, in the alternative, adequate indemnity against such
risk or liability is not reasonably assured to it.
(p) The Trustee has no obligation or liability to the Bondowners for the
payment of interest or premium, if any, on or principal of the Bonds, but rather
the Trustee's sole obligations are to administer, for the benefit of the Issuer,
the Credit Enhancer, the Borrower and the Bondowners, the Funds established
hereunder.
(q) In the event the Trustee shall receive inconsistent or conflicting
requests and indemnity from two or more groups of Bondowners, each representing
less than a majority of the aggregate principal amount of the Bonds then
outstanding, the Trustee, in its sole discretion, may determine what action, if
any, shall be taken; provided, that, the Trustee shall follow the direction of
the Credit Enhancer if the Credit Enhancer is not in default under the Credit
Facility.
(r) Except for information provided by the Trustee concerning the Trustee,
the Trustee shall have no responsibility with respect to any information in any
offering memorandum or other disclosure material distributed with respect to the
Bonds. The Trustee shall have no responsibility for compliance with securities
laws in connection with issuance of the Bonds.
(s) The Trustee's immunities and protections from liability, and its right
to payment of compensation and indemnification in connection with performance of
its duties and obligations under the Indenture and the Agreement, shall survive
the Trustee's resignation or removal, or the final payment of the Bonds.
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(t) In acting or omitting to act pursuant to the provisions of the
Agreement, the Trustee shall be entitled to all of the rights, protections and
immunities accorded to the Trustee under the terms of this Indenture, including
but not limited to those set out in this Article IX.
(u) Notwithstanding anything otherwise provided in this Indenture, and
without regard to whether or not an Event of Default may have occurred and be
continuing, the Trustee may notify the Credit Enhancer and the Bondowners of
environmental hazards that the Trustee in its reasonable judgment has reason to
believe exist with respect to the Project, and the Trustee has the right to take
no further action and in such event no fiduciary duty exists which imposes any
obligation for further action with respect to the Project; provided, that if the
Trustee is directed by the Owners of a majority in aggregate principal amount of
Bonds then Outstanding (with the written consent of the Credit Enhancer) or the
Credit Enhancer to take further action, the Trustee may (i) take such further
action upon being furnished with indemnity and security satisfactory to it for
all reasonable costs, expenses, reimbursable fees, liabilities and losses,
including, without limitation, losses and liabilities in connection with
hazardous substances and environmental contamination, and the clean up thereof,
and reasonable attorney's fees and expenses, or (ii) elect not to proceed in
accordance with the directions of the Bondowners or the Credit Enhancer without
incurring any liability to the Bondowners or the Credit Enhancer if in the sole
opinion of the Trustee such direction may result in environmental or other
liability to the Trustee, the Credit Enhancer or the Bondowners, and the Trustee
may rely upon an opinion of its counsel in determining whether any such action
directed by Bondowners may result in such liability.
Section 902. Fees. Charges and Expenses of the Trustee. The Trustee shall
be entitled to payment of and/or reimbursement for reasonable fees for its
ordinary services rendered hereunder and all advances, agent and counsel fees
and other ordinary expenses reasonably and necessarily made or incurred by the
Trustee in connection with such ordinary services and, in the event that it
should become necessary that the Trustee perform extraordinary services, it
shall be entitled to reasonable extra compensation therefor and to reimbursement
for reasonable and necessary extraordinary expenses in connection therewith;
provided that if such extraordinary services or extraordinary expenses are
occasioned by the neglect or willful misconduct of the Trustee it shall not be
entitled to compensation or reimbursement therefor. The Trustee shall be
entitled to payment and reimbursement for the reasonable fees and charges of the
Trustee as Paying Agent for the Bonds and as Bond Registrar. Pursuant to the
provisions of Section 3.7 of the Agreement, the Borrower has agreed to pay to
the Trustee all reasonable fees, charges and expenses of the Trustee under this
Indenture. The Trustee agrees that the Issuer shall have no liability for any
fees, charges, advances, costs. and expenses of the Trustee, and the Trustee
agrees to look only to the Borrower for the payment of all fees, charges and
expenses of the Trustee as provided in the Agreement. Upon the occurrence of an
Event of Default and during its continuance, the Trustee shall have a lien with
right of payment prior to payment on account of principal of, redemption
premium, if any, or interest on any Bond, upon all moneys in its possession
under any provisions hereof for the foregoing advances, fees, costs and expenses
incurred, other than moneys received under the Credit Facility, or deposit in
the Purchase Fund or Rebate Fund, and which constitute Available Moneys for the
payment of redemption premium.
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Section 903. Notice to the Bondowners if Default Occurs. If a Default
occurs of which the Trustee is by Section 901(h) hereof required to take notice
or if notice of Default be given as in said Section provided, then the Trustee
shall give written notice thereof by mail, within 30 days of the receipt of
notice by the Trustee of such Default, to the Borrower, the Credit Enhancer and
to the Owners of all Bonds then Outstanding as shown by the Bond Register in the
same manner as required by Section 1302 hereof; provided that the Trustee shall
further give prompt notice of such Default to the Issuer and the Credit Enhancer
by such means as is practicable under the circumstances.
Section 904. Intervention by the Trustee. In any judicial proceeding to
which the Issuer is party and which, in the opinion of the Trustee and its
counsel, has a substantial bearing on the interests of Owners of the Bonds or
the Credit Enhancer, the Trustee may intervene on behalf of Bondowners and the
Credit Enhancer and shall do so if requested in writing by the Credit Enhancer
or the Owners of at least 25% in the aggregate principal amount of Bonds then
Outstanding (with the written consent of the Credit Enhancer), and if provided
with indemnity satisfactory to it.
Section 905. Successor Trustee Upon Merger, Consolidation or Sale. Any
corporation or association with or into which the Trustee may be merged or
converted or with or into which it may be consolidated, or to which the Trustee
may sell or transfer its corporate trust business and assets as a whole or
substantially as a whole, or any corporation or association resulting from any
merger, conversion, sale, consolidation or transfer to which it is a party,
shall be and become successor Trustee hereunder and shall be vested with all the
trusts, powers, rights, obligations, duties, remedies, immunities and privileges
hereunder as was its predecessor, without the execution or filing of any
instrument or any further act on the part of any of the parties hereto.
Section 906. Trustee Required; Eligibility. (a) There shall at all times
be a Trustee hereunder which shall be a trust institution or bank duly organized
under the laws of the United States of America or any state or territory
thereof, in good standing and qualified to accept such trust having a combined
capital stock, surplus and undivided profits of not less than $50,000,000. If
such institution publishes reports of condition at least annually pursuant to
law or regulation, then for the purposes of this Section the capital, surplus
and undivided profits of such institution shall be deemed to be its capital,
surplus and undivided profits as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner provided in Section 907. No resignation or removal of the Trustee and
no appointment of a successor Trustee shall become effective until the successor
Trustee has accepted its appointment under Section 909.
(b) Notwithstanding anything herein, in the Series 1994B Indenture or in
the Borrower Documents to the contrary, each of the "Borrower", the "Credit
Enhancer", the "Paying Agent(s)", the "Remarketing Agent", the "Tender Agent"
and the "Trustee" (including for such purpose each co-trustee) shall, as between
the documents relating to the Bonds and the Series 1994B Bonds be one and the
same Person. In this regard:
(i) the Trustee, including any successor Trustee, shall at all
times hereunder also serve as Trustee pursuant to the Series
1994B Indenture;
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(ii) the Trustee agrees to resign hereunder contemporaneously with
any resignation under the Series 1994B Indenture; and
(iii) any removal of the Trustee pursuant to the Series 1994B
Indenture shall result in the contemporaneous removal of the
Trustee hereunder.
Section 907. Resignation of Trustee. The Trustee and any successor Trustee
may at any time resign from the trusts hereby created by giving 30 days' written
notice to the Credit Enhancer, the Remarketing Agent, the Issuer, the Borrower
and the Bondowners, and such resignation shall take effect at the end of such 30
days, or upon the earlier appointment of a successor Trustee by the Issuer or by
the Owners of a majority in aggregate principal amount of the Bonds then
outstanding in accordance with Section 908 hereof; provided, however, that in no
event shall the resignation of a Trustee or successor Trustee become effective
until such time as a successor Trustee has been appointed and has accepted
appointment.
Section 908. Removal of Trustee. The Trustee may be removed for cause at
any time or without cause upon thirty days written notice by an instrument or
concurrent instruments in writing delivered to the Trustee and the Issuer and
signed by the Borrower (with the consent of the Credit Enhancer), the Credit
Enhancer or the Owners of a majority in aggregate principal amount of Bonds then
Outstanding (with the consent of the Credit Enhancer); provided, however, that
any such removal shall not be effective until such time as a successor Trustee
has been appointed and has accepted such appointment. The Issuer, the Borrower,
the Credit Enhancer or any Bondowner may at any time petition any court of
competent jurisdiction for the removal for cause of the Trustee.
Section 909. Appointment of Successor Trustee. In case the Trustee
hereunder shall resign or be removed, or shall otherwise become incapable of
acting hereunder, or in case it shall be taken under the control of any public
officer or officers or of a receiver appointed by a court, a successor Trustee,
approved in writing by the Credit Enhancer and the Borrower, may be appointed by
the Owners of a majority in aggregate principal amount of Bonds then
Outstanding, by an instrument or concurrent instruments in writing; provided,
nevertheless, that in case of such vacancy the Issuer, by an instrument executed
and signed by the Chairman of the Board of Directors of the Issuer and attested
by its Executive Director under its seal, may appoint a temporary Trustee,
approved by the Credit Enhancer, to fill such vacancy; or if such vacancy has
continued for 60 days, the Credit Enhancer and the Borrower may appoint such
temporary Trustee, until a successor Trustee shall be appointed by the
Bondowners in the manner above provided; and any such temporary Trustee so
appointed by the Issuer or the Credit Enhancer shall immediately and without
further acts be superseded by the successor Trustee so appointed by such
Bondowners. Any successor Trustee or temporary Trustees must have the
qualifications provided for in Section 906.
Section 910. Vesting of Trusts in Successor Trustee. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to its
predecessor and also to the Issuer, the Credit Enhancer and the Borrower an
instrument in writing accepting such appointment hereunder, and thereupon such
successor shall become fully vested with all the trusts, powers, rights,
obligations, duties, remedies, immunities and privileges of its predecessor; but
such predecessor shall, nevertheless, on the written request of the Issuer, the
Credit Enhancer or its successor, execute and deliver an instrument transferring
to such successor Trustee all the trusts, powers, rights, obligations, duties,
remedies, immunities and privileges of such predecessor hereunder; and every
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predecessor Trustee shall deliver all securities and moneys and documents held
by it as Trustee hereunder to its successor. Should any instrument in writing
from the Issuer be required by any successor Trustee for more fully and
certainly vesting in such successor the trusts, powers, rights, obligations,
duties, remedies, immunities and privileges hereby vested in the predecessor,
any and all such instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer.
Section 911. Trust Estate May be Vested in Co-Trustee. It is the purpose
of this Indenture that there shall be no violation of any law of any
jurisdiction (including particularly the State) denying or restricting the right
of banking corporations or associations to transact business as trustee in such
jurisdiction. It is recognized that in case of litigation under this Indenture
or the Agreement, and in particular in case of the enforcement with respect to
any default, or in case the Trustee deems that by reason of any present or
future law of any jurisdiction it may not exercise any of the powers, rights or
remedies herein granted to the Trustee, or take any other action which may be
desirable or necessary in connection therewith, it may be necessary or desirable
that the Trustee appoint an individual or institution as a co-trustee or
separate trustee, and the Trustee is hereby authorized to appoint such
co-trustee or separate trustee, with the written consent of the Issuer and the
Credit Enhancer.
In the event that the Trustee appoints an additional individual or
institution as co-trustee or separate trustee, each and every remedy, power,
right, claim, demand, cause of action, immunity, title, interest and lien
expressed or intended by this Indenture to be exercised by the Trustee with
respect thereto shall be exercisable by such co-trustee or separate trustee but
only to the extent necessary to enable such co-trustee or separate trustee to
exercise such powers, rights and remedies, and every covenant and obligation
necessary to the exercise thereof by such co-trustee or separate trustee shall
run to and be enforceable by either of them.
Should any deed, conveyance or instrument in writing from the Issuer be
required by the co-trustee or separate trustee so appointed by the Trustee for
more fully and certainly vesting in and confirming to him or it such properties,
rights, powers, trusts, duties and obligations, any and all such deeds,
conveyances and instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer.
In case any co-trustee or separate trustee shall die, become incapable of
acting, resign or be removed, all the properties, rights, powers, trusts, duties
and obligations of such co-trustee or separate trustee, so far as permitted by
law, shall vest in and be exercised by the Trustee until the appointment of a
successor to such co-trustee or separate trustee.
Section 912. Accounting. The Trustee shall render a monthly accounting,
for each calendar month, to the Borrower, to the Credit Enhancer and to any
Bondowner requesting the same at the cost of such Bondowner, and an annual (or
more often if requested) accounting, for each calendar year ended December 31,
to the Issuer showing in reasonable detail all financial transactions relating
to the Trust Estate during the accounting period and the balance in any funds or
accounts created by this Indenture as of the beginning and close of such
accounting period.
Section 913. Paying Agents; Bond Registrar; Appointment and Acceptance of
Duties; Removal. The Trustee is hereby designated and agrees to act as Paying
Agent and as Bond
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Registrar for and in respect of the Bonds. The Tender Agent shall be the Paying
Agent with respect to Tendered Bonds.
Section 914. The Tender Agent.
(a) The Trustee is hereby appointed as the initial Tender Agent for the
Bonds and with respect to Tendered Bonds, the Paying Agent, and hereby agrees to
carry out its responsibilities described herein. If the Tender Agent is other
than the Trustee, the Tender Agent shall signify its acceptance of the duties
and obligations imposed upon it hereunder by a written instrument of acceptance
delivered to the Issuer, the Credit Enhancer, the Borrower, the Trustee and the
Remarketing Agent, under which the Tender Agent will agree to particularly:
(1) hold all Bonds delivered to it for purchase hereunder as agent
and bailee of, and in escrow for the benefit of, the respective Owners
which have so delivered such Bonds; until moneys representing the Purchase
Price of such Bonds shall have been delivered to or for the account of or
to the order of such Owners; and
(2) keep such books and records as shall be consistent with prudent
industry practice, and make such books and records available for
inspection by the other parties.
The parties hereto shall each cooperate to cause the necessary
arrangements to be made and to be thereafter continued whereby funds from the
sources specified herein will be made available for the purchase of Bonds
presented at the Principal Office of the Tender Agent, and to otherwise enable
the Tender Agent to carry out its duties hereunder.
The Tender Agent, the Trustee and the Remarketing Agent shall cooperate to
the extent necessary to permit the preparation, execution, issuance,
authentication and delivery by the Tender Agent of replacement Bonds in
connection with the tender and remarketing of Bonds hereunder.
The Issuer, the Trustee and the Borrower acknowledge that, in carrying out
its responsibilities hereunder, the Tender Agent shall be acting solely for the
benefit of and as agent for the Owners from time to time of the Bonds. No
delivery of the Bonds to the Tender Agent or any agent of the Tender Agent or
purchase of Bonds by the Tender Agent shall constitute a redemption of the Bonds
or any extinguishment of the debt evidenced thereby.
(b) The Tender Agent shall be a commercial bank or trust company, duly
organized under the laws of the United States of America or any state or
territory thereof having a combined capital stock, surplus and undivided profits
of at least $20,000,000 and authorized by law to perform all of the duties
imposed upon it by this Indenture. The Tender Agent may resign and be discharged
of the duties and obligation created by this Indenture by giving at least thirty
(30) days' notice by mail to the Trustee, the Borrower, the Remarketing Agent,
and the Credit Enhancer; provided, however, that such resignation shall not take
effect unless and until a successor Tender Agent shall be appointed by the
Trustee with the consent of the Credit Enhancer. The Trustee shall use its best
efforts to appoint a successor Tender Agent during such thirty (30) day period
and in the event a successor Tender Agent has not taken office prior to the
expiration of such thirty (30) day period, the Tender Agent may petition a court
of applicable jurisdiction to appoint a successor Tender Agent. The Tender Agent
may be removed at any time by an instrument signed by the
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Borrower, with the written consent of the Credit Enhancer, or the Credit
Enhancer, and filed with the Borrower, the Credit Enhancer, the Issuer, the
Tender Agent, the Remarketing Agent and the Trustee; provided, however, that
such removal shall not take effect unless and until a successor Tender Agent
shall be appointed by the Trustee with the approval of the Borrower and the
Credit Enhancer, or by the Borrower and the Credit Enhancer if the Trustee has
not made such appointment within thirty (30) days from such filing. In the event
of the resignation or removal of the Tender Agent, the Tender Agent shall
deliver any moneys and Bonds held by it to its successor, and if there be no
successor, to the Trustee.
(c) Tender Agent shall be appointed by the Trustee with the approval of
the Borrower and the Credit Enhancer, or by the Borrower and the Credit Enhancer
if the Trustee has not made such appointment within thirty (30) days from such
filing. In the event of the resignation or removal of the Tender Agent, the
Tender Agent shall deliver any moneys and Bonds held by it to its successor, and
if there be no successor, to the Trustee.
(d) In accordance with Section 906(b) hereof:
(i) the Tender Agent, including any successor Tender Agent, shall
at all times hereunder also serve as Tender Agent pursuant to
the Series 1994B Indenture;
(ii) the Tender Agent agrees to resign hereunder contemporaneously
with any resignation under the Series 1994B Indenture; and
(iii) any removal of the Tender Agent pursuant to the Series 1994B
Indenture shall result in the contemporaneous removal of the
Tender Agent hereunder.
Section 915. Notice to Rating Agency. The Trustee shall notify the Rating
Agency (until such time as the Rating Agency no longer maintains a rating on the
Bonds) as soon as practicable (i) after the Trustee becomes aware of (1) any
expiration, termination or renewal of the Credit Facility, (2) any redemption or
purchase of all of the Bonds, (3) any change in the Credit Facility, the
Agreement or this Indenture, or (4) the interest portion of the Credit Facility
will not be reinstated, or (ii) if (1) the Trustee resigns or is removed or a
new Trustee is appointed, (2) the Remarketing Agent resigns or is removed or a
new Remarketing Agent is appointed, (iii) an Alternate Credit Facility is
provided, (iv) there is a mandatory tender of all Bonds, (v) there is a call for
the redemption of all Bonds, or (vi) there is a change in the Interest Mode
pursuant to Section 204 hereof.
Section 916. Right of Trustee to Pay Taxes and Other Charges. In case any
tax, assessment or governmental or other charge upon, or insurance premium with
respect to, any part of the Project is not paid as required herein or in the
Agreement, or in case any amount required to be rebated to the United States
pursuant to the provisions of Section 148(f) of the Code is not paid when due,
the Trustee may pay such tax, assessment or governmental charge, insurance
premium, or rebate amount, without prejudice, however, to any rights of the
Trustee or the Bondowners hereunder arising in consequence of such failure; and
any amount at any time so paid under this Section, with interest thereon from
the date of payment at a rate per annum equal to the Trustee's base rate for
variable rate commercial loans in effect at the time plus two percent (2%),
shall
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become an additional obligation secured by this Indenture, and the same shall be
given a preference in payment over any payment of principal of, premium, if any,
or interest on the Bonds, and shall be paid out of the proceeds of rents,
revenues and receipts collected from the Project, not including payments on the
Credit Facility, if not otherwise caused to be paid; but the Trustee shall be
under no obligation to make any such payment unless it shall have been requested
to do so by the Credit Enhancer or the Owners of at least twenty-five percent
(25%) of the aggregate principal amount of Bonds then Outstanding and shall have
been provided adequate funds for the purpose of such payment.
[End of Article IX]
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ARTICLE X
SUPPLEMENTAL INDENTURES
Section 1001. Supplemental Indentures Not Requiring Consent of Bondowners.
The Issuer and the Trustee may from time to time, with the prior written consent
of the Credit Enhancer and the Borrower, if required pursuant to Section 1003
hereof, but without the consent of or notice to any of the Bondowners or the
owners of the Series 1994B Bonds, enter into such Supplemental Indenture or
Supplemental Indentures as shall not be inconsistent with the terms and
provisions hereof, so long as such Supplemental Indenture or Supplemental
Indentures does not cause the then-current rating on the Bonds to be lowered,
for any one or more of the following purposes:
(a) To cure any ambiguity, formal defect or omission in this Indenture or
to make any other change not materially prejudicial to the Bondowners or the
owners of the Series 1994B Bonds;
(b) To grant to or confer upon the Trustee for the benefit of the
Bondowners any additional rights, remedies, powers or authority that may
lawfully be granted to or conferred upon the Bondowners or the Trustee or either
of them;
(c) To subject to this Indenture additional revenues, properties or
collateral;
(d) To modify, amend or supplement this Indenture or any indenture
supplemental thereto in such manner as to permit the qualification of the
Indenture under the Trust Indenture Act of 1939, as then amended, or any
similar federal statute hereafter in effect or to permit the qualification of
the Bonds for sale under the securities laws of any state of the United States;
(e) To evidence the appointment of a separate trustee or the succession of
a new trustee hereunder;
(f) To make any other change which will become effective on a date on
which the Bonds are subject to mandatory tender pursuant to Section 302 hereof,
provided the substance of such change is described in the Trustee's notice to
Bondowners in connection with an election to retain Bonds;
(g) To make any other change which, in the sole judgment of the Trustee,
does not materially adversely affect the interests of the Bondowners or the
owners of the Series 1994B Bonds; it being understood that in exercising such
judgment the Trustee may rely on the opinion of such counsel as it may select;
(h) To more precisely identify the Project or to substitute or add
additional property thereto; and
(i) To conform this Indenture to the Code or other or future applicable
federal law concerning tax-exempt obligations;
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provided that, in the event a Supplemental Indenture is entered into with
respect to any of the matters referred to in (a) through (b) above, a
corresponding supplemental indenture, if appropriate under the circumstances,
shall be entered into with respect to the Series 1994B Indenture.
Section 1002. Supplemental Indentures Requiring Consent of Bondowners.
Exclusive of Supplemental Indentures covered by Section 1001 hereof and subject
to the terms and provisions contained in this Section, and not otherwise, the
Owners (within the meaning of this Indenture and the Series 1994B Indenture) of
not less than 51% in aggregate principal amount of the Bonds and the Series
1994B Bonds then outstanding shall have the right from time to time, with the
prior written consent of the Credit Enhancer and, if required pursuant to
Section 1003 hereof, the Borrower, anything contained in this Indenture to the
contrary notwithstanding, to consent to and approve the execution by the Issuer
and the Trustee of such other Supplemental Indenture or Supplemental Indentures
as shall be deemed necessary and desirable by the Issuer for the purpose of
modifying, amending, adding to or rescinding, in any particular, any of the
terms or provisions contained in this Indenture or in any Supplemental Indenture
(including any consents that may be given in connection with an exchange or
tender offer); provided, however, that nothing in this Section contained shall
permit or be construed as permitting without the consent of the Owners (within
the meaning of this Indenture and the Series 1994B Indenture) of 100% of the
Bonds and the Series 1994B Bonds then outstanding, the Issuer, the Trustee and
the Credit Enhancer, (a) an extension of the maturity of the principal of or the
scheduled date of payment of interest on any Bond issued hereunder, or (b) a
reduction in the principal amount, redemption premium or any interest payable on
any Bond, or (c) a privilege or priority of any Bond or Bonds over any other
Bond or Bonds, or (d) a reduction in the aggregate principal amount of Bonds the
Owners of which are required for consent to any such Supplemental Indenture, or
(e) any modification of the redemption or tender features of the Bonds, or (f)
any change which results in the lowering of the then-current rating on the
Bonds; and provided, further, that in the event a Supplemental Indenture is
entered into in accordance with this Section, a corresponding supplemental
indenture, if appropriate under the circumstances, shall be entered into with
respect to the Series 1994B Indenture.
If at any time the Issuer shall request the Trustee to enter into any such
Supplemental Indenture for any of the purposes of this Section, the Trustee
shall cause notice of the proposed execution of such Supplemental Indenture to
be mailed to each Bondowner, each owner of Series 1994B Bonds and the Credit
Enhancer (and a copy of such proposed Supplemental Indenture shall be mailed
with such notice to the Credit Enhancer. Such notice shall briefly set forth the
nature of the proposed Supplemental Indenture and shall state that copies
thereof are on file at the Principal Office of the Trustee for inspection by all
Bondowners and owners of the Series 1994B Bonds and a copy of such proposed
supplemental Indenture shall be mailed with such notice to the Credit Enhancer.
If within 60 days or such longer period as shall be prescribed by the Issuer
following the mailing of such notice, the Credit Enhancer and the Owners (within
the meaning of this Indenture and the Series 1994B Indenture) of not less than
fifty-one percent (51%) in aggregate principal amount of the Bonds and the
Series 1994B Bonds then outstanding at the time of the execution of any such
Supplemental Indenture shall have consented to and approved the execution
thereof as herein provided, no Owner of any Bond shall have any right to object
to any of the terms and provisions contained therein, or the operation thereof,
or in any manner to question the propriety of the execution thereof, or to
enjoin or restrain the Trustee or the Issuer
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from executing the same or from taking any action pursuant to the provisions
thereof. Upon the execution of any such Supplemental Indenture as in this
Section permitted and provided, this Indenture shall be and be deemed to be
modified and amended in accordance therewith.
Section 1003. Borrower's Consent to Supplemental Indentures. Anything
herein to the contrary notwithstanding, a Supplemental Indenture under this
Article which affects any rights or obligations of the Borrower shall not become
effective unless and until the Borrower shall have consented in writing to the
execution and delivery of such Supplemental Indenture. In this regard, the
Trustee shall cause notice of the proposed execution and delivery of any such
Supplemental Indenture together with a copy of the proposed Supplemental
Indenture to be mailed to the Borrower at least 15 days prior to the proposed
date of execution and delivery of any such Supplemental Indenture. Under no
circumstances shall a failure by the Borrower to respond to such notice be
construed as a consent for these purposes.
Section 1004. Opinion of Bond Counsel. Notwithstanding anything to the
contrary in Sections 1001 or 1002, before the Issuer or the Trustee enter into
any supplemental indenture pursuant to Section 1001 or 1002. there shall have
been delivered to the Issuer, the Trustee, the Borrower and the Credit Enhancer
an Opinion of Bond Counsel stating that such supplemental indenture is
authorized or permitted by this Indenture and the Act, complies with their
respective terms, will, upon the execution and delivery thereof, be valid and
binding upon the Issuer in accordance with its terms and will not adversely
affect the exclusion of interest on the Bonds from gross income for federal
income tax purposes.
[End of Article X]
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ARTICLE XI
AMENDMENT OF AGREEMENT AND CREDIT FACILITY
Section 1101. Amendments, Changes or Modifications to the Agreement and
Credit Facility Not Requiring Consent of Bondowners. So long as such does not
cause the then-current rating on the Bonds to be lowered, the Trustee, with the
prior written consent of the Credit Enhancer, may, without the consent of or
notice to the Bondowners or the owners of the Series 1994B Bonds, consent to any
amendment, change or modification of the Agreement and the Credit Facility, as
may be required (i) by the provisions of such documents and this Indenture, (ii)
for the purpose of curing any ambiguity or formal defect or omission in such
documents, or in connection with any other change therein which, in the judgment
of the Trustee, is not to the material prejudice of the Trustee or the
Bondowners or the owners of the Series 1994B Bonds, (iii) so as to more
precisely identify the Project or substitute or add additional property thereto,
(iv) to conform the Agreement or the Credit Facility to the Code or other or
future applicable Federal law concerning tax-exempt obligations or (v) in
connection with any other change therein which, in the sole judgment of the
Trustee, does not materially adversely affect the interests of the Bondowners or
the owners of the Series 1994B Bonds; provided that, in the event a Supplemental
Indenture is entered into with respect to any of the matters referred to in (i)
through (iii) and (v) above, a corresponding Supplemental Indenture, if
appropriate under the circumstances, shall be entered into with respect to the
Series 1994B Indenture. In exercising such judgment, the Trustee may rely on the
opinions of such counsel as it may select.
Section 1102. Amendments, Changes or Modifications to the Agreement and
Credit Facility Requiring Consent of Bondowners. except as provided for in
Section 1101 hereof, the Trustee shall not consent to any amendment, change or
modification of the Agreement or the Credit Facility without the mailing of
notice and the obtaining of the written approval or consent of the Credit
Enhancer and the Owners (within the meaning of this Indenture and the Series
1994B Indenture) of not less than fifty-one percent (51%) in aggregate principal
amount of the Bonds and the Series 1994B Bonds at the time outstanding given and
obtained as provided in Section 1002 hereof (including any consents that may be
given in connection with an exchange or tender offer); provided, however, that
no such amendment, change or modification to such documents shall be entered
into which permits, without the consent of the Owners (within the meaning of
this Indenture and the Series 1994B Indenture) of 100% of the Bonds and the
Series 1994B Bonds then outstanding, the Issuer, the Trustee and the Credit
Enhancer, (a) a reduction of the maturity or expiration date of the Credit
Facility, or (b) a change in the timing of payments under or the amounts
required to be paid under the Credit Facility, or (c) a lowering of the then-
current credit rating on the Bonds; and provided, further, that in the event a
Supplemental Indenture is entered into in accordance with this Section, a
corresponding supplemental indenture, if appropriate under the circumstances,
shall be entered into with respect to the Series 1994B Indenture. If at any time
the Issuer, the Credit Enhancer and the Borrower shall request the consent of
the Trustee to any such proposed amendment, change or modification to such
documents, the Trustee shall cause notice of such proposed amendment, change or
modification to such documents to be given in the same manner as provided by
Section 1002 hereof with respect to Supplemental Indentures and the
corresponding supplemental indentures with respect to the Series 1994B Bonds.
Such notice shall briefly set forth the nature of such proposed amendment,
change or modification to such documents and shall state that copies of the same
are on file at the Principal Office of the Trustee for
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inspection by all Bondowners and a copy of such proposed amendment, change or
modification to such document shall be mailed with such notice to the Credit
Enhancer.
Section 1103. Opinion of Bond Counsel. Anything to the contrary in
Sections 1101 or 1102 notwithstanding, before the Trustee shall consent to any
amendment of the Agreement or the Credit Facility there shall have been
delivered to the Trustee, the Borrower and the Credit Enhancer an Opinion of
Bond Counsel stating that such amendment is authorized or permitted by this
Indenture and the Act, complies with their respective terms, will, upon the
execution and delivery thereof, be valid and binding upon the Issuer (if the
Issuer is a party thereto) in accordance with its terms and will not adversely
affect the exclusion of interest on the Bonds from gross income for federal
income tax purposes.
[End of Article XI]
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<PAGE>
ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 1201. Defeasance. If the Bonds are in an Interest Mode other than
a Weekly Mode or Monthly Mode and if the Issuer shall pay or provide for the
payment (other than by the Credit Enhancer) of any Bond or Bonds Outstanding in
any one or more of the following ways:
(a) by paying or causing to be paid, from Available Moneys, the principal
of (including redemption premium, if any) and interest on such Bonds, as and
when the same become due and payable;
(b) by depositing with the Trustee, in trust and irrevocably setting aside
exclusively for such payment, at or before maturity, Available Moneys in an
amount sufficient to pay or redeem (when redeemable) Bonds (including the
payment of redemption premium, if any, and interest payable on such Bonds to the
maturity or redemption date thereof), provided that such moneys, if invested,
shall be invested in Government Securities which are not subject to redemption
and payment prior to maturity except at the option of the holder thereof
("Non-Callable Government Securities") in an amount and with maturities, without
consideration of any income or increment to accrue thereon, sufficient to pay or
redeem (when redeemable) and discharge the indebtedness on such Bonds at or
before their respective maturity dates, to pay the interest thereon as it comes
due;
(c) by delivering to the Trustee, for cancellation by it, such Bonds; or
(d) by depositing with the Trustee, in trust, Non-Callable Government
Securities acquired with Available Moneys in such amounts as are certified to
the Trustee to be fully sufficient, together with other Available Moneys
deposited therein and together with the income or increment to accrue thereon,
without consideration of any reinvestment thereof, to pay or redeem (when
redeemable) and discharge the indebtedness on such Bonds at or before their
respective maturity dates, to pay the interest thereon as it comes due;
then such Bond or Bonds shall be deemed to be paid within the meaning of this
Article and shall cease to be entitled to any lien, benefit or security under
this Indenture, except for the purposes of any such payment from such moneys or
Government Securities and except for the purposes of registration, transfer and
exchange of such Bonds. If all the Bonds are not to be redeemed within 30 days,
the Trustee shall mail, as soon as practicable, in the manner prescribed by
Article IV hereof, a notice to the owners of such Bonds that the deposit
required by (b) or (d) above has been made with the Trustee and that said Bonds
are deemed to have been paid in accordance with this Article and stating the
maturity or redemption date upon which moneys are to be available for the
payment of the principal of or redemption price, if applicable, on said Bonds as
specified in (1)) or (d) above.
Notwithstanding the foregoing, in the case of the Bonds which by their
terms may be redeemed prior to the stated maturities thereof, no deposit under
clauses (b) or (d) of the immediately preceding paragraph shall be deemed a
payment of such Bonds as aforesaid until, as to all such Bonds which are to be
redeemed prior to their respective stated maturities and as to
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Bonds subject to interest rate adjustment prior to maturity which shall be
redeemed prior to the next Interest Adjustment Date, proper notice of such
redemption shall have been given in accordance with Article IV of this Indenture
or irrevocable instructions shall have been given to the Trustee to give such
notice at the time when such notice may be given pursuant to the provisions of
this Indenture.
Notwithstanding any provisions of any other Section of this Indenture
which may be contrary to the provisions of this Section, all Available Moneys or
Non-Callable Government Securities or other investments acceptable to the Credit
Enhancer set aside and held in trust pursuant to the provisions of this Section
for the payment of Bonds (including redemption premium thereon, if any, and
interest) shall be applied to and used solely for the payment of the particular
Bonds (including redemption premium thereon, if any, and interest) with respect
to which such Available Moneys and Non-Callable Government Securities or other
investments acceptable to the Credit Enhancer have been so set aside in trust.
The Issuer may at any time surrender to the Trustee for cancellation by it
any Bond previously authenticated and delivered which the Issuer may have
acquired in any manner whatsoever, and such Bonds, upon such surrender and
cancellation, shall be deemed to be paid and retired.
Section 1202. Satisfaction and Discharge of the Indenture. If the Issuer
shall pay the principal of, redemption premium, if any, and interest on all of
the Bonds Outstanding in accordance with their terms, or shall provide for such
payment as provided in Section 1201 hereof, and if the Issuer shall also pay or
cause to be paid all other sums payable hereunder by the Issuer, then and in
that case this Indenture and the estate and rights granted hereunder shall
cease, terminate and become null and void, and thereupon the Trustee shall, upon
Written Request of the Issuer, and an Opinion of Counsel, each stating that in
the opinion of the signers all conditions precedent to the satisfaction and
discharge of this Indenture have been complied with, forthwith execute proper
instruments acknowledging satisfaction of and discharging this Indenture and the
lien hereof; provided that, with respect to Bonds for which payment has been
provided at the time but which has not in fact been paid, the liability of the
Issuer in respect of such Bonds shall continue provided that the Owners thereof
shall thereafter be entitled to payment only out of the moneys or Government
Securities deposited with the Trustee as provided in this Article. The
satisfaction and discharge of this Indenture shall be without prejudice to the
rights of the Trustee to charge and be reimbursed by the Issuer and the Borrower
for any expenditures which it may thereafter incur in connection herewith.
Notwithstanding the release and discharge of the lien of this Indenture as
provided above, those provisions of this Indenture relating to the maturity of
the Bonds, interest payments and dates thereof, tender and purchase provisions,
exchange and transfer of Bonds, replacement of mutilated, destroyed, lost,
stolen or Undelivered Bonds, the safekeeping and cancellation of Bonds,
nonpresentment of Bonds, the holding of moneys in trust, redemption of Bonds and
the duties of the Trustee, the Bond Registrar, the Paying Agent and the
Remarketing Agent in connection with all of the foregoing, remain in effect and
shall be binding upon the Trustee and the Bondowners.
The Issuer is hereby authorized to accept a certificate by the Trustee
that the whole amount of the principal, redemption premium, if any, and interest
so due and payable upon all of the Bonds
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<PAGE>
then Outstanding has been paid or such payment provided for in accordance with
Section 1201 hereof as evidence of satisfaction of this Indenture, and upon
receipt thereof shall cancel and erase the inscription of this Indenture from
its records.
All moneys, funds, securities or other property remaining on deposit in
all Funds or Accounts established under this Indenture (other than said moneys
or Government Securities or other investments deposited in trust as above
provided) shall, upon the full satisfaction of this Indenture, forthwith be
transferred, paid over and distributed to the Credit Enhancer and the Borrower
in the manner provided in Section 510 hereof.
If there is a release and discharge of the lien of this Indenture as
provided above, the Trustee shall so notify the Rating Agency.
Section 1203. When Refunding is Not Permitted. None of the Bonds
Outstanding hereunder may be refunded nor may this Indenture be discharged if
under any circumstances the interest on the Bonds is thereby made subject to
federal income taxation. In determining the foregoing, the Trustee may rely upon
an Opinion of Bond Counsel (which opinion may be based upon a ruling or rulings
of the Internal Revenue Service) to the effect that the interest on the Bonds
proposed to be refunded will not be subject to federal income taxation,
notwithstanding the satisfaction and discharge of this Indenture.
[End of Article XII]
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 1301. Consents and Other Instruments by Bondowners. Any consent,
request, direction, approval, objection or other instrument required by this
Indenture to be signed and executed by the Bondowners may be in any number of
concurrent writings of similar tenor and may be signed or executed by such
Bondowners in person or by agent appointed in writing. Proof of the execution of
any such instrument or of the writing appointing any such agent and of the
ownership of Bonds, if made in the following manner, shall be sufficient for any
of the purposes of this Indenture except for the assignment of the ownership of
any Bond which proof shall be made by signature guaranty, and shall be
conclusive in favor of the Trustee with regard to any action taken, suffered or
omitted under any such instrument, namely:
(a) The fact and date of the execution by any person of any such
instrument may be proved by the certificate of any officer in any jurisdiction
who by law has power to take acknowledgments within such jurisdiction that the
person signing such instrument acknowledged before him the execution thereof, or
by affidavit of any witness to such execution.
(b) The fact of ownership of Bonds and the amount or amounts, numbers and
other identification of such Bonds, and the date of holding the same shall be
proved by the Bond Register.
In determining whether the Owners of the requisite principal amount of
Bonds Outstanding have given any request, demand, authorization, direction,
notice, consent or waiver under this Indenture, Bonds owned by, or held by or
for the account of, the Issuer, the Borrower or any Affiliated Party of the
Borrower shall be disregarded and deemed not to be Outstanding under this
Indenture, except that, in determining whether the Trustee shall be protected in
relying upon any such request, demand, authorization, direction, notice, consent
or waiver, only Bonds which the Trustee knows to be so owned shall be so
disregarded. Notwithstanding the foregoing, Bonds (including Pledged Bonds) so
owned which have been pledged in good faith shall not be disregarded if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Bonds and that the pledgee is not the Issuer, the
Borrower or any Affiliated Party of the Borrower.
Section 1302. Notices. Except as otherwise provided herein, it shall be
sufficient service of any notice, request, complaint, demand or other paper
required by this Indenture to be given to or filed with the Issuer, the Trustee,
the Credit Enhancer, the Remarketing Agent, the Borrower or the Bondowners if
the same shall be duly mailed by first-class mail, postage pre-paid, certified
or registered mail, or sent by telegram, telecopy or telex or other similar
communication, or when given by telephone, confirmed in writing by first-class
mail, postage pre-paid, certified or registered mail, or sent by telegram,
telecopy or telex or other similar communication, on the same day, addressed:
(a) To the Issuer at:
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<PAGE>
South Carolina Jobs-Economic Development Authority
1201 Main Street, Suite 1750
Columbia, South Carolina 29201
Attention: Executive Director
Telephone: (803) 737-0079
Telecopier: (803) 737-0016
(b) To the Trustee and Tender Agent at:
Mark Twain Bank
8820 Ladue Road
St. Louis, Missouri 63124
Attention: Corporate Trust Division
Telephone: (314) 889-0753
Telecopier: (314) 889-0736
(c) To the Credit Enhancer at:
Heller Financial, Inc.
500 West Monroe Street, 12th Floor
Chicago, Illinois 60661
Attention: Portfolio Manager, Portfolio Organization,
Corporate Finance Group
Telephone: (312) 441-7500
Telecopier: (312) 441-7367
With a copy to Legal Department, Portfolio Organization,
Corporate Finance Group
(d) To the Remarketing Agent at:
Stern Brothers & Co.
8000 Maryland Avenue, Suite 1020
St. Louis, Missouri 63105
Attention: Mr. Terrence M. Finn
Telephone: (314) 727-5519
Telecopier: (314) 727-7313
(e) To the Borrower at:
Roller Bearing Company of America, Inc.
140 Terry Drive
Newtown, Pennsylvania 18940
Attention: Chief Financial Officer
Telephone: (215) 579-4300
Telecopier: (215) 579-4318
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<PAGE>
With a copy to:
Gibson, Dunn & Crutcher
2029 Century Park East, Suite 4000
Los Angeles, California 90067
Attention: Bruce D. Meyer
Telephone: (310) 552-8686
Telecopier: (310) 277-5827
(f) To the Bondowners:
Addressed to each of the Owners of all Bonds at the time
Outstanding, as shown by the Bond Register.
(g) Initially, to the Rating Agency at:
Standard & Poor's Ratings Group
25 Broadway
New York, New York 10004
Attention: LOC Rating Surveillance
Telephone: (212) 208-1846
Telecopier: (212) 208-0031
All notices given by first-class mail, certified or registered mail,
postage prepaid, as aforesaid shall be deemed duly given as of the third day
after the same are so mailed; provided that notices shall be deemed given as of
the date they are sent by telecopy or otherwise received. A duplicate copy of
each notice, certificate or other communication given hereunder by either the
Issuer or the Trustee to the other shall also be given to the Borrower, the
Remarketing Agent and the Credit Enhancer. In the event of notice to any party
other than the Issuer or the Trustee, a copy of the notice shall be provided to
the Borrower, the Remarketing Agent and the Credit Enhancer. In addition, the
Trustee shall send to the Credit Enhancer, the Borrower, the Tender Agent and
the Remarketing Agent a copy of each notice sent to the Bondowners. The Issuer,
the Trustee, the Tender Agent, the Borrower, the Credit Enhancer and the
Remarketing Agent may from time to time designate, by notice given hereunder to
the others of such parties, such other address to which subsequent notices,
certificates or other communications shall be sent.
Section 1303. Limitation of Rights Under the Indenture. With the exception
of rights herein expressly conferred and as otherwise provided in this Section,
nothing expressed or mentioned in or to be implied from this Indenture or the
Bonds is intended or shall be construed to give any person other than the
parties hereto, the Borrower, the Credit Enhancer and the Owners of the Bonds,
any right, remedy or claim under or in respect to this Indenture. This Indenture
and all of the covenants, conditions and provisions hereof are, except as
otherwise provided in this Section, intended to be and are for the sole and
exclusive benefit of the parties hereto, the Borrower, the Credit Enhancer and
the Owners of the Bonds as herein provided.
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<PAGE>
The Trustee and the Issuer acknowledge and agree that each of the
Borrower, the Credit Enhancer, the Remarketing Agent and the Tender Agent is a
third-party beneficiary of those provisions herein which relate to the making of
payments or giving of notice to or consents by or following the directions of or
the performance of other acts to benefit it, and all such provisions shall be
enforceable by such parties, and in addition acknowledge and agree that the
Credit Enhancer shall for all purposes hereunder be treated as the Owner of
Pledged Bonds.
Section 1304. Suspension of Mail Service. If, because of the temporary or
permanent suspension of mail service or for any other reason, it is impossible
or impractical to mail any notice in the manner herein provided, then such
delivery of notice in lieu thereof as shall be made with the approval of the
Trustee shall constitute a sufficient notice.
Section 1305. Business Days. If any date for the payment of principal of,
redemption premium, if any, or interest on the Bonds or the taking of any other
action hereunder is not a Business Day, then such payment shall be due, or such
action shall be taken, on the first Business Day thereafter with the same force
and effect as if made on the date fixed for payment or performance.
Section 1306. Immunity of Officers,. Employees and Members of Issuer. No
recourse shall be had for the payment of the principal of or redemption premium,
if any, or interest on any of the Bonds or for any claim based thereon or upon
any obligation, covenant or agreement in this Indenture contained against any
past, present or future officer, member, employee or agent of the Issuer, or of
any successor body, as such, either directly or through the Issuer or any
successor body, under any rule of law or equity, statute or constitution, or by
the enforcement of any assessment or penalty or otherwise, and all such
liability of any such officers, members, employees or agents as such is hereby
expressly waived and released as a condition of and consideration for the
execution of this Indenture and the issuance of such Bonds.
Section 1307. Credit Enhancer's Remedial Rights. The Issuer and the
Trustee on behalf of the Bondowners hereby acknowledge and agree that should the
Credit Enhancer exercise certain of its remedial rights under the Credit
Documents, the Credit Enhancer (or an Affiliate or designee thereof) may become
successor in interest to the Borrower under the Agreement. No such exercise of
the Credit Enhancer's rights under the Credit Documents, or succession of the
Credit Enhancer (or an affiliate or designee thereof) to the interest of the
Borrower under the Agreement, shall require, as a condition precedent, either
(i) the further consent of the Issuer, the Trustee or the Bondowners, or (ii)
the acceleration of the Bonds (unless the Credit Enhancer elects such in its
sole discretion).
Section 1308. Severability. If any provision of this Indenture shall be
held or deemed to be invalid, inoperative or unenforceable as applied in any
particular case in any jurisdiction or jurisdictions or in all jurisdictions, or
in all cases because it conflicts with any other provision or provisions hereof
or any constitution or statute or rule of public policy, or for any other
reason, such circumstances shall not have the effect of rendering the provision
in question inoperative or unenforceable in any other case or circumstances, or
of rendering any other provision or provisions herein contained invalid,
inoperative or unenforceable to any extent whatever. The invalidity of any one
or more phrases, sentences, clauses or Sections in this Indenture contained
shall not affect the remaining portions of this Indenture, or any part thereof.
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<PAGE>
Section 1309. Complete Agreement. The Issuer and the Trustee understand
that oral agreements or commitments to loan money, extend credit or to forbear
from enforcing repayment of a debt including promises to extend or renew such
debt are not enforceable. To protect the Issuer and the Trustee from
misunderstanding or disappointment, any agreements the Issuer and the Trustee
reach covering such matters are contained in this Indenture, which is the
complete and exclusive statement of the agreement between the Issuer and the
Trustee, except as the Issuer and the Trustee may later agree in writing
(subject to the provisions of Article X of this Indenture) to modify this
Indenture.
Section 1310. Execution in Counterparts. This Indenture may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
Section 1311. Governing Law. This Indenture shall be governed exclusively
by and construed in accordance with the applicable laws of the State of South
Carolina.
[End of Article XIII]
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<PAGE>
IN WITNESS WHEREOF, the South Carolina Jobs-Economic Development Authority
has caused these presents to be signed in its name and behalf and its corporate
seal to be hereunto affixed and attested by its duly authorized officers, and to
evidence its acceptance of the trusts hereby created, the Trustee, has caused
these presents to be signed in its name and behalf and its corporate seal to be
hereunto affixed and attested by its duly authorized officers, all as of the day
and year first above written.
SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT
AUTHORITY
By /s/ Robert L. Mobley
--------------------------------------
Chairman, Board of Directors
(SEAL]
ATTEST:
/s/ [ILLEGIBLE]
- ---------------------------------
Executive Director
MARK TWAIN BANK as Trustee By
[SEAL] By /s/ [ILLEGIBLE]
--------------------------------------
Vice President
ATTEST:
/s/ [ILLEGIBLE]
- ---------------------------------
Assistant Secretary
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EXHIBIT A
BOND FORM
(Form of Face of Bond)
REGISTERED REGISTERED
NO. R- $__________
UNITED STATES OF AMERICA
State of South Carolina
SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY
VARIABLE RATE DEMAND
INDUSTRIAL DEVELOPMENT REVENUE BOND
(Roller Bearing Company of America, Inc. Project)
Series 1994A
Interest Rate: Maturity Date: Dated Date: CUSIP:
- -------------- -------------- ----------- ------
September 1, 2017
Registered Owner:
Principal Amount: Dollars
THIS BOND AND THE RELATED CREDIT FACILITY INITIALLY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR THE
SECURITIES LAWS OF ANY STATE. ACCORDINGLY, BONDS THAT ARE SUBJECT TO THE
BENEFITS OF THE CREDIT FACILITY MAY BE SOLD, REMARKETED, OR OTHERWISE
TRANSFERRED ONLY IN TRANSACTIONS IN WHICH THE BONDS AND THE RELATED CREDIT
FACILITY ARE REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES STATUTES OR IN TRANSACTIONS IN WHICH THE BONDS AND THE RELATED CREDIT
FACILITY ARE EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
ANY APPLICABLE STATE SECURITIES LAWS. THE ISSUER AND THE CREDIT ENHANCER HAVE NO
OBLIGATION TO CAUSE THE BONDS OR THE CREDIT FACILITY TO BE REGISTERED UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR TO COMPLY WITH ANY
EXEMPTION THAT MAY BE AVAILABLE UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, INCLUDING, WITHOUT LIMITATION, RULE 144A UNDER THE SECURITIES
ACT. THE TRANSFER RESTRICTIONS DESCRIBED HEREIN DO NOT PRECLUDE THE REGISTERED
OWNER OF THIS BOND FROM TENDERING THIS BOND TO THE TENDER AGENT AS DESCRIBED
HEREIN. THE HOLDER HEREOF AGREES THAT ANY TRANSFER OF THIS BOND WILL BE IN
ACCORDANCE WITH THE INDENTURE (AS DESCRIBED HEREIN).
THIS BOND IS SUBJECT TO MANDATORY TENDER FOR PURCHASE AT THE TIME AND IN
THE MANNER HEREINAFTER DESCRIBED, AND MUST BE SO TENDERED OR WILL BE
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DEEMED TO HAVE BEEN SO TENDERED UNDER CERTAIN CIRCUMSTANCES DESCRIBED HEREIN.
The South Carolina Jobs-Economic Development Authority (the "Issuer"), a
body politic and corporate and an agency of the State of South Carolina, for
value received hereby acknowledges itself obligated to, and promises to pay, the
Registered Owner identified above, or registered assigns, but only out of the
sources pledged for that purpose as hereinafter provided, and not otherwise, on
the Maturity Date set forth above or on prior redemption of the Principal Amount
above and interest thereon from the most recent Interest Payment Date (as
hereinafter defined) to which interest has been paid or for which due provision
has been made or, if no interest has been paid, from the Dated Date set forth
above, at the rate of interest per annum determined as set forth herein, until
the Issuer's obligation with respect to payment of said Principal Amount is
discharged.
Principal of, redemption premium, if any, and interest on this Bond are
payable in any coin or currency of the United States of America which, at the
respective dates of payment thereof, is legal tender for the payment of public
and private debts, and such principal and premium, if any, on this Bond shall be
payable at the Principal Office of Mark Twain Bank, St. Louis, Missouri, as
trustee (the "Trustee"), and, with respect to Tender Price, at the Principal
Office of Mark Twain Bank, St. Louis, Missouri, as tender agent (the "Tender
Agent") upon presentation and surrender of this Bond. Payment of interest on
this Bond will be made by check or draft of the Trustee mailed to the person in
whose name this Bond is registered on the Bond Register as of the close of
business of the Trustee on the Record Date for such Interest Payment Date,
except that interest not duly paid or provided for when due will be payable to
the person in whose name this Bond is registered at the dose of business on the
Business Day immediately preceding the date of payment of such defaulted
interest as provided for in the hereinafter referred to Indenture. In the case
of an interest payment to any Owner of $1,000,000 or more in aggregate principal
amount of Bonds as of the commencement of business of the Trustee on the Record
Date for a particular Interest Payment Date or in the case of the purchase from
an Owner of $1,000,000 or more in aggregate principal amount of Bonds on the
Tender Date, payment of interest or the Tender Price, as applicable, will be
made by wire transfer to such Owner upon written notice to the Trustee from such
Owner containing the wire transfer address (which shall be in the continental
United States) to which such Owner wishes to have such wire directed and, with
regard to interest payments, such written notice is given by such Owner to the
Trustee not less than fifteen (15) days prior to such Record Date and regarding
payment of the Tender Price, which written notice accompanies such Owner's
Notice of Election to Tender Bonds.
The Bonds and the interest thereon are limited obligations of the Issuer
payable solely out of the Revenues and other moneys pledged thereto and held by
the Trustee as provided in the Indenture and are secured by a transfer, pledge
and assignment of and a grant of a security interest in the Trust Estate to the
Trustee and in favor of the Owners of the Bonds, as provided in the Indenture.
THE BONDS AND THE PREMIUM, IF ANY, AND INTEREST THEREON (INCLUDING ANY AMOUNTS
PAYABLE IN CONNECTION WITH ANY PREPAYMENT OR PURCHASE OF THE BONDS) ARE LIMITED
OBLIGATIONS OF THE ISSUER; THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON
THE BONDS (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PURCHASE OF THE
BONDS) ARE PAYABLE SOLELY FROM THE REVENUES OR MONEYS TO BE RECEIVED IN
CONNECTION WITH THE FINANCING OF THE PROJECT OR FROM ANY OTHER MONEYS MADE
AVAILABLE TO THE ISSUER FOR SUCH PURPOSE; NEITHER THE BONDS NOR
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THE INTEREST THEREON (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY
PURCHASE OF THE BONDS) SHALL EVER CONSTITUTE AN INDEBTEDNESS OR A CHARGE AGAINST
THE GENERAL CREDIT OF THE STATE, THE ISSUER, OR ANY POLITICAL SUBDIVISION OF THE
STATE, OR OF THE TAXING POWERS OF THE STATE WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY LIMITATION AND SHALL NEVER CONSTITUTE OR GIVE RISE
TO ANY PECUNIARY LIABILITY OF THE STATE, THE ISSUER, OR ANY POLITICAL
SUBDIVISION OF THE STATE, THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS TO WHICH
THE FAITH OR CREDIT OF THE STATE, THE ISSUER, OR ANY POLITICAL SUBDIVISION OF
THE STATE, OR TAXING POWER OF THE STATE, IS PLEDGED.
No recourse shall be had for the payment of the principal of, premium, if
any or interest on, any of the Bonds or for any claim based thereon or upon any
obligation, covenant or agreement in the Indenture contained, against any past,
present or future director, trustee, officer, official, employee or agent of the
Issuer, or any director, trustee, officer, official, employee or agent of any
successor to the Issuer, as such, either directly or through the Issuer or any
successor to the Issuer, under any rule of law or equity, statute or
constitution or by the enforcement of any assessment or penalty or otherwise,
and all such liability of any director, trustee, officer, official, employee or
agent, as such, is hereby expressly waived and released as a condition of and
consideration for the execution of the Indenture and the issuance of any of the
Bonds.
Capitalized terms used herein shall have the meanings set forth in the
Trust Indenture, dated as of September 1, 1994 (the "Indenture"), by and between
the Issuer and the Trustee with respect to the Bonds unless otherwise defined
herein.
ADDITIONAL PROVISIONS OF THIS BOND ARE SET FORTH ON THE REVERSE HEREOF.
This Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture until the Certificate of
Authentication hereon shall have been manually signed by an authorized officer
of the Trustee.
IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions and things
required to exist, to happen and to be performed precedent to and in the
issuance of this Bond have existed, have happened and have been performed in due
form, time and manner as required by law.
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<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed and
attested by the printed facsimile signatures of its duly authorized officers,
and its corporate seal to be printed hereon, all as of the Dated Date shown
above.
(SEAL] SOUTH CAROLINA JOBS-ECONOMIC
DEVELOPMENT AUTHORITY
By (Facsimile Signature)
--------------------------------------
Chairman, Board of Directors
ATTEST:
By (Facsimile Signature)
-----------------------------
Executive Director
AUTHENTICATION CERTIFICATE
The undersigned hereby certifies that this is one of the Bonds described
in the within-mentioned Indenture.
Date of Authentication:____________
MARK TWAIN BANK, as Trustee
By
---------------------------------------
Authorized Signatory
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<PAGE>
(Form of Reverse of Bond)
CERTAIN DEFINITIONS
Unless otherwise defined herein, capitalized words and terms used in this
Bond shall have the meanings ascribed to such terms in the Indenture. In
addition, the following words and terms as used in this Bond shall have the
following meanings:
"Agreement" means the Loan Agreement, including the Exhibits attached
thereto, dated as of the date of the Indenture, between the Issuer and the
Borrower, with respect to the Bonds, as such Agreement may be from time to time
amended, restated or supplemented in accordance with the provisions of the
Agreement and the Indenture.
"Alternate Credit Facility" means any alternate credit facility designated
and qualified as such and provided in accordance with the Indenture.
"Alternate Credit Facility Date" means a Business Day on or prior to the
Termination Date on which the Borrower has complied with all requirements of the
Indenture regarding the substitution of an Alternate Credit Facility for the
Credit Facility then in effect.
"Annual Mode" means an Interest Mode during which the interest rate on the
Bonds is determined at twelve month intervals, as provided in the Indenture.
"Authorized Denominations" means (i) in the case of Bonds in a Weekly Mode
or Monthly Mode, $100,000 and any integral multiple of $5,000 in excess thereof;
(ii) in the case of Bonds in a Semiannual Mode, Annual Mode or Multiyear Mode,
$5,000 or any integral multiple thereof, provided that if the Credit Facility is
not exempt from registration under the Securities Act of 1933 and has not been
registered thereunder, as amended, then the Authorized Denomination shall be
$100,000 and any integral multiple of $5,000 in excess thereof; or (iii) in the
case of a Bond which is a Pledged Bond, $100,000 or any integral multiple of
$5,000 in excess thereof.
"Bond Registrar" means the Trustee, when acting as such.
"Business Day" means any day which is not (i) a Saturday, a Sunday or any
other day on which banking institutions in the City of New York, New York or the
city in which the principal corporate trust office of the Trustee, and the
principal office of the Remarketing Agent, the Tender Agent or the Credit
Enhancer is located, are required or authorized to close or (ii) a day on which
the New York Stock Exchange is closed.
"Credit Facility" means the letter of credit initially issued by Heller
Financial, Inc. or any Alternate Credit Facility issued by the Credit Enhancer
in substitution therefor in accordance with the Indenture, as the same may be
amended, supplemented, extended or renewed from time to time in accordance with
the Loan Agreement and the Indenture.
"Financial Institution" means any qualified institutional buyer, as that
term is defined from time to time in 17 C.F.R. ss.230.144A(a)(i) ("Rule 144A").
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"Immediate Notice" means notice by telephone, telegram, telex, telecopier
or other telecommunication device to such phone numbers or addresses as are
specified in the Indenture or such other phone number or address as the
addressee shall have directed in writing, promptly followed by written notice by
first-class mail postage prepaid to such addresses.
"Interest Mode" means a period of time relating to the frequency with
which the interest rate on the Bonds is determined pursuant to the Indenture,
which Interest Mode may be a Weekly Mode, a Monthly Mode, a Semiannual Mode, an
Annual Mode or a Multiyear Mode.
"Interest Mode Adjustment Date" means a date on which the Interest Mode of
the Bonds is changed from one Interest Mode to a different Interest Mode, and
such date shall be an Interest Payment Date.
"Interest Mode Adjustment Notice" means the notice of a new Interest Mode
with respect to any Bonds in accordance with the Indenture.
"Interest Payment Date" means the date on which an interest installment is
required to be paid on the Bonds to the Owners thereof, (i) with respect to all
Bonds other than Pledged Bonds, (1) as to the first Interest Period, October 3,
1994; (2) as to any Weekly Mode or Monthly Mode, the first Business Day of each
month; (3) as to any Semiannual Mode, Annual Mode or Multiyear Mode, each
September 1, and March 1, commencing with the first such September 1, or March 1
following the Interest Mode Adjustment Date, or the next succeeding Business Day
thereafter if any such September 1, or March 1, is not a Business Day; and (4)
an Interest Mode Adjustment Date; and (ii) with respect to Pledged Bonds, the
first Business Day of each calendar month and the date of sale of Pledged Bonds.
"Interest Period" means, with respect to the Bonds in any Interest Mode,
the period from and including each Interest Payment Date for such Interest Mode
to and including the day immediately preceding the following Interest Payment
Date for such Interest Mode, except that the first Interest Period shall be the
period from and including the date of original delivery of the Bonds to and
including the day immediately preceding the first Interest Payment Date for the
Bonds.
"Mandatory Purchase Date" means each date designated by the Credit
Enhancer for purchase of the Bonds in accordance with the Indenture.
"Maximum Rate" means the lesser of (i) 15% per annum or (ii) the rate
utilized in the Credit Facility for purposes of computing the interest component
thereof.
"Monthly Mode" means an Interest Mode during which the interest rate on
the Bonds is determined in monthly intervals as set forth in the Indenture.
"Multiyear Mode" means an Interest Mode during which the interest rate on
the Bonds is determined at intervals of integral (greater than one) multiples of
twelve months, as provided in the Indenture.
"Notice of Election to Tender/Retain Bonds" means the Notice of Election
to Tender/Retain Bonds in substantially the form attached to the Indenture
delivered by a Bondowner to the Tender
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Agent (i) which contain a demand for the purchase of Bonds on the Tender Date,
or (ii) following receipt of a notice of a mandatory tender of Bonds which
contain an election to retain Bonds. "Notice of Election to Tender Bonds" shall
refer to those provisions of the Notice of Election to Tender/Retain Bonds which
relate to the election to tender Bonds as provided in the Indenture. "Notice of
Election to Retain Bonds" shall refer to those provisions of the Notice of
Election to Tender/Retain Bonds which relate to the election to retain Bonds.
"Rate Adjustment Date" means the date as of which the interest rate
determined for an Interest Mode shall be effective, which (i) during a Weekly
Mode shall be Thursday of each week (whether or not a Business Day); (ii) during
a Monthly Mode shall be the first calendar day of each month; (iii) during a
Semiannual Mode shall be the first calendar day of such Semiannual Mode which
shall be September 1 or March 1 and the first day following each six-month
period thereafter; and, (iv) during an Annual Mode or a Multiyear Mode shall be
the first calendar day of such Annual Mode or Multiyear Mode, which shall be
September 1, and thereafter the first calendar day following the completion of
the then current Annual Mode or Multiyear Mode. The initial Rate Adjustment Date
is September 15, 1994.
"Rate Adjustment Notice" means the Rate Adjustment Notice to be mailed by
the Trustee in the form and in accordance with the Indenture.
"Rate Determination Date" means no later than 4:00 p.m., New York Time, on
the Business Day immediately preceding a Rate Adjustment Date for a Weekly or a
Monthly Mode, and on the third (3rd) Business Day immediately preceding a Rate
Adjustment Date for a Semiannual Mode, Annual Mode or Multiyear Mode.
"Rate Period" means the period from a Rate Adjustment Date to, but not
including, the next Rate Adjustment Date.
"Record Date" means, with respect to Bonds in a Semiannual Mode, an Annual
Mode or a Multiyear Mode, the fifteenth calendar day, whether or not a Business
Day of the month, preceding such Interest Payment Date, and, with respect to
Bonds in a Weekly Mode or Monthly Mode, the fifth calendar day immediately
preceding such Interest Payment Date.
"Semiannual Mode" means an Interest Mode during which the interest rate on
the Bonds is determined at six-month intervals as set forth in the Indenture.
"Tender Agent" means initially the Trustee and any successor tender agent
appointed pursuant to the Indenture. The Tender Agent shall act as Paying Agent
as to Tendered Bonds.
"Tender Date" means (a) each date designated by a Bondowner for purchase
of any Bonds in accordance with the provisions of the Indenture, and (b) each
date on which Bonds are required to be tendered in accordance with the
provisions of the Indenture, including any Mandatory Purchase Date, whether or
not such Bonds are actually tendered.
"Tender Price" means 100% of the principal amount of any Bond tendered
pursuant to the provisions of the Indenture plus interest accrued and unpaid
thereon to, but not including, the Tender Date.
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"Tendered Bonds" means (a) any Bonds tendered by a Bondowner for purchase
pursuant to the optional redemption provisions of the Indenture, and (b) any
Bonds required to be tendered for purchase pursuant to the mandatory tender
provisions of the Indenture, in each case whether or not such Bonds are actually
tendered.
"Termination Date" means (i) if the Credit Facility is not a letter of
credit, the maturity or expiration date of the Credit Facility or (ii) if the
Credit Facility is a letter of credit, the Interest Payment Date which is at
least five (5) days preceding the date on which the Credit Facility is to expire
pursuant to its terms, in each case including any extension of such maturity or
expiration date.
"Weekly Mode" means an Interest Mode during which the interest rate on the
Bonds is determined in weekly intervals as set forth in the Indenture.
GENERAL PROVISIONS
This Bond is one of a series of Bonds of the Issuer limited in aggregate
original principal amount to $7,700,000 and designated as Variable Rate Demand
Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc.
Project) Series 1994A (the "Bonds"). All of the Bonds are issued under a Trust
Indenture dated as of September 1, 1994 (the "Indenture"), between the Issuer
and the Trustee, to provide funds to make a loan (the "Loan") to Roller Bearing
Company of America, Inc., a Delaware corporation (the "Borrower"), under a Loan
Agreement dated as of September 1, 1994 (the "Agreement"), between the Issuer
and the Borrower. The Loan shall provide funds to finance the Project (as
defined in the Agreement) and to pay certain costs of issuance, all by the
authority of and in full compliance with the provisions, restrictions and
limitations of the Constitution and statutes of the State of South Carolina,
including particularly Title 41, Chapter 43, Code of Laws of South Carolina
1976, as amended, and pursuant to proceedings duly had by the Issuer.
Concurrently with the original issuance herewith, the Issuer has delivered
its $3,000,000 aggregate original principal amount Variable Rate Demand
Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc.
Project) Series 1994B (the "Series 1994B Bonds").
TO INITIALLY SECURE THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE
BONDS, THE BORROWER HAS CAUSED HELLER FINANCIAL, INC. A DELAWARE CORPORATION
(THE "CREDIT ENHANCER"), TO DELIVER AN IRREVOCABLE TRANSFERABLE DIRECT-PAY
LETTER OF CREDIT (THE "CREDIT FACILITY") TO THE TRUSTEE. SUBJECT TO CERTAIN
CONDITIONS, THE CREDIT FACILITY MAY BE REPLACED BY AN ALTERNATE CREDIT FACILITY.
UNDER THE CREDIT FACILITY, THE CREDIT ENHANCER IS OBLIGATED TO PAY AMOUNTS
SUFFICIENT FOR THE PAYMENT OF (A) THE PRINCIPAL OF THE BONDS OR THE PORTION OF
THE TENDER PRICE CORRESPONDING TO THE PRINCIPAL OF THE BONDS, AND (B) ACCRUED
INTEREST ON THE BONDS OR THE PORTION OF THE TENDER PRICE OF THE BONDS
CORRESPONDING TO ACCRUED INTEREST THEREON. THE CREDIT FACILITY IS SCHEDULED TO
TERMINATE ON SEPTEMBER 15, 1999, UNLESS EXTENDED OR TERMINATED EARLIER PURSUANT
TO ITS TERMS.
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Counterparts or copies of the Indenture and the other documents referred
to herein are on file at the Principal Office of the Trustee in St. Louis,
Missouri, and reference is hereby made thereto and to the documents referred to
therein for the provisions thereof, including the provisions with respect to the
rights, obligations, duties and immunities of the Issuer, the Trustee, the
Credit Enhancer, the Borrower and the Registered Owners of the Bonds under such
documents, to all of which the Registered Owner hereof, by acceptance of this
Bond, assents. The Registered Owner of this Bond shall have no right to enforce
the provisions of the Indenture or to institute, appear in or defend any suit or
other proceedings with respect thereto, except as provided in the Indenture. The
Indenture and other documents referred to therein may be modified or amended to
the extent permitted by and as provided therein. Upon the occurrence of certain
Events of Default (as defined in the Indenture), all Bonds may be declared
immediately due and payable as provided in the Indenture. Interest on the Bonds
shall cease to accrue on the date of such declaration. Subject to the
limitations provided for in the Indenture, this Bond may be exchanged for a like
aggregate principal amount of Bonds in Authorized Denominations. Bonds are
transferable by the Registered Owner thereof in person or by such Owner's
attorney duly authorized in writing at the Principal Office of the Bond
Registrar, but only in the manner and subject to the limitations provided for in
the Indenture and upon surrender and cancellation of this Bond. Such limitations
include a requirement that Bonds that are subject to the benefits of the Credit
Facility may be sold, remarketed or otherwise transferred only in transactions
in which the Bonds and the related Credit Facility are registered under the
Securities Act and any applicable state securities statutes or in transactions
in which the Bonds and the related Credit Facility are exempt from the
registration requirements of the Securities Act and any applicable state
securities laws, and any Bondowner desiring to effect such transfer is required
to indemnify the Issuer, the Trustee and the Credit Enhancer against any
liability, cost or expense (including attorneys' fees) that may result if the
transfer is not so exempt, or is not made in accordance with such federal and
state laws. Upon such transfer a new Bond or Bonds in Authorized Denominations
for the same aggregate principal amount will be issued to the transferee in
exchange. The Bond Registrar may require a Registered Owner, among other things,
to furnish appropriate endorsements and transfer documents and to pay any taxes
and fees required by law or permitted by the Indenture in connection with the
exchange or transfer. The Issuer, the Tender Agent and the Trustee may treat the
Registered Owner of this Bond as the absolute Owner for the purpose of receiving
payment as herein provided and for all other purposes and none of them shall be
affected by any notice to the contrary.
INTEREST RATE PROVISIONS
(a) Generally. The interest rate on the Bonds shall be separately
determined by Stern Brothers & Co., St. Louis, Missouri, or any successor or
assign (the "Remarketing Agent"), as provided in the Indenture and as summarized
below. In no event shall the interest rate borne by the Bonds at any time exceed
the Maximum Rate. Interest accrued on the Bonds during each Interest Period
shall be paid on the next succeeding Interest Payment Date and, while the Bonds
are in a Weekly Mode or a Monthly Mode, shall be computed on the basis of a year
of 365 or 366 days, as appropriate, for the actual number of days elapsed and,
while the Bonds are in a Semiannual Mode, an Annual Mode or a Multiyear Mode,
shall be computed on the basis of a year of 360 days and twelve 30-day months.
Each determination of the interest rate for the Bonds, as provided in the
Indenture, shall be conclusive and binding upon the Bondowners, the Issuer, the
Borrower, the Tender Agent, the Remarketing Agent, the Credit Enhancer and the
Trustee. Upon request, the Remarketing Agent shall give the Issuer, the Trustee,
the Tender Agent, the Credit
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Enhancer, the Borrower or any Bondowner Immediate Notice of the interest rate on
the Bonds at any time.
(b) Weekly Mode. The interest rate for Bonds in a Weekly Mode shall be
determined in the following manner. On each Rate Determination Date, the
Remarketing Agent shall determine the interest rate which such Bonds shall bear
during the Rate Period following such Rate Determination Date. The interest rate
so determined shall be effective on the Rate Adjustment Date. Promptly after
each Rate Adjustment Date, the Remarketing Agent shall give written notice of
the interest rate so set to the Trustee, the Credit Enhancer and the Borrower.
On each Interest Payment Date the Trustee shall mail to each Bondowner a written
statement showing the interest rates for such Bonds during the preceding
Interest Period.
(c) Monthly Mode. The interest rate for any Bonds in a Monthly Mode shall
be determined in the following manner. On each Rate Determination Date, the
Remarketing Agent shall determine the interest rate which such Bonds shall bear
during the Rate Period following such Rate Determination Date. The interest rate
so determined shall be effective on the Rate Adjustment Date. Promptly after
each Rate Determination Date, the Remarketing Agent shall give written notice of
the interest rate so set to the Borrower, the Credit Enhancer and the Trustee.
On each Interest Payment Date the Trustee shall mail to each Bondowner a written
statement showing the interest rates during the preceding Interest Period.
(d) Semiannual Mode, Annual Mode or Multiyear Mode. The interest rate for
Bonds in a Semiannual Mode, an Annual Mode or a Multiyear Mode shall be
determined in the following manner. Not less than 30 days nor more than 35 days
before each Rate Adjustment Date, the Remarketing Agent shall determine the
interest rate (the "Preliminary Rate") which the Bonds would bear if such day
were a Rate Determination Date. The Remarketing Agent shall give Immediate
Notice of the Preliminary Rate to the Borrower, the Credit Enhancer and the
Trustee. The Trustee shall thereupon mail, not less than 25 days prior to the
Rate Adjustment Date, to each Bondowner a Rate Adjustment Notice. On the Rate
Determination Date the Remarketing Agent shall determine the interest rate which
each of such Bonds shall bear for each such Rate Period, which rate may be less
than, equal to, or greater than the Preliminary Rate. By Immediate Notice on
such Rate Determination Date, the Remarketing Agent shall give written notice of
the interest rate so set to the Borrower, the Credit Enhancer, the Tender Agent
and the Trustee, and the Trustee shall mail to all Bondowners written notice of
the interest rate so determined.
(e) Interest Modes. The Bonds shall initially be in a Weekly Mode. The
Interest Mode for the Bonds may be changed from time to time at the option of
the Borrower, with the prior written consent of the Credit Enhancer exercised as
provided in the Indenture, to another Interest Mode on an Interest Payment Date
on which the Bonds are subject to optional redemption pursuant to the Indenture
at a redemption price equal to the principal amount thereof, plus accrued
interest, without premium, as selected by the Borrower. The Borrower may
exercise such option at any time by giving written notice not more than 60 nor
less than 45 days prior to the Interest Mode Adjustment Date to the Issuer, the
Trustee, the Remarketing Agent, the Tender Agent and the Credit Enhancer stating
its election to convert the Interest Mode for the Bonds to another Interest
Mode, which notice shall specify the new Interest Mode and the Interest Mode
Adjustment Date. Such Interest Mode Adjustment Date shall be a Rate Adjustment
Date for the Bonds in such new Interest Mode. Upon the exercise of such option
by the Borrower and upon the Trustee's receipt of the
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prior written consent of the Credit Enhancer to the exercise of such option, not
less than 30 days prior to the Interest Mode Adjustment Date, the Trustee shall
mail an Interest Mode Adjustment Notice to each Owner of Bonds, and, in the
event of a conversion to a Weekly Mode or a Monthly Mode from any other Interest
Mode, a Notice of Election to Tender Bonds in substantially the form as provided
in the Indenture.
REDEMPTION PROVISIONS
The Bonds are subject to redemption prior to maturity as provided in the
Indenture which redemption provisions are summarized as follows:
Optional Redemption. Bonds (other than any Bonds in a Multiyear Mode) are
subject to redemption prior to maturity at the option of the Issuer upon
instructions from the Borrower with the prior written consent of the Credit
Enhancer, in whole or in part in Authorized Denominations, on any Interest
Payment Date at 100% of the principal amount thereof plus accrued interest to
the redemption date, first, from proceeds of a payment under the Credit Facility
and, second, from other Available Moneys. Bonds in a Multiyear Mode are subject
to redemption prior to maturity at the option of the Issuer upon instructions
from the Borrower with the prior written consent of the Credit Enhancer, in
whole or in part in Authorized Denominations, on any Interest Payment Date at
the redemption prices set forth below plus accrued interest to the redemption
date, first, from proceeds of a payment under the Credit Facility and, second,
from other Available Moneys:
OPTIONAL REDEMPTION IN MULTIYEAR MODE
Length of Redemption Prices
Multiyear Mode as a Percentage of Call Protection
(In Years)* Principal Amounts Period*
-------------- ------------------ ---------------
Greater than 10 102% after 7 years 7 years
declining 1/2% per 12
months to 100%
Less than or equal 102% after 4 years 4 years
to 10 and greater declining 1/2% per 12
than 7 months to 100%
Less than or equal 102% after 3 years 3 years
to 7 and greater declining 1% per 12
than 5 months to 100%
Less than or equal 101% after 2 years 2 years
to 5 and greater declining 1/2% per 6
than 2 months to 100%
Less than or equal 100 1/2% after 1 year 1 year
to 2 and greater declining 1/2% per 6
than 1 months to 100%
- ----------
* Measured from and including the first day of such Rate Period.
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Mandatory Redemption. The Bonds are also subject to mandatory redemption by the
Issuer in each case, first, from proceeds of a payment under the Credit Facility
and, second, from other Available Moneys at 100% of the principal amount
thereof, without premium, plus accrued interest to the date of redemption (i) in
whole on the earliest practicable date for which notice can be given, if a
Determination of Taxability occurs with respect to the Bonds, (ii) immediately
in whole, in the event the Trustee shall receive notice from the Credit Enhancer
of the occurrence of a default under the Letter of Credit Agreement and
irrevocable instructions to draw on the Credit Facility, such notice being
conclusive and binding as to the occurrence of a default under the Letter of
Credit Agreement, and (iii) in part on the earliest practicable date for which
notice can be given, from proceeds of the Bonds remaining in the Project Fund on
the Completion Date. In addition, the Bonds shall be subject to redemption by
the Issuer, at the option and upon instructions from the Borrower with the prior
written consent of the Credit Enhancer, in whole or in part at any time on the
earliest practicable date for which notice can be given, upon the occurrence of
a condemnation, loss of tide or casualty loss to the Project at 100% of the
principal amount thereof, without premium, plus accrued interest to the date of
redemption.
The Trustee shall select Bonds for redemption as provided in the
Indenture. The Trustee shall cause notice of any such redemption to be given as
provided in the Indenture to the Registered Owner of the Bonds designated for
redemption in whole or in part, at its address as shown on the Bond Register by
mailing a copy of the redemption notice by first-class mail, postage prepaid, at
least 15 and not more than 30 days prior to the redemption date. The failure of
the Trustee to give notice to any Bondowner or any defect of such notice shall
not affect the validity of the redemption of any other Bonds and provided
further that no such prior notice of redemption is required for a mandatory
redemption because of a default under the Letter of Credit Agreement. On the
date fixed for redemption by notice given as provided in the Indenture, the
Bonds so called for redemption shall become and be due and payable at the
redemption price provided for redemption of such Bonds on such date.
TENDER PROVISIONS
Optional Tender. While the Bonds are in a Weekly Mode or Monthly Mode, any
Bond or portion thereof shall be purchased on the Tender Date by the Tender
Agent on the demand of the Owner thereof, at the Tender Price, upon delivery to
the Tender Agent on a Business Day at its Principal Office of an irrevocable
written notice in the form of the Notice of Election to Tender Bonds which
states (A) the principal amount and number of such Bond (and the portion of such
Bond to be purchased if less than the full principal amount is to be purchased),
the name and the address of such Owner and the taxpayer identification number,
if any, of such Owner and (B) that such Bond, or portion thereof, is to be
purchased on a day (which shall be the Tender Date), which day will be a
Business Day which is at least seven (7) calendar days after the receipt by the
Tender Agent of such Notice of Election to Tender Bonds. Such Notice of Election
to Tender Bonds shall be deemed received on a Business Day if received by the
Tender Agent no later than 3:00 p.m., New York Time, on such Business Day. Any
Notice of Election to Tender Bonds received by the Tender Agent after 3:00 p.m.,
New York Time, shall be deemed received on the next succeeding Business Day.
Any Owner of Bonds who has demanded purchase of its Bond or portion
thereof as described above shall deliver such Bond (with an appropriate transfer
of registration form executed
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in blank, together with a signature guaranty) (together with, in the case of any
Bond with a specified Tender Date prior to an Interest Payment Date and after
the related Record Date, a due-bill check in form satisfactory to the Tender
Agent for interest due on such Bond on such Interest Payment Date) to the Tender
Agent at its Principal Office prior to 10:30 a.m., New York Time, on the Tender
Date specified in the aforesaid written notice.
Mandatory Tender.
(1) On Termination Date or Interest Mode Adjustment Date. All Bonds
are required to be tendered to the Tender Agent for purchase on the
Termination Date or an Interest Mode Adjustment Date; provided, however,
that if the credit enhancement requirements of the Indenture are met,
there shall not be so tendered on the Termination Date or the Interest
Mode Adjustment Date, as applicable, any Bonds or portion thereof which
will be in Authorized Denominations with respect to which the Owners
thereof have delivered to the Tender Agent by hand or by mail at its
Principal Office a properly completed Notice of Election to Retain Bonds,
together with a signature guaranty, on or prior to the fifth Business Day
next preceding the Termination Date or the Interest Mode Adjustment Date,
as applicable. Any Bondowner required to tender Bonds under this
subsection (1) shall tender its Bonds to the Tender Agent for purchase at
its Principal Office prior to 10:30 a.m., New York Time, on the
Termination Date or the Interest Mode Adjustment Date, as applicable. The
failure to tender Bonds on any such date is the equivalent of a tender and
such Bonds shall be converted to Undelivered Bonds and replacement Bonds
shall be executed, authenticated and delivered in the place of such
Undelivered Bonds and such replacement Bonds may be offered and sold by
the Remarketing Agent in accordance with the Indenture and Remarketing
Agreement if the credit enhancement requirements of the Indenture are met.
(2) On Alternate Credit Facility Date. While the Bonds are in an
Interest Mode other than a Multiyear Mode, all Bonds are required to be
tendered to the Tender Agent for purchase on an Alternate Credit Facility
Date; provided, however, that there shall not be so tendered on the
Alternate Credit Facility Date any Bonds or portion thereof which will be
in Authorized Denominations with respect to which the Owners thereof have
delivered to the Tender Agent by hand or by mail at its Principal Office a
properly completed Notice of Election to Retain Bonds, together with a
signature guaranty, on or prior to the fifth Business Day next preceding
the Alternate Credit Facility Date. Any Bondowner required to tender Bonds
under this subsection (2) shall tender its Bonds to the Tender Agent for
purchase at its Principal Office prior to 10:30 a.m., New York Time, on
the Alternate Credit Facility Date. The failure to tender its Bonds on any
such date is the equivalent of a tender and such Bonds shall be converted
to Undelivered Bonds and replacement Bonds shall be executed,
authenticated and delivered in the place of such Undelivered Bonds and
such replacement Bonds may be offered and sold by the Remarketing Agent in
accordance with the Indenture and Remarketing Agreement if the credit
enhancement requirements of the Indenture are met.
(3) On Rate Adjustment Date During Semiannual Mode. Annual Mode and
Multiyear Mode. While the Bonds are in a Semiannual Mode, Annual Mode or
Multiyear Mode, all Bonds are required to be tendered to the Tender Agent
for purchase on a Rate
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Adjustment Date; provided, however, that there shall not be so tendered on
the Rate Adjustment Date any Bonds or portions thereof which will be in
Authorized Denominations with respect to which the Owners thereof have
delivered to the Tender Agent by hand or by mail at its Principal Office a
properly completed Notice of Election to Retain Bonds, together with a
signature guaranty, on or prior to the fifth Business Day next preceding a
Rate Adjustment Date. Any Bondowner required to tender Bonds under this
subsection (3) shall tender its Bonds to the Tender Agent for purchase at
its Principal Office prior to 10:30 a.m., New York Time, on the Rate
Adjustment Date. The failure to tender its Bonds on any such date is the
equivalent of a tender and such Bonds shall be converted to Undelivered
Bonds and replacement Bonds shall be executed, authenticated and delivered
in the place of such Undelivered Bonds as provided in the Indenture and
such replacement Bonds may be offered and sold by the Remarketing Agent in
accordance with the Indenture and Remarketing Agreement if the credit
enhancement requirements of the Indenture are met.
(4) Mandatory Tender in Lieu of Acceleration on Default.
Additionally, all Bonds are subject to mandatory tender for purchase on
the Mandatory Purchase Date from the Bondowners by the Trustee for the
account of the Credit Enhancer in lieu of acceleration of the Bonds and
mandatory redemption, upon the occurrence of an event of default under the
Letter of Credit Agreement and notice from the Credit Enhancer requiring
the mandatory purchase of the Bonds. Upon receipt of notice from the
Credit Enhancer directing the Trustee to purchase the Bonds and setting
the Mandatory Purchase Date, which shall be a Business Day which is at
least three (3) and no more than ten (10) calendar days after the receipt
by the Trustee of such notice, the Trustee shall immediately request a
payment under the Credit Facility to be received no later than 3:00 P.M.,
New York Time, on the Mandatory Purchase Date, and shall also send notice
to the Bondowners of the mandatory purchase. On the Mandatory Purchase
Date, the Tender Agent shall pay to the Bondowners the purchase price for
the Bonds, which shall be an amount equal to 100% of the principal amount
of any Bond tendered or deemed tendered plus accrued and unpaid interest
thereon to the Mandatory Purchase Date. Any Bondowner required to tender
Bonds under this subsection (4) shall tender its Bonds to the Tender Agent
for purchase at its Principal Office prior to 10:30 A.M., New York Time,
on the Mandatory Purchase Date. The failure to tender its Bonds on any
such date is the equivalent of a tender and such Bonds shall be converted
to Undelivered Bonds and replacement Bonds shall be executed,
authenticated and delivered in the place of such Undelivered Bonds if the
credit enhancement requirements of the Indenture are met.
Notice of Mandatory Tender. The Trustee shall give notice to Bondowners of the
mandatory tender for Bonds on an Interest Mode Adjustment Date, on an Alternate
Credit Facility Date, if the Bonds are in a Multiyear Mode, Annual Mode or
Semiannual Mode on a Rate Adjustment Date, on the Termination Date and on the
Mandatory Purchase Date in accordance with the provisions of the Indenture.
Failure to Give Notice. Failure by the Trustee to give any notice regarding a
mandatory tender as provided in the Indenture, any defect therein or any failure
by any Bondowner to receive any such notice shall not in any way change such
Owner's obligation to tender the Bonds for purchase on any mandatory Tender
Date.
A-14
<PAGE>
Irrevocability of Election. Any election by a Bondowner to exercise the option
to have its Bond or Bonds purchased, or any election by a Bondowner to retain
its Bond or Bonds upon any mandatory Tender Date, shall be irrevocable upon
delivery to the Tender Agent of the Notice of Election to Tender Bonds (together
with, if required at the time of delivery of such notice, the Tendered Bonds) or
of the Notice of Election to Retain Bonds, as the case may be. If any Owner of
Bonds falls to deliver the Bonds described in such Owner's Notice of Election to
Tender Bonds, such Bonds shall be converted to Undelivered Bonds. Replacement
Bonds shall be executed, authenticated and delivered in place of such
Undelivered Bonds as provided in the Indenture and such replacement Bonds may be
offered and sold by the Remarketing Agent in accordance with the Indenture and
Remarketing Agreement if the credit enhancement requirements of the Indenture
are met.
Purchase of Tendered Bonds. Tendered Bonds shall be purchased from the Owners
thereof on the Tender Date at the Tender Price which shall be payable solely
from the following sources in the order of priority listed: (1) proceeds of the
remarketing of such Tendered Bonds pursuant to the Remarketing Agreement and the
Indenture which constitute Available Moneys; and (2) proceeds of a payment under
the Credit Facility to purchase such Tendered Bonds.
Notwithstanding any provision of the Indenture to the contrary, there
shall be no purchases (other than a mandatory tender on the Termination Date or
a mandatory purchase on the Mandatory Purchase Date) or sales of Bonds pursuant
to the provisions of the Indenture relating to the tender of Bonds if there
shall have occurred and be continuing certain Events of Default under the
Indenture.
A-15
<PAGE>
=====================================================================
(FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______
________________________________________________________________________________
(Please Print or Typewrite Name, Address and Social Security Number or Taxpayer
Identification Number of Transferee) the within Bond and all rights therein, and
hereby irrevocably constitutes and appoints _____________________ Attorney to
transfer the within Bond on the books kept for registration thereof, with full
power of substitution in the premises.
Dated: _____________ _________________________________________
NOTICE: The signature to this Assignment
must correspond with the name as it
appears upon the face of the within Bond
in every particular, without alteration
or enlargement or any change whatever.
Signature Guaranteed By:
_________________________________________
NOTICE: Signature(s) must be guaranteed
by an eligible guarantor institution as
defined by SEC Rule l7Ad-15 (17 CFR
240.l7Ad-15).
By_______________________________________
Title____________________________________
=====================================================================
A-16
<PAGE>
The following abbreviations, when used in the inscription on the face of
the within Bond, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with right of survivorship and not as tenants
in common
UNIF TRANS MIN ACT_____________________
(Cust)
Custodian__________________
(Minor)
under Uniform Transfers to Minors Act
_______________________
(State)
Additional abbreviations may also be used though not in the above list.
=====================================================================
A-17
<PAGE>
LEGAL OPINION
I, the undersigned, Executive Director of the South Carolina Jobs-Economic
Development Authority, hereby certify that the following is a true and correct
copy of the approving legal opinion of Sinkler & Boyd, P.A., on the within Bond
and the series of which said Bond is a part, except that it omits the date of
such opinion; that said legal opinion was manually executed and was dated and
issued as of the date of delivery of and payment for such Bonds, and is on file
with _______________________________, the Trustee.
facsimile
-----------------------------------------
Executive Director
South Carolina Jobs-Economic Development
Authority
=====================================================================
(Legal Opinion)
A-18
<PAGE>
EXHIBIT B
INVESTMENT SECURITIES COLLATERAL REQUIREMENT
Collateral securing Investment Securities must comply with the following
requirements:
(i) The Trustee or a third party acting solely as agent for the
Trustee has possession of the collateral;
(ii) The Trustee or a third party acting as agent for the Trustee
shall have a first perfected security interest in the collateral free and
clear of the claims of any third parties;
(iii) The collateral will consist of Government Securities and will
have a minimum market value (expressed as a percentage of the obligation)
on a valuation date as follows:
Remaining Maturity
Frequency of
Valuation 0*-1 yrs 1*-5 yrs 5*-10 yrs 10*-15 yrs 15*-30 yrs
Daily 103% 106% 107% 109% 116%
Weekly 104 112 114 120 125
Monthly 107 123 130 133 143
Quarterly 108 125 135 140 150
- ----------
* Not inclusive
(iv) In the event the collateral does not meet the requisite
collateral percentage set forth in (iii) above on a valuation date, the
party supplying the collateral shall have the following number of days to
provide additional collateral in order to meet the requisite percentage:
(a) one business day for daily valuations,
(b) two business days for weekly valuations, and
(c) one month for monthly and quarterly valuations; and
(v) The Trustee will liquidate the collateral and reinvest the
proceeds in Investment Securities if the requisite collateral percentage
is not maintained after the period set forth in (iv) above.
B-1
<PAGE>
EXHIBIT C
[RESERVED.]
C-1
<PAGE>
South Carolina Jobs-Economic Development Authority
Variable Rate Demand
Industrial Development Revenue Bonds
(Roller Bearing Company of America, Inc. Project)
Series 1994A
EXHIBIT D
NOTICE OF ELECTION TO TENDER/RETAIN BONDS
The undersigned hereby irrevocably notifies _________________________, as
Tender Agent, of its election to (check one)
___ (i) present the Bonds described below and have such Bonds
purchased by the Tender Agent on ______, ___ (the "Tender
Date") at the Tender Price equal to 100% of the principal
amount plus interest accrued and unpaid thereon, to, but not
including, the Tender Date.
___ (ii) retain the Bonds described below. The undersigned hereby
acknowledges that any rating on the Bonds may be reduced or
withdrawn after the date hereof. [If the Interest Mode is
being adjusted from a Weekly Mode or Monthly Mode to any other
Interest Mode add the following: "and that the tender option
terminates on such Interest Mode Adjustment Date"]
This Notice shall not be accepted by the Tender Agent unless it is
properly completed and received at its offices (specified below). Such Notice
must be delivered to the Tender Agent on a Business Day by hand or by mail, at
______________________, Attention: Corporate Trust Department.
Provisions Relating to Election to Retain Bonds. This Notice must be
delivered to the Tender Agent on a Business Day by hand or by mail, at
_____________________, Attention: Corporate Trust Department, on or prior to the
fifth Business Day next preceding (i) a Rate Adjustment Date, (ii) an Interest
Mode Adjustment Date, or (iii) an Alternate Credit Facility Date, as such terms
are defined in the Indenture.
AN OWNER'S EXERCISE OF THE OPTION TO RETAIN SUCH BOND IS IRREVOCABLE AND
BINDING ON SUCH OWNER AND CANNOT BE WITHDRAWN.
Provisions Relating to Election To Tender Bonds: The undersigned hereby
agrees to sell, assign and transfer the Bonds to the Tender Agent, and hereby
irrevocably constitutes and appoints the Tender Agent, as duly authorized
attorney, to authorize the Trustee to transfer the Bonds on the books kept for
registration thereof and to register such Bonds, with full power of
substitution. The undersigned agrees to deliver to the Tender Agent, at
___________________________, Attention: Corporate Trust Department, the Bonds at
or before 10:30 a.m., New York Time, on the Tender Date.
AN OWNER'S EXERCISE OF THE OPTION TO HAVE SUCH BOND PURCHASED IS
IRREVOCABLE AND BINDING ON SUCH OWNER AND CANNOT BE WITHDRAWN. IF ANY OWNER OF
BONDS SHALL FAIL TO DELIVER THE BONDS DESCRIBED IN SUCH OWNER'S NOTICE, SUCH
BONDS SHALL CONSTITUTE UNDELIVERED BONDS. REPLACEMENT BONDS
D-1
<PAGE>
SHALL BE EXECUTED, AUTHENTICATED AND DELIVERED IN THE PLACE OF SUCH UNDELIVERED
BONDS AS PROVIDED IN THE INDENTURE AND SUCH REPLACEMENT BONDS MAY BE OFFERED AND
SOLD BY THE REMARKETING AGENT IN ACCORDANCE WITH THE REMARKETING AGREEMENT.
The undersigned hereby directs the Tender Agent to make payment to the
undersigned of the Tender Price of the Bonds, together with accrued interest
thereon, and elects to receive payment of the Tender Price of the Bonds, in one
of the following manners (check the desired method):
MANNER A __ by check or draft mailed to the Owner on the applicable Tender Date,
upon surrender of the Bonds (if not submitted herewith) to the
Tender Agent at the address specified above for hand delivery.
MANNER B __ by wire transfer of immediately available funds to account number
__________ ________ at ________________________ (must be in
continental United States) on the applicable Tender Date; provided
however, that the undersigned may not utilize this Manner B to
receive the Tender Price unless the undersigned is the Owner of and
is tendering at least $1,000,000 aggregate principal amount of the
Bonds and the wire transfer instructions are provided to the Tender
Agent with this Notice.
General Provisions. The Tender Agent's determination of whether this
Notice is properly completed and the compliance with the delivery requirements
set forth herein shall be binding on the undersigned.
D-2
<PAGE>
Bond or Bonds (or Portions Thereof)
Presented For Purchase/To Be Retained
Amount thereof being
Tendered(1)/Amount
Bond Number(s) thereof being Retained(2)
____________ _____________
____________ _____________
____________ _____________
____________ _____________
Total
Amount:__________
(1) Unless Bondowner is having all of his Bonds purchased, principal
amount must be $100,000 or integral multiples of $5,000 in excess thereof if in
the Weekly Mode or the Monthly Mode and $5,000 or integral multiples thereof if
in the Semiannual Mode, Annual Mode and Multiyear Mode, with remaining principal
of retained Bonds in Authorized Denominations.
(2) must be a principal amount which is $100,000 or integral multiples of
$5,000 in excess thereof if in the Weekly Mode or the Monthly Mode and $5,000 or
integral multiples thereof if in the Semiannual Mode, Annual Mode and Multiyear
Mode.
Signature(s) *_________________________________
Signature
guaranteed by__________________________________
_______________________________________________
Print or Type Name
_______________________________________________
Street Address
_______________________________________________
City, State and Zip Code
_______________________________________________
Area Code and Telephone Number
_______________________________________________
Social Security Number or Taxpayer ID Number:
* The signature(s) to this Notice must correspond with the name(s) of the
Owner of any Bond(s) submitted herewith, as it appears on the books of the
Tender Agent, in every particular without alteration, enlargement or any change
whatsoever and such signature must be guaranteed by an eligible guarantor
institution as defined by SEC Rule l7Ad-15 (17 CFR 240.l7Ad-15).
D-3
<PAGE>
EXHIBIT E
RATE ADJUSTMENT NOTICE
This notice is being sent pursuant to the provisions of the Trust
Indenture dated as of September 1, 1994 (the "Indenture") between the South
Carolina Jobs-Economic Development Authority (the "Issuer") and
________________________, as Trustee (the "Trustee"). Capitalized terms used in
this notice shall have the same meanings as in your Bond, unless otherwise
defined. You are hereby notified as follows:
1. The interest rate on the Issuer's Variable Rate Demand Industrial
Development Revenue Bonds (Roller Bearing Company of America, Inc. Project)
Series 1994A (the "Bonds"), will be adjusted on ________ (the "Rate Adjustment
Date"). Your Bond will be purchased on the Rate Adjustment Date at a price of
100% of the principal amount thereof plus interest accrued and unpaid thereon
to, but not including, the Tender Date, unless you elect to retain your Bond.
2. The Remarketing Agent has notified the Trustee that the Preliminary
Rate determined in accordance with the Indenture is __% (the "Preliminary
Rate"). The actual interest rate for the Bonds shall be determined on the Rate
Adjustment Date, which rate may be less than, equal to or greater than the
Preliminary Rate. In order to retain all or any portion of your Bond (which
portion shall be [$100,000] [$5,000] or an integral multiple thereof), you must
deliver to ____________________________, at its principal corporate trust office
at______________________, Attention: Corporate Trust Department, on or prior to
the fifth (5th) Business Day preceding such date the attached Notice of Election
to Retain Bonds.
3. In addition, you are further notified that on the Rate Adjustment Date,
the interest on your Bond will be established at a new interest rate and
interest on your Bond will be payable at such newly established interest rate
for the Interest Period commencing on the Rate Adjustment Date.
____________________________
___________________________________
Title:_____________________________
<PAGE>
EXHIBIT F
INTEREST MODE ADJUSTMENT NOTICE
This notice is being sent pursuant to the provisions of the Trust
Indenture dated as of September 1, 1994 (the "Indenture"), between the South
Carolina Jobs-Economic Development Authority (the "Issuer"), and
____________________, as Trustee. Capitalized terms used in this notice shall
have the same meanings as in the Indenture.
You are hereby notified as follows:
1. An option has been exercised to convert the Interest Rate Mode
applicable to the Issuer's Variable Rate Demand Industrial Development Revenue
Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A (the
"Bonds"), from a(n) Weekly/Monthly/Semiannual/Annual/ Multiyear (____)-Year Mode
to a(n) Weekly/Monthly/Semiannual/Annual/ Multiyear (__)-Year) Mode on ______
(the "Interest Mode Adjustment Date"). Unless you deliver a Notice of Election
to Retain Bonds to _____________________________ (the "Tender Agent"), at its
principal corporate trust office, at ________________________, Attention:
Corporate Trustee Department, in the form which is attached, your Bond will be
purchased on such date at a price of 100% of the principal amount thereof plus
interest accrued and unpaid thereon to, but not including, the Tender Date.
2. If your Bond or any portion thereof is so purchased, payment therefor
will be made on or after the tender date thereof upon presentation and surrender
at the principal corporate trust office of the Tender Agent at
__________________________, Attention: Corporate Trust Department, of such Bond,
duly endorsed in blank for transfer (with all signatures guaranteed by an
eligible guarantor institution as defined by SEC Rule l7Ad-15 (17 CFR
240.l7Ad-15)).
3. In addition, you are further notified that:
(A) Interest will no longer accrue to you on your Bond on and after
the tender date thereof unless the Tender Agent has received directions
from you not to so purchase your Bond as herein provided, and, other than
the right to receive payment of the purchase price for your Bond, you
shall then cease to have further rights under the Indenture;
(B) You have the right to direct the Tender Agent not to purchase
all or any portion of your Bond, which portion shall be $________ (the
minimum authorized denomination for the new Interest Mode) or any integral
multiple thereof, if you deliver the attached Notice of Election to Retain
Bonds to the Tender Agent at its address above on or before the date
occurring 5 days prior to the Interest Mode Adjustment Date; and
(C) In the event you properly file a Notice of Election to Retain
Bonds, the following will occur:
(i) After the Interest Mode Adjustment Date, the interest rate
on the portion of your Bond not purchased will be determined in
accordance with the Weekly/Monthly/Semiannual/Annual/Multiyear
(__-year) Mode, with interest being paid on the [first Business Day
of each month] [September 1 and March 1 of each year]; (and)
F-1
<PAGE>
(ii) The Trustee will inform you of the Interest Rate on the
portion of your Bond not purchased, on or soon after the Interest
Mode Adjustment Date[; and] [.]
[THE FOLLOWING SHALL BE INSERTED ONLY IF THE BONDS WILL BE IN
A WEEKLY MODE OR MONTHLY MODE]
[(iii) After the Interest Mode Adjustment Date, you may
require the portion of your Bond not previously purchased to be
purchased pursuant to Section 301 of the Indenture on a Tender Date
specified by you as further described in the Indenture.]
Date: __________
____________________________,
as Trustee
By:__________________________________________
Title:____________________________________
F-2
<PAGE>
EXHIBIT G
NOTICE OF ALTERNATE CREDIT FACILItY
THIS NOTICE WILL NOT BE GIVEN IF THE BONDS
ARE IN A MULTIYEAR MODE
NOTICE TO BONDOWNERS
This notice is being sent pursuant to the provisions of the Trust
Indenture dated as of September 1, 1994 (the "Indenture"), between the South
Carolina Jobs-Economic Development Authority (the "Issuer") and
__________________________, as Trustee. Capitalized terms used in this notice
shall have the same meanings as in the Indenture.
You are hereby notified as follows:
1. An Alternate Credit Facility issued by ______________________ and
relating to the Issuer's Variable Rate Demand Industrial Development Revenue
Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A (the
"Bonds"), will become effective on ___________ (the "Alternate Credit Facility
Date"). Unless you deliver a Notice of Election to Retain Bonds as described
below, your Bond will be purchased on such date at a price of 100% of the
principal amount thereof. A copy of the proposed form of Alternate Credit
Facility and certain financial information relating to the issuer thereof are on
file at the office of the Trustee and are available for inspection at your
request.
2. If your Bond or any portion thereof is so purchased, payment therefor
will be made on the Alternate Credit Facility Date upon presentation and
surrender at the Principal Office of the Tender Agent
(_________________________, Attention: Corporate Trust Department) prior to
10:30 A.M., New York Time on the Alternate Credit Facility Date, of such Bond,
duly endorsed in blank for transfer (with all signatures guaranteed by an
eligible guarantor institution as defined by SEC rule l7Ad-15 (17 CFR
240.l7Ad-15)).
3. In addition, you are further notified that:
(A) Interest will no longer accrue to you on your Bond on and after
the Alternate Credit Facility Date unless the Trustee has received
directions from you not to so purchase your Bond as herein provided, and,
other than the right to receive payment of the purchase price for your
Bond, you shall then cease to have further rights under the Indenture;
and
G-1
<PAGE>
(B) You have the right to direct that all or any portion of your
Bond not be purchased, which portion shall be $_____ (the minimum
authorized denomination for the Interest Rate Mode to be in effect on the
Alternate Credit Facility Date) or any integral multiple thereof, if you
deliver the Notice of Election to Retain Bonds to the Tender Agent at its
address above on or before the fifth Business Day next preceding the
Alternate Credit Facility Date.
Dated: ___________
____________________________
as Trustee
By:__________________________________________
Title:____________________________________
G-2
<PAGE>
EXHIBIT H
REPRESENTATION LETTER
[Trustee]
[Trustee Address]
[Remarketing Agent]
[Remarketing Agent Address]
[Credit Enhancer]
[Credit Enhancer Address]
Re: $7,700,000 Variable Rate Demand Industrial Development Revenue
Bonds (Roller Bearing Company of America, Inc. Project) Series
1994A of the South Carolina Jobs-Economic Development Authority
Ladies and Gentlemen:
The undersigned (the "Investor") hereby represents and warrants to you as
follows:
[THE FOLLOWING PARAGRAPH 1 IS FOR USE PURSUANT TO SECTION 210(i) OF THE
INDENTURE.]
1. The Investor proposes to purchase $__________ aggregate principal
amount of the above-referenced bonds (the "Bonds") issued pursuant to that
certain Trust Indenture dated as of September 1, 1994 (the "Indenture"), between
the South Carolina Jobs-Economic Development Authority and
______________________, as trustee. The Investor understands that the Bonds and
the credit enhancement with respect thereto have not been registered under the
Securities Act of 1933, as amended (the "1933 Act") or the securities laws of
any state and will be sold to the Investor in reliance upon certain exemptions
from registration and in reliance upon the representations and warranties of the
Investor set forth herein.
[THE FOLLOWING PARAGRAPH 1 IS FOR USE PURSUANT TO SECTION 210(iii) OF THE
INDENTURE.]
1. The Investor understands that [Remarketing Agent] may offer to the
Investor for purchase in a secondary market transaction the above-referenced
bonds (the "Bonds") issued pursuant to that certain Trust Indenture dated as of
September 1, 1994 (the "Indenture"), between the South Carolina Jobs-Economic
Development Authority and _____________________, as trustee. The Investor
understands that the Bonds and the credit enhancement with respect thereto have
not been registered under the Securities Act of 1933, as amended (the "1933
Act") or the securities laws of any state and may be sold to the Investor in
reliance upon certain exemptions from registration and in reliance upon the
representations and warranties of the Investor set forth herein.
H-1
<PAGE>
2. The Investor has sufficient knowledge and experience in business and
financial matters in general, and investments such as the Bonds in particular,
to enable the Investor to evaluate the risks involved in an investment in the
Bonds.
3. The Investor confirms that its investment in the Bonds constitutes an
investment that is suitable for and consistent with its investment program and
that the Investor is able to bear the economic risk of an investment in the
Bonds, including a complete loss of such investment.
4. The Investor is purchasing the Bonds solely for its own account for
investment purposes only, and not with a view to, or in connection with, any
distribution, resale, pledging, fractionalization, subdivision or other
disposition thereof (subject to the understanding that disposition of Investor's
property will remain at all times within its control).
5. The Investor agrees that it will only offer, sell, pledge, transfer or
exchange any of the Bonds it purchases (i) in accordance with an available
exemption from the registration requirements of Section 5 of the 1933 Act, (ii)
in accordance with any applicable state securities laws and (iii) in accordance
with the provisions of the Indenture.
6. The Investor is familiar with Rule 144A promulgated under the 1933 Act
and is a "qualified institutional buyer" as defined in Rule 144A; it is aware
that [the] [any] sale of Bonds to it [is] [may be] made in reliance on Rule 144A
and understands that such Bonds may be offered, resold, pledged or transferred
only (i) to a person who the Investor reasonably believes is a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the 1933 Act.
7. If the Investor sells any of the Bonds other than pursuant to a
mandatory or optional tender and purchase provided for in and complying with the
Indenture, the Investor or its agent will obtain from any subsequent purchaser
the same representations contained in this Representation Letter.
8. The Investor acknowledges and understands that you, any trustee under
the Indenture and each of the "issuers" (as such term is used in the 1933 Act)
of the Bonds and any security related thereto are relying and will continue to
rely on the statements made herein. The Investor agrees to notify you
immediately of any changes in the information and conclusions herein.
Very truly yours,
[Name of Investor]
Dated:_________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
[Must be President, Chief Financial
Officer or other Executive Officer]
H-2
CONFIDENTIAL
================================================================================
--------------
LOAN AGREEMENT
--------------
between
SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY
and
ROLLER BEARING COMPANY OF AMERICA, INC.
Relating to
----------
$3,000,000
Variable Rate Demand
Industrial Development Revenue Bonds
(Roller Bearing Company of America, Inc. Project)
Series 1994B
-----------------------------
DATED AS OF SEPTEMBER 1, 1994
-----------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and is not intended
to define, limit or describe the scope or intent of any provisions of this Loan
Agreement).
Page
----
ARTICLE I DEFINITIONS, CONSTRUCTION AND CERTAIN GENERAL
PROVISIONS .................................................... 2
Section 1.1. Definitions ............................................ 2
Section 1.2. Rules of Interpretation ................................ 3
ARTICLE II REPRESENTATIONS ............................................... 4
Section 2.1. Representations by the Issuer .......................... 4
Section 2.2. Representations and Warranties by the Borrower ......... 4
ARTICLE III THE LOAN; ISSUANCE OF THE BONDS ............................... 7
Section 3.1. Amount and Source of the Loan .......................... 7
Section 3.2. Reserved ............................................... 7
Section 3.3. Reserved ............................................... 7
Section 3.4. Disbursements from the Project Fund and the
Cost of Issuance Fund .................................. 7
Section 3.5. Investment of Fund Moneys .............................. 8
Section 3.6. Loan Payments .......................................... 8
Section 3.7. Additional Payments .................................... 9
Section 3.8. Obligations Unconditional .............................. 10
Section 3.9. Credit Facility ........................................ 10
Section 3.10. Alternate Credit Facility .............................. 10
Section 3.11. Issuance of Bonds ...................................... 10
- ii -
<PAGE>
Section 3.12. Borrower Required to Pay Costs in Event Project
Fund Insufficient ...................................... 10
Section 3.13. Completion Date ........................................ 11
ARTICLE IV OPERATION OF THE PLANT ........................................ 12
Section 4.1. Operation of the Plant ................................. 12
Section 4.2. Environmental Compliance ............................... 12
Section 4.3. Payment of Project Costs ............................... 12
Section 4.4. Deficiency of Project Fund ............................. 12
ARTICLE V MAINTENANCE; TAXES; INSURANCE ................................. 13
Section 5.1. Maintenance of Plant by Borrower ....................... 13
Section 5.2. Sale or Lease of Plant; Assignment of Loan Agreement
by Borrower ............................................ 13
Section 5.3. Taxes, Assessments and Other Charges ................... 13
Section 5.4. Use of Plant ........................................... 13
Section 5.5. Insurance Required ..................................... 13
ARTICLE VI PARTICULAR COVENANTS .......................................... 14
Section 6.1. Access to the Plant and Inspection; Operation
of the Plant ........................................... 14
Section 6.2. Financial Statements ................................... 14
Section 6.3. Indemnification ........................................ 14
Section 6.4. Further Assurances and Corrective Instruments .......... 15
Section 6.5. Litigation Notice ...................................... 15
Section 6.6. Annual Certificate ..................................... 15
ARTICLE VII ASSIGNMENT OF ISSUER'S RIGHTS UNDER LOAN
AGREEMENT ..................................................... 17
Section 7.1. Assignment by the Issuer ............................... 17
Section 7.2. Restriction on Transfer of Issuer's Rights ............. 17
- iii -
<PAGE>
Section 7.3. Credit Enhancer's Remedial Rights ...................... 17
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES ................................ 18
Section 8.1. Events of Default Defined .............................. 18
Section 8.2. Remedies on Default .................................... 18
Section 8.3. No Remedy Exclusive .................................... 19
Section 8.4. Agreement to Pay Attorneys' Fees and Expenses .......... 20
Section 8.5. Issuer and Borrower to Give Notice of Default .......... 20
Section 8.6. Performance Of Borrower's Obligations .................. 20
Section 8.7. Remedial Rights Assigned to the Trustee ................ 20
Section 8.8. Credit Enhancer to Direct Trustee ...................... 20
ARTICLE IX PREPAYMENT AND ACCELERATION OF LOAN PAYMENTS .................. 22
Section 9.1. Prepayment at the Option of the Borrower ............... 22
Section 9.2. Optional Prepayment Upon Certain Events ................ 22
Section 9.3. Reserved ............................................... 22
Section 9.4. Mandatory Prepayment Upon Certain Defaults ............. 22
Section 9.5. Mandatory Prepayment From Amounts Remaining
in Project Fund ........................................ 22
Section 9.6. Right to Prepay at Any Time ............................ 22
Section 9.7. Notice of Prepayment ................................... 22
Section 9.8. Precedence of this Article ............................. 23
ARTICLE X MISCELLANEOUS ................................................. 24
Section 10.1. Authorized Representatives ............................. 24
Section 10.2. Term of Loan Agreement ................................. 24
Section 10.3. Notices ................................................ 24
Section 10.4. Performance Date Not a Business Day .................... 25
- iv -
<PAGE>
Section 10.5. Binding Effect ......................................... 25
Section 10.6. Amendments, Changes and Modifications .................. 25
Section 10.7. Execution in Counterparts .............................. 25
Section 10.8. No Pecuniary Liability ................................. 25
Section 10.9. Extent of Covenants of the Issuer; No Personal
or Pecuniary Liability ................................. 25
Section 10.10. Net Loan ............................................... 26
Section 10.11. Security Interests ..................................... 26
Section 10.12. Complete Agreement ..................................... 26
Section 10.13. Severability ........................................... 26
Section 10.14. Governing Law .......................................... 27
Section 10.15. Not a Limitation ....................................... 27
Section 10.16. Consent to Jurisdiction; Service of Process ............ 27
EXHIBIT A .................................................................. A-1
EXHIBIT B .................................................................. B-1
EXHIBIT C .................................................................. C-1
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<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of September 1, 1994 (this "Agreement" or
Loan Agreement), between the SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY,
a body corporate and politic and an agency of the State of South Carolina (the
"Issuer"), and ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware corporation
(the "Borrower");
WITNESSETH:
WHEREAS, the Issuer acting by and through its Board of Directors, is
authorized and empowered under and pursuant to the provisions of Title 41,
Chapter 43, Code of Laws of South Carolina 1976, as amended (the "Act"), to
acquire and cause to be acquired properties that are projects under the Act
through which the industrial, commercial, agricultural and recreational
development of the State of South Carolina (the "State") will be promoted and
trade developed by inducing business enterprises to locate in and remain in the
State and thus provide maximum opportunities for the creation and retention of
jobs and improvement of the standard of living of the citizens of the State; and
WHEREAS, the Issuer is further authorized by Section 41-43-110 of the Act
to issue revenue bonds payable by the Issuer solely from revenues and receipts
from any financing agreement between the Issuer and any business enterprise with
respect to such project and secured by a pledge of said revenues and receipts
and by an assignment of such financing agreement; and
WHEREAS, pursuant to the Act, the Issuer is authorized to issue its
Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing
Company of America, Inc. Project) Series 1994B in the principal amount of
$3,000,000 (the "Bonds") for the purpose of providing working capital (the
"Project") in connection with an approximately 60,000 square foot expansion of
an existing facility for the manufacture of roller bearings in Darlington
County, South Carolina which is owned and operated by the Borrower; and
WHEREAS, the proceeds from the sale of the Bonds will be loaned to the
Borrower pursuant to the provisions of this Loan Agreement to enable the
Borrower to fund the Project; and
WHEREAS, the amount necessary to provide the working capital constituting
the Project will require the issuance, sale and delivery of the Bonds, as
hereinafter provided; and
WHEREAS, to secure the payment of the principal of and interest on the
Bonds and the purchase price of Bonds tendered by the Owners thereof as provided
in the Trust Indenture of even date herewith (the "Indenture") between the
Issuer and Mark Twain Bank, as Trustee (the "Trustee"), the Borrower has caused
the Credit Enhancer (as defined in the Indenture) to issue its Credit Facility
(as defined in the Indenture) to the Trustee; and
WHEREAS, pursuant to the foregoing, the Issuer desires to loan the
proceeds of the Bonds to the Borrower and the Borrower desires to borrow the
proceeds of the Bonds from the Issuer, to be repaid by the Borrower and upon the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, covenants and agreements herein contained, the Issuer and the
Borrower do hereby represent, covenant and agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS, CONSTRUCTION AND CERTAIN GENERAL PROVISIONS
Section 1.1. Definitions. All words and terms defined in Section 101 of
the Indenture shall have the same meaning in this Loan Agreement unless
otherwise defined herein. In addition to words and terms defined in the
Indenture or defined elsewhere in this Loan Agreement, the following words and
terms shall have the following meanings, unless some other meaning is plainly
intended:
"Additional Payments" means the Additional Payments described in Section
3.7 hereof.
"Borrower Documents" means this Loan Agreement and the Collateral
Documents.
"Default" means any event or condition which constitutes, or with the
giving of any requisite notice or upon the passage of any requisite time period
or upon the occurrence of both would constitute, an Event of Default under this
Agreement or the Indenture.
"Event of Default" means any Event of Default as defined in Section 8.1
hereof.
"Loan Payment Date" means an Interest Payment Date, Principal Payment Date
or any other date on which the principal of and interest on the Bonds is
payable.
"Loan Payments" means the Loan Payments described in Section 3.6 hereof.
"Loan Term" means the period from the effective date of this Loan
Agreement until the expiration hereof pursuant to Section 10.2 of this Loan
Agreement.
"Plant" means the facility, including machinery and equipment, for
manufacture of roller bearings operated by the Borrower in Darlington County,
South Carolina, as expanded with the proceeds of the Series 1994A Bonds.
"Project" means the working capital generally described in Exhibit A
hereto, as provided for in this Loan Agreement.
"Series 1994A Bonds" means the Issuer's $7,700,000 Variable Rate Demand
Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc.
Project) Series 1994A.
"Series 1994A Loan Agreement" means the Loan Agreement dated of even date
herewith between the Issuer and the Borrower, delivered with respect to the
Series 1994A Bonds, as amended, restated or supplemented.
"Unassigned Issuer's Rights" means the Issuer's rights to reimbursement
and payment of its costs and expenses and rebatable arbitrage under Sections
3.7(b) and (d).8.4 and 8.6 hereof, its rights of access under Section 6.1
hereof, its rights to indemnification under Sections 4.5 and 6.3 hereof, its
rights to exemption from liability under Sections 10.8 and 10.9 hereof, its
rights to receive notices, reports and other statements and its rights to
consent to certain matters.
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<PAGE>
Section 1.2. Rules of Interpretation. (a) Words of the masculine gender
shall be deemed and construed to include correlative words of the feminine and
neuter genders.
(b) Unless the context shall otherwise indicate words importing the
singular number shall include the plural and vice versa, and words importing
person shall include firms, partnerships, associations, joint stock companies,
joint ventures, trusts, unincorporated organizations, limited liability
companies and corporations, including governmental entities, as well as natural
persons.
(c) The words "herein", "hereby", "hereunder", "hereof", "hereto",
"hereinbefore", "hereinafter" and other equivalent words refer to this Loan
Agreement and not solely to the particular article, section, paragraph or
subparagraph hereof in which such word is used.
(d) Reference herein to a particular article or a particular section shall
be construed to be a reference to the specified article or section hereof unless
the context or use clearly indicates another or different meaning or intent.
Reference herein to a schedule or an exhibit shall be construed to be a
reference to the specified schedule or exhibit hereto unless the context or use
clearly indicates another or different meaning or intent.
(e) Wherever an item or items are listed after the word "including", such
listing is not intended to be a listing that excludes items not listed.
(f) The table of contents, captions and headings in this Loan Agreement
are for convenience only and in no way define, limit or describe the scope or
intent of any provisions or sections of this Loan Agreement.
[End of Article I]
- 3 -
<PAGE>
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations by the Issuer. The Issuer makes the following
representations as the basis for the undertakings on its part herein contained:
(a) The Issuer is a body politic and corporate and an agency of the State.
(b) The Issuer has lawful power and authority under the Act, acting
through its Board of Directors, to enter into the transactions contemplated by
this Loan Agreement and to carry out its obligations hereunder. By proper action
of the Board of Directors, the Issuer has been duly authorized to execute and
deliver this Loan Agreement, acting by and through its duly authorized officers.
(c) The issuance of the Bonds will further the public purposes of the Act.
(d) To finance the costs of the working capital constituting the Project,
the Issuer proposes to issue the Bonds in the aggregate principal amount of
$3,000,000. The Bonds will bear interest at the rates and be scheduled to mature
as set forth in Article II of the Indenture and will be subject to purchase from
the Owners thereof in accordance with the provisions of Article III of the
Indenture and redemption prior to maturity in accordance with the provisions of
Article IV of the Indenture. The Bonds are to be issued under and secured by the
Indenture, pursuant to which the payments, revenues and receipts derived by the
Issuer pursuant to this Loan Agreement, other than Unassigned Issuer's Rights,
will be pledged and assigned to the Trustee as security for payment of the
principal of, premium, if any, and interest on the Bonds.
(e) To the best of its knowledge, no member of the governing body of the
Issuer or any other officer of the Issuer has any significant or conflicting
interest, financial, employment or otherwise, in the Borrower, the Project or in
the transactions contemplated hereby.
Section 2.2. Representations and Warranties by the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Delaware, has the power and
authority to own its properties and carry on its business as now being
conducted, and is duly qualified to do such business, and is in good standing,
wherever such qualification is required, including the State.
(b) The Borrower has the power and authority to execute and deliver the
Borrower Documents, and to carry out the transactions contemplated hereby and
thereby, and has duly authorized the execution, delivery and performance of each
of the foregoing.
(c) Neither the execution nor delivery of the Borrower Documents, nor the
consummation of the transactions contemplated hereby or thereby, nor the
fulfillment of or compliance with the terms and conditions hereof or thereof,
conflicts with or results in a breach of or will constitute a default under any
of the terms, conditions or provisions or any legal restriction of any agreement
or instrument to which the Borrower is now a party or by which it is bound, or
constitutes a default under any of the
- 4 -
<PAGE>
foregoing or violates any judgment, order, writ, injunction, decree, law, rule
or regulation to which it is subject.
(d) The Borrower is knowledgeable in the operation of manufacturing
facilities of the magnitude and nature of the Plant.
(e) The Borrower is not presently under any cease or desist order or other
orders of a similar nature, temporary or permanent, of any federal or state
authority which would have the effect of preventing or hindering performance of
its duties hereunder, nor are there any proceedings presently in progress or to
its knowledge contemplated which would, if successful, lead to the issuance of
any such order.
(f) To the best of its knowledge, the Borrower has made, and will during
the term of this Agreement make, all filings which it is obligated to make with,
and has obtained, and will during the term of this Agreement obtain, all
approvals and consents which it is obligated to obtain from all federal, state
and local regulatory agencies having jurisdiction to the extent, if any,
required by applicable laws and regulations to be made or to be obtained in
connection with the Project, the execution and delivery by the Borrower of the
Borrower Documents, the transaction contemplated thereunder, and the performance
by the Borrower of its obligations thereunder.
(g) To the best of the Borrower's knowledge, except to the extent
disclosed to the Credit Enhancer, the operation and maintenance of the Plant
does not conflict with any zoning, building, safety, health or environmental
quality or other law, ordinance, order, rule or regulation applicable thereto.
(h) The Borrower will keep and perform faithfully all of its duties,
obligations, covenants and undertakings contained herein and in the Borrower
Documents.
(i) The Borrower will execute and deliver such additional instruments and
perform such additional acts as may be necessary, in the opinion of the Issuer,
to carry out the intent hereof and of the Borrower Documents or to perfect or
give further assurances of any of the rights granted or provided for herein or
in the Borrower Documents.
(j) The Borrower agrees that during the Loan Term it will maintain its
existence, will not dissolve (other than a technical dissolution under State law
so long as the Borrower is immediately reconstituted) or otherwise dispose of
all or substantially all of its assets; provided that the Borrower may, without
violating the agreement contained in this paragraph, merge or consolidate with
another legal entity or sell or otherwise transfer to another legal entity all
or substantially all of its assets as an entirety and thereafter dissolve,
provided (i) that such merger, consolidation or transfer will not affect the
excludability of the interest on the Bonds from gross income for federal income
tax purposes; (ii) that if the successor or transferee legal entity is not the
Borrower, then such legal entity shall be a legal entity, organized and existing
under the laws of one of the States of the United States of America and shall be
qualified to do business in the State; (iii) such successor or transferee entity
shall assume all of the obligations of the Borrower under the Borrower Documents
in which event the Borrower shall be released from its obligations under the
Borrower Documents; and (iv) the Credit Enhancer consents thereto in writing.
- 5 -
<PAGE>
(k) The Borrower will advise the Issuer, the Credit Enhancer and the
Trustee promptly in writing of the occurrence of any Default hereunder or any
event which, with the passage of time or service of notice, or both, would
constitute an Event of Default hereunder, specifying the nature and period of
existence of such event and the actions being taken or proposed to be taken with
respect thereto.
(l) Any certificate signed by an Authorized Borrower Representative and
delivered pursuant to this Loan Agreement or the Indenture shall be deemed a
representation and warranty of the Borrower as to the statement made therein.
(m) Concurrently with the execution of this Loan Agreement, the Borrower
will cause to be delivered to the Trustee, on behalf of the Issuer, the Credit
Facility and the Credit Facility shall be in full force and effect and shall
secure the payment of the principal and purchase price of, and interest on, the
Bonds.
(n) The working capital constituting the Project will be used solely in
connection with the Borrower's operation of the Plant or to pay costs of
issuance of the Bonds.
(o) There is not now pending or, to the knowledge of the Borrower,
threatened, any suit, action or proceeding against or affecting the Borrower by
or before any court, arbitrator, administrator, administrative agency or other
governmental authority which, if decided adversely to the Borrower, would
materially and adversely affect the validity of any of the transactions
contemplated by this Loan Agreement or the Indenture, or impair the ability of
the Borrower to perform its obligations under this Loan Agreement or the
Indenture, or as contemplated hereby or thereby, nor, to the knowledge of the
Borrower, is there any basis therefor.
(p) The Project is of the type authorized and permitted by the Act, and
the Project is substantially the same in all material respects to that described
in the notice of public hearing published in The Darlington News and Post on
June 1, 1994.
(q) The Plant is located wholly within Darlington County, South Carolina.
(r) The Borrower will not take any action or omit to take any action or
permit any action which is within its control to be taken or omitted which would
impair the excludability from gross income for federal income taxation purposes
of interest on the Series 1994A Bonds.
[End of Article II]
- 6 -
<PAGE>
ARTICLE III
THE LOAN; ISSUANCE OF THE BONDS
Section 3.1. Amount and Source of the Loan. The Issuer agrees to lend to
the Borrower, upon the terms and conditions herein and in the Indenture
specified, the net proceeds received by the Issuer from the sale of the Bonds
(the "Loan"), and to cause such proceeds to be deposited in accordance with the
Indenture.
Section 3.2. [Reserved].
Section 3.3. [Reserved].
Section 3.4. Disbursements from the Project Fund and the Cost of Issuance
Fund.
(a) The Issuer has, in the Indenture, authorized and directed the Trustee,
provided no Event of Default has occurred and is continuing, to make
disbursements from the Project Fund and the Cost of Issuance Fund, to:
(i) provide working capital for the Borrower in connection with the
operation of the Plant;
(ii) pay financing, legal, accounting, printing and engraving fees,
charges and expenses, and all other such fees, charges and expenses
incurred in connection with the authorization, sale, issuance and delivery
of the Bonds and the preparation and delivery of this Loan Agreement and
related documents; and
(iii) pay the fees and expenses of the Trustee, Registrar, Tender
Agent and Paying Agent properly incurred in connection with the execution
and delivery of the Indenture and of the Credit Enhancer properly incurred
in connection with the issuance of the Credit Facility and the execution
and delivery of the Letter of Credit Agreement.
(b) All moneys in the Project Fund (including moneys earned thereon by
investment thereof) remaining after the completion of funding of the Project and
payment, or provision for payment, in full of the costs provided in the
preceding subsection of this Section, then due and payable, shall as soon as
practicable be paid into the Revenue Fund to be used for the redemption of the
Bonds, or a portion thereof, at the earliest possible date.
(c) All disbursements from the Project Fund for the items described in
this Section shall be made only upon the written order of an Authorized Borrower
Representative and the following conditions shall have been satisfied with
respect to such disbursement:
(A) There shall have been delivered to the Trustee and the
Credit Enhancer a certificate of an Authorized Borrower
Representative in the form of Exhibit B attached hereto certifying,
with respect to such disbursement, to the Credit Enhancer and the
Trustee (1) the amount of working capital and/or cost of credit
enhancement to be disbursed, (2) that such amount will be expended
by the Borrower in connection with the operation of the Plant and
(3) that none of the items for which the disbursement is
- 7 -
<PAGE>
proposed to be made formed the basis for any disbursement
theretofore made from the Project Fund;
(B) There shall be in existence no Event of Default or
situation which, upon the giving of notice or the passage of time or
both would become an Event of Default; and
(C) The Credit Enhancer shall have approved the requested
disbursement from the Project Fund.
(d) Should the Borrower be unable to request final disbursement from the
Project Fund as described above prior to a date which is five (5) years from the
Bond Issuance Date, such funds remaining in the Project Fund shall be considered
to be moneys remaining in the Project Fund after completion of the Project and
shall be paid into the Revenue Fund and expended as described in Section 3.4(b)
unless the Borrower delivers to the Trustee an opinion of Bond Counsel that such
treatment is not necessary to retain the State tax-exempt status of the Bonds.
(e) All disbursements from the Cost of Issuance Fund for the items
described above shall be made only upon the written order of the Authorized
Borrower Representative in substantially the form attached hereto as Exhibit B.
Section 3.5. Investment of Fund Moneys. Any moneys held as part of the
Funds under the Indenture shall be invested or reinvested by the Trustee as
provided in the Indenture.
Section 3.6. Loan Payments. The Borrower shall pay the following amounts
to the Trustee, all as "Loan Payments" under this Loan Agreement:
(a) The Borrower covenants and agrees during the Loan Term to make Loan
Payments to the Trustee at its Principal Office, for the account of the Issuer,
for deposit in the Revenue Fund, in federal or other immediately available
funds, during normal business hours on or before 10:00 A.M., Trustee's local
time, on each Loan Payment Date, the amount of such payment being as follows:
(i) the amount of the principal, if any, of the Bonds due and
payable on such Loan Payment Date, whether at stated maturity, by
redemption prior to maturity or acceleration or otherwise;
(ii) the amount of interest on the Bonds due and payable on such
Loan Payment Date;
(iii) the amount of redemption premium, if any, on the Bonds due and
payable on such Loan Payment Date; and
(iv) the purchase price of any Bonds required to be purchased on
such Loan Payment Date pursuant to Article III of the Indenture.
- 8 -
<PAGE>
(b) The amounts received by the Trustee under the Credit Facility shall be
credited against the Loan Payment due on the applicable Loan Payment Date. Any
Loan Payment made by the Borrower and held by the Trustee in such event shall be
delivered to the Credit Enhancer in reimbursement of the amounts so received by
the Trustee under the Credit Facility, and any excess shall be returned to the
Borrower as an overpayment.
(c) Except for such interest of the Borrower as may hereafter arise
pursuant to Section 510 of the Indenture, the Borrower and the Issuer each
acknowledge that neither the Borrower nor the Issuer has any interest in the
Revenue Fund or the Debt Service Fund and any moneys deposited therein shall be
in the custody of and held by the Trustee in trust for the benefit of the
Bondowners and the Credit Enhancer.
Section 3.7. Additional Payments. The Borrower shall pay the following
amounts to the following persons, all as "Additional Payments" under this Loan
Agreement:
(a) To the Trustee, when due, all reasonable fees and charges for its
services rendered under the Indenture, this Loan Agreement and the Borrower
Documents, and all reasonable expenses (including without limitation reasonable
fees and charges of the Paying Agent, the Bond Registrar, counsel, accountant,
engineer or other person) incurred in the performance of the duties of the
Trustee under the Indenture, this Loan Agreement and the other Borrower
Documents, for which the Trustee and other persons are entitled to repayment or
reimbursement;
(b) To the Issuer, upon demand, its regular administrative and issuance
fees and charges, if any, and all expenses (including without limitation
attorney's fees) incurred by the Issuer in relation to the transactions
contemplated by this Loan Agreement and the Indenture, which are not otherwise
to be paid by the Borrower under this Loan Agreement or the Indenture;
(c) To the appropriate Person, all taxes, assessments and charges required
to be paid pursuant to Section 5.3 hereof;
(d) To the appropriate person, such payments as are required (i) as
payment for or reimbursement of any and all reasonable costs, expenses and
liabilities incurred by the Issuer, the Credit Enhancer or the Trustee or any of
them in satisfaction of any obligations of the Borrower hereunder and under the
other Borrower Documents that the Borrower does not perform, or incurred in the
defense of any action or proceeding with respect to the Project, this Loan
Agreement, the Indenture or the other Borrower Documents, or (ii) as
reimbursement for expenses paid, or as prepayment of expenses to be paid, by the
Issuer or the Trustee that are incurred as a result of a request by the Borrower
or for which the Borrower is liable under this Loan Agreement;
(e) To the appropriate Person, any other amounts required to be paid by
the Borrower under this Loan Agreement; and
(f) All Costs of Issuance and fees, charges and expenses, including agent
and counsel fees, incurred in connection with the issuance of the Bonds, as and
when the same become due.
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<PAGE>
Any past due Additional Payments shall continue as an obligation of the
Borrower until they are paid and shall bear interest (except as may be otherwise
provided in the Collateral Documents with respect to obligations owed to the
Credit Enhancer) at the base rate of interest announced from time to time by the
Trustee for variable rate commercial loans plus two percent (2%) during the
period such Additional Payments remain unpaid.
Section 3.8. Obligations Unconditional. The obligations of the Borrower to
make Loan Payments and Additional Payments on or before the date the same become
due, and to perform all of its other obligations, covenants and agreements
hereunder shall be absolute and unconditional, and the Borrower shall make such
payments and perform such obligations without abatement, diminution or deduction
regardless of any cause or circumstances whatsoever including, without
limitation, any defense, set-off, recoupment or counterclaim which the Borrower
may have or assert against the Issuer, the Trustee or any other Person.
Section 3.9. Credit Facility. Concurrently with the issuance of the Bonds,
the Borrower shall cause the Credit Facility to be delivered to the Trustee to
induce the purchase of the Bonds by the original purchasers thereof. The
Borrower shall cause the Credit Facility or an Alternate Credit Facility to be
continuously maintained until all of the Bonds have been fully paid or their
payment provided for in accordance with Article XII of the Indenture.
Section 3.10. Alternate Credit Facility. The Borrower may (without penalty
or premium) provide and the Trustee shall accept any Alternate Credit Facility,
provided that any Alternate Credit Facility shall meet the requirements of
Section 706 of the Indenture and an opinion of counsel acceptable to the Trustee
has been delivered to the Trustee to substantially the same effect as the
opinion of counsel to the Credit Enhancer delivered in connection with the
issuance of the initial Credit Facility and, in addition, to the effect that the
exemption of the Bonds (or any securities evidenced thereby) from the
registration requirements of the Securities Act of 1933, as amended, shall not
be impaired by the substitution of such Alternate Letter of Credit or that the
applicable registration or qualification requirements of such Act have been
satisfied.
Section 3.11. Issuance of Bonds. In order to provide funds for the
Project, the Issuer agrees that it will issue, sell and deliver the Bonds to the
original purchasers thereof. The proceeds of the sale of the Bonds shall be paid
over to the Trustee for the account of the Issuer in accordance with the
Indenture.
Section 3.12. Borrower Required to Pay Costs in Event Project Fund
Insufficient. In the event that money in the Project Fund is not sufficient to
pay all costs of providing the Project, the Borrower shall, nonetheless,
complete the Project and shall pay all costs of such completion in full from its
own funds. The Borrower shall not be entitled to any reimbursement for such
completion costs from the Issuer, the Credit Enhancer or any Trustee, Registrar
or Paying Agent, nor shall it be entitled to any abatement, diminution or
postponement of Loan Payments.
- 10 -
<PAGE>
Section 3.13. Completion Date. The Completion Date of the Project shall be
evidenced to the Issuer, the Credit Enhancer and the Trustee by a certificate
signed by an Authorized Borrower Representative substantially in the form
attached hereto as Exhibit C.
[End of Article III]
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<PAGE>
ARTICLE IV
OPERATION OF THE PLANT
Section 4.1. Operation of the Plant. The Borrower represents, warrants,
covenants and agrees that it has obtained or shall obtain all necessary or
required permits, licenses, consents and approvals that are material for the
operation and maintenance of the Plant and shall comply in all material respects
with all lawful requirements of any governmental body regarding the use or
condition of the Plant, whether existing or later enacted, foreseen or
unforeseen or whether involving any change in governmental policy or requiring
structural or other changes to the Project and irrespective of the cost of so
complying.
Neither the Issuer, the Trustee or the Credit Enhancer, nor their
respective successors or assigns are the agents or representatives of the
Borrower, and the Borrower is not the agent of the Issuer, the Trustee or the
Credit Enhancer, and this Loan Agreement shall not be construed to make any of
the Issuer, the Trustee or the Credit Enhancer liable to materialmen,
contractors, subcontractors, craftsmen, laborers or others for goods or services
delivered by them in connection with the expansion of the Plant, or for debts or
claims accruing to the aforesaid parties against the Borrower. This Loan
Agreement shall not create any contractual relation either expressed or implied
between the Issuer, the Trustee or the Credit Enhancer and any materialmen,
contractors, subcontractors, craftsmen, laborers or any other person supplying
any work, labor or materials in connection with the expansion of the Plant.
Section 4.2. Environmental Compliance. The Borrower will comply in all
material respects with the environmental provisions of the Credit Documents, the
provisions of which (including relevant definitions) are incorporated herein by
this reference and constitute a part of this Agreement.
Section 4.3. Payment of Project Costs. The proceeds from the sale of the
Bonds shall be paid by the Trustee from the Project Fund in accordance with
Section 3.4 of this Agreement to provide for the payment of the Project costs.
Section 4.4. Deficiency of Project Fund. The Issuer makes no warranty,
either express or implied, that the amounts in the Project Fund shall be
sufficient to fully provide for the costs of the Project. The Borrower shall not
be entitled to any reimbursement for the payment of any such deficiency by the
Issuer, the Trustee, the Credit Enhancer or any Bondowner, nor shall it be
entitled to any diminution of any amounts otherwise payable under this Loan
Agreement.
[End of Article IV]
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<PAGE>
ARTICLE V
MAINTENANCE; TAXES; INSURANCE
Section 5.1. Maintenance of Plant by Borrower. The Borrower agrees that
during the term of this Agreement it will keep and maintain the Plant in good
condition, repair and working order, ordinary wear and tear excepted, at its own
cost, and will make or cause to be made from time to time all necessary repairs
thereto (including external and structural repairs) and renewals and
replacements thereto.
Section 5.2. Sale or Lease of Plant; Assignment of Loan Agreement by
Borrower. Upon the written consent of the Credit Enhancer and the delivery of an
Opinion of Bond Counsel to the Trustee and the Credit Enhancer that such action
is permitted by the Borrower Documents and the Act, and shall not adversely
affect the exclusion from gross income for federal income tax purposes of the
interest on the Series 1994A Bonds, the Borrower may assign, mortgage, pledge,
sell, lease, grant a security interest in, or in any other manner transfer,
convey or dispose of the Plant or any interest therein or part thereof or assign
any of its right, title and interest in, to and under this Loan Agreement in
accordance with the Borrower Documents; provided that no such assignment with
respect to this Loan Agreement shall be made unless a corresponding assignment
is made with respect to the Series l994A Loan Agreement.
Section 5.3. Taxes, Assessments and Other Charges. The Borrower shall pay
all taxes, assessments and charges of any kind whatsoever that may at any time
be lawfully assessed or levied against or with respect to the Plant (including
any tax upon or with respect to the income or profits of the Issuer from the
Plant that, if not paid, would become a charge on the payments to be made under
this Loan Agreement prior to or on a parity with the charge thereon created by
the Indenture and including ad valorem, sales and excise taxes, assessments and
charges upon the Borrower's interest in the Plant), all utility and other
charges incurred in the operation, maintenance, use, occupancy and upkeep of the
Plant and all assessments and charges lawfully made by any governmental body for
public improvements that may be secured by lien on the Plant.
Section 5.4. Use of Plant. The Issuer will not take or cause the Trustee
to take any action (other than as provided herein or in the Indenture) to
interfere with the Borrower's interest in the Plant or to interfere with
possession, custody, use and enjoyment of the Plant.
Section 5.5. Insurance Required. The Borrower shall cause the Plant to be
kept continuously insured against such risks as are customarily insured against
by companies conducting activities similar to those of the Borrower in
connection with the Plant, and shall pay as the same become due all premiums in
respect thereof, all as provided in the Credit Documents.
[End of Article V]
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ARTICLE VI
PARTICULAR COVENANTS
Section 6.1. Access to the Plant and Inspection; Operation of the Plant.
The duly authorized agents of the Issuer, the Credit Enhancer and the Trustee
shall have the right, at all reasonable times upon the furnishing of reasonable
notice under the circumstances, to enter upon the Plant and to examine and
inspect the Plant, subject to any secrecy regulation or agreement or national
security law or regulation of the government of the United States of America.
The Borrower will execute, acknowledge and deliver all such further documents
and do all such other acts and things as may be necessary to grant to the
Issuer, the Credit Enhancer and the Trustee such right of entry. The duly
authorized agents of the Issuer, the Credit Enhancer and the Trustee shall also
be permitted, at all reasonable times upon reasonable notice under the
circumstances, to examine the books and records of the Borrower with respect to
the Plant, the working capital provided for herein, and the obligations of the
Borrower hereunder.
Section 6.2. Financial Statements. The Borrower shall furnish the Credit
Enhancer and the Trustee with copies of its audited financial statements for
each of its fiscal years within 120 days after the end of the preceding fiscal
year accompanied by a certificate of the Authorized Borrower Representative
stating (i) that the information contained in such statements is materially true
and correct, and (ii) that, to the best of his knowledge after reasonable
investigation, no Default exists, and if there is such a Default, specifying the
nature and period of existence thereof and what action, if any, the Borrower is
taking or proposes to take with respect thereto.
Section 6.3. Indemnification. (a) The Borrower releases the Issuer and the
Trustee from, agrees that the Issuer and the Trustee shall not be liable for,
and indemnifies the Issuer and the Trustee against, all liabilities, losses,
damages (including reasonable attorneys' fees), causes of action, suits, claims,
costs and expenses, demands and judgments of any nature imposed upon or asserted
against the Issuer or the Trustee, on account of: (i) any loss or damage to
property or injury to or death of or loss by any Person that may be occasioned
by any cause whatsoever pertaining to the construction, maintenance, operation
and use of the Plant; (ii) any breach or default on the part of the Borrower in
the performance of any covenant or agreement of the Borrower under this Loan
Agreement, the Borrower Documents or any related document, or arising from any
act or failure to act by the Borrower, or any of its agents, contractors,
servants, employees or licensees; (iii) violation by the Borrower or any
Affiliate of any law, ordinance or regulation affecting the ownership, occupancy
or use of the Plant; (iv) the authorization, issuance and sale of the Bonds, and
the provision of any information furnished by the Borrower in connection
therewith concerning the Project or the Borrower or arising from (1) any errors
or omissions of any nature whatsoever such that the Bonds, when delivered to the
Bondowners, are not validly issued and binding obligations of the Issuer, or (2)
any fraud or misrepresentations or omissions contained in the proceedings of the
Issuer or the Trustee with respect to, or as a result of, materials furnished in
writing by the Borrower relating to the issuance of the Bonds which, if known to
the original purchaser of the Bonds, would reasonably be a material factor in
its decision to purchase the Bonds; and (v) any claim or action or proceeding
with respect to the matters set forth in subsections (i), (ii), (iii) and (iv)
above brought thereon; provided, however, that the Borrower does not hereby
release the Issuer or the Trustee from, or agree that either of them shall not
be liable for, or indemnify either of them against any liabilities, losses,
damages (including attorneys' fees), causes of action, suits, claims, costs and
expenses, demands and judgments of any nature imposed upon or asserted against
either of them on account of, with respect to the Issuer, its willful
misconduct, or, with respect to the Trustee, its negligence or willful
misconduct.
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<PAGE>
(b) The Borrower agrees to indemnify the Trustee for and to hold it
harmless against all liabilities, claims, costs and expenses incurred without
negligence or willful misconduct on the part of the Trustee, on account of any
action taken or omitted to be taken by the Trustee in accordance with the terms
of this Loan Agreement, the Bonds or the Indenture or any action taken at the
request of or with the consent of the Borrower, including the costs and expenses
of the Trustee in defending itself against any such claim, action or proceeding
brought in connection with the exercise or performance of any of its powers or
duties under this Loan Agreement, the Bonds or the Indenture.
(c) In case any action or proceeding is brought against the Issuer or the
Trustee in respect of which indemnity may be sought hereunder, the party seeking
indemnity promptly shall give notice of that action or proceeding to the
Borrower, and the Borrower upon receipt of that notice shall have the obligation
and the right to assume the defense of the action or proceeding; provided, that
failure of a party to give that notice shall not relieve the Borrower from any
of its obligations under this Section unless that failure prejudices the defense
of the action or proceeding by the Borrower. At its own expense, an indemnified
party may employ separate legal counsel and participate in (but not control) the
defense. The Borrower shall not be liable for any settlement without its
consent.
(d) The indemnification set forth above is intended to and shall include
the indemnification of all affected officials, directors, officers, staff and
employees of the Issuer, and the Trustee, respectively. That indemnification is
intended to and shall be enforceable by the Issuer to the full extent permitted
by law.
Section 6.4. Further Assurances and Corrective Instruments. Subject to the
Indenture, the Issuer and the Borrower from time to time will execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
Supplemental Loan Agreements and such further instruments as may reasonably be
required for correcting any inadequate or incorrect description of the Project
and for carrying out the intention or facilitating the performance of this Loan
Agreement.
Section 6.5. Litigation Notice. The Borrower shall give the Trustee and
the Credit Enhancer prompt notice of any action, suit or proceeding by it or
against it at law or in equity, or before any governmental instrumentality or
agency, or of any of the same which may be threatened, which, if adversely
determined, would materially impair the right of the Borrower to carry on the
business which is contemplated in connection with the Project, or would
materially and adversely affect its business, operations, properties, assets or
condition. Within five Business Days after the filing against the Borrower, and
prior to the filing by the Borrower, of a petition in bankruptcy, the Borrower
shall notify the Trustee and the Credit Enhancer in writing as to such
occurrence.
Section 6.6. Annual Certificate. The Borrower will furnish to the Issuer,
the Trustee and the Credit Enhancer, on or before September 1 of each year, a
certificate, signed by an Authorized Borrower Representative, stating that the
Borrower has made a review of its activities with respect to the Project during
the preceding calendar year for the purpose of determining whether or not the
Borrower has complied with all of the terms, provisions and conditions of the
Borrower Documents and that the
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<PAGE>
Borrower has, to the best of its knowledge, kept, observed, performed and
fulfilled each and every covenant, provision and condition of the Borrower
Documents on its part to be performed and is not in default, in the performance
or observance of any of the terms, covenants, provisions or conditions hereof.
If the Borrower shall be in default such certificate shall specify all such
defaults and the nature thereof.
[End of Article VI]
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<PAGE>
ARTICLE VII
ASSIGNMENT OF ISSUER'S RIGHTS UNDER LOAN AGREEMENT
Section 7.1. Assignment by the Issuer. The Issuer, by means of the
Indenture and as security for the payment of the principal of, purchase price
of, and redemption premium, if any, and interest on the Bonds, and the
obligations payable to the Credit Enhancer under the Letter of Credit Agreement,
will assign, pledge and grant a security interest in certain of its rights,
title and interests in, to and under this Loan Agreement, including Loan
Payments and Additional Payments and other revenues, moneys and receipts
received by it pursuant to this Loan Agreement, to the Trustee (reserving its
Unassigned Issuer's Rights).
Section 7.2. Restriction on Transfer of Issuer's Rights. The Issuer will
not sell, assign, transfer or convey its interests in this Loan Agreement except
pursuant to the Indenture.
Section 7.3. Credit Enhancer's Remedial Rights. The Issuer and the
Borrower hereby acknowledge and agree that should the Credit Enhancer exercise
certain of its remedial rights under the Credit Documents, the Credit Enhancer
(or an affiliate or designee thereof) may become successor in interest to the
Borrower hereunder. No such exercise of the Credit Enhancer's rights under the
Credit Documents, or succession of the Credit Enhancer (or an affiliate or
designee thereof) to the interest of the Borrower hereunder, shall require, as a
condition precedent, either (i) the further consent of the Issuer, the Trustee
or the Bondowners, or (ii) the acceleration of the Bonds (unless the Credit
Enhancer elects such in its sole discretion).
[End of Article VII]
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ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.1. Events of Default Defined. The term "Event of Default" shall
mean any one or more of the following events:
(a) Failure by the Borrower to make timely payment of any Loan Payment or
any Additional Payment when due.
(b) Failure by the Borrower to observe and perform any covenant, condition
or agreement on the part of the Borrower under this Loan Agreement or the
Indenture, other than as referred to in the preceding subparagraph (a) of this
Section, for a period of 60 days after written notice of such default has been
given to the Borrower and the Credit Enhancer by the Trustee during which time
such default is neither cured by the Borrower or the Credit Enhancer nor waived
in writing by the Credit Enhancer and the Trustee, provided that, if the failure
stated in the notice cannot be corrected within said 60-day period, the Credit
Enhancer and the Trustee may consent in writing to an extension of such time
prior to its expiration and the Credit Enhancer and the Trustee will not
unreasonably withhold their consent to such an extension if corrective action is
instituted by the Borrower or the Credit Enhancer within the 60-day period and
diligently pursued to completion and if such consent, in their judgment, does
not materially adversely affect the interests of the Bondowners.
(c) Any representation or warranty by the Borrower herein or in any
certificate or other instrument delivered under or pursuant to this Loan
Agreement or the Indenture or in connection with the financing of the Project
shall prove to have been false, incorrect, misleading or breached in any
material respect on the date when made, unless waived in writing by the Issuer,
the Credit Enhancer and the Trustee or cured by the Borrower or the Credit
Enhancer within 30 days after the discovery thereof and notice has been given to
the Borrower and the Credit Enhancer.
(d) The occurrence of an Act of Bankruptcy with respect to the Borrower.
(e) The occurrence of an Event of Default as defined in the Indenture.
(f) The occurrence of an Event of Default as defined in the Series 1994A
Loan Agreement.
Section 8.2. Remedies on Default. Subject to the provisions of Section 8.8
hereof, whenever any Event of Default shall have occurred and be continuing, the
Trustee, as the assignee of the Issuer, may take any one or more of the
following remedial steps; provided that if the principal of all Bonds then
Outstanding and the interest accrued thereon shall have been declared
immediately due and payable pursuant to the provisions of Section 802 of the
Indenture, all Loan Payments for the remainder of the Loan Term shall become
immediately due and payable without any further act or action on the part of the
Issuer or the Trustee and the Trustee may immediately proceed (subject to the
provisions of Section 8.8 hereof) to take any one or more of the remedial steps
set forth in subparagraph (b) of this Section:
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<PAGE>
(a) By written notice to the Borrower (with a copy to the Credit Enhancer)
declare all Loan Payments to be immediately due and payable, together with
interest on overdue payments of principal and redemption premium, if any, and,
to the extent permitted by law, interest, at the rate or rates of interest
specified in the respective Bonds, without presentment, demand or protest, all
of which are expressly waived.
(b) Take whatever other action at law or in equity, including causing the
appointment of a receiver or receivers for the Borrower and/or its assets,
taking all actions necessary and appropriate to exercise or to cause the
exercise the rights and powers set forth herein or in the Indenture, as may
appear necessary or desirable to collect the amounts payable pursuant to this
Loan Agreement then due and thereafter to become due or to enforce the
performance and observance of any obligation, agreement or covenant of the
Borrower under this Loan Agreement or the Indenture.
In the enforcement of the remedies provided in this Section, the Trustee
may treat all expenses of enforcement, including reasonable legal, accounting
and advertising fees and expenses, as Additional Payments then due and payable
by the Borrower.
Any amount collected pursuant to action taken under this Section (other
than payments on the Credit Facility) shall be paid to the Trustee and applied,
first, to the payment of any costs, expenses and fees incurred by the Issuer or
the Trustee as a result of taking such action and, next, any balance shall be
used to satisfy any Loan Payments then due by payment into the Revenue Fund and
applied in accordance with the Indenture and, then, to satisfy any other
Additional Payments then due or to cure any other Event of Default.
Notwithstanding the foregoing, the Trustee shall not be obligated to take
any remedial action described in (b) above that in its opinion will or might
cause it to expend time or money or otherwise incur liability, unless and until
indemnity satisfactory to it has been furnished to the Trustee at no cost or
expense to the Trustee.
The provisions of this Section are subject to the limitation that the
annulment of a declaration that the Bonds are immediately due and payable shall
automatically constitute an annulment of any corresponding declaration made
pursuant to subparagraph (a) of this Section and a waiver and rescission of the
consequences of such declaration and of the Event of Default with respect to
which such declaration has been made, provided that no such waiver or rescission
shall extend to or affect any other or subsequent Default or impair any right
consequent thereon. In the event any covenant, condition or agreement contained
in this Loan Agreement shall be breached or any Event of Default shall have
occurred and such breach or Event of Default shall thereafter be waived by the
Trustee, such waiver shall be limited to such particular breach or Event of
Default.
Section 8.3. No Remedy Exclusive. Subject to the provisions of Section 8.8
hereof, no remedy herein conferred or reserved is intended to be exclusive of
any other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this Loan
Agreement or now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon Default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle the Trustee to exercise any remedy
reserved to it in this Article, it shall not be necessary to give any notice,
other than such notice as may be herein expressly required.
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<PAGE>
Section 8.4. Agreement to Pay Attorneys' Fees and Expenses. Subject to the
provisions of Section 3.7 hereof, in correction with any Event of Default by the
Borrower, if the Issuer or the Trustee employs attorneys or incurs other
expenses for the collection of amounts payable hereunder or the enforcement of
the performance or observance of any covenants or agreements on the part of the
Borrower herein contained, the Borrower agrees that it will, on demand therefor,
pay to the Issuer and the Trustee the reasonable fees of such attorneys and such
other reasonable expenses so incurred by the Issuer and the Trustee.
Section 8.5. Issuer and Borrower to Give Notice of Default. The Issuer,
the Trustee and the Borrower shall each, at the expense of the Borrower,
promptly give to the Credit Enhancer and the other listed parties written notice
of any Default of which the Issuer, the Trustee or the Borrower, as the case may
be, shall have actual knowledge or written notice, but the Issuer shall not be
liable for failing to give such notice.
Section 8.6. Performance Of Borrower's Obligations. If the Borrower shall
fail to keep or perform any of its obligations as provided in this Loan
Agreement in respect of (a) maintenance of insurance, (b) payments of taxes,
assessments and other charges, (c) repairs and maintenance of the Plant, and (d)
compliance with legal or insurance requirements, or in the making of any other
payment or performance of any other obligation, then the Issuer, the Credit
Enhancer or the Trustee, may (but shall not be obligated so to do) upon the
continuance of such failure on the Borrower's part for 5 days after notice of
such failure is given to the Borrower and the other listed parties by the
Issuer, the Credit Enhancer or the Trustee, and without waiving or releasing the
Borrower from any obligation hereunder, as an additional but not exclusive
remedy, make any such payment or perform any such obligation, and all sums so
paid by the Issuer, the Credit Enhancer or the Trustee and all necessary
incidental costs and expenses incurred by the Issuer, the Credit Enhancer or the
Trustee in performing such obligations shall be deemed to be Additional Payments
or payments due under the Collateral Documents, as applicable, and shall be paid
to the Issuer, the Credit Enhancer or the Trustee on demand.
Section 8.7. Remedial Rights Assigned to the Trustee. Upon the execution
and delivery of the Indenture, the Issuer will thereby have assigned to the
Trustee all rights and remedies conferred upon or reserved to the Issuer by this
Loan Agreement, reserving only the Unassigned Issuer's Rights. Subject to the
provisions of Section 8.8 hereof, the Trustee shall have the exclusive right to
exercise such rights and remedies conferred upon or reserved to the Issuer by
this Loan Agreement in the same manner and to the same extent, but under the
limitations and conditions imposed thereby and hereby. The Trustee, the Credit
Enhancer and the Bondowners shall be deemed third party creditor beneficiaries
of all representations, warranties, covenants and agreements contained herein.
Section 8.8. Credit Enhancer to Direct Trustee. Any provision herein to
the contrary notwithstanding, unless an Event of Default described in
subparagraph (a), (b), (c) or (e)(i) of Section 801 of the Indenture, or an
Event of Default described in subparagraph (g) of said Section 801 as the same
relates to a default described in subparagraphs (a), (b), (c) or (e)(i) of
Section 801 of the Series 1994A Indenture, shall have occurred and be
continuing, the Issuer shall (subject to the requirements of Section 901(1) of
the Indenture) exercise the remedies provided for hereunder only if and as
directed in writing by the Credit Enhancer and shall not waive any Event of
Default without the prior written consent
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<PAGE>
of the Credit Enhancer; provided that such direction shall not be otherwise than
in accordance with the provisions of law and of the Indenture.
[End of Article VIII]
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<PAGE>
ARTICLE IX
PREPAYMENT AND ACCELERATION OF LOAN PAYMENTS
Section 9.1. Prepayment at the Option of the Borrower. Upon the exercise
by the Borrower, with the prior written consent of the Credit Enhancer, of its
option to cause the Bonds or any portion thereof to be redeemed pursuant to
Section 401 of the Indenture, the Borrower shall prepay Loan Payments in whole
or in part at the times and at the prepayment prices sufficient to redeem all or
a corresponding portion of the Bonds then Outstanding in accordance with said
Section. At the written direction of the Borrower such prepayments shall be
applied to the redemption of the Bonds in whole or in part in accordance with
said Section.
Section 9.2. Optional Prepayment Upon Certain Events. Upon the occurrence
of any of the conditions or events set forth in Section 402(d) of the Indenture,
the Borrower shall have the option, with the prior written consent of the Credit
Enhancer, to prepay Loan Payments, in whole or in part at any time, at the time
and at the prepayment price sufficient to redeem all or a corresponding portion
of the Bonds then Outstanding in accordance with said Section.
Section 9.3. [Reserved].
Section 9.4. Mandatory Prepayment Upon Certain Defaults. Upon the
occurrence of any event set forth in Section 402(c) of the Indenture, the
Borrower shall prepay Loan Payments in whole at the time and at the prepayment
price sufficient to redeem all of the Bonds then Outstanding in accordance with
said Section.
Section 9.5. Mandatory Prepayment From Amounts Remaining in Project Fund.
Redemption of Bonds with proceeds derived under Section 3.4(b) hereof shall be
deemed a prepayment of the Loan Payments in the same amount as the amount of
Bonds redeemed. The Borrower shall pay or cause to be paid to the Trustee from
Available Moneys, at the time of a transfer from the Project Fund to the Revenue
Fund, such amount as is necessary to cause the transferred amount to equal an
Authorized Denomination.
Section 9.6. Right to Prepay at Any Time. The Borrower shall have the
option at any time to prepay all of the Loan Payments, Additional Payments and
other amounts it is required to pay hereunder by paying to the Trustee all such
sums as are sufficient to satisfy and discharge the Indenture and paying or
making provision for the payment of all other sums payable hereunder.
Section 9.7. Notice of Prepayment. To exercise an option granted by
Section 9.1, Section 9.2 or Section 9.6, the Borrower shall give written notice
to the Issuer, the Credit Enhancer and the Trustee which shall specify therein
the date upon which a prepayment of Loan Payments will be made, which date shall
be not less than 45 days from the date the notice is received by the Trustee,
and which shall contain the written consent of the Credit Enhancer. In the
Indenture, the Issuer has directed the Trustee to forthwith take all steps
(other than the payment of the money required to redeem the Bonds) necessary
under the applicable provisions of the Indenture to effect any redemption of the
then Outstanding Bonds, in whole, or in part, pursuant to Section 402 of the
Indenture.
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<PAGE>
Section 9.8. Precedence of this Article. The rights, options and
obligations of the Borrower set forth in this Article may be exercised or shall
be fulfilled, as the case may be, whether or not a Default exists hereunder,
provided that such Default will not result in nonfulfillment of any condition to
the exercise of any such right or option and provided further that no amounts
payable pursuant to this Loan Agreement shall be prepaid in part during the
continuance of an Event of Default described in subparagraph (a) of Section 8.1
hereof.
[End of Article IX]
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ARTICLE X
MISCELLANEOUS
Section 10.1. Authorized Representatives. Whenever under this Loan
Agreement the approval of the Issuer is required or the Issuer is required or
permitted to take some action, such approval shall be given or such action shall
he taken by an Authorized Issuer Representative, and the Borrower, the Credit
Enhancer and the Trustee shall be authorized to act on any such approval or
action. Any approval shall not he unreasonably withheld or delayed.
Whenever under this Loan Agreement the approval of the Borrower is
required or the Borrower is required or permitted to take some action, such
approval shall be given or such action shall be taken by an Authorized Borrower
Representative, and the Issuer, the Credit Enhancer and the Trustee shall be
authorized to act on any such approval or action.
Whenever under this Loan Agreement the approval of the Credit Enhancer is
required or the Credit Enhancer is required or permitted to take some action,
such approval shall be given or such action shall be taken by an authorized
Credit Enhancer representative, and the Issuer, the Borrower and the Trustee
shall be authorized to act on any such approval or action.
Section 10.2. Term of Loan Agreement. This Loan Agreement shall be
effective from and after its execution and delivery and shall continue in full
force and effect until the Bonds are deemed to be paid within the meaning of
Article XII of the Indenture and provision has been made for paying all other
sums payable by the Borrower to the Issuer, the Trustee, the Credit Enhancer and
the Paying Agent to the date of the retirement of the Bonds. All agreements,
covenants, representations and certifications by the Borrower as to all matters
affecting the status of the interest on the Bonds and the indemnifications
provided by Section 6.3 hereof shall survive the termination of this Loan
Agreement for 12 months unless a claim has been made and then such
indemnification shall continue with regard to that claim only.
Section 10.3. Notices. Except as otherwise provided herein, it shall be
sufficient service of any notice, request, complaint, demand or other paper
required by this Agreement to be given to or filed if the same shall be duly
mailed by first-class mail, postage pre-paid, certified or registered mail, or
sent by telegram, telecopy or telex or other similar communication, confirmed in
writing by first-class mail, postage prepaid, certified or registered mail, or
sent by telegram, telecopy or telex or other similar communication, on the same
day, addressed as specified in Section 1302 of the Indenture. All notices given
by first-class mail, certified or registered mail, postage prepaid, as aforesaid
shall be deemed duly given as of the third day after they are so mailed; all
notices given by telegram, telecopy or telex or other similar communication
shall be deemed duly given as of the date the same are transmitted by such means
to the recipient thereof; provided, however, that any notice deemed to be given
on a date that is not a Business Day in the jurisdiction in which such notice is
delivered to the addressee thereof, such notice shall not he deemed duly given
until the next succeeding Business Day; provided, further, that notices to the
Trustee shall he deemed given as of the date they are received by the Trustee. A
duplicate copy of each notice, certificate or other communication given
hereunder by either the Issuer or the Trustee to the other shall also be given
to the Borrower, the Remarketing Agent and the Credit Enhancer. In the event of
notice to any party other than the Issuer or the Trustee, a copy of the notice
shall he provided to the Borrower, the Remarketing Agent and the Credit
Enhancer. In addition, the Trustee shall send to the Credit Enhancer, the
Borrower, the Tender Agent and the Remarketing Agent a copy of each notice sent
to the Bondowners. The Issuer, the Trustee, the Tender Agent, the Borrower, the
Credit Enhancer
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<PAGE>
and the Remarketing Agent may from time to time designate, by notice given under
the terms of the Indenture to the others of such parties, such other address to
which subsequent notices, certificates or other communications shall be sent.
Section 10.4. Performance Date Not a Business Day. If the last day for
performance of any act or the exercising of any right, as provided in this Loan
Agreement, shall not be a Business Day, such payment may be made or act
performed or right exercised on the next succeeding Business Day.
Section 10.5. Binding Effect. This Loan Agreement shall inure to the
benefit of and shall be binding upon the Issuer, the Borrower and their
respective successors and assigns, subject to the provisions contained in
Section 5.2 hereof. The Issuer and the Borrower acknowledge that the Credit
Enhancer is a third-party beneficiary of those provisions herein which relate to
the making of payments or giving of notice to or consents by or following the
directions of or the performance of other acts to benefit it and all such
provisions shall be enforceable by the Credit Enhancer.
Section 10.6. Amendments, Changes and Modifications. Except as otherwise
provided in this Loan Agreement or in the Indenture, subsequent to the issuance
of Bonds and prior to all of the Bonds being deemed to be paid in accordance
with Article XII of the Indenture and provision being made for the payment of
all sums payable under the Indenture in accordance with Article XII thereof,
this Loan Agreement may not be effectively amended, changed, modified, altered
or terminated without the prior concurring written consent of the Trustee and
the Credit Enhancer, given in accordance with the Indenture.
Section 10.7. Execution in Counterparts. This Loan Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
Section 10.8. No Pecuniary Liability. No provision, representation,
covenant or agreement contained in this Loan Agreement or in the Indenture, the
Bonds, or any obligation herein or therein imposed upon the Issuer, or the
breach thereof, shall constitute or give rise to or impose upon the Issuer a
pecuniary liability (except to the extent of any loan repayments, revenues and
receipts derived by the Issuer pursuant to this Loan Agreement). No provision
hereof shall be construed to impose a charge against the general credit of the
Issuer or the State or the taxing powers of the State within the meaning of any
constitutional provision or statutory limitation, or any personal or pecuniary
liability upon any director, official or employee of the Issuer.
Section 10.9. Extent of Covenants of the Issuer; No Personal or Pecuniary
Liability. All covenants, obligations and agreements of the Issuer contained in
this Loan Agreement and the Indenture shall be effective to the extent
authorized and permitted by applicable law. No such covenant, obligation or
agreement shall be deemed to be a covenant, obligation or agreement of any
present or future member, officer, agent or employee of the Issuer in other than
his official capacity, and no official executing the Bonds shall be liable
personally on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof or by reason of the covenants,
obligations or agreements of the Issuer contained in this Loan Agreement or in
the Indenture. No provision, covenant or agreement contained in this Loan
Agreement, the Indenture or the Bonds, or any obligation herein or therein
imposed upon the Issuer, or the breach thereof, shall constitute or give rise to
or impose upon the Issuer a pecuniary liability or a charge.
- 25 -
<PAGE>
Section 10.10. Net Loan. The parties hereto agree (a) that the payments of
Loan Payments are designed to provide the Issuer and the Trustee with moneys
adequate in amount to pay all principal of, purchase price of, and redemption
premium, if any, and interest accruing on the Bonds as the same become due and
payable, (b) that to the extent that the payments of Loan Payments are not
sufficient to provide the Issuer and the Trustee with funds sufficient for the
purposes aforesaid, subject to the provisions of Section 3.8 hereof, the
Borrower shall be obligated to pay, and it does hereby covenant and agree to
pay, upon demand therefor, as Additional Payments, such further moneys, in cash,
as may from time to time be required for such purposes, and (c) that if after
the principal of, and redemption premium, if any, and interest on the Bonds and
all costs incident to the payment of the Bonds have been paid in full the
Trustee or the Issuer holds unexpended funds received in accordance with the
terms hereof, such unexpended funds shall, after payment therefrom of all sums
then due and owing by the Borrower under the terms of this Loan Agreement, be
distributed in accordance with the Indenture.
Section 10.11. Security Interests. The Issuer and the Borrower agree to
enter into all instruments (including financing statements and statements of
continuation) necessary for perfection of and continuance of the perfection of
the security interests of the Issuer and the Trustee in the Project. The Trustee
shall file or cause to be filed all such instruments required to be so filed and
shall continue or cause to be continued the liens of such instruments for so
long as the Bonds shall be Outstanding.
Section 10.12. Complete Agreement. The Issuer and the Borrower understand
that oral agreements or commitments to loan money, extend credit or to forbear
from enforcing repayment of a debt including promises to extend or renew such
debt are not enforceable. To protect the Issuer and the Borrower from
misunderstanding or disappointment, any agreements the Issuer and the Borrower
reach covering such matters are contained in this Loan Agreement, which is the
complete and exclusive statement of the agreement between the Issuer and the
Borrower, except as the Issuer and the Borrower may later agree in writing
(subject to the provisions of Article XI of the Indenture) to modify this
Agreement.
Section 10.13. Severability. If any provision of this Loan Agreement, or
any covenant, stipulation, obligation, agreement, act or action, or part thereof
made, assumed, entered into or taken thereunder, or any application of such
provision, is for any reason held to be illegal or invalid, such illegality or
invalidity shall not affect any other provision of this Loan Agreement or any
other covenant, stipulation, obligation, agreement, act or action, or part
thereof, made, assumed, entered into, or taken, each of which shall be construed
and enforced as if such illegal or invalid portion were not contained herein.
Such illegality or invalidity of any application thereof shall not affect any
legal and valid application thereof, and each such provision, covenant,
stipulation, obligation, agreement, act or action, or part thereof, shall be
deemed to be effective, operative, made, entered into or taken in the manner and
to the full extent permitted by law.
- 26 -
<PAGE>
Section 10.14. Governing Law. This Loan Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina.
Section 10.15. Not a Limitation. Nothing in this Loan Agreement contained
is intended to be (and nothing herein shall be construed to be) a limitation on
the obligations of the Borrower to the Credit Enhancer under the Credit
Documents.
Section 10.16. Consent to Jurisdiction; Service of Process.
(a) The Borrower hereby agrees and consents that any action or proceeding
arising out of or brought to enforce the provisions of this Loan Agreement or
any of the other Borrower Documents may be brought in any appropriate court in
the State or in any other court having jurisdiction over the subject matter, all
at the sole election of the Issuer or the Trustee, and by the execution of this
Loan Agreement, the Borrower irrevocably consents to the jurisdiction of each
such court.
(b) If for any reason the Borrower should become not qualified to do
business in the State, the Borrower hereby agrees to designate and appoint,
without power of revocation, an agent for service of process within the State,
as the agent for the Borrower upon whom may be served all process, pleadings,
notice, or other papers, which may be served upon the Borrower as a result of
any of the Borrower's obligations hereunder.
(c) The Borrower covenants that throughout the period during which any of
the Bonds remain outstanding, if a new agent for service or process within the
State is designated pursuant to the terms of subsection (1,) of this section,
the Borrower will immediately file with the Issuer, the name and address of such
new agent and the date on which its appointment is to become effective.
- 27 -
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Borrower have caused this Loan
Agreement to be executed in their respective names.
SOUTH CAROLINA JOBS-ECONOMIC
DEVELOPMENT AUTHORITY
By /s/ [Illegible]
------------------------------------
Chairman, Board of Directors
[SEAL]
ATTEST:
By /s/ [Illegible]
-------------------------------------
Executive Director
ROLLER BEARING COMPANY OF AMERICA,
INC.
By /s/ [Illegible]
------------------------------------
Its CFO and TREASURER
[SEAL]
ATTEST:
By /s/ [Illegible]
-------------------------------------
Its__________________________________
- 28 -
<PAGE>
EXHIBIT A
DESCRIPTION OF PROJECT
The provision of working capital to be utilized in connection with an
approximately 60,000 square foot expansion of an existing facility for the
manufacture of roller bearings in Darlington County, South Carolina.
A-1
<PAGE>
EXHIBIT B
Request No._____________ Date: ___________
WRITTEN REQUEST FOR DISBURSEMENT FROM
SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY
----------
____________FUND
(ROLLER BEARING OF AMERICA, INC. PROJECT)
Series 1994B
To: Mark Twain Bank
Attention: Corporate Trust Department
as Trustee under the Trust Indenture, dated as of September 1, 1994,
between the South Carolina Jobs-Economic Development Authority, and said
Trustee
Pursuant to Section 3.4 of the Loan Agreement, dated as of September 1,
1994 (the "Loan Agreement"), between the South Carolina Jobs-Economic
Development Authority and Roller Bearing Company of America, Inc. (the
"Borrower"), the Borrower hereby requests payment from the ___ Fund in
accordance with this request and said Section 3.4 and hereby states and
certifies as follows:
1. The date and number of this request are as set forth above. The
amount of such request is $_________
2. All terms in this request shall have and are used with the meanings
specified in the Loan Agreement.
3. The conditions to disbursement set forth in Section 3.4(c) of the
Loan Agreement have been met and satisfied with respect to this
request.
4. With respect to this request, the Borrower hereby certifies as to
those items set forth in (2) and (3) of Section 3.4(c)(A) of the
Loan Agreement.
ROLLER BEARING COMPANY OF
AMERICA, INC.
By:____________________________________
Authorized Borrower Representative
Consented to this ___ day of _____, 199__.
HELLER FINANCIAL, INC.
By________________________________
Authorized Signatory
B-1
<PAGE>
EXHIBIT C
COMPLETION CERTIFICATE
To: Mark Twain Bank, Trustee
and
South Carolina Jobs-Economic Development Authority, Issuer
and
Heller Financial Inc., Credit Enhancer
From: Authorized Borrower Representative
Subject: $3,000,000 South Carolina Jobs-Economic Development Authority
Variable Rate Demand Industrial Development Revenue Bonds
(Roller Bearing Company of America, Inc. Project) Series 1994B
The undersigned hereby certifies in connection with the Project, financed
with the proceeds of the above-described Bonds issued by the South Carolina
Jobs-Economic Development Authority (the "Issuer") pursuant to the Trust
Indenture dated as of September 1, 1994 (the "Indenture") between the Issuer and
________________________ (the "Trustee"), the proceeds of which have been loaned
to Roller Bearing Company of America, Inc. (the "Borrower") pursuant to the Loan
Agreement between the Borrower and the Issuer dated as of September 1, 1994 (the
"Loan Agreement") (words capitalized herein have the meaning ascribed to them in
the Loan Agreement):
1. The funding of the Project was completed as of ______________, 19__
(the "Completion Date").
2. The money in the Project Fund in excess of the total set forth in 1(a)
above represents the surplus proceeds of the Bonds and the Trustee under the
Indenture is hereby authorized and directed to deposit such money to the Revenue
Fund to be used to redeem the principal amount of outstanding Revenue Bonds at
the earliest possible time. Accompanying this Certificate (or otherwise to be
made available to the Trustee as follows: ) are Available Moneys sufficient to
cause the amount to be deposited to equal an Authorized Denomination.
C-1
<PAGE>
This certificate is given without prejudice to any rights against third
parties which exist at the date hereof or which may subsequently come into
being.
ROLLER BEARING COMPANY OF
AMERICA, INC.
By:___________________________________
Authorized Borrower Representative
Date: _______________, 19__
C-2
CONFIDENTIAL
================================================================================
SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY
and
MARK TWAIN BANK,
as Trustee
-----------------------------
TRUST INDENTURE
Dated as of September 1, 1994
-----------------------------
Relating to
$3,000,000
Variable Rate Demand
Industrial Development Revenue Bonds
(Roller Bearing Company of America, Inc. Project)
Series 1994B
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION .......................... 4
Section 101. Definitions of Words and Terms .............................. 4
Section 102. Rules of Interpretation ..................................... 14
ARTICLE II THE BONDS ................................................... 16
Section 201. Authorization, Issuance and Terms of Bonds .................. 16
Section 202. Nature of Obligations ....................................... 17
Section 203. Interest Rates and Interest Payment Provisions .............. 17
Section 204. Changes in Interest Modes ................................... 19
Section 205. Execution, Authentication and Delivery of Bonds ............. 20
Section 206. Registration, Transfer and Exchange of Bonds ................ 21
Section 207. Temporary Bonds ............................................. 22
Section 208. Mutilated, Lost, Stolen, Destroyed or Undelivered Bonds ..... 22
Section 209. Cancellation and Destruction of Bonds Upon Payment .......... 23
Section 210. Limitation on Transfer and Exchange ......................... 23
ARTICLE III TENDER AND PURCHASE OF BONDS ................................ 25
Section 301. Optional Tender of Bonds During Weekly Mode or Monthly Mode . 25
Section 302. Mandatory Tender of Bonds ................................... 26
Section 303. Irrevocability of Elections; Return of Improperly Completed
Documents ................................................... 27
Section 304. Notice of Principal Amount of Bonds Tendered ................ 28
Section 305. Remarketing of Tendered Bonds ............................... 28
Section 306. Notice of Principal Amount of Bonds Remarketed .............. 29
Section 307. Purchase of Tendered Bonds .................................. 29
Section 308. Remarketing of Pledged Bonds ................................ 30
Section 309. Purchase Fund ............................................... 31
Section 310. No Sales After Certain Defaults ............................. 31
Section 311. Remarketing Agent ........................................... 32
Section 312. Qualifications of Remarketing Agent ......................... 32
ARTICLE IV REDEMPTION OF BONDS ......................................... 33
Section 401. Optional Redemption ......................................... 33
Section 402. Mandatory and Extraordinary Redemption ...................... 34
Section 403. Selection of Bonds to be Redeemed ........................... 34
Section 404. Notice of Redemption of Bonds in Weekly or Monthly Mode ..... 35
Section 405. Notice of Redemption of Bonds in Semiannual, Annual or
Multiyear Mode .............................................. 36
Section 406. Effect of Call for Redemption ............................... 37
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<PAGE>
ARTICLE V REVENUES AND FUNDS .......................................... 38
Section 501. Creation of Funds and Accounts .............................. 38
Section 502. Initial Deposits ............................................ 38
Section 503. Project Fund ................................................ 38
Section 504. Costs of Issuance Fund ...................................... 38
Section 505. Revenue Fund ................................................ 39
Section 506. Debt Service Fund ........................................... 40
Section 507. General Fund ................................................ 40
Section 508. Payments Under Credit Facility .............................. 41
Section 509. Reserved .................................................... 42
Section 510. Final Balances .............................................. 42
Section 511. Non-Presentment of Bonds .................................... 42
ARTICLE VI DEPOSITARIES OF MONEYS, SECURITY FOR DEPOSITS
AND INVESMENT OF FUNDS ...................................... 44
Section 601. Moneys to be Held in Trust .................................. 44
Section 602. Investment of Moneys ........................................ 44
Section 603. Record Keeping .............................................. 45
ARTICLE VII PARTICULAR COVENANTS AND PROVISIONS ......................... 46
Section 701. Issuer to Issue Bonds and Execute Indenture ................. 46
Section 702. Performance of Covenants .................................... 46
Section 703. Instruments of Further Assurance ............................ 46
Section 704. Credit Facility ............................................. 46
Section 705. Enforcement of Credit Facility .............................. 46
Section 706. Alternate Credit Facility ................................... 47
Section 707. General Limitation on Issuer Obligations .................... 48
Section 708. Recording and Filing ........................................ 48
Section 709. Possession and Inspection of Books and Documents ............ 48
Section 710. Rights and Duties Under Agreement and Credit Facility ....... 48
Section 711. Tax Covenants ............................................... 48
ARTICLE VIII DEFAULT AND REMEDIES ........................................ 49
Section 801. Events of Default ........................................... 49
Section 802. Acceleration; Mandatory Purchase ............................ 50
Section 803. Surrender of Possession of Trust Estate; Rights and Duties of
Trustee in Possession ....................................... 51
Section 804. Appointment of Receivers in Event of Default ................ 51
Section 805. Exercise of Remedies by the Trustee ......................... 52
Section 806. Limitation on Exercise of Remedies by Bondowners ............ 52
Section 807. Right of Bondowners to Direct Proceedings ................... 53
Section 808. Application of Moneys in Event of Default ................... 53
Section 809. Remedies Cumulative ......................................... 55
Section 810. Delay or Omission Not Waiver ................................ 55
Section 811. Effect of Discontinuance of Proceedings ..................... 55
Section 812. Waivers of Events of Default ................................ 55
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<PAGE>
Section 813. Pledged Bonds ............................................... 56
ARTICLE IX THE TRUSTEE ................................................. 57
Section 901. Acceptance of Trusts ........................................ 57
Section 902. Fees, Charges and Expenses of the Trustee ................... 60
Section 903. Notice to the Bondowners if Default Occurs .................. 60
Section 904. Intervention by the Trustee ................................. 61
Section 905. Successor Trustee Upon Merger, Consolidation or Sale ........ 61
Section 906. Trustee Required; Eligibility ............................... 61
Section 907. Resignation of Trustee ...................................... 62
Section 908. Removal of Trustee .......................................... 62
Section 909. Appointment of Successor Trustee ............................ 62
Section 910. Vesting of Trusts in Successor Trustee ...................... 62
Section 911. Trust Estate May be Vested in Co-Trustee .................... 63
Section 912. Accounting .................................................. 63
Section 913. Paying Agents; Bond Registrar; Appointment and Acceptance of
Duties; Removal ............................................. 63
Section 914. The Tender Agent ............................................ 64
Section 915. Notice to Rating Agency ..................................... 65
Section 916. Right of Trustee to Pay Taxes and Other Charges ............. 65
ARTICLE X SUPPLEMENTAL INDENTURES ..................................... 66
Section 1001. Supplemental Indentures Not Requiring Consent of Bondowners . 66
Section 1002. Supplemental Indentures Requiring Consent of Bondowners ..... 67
Section 1003. Borrower's Consent to Supplemental Indentures ............... 69
Section 1004. Opinion of Bond Counsel ..................................... 69
ARTICLE XI AMENDMENT OF AGREEMENT AND CREDIT FACILITY .................. 70
Section 1101. Amendments, Changes or Modifications to the Agreement and
Credit Facility Not Requiring Consent of Bondowners ......... 70
Section 1102. Amendments, Changes or Modifications to the Agreement and
Credit Facility Requiring Consent of Bondowners ............. 70
Section 1103. Opinion of Bond Counsel ..................................... 71
ARTICLE XII SATISFACTION AND DISCHARGE OF INDENTURE ..................... 72
Section 1201. Defeasance .................................................. 72
Section 1202. Satisfaction and Discharge of the Indenture ................. 73
ARTICLE XIII MISCELLANEOUS PROVISIONS .................................... 75
Section 1301. Consents and Other Instruments by Bondowners ................ 75
Section 1302. Notices ..................................................... 75
Section 1303. Limitation of Rights Under the Indenture .................... 77
Section 1304. Suspension of Mail Service .................................. 77
Section 1305. Business Days ............................................... 78
Section 1306. Immunity of Officers, Employees and Members of
Issuer ...................................................... 78
- iii -
<PAGE>
Section 1307. Credit Enhancer's Remedial Rights ........................... 78
Section 1308. Severability ................................................ 78
Section 1309. Complete Agreement .......................................... 79
Section 1310. Execution in Counterparts ................................... 79
Section 1311. Governing Law ............................................... 79
Exhibit A - Bond Form
Exhibit B - Investment Securities Collateral Requirement
Exhibit C - [Reserved.]
Exhibit D - Notice of Election to Tender/Retain Bonds
Exhibit E - Rate Adjustment Notice
Exhibit F - Interest Mode Adjustment Notice
Exhibit G - Notice of Alternate Credit Facility
Exhibit H - Representation Letter
- iv -
<PAGE>
TRUST INDENTURE
THIS TRUST INDENTURE (the "Indenture"), made and entered into as of
September 1, 1994, by and between the SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT
AUTHORITY, a body corporate and politic and an agency of the State of South
Carolina (the "Issue"), and Mark Twain Bank, a Missouri banking corporation duly
organized and existing and authorized to accept and execute trusts of the
character herein set out under the laws of the State of Missouri, and having its
principal corporate trust office located in St. Louis, Missouri, as Trustee (the
"Trustee");
WITNESSETH:
WHEREAS, the Issuer acting by and through its Board of Directors, is
authorized and empowered under and pursuant to the provisions of Title 41,
Chapter 43, Code of Laws of South Carolina 1976, as amended (the "Act"), to
acquire and cause to be acquired properties that are projects under the Act
through which the industrial, commercial, agricultural and recreational
development of the State of South Carolina (the "State") will be promoted and
trade developed by inducing business enterprises to locate in and remain in the
State and thus provide maximum opportunities for the creation and retention of
jobs and improvement of the standard of living of the citizens of the State; and
WHEREAS, the Issuer is further authorized by Section 41-43-110 of the Act
to issue revenue bonds payable by the Issuer solely from revenues and receipts
from any financing agreement between the Issuer and any business enterprise with
respect to such project and secured by a pledge of said revenues and receipts
and by an assignment of such financing agreement; and
WHEREAS, pursuant to the Act, the Authority is authorized to issue its
Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing
Company of America, Inc. Project) Series 1994B in the original aggregate
principal amount of $3,000,000 (the "Bonds"), for the purpose of providing
working capital ("the Project") with respect to an approximately 60,000 square
foot expansion of an existing facility for the manufacture of roller bearings in
Darlington County, South Carolina which is owned and operated by Roller Bearing
Company of America, Inc., a Delaware corporation (the "Borrower"); and
WHEREAS, the Borrower has requested that the Issuer issue the Bonds in
order to finance the Project; and
WHEREAS, the Board of Directors of the Issuer passed and approved a
Resolution on August 24, 1994, authorizing the Issuer to issue the Bonds
pursuant to this Indenture for the above purposes; and
WHEREAS, pursuant to such Resolution, the Issuer is authorized (i) to
execute and deliver this Indenture for the purpose of issuing and securing the
Bonds as hereinafter provided, and (ii) to enter into a Loan Agreement of even
date herewith (the "Agreement"), between the Issuer and the Borrower, under
which the Issuer will loan the proceeds of the Bonds to the Borrower in
accordance with the provisions of the Agreement to finance the Project, in
consideration of payments to be made by the Borrower to the Trustee which are to
be sufficient to pay the principal of, redemption premium, if any, and interest
on the Bonds as the same become due; and
<PAGE>
WHEREAS, Heller Financial, Inc., a Delaware corporation (the "Credit
Enhancer"), has agreed to execute and deliver an irrevocable direct-pay letter
of credit (the "Credit Facility") in order to secure the timely payment of the
principal of and interest on the Bonds; and
WHEREAS, all things necessary to make the Bonds, when authenticated by the
Trustee and issued as in this Indenture provided, the valid, legal and binding
obligations of the Issuer, and to constitute this Indenture a valid, legal and
binding pledge and assignment of the property, rights, interests and revenues
herein made for the security of the payment of the principal of, redemption
premium, if any, and interest on the Bonds issued hereunder, have been done and
performed, and the execution and delivery of this Indenture and the execution
and issuance of the Bonds, subject to the terms hereof, have in all respects
been duly authorized and approved by the Issuer; and
WHEREAS, THE BONDS AND THE PREMIUM, IF ANY, AND INTEREST THEREON
(INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PREPAYMENT OR PURCHASE OF
THE BONDS) ARE LIMITED OBLIGATIONS OF THE ISSUER; THE PRINCIPAL OF, PREMIUM, IF
ANY, AND INTEREST ON THE BONDS ("INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION
WITH ANY PURCHASE OF THE BONDS) ARE PAYABLE SOLELY FROM THE REVENUES OR MONEYS
TO BE RECEIVED IN CONNECTION WITH THE FINANCING OF THE PROJECT OR FROM ANY OTHER
MONEYS MADE AVAILABLE TO THE ISSUER FOR SUCH PURPOSE; NEITHER THE BONDS NOR THE
INTEREST THEREON (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PURCHASE
OF THE BONDS) SHALL EVER CONSTITUTE AN INDEBTEDNESS OR A CHARGE AGAINST THE
GENERAL CREDIT OF THE STATE, THE ISSUER, OR ANY OTHER PUBLIC BODY, OR OF THE
TAXING POWERS OF THE STATE WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY
LIMITATION AND SHALL NEVER CONSTITUTE OR GIVE RISE TO ANY PECUNIARY LIABILITY OF
THE STATE, THE ISSUER, OR ANY OTHER PUBLIC BODY; THE BONDS DO NOT CONSTITUTE AN
INDEBTEDNESS TO WHICH THE FAITH OR CREDIT OF THE STATE, THE ISSUER, OR ANY OTHER
PUBLIC BODY, OR TAXING POWER OF THE STATE, IS PLEDGED;
NOW THEREFORE, THIS INDENTURE WITNESSETH:
GRANTING CLAUSES
That the Issuer, in consideration of the premises, the acceptance by the
Trustee of the trusts hereby created, the purchase and acceptance of the Bonds
by the Owners thereof, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and in order to secure the
payment of the principal of, redemption premium, if any, and interest on the
Bonds according to their tenor and effect, to secure all obligations owed by the
Borrower to the Credit Enhancer under the Letter of Credit Agreement, and to
secure the performance and observance by the Issuer of all the covenants,
agreements and conditions herein and in the Bonds contained, does hereby
transfer, pledge and assign, without recourse, to the Trustee and its successors
and assigns in trust forever, and does hereby grant a security interest unto the
Trustee and its successors in trust and its assigns, in and to all and singular
the property described in paragraphs (a) and (b) below (said property being
herein referred to as the "Trust Estate"), to wit:
(a) All right, title and interest of the Issuer (including, but not
limited to, the right to enforce any of the terms thereof) in, to and under all
Revenues (as hereinafter defined) derived by
- 2 -
<PAGE>
the Issuer under and pursuant to and subject to the provisions of the Agreement
but excluding the Unassigned Issuer's Rights as defined in the Agreement) and
the Credit Facility; and
(b) All other moneys and securities from time to time held by the Trustee
under the terms of this Indenture (excluding amounts held in the Purchase Fund
(as hereinafter defined)), and any and all other property (real, personal or
mixed) of every kind and nature from time to time hereafter, by delivery or by
writing of any kind, pledged, assigned or transferred as and for additional
security hereunder by the Issuer, or by anyone in its behalf or with its written
consent, to the Trustee, which is hereby authorized to receive any and all such
property at any and all times and to hold and apply the same subject to the
terms hereof.
TO HAVE AND TO HOW, all and singular, the Trust Estate with all rights and
privileges hereby transferred, pledged, assigned and/or granted or agreed or
intended so to be, to the Trustee and its successors and assigns in trust
forever;
IN TRUST NEVERTHELESS, upon the terms and conditions herein set forth for
the equal and proportionate benefit, security and protection of all present and
future Owners of the Bonds Outstanding, without preference, priority or
distinction as to participation in the lien, benefit and protection hereof of
one Bond over or from the others, except as herein otherwise expressly provided
and on a subordinate basis thereto, to secure the obligations of the Borrower to
the Credit Enhancer;
PROVIDED, NEVERTHELESS, and these presents are upon the express condition,
that if the Issuer or its successors or assigns shall well and truly pay or
cause to be paid the principal of and premium, if any, on such Bonds with
interest, according to the provisions set forth in the Bonds, or shall provide
for the payment or redemption of such Bonds by depositing or causing to be
deposited with the Trustee the entire amount of funds or securities requisite
for payment or redemption thereof when and as authorized by the provisions of
Article XII hereof (it being understood that any payment with respect to the
principal of or interest on Bonds by the Borrower or any purchase of Bonds
pursuant to Article III hereof shall not be deemed payment or provision for
payment of principal of or interest on Bonds, except Bonds purchased and
cancelled by the Trustee, all such uncancelled Bonds to remain Outstanding
hereunder and principal of and interest thereon payable to the Owners thereof,
whether such Owners be the Credit Enhancer or persons to whom Bonds are
remarketed), and shall also pay or cause to be paid all other sums payable
hereunder by the Issuer and if all amounts due and owing to the Credit Enhancer
under the Letter of Credit Agreement shall have been paid in full, then these
presents and the estate and rights hereby granted shall cease, terminate and
become void, and thereupon the Trustee, on payment of its lawful charges and
disbursements then unpaid, on demand of the Issuer and upon the payment by the
Issuer of the cost and expenses thereof, shall duly execute, acknowledge and
deliver to the Issuer such instruments of satisfaction or release as may be
necessary or proper to discharge this Indenture of record, and if necessary
shall grant, reassign and deliver to the Issuer, with a copy to the Credit
Enhancer and the Borrower, all and singular the property, rights, privileges and
interests by it hereby granted, conveyed and assigned, and all substitutes
therefor, or any part thereof, not previously disposed of or released as herein
provided; otherwise this Indenture shall be and remain in full force;
- 3 -
<PAGE>
THIS INDENTURE FURTHER WITNESSETH, and it is hereby expressly declared,
covenanted and agreed by and between the parties hereto, that all Bonds issued
and secured hereunder are to be issued, authenticated and delivered and that all
the Trust Estate is to be held and applied under, upon and subject to the terms,
conditions, stipulations, covenants, agreements, trusts, uses and purposes as
hereinafter expressed, and the Issuer does hereby agree and covenant with the
Trustee, for the benefit of the respective Owners from time to time of the Bonds
and the Credit Enhancer, as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 101. Definitions of Words and Terms. In addition to words and
terms elsewhere defined herein and therein, the following words and terms as
used in this Indenture and in the Agreement shall have the following meanings,
unless some other meaning is plainly intended:
"Accounts" means the accounts created pursuant to Section 501 hereof.
"Act" means Title 41, Chapter 43, Code of Laws of South Carolina 1976, as
amended.
"Act of Bankruptcy" means, as to the Borrower, any of the following: (a)
the commencement by the Borrower of a voluntary case under the federal
bankruptcy laws, as now in effect or hereafter amended, or any other applicable
federal or state bankruptcy, insolvency or similar laws; (b) the filing of a
petition with a court having jurisdiction over the Borrower to commence an
involuntary case against the Borrower under the federal bankruptcy laws, as now
in effect or hereafter amended, or any other applicable federal or state
bankruptcy, insolvency or similar laws, and such petition is not discharged
within 60 days of the filing thereof; (c) the Borrower shall admit in writing
its inability to pay its debts generally as they become due; (d) a receiver,
trustee or liquidator of the Borrower shall be appointed in any proceeding
brought against the Borrower; (e) assignment by the Borrower of all or
substantially all of its assets for the benefit of its creditors; or (f) the
entry by the Borrower into an agreement of composition with its creditors, and,
as to the Issuer, the commencement by the Issuer of a voluntary case under the
federal bankruptcy laws, as now in effect or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or similar laws.
"Affiliated Party" or "Affiliate" means any Related Person as to a
particular Person, and any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified
Person. "Control", when used with respect to a particular Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of such Person whether through the
ownership of voting stock, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Agreement" or "Loan Agreement" means the Loan Agreement, including the
Exhibits attached thereto, dated as of the date of this Indenture, between the
Issuer and the Borrower, with respect to the Bonds, as such Agreement may be
from time to time amended, restated or supplemented in accordance with the
provisions of Section 10.6 of the Agreement and Article XI hereof.
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"Alternate Credit Facility" means any alternate credit facility designated
and qualified as such and provided pursuant to Section 706 hereof no later than
the twenty-fifth (25th) day prior to the then applicable Termination Date.
"Alternate Credit Facility Date" means a Business Day on or prior to the
Termination Date on which the Borrower has complied with all requirements of
this Indenture, including Section 706, regarding the substitution of an
Alternate Credit Facility for the Credit Facility then in effect.
"Annual Mode" means an Interest Mode during which the interest rate on the
Bonds is determined at twelve month intervals, as provided in Section 203(e)
hereof.
"Authorized Borrower Representative" means either the Chief Financial
Officer or the Vice President of the Borrower, or such other official of the
Borrower at the time designated to act on behalf of the Borrower as evidenced by
written certificate furnished to the Issuer, the Credit Enhancer and the Trustee
containing the specimen signature of such person and signed on behalf of the
Borrower by its Chief Executive Officer or its Chief Financial Officer. Such
certificate may designate an alternate or alternates, each of whom shall be
entitled to perform all duties of and exercise all powers of an Authorized
Borrower Representative.
"Authorized Denominations" means (i) in the case of Bonds in a Weekly Mode
or Monthly Mode, $100,000 and any integral multiple of $5,000 in excess thereof;
(ii) in the case of Bonds in a Semiannual Mode, Annual Mode or Multiyear Mode,
$5,000 or any integral multiple thereof, provided that if the Credit Facility is
not exempt from registration under the Securities Act of 1933, as amended, and
has not been registered thereunder then the Authorized Denomination shall be
$100,000 and any integral multiple of $5,000 in excess thereof; or (iii) in the
case of a Bond which is a Pledged Bond, $100,000 or any integral multiple of
$5,000 in excess thereof.
"Authorized Issuer Representative" means the Chairman of the Board of
Directors or the Executive Director of the Issuer, or such other person at the
time designated to act on behalf of the Issuer as evidenced by written
certificate furnished to the Borrower, the Credit Enhancer and the Trustee
containing the specimen signature of such person and signed on behalf of the
Issuer by its Executive Director. Such certificate may designate an alternate or
alternates, each of whom shall be entitled to perform all duties of and exercise
all powers of an Authorized Issuer Representative.
"Available Moneys" means (i) proceeds from the initial sale of the Bonds
by the Issuer that have not been commingled with other funds that do not
constitute Available Moneys and proceeds from the investment thereof; (ii)
moneys that have been paid to the Trustee pursuant to payments on the Credit
Facility and that have been held in the Credit Facility Account and not
commingled with other funds that do not constitute Available Moneys, and
proceeds from the investment thereof; and (iii) moneys with respect to which the
Trustee has received an unqualified opinion of nationally recognized counsel
expert on bankruptcy matters to the effect that payment of such proceeds to the
Owners would not constitute a voidable preference under Section 547 of the
United States Bankruptcy Code which could be recovered under Section 550(a) of
the Bankruptcy Code in the event of the filing of a petition thereunder by or
against the Issuer, the Borrower or any Affiliated Party of the Borrower.
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"Available Moneys Account" means the account by that name in the Revenue
Fund created pursuant to Section 501 hereof.
"Bond" or "Bonds" means any bond or bonds authenticated and delivered
under and pursuant to this Indenture.
"Bond Counsel" means any attorney or firm of attorneys designated by the
Issuer and reasonably acceptable to the Borrower, the Trustee and the Credit
Enhancer having a national reputation for skill in connection with the
authorization and issuance of municipal obligations in the State.
"Bond Issuance Date" means the date of initial issuance and delivery of
the Bonds.
"Bond Pledge Agreement" means the Pledge and Security Agreement dated as
of September 1, 1994, by and among the Borrower, the Trustee and the Credit
Enhancer, as amended, restated and supplemented from time to time.
"Bond Register" means the registration books of the Issuer kept by the
Trustee to evidence the registration and transfer of Bonds.
"Bond Registrar" means the Trustee when acting as such.
"Bondowner" or "Owner" or "Registered Owner" means the person in whose
name a Bond is registered on the Bond Register.
"Borrower" means Roller Bearing Company of America, Inc., a Delaware
corporation, and any successor or assign thereto permitted under the Agreement.
"Borrower Bonds" means (i) Bonds owned or held by the Borrower or any
Affiliate of the Borrower, or by the Trustee or the Tender Agent, or the agent
of either of them, for the account of the Borrower or any Affiliate of the
Borrower, including, but not limited to, Pledged Bonds, or (ii) Bonds which the
Borrower has notified the Trustee, or which the Trustee knows, were purchased by
another Person for the account of the Borrower or any Affiliate of the Borrower,
including, but not limited to, Pledged Bonds.
"Business Day" means a day which is not (a) a Saturday, Sunday or any
other day on which banking institutions in New York, New York, or the city or
cities in which the principal corporate trust office of the Trustee, and the
principal office of the Tender Agent, the Remarketing Agent or the Credit
Enhancer is located, are required or authorized to close or (b) a day on which
the New York Stock Exchange is closed.
"Collateral Documents" means the Letter of Credit Agreement, the Bond
Pledge Agreement and any other document securing the obligations of the Borrower
to the Credit Enhancer in connection with the Letter of Credit Agreement, in
each case as the same may be amended, restated or supplemented from time to
time.
"Costs of Issuance Fund" means the fund by that name created in Section
501 hereof.
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"Credit Enhancer" means initially Heller Financial, Inc., a Delaware
corporation, and any provider or providers of an Alternate Credit Facility.
"Credit Documents" means the documents described by said term in the
Letter of Credit Agreement, in each case as the same may be amended, restated or
supplemented from time to time.
"Credit Facility means the letter of credit initially issued by Heller
Financial, Inc. and any Alternate Credit Facility issued by the Credit Enhancer
in addition to or in substitution therefor, as the same may be amended,
restated, supplemented, extended or renewed from time to time in accordance with
the Agreement and this Indenture.
"Credit Facility Account" means the account by that name created in
Section 501(c) of this Indenture.
"Debt Service Fund" means the fund by that name created in Section 501
hereof.
"Default" means any event or condition which constitutes, or with the
giving of any requisite notice or upon the passage of any requisite time period
or upon the occurrence of both, would constitute, an Event of Default under the
Agreement or this Indenture.
"Event of Default" means any event or occurrence as defined in Section 801
hereof.
"Financial Institution" means any qualified institutional buyer, as that
term is defined from time to time in 17 C.F.R. ss.230.144A(a)(i) ("Rule 144A").
"Funds" means the funds created pursuant to Article V hereof.
"General Fund" means the fund by that name created in Section 501 hereof.
"Government Securities" means direct obligations of, or obligations the
payment of the principal of and interest on which are unconditionally guaranteed
by, the United States of America.
"Immediate Notice" means notice by telephone, telegram, telex, telecopier
or other telecommunication device to such phone numbers or addresses as are
specified in Section 1302 hereof or such other phone number or address as the
addressee shall have directed in writing, promptly followed by written notice by
first-class mail postage prepaid to such addresses.
"Indenture" means this Trust Indenture as originally executed by the
Issuer and the Trustee, as from time to time amended and supplemented by
Supplemental Indentures in accordance with the provisions of Article X of this
Indenture.
"Interest Mode" means a period of time relating to the frequency with
which the interest rate on the Bonds is determined pursuant to Section 203
hereof, which Interest Mode may be a Weekly Mode, a Monthly Mode, a Semiannual
Mode, an Annual Mode or a Multiyear Mode. Pledged Bonds bear interest at the
Pledged Bond Rate and are not subject to such Interest Mode descriptions.
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"Interest Mode Adjustment Date" means a date on which the Interest Mode of
the Bonds is changed from one Interest Mode to a different Interest Mode, and
such date shall be an Interest Payment Date.
"Interest Mode Adjustment Notice" means the notice of a new Interest Mode
with respect to any Bonds in accordance with Section 204 hereof in substantially
the form of Exhibit F attached hereto.
"Interest Payment Date" means the date on which an interest installment is
required to be paid on the Bonds to the Owners thereof, (i) with respect to all
Bonds other than Pledged Bonds, (1) as to the first Interest Period, October 3,
1994; (2) as to any Weekly Mode or Monthly Mode, the first Business Day of each
month; (3) as to any Semiannual Mode, Annual Mode or Multiyear Mode, each March
1 and September 1, commencing with the first such March 1 or September 1
following the Interest Mode Adjustment Date, or the next succeeding Business Day
thereafter if any such March 1 or September 1 is not a Business Day; and (4) an
Interest Mode Adjustment Date; and (ii) with respect to Pledged Bonds, the first
Business Day of each calendar month and the date of sale of Pledged Bonds.
"Interest Period" means, with respect to the Bonds in any Interest Mode,
the period from and including each Interest Payment Date for such Interest Mode
to and including the day immediately preceding the following Interest Payment
Date for such Interest Mode, except that the first Interest Period shall be the
period from and including the date of original delivery of the Bonds to and
including the day immediately preceding the first Interest Payment Date for the
Bonds.
"Investment Securities" means any of the following securities purchased in
accordance with Section 602 hereof, if and to the extent the same are at the
time legal for investment of the funds being invested:
(a) Government Securities;
(b) deposits which are fully insured by the Federal Deposit Insurance
Corporation ("FDIC") in one or more of the following institutions: banks with a
rating of A-1 or higher (including without limitation, the Trustee or any bank
affiliated with the Trustee) organized under the laws of the United States of
America or any state thereof;
(c) federal funds, unsecured certificates of deposit, time deposits and
bankers acceptances (having maturities of not more than 365 days) of any bank,
the short-term obligations of which are in the highest short-term rating
category of the Rating Agency (if the Bonds are rated by Standard & Poor's, such
category is A-1+);
(d) any shares in money market mutual funds provided such money market
funds are rated AAAm or AAAmG by the Rating Agency; and
(e) repurchase agreements with (A) any institution described in clause (b)
above or (B) any other entity that is under the jurisdiction of the Bankruptcy
Code, provided that, with respect to a repurchase agreement with such other
entity, the terms of such repurchase agreement shall be less than one year,
shall be with respect to Government Securities which meet the Investment
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Securities Collateral Requirement and shall mature at least 30 days before the
time or times that such investments shall be needed for the purposes for which
they were deposited.
"Investment Securities Collateral Requirement" means Government Securities
which meet the requirements set forth in Exhibit B attached hereto and
incorporated herein by this reference.
"Investor's Representation Letter" means the Investor's Representation
Letter in substantially the form attached to this Indenture as Exhibit H.
"Issuer" means the South Carolina Jobs-Economic Development Authority, a
body corporate and politic and an agency of the State, or any body, agency or
instrumentality of the State succeeding to or charged with the powers, duties
and functions of the Issuer.
"Letter of Credit Agreement" means the Letter of Credit Agreement dated as
of the date of this Indenture, between the Borrower and the initial Credit
Enhancer, and any similar agreement between the Borrower and the Credit Enhancer
with respect to the issuance of an Alternate Credit Facility.
"Loan Payment Date" means the day established for a Loan Payment under the
Agreement.
"Loan Term" means the period from the date of initial delivery and
authentication of the Bonds until such time as the Bonds are no longer
Outstanding and all other amounts payable by the Borrower under the Agreement
and the Letter of Credit Agreement shall have been paid.
"Mandatory Purchase Date" means each date designated by the Credit
Enhancer for purchase of the Bonds in accordance with the provisions of Section
302(d) of this Indenture.
"Maximum Rate" means the lesser of (i) 15% per annum or (ii) the rate
utilized in the Credit Facility for purposes of computing the interest component
thereof.
"Monthly Mode" means an Interest Mode during which the interest rate on
the Bonds is determined in monthly intervals as set forth in Section 203(d)
hereof.
"Moody's" means Moody's Investors Service, a corporation organized and
existing under the laws of the State of Delaware, and its successors and
assigns, and, if such corporation shall be dissolved or liquidated or shall no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized securities rating agency
designated by the Issuer, with the prior written approval of the Credit Enhancer
and the Borrower, by notice to the Trustee.
"Multiyear Mode" means an Interest Mode during which the interest rate on
the Bonds is determined at intervals of integral (greater than one) multiples of
twelve months, as provided in Section 203(e) hereof.
"New York Time" means the time on any given day in the City of New York,
New York, whether such time be Eastern Standard Time or Eastern Daylight Savings
Time.
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"1933 Act" means the Securities Act of 1933, as amended.
"Notice of Election to Tender/Retain Bonds" means the Notice of Election
to Tender/Retain Bonds in substantially the form attached hereto as Exhibit D
delivered by a Bondowner to the Tender Agent (i) pursuant to Section 301 hereof
which contains a demand for the purchase of Bonds on the Tender Date, or (ii)
following receipt of a notice of a mandatory tender of Bonds as specified in
Section 302 hereof which contains an election to retain Bonds. "Notice of
Election to Tender Bonds" shall refer to those provisions of the Notice of
Election to Tender/Retain Bonds which relate to the election to tender Bonds as
hereinafter provided. "Notice of Election to Retain Bonds" shall refer to those
provisions of the Notice of Election to Tender/Retain Bonds which relate to the
election to retain Bonds.
"Opinion of Bond Counsel" means a written opinion of Bond Counsel
addressed to the Trustee, for the benefit of the Owners of the Bonds, and the
Credit Enhancer.
"Opinion of Counsel" means a written opinion of an attorney or firm of
attorneys addressed to the Trustee, for the benefit of the Owners of the Bonds
and the Credit Enhancer, who may (except as otherwise expressly provided in this
Indenture) be counsel to the Issuer, the Borrower, the Owners of the Bonds, the
Credit Enhancer or the Trustee, and who is acceptable to the Trustee and the
Credit Enhancer.
"Outstanding when used with reference to Bonds, means, as of a particular
date, all Bonds theretofore authenticated and delivered under this Indenture
except:
(a) Bonds theretofore cancelled by the Trustee or delivered to the Trustee
for cancellation pursuant to Section 209 hereof;
(b) Bonds which are deemed to have been paid in accordance with Article
XII hereof;
(c) Bonds in exchange for or in lieu of which other Bonds have been
authenticated and delivered pursuant to Article II of this Indenture;
(d) Undelivered Bonds; and
(e) For purposes of any consent or other action to be taken by the Owner
of a specified percentage of Bonds under this Indenture or the Agreement, Bonds
owned or held for the account of the Issuer or Borrower Bonds. Notwithstanding
the foregoing, Bonds so owned which have been pledged in good faith shall not be
disregarded as aforesaid if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Bonds and that the
pledgee is not the Issuer, the Borrower or any Affiliated Party.
"Paying Agent" means the Tender Agent as to all Tendered Bonds, the
Trustee as to all other Bonds, and any other bank or trust institution organized
under the laws of any state of the United States of America or any national
banking association designated by this Indenture or any Supplemental Indenture
as paying agent for the Bonds at which the principal of, and redemption premium,
if any, and interest on, such Bonds shall be payable.
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"Person" means an individual, a corporation, a partnership, an
association, a joint stock company, a joint venture, a trust, an unincorporated
organization, a limited liability company, or a government or any agency or
political subdivision thereof.
"Placement Date" means any date on which a Pledged Bond is purchased from
the Borrower by a Person designated by the Remarketing Agent pursuant to the
Remarketing Agreement or is sold by the Borrower.
"Plant" means the facility, including machinery and equipment, for the
manufacture of roller bearings in Darlington County, South Carolina, operated by
the Borrower.
"Pledged Bonds" means any Bonds purchased by the Borrower with payments
made on the Credit Facility, which Bonds are registered in the name of the
Borrower and held by the Trustee on behalf of the Credit Enhancer pursuant to
the terms of the Bond Pledge Agreement, until such time as such Bonds are sold
by the Borrower or by the Remarketing Agent.
"Pledged Bond Rate" means the rate of interest per annum payable with
respect to each Pledged Bond, which shall be equal to the Interest Rate set
forth in Section 2.9 of the Letter of Credit Agreement.
"Preliminary Rate" means Preliminary Rate as defined in Section 203(e)
hereof.
"Principal Office" means, with respect to the Trustee and the Tender
Agent, its principal corporate trust office, initially 8820 Ladue Road, St.
Louis, Missouri 63124, Attention: Corporate Trust Division.
"Principal Payment Date" means the maturity date or redemption date
(including as a result of acceleration) of any Bond.
"Project" means the working capital described in Exhibit A to the
Agreement.
"Project Fund" means the fund by that name created by Section 501 hereof.
"Purchase Fund" means the fund by that name created by Section 501 hereof.
"Rate Adjustment Date" means the date as of which the interest rate
determined for an Interest Mode shall be effective, which (i) during a Weekly
Mode shall be Thursday of each week (whether or not a Business Day); (ii) during
a Monthly Mode shall be the first calendar day of each month; (iii) during a
Semiannual Mode shall be the first calendar day of such Semiannual Mode which
shall be March 1 or September 1 and the first day following each six-month
period thereafter; and, (iv) during an Annual Mode or a Multiyear Mode shall be
the first calendar day of such Annual Mode or Multiyear Mode, which shall be
September 1, and thereafter the first calendar day following the completion of
the then current Annual Mode or Multiyear Mode. The initial Rate Adjustment Date
is September 15, 1994.
"Rate Adjustment Notice" means the Rate Adjustment Notice in substantially
the form of Exhibit E hereto to be mailed by the Trustee in accordance with
Section 203(e) hereof.
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"Rate Determination Date" means no later than 4:00 P.M., New York Time, on
the Business Day immediately preceding a Rate Adjustment Date for a Weekly or a
Monthly Mode, and on the third (3rd) Business Day immediately preceding a Rate
Adjustment Date for a Semiannual Mode, Annual Mode or Multiyear Mode.
"Rate Period" means the period from a Rate Adjustment Date to, but not
including, the next Rate Adjustment Date.
"Rating Agency" means (collectively, as required) Moody's, if the Bonds
are then rated by Moody's, Standard & Poor's, if the Bonds are then rated by
Standard & Poor's, and any other national rating service which has outstanding
credit rating on the Bonds.
"Record Date" means, with respect to Bonds in a Semiannual Mode, an Annual
Mode or a Multiyear Mode, the fifteenth calendar day, whether or not a Business
Day, of the month preceding such Interest Payment Date, and, with respect to
Bonds in a Weekly Mode or Monthly Mode, the fifth calendar day, whether or not a
Business Day, immediately preceding such Interest Payment Date.
"Related Documents" means the Collateral Documents and the Credit
Documents.
"Remarketing Agent" means the remarketing agent at the time serving as
such under the Remarketing Agreement and designated as the Remarketing Agent for
purposes of this Indenture. The initial Remarketing Agent is Stern Brothers &
Co., St. Louis, Missouri.
"Remarketing Agreement" means the Remarketing Agreement dated as of
September 1,1994, between the Borrower and the Remarketing Agent or, if such
Remarketing Agreement shall be terminated, such other agreement, approved by the
Credit Enhancer, which may from time to time be entered into with any
Remarketing Agent with respect to the remarketing or placement of the Bonds.
"Remarketing Proceeds" means proceeds from the resale by the Remarketing
Agent of Bonds delivered for purchase pursuant to Section 301 or 302 hereof that
have not been commingled with other funds which do not constitute Remarketing
Proceeds, and proceeds from the investment thereof, provided that Remarketing
Proceeds cannot include any moneys provided by the Borrower, the Issuer, any
guarantor of the Bonds (excluding the issuer of the Credit Facility, but only
with respect to moneys provided pursuant to the Credit Facility), any Affiliated
Party of the foregoing, or any Person which is an "insider" of the Borrower or
any such guarantor within the meaning of Title 11 of the United States Code, as
amended.
"Resolution" means the resolution of the Board of Directors of the Issuer
authorizing the execution and delivery of the Agreement, this Indenture and the
issuance of the Bonds.
"Revenue Fund" means the fund by that name created in Section 501 hereof.
"Revenues" means the amounts pledged hereunder to the payment of principal
of, and premium, if any, and interest on the Bonds, consisting of the following:
(i) all income, revenues, proceeds and other amounts, to which the Issuer is
entitled, derived from the Borrower (except the
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Unassigned Issuer's Rights as defined in the Agreement), including all scheduled
payments under the Agreement, payments received on the Credit Facility and all
receipts of the Trustee credited under the provisions of this Indenture against
said amounts payable, and (ii) moneys held in the Funds and Accounts, together
with investment earnings thereon, other than funds held for the payment of
specific Bonds pursuant to Section 510 hereof or amounts held in the Purchase
Fund.
"Series 1994A Bonds" means the Issuer's $7,700,000 original principal
amount Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing
Company of America, Inc. Project) Series 1994A, issued pursuant to the Series
1994A Indenture.
"Series 1994A Indenture" means the Indenture of Trust dated as of
September 1, 1994 between the Issuer and the Trustee, delivered with respect to
the Series 1994A Bonds.
"Semiannual Mode" means an Interest Mode during which the interest rate on
the Bonds is determined at six-month intervals as set forth in Section 203(e)
hereof.
"Standard & Poor's" means Standard & Poor's Ratings Group, A Division of
McGraw-Hill, Inc., a corporation organized and existing under the laws of the
State of New York, and its successors and assigns, and, if such corporation
shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, Standard & Poor's shall be deemed to refer to any
other nationally recognized securities rating agency designated by the Issuer,
with the prior written approval of the Credit Enhancer, by notice to the Trustee
and the Borrower.
"State" means the State of South Carolina.
"Supplemental Indenture" means any indenture supplemental or amendatory to
this Indenture entered into by the Issuer and the Trustee pursuant to Article X
of this Indenture.
"Tender Agent" means initially the Trustee, and any successor tender agent
appointed pursuant to Section 914 hereof. The Tender Agent shall act as Paying
Agent as to Tendered Bonds.
"Tender Date" means (a) each date designated by a Bondowner for purchase
of any Bonds in accordance with the provisions of Section 301 hereof, and (b)
each date on which Bonds are required to be tendered in accordance with the
provisions of Section 302 hereof, including any Mandatory Purchase Date, whether
or not such Bonds are actually tendered.
"Tender Price" means 100% of the principal amount of any Bond tendered
pursuant to the provisions of Section 301 or Section 302 of this Indenture plus
interest accrued and unpaid thereon to, but not including, the Tender Date.
"Tendered Bonds" means (a) any Bonds tendered by a Bondowner for purchase
pursuant to Section 301 hereof, and (b) any Bonds required to be tendered for
purchase pursuant to Section 302 hereof, unless a proper waiver has been made by
the Owner of such Bonds, in each case whether or not such Bonds are actually
tendered.
"Termination Date" means (i) if the Credit Facility is not a letter of
credit, the maturity or expiration date of the Credit Facility or, if such day
is not a Business Day, the next preceding
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Business Day or (ii) if the Credit Facility is a letter of credit, the last
Interest Payment Date which is at least five (5) days preceding the date on
which the Credit Facility is to expire pursuant to its terms, in each case
including any extension of such maturity or expiration date.
"Trust Estate" means the Trust Estate described in the granting clauses of
this Indenture.
"Trustee" means Mark Twain Bank a banking corporation duly organized and
existing under the laws of the State of Missouri, and its successor or
successors and any other association or corporation which at any time may be
substituted in its place pursuant to and at the time serving as trustee under
this Indenture.
"Unavailable Moneys Account" means the account by that name in the Revenue
Fund created pursuant to Section 501 of this Indenture.
"Undelivered Bonds" means Bonds which are deemed to have been tendered to
the Trustee or Tender Agent, as applicable, for purchase pursuant to Section 301
or 302 hereof but which have not been surrendered to the Trustee or Tender
Agent, as applicable.
"Weekly Mode" means an Interest Mode during which the interest rate on the
Bonds is determined in weekly intervals as set forth in Section 203(c) hereof.
"Written Request" with reference to the Issuer means a request in writing
signed by an Authorized Issuer Representative and with reference to the Borrower
means a request in writing signed by an Authorized Borrower Representative.
Section 102. Rules of Interpretation.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(a) Words of the masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders.
(b) Words importing the singular number shall include the plural and vice
versa and words importing person shall include firms, associations and
corporations, including public bodies, as well as natural persons.
(c) The table of contents hereto and the headings and captions herein are
not a part of this document.
(d) Terms used in an accounting context and not otherwise defined shall
have the meaning ascribed to them by generally accepted principles of
accounting.
(e) Notwithstanding anything herein, in the Series 1994A Indenture or in
the Borrower Documents to the contrary, each of the "Borrower", the "Credit
Enhancer", the "Paying Agent(s)", the "Remarketing Agent", the "Tender Agent"
and the "Trustee" (including, for such purpose, each
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co-trustee) shall, as between the documents relating to the Bonds and the Series
1994A Bonds be one and the same Person.
[End of Article I]
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ARTICLE II
THE BONDS
Section 201. Authorization. Issuance and Terms of Bonds.
(a) Authorized Amount of Bonds. No Bonds may be issued under the
provisions of this Indenture except in accordance with this Article. The total
aggregate principal amount of the Bonds that may be issued hereunder and at any
time Outstanding is hereby expressly limited to $3,000,000.
(b) Tide of Bonds. The Bonds authorized to be issued under this Indenture
shall be designated "Variable Rate Demand Industrial Development Revenue Bonds
(Roller Bearing Company of America, Inc. Project) Series 1994B".
(c) Form of Bonds. The Bonds shall be substantially in the form set forth
in Exhibit A attached hereto, with such appropriate variations, omissions and
insertions as are permitted or required by this Indenture, and may have endorsed
thereon such legends or text as may be necessary or appropriate to conform to
any applicable rules and regulations of any governmental authority or any usage
or requirement of law with respect thereto.
(d) Denominations. The Bonds shall be issuable as fully registered Bonds
without coupons in Authorized Denominations only.
(e) Numbering. Unless the Issuer shall otherwise direct, the Bonds shall
be numbered from R-1 upward.
(f) Dating. The Bonds shall be dated as of the Bond Issuance Date, be
issuable in Authorized Denominations, and bear interest from the most recent
Interest Payment Date to which interest has been paid or for which due provision
has been made or if no Interest Payment Date has occurred therefor, the dated
date thereof.
(g) Maturity. The Bonds shall mature on September 1, 2017, subject to
optional and mandatory redemption as provided in Article IV hereof.
(h) Tender and Purchase of Bonds. The Bonds are subject to optional and
mandatory tender for purchase as provided in Article III hereof.
(i) Method and Place of Payment. Except as provided herein, the principal
of, and redemption premium, if any, and interest on the Bonds shall be payable
in any coin or currency of the United States of America which, at the respective
dates of payment thereof, is legal tender for the payment of public and private
debts, and such principal and premium, if any, shall be payable at the Principal
Office of the Trustee or at the office of any alternate Paying Agent, and, with
respect to the Tender Price, at the Principal Office of the Tender Agent, upon
presentation and surrender of such Bonds. Payment of interest on any Bond shall
be made by check or draft of the Trustee mailed to the person in whose name such
Bond is registered on the Bond Register as of the close of business of the
Trustee on the Record Date for such Interest Payment Date, except that
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interest not duly paid or provided for when due shall be payable to the person
in whose name such Bond is registered at the close of business on the Business
Day immediately preceding the date of payment of such defaulted interest. In the
case of an interest payment to any Owner of $1,000,000 or more in aggregate
principal amount of Bonds as of the commencement of business of the Trustee on
the Record Date for a particular Interest Payment Date or in the case of the
purchase from an Owner of $1,000,000 or more in aggregate principal amount of
Bonds on the Tender Date, payment of interest or the Tender Price, as
applicable, shall be made by wire transfer to such Owner upon written notice to
the Trustee from such Owner containing the wire transfer address (which shall be
in the continental United States) to which such Owner wishes to have such wire
directed and, with regard to interest payments, such written notice is given by
such Owner to the Trustee not less than fifteen (15) days prior to such Record
Date and regarding payment of the Tender Price, which written notice accompanies
such Owner's Notice of Election to Tender Bonds.
Section 202. Nature of Obligations.
(a) The Bonds and the interest thereon shall be limited obligations of the
Issuer payable solely from Bond proceeds, the Revenues and other moneys pledged
thereto and held by the Trustee as provided herein, and are secured by a
transfer, pledge and assignment of and a grant of a security interest in the
Trust Estate to the Trustee and in favor of the Owners of the Bonds, as provided
in this Indenture.
(b) The Bonds and the interest thereon do not constitute a debt or general
obligation of the Issuer, the State, or any political subdivision thereof, and
do not constitute an indebtedness or a charge against the general credit of the
State or the Issuer within the meaning of any constitutional or statutory
limitation or restriction. The Bonds are not payable in any manner by taxation.
(c) No recourse shall be had for the payment of the principal of, or
premium, if any, or interest on, any of the Bonds or for any claim based thereon
or upon any obligation, provision, covenant or agreement contained in this
Indenture contained, against any past, present or future director, trustee,
officer, official, employee or agent of the Issuer, or any director, trustee,
officer, official, employee or agent of any successor to the Issuer, as such,
either directly or through the Issuer or any successor to the Issuer, under any
rule of law or equity, statute or constitution or by the enforcement of any
assessment or penalty or otherwise, and all such liability of any such director,
trustee, officer, official, employee or agent as such is hereby expressly waived
and released as a condition of and in consideration for the execution of this
Indenture and the issuance of any of the Bonds. Neither the officers of the
Issuer nor any person executing the Bonds shall be personally liable on the
Bonds by reason of the issuance thereof.
Section 203. Interest Rates and Interest Payment Provisions.
(a) Calculation of Interest. Subject to the provisions of Section 802 (a)
hereof, the Bonds shall bear interest from and including the date thereof until
payment of the principal or redemption price thereof shall have been made or
provided for in accordance with the provisions hereof, whether at maturity, upon
redemption or otherwise. Anything herein to the contrary notwithstanding, in no
event shall the interest rate borne by the Bonds, other than Pledged Bonds, at
any time exceed the Maximum Rate. Subject to such limitation, the interest rates
on the Bonds
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shall be determined as provided in this Section. Interest accrued on the Bonds
during each Interest Period shall be paid on the next succeeding Interest
Payment Date and, while the Bonds are in a Weekly Mode or a Monthly Mode, shall
be computed on the basis of a year of 365 or 366 days, as appropriate, for the
actual number of days elapsed and, while the Bonds are in a Semiannual Mode, an
Annual Mode or a Multiyear Mode, shall be computed on the basis of a year of 360
days and twelve 30-day months. The Trustee shall calculate the amount of
interest to be paid on each Interest Payment Date, and the Remarketing Agent
shall confirm such interest amount calculation, and the Trustee shall notify the
Borrower and the Credit Enhancer of such amount by 10:00 a.m., New York Time, on
the Business Day next preceding each Interest Payment Date.
(b) Standard for Determination of Interest Rate. The Remarketing Agent
shall determine the interest rate for the Rate Period commencing with each Rate
Adjustment Date to be the lowest rate which, in the best judgment of the
Remarketing Agent, on the Rate Determination Date, would result in the market
value of such Bonds on the Rate Adjustment Date being equal to 100% of their
principal amount. In determining such interest rate, the Remarketing Agent shall
have due regard for general financial conditions and such other conditions as,
in the judgment of the Remarketing Agent, have a bearing on the interest rate on
the Bonds, including then prevailing market conditions, the yields at which
comparable securities are then being sold and the tender provisions applicable
thereto during the forthcoming Rate Period. Each determination of the interest
rate for the Bonds, as provided herein, shall be conclusive and binding upon the
Bondowners, the Issuer, the Borrower, the Tender Agent, the Remarketing Agent,
the Credit Enhancer and the Trustee. Upon request, the Remarketing Agent shall
give the Issuer, the Trustee, the Credit Enhancer, the Borrower, the Tender
Agent or any Bondowner Immediate Notice of the interest rate on the Bonds at any
time.
(c) Weekly Mode. The interest rate for Bonds in a Weekly Mode shall be
determined in the following manner. On each Rate Determination Date, the
Remarketing Agent shall determine the interest rate which such Bonds shall bear
during the Rate Period following such Rate Determination Date. The interest rate
so determined shall be effective on the Rate Adjustment Date. Promptly after
each Rate Determination Date, the Remarketing Agent shall give written notice of
the interest rate so set to the Trustee, the Credit Enhancer and the Borrower.
On each Interest Payment Date the Trustee shall mail to each Bondowner a written
statement showing the interest rates for such Bonds during the preceding
Interest Period.
(d) Monthly Mode. The interest rate for any Bonds in a Monthly Mode shall
be determined in the following manner. On each Rate Determination Date, the
Remarketing Agent shall determine the interest rate which such Bonds shall bear
during the Rate Period following such Rate Determination Date. The interest rate
so determined shall be effective on the Rate Adjustment Date. Promptly after
each Rate Determination Date, the Remarketing Agent shall give written notice of
the interest rate so set to the Borrower, the Credit Enhancer and the Trustee.
On each Interest Payment Date the Trustee shall mail to each Bondowner a written
statement showing the interest rates for such Bonds during the preceding
Interest Period.
(e) Semiannual Mode. Annual Mode or Multiyear Mode. The interest rate for
Bonds in a Semiannual Mode, an Annual Mode or a Multiyear Mode shall be
determined in the following manner. Not less than 30 days nor more than 35 days
before each Rate Adjustment Date, the Remarketing Agent shall determine the
interest rate (the "Preliminary Rate") which the Bonds would
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bear if such day were a Rate Determination Date. The Remarketing Agent shall
give Immediate Notice of the Preliminary Rate to the Borrower, the Credit
Enhancer and the Trustee. The Trustee shall thereupon mail, not less than 25
days prior to the Rate Adjustment Date, to each Bondowner a Rate Adjustment
Notice in substantially the form attached hereto as Exhibit E. On the Rate
Determination Date the Remarketing Agent shall determine the interest rate which
each of such Bonds shall bear for each such Rate Period, which rate may be less
than, equal to or greater than the Preliminary Rate. By Immediate Notice on such
Rate Determination Date the Remarketing Agent shall give written notice of the
interest rate so set to the Borrower, the Credit Enhancer, the Tender Agent and
the Trustee, and the Trustee shall mail to all Bondowners written notice of the
interest rate so determined.
(f) Alternative Rate Calculation. If for any reason the interest rate for
the Bonds is not or cannot be established as provided in the preceding
paragraphs, or is held invalid or unenforceable by a court of law, all Bonds
shall immediately convert to a Weekly Mode, anything in this Indenture to the
contrary notwithstanding, and the interest rate shall be a rate equal to the
lesser of (i) 135% of the 90-day U.S. Treasury Bill rate, determined on the
basis of the average per annum rate at which 90-day U.S. Treasury Bills have
been sold on a bond-equivalent basis at the most recent U.S. Treasury auction
preceding the Rate Determination Date, or (ii) the Maximum Rate.
(g) Pledged Bonds. Notwithstanding the above provisions of this Section
203 the Pledged Bonds shall bear interest at the Pledged Bond Rate during the
period that such Bonds are Pledged Bonds. The Credit Enhancer shall use its best
efforts to notify the Trustee on the Business Day preceding each Interest
Payment Date in respect of such a period of the Pledged Bond Rate in effect from
time to time during such period. The Credit Facility shall not be drawn on to
pay any Pledged Bond.
Section 204. Changes in Interest Modes.
(a) The Bonds shall initially be in a Weekly Mode. The Interest Mode for
the Bonds may be changed from time to time at the option of the Borrower, with
the prior written consent of the Credit Enhancer exercised as provided in this
Section, to another Interest Mode selected by the Borrower, on an Interest
Payment Date on which the Bonds are subject to redemption pursuant to Section
401 hereof at a redemption price equal to the principal amount thereof, plus
accrued interest, without premium. The Borrower may exercise such option at any
time by giving written notice not more than 60 nor less than 45 days prior to
the Interest Mode Adjustment Date, to the Issuer, the Trustee, the Tender Agent,
the Remarketing Agent and the Credit Enhancer stating its election to convert
the Interest Mode for the Bonds to another Interest Mode, which notice shall
specify the new Interest Mode and the Interest Mode Adjustment Date. Such
Interest Mode Adjustment Date shall be a Rate Adjustment Date for the Bonds in
such new Interest Mode. Upon the exercise of such option by the Borrower and
upon the Trustee's receipt of the prior written consent of the Credit Enhancer
to the exercise of such option, the Trustee shall mail, not less than thirty
(30) days prior to the Interest Mode Adjustment Date, an Interest Mode
Adjustment Notice to each Owner of Bonds, and, in the event of a conversion to a
Weekly Mode or a Monthly Mode from any other Interest Mode, a Notice of Election
to Tender/Retain Bonds in substantially the form attached hereto as Exhibit D.
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(b) No change in the Interest Mode shall occur unless (i) the Trustee
shall have received, prior to sending the Interest Mode Adjustment Notice, an
Opinion of Bond Counsel stating that the change in the Interest Mode is
authorized and permitted by this Indenture and the Act and such Opinion of Bond
Counsel is confirmed as of the Interest Mode Adjustment Date, and (ii) the
Credit Enhancer shall have given its prior written consent to the change in the
Interest Mode and shall have fully and timely made any payment due under the
Credit Facility made in connection with the related Interest Mode Adjustment
Date pursuant to Section 508 hereof. Further, no change from a Weekly Mode to
any other Interest Mode may occur unless a corresponding change in Interest Mode
with respect to the Series 1994A Bonds occurs on the same date.
Section 205. Execution. Authentication and Delivery of Bonds.
(a) The Bonds shall be executed on behalf of the Issuer by the manual or
facsimile signature of the Chairman of the Board of Directors of the Issuer and
attested by the manual or facsimile signature of its Executive Director,
Secretary or Assistant Secretary, and shall have the corporate seal of the
Issuer affixed thereto or imprinted thereon. In case any officer whose signature
or facsimile thereof appears on any Bonds shall cease to be such officer before
the delivery of such Bonds, such signature or facsimile thereof shall
nevertheless be valid and sufficient for all purposes, the same as if such
person had remained in office until delivery. Any Bond may be signed by such
persons who at the actual time of the execution of such Bond shall be the proper
officers to sign such Bond although at the date of such Bond such persons may
not have been such officers.
(b) The Bonds shall have endorsed thereon a Certificate of Authentication
substantially in the form set forth in Exhibit A hereto, which shall be manually
executed by the Trustee. No Bond shall be entitled to any security or benefit
under this Indenture or shall be valid or obligatory for any purpose unless and
until such Certificate of Authentication shall have been duly executed by the
Trustee. Such executed Certificate of Authentication upon any Bond shall be
conclusive evidence that such Bond has been duly authenticated and delivered
under this Indenture. The Certificate of Authentication on any Bond shall be
deemed to have been duly executed if signed by any authorized officer or
employee of the Trustee, but it shall not be necessary that the same officer or
employee sign the Certificate of Authentication on all of the Bonds that may be
issued hereunder at any one time.
(c) Prior to or simultaneously with the authentication and delivery of the
Bonds by the Trustee there shall be filed with the Trustee the following:
(1) A copy of the Resolution, certified by the Executive Director of
the Issuer.
(2) An original executed counterpart of this Indenture, the
Agreement and the Credit Facility.
(3) An Opinion of Bond Counsel, dated the date of initial delivery
of the Bonds, to the effect that the Bonds are valid and binding special
limited obligations of the Issuer and that interest on the Bonds is exempt
from income taxation in the State of South Carolina.
(4) A request and authorization to the Trustee on behalf of the
Issuer, executed by the Authorized Issuer Representative, to authenticate
the Bonds and deliver said Bonds
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to the purchasers therein identified upon payment to the Trustee, for the
account of the Issuer, of the purchase price thereof. The Trustee shall
be entitled to rely conclusively upon such request and authorization as
to the names of the purchasers and the amount of such purchase price.
(5) Evidence satisfactory to the Issuer, the Credit Enhancer and the
Trustee that the Bonds have been purchased by "qualified institutional
buyers" as defined in Rule 144A of the 1933 Act.
(6) Such other certificates, statements, receipts, documents and
Opinions of Counsel as the Trustee shall reasonably require for the
delivery of the Bonds.
(d) When the documents mentioned in paragraph (c) of this Section shall
have been filed with the Trustee, and when the Bonds shall have been executed
and authenticated as required by this Indenture, the Trustee shall deliver the
Bonds to or upon the order of the purchasers thereof, but only upon payment to
the Trustee of the purchase price of the Bonds. The proceeds of the sale of the
Bonds, including premium thereon, if any, shall be immediately paid over to the
Trustee, and the Trustee shall deposit and apply such proceeds as set forth in
Section 502 hereof.
Section 206. Registration. Transfer and Exchange of Bonds.
(a) The Trustee is hereby appointed Bond Registrar and as such shall keep
the Bond Register at its principal corporate trust office. No later than the
second Business Day following each Record Date, the Trustee shall send a copy of
the Bond Register to the Tender Agent by first-class mail.
(b) Any Bond may be transferred only upon the Bond Register upon surrender
thereof to the Trustee duly endorsed for transfer or accompanied by an
assignment duly executed by the registered Owner or such Owner's attorney or
legal representative in such form as shall be satisfactory to the Trustee.
Subject to Section 210 hereof, upon any such transfer, the Issuer shall execute
and the Trustee shall authenticate and deliver in exchange for such Bond a new
Bond or Bonds, registered in the name of the transferee, of any Authorized
Denomination.
(c) Any Bonds, upon surrender thereof at the principal corporate trust
office of the Trustee, together with an assignment duly executed by the Owner or
such Owner's attorney or legal representative in such form as shall be
satisfactory to the Trustee, may, at the option of the Owner thereof, be
exchanged for an equal aggregate principal amount of the Bonds, of any
Authorized Denomination.
(d) In all cases in which Bonds shall be exchanged or transferred
hereunder, the Issuer shall execute and the Trustee shall authenticate and
deliver at the earliest practicable time Bonds in accordance with the provisions
of this Indenture. All Bonds surrendered in any such exchange or transfer shall
forthwith be cancelled by the Trustee.
(e) The Issuer or the Trustee may make a charge against each Bondowner
requesting a transfer or exchange of Bonds for every such transfer or exchange
of Bonds sufficient to reimburse it for any tax or other governmental charge
required to be paid with respect to such transfer or
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exchange, the cost of printing, if any, each new Bond issued upon any transfer
or exchange and the reasonable expenses of the Issuer and the Trustee in
connection therewith, and such charge shall be paid before any such new Bond
shall be delivered.
(f) At reasonable times and under reasonable regulations established by
the Trustee, the Bond Register may be inspected and copied by the Borrower, the
Issuer, the Credit Enhancer or the Owners (or a designated representative
thereof) of 10% or more in aggregate principal amount of Bonds then Outstanding,
such ownership and the authority of any such designated representative to be
evidenced to the satisfaction of the Trustee.
(g) The person in whose name any Bond shall be registered on the Bond
Register shall be deemed and regarded as the absolute Owner of such Bond for all
purposes, and payment of or on account of the principal of and redemption
premium, if any, and interest on any such Bond shall be made only to or upon the
order of the registered Owner thereof or such Owner's attorney or legal
representative (except that any such payments on Pledged Bonds shall be made to
the Credit Enhancer). All such payments shall be valid and effectual to satisfy
and discharge the liability upon such Bond, including the interest thereon, to
the extent of the sum or sums so paid.
Section 207. Temporary Bonds.
(a) Until definitive Bonds are ready for delivery, the Issuer may execute
and, upon request of the Issuer, the Trustee shall authenticate and deliver in
lieu of definitive Bonds, but subject to the same limitations and conditions as
definitive Bonds, temporary printed, engraved, lithographed or typewritten
Bonds.
(b) If temporary Bonds shall be issued, the Issuer shall cause the
definitive Bonds to be prepared and to be executed and delivered to the Trustee,
and the Trustee, upon presentation to it at its principal corporate trust office
of any temporary Bond shall cancel the same and authenticate and deliver in
exchange therefor, without charge to the Owner thereof, a definitive Bond or
Bonds in the same aggregate amount as the temporary Bond surrendered in
Authorized Denominations. Until so exchanged the temporary Bonds shall in all
respects be entitled to the same benefit and security of this Indenture as the
definitive Bonds to be issued and authenticated hereunder.
Section 208. Mutilated, Lost, Stolen, Destroyed or Undelivered Bonds. In
the event any Bond shall become mutilated, or be lost, stolen or destroyed, the
Issuer shall execute and the Trustee shall authenticate and deliver a new Bond
of like date and tenor as the Bond mutilated, lost, stolen or destroyed;
provided that, in the case of any mutilated Bond, such mutilated Bond shall
first be surrendered to the Trustee, and in the case of any lost, stolen or
destroyed Bond, there shall be first furnished to the Issuer and the Trustee
evidence of such loss, theft or destruction satisfactory to the Issuer and the
Trustee, together with indemnity satisfactory to them, the Borrower and the
Credit Enhancer. In the event any such Bond shall have matured or been called
for redemption, instead of issuing a substitute Bond the Issuer may pay or
authorize the payment of the same without surrender thereof. Upon the issuance
of any substitute Bond, the Issuer and the Trustee may require the payment of an
amount by the Bondowner sufficient to reimburse the Issuer and the Trustee for
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable fees and expenses incurred in connection therewith.
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In the event that there are Undelivered Bonds, the Trustee shall
authenticate and deliver, with such delivery to occur at the Principal Office of
the Trustee to the new Owner or Owners thereof a new Bond or Bonds of like
amount in Authorized Denominations registered in the name of the new Owner or
Owners thereof. It shall be the duty of the Trustee to hold the moneys received
from the remarketing of a replacement Bond issued in place of an Undelivered
Bond, without liability for interest thereon, for the benefit of the former
Bondowner, who shall thereafter be restricted exclusively to such moneys for any
claim of whatever nature under this Indenture or with respect to the Undelivered
Bond and so long as the moneys held by the Trustee equal the full amount due on
such Bond on the tender date, whether from such remarketing or payment on the
Credit Facility, such Bond shall thereafter no longer be secured by this
Indenture or the Credit Facility (except for such moneys so held). Such moneys
shall be held by the Trustee in the Purchase Fund, along with any other monies
deposited in such Fund pursuant to said Section, and no moneys held in the
Purchase Fund shall be invested.
Section 209. Cancellation and Destruction of Bonds Upon Payment. All Bonds
which have been paid or redeemed or which the Trustee has purchased or which
have otherwise been surrendered to the Trustee under this Indenture, either at
or before maturity, shall be cancelled and destroyed by the Trustee immediately
upon the payment, redemption or purchase of such Bonds and the surrender thereof
to the Trustee. The Trustee shall execute a certificate in triplicate describing
the Bonds so cancelled and destroyed, and shall file executed counterparts of
such certificate with the Issuer, the Borrower and the Credit Enhancer. Bonds at
any time held by the Issuer shall be surrendered to the Trustee for cancellation
in accordance with the provisions of this Section.
Section 210. Limitation on Transfer and Exchange. The Bonds have not been
registered or qualified under the 1933 Act or the securities laws of any state.
Notwithstanding Section 206 hereof, so long as the Credit Facility secures the
Bonds, no transfer of any Bond shall be made unless such transfer is made in a
transaction which does not require registration or qualification under the 1933
Act or under any applicable state securities laws. The Trustee shall not
register any transfer or exchange of a Bond unless (i) such Bondholder's
prospective transferee delivers to the Trustee an investment letter
substantially in the form set forth as Exhibit H to this Indenture; or (ii) an
opinion of counsel in form and substance reasonably satisfactory to the Trustee
and the Credit Enhancer that such transfer or exchange is made in accordance
with an applicable exemption from the 1933 Act and applicable state securities
laws and such opinion is addressed to and delivered to the Trustee, the Borrower
and the Credit Enhancer; or (iii) such transferee is an Eligible Transferee (as
defined below) and the Remarketing Agent has delivered a certificate stating
that such transfer complies with the exemption from registration provided by
Rule 144A under the 1933 Act. As used in this Section, an "Eligible Transferee"
is an entity that appears on a list provided by the Remarketing Agent and which
has delivered an investment letter to the Trustee substantially in the form set
forth as Exhibit H to this Indenture, provided, however, that such list and
investment letter are dated as of a date within the preceding twelve months. Any
such holder desiring to effect such transfer shall, and does hereby, agree to
indemnify the Trustee, the Borrower and the Credit Enhancer against any
liability, cost or expense (including attorneys' fees) that may result if the
transfer is not so exempt, or is not made in accordance with such federal and
state laws. The provisions of this paragraph shall not be applicable in the
event that the Issuer, the Trustee, the Borrower and the Credit Enhancer shall
have received an opinion of counsel in form and substance satisfactory to the
Issuer, the Trustee and the Credit Enhancer that the Bonds and
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the Credit Facility are exempt from registration under the 1933 Act and any
applicable state securities laws.
[End of Article II]
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ARTICLE III
TENDER AND PURCHASE OF BONDS
Section 301. Optional Tender of Bonds During Weekly Mode or Monthly Mode.
(a) General. While the Bonds are in a Weekly Mode or Monthly Mode, the
Owner of any Bond shall have the right to have such Bond purchased in whole or
in part (which portion shall be in a principal amount equal to an Authorized
Denomination) on the dates specified in paragraph (b) below at the Tender Price.
An Owner's exercise of the option to have such Bond purchased is irrevocable and
binding on such Owner and cannot be withdrawn. If any Owner of Bonds shall fail
to deliver the Bonds described in such Owner's Notice of Election to Tender
Bonds in accordance with this Section 301, such Bonds shall constitute
Undelivered Bonds. Replacement Bonds shall be executed, authenticated and
delivered in the place of such Undelivered Bonds as provided in Section 208
hereof and such replacement Bonds may be offered and sold by the Remarketing
Agent in accordance with this Indenture and the Remarketing Agreement.
(b) Notice of Tender by Bondowners. Any Bond, or portion thereof, shall be
purchased on the Tender Date by the Tender Agent on the demand of the Owner
thereof, at the Tender Price, upon delivery to the Tender Agent on a Business
Day at its Principal Office of an irrevocable written notice in the form of the
Notice of Election to Tender Bonds which states (A) the principal amount and
number of such Bond (and the portion of such Bond to be purchased if less than
the full principal amount is to be purchased), the name and the address of such
Owner and the taxpayer identification number, if any, of such Owner and (B) that
such Bond, or portion thereof, is to be purchased on a day (which shall be the
Tender Date), which day will be a Business Day which is at least seven (7)
calendar days after the receipt by the Tender Agent of such Notice of Election
to Tender Bonds. Such Notice of Election to Tender Bonds shall be deemed
received on a Business Day if received by the Tender Agent no later than 3:00
p.m., New York Time, on such Business Day. Any Notice of Election to Tender
Bonds received by the Tender Agent after 3:00 p.m., New York Time, shall be
deemed received on the next succeeding Business Day.
Any Owner of Bonds who has demanded purchase of its Bond, or portion
thereof, as described in this Section 301 shall deliver such Bond (with an
appropriate transfer of registration form executed in blank, together with a
signature guaranty) (together with, in the case of any Bond with a specified
Tender Date prior to an Interest Payment Date and after the related Record Date,
a due-bill check in form satisfactory to the Tender Agent for interest due on
such Bond on such Interest Payment Date) to the Tender Agent at its Principal
Office prior to 10:30 A.M., New York Time, on the Tender Date specified in the
aforesaid written notice.
(c) Failure to Give Notice. Failure by the Tender Agent to redeliver a
Notice of Election to Tender Bonds or a Tendered Bond as provided in Section 303
hereof shall not extend the period for making elections, in any way change the
rights of the Owners of Bonds to elect to have their Bonds purchased pursuant to
this Section or in any way change the conditions which must be satisfied in
order for such election to be effective or for payment of the purchase price to
be made after an effective election.
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Section 302. Mandatory Tender of Bonds.
(a) On Termination Date or Interest Mode Adjustment Date. All Bonds are
required to be tendered to the Tender Agent for purchase on the Termination Date
or an Interest Mode Adjustment Date; provided, however, that there shall not be
so tendered on the Termination Date or the Interest Mode Adjustment Date, as
applicable, any Bonds, or portion thereof, which will be in Authorized
Denominations with respect to which the Owners thereof have delivered to the
Tender Agent by hand or by mail at its Principal Office a properly completed
Notice of Election to Retain Bonds, together with a signature guaranty, on or
prior to the fifth Business Day next preceding the Termination Date or the
Interest Mode Adjustment Date, as applicable, subject to the provisions of
Section 204(b) hereof (with respect to the Interest Mode Adjustment Date) and
Section 302(g) hereof (with respect to the Termination Date). Any Bondowner
required to tender Bonds under this subsection (a) shall tender its Bonds to the
Tender Agent for purchase at its Principal Office prior to 10:30 A.M., New York
Time, on the Termination Date or the Interest Mode Adjustment Date, as
applicable. The failure to tender Bonds on any such date is the equivalent of a
tender, and such Bonds shall be converted to Undelivered Bonds and replacement
Bonds shall be executed, authenticated and delivered in the place of such
Undelivered Bonds as provided in Section 208 hereof and such replacement Bonds
may be offered and sold by the Remarketing Agent in accordance with this
Indenture and the Remarketing Agreement, subject to the provisions of Section
204(b) and Section 302(g) hereof, as applicable.
(b) On Alternate Credit Facility Date. While the Bonds are in an Interest
Mode other than a Multiyear Mode, all Bonds are required to be tendered to the
Tender Agent for purchase on an Alternate Credit Facility Date; provided,
however, that there shall not be so tendered on the Alternate Credit Facility
Date any Bonds or portion thereof which will be in Authorized Denominations with
respect to which the Owners thereof have delivered to the Tender Agent by hand
or by mail at its Principal Office a properly completed Notice of Election to
Retain Bonds, together with a signature guaranty, on or prior to the fifth
Business Day next preceding the Alternate Credit Facility Date. Any Bondowner
required to tender Bonds under this subsection (b) shall tender its Bonds to the
Tender Agent for purchase at its Principal Office prior to 10:30 A.M., New York
Time, on the Alternate Credit Facility Date. The failure to tender Bonds on any
such date is the equivalent of a tender and such Bonds shall be converted to
Undelivered Bonds and replacement Bonds shall be executed, authenticated and
delivered in the place of such Undelivered Bonds as provided in Section 208
hereof and such Replacement Bonds may be offered and sold by the Remarketing
Agent in accordance with this Indenture and the Remarketing Agreement.
(c) On Rate Adjustment Date During Semiannual Mode, Annual Mode and
Multiyear Mode. While the Bonds are in a Semiannual Mode, Annual Mode or
Multiyear Mode, all Bonds are required to be tendered to the Tender Agent for
purchase on each Rate Adjustment Date; provided, however, that there shall not
be so tendered on any Rate Adjustment Date any Bonds or portion thereof which
will be in Authorized Denominations with respect to which the Owners thereof
have delivered to the Tender Agent by hand or by mail at its Principal Office a
properly completed Notice of Election to Retain Bonds, together with a signature
guaranty, on or prior to the fifth Business Day next preceding such Rate
Adjustment Date. Any Bondowner required to tender Bonds under this subsection
(c) shall tender Bonds to the Tender Agent for purchase at its Principal Office
prior to 10:30 A.M., New York Time, on the Rate Adjustment Date. The failure to
tender its Bonds on any such date is the equivalent of a tender and such Bonds
shall be converted to Undelivered Bonds
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and Replacement Bonds shall be executed, authenticated and delivered in the
place of such Undelivered Bonds as provided in Section 208 hereof and such
Replacement Bonds may be offered and sold by the Remarketing Agent in accordance
with this Indenture and the Remarking Agreement.
(d) Mandatory Tender in Lieu of Acceleration on Default. Additionally, all
Bonds shall be subject to mandatory tender for purchase on the Mandatory
Purchase Date from the Bondowners by the Trustee for the account of the Credit
Enhancer, as set forth in Section 802(b) hereof in lieu of acceleration of the
Bonds as set forth in Section 802(a) hereof, and mandatory redemption of Bonds
as set forth in Section 402(c) and upon the occurrence of an Event of Default
under Section 801(e) hereof. Upon receipt of notice from the Credit Enhancer
directing the Trustee to purchase the Bonds and the establishment by the Trustee
of the Mandatory Purchase Date, which shall be a Business Day which is at least
three (3) and no more than ten (10) calendar days after the receipt by the
Trustee of such notice, the Trustee shall immediately request a payment under
the Credit Facility pursuant to Section 508 hereof in the amount required by
Section 802(b) to be received no later than 3:00 o'clock P.M., New York Time, on
the Mandatory Purchase Date, and shall also send notice to the Bondowners of the
mandatory purchase. On the Mandatory Purchase Date, the Tender Agent shall pay
to the Bondowners the purchase price for the Bonds, which shall be an amount
equal to 100% of the principal amount of any Bond tendered or deemed tendered
plus accrued and unpaid interest thereon to the Mandatory Purchase Date. Any
Bondowner required to tender Bonds under this subsection (d) shall tender its
Bonds to the Tender Agent for purchase at its Principal Office prior to 10:30
o'clock A.M., New York Time, on the Mandatory Purchase Date. The failure to
tender Bonds on any such date is the equivalent of a tender and such Bonds shall
be converted to Undelivered Bonds and replacement Bonds shall be executed,
authenticated and delivered in the place of such Undelivered Bonds as provided
in Section 208 hereof.
(e) Notice of Mandatory Tender. The Trustee shall give notice to
Bondowners of the mandatory tender for purchase of Bonds (i) on an Interest Mode
Adjustment Date in accordance with Section 204 hereof, (ii) on an Alternate
Credit Facility Date in accordance with Section 706 hereof, (iii) if the Bonds
are in a Multiyear Mode, Annual Mode or Semiannual Mode, on a Rate Adjustment
Date in accordance with Section 203(e) hereof, (iv) on the Termination Date not
less than 25 or more than 60 calendar days prior to such Termination Date and
(v) on the Mandatory Purchase Date in accordance with Section 302(d) hereof.
(f) Failure to Give Notice. Failure by the Trustee to give any notice as
provided in paragraph (e) of this Section, any defect therein or any failure by
any Bondowner to receive any such notice shall not in any way change such
Owner's obligation to tender the Bonds for purchase on any mandatory Tender
Date.
(g) No Remarketing. No Bond purchased on the Termination Date pursuant to
Section 302(a) shall be remarketed on any date on or prior to the delivery of an
Alternate Credit Facility. All Bonds transferred hereunder shall be in
compliance with the provisions of Section 210 hereof.
Section 303. Irrevocability of Elections; Return of Improperly Completed
Documents. The Tender Agent, to whom a Notice of Election to Tender Bonds or a
Notice of Election to Retain Bonds has been delivered, shall determine whether
such Notice has been properly completed and such determination shall be binding
on the Owner of such Bond. Any election by a Bondowner to
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exercise the option to have its Bond or Bonds purchased, or any election by a
Bondowner to retain its Bond or Bonds upon any mandatory Tender Date, shall be
irrevocable upon delivery to the Tender Agent of the Notice of Election to
Tender Bonds (together with, if required at the time of delivery of such notice,
the Tendered Bonds) or of the Notice of Election to Retain Bonds, as the case
may be. The Tender Agent shall promptly return any incomplete or improperly
completed Notice of Election to Tender Bonds (together with, if required, the
Tendered Bonds) or Notice of Election to Retain Bonds to the Person or Persons
submitting such documents.
Section 304. Notice of Principal Amount of Bonds Tendered. Promptly upon
its receipt of any Notice of Election to Tender Bonds pursuant to Section 301
hereof, the Tender Agent shall (i) verify the information contained in such
Notice against the Bondholder list provided to the Tender Agent by the Trustee,
which list shall be delivered by the Trustee to the Tender Agent no later than
the second Business Day prior to each Tender Date, (ii) verify that both the
Tendered Bonds and the Bonds retained by the Owner are in Authorized
Denominations, and (iii) give Immediate Notice to the Trustee, the Remarketing
Agent, the Credit Enhancer and the Borrower of its receipt of such Notice and
specifying the total principal amount of Bonds to be tendered for purchase on
the applicable Tender Date. Promptly after the requisite time by which Notices
of Election to Retain Bonds are required to be delivered pursuant to Section 302
hereof, the Tender Agent shall give Immediate Notice to the Trustee, the
Remarketing Agent, the Credit Enhancer and the Borrower of its receipt of such
Notices and specifying the total principal amount of Bonds required to be
tendered for purchase on the applicable Tender Date and the aggregate Tender
Price therefor. The written portion of such Immediate Notice given by the Tender
Agent shall include copies of such Notices of Election to Tender Bonds or
Notices of Election to Retain Bonds.
Section 305. Remarketing of Tendered Bonds. Pursuant to the terms hereof
and of the Remarketing Agreement, and upon receipt of notice from the Tender
Agent, specifying the principal amount of Tendered Bonds, as provided in Section
304 hereof, the Remarketing Agent shall exercise its best efforts to sell all of
such Tendered Bonds as provided in the Remarketing Agreement subject to the
provision of Section 210 hereof; provided, however, that the Remarketing Agent
shall not remarket any Bonds at a price below par plus accrued interest thereon.
The Remarketing Agent shall transfer, by wire transfer in immediately available
funds, an amount equal to the proceeds derived from such sale of Tendered Bonds
to the Tender Agent at or before 10:00 A.M., New York Time, on the Tender Date.
The Tender Agent shall immediately notify the Trustee in writing of any amount
received by the Tender Agent from the Remarketing Agent. The Trustee shall
transfer from the Purchase Fund from the proceeds received from the Credit
Facility, by wire transfer in immediately available funds to the Tender Agent at
or before 4:00 P.M., New York Time, on the Tender Date, any additional amount
needed by the Tender Agent to pay the full Tender Price on the Tender Date. The
Trustee shall, on the Tender Date, remit to the Credit Enhancer the remainder of
the funds in the Purchase Fund (other than any funds being held for the benefit
of former Owners of Undelivered Bonds) which were not transferred to the Tender
Agent on such Tender Date including all investment earnings thereon as soon
thereafter as available. The Tender Agent shall, on the Tender Date, remit to
the Credit Enhancer the amount (if any) by which the sum of the amounts
transferred to the Tender Agent by the Remarketing Agent and the amounts
transferred to the Tender Agent by the Trustee exceed the Tender Price of the
Tendered Bonds to the extent such funds are owed to the Credit Enhancer; and if
no funds are owed to the Credit Enhancer, such amount shall be remitted to the
Borrower.
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Section 306. Notice of Principal Amount of Bonds Remarketed.
(a) Prior to 10:00 A.M., New York Time, on the second Business Day
immediately preceding the Tender Date, or such later time as shall be agreed to
by the Tender Agent and the Credit Enhancer, the Remarketing Agent shall give
Immediate Notice to the Trustee, the Tender Agent, the Credit Enhancer and the
Borrower specifying the new interest rate, if any, to become effective as of
such Tender Date (if such Tender Date is a Rate Adjustment Date) and the
aggregate principal amount of Tendered Bonds which (i) have been remarketed
other than to the Issuer, the Borrower or any Affiliated Party of the Borrower
and the Tender Price therefor, (ii) have not been remarketed and the Tender
Price therefor, (iii) have been remarketed to the Issuer, the Borrower or any
Affiliated Party of the Borrower, and (iv) the amount of money, if any, to be
paid over to the Tender Agent by the Remarketing Agent on the Tender Date, which
amount shall be equal to the proceeds of the sale of the Tendered Bonds so
remarketed (other than the remarketing of Tendered Bonds to the Issuer, the
Borrower or any Affiliated Party of the Borrower). Proceeds of the sale of
Tendered Bonds to the Issuer, the Borrower or any Affiliated Party of the
Borrower shall be deposited and applied in accordance with Section 505(d)
hereof. Concurrently with the notice described in the second preceding sentence,
the Remarketing Agent shall also give the Trustee (with a copy to the Tender
Agent) instructions as to the registration and delivery, with such delivery to
occur at the Principal Office of the Tender Agent, to the Remarketing Agent of
any Tendered Bonds for whose purchase the Remarketing Agent will make a deposit
of funds with the Tender Agent on the Tender Date.
(b) Prior to 10:00 a.m., New York Times on the Business Day immediately
preceding the Tender Date, the Tender Agent shall give Immediate Notice to the
Trustee, the Borrower and the Credit Enhancer specifying the amount of proceeds
from the remarketing of tendered Bonds on deposit with the Tender Agent. The
Trustee shall make a demand for payment on the Credit Facility in accordance
with Section 508(b) hereof in an amount equal to the Tender Price of all
Tendered Bonds less the proceeds of the remarketing of Tendered Bonds then on
deposit with the Tender Agent. The Trustee shall cause the proceeds of the
payment under the Credit Facility to be delivered to the Tender Agent for
purchase of Tendered Bonds as described in Section 307 hereof.
Section 307. Purchase of Tendered Bonds.
(a) Tendered Bonds shall be purchased from the Owners thereof on the
Tender Date at the Tender Price which shall be payable solely from the following
sources in the order of priority listed:
(1) Remarketing Proceeds;
(2) proceeds of a payment under the Credit Facility to purchase such
Tendered Bonds;
(3) Available Moneys from any other source; and
(4) moneys from any other source.
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(b) On each Tender Date, all Bonds purchased out of Remarketing Proceeds
shall be delivered and registered as directed by the Remarketing Agent pursuant
to Section 306(a) hereof.
(c) The Tender Agent shall pay the Tender Price for each Tendered Bond
prior to the Tender Agent's close of business on the Tender Date only after
receipt of such Bond, properly endorsed in blank, together with a signature
guaranty (together with, in the case of any Bond with a specified Tender Date
prior to an Interest Payment Date and after the related Record Date, a due-bill
check in form satisfactory to the Tender Agent for interest due on such Bond on
such Interest Payment Date). Payment of the Tender Price of any Bond tendered
for purchase shall be made: (1) by check or draft mailed to the Owner thereof at
the Owner's address as it appears on the Bond Register or at such other address
as is furnished to the Tender Agent in writing by such Owner; or (2) in the case
of the purchase from an Owner of $1,000,000 or more in aggregate principal
amount of Bonds, by wire transfer to such Owner upon written notice from such
Owner containing the wire transfer address (which shall be in the continental
United States) to which such Owner wishes to have such wire directed which
written notice accompanies such Owner's Notice of Election to Tender Bonds.
(d) The Trustee shall take the following actions with respect to Tendered
Bonds: (1) with respect to Bonds which have been remarketed and for which the
Tender Agent has received payment, on the written advice of the Remarketing
Agent, authenticate said Bonds in the names of the purchasers thereof and in the
appropriate denominations, and deliver said Bonds to the Remarketing Agent upon
the Tender Agent's receipt of payment therefor; (2) with respect to Tendered
Bonds which have not been remarketed and which are to be purchased by the
Borrower and pledged to the Credit Enhancer pursuant to the Bond Pledge
Agreement, register said Bonds as owned by the Borrower and pledged to the
Credit Enhancer and hold such Bonds as agent and bailee for the Credit Enhancer
in accordance with the terms of the Bond Pledge Agreement; and (3) with respect
to all Bonds which have been physically tendered, cancel such certificates.
Tendered Bonds which have been purchased by the Trustee on behalf of the
Borrower shall be registered in the name of the Borrower subject to the security
interest of the Credit Enhancer, and held on behalf of the Credit Enhancer.
(e) Notwithstanding anything in this Indenture to the contrary, the Tender
Agent shall pay the Tender Price with respect to an Undelivered Bond only upon
the actual receipt of such Bond, and such Tender Price shall be equal to the par
amount of such Bond plus accrued interest to the Tender Date. An Undelivered
Bond shall not be considered Outstanding pursuant to this Indenture and shall no
longer be secured by the Credit Facility.
Section 308. Remarketing of Pledged Bonds. When a purchaser for Pledged
Bonds is found, the Remarketing Agent will (a) give Immediate Notice prior to
10:00 A.M., New York Time, on the second Business Day next preceding the
Placement Date, or such earlier or later time as shall be agreed to by the
Credit Enhancer, the Trustee and the Borrower, to the Credit Enhancer, the
Borrower and the Trustee specifying the principal amount of Pledged Bonds to be
purchased, the purchase price thereof and the Placement Date on which such
purchase is to occur and (b) instruct the purchasers thereof to deliver an
amount (in immediately available funds) equal to the purchase price of such
Pledged Bonds to the Trustee by 10:30 A.M., New York Time, on the Placement Date
for the same day transfer to the Credit Enhancer. No Pledged Bonds shall be
released to new Owners unless the Trustee and the Tender Agent have received
written notice from the Credit
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Enhancer that the Credit Facility has been reinstated by an amount equal to the
principal of and interest portion of such Pledged Bonds and that the Credit
Enhancer has been reimbursed for the amount of the draw to purchase such Pledged
Bonds. The Pledged Bonds shall be purchased, subject to the provisions of
Section 210 hereof, from the Borrower on the Placement Date at a purchase price
equal to the principal amount thereof. In addition, until the purchase price
therefor is received by the Credit Enhancer, Bonds shall not be delivered to the
purchaser of Pledged Bonds and such Pledged Bonds to be so purchased shall
remain Pledged Bonds.
Section 309. Purchase Fund.
(a) The Purchase Fund has not been pledged or assigned under this
Indenture and is not subject to the lien created by this Indenture. Upon receipt
by the Tender Agent of the proceeds of a remarketing of Tendered Bonds (other
than Bonds remarketed to the Issuer, the Borrower or an Affiliated Party of the
Borrower, which will be placed in a separate trust account in the Purchase
Fund), the Tender Agent shall deposit such funds in a segregated escrow account
maintained by the Tender Agent and designated "Undelivered Bond Account" which
funds shall not be invested, and the Tender Agent shall not be liable to the
Issuer or the Borrower for any interest thereon, and any moneys shall be held
and applied as provided herein. The Trustee shall deposit moneys received from
the Credit Enhancer pursuant to a payment on the Credit Facility in accordance
with Section 508(b)(4) or (5) hereof in the Purchase Fund for application to the
Tender Price of the Tendered Bonds. Upon receipt by the Trustee of the proceeds
of the placement of Pledged Bonds on a Placement Date, the Trustee shall deposit
such moneys in the Purchase Fund for payment to the Credit Enhancer to the
extent such Pledged Bonds were purchased out of funds provided by the Credit
Facility and not reimbursed to the Credit Enhancer by the Borrower and,
thereafter, to the Borrower. Moneys from the remarketing of Tendered Bonds to
the Issuer, the Borrower or an Affiliated Party of the Borrower, shall be
applied solely to the purchase price of Pledged Bonds.
(b) On any Tender Date or Placement Date, the Trustee shall transfer on
the Bond Register ownership of all of the Tendered Bonds to the names of the
respective purchasers thereof. From and after such date, the principal of,
redemption premium, if any, and interest on such Bonds shall be payable solely
to such purchasers, their transferees or the successors thereto. The Owners of
Tendered Bonds immediately prior to a Tender Date with respect to which a Notice
of Election to Tender Bonds has been given pursuant to Section 301 hereof or a
Notice of Election to Retain Bonds has not been given pursuant to Section 302
hereof shall be entitled solely to payment of the Tender Price for such Bonds
upon delivery thereof to the Tender Agent as herein provided and shall not be
entitled to the payment of any principal, redemption premium, if any, or
interest thereon thereafter.
Section 310. No Sales After Certain Defaults. Notwithstanding any
provision of this Indenture to the contrary, there shall be no sales of Bonds
pursuant to this Article III if there shall have occurred and be continuing an
Event of Default described in Section 801(a), (b), (c), (e) or (g) (except, with
respect to paragraph (g), a default under Section 801(d) or (f) of the Series
1994A Indenture) hereof. The Trustee shall give Immediate Notice to the Paying
Agent, the Remarketing Agent, the Tender Agent, the Credit Enhancer, the
Borrower and the Bondowners of (i) the occurrence and continuation of any of the
events set forth in the preceding sentence and that such event results in no
purchase or sales of Bonds being permitted pursuant to this Article III
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and (ii) the curing of any of such events and that in consequence purchases and
sales are again permitted pursuant to this Article III.
Section 311. Remarketing Agent. The Issuer, upon instructions from the
Borrower, with the written consent of the Credit Enhancer, or upon instructions
from the Credit Enhancer if an event of default under the Letter of Credit
Agreement exists, shall appoint the Remarketing Agent for the Bonds, subject to
the conditions set forth in Section 312 hereof. The Issuer hereby appoints Stern
Brothers & Co. as the initial Remarketing Agent. The Remarketing Agent shall
designate to the Trustee its principal office and signify its acceptance of the
duties and obligations imposed upon it hereunder by a written instrument of
acceptance or a remarketing agent agreement delivered to the Issuer, the
Borrower and the Credit Enhancer under which the Remarketing Agent will also
agree to keep such books and records as shall be consistent with prudent
industry practice and to make such books and records available for inspection by
the Issuer, the Trustee, the Tender Agent, the Borrower and the Credit Enhancer
at all reasonable times. The Borrower and the Remarketing Agent shall enter into
a Remarketing Agreement the terms of which shall be subject to the written
approval of the Credit Enhancer.
Section 312. Qualifications of Remarketing Agent. The Remarketing Agent
shall be a member of the National Association of Securities Dealers, Inc. and
shall meet such capitalization and/or credit requirements as are acceptable to
the Rating Agency, and authorized by law to perform all the duties imposed upon
it by this Indenture. The Remarketing Agent may at any time resign and be
discharged of the duties and obligations created by this Indenture by giving at
least 30 days' written notice to the Issuer, the Borrower, the Tender Agent, the
Trustee and the Credit Enhancer. The Remarketing Agent may be removed at any
time, without cause, upon at least 30 days' written notice to the Remarketing
Agent, at the direction of the Credit Enhancer or the Borrower by an instrument
signed by an Authorized Borrower Representative, with the written consent of the
Credit Enhancer, filed with the Trustee, the Credit Enhancer, the Tender Agent,
the Issuer and the Remarketing Agent. In no event shall the resignation or
removal of the Remarketing Agent be effective until a qualified successor has
accepted appointment as such.
In the event of the resignation or removal of the Remarketing Agent, the
Remarketing Agent shall pay over, assign and deliver any moneys and Bonds held
by it in such capacity to its successor. In the event that the Issuer shall fail
to appoint a replacement Remarketing Agent hereunder, the Credit Enhancer with
the written consent of the Borrower, or the Borrower with the written consent of
the Credit Enhancer, may do so.
[End of Article III]
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ARTICLE IV
REDEMPTION OF BONDS
Section 401. Optional Redemption.
(a) Optional Redemption of Bonds Not in Multiyear Mode. Bonds (other than
Bonds in a Multiyear Mode) shall be subject to redemption and payment prior to
maturity, at the option of the Issuer upon instructions from the Borrower with
the prior written consent of the Credit Enhancer, on any Interest Payment Date,
in whole or in part in Authorized Denominations, at the principal amount thereof
plus accrued interest to the redemption date, first, from proceeds of a payment
under the Credit Facility and, second, from other Available Moneys.
(b) Optional Redemption of Bonds in Multiyear Mode. The Bonds in a
Multiyear Mode shall be subject to redemption and payment prior to maturity, at
the option of the Issuer upon instructions from the Borrower with the prior
written consent of the Credit Enhancer, on any Interest Payment Date, in whole
or in part in Authorized Denominations, at the redemption prices (expressed as
percentages of the principal amount) set forth below, plus accrued interest to
the redemption date, first, from proceeds of a payment under the Credit Facility
and, second, from other Available Moneys as follows:
OPTIONAL REDEMPTION IN MULTIYEAR MODE
Length of Redemption Prices
Multiyear Mode as a Percentage of Call Protection
(In Years)* Principal Amounts Period*
- -------------- ------------------ ---------------
Greater than 10 102% after 7 years 7 years
declining 1/2% per 12
months to 100%
Less than or equal 102% after 4 years 4 years
to 10 and greater declining 1/2% per 12
than 7 months to 100%
Less than or equal 102% after 3 years 3 years
to 7 and greater declining 1% per 12
than 5 months to 100%
Less than or equal 101% after 2 years 2 years
to 5 and greater declining 1/2% per 6
than 2 months to 100%
Less than or equal 100 1/2% after 1 year 1 year
to 2 and greater declining 1/2% per 6
than 1 months to 100%
- ----------
* Measured from and including the
first day of such Rate Period.
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<PAGE>
(c) Any provision herein to the contrary notwithstanding, no notice of the
redemption of Bonds pursuant to this Section 401 shall be given unless
sufficient Available Moneys are available and have been irrevocably deposited
into the Available Moneys Account or the Credit Facility Account of the Revenue
Fund with the Trustee, or if the Credit Enhancer commits to make a payment under
the Credit Facility to the Trustee pursuant to Section 508(b)(3) hereof.
Section 402. Mandatory and Extraordinary Redemption.
(a) [Reserved.]
(b) [Reserved.]
(c) Redemption Upon Letter of Credit Agreement Default. The Bonds shall be
subject to immediate mandatory redemption by the Issuer in whole in the event
the Trustee shall receive from the Credit Enhancer written notice of the
occurrence of an event of default under the Letter of Credit Agreement and
direction to accelerate the Bonds and irrevocable instructions to obtain a
payment under the Credit Facility in accordance with the terms of the Credit
Facility, first, from proceeds of a payment under the Credit Facility and,
second, from other Available Moneys at the principal amount thereof, without
premium, plus accrued interest to the date of redemption, and the Bonds shall
cease to bear interest on such date, which shall be a Business Day that is at
least three and no more than ten calendar days after receipt by the Trustee of
said notice; provided that pursuant to Section 802(b) hereof the Credit Enhancer
may direct the purchase of Bonds in such event in lieu of mandatory redemption.
The receipt of such notice shall be conclusive and binding upon the Trustee, the
Issuer and the Bondholders as to the occurrence of a default under the Letter of
Credit Agreement.
(d) Redemption in Event of Condemnation, Deficiency of Title, Fire or
Other Casualty. The Bonds shall be subject to redemption by the Issuer, at the
option of and upon instructions from the Borrower with the prior written consent
of the Credit Enhancer, in whole or in part at any time on the earliest
practicable date for which notice can be given, upon the occurrence of a
condemnation, loss of Title or casualty loss to the "Project" as defined in the
Series 1994A Indenture, first, from proceeds of a payment under the Credit
Facility, and second, from other Available Moneys at the principal amount
thereof, without premium, plus accrued interest to the redemption date.
(e) [Reserved.)
(f) Redemption from Excess Moneys in Project Fund. The Bonds are subject
to mandatory redemption in part on the earliest practicable date after the
Completion Date for the Project as certified by the Borrower in accordance with
the Agreement, to the extent of excess moneys remaining in the Project Fund, at
the principal amount thereof, without premium, plus accrued interest to the
redemption date. If the amount of moneys remaining in the Project Fund is not
sufficient to redeem an Authorized Denomination of Bonds, the Borrower shall
arrange for the deposit with the Trustee of sufficient Available Moneys to
effect the redemption of a minimum Authorized Denomination of Bonds.
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<PAGE>
Section 403. Selection of Bonds to be Redeemed.
(a) Bonds shall be redeemed pursuant to Sections 401 and 402 only in
Authorized Denominations. When less than all of the Outstanding Bonds are to be
redeemed and paid prior to maturity pursuant to Section 401 or 402 hereof, such
Bonds or portions of Bonds to be redeemed shall be selected by the Trustee by
lot in Authorized Denominations in such equitable manner as it may determine;
provided that Bonds shall be redeemed in the following order of priority: (1)
Pledged Bonds; (2) Tendered Bonds that cannot be remarketed; and (3) any other
Bonds.
(b) In the case of a partial redemption of Bonds when Bonds of
denominations greater than the applicable Authorized Denominations are then
Outstanding, then for all purposes in connection with such redemption each unit
of face value of the applicable Authorized Denomination shall be treated as
though it was a separate Bond of the applicable Authorized Denomination. If one
or more, but not all, of the units of principal amount of the applicable
Authorized Denomination represented by any Bond are selected for redemption,
then upon notice of intention to redeem such unit or units, the Owner of such
Bond or such Owner's attorney or legal representative shall forthwith present
and surrender such Bond to the Trustee (i) for payment of the redemption price
(including the redemption premium, if any, and interest to the date fixed for
redemption) of the unit or units of principal amount called for redemption, and
(ii) for exchange, without charge to the Owner thereof, for a new Bond or Bonds
of the aggregate principal amount of the unredeemed portion of the principal
amount of such Bond. If the Owner of any such Bond of a denomination greater
than the applicable Authorized Denominations shall fail to present such Bond to
the Trustee for payment and exchange as aforesaid, said Bond shall,
nevertheless, become due and payable on the redemption date to the extent of the
unit or units of principal amount called for redemption and shall cease to
accrue interest on such amount.
(c) No Bond may be redeemed in part if the principal amount thereof to
remain outstanding following such partial redemption is not itself an Authorized
Denomination.
Section 404. Notice of Redemption of Bonds in Weekly or Monthly Mode.
Notice of the call of Bonds in the Weekly Mode or the Monthly Mode for any
redemption identifying the Bonds or portions thereof to be redeemed shall be
given by the Trustee, in the name of the Issuer, to the Remarketing Agent, the
Credit Enhancer, the Borrower and the Owner of each Bond to be redeemed at the
address shown on the Bond Register by mailing a copy of the redemption notice by
first-class mail, postage prepaid, at least 15 days and not more than 30 days
prior to the redemption date; provided, however, that failure to give such
notice by mailing as aforesaid to any Bondowner or any defect therein as to any
particular Bond shall not affect the validity of any proceedings for the
redemption of any other Bonds; and provided further that no such prior notice of
redemption is required for a redemption pursuant to Section 402(c) hereof. As
provided in Section 405 hereof, any notice of redemption shall state the date
and place of redemption, the numbers of the Bonds or portions of Bonds to be
redeemed (and in the case of the redemption of a portion of any Bond the
principal amount thereof being redeemed), the redemption prices and that
interest will cease to accrue from and after the redemption date. Following each
redemption of Bonds, the Trustee shall mail by first-class mail to the Borrower
and the Credit Enhancer a notice of the principal amount of Bonds redeemed.
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<PAGE>
Section 405. Notice of Redemption of Bonds in Semiannual. Annual or
Multiyear Mode.
(a) Unless waived by any Owner of Bonds to be redeemed, official notice of
any redemption of Bonds in a Semiannual, Annual or Multiyear Mode shall be given
by the Trustee on behalf of the Issuer by mailing a copy of an official
redemption notice by first class mail, postage prepaid, at least 15 days and not
more than 30 days prior to the redemption date to the Remarketing Agent, the
Credit Enhancer and the Owner of the Bond or Bonds to be redeemed at the address
shown on the Bond Register or at such other address as is furnished in writing
by such Owner to the Trustee; provided, however, that failure to give such
notice by mailing as aforesaid to any Bondowner or any defect therein as to any
particular Bond shall not affect the validity of any proceedings for the
redemption of any other Bonds; and provided further that no such prior notice of
redemption is required for a redemption pursuant to Section 402(c) hereof. The
Trustee shall not give the notice described above with respect to redemption of
the Bonds pursuant to Section 401 (a) or (b) or Section 402(d) hereof without
the prior written consent of the Credit Enhancer.
(b) All official notices of redemption pursuant to this Section and
Section 404 hereof shall be dated and shall state:
(1) the redemption date,
(2) the redemption price,
(3) if less than all outstanding Bonds are to be redeemed, the
identification (and, in the case of partial redemption, the respective
principal amounts) of the Bonds to be redeemed,
(4) that on the redemption date the redemption price will become due
and payable upon each such Bond or portion thereof called for redemption,
and that interest thereon shall cease to accrue from and after said date,
and
(5) the place where such Bonds are to be surrendered for payment of
the redemption price, which place of payment shall be the Principal Office
of the Trustee.
(c) In addition to the foregoing notice, further notice pursuant to this
Section and Section 404 hereof shall be given by the Trustee on behalf of the
Issuer as set out below, but no defect in said further notice nor any failure to
give all or any portion of such further notice shall in any manner defeat the
effectiveness of a call for redemption if notice thereof is given as above
prescribed.
(1) Each further notice of redemption given hereunder shall contain
the information required above for an official notice of redemption plus
(i) the CUSIP numbers of all Bonds being redeemed; (ii) the date of issue
of the Bonds as originally issued; (iii) the rate of interest borne by
each Bond being redeemed; (iv) the maturity date of each Bond being
redeemed; and (v) any other descriptive information needed to identify
accurately the Bonds being redeemed.
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(2) Each further notice of redemption shall be sent at least 35 days
before the redemption date by registered or certified mail or overnight
delivery service to Depository Trust Company, Midwest Securities Trust
Company, Pacific Securities Depository Trust Company and Philadelphia
Depository Trust Company and to one or more national information services
that disseminate notices of redemption of obligations such as the Bonds.
(d) With respect to all Bonds redeemed pursuant to this Indenture, upon
the payment of the redemption price of Bonds being redeemed, each check or other
transfer of funds issued for such purpose shall bear the CUSIP number
identifying, by issue and maturity, the Bonds being redeemed with the proceeds
of such check or other transfer.
(e) With respect to all Bonds redeemed pursuant to this Indenture,
following each redemption of Bonds, the Trustee shall mail by first-class mail
to the Credit Enhancer and the Borrower a notice of the principal amount of
Bonds redeemed.
Section 406. Effect of Call for Redemption. On or prior to the date fixed
for redemption, Available Moneys available solely for such redemption in
accordance with the requirements of Sections 401 and 402 hereof shall be
deposited with the Trustee to pay the principal of the Bonds called for
redemption and accrued interest thereon to the redemption date and the
redemption premium, if any, thereon. Upon the happening of the above conditions,
and notice having been given as provided in Section 404 or 405 hereof, as
applicable, the Bonds or the portions of the principal amount of Bonds thus
called for redemption shall cease to bear interest on the specified redemption
date, provided moneys (which must be Available Moneys when required by Section
401 or 402 hereof) sufficient for the payment of the redemption price of the
Bonds called for redemption are on deposit at the place of payment at the time
fixed for such redemption, and shall no longer be entitled to the protection,
benefit or security of this Indenture and shall not be deemed to be Outstanding
under the provisions of this Indenture.
[End of Article IV]
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ARTICLE V
REVENUES AND FUNDS
Section 501. Creation of Funds and Accounts. The following Funds and
Accounts of the Issuer are hereby created and established with the Trustee:
(a) the Project Fund;
(b) the Costs of Issuance Fund;
(c) the Revenue Fund, consisting of the Unavailable Moneys Account, the
Available Moneys Account and the Credit Facility Account;
(d) the Debt Service Fund, consisting of the Interest Account, the
Principal Account and the Redemption Account;
(e) the General Fund; and
(f) the Purchase Fund and the Undelivered Bond Account therein.
Each Fund and Account shall be maintained by the Trustee as a separate and
distinct trust fund or account to be held, managed, invested, disbursed and
administered as provided in this Indenture. All moneys deposited in the Funds
and Accounts shall be used solely for the purposes set forth in this Indenture.
The Trustee shall keep and maintain adequate records pertaining to each Fund and
Account and all disbursements therefrom.
Section 502. Initial Deposits. On the Bond Issuance Date, as shall be more
fully specified in a written request from the Issuer, the Trustee shall deposit
$2,976,168 from the proceeds received from the sale of the Bonds into the
Project Fund and $23,832 to the Costs of Issuance Fund.
Section 503. Project Fund.
(i) Moneys in the Project Fund shall be disbursed in accordance with
the provisions of the Agreement to provide working capital for the
Borrower as provided in the Agreement.
(ii) The Trustee shall cause to be kept and maintained adequate
records pertaining to the Project Fund and all disbursements from such
Fund. If requested by the Issuer, the Credit Enhancer or the Borrower, the
Trustee shall file copies of the records pertaining to the Project Fund
and all disbursements from such fund with the Issuer, the Credit. Enhancer
and the Borrower.
Section 504. Costs of Issuance Fund. The Trustee shall deposit into the
Costs of Issuance Fund the amount required by Section 502. Moneys in the Costs
of Issuance Fund shall be disbursed from time to time for the payment of the
costs of issuing the Bonds upon the direction of the
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Borrower as evidenced by a requisition in the form of Exhibit B to the Agreement
executed by an Authorized Borrower Representative and approved by the Credit
Enhancer. Moneys in the Costs of Issuance Fund shall be expended no later than
180 days after the Bond Issuance Date. Any moneys remaining therein on such date
shall be transferred to the General Fund and the Costs of Issuance Fund shall be
closed.
Section 505. Revenue Fund.
(a) The Trustee shall deposit into the Revenue Fund all Revenues (except
as otherwise provided in Section 509 hereof) and any other amounts received by
the Trustee which are subject to the lien and pledge of this Indenture, to the
extent not required to be deposited in other Funds and Accounts in accordance
with the terms of this Indenture. The Trustee shall first apply those moneys on
deposit in the Credit Facility Account which represent payments received with
respect to the Credit Facility and any earnings thereon and then, if needed,
investment earnings on Funds and Accounts (to the extent such moneys constitute
Available Moneys) on each Interest Payment Date and Principal Payment Date on
the Bonds, in the order of priority and for the purposes as follows:
(1) First, to the Interest Account of the Debt Service Fund, an
amount sufficient to pay the interest becoming due and payable on the
Bonds on such date;
(2) Second, to the Principal Account of the Debt Service Fund, an
amount sufficient to pay the principal of the Bonds maturing on such date,
if any; and
(3) Third, to the Redemption Account of the Debt Service Fund, the
balance of such moneys.
(b) Moneys in the Credit Facility Account remaining after the transfers
made pursuant to paragraph (a) above shall be returned to the Credit Enhancer as
a reimbursement of the amounts paid under the Credit Facility.
(c) The Trustee shall deposit into the Unavailable Moneys Account
principal, interest and premium payments made by the Borrower pursuant to
Section 3.6(a)(i), (ii), (iii) and (iv) of the Loan Agreement. Upon the Credit
Enhancer's payment to the Trustee under the Credit Facility pursuant to a
request under Section 508(b) (1), (2) or (3) hereof, the Trustee shall transfer
to the Credit Enhancer the amount on deposit in the Unavailable Moneys Account.
In the event of an Event of Default described in paragraphs (a), (b), (c), (e)
or (g) (except with respect to paragraph (g), a default under Section 801(d) or
(f) of the Series 1994A Indenture) of Section 801 hereof, any moneys on deposit
in the Unavailable Moneys Account which constitute Available Moneys shall be
transferred to the Available Moneys Account and applied in accordance with this
Indenture.
(d) The Trustee shall also deposit into the Unavailable Moneys Account
moneys to be applied to the purchase of Bonds pursuant to Section 307 hereof or
the redemption of Bonds, as provided in this Section, pursuant to Sections 401
and 402. When moneys deposited pursuant to the preceding sentence shall become
Available Moneys, such Available Moneys shall be transferred to the Available
Moneys Account. Moneys on deposit in the Available Moneys Account to be applied
to the payment of the Bonds at maturity shall be transferred to the Principal
Account on
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the maturity date to pay the principal of the Bonds and to the Interest Account
to pay accrued interest. Moneys on deposit in the Available Moneys Account to be
applied to the redemption of Bonds pursuant to Sections 401 and 402 shall be
transferred to the Redemption Account on the date fixed for such redemption to
the extent necessary to pay the premium, if any, on and principal of the Bonds
as the same shall become due and payable by such redemption and to the Interest
Account to pay accrued interest. Available Moneys on deposit in the Available
Moneys Account, to be applied to the purchase of Bonds pursuant to Section 307,
shall be transferred to the Purchase Fund on the Tender Date to the extent
necessary to pay the Tender Price of the Bonds as the same shall become due and
payable on such Tender Date. Any moneys remaining in the Available Moneys
Account following the redemption or purchase of Bonds with respect to which such
deposit was made shall first be applied to pay the Credit Enhancer any amounts
due and payable under the Letter of Credit Agreement and thereafter shall be
transferred to the General Fund.
Section 506. Debt Service Fund.
(a) The Trustee shall deposit into the Interest Account the amounts
required by Section 505 of this Indenture. Moneys on deposit in the Interest
Account shall be applied solely to pay the interest on the Bonds as the same
becomes due and payable. On each date fixed for redemption of the Bonds and on
each scheduled Interest Payment Date on the Bonds, the Trustee shall remit to
the respective Bondowners of such Bonds an amount from the Interest Account
sufficient to pay the interest on the Bonds becoming due and payable on such
date.
(b) The Trustee shall deposit into the Principal Account the amounts
required by Section 505 of this Indenture. Moneys on deposit in the Principal
Account shall be applied solely to pay the principal of the Bonds as the same
becomes due and payable at maturity. On each Principal Payment Date of the
Bonds, the Trustee shall set aside and hold in trust an amount from the
Principal Account sufficient to pay the principal of the Bonds becoming due and
payable on such date.
(c) The Trustee shall deposit into the Redemption Account the amounts
required by Section 505 of this Indenture. Moneys on deposit in the Redemption
Account shall be applied solely to pay the principal and premium, if any, on the
Bonds as the same become due and payable by redemption. On each date fixed for
such redemption, the Trustee shall set aside and hold in trust an amount from
the Redemption Account sufficient to pay the principal of and premium, if any,
on the Bonds becoming due and payable on such date.
Section 507. General Fund. The Trustee shall deposit into the General Fund
the amounts required by Sections 504 and 505 and all moneys deposited by the
Borrower with the Trustee as payment of the fees and expenses of the Trustee,
any Paying Agent, the Issuer and the Remarketing Agent. The Trustee shall apply
moneys on deposit in the General Fund solely for the following purposes, in the
following order of priority and in accordance with the following conditions:
(a) first, to the Trustee for the reasonable cost of ordinary expenses
incurred and ordinary services rendered, and to the Issuer for its actual
expenses incurred in connection with the administration of the Bond financing
for the Project, upon the Trustee's receipt of a statement that the amount
indicated thereon is justly due and owing and has not been the subject of
another written request which has been paid;
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<PAGE>
(b) to the Trustee for the reasonable cost of extraordinary expenses
incurred and extraordinary services rendered if said extraordinary expenses and
extraordinary services are necessary and reasonable and are not occasioned by
the negligence or willful misconduct of the Trustee;
(c) to the Remarketing Agent, an amount equal to any amounts due and
payable under the Remarketing Agreement; and
(d) to the Credit Enhancer, an amount equal to any amounts due and payable
under the Letter of Credit Agreement.
Section 508. Payments Under Credit Facility.
(a) The Credit Facility shall be held by the Trustee. Payments on the
Credit Facility shall be made or requested in accordance with its terms
consistent with the provisions of this Indenture and the Agreement. Payments on
the Credit Facility (other than pursuant to subparagraphs (b)(4) and (5) of this
Section, which amount will be deposited into the Purchase Fund) shall be
deposited in the Credit Facility Account and applied by the Trustee in
accordance with Section 505.
(b) The Trustee shall request payments under the Credit Facility, in
accordance with and to the extent, if any, required by the terms thereof, in the
amounts and at such time as may be necessary to make timely payments of the
principal of and interest, but not premium, on the Bonds required to be made
from the Debt Service Fund. In accordance with the preceding sentence, the
Trustee shall request payments under the Credit Facility by presenting a
conforming request to the Credit Enhancer (to the extent, if any, required by
the terms of the Credit Facility) two (2) Business Days prior to the applicable
Interest Payment Date, Principal Payment Date or redemption date referenced in
subsections (1), (2) and (3) herein, and prior to 11:00 A.M., New York Time, on
the applicable Tender Date referenced in subsections (4) and (5) herein, in
order for moneys to be received in the amounts and at the times as follows:
(1) No later than 3:30 P.M., New York Time, one (1) Business Day
prior to each Interest Payment Date, an amount equal to interest due on
the Bonds on such Interest Payment Date;
(2) No later than 3:30 P.M., New York Time, one (1) Business Day
prior to each Principal Payment Date, an amount equal to the full
principal amount of the Bonds coming due on such Principal Payment Date
because of the maturity of the Bonds;
(3) No later than 3:30 P.M., New York Time, one (1) Business Day
prior to each date fixed for (A) the mandatory redemption of the Bonds
pursuant to Section 402 hereof, other than as provided in Section
508(b)(2) hereof, or (B) the optional redemption of the Bonds pursuant to
Section 401 hereof, in each case an amount which, when added to any
Available Moneys (other than payments under the Credit Facility) in excess
of the amount of the applicable redemption premium and then available for
such purpose, will be equal to the full principal amount plus accrued
interest on the Bonds to be redeemed (other than the amount owing as a
redemption premium, if any);
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<PAGE>
(4) No later than 3:00 P.M., New York Time, on the Tender Date for
any Bonds in accordance with Section 301 hereof, an amount which, when
added to any other Remarketing Proceeds available for such purpose in the
Purchase Fund, is equal to the Tender Price of Bonds for which Notices of
Election to Tender Bonds have been timely received; and
(5) No later than 3:00 P.M., New York Time, on the Tender Date for
any Bonds in accordance with Section 302 hereof, an amount which, when
added to any other Remarketing Proceeds then available for such purpose in
the Purchase Fund, is equal to the Tender Price of all of the Bonds
required to be tendered on such date pursuant to Section 302 and for which
no Notices of Election to Retain Bonds have been received.
(6) Notwithstanding the provisions of this Section 508 pursuant to
Section 802 hereof, the Trustee shall immediately demand payment under the
Credit Facility upon any acceleration of the maturity of the Bonds, or
upon any direction by the Credit Enhancer to the Trustee to purchase the
Bonds for the Credit Enhancer's own account.
(c) No payments shall be made under the Credit Facility for the payment of
the principal of and interest on the Borrower Bonds.
(d) The Borrower shall be permitted to provide the Trustee with an
Alternate Credit Facility in accordance with the requirements of Section 706
hereof and Section 3.9 of the Agreement.
Section 509. [Reserved].
Section 510. Final Balances. Upon the deposit with the Trustee of moneys
sufficient to pay all principal of, premium, if any, and interest on the Bonds,
and upon satisfaction of all clams against the Issuer hereunder, including all
fees, charges and expenses of the Trustee, the Issuer, the Remarketing Agent and
any Paying Agent which are properly due and payable hereunder, or upon the
making of adequate provisions for the payment of such amounts as permitted
hereby, all moneys remaining in all Funds and Accounts, except moneys necessary
to pay principal of, premium, if any, and interest on the Bonds, which moneys
shall be held by the Trustee and (after 5 years) paid to the Credit Enhancer or
the Borrower, as appropriate, pursuant to Section 511 hereof, shall be remitted
first, to the Credit Enhancer to the extent of any amounts remaining unpaid
under any of the Collateral Documents and, second, to the Borrower.
Section 511. Non-Presentment of Bonds. In the event any Bond shall not be
presented for payment when the principal thereof becomes due, either (i) at
maturity or at the date fixed for redemption thereof, or (ii) on the Tender Date
therefor, if moneys sufficient to pay such Bond shall have been deposited in the
Debt Service Fund or, with respect to Bonds becoming due pursuant to clause
(ii), the Purchase Fund or the Undelivered Bond Account held by the Tender Agent
in accordance with Section 309 hereof, all liability of the Issuer to the holder
thereof for the payment of such Bond shall forthwith cease, terminate and be
completely discharged, and thereupon it shall be the duty of the Trustee or the
Tender Agent as applicable to hold such moneys, without liability for interest
thereon, for the benefit of the holder of such Bond who shall thereafter be
restricted
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exclusively to such moneys, for any claim of whatever nature of such holder
under this Indenture or on, or with respect to, said Bond.
Any moneys so deposited with and held by the Trustee not so applied to the
payment of Bonds within five (5) years after the date on which the same shall
have become due shall be paid by the Trustee or the Tender Agent first, to the
Credit Enhancer to the extent of any amounts remaining unpaid under any of the
Collateral Documents and second, to the Borrower, free from the trusts created
by this Indenture. Thereafter, Bondowners shall be entitled to look only to the
Borrower for payment, and then only to the extent of the amount so repaid to the
Credit Enhancer or the Borrower by the Trustee or the Tender Agent. The Credit
Enhancer and the Borrower shall not be liable for any interest on the sums paid
to it pursuant to this Section and shall not be regarded as a trustee of such
money.
[End of Article V]
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ARTICLE VI
DEPOSITARIES OF MONEYS, SECURITY FOR DEPOSITS
AND INVESTMENT OF FUNDS
Section 601. Moneys to be Held in Trust. All moneys deposited with or paid
to the Trustee for the account of any Fund or Account under any provision of
this Indenture, and all moneys deposited with or paid to any Paying Agent under
any provision of this Indenture shall be held by the Trustee or Paying Agent in
trust and shall be applied only in accordance with the provisions of this
Indenture and, until used or applied as herein provided, shall constitute part
of the Trust Estate (except for the Purchase Fund) and be subject to the lien,
terms and provisions hereof and shall not be commingled with any other funds of
the Issuer, the Credit Enhancer or the Borrower except as provided under Section
602 for investment purposes. Neither the Trustee nor any Paying Agent shall be
under any liability for interest on any moneys received hereunder except such as
may be agreed upon.
Section 602. Investment of Moneys.
(a) Moneys in all Funds and Accounts (except the Purchase Fund) shall be
continuously invested and reinvested by the Trustee at the written direction of
the Borrower (with the written consent of the Credit Enhancer) as provided in
this Section 602. Moneys in the Purchase Fund shall not be invested. Moneys on
deposit in all Funds and Accounts may be invested only in Investment Securities;
provided that (1) amounts received under the Credit Facility shall be invested
and reinvested by the Trustee only in Government Securities maturing on the
earlier of 30 days after the date on which such obligations are acquired or such
time or times as said money shall be needed for the purposes for which they were
deposited, and (2) Available Moneys (other than payments under the Credit
Facility) to be applied in accordance with Section 505(d) shall be invested and
reinvested by the Trustee only in Government Securities maturing on the earlier
of 30 days after the date on which such obligations are acquired or such time or
times as said money shall be needed for the purposes for which they were
deposited; and provided, further, that the Borrower's direction to so invest
shall be received by 12:00 noon, New York Time, on the day prior to any such
investment. All such investments shall mature not later, nor, to the extent
reasonably practicable subject to the restrictions above, earlier, than the date
such moneys or investment proceeds are required for the purposes of the
respective Funds and Accounts.
(b) All investments shall constitute a part of the Fund or Account from
which the moneys used to acquire such investments have come. The Trustee shall
sell and reduce to cash a sufficient amount of investments in a Fund or Account
whenever the cash balance therein is insufficient to pay the amounts then
required to be paid therefrom. The Trustee may transfer investments from any
Fund or Account to any other Fund or Account in lieu of cash when required or
permitted by the provisions of this Indenture.
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Section 603. Record Keeping. The Trustee shall maintain records designed
to show compliance with the provisions of this Article and with the provisions
of Article V for at least six (6) years after the payment of the Bonds.
[End of Article VI]
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ARTICLE VII
PARTICULAR COVENANTS AND PROVISIONS
Section 701. Issuer to Issue Bonds and Execute Indenture. The Issuer
covenants that it is duly authorized under the Act to execute and deliver this
Indenture, to issue the Bonds and to pledge and assign the Trust Estate in the
manner and to the extent herein set forth; that all action on its part for the
execution and delivery of this Indenture and the issuance of the Bonds has been
duly and effectively taken; and that the Bonds in the hands of the Owners
thereof are and will be valid and enforceable obligations of the Issuer
according to the import thereof.
Section 702. Performance of Covenants. The Issuer covenants that it will
faithfully perform, or cause to be performed, at all times any and all
covenants, undertakings, stipulations and provisions contained in this
Indenture, in the Bonds and in all proceedings pertaining thereto.
Section 703. Instruments of Further Assurance. The Issuer covenants that
it will do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, such Supplemental Indentures and such further acts,
instruments, financing statements and other documents as the Trustee may
reasonably require for the better assuring, transferring, pledging and assigning
to the Trustee, and granting a security interest unto the Trustee in and to the
Trust Estate and the other property and revenues herein described. The Agreement
and all other documents, instruments or policies of insurance required by the
Trustee shall be delivered to and held by the Trustee.
Section 704. Credit Facility. The Trustee shall hold and maintain the
Credit Facility for the benefit of the Bondowners until the Credit Facility
terminates or expires in accordance with its terms. The Trustee shall diligently
enforce all terms, covenants and conditions of the Credit Facility. If at any
time during the term of the Credit Facility any successor Trustee shall be
appointed and qualified under this Indenture, the resigning or removed Trustee
shall request that the Credit Enhancer transfer the Credit Facility to the
successor Trustee, to the extent such action is necessary, and shall comply with
the applicable provisions of the Credit Facility. If the resigning or removed
Trustee fails to make this request, the successor Trustee shall do so before
accepting appointment. On the Termination Date the Trustee shall immediately
surrender the Credit Facility then in effect to the Credit Enhancer unless an
event of default thereunder shall have occurred and is continuing.
Section 705. Enforcement of Credit Facility. The Trustee, for the benefit
of the Owners of Bonds, subject to the provisions of Section 901(1) hereof,
shall diligently enforce and take all reasonable steps, actions and proceedings
necessary for the enforcement of all terms, covenants and provisions of the
Credit Facility as contemplated herein and therein. The Trustee shall not
consent to or permit any amendment or modification of the Credit Facility which
would materially adversely affect the rights or interests of the Owners of
Bonds.
Any provisions herein requiring notice to or from the Credit Enhancer or
the consent of the Credit Enhancer prior to any action by the Trustee or the
Issuer shall have no force or effect (1) following the later of (i) the
Termination Date and (ii) the repayment of all amounts owed to the Credit
Enhancer pursuant to the Collateral Documents or (2) during any period an event
of default
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<PAGE>
under the Credit Facility shall have occurred and is continuing, except with
respect to all rights accruing to the Credit Enhancer with respect to
unreimbursed draws on the Credit Facility.
Section 706. Alternate Credit Facility. An Alternate Credit Facility, in
substitution for the Credit Facility then in effect, may be provided prior to
any Termination Date if the Borrower shall give written notice not more than 60
nor less than 30 calendar days prior to the Alternate Credit Facility Date to
the Issuer, the Trustee, the Tender Agent, the Remarketing Agent, the Rating
Agency and the Credit Enhancer stating its election to provide an Alternate
Credit Facility. Any such Alternate Credit Facility must be either (a) an
irrevocable direct pay letter of credit, or (b) bond insurance contract, in both
cases constituting an unconditional and irrevocable commitment to pay principal
of and interest on the Bonds. If the Bonds are in any Interest Mode other than a
Multiyear Mode, the Alternate Credit Facility Date must be a Rate Adjustment
Date.
(a) Upon the exercise of such option by the Borrower, in the event the
Bonds are in any Interest Mode other than a Multiyear Mode, the Trustee shall
send to the Bondowners a Notice of Alternate Credit Facility in substantially
the form of Exhibit G not later than 20 calendar days prior to the Alternate
Credit Facility Date. The Trustee shall not accept such Alternate Credit
Facility unless the Trustee shall have received, (1) prior to sending the Notice
of Alternate Credit Facility (i) an Opinion of Bond Counsel stating that the
delivery of such Alternate Credit Facility to the Trustee is authorized under
this Indenture and the Act and complies with the terms hereof, and (ii) a
certificate from an Authorized Borrower Representative and a written
acknowledgment by the Credit Enhancer stating that all amounts owing to the
Credit Enhancer under the Collateral Documents have been paid and that there are
no Pledged Bonds outstanding, and (2) on or before the Alternate Credit Facility
Date a supplemental opinion of Bond Counsel stating that the delivery of the
Alternate Credit Facility is authorized under this Indenture and the Act and
complies with the terms hereof.
(b) Upon the exercise of such option by the Borrower, in the event the
Bonds are in a Multiyear Mode, the Trustee shall send to the Bondowners a Notice
of Alternate Credit Facility in substantially the form of Exhibit G not later
than 20 calendar days prior to the Alternate Credit Facility Date. The Trustee
shall not accept such Alternate Credit Facility unless the Trustee shall have
received, (1) prior to sending the Notice of Alternate Credit Facility (i) an
Opinion of Bond Counsel stating that the delivery of such Alternate Credit
Facility to the Trustee is authorized under this Indenture and the Act, complies
with the terms hereof and will not adversely affect the exclusion of interest on
the Bonds from gross income for federal income tax purposes, (ii) written
evidence from the Rating Agency that the Bonds will be rated no lower than the
then existing ratings on the Bonds by the Rating Agency, and (iii) a certificate
from an Authorized Borrower Representative and a written acknowledgment by the
Credit Enhancer stating that all amounts owing to the Credit Enhancer under the
Collateral Documents have been paid and that there are no Pledged Bonds
outstanding, and (2) on or before the Alternate Credit Facility Date a
supplemental opinion of Bond Counsel stating that the delivery of the Alternate
Credit Facility is authorized under this Indenture and the Act, complies with
the terms hereof and will not adversely affect the exclusion of interest on the
Bonds from gross income for federal income tax purposes.
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Section 707. General Limitation on Issuer Obligations. ANY OTHER TERM OR
PROVISION OF THIS INDENTURE OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION WITH
THE TRANSACTION WHICH IS THE SUBJECT HEREOF TO THE CONTRARY NOTWITHSTANDING, THE
ISSUER SHALL NOT BE REQUIRED TO TAKE OR OMIT TO TAKE, OR REQUIRE ANY OTHER
PERSON OR ENTITY TO TAKE OR OMIT TO TAKE, ANY ACTION WHICH WOULD CAUSE IT OR ANY
PERSON OR ENTITY TO BE, OR RESULT IN IT OR ANY PERSON OR ENTITY BEING, IN
VIOLATION OF ANY LAW OF THE STATE.
Section 708. Recording and Filing. Subject to Section 901(c) hereof, the
Trustee shall use its best efforts to keep and file or cause to be kept and
filed all financing statements related to this Indenture and all supplements
hereto, the Agreement and all supplements thereto, the Credit Facility and all
supplements thereto and such other documents as may be necessary to be kept and
filed in such manner and in such places as may be required by law in order to
preserve and protect fully the security of the Owners and the rights of the
Trustee hereunder. In carrying out its duties under this Section, the Trustee
shall be entitled to rely on an opinion of its counsel specifying what actions
are required to comply with this Section.
Section 709. Possession and Inspection of Books and Documents. The Issuer
and the Trustee covenant and agree that all books and documents in their
possession relating to the Agreement and the Credit Facility and to the
distribution of proceeds thereof shall at all times be open to inspection by
such accountants or other agencies or persons as the Credit Enhancer or the
Borrower may from time to time designate.
Section 710. Rights and Duties Under Agreement and Credit Facility. The
Trustee hereby acknowledges and agrees to the terms, conditions, appointments
and agencies of the Agreement and the Credit Facility as they relate to it and
its participation in the transactions contemplated hereby and thereby. Subject
to the provisions of Section 901(1) hereof, the Trustee shall perform all
obligations and duties of the Issuer under the Agreement (and the Issuer hereby
appoints the Trustee as the Issuer's agent and attorney-in-fact for all such
purposes). The Trustee, as assignee hereunder, in its name or to the extent
permitted by law, in the name of the Issuer, may enforce all rights of the
Issuer but only with the prior written consent of the Credit Enhancer unless the
Credit Enhancer is in default under the Credit Facility) and all obligations of
the Credit Enhancer and the Borrower under the Agreement and the Credit Facility
(and waive the same with the consent of the Credit Enhancer, except for rights
expressly granted to the Borrower) on behalf of the Bondowners whether or not
the Issuer is in default hereunder.
Section 711. Tax Covenants.
(a) The Trustee and the Issuer will not take any action or omit to take
any action or permit any action which is within its control to be taken or
omitted which would to its knowledge impair (i) the applicable exemptions from
taxation in the State with respect to the Bonds or (ii) the excludability from
gross income for federal taxation purposes of interest on the Series 1994A
Bonds.
(b) The Issuer and the Trustee shall at all times do and perform all acts
and things permitted by law and this Indenture which are necessary or desirable
in order to preserve the applicable exemptions from taxation in the State with
respect to the Bonds.
[End of Article VII]
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ARTICLE VIII
DEFAULT AND REMEDIES
Section 801. Events of Default. If any one or more of the following events
occur, it is hereby defined as and declared to be and to constitute an "Event of
Default":
(a) default in the due and punctual payment of any interest on any Bond;
(b) default in the due and punctual payment of the principal of or
redemption premium, if any, on any Bond, whether at the stated maturity or
accelerated maturity thereof, or upon proceedings for redemption thereof or
otherwise;
(c) default in the payment of the Tender Price of any Tendered Bond (the
substance of which must be communicated by Immediate Notice by the Trustee to
the Credit Enhancer, the Borrower and the Issuer);
(d) the occurrence of an event of default under Article VIII of the
Agreement;
(e) the occurrence of either or both of the following:
(i) the Trustee has received written notice from the Credit
Enhancer, within the period provided for in the Credit
Facility, that the Credit Enhancer will not reinstate the
interest portion of the Credit Facility; or
(ii) the Trustee's receipt of written notice from the Credit
Enhancer that an "Event of Default" has occurred under the
Letter of Credit Agreement together with a direction from the
Credit Enhancer to the Trustee requiring either (A) the
acceleration of the Bonds pursuant to Section 802(a) or (B)
the mandatory purchase of the Bonds pursuant to Section 802(b)
hereof;
(f) default in the performance or observance of any other of the
covenants, agreements or conditions on the part of the Issuer in this Indenture
or in the Bonds contained, and the continuance thereof for a period of thirty
(30) days after written notice thereof shall have been given to the Issuer, the
Credit Enhancer and the Borrower by the Trustee, or to the Trustee, the Issuer,
the Credit Enhancer and the Borrower by the Owners of not less than twenty-five
percent (25%) in aggregate principal amount of Bonds then Outstanding; provided,
however, if any default shall be such that it cannot be corrected within such
30-day period, it shall not constitute an Event of Default if corrective action
is instituted by the Issuer or the Borrower within such period and diligently
pursued until the default is corrected; or
(g) the occurrence of an event of default pursuant to Article VIII of the
Series 1994A Trust Indenture.
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The Trustee shall give Immediate Notice of any Event of Default to the Issuer,
the Borrower and the Credit Enhancer as promptly as practicable after the
occurrence of an Event of Default becomes known to the Trustee.
Section 802. Acceleration: Mandatory Purchase.
(a) If an Event of Default described in paragraph (a), (b), (c), (e)(i) or
(g) (except, with respect to paragraph (g), a default under Section 801(d),
(e)(ii) or (f) of the Series 1994A Indenture) of Section 801 hereof shall have
occurred and be continuing, the Trustee shall, by notice in writing delivered to
the Issuer, the Borrower and the Credit Enhancer, declare the principal of all
Bonds then Outstanding and the interest accrued thereon immediately due and
payable, and the Bonds shall cease to bear interest on such date; subject,
however, to subparagraph (b) hereof. The principal and interest shall thereupon
become due and payable on a date established by the Trustee, which date shall
not be more than ten (10) calendar days after such acceleration.
If an Event of Default described in paragraph (e)(ii) or (g) (but, with
respect to paragraph (g), only with respect to a default under Section
803(e)(ii) of the Series 1994A Indenture) of Section 801 hereof shall have
occurred and be continuing, the Trustee shall, by notice in writing delivered to
the Issuer, the Borrower and the Credit Enhancer, declare the principal of all
Bonds then Outstanding and the interest accrued thereon due and payable on such
date as the Trustee shall establish pursuant to Section 402(c) hereof, and the
Bonds shall cease to bear interest on such date; subject, however, to
subparagraph (b) hereof.
If an Event of Default described in paragraph (d), (f) or (g) (but, with
respect to paragraph (g), only with respect to a default under Section 801(d) or
(f) of the Series 1994A Indenture) of Section 801 hereof, shall have occurred
and be continuing, the Trustee may upon the written request of the Owners of not
less than 25% in aggregate principal amount of the Bonds then Outstanding shall,
but only with the prior written consent of the Credit Enhancer (unless the
Credit Enhancer is in default under the Credit Facility in which case no such
consent shall be required), by notice in writing delivered to the Issuer, the
Borrower and the Credit Enhancer declare the principal of all Bonds then
Outstanding and the interest accrued thereon immediately due and payable, and
such principal and interest shall thereupon become and be immediately due and
payable.
Upon any acceleration of the maturity of the Bonds hereunder, the Trustee
shall immediately demand payment under the Credit Facility to the extent
permitted by the terms thereof and pursue the remedies of the Trustee
thereunder.
If, at any time after such declaration, but before the Bonds shall have
matured by their terms, all overdue installments of principal of and interest on
the Bonds, together with the reasonable and proper expenses of the Trustee, and
all other sums then payable by the Issuer under this Indenture shall either be
paid or provision satisfactory to the Trustee shall be made for such payment,
then and in every such case the Trustee shall, but only with the approval of the
Credit Enhancer and the Owners of not less than a majority in aggregate
principal amount of the Bonds Outstanding, and upon the reinstatement of the
Credit Facility, rescind such declaration and annul such default in its
entirety. In such event, the Trustee shall rescind any declaration of
acceleration 6f the Loan Payments as provided in Section 8.2 of the Agreement.
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In case of any rescission, then and in every such case the Issuer, the
Trustee and the Bondowners shall be restored to their former positions, rights
and obligations hereunder, respectively, but no such rescission shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon.
(b) Mandatory Purchase. Upon the occurrence and continuance of an Event of
Default under paragraph (e)(ii) or (g) (but, with respect to paragraph (g), only
with respect to a default under Section 801(e)(ii) of the Series 1994A
Indenture) of Section 801 hereof, as provided in Section 302(d) hereof the
Credit Enhancer in its notice to the Trustee may direct the Trustee to purchase
the Bonds for the Credit Enhancer's own account, rather than to accelerate the
Bonds as provided in Section 802(a) hereof. In such case, the Trustee shall draw
upon the Credit Facility in accordance with the provisions of Section 302 (d)
hereof to pay the purchase price for the Bonds, which shall be an amount equal
to the principal of all Outstanding Bonds and accrued interest thereon to the
Mandatory Purchase Date, and upon receipt of the proceeds of such draw, shall
immediately purchase the Bonds in accordance with Section 302 hereof.
Section 803. Surrender of Possession of Trust Estate: Rights and Duties of
Trustee in Possession. If an Event of Default shall have occurred and be
continuing, the Issuer, upon demand of the Trustee, shall forthwith surrender
the possession of, and it shall be lawful for the Trustee, by such officer or
agent as it may appoint, to take possession of all or any part of the Trust
Estate, together with the books, papers and accounts of the Issuer pertaining
thereto, and including the rights and the position of the Issuer under the
Agreement and to hold and manage the same and to collect, receive and sequester
the payments, revenues and receipts derived under the Agreement, and out of the
same and any moneys received from any receiver of any part thereof pay and set
up proper reserves for the payment of all proper costs and expenses of so
taking, holding and managing the same, including (i) reasonable compensation to
the Trustee, its agents and counsel, (ii) any reasonable charges of the Trustee
hereunder, and (iii) any taxes and assessments, and other charges, prior to the
lien of this Indenture which the Trustee may deem it wise to pay, and the
Trustee shall apply the remainder of the moneys so received in accordance with
Section 808. Whenever all that is due upon the Bonds shall have been paid and
all defaults made good and all payments pursuant to Section 509 hereof have been
made, the Trustee shall surrender possession of the Trust Estate to the Issuer,
its successors or assigns, the same right of entry, however, to exist upon any
subsequent Event of Default, subject to the provisions of Article V hereof.
While the Credit Facility is in force and effect, if no Bonds are outstanding,
the Trustee and the Issuer have been fully recompensed for all their costs and
expenses, the Credit Enhancer is not in default under the Credit Facility, and
any amounts remain unreimbursed with respect thereto, the Issuer shall
thereafter transfer possession of the Trust Estate to the Credit Enhancer.
While in possession of the Trust Estate, the Trustee shall render annually
(or more often if requested in writing) to the Issuer, the Borrower and the
Credit Enhancer a summarized statement of receipts and expenditures in
connection therewith.
Section 804. Appointment of Receivers in Event of Default. If an Event of
Default shall have occurred and be continuing, and upon the filing of a suit or
other commencement of judicial proceedings to enforce the rights of the Trustee
and of the Bondowners under this Indenture, the Trustee shall be entitled, with
the approval of the Credit Enhancer if the Credit Enhancer is not in
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default under the Credit Facility, as a matter of right, to the appointment of a
receiver or receivers of the Trust Estate and of the earnings, income, products
and profits thereof, pending such proceedings, with such powers as the court
making such appointment shall confer.
Section 805. Exercise of Remedies by the Trustee. If an Event of Default
shall have occurred and be continuing, the Trustee may, with the approval of the
Credit Enhancer if the Credit Enhancer is not in default under the Credit
Facility, pursue any available remedy at law or equity by suit, action, mandamus
or other proceeding to enforce the payment of the principal of and redemption
premium, if any, and interest on the Bonds then Outstanding, and to enforce and
compel the performance of the duties and obligations of the Issuer as herein set
forth.
If an Event of Default shall have occurred and be continuing, and if
requested so to do by the Credit Enhancer or by the Owners of not less than 25%
in aggregate principal amount of the Bonds then Outstanding and indemnified as
provided in paragraph (1) of Section 901 with the approval of the Credit
Enhancer if the Credit Enhancer is not in default under the Credit Facility, the
Trustee shall be obligated to exercise such one or more of the rights and powers
conferred by this Article as the Trustee, being advised by counsel, shall deem
most expedient in the interests of the Bondowners.
All rights of action under this Indenture or under any of the Bonds may be
enforced by the Trustee without the possession of any of the Bonds or the
production thereof in any trial or other proceedings relating thereto, and any
such suit or proceeding instituted by the Trustee shall be brought in its name
as Trustee without the necessity of joining as plaintiffs or defendants any
Bondowner, and any recovery or judgment shall, subject to Section 808 be for the
equal benefit of all the Owners of the Outstanding Bonds.
Section 806. Limitation on Exercise of Remedies by Bondowners. No
Bondowner shall have any right to institute any suit, action or proceeding in
equity or at law for the enforcement of this Indenture or for the execution of
any trust hereunder or for the appointment of a receiver or any other remedy
hereunder, unless:
(1) a default has occurred of which the Trustee has notice or is
deemed to have notice as provided in subparagraph (h) of Section 901, and
(2) such default shall have become an Event of Default, and
(3) the Owners of not less than 25% in aggregate principal amount of
the Bonds then Outstanding or the Credit Enhancer (with respect to an
Event of Default described in paragraph (e) or (g) (but, with respect to
paragraph (g), only with respect to a default under Section 801(e) of the
Series 1994A Indenture) of Section 801 hereof) shall have made written
request to the Trustee, shall have offered it reasonable opportunity
either to proceed to exercise the powers hereinbefore granted or to
institute such action, suit or proceeding in its own name, and shall have
provided to the Trustee indemnity as provided in subparagraph (1) of
Section 901 and
(4) the Trustee shall thereafter fail or refuse to exercise the
powers herein granted or to institute such action, suit or proceeding in
its own name, and
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(5) the Credit Enhancer shall have consented thereto if the Credit
Enhancer is not in default under the Credit Facility;
and such notification, request and indemnity are hereby declared in every case,
at the option of the Trustee (with the exception of any duty to make demand on,
and proceed under, the Credit Facility, cause an acceleration of the Bonds or
make payments when due), to be conditions precedent to the execution of the
powers and trusts of this Indenture, and to any action or cause of action for
the enforcement of this Indenture, or for the appointment of a receiver or for
any other remedy hereunder, it being understood and intended that no one or more
Bondowners shall have any right in any manner whatsoever to affect, disturb or
prejudice this Indenture by such Bondowners action or to enforce any right
hereunder except in the manner herein provided, and that all proceedings at law
or in equity shall be instituted, had and maintained in the manner herein
provided and for the equal benefit of the Owners of all Bonds then Outstanding.
Nothing in this Indenture, however, shall affect or impair the right of any
Bondowner to payment of the principal of, redemption premium, if any, and
interest on any Bond at and after its maturity or the obligation of the Issuer
to pay the principal of, and redemption premium, if any, and interest on each of
the Bonds to the respective Owners thereof at the time and place, from the
source and in the manner herein and in such Bond expressed.
Section 807. Right of Bondowners to Direct Proceeding. Any other provision
herein to the contrary notwithstanding, the Owners of a majority in aggregate
principal amount of the Bonds then Outstanding shall have the right, at any
time, with the approval of the Credit Enhancer if the Credit Enhancer is not in
default under the Credit Facility, by an instrument or instruments in writing
executed and delivered to the Trustee, to direct the time, method and place of
conducting all proceedings to be taken in connection with the enforcement of
this Indenture, or for the appointment of a receiver or any other proceedings
hereunder; provided that the Trustee shall have been provided indemnity
satisfactory to it in accordance with Section 901(1) hereof and provided that
such direction shall not be otherwise than in accordance with the provisions of
law and of this Indenture, and provided, further, that the Trustee shall have
the right to decline to follow any such direction if the Trustee in good faith
shall determine that the proceeding so directed would involve it in personal
liability.
Section 808. Application of Moneys in Event of Default. Upon an Event of
Default all moneys held or received by the Trustee pursuant to this Indenture,
the Agreement or the Credit Facility or pursuant to any right given or action
taken under this Article shall, after payment of the reasonable costs and
expenses of the proceedings resulting in the collection of such moneys, be
deposited in the Debt Service Fund (provided, however, Available Moneys shall be
used only for payment of principal or interest on the Bonds) and all moneys so
deposited in the Debt Service Fund shall be applied as follows:
(a) If the principal of all the Bonds shall not have become or shall not
have been declared due and payable, all such moneys shall be applied:
First -- To the payment to the persons entitled thereto of all
installments of interest then due and payable on the Bonds, other than the
Borrower Bonds, in the order in which such installments of interest became
due and payable, with interest thereon at the rate or rates specified in
the respective Bonds to the extent permitted by law, and, if the amount
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available shall not be sufficient to pay in full any particular
installment, then to the payment ratably, according to the amounts due on
such installment, to the persons entitled thereto, without any
discrimination or privilege;
Second -- To the payment to the persons entitled thereto of the
unpaid principal of and redemption premium, if any, on any of the Bonds,
other than Borrower Bonds, that shall have become due and payable (other
than Bonds called for redemption for the payment of which moneys or
securities are held pursuant to this Indenture), in the order of their due
date, with interest on such principal and redemption premium, if any, at
the rate or rates specified in the respective Bonds from the respective
dates upon which they became due and payable, and, if the amount available
shall not be sufficient to pay in full such principal and redemption
premium, if any, due on any particular date, together with such interest,
then to the payment ratably, according to the amounts of principal and
redemption premium, if any, due on such date, to the persons entitled
thereto without any discrimination or privilege;
Third -- To the payment to the Credit Enhancer, the unpaid principal
and interest due on the Pledged Bonds;
Fourth -- To the payment of the reasonable expenses, liabilities and
advances incurred or made by the Trustee;
Fifth -- To the Credit Enhancer any amounts due and owing under the
Collateral Documents;
Sixth -- To pay principal and interest on the Borrower Bonds; and
Seventh -- To the Borrower.
(b) If the principal of all the Bonds shall have become due or shall have
been declared due and payable, all such moneys shall be applied to the payment
of the principal, redemption premium, if any, and interest then due and unpaid
on all of the Bonds, with interest on such principal and redemption premium, if
any, and, to the extent permitted by law, on such interest, at the rate or rates
specified in the respective Bonds, without preference or priority of principal,
redemption premium or interest over principal, redemption premium or interest or
of any installment of interest over any other installment of interest or of any
Bond over any other Bond, ratably, according to, the amounts due respectively
for principal, redemption premium, if any, and interest, to the persons entitled
thereto, without any discrimination or privilege; provided however principal of
and interest on Borrower Bonds shall only be paid after the amounts due the
Credit Enhancer under the Related Documents shall have been paid in full.
(c) If the principal of all the Bonds shall have been declared due and
payable, and if such declaration shall thereafter have been rescinded and
annulled under this Article then, subject to paragraph (b) of this Section, in
the event that the principal of all the Bonds shall later become due or be
declared due and payable, the moneys shall be applied in accordance with
paragraph (a) of this Section.
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<PAGE>
Whenever moneys are to be applied pursuant to this Section, such moneys
shall be applied at such times and from time to time as the Trustee shall
determine, having due regard to the amount of such moneys available and which
may become available for such application in the future.
Whenever all of the Bonds and interest thereon have been paid under this
Section, and all expenses and charges of the Trustee have been paid, any balance
remaining in the Funds shall be paid first to the Credit Enhancer and second to
the Borrower as provided in Section 510.
Section 809. Remedies Cumulative. No remedy conferred by this Indenture
upon or reserved to the Trustee, to the Credit Enhancer or to the Bondowners is
intended to be exclusive of any other remedy, but each and every such remedy
shall be cumulative and shall be in addition to any other remedy given to the
Trustee, to the Credit Enhancer or to the Bondowners hereunder or now or
hereafter existing at law or in equity or by statute.
Section 810. Delay or Omission Not Waiver. No delay or omission to
exercise any right, power or remedy accruing upon any Event of Default shall
impair any such right, power or remedy or shall be construed to be a waiver of
any such Event of Default or acquiescence therein, and every such right, power
or remedy may be exercised from time to time and as often as may be deemed
expedient.
Section 811. Effect of Discontinuance of Proceeding. In case the Trustee
shall have proceeded to enforce any right under this Indenture by the
appointment of a receiver, by entry, or otherwise, and such proceedings shall
have been discontinued or abandoned for any reason, or shall have been
determined adversely, then and in every such case the Issuer, the Borrower, the
Trustee, the Credit Enhancer and the Bondowners shall, with the written consent
of the Credit Enhancer, be restored to their former positions and rights
hereunder, and all rights, remedies and powers of the Trustee shall continue as
if no such proceedings had been taken.
Section 812. Waivers of Events of Default. The Trustee shall waive any
Event of Default and its consequences and rescind any declaration of maturity of
principal upon the written request of the Owners of a majority in aggregate
principal amount of the Bonds then Outstanding; provided that there shall not be
waived without the written consent of the Owners of all the Bonds Outstanding
(a) any Event of Default in the payment of the principal of any Outstanding
Bonds at their maturity, upon the redemption (including as a result of
acceleration) or tender thereof, (b) any Event of Default under Section 801(e)
or (g) hereof (but, with respect to paragraph (g), only with respect to a
default under Section 801(e) of the Series 1994A Indenture) unless the Credit
Enhancer shall have given written notice to the Trustee that the Credit Facility
has been reinstated in full, or (c) any Event of Default in the payment when due
of the interest on any such Bonds unless, prior to such waiver or rescission,
all arrears of interest, with interest (to the extent permitted by law) at the
rate borne by the Bonds on overdue installments of interest in respect of which
such default shall have occurred, or all arrears of payments of principal when
due, as the case may be, and all expenses of the Trustee in connection with such
Event of Default shall have been paid or provided for; provided further that
there shall not be waived without the written consent of the Credit Enhancer any
Event of Default under Section 801(e)(ii) or (g) hereof (but, with respect to
paragraph (g), only with respect to a default under Section 801(e)(ii) of the
Series 1994A Indenture); and provided further that no Event of Default shall be
waived without the
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written consent of the Credit Enhancer if it has honored all its obligations
under the Credit Facility. In case of any such waiver or rescission, or in case
any proceeding taken by the Trustee on account of any such Event of Default
shall have been discontinued or abandoned or determined adversely, then and in
every such case the Issuer, the Borrower, the Trustee, the Bondowners and the
Credit Enhancer shall be restored to their former positions, rights and
obligations hereunder, respectively, but no such waiver or rescission shall
extend to any subsequent or other default, or impair any right consequent
thereon.
Section 813. Pledged Bonds. For the purposes of this Article VIII. Pledged
Bonds shall not be deemed Outstanding under this Indenture until the payment in
full of the principal of and interest on all other Bonds or the provision for
the payment thereof shall have been duly made. In the event any vote or consent
of the Bondowners is required hereunder, all Pledged Bonds shall be deemed
Outstanding for such purpose hereunder and the Credit Enhancer shall be deemed
the Owner thereof for purposes of voting or consenting thereto.
[End of Article VIII]
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ARTICLE IX
THE TRUSTEE
Section 901. Acceptance of Trusts. The Trustee hereby accepts the trusts
imposed upon it by this Indenture, and agrees to perform said trusts, but only
upon and subject to the following express terms and conditions:
(a) The Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into this
Indenture against the Trustee. Subject to the limitations on liability of the
Trustee contained in Section 901(l), in case an Event of Default shall have
occurred of which the Trustee is deemed hereunder to have knowledge (and which
has not been cured or waived), the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and shall use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's affairs.
(b) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or through agents, attorneys or
receivers. The Trustee shall be entitled to act upon the opinion or advice of
counsel in the exercise of reasonable care, who may be counsel to the Issuer,
the Credit Enhancer or the Borrower, concerning all matters of trusts hereof and
the duties hereunder, and may in all cases pay such reasonable compensation to
all such agents, attorneys and receivers as may reasonably be employed in
connection with the trusts hereof. The Trustee shall not be responsible for any
loss or damage resulting from any action or nonaction by it taken or omitted to
be taken in good faith in reliance upon such opinion or advice of counsel.
(c) The Trustee shall not be responsible for any recital herein or in the
Bonds (except with respect to the Certificate of Authentication of the Trustee
endorsed on the Bonds), or for the recording or rerecording, filing or refiling
of this Indenture or any security agreements or financing statements in
connection therewith (except with respect to the filing of continuation
statements), or for insuring the Project or collecting any insurance moneys or
taxes, or for the validity of the execution by the Issuer of this Indenture or
of any Supplemental Indentures or instruments of further assurance, or for the
sufficiency of the security for the Bonds. The Trustee shall not be responsible
or liable for any loss suffered in connection with any investment of funds made
by it in accordance with Article VI hereof.
(d) The Trustee shall not be accountable for the use of any Bonds
authenticated and delivered hereunder. The Trustee, in its individual or any
other capacity, may become the Owner or pledgee of Bonds with the same rights
which it would have if it were not Trustee.
(e) The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, affidavit, letter, telegram
or other paper or document provided for under this Indenture believed by it to
be genuine and correct and to have been signed, presented or sent by the proper
person or persons. Any action taken by the Trustee pursuant to and in accordance
with this Indenture upon the request or authority or consent of any person who,
at the time of making such
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request or giving such authority or consent is the Owner of any Bond, shall be
conclusive and binding upon all future Owners of the same Bond and upon Bonds
issued in exchange therefor or upon transfer or in place thereof.
(f) As to the existence or nonexistence of any fact or as to the
sufficiency or validity of any instrument, paper or proceeding, or whenever in
the administration of this Indenture the Trustee shall deem it desirable that a
matter be provided or established prior to taking, suffering or omitting any
action hereunder, the Trustee shall be entitled to rely upon a certificate
signed by an Authorized Issuer Representative as sufficient evidence of the
facts therein contained.
(g) The permissive right of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty, and the Trustee shall not be
answerable for other than its negligence or willful misconduct.
(b) The Trustee shall not be required to take notice or be deemed to have
notice of any Default hereunder except an Event of Default under Section 801(a),
(b), (c), (e) or (g) hereof (but, with respect to paragraph (g), only with
respect to a default under Section 801(a), (b), (c) or (e) of the Series 1994A
Indenture), or failure by the Issuer to cause to be made any of the payments to
the Trustee required to be made in Article V hereof, unless the Trustee shall be
specifically notified in writing of such Default by the Issuer, the Credit
Enhancer or the Owners of at least 25% in aggregate principal amount of all
Bonds then Outstanding. All notices or other instruments required by this
Indenture to be delivered to the Trustee shall be delivered at the Principal
Office of the Trustee, and, in the absence of such notice so delivered, the
Trustee may conclusively assume there is no Default except as aforesaid. The
Trustee shall notify the Credit Enhancer and the Borrower of any Default known
to the Trustee that has not yet become a matured Event of Default.
(i) At any and all reasonable times the Trustee and its duly authorized
agents, attorneys, experts, engineers, accountants and representatives shall
have the right, but shall not be required, to inspect the Project, including all
books, papers and records of the Issuer pertaining to the Project, the loan made
pursuant to the Agreement and the Bonds, and to take such memoranda from and in
regard thereto as may be desired.
(j) The Trustee shall not be required to give any bond or surety in
respect of the execution of its trusts and powers hereunder or otherwise in
respect of the Project.
(k) The Trustee shall have the right, but shall not be required, to
demand, in respect of the authentication of any Bonds, the withdrawal of any
cash, the release of any property, or any action whatsoever within the purview
of this Indenture, any showings, certificates, opinions, appraisals or other
information, or corporate or partnership action or evidence thereof, in addition
to that by the terms hereof required, as a condition of such action by the
Trustee as are deemed desirable for the purpose of establishing the right of the
Issuer to the authentication of any Bonds, the withdrawal of any cash, the
release of any property or the taking of any other action by the Trustee.
(l) Before taking any action under this Indenture, the Trustee may require
that satisfactory indemnity be furnished to it for the reimbursement of all
costs and expenses to which it may be put and to protect it against all
liability, except liability which is adjudicated to have
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resulted from its negligence or willful misconduct by reason of any action so
taken. Notwithstanding the foregoing, the Trustee shall be required, without
indemnity, to make drawings on the Credit Facility, to pay the principal and
purchase price of, and premium, if any and interest on the Bonds from moneys
available in the Funds and Accounts hereunder, to accelerate the maturity of the
Bonds pursuant to Section 802(a) or to call the Bonds for mandatory purchase
pursuant to Section 802(b) and, upon the acceleration of the maturity of the
Bonds or the mandatory purchase of the Bonds, to immediately demand payment
under the Credit Facility to the extent permitted by the terms thereof and
pursue the remedies of the Trustee thereunder.
(m) All moneys received by the Trustee shall, until used, applied or
invested as herein provided, be held in trust for the purposes for which they
were received but need not be segregated from other funds, except to the extent
required by law or this Indenture. The Trustee shall be under no liability for
interest on any moneys received hereunder, except such as may be agreed upon.
(n) Notwithstanding the effective date of this Indenture or anything to
the contrary in this Indenture, the Trustee shall have no liability or
responsibility for any act or event relating to this Indenture which occurs
prior to the date the Trustee formally executes this Indenture and commences
acting as Trustee hereunder.
(o) No provision of this Indenture shall be deemed to require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of its rights
or powers, if the Trustee shall have reasonable grounds for believing that
repayment of such funds or, in the alternative, adequate indemnity against such
risk or liability is not reasonably assured to it.
(p) The Trustee has no obligation or liability to the Bondowners for the
payment of interest or premium, if any, on or principal of the Bonds, but rather
the Trustee's sole obligations are to administer, for the benefit of the Issuer,
the Credit Enhancer, the Borrower and the Bondowners, the Funds established
hereunder.
(q) In the event the Trustee shall receive inconsistent or conflicting
requests and indemnity from two or more groups of Bondowners, each representing
less than a majority of the aggregate principal amount of the Bonds then
outstanding, the Trustee, in its sole discretion, may determine what action, if
any, shall be taken; provided, that, the Trustee shall follow the direction of
the Credit Enhancer if the Credit Enhancer is not in default under the Credit
Facility.
(r) Except for information provided by the Trustee concerning the Trustee,
the Trustee shall have no responsibility with respect to any information in any
offering memorandum or other disclosure material distributed with respect to the
Bonds. The Trustee shall have no responsibility for compliance with securities
laws in connection with issuance of the Bonds.
(s) The Trustee's immunities and protections from liability, and its right
to payment of compensation and indemnification in connection with performance of
its duties and obligations under the Indenture and the Agreement, shall survive
the Trustee's resignation or removal, or the final payment of the Bonds.
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(t) In acting or omitting to act pursuant to the provisions of the
Agreement, the Trustee shall be entitled to all of the rights, protections and
immunities accorded to the Trustee under the terms of this Indenture, including
but not limited to those set out in this Article IX.
(u) Notwithstanding anything otherwise provided in this Indenture, and
without regard to whether or not an Event of Default may have occurred and be
continuing, the Trustee may notify the Credit Enhancer and the Bondowners of
environmental hazards that the Trustee in its reasonable judgment has reason to
believe exist with respect to the Project, and the Trustee has the right to take
no further action and in such event no fiduciary duty exists which imposes any
obligation for further action with respect to the Project; provided, that if the
Trustee is directed by the Owners of a majority in aggregate principal amount of
Bonds then Outstanding (with the written consent of the Credit Enhancer) or the
Credit Enhancer to take further action, the Trustee may (i) take such further
action upon being furnished with indemnity and security satisfactory to it for
all reasonable costs, expenses, reimbursable fees, liabilities and losses,
including, without limitation, losses and liabilities in connection with
hazardous substances and environmental contamination, and the clean up thereof,
and reasonable attorney's fees and expenses, or (ii) elect not to proceed in
accordance with the directions of the Bondowners or the Credit Enhancer without
incurring any liability to the Bondowners or the Credit Enhancer if in the sole
opinion of the Trustee such direction may result in environmental or other
liability to the Trustee, the Credit Enhancer or the Bondowners, and the Trustee
may rely upon an opinion of its counsel in determining whether any such action
directed by Bondowners may result in such liability.
Section 902. Fees, Charges and Expenses of the Trustee. The Trustee shall
be entitled to payment of and/or reimbursement for reasonable fees for its
ordinary services rendered hereunder and all advances, agent and counsel fees
and other ordinary expenses reasonably and necessarily made or incurred by the
Trustee in connection with such ordinary services and, in the event that it
should become necessary that the Trustee perform extraordinary services, it
shall be entitled to reasonable extra compensation therefor and to reimbursement
for reasonable and necessary extraordinary expenses in connection therewith;
provided that if such extraordinary services or extraordinary expenses are
occasioned by the neglect or willful misconduct of the Trustee it shall not be
entitled to compensation or reimbursement therefor. The Trustee shall be
entitled to payment and reimbursement for the reasonable fees and charges of the
Trustee as Paying Agent for the Bonds and as Bond Registrar. Pursuant to the
provisions of Section 3.6 of the Agreement, the Borrower has agreed to pay to
the Trustee all reasonable fees, charges and expenses of the Trustee under this
Indenture. The Trustee agrees that the Issuer shall have no liability for any
fees, charges, advances, costs and expenses of the Trustee, and the Trustee
agrees to look only to the Borrower for the payment of all fees, charges and
expenses of the Trustee as provided in the Agreement. Upon the occurrence of an
Event of Default and during its continuance, the Trustee shall have a lien with
right of payment prior to payment on account of principal of, redemption
premium, if any, or interest on any Bond, upon all moneys in its possession
under any provisions hereof for the foregoing advances, fees, costs and expenses
incurred, other than moneys received under the Credit Facility, or deposit in
the Purchase Fund or Rebate Fund, and which constitute Available Moneys for the
payment of redemption premium.
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Section 903. Notice to the Bondowners if Default Occurs. If a Default
occurs of which the Trustee is by Section 901(h) hereof required to take notice
or if notice of Default be given as in said Section provided, then the Trustee
shall give written notice thereof by mail, within 30 days of the receipt of
notice by the Trustee of such Default, to the Borrower, the Credit Enhancer and
to the Owners of all Bonds then Outstanding as shown by the Bond Register in the
same manner as required by Section 1302 hereof; provided that the Trustee shall
further give prompt notice of such Default to the Issuer and the Credit Enhancer
by such means as is practicable under the circumstances.
Section 904. Intervention by the Trustee. In any judicial proceeding to
which the Issuer is party and which, in the opinion of the Trustee and its
counsel, has a substantial bearing on the interests of Owners of the Bonds or
the Credit Enhancer, the Trustee may intervene on behalf of Bondowners and the
Credit Enhancer and shall do so if requested in writing by the Credit Enhancer
or the Owners of at least 25% in the aggregate principal amount of Bonds then
Outstanding (with the written consent of the Credit Enhancer), and if provided
with indemnity satisfactory to it.
Section 905. Successor Trustee Upon Merger. Consolidation or Sale. Any
corporation or association with or into which the Trustee may be merged or
converted or with or into which it may be consolidated, or to which the Trustee
may sell or transfer its corporate trust business and assets as a whole or
substantially as a whole, or any corporation or association resulting from any
merger, conversion, sale, consolidation or transfer to which it is a party,
shall be and become successor Trustee hereunder and shall be vested with all the
trusts, powers, rights, obligations, duties, remedies, immunities and privileges
hereunder as was its predecessor, without the execution or filing of any
instrument or any further act on the part of any of the parties hereto.
Section 906. Trustee Required: Eligibility. (a) There shall at all times
be a Trustee hereunder which shall be a trust institution or bank duly organized
under the laws of the United States of America or any state or territory
thereof, in good standing and qualified to accept such trust having a combined
capital stock, surplus and undivided profits of not less than $50,000,000. If
such institution publishes reports of condition at least annually pursuant to
law or regulation, then for the purposes of this Section the capital, surplus
and undivided profits of such institution shall be deemed to be its capital,
surplus and undivided profits as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner provided in Section 907. No resignation or removal of the Trustee and
no appointment of a successor Trustee shall become effective until the successor
Trustee has accepted its appointment under Section 909.
(b) Notwithstanding anything herein, in the Series 1994A Indenture or in
the Borrower Documents to the contrary, each of the "Borrower", the "Credit
Enhancer", the "Paying Agent(s)", the "Remarketing Agent", the "Tender Agent"
and the "Trustee" (including, for such purpose, each co-trustee) shall, as
between the documents relating to the Bonds and the Series 1994A Bonds be one
and the same Person. In this regard:
(i) the Trustee, including any successor Trustee, shall at all
times hereunder also serve as Trustee pursuant to the Series
1994A Indenture;
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(ii) the Trustee agrees to resign hereunder contemporaneously with
any resignation under the Series 1994A Indenture; and
(iii) any removal of the Trustee pursuant to the Series 1994A
Indenture shall result in the contemporaneous removal of the
Trustee hereunder.
Section 907. Resignation of Trustee. The Trustee and any successor Trustee
may at any time resign from the trusts hereby created by giving 30 days' written
notice to the Credit Enhancer, the Remarketing Agent, the Issuer, the Borrower
and the Bondowners, and such resignation shall take effect at the end of such 30
days, or upon the earlier appointment of a successor Trustee by the Issuer or by
the Owners of a majority in aggregate principal amount of the Bonds then
outstanding in accordance with Section 908 hereof; provided, however, that in no
event shall the resignation of a Trustee or successor Trustee become effective
until such time as a successor Trustee has been appointed and has accepted
appointment.
Section 908. Removal of Trustee. The Trustee may be removed for cause at
any time or without cause upon thirty days written notice by an instrument or
concurrent instruments in writing delivered to the Trustee and the Issuer and
signed by the Borrower (with the consent of the Credit Enhancer), the Credit
Enhancer or the Owners of a majority in aggregate principal amount of Bonds then
Outstanding (with the consent of the Credit Enhancer); provided, however, that
any such removal shall not be effective until such time as a successor Trustee
has been appointed and has accepted such appointment. The Issuer, the Borrower,
the Credit Enhancer or any Bondowner may at any time petition any court of
competent jurisdiction for the removal for cause of the Trustee.
Section 909. Appointment of Successor Trustee. In case the Trustee
hereunder shall resign or be removed, or shall otherwise become incapable of
acting hereunder, or in case it shall be taken under the control of any public
officer or officers or of a receiver appointed by a court, a successor Trustee,
approved in writing by the Credit Enhancer and the Borrower, may be appointed by
the Owners of a majority in aggregate principal amount of Bonds then
Outstanding, by an instrument or concurrent instruments in writing; provided,
nevertheless, that in case of such vacancy the Issuer, by an instrument executed
and signed by the Chairman of the Board of Directors of the Issuer and attested
by its Executive Director under its seal, may appoint a temporary Trustee,
approved by the Credit Enhancer, to fill such vacancy; or if such vacancy has
continued for 60 days, the Credit Enhancer and the Borrower may appoint such
temporary Trustee, until a successor Trustee shall be appointed by the
Bondowners in the manner above provided; and any such temporary Trustee so
appointed by the Issuer or the Credit Enhancer shall immediately and without
further acts be superseded by the successor Trustee so appointed by such
Bondowners. Any successor Trustee or temporary Trustees must have the
qualifications provided for in Section 906.
Section 910. Vesting of Trusts in Successor Trustee. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to its
predecessor and also to the Issuer, the Credit Enhancer and the Borrower an
instrument in writing accepting such appointment hereunder, and thereupon such
successor shall become fully vested with all the trusts, powers, rights,
obligations, duties, remedies, immunities and privileges of its predecessor; but
such predecessor shall, nevertheless, on the written request of the Issuer, the
Credit Enhancer or its successor, execute and deliver an instrument transferring
to such successor Trustee all the trusts, powers, rights, obligations, duties,
remedies, immunities and privileges of such predecessor hereunder; and every
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predecessor Trustee shall deliver all securities and moneys and documents held
by it as Trustee hereunder to its successor. Should any instrument in writing
from the Issuer be required by any successor Trustee for more fully and
certainly vesting in such successor the trusts, powers, rights, obligations,
duties, remedies, immunities and privileges hereby vested in the predecessor,
any and all such instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer.
Section 911. Trust Estate May be Vested in Co-Trustee. It is the purpose
of this Indenture that there shall be no violation of any law of any
jurisdiction (including particularly the State) denying or restricting the right
of banking corporations or associations to transact business as trustee in such
jurisdiction. It is recognized that in case of litigation under this Indenture
or the Agreement, and in particular in case of the enforcement with respect to
any default, or in case the Trustee deems that by reason of any present or
future law of any jurisdiction it may not exercise any of the powers, rights or
remedies herein granted to the Trustee, or take any other action which may be
desirable or necessary in connection therewith, it may be necessary or desirable
that the Trustee appoint an individual or institution as a co-trustee or
separate trustee, and the Trustee is hereby authorized to appoint such
co-trustee or separate trustee, with the written consent of the Issuer and the
Credit Enhancer.
In the event that the Trustee appoints an additional individual or
institution as co-trustee or separate trustee, each and every remedy, power,
right, claim, demand, cause of action, immunity, tide, interest and lien
expressed or intended by this Indenture to be exercised by the Trustee with
respect thereto shall be exercisable by such co-trustee or separate trustee but
only to the extent necessary to enable such co-trustee or separate trustee to
exercise such powers, rights and remedies, and every covenant and obligation
necessary to the exercise thereof by such co-trustee or separate trustee shall
run to and be enforceable by either of them.
Should any deed, conveyance or instrument in writing from the Issuer be
required by the co-trustee or separate trustee so appointed by the Trustee for
more fully and certainly vesting in and confirming to him or it such properties,
rights, powers, trusts, duties and obligations, any and all such deeds,
conveyances and instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer.
In case any co-trustee or separate trustee shall die, become incapable of
acting, resign or be removed, all the properties, rights, powers, trusts, duties
and obligations of such co-trustee or separate trustee, so far as permitted by
law, shall vest in and be exercised by the Trustee until the appointment of a
successor to such co-trustee or separate trustee.
Section 912. Accounting. The Trustee shall render a monthly accounting,
for each calendar month, to the Borrower, the Credit Enhancer and to any
Bondowner requesting the same at the cost of such Bondowner, and an annual (or
more often if requested) accounting, for each calendar year ended December 31,
to the Issuer showing in reasonable detail all financial transactions relating
to the Trust Estate during the accounting period and the balance in any funds or
accounts created by this Indenture as of the beginning and close of such
accounting period.
Section 913. Paying Agents; Bond Registrar; Appointment and Acceptance of
Duties; Removal. The Trustee is hereby designated and agrees to act as Paying
Agent and as Bond
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Registrar for and in respect of the Bonds. The Tender Agent shall be the Paying
Agent with respect to Tendered Bonds.
Section 914. The Tender Agent.
(a) The Trustee is hereby appointed as the initial Tender Agent for the
Bonds and with respect to Tendered Bonds, the Paying Agent, and hereby agrees to
carry out its responsibilities described herein. If the Tender Agent is other
than the Trustee, the Tender Agent shall signify its acceptance of the duties
and obligations imposed upon it hereunder by a written instrument of acceptance
delivered to the Issuer, the Credit Enhancer, the Borrower, the Trustee and the
Remarketing Agent, under which the Tender Agent will agree to particularly:
(1) hold all Bonds delivered to it for purchase hereunder as agent
and bailee of, and in escrow for the benefit of, the respective Owners
which have so delivered such Bonds; until moneys representing the Purchase
Price of such Bonds shall have been delivered to or for the account of or
to the order of such Owners; and
(2) keep such books and records as shall be consistent with prudent
industry practice, and make such books and records available for
inspection by the other parties.
The parties hereto shall each cooperate to cause the necessary
arrangements to be made and to be thereafter continued whereby funds from the
sources specified herein will be made available for the purchase of Bonds
presented at the Principal Office of the Tender Agent, and to otherwise enable
the Tender Agent to carry out its duties hereunder.
The Tender Agent, the Trustee and the Remarketing Agent shall cooperate to
the extent necessary to permit the preparation, execution, issuance,
authentication and delivery by the Tender Agent of replacement Bonds in
connection with the tender and remarketing of Bonds hereunder.
The Issuer, the Trustee and the Borrower acknowledge that, in carrying out
its responsibilities hereunder, the Tender Agent shall be acting solely for the
benefit of and as agent for the Owners from time to time of the Bonds. No
delivery of the Bonds to the Tender Agent or any agent of the Tender Agent or
purchase of Bonds by the Tender Agent shall constitute a redemption of the Bonds
or any extinguishment of the debt evidenced thereby.
(b) The Tender Agent shall be a commercial bank or trust company, duly
organized under the laws of the United States of America or any state or
territory thereof having a combined capital stock, surplus and undivided profits
of at least $20,000,000 and authorized by law to perform all of the duties
imposed upon it by this Indenture. The Tender Agent may resign and be discharged
of the duties and obligation created by this Indenture by giving at least thirty
(30) days' notice by mail to the Trustee, the Borrower, the Remarketing Agent,
and the Credit Enhancer; provided, however, that such resignation shall not take
effect unless and until a successor Tender Agent shall be appointed by the
Trustee with the consent of the Credit Enhancer. The Trustee shall use its best
efforts to appoint a successor Tender Agent during such thirty (30) day period
and in the event a successor Tender Agent has not taken office prior to the
expiration of such thirty (30) day period, the Tender Agent may petition a court
of applicable jurisdiction to appoint a successor Tender Agent. The Tender Agent
may be removed at any time by an instrument signed by the
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Borrower, with the written consent of the Credit Enhancer, or the Credit
Enhancer, and filed with the Borrower, the Credit Enhancer, the Issuer, the
Tender Agent, the Remarketing Agent and the Trustee; provided, however, that
such removal shall not take effect unless and until a successor Tender Agent
shall be appointed by the Trustee with the approval of the Borrower and the
Credit Enhancer, or by the Borrower and the Credit Enhancer if the Trustee has
not made such appointment within thirty (30) days from such filing. In the event
of the resignation or removal of the Tender Agent, the Tender Agent shall
deliver any moneys and Bonds held by it to its successor, and if there be no
successor, to the Trustee.
(c) In accordance with Section 906(b) hereof:
(i) the Tender Agent, including any successor Tender Agent, shall
at all times hereunder also serve as Tender Agent pursuant to
the Series 1994A Indenture;
(ii) the Tender Agent agrees to resign hereunder contemporaneously
with any resignation under the Series 1994A Indenture; and
(iii) any removal of the Tender Agent pursuant to the Series 1994A
Indenture shall result in the contemporaneous removal of the
Tender Agent hereunder.
Section 915. Notice to Rating Agency. The Trustee shall notify the Rating
Agency (until such time as the Rating Agency no longer maintains a rating on the
Bonds) as soon as practicable (i) after the Trustee becomes aware of (1) any
expiration, termination or renewal of the Credit Facility, (2) any redemption or
purchase of all of the Bonds, (3) any change in the Credit Facility, the
Agreement or this Indenture, or (4) the interest portion of the Credit Facility
will not be reinstated, or (ii) if (1) the Trustee resigns or is removed or a
new Trustee is appointed, (2) the Remarketing Agent resigns or is removed or a
new Remarketing Agent is appointed, (iii) an Alternate Credit Facility is
provided, (iv) there is a mandatory tender of all Bonds, (v) there is a call for
the redemption of all Bonds, or (vi) there is a change in the Interest Mode
pursuant to Section 204 hereof.
Section 916. Right of Trustee to Pay Taxes and Other Charges. In case any
tax, assessment or governmental or other charge upon, or insurance premium with
respect to, any part of the [Plant] is not paid as required herein or in the
Agreement, the Trustee may pay such tax, assessment or governmental charge,
insurance premium, or rebate amount, without prejudice, however, to any rights
of the Trustee or the Bondowners hereunder arising in consequence of such
failure; and any amount at any time so paid under this Section, with interest
thereon from the date of payment at a rate per annum equal to the Trustee's base
rate for variable rate commercial loans in effect at the time plus two percent
(2%), shall become an additional obligation secured by this Indenture, and the
same shall be given a preference in payment over any payment of principal of,
premium, if any, or interest on the Bonds, and shall be paid out of the proceeds
of rents, revenues and receipts collected from the Project, not including
payments on the Credit Facility, if not otherwise caused to be paid; but the
Trustee shall be under no obligation to make any such payment unless it shall
have been requested to do so by the Credit Enhancer or the Owners of at
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least twenty-five percent (25%) of the aggregate principal amount of Bonds then
Outstanding and shall have been provided adequate funds for the purpose of such
payment.
[End of Article IX]
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ARTICLE X
SUPPLEMENTAL INDENTURES
Section 1001. Supplemental Indentures Not Requiring Consent of Bondowners.
The Issuer and the Trustee may from time to time, with the prior written consent
of the Credit Enhancer and the Borrower, if required pursuant to Section 1003
hereof, but without the consent of or notice to any of the Bondowners or the
owner of the Series 1994A Bonds, enter into such Supplemental Indenture or
Supplemental Indentures as shall not be inconsistent with the terms and
provisions hereof, so long as such Supplemental Indenture or Supplemental
Indentures does not cause the then-current rating on the Bonds to be lowered,
for any one or more of the following purposes:
(a) To cure any ambiguity, formal defect or omission in this Indenture or
to make any other change not materially prejudicial to the Bondowners or the
owners of the Series 1994A Bonds;
(b) To grant to or confer upon the Trustee for the benefit of the
Bondowners any additional rights, remedies, powers or authority that may
lawfully be granted to or conferred upon the Bondowners or the Trustee or either
of them;
(c) To subject to this Indenture additional revenues, properties or
collateral;
(d) To modify, amend or supplement this Indenture or any indenture
supplemental thereto in such manner as to permit the qualification of the
Indenture under the Trust Indenture Act of 1939, as then amended, or any similar
federal statute hereafter in effect or to permit the qualification of the Bonds
for sale under the securities laws of any state of the United States;
(e) To evidence the appointment of a separate trustee or the succession of
a new trustee hereunder;
(f) To make any other change which will become effective on a date on
which the Bonds are subject to mandatory tender pursuant to Section 302 hereof,
provided the substance of such change is described in the Trustee's notice to
Bondowners in connection with an election to retain Bonds;
(g) To make any other change which, in the sole judgment of the Trustee,
does not materially adversely affect the interests of the Bondowners or the
owners of the Series 1994A Bonds; it being understood that in exercising such
judgment the Trustee may rely on the opinion of such counsel as it may select;
and
(h) To more precisely identify the Project or to substitute or add
additional property thereto;
provided that, in the event a Supplemental Indenture is entered into with
respect to any of the matters referred to in (a) through (h) above, a
corresponding supplemental indenture, if appropriate under the circumstances,
shall be entered into with respect to the Series 1994A Indenture.
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Section 1002. Supplemental Indentures Requiring Consent of Bondowners.
Exclusive of Supplemental Indentures covered by Section 1001 hereof and subject
to the terms and provisions contained in this Section, and not otherwise, the
Owners (within the meaning of this Indenture and the Series 1994A Indenture) of
not less than 51% in aggregate principal amount of the Bonds and the Series
1994A Bonds then outstanding shall have the right from time to time, with the
prior written consent of the Credit Enhancer and, if required pursuant to
Section 1003 hereof, the Borrower, anything contained in this Indenture to the
contrary notwithstanding, to consent to and approve the execution by the Issuer
and the Trustee of such other Supplemental Indenture or Supplemental Indentures
as shall be deemed necessary and desirable by the Issuer for the purpose of
modifying, amending, adding to or rescinding, in any particular, any of the
terms or provisions contained in this Indenture or in any Supplemental Indenture
(including any consents that may be given in connection with an exchange or
tender offer); provided, however, that nothing in this Section contained shall
permit or be construed as permitting without the consent of the Owners (within
the meaning of this Indenture and the Series 1994A Indenture) of 100% of the
Bonds and the Series 1994A Bonds then outstanding, the Issuer, the Trustee and
the Credit Enhancer, (a) an extension of the maturity of the principal of or the
scheduled date of payment of interest on any Bond issued hereunder, or (b) a
reduction in the principal amount, redemption premium or any interest payable on
any Bond, or (c) a privilege or priority of any Bond or Bonds over any other
Bond or Bonds, or (d) a reduction in the aggregate principal amount of Bonds the
Owners of which are required for consent to any such Supplemental Indenture, or
(e) any modification of the redemption or tender features of the Bonds, or (f)
any change which results in the lowering of the then-current rating on the
Bonds; and provided, further, that in the event a Supplemental Indenture is
entered into in accordance with this Section, a corresponding supplemental
indenture, if appropriate under the circumstances, shall be entered into with
respect to the Series 1994A Indenture.
If at any time the Issuer shall request the Trustee to enter into any such
Supplemental Indenture for any of the purposes of this Section, the Trustee
shall cause notice of the proposed execution of such Supplemental Indenture to
be mailed to each Bondowner, each owner of the Series 1994A Bonds and the Credit
Enhancer (and a copy of such proposed Supplemental Indenture shall be mailed
with such notice to the Credit Enhancer. Such notice shall briefly set forth the
nature of the proposed Supplemental Indenture and shall state that copies
thereof are on file at the Principal Office of the Trustee for inspection by all
Bondowners and owners of the Series 1994A Bonds and a copy of such proposed
supplemental Indenture shall be mailed with such notice t6 the Credit Enhancer.
If within 60 days or such longer period as shall be prescribed by the Issuer
following the mailing of such notice, the Credit Enhancer and the Owners (within
the meaning of this Indenture and the Series 1994A Indenture) of not less than
fifty-one percent (51%) in aggregate principal amount of the Bonds and the
Series 1994A Bonds then outstanding at the time of the execution of any such
Supplemental Indenture shall have consented to and approved the execution
thereof as herein provided, no Owner of any Bond shall have any right to object
to any of the terms and provisions contained therein, or the operation thereof,
or in any manner to question the propriety of the execution thereof, or to
enjoin or restrain the Trustee or the Issuer from executing the same or from
taking any action pursuant to the provisions thereof. Upon the execution of any
such Supplemental Indenture as in this Section permitted and provided, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith.
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Section 1003. Borrower's Consent to Supplemental Indentures. Anything
herein to the contrary notwithstanding, a Supplemental Indenture under this
Article which affects any rights or obligations of the Borrower shall not become
effective unless and until the Borrower shall have consented in writing to the
execution and delivery of such Supplemental Indenture. In this regard, the
Trustee shall cause notice of the proposed execution and delivery of any such
Supplemental Indenture together with a copy of the proposed Supplemental
Indenture to be mailed to the Borrower at least 15 days prior to the proposed
date of execution and delivery of any such Supplemental Indenture. Under no
circumstances shall a failure by the Borrower to respond to such notice be
construed as a consent for these purposes.
Section 1004. Opinion of Bond Counsel. Notwithstanding anything to the
contrary in Sections 1001 or 1002. before the Issuer or the Trustee enter into
any supplemental indenture pursuant to Section 1001 or 1002, there shall have
been delivered to the Issuer, the Trustee, the Borrower and the Credit Enhancer
an Opinion of Bond Counsel stating that such supplemental indenture is
authorized or permitted by this Indenture and the Act, complies with their
respective terms, will, upon the execution and delivery thereof, be valid and
binding upon the Issuer in accordance with its terms.
[End of Article X]
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ARTICLE XI
AMENDMENT OF AGREEMENT AND CREDIT FACILITY
Section 1101. Amendments, Changes or Modifications to the Agreement and
Credit Facility Not Requiring Consent of Bondowners. So long as such does not
cause the then-current rating on the Bonds to be lowered, the Trustee, with the
prior written consent of the Credit Enhancer, may, without the consent of or
notice to the Bondowners or the owners of the Series 1994A Bonds, consent to any
amendment, change or modification of the Agreement and the Credit Facility, as
may be required (i) by the provisions of such documents and this Indenture, (ii)
for the purpose of curing any ambiguity or formal defect or omission in such
documents, or in connection with any other change therein which, in the judgment
of the Trustee, is not to the material prejudice of the Trustee, the Bondowners
or the owners of the Series 1994A Bonds, (iii) so as to more precisely identify
the Project, or (iv) in connection with any other change therein which, in the
sole judgment of the Trustee, does not materially adversely affect the interests
of the Bondowners or the owners of the Series 1994A Bonds, provided that, in the
event a Supplemental Indenture is entered into with respect to any of the
matters referred to in (i) through (iv) above, a corresponding supplemental
indenture, if appropriate under the circumstances, shall be entered into with
respect to the Series 1994B Indenture. In exercising such judgment, the Trustee
may rely on the opinions of such counsel as it may select.
Section 1102. Amendments, Changes or Modifications to the Agreement and
Credit Facility Requiring Consent of Bondowners. Except as provided for in
Section 1101 hereof, the Trustee shall not consent to any amendment, change or
modification of the Agreement or the Credit Facility without the mailing of
notice and the obtaining of the written approval or consent of the Credit
Enhancer and the Owners (within the meaning of this Indenture and the Series
1994A Indenture) of not less than fifty-one percent (51%) in aggregate principal
amount of the Bonds and the Series 1994A Bonds at the time outstanding given and
obtained as provided in Section 1002 hereof (including any consents that may be
given in connection with an exchange or tender offer); provided, however, that
no such amendment, change or modification to such documents shall be entered
into which permits, without the consent of the Owners (within the meaning of
this Indenture and the Series 1994A Indenture) of 100% of the Bonds and the
Series 1994A Bonds then outstanding, the Issuer, the Trustee and the Credit
Enhancer, (a) a reduction of the maturity or expiration date of the Credit
Facility, or (b) a change in the timing of payments under or the amounts
required to be paid under the Credit Facility, or (c) a lowering of the
then-current credit rating on the Bonds; and provided, further, that in the
event a Supplemental Indenture is entered into in accordance with this Section,
a corresponding supplemental indenture, if appropriate under the circumstances,
shall be entered into with respect to the Series 1994A Indenture. If at any time
the Issuer, the Credit Enhancer and the Borrower shall request the consent of
the Trustee to any such proposed amendment, change or modification to such
documents, the Trustee shall cause notice of such proposed amendment, change or
modification to such documents to be given in the same manner as provided by
Section 1002 hereof with respect to Supplemental Indentures and the
corresponding supplemental indentures with respect to the Series 1994A Bonds.
Such notice shall briefly set forth the nature of such proposed amendment,
change or modification to such documents and shall state that copies of the same
are on file at the Principal Office of the Trustee for inspection by all
Bondowners and a copy of such proposed amendment, change or modification to such
document shall be mailed with such notice to the Credit Enhancer.
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Section 1103. Opinion of Bond Counsel. Anything to the contrary in
Sections 1101 or 1102 notwithstanding, before the Trustee shall consent to any
amendment of the Agreement or the Credit Facility there shall have been
delivered to the Trustee, the Borrower and the Credit Enhancer an Opinion of
Bond Counsel stating that such amendment is authorized or permitted by this
Indenture and the Act, complies with their respective terms, will, upon the
execution and delivery thereof, be valid and binding upon the Issuer (if the
Issuer is a party thereto) in accordance with its terms.
[End of Article XI]
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ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 1201. Defeasance. If the Bonds are in an Interest Mode other than
a Weekly Mode or Monthly Mode and if the Issuer shall pay or provide for the
payment (other than by the Credit Enhancer) of any Bond or Bonds Outstanding in
any one or more of the following ways:
(a) by paying or causing to be paid, from Available Moneys, the principal
of (including redemption premium, if any) and interest on such Bonds, as and
when the same become due and payable;
(b) by depositing with the Trustee, in trust and irrevocably setting aside
exclusively for such payment, at or before maturity, Available Moneys in an
amount sufficient to pay or redeem (when redeemable) Bonds (including the
payment of redemption premium, if any, and interest payable on such Bonds to the
maturity or redemption date thereof), provided that such moneys, if invested,
shall be invested in Government Securities which are not subject to redemption
and payment prior to maturity except at the option of the holder thereof
("Non-Callable Government Securities") in an amount and with maturities, without
consideration of any income or increment to accrue thereon, sufficient to pay or
redeem (when redeemable) and discharge the indebtedness on such Bonds at or
before their respective maturity dates, to pay the interest thereon as it comes
due;
(c) by delivering to the Trustee, for cancellation by it, such Bonds; or
(d) by depositing with the Trustee, in trust, Non-Callable Government
Securities acquired with Available Moneys in such amounts as are certified to
the Trustee to be fully sufficient, together with other Available Moneys
deposited therein and together with the income or increment to accrue thereon,
without consideration of any reinvestment thereof, to pay or redeem (when
redeemable) and discharge the indebtedness on such Bonds at or before their
respective maturity dates, to pay the interest thereon as it comes due;
then such Bond or Bonds shall be deemed to be paid within the meaning of this
Article and shall cease to be entitled to any lien, benefit or security under
this Indenture, except for the purposes of any such payment from such moneys or
Government Securities and except for the purposes of registration, transfer and
exchange of such Bonds. If all the Bonds are not to be redeemed within 30 days,
the Trustee shall mail, as soon as practicable, in the manner prescribed by
Article IV hereof, a notice to the owners of such Bonds that the deposit
required by (b) or (d) above has been made with the Trustee and that said Bonds
are deemed to have been paid in accordance with this Article and stating the
maturity or redemption date upon which moneys are to be available for the
payment of the principal of or redemption price, if applicable, on said Bonds as
specified in (b) or (d) above.
Notwithstanding the foregoing, in the case of the Bonds which by their
terms may be redeemed prior to the stated maturities thereof, no deposit under
clauses (b) or (d) of the immediately preceding paragraph shall be deemed a
payment of such Bonds as aforesaid until, as to all such Bonds which are to be
redeemed prior to their respective stated maturities and as to
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Bonds subject to interest rate adjustment prior to maturity which shall be
redeemed prior to the next Interest Adjustment Date, proper notice of such
redemption shall have been given in accordance with Article IV of this Indenture
or irrevocable instructions shall have been given to the Trustee to give such
notice at the time when such notice may be given pursuant to the provisions of
this Indenture.
Notwithstanding any provisions of any other Section of this Indenture
which may be contrary to the provisions of this Section, all Available Moneys or
Non-Callable Government Securities or other investments acceptable to the Credit
Enhancer set aside and held in trust pursuant to the provisions of this Section
for the payment of Bonds (including redemption premium thereon, if any, and
interest) shall be applied to and used solely for the payment of the particular
Bonds (including redemption premium thereon, if any, and interest) with respect
to which such Available Moneys and Non-Callable Government Securities or other
investments acceptable to the Credit Enhancer have been so set aside in trust.
The Issuer may at any time surrender to the Trustee for cancellation by it
any Bond previously authenticated and delivered which the Issuer may have
acquired in any manner whatsoever, and such Bonds, upon such surrender and
cancellation, shall be deemed to be paid and retired.
Section 1202. Satisfaction and Discharge of the Indenture. If the Issuer
shall pay the principal of, redemption premium, if any, and interest on all of
the Bonds Outstanding in accordance with their terms, or shall provide for such
payment as provided in Section 1201 hereof, and if the Issuer shall also pay or
cause to be paid all other sums payable hereunder by the Issuer, then and in
that case this Indenture and the estate and rights granted hereunder shall
cease, terminate and become null and void, and thereupon the Trustee shall, upon
Written Request of the Issuer, and an Opinion of Counsel, each stating that in
the opinion of the signers all conditions precedent to the satisfaction and
discharge of this Indenture have been complied with, forthwith execute proper
instruments acknowledging satisfaction of and discharging this Indenture and the
lien hereof; provided that, with respect to Bonds for which payment has been
provided at the time but which has not in fact been paid, the liability of the
Issuer in respect of such Bonds shall continue provided that the Owners thereof
shall thereafter be entitled to payment only out of the moneys or Government
Securities deposited with the Trustee as provided in this Article. The
satisfaction and discharge of this Indenture shall be without prejudice to the
rights of the Trustee to charge and be reimbursed by the Issuer and the Borrower
for any expenditures which it may thereafter incur in connection herewith.
Notwithstanding the release and discharge of the lien of this Indenture as
provided above, those provisions of this Indenture relating to the maturity of
the Bonds, interest payments and dates thereof, tender and purchase provisions,
exchange and transfer of Bonds, replacement of mutilated, destroyed, lost,
stolen or Undelivered Bonds, the safekeeping and cancellation of Bonds,
nonpresentment of Bonds, the holding of moneys in trust, redemption of Bonds and
the duties of the Trustee, the Bond Registrar, the Paying Agent and the
Remarketing Agent in connection with all of the foregoing, remain in effect and
shall be binding upon the Trustee and the Bondowners.
The Issuer is hereby authorized to accept a certificate by the Trustee
that the whole amount of the principal, redemption premium, if any, and interest
so due and payable upon all of the Bonds
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then Outstanding has been paid or such payment provided for in accordance with
Section 1201 hereof as evidence of satisfaction of this Indenture, and upon
receipt thereof shall cancel and erase the inscription of this Indenture from
its records.
All moneys, funds, securities or other property remaining on deposit in
all Funds or Accounts established under this Indenture (other than said moneys
or Government Securities or other investments deposited in trust as above
provided) shall, upon the full satisfaction of this Indenture, forthwith be
transferred, paid over and distributed to the Credit Enhancer and the Borrower
in the manner provided in Section 510 hereof.
If there is a release and discharge of the lien of this Indenture as
provided above, the Trustee shall so notify the Rating Agency.
[End of Article XII]
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 1301. Consents and Other Instruments by Bondowners. Any consent,
request, direction, approval, objection or other instrument required by this
Indenture to be signed and executed by the Bondowners may be in any number of
concurrent writings of similar tenor and may be signed or executed by such
Bondowners in person or by agent appointed in writing. Proof of the execution of
any such instrument or of the writing appointing any such agent and of the
ownership of Bonds, if made in the following manner, shall be sufficient for any
of the purposes of this Indenture except for the assignment of the ownership of
any Bond which proof shall be made by signature guaranty, and shall be
conclusive in favor of the Trustee with regard to any action taken, suffered or
omitted under any such instrument, namely:
(a) The fact and date of the execution by any person of any such
instrument may be proved by the certificate of any officer in any jurisdiction
who by law has power to take acknowledgments within such jurisdiction that the
person signing such instrument acknowledged before him the execution thereof, or
by affidavit of any witness to such execution.
(b) The fact of ownership of Bonds and the amount or amounts, numbers and
other identification of such Bonds, and the date of holding the same shall be
proved by the Bond Register.
In determining whether the Owners of the requisite principal amount of
Bonds Outstanding have given any request, demand, authorization, direction,
notice, consent or waiver under this Indenture, Bonds owned by, or held by or
for the account of, the Issuer, the Borrower or any Affiliated Party of the
Borrower shall be disregarded and deemed not to be Outstanding under this
Indenture, except that, in determining whether the Trustee shall be protected in
relying upon any such request, demand, authorization, direction, notice, consent
or waiver, only Bonds which the Trustee knows to be so owned shall be so
disregarded. Notwithstanding the foregoing, Bonds (including Pledged Bonds) so
owned which have been pledged in good faith shall not be disregarded if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Bonds and that the pledgee is not the Issuer, the
Borrower or any Affiliated Party of the Borrower.
Section 1302. Notices. Except as otherwise provided herein, it shall be
sufficient service of any notice, request, complaint, demand or other paper
required by this Indenture to be given to or filed with the Issuer, the Trustee,
the Credit Enhancer, the Remarketing Agent, the Borrower or the Bondowners if
the same shall be duly mailed by first-class mail, postage pre-paid, certified
or registered mail, or sent by telegram, telecopy or telex or other similar
communication, or when given by telephone, confirmed in writing by first-class
mail, postage pre-paid, certified or registered mail, or sent by telegram,
telecopy or telex or other similar communication, on the same day, addressed:
(a) To the Issuer at:
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South Carolina Jobs-Economic Development Authority
1201 Main Street, Suite 1750
Columbia, South Carolina 29201
Attention: Executive Director
Telephone: (803) 737-0079
Telecopier: (803) 737-0016
(b) To the Trustee and Tender Agent at:
Mark Twain Bank
8820 Ladue Road
St. Louis, Missouri 63124
Attention: Corporate Trust Division
Telephone: (314) 889-0753
Telecopier: (314) 889-0736
(c) To the Credit Enhancer at:
Heller Financial, Inc.
500 West Monroe Street, 12th Floor
Chicago, Illinois 60661
Attention: Portfolio Manager, Portfolio Organization,
Corporate Finance Group
Telephone: (312) 441-7500
Telecopier: (312) 441-7367
With a copy to Legal Department, Portfolio Operation,
Corporate Finance Group
(d) To the Remarketing Agent at:
Stern Brothers & Co.
8000 Maryland Avenue, Suite 1020
St. Louis, Missouri 63105
Attention: Mr. Terrence M. Finn
Telephone: (314) 727-5519
Telecopier: (314) 727-7313
(e) To the Borrower at:
Roller Bearing Company of America, Inc.
140 Terry Drive
Newtown, Pennsylvania 18940
Attention: Chief Financial Officer
Telephone: (215) 579-4300
Telecopier: (215) 579-4318
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<PAGE>
With a copy to:
Gibson, Dunn & Crutcher
2029 Century Park East, Suite 4000
Los Angeles, California 90067
Attention: Bruce D. Meyer
Telephone: (310) 552-8686
Telecopier.: (310) 277-5827
(f) To the Bondowners:
Addressed to each of the Owners of all Bonds at the time
Outstanding, as shown by the Bond Register.
(g) Initially, to the Rating Agency at:
Standard & Poor's Ratings Group
25 Broadway
New York, New York 10004
Attention: LOC Rating Surveillance
Telephone: (212) 208-1846
Telecopier: (212) 208-0031
All notices given by first-class mail, certified or registered mail,
postage prepaid, as aforesaid shall be deemed duly given as of the third day
after the same are so mailed; provided that notices shall be deemed given as of
the date they are sent by telecopy or otherwise received. A duplicate copy of
each notice, certificate or other communication given hereunder by either the
Issuer or the Trustee to the other shall also be given to the Borrower, the
Remarketing Agent and the Credit Enhancer. In the event of notice to any party
other than the Issuer or the Trustee, a copy of the notice shall be provided to
the Borrower, the Remarketing Agent and the Credit Enhancer. In addition, the
Trustee shall send to the Credit Enhancer, the Borrower, the Tender Agent and
the Remarketing Agent a copy of each notice sent to the Bondowners. The Issuer,
the Trustee, the Tender Agent, the Borrower, the Credit Enhancer and the
Remarketing Agent may from time to time designate, by notice given hereunder to
the others of such parties, such other address to which subsequent notices,
certificates or other communications shall be sent.
Section 1303. Limitation of Rights Under the Indenture. With the exception
of rights herein expressly conferred and as otherwise provided in this Section,
nothing expressed or mentioned in or to be implied from this Indenture or the
Bonds is intended or shall be construed to give any person other than the
parties hereto, the Borrower, the Credit Enhancer and the Owners of the Bonds,
any right, remedy or claim under or in respect to this Indenture. This Indenture
and all of the covenants, conditions and provisions hereof are, except as
otherwise provided in this Section, intended to be and are for the sole and
exclusive benefit of the parties hereto, the Borrower, the Credit Enhancer and
the Owners of the Bonds as herein provided.
The Trustee and the Issuer acknowledge and agree that each of the
Borrower, the Credit Enhancer, the Remarketing Agent and the Tender Agent is a
third-party beneficiary of those
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provisions herein which relate to the making of payments or giving of notice to
or consents by or following the directions of or the performance of other acts
to benefit it, and all such provisions shall be enforceable by such parties, and
in addition acknowledge and agree that the Credit Enhancer shall for all
purposes hereunder be treated as the Owner of Pledged Bonds.
Section 1304. Suspension of Mail Service. If, because of the temporary or
permanent suspension of mail service or for any other reason, it is impossible
or impractical to mail any notice in the manner herein provided, then such
delivery of notice in lieu thereof as shall be made with the approval of the
Trustee shall constitute a sufficient notice.
Section 1305. Business Days. If any date for the payment of principal of,
redemption premium, if any, or interest on the Bonds or the taking of any other
action hereunder is not a Business Day, then such payment shall be due, or such
action shall be taken, on the first Business Day thereafter with the same force
and effect as if made on the date fixed for payment or performance.
Section 1306. Immunity of Officers, Employees and Members of Issuer. No
recourse shall be had for the payment of the principal of or redemption premium,
if any, or interest on any of the Bonds or for any claim based thereon or upon
any obligation, covenant or agreement in this Indenture contained against any
past, present or future officer, member, employee or agent of the Issuer, or of
any successor body, as such, either directly or through the Issuer or any
successor body, under any rule of law or equity, statute or constitution, or by
the enforcement of any assessment or penalty or otherwise, and all such
liability of any such officers, members, employees or agents as such is hereby
expressly waived and released as a condition of and consideration for the
execution of this Indenture and the issuance of such Bonds.
Section 1307. Credit Enhancer's Remedial Rights. The Issuer and the
Trustee on behalf of the Bondowners hereby acknowledge and agree that should the
Credit Enhancer exercise certain of its remedial rights under the Credit
Documents, the Credit Enhancer (or an Affiliate or designee thereof) may become
successor in interest to the Borrower under the Agreement. No such exercise of
the Credit Enhancer's rights under the Credit Documents, or succession of the
Credit Enhancer (or an affiliate or designee thereof) to the interest of the
Borrower under the Agreement, shall require, as a condition precedent, either
(i) the further consent of the Issuer, the Trustee or the Bondowners, or (ii)
the acceleration of the Bonds (unless the Credit Enhancer elects such in its
sole discretion).
Section 1308. Severability. If any provision of this Indenture shall be
held or deemed to be invalid, inoperative or unenforceable as applied in any
particular case in any jurisdiction or jurisdictions or in all jurisdictions, or
in all cases because it conflicts with any other provision or provisions hereof
or any constitution or statute or rule of public policy, or for any other
reason, such circumstances shall not have the effect of rendering the provision
in question inoperative or unenforceable in any other case or circumstances, or
of rendering any other provision or provisions herein contained invalid,
inoperative or unenforceable to any extent whatever. The invalidity of any one
or more phrases, sentences, clauses or Sections in this Indenture contained
shall not affect the remaining portions of this Indenture, or any part thereof.
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Section 1309. Complete Agreement. The Issuer and the Trustee understand
that oral agreements or commitments to loan money, extend credit or to forbear
from enforcing repayment of a debt including promises to extend or renew such
debt are not enforceable. To protect the Issuer and the Trustee from
misunderstanding or disappointment, any agreements the Issuer and the Trustee
reach covering such matters are contained in this Indenture, which is the
complete and exclusive statement of the agreement between the Issuer and the
Trustee, except as the Issuer and the Trustee may later agree in writing
(subject to the provisions of Article X of this Indenture) to modify this
Indenture.
Section 1310. Execution in Counterparts. This Indenture may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
Section 1311. Governing Law. This Indenture shall be governed exclusively
by and construed in accordance with the applicable laws of the State of South
Carolina.
[End of Article XIII]
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IN WITNESS WHEREOF, the South Carolina Jobs-Economic Development Authority
has caused these presents to be signed in its name and behalf and its corporate
seal to be hereunto affixed and attested by its duly authorized officers, and to
evidence its acceptance of the trusts hereby created, the Trustee, has caused
these presents to be signed in its name and behalf and its corporate seal to be
hereunto affixed and attested by its duly authorized officers, all as of the day
and year first above written.
SOUTH CAROLINA JOBS-ECONOMIC
DEVELOPMENT AUTHORITY
By /s/ [ILLEGIBLE]
--------------------------------------
[SEAL] Chairman, Board of Directors
ATTEST:
/s/ [ILLEGIBLE]
- ------------------------------------
Executive Director
MARK TWAIN BANK, as Trustee
By /s/ [ILLEGIBLE]
--------------------------------------
[SEAL] Vice President
ATTEST:
/s/ [ILLEGIBLE]
- ------------------------------------
Assistant Secretary
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EXHIBIT A
BOND FORM
(Form of Face of Bond)
REGISTERED REGISTERED
NO. R- $___________
UNITED STATES OF AMERICA
State of South Carolina
SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY
VARIABLE RATE DEMAND
INDUSTRIAL DEVELOPMENT REVENUE BOND
(Roller Bearing Company of America, Inc. Project)
Series 1994B
Interest Rate: Maturity Date: Dated Date: CUSIP:
- -------------- -------------- ----------- ------
September 1, 2017
Registered Owner:
Principal Amount: Dollars
THIS BOND AND THE RELATED CREDIT FACILITY INITIALLY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR THE
SECURITIES LAWS OF ANY STATE. ACCORDINGLY, BONDS THAT ARE SUBJECT TO THE
BENEFITS OF THE CREDIT FACILITY MAY BE SOLD, REMARKETED, OR OTHERWISE
TRANSFERRED ONLY IN TRANSACTIONS IN WHICH THE BONDS AND THE RELATED CREDIT
FACILITY ARE REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES STATES OR IN TRANSACTIONS IN WHICH THE BONDS AND THE RELATED CREDIT
FACILITY ARE EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
ANY APPLICABLE STATE SECURITIES LAWS. THE ISSUER AND THE CREDIT ENHANCER HAVE NO
OBLIGATION TO CAUSE THE BONDS OR THE CREDIT FACILITY TO BE REGISTERED UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR TO COMPLY WITH ANY
EXEMPTION THAT MAY BE AVAILABLE UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, INCLUDING, WITHOUT LIMITATION, RULE 144A UNDER THE SECURITIES
ACT. THE TRANSFER RESTRICTIONS DESCRIBED HEREIN DO NOT PRECLUDE THE REGISTERED
OWNER OF THIS BOND FROM TENDERING THIS BOND TO THE TENDER AGENT AS DESCRIBED
HEREIN. THE HOLDER HEREOF AGREES THAT ANY TRANSFER OF THIS BOND WILL BE IN
ACCORDANCE WITH THE INDENTURE (AS DESCRIBED HEREIN).
THIS BOND IS SUBJECT TO MANDATORY TENDER FOR PURCHASE AT THE TIME AND IN
THE MANNER HEREINAFTER DESCRIBED, AND MUST BE SO TENDERED OR WILL BE
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DEEMED TO HAVE BEEN SO TENDERED UNDER CERTAIN CIRCUMSTANCES DESCRIBED HEREIN.
The South Carolina Jobs-Economic Development Authority (the "Issuer"), a
body politic and corporate and an agency of the State of South Carolina, for
value received hereby acknowledges itself obligated to, and promises to pay, the
Registered Owner identified above, or registered assigns, but only out of the
sources pledged for that purpose as hereinafter provided, and not otherwise, on
the Maturity Date set forth above or on prior redemption of the Principal Amount
above and interest thereon from the most recent Interest Payment Date (as
hereinafter defined) to which interest has been paid or for which due provision
has been made or, if no interest has been paid, from the Dated Date set forth
above, at the rate of interest per annum determined as set forth herein, until
the Issuer's obligation with respect to payment of said Principal Amount is
discharged.
Principal of, redemption premium, if any, and interest on this Bond are
payable in any coin or currency of the United States of America which, at the
respective dates of payment thereof, is legal tender for the payment of public
and private debts, and such principal and premium, if any, on this Bond shall be
payable at the Principal Office of Mark Twain Bank, St. Louis, Missouri, as
trustee (the "Trustee"), and, with respect to Tender Price, at the Principal
Office of Mark Twain Bank, St. Louis, Missouri, as tender agent (the "Tender
Agent") upon presentation and surrender of this Bond. Payment of interest on
this Bond will be made by check or draft of the Trustee mailed to the person in
whose name this Bond is registered on the Bond Register as of the close of
business of the Trustee on the Record Date for such Interest Payment Date,
except that interest not duly paid or provided for when due will be payable to
the person in whose name this Bond is registered at the close of business on the
Business Day immediately preceding the date of payment of such defaulted
interest as provided for in the hereinafter referred to Indenture. In the case
of an interest payment to any Owner of $1,000,000 or more in aggregate principal
amount of Bonds as of the commencement of business of the Trustee on the Record
Date for a particular Interest Payment Date or in the case of the purchase from
an Owner of $1,000,000 or more in aggregate principal amount of Bonds on the
Tender Date, payment of interest or the Tender Price, as applicable, will be
made by wire transfer to such Owner upon written notice to the Trustee from such
Owner containing the wire transfer address (which shall be in the continental
United States) to which such Owner wishes to have such wire directed and, with
regard to interest payments, such written notice is given by such Owner to the
Trustee not less than fifteen (15) days prior to such Record Date and regarding
payment of the Tender Price, which written notice accompanies such Owner's
Notice of Election to Tender Bonds.
Interest on this Bond will be includable in gross income of the Owner
hereof for federal income tax purposes.
The Bonds and the interest thereon are limited obligations of the Issuer
payable solely out of the Revenues and other moneys pledged thereto and held by
the Trustee as provided in the Indenture and are secured by a transfer, pledge
and assignment of and a grant of a security interest in the Trust Estate to the
Trustee and in favor of the Owners of the Bonds, as provided in the Indenture.
THE BONDS AND THE PREMIUM, IF ANY, AND INTEREST THEREON (INCLUDING ANY AMOUNTS
PAYABLE IN CONNECTION WITH ANY PREPAYMENT OR PURCHASE OF THE BONDS) ARE LIMITED
OBLIGATIONS OF THE ISSUER; THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON
THE BONDS (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH
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ANY PURCHASE OF THE BONDS) ARE PAYABLE SOLELY FROM THE REVENUES OR MONEYS TO BE
RECEIVED IN CONNECTION WITH THE FINANCING OF THE PROJECT OR FROM ANY OTHER
MONEYS MADE AVAILABLE TO THE ISSUER FOR SUCH PURPOSE; NEITHER THE BONDS NOR THE
INTEREST THEREON (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PURCHASE
OF THE BONDS) SHALL EVER CONSTITUTE AN INDEBTEDNESS OR A CHARGE AGAINST THE
GENERAL CREDIT OF THE STATE, THE ISSUER, OR ANY POLITICAL SUBDIVISION OF THE
STATE, OR OF THE TAXING POWERS OF THE STATE WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY LIMITATION AND SHALL NEVER CONSTITUTE OR GIVE RISE
TO ANY PECUNIARY LIABILITY OF THE STATE, THE ISSUER, OR ANY POLITICAL
SUBDIVISION OF THE STATE, THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS TO WHICH
THE FAITH OR CREDIT OF THE STATE, THE ISSUER, OR ANY POLITICAL SUBDIVISION OF
THE STATE, OR TAXING POWER OF THE STATE, IS PLEDGED.
No recourse shall be had for the payment of the principal of, premium, if
any or interest on, any of the Bonds or for any claim based thereon or upon any
obligation, covenant or agreement in the Indenture contained, against any past,
present or future director, trustee, officer, official, employee or agent of the
Issuer, or any director, trustee, officer, official, employee or agent of any
successor to the Issuer, as such, either directly or through the Issuer or any
successor to the Issuer, under any rule of law or equity, statute or
constitution or by the enforcement of any assessment or penalty or otherwise,
and all such liability of any director, trustee, officer, official, employee or
agent, as such, is hereby expressly waived and released as a condition of and
consideration for the execution of the Indenture and the issuance of any of the
Bonds.
Capitalized terms used herein shall have the meanings set forth in the
Trust Indenture, dated as of September 1, 1994 (the "Indenture"), by and between
the Issuer and the Trustee with respect to the Bond unless otherwise defined
herein.
ADDITIONAL PROVISIONS OF THIS BOND ARE SET FORTH ON THE REVERSE HEREOF.
This Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture until the Certificate of
Authentication hereon shall have been manually signed by an authorized officer
of the Trustee.
IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions and things
required to exist, to happen and to be performed precedent to and in the
issuance of this Bond have existed, have happened and have been performed in due
form, time and manner as required by law.
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IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed and
attested by the printed facsimile signatures of its duly authorized officers,
and its corporate seal to be printed hereon, all as of the Dated Date shown
above.
[SEAL] SOUTH CAROLINA JOBS-ECONOMIC
DEVELOPMENT AUTHORITY
By (Facsimile Signature)
--------------------------------------
Chairman, Board of Directors
ATTEST:
By (Facsimile Signature)
----------------------------------
Executive Director
AUTHENTICATION CERTIFICATE
The undersigned hereby certifies that this is one of the Bonds described
in the within-mentioned Indenture.
Date of Authentication:_________
MARK TWAIN BANK, as Trustee
By
--------------------------------------
Authorized Signatory
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(Form of Reverse of Bond)
CERTAIN DEFINITIONS
Unless otherwise defined herein, capitalized words and terms used in this
Bond shall have the meanings ascribed to such terms in the Indenture. In
addition, the following words and terms as used in this Bond shall have the
following meanings:
"Agreement" means the Loan Agreement, including the Exhibits attached
thereto, dated as of the date of the Indenture, between the Issuer and the
Borrower, with respect to the Bonds, as such Agreement may be from time to time
amended, restated or supplemented in accordance with the provisions of the
Agreement and the Indenture.
"Alternate Credit Facility" means any alternate credit facility designated
and qualified as such and provided in accordance with the Indenture.
"Alternate Credit Facility Date" means a Business Day on or prior to the
Termination Date on which the Borrower has complied with all requirements of the
Indenture regarding the substitution of an Alternate Credit Facility for the
Credit Facility then in effect.
"Annual Mode" means an Interest Mode during which the interest rate on the
Bonds is determined at twelve month intervals, as provided in the Indenture.
"Authorized Denominations" means (i) in the case of Bonds in a Weekly Mode
or Monthly Mode, $100,000 and any integral multiple of $5,000 in excess thereof;
(ii) in the case of Bonds in a Semiannual Mode, Annual Mode or Multiyear Mode,
$5,000 or any integral multiple thereof, provided that if the Credit Facility is
not exempt from registration under the Securities Act of 1933 and has not been
registered thereunder, as amended, then the Authorized Denomination shall be
$100,000 and any integral multiple of $5,000 in excess thereof; or (iii) in the
case of a Bond which is a Pledged Bond, $100,000 or any integral multiple of
$5,000 in excess thereof.
"Bond Registrar" means the Trustee, when acting as such.
"Business Day" means any day which is not (i) a Saturday, a Sunday or any
other day on which banking institutions in the City of New York, New York or the
city in which the principal corporate trust office of the Trustee, and the
principal office of the Remarketing Agent, the Tender Agent or the Credit
Enhancer is located, are required or authorized to close or (ii) a day on which
the New York Stock Exchange is closed.
"Credit Facility" means the letter of credit initially issued by Heller
Financial, Inc. or any Alternate Credit Facility issued by the Credit Enhancer
in substitution therefor in accordance with the Indenture, as the same may be
amended, supplemented, extended or renewed from time to time in accordance with
the Loan Agreement and the Indenture.
"Financial Institution" means any qualified institutional buyer, as that
term is defined from time to time in 17 C.F.R. ss.230.144A(a)(i) ("Rule 144A").
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"Immediate Notice" means notice by telephone, telegram, telex, telecopier
or other telecommunication device to such phone numbers or addresses as are
specified in the Indenture or such other phone number or address as the
addressee shall have directed in writing, promptly followed by written notice by
first-class mail postage prepaid to such addresses.
"Interest Mode" means a period of time relating to the frequency with
which the interest rate on the Bonds is determined pursuant to the Indenture,
which Interest Mode may be a Weekly Mode, a Monthly Mode, a Semiannual Mode, an
Annual Mode or a Multiyear Mode.
"Interest Mode Adjustment Date" means a date on which the Interest Mode of
the Bonds is changed from one Interest Mode to a different Interest Mode, and
such date shall be an Interest Payment Date.
"Interest Mode Adjustment Notice" means the notice of a new Interest Mode
with respect to any Bonds in accordance with the Indenture.
"Interest Payment Date" means the date on which an interest installment is
required to be paid on the Bonds to the Owners thereof, (i) with respect to all
Bonds other than Pledged Bonds, (1) as to the first Interest Period, October 3,
1994; (2) as to any Weekly Mode or Monthly Mode, the first Business Day of each
month; (3) as to any Semiannual Mode, Annual Mode or Multiyear Mode, each
September 1, and March 1, commencing with the first such September 1, or March 1
following the Interest Mode Adjustment Date, or the next succeeding Business Day
thereafter if any such September 1, or March 1, is not a Business Day; and (4)
an Interest Mode Adjustment Date; and (ii) with respect to Pledged Bonds, the
first Business Day of each calendar month and the date of sale of Pledged Bonds.
"Interest Period" means, with respect to the Bonds in any Interest Mode,
the period from and including each Interest Payment Date for such Interest Mode
to and including the day immediately preceding the following Interest Payment
Date for such Interest Mode, except that the first Interest Period shall be the
period from and including the date of original delivery of the Bonds to and
including the day immediately preceding the first Interest Payment Date for the
Bonds.
"Mandatory Purchase Date" means each date designated by the Credit
Enhancer for purchase of the Bonds in accordance with the Indenture.
"Maximum Rate" means the lesser of (i) 15% per annum or (ii) the rate
utilized in the Credit Facility for purposes of computing the interest component
thereof.
"Monthly Mode" means an Interest Mode during which the interest rate on
the Bonds is determined in monthly intervals as set forth in the Indenture.
"Multiyear Mode" means an Interest Mode during which the interest rate on
the Bonds is determined at intervals of integral (greater than one) multiples of
twelve months, as provided in the Indenture.
"Notice of Election to Tender/Retain Bonds" means the Notice of Election
to Tender/Retain Bonds in substantially the form attached to the Indenture
delivered by a Bondowner to the Tender
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Agent (i) which contain a demand for the purchase of Bonds on the Tender Date,
or (ii) following receipt of a notice of a mandatory tender of Bonds which
contain an election to retain Bonds. "Notice of Election to Tender Bonds" shall
refer to those provisions of the Notice of Election to Tender/Retain Bonds which
relate to the election to tender Bonds as provided in the Indenture. "Notice of
Election to Retain Bonds" shall refer to those provisions of the Notice of
Election to Tender/Retain Bonds which relate to the election to retain Bonds.
"Rate Adjustment Date" means the date as of which the interest rate
determined for an Interest Mode shall be effective, which (i) during a Weekly
Mode shall be Thursday of each week (whether or not a Business Day); (ii) during
a Monthly Mode shall be the first calendar day of each month; (iii) during a
Semiannual Mode shall be the first calendar day of such Semiannual Mode which
shall be September 1 or March 1 and the first day following each six-month
period thereafter; and, (iv) during an Annual Mode or a Multiyear Mode shall be
the first calendar day of such Annual Mode or Multiyear Mode, which shall be
September 1, and thereafter the first calendar day following the completion of
the then current Annual Mode or Multiyear Mode. The initial Rate Adjustment Date
is September 15, 1994.
"Rate Adjustment Notice" means the Rate Adjustment Notice to be mailed by
the Trustee in the form and in accordance with the Indenture.
"Rate Determination Date" means no later than 4:00 p.m., New York Time, on
the Business Day immediately preceding a Rate Adjustment Date for a Weekly or a
Monthly Mode, and on the third (3rd) Business Day immediately preceding a Rate
Adjustment Date for a Semiannual Mode, Annual Mode or Multiyear Mode.
"Rate Period" means the period from a Rate Adjustment Date to, but not
including, the next Rate Adjustment Date.
"Record Date" means, with respect to Bonds in a Semiannual Mode, an Annual
Mode or a Multiyear Mode, the fifteenth calendar day, whether or not a Business
Day of the month, preceding such Interest Payment Date, and, with respect to
Bonds in a Weekly Mode or Monthly Mode, the fifth calendar day immediately
preceding such Interest Payment Date.
"Semiannual Mode" means an Interest Mode during which the interest rate on
the Bonds is determined at six-month intervals as set forth in the Indenture.
"Tender Agent" means initially the Trustee and any successor tender agent
appointed pursuant to the Indenture. The Tender Agent shall act as Paying Agent
as to Tendered Bonds.
"Tender Date" means (a) each date designated by a Bondowner for purchase
of any Bonds in accordance with the provisions of the Indenture, and (b) each
date on which Bonds are required to be tendered in accordance with the
provisions of the Indenture, including any Mandatory Purchase Date, whether or
not such Bonds are actually tendered.
"Tender Price" means 100% of the principal amount of any Bond tendered
pursuant to the provisions of the Indenture plus interest accrued and unpaid
thereon to, but not including, the Tender Date.
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"Tendered Bonds" means (a) any Bonds tendered by a Bondowner for purchase
pursuant to the optional redemption provisions of the Indenture, and (b) any
Bonds required to be tendered for purchase pursuant to the mandatory tender
provisions of the Indenture, in each case whether or not such Bonds are actually
tendered.
"Termination Date" means (i) if the Credit Facility is not a letter of
credit, the maturity or expiration date of the Credit Facility or (ii) if the
Credit Facility is a letter of credit, the Interest Payment Date which is at
least five (5) days preceding the date on which the Credit Facility is to expire
pursuant to its terms, in each case including any extension of such maturity or
expiration date.
"Weekly Mode" means an Interest Mode during which the interest rate on the
Bonds is determined in weekly intervals as set forth in the Indenture.
GENERAL PROVISIONS
This Bond is one of a series of Bonds of the Issuer limited in aggregate
original principal amount to $3,000,000 and designated as Variable Rate Demand
Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc.
Project) Series 1994B (the "Bonds"). All of the Bonds are issued under a Trust
Indenture dated as of September 1, 1994 (the "Indenture"), between the Issuer
and the Trustee, to provide funds to make a loan (the "Loan") to Roller Bearing
Company of America, Inc., a Delaware corporation (the "Borrower"), under a Loan
Agreement dated as of September 1, 1994 (the "Agreement"), between the Issuer
and the Borrower. The Loan shall provide funds to finance the Project (as
defined in the Agreement) and to pay certain costs of issuance, all by the
authority of and in full compliance with the provisions, restrictions and
limitations of the Constitution and statutes of the State of South Carolina,
including particularly Title 41, Chapter 43, Code of Laws of South Carolina
1976, as amended, and pursuant to proceedings duly had by the Issuer.
Concurrently with the original issuance herewith, the issuer has delivered
its $7,700,000 aggregate original principal amount Variable Rate Demand
Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc.
Project) Series 1994A (the "Series 1994A Bonds").
TO INITIALLY SECURE THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE
BONDS, THE BORROWER HAS CAUSED HELLER FINANCIAL, INC., A DELAWARE CORPORATION
(THE "CREDIT ENHANCER"), TO DELIVER AN IRREVOCABLE TRANSFERABLE DIRECT-PAY
LETTER OF CREDIT (THE "CREDIT FACILITY") TO THE TRUSTEE. SUBJECT TO CERTAIN
CONDITIONS, THE CREDIT FACILITY MAY BE REPLACED BY AN ALTERNATE CREDIT FACILITY.
UNDER THE CREDIT FACILITY, THE CREDIT ENHANCER IS OBLIGATED TO PAY AMOUNTS
SUFFICIENT FOR THE PAYMENT OF (A) THE PRINCIPAL OF THE BONDS OR THE PORTION OF
THE TENDER PRICE CORRESPONDING TO THE PRINCIPAL OF THE BONDS, AND (B) ACCRUED
INTEREST ON THE BONDS OR THE PORTION OF THE TENDER PRICE OF THE BONDS
CORRESPONDING TO ACCRUED INTEREST THEREON. THE CREDIT FACILITY IS SCHEDULED TO
TERMINATE ON SEPTEMBER 15, 1999, UNLESS EXTENDED OR TERMINATED EARLIER PURSUANT
TO ITS TERMS.
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Counterparts or copies of the Indenture and the other documents referred
to herein are on file at the Principal Office of the Trustee in St. Louis,
Missouri, and reference is hereby made thereto and to the documents referred to
therein for the provisions thereof, including the provisions with respect to the
rights, obligations, duties and immunities of the Issuer, the Trustee, the
Credit Enhancer, the Borrower and the Registered Owners of the Bonds under such
documents, to all of which the Registered Owner hereof, by acceptance of this
Bond, assents. The Registered Owner of this Bond shall have no right to enforce
the provisions of the Indenture or to institute, appear in or defend any suit or
other proceedings with respect thereto, except as provided in the Indenture. The
Indenture and other documents referred to therein may be modified or amended to
the extent permitted by and as provided therein. Upon the occurrence of certain
Events of Default (as defined in the Indenture), all Bonds may be declared
immediately due and payable as provided in the Indenture. Interest on the Bonds
shall cease to accrue on the date of such declaration. Subject to the
limitations provided for in the Indenture, this Bond may be exchanged for a like
aggregate principal amount of Bonds in Authorized Denominations. Bonds are
transferable by the Registered Owner thereof in person or by such Owner's
attorney duly authorized in writing at the Principal Office of the Bond
Registrar, but only in the manner and subject to the limitations provided for in
the Indenture and upon surrender and cancellation of this Bond. Such limitations
include a requirement that Bonds that are subject to the benefits of the Credit
Facility may be sold, remarketed or otherwise transferred only in transactions
in which the Bonds and the related Credit Facility are registered wider the
Securities Act and any applicable state securities statutes or in transactions
in which the Bonds and the related Credit Facility are except from the
registration requirements of the Securities Act and any applicable state
securities laws, and any Bondowner desiring to effect such transfer is required
to indemnify the Issuer, the Trustee and the Credit Enhancer against any
liability, cost or expense (including attorneys' fees) that may result if the
transfer is not so exempt, or is not made in accordance with such federal and
state law. Upon such transfer a new Bond or Bonds in Authorized Denominations
for the same aggregate principal amount will be issued to the transferee in
exchange. The Bond Registrar may require a Registered Owner, among other things,
to furnish appropriate endorsements and transfer documents and to pay any taxes
and fees required by law or permitted by the Indenture in connection with the
exchange or transfer. The Issuer, the Tender Agent and the Trustee may treat the
Registered Owner of this Bond as the absolute Owner for the purpose of receiving
payment as herein provided and for all other purposes and none of them shall be
affected by any notice to the contrary.
INTEREST RATE PROVISIONS
(a) Generally. The interest rate on the Bonds shall be separately
determined by Stern Brothers & Co., St. Louis, Missouri, or any successor or
assign (the "Remarketing Agent"), as provided in the Indenture and as summarized
below. In no event shall the interest rate borne by the Bonds at any time exceed
the Maximum Rate. Interest accrued on the Bonds during each Interest Period
shall be paid on the next succeeding Interest Payment Date and, while the Bonds
are in a Weekly Mode or a Monthly Mode, shall be computed on the basis of a year
of 365 or 366 days, as appropriate, for the actual number of days elapsed and,
while the Bonds are in a Semiannual Mode, an Annual Mode or a Multiyear Mode,
shall be computed on the basis of a year of 360 days and twelve 30-day months.
Each determination of the interest rate for the Bonds, as provided in the
Indenture, shall be conclusive and binding upon the Bondowners, the Issuer, the
Borrower, the Tender Agent, the Remarketing Agent, the Credit Enhancer and the
Trustee. Upon request, the Remarketing Agent shall give the Issuer, the Trustee,
the Tender Agent, the Credit
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Enhancer, the Borrower or any Bondowner Immediate Notice of the interest rate on
the Bonds at any time.
(b) Weekly Mode. The interest rate for Bonds in a Weekly Mode shall be
determined in the following manner. On each Rate Determination Date, the
Remarketing Agent shall determine the interest rate which such Bonds shall bear
during the Rate Period following such Rate Determination Date. The interest rate
so determined shall be effective on the Rate Adjustment Date. Promptly after
each Rate Adjustment Date, the Remarketing Agent shall give written notice of
the interest rate so set to the Trustee, the Credit Enhancer and the Borrower.
On each Interest Payment Date the Trustee shall mail to each Bondowner a written
statement showing the interest rates for such Bonds during the preceding
Interest Period.
(c) Monthly Mode. The interest rate for any Bonds in a Monthly Mode shall
be determined in the following manner. On each Rate Determination Date, the
Remarketing Agent shall determine the interest rate which such Bonds shall bear
during the Rate Period following such Rate Determination Date. The interest rate
so determined shall be effective on the Rate Adjustment Date. Promptly after
each Rate Determination Date, the Remarketing Agent shall give written notice of
the interest rate so set to the Borrower, the Credit Enhancer and the Trustee.
On each Interest Payment Date the Trustee shall mail to each Bondowner a written
statement showing the interest rates during the preceding Interest Period.
(d) Semiannual Mode. Annual Mode or Multiyear Mode. The interest rate for
Bonds in a Semiannual Mode, an Annual Mode or a Multiyear Mode shall be
determined in the following manner. Not less than 30 days nor more than 35 days
before each Rate Adjustment Date, the Remarketing Agent shall determine the
interest rate (the "Preliminary Rate") which the Bonds would bear if such day
were a Rate Determination Date. The Remarketing Agent shall give Immediate
Notice of the Preliminary Rate to the Borrower, the Credit Enhancer and the
Trustee. The Trustee shall thereupon mail, not less than 25 days prior to the
Rate Adjustment Date, to each Bondowner a Rate Adjustment Notice. On the Rate
Determination Date the Remarketing Agent shall determine the interest rate which
each of such Bonds shall bear for each such Rate Period, which rate may be less
than, equal to, or greater than the Preliminary Rate. By Immediate Notice on
such Rate Determination Date, the Remarketing Agent shall give written notice of
the interest rate so set to the Borrower, the Credit Enhancer, the Tender Agent
and the Trustee, and the Trustee shall mail to all Bondowners written notice of
the interest rate so determined.
(e) Interest Modes. The Bonds shall initially be in a Weekly Mode. The
Interest Mode for the Bonds may be changed from time to time at the option of
the Borrower, with the prior written consent of the Credit Enhancer exercised as
provided in the Indenture, to another Interest Mode on an Interest Payment Date
on which the Bonds are subject to optional redemption pursuant to the Indenture
at a redemption price equal to the principal amount thereof, plus accrued
interest, without premium, as selected by the Borrower. The Borrower may
exercise such option at any time by giving written notice not more than 60 nor
less than 45 days prior to the Interest Mode Adjustment Date to the Issuer, the
Trustee, the Remarketing Agent, the Tender Agent and the Credit Enhancer stating
its election to convert the Interest Mode for the Bonds to another Interest
Mode, which notice shall specify the new Interest Mode and the Interest Mode
Adjustment Date. Such Interest Mode Adjustment Date shall be a Rate Adjustment
Date for the Bonds in such new Interest Mode. Upon the exercise of such option
by the Borrower and upon the Trustee's receipt of the
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prior written consent of the Credit Enhancer to the exercise of such option, not
less than 30 days prior to the Interest Mode Adjustment Date, the Trustee shall
mail an Interest Mode Adjustment Notice to each Owner of Bonds, and, in the
event of a conversion to a Weekly Mode or a Monthly Mode from any other Interest
Mode, a Notice of Election to Tender Bonds in substantially the form as provided
in the Indenture.
REDEMPTION PROVISIONS
The Bonds are subject to redemption prior to maturity as provided in the
Indenture which redemption provisions are summarized as follows:
Optional Redemption. Bonds (other than any Bonds in a Multiyear Mode) are
subject to redemption prior to maturity at the option of the Issuer upon
instructions from the Borrower with the prior written consent of the Credit
Enhancer, in whole or in part in Authorized Denominations, on any Interest
Payment Date at 100% of the principal amount thereof plus accrued interest to
the redemption date, first, from proceeds of a payment under the Credit Facility
and, second, from other Available Moneys. Bonds in a Multiyear Mode are subject
to redemption prior to maturity at the option of the Issuer upon instructions
from the Borrower with the prior written consent of the Credit Enhancer, in
whole or in part in Authorized Denominations, on any Interest Payment Date at
the redemption prices set forth below plus accrued interest to the redemption
date, first, from proceeds of a payment under the Credit Facility and, second,
from other Available Moneys:
OPTIONAL REDEMPTION IN MULTIYEAR MODE
Length of Redemption Prices
Multiyear Mode as a Percentage of Call Protection
(In Years)* Principal Amounts Period*
- -------------- ------------------ ---------------
Greater than 10 102% after 7 years 7 years
declining 1/2% per 12
months to 100%
Less than or equal 102% after 4 years 4 years
to 10 and greater declining 1/2% per 12
than 7 months to 100%
Less than or equal 102% after 3 years 3 years
to 7 and greater declining 1% per 12
than 5 months to 100%
Less than or equal 101% after 2 years 2 years
to 5 and greater declining 1/2% per 6
than 2 months to 100%
Less than or equal 100 1/2% after 1 year 1 year
to 2 and greater declining 1/2% per 6
than 1 months to 100%
- ----------
* Measured from and including the first day of such Rate Period.
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Mandatory Redemption. The Bonds are also subject to mandatory redemption by the
Issuer in each case, first, from proceeds of a payment under the Credit Facility
and, second, from other Available Moneys at 100% of the principal amount
thereof, without premium, plus accrued interest to the date of redemption, (i)
immediately in whole, in the event the Trustee shall receive notice from the
Credit Enhancer of the occurrence of a default under the Letter of Credit
Agreement and irrevocable instructions to draw on the Credit Facility, such
notice being conclusive and binding as to the occurrence of a default under the
Letter of Credit Agreement and (ii) in part on the earliest practicable date for
which notice can be given, from proceeds of the Bonds remaining in the Project
Fund on the Completion Date. In addition, the Bonds shall be subject to
redemption by the Issuer, at the option and upon instructions from the Borrower
with the prior written consent of the Credit Enhancer, 'in whole or in part at
any time on the earliest practicable date for which notice can be given, upon
the occurrence of a condemnation, loss of Title or casualty loss to the
"Project", as defined in the Trust Indenture pertaining to the Series 1994A
Bonds, at 100% of the principal amount thereof, without premium, plus accrued
interest to the date of redemption.
The Trustee shall select Bonds for redemption as provided in the
Indenture. The Trustee shall cause notice of any such redemption to be given as
provided in the Indenture to the Registered Owner of the Bonds designated for
redemption in whole or in part, at its address as shown on the Bond Register by
mailing a copy of the redemption notice by first-class mail, postage prepaid, at
least 15 and not more than 30 days prior to the redemption date. The failure of
the Trustee to give notice to any Bondowner or any defect of such notice shall
not affect the validity of the redemption of any other Bonds and provided
further that no such prior notice of redemption is required for a mandatory
redemption because of a default under the Letter of Credit Agreement. On the
date fixed for redemption by notice given as provided in the Indenture, the
Bonds so called for redemption shall become and be due and payable at the
redemption price provided for redemption of such Bonds on such date.
TENDER PROVISIONS
Optional Tender. While the Bonds are in a Weekly Mode or Monthly Mode, any Bond
or portion thereof shall be purchased on the Tender Date by the Tender Agent on
the demand of the Owner thereof, at the Tender Price, upon delivery to the
Tender Agent on a Business Day at its Principal Office of an irrevocable written
notice in the form of the Notice of Election to Tender Bonds which states (A)
the principal amount and number of such Bond (and the portion of such Bond to be
purchased if less than the full principal amount is to be purchased), the name
and the address of such Owner and the taxpayer identification number, if any, of
such Owner and (B) that such Bond, or portion thereof, is to be purchased on a
day (which shall be the Tender Date), which day will be a Business Day which is
at least seven (7) calendar days after the receipt by the Tender Agent of such
Notice of Election to Tender Bonds. Such Notice of Election to Tender Bonds
shall be deemed received on a Business Day if received by the Tender Agent no
later than 3:00 p.m., New York Time, on such Business Day. Any Notice of
Election to Tender Bonds received by the Tender Agent after 3:00 p.m., New York
Time, shall be deemed received on the next succeeding Business Day.
Any Owner of Bonds who has demanded purchase of its Bond or portion
thereof as described above shall deliver such Bond (with an appropriate transfer
of registration form executed
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in blank, together with a signature guaranty) (together with, in the case of any
Bond with a specified Tender Date prior to an Interest Payment Date and after
the related Record Date, a due-bill check in form satisfactory to the Tender
Agent for interest due on such Bond on such Interest Payment Date) to the Tender
Agent at its Principal Office prior to 10:30 a.m., New York Time, on the Tender
Date specified in the aforesaid written notice.
Mandatory Tender.
(1) On Termination Date or Interest Mode Adjustment Date. All Bonds
are required to be tendered to the Tender Agent for purchase on the
Termination Date or an Interest Mode Adjustment Date; provided, however,
that if the credit enhancement requirements of the Indenture are met,
there shall not be so tendered on the Termination Date or the Interest
Mode Adjustment Date, as applicable, any Bonds or portion thereof which
will be in Authorized Denominations with respect to which the Owners
thereof have delivered to the Tender Agent by hand or by mail at its
Principal Office a properly completed Notice of Election to Retain Bonds,
together with a signature guaranty, on or prior to the fifth Business Day
next preceding the Termination Date or the Interest Mode Adjustment Date,
as applicable. Any Bondowner required to tender Bonds under this
subsection (1) shall tender its Bonds to the Tender Agent for purchase at
its Principal Office prior to 10:30 a.m., New York Time, on the
Termination Date or the Interest Mode Adjustment Date, as applicable. The
failure to tender Bonds on any such date is the equivalent of a tender and
such Bonds shall be converted to Undelivered Bonds and replacement Bonds
shall be executed, authenticated and delivered in the place of such
Undelivered Bonds and such replacement Bonds may be offered and sold by
the Remarketing Agent in accordance with the Indenture and Remarketing
Agreement if the credit enhancement requirements of the Indenture are met.
(2) On Alternate Credit Facility Date. While the Bonds are in an
Interest Mode other than a Multiyear Mode, all Bonds are required to be
tendered to the Tender Agent for purchase on an Alternate Credit Facility
Date; provided, however, that there shall not be so tendered on the
Alternate Credit Facility Date any Bonds or portion thereof which will be
in Authorized Denominations with respect to which the Owners thereof have
delivered to the Tender Agent by hand or by mail at its Principal Office a
properly completed Notice of Election to Retain Bonds, together with a
signature guaranty, on or prior to the fifth Business Day next preceding
the Alternate Credit Facility Date. Any Bondowner required to tender Bonds
under this subsection (2) shall tender its Bonds to the Tender Agent for
purchase at its Principal Office prior to 10:30 a.m., New York Time, on
the Alternate Credit Facility Date. The failure to tender its Bonds on any
such date is the equivalent of a tender and such Bonds shall be converted
to Undelivered Bonds and replacement Bonds shall be executed,
authenticated and delivered in the place of such Undelivered Bonds and
such replacement Bonds may be offered and sold by the Remarketing Agent in
accordance with the Indenture and Remarketing Agreement if the credit
enhancement requirements of the Indenture are met.
(3) On Rate Adjustment Date During Semiannual Mode, Annual Mode and
Multiyear Mode. While the Bonds are in a Semiannual Mode, Annual Mode or
Multiyear Mode, all Bonds are required to be tendered to the Tender Agent
for purchase on a Rate
A-13
<PAGE>
Adjustment Date; provided, however, that there shall not be so tendered on
the Rate Adjustment Date any Bonds or portions thereof which will be in
Authorized Denominations with respect to which the Owners thereof have
delivered to the Tender Agent by hand or by mail at its Principal Office a
properly completed Notice of Election to Retain Bonds, together with a
signature guaranty, on or prior to the fifth Business Day next preceding a
Rate Adjustment Date. Any Bondowner required to tender Bonds under this
subsection (3) shall tender its Bonds to the Tender Agent for purchase at
its Principal Office prior to 10:30 a.m., New York Time, on the Rate
Adjustment Date. The failure to tender its Bonds on any such date is the
equivalent of a tender and such Bonds shall be converted to Undelivered
Bonds and replacement Bonds shall be executed, authenticated and delivered
in the place of such Undelivered Bonds as provided in the Indenture and
such replacement Bonds may be offered and sold by the Remarketing Agent in
accordance with the Indenture and Remarketing Agreement if the credit
enhancement requirements of the Indenture are met.
(4) Mandatory Tender in Lieu of Acceleration on Default.
Additionally, all Bonds are subject to mandatory tender for purchase on
the Mandatory Purchase Date from the Bondowners by the Trustee for the
account of the Credit Enhancer in lieu of acceleration of the Bonds and
mandatory redemption, upon the occurrence of an event of default under the
Letter of Credit Agreement and notice from the Credit Enhancer requiring
the mandatory purchase of the Bonds. Upon receipt of notice from the
Credit Enhancer directing the Trustee to purchase the Bonds and setting
the Mandatory Purchase Date, which shall be a Business Day which is at
least three (3) and no more than ten (10) calendar days after the receipt
by the Trustee of such notice, the Trustee shall immediately request a
payment under the Credit Facility to be received no later than 3:00 P.M.,
New York Time, on the Mandatory Purchase Date, and shall also send notice
to the Bondowners of the mandatory purchase. On the Mandatory Purchase
Date, the Tender Agent shall pay to the Bondowners the purchase price for
the Bonds, which shall be an amount equal to 100% of the principal amount
of any Bond tendered or deemed tendered plus accrued and unpaid interest
thereon to the Mandatory Purchase Date. Any Bondowner required to tender
Bonds under this subsection (4) shall tender its Bonds to the Tender Agent
for purchase at its Principal Office prior to 10:30 A.M., New York Time,
on the Mandatory Purchase Date. The failure to tender its Bonds on any
such date is the equivalent of a tender and such Bonds shall be converted
to Undelivered Bonds and replacement Bonds shall be executed,
authenticated and delivered in the place of such Undelivered Bonds if the
credit enhancement requirements of the Indenture are met.
Notice of Mandatory Tender. The Trustee shall give notice to Bondowners of the
mandatory tender for Bonds on an Interest Mode Adjustment Date, on an Alternate
Credit Facility Date, if the Bonds are in a Multiyear Mode, Annual Mode or
Semiannual Mode on a Rate Adjustment Date, on the Termination Date and on the
Mandatory Purchase Date in accordance with the provisions of the Indenture.
Failure to Give Notice. Failure by the Trustee to give any notice regarding a
mandatory tender as provided in the Indenture, any defect therein or any failure
by any Bondowner to receive any such notice shall not in any way change such
Owner's obligation to tender the Bonds for purchase on any mandatory Tender
Date.
A-14
<PAGE>
Irrevocability of Election. Any election by a Bondowner to exercise the option
to have its Bond or Bonds purchased, or any election by a Bondowner to retain
its Bond or Bonds upon any mandatory Tender Date, shall be irrevocable upon
delivery to the Tender Agent of the Notice of Election to Tender Bonds (together
with, if required at the time of delivery of such notice, the Tendered Bonds) or
of the Notice of Election to Retain Bonds, as the case may be. If any Owner of
Bonds fails to deliver the Bonds described in such Owner's Notice of Election to
Tender Bonds, such Bonds shall be converted to Undelivered Bonds. Replacement
Bonds shall be executed, authenticated and delivered in place of such
Undelivered Bonds as provided in the Indenture and such replacement Bonds may be
offered and sold by the Remarketing Agent in accordance with the Indenture and
Remarketing Agreement if the credit enhancement requirements of the Indenture
are met.
Purchase of Tendered Bonds. Tendered Bonds shall be purchased from the Owners
thereof on the Tender Date at the Tender Price which shall be payable solely
from the following sources in the order of priority listed: (1) proceeds of the
remarketing of such Tendered Bonds pursuant to the Remarketing Agreement and the
Indenture which constitute Available Moneys; and (2) proceeds of a payment under
the Credit Facility to purchase such Tendered Bonds.
Notwithstanding any provision of the Indenture to the contrary, there
shall be no purchases (other than a mandatory tender on the Termination Date or
a mandatory purchase on the Mandatory Purchase Date) or sales of Bonds pursuant
to the provisions of the Indenture relating to the tender of Bonds if there
shall have occurred and be continuing certain Events of Default under the
Indenture.
A-15
<PAGE>
================================================================================
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________________________________________________
(Please Print or Typewrite Name, Address and Social Security Number or Taxpayer
Identification Number of Transferee) the within Bond and all rights therein, and
hereby irrevocably constitutes and appoints ____________________ Attorney to
transfer the within Bond on the books kept for registration thereof, with full
power of substitution in the premises.
Dated:
------------- -----------------------------------------
NOTICE: The signature to this Assignment
must correspond with the name as it
appears upon the face of the within Bond
in every particular, without alteration
or enlargement or any change whatever.
Signature Guaranteed By:
-----------------------------------------
NOTICE: Signature(s) must be guaranteed
by an eligible guarantor institution as
defined by SEC Rule l7Ad-15 (17 CFR
240.l7Ad-15).
By
--------------------------------------
Title
------------------------------------
================================================================================
A-16
<PAGE>
The following abbreviations, when used in the inscription on the face of
the within Bond, shall ,be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with right of survivorship and not as tenants
in common
UNIF TRANS MIN ACT _______________
(Cust)
Custodian ______________
(Minor)
under Uniform Transfers to Minors Act
__________________________
(State)
Additional abbreviations may also be used though not in the above list.
================================================================================
A-17
<PAGE>
LEGAL OPINION
I, the undersigned, Executive Director of the South Carolina Jobs-Economic
Development Authority, hereby certify that the following is a true and correct
copy of the approving legal opinion of Sinkler & Boyd, P.A., on the within Bond
and the series of which said Bond is a part, except that it omits the date of
such opinion; that said legal opinion was manually executed and was dated and
issued as of the date of delivery of and payment for such Bonds, and is on file
with ____________________, the Trustee.
facsimile
--------------------------------------------------
Executive Director
South Carolina Jobs-Economic Development Authority
================================================================================
(Legal Opinion)
A-18
<PAGE>
EXHIBIT B
INVESTMENT SECURITIES COLLATERAL REQUIREMENT
Collateral securing Investment Securities must comply with the following
requirements:
(i) The Trustee or a third party acting solely as agent for the
Trustee has possession of the collateral;
(ii) The Trustee or a third party acting as agent for the Trustee
shall have a first perfected security interest in the collateral free and
clear of the claims of any third parties;
(iii) The collateral will consist of Government Securities and will
have a minimum market value (expressed as a percentage of the obligation)
on a valuation date as follows:
Remaining Maturity
Frequency of
Valuation 0*-1 yrs 1*-5 yrs 5*-10 yrs 10*-15 yrs 15*-30 yrs
- ------------ -------- -------- --------- ---------- ----------
Daily 103% 106% 107% 109% 116%
Weekly 104 112 114 120 125
Monthly 107 123 130 133 143
Quarterly 108 125 135 140 150
- ----------
* Not inclusive
(iv) In the event the collateral does not meet the requisite
collateral percentage set forth in (iii) above on a valuation date, the
party supplying the collateral shall have the following number of days to
provide additional collateral in order to meet the requisite percentage:
(a) one business day for daily valuations,
(b) two business days for weekly valuations, and
(c) one month for monthly and quarterly valuations; and
(v) The Trustee will liquidate the collateral and reinvest the
proceeds in Investment Securities if the requisite collateral percentage
is not maintained after the period set forth in (iv) above.
B-1
<PAGE>
EXHIBIT C
[RESERVED.]
C-1
<PAGE>
South Carolina Jobs-Economic Development Authority
Variable Rate Demand
Industrial Development Revenue Bonds
(Roller Bearing Company of America, Inc. Project)
Series 1994B
EXHIBIT D
NOTICE OF ELECTION TO TENDER/RETAIN BONDS
The undersigned hereby irrevocably notifies ___________________, as Tender
Agent, of its election to (check one)
____ (i) present the Bonds described below and have such Bonds
purchased by the Tender Agent on ____________, ___ (the
"Tender Date") at the Tender Price equal to 100% of the
principal amount plus interest accrued and unpaid thereon, to,
but not including, the Tender Date.
____ (ii) retain the Bonds described below. The undersigned hereby
acknowledges that any rating on the Bonds may be reduced or
withdrawn after the date hereof. [If the Interest Mode is
being adjusted from a Weekly Mode or Monthly Mode to any other
Interest Mode add the following: "and that the tender option
terminates on such Interest Mode Adjustment Date"]
This Notice shall not be accepted by the Tender Agent unless it is
properly completed and received at its offices (specified below). Such Notice
must be delivered to the Tender Agent on a Business Day by hand or by mail, at
____________, Attention: Corporate Trust Department.
Provisions Relating to Election to Retain Bonds. This Notice must be
delivered to the Tender Agent on a Business Day by hand or by mail, at
_____________, Attention: Corporate Trust Department, on or prior to the fifth
Business Day next preceding (i) a Rate Adjustment Date, (ii) an Interest Mode
Adjustment Date, or (iii) an Alternate Credit Facility Date, as such terms are
defined in the Indenture.
AN OWNER'S EXERCISE OF THE OPTION TO RETAIN SUCH BOND IS IRREVOCABLE AND
BINDING ON SUCH OWNER AND CANNOT BE WITHDRAWN.
Provisions Relating to Election To Tender Bonds: The undersigned hereby
agrees to sell, assign and transfer the Bonds to the Tender Agent, and hereby
irrevocably constitutes and appoints the Tender Agent, as duly authorized
attorney, to authorize the Trustee to transfer the Bonds on the books kept for
registration thereof and to register such Bonds, with full power of
substitution. The undersigned agrees to deliver to the Tender Agent, at
__________________________, Attention: Corporate Trust Department, the Bonds at
or before 10:30 a.m., New York Time, on the Tender Date.
AN OWNER'S EXERCISE OF THE OPTION TO HAVE SUCH BOND PURCHASED IS
IRREVOCABLE AND BINDING ON SUCH OWNER AND CANNOT BE WITHDRAWN. IF ANY
OWNER OF BONDS SHALL FAIL TO DELIVER THE BONDS DESCRIBED IN SUCH OWNER'S
NOTICE, SUCH BONDS SHALL CONSTITUTE UNDELIVERED BONDS. REPLACEMENT BONDS
D-1
<PAGE>
SHALL BE EXECUTED, AUTHENTICATED AND DELIVERED IN THE PLACE OF SUCH UNDELIVERED
BONDS AS PROVIDED IN THE INDENTURE AND SUCH REPLACEMENT BONDS MAY BE OFFERED AND
SOLD BY THE REMARKETING AGENT IN ACCORDANCE WITH THE REMARKETING AGREEMENT.
The undersigned hereby directs the Tender Agent to make payment to the
undersigned of the Tender Price of the Bonds, together with accrued interest
thereon, and elects to receive payment of the Tender Price of the Bonds, in one
of the following manners (check the desired method):
MANNER A __ by check or draft mailed to the Owner on the applicable
Tender Date, upon surrender of the Bonds (if not submitted
herewith) to the Tender Agent at the address specified above
for hand delivery.
MANNER B __ by wire transfer of immediately available funds to account
number __________________ at __________________________ (must
be in continental United States) on the applicable Tender
Date; provided however, that the undersigned may not utilize
this Manner B to receive the Tender Price unless the
undersigned is the Owner of and is tendering at least
$1,000,000 aggregate principal amount of the Bonds and the
wire transfer instructions are provided to the Tender Agent
with this Notice.
General Provisions. The Tender Agent's determination of whether this
Notice is properly completed and the compliance with the delivery requirements
set forth herein shall be binding on the undersigned.
D-2
<PAGE>
Bond or Bonds (or Portions Thereof)
Presented For Purchase/To Be Retained
Amount thereof being
Tendered(1)/Amount thereof
Bond Number(s) being Retained(2)
________ ________
________ ________
________ ________
________ ________
Total
Amount: ____________
(1) Unless Bondowner is having all of his Bonds purchased, principal
amount must be $100,000 or integral multiples of $5,000 in excess thereof if in
the Weekly Mode or the Monthly Mode and $5,000 or integral multiples thereof if
in the Semiannual Mode, Annual Mode and Multiyear Mode, with remaining principal
of retained Bonds in Authorized Denominations.
(2) Must be a principal amount which is $100,000 or integral multiples of
$5,000 in excess thereof if in the Weekly Mode or the Monthly Mode and $5,000 or
integral multiples thereof if in the Semiannual Mode, Annual Mode and Multiyear
Mode.
Signature(s)* ______________________________________
______________________________________
Signature
guaranteed by ______________________________________
____________________________________________________
Print or Type Name
____________________________________________________
Street Address
____________________________________________________
City, State and zip Code
____________________________________________________
Area Code and Telephone Number
____________________________________________________
Social Security Number or Taxpayer ID Number:
* The signature(s) to this Notice must correspond with to the name(s) of
the Owner of any Bond(s) submitted herewith, as it appears on the books of the
Tender Agent, in every particular without alteration, enlargement or any change
whatsoever and such signature must be guaranteed by an eligible guarantor
institution as defined by SEC Rule l7Ad-15 (17 CFR 240.l7Ad-15).
D-3
<PAGE>
EXHIBIT E
RATE ADJUSTMENT NOTICE
This notice is being sent pursuant to the provisions of the Trust
Indenture dated as of September 1, 1994 (the "Indenture") between the South
Carolina Jobs-Economic Development Authority (the "Issuer") and
__________________________, as Trustee (the "Trustee"). Capitalized terms used
in this notice shall have the same meanings as in your Bond, unless otherwise
defined. You are hereby notified as follows:
1. The interest rate on the Issuer's Variable Rate Demand Industrial
Development Revenue Bonds (Roller Bearing Company of America, Inc. Project)
Series 1994B (the "Bonds"), will be adjusted on ________ (the "Rate Adjustment
Date"). Your Bond will be purchased on the Rate Adjustment Date at a price of
100% of the principal amount thereof plus interest accrued and unpaid thereon
to, but not including, the Tender Date, unless you elect to retain your Bond.
2. The Remarketing Agent has notified the Trustee that the Preliminary
Rate determined in accordance with the Indenture is ___% (the "Preliminary
Rate"). The actual interest rate for the Bonds shall be determined on the Rate
Adjustment Date, which rate may be less than, equal to or greater than the
Preliminary Rate. In order to retain all or any portion of your Bond (which
portion shall be [$100,000] [$5,000] or an integral multiple thereof), you must
deliver to ____________________________, at its principal corporate trust office
at_____________________, Attention: Corporate Trust Department, on or prior to
the fifth (5th) Business Day preceding such date the attached Notice of Election
to Retain Bonds.
3. In addition, you are further notified that on the Rate Adjustment Date,
the interest on your Bond will be established at a new interest rate and
interest on your Bond will be payable at such newly established interest rate
for the Interest Period commencing on the Rate Adjustment Date.
_______________________________
______________________________________
Title: _______________________________
<PAGE>
EXHIBIT F
INTEREST MODE ADJUSTMENT NOTICE
This notice is being sent pursuant to the provisions of the Trust
Indenture dated as of September 1, 1994 (the "Indenture"), between the South
Carolina Jobs-Economic Development Authority (the "Issuer"), and
___________________________, as Trustee. Capitalized terms used in this notice
shall have the same meanings as in the Indenture.
You are hereby notified as follows:
1. An option has been exercised to convert the Interest Rate Mode
applicable to the Issuer's Variable Rate Demand Industrial Development Revenue
Bonds (Roller Bearing Company of America, Inc. Project) Series 1994B (the
"Bonds"), from a(n) Weekly/Monthly/Semiannual/Annual/ Multiyear (____)-Year Mode
to a(n) Weekly/Monthly/Semiannual/ Annual/Multiyear (___)-Year) Mode on ______
(the "Interest Mode Adjustment Date"). Unless you deliver a Notice of Election
to Retain Bonds to _____________________________ (the "Tender Agent"), at its
principal corporate trust office, at _______________________, Attention:
Corporate Trustee Department, in the form which is attached, your Bond will be
purchased on such date at a price of 100% of the principal amount thereof plus
interest accrued and unpaid thereon to, but not including, the Tender Date.
2. If your Bond or any portion thereof is so purchased, payment therefor
will be made on or after the tender date thereof upon presentation and surrender
at the principal corporate trust office of the Tender Agent at ___________,
Attention: Corporate Trust Department, of such Bond, duly endorsed in blank for
transfer (with all signatures guaranteed by an eligible guarantor institution as
defined by SEC Rule l7Ad-15 (17 CFR 240.l7Ad-15)).
3. In addition, you are further notified that:
(A) Interest will no longer accrue to you on your Bond on and after
the tender date thereof unless the Tender Agent has received directions
from you not to so purchase your Bond as herein provided, and, other than
the right to receive payment of the purchase price for your Bond, you
shall then cease to have further rights under the Indenture;
(B) You have the right to direct the Tender Agent not to purchase
all or any portion of your Bond, which portion shall be $________ (the
minimum authorized denomination for the new Interest Mode) or any integral
multiple thereof, if you deliver the attached Notice of Election to Retain
Bonds to the Tender Agent at its address above on or before the date
occurring S days prior to the Interest Mode Adjustment Date; and
(C) In the event you properly file a Notice of Election to Retain
Bonds, the following will occur:
(i) After the Interest Mode Adjustment Date, the interest rate
on the portion of your Bond not purchased will be determined in
accordance with the Weekly/Monthly/Semiannual/Annual/Multiyear
(__-year) Mode, with interest being paid on the [first Business Day
of each month] [September 1 and March 1 of each year]; [and]
F-1
<PAGE>
(ii) The Trustee will inform you of the Interest Rate on the
portion of your Bond not purchased, on or soon after the Interest
Mode Adjustment Date[; and] [.]
[THE FOLLOWING SHALL BE INSERTED ONLY IF THE BONDS WILL BE IN
A WEEKLY MODE OR MONTHLY MODE]
[(iii) After the Interest Mode Adjustment Date, you may
require the portion of your Bond not previously purchased to be
purchased pursuant to Section 301 of the Indenture on a Tender Date
specified by you as further described in the Indenture.]
Date: _______
_____________________________,
as Trustee
By: __________________________________
Title: _______________________________
F-2
<PAGE>
EXHIBIT G
NOTICE OF ALTERNATE CREDIT FACILITY
THIS NOTICE WILL NOT BE GIVEN IF THE BONDS
ARE IN A MULTIYEAR MODE
NOTICE TO BONDOWNERS
This notice is being sent pursuant to the provisions of the Trust
Indenture dated as of September 1, 1994 (the "Indenture"), between the South
Carolina Jobs-Economic Development Authority (the "Issuer") and
__________________________, as Trustee. Capitalized terms used in this notice
shall have the same meanings as in the Indenture.
You are hereby notified as follows:
1. An Alternate Credit Facility issued by _______________________ and
relating to the Issuer's Variable Rate Demand Industrial Development Revenue
Bonds (Roller Bearing Company of America, Inc. Project) Series 1994B (the
"Bonds"), will become effective on ___________ (the "Alternate Credit Facility
Date"). Unless you deliver a Notice of Election to Retain Bonds as described
below, your Bond will be purchased on such date at a price of 100% of the
principal amount thereof. A copy of the proposed form of Alternate Credit
Facility and certain financial information relating to the issuer thereof are on
file at the office of the Trustee and are available for inspection at your
request.
2. If your Bond or any portion thereof is so purchased, payment therefor
will be made on the Alternate Credit Facility Date upon presentation and
surrender at the Principal Office of the Tender Agent (___________, Attention:
Corporate Trust Department) prior to 10:30 A.M., New York Time on the Alternate
Credit Facility Date, of such Bond, duly endorsed in blank for transfer (with
all signatures guaranteed by an eligible guarantor institution as defined by SEC
Rule 17Ad-15 (17 CFR 240.l7Ad-15)).
3. In addition, you are further notified that:
(A) Interest will no longer accrue to you on your Bond on and after
the Alternate Credit Facility Date unless the Trustee has received
directions from you not to so purchase your Bond as herein provided, and,
other than the right to receive payment of the purchase price for your
Bond, you shall then cease to have further rights under the Indenture; and
G-1
<PAGE>
(B) You have the right to direct that all or any portion of your
Bond not be purchased, which portion shall be $_____ (the minimum
authorized denomination for the Interest Rate Mode to be in effect on the
Alternate Credit Facility Date) or any integral multiple thereof, if you
deliver the Notice of Election to Retain Bonds to the Tender Agent at its
address above on or before the fifth Business Day next preceding the
Alternate Credit Facility Date.
Dated: ___________
_____________________________
as Trustee
By: __________________________________
Title: _______________________________
G-2
<PAGE>
EXHIBIT H
REPRESENTATION LETTER
______, ___
[Trustee]
[Trustee Address]
[Remarketing Agent]
[Remarketing Agent Address]
[Credit Enhancer]
[Credit Enhancer Address)
Re: $3,000,000 Variable Rate Demand Industrial Development Revenue Bonds
(Roller Bearing Company of America, Inc. Project) Series 1994B of
the South Carolina Jobs-Economic Development Authority
Ladies and Gentlemen:
The undersigned (the "Investor") hereby represents and warrants to you as
follows:
[THE FOLLOWING PARAGRAPH 1 IS FOR USE PURSUANT TO SECTION 210(i) OF THE
INDENTURE.]
1. The Investor proposes to purchase $__________ aggregate principal
amount of the above-referenced bonds (the "Bonds") issued pursuant to that
certain Trust Indenture dated as of September 1, 1994 (the "Indenture"), between
the South Carolina Jobs-Economic Development Authority and
______________________, as trustee. The Investor understands that the Bonds and
the credit enhancement with respect thereto have not been registered under the
Securities Act of 1933, as amended (the "1933 Act") or the securities laws of
any state and will be sold to the Investor in reliance upon certain exemptions
from registration and in reliance upon the representations and warranties of the
Investor set forth herein.
[THE FOLLOWING PARAGRAPH 1 IS FOR USE PURSUANT TO SECTION 210(iii) OF THE
INDENTURE.]
1. The Investor understands that [Remarketing Agent) may offer to the
Investor for purchase in a secondary market transaction the above-referenced
bonds (the "Bonds") issued pursuant to that certain Trust Indenture dated as of
September 1, 1994 (the "Indenture"), between the South Carolina Jobs-Economic
Development Authority and _________________________, as trustee. The Investor
understands that the Bonds and the credit enhancement with respect thereto have
not been registered under the Securities Act of 1933, as amended (the "1933
Act") or the securities laws of any state and may be sold to the Investor in
reliance upon certain exemptions from registration and in reliance upon the
representations and warranties of the Investor set forth herein.
H-1
<PAGE>
2. The Investor has sufficient knowledge and experience in business and
financial matters in general, and investments such as the Bonds in particular,
to enable the Investor to evaluate the risks involved in an investment in the
Bonds.
3. The Investor confirms that its investment in the Bonds constitutes an
investment that is suitable for and consistent with its investment program and
that the Investor is able to bear the economic risk of an investment in the
Bonds, including a complete loss of such investment.
4. The Investor is purchasing the Bonds solely for its own account for
investment purposes only, and not with a view to, or in connection with, any
distribution, resale, pledging, fractionalization, subdivision or other
disposition thereof (subject to the understanding that disposition of Investor's
property will remain at all times within its control).
5. The Investor agrees that it will only offer, sell, pledge, transfer or
exchange any of the Bonds it purchases (i) in accordance with an available
exemption from the registration requirements of Section 5 of the 1933 Act, (ii)
in accordance with any applicable state securities laws and (iii) in accordance
with the provisions of the Indenture.
6. The Investor is familiar with Rule 144A promulgated under the 1933 Act
and is a "qualified institutional buyer" as defined in Rule 144A; it is aware
that [the] [any] sale of Bonds to it [is] [may be] made in reliance on Rule 144A
and understands that such Bonds may be offered, resold, pledged or transferred
only (i) to a person who the Investor reasonably believes is a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the 1933 Act.
7. If the Investor sells any of the Bonds other than pursuant to a
mandatory or optional tender and purchase provided for in and complying with the
Indenture, the Investor or its agent will obtain from any subsequent purchaser
the same representations contained in this Representation Letter.
8. The Investor acknowledges and understands that you, any trustee under
the Indenture and each of the "issuers" (as such term is used in the 1933 Act)
of the Bonds and any security related thereto are relying and will continue to
rely on the statements made herein. The Investor agrees to notify you
immediately of any changes in the information and conclusions herein.
Very truly yours,
[Name of Investor]
Dated: ___________________________
By: _____________________________________
Name: ___________________________________
Title: __________________________________
[Must be President, Chief Financial
Officer or other Executive Officer]
H-2
PREAMBLE
This Agreement is entered into this 1st day of February, 1996 by and between
Heim Bearing division, Roller Bearing Company, hereinafter called the COMPANY,
AND THE INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL
IMPLEMENT WORKERS OF AMERICA, U.A.W., AND AMALGAMATED LOCAL 376, UAW, the
certified bargaining representative of all employees in the appropriate unit, a
signatory party hereto, hereinafter referred to as the UNION.
ASSIGNABILITY
This Agreement shall be binding upon the Successors and Assignees of the parties
hereto, and no provisions, terms, or obligations herein contained shall be
affected, modified, altered or changed in any respect whatsoever by any change
in the regular status, ownership or management of either party herein, provided
the plant and facilities of the Company remain within the State of Connecticut.
In the event the present owners sell or assign the plant, or sell their interest
in the business, the present owners agree to make this Agreement a condition of
such sale or assignment, provided such sale or assignment contemplates that the
plant and facilities of the Company will remain within the State of Connecticut,
and the present owners shall be relieved of any personal liability whatsoever
under the Agreement thereafter.
ARTICLE A
EMPLOYEES COVERED BY THIS
AGREEMENT
Section 1. The Company recognizes the Union as the sole and exclusive bargaining
agency of the following employees: all production and maintenance employees,
including stockroom employees and tool clerks, also shipping and receiving
clerks, excluding, however, engineering and clerical employees and supervisory
employees as defined in the Labor-Management Relations Act of 1947, and any
amendments thereto.
2
<PAGE>
ARTICLE B
RECOGNITION
Section 1. The Union represents that it has been authorized by a majority of the
Company's employees in a unit appropriate for such purposes, as the
representative designated or selected for the purpose of collective bargaining
in respect to rates of pay, wages, hours of employment, or other conditions of
employment.
ARTICLE C
UNION SECURITY
Section 1. All present employees within the Bargaining Unit on the effective
date of this Agreement shall, within thirty days thereafter, as a condition of
employment, become and/or remain members of the Union in good standing to the
extent of paying membership dues and initiation fees.
Section 2. Employees in the Bargaining Unit who have not on the effective date
of this Agreement completed thirty days of employment with the Company shall, as
a condition of employment, within thirty days after the effective date of this
Agreement or at the expiration of thirty days of employment, whichever period is
longer, become and remain members of the Union in good standing to the extent of
paying membership dues and initiation fees.
Section 3. All new employees hired during the life of this Agreement shall, as a
condition of employment, within thirty days after date of hire or thirty days
after the signing of this Agreement, whichever period is longer, become and
remain members of the Union in good standing to the extent of paying membership
dues and initiation fees.
Section 4. The Company will give to each present employee a printed copy of this
Agreement.
3
<PAGE>
Section 5. The Company will give a printed copy of this Agreement, together with
an authorization form for check-off of dues to all new hires.
ARTICLE D
CHECK-OFF
Section 1. The Company shall deduct, for employees covered by this Agreement who
are members of the Union, their Union membership dues and initiation fees levied
against all Union members in accordance with the Constitution and Bylaws of the
Union and promptly remit the same, together with a list of employees for whom
deductions were made, to the Financial Secretary of the Union who is authorized
to receive said payments, provided that the Company has received from such
employees individual and voluntary signed authorizations. Authorization cards
shall be in the following form:
AUTHORIZATION FOR CHECK-OFF OF DUES
To Heim Bearing Division, Imo Industries Inc.
Date _______________
I hereby assign to Local Union No. 376, International Union, United
Automobile Aerospace and Agricultural Implement Workers of America (UAW), from
any wages earned or to be earned by me as your employee (in my present or in any
future employment by you), such sums as the Financial Officer of said Local
Union No. 376 may certify as due and owing from me as membership dues, including
an initiation or reinstatement fee and monthly dues in such sum as may be
established from time to time as union dues in accordance with the Constitution
of the International Union, UAW. I authorize and direct you to deduct such
amounts from my pay and to remit same to the Union at such times and in such
manner as may be agreed upon between you and the Union at any time while this
authorization is in effect.
This assignment, authorization and direction shall be irrevocable for the
period
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of one (1) year from the date of delivery hereof to you, or until the
termination of the collective agreement between the Company and the Union which
is in force at the time of delivery of this authorization, whichever occurs
sooner; and I agree and direct that this assignment, authorization and direction
shall be automatically renewed and shall be irrevocable for successive periods
of one (1) year each or for the period of each succeeding applicable collective
agreement between the Company and the Union, whichever shall be shorter, unless
written notice is given by me to the Company and the Union, not more than twenty
(20) days and not less than ten (10) days prior to the expiration of each period
of one (1) year, or of each applicable collective agreement between the Company
and the Union whichever occurs sooner.
This authorization is made pursuant to the provisions of Section 392(c) of
the Labor Management Relations Act of 1947 and otherwise.
- --------------------------------------------------------------------------------
(Signature of Employee here)
- --------------------------------------------------------------------------------
(Type or print name of Employee here)
- --------------------------------------------------------------------------------
(Date of Sign.) (Emp. Clock No.)
- --------------------------------------------------------------------------------
(Address of Employee)
- --------------------------------------------------------------------------------
(City) (State) (Zip)
- --------------------------------------------------------------------------------
(Soc. Sec. No.) (Date of Del. to
Employer)
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Section 2. All deductions covered by this Agreement shall be made in a manner
agreed upon with the Union, except that dues and initiation fees will be on a
monthly basis. However, local practices, relative to number of hours per month
to be worked before dues deductions shall be made, shall be in accord with the
Constitution of the International Union. If in any month full dues are not
deducted, the Company and the Union may agree upon an orderly manner of
collection in the succeeding month or months.
Section 3. All sums deducted under the Agreement shall be remitted to the
Financial Secretary of the local Union, prior to the first of the month
following the deduction and the Company will furnish the Financial Secretary of
the local Union, monthly, a record of those for whom deductions have been made,
together with the amount of such deductions and also a record of all
terminations and employees absent during the week of the check-off.
ARTICLE 1
HOURS AND OVERTIME
Section 1. The normal work week shall be:
(a) Forty (40) hours, based on eight (8) hours per day, five (5) days per
week, Monday through Friday inclusive.
(b) The normal work week shall begin on Sunday night at 11:00p.m. with the
start of the third (3rd) shift and end 168 hours later.
(c) The first and second shifts shall start on a Monday as per schedule (d)
below and end 168 hours later.
(d) The work day shall be the 24 hour period beginning with the employees
regular scheduled shift starting time.
(1) First shift hours 7:00a.m. to 3:30 p.m.
(2) Second shift hours 3:30p.m. to midnight.
(3) Third shift hours 11:00p.m to 7:00 a.m.
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(a) Third shift employees will be entitled to a paid 20 minute lunch.
(b) Friday will be the third shift's "Saturday" for overtime pay
calculation purposes.
(c) Saturday will be the third shift's "Sunday" for overtime pay
calculation purposes.
(d) Third shift employees will not be required to work overtime prior to
the start of the shift on Sunday night.
(4) First and second shift employees presently working twelve (12) hour
shifts will revert to schedules (d)1 and (d)2 respectively in the
event that the twelve (12) hour shifts are discontinued for any
reason.
Section 2. Time and one-half shall be paid for all work performed.
(a) In excess of eight (8) hours in any one day.
(b) In excess of forty (40) hours in any one week.
(c) On Saturdays as such.
(d) Any employee called in to work outside of the regularly scheduled shift
hours shall be paid not less than four (4) hours at his/her base rate as
follows:
(1) Time actually worked at prevailing rate, plus
(2) The remaining of the four (4) hours not worked at straight time pay
unless it is a premium day and the premium rate shall prevail.
(e) Double time will be paid for all work performed on Sundays.
Section 3. Notification of Overtime
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(a) Employees shall not be required to work overtime when insufficient notice
is given. Notification at any time prior to the close of the prior day's
shift will be considered sufficient notice for daily overtime.
(b) Employees will be charged for all overtime hours where proper notification
has been given, whether the employee works or not.
(c) Employees shall not be required to work Saturday or Sunday overtime when
insufficient notice is given or when there is a reasonable excuse for not
working. Notice of Saturday or Sunday overtime must be given to the
employee no later than the end of the shift on the preceding Thursday.
Section 4.
(a) Overtime will be equally distributed among those employees within the
departments by classification provided they have the ability to perform
the available overtime work.
(b) Overtime records shall be openly displayed on the Foreperson's desk in
each department for the employees to inspect at any time. All records will
be updated accordingly.
(c) Employees with the lowest overtime hours will be asked to work first
within their department by job classification.
(d) Employees working overtime outside their departments shall be charged for
actual hours worked back to their department for overtime equalization.
(e) The Company shall keep a record of overtime worked and overtime refused by
employees and shall furnish the Union with a copy of such record at the
end of each month. If the difference in overtime hours worked between the
employee with the greatest number of overtime hours and the other
employees in the same work classification shall exceed ten (10) hours at
the end of every three (3) month period, such difference shall be paid at
time and one-half the other
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employee's regular hourly rate, except when such difference results from
the other employee's refusal to work in accordance with this article.
Section 5. Overtime hours available will be recorded according to the following:
(a) Overtime hours offered and refused will be considered hours worked for the
purpose of equalizing overtime.
(b) Employees absent for any reason will be charged for all overtime hours
they would have been offered had they been at work.
Section 6. There shall be no duplication of compensation for overtime for the
same hours worked by an employee by reason of daily, weekly or other
overtime provisions of any kind.
ARTICLE 2
HOLIDAYS
Section 1.
(a) Except as hereinafter provided, all work done on the holidays set forth
below shall be paid for at the rate of double time plus holiday pay. The
specified holidays shall also be considered as days worked for the purpose
of computing overtime pay only.
M.L. King Day Labor Day
Good Friday Thanksgiving Day
Memorial Day Friday after Thanksgiving
Independence Day
*Friday after Independence Day in 1996 only
The Company proposes to continue to provide the following Christmas and New
Year's Holidays with pay per the following schedule:
1996 Dec. 24 25 26 30 31 Jan. 1, 1997
1997 Dec. 24 25 26 30 31 Jan. 1, 1998
1998 Dec. 24 25 29 30 31 Jan. 1, 1999
*Employee Birthday is included in the Christmas shut down period in each
year.
(b) It is understood between the parties that an employee who is off work
receiving sick
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and accident benefits during a week in which a holiday falls will be paid
such holiday pay in addition to S&A benefits. Similarly, employees
receiving Workers' Compensation will receive holiday pay for a period not
to exceed the agreed upon time limits for S&A coverage.
Section 2. When a holiday falls on a Saturday, it shall be celebrated on the
preceding Friday. When a holiday falls on a Sunday, such holiday shall be
celebrated on the following Monday, excluding Christmas and New Year's week.
Section 3. The holidays mentioned above shall be with pay. Consequently, all
employees shall receive an amount equal to eight (8) hours pay at their hourly
rate for the specified holiday even though no work is performed. In order to be
eligible for holiday pay, the employees must:
(a) Have been in attendance on the work days preceding and following the
holiday unless the absence is for:
(1) Death in the immediate family as defined in Article 9.
(2) Jury Duty.
(3) Important Union business on the part of Stewards, Shop
Committeepersons, Officers or Appointees made known to and approved
by the Company prior to such holidays.
(4) An employee who is laid off and again recalled within thirty (30)
days, during which period a paid holiday falls, shall receive
holiday pay for that holiday.
(5) For other reasonable cause.
(b) Employees on twelve (12) hour shifts will revert to their normal eight (8)
hour shifts and will not be required to work overtime on the day prior to
Good Friday, Thanksgiving and Independence Day.
Section 4. When a holiday falls within a scheduled vacation period, another day
off be-
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between Monday and Friday will be granted for that vacation day not taken or
paid for during the vacation period.
Section 5. Employees on leave of absence shall not be entitled to any holiday
pay during such leave.
ARTICLE 3
WAGES AND RATES OF PAY
Section 1.
(a) Effective February 1, 1996, a general wage increase of 4.0%
Effective February 1, 1997, a general wage increase of 3 0%
Effective February 1, 1998, a general wage increase of 3.0%
The hourly rates of pay shown in Appendix A, and Appendix B attached
hereto and made a part hereof, shall remain in effect for the life of this
Agreement.
(b) It is agreed that during the period of this Agreement, each employee
covered by this Agreement, each employee covered by this Agreement, shall
receive a guaranteed cost of living allowance which will be added to the
employee's straight time hourly earnings as set forth in Appendix A of the
Agreement. The guaranteed cost of living increases will be as follows:
August 5, 1996 10 cents
August 4, 1997 5 cents
August 3, 1998 5 cents
(c) Should the effective date of the increases mentioned above fall on a
Monday, Tuesday or Wednesday, the increase specified shall revert to
Monday. Should the increases specified above fall on a Thursday or Friday,
the increases shall become effective on the following Monday.
Section 2. Any employees required to work on a shift other than the day shift
will be paid a
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shift premium equal to 10% of their hourly rate in addition to their regular
earnings for such hours worked.
Section 3.
(a) The Company and the Union have negotiated job descriptions and evaluations
by Labor Grade. Such descriptions and evaluations are a part of this
Agreement.
(b) Newly hired employees will start at the hire rate unless their training,
knowledge or experience justify hiring at a higher rate. They will
progress to the maximum rate by receiving a twenty (20) cent per hour
increase after each sixty (60) days worked, payable starting on the
nearest Monday. It is recognized that the last raise may be less than
twenty (20) cents per hour.
Employees, still in progression, who are successful bidders on another job
in a higher labor grade will receive a twenty (20) cent per hour increase
when they start the new job and then will progress in twenty (20) cent
increments after each sixty (60) days worked until they reach the maximum.
Rate changes will be made on the nearest Monday. The last raise may be
less than twenty (20) cents.
(c) Employees who are promoted from the maximum rate of one job to a higher
paying job will receive the maximum rate of the higher job on the date of
promotion.
(d) Employees who are at maximum and have been transferred to a higher rated
job and are later transferred back to a lower rated job will receive the
maximum of the lower rated job.
(e) Employees who have not progressed to the maximum and who move from a
higher rated job to a lower rated job will go down to a rate in the lower
grade that is equivalent to the progression point that they were in the
higher rated job.
(f) All employees currently in Labor Grade 1
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will be promoted to Labor Grade 2.
ARTICLE 4
VACATIONS
Section 1. Effective February 1, 1996, the continuous service requirements and
earned vacation with pay at straight time as detailed in the following vacation
schedule table shall apply. The service requirement will be based upon seniority
as of August 1st of the vacation year.
Service Requirement Earned Vacation
1 yr but less than 2 yrs 1wk (40 hrs)
2 yrs but less than 5 yrs 2wks (80 hrs)
5 yrs but less than 10 yrs 2-1/2 wks (100 hrs)
10yrs but less than 15 yrs 3wks (120 hrs)
15yrs but less than 20 yrs 3-1/2wks (140 hrs)
20 yrs but less than 25 yrs 4wks (160 hrs)
25 years and over 5wks (200 hrs)
Section 2. The vacation shutdown period shall be designated by the Company but
notice thereof shall be given to the Union not later than six (6) months prior
to the start of the vacation shutdown period.
The vacation shutdown period shall be any two consecutive weeks falling within
the following time periods. The Company may choose not to have a vacation
shutdown.
1996 July 15 thru August 9
1997 July 21 thru August 15
1998 July 20 thru August 18
Section 3. Employees entitled to at least two (2) weeks of vacation must take
the same during the plant shutdown. Employees entitled to more than two (2)
weeks of vacation may take same at a time of their choice but seniority and
Company production schedules shall be taken into consideration.
Section 4. Employees must have worked a minimum of 1000 hours in order to
qualify for full vacation pay as provided in Section 1 above. Employees working
less than 1000 hours shall be paid on a pro-rated basis. The period for
determining hours worked shall be from August 1 of the prior year through July
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31 of the current year. Employees terminated for any reason shall receive a
pro-rated vacation pay. Absence due to sickness or injury shall be counted as
hours worked.
Section 5. The Company agrees to provide a vacation bonus of $100 to all
employees with 20 years of service. The Company agrees to provide a vacation
bonus of $200 to all employees with 25 years service or more.
Section 6. Those employees who are entitled to and wish to schedule additional
time off during the vacation year should notify their supervisors in writing by
March 15. Permission will be granted based upon Company seniority and Company
production schedules and specific written responses will be made by April 1.
Section 7. All vacation pay shall be distributed the last period prior to the
shutdown period.
ARTICLE 5
SENIORITY
Section 1. A seniority list including date of birth, hiring date, job
classification, department, labor grade, total points and social security number
shall be maintained and a copy shall be furnished to the Union quarterly.
(a) The Company shall furnish the Union with a monthly report showing the
names and dates of new hires, layoffs, recalls, quits, discharges, leaves
of absence (granted and expired) and adjustments in the seniority listings
with respect to dates. Any errors in the seniortiy lists, layoffs and
recalls that are discovered due to this submission shall be corrected
immediately.
(b) The Shop Chairperson shall be notified promptly of any additions or
deletions.
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Section 2. Employees will lose their seniority status if they:
(a) Quit.
(b) Are discharged for justifiable cause.
(c) Do not report for work within five (5) working days following a
notification by certified letter of restoration after a layoff, except
where a reasonable excuse is provided.
(d) Are absent without a leave of absence or excused absence for three (3)
consecutive working days without notifying the Company, except where
reasonable cause is provided.
(e) Are on layoff in excess of thirty -six (36) months. Probationary employees
who are laid-off will not be listed on the layoff list.
(f) Are absent from work because of a non-occupational disability for a
continuous period in excess of eighteen (18) months.
Section 3. New employees shall be regarded as temporary or probationary
employees for the first thirty (30) working days of their
employment.
Section 4. Employees advanced from hourly status to salary status shall lose
seniority and privileges under this contract thirty (30) calendar
days after such appointment unless returned to the Bargaining Unit
within said period.
Section 5. Employees who are absent from work because of illness or injury will
be returned to their "original" job upon presenting the Company with
a copy of their unconditional medical release to return to work.
If their "orginal" job is no longer available, they will exercise
their contract rights in accordance with Article 8 of this contract.
Jobs that become vacant, because the employee in that job
classification has been absent from work because of injury or
illness for a period
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of more than thirty (30) days and,
In the judgement of the Company, that job needs to be filled it shall be handled
as follows:
1. The Company shall offer recall rights to all eligible employees in
an equal or higher labor grade in accordance with Article 8, Section
1(b) of the contract.
2. If no employee(s) have recall rights as describe in item 1. above,
the Company, at its descretion may post the job as "Temporary" job.
Bids on the "Temporary" job shall be handled in accordance with
Article 6 of the contract.
3. If there are no successful bids on the "Temporary" job, the Company
shall offer recall rights to all eligible employees in a lower labor
grade.
4. If there is a reduction in force in a department where a "Temporary"
job exists, the employee in the "Temporary" job must be returned to
the same status he/she had prior to accepting the "Temporary" job
befor the layoff commences.
5. If the "Temporary" job is not filled after the above three actions
have been taken and, in the judgement of the Company, the job needs
to e filled, the Company may hire "from the street" to fill the job
with the understanding that it is a "Temporary" job. the person
hired from the street to fill the "Temporary" job shall exercise
his/her rights, if any, under Article 8 of the contract when such
"Temporary" job ceases to exist.
6. When it is determined the disabled employee will not or cannot
return to work the opening will be posted in accordance to Article
6.
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ARTICLE 6
JOB POSTING
Section 1. Job openings will be filled based on plantwide seniority and basic
qualifications regardless of shift.
(a) New jobs and vacancies in existing jobs to which no employee has recall
rights will be posted on the plant bulletin board for a period of three
(3) working days. A general description of each job responsibility will be
shown on the posting.
(b) If the same job opening occurs within a period of thirty (30) days from
the first date of an original job posting, no new posting will be
required. The new job opening will be filled from the original bidding
list. If there are no remaining qualified bidders on the original list,
the new job opening shall be posted immediately. However, a new posting
will be required at the end of the original thirty (30) day job posting.
(c) During the posting period, eligible employees may bid on the posted jobs
by completing a Bid Slip and submitting it to their Supervisor. The
Company will notify the Union in writing and state the reason for
withdrawing the posting for any job.
(d) Employees will be eligible to bid on a higher, equal or lower paying job
provided:
(1) They have completed the probationary period.
(2) Those who have bid and been accepted on lower paying jobs under this
procedure must remain in the new department for a period of at least
six (6) months before being eligible to again bid on another job
outside their department. However, these employees may bid upward or
lateral through all labor grades within their department at any
time.
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(e) Following the closing of the posting, bidders will be considered and
interviewed by the Personnel Department for each job opening in order of
seniority; a Shop Committeeperson shall be present. The most senior
employee who has the basic qualifications to perform the required work
will be promoted to the job within a period of thirty (30) calendar days.
Unsuccessful bidders will be notified by the Company in writing. A copy of
the notice of disaward which will include the grounds for disaward will be
given to the Shop Chairperson. Bidders may withdraw their bids at any time
before starting the new job by signing a refusal slip provided by the
Company, a copy of which will be given to the Shop Chairperson.
(f) Job openings in a "Training Program" will also be filled under this
procedure.
(g) Should an employee with basic qualifications grieve the Company's
selection in filling the vacancy, the employee must be shown the basic
requirements of the job and have the assistance of the Leadperson and/or
Supervisor for a five (5) day period in order to prove his/her ability to
meet the basic qualifications.
(h) The Shop Chairperson or an appointee will be notified prior to all
permanent transfers and promotions within the Bargaining Unit.
ARTICLE 7
TEMPORARY TRANSFERS
Section 1. The Union will be notified at the time when temporary transfers
become necessary.
Temporary work assignments:
(a) Employees may be temporarily transferred from one department to another
for a period not to exceed six (6) days per month, and provided that
during the transfer, the job he/she left shall not be filled and he/she
shall be returned to his/her permanent job upon completion of temporary
assignment or for longer periods of time if agreed by the Union and the
Company.
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(b) Employees shall be transferred by seniority, lowest senior person first
within the department to a lower rated job.
(c) Employees shall be transferred by seniority, highest senior person first
within the department to a higher rated job.
(d) No employee will be required to perform work in a higher labor grade on
any basis (temporary or permanent) unless they are paid according to the
prevailing rate of pay on said higher labor grade. No employee will be
forced or coerced into taking a promotion.
(e) No employee will be required to perform work in a lower labor grade on a
temporary basis at the rate of pay in said lower labor grade. That is,
employees will be guaranteed their former (higher) rate of pay while
working on a temporary transfer in a lower labor grade.
(f) The Shop Committeeperson in the area involved in a transfer will receive a
copy of a transfer notice. This transfer notice will state the department,
job title and labor grade to which the employee is being transferred. The
Shop Committeeperson will be notified immediately by a written transfer
notice in any of the following conditions:
A. Any transfer lasting more than one day.
B. Any change in labor grade at any time.
(g) Employees shall have the privilege of exchanging shifts temporarily by
individual arrangement provided they notify their supervisor in advance
and have the necessary qualifications to perform the work. The change must
be effected without additional cost or penalty to the Company. If the
period of such exchange of shifts is in excess of one (1) week, the
Company and the Union must mutually agree to such arrangements.
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Section 2. An Employee with one (1) year of seniority or more shall be
permitted to use this sebniority to exercise shift preference in writing
one week in advance to displace another employee with less seniority in
the ssame job classification and department on another shift. The shift
change option is limited to only one (1) time per year.
ARTICLE 8
LAYOFF RECALLS
Section 1.
(a) All layoffs, recalls, transfers and promotions within the Bargaining Unit
shall be made on the basis of plantwide seniority provided the employee
has the basic qualifications to perform the required work
(b) When it becomes necessary to reduce the work force it shall be done as
followsf by laying off all probationary and part-time employees first.
(c) The Company shall, in the event of layoff, provide notification to
affected employees early enough to furnish at least three (3) working days
notice to the Shop Committee and employees affected by any layoff for any
period of time, or pay such employees hourly base rates in liew of said
notice. this requirement shall not apply to interruption resulting from
any condition beyond the company's control. all layoffs must commence on
the last working day of the week (Friday).
(d) Employees in classifications affected by layoff will have an option to
accept a lay-off slip stating lack-of-work or bump a junior service
employee provided they have the basic qualifications to perform the work.
the initial noticiation mentioned in paragraph (c) will begin the
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bumping process and employees must make their bumping decision
immediately. Upon request by the employee, the bumping decision can be
delayed, but not beyond two (2) hours and then is bound by that choice.
(e) Employees will have five (5) days in which to demonstrate their ability to
perform a job in cases of layoff and recall. Employee must be shown basic
requirements of job and have assistance of Leadperson and/or Foreperson
for five (5) day period.
(f) There shall be no upward bumping.
(g) In the event of a layoff, the Shop Chairperson, the members of the Shop
Committee and Company employees who are Executive Officers of the Local
Union shall be accorded top seniority, but they must have the basic
qualifications to perform the available work.
(h) Recalls shall be in reverse order of layoff. The most senior employee with
basic qualifications on the layoff list will be recalled for available
work. Employees recalled to fill a temporary job vacancy may refuse this
assignment without prejudicing their recall rights.
(i) Employees affected by bumping procedure must return to their original job
when such opening occurs.
ARTICLE 9
LEAVE OF ABSENCE-EMERGENCY TIME OFF
Section 1. When the requirements of the Company will permit, employees upon
written request on account of illness or death in their immediate family or
other reasonable cause approved by the Company, will be granted a leave or
absence without pay for a period of not more than ninety (90) days, which shall
be renewable if production requirements permit. Any such employees on leave who
engaged in other employment, or who fail to report for work on the expiration of
their leave, will be considered as having quit. All such leaves of ab-
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sences shall be granted in writing by the Company.
Section 2. Employees granted a leave of absence must prepay all insurance
premiums prior to their departure for said leave. This prepayment must also be
made in the event the leave is extended by mutual agreement.
Section 3. Any employee who enters the Armed Forces shall be entitled to a leave
of absence, accumulations of seniority and re-employment rights, in accordance
with Federal and State Laws. In addition, an employee who is a member of the
Military Reserve or National Guard shall be granted leave for annual training or
special tour not to exceed three (3) weeks per calendar year. Such employee
during this period shall receive the difference in pay, if any, between their
normal rate of pay and wages paid by the service branch.
Section 4. Seniority will be accumulated during leaves of absences as described
above.
Section 5. Employees may be granted emergency time off of not more than fourteen
(14) calendar days by contacting the Company by telephone or telegram within
three (3) working days giving the reasons for such request. Such time off will
be granted for legitimate emergency reasons. Extensions of emergency time off
may be requested under the provisions of Section 1 of this Article 9.
Section 6. Employees will be granted pregnancy leave of absence and such leaves
will be treated as any other type of medical leave of absence.
ARTICLE 10
CALL-TIME
Section 1.
(a) Employees reporting for work on their regular shift without notice from
the Company that no work will be available for them, shall be offered
other work for at least four (4) hours or shall be paid
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the base rate of their regular job for four (4) hours if there is no other
work for them. If they refuse the work offered, they shall forfeit the
right to receive reporting pay.
(b) Notice to the employees by the Company will be given not later than the
end of their regular shift.
(c) This Article shall not apply where the lack of work is due to conditions
beyond the control of the Company, or in the case of an employee who has
been absent and has not given the Company adequate notice of return to
work.
ARTICLE 11
COMMITTEEPERSONS, GRIEVANCE AND
ARBITRATION PROCEDURE
Section 1. In addition to the Shop Chairperson, the Union shall have a
Committeeperson for each sixty (60) employees, except that there shall be a
minimum of three (3) Committeepersons on the first shift, two (2) on the second
shift and one (1) on the third shift. The Union will provide the Company with a
current list of the Committeepersons and their departmental responsibilities.
Section 2. Time necessarily spent during the normal working hours (and during
scheduled overtime) by the Shop Chairperson, committeepersons, grievant and
Union employees of the Company on negotiations, grievances or arbitration
hearings will be paid for by the Company. If in the opinion of the Company such
time spent becomes unreasonable, the Company will notify and confer with the
Union.
(a) The Company shall pay the Shop Chairperson for all time spent during the
normal working hours (and during scheduled overtime) on Union business
including the handling and investigation of grievances as set out in this
Agreement, for time spent on arbitration hearings and for negotiations.
Section 3. A grievance is a difference of opinion between the Company and the
Union or an employee involving the interpretation or ap-
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plication of the terms of this Agreement.
Section 4. Grievances shall be processed as follows:
(a) The grievance must be submitted within fifteen (15) working days after the
employee and the Union are aware of it.
(b) The Shop Chairperson or Committeeperson and employee shall discuss the
grievance with the immediate Supervisor of the department in which the
grievance has occurred. If the immediate Supervisor's oral answer is not
satisfactory, the grievance shall be submitted to Step 1.
(c) Step 1: The grievance shall be reduced to writing and presented to the
employee's immediate Supervisor by the Union within three (3) working days
from the date of the oral answer. The Supervisor shall write the answer on
the grievance form and return three (3) copies to the Union
Committeeperson before the end of the third (3rd) working day after
receipt of the grievance. Failing a satisfactory settlement, the Union
will have three (3) working days in which to appeal to the Supervisor for
referral to Step 2.
(d) Step 2: The Union Shop Chairperson shall meet with the Company
representative designated to handle the second step within three (3) days
from the date of the appeal. The Company will give its written answer
within three (3) working days after the meeting. Failing a satisfactory
settlement, the Union will have three (3) working days in which to appeal
to the Personnel Manager for referral to Step 3.
(e) Step 3: The President of the Local Union and/or the Business Agent and/or
the International Representative, together with the Union Shop Committee
shall take up the grievance with the Committee of Management which shall
include an executive of the Company. This meeting will be scheduled within
seven (7) working days after the
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<PAGE>
date of the appeal. The Company will have five (5) working days following
the date of the meeting in which to make a written disposition of the
grievance. Failing a satisfactory settlement, the Union will have fourteen
(14) days in which to notify the Company in writing of its intent to
arbitrate the issue.
(f) Upon receipt of the Union's notice of their intention to arbitrate, a
prearbitration hearing shall be scheduled within thirty (30) working days.
After the prearbitration hearing, the Company General Manager will have
ten (10) working days to answer. If the answer is not satisfactory, the
Union will have thirty (30) days following that answer in which to appeal
for arbitration. If the Union does not appeal within said time limit, the
grievance shall be considered as being satisfactorily settled.
(g) All of the above stated time limits may be extended by mutual agreement.
(h) The Grievant may be present upon request of either party at any of the
steps outlined above.
(i) If grievances are appealed to arbitration, the parties will alternate
between the American Arbitration Association and the State Board of
Mediation and Arbitration.
(j) If submitted to the Connecticut State Board of Mediation and Arbitration,
the parties shall operate under the procedures set forth by said Board,
whose decision shall be final and binding upon the parties.
(k) If submitted to the American Arbitration Association, the parties shall
operate under the procedure set forth by the American Arbitration
Association, whose decision shall be final and binding upon the parties.
(l) The Arbitrator may interpret this agreement and apply it to the particular
case under consideration but shall, however, have no authority to add to,
subtract from or
25
<PAGE>
modify the terms of this agreement in any way.
(m) The cost of Arbitration shall be shared equally by the Company and the
Union.
(n) Arbitration cases involving time study, job evaluation and job standards,
shall be submitted only to the American Arbitration Association.
(o) The Company shall not be required to pay back pay for any period in excess
of thirty (30) working days prior to the time a written grievance is
properly filed with the Company.
Section 5. The Local Union President and/or two (2) appointees, and/or a
representative of the International UAW Engineering Department, shall be
permitted to enter the plant for the purpose of investigating, advising or
negotiating on grievances. However, they shall first make known their intent to
the Company and shall receive permission for said visit. This shall be
restricted to entrance during working hours only.
ARTICLE 12
HEALTH AND SAFETY
Section 1.
(a) The Company agrees it will provide proper safety devices and sanitary
conditions in the plant. Failure to do so may be a matter of grievance.
Furthermore, the Company agrees that it will pay the full cost of Company
mandated safety equipment.
(b) Once each month starting in February, 1989 at a time to be scheduled by
management, a safety tour between two (2) members of management and two
(2) employee representatives of the Union will make a plant safety tour.
At the end of the tour, unsafe practices and conditions found in the plant
will be listed. Appropriate actions will be taken by management to correct
unsafe conditions found. This committee will jointly plan to prevent
accidents,
26
<PAGE>
investigate accidents, review accident reports, and OSHA compliance.
Regular meetings will be scheduled to facilitate the promotion of health
and safety in the plant.
(c) The Company will issue and fill out accident forms on all injuries and
give the Shop Committeeperson a copy immediately.
Section 2. The Company shall provide first aid facilities and a qualified
attendant to perform first aid duties.
Section 3. Employees who are injured on the job can be sent home and receive pay
for the balance of their day only if authorized by written instruction from the
Medical Department or the Company doctor. The Company will issue a form to be
used in such cases, a copy of which will be given to the employee's Foreperson
and to the Union.
Section 4. Where possible, employees sustaining injuries at work, or affected by
occupational diseases during the course of their employment, and who are
physically handicapped as a result thereof, shall be given other suitable
employment as may be then available.
ARTICLE 13
LEADPERSON'S SCOPE
Section 1. To relay general instructions from Foreperson to operators with
reference to product, operations, tools, equipment and duties.
Section 2. All matters involving personnel problems are to be handled by the
Forepersons who have full supervisory authority over all employees in their
departments, including Leadpersons.
Section 3. Leadpersons shall not have the right to hire, fire, or recommend
disciplinary action or recommend promotions or demotions.
27
<PAGE>
ARTICLE 14
BEREAVEMENT PAY
Section 1. Employees (including probationary) shall be entitled to three (3)
working days off with pay in the event of a death within the "immediate family"
Section 2. Immediate family shall be limited to spouse, child, mother, father,
sister, brother, grandparent, mother or father-in-law, brother or sister-in-law,
daughter or son-in-law, legal guardian or stepchild.
ARTICLE 15
JURY DUTY
Section 1. Employees who have completed their probationary period, and who are
called and report for Jury Duty on days they would have otherwise worked for the
Company, shall be paid regular wages for thirty (30) days, the employee shall be
paid the difference between the payment they receive for such service and the
amount calculated by multiplying (8) times their regular hourly rate of pay for
each day involved limited, however, to Monday through Friday.
Section 2. In order to receive Jury Duty make-up payment, the employees must
give Management prior notice of said Duty and furnish evidence that they
actually performed such service, showing the amount of payment received
accordingly. These provisions are not applicable to employees who, without being
called, volunteer for Jury Duty.
ARTICLE 16
NOTICE OF DISCHARGE
Section 1. The Company agrees to give immediate written notice to the Shop
Committeeperson and the employee involved of all discharges and suspensions made
within the unit, except in emergencies.
Section 2. The Chairperson and/or Committeeperson shall be present at time of
employee discharge and suspension except in emergencies.
28
<PAGE>
Section 3. If an employee is discharged or suspended, he/she shall have the
right to a hearing within twenty four (24) hours after suspension or discharge.
He/she shall be represented by the Shop Chairperson and Committeeperson and/or
Business Agent and/or International Representative.
Section 4. When employees are discharged or suspended and file a complaint
claiming that they were unjustly discharged or suspended, the Shop
Committeeperson may invoke the grievance procedure at the third step within five
(5) days after the discharge or suspension.
Section 5. If, upon appeal, any discharge or suspension shall be found to be
unfair or discriminatory, the employee will be reinstated with seniority rights
unimpaired and will be given retroactive pay for all time lost due to the
discharge or suspension, less the earnings he/she may have received from gainful
employment or unemployment insurance obtained in the interim.
ARTICLE 17
UNION COOPERATION
The Union agrees that in exchange for a fair day's pay for a fair day's work, it
must maintain a high level of productivity. The Union and its members will
cooperate in attaining such a level of productivity as is consistent with the
health and welfare of its members. The Union and its members will seek to assist
in effectuating economies and the utilization of improved methods and machinery.
ARTICLE 18
MANAGEMENT
It is understood and agreed that with the exception of the specific provisions
of this contract, nothing in this Agreement shall be considered to limit or
restrict the Company in the exercise of the customary functions of Management.
ARTICLE 19
NO STRIKES OR LOCKOUTS
Section 1. The Union agrees that there shall
29
<PAGE>
be no strikes during the term of this Agreement on any issues which may be the
subject of arbitration or on which the contract is silent.
Section 2. The Company agrees that there shall be no lockouts during the term of
this Agreement on any issues which may be the subject of arbitration or on which
the contract is silent.
ARTICLE 20
PAID SICK AND/OR
PERSONAL LEAVE ALLOWANCE
Section 1. Each employee, upon vacation eligibility date, shall be credited with
six (6) days (48 hours) paid sick and/or personal leave allowance in accordance
with the following provisions.
(a) Employee must have worked at least 1000 hours in the prior twelve (12)
month period. The period for determining hours worked shall be from August
1st of the prior year through July 31st of the current year.
(b) In the event an employee worked less than 1000 hours in said period, paid
sick and/or personal leave allowance will be credited in the same
proportion as the hours worked are to 1000. New employees must have worked
at least 1000 hours in order to be eligible for paid sick and/or personal
leave allowance. Employees terminated for any reason shall receive a
pro-rated sick or personal pay.
Section 2. An employee with credited sick and/or personal leave allowance as
provided in Section 1 above, may use such allowance during the following twelve
(12) month period for illness (when not receiving accident and health insurance
benefits), or personal reasons, but provided that absence from work has been
excused, is for not less than four (4) continuous hours and has at least four
(4) hours paid sick and/or personal leave allowance credit remaining. Employees
shall notify Company when electing to take personal days off.
30
<PAGE>
Section 3. Paid sick and/or personal leave allowance shall be computed on the
basis of the employee's regular rate of pay as of the day of absence and shall
be paid on the pay check for said period so long as application for same has
been submitted on a timely basis. Application for payment shall be made through
the employee's supervisor on forms so provided.
Section 4. Unused paid sick and/or personal leave allowance, at the time of the
employee's next eligibility date, will be paid to the employee in a lump sum
calculated on the basis of the employee's regular rate of pay at such time.
ARTICLE 21
NONCOVERED EMPLOYEES
Section 1. Persons excluded from the Bargaining Unit shall not perform work of
the type customarily performed by employees of the Bargaining Unit, except in
the following situations.
(a) In emergencies when employees are not available.
(b) In the bona fide instruction or training of employees.
(c) Duties of an experimental nature or in the case of vendors or warrantees,
tryouts.
Section 2. When it is determined that Bargaining Unit work has been performed by
non-bargaining unit employees in violation of Section 1, the employee in the
appropriate job description with the least amount of accumulated overtime hours
will receive pay at the applicable rate for the hours of work performed.
Section 3. The Company shall notify the Union Chairperson and/or the
Committeeperson in the section affected prior to the assignment of any persons
excluded from the Bargaining Unit to any of the situations listed in Section 1.
Section 4. Any grievance involving interpretation of this Article may be
submitted in writing directly to Step 3.
31
<PAGE>
ARTICLE 22
GENERAL PROVISIONS
Section 1. The Company shall notify the Union of its supervisory
representatives; the Union shall notify the Company of its Committee members
operating under the Contract.
Section 2. Employees will be paid equal pay for equal work.
Section 3. The Company and the Union agree that they will not discriminate
against any employee or applicant for employment because of age, race, color,
religious creed, sex, national origin, ancestry or physical disability, disabled
veterans, and veterans of the Vietnam era.
Section 4. Part time employees shall have seniority only among other part-time
employees, and shall share in monetary benefits under the contract on a prorated
basis only, with the exception of general wage rates which they shall share
fully.
Section 5. Officers, Stewards and Committeepersons of the Union shall be
permitted to leave work in connection with official Union business whenever
authorized by the President or the Business Agent of the Amalgamated Local
Union, and members elected or appointed to official Union conventions or
conferences, or authorized by the Local Union to attend any official Union
functions shall be permitted to leave work for such purposes provided permission
shall be obtained in advance from the Company, which permission will not
unreasonably be withheld and provided further that the Company shall not be
liable for any pay during the period of absence.
Section 6. Except as provided herein, it is understood between the parties that
there shall be no duplication of compensation for the same hours for any reason.
Section 7. The Company and the Union agree to institute a mutually agreeable
training or apprenticeship program.
32
<PAGE>
Section 8. The Company shall print and distribute copies of this contract to all
Bargaining Unit employees within one hundred twenty (120) days of the effective
date of this Agreement.
Section 9. The Company will offer educational assistance to any employee with
three or more years of service under the following conditions:
(a) Courses must be job related and approved by Management prior to starting
the program of instruction for which payment will be made.
(b) Courses must be successfully passed prior to payment.
(c) There will be a semester limitation of assistance not to exceed $200 per
individual, effective February 1, 1992.
Section 10. Bargaining unit work within the plant shall not be sub-contracted
when the work is normally and usually performed by bargaining unit employees
with appropriate equipment and qualified employees are availale, except where
circumstances demand or economics warrant it. If such decision is based on cost,
the Company will notify and discuss with the Union as soon as possible the
reasons why it believes such action to be necessary, so the parties may explore
alternatives to such transfer of work.
ARTICLE 23
INSURANCE PROGRAM
Section 1. Health Maintenance Organization
Each employee covered by this Agreement shall have their hospital, medical,
surgical, and related insurance coverage with a Health Maintenance organization,
(HMO). the effective date for this coverage March 1, 1996 through February 28,
1996 will be PHS/Guardian Alliance. If the premium rate for this plan increases
by more than 6% for the March 1, 1997 renewal date, the Company and the Union
agree to meet and discuss options. If the medical insurance premium for the
March 1, 1998 renewal date increases by more than 6% over the agreed upon 1997
premiums, the Company and the Union agree to meet and discuss options.
33
<PAGE>
Section 5. The Company shall pay $25 per month per employee for dental insurance
per the Local 376, UAW Dental Plan effective February 1, 1996.
Section 6. Employees who retire early may continue their life and/or medical
insurance at group rates until age sixty-five (65). In order to receive retiree
life and/or medical insurance paid for by the Company at age sixty-five (65),
the employee must elect to carry the retiree life and/or medical insurance until
age sixty-five (65).
Employees who retire early on or after 2/1/96 may continue their life and/or
medical insurance at group rates until age sixty-five (65). In order to receive
retiree life paid for by the Company and $50/mo towards retiree medical and/or
Medicare Part B Reimbursement paid for by the Company at age sixty-five (65),
the employee must elect to carry the retiree life and/or medical insurance until
age sixty-five (65).
Section 7. Employees who retire on or after February 1,1983, will be entitled to
have Medicare Part B premium paid for by the Company when they reach age
sixty-five (65). Employees entitled to receive Medicare Part B premiums should
submit a statement to the Personnel Department every six (6) months to receive
reimbursement.
Employees who retire on or after 2/1/96 are entitled to $50 per month paid for
by the company toward both medical and/or Medicare Part B reimbursement when
they reach age sixty-five (65).
ARTICLE 24
PLANT CLOSURE AGREEMENT
An employee whose employment is terminated as a direct result of the plant being
closed shall receive;
(a) Separation pay in an amount equal to $200 for each year of continuous
service,
(b) Any vacation benefits accrued but not yet paid, and
(c) The continuation of the hospital, medical, surgical, dental and life
insurance in effect at the time of their termination for four (4) months.
ARTICLE 25
TERMINATION DATE
This Agreement shall commence February 1, 1992 and terminate midnight, January
31, 1995.
This Agreement shall be in full force and effect for a period of three (3) years
from the date hereof and for additional periods of one (1) year thereafter
except that should either party hereto intend to terminate this Agreement or
35
<PAGE>
modify any portion or any of the terms hereof, it shall give written notice by
certified mail to the other party not less than sixty (60) nor more than
seventy-five (75) days prior to its expiration date.
Should notice of termination be given by either party as herein provided, this
Contract shall terminate as of its expiration date.
Should either party hereto give the other party such written notice requesting
amendment or modification of this Agreement, such notice shall be specific as to
the amendments or modifications proposed. Negotiations on such proposed
amendments or modifications shall begin not later than twenty (20) days after
the date of mailing of such notice. During such negotiations, this Agreement
shall remain in full force and effect except that should negotiations extend
beyond the termination date then either party, upon ten (10) days notice to the
other in writing and by certified mail may terminate the Contract in which event
this Agreement shall terminate on the tenth day after mailing of such notice.
Notice shall be in writing and shall be sent by certified mail addressed, if to
the Union, to the International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America, UAW, and Amalgamated Local 376, 30
Elmwood Court, Newington, Connecticut and if to the Company, to the Heim
Bearings Division of Imo Industries Inc., 60 Round Hill Road, Fairfield,
Connecticut, 06430.
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names to be subscribed
by their duly authorized officers and representatives this
FOR INTERNATIONAL UNION,
UNITED AUTOMOBILE, AEROSPACE
AND AGRICULTURAL IMPLEMENT
WORKERS OF AMERICA, UAW
AND AMALGAMATED LOCAL 376
John F. Shail, Chairperson
Willie Polite, Committeeperson
Brian Hogan, Committeeperson
Russell See, President, UAW 376
Len Dube, International Rep. UAW
FOR THE HElM BEARINGS DIVISION OF
IMO INDUSTRIES INC.
Lawrence A. Raffone, General Manager
Joseph N. Colantonio, Human Resources Manager
Mario E. DiDomenico, Company Committee
FOR IMO INDUSTRIES INC.
Donald F. Vosburgh, V.P. Human Resoures
37
<PAGE>
APPENDIX A
Wage Schedule 1992
Feb. 1, 1992 Aug. 1, 1992
--------------------------------------
Base Rate 10c COLA Added
Labor Grade Hire* Maximum to Hire* Maximum
------------------------------------------------------------
12 12.55 14.29 12.65 14.39
11 12.03 13.76 12.13 13.86
10 11.51 13.24 11.61 13.34
9 11.08 12.82 11.18 12.92
8 10.46 12.19 10.56 12.29
7 9.89 11.62 9.99 11.72
6 9.67 11.40 9.77 11.50
5 9.17 10.92 9.27 11.02
4 8.85 10.58 8.95 10.68
3 8.58 10.30 8.68 10.40
2 8.40 10.14 8.50 10.24
1 8.19 9.93 8.29 10.03
* Progression from minimum to maximum will be provided in Article 3, Section
(3).
38
<PAGE>
APPENDIX A
Wage Schedule 1993
Feb. 1, 1992 Aug. 1, 1992
--------------------------------------
Base Rate 5c COLA Added
Labor Grade Hire* Maximum to Hire* Maximum
------------------------------------------------------------
12 13.09 14.89 13.14 14.94
11 12.55 14.35 12.60 14.40
10 12.02 13.81 12.07 13.86
9 11.57 13.37 11.62 13.42
8 10.93 12.72 10.98 12.77
7 10.34 12.13 10.39 12.18
6 10.11 11.90 10.16 11.95
5 9.59 11.41 9.64 11.46
4 9.26 11.05 9.31 11.10
3 8.98 10.76 9.03 10.81
2 8.80 10.60 8.85 10.65
1 8.58 10.38 8.63 10.43
(1) Increased by 3.5% of 1992 Rates with COLAs added.
* Progression from minimum to maximum will be provided in Article 3, Section
(3).
39
<PAGE>
RBC HEIM
HOURLY PAYROLL RETIREMENT PLAN
AMENDED AND RESTATED
EFFECTIVE FEBRUARY 1, 1989
(As amended through September 1, 1996)
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
"Accrued Benefit" .......................................................... 2
"Active Participant" ....................................................... 2
"Actuarial Equivalent" or "Actuarially Equivalent" ......................... 2
"Actuary" .................................................................. 2
"Affiliated Company" ....................................................... 3
"Age" ...................................................................... 3
"Benefit Commencement Date" ................................................ 3
"Board of Directors" ....................................................... 4
"Break in Service" ......................................................... 4
"Code" ..................................................................... 4
"Company" .................................................................. 5
"Compensation" ............................................................. 5
"Covered Employee" ......................................................... 5
"Disability Retirement Date" ............................................... 5
"Disabled Participant" ..................................................... 6
"Early Retirement Date" .................................................... 6
"Effective Date" ........................................................... 6
"Employee" ................................................................. 6
"Employment Commencement Date" ............................................. 6
"ERISA" .................................................................... 7
"Fund" ..................................................................... 7
"Hour of Service" .......................................................... 7
"Joint Board of Administration or Board of Administration" ................. 10
"Late Retirement Date" ..................................................... 10
"Limitation Year" .......................................................... 10
"Normal Retirement Date" ................................................... 10
"Participant" .............................................................. 10
"Participating Company" .................................................... 11
"Plan" ..................................................................... 11
"Plan Year" ................................................................ 11
"Predecessor Company" ...................................................... 11
"Required Beginning Date" .................................................. 11
"Separation from Service" .................................................. 12
"Social Security Retirement Age" ........................................... 12
"Spouse" ................................................................... 13
"Surviving Spouse" ......................................................... 13
"Total Disability" ......................................................... 13
"Trust Agreement" .......................................................... 14
"Trustee" .................................................................. 14
"Union" .................................................................... 14
"Year of Credited Service" ................................................. 14
"Year of Vesting Service" .................................................. 14
-i-
<PAGE>
Page
----
ARTICLE II
TRANSITION AND ELIGIBILITY TO PARTICIPATE
2.1 Rights Affected and Preservation of Accrued Benefit ................. 15
2.2 Eligibility to Participate .......................................... 15
ARTICLE III
VESTING SERVICE AND CREDITED SERVICE
3.1 Years of Vesting Service ............................................ 17
3.2 Credited Service for Benefit Accrual ................................ 17
3.3 Additional Rules .................................................... 18
3.4 Loss of Vesting Service ............................................. 19
3.5 Loss of Credited Service ............................................ 19
3.6 Restoration of Service .............................................. 20
ARTICLE V
ELIGIBILITY FOR BENEFITS
4.1 Normal Retirement ................................................... 21
4.2 Late Retirement ..................................................... 21
4.3 Early Retirement .................................................... 21
4.4 Disability Retirement ............................................... 21
4.5 Furnishing Data ..................................................... 23
ARTICLE V
CALCULATION OF BENEFITS
5.1 Accrued Benefit ..................................................... 24
5.2 Normal Retirement ................................................... 25
5.3 Late Retirement ..................................................... 25
5.4 Early Retirement .................................................... 25
5.5 Disability Retirement ............................................... 26
5.6 Transfers of Employment ............................................. 26
5.7 Death Before Commencement of Benefits ............................... 27
5.8 Survivor's Benefit for Surviving Spouse ............................. 27
5.9 Death Benefit After Retirement ...................................... 28
5.10 Maximum Benefit ..................................................... 28
ARTICLE VI
VESTING
6.1 Nonforfeitable Amounts .............................................. 36
6.2 Treatment of Terminated Vested Participant .......................... 36
6.3 Form and Payment of Benefit ......................................... 37
6.4 Termination of Benefit .............................................. 37
6.5 Special Rules for Certain Terminated Participants ................... 37
- ii -
<PAGE>
Page
----
ARTICLE VII
PAYMENT OF BENEFITS
7.1 Minimum Distribution Requirements ................................... 39
7.2 Normal Form of Benefit .............................................. 40
7.3 Optional Form of Benefit ............................................ 41
7.4 Rules for Election of Optional Form of Benefit ...................... 43
7.5 Explanations to Participants ........................................ 46
7.6 Termination of Benefits ............................................. 46
7.7 Beneficiary Designation ............................................. 47
7.8 Failure to Apply for Pension ........................................ 48
7.9 Mailing Address ..................................................... 49
ARTICLE VIII
THE FUND AND FUNDING
8.1 Designation of Trustee .............................................. 50
8.2 Contributions to the Fund ........................................... 50
8.3 Use of Contributions to the Fund .................................... 51
8.4 Forfeitures ......................................................... 52
8.5 Expenses of Administration .......................................... 52
8.6 Sole Source of Benefits ............................................. 52
ARTICLE IX
ADMINISTRATION
9.1 Joint Board of Administration ....................................... 53
9.2 Meetings ............................................................ 53
9.3 Quorum .............................................................. 54
9.4 Power of Board ...................................................... 54
9.5 Disposition of Cases Outside Board's Jurisdiction ................... 54
9.6 Board Rulings Prospective ........................................... 54
9.7 Claims Procedure .................................................... 55
9.8 Organizational Matters .............................................. 56
9.9 Company Responsibility .............................................. 57
9.10 Liability of Board Members .......................................... 57
9.11 Grievance Procedure Not Applicable .................................. 58
9.12 Determination of Facts .............................................. 58
ARTICLE X
AMENDMENT AND TERMINATION
10.1 Power of Amendment and Termination .................................. 60
10.2 Disposition on Termination .......................................... 61
10.3 Merger, Consolidation, or Transfer .................................. 63
- iii -
<PAGE>
Page
----
ARTICLE XI
GENERAL PROVISIONS
11.1 No Employment Rights ................................................ 64
11.2 Governing Law ....................................................... 64
11.3 Severability of Provisions .......................................... 64
11.4 No Interest in Fund ................................................. 64
11.5 Spendthrift Clause .................................................. 65
11.6 Incapacity .......................................................... 65
11.7 Withholding ......................................................... 66
11.8 Missing Participants ................................................ 66
SCHEDULE A - ACTUARIAL EQUIVALENTS
SCHEDULE B - MINIMUM DISTRIBUTION INCIDENTAL BENEFIT TABLES
- iv-
<PAGE>
WHEREAS, the Heim Division of Incom International Inc., adopted the
Hourly Payroll Retirement Plan of Incom International Inc., Heim Division,
effective February 1, 1984, for certain of its employees; and
WHEREAS, the Heim Division of Incom International Inc. was purchased
by Imo Industries Inc. and Imo Industries Inc. adopted the Hourly Payroll
Retirement Plan of Incom International Inc., Heim Division and renamed such plan
the Heim Bearings Division, Imo Industries Inc. Hourly Payroll Retirement Plan,
effective February 1, 1989; and
WHEREAS, Roller Bearing Company of America purchased the Heim
Bearings Division of Imo Industries Inc. and adopted the Heim Bearings Division,
Imo Industries Inc. Hourly Payroll Retirement Plan and renamed such plan the RBC
Heim Hourly Payroll Retirement Plan, effective May 10, 1993; and
WHEREAS, Roller Bearing Company of America desires at this time to
amend the RBC Heim Hourly Payroll Retirement Plan to reflect the most recent
collective bargaining agreement pursuant to which the Plan is maintained;
NOW, THEREFORE, effective through September 1, 1996, the RBC Heim
Hourly Payroll Retirement Plan is continued and amended as hereinafter set
forth:
1
<PAGE>
ARTICLE I
DEFINITIONS
Except where otherwise clearly indicated by context, the masculine
shall include the feminine and the singular shall include the plural, and
vice-versa. Any term used herein without an initial capital letter that is used
in a provision of the Code with which this Plan must comply to meet the
requirements of section 401(a) of the Code shall be interpreted as having the
meaning used in such provision of the Code, if necessary for the Plan to comply
with such provision.
"Accrued Benefit" means, for any Participant as of any date, subject
to Section 5.10, the amount of monthly benefit earned to such date, payable
monthly as a single life annuity beginning at the Participant's Normal
Retirement Date (or immediately, if the Participant has passed his Normal
Retirement Date and is still an Employee) calculated in accordance with Section
5.1.
"Active Participant" means a Participant who is a Covered Employee.
"Actuarial Equivalent" or "Actuarially Equivalent" means of equal
actuarial value on the basis of the assumptions and factors described in
Schedule A.
"Actuary" means the actuarial firm or individual selected by the
Company from time to time.
2
<PAGE>
"Affiliated Company" means, with respect to any Participating
Company, (a) any corporation that is a member of the same controlled group of
corporations (within the meaning of section 414(b) of the Code) as such
Participating Company; (b) any member of an affiliated service group, as
determined under section 414(m) of the Code, of which such Participating Company
is a member; (c) any trade or business that is under common control with such
Participating Company, as determined under section 414(c) of the Code and (d)
any other entity which is required to be aggregated with a Participating Company
under section 414(o) of the Code. "50% Affiliated Company" means an Affiliated
Company, but determined with "more than 50%" substituted for the phrase "at
least 80%" in section 1563(a) of the Code, when applying sections 414(b) and
414(c) of the Code.
"Age" means, for any individual, his age on last birthday, except
that an individual attains Age 70-1/2 on the corresponding date in the sixth
calendar month following the month in which his 70th birthday falls (or the last
day of such sixth month if there is no such corresponding date therein).
"Benefit Commencement Date" means, for any Participant, the date as
of which his first benefit payment is due disregarding any disability benefits
payable pursuant to Section 5.5. For purposes of Section 5.8, and for purposes
of Paragraph (3) of Subsection 5.10(a), in calculating the maximum benefit
payable to the Surviving Spouse of a Participant under Section 5.8 "Benefit
Commencement Date" also means, with respect to the
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<PAGE>
Surviving Spouse, the date on which the survivor's benefit under Section 5.8
commences to the Surviving Spouse.
"Board of Directors" means the board of directors of the Company.
"Break in Service" means, for any Employee or former Employee, any
Plan Year in which he is not credited with more than 500 Hours of Service.
(a) Notwithstanding the foregoing, if an Employee is absent
for any absence for which the Joint Board of Administration adopted a rule
pursuant to which service shall be credited for purposes of avoiding a Break in
Service, then, to the extent he is not otherwise credited with Hours of Service
with respect to such absence, he shall be credited with an Hour of Service,
solely for purposes of this definition, for each Hour of Service with which he
would have been credited if he had continued to be actively employed during the
period of absence.
(b) Notwithstanding the foregoing, if an Employee is absent
from work by reason of pregnancy, childbirth, or placement in connection with
adoption, or for purposes of the care of such Employee's child immediately after
birth or placement in connection with adoption, such Employee shall not have a
Break in Service during the first Plan Year in which the Employee would
otherwise have a Break in Service pursuant to the rules set forth in Subsection
(a) of this Section.
"Code" means the Internal Revenue Code of 1986, as amended.
4
<PAGE>
"Company" means, effective on and after May 10, 1993, Roller Bearing
Company of America, and its successors. Prior to May 10, 1993 the "Company"
means the Heim Bearings Division of Imo Industries Inc.
"Compensation" means, for any Active Participant, for the purposes
of Section 5.10, except as otherwise provided therein, his "compensation as such
word is defined in Treas. Reg. ss.1.415-2(d)(10).
"Covered Employee" means each Employee who (a) is employed by a
Participating Company on an hourly-rated basis, and (b) is covered under the
basic collective bargaining agreement between the Participating Company and the
Union, as amended from time to time, and (c) is not covered by another defined
benefit pension plan of a Participating Company or to which a Participating
Company makes contributions. An Employee who is such solely by reason of being a
leased employee within the meaning of section 414(n) or 414(o) of the Code shall
not be a Covered Employee.
"Disability Retirement Date" means, for any Participant, the date on
which he (a) is determined by the Company to have suffered a Total Disability,
and (b) has a Separation from Service due to such Total Disability; provided,
however, that a Participant shall not have a Disability Retirement Date unless,
at the time his Total Disability occurs, he is an Employee, and has to his
credit 10 or more Years of Vesting Service.
5
<PAGE>
"Disabled Participant" means a Participant who has a Disability
Retirement Date that occurs prior to his Normal Retirement Date and who has not
ceased to be a Disabled Participant pursuant to Section 4.4(c).
"Early Retirement Date" means, for any Participant, the first day of
the calendar month coincident with or next following the date on which he has a
Separation from Service after he has attained Age 55 and has to his credit 10 or
more Years of Vesting Service.
"Effective Date" means (except as otherwise set forth herein)
February 1, 1989, the effective date of this amended and restated Plan. The Plan
was originally effective on August 15, 1956.
"Employee" means an individual who is employed by a Participating
Company or an Affiliated Company. An individual who is not otherwise employed by
a Participating Company or Affiliated Company shall be deemed to be employed by
such Company if he is a leased employee with respect to whose services such
Participating Company or Affiliated Company is the recipient within the meaning
of Code section 414(n) or 414(o), but to whom Code section 414(n)(5) does not
apply.
"Employment Commencement Date" means, for any Employee, the date on
which he is first entitled to be credited with an "Hour of Service" described in
Paragraph (a)(1) of the definition of Hour of Service in this Article.
6
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Fund" means the fund established for this Plan, administered under
the Trust Agreement, out of which benefits payable under this Plan shall be
paid.
"Hour of Service" means, for any Employee, a credit awarded with
respect to:
(a) except as provided in (b) or (c),
(1) each hour for which he is directly or indirectly
paid or entitled to payment by a Participating Company or an Affiliated Company
for the performance of employment duties; or
(2) each hour for which he is entitled, either by award
or agreement, to back pay from a Participating Company or an Affiliated Company,
irrespective of mitigation of damages; or
(3) each hour for which he is directly or indirectly
paid or entitled to payment by a Participating Company or an Affiliated Company
on account of a period of time during which no duties are performed due to
vacation, holiday, illness, incapacity (including disability), jury duty,
layoff, leave of absence, or military duty; or
(4) each hour for which he is absent for military
service under leave granted by the Participating Company or Affiliated Company
or required by law, provided the Employee returns to service with the
Participating Company or Affiliated
7
<PAGE>
Company within 90 days of his release from active military duty or any longer
period during which his right to reemployment is protected by law; or
(5) each hour for which he is absent during a period of
absence described in Section 3.3 for which Years of Vesting Service or Years of
Credited Service are credited on his behalf.
(b) For any period that includes any hours for which an Hour
of Service would otherwise be credited to an Employee under (a), above, the
Company may, in accordance with rules applied in a uniform and
non-discriminatory manner, elect instead to credit Hours of Service using one or
more of the following equivalencies:
Basis Upon Which Records Credit Granted to Individual
Are Maintained For Period
- ------------------------ ----------------------------
shift actual hours for full shift
day 10 Hours of Service
week 45 Hours of Service
month 190 Hours of Service
Notwithstanding the foregoing and any other provision of the Plan to
the contrary, for any period that includes any hours for which an Hour of
Service would be credited to an Employee during a period of absence from work
described in Section 3.3(a) for the purpose of calculating Years of Vesting
Service, the Company shall credit Hours of Service using one or more of the
following equivalencies:
8
<PAGE>
Basis Upon Which Records Credit Granted to Individual
Are Maintained For Period
- ------------------------ ----------------------------
day 8 Hours of Service
week 40 Hours of Service
month 174 Hours of Service
(c) Anything to the contrary in Subsection (a) or (b)
notwithstanding:
(1) Except as provided in Section 3.3, no Hours of
Service shall be credited to an Employee for any period during which payments
are made or due him under a plan maintained solely for the purpose of complying
with applicable workers' compensation, unemployment compensation, or disability
insurance laws.
(2) No more than 501 Hours of Service shall be credited
to an Employee under Paragraph (a)(3) of this definition on account of any
single continuous period during which no duties are performed by him, except to
the extent otherwise provided in Section 3.3 or elsewhere in this Plan.
(3) No Hours of Service shall be credited to an Employee
with respect to payments solely to reimburse for medical or medically related
expenses.
(4) No Hours of Service shall be credited twice.
(5) Hours of Service shall be credited at least as
liberally as required by the rules set forth in U.S. Department of Labor Reg.
ss.2530.200b-2(b) and (c).
9
<PAGE>
(6) In the case of an Employee who is such solely by
reason of service as a leased employee within the meaning of section 414(n) or
414(o) of the Code, Hours of Service shall be credited as if such Employee were
employed and paid with respect to such service (or with respect to any related
absences or entitlements) by the Participating Company or Affiliated Company
that is the recipient thereof.
"Joint Board of Administration or Board of Administration" means the
board of administrators appointed by the Company and the Union in accordance
with Section 9.1.
"Late Retirement Date" means, for any Participant, the first day of
the calendar month coincident with or next following the date on which he has a
Separation from Service, if such Separation from Service occurs after the
Participant's Normal Retirement Date.
"Limitation Year" means the Plan Year.
"Normal Retirement Date" means, for any Participant, the first day
of the calendar month coincident with or next following the date on which he
attains Age 65.
"Participant" means an individual who is an Active Participant, a
former Active Participant receiving benefits under the Plan, a former Active
Participant who has a present or future right to receive benefits under the
Plan, or an Employee who was once an Active Participant and has been transferred
so that he is no longer a Covered Employee.
10
<PAGE>
"Participating Company" means the Company and each other
organization which is authorized by the Board of Directors to adopt this Plan by
action of its board of directors or other governing body.
"Plan" means the RBC Heim Hourly Payroll Retirement Plan, as set
forth herein (including any Schedules).
"Plan Year" means each 12-consecutive month period that begins on
January 1st or any anniversary thereof and ends on the next following December
31st.
"Predecessor Company" means, with respect to any Participating
Company or Affiliated Company, any corporation to which such participating
Company or Affiliated Company is a successor in interest by merger,
consolidation, asset acquisition, stock acquisition, or reincorporation, and any
other corporation designated as such for purposes of this Plan by the Board of
Directors.
"Required Beginning Date" means, for any Participant:
(a) if he attained Age 70-1/2 before January 1, 1988, and is
not a 5-percent owner (within the meaning of section 416 of the Code) of a
Participating Company at any time during the five-Plan-Year period ending in the
calendar year in which he attained Age 70-1/2, or thereafter, April 1 of the
calendar year following the later of the calendar year in which he has a
Separation from Service or the calendar year in which he attained Age 70-1/2;
11
<PAGE>
(b) if he attained Age 70-1/2 before January 1, 1988, and is a
5-percent owner (within the meaning of section 416 of the Code) of a
Participating Company at any time during the five-Plan-Year period ending in the
calendar year in which he attained Age 70-1/2, or thereafter, the later of (1)
December 31, 1987, (2) April 1 of the calendar year following the calendar year
in which he attained Age 70-1/2, or (3) April 1 of the calendar year following
the calendar year in which he becomes a 5-percent owner;
(c) except as provided in Subsection (d) below, if he attains
Age 70-1/2 on or after January 1, 1988, April 1 of the calendar year next
following the calendar year in which he attains Age 70-1/2;
(d) if he attained Age 70-1/2 before January 1, 1989 and after
December 31, 1987, is not a 5-percent owner (within the meaning of section 416
of the Code) of a Participating Company, and has not had a Separation from
Service before January 1, 1989, April 1, 1990.
"Separation from Service" means, for any Employee, his death,
retirement, resignation, discharge or any absence that causes him to cease to be
an Employee.
"Social Security Retirement Age" means (a) for any individual born
before January 1, 1938, Age 65, (b) for any individual born after December 31,
1937, but before January 1, 1955, Age 66, or (c) for any individual born after
December 31, 1954, Age 67.
12
<PAGE>
"Spouse" means, with respect to any Participant, the individual to
whom such Participant is married as of the date of reference.
"Surviving Spouse" means, with respect to any Participant:
(a) for purposes of the survivor's benefit described in
Section 5.8, the individual, if any, who is such Participant's Spouse; and
(b) for purposes of the joint and survivor annuity described
in Section 7.2, the individual, if any, who is such Participant's Spouse on the
Participant's Benefit Commencement Date.
"Total Disability" means, with respect to any Participant, a
disability due to accident, injury, or disease that renders him unable to engage
in any regular employment for a Participating Company and the Social Security
Administration has issued a determination letter which states that he is
entitled to receive disability benefits under the Federal Social Security Act by
reason of his disability, but, except as prohibited by applicable law, excluding
such a disability that results from:
(a) chronic alcoholism;
(b) addiction to narcotics;
(c) commission of any act which results in the conviction of
any felony, except involuntary manslaughter resulting from an act of the
Participant which does not in and of itself constitute a felony; or
13
<PAGE>
(d) intentionally self-inflicted or self-incurred injury.
"Trust Agreement" means the agreement and declaration of trust
executed for purposes of the Plan.
"Trustee" means the corporate trustee or one or more individuals
collectively appointed and acting under the Trust Agreement.
"Union" means International Union, United Automobile Aerospace and
Agricultural Implement Workers of America, U.A.W., and Amalgamated Local 376,
U.A.W.
"Year of Credited Service" means, for any Participant, a credit used
to determine his Accrued Benefit under the Plan, as further described in Article
III.
"Year of Vesting Service" means, for any Employee, a credit used to
determine his vested status under the Plan, as further described in Article III.
14
<PAGE>
ARTICLE II
TRANSITION AND ELIGIBILITY TO PARTICIPATE
2.1 Rights Affected and Preservation of Accrued Benefit. Except as
provided to the contrary herein, the provisions of this amended and restated
Plan shall apply only to Employees who complete an Hour of Service on or after
the Effective Date. The rights of any other individual shall be governed by the
Plan as in effect upon his Separation from Service, except to the extent
expressly provided in any amendment adopted subsequently thereto.
2.2 Eligibility to Participate.
(a) Effective January 1, 1988, any Employee credited with an
Hour of Service on or after such date whose Employment Commencement Date
occurred on or after his 60th birthday shall become an Active Participant on the
later of January 1, 1988 or the date he otherwise satisfies the requirements of
Subsections (b) or (c) of this Section, if he is then a Covered Employee.
(b) Each Employee who was an Active Participant immediately
prior to the Effective Date and is a Covered Employee on the Effective Date
shall continue to be an Active Participant as of the Effective Date. Each
Employee who was not an Active Participant immediately prior to the Effective
Date shall become an Active Participant as of the Effective Date if he is then a
15
<PAGE>
Covered Employee. Each other Employee shall become an Active Participant on the
date he becomes a Covered Employee.
(c) A Participant (or a former Participant) who has a
Separation from Service and who is later reemployed as a Covered Employee shall
become an Active Participant as of the date on which he first again completes an
Hour of Service as a Covered Employee.
16
<PAGE>
ARTICLE III
VESTING SERVICE AND CREDITED SERVICE
3.1 Years of Vesting Service. Each Employee shall be credited with a
Year of Vesting Service for each Plan Year for which he is credited with 1,000
or more Hours of Service. An Employee who has been credited with fewer than
1,000 Hours of Service for a Plan Year shall be credited with one-twelfth (1/12)
of a Year of Vesting Service for each eighty (80) of such Hours of Service,
computed to the nearest one-twelfth (1/12); provided that any Participant who
completes at least forty (40) such Hours of Service during any Plan Year will
accrue at least one-twelfth (1/12) of a Year of Vesting Service.
3.2 Credited Service for Benefit Accrual.
(a) Except as provided in this Article, a Participant shall be
credited with a Year of Credited Service for each Plan Year for which he is
credited with 1,700 or more Hours of Service. For the purpose of calculating a
Participant's Years of Credited Service, all Hours of Service at premium rate
will be computed as straight-time hours and only Hours of Service credited for a
period during which he is (or, in the case of back pay, would have been) a
Covered Employee shall be credited.
(b) A Participant who has been credited with fewer than 1,700
Hours of Service for a Plan Year shall be credited with a fraction of a Year of
Credited Service, not to exceed 1.0, calculated to the nearest one-tenth (1/10)
of a year,
17
<PAGE>
the numerator of which is the number of Hours of Service with which the
Participant is credited, and the denominator of which is 1,700.
3.3 Additional Rules.
(a) For the purpose of calculating a Participant's Years of
Vesting Service, service shall be credited for the following periods of absence
from work during which the Participant would normally have been scheduled to
work:
(1) absence from work, to a maximum of two years,
because of injury or disease incurred in the course of employment with a
Participating Company and with respect to which he receives Worker's
Compensation benefits;
(2) a period of involuntary layoff, to a maximum of 12
months, during which he has recall rights; provided, however, that if the
Participant fails to return to work upon recall in accordance with the
applicable collective bargaining agreement, no service shall be credited during
such period of layoff and his employment will be deemed to have terminated as of
the beginning of such period of layoff;
(3) absence from work due to any temporary illness which
does not constitute a Total Disability, for which the Participant receives
compensation under a disability program sponsored by a Participating Company,
provided the Participant has completed at least 170 Hours of Service in the year
in which such illness arose;
18
<PAGE>
(4) absence for paid vacation or paid holidays not
worked; and
(5) any period or absence for which vesting service
shall be credited according to applicable rules adopted by the Joint Board of
Administration.
(b) For the purposes of calculating a Participant's Years of
Credited Service, service shall be credited for the following periods of absence
from work during which the Participant would normally have been scheduled to
work:
(1) absence because of vacation;
(2) absence from work, to a maximum of two years,
because of injury or disease incurred in the course of employment with a
Participating Company and with respect to which he receives Worker's
Compensation benefits;
(3) absence pursuant to an excused absence granted under
the collective bargaining agreement with the Union.
3.4 Loss of Vesting Service. An Employee's Years of Vesting Service
shall be cancelled if he incurs a Break in Service before his Normal Retirement
Date and at a time when his vested percentage under Section 6.1 is zero or his
Accrued Benefit is zero.
3.5 Loss of Credited Service. An Employee's Years of Credited
Service shall be cancelled if he is deemed to receive a single-sum payment upon
Separation from Service. An Employee shall be deemed to receive a single-sum
distribution of his entire Accrued Benefit as of the date of his Separation from
19
<PAGE>
Service if the Actuarially Equivalent single-sum value of his vested Accrued
Benefit is zero.
3.6 Restoration of Service.
The Years of Vesting Service and Years of Credited Service of
an Employee whose Years of Vesting Service and Years of Credited Service have
been cancelled pursuant to Section 3.4 and/or Section 3.5 shall be restored to
his credit if he thereafter completes a Year of Vesting Service at a time when
the number of his consecutive Breaks in Service is less than the greater of (a)
the number of Years of Vesting Service to his credit when the first such Break
in Service occurred, or (b) five.
20
<PAGE>
ARTICLE IV
ELIGIBILITY FOR BENEFITS
4.1 Normal Retirement. A Participant who has a Separation from
Service on his Normal Retirement Date shall be entitled to a pension. Such
Participant's Benefit Commencement Date shall be his Normal Retirement Date.
4.2 Late Retirement. A Participant who has a Separation from Service
after his Normal Retirement Date shall be entitled to a pension. Such
Participant's Benefit Commencement Date shall be the earlier of his Late
Retirement Date or his Required Beginning Date.
4.3 Early Retirement. A Participant who has an Early Retirement Date
shall be entitled to a pension. Such Participant's Benefit Commencement Date
shall be his Normal Retirement Date; provided, that he may elect as his Benefit
Commencement Date his Early Retirement Date the first day of any month after his
Early Retirement Date and not after his Normal Retirement Date. Such election
must be made no earlier than 90 days prior to the Benefit Commencement Date
elected by the Participant.
4.4 Disability Retirement.
(a) A Participant who has a Disability Retirement Date prior
to his Normal Retirement Date shall be entitled to an immediate disability
benefit commencing on the first day of the month coincident with or next
following his Disability Retirement
21
<PAGE>
Date and ending on the date he ceases to be a Disabled Participant as described
in Subsection (c) of this Section.
(b) Total Disability shall be determined by the Company, which
may consult with a medical examiner who shall have the right to make such
physical examinations and other investigations as may be reasonably required to
determine Total Disability. The Company may direct that any former Employee who
is receiving a disability benefit shall be reexamined without expense to him
from time to time prior to the date specified in Subsection (c) of this
Section, but not more than twice in any Plan Year, to determine whether his
Total Disability continues to exist.
(c) A Disabled Participant shall cease to be such if and when:
(1) he reaches his Normal Retirement Date;
(2) he ceases to suffer from a Total Disability;
(3) he refuses to submit to reexamination in accordance
with Subsection (b) of this Section; or
(4) he dies.
If a Disabled Participant has met the requirements to receive a pension under
Section 4.3 or 6.2, such Participant may elect as his Benefit Commencement Date
any date as may be provided under the applicable Section. When a Disabled
Participant ceases to be such his current disability benefit shall end, and he
shall be entitled, if he has not previously elected a Benefit Commencement
22
<PAGE>
Date in accordance with the preceding sentence, to a pension under the other
provisions of the Plan, applied on the basis of his Separation from Service due
to his Total Disability.
4.5 Furnishing Data. Each Employee and beneficiary shall furnish
such information as the Company may consider necessary for the determination of
the Employee's rights and benefits under the Plan and shall otherwise cooperate
fully with the Company in the administration of the Plan. Payment of benefits
shall be deferred until all of such information is supplied.
23
<PAGE>
ARTICLE V
CALCULATION OF BENEFITS
5.1 Accrued Benefit.
A Participant's monthly pension shall be equal to $14.50
multiplied by each Year of Credited Service for a retirement occurring on or
after February 1, 1989 and before February 1, 1990; $15.00 multiplied by each
Year of Credited Service for a retirement occurring on or after February 1, 1990
and before February 1, 1991; $l5.75 multiplied by each Year of Credited Service
for a retirement occurring on or after February 1, 1991 and before February 1,
1992; $16.25 multiplied by each Year of Credited Service for a retirement
occurring on or after February 1, 1992 and before February 1, 1993; $16.75
multiplied by each Year of Credited Service for a retirement occurring on or
after February 1, 1993 and before February 1, 1994; $17.25 multiplied by each
Year of Credited Service for a retirement occurring on or after February 1, 1994
and before February 1, 1996; $18.25 multiplied by each Year of Credited Service
for a retirement occurring on or after February 1, 1996 and before February 1,
1997; $19.25 multiplied by each Year of Credited Service for a retirement
occurring on or after February 1, 1997 and before February 1, 1998; and $20.25
multiplied by each Year of Credited Service for a retirement occurring on or
after February 1, 1998.
24
<PAGE>
5.2 Normal Retirement. A Participant who is entitled to a pension
under Section 4.1 shall receive a monthly pension. Subject to Section 5.10, such
pension shall be the Actuarial Equivalent, in the form set forth in Article VII,
of the Participant's Accrued Benefit as of his Normal Retirement Date.
5.3 Late Retirement.
(a) A Participant who is eligible for a pension under Section
4.2 shall receive a monthly pension. Subject to Section 5.10, such pension shall
be the Actuarial Equivalent, in the form set forth in Article VII, of the
Participant's Accrued Benefit as of the earlier of his Late Retirement Date or
his Required Beginning Date.
(b) If a Participant's Required Beginning Date, and therefore
his Benefit Commencement Date, precedes his Late Retirement Date, the amount of
the pension payable to the Participant shall be determined as of his Benefit
Commencement Date and shall be adjusted annually as of January 1 in each
calendar year following his Benefit Commencement Date, up to and including the
January 1 next following his Late Retirement Date. Such annual adjustment shall
include any increase (but not any decrease) in the Participant's Accrued
Benefit, determined in accordance with Section 5.1, as a result of additional
Years of Credited Service since the Participant's Benefit Commencement Date or
the last such annual adjustment, whichever applies.
5.4 Early Retirement. A Participant who is entitled to a pension
under Section 4.3 shall receive a monthly pension.
25
<PAGE>
Subject to Section 5.10, such pension shall be the Actuarial Equivalent, in the
form set forth in Article VII, of the Participant's Accrued Benefit as of his
Early Retirement Date, reduced by one-half percent (1/2%) for each full calendar
month by which his Benefit Commencement Date precedes his Normal Retirement
Date.
5.5 Disability Retirement.
(a) The immediate disability benefit payable to a Disabled
Participant pursuant to Section 4.4 shall be, subject to Section 5.10, a monthly
benefit equal to the Participant's Accrued Benefit, determined as of his
Disability Retirement Date, without reduction for early commencement.
(b) Subject to Section 5.10, a Disabled Participant or a
former Disabled Participant who is entitled to a pension under Section 5.4 or
Article VI may elect to receive such pension as of any date provided under the
applicable Section which shall be his Benefit Commencement Date; provided,
however, that the monthly disability benefit payable to a Disabled Participant
shall be reduced (but not below zero) by the Actuarial Equivalent, in the form
of a single life annuity, of the monthly amount of any pension paid to the
Participant as the result of his election of a Benefit Commencement Date under
Section 5.4 or Article VI.
5.6 Transfers of Employment.
If a Participant ceases to be a Covered Employee under this
Plan but remains employed by a Participating Company,
26
<PAGE>
or if an Employee of a Participating Company becomes a Covered Employee under
this Plan, he will receive credit under this Plan for Years of Vesting Service
for all periods of employment as an Employee of the Participating Company and
credit under the Plan for Years of Credited Service for all periods of
employment as a Covered Employee of the Participating Company.
5.7 Death Before Commencement of Benefits. The Accrued Benefit of a
Participant who dies before his Benefit Commencement Date shall be forfeited
except as provided in Section 5.8.
5.8 Survivor's Benefit for Surviving Spouse. If a Participant who
has any vested interest in his Accrued Benefit under the Plan, dies before his
Benefit Commencement Date leaving a Surviving Spouse, such Surviving Spouse
shall receive a survivor's benefit. Such benefit shall be a monthly pension for
life commencing, as elected in writing by the Spouse no earlier than 90 days
prior to the Benefit Commencement Date elected by the Spouse, on the first day
of any month following the earliest date on which the Participant could have
elected to receive immediate retirement benefits, but not later than the date
that would have been the Participant's Normal Retirement Date. If the
Participant dies after his Normal Retirement Date, benefits shall commence on
the first day of the month following the month of the Participant's death.
Subject to Section 5.10 the survivor's benefit shall be the benefit such
Surviving Spouse would have received if the Participant (1) had had a Separation
from Service
27
<PAGE>
on the date of his death (if he is then an Employee), (2) had survived to the
Benefit Commencement Date elected by the Surviving Spouse, (3) had then begun to
receive an immediate retirement benefit.
5.9 Death Benefit After Retirement. If a Participant dies after his
Benefit Commencement Date, his beneficiary shall be entitled to receive any
amount payable under the form of benefit that is in effect for such Participant.
5.10 Maximum Benefit. The provisions of this Section shall be
effective for Limitation Years beginning in 1987 and thereafter and shall be
construed to comply with section 415 of the Code.
(a) (1) Notwithstanding anything in this Article to the
contrary, in no event shall the combined annual benefit payable with respect to
a Participant on a single life basis, under this and any other defined benefit
plan to which a Participating Company or a 50% Affiliated Company contributes,
exceed the lesser of (A) $90,000 (or such other dollar limitation as in effect
for the Limitation Year under section 415(b)(1)(A) of the Code) or (B) one
hundred percent (l00%) of the Participant's average Compensation during the
three consecutive calendar years as an Active Participant in which such
Compensation is the highest.
(2) (A) If the benefit is payable with respect to a
Participant who has been an Active Participant for fewer than 10 full years at
the time that retirement benefits
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begin, the dollar limitation described in Subparagraph (a)(1)(A) of this Section
shall be multiplied by a fraction, the numerator of which is the number of the
Participant's years as an Active Participant and the denominator of which is 10.
(B) If the benefit is payable with respect to a
Participant who has fewer than 10 Years of Vesting Service, the limitations
described in Subparagraph (a)(1)(B), Paragraph (a)(4) and Subparagraphs
(c)(1)(A) and (c)(1)(B) of this Section shall be multiplied by a fraction, the
numerator of which is the number of the Participant's Years of Vesting Service
and the denominator of which is 10.
(3) If a Participant's (or beneficiary's) Benefit Commencement
Date is not the date on which the Participant attains (or would have attained,
if living) his Social Security Retirement Age, the dollar limitation in
Subparagraphs (a)(1)(A) and (c)(1)(A) shall be adjusted as follows:
(A) If the Participant's (or beneficiary's) Benefit
Commencement Date occurs before the Participant attains (or would have attained,
if living) his Social Security Retirement Age, but on or after the date he
attains (or would have attained, if living) Age 62, the dollar limitation shall
be reduced by five-ninths percent (5/9 of 1%) for each of the first 36 months
and five-twelfths percent (5/12 of 1%) for each additional month by which the
Participant's (or beneficiary's) Benefit Commencement Date precedes the date he
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attains (or would have attained, if living) his Social Security Retirement Age.
(B) If the Participant's (or beneficiary's) Benefit
Commencement Date occurs before the Participant attains (or would have attained,
if living) his Social Security Retirement Age and before he attains (or would
have attained, if living) Age 62, the dollar limitation shall be reduced in
accordance with Subsection (a)(3)(A) as if retirement benefits were commencing
to the Participant at Age 62, and this reduced dollar limitation shall be
further reduced to its Actuarial Equivalent beginning at the Participant's (or
beneficiary's) Benefit Commencement Date, using an interest rate equal to the
greater of five percent (5%) or the rate set forth in the "Maximum Benefit
Assumptions" section of Schedule A (if any);
(C) If the Participant's (or beneficiary's) Benefit
Commencement Date occurs after the date the Participant attains (or would have
attained, if living) his Social Security Retirement Age, the dollar limitation
shall be adjusted to its Actuarial Equivalent beginning at the Participant's (or
beneficiary's) Benefit Commencement Date, using an interest rate equal to the
lesser of five percent (5%) or the rate set forth in the "Maximum Benefit
Assumptions" section of Schedule A (if any).
(4) The annual benefit payable with respect to a Participant
may exceed 100% of his average Compensation for
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the highest three consecutive calendar years as an Active Participant (but not
in excess of the amount applicable under Subparagraph (a)(1)(A) of this Section,
adjusted as set forth in Paragraph (a)(3)), if (A) the annual benefit does not
exceed $10,000 for the current Plan Year or for any prior Plan Year, and (B) the
Participant has at no time participated in a defined contribution plan
maintained by a Participating Company or a 50% Affiliated Company.
(b) If a Participant's benefits are otherwise limited by this
Section, the benefit payable to the Participant and/or the Participant's
Surviving Spouse under Section 5.8 or Section 7.2 shall be based upon the
Participant's benefit determined without regard to this Section, and the
limitations of this Section shall apply to the resulting benefit payable to the
Participant and/or his Surviving Spouse.
(c) If in any Limitation Year a Participant is a participant
in one or more defined contribution plans sponsored by a Participating Company
or a 50% Affiliated Company, the annual benefit referred to in Subsection (a)
shall be reduced, if necessary, so that the sum of the fractions described in
Paragraphs (1) and (2) of this Subsection does not exceed 1.0 for such
Limitation Year.
(1) Defined Benefit Fraction - A fraction, the numerator
of which is the Participant's projected annual benefit under all defined benefit
plans to which a Participating Company or 50% Affiliated Company contributes,
determined as of
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the close of the limitation years of such plans, and the denominator of which is
the lesser of: (A) 1.25 x $90,000 (or such other dollar limitation in effect for
the Limitation Year under section 415(b)(1)(A) of the Code) or (B) one hundred
forty percent (140%) of the Participant's highest average Compensation over any
three consecutive calendar years.
(2) Defined Contribution Fraction - A fraction, the
numerator of which is the sum of the annual additions to the Participant's
accounts under such defined contribution plans for all limitation years, and the
denominator of which is the sum of the lesser of the following amounts,
determined for each of such limitation years with a Participating Company or a
50% Affiliated Company: (A) 1.25 x $30,000 (or such dollar limitation as in
effect for such Limitation Year under section 415(c)(1)(A) for the Limitation
Year) or (B) thirty-five percent (35%) of the Participant's Compensation for
such limitation year.
(3) Adjustment to Defined Contribution Fraction.
Notwithstanding the above, if the Plan satisfied section 415 of the Code as in
effect for the last limitation year beginning prior to January 1, 1987, an
amount shall be subtracted from the numerator of the defined contribution
fraction (not exceeding such numerator) as prescribed by the Secretary of the
Treasury so that the sum of the defined benefit fraction and defined
contribution fraction computed under section 415(e)(1) of
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the Code as amended effective January 1, 1987, does not exceed 1.0 for such
limitation year.
(4) Definitions - For the purpose of this Subsection,
"projected annual benefit" shall mean the annual benefit to which a Participant
would be entitled under the terms of a defined benefit plan if he had continued
employment until his normal retirement date under such plan and if his
compensation for the purpose of such plan had continued at the same rate.
"Annual additions" to a Participant's accounts under any defined contribution
plan for any limitation year shall mean the sum of (A) employer contributions;
(B) forfeitures; (C) (i) for Limitation Years beginning on or after January 1,
1987, the Participant's own contributions, if any, and (ii) for Limitation Years
beginning before January 1, 1987, the lesser of (I) one-half of the
Participant's own contributions, if any, or (II) the Participant's own
contributions in excess of six percent (6%) of his compensation for such
limitation year; (D) all amounts allocated to any Participant after March 31,
1984 to an individual medical account (within the meaning of Code section
415(1)(2)) which is part of a pension or annuity plan maintained by a
Participating Company or any Affiliated Company; and (E) all amounts derived
from contributions paid or accrued after December 31, 1985, in taxable years
ending after such date which are attributable to post-retirement medical
benefits allocated to a separate account of a Participant who is a key employee,
as defined in section 419A(d)(3) of the Code, under a welfare
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benefit fund maintained by a Participating Company or any 50% Affiliated
Company.
(d) The limitations described in Subsections (a) and (b) shall
not reduce any benefit which was accrued by a Participant under the Plan prior
to the first day of its Limitation Year beginning in 1987, using the applicable
maximum dollar limitations then in effect; provided, however, that this sentence
shall not apply to any Participant who was not a Participant as of the first day
of the first Limitation Year that began in 1987. For the purpose of this
Subsection (d), no change in the Plan after May 5, 1986 and no cost of living
adjustment after May 5, 1986 shall be taken into account.
(e) (1) The Company may elect to apply Subsection (c)(2) with
respect to any Limitation Year ending after December 31, 1982 by calculating the
denominator under Subsection (c)(2) using an alternate amount for all Plan Years
ending before January 1, 1983. The alternate amount shall be equal to the amount
determined for the denominator under Subsection (c)(2) as in effect for the
Limitation Year ending in 1982 multiplied by the "transition fraction."
(2) The "transition fraction" shall be a fraction
determined as follows:
(A) The numerator shall consist of the lesser of:
(i) $51,875 or (ii) thirty-five percent (35%) of the Participant's compensation
for the Plan Year ending in 1981.
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(B) The denominator shall consist of the lesser
of: (i) $41,500 or (ii) twenty-five percent (25%) of the Participant's
compensation for the Plan Year ending in 1981.
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ARTICLE VI
VESTING
6.1 Nonforfeitable Amounts.
(a) A Participant who is credited with one or more Hours of
Service as an Employee on or after January 1, 1989 shall have a 100%
nonforfeitable interest in his Accrued Benefit when he has to his credit five
Years of Vesting Service. A Participant who has fewer than five Years of Vesting
Service to his credit shall have no nonforfeitable interest in his Accrued
Benefit.
(b) Notwithstanding the foregoing, a Participant who is an
Employee shall have a 100% nonforfeitable interest in his Accrued Benefit upon
the date on which he attains Age 65.
6.2 Treatment of Terminated Vested Participant.
(a) A Participant who has a Separation from Service at a time
when he has a nonforfeitable interest in his Accrued Benefit pursuant to Section
6.1, other than by death or as provided in Article IV, shall be eligible for a
deferred pension. His Benefit Commencement Date shall be his Normal Retirement
Date, if he is then living. Subject to Section 5.10, the pension payable under
this Section shall be equal to the Participant's Accrued Benefit as of the date
of his Separation from Service. If the Participant has no nonforfeitable
interest in his Accrued Benefit, he shall forfeit his Accrued Benefit.
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(b) If a Participant who is eligible for a deferred pension
under Subsection (a) of this Section has 10 or more Years of Vesting Service to
his credit as of the date of his Separation from Service, he may elect as his
Benefit Commencement Date (1) the first day of the calendar month coincident
with or next following his 55th birthday, or (2) the first day of any month
after such birthday and before his Normal Retirement Date. Such election must be
made no earlier than 90 days prior to the Benefit Commencement Date elected by
the Participant.
(c) A Participant who elects a Benefit Commencement Date under
Subsection (b) of this Section shall receive the benefit described in Subsection
(a) of this Section in an amount reduced by one-half percent (1/2%) for each
full calendar month by which his Benefit Commencement Date precedes his Normal
Retirement Date.
6.3 Form and Payment of Benefit. Deferred vested benefits shall be
paid in a form provided for in Article VII.
6.4 Termination of Benefit. The last deferred vested benefit payment
hereunder shall be made in accordance with the provisions of Article VII.
6.5 Special Rules for Certain Terminated Participants.
(a) Notwithstanding Section 2.1, if a Participant:
(1) is eligible for a deferred vested benefit under the
Plan,
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(2) has been credited with at least one Hour of Service
on or after September 2, 1974,
(3) had a Separation from Service prior to the first day
of the first Plan Year beginning after December 31, 1975,
(4) has not thereafter been an Employee, and
(5) is alive on August 23, 1984 and has not begun to
receive benefit payments as of that date, such Participant's retirement benefits
shall be paid in accordance with Article VII.
(b) Notwithstanding Section 2.1, if a Participant:
(1) has at least one Hour of Service after the first day
of the Plan Year beginning on or immediately after January 1, 1976,
(2) has not been credited with any Hours of Service
after August 22, 1984,
(3) has at least 10 Years of Vesting Service and a
vested right to all or a portion of his Accrued Benefit, and
(4) is alive on August 23, 1984 and has not begun to
receive benefit payments as of that date, he may elect to be covered by the
survivor's benefit described in Section 5.8.
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ARTICLE VII
PAYMENT OF BENEFITS
7.1 Minimum Distribution Requirements.
(a) Except as required by Subsection (c) of this Section, a
Participant's Benefit Commencement Date shall be no earlier than the date of his
Separation from Service.
(b) Except as required by Subsection (c) of this Section, his
Benefit Commencement Date shall be no later than the 60th day after the close of
the Plan Year in which the Participant attains Age 65 or has a Separation from
Service, whichever occurs last.
(c) A Participant's Benefit Commencement Date shall be no
later than his Required Beginning Date.
(d) Notwithstanding anything in the Plan to the contrary, if a
Participant dies before his Benefit Commencement Date, his entire interest under
the Plan, to the extent not forfeited, shall be distributed either:
(1) not later than December 31 of the calendar year
containing the fifth anniversary of the date of the Participant's death, or
(2) over the life or life expectancy of the
Participant's beneficiary, commencing no later than (A) December 31 of the
calendar year following the year of the Participant's death, or (B) if the
beneficiary is the Participant's Spouse, December 31 of the later of (i) the
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calendar year following the year of the Participant's death or (ii) the calendar
year in which the Participant would have attained Age 70-1/2.
(e) Notwithstanding anything in the Plan to the contrary, the
form and the timing of all distributions under the Plan shall be in accordance
with regulations issued by the Department of the Treasury under section
401(a)(9) of the Code, including the incidental death benefit requirements of
section 401(a)(9)(G) of the Code.
(f) This Section shall apply to all Participants, including
Participants who had a Separation from Service or ceased to be a Covered
Employee prior to January 1, 1989.
7.2 Normal Form of Benefit.
(a) Except in the case of a current disability benefit payable
pursuant to Section 4.4, benefits under the Plan shall be paid in the normal
form of benefit described in Subsection (b) or (c) , as the case may be, unless
the Participant elects an optional form of benefit under Section 7.3. No spousal
consent shall be required for payment of benefits in the normal form. A current
disability benefit payable pursuant to Section 4.4 shall only be paid in the
form of a single life annuity.
(b) The normal form of benefit for a Participant who has a
Spouse as of his Benefit Commencement Date shall be a joint and survivor
annuity, with monthly installments payable after the death of the retired
Participant to his Surviving Spouse, if he leaves one, for the life of such
Surviving Spouse
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in an amount equal to fifty-five percent (55%) of the benefit paid to the
retired Participant.
(c) The normal form of benefit for a Participant who does not
have a Spouse as of his Benefit Commencement Date shall be a single life annuity
with equal monthly installments payable to the retired Participant for his
lifetime.
7.3 Optional Form of Benefit.
(a) In lieu of the normal form of benefit as determined under
Section 7.2, the Participant may elect, subject to the rules of Section 7.4, one
of the following optional forms of benefit; except, that, a Participant may not
elect to receive the current disability benefit payable pursuant to Section 4.4
in any optional form of benefit:
(1) a single life annuity with equal monthly
installments payable to the retired Participant for his lifetime; or
(2) a joint and survivor annuity with any individual
designated beneficiary, payable in monthly installments to the Participant for
his lifetime and with fifty-five percent (55%) of the amount of such monthly
installment payable after the death of the Participant to the designated
beneficiary of such Participant, if then living, for the life of such designated
beneficiary; provided, however, that a Participant may only elect this form of
benefit if he retires from service at or after his Normal Retirement Date.
Notwithstanding the foregoing, the percentage payable to the
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Participant's beneficiary (unless the beneficiary is the Participant's Spouse)
after the Participant's death may not exceed the applicable percentage from
Table I in Schedule B.
(b) In addition to the normal form of benefit provided in
Section 7.2(b) or the optional form of benefit provided in Section 7.3(a)(2), a
Participant may elect, subject to the rules of Section 7.4, that (1) he and his
Spouse, if he has elected the form of benefit provided in Section 7.2(b); or (2)
he and his designated beneficiary, if he has elected the form of benefit
provided in Section 7.3(a)(2), may receive an aggregate of 120 total monthly
payments guaranteed. If the Participant and his Spouse or beneficiary, as
applicable, die before receiving a combined total of 120 monthly payments, in
whichever form of benefit has been elected, then beginning on the first day of
the month in which the Spouse's or beneficiary's death, as applicable, occurs
and continuing until the balance of the guaranteed payments have been made,
payments in the amount payable to the Spouse or beneficiary, as applicable,
shall be made to the individual elected by the Participant to receive the
remainder of the guaranteed payment (hereinafter called the "Second
Beneficiary"). If the Second Beneficiary dies before the full number of
guaranteed monthly payments have been made, the Actuarial Equivalent of any
balance of guaranteed payments shall be paid in a single sum to the estate of
the last to survive of (1) the Second Beneficiary or (2) the Participant's
Spouse or beneficiary, as applicable. Notwithstanding the foregoing, the
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number of monthly payments guaranteed shall be calculated so that the number of
guaranteed monthly payments remaining as of the beginning of the calendar year
preceding the Participant's Required Beginning Date does not exceed the joint
life expectancy of the Participant and his beneficiary, or if less, and the
Participant's beneficiary is not the Participant's Spouse, the applicable number
from Table II in Schedule B multiplied by 12. Notwithstanding the foregoing, a
Participant may only elect this form of benefit if he retires from service at or
after his Normal Retirement Date.
7.4 Rules for Election of Optional Form of Benefit. A Participant
may elect an optional form of benefit under Section 7.3 by filing a written
notice with the Company in the form and manner prescribed by the Company and in
no other. The following rules shall be applied in a uniform and
nondiscriminatory manner with respect to the election of optional forms of
benefit.
(a) A Participant may elect an optional form of benefit at any
time during the period that begins 90 days prior to the first day of the
calendar month in which his Benefit Commencement Date falls and ends on his
Benefit Commencement Date. If a Participant's Benefit Commencement Date is less
than ninety days after the date on which the Participant notifies the Company of
his intent to begin receiving benefits, payments shall begin on the
Participant's Benefit Commencement Date, but the Participant may revoke his
election and make a new election at
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any time during the period ending 90 days after the date such notice is given.
(b) A Participant who does not establish to the satisfaction
of the Company that he has no Spouse on his Benefit Commencement Date may elect
to receive an optional form of benefit under Section 7.3 only if:
(1) (A) his Spouse (or the Spouse's legal guardian if
the Spouse is legally incompetent) executes a written instrument whereby such
Spouse:
(i) consents not to receive the normal form of
benefit described in Subsection (b) of Section 7.2;
(ii) consents to the specific optional form
elected by the Participant, or (provided such instrument acknowledges the
Spouse's right to limit consent to a specific optional form) to the
Participant's right to choose any optional form without any further consent by
the Spouse; and
(iii) if applicable, consents in writing to either
the specific beneficiary or beneficiaries designated by the Participant pursuant
to his election or (provided such instrument acknowledges the Spouse's right to
limit consent to a specific beneficiary) to the Participant's right to designate
any beneficiary or beneficiaries without any further consent by the Spouse; and
(B) such instrument acknowledges the effect of the
election to which the Spouse's consent is being
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given and is witnessed by a Plan representative or a notary public; or
(2) the Participant (A) establishes to the satisfaction
of the Company that his Spouse cannot be located or (B) furnishes a court order
to the Company establishing that the Participant is legally separated or has
been abandoned (within the meaning of local law), unless a qualified domestic
relations order pertaining to such Participant provides that the Spouse's
consent must be obtained.
The consent of a Spouse in accordance with this Subsection (b) shall not be
effective with respect to other Spouses of the Participant, and an election to
which Paragraph (3) of this Subsection applies shall become void if the
circumstances causing the consent of the Spouse not to be required cease to
exist prior to the Participant's Benefit Commencement Date.
(c) A Participant may revoke an election under Subsection (b)
of this Section. Such revocation may be made at any time during the election
period described in Subsection (a). Such revocation shall not void any
prospectively effective consent given by his Spouse in connection with the
revoked election.
(d) If a Participant's Spouse or other designated beneficiary
dies before the Participant's Benefit Commencement Date, but after an election
of a joint and survivor annuity has been made hereunder, the election shall be
automatically revoked.
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(e) In the event of the divorce or a Participant prior to his
Benefit Commencement Date, but following the Participant's election of a joint
and survivor annuity form of benefit, the election shall be automatically
revoked.
7.5 Explanations to Participants. The Company shall provide to each
Participant no less than 30 days and no more than 90 days before his Benefit
Commencement Date a written explanation of:
(a) the terms and conditions of the normal form of benefit and
each optional form of benefit, including information explaining the relative
values of each form or benefit;
(b) the Participant's right to waive the normal form of
benefit and the effect of such waiver;
(c) the rights of the Participant's Spouse with respect to
such waiver;
(d) the right to revoke an election to receive an optional
form of benefit and the effect of such revocation; and
(e) if the Participant has not attained Age 65, the
Participant's right to defer commencement of his benefit until his Normal
Retirement Date.
7.6 Termination of Benefits. The last benefit payment hereunder with
respect to any Participant shall be:
(a) in the case of a single life annuity, the payment due on
the first day of the month in which occurs the death of the retired Participant;
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(b) in the case of a surviving Spouse's benefit or a joint and
survivor benefit, the payment due on the first day of the month in which occurs
the later of the death of the Participant or the death of the Spouse (or, if
applicable, the death of the designated beneficiary of such Participant);
(c) in the case of the optional form of benefit elected under
Section 7.3(b), the later of (1) the payment due on the first day of the month
in which the death of the Participant's Spouse or beneficiary, as applicable,
occurs or (2) the 120th monthly payment; or
(d) in the case of a current disability benefit under Section
4.4, the payment due on the first day of the month in which the Participant
ceases to be a Disabled Participant pursuant to Section 4.4(c).
7.7 Beneficiary Designation.
(a) Except as provided in Subsection (a) of Section 7.4 in the
case of a Participant whose election period extends beyond his Benefit
Commencement Date, a Participant's designation of a beneficiary under a joint
and survivor annuity may not be changed on or after the Participant's Benefit
Commencement Date.
(b) A Participant's designation of a Second Beneficiary to
receive any remainder of a guaranteed number of payments may be made or changed
until the earlier of the Participant's death or the expiration of the guaranteed
period.
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(c) Subject to the provisions of Subsections (a) and (b) and
to the provisions set forth above relating to the rights of Spouses to survivor
benefit payments, each Participant may designate or change the previous
designation of the beneficiary or beneficiaries who shall receive benefits, if
any, after his death. Such designation or change of designation shall be made by
executing and filing with the Company a form prescribed by the Company and in no
other manner. No designation, revocation, or change of beneficiaries shall be
valid and effective unless and until filed with the Company. If no designation
is made, or if all of the beneficiaries named in such designation predecease the
Participant or cannot be located by the Company, the interest, if any, of the
deceased Participant shall be paid to the Participant's Spouse, if living, or,
otherwise, to the Participant's estate.
7.8 Failure to Apply for Pension. Benefit payments shall commence
when properly written application for same is received by the Company. In the
event that a Participant fails to apply to the Company for pension benefits by
the earlier of (a) his Normal Retirement Date or the date on which he has a
Separation from Service, if later, or (b) the end of the calendar year in which
he attains Age 70-1/2, the Company shall make diligent efforts to locate such
Participant and obtain such application. In the event the Participant fails to
make application by his Required Beginning Date, the Company shall commence
distribution as of the Required Beginning Date without
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such application. No payments shall be made for the period in which benefits
would have been payable if the Participant had made timely application therefor;
provided, however, that, if the Participant's Benefit Commencement Date (or, if
the Participant has died, his Spouse's Benefit Commencement Date under Section
5.8 has been delayed until after the Participant's Normal Retirement Date solely
by reason of failure to make application, the benefit payable (1) to the
Participant on and after his Benefit Commencement Date, or (2) to the
Participant's Spouse pursuant to Section 5.8 on and after the Spouse's Benefit
Commencement Date, shall be equal to the Actuarial Equivalent of the benefit the
Participant or Spouse would have received had benefits commenced on the
Participant's Normal Retirement Date, as determined to reflect the deferral of
benefit commencement.
7.9 Mailing Address. Benefit payments and notifications hereunder
shall be deemed made when mailed to the last address furnished to the Company by
the Participant or beneficiary to whom they are due.
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ARTICLE VIII
THE FUND AND FUNDING
8.1 Designation of Trustee. The Company, by appropriate resolution
of its Board of Directors, shall name and designate a Trustee and shall enter
into a Trust Agreement with such Trustee. The Company shall have the power, by
appropriate resolution of its Board of Directors, to amend the Trust Agreement,
remove the Trustee, and designate a successor Trustee, all as provided in the
Trust Agreement. All of the assets of the Plan shall be held by the Trustee for
use in accordance with the Plan.
8.2 Contributions to the Fund. The benefits provided under the Plan
shall be financed exclusively by contributions made from time to time to the
Trustee by the Participating Companies, and by the Fund created thereby. Subject
to the provisions of applicable law, the liability of the Participating
Companies under the Plan shall be limited to the contributions determined by the
Participating Companies from time to time in accordance with the advice and
counsel of the Actuary. The funding policy applicable to the Fund shall be
established by the Company and shall be reviewed from time to time. All
contributions are conditioned on their deductibility for Federal income tax
purposes in the taxable year that includes the first day of the Plan Year for
which they are made.
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8.3 Use of Contributions to the Fund. The contributions deposited
under the terms of this Plan shall constitute the Fund held for the benefit of
Participants and their eligible survivors under and in accordance with this
Plan. No part of the corpus or income of the Fund shall be used for or diverted
to purposes other than exclusively for the benefit of such Participants and
their eligible survivors, and for necessary administrative costs; provided,
however, that in the event of the termination of the Plan, and after all fixed
and contingent liabilities have been satisfied, and upon compliance with
Sections 4041 and 4044 of ERISA, any remaining funds attributable to
contributions by the Participating Companies shall revert to those companies;
and further provided that in the case of a contribution (a) made by a
Participating Company as a mistake of fact, or (b) which is conditioned upon the
initial qualification of the Plan under section 401(a) of the Code, or (c) for
which a tax deduction is disallowed, in whole or in part by the Internal Revenue
Service, the Participating Company shall be entitled to a refund of said
contribution within one year after payment of a contribution made as a mistake
of fact, or within one year of the date on which the initial qualification of
the Plan is denied by the Internal Revenue Service, or within one year after
disallowance of the tax deduction, to the extent of such disallowance, as the
case may be.
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8.4 Forfeitures. Forfeitures shall not be applied to increase the
benefits of any Participant, but shall reduce the contributions of the
Participating Companies hereunder.
8.5 Expenses of Administration. All expenses of administration of
this Plan shall be paid from the Fund unless they are paid directly by the
Participating Companies.
8.6 Sole Source of Benefits. The Fund shall be the sole source for
the provision of benefits under the Plan. Neither the Participating Companies
nor any other person shall be liable therefor.
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ARTICLE IX
ADMINISTRATION
9.1 Joint Board of Administration. There shall be established a
Joint Board of Administration composed of four members, two appointed by the
Company and two appointed by the Union. The members will serve without
compensation from the Fund. An impartial chairman will be selected by mutual
agreement of the Company and the Union members of the Joint Board of
Administration, and will attend and vote at meetings of the Board only in the
event of a deadlock. The fees and expenses of the impartial chairman will be
paid from the Fund. Either the Company or the Union, at any time, may remove a
member appointed by it and may appoint a member to fill any vacancy among
members appointed by it. No person shall act as a member of the Board of
Administration unless notice of his appointment has been given in writing by the
party making the appointment to the other party. The Board shall be the
administrator and named fiduciary of the Plan for purposes of the ERISA.
9.2 Meetings. The Board shall meet at such times and at such periods
for the transaction of necessary business as may be mutually agreed upon by its
members. The Board and those persons or entities to whom the Board has delegated
responsibilities shall keep accurate records and minutes of meetings,
interpretations, and decisions.
53
<PAGE>
9.3 Quorum. To constitute a quorum for the transaction of business,
the presence of one Union member and one Company member shall be required. At
all meetings the members appointed by the Company shall have a total of two
votes to be cast on behalf of the Company and the members appointed by the Union
shall have a total of two votes to be cast on behalf of the Union. Decisions of
the Board will be made by a majority of the votes cast.
9.4 Power of Board. Unless otherwise provided in the collective
bargaining agreement between the Company and the Union, the Joint Board of
Administration shall have no power to add to or subtract from or modify any of
the terms of this Plan, nor to change or add to any benefit provided by the
Plan, nor to waive or fail to apply any benefit provided by the Plan, nor to
waive or fail to apply any requirement or eligibility for a benefit under the
Plan.
9.5 Disposition of Cases Outside Board's Jurisdiction. Any case
referred to the Joint Board of Administration on which it has no power to rule
shall be referred back to the parties without ruling.
9.6 Board Rulings Prospective. No ruling or decision of the Joint
Board of Administration in one case shall create a basis for a retroactive
adjustment in any other case prior to the date of filing of each such specific
claim.
54
<PAGE>
9.7 Claims Procedure.
(a) The Company will advise each Participant of any benefits
to which he is entitled under the Plan. If any person believes that the Company
has failed to advise him of any benefit to which he is entitled, he may file a
written claim with the Board. The Board shall review such claim and shall
provide to every claimant who is denied a claim for benefits written notice
setting forth in a manner calculated to be understood by the claimant:
(1) the specific reason or reasons for the denial;
(2) specific reference to pertinent plan provisions on
which the denial is based;
(3) a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why such material or information is necessary;
(4) an explanation of the claim review procedure set
forth in Subsection (b), below.
Such notice shall be forwarded to the claimant within 90 days of the
Board's receipt of the claim; provided, however that in special circumstances
the Board may extend the response period for up to an additional 90 days, in
which event it shall notify the claimant in writing of the extension, and shall
specify the reason or reasons for the extension.
55
<PAGE>
(b) Within 60 days of receipt by a claimant of a notice
denying a claim under Subsection (a), the claimant or his duly authorized
representative may request in writing a full and fair review of the claim by the
Board. In connection with such review, the claimant or his duly authorized
representative may review pertinent documents and may submit issues and comments
in writing. The Board shall make a decision promptly, and not later than 60 days
after the Plan's receipt of a request for review, unless special circumstances
require an extension of time for processing (in which case the claimant shall be
notified in writing prior to the commencement of the extension), a decision
shall be rendered as soon as possible, but not later than 120 days after receipt
of a request for review.
9.8 Organizational Matters. As soon as possible after the effective
date of this Plan, the Union and Company members of the Board of Administration
shall work out matters such as, but not limited to:
(a) The procedures for reviewing applications for pensions and
the furnishing of evidence necessary to establish Employees' rights to such
benefits.
(b) The handling of complaints regarding the determination of
age, service credits, and computation of benefits.
(c) Procedures for making appeals to the Board.
(d) Means of verifying service credits to which Employees are
entitled under the Plan.
56
<PAGE>
(e) Methods of furnishing information to the Employees
regarding past and future service credits.
(f) The review of pertinent information about the Plan for
dissemination to employees.
(g) How pension payments will be authorized by the Board.
All such matters shall be consistent with all other provisions of
the Plan. The working out of the procedures in this Section shall be the
responsibility of the Company and Union members of the Board, and the Impartial
Chairman shall have no power to decide any question with respect thereto.
9.9 Company Responsibility. Except as provided otherwise in this
Plan, the general administration of the provisions of the Plan shall be the
responsibility of the Company. The Company shall have all such powers as may be
necessary to carry out the provisions of the Plan except the powers and duties
given to the Joint Board of Administration by this Plan.
9.10 Liability of Board Members. The Board and any member of the
Board shall be entitled to rely upon the correctness of any information
furnished by the Union or the Company. Neither the Board, nor any of its
members, nor the Union nor any officer or other representative of the Union, nor
the Company nor any officer or other representative of the Company, shall be
liable because of any act, or failure to act, on the part of the Board or any of
its members, or any person,
57
<PAGE>
except that nothing herein shall be deemed to relieve any such individual from
any liability for his own failure to exercise a fiduciary responsibility with
the care, skill, prudence, and diligence under the circumstances then prevailing
that a prudent man acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with like
aims.
9.11 Grievance Procedure Not Applicable. No matter respecting the
Plan or any difference arising thereunder shall be subject to the grievance
procedure established in the Collective Bargaining Agreement between the Company
and the Union.
9.12 Determination of Facts.
(a) The records of the Company shall be presumed to be
conclusive of the facts concerning the employment or nonemployment of any
employee unless shown beyond a reasonable doubt that they are incorrect.
(b) Age shall be provided by official birth certificate,
issued by proper public authority in the area in which the employee or former
employee claims to have been born. If any employee or former employee does not
produce a birth certificate, he must produce evidence of age satisfactory to the
Board of Administration in its reasonable discretion.
(c) If any question shall arise concerning an employee, former
employee or retired employee, about the age of the employee, former employee or
retired employee, the date of the beginning of his credited service, and the
amount of the
58
<PAGE>
pension, if any, to which he claims to be entitled, the employee, or the
officers of the Local Union on his behalf, or the former employee shall prepare
a written statement which he shall sign in duplicate of all facts and
circumstances concerning the matters and the Board of Administration shall send
one counterpart to the personnel office of the Company who shall write a
complete statement of the case and send it in duplicate to the Board of
Administration.
(d) The Board shall accept as final:
(1) Determination under the applicable labor agreement
on seniority or employee; on loss of seniority and on any other matter for which
the terms of such agreement and not the terms of the Plan provide a means of
determining.
(2) Any determination made by the appropriate government
agency as to the extent of any government administered benefit which shall be
material in administering the Pension Plan.
59
<PAGE>
ARTICLE X
AMENDMENT AND TERMINATION
10.1 Power of Amendment and Termination.
(a) It is the intention of each Participating Company that
this Plan will be permanent. However, subject to any applicable collective
bargaining agreement, each Participating Company reserves the right to terminate
its participation in this Plan at any time by or pursuant to action or its board
of directors or other governing body. Furthermore, the Plan may be modified,
amended or terminated by joint action of the Union and the Company under the
terms of any applicable collective bargaining agreement, including retroactive
modification or amendment, if necessary or appropriate, to qualify or maintain
the Plan as a plan and trust meeting the applicable requirements of the Code and
ERISA.
(b) Each amendment to the Plan shall be binding on each
Participating Company if such Participating Company, by or pursuant to action of
its board of directors, (1) consents to such amendment at any time, or (2) fails
to object thereto within thirty days after receiving notice thereof.
(c) Any amendment or termination of the Plan shall become
effective as of the date designated by the Board of Directors. Except as
expressly provided elsewhere in the Plan, prior to the satisfaction of all
liabilities with respect to the benefits provided under this Plan, no amendment
or termination
60
<PAGE>
shall cause any part of the monies contributed hereunder to revert to the
Participating Companies or to be diverted to any purpose other than for the
exclusive benefit of Participants and their beneficiaries.
10.2 Disposition on Termination.
(a) Upon the termination or partial termination of the Plan,
each Active Participant with respect to whom the Plan is terminating (including
each former Active Participant who has not received a distribution under Section
7.8 and has fewer than five consecutive Breaks in Service) who would not have a
nonforfeitable right to one hundred percent (100%) of his Accrued Benefit if his
employment terminated on the date of the termination or partial termination of
the Plan shall become fully vested and shall have a nonforfeitable right to his
Accrued Benefit. However, in the event of such a termination, each Participant
and beneficiary shall have recourse toward satisfaction of his nonforfeitable
right to a pension only from Plan assets or from the Pension Benefit Guaranty
Corporation, to the extent that it guarantees benefits.
(b) The amount of the Fund shall be determined and, after
providing for expenses incident to termination and liquidation, the remaining
assets thereof shall be allocated for the purpose of paying benefits
proportionately among each of the priority groups described below in the
following order of precedence:
61
<PAGE>
(1) to provide benefits to retired Participants and
beneficiaries who began receiving benefits at least three years before the
Plan's termination (including those benefits which would have been received for
at least three years if the Participant had retired that long ago), based on
Plan provisions in effect five years prior to termination during which period
such benefit would be the least, provided that the lowest benefit in pay status
during a three-year period shall be considered the benefit in pay status for
such period;
(2) to provide all other Accrued Benefits guaranteed by
Federal law (or which would be so guaranteed but for section 4022(b)(5) or 4022B
of ERISA);
(3) to provide all other vested Accrued Benefits
(determined before application of Subsection (a) of this Section);
(4) to provide all remaining non-vested Accrued
Benefits.
(c) If the assets available for allocation under any priority
group (other than as provided in priority groups (3) and (4) are insufficient to
satisfy in full the Accrued Benefits of all Participants and beneficiaries, the
assets shall be allocated pro rata among such Participants and beneficiaries on
the basis of the Actuarial Equivalent single-sum value of their respective
benefits (as of the termination date). The foregoing payments, and payments in
the event that assets are insufficient to pay the Accrued Benefits provided in
priority groups (3) and
62
<PAGE>
(4), will be paid in accordance with regulations prescribed by the Pension
Benefit Guaranty Corporation. The allocation of assets upon termination of the
Plan will be carried out in such a manner as to preserve the qualification of
the Plan under section 401(a) of the Code.
In the event that all Accrued Benefits described above have been
fully funded, any remaining funds shall revert to the Participating Companies in
such proportion as the Participating Companies shall determine.
10.3 Merger, Consolidation, or Transfer. In case of any merger or
consolidation with, or transfer of assets or liabilities to, any other plan, as
provided in the Code, the benefit of any Participant or beneficiary immediately
after such merger, consolidation, or transfer (if the Plan had then terminated)
shall be at least equal to the benefit such Participant or beneficiary would
have received immediately before such merger, consolidation, or transfer (if the
Plan had then terminated).
63
<PAGE>
ARTICLE XI
GENERAL PROVISIONS
11.1 No Employment Rights. Neither the action of the Company in
establishing the Plan, nor of any Participating Company in adopting the Plan,
nor any provisions of the Plan, nor any action taken by the Company, any
Participating Company or the Company shall be construed as giving to any
Employee the right to be retained in the employ of the Company or any
Participating Company, or any right to payment except to the extent of the
benefits provided in the Plan to be paid from the Fund.
11.2 Governing Law. Except to the extent superseded by ERISA, all
questions pertaining to the validity, construction, and operation of the Plan
shall be determined in accordance with the laws of the state in which the
principal place of business of the Company is located.
11.3 Severability of Provisions. If any provision of this Plan is
determined to be void by any court of competent jurisdiction, the Plan shall
continue to operate and, for the purposes of the jurisdiction of that court
only, shall be deemed not to include the provisions determined to be void.
11.4 No Interest in Fund. No person shall have any interest in, or
right to, any part of the principal or income of the Fund, except as and to the
extent expressly provided in this Plan and in the Trust Agreement.
64
<PAGE>
11.5 Spendthrift Clause. No benefit payable at any time under this
Plan and no interest or expectancy herein shall be anticipated, assigned, or
alienated by any Participant or beneficiary, or subject to attachment,
garnishment, levy, execution, or other legal or equitable process, except for
(1) a Federal tax levy made pursuant to section 6331 of the Code and (2) any
benefit payable pursuant to a domestic relations order which is determined to be
a qualified domestic relations order as defined in the Code. Any attempt to
alienate or assign a benefit hereunder, whether currently or hereafter payable,
shall be void.
11.6 Incapacity. If the Company deems any Participant who is
entitled to receive payments hereunder incapable of receiving or disbursing the
same by reason of Age, illness, infirmity, or incapacity of any kind, the
Company may direct the Trustee to apply such payments directly for the comfort,
support, and maintenance of such Participant, or to pay the same to any
responsible person caring for the Participant who is determined by the Company
to be qualified to receive and disburse such payments for the Participant's
benefit; and the receipt of such person shall be a complete acquittance for the
payment of the benefit. Payments pursuant to this Section shall be complete
discharge to the extent thereof of any and all liability of the Participating
Companies, the Company, the Joint Board of Administration, the Trustee, and the
Fund.
65
<PAGE>
11.7 Withholding. The Company and the Trustee shall have the right
to withhold any and all state, local, and Federal taxes which may be withheld in
accordance with applicable law.
11.8 Missing Participants. In the event that all, or any portion, of
the distribution payable to a Participant or his beneficiary hereunder shall, at
the expiration of five (5) years after it shall become payable, remain unpaid
solely by reason of the inability of the Company, after sending a registered
letter, return receipt requested, to the last known address, and after further
diligent effort, to ascertain the whereabouts of such Participant or his
beneficiary, the amount so distributable shall be forfeited and shall be used to
reduce the cost of the Plan. In the event a Participant or beneficiary is
located after his benefit has been forfeited, such benefit shall be restored.
Executed this _____ day of ____________, 1996.
[SEAL] ROLLER BEARING COMPANY OF
AMERICA
By:
--------------------------------
President
Attest:
---------------------------
Secretary [Witness]
66
<PAGE>
SCHEDULE A
ACTUARIAL EQUIVALENTS
The following assumptions will be used for determining Actuarially
Equivalent benefits, except as specified to the contrary in the Plan: 5-1/2%
interest and the 1984 Group Annuity Mortality Table for males. Any factors not
included herein will be determined by the Company.
Notwithstanding the foregoing, for purposes of determining
Actuarially Equivalent single-sum amounts, the following interest rates shall be
used.
(a) If the Actuarial Equivalent single-sum value of a
Participant's vested Accrued Benefit using the "applicable
interest rate" (as defined below) does not exceed $25,000, the
applicable interest rate or
(b) If the Actuarial Equivalent single-sum value of a
Participant's vested Accrued Benefit using the applicable
interest rate exceeds $25,000, one hundred twenty percent
(120%) of the applicable interest rate.
For purposes of this Schedule A, "applicable interest rate" means the interest
rate which would be used as of the date of the distribution by the Pension
Benefit Guaranty Corporation for purposes of determining the present value of a
lump sum distribution on plan termination.
A-1
<PAGE>
SCHEDULE B
MINIMUM DISTRIBUTION INCIDENTAL BENEFIT TABLES
TABLE I
Excess of Age of employee Applicable
over Age of beneficiary percentage
- ----------------------- ----------
10 years or less ............................... 100%
11 ............................................. 96%
12 ............................................. 93%
13 ............................................. 90%
14 ............................................. 87%
15 ............................................. 84%
16 ............................................. 82%
17 ............................................. 79%
18 ............................................. 77%
19 ............................................. 75%
20 ............................................. 73%
21 ............................................. 72%
22 ............................................. 70%
23 ............................................. 68%
24 ............................................. 67%
25 ............................................. 66%
26 ............................................. 64%
27 ............................................. 63%
28 ............................................. 62%
29 ............................................. 61%
30 ............................................. 60%
31 ............................................. 59%
32 ............................................. 59%
33 ............................................. 58%
34 ............................................. 57%
35 ............................................. 56%
36 ............................................. 56%
37 ............................................. 55%
38 ............................................. 55%
39 ............................................. 54%
40 ............................................. 54%
41 ............................................. 53%
42 ............................................. 53%
43 ............................................. 53%
44 and greater ................................. 52%
Sch. B-1
<PAGE>
TABLE II
Age of Participant
in calendar year
preceding Required Maximum Guaranteed
Beginning Date Payments Remaining
- ------------------ ------------------
70 .................................................... 26.2
71 .................................................... 25.3
72 .................................................... 24.4
73 .................................................... 23.5
74 .................................................... 22.7
75 .................................................... 21.8
76 .................................................... 20.9
77 .................................................... 20.1
78 .................................................... 19.2
79 .................................................... 18.4
80 .................................................... 17.6
81 .................................................... 16.8
82 .................................................... 16.0
83 .................................................... 15.3
84 .................................................... 14.5
85 .................................................... 13.8
86 .................................................... 13.1
87 .................................................... 12.4
88 .................................................... 11.8
89 .................................................... 11.1
90 .................................................... 10.5
91 .................................................... 9.9
92 .................................................... 9.4
93 .................................................... 8.8
94 .................................................... 8.3
95 .................................................... 7.8
96 .................................................... 7.3
97 .................................................... 6.9
98 .................................................... 6.5
99 .................................................... 6.1
100 .................................................... 5.7
101 .................................................... 5.3
102 .................................................... 5.0
103 .................................................... 4.7
104 .................................................... 4.4
105 .................................................... 4.1
106 .................................................... 3.8
107 .................................................... 3.6
108 .................................................... 3.4
109 .................................................... 3.2
110 .................................................... 2.8
111 .................................................... 2.6
112 .................................................... 2.4
113 .................................................... 2.0
114 .................................................... 2.0
115 and older .......................................... 1.8
Sch. B-2
Attachment C(3)
CONFIDENTIAL
AGREEMENT
Between
Nice Specialty Bearings Division
SKF Bearing Industries
and
United Steelworkers
of America (AFL-CIO)
and its
Local 6326
Effective October 26, 1996
[Union Logo]
<PAGE>
TABLE OF CONTENTS
Article Page
I Union Recognition....................................... 1
II Union Security.......................................... 2
III Check Off of Dues....................................... 3
IV Seniority............................................... 4
V Transfers and Seniority................................. 5
VI Layoff and Hiring Procedure............................. 15
VII Leave of Absence........................................ 19
VIII Grievance Procedure..................................... 21
IX Vacations............................................... 24
X Hours of Employment and Overtime Payments............... 29
XI Wages................................................... 35
XII Hospitalization and General Welfare..................... 36
XIII Holidays................................................ 41
XIV Pension Benefits........................................ 42
XV Safety and Health....................................... 46
XVI General................................................. 49
XVII Good Faith.............................................. 53
XVIII Craft Trades............................................ 54
XIX Plant Shutdown.......................................... 55
XX Termination and Notice.................................. 56
Appendix "A"........................................................ 64
Appendix "B"........................................................ 58
<PAGE>
AGREEMENT
The Agreement dated October 26, 1996, is entered into between NICE BEARING
PRODUCTS, DIVISION OF SKF USA, INC., hereinafter referred to as the "Company",
and the UNITED STEELWORKERS OF AMERICA, AFL-CIO, hereinafter referred to as the
"Union", on behalf of itself and the members of Local Union No. 6326.
WITNESSETH:
WHEREAS, the Company recognizes the Union as the sole collective bargaining
agency for all employees of the said Company and its manufacturing and
processing plant located in Kulpsville, Pennsylvania, exclusive of employees
performing the duties of superintendents, assistant superintendents, foremen and
the other supervisors, plant protection employees, and office employees; and
WHEREAS, it is the intent and purpose hereof to promote, encourage and
improve industrial and economic relations between the Company and employees and
to set forth herein the rate of pay, hours of work, and conditions of employment
to be observed between the parties hereto, to be effective with the date of
final agreement;
NOW, THEREFORE, in consideration of the promises and mutual agreements
hereinafter contained, it is agreed as follows:
ARTICLE I
Union Recognition
Section 1. The Company recognizes the Union as the certified collective
bargaining agent for all of its production
1
<PAGE>
and maintenance employees engaged on jobs in the Company's Kulpsville,
Pennsylvania plant, excluding clerical employees, plant protection employees,
general office employees, and supervisory employees as defined in the Act
(National Labor Relations Act of 1947).
Section 2. The Company recognizes the right of labor to organize in order to
promote the interests and welfare of labor and to bargain effectively and will
not interfere with the right of employees to become members of the Union, nor
will it discriminate against employees for filing or causing to be filed a just
grievance or because of membership in the Union, or against any officer or
representative elected or appointed to act in behalf of the Union pursuant to
the terms of the Agreement.
The Union recognizes that the management of business and the direction of
its workforce are exclusively the right of Management in all respect not
inconsistent with the specific provisions of the Agreement or any law, and it is
understood that any matters not covered with respect to same shall rest within
the sound discretion of Management. Management will receive and consider any
suggestions from the Union with respect to the exercise of the rights herein
reserved.
Section 3. The term "he" or "his" as used in this Agreement, shall apply to
both male and female employees.
ARTICLE II
Union Security
Section 1. All employees who are members of the Union as of the signing of
this Agreement shall remain members of the Union as a condition of continued
employment with the Company.
2
<PAGE>
Section 2. All employees who are not now members of the Union shall be
required, as a condition of continued employment, to become members not later
than thirty (30) days after the signing of this Agreement and must remain
members of the Union.
Section 3. All employees hired or transferred into the bargaining unit
subsequent to the date of the signing of this Agreement, shall immediately upon
completion of thirty (30) days employment, acquire and maintain membership in
the Union as a condition of continued employment with the Company.
ARTICLE III
Check-off Dues
Section 1. The Company, for those employees who have heretofore or hereafter
by written authorization so directed, shall deduct from the second pay of each
month, for the preceding month, an initiation fee for the new members, and the
proper Union dues for all members and promptly remit same to the International
Treasurer of the Union.
The written authorization submitted is deemed to be only an authority for
the Company to deduct dues and initiation fees as set forth in the Union's form.
Section 2. The Company agrees to compute union dues on the basis of earnings
in the preceeding month. Further, it is agreed that PAC contributions are done
no more than once per year. In case of earnings insufficient to cover deduction
of dues, the dues shall be deducted from the next deduction period or next pay
in which there are sufficient earnings.
(a.) In case of earnings of less than sixteen (16) hours,
3
<PAGE>
dues will not be deducted. They will be deducted from the next pay which is
sixteen (16) or more hours.
Section 3. The Union shall indemnify the Company and hold it harmless
against any and all suits, claims, demands and liabilities that shall arise out
of by reason of any action taken by the Company for the purpose of complying
with the provisions of Sections 1 and 2 of this Article.
Section 4. The Company, for those employees who have heretofore by written
authorization so directed, shall deduct $5.00 from one pay per year for P.A.C.
ARTICLE IV
Seniority
Section 1. The Company hereby recognizes its obligations to its employees of
long, and faithful service and hereby agrees to strictly adhere to the rule of
departmental seniority in laying off and rehiring employees, except, as noted
hereafter.
Section 2. (a) The basis for the accumulation of depart-mental seniority
will be time in excess of ninety (90) days. Time lost due to leave of absence
for more than two (2) weeks duration is not applicable to this calculation.
(b) No loss of seniority occurs during layoff except that employees who are
laid off with less than one (1) year of seniority shall not accrue time for
pension and vacation purposes. Should layoff exceed thirty-six (36) months, all
employment rights will cease; except that employees with more than one year of
service shall not accrue time for pension and vacation purposes beyond
thirty-six (36) months.
Section 3. (a) An employee may acquire seniority rights by working (90)
continuous days within a department, in
4
<PAGE>
which event the employee's departmental seniority will date back (90) days. When
an employee acquires seniority, his name shall be placed on the seniority list
in this department. New employees who have worked less than ninty (90) calendar
days shall be classified as probationary employees. There shall be no
responsibility for re-employment of such employees if they are laid or
discharged during this period.
If a newly hired employee does not acquire ninty (90) days Seniority in any
one department his total seniority will be applied to the department in which he
was hired, after that employee attains ninty(90) days seniority
Benefits for newly hired employees will begin after sixty (60) days.
(b) It is mutually agreed that seniority departments and department
seniority of employees as theretofore agreed upon will remain in effect unless
regrouping of seniority departments is otherwise agreed upon between the Company
and the Union. Whether new departments shall be included in an existing
department or shall constitute a new seniority department will be determined by
agreement between the Company and the Union.
(c) The following are the seniority departments heretofore agreed upon:
1. Automatics
2. Grinding
3. Hardening
4. Quality
5. Labor Pool
6. Lathe
7. Maintenance
8. Packing
9. Precision Assembly
10. Material Handlers
11. Toolroom
5
<PAGE>
Section 4. In the event of a reduction or layoff in a department, an
employee of one classification may bump a junior employee who is in a different
classification, providing the senior employee can demonstrate proficiency on the
job within two (2) weeks. He will be given an additional two (2) weeks to
qualify.
In such cases, the Company will give said senior employee a trial in the job
unless the senior employee definitely does not have the necessary qualifications
to perform the job satisfactorily. (If the employee is not performing at the job
satisfactorily in this period, the Company will attempt to place him on another
job consistent with his seniority, after discussing the matter with the Union).
(a) If an employee is reduced in a job which has a substitute, that employee
may take the substitute job provided he has more seniority than the employee who
presently holds that substitute job.
(b) When an employee bids into a department other than his own, he will
acquire his full seniority in the new department after he spends sixty (60)
consecutive days within a one year span.
Section 5. The Company agrees to notify the Union within two (2) days, in
writing, of the hiring date of any new employee.
Section 6. The seniority of an employee shall be considered broken, all
rights forfeited and there is no obligation to rehire when he:
(a) Voluntarily leaves the services of the Company or is discharged for
cause.
(b) Fails to return to work within five (5) working days after being
notified by telephone unless prevented to do so because of sickness, injuries,
or causes beyond his control and the Company is notified prior to the end of the
fifth
6
<PAGE>
working day. In such event, he shall be given a reasonable time in which to
report for duty. The date of return shall not be later than one (1) year
thereafter. Such a condition shall not prevent employees next in service from
being employed during the interim. In instances where notification is by
certified mail only, the five (5) days commence with the receipt of the letter
by the employee. In any event, if there is no response within (2) weeks, the
employee whom the Company is unable to reach will be terminated.
(c) Is absent for three (3) consecutive working days without notice.
Section 7. The members of the Union contract negotiations committee shall
have top seniority insofar as layoffs are concerned for the duration of any
negotiating period. For purposes of layoff and rehire, the officers of the Union
shall have plantwide and departmental seniority in the following order:
President, Grievance Chairman, Vice-President and Grievance Committee providing
they have the ability to perform whatever jobs are available. No layoff notice
is required if one of the aforementioned leaves his office. The Union agrees to
keep its list of officers and stewards up to date and will hold the Company
blameless if list is not kept current. If the law is changed to reflect previous
contractual under-standings, language included in the 1980 contract will apply.
Section 8. If an employee is disabled as a result of a noncompensable
accident, or suffers a health problem that makes it impossible for him to
perform his normal duties, the Company will attempt to place him in another job
within his capabilities seniority permitting. If this is not the employee's
department in which he holds seniority, he will assume seniority in the new
department after sixty (60) consecutive days. Whether the employee's disability
is considered temporary or permanent will be determined by the appropriate Union
and Company representatives.
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ARTICLE V
Transfers and Seniority
Section 1. (a) If an employee transfers from one seniority department to
another through posting of job awards, he shall retain such seniority rights
within the department that had at the date of transfer, and in the case of a
reduction in labor force within the new department, the employee shall have the
right to return to his original seniority department providing he is qualified
to do the job. Seniority in the new department shall begin as of the day of
transfer, provided that the employee has been accepted in the new department.
Full seniority (that is continuous time worked for the Company) will be
recognized for Company transfer prior to October 15, 1949.
(b) If the employee is disqualified within a period of sixty (60) days, he
shall return to his original seniority department and the job he held at the
time of award. Such employee shall then be restricted from bidding out of his
department for a period of six (6) months.
(c) If an employee disqualified himself within a period of sixty (60) days,
he shall return to his original seniority department and the job he held at the
time of award. Such employee shall then be restricted from bidding out of his
department for a period of six (6) months, except to fill a job that would
otherwise be sent outside for hire. This would not restrict the employee from
bidding on jobs within the department.
(d) When an employee goes to another department by bid, that employee shall
acquire full seniority rights in the new department after sixty (60) consecutive
days. An employee who bids and is accepted on a job in another department wil be
restricted from bidding again for six (6) months, except as in Section 1-b
above.
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(e) If an employee bids off an upgrade job within his department he will
return to the base of the department on the same shift providing he has the
seniority. If he does not have the seniority, he will move to the shift of the
least senior employee in the base and will be restricted from bidding on other
jobs within the department for sixty (60) days.
(f) If an employee is forced off his job in his department because of
equalization, he may bump the least senior employee in a job on the shift which
he can perform.
(g)When an employee is laid off and goes to another department, he shall
acquire full seniority immediately upon qualification (within two(2) weeks).
Section 2. (a) An employee may be transferred into another department
temporarily without affecting his seniority status, and the stewards of both
departments involved shall be notified at the time of transfer. The transferred
employee shall receive the rate of his own job or the rate of the job to which
he is transferred, whichever is higher. At the time of transfer, the employee
will not move to the other department without a transfer slip from the foreman.
(1) The Company may assign employees to work in another department, (a) if
there is a greater need in that department or (b) if there is a lack of work in
the affected classification. If senior employees are involved, they may displace
junior employees in the department providing they can do the work and the junior
employee, will be reassigned. If this condition continues beyond one (l) day,
the Company will discuss it with the Union.
(2)Transfers may be made to cover for daily absenteeism within a department
and may continue for up to five (5) working days. If the absence of any employee
should exceed five (5) working days, the Company will post for a temporary
opening or recall an employee to that position
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with full seniority rights, whichever is deemed necessary, based on seniority.
(3) The following procedure will be used in making said recalls: A telephone
call will be placed to employees by line of seniority who are on the recall
list, explaining that there is an immediate need to fill an opening. If the
employee refuses recall or is unable to answer the phone, the Company will
continue down the recall list until the opening is filled. There will be no
penalty placed upon employees who refuse recalls or fail to answer the phone.
(4) When the recall list has been exhausted, the Company will post for the
temporary opening to cover the period involved but not to exceed 30 days unless
agreed to by the Union.
(b) Transfer within a department is considered assignment. If an employee is
absent from an upgraded job and the substitute is unavailable because of
absence, or no one has bid on the substitute job for 3 months, or the job cannot
be filled by canvassing on seniority basis in the department, then the Company
may assign the least senior qualified employee to the job within the department
on the same shift.
Canvassing is by the base of the department first and where there are two
bases, then seniority prevails.
(c) If there is an upgraded job posted within a department and no one
applies, the Company may take the least senior employee in the base of the
department on the shift the job was posted for and train him in the upgraded job
or make recall.
Section 3. When layoffs are necessary, transfers may be made from one
department to another providing no layoffs exist in the department to which
transfers are being made. In such cases an employee shall retain his seniority
status in his original department. The employee transferred must be
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qualified to perform the job available. The method of pay for employees with
less than four (4) months service will be governed by Appendix A.
(a) If an employee is to be laid off due to lack of work in his seniority
department, Article VI, Section 1 (b),(c), and (d) will apply.
(b) If an employee elects to take a layoff rather than transfer, there will
be no obligation on the part of the Company to recall him for any job opening
offered to him at the time of layoff, unless the job opening is in his own
seniority department or was not offered at time of layoff. Under such
circumstances, the Company will offer the employee the job before hiring new
employees.
(c) It is further understood and agreed that this change in the recall
rights will only affect those who at the time of layoff elected not to take a
transfer to other work that is available at the time. People who were laid off
without the opportunity to move to other departments will continue to have the
recall rights that they had in the past.
Section 4. In the event work is transferred from one department to another
on a permanent basis, the affected employees will be given the opportunity of
moving with full seniority to the new department.
Section 5. The Company shall place in each department, panels for the
maintenance of quarterly department seniority lists and permanent transfers. No
notices of Union matters are to be posted on departmental bulletin boards. The
Company shall install bulletin boards within the plant for posting by Union of
announcements covering Union matters.
(a) Every six (6) months, the Company shall place in each department a
plantwide seniority list.
Section 6. Any employee who accepts a salary job will have ninety (90) days
to return to the bargaining unit. If the
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employee's tenure in the salary job should exceed ninety (90) days, he will lose
all rights and will return to the bargaining unit only as a new employee. This
section does not apply to salary workers who left the bargaining unit prior to
October 18, 1980.
Section 7. (a) The Company agrees when a vacancy exists within the
bargaining unit for a higher position or a new job rating (to include all
promotion, upgrading, transfers and reassignments), present employees will be
considered for these positions before new employees are added to the workforce.
The Company will carefully and impartially consider the ability, experience,
past performance, interest demonstrated and any other qualifications of the
candidates for these vacancies in order of seniority. The Company will give the
applicant accepted an appropriate opportunity to demonstrate his proficiency.
(b) The following procedure shall apply for posting of job vacancies:
DEPARTMENTALLY-Post as shift opening/job opportunity (Post for three (3)
days.)
Procedure following in making award (Departmentally):
(1) Shift preference
(2) Departmental promotion
(3) Recall within or outside of department.
PLANTWIDE-Post as job opportunity (Post for three (3) days plantwide.)
Procedure following in making award (Plantwide):
(1) Seniority
(2) Skill and ability
(3) Plantwide recall
(4) Outside hire.
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Where there are combination postings such as shift openmg and job
opportunities, then the posting will be for three (3) days. Any eligible active
employee in the same classification or same or lower pay grade may make
application by filling out a Job Vacancy Form in triplicate. One copy shall be
given to the applicant, one copy to the the Union and one copy to the Company
Personnel Department. if the Company posts a job vacancy and later decides to
withdraw the job, it is understood that the Union will be notified of such
withdrawal.
(c) Seniority in the new department will begin to accumulate on the day of
transfer. if during the trial period of sixty (60) days, the employee is not
accepted, he will return to his original department with no loss of seniority
for the time spent in the new department. Loss of seniority will not apply in
the case of temporary transfer. This paragraph is not applicable to set-up men,
floor inspectors, training programs and apprenticeship programs.
(d) An employee may bid down only if the job which the employee bids will
provide greater opportunity for advancement. An employee may bid down on any job
if the difference in pay is 20(cents) per hour or less.
Section 8. All job promotions that are labor grade 8 and higher will be
awarded based on the results of mechanical aptitude tests. The highest senior
person who passes the test will be awarded the job.
Individual tests will be reviewed with the Union President or his designated
substitute at the President's request. Employees who are applicants for the
vacancies will be entitled to repeat tests previously taken. Senior employees
who pass the test will not supplant junior employees who have passed previous
tests and are in training.
Section 9. (a) In considering employees for tested job vacancies within a
department, the most senior applicant
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will be given a trial, except under extra-ordinary circumstances.
(b) In considering employees for tested job vacancies within a department,
the most senior applicant who fills the qualifications will be given a trial.
(c) In considering employees for tested job vacancies on a plantwide basis,
the most senior applicant who fills the qualifications will be given a trial.
(d) The Company will supply the Union with the types of test to be
administered to bargaining unit employees. This rule will apply to any job
classification where testing occurs.
Section 10. When an opening exists on any shift, the most senior employee in
the same classification on another shift who requests such shift assignment may
transfer into the vacancy. Application for such transfer must be made within
three (3) working days of posting of the opening.
Section 11. (a) When a job is posted while an eligible employee is on
vacation, that employee will be given three (3) days in which to bid on the
posting subsequent to his return. Notification of the posting is the
responsibility of the employee's Grievance Committeeman and Steward.
(b) All awards to job vacancies will be posted within five (5) working days.
After the award has been made, the Company will have up to six (6) weeks to move
the affected employee to the job he has been awarded. However, the employee will
receive the rate of pay of his new job at the time of award, providing the rate
of pay is higher.
(c) If a job is posted when an employee is out for two (2) weeks or less,
that employee will be given three (3) days in which to bid on the departmental
opening upon his return. Notification of the posting is the responsibility of
the employee's steward and grievance chairman. An employee who was on a medical
leave of absence may return to anoth-
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er shift in his classification, seniority permitting, if that shift opening
occurred while he was on sick leave of two (2) weeks or more.
(d) Should a job posting occur while an employee is out on a compensated
bereavement period, he will have three (3) days to apply for such posting
immediately upon his return.
(e) Should a job posting occur while an employee is on foreman's leave, he
will have three (3) days to apply for such posting immediately upon his return.
(f) Should a job posting occur while an employee is on sick leave or
Workmens' Compensation, he will have three (3) days to apply for such posting
immediately upon his return.
ARTICLE VI
Layoff and Hiring Procedure
Section 1. (a) In the event of a workforce reduction, the Company shall give
those employees, immediately affected, at least two and one-half (2-1/2) working
days' notice in advance, or will pay him at straight time rate for two and
one-half (2-1/2) working days at the time of layoff. Such notice shall not apply
to those employees who have less than sixty (60) continuous working days'
service or those employees on a transfer of less than thirty (30) days'
duration, who are laid off because of another employee's high seniority. If an
employee is not at work for whatever reason on the day of the notice, the above
will not apply. The Company will make every effort to contact affected employees
who are not at work during processing procedures to learn what jobs they choose
to bump. However, if the
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employee cannot be reached, he will immediately upon his return, be processed
with his bumping options.
(b) When an employee is to be laid off from his present department he will
be afforded the following options, seniority permitting: remaining in his
department on another shift; returning to any department where he may exercise
seniority; or accepting a layoff from the Company with recall rights to any
department in which the employee has accrued seniority.
(c) When an employee has exhausted his departmental seniority rights before
layoff, he will be given the option of bumping one of least senior employee in
the bargaining unit, provided he is qualified to do the job within a two (2)
week period. if within two (2) weeks, the employee is not performing the job
satisfactorily, the Company will attempt to place him on another job consistent
with his seniority after discussing the matter with the Union.
(d) If an employee bumps into any of the departments listed below, he will
not be disqualified before moving into the job unless there is an obvious
incapacity:
Labor Pool
Packing
(e) When an employee is displaced and bumps a less senior employee, there
will be no posting for a job opportunity, but if more than one shift is
involved, the shift opening will be posted for the affected classification.
(f) If an employee has been on a layoff status for a period of at least 24
months but prior to his recall rights expiring, thirty-six (36) months, he may
be offered a job if it is available, prior to hiring from the outside. If the
employee accepts the job he will be given a sixty (60) day training period if
necessary.
(g) If an employee is being reduced and accepts one of
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<PAGE>
the less senior jobs in the bargaining unit before layoff, he may disqualify
himself from that job and still be eligible to apply for it after the lapse of
one year.
(h) An employee on layoff may be offered a job posting, including one on
which he disqualified himself after bumping into it at time of layoff.
(i) When a shift or part of a shift is removed due to lack of work or
reduction of work, any employee affected will be given the opportunity to
exercise his seniority on the shift and job of his choice, providing he is
immediately qualified to do the job. This will apply in situations where two or
more shifts are in operation.
Section 2.(a) If employees are laid off and subsequent thereto it becomes
necessary to increase the working force in any department, rehiring shall be in
order of seniority. The Company shall notify eligible employees by telephone,
where possible, to report for work and confirm it by certified mail to the last
known address, and shall give a copy of such notice to the Union at the same
time. if such employee does not report within five (5) working days after being
notified by telephone, he shall lose his seniority unless he is prevented from
returning to due to sickness, injuries, or causes beyond his control, and the
Company is notified prior to the end of the fifth working day. In such event, he
shall be given a reasonable time in which to report for duty. Such a condition
shall not prevent employees next in service from being employed during the
interim. In instances where notification is by certified mail only, the five (5)
days commence with the receipt of the letter by the employee. In the event, if
there is no response within two (2) weeks, the employee whom the Company is
unable to reach will be terminated.
(b) Whenever practical, a permanent employee will not be laid off while a
probationary employee is still working.
Section 3. The Company agrees to give the Union,
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<PAGE>
through the Chairman of the Grievance Committee, an opportunity to submit
applications for former employees to fill vacancies, but the Company does not
agree to fill vacancies by such applications if, in the opinion of the Company,
after full inquiry, from past experience, they would not make desirable
employees.
Section 4. The Company shall give the Union, whenever possible, at least two
and one-half (2-1/2) days' notice, in writing, of all proposed layoffs. Such
notices shall indicate the names of employees to be laid off.
Section 5. The Company agrees to notify the Union immediately, in writing,
of all temporary and permanent layoffs, resignations, discharges and transfers.
Section 6. It shall be the duty of the employees to advise the Personnel
Office of the Company, in writing, of their proper home addresses, and any
notice sent by the Company by certified mail or telegraph to the last known
address of record with the Company shall be considered proper notice. The
Company agrees to inform the Union of new or corrected addresses.
Section 7. If an employee is scheduled to report for duty and no work is
available, or he is given less than four (4) hours' work he shall receive pay
for not less than four (4) hours' at his regular rate. Except during overtime
hours, if an employee is transferred to other work, he shall be guaranteed eight
(8) hours of work and be paid in accordance with the provision governing
transfers. This will not apply however:
(a) When an employee is absent on the preceding scheduled work day and fails
to make necessary arrangements for his time off with his immediate supervisor.
(b) When an employee is notified not to come to work at least (4) hours
before the beginning of his shift by telephone
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or radio or other available means as listed with the Personnel Office.
(c) When the plant or part of the plant is closed due to conditions beyond
the control of management.
(d) When the above mentioned occurs, after two weeks, all medical and
insurance benefits will continue for the affected employees unless they are
placed on layoff status.
ARTICLE VII
Leave of Absence
Section 1. A leave of absence shall be understood to mean an absence from
work without pay, requested by an employee and consented to by the Company
covering an agreed period of time and for reasonable cause. The Union shall be
notified of any such leave prior to commencement thereof and of any extension
thereto. Seniority shall not accumulate during such leaves. Leaves of absence
will not be granted for the purpose of allowing an employee to take another
position temporarily, try out new work, or venture into business for himself.
Section 2. (a) Upon written request by the District Director, United
Steelworkers of America or his designated representative, a leave of absence not
to exceed two (2) years will be granted to members of the Union selected to work
full time for the Union in an official capacity. Such leave of absence will be
without loss of seniority, but no other benefits shall apply during the term of
such leave.
(b) Employees elected and appointed as delegates to any Union meeting,
conference or convention necessitating a temporary leave of absence shall be
granted such leave of absence without pay and without loss of seniority.
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It is understood that this Section shall not be used to circumvent the
provision of this contract dealing with strikes and lockouts.
(c) Employees elected to public office or appointed to non-civil service
positions shall be granted a leave of absence not to exceed four (4) years.
Neither seniority nor benefits accumulate during the term of such leave.
(d) Upon proper notification, any two (2) employees assigned by the union to
engage in activity relevant to political elections, will be excused from work on
the day in question.
Section 3. An employee on sick leave will be removed from the active
payroll. However, if an employee is not on the active payroll on 12/31 but
returns to work on or before 3/31 of the succeeding year and works at least
thirty (30) days in that year, that employee will be eligible for fu[l vacation
benefits. This provision is effective 1/1/87.
Section 4. (a) Employees on sick leave for one (1) year or more will be
taken off the payroll. Those employees will not lose any rights to life
insurance or medical insurance, or any other accrued rights, and will be
reinstated at full accumulated seniority if and when they are able to return to
work. However, for employees with less than ten (10) years of service, all
benefits will cease after one (1) year.
(b) During the period in which A&H benefits are paid, hospital coverage and
life insurance will continue.
Section 5. (a) Foreman may grant up to two (2) weeks off without loss of
seniority and without processing such request through the Personnel office. All
requests for more than two (2) weeks must be processed through the Personnel
office. Any additional time will be deducted from the employee's seniority.
(b) An employee on approval leave will return to his job
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and shift, if the job has been filled on a temporary basis in his absence.
ARTICLE VIII
Grievance Procedure
Section 1. If any difference arises between the Company and the Union as to
the meaning or application of any provision of this Agreement, or as to its
compliance by either party with any of its obligations under this agreement,
such difference shall be settled in the following manner:
(a) Step 1
1. An oral discussion of the difference must take place between the
employee and his foreman with the Shop Steward. The Foreman must
give his answer within twenty-four (24) hours.
2. If the difference remains unsettled, the grievance-man or his
substitute may be called to discuss the matter further, and if no
settlement is reached, then within seven (7) days the employee may
present the grievance in writing to his foreman through his steward.
A written answer must be given by the foreman to the steward within
seventy-two (72) hours.
(b) Step 2
Any grievance not settled under Step 1 shall, within ten (10) days from the
date of the foreman's answer, be heard by the Step 2 Grievance Committee.
1. The Union Step 2 Committee shall consist of the Grievance Chairman,
the Area Grievanceman, and the Shop Steward involved. Designated
substitutes for any of the above are permitted. The
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Union may call upon the aggrieved and any witnesses the Union deems
advisable.
2. The Company Step 2 Committee shall consist of the Personnel Manager
and one other member of Management, or their designated substitute.
3. Either party may call up to two (2) witnesses.
(c) Step 3
1. On the second and fourth Tuesday of each month, the Company will be
available to discuss any pending Second Step grievance. Third Step
grievances shall be scheduled by mutual consent.
In case of postponement of a second step meeting by either party, such
meeting will be rescheduled the next regular working day. In case of
postponement of a third step meeting by either party, such meeting will be
rescheduled by a mutual agreement of the parties.
(d) Step 4 - Arbitration
Grievances which have not been satisfactorily settled in Step 3 may be filed
by the Union for arbitration within ten (10) days after they are heard in the
Third Step.
1. If the Union submits the matter to arbitration, it shall be referred
to the American Arbitration Association and an arbitrator appointed
according to the procedure of that association. The decision of the
arbitrator shall be final and binding on all parties.
The cost of arbitration shall be divided equally between the Union and the
Company. No arbitrator shall have the right to add to, subtract from, or in any
way modify the provisions of this Agreement.
Section 2. Except for grievances involving seniority, all grievances must be
filed in writing thirty (30) days after the
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event which led to the grievance. In cases of grievances involving retroactive
pay, retroactivity shall in no case exceed a period of more than thirty (30)
days prior to the date of the filing of the grievance, except for arithmetical
errors in calculating pay.
Section 3. (a) Any Union member who is discharged or suspended for
disciplinary reasons by the Company may enter a complaint in writing within one
calendar week of the date of discharge or suspension and shall take precedence
over other issues pending in the grievance procedure. A hearing for the
discharged or suspended employee will be held within twenty-four (24) hours of
the Union's request for such a hearing, and all parties involved in Step 3
grievances will attend.
(b) If disciplinary action is taken against an employee on the night shift
and no Union representative is present, the Company will notify the proper Union
representative on the following shift.
(c) Should it be decided that an employee has been discharged or suspended
without just cause, such employee will be reinstated without loss of seniority
and shall be paid for all the hours he would have worked, less any deductions
required by law.
(d) If the Company fails to hear a Step 1 or Step 2 grievance within the
contractual time limits, the grievance will move automatically to the next step
of the grievance procedure.
Section 4. The Company agrees to continue the past practice of paying for a
reasonable amount of straight time lost in the grievance procedure.
Section 5. Grievances pertaining to safety and health will automatically be
inserted in Step 3 of the grievance pro-
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cedure. Any such grievance will be heard within one (1) week of submission.
Section 6. Second Step grievances will be scheduled as follows:
1st Shift-Any time during the shift.
2nd Shift-2:00 P.M. or later.
3rd Shift-Initial grievance prior to 8:00 A.M.
Section 7. Union officials will notify their foreman when they leave their
jobs to conduct union business. Further, they will provide their foreman with
the approximate time needed.
ARTICLE IX
Vacations
Section 1. The vacation year shall begin on January 1, and end December 31.
Each employee who is on the payroll on December 31 of any year shall be entitled
to receive his full vacation benefits in the ensuing year, notwithstanding the
fact that his services may have been terminated in the ensuing year prior to the
receipt of vacation pay.
Section 2. (a) Employees not on the active payroll as of December 31, but
who become active after December 31, due to recall or return from a Company
approved Leave of Absence, will be entitled to vacation benefits for each month
of service in the current vacation year.
(b) In cases of employees with less than one year's service, vacation
benefits will be prorated as mentioned in (a) above, except that employees with
less than six (6) months' service will not be entitled to vacation benefits.
(c) If any employee elects not to return to his department in which he
formerly worked when called by the Company
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<PAGE>
after a layoff, the employee loses the right to the vacation privilege, unless
he was on the active payroll the previous December 31, in which case he will be
paid his full vacation benefit.
(d) All employees returning from layoff to a permanent job who have been
paid vacation benefits in the current year, will be entitled to take equivalent
time off without pay, except such employees must work at least one month
immediately upon return from layoff.
(e) When an employee is laid off, he will receive all vacation benefits due
at the time of such layoff. All employees returning from layoff to a temporary
job who have been paid vacation benefits in the current year, will be entitled
to take equivalent time off without pay. Except such employees must work three
months immediately upon return from layoff.
Section 3. (a) The vacation schedule in effect during the 1965-68 Agreement
will remain in effect until December 31, 1983. As of January 1, 1984, vacation
benefits for eligible employees shall be as follows:
Accredited Service
Prior to 12/31 of
Vacation Year Vacation
l yr. - 3 yrs. 1 week 1 day
3 yrs. - 5 yrs. 1 week, 4 days
5 yrs. - 7 yrs. 2 weeks, 1 day
7 yrs. - 9 yrs. 2 weeks, 2 days
9 yrs. - 11 yrs. 2 weeks, 4 days
11 yrs. - l3 yrs. 3 weeks
13 yrs. - 15 yrs. 3 weeks, 1 day
15 yrs. - 20 yrs. 4 weeks
20 yrs. - 25 yrs. 5 weeks, 1 day
25 yrs. - and over 5 weeks, 3 days
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(b) Vacation pay for each eligible employee will be computed on the basis of
a forty (40) hour week at straight time for the highest rate paid for the
majority of the time worked between January 1 and June 1. The vacation pay for
an employee taking his vacation prior to June 1 will be based on his highest
rate for the majority of time from January 1, until he applies for his vacation.
Vacations taken after June 1 will be paid at the employee's current rate.
(c) The Company agrees to pay the employee his vacation pay at the time the
employee takes his vacation between January 1 and December 31. It is provided,
however, that the employee will receive his vacation pay on a regular pay date
and that one week's notice be given in advance of such pay date.
(d) The Company agrees to pay employees only when the vacation is taken. Any
employee who is scheduled for a vacation and works during that scheduled
vacation will forfeit such time worked. The forfeiture will not apply if prior
agreement has been made.
Any employee who is scheduled for vacation may not change such vacation
except by mutual agreement between the Company and the Union.
(e) An employee will receive vacation pay for each individual day he charges
to vacation.
(f) An employee who desires vacation by seniority must request such vacation
by March 1. If an employee does not follow the above procedure, the Company will
assign his vacation.
(g) Individual holidays cannot be charged as vacation days. The only
exception will be where the holiday, or holidays, fall within the employee's
scheduled vacation week. In these instances, the employee will receive his
holiday pay.
(h) An employee will be permitted to post date vacation
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days if twenty-four (24) hours notice is given, except in a case of an
emergency, in which case the twenty-four (24) hours notice will be waived. No
post dating will be permitted in the period between June 1st and September 15th.
(i) Any employee who is absent from the Company due to sickness or personal
leave of absence may opt to take vacation money in lieu of time off.
(j) Any exception to Section 3 (i) must be agreed upon by the Company and
Union.
(k) The vacation agreement as outlined by this Article will be enforced by
both the Company and the Union.
(l) Employees who honor their military reserve commitments in conjunction
with their vacation time are not entitled to reserve make up pay.
(m) Between the dates of January 1st and June 1st and September 15th and
December 31st, an employee may split his vacation week into days.
Section 4. Any employee who shall have worked a full month or any fraction
thereof shall be given credit for the full month in computing earned vacation
Lime on a prorated basis. An employee who returns from layoff or is hired on or
before the 15th of the month shall be given full credit for that month.
Section 5. (a) Vacations will be scheduled by the Department Foreman in
accordance with production requirements.
(b) Employees with the greatest seniority within a job classification will
be given preference in scheduling vacation. This will not be applicable to any
department which has an exception agreement.
(c) The right of the Company to shut down for two (2) consecutive weeks of
mandatory vacation anytime from the
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15th of July until the 15th of August is recognized by the Union. In addition,
the Company has the right to schedule a vacation shutdown during the final week
of the year (i.e. between Christmas Eve and New Year). The Company will notify
the Union of the three (3) weeks shutdown by February 1St of the vacation year.
Any function pertaining to inventory during that shutdown would be performed by
individuals in the department where the inventory is to take place by seniority.
(d) If there is work to be performed in a department during the vacation
shutdown, employees in the department without eligibility for the scheduled
shutdown weeks of vacation will be canvassed for the work on a seniority basis.
If more employees are necessary, the jobs will be filled by employees on a
seniority basis in the department where the work is needed. Should the employee
requirements remain unfilled, additional employees will be canvassed from the
master seniority list on a plantwide basis.
Section 6. (a) The vacation schedule shall be posted departmentally on or
before January 15th. This schedule will give the amount of hours the employee
has for the vacation year.
(b) The vacation schedule as to the employee's choice of vacation shall be
posted departmentally by April 1.
(c) If the vacation schedule has not been posted by April 1, any employee
who has submitted his vacation selection will be entitled to that selection.
Section 7. Any employee who is on vacation for a full week shall not be
eligible for overtime assignment during any weekday or weekend falling within
such vacation period.
Section 8. (a) An employee who is granted a leave of absence for illness or
injury to himself, his employment duties being the proximate cause of
disability, may opt to
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receive his vacation pay while on said leave of absence. An employee who has
accumulated five (5) or more years of seniority and is absent from work due to
illness shall be entitled to have such absence up to, but not exceeding one (1)
year, credited as time worked for the purpose of qualifying for a paid vacation.
(b) If, after October 15, 1977, an employee with five (5) or more years of
service is laid off, he shall accrue time for purpose of pension and vacation
eligibility.
(1) After October 12, 1974, an employee with five (5) or more years of
service is laid off, up to three (3) years of such layoff will be
counted as time worked toward pension eligibility.
(2) If, after October 19, 1968, an employee with five (5) or more years of
service is laid off, up to one (1) year of such layoff will be counted
as time worked toward pension eligibility.
(3) Those active employees laid off prior to October 19, 1968, will be
credited for all layoff time for pension eligibility.
Section 9. In the event of death of any employee who was eligible for a
vacation but did not use his vacation, the amount of the vacation pay to which
he would have been entitled shall be paid to his surviving spouse or legal
representative in accordance with the laws of his state of domicile at the time
of death.
ARTICLE X
Hours of Employment and Overtime Payments
Section 1. (a) The contracting parties hereby agree that the normal day
shall be eight (8) hours and that the normal
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work week shall be five (5) consecutive days, commencing Monday and ending
Friday. It is agreed that the present working schedule shall remain in effect,
and that any change in established schedules may be changed by mutual agreement
between the Company and the Union. This shall not be construed as a guarantee of
hours or work per day or per week.
(b) Starting times and shifts will remain in effect for the length on this
contract. Any change must be mutually agreed upon by the Company and the Union.
(c) Shift Schedules:
7:00 AM to 3:00 PM
7:00 AM to 3:30 PM "A" Shift
7:30 AM to 4:00 PM
3:00 PM to 11:00 PM
3:00 PM to 11:30 PM "B" Shift
3:30 PM to 12:00 PM
11:00 PM to 7:00 AM "C" Shift
(d) When a given classification is assigned across three (3) shifts, those
employees affected will work straight eight (8) hour shifts.
(e)Curtailment on a partial department, departmental or plantwide basis will
be as follows:
(A) The Company will notify the Union three (3) days prior to curtailment
except for circumstances beyond the control of the Company.
(B) On a partial departmental basis, work will be performed by immediately
qualified employees in line of seniority.
(C) If curtailment exceed five (5) consecutive days duration, the Company
will then revert to the layoff provisions of the contract.
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(D) If curtailment occurs for one (I) or more days in a department, the
Company will attempt to place the affected employees in other
departments without interfering with employees in those departments. An
employee may also opt to take time off without pay or to use vacation
time.
Section 2. All work in excess of eight (8) hours per day on any regular
working shift or all work in the work week in excess of forty (40) hours shall
be paid for by the Company at the rate of one and one-half (1 1/2) times the
regular rate.
Section 3. (a) All work performed on Saturday shall be paid for at one and
one-half (1 1/2) times the employee's regular hourly rate, and all work
performed on Sunday shall be paid for at two (2) times the regular hourly rate.
However, Management will not be obligated to give Saturday and Sunday work to
any employee who has lost a scheduled day or more Monday through Saturday of
that week. This shall apply even though the employee may have worked less than
forty (40) hours during the regular work week. Before an employee is denied an
overtime opportunity because of absence, the foreman will contact the Personnel
Manager to prevent any unjust application of this rule.
(b) A holiday shall be counted as a day worked for purposes of overtime
computation.
Section 4. (a) When in the judgement of Management, overtime is required for
a given department, the regular employees assigned to the department shall be
given preference over other employees to accept such overtime. All reasonable
means will be employed to equalize overtime among shifts. When, in the judgment
of Management, overtime is necessary for employees in a given classification
within a department, the opportunity to work the available overtime will be
rotated equally among all qualified
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employees within the classification, provided that they have the ability to do
the work available. Any questions as to the qualifications or capability of any
employee or employees will be explained by the Foreman to their Shop Steward.
This paragraph does not apply to Tool Room employees.
(b) It shall be clearly understood that the responsibility for keeping the
rotating list up to date shall rest with the Shop Steward of the department and
further, that the Union will hold the Company blameless for any grievance
arising from the selection of workers from the list, providing the foreman has
selected those persons whose turn it is to work according to the Shop Steward's
list. In the event of a mistake under this subsection, the employee affected
thereby shall be given an overtime makeup turn the next time overtime is
scheduled in this particular classification.
(c) The Company agrees (overtime work not being compulsory) to schedule
weekend overtime by 11:30 AM on Thursday, except where an emergency makes such
scheduling impossible. Whenever possible, the list of employees to work weekend
overtime shall be given to the Company by the Union no later than 11:00 AM on
the Friday immediately preceding the scheduled overtime.
(d) Where a department or any employee in the department has been on an
overtime basis, an employee will receive eight (8) hours notice, wherever
practical before returning to his regular shift.
(e) Overtime may be worked in a department where layoffs exist. If the
overtime worked exceeds 50% in two (2) consecutive weeks, the Company will
immediately recall at least one (1) employee per week for the duration of the
overtime.
(f) Where there is a layoff due to elimination of a job or equipment,
Section 4 (e) will not apply.
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(g) Preventive maintenance will not be subject to Section 4 (e).
Section 5. The Company agrees not to hire additional employees, in any
department where the scheduled work day of eight (8) hours is curtailed or where
the scheduled work week of forty (40) hours is curtailed.
Section 6. (a) Employees will not be moved to another department to receive
overtime when said department is not on overtime schedule, except where the
employee of said department will not work the necessary overtime to meet
production or maintenance schedules.
(b) Proper notification of overtime will normally be within four (4) hours
after the start of the shift unless the Company and Union agree otherwise.
(c) Transfers will not be permitted from a department which is on an
overtime basis. A department is on overtime only when the overtime hours are
actually being worked and not when the overtime is scheduled.
(d) When overtime is to be worked within a department, employees will be
canvassed on a seniority basis within the classification.
(e) If an employee is scheduled for overtime on Saturday or Sunday and
reports for duty, he shall receive pay for no less than four (4) hours work. If
the employee is transferred to other work on overtime, he shall be guaranteed
eight (8) hours work and be paid in accordance with the provision governing
transfers.
(f) Employees who are called back to work after the end of their regularly
scheduled shift will be guaranteed a minimum of four (4) hours pay at the
appropriate overtime rate. However, when any callback results in consecutive
hours worked just before employee's regularly assigned shift those hours will be
paid at the appropriate rate and hours after the
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start of the scheduled shift will be paid on a straight time basis.
(g) An employee who works eight (8) hours in his own classification may work
as a substitute on another job within a twenty-four hour period only on an
emergency basis.
(h) In situations where an employee holds more than one job in a department
and partial overtime is scheduled, that employee must work in his own
classification if such work is available, unless there is more immediate need
for him in his substitute classification.
(i) When an employee is transferred from a department scheduled for eight
(8) hours to a department scheduled for the same, and the second department is
subsequently given overtime, he will where necessary, be afforded the
opportunity to work such overtime.
(j) When an employee is transferred from a department scheduled for eight
(8) hours to a department already on overtime, he will be afforded the
opportunity to work such overtime when it is practical.
Section 7. (a) The parties also recognize the need in many cases for special
exception overtime agreements, which are to be entered into promptly in writing
between the Plant Manager; the Grievance Chairman; the Foreman and the Shop
Steward. The present exception agreements shall remain in effect unless
otherwise changed by agreement between the Plant Manager and Chairman of the
Grievance Committee, plus the Departmental Steward and Foreman.
(b) All special overtime agreements which affect shift changes must be in
writing and signed by the Grievance Chairman, the President of the Union, and
the Company's designated representative.
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ARTICLE XI
Wages
Section 1. Effective October 26, 1996, a general increase of $.45 per hour
will be added to individual base rates. Effective October 25, 1997, a general
increase of $.35 per hour will be added to individual base rates. Effective
October 24, 1998, a general increase of $.35 per hour will be added to
individual base rates.
Section 2. The rates of pay for each job classification are listed under
Appendix "A" of this contract.
Section 3. The rate of pay for newly created positions shall be determined
by the Job Evaluation Committee, consisting of two members from the Union and
two members of Management.
Section 4. All employees who work on the regular night shift shall receive a
5% premium on top of their scheduled base rate of pay. (Regular night shift
shall be defined as any shift commencing after 3:00 PM).
Section 5. It is further agreed that the Company will furnish wage rates and
hours of employment to the Union in each year of the contract.
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ARTICLE XII
Hospitalization and General Welfare
Section 1. The Company agrees to maintain the present Group Health and
Welfare insurance plan which provides eligible employees and dependents with
non-occupational hospitalization benefits, as well as life insurance, accidental
death and dismemberment insurance and disability income in the event of
non-occupational accident or sickness. Effective on the dates indicated below,
the following increased benefits will be provided:
(a) Effective January 1, 1978, surgical benefits will be paid on a
prevailing fee basis as provided in the Blue Shield Prevailing Fee program.
(b) The Blue Cross/Blue Shield Major Medical coverage as well as Deductibles
for Employees and their dependents now in effect as of January 1, 1994, shall be
outlined in a Summary Plan Description and will be made available to all
employees.
1. An individual deductible of $200.00 will apply for all in-patient
hospitalization admissions during the course of one calendar year. The
deductible will not be applied more than two times with respect to
inpatient admissions incurred by an employee and all enrolled dependents
in a calendar year. The plan deductibles are not eligible for payment
under the Major Medical health insurance benefit. This in hospital
deductible applies to any employee who retires on or after January 1,
1994.
2. An individual deductible of $250.00 will apply for all in-patient
hospitalization admission during the course of one calendar year. The
deductible will not be applied more than two times with respect to
in-patient admissions incurred by an employee and all enrolled
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dependents in a calendar year. This plan deductibles are not eligible
for payment under the Major Medical health insurance benefits. This
in-hospital deductible applies to any employee who retires on or affer
December 1, 1996.
(c) For disabilities commencing after January 1, 1997, $200.00 per week
beginning with the first day of accident, or the eighth day in the event of
sickness. Benefits will be payable up to a maximum of 52 weeks for each
disability. Indemnity papers will be renewed monthly if no definite date of
return is given by the doctor.
(d) Effective November 1, 1983, Group Life Insurance and Accidental Death
and Dismemberment Insurance for active employees will be $9,000.00 up to age 70.
(e) Effective January 1, 1975, present retirees, age 65 and over, or any
employee who retires at or after age 65 with 10 years or more of accredited
service, will be covered by the Blue Shield and Blue Cross 65-Special Plans.
(f) Employees who retire on or after January 1, 1972 under the Total and
Permanent Disability Provision of the Pension Plan will be covered until they
attain age 65 by the Name basic Blue Cross Hospitalization, Blue Shield
Medical-Surgical and Major Medical Programs applicable to active employees
(excluding the group dental and drug programs).
(g) Effective January 1, 1975, present pension retired employees under age
65 and any employee who retires before age 65 under the provisions of the
Pension Plan will be covered until they attain age 65 by the same basic Blue
Cross Hospitalization, Blue Shield Medical-Surgical, and Major Medical Programs
(excluding the group dental and drug programs) applicable to active employees
except:
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1. 365 days of hospitalization - basic Blue Cross Hospital Plan.
2. 365 days of in-hospital medical care - basic Blue Shield Program.
3. No home and office medical visits - basic Blue Shield Program.
4. Maximum benefit $10,000 (not renewable) - Major Medical coverage.
(h) Effective January 1, 1975, benefits for spouses of pension retired
employees will be provided as specified in (f) and (g) above, depending on their
age.
1. Health insurance benefits for employees retiring after November 1, 1993,
will be capped at whatever the cost those benefits are at the expiration
of the Labor Agreement. This provision will not apply to employees who
accept the 1993 incentive retirement package, but who retire after
November 1, 1993.
2. Any employee retiring during the life of this agreement will have
benefits capped at whatever the cost of those benefits on November 1,
1996.
(i) Effective December 1, 1974, the Company will provide a Basic Blue Shield
Dental Care Program for active employees and their dependents. The Plan will pay
100% of the prevailing fee or actual charges (whichever is lower) for the
following covered dental procedures:
1. Oral examination.
2. X-rays of the teeth.
3. Topical fluoride application for subscribers under age 19.
4. Cleaning, scaling and polishing of teeth.
5. Repair of dentures.
6. Palliative emergency treatment of conditions causing dental pain.
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7. Fillings, consisting of silver amaigam and synthetic tooth color
restorations.
8. Simple extractions.
9. Endodontics (Treatment of the tooth's nerve).
10. Consultations.
11. General Anesthesia.
12. Space Maintainers.
(j) Additional dental benefits will be provided for active employees, their
spouses and their eligible children under age 19, effective January 1, 1978. The
Plan will pay for these additional benefits on the basis of 80% of the
prevailing fee or the amount charged, whichever is less.
1. Prosthetics and Crown, Inlay and Onlay restorations.
(k) Additional dental benefits will be provided for active employees, their
spouses and their eligible children under age 19. These benefits including the
following:
1. Oral Surgery (100% of UCR fee)
1. Surgical removal of teeth.
2. Surgical removal of maxillary or mandibular intrabony cysts.
3. Procedure performed for the preparation of the mouth for dentures.
4. Apicoectomy (dental root resection).
2. Periodontics (50% or UCR fee)
1. Periodontal examinations.
2. Gingival curettage.
3. Gingivectomy and gingivoplasty.
4. Osseous (bone) surgery in connection with periodontal disease,
including flat entry and closure.
5. Mucogingivoplastic surgery.
Payment under the Blue Shield Dental Program is limited to $1,000 per person for
all services rendered in any calendar year.
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(l) Effective January 1, 1994, a $5.00 co-payment amount will apply for each
separate prescription order and refill.
Section 2. The benefits listed above take effect on the dates indicated for
active employees and become applicable at the increased rates to employees on
any Leave of Absence only upon their return to active employment after the
respective change dates listed above.
Section 3. Should a statute be enacted making mandatory benefits of the same
or similar nature as covered in any manner of this Plan, such statutory benefits
shall not be pyramided, but shall be offset against any benefits payable under
this Plan, and it may be necessary for us to adjust our Plan in accordance with
such statute or statues.
This Plan is subject to the insurance industry's co-ordination of benefits
provision (also referred to as a non-profit, non-duplication provision) as set
forth in the applicable master contracts. The purpose of this provision is to
permit an individual who is insured under more than one group insurance plan to
receive from all plans no more than 100% of his allowable medical expenses.
More complete details, including eligibility requirements will be published
in a separate booklet which will be issued to each employee.
Section 4. Any employee hired after October 24, 1992 will pay $7.00/week for
an individual or $12.00/week for a family toward the cost of medical insurance.
(a) An employee hired after October 26, 1996 will pay $9.00 per week toward
medical insurance for an individual and $15.00 per week for a family. The stand
alone prescription drug plan currently available to active employees will not be
available to employees hired after October 26, 1996. Prescription drugs will be
eligible for reimbursement.
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ARTICLE XIII
Holidays
Section 1. The following holidays shall be recognized as paid holidays for
all hourly employees (such holiday time to be from 12:01 AM to 12:00 o'clock
midnight of said holiday:)
Good Friday Labor Day
Easter Monday Thanksgiving Day
Memorial Day Day after Thanksgiving
Independence Day Three Holidays to be
designated at Year's End
Section 2. Hourly rate employees covered by this Agreement shall receive
eight (8) hours pay at their regular rate, including night shift bonus, for each
of the above holidays, no work being required.
Section 3. It is mutually agreed between the parties to this contract that:
(a) When any of the above holidays shall fall on Saturday, the preceding
Friday shall be observed in lieu thereof as a paid holiday. When any of the
above holidays shall fall on Sunday, the Monday following shall be observed in
lieu thereof as a paid holiday. When the Christmas holidays fall on Friday and
Saturday, Thursday and Friday will be observed as the holidays. Should the
Christmas holiday fall on Sunday and Monday, Monday and Tuesday will be observed
as holidays.
(b) An employee who works on any one of the above mentioned holidays shall
be paid at double the regular established rate for hours worked plus his holiday
pay.
(c) A holiday which occurs during an employee's vacation shall not affect
the period of vacation and the employee
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in such cases will return to work at the beginning of the regular work week
rather than a day later. When a paid holiday occurs while the employee is on
vacation, he will receive the holiday pay in addition to vacation pay. If a
holiday occurs during an employee's vacation week, the employee may have the
privilege of taking the day at a later time-the day to be agreed upon by the
Company and the individual involved.
(d) A holiday shall be counted as a day worked for purposes of overtime
computations.
Section 4. To be eligible for holiday pay, an employee must work that first
scheduled workday after the holiday unless he has been excused or is absent for
reasonable cause. Any employee who is absent forty-five days or more prior to
any of the above holidays shall not be entitled to pay for such holiday.
Section 5. Any new employee or former employee of the Company who quits his
job, or was discharged must, if rehired, be on the payroll for sixty (60) days
before becoming eligible to receive holiday benefits.
ARTICLE XIV
Pension Benefits
Section 1. A Pension Plan has been provided in an agreement which is
separate and apart from this Agreement.
Section 2. Employees who retire shall be paid a lump sum retirement benefit
of $1,500 provided that they have had at least ten (10) years of Company service
and reached age sixty-five (65). Employees with at least ten (10) years of
Company Service who retire between the ages of fifty-five (55) and sixty-five
(65) under the 55/30, early, or disability
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retirement provisions of the Pension Plan will receive a reduced lump sum
benefit in accordance with the following:
Attained Age
At Least Less Than Amount
55 56 $ 750
56 57 800
57 58 850
58 59 900
59 60 975
60 61 1,050
61 62 1,125
62 63 1,200
63 64 1,300
64 65 1,400
It is understood that the lump sum retirement benefits shall be payable in
addition to any vacation payments that may be due an employee at the time of his
retirement.
(a) Employees who retire with thirty (30) or more years of service will
receive a lump sum retirement benefit of $2000.00
Section 3. Employees who retire on or after November 15, 1971, shall be
provided at no cost to the retiree with a Life Insurance Policy in the amount of
$1,200.00.
(a) Employees who retire on or after December 1, 1977, shall be provided, at
no cost to the retiree, with a Life Insurance Policy in the amount of $1,500.00.
(b) Employees who retire on or after December 1, 1983, shall be provided
with Group Life Insurance in the amount of $2,000.00.
Section 4. Effective December 1, 1979, an employee with thirty (30) years or
more of accredited service may retire, at any age, and receive a pension without
actuarial reduction.
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(a) The present minimum pension forrnula shall be improved by increasing the
pension per month per year of service from $24.00 to $27.00 effective for
retirements on or after November 1, 1996
1. Any pensioner who retires prior to November 30, 1987, but on or
after November 30, 1986 under the provisions of the Pension Plan and
who is still receiving a monthly retirement benefit under the Plan,
shall have his monthly retirement benefit increased by $.50 per
month per year of service, effective December 1, 1987.
2. Effective as of December 1, 1980, benefit service shall include
service completed up to the last day of the month during which a
member attains age 70.
3. Any pensioner who retired prior to November 30, 1980 under the
provisions of the Pension Plan for Hourly Paid employees and who of
December 1, 1980 is still receiving a monthly retirement benefit
under the Plan which is less than $100.00 per month, shall have his
monthly retirement benefit increased by $15.00 per month, effective
December 1, 1980. Those pensioners who selected a Joint and Survivor
Annuity will receive the acturial equivalent of this amount.
(b) The 35-year maximum service limitation used to compute the pension
benefit will be removed for those employees retiring on or after December 1,
1977.
(c) Surviving Spouse: (Eligibility)
1. A monthly benefit will be paid to any eligible surviving spouse of
any active employee with at least 15 years of accredited service who
dies on or after December 1, 1977 at any age, and has not retired.
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2. A person shall be considered a surviving spouse only if married one
year, and immediately after the employee's death, such person is a
widow or widower of such employee within the provisions of the
Social Security Act.
(d) Amount of benefit - the amount payable to an eligible surviving spouse
will be:
1. 50% of the employee's normal retirement pension or $100 whichever is
higher, for any month before the month in which the surviving spouse
reaches age 60.
2. 50% of the employees normal retirement pension less 50% of the
widow's (or widower's Social Security benefit or $50.00 whichever is
higher, for each month after the surviving spouse reaches age 60.
3. As used above, normal retirement pension means the benefit
calculated assuming the employee had retired on the date of his
death at age 65.
(e) Payment and Termination of Benefits:
1. The first payment of any surviving benefit starts at the end of the
month following the month in which the active employee dies,
provided proper and timely application is made by the surviving
spouse. If timely application is not made, retroactive payment of
surviving spouse's benefit is limited to six (6) months.
2. The surviving benefit shall cease the last day of the calendar month
in which the surviving spouse shall die or the last day of the
calendar month in which the surviving spouse remarries.
More complete details will be published in a separate booklet to be furnished
each employee.
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ARTICLE XV
Safety and Health
Section 1. The Company, recognizes the importance of taking every reasonable
precaution to promote and protect the health and lives of its employees, hereby
agrees:
(a) To abide by and maintain to the best of its ability sanitation, safety,
health and satisfactory working conditions which comply with applicable Federal,
State and County and Municipal laws and regulations; to maintain a clean,
properly lighted, heated and ventilated factory with approved safety devices;
first aid and sanitation facilities as are necessary to promote the health,
safety and general welfare of its employees.
(b) That no employee shall be required to perform any work which will
seriously endanger his personal safety or health, provided, however that to be
justified in refusing to perform work, an employee must be able to show that he
has a reasonable basis for believing the work involved would seriously endanger
his personal safety or health.
(c) If an employee is injured while working on the job, his pay shall
continue during the normal scheduled work hours while he remains on the plant
premises. If an employee is sent from his job to a physician to receive medical
attention because of an injury on the job, he shall be paid for all lost time,
not to exceed eight (8) hours. If it becomes necessary, the Company shall
provide quick, comfortable transportation to the doctor or hospital or home.
Section 2. (a) There shall be a health and safety committee in the plant
composed of one member to be appointed by Management and one member to be
appointed by the Union. It shall be the duty of the Committee to make a thorough
and complete survey of the plant weekly for the purpose of listening to any
investigation of complaints relating to health,
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safety and working conditions, ascertaining whether conditions exist which are
dangerous to the health and safety of the employees. There is to be no exception
to this rule unless it is agreed upon between the Union's Safety Chairman and
the Plant Manager or their designated alternates. Any such conditions shall be
reported to the foreman of the department and steward shall be advised so he may
check to see that correction is made as soon as possible. If, in the opinion of
the department steward, proper remedial steps are not taken, then it shall be
his duty to report such conditions to the Area Grievance Committeman of the
Union.
No discriminatory or punitive action shall be taken by the Company or its
representative against a steward who performs his duties herein imposed in good
faith. In case of any serious accident, all members of the Plant Safety
Committee will be immediately notified and thorough examination shall be made by
the full plant committee. From time to time a representative of the Workman's
Compensation Insurance Carrier shall attend the safety meeting.
(b) Safety meetings shall be conducted on a monthly basis. In attendance
will be the Union Safety Chairman and a designated Company representat!ve.
Section 3. The members of the Health and Safety Committee shall receive
their regular hourly wages for time away from their regular scheduled duties
while on inspection tours or meetings.
Section 4. When an employee is taken to a doctor or hospital for personal
illness or injury sustained off plant property the Company is not liable for
medical or hospital expense when not covered by Company insurance. This will not
relieve the Company from any legal liability.
Section 5. (a) An employee who is permanently unable to perform his
regularly assigned job as a result of a Company
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incurred disability may apply for permanent transfer subject to the following
conditions: The search by the Company for an appropriate job must begin by
reviewing jobs held by employees with less than three (3) years seniority and
continuing the search at yearly intervals. In no event may the applicant
displace an employee with more Company seniority. An employee transferred under
this Section relinquishes recall rights to his former job and he carries his
full Company seniority into the department where he is placed. The search will
be conducted departmentally, and failing successful placement, the search will
be continued on a plantwide basis. The Workers' Compensation Chairperson shall
participate with the employee and the Company in all compensable job searches
and receive a copy of such results.
(b) An employee who has, as a result of a company incurred injury, suffered
the loss of an eye or the equivalent of complete amputation of an essential body
member, may apply for preferred seniority on his regularly assigned job, as long
as he is physically able to perform the duties thereof. If the injury prevents
his efficient performance on his regularly assigned jobs, he may request a
transfer, whereupon the Company will attempt to place him in a job commensurate
with his skill and physical capability. An application approved under this
section shall mean that the employee shall not be subject to displacement as
long as he is physically capable of efficiently performing the duties of that
job.
(c) Light duty work as provided for compensable injury employees is not
limited to any specific area. This provision will not deprive any active
employee of a work opportunity, upgrade or promotion nor cause the layoff of any
active employee or block the recall of any employee on layoff. Where the Union
can show evidence that a light duty
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employee is used in violation of the above, such employee will be removed. The
Shop Steward and Area Grievanceman on the shift involved will be notified when a
light duty person is assigned.
ARTICLE XVI
General
Section 1. Effective on all pay as heretofore, the City Payroll Tax will be
deducted from the weekly pay of each employee, and be paid by the Company to the
Receiver of Taxes, of the City of Philadelphia, in accordance with the City
Payroll Tax Law at present in effect. The amount of this deduction shall be
shown on each employee's pay envelope each week.
Section 2. If an employee resigns after having been absent, his resignation
will be considered to have taken place the last day worked, without waiver or
intervening rights.
Section 3. The Union agrees that during the life of this contract, it will
not interfere with production or permit any of its members to interfere with
production or production rates, providing such rates are reasonable, just and
not detrimental to the safety of the employee.
Section 4. All veterans of World War II, the Korean War, or Viet Nam or
situations arising therefrom, who previous to induction were employed by the
Company and who have returned within ninety (90) days after their discharge from
War Service shall be compensated for any lost time for medical checkup for
injuries received in World War II, the Korean War, Viet Nam, or situations
arising therefrom, so long as the maximum compensation shall not exceed eight
(8) hours in any thirty (30) day period. Regulation govern-
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mental procedure shall be obtained in certification of a veteran's incapacity;
proper governmental identification in the form of documentary evidence shall be
submitted to the Plant Manager in such cases. In the circumstances of Malaria,
such veteran would be treated in accordance with Governmental regulations by a
physician duly appointed by the Government. The Company will comply with all
existing Federal and State statutes pertaining to veteran's rights and benefits.
Section 5. The Foreman may perform such work normally under his jurisdiction
and direction as is necessary, (1) to maintain an uninterrupted flow of work and
normal departmental efficiency, (2) to train employees, and (3) to relieve
bottlenecks in production.
This Article shall not limit the Foreman in performing other similar work
which is a part of his regular duty as Foreman, so long as doing such work does
not affect the work opportunities of those employees under him.
(a) Members of the bargaining unit will not perform salary jobs nor will
salary people perform bargaining unit jobs, except where bargaining unit
employees are asked and refused.
Section 6. The Union recognizes that it is necessary for the Company to
issue rules from time to time governing the conduct of employees and that it is
the duty of each employee to familiarize himself with such rules and
regulations. This does not constitute acceptance by the Union of any specific
rules not in compliance with the provisions of this Agreement.
Section 7. In case of jury duty, the Company will make up the difference in
pay between jury duty pay and straight time pay by the Company for forty (40)
hours per week. The Company will pay up to eight (8) hours for employees who
lose time from work due to necessity of going to the
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Courthouse either to qualify for or to be excused from jury duty.
(a) If an employee is on jury duty and "daily" overtime is scheduled in that
period, the employee will not be entitled to work such overtime. However, that
employee will be entitled to work overtime if it is scheduled on a weekend.
(b) If an employee is on jury duty and death occurs in the immediate family,
the employee will be covered under terms outlined in Section 9 (a) of this
Article.
(c) If an employee is on jury duty and is released for any reason, he shall
have the option of reporting to work or having an excused absence. This option
may be exercised only one (1) day in any one (1) week period and only after
notification to the Company.
Section 8. Any permanent wage employee who is required to attend Military
Reserve Training encampment shall be excused from work up to two (2) weeks and
shall be paid up to two (2) weeks the difference between his military pay and
what he would have earned while working for the Company, up to a maximum of
eighty (80) hours. The employee must present proof of his gross military pay
before any payment is made.
Section 9. (a) An employee will be granted three (3) days off with eight (8)
hours straight time pay in the event of a death in the immediate family for the
purpose of arranging and attending the funeral; the immediate family being
mother, father, spouse, children, brothers, sisters, half-brothers,
half-sisters, mother-in law, father-in-law, son-in-law, daughter-in-law,
step-parents, step-children, grandparents and grandchildren. One (1) of these
three (3) days may follow the funeral.
(b) An employee will be given one (1) day off with eight
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(8) hours straight time pay to attend the funeral of a step-parent of spouse.
(c) If a death occurs in the immediate family of an employee while he is on
vacation, that employee will be entitled to three (3) consecutive days off
immediately upon conclusion of the vacation period.
Section 10. All employees, who at the time of the signing of the contract,
are volunteer firemen, fire policemen and ambulance personnel, shall be paid for
the time lost at their straight time hourly rate while performing duties at a
fire, if such duties are performed during their regular scheduled working hours.
This paragraph applies when those duties are the cause of an employee reporting
late for work or leaving early.
Section 11. It is the policy of the Company not to discriminate against any
employee or applicant for employment because of race, color, religion, national
origin, sex, age, handicap, veteran's disability, or Vietnam era Veteran.
Section 12. The Company will establish a program of retirement preparation
classes to acquaint employees nearing retirement age with their benefits and, in
addition, they shall have made available to them advise and counsel with respect
to adjusting their mode of living when they retire from active employment.
Section 13. Any employee who is asked to use his own vehicle for Company
business shall receive an allowance of $.28 per mile.
Section 14. Special written agreements in existence prior to the date of
this contract which have not been changed by the terms thereof shall remain in
effect unless subsequently modified by the mutual consent of the Union and the
Company.
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ARTICLE XVH
Good Faith
Section 1. This Agreement has been entered into in good faith by the parties
hereto and each party agrees that it will carry out this Agreement to the best
of its ability so that harmony and cooperation between the Company and the Union
and the employees covered by this Agreement will prevail for the duration of
this Agreement.
Section 2. The Union agrees to maintain quality standards as established by
the Company in the attainment of full production and efficiency, and to that
end, the Union agrees to observe all rules of the Company not inconsistent with
this Agreement.
Section 3. It is the expressed desire of the Company and the Union that the
procedure outlined in this Agreement for the settlement of disputes will serve
the purpose of effecting a peaceful settlement of all disputes that may arise
during the lifetime of this Agreement. To that end the Company agrees that so
long as the Agreement is in effect, it will not lock out any employees in
connection with a labor dispute.
Section 4. The Union agrees that so long as this Agreement is in effect, it
will not call, cause or sanction any strike, slowdown or stoppage of work during
the lifetime of this contract. The Union further agrees that with respect to any
strike, slowdown or stoppage of work during the lifetime of this contract, the
Company may discharge or otherwise discipline any participating employees and
such discharges or other forms of discipline shall not be the subject of a
grievance by the Union, except on the grounds that the employee or employees did
not participate in any activity prohibited by this Section.
Section 5. It is further understood and agreed that in the event of any
prohibited activities on the part of any employ-
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ee which is not called, caused or sanctioned by the International or Local
Union, there shall be no liability on the part of the International or Local
Union, its officers or agents on account of such activity.
ARTICLE XVIII
Craft Trades
Section 1 - Classifications
The following jobs comprise the Craft Trades:
a) Tool, Die and Gage Maker
b) Maintenance Mechanic
c) Electronic Tech
Section 2. (a) In the event of a reduction in classification, the affected
employee may bump into the immediate higher pay classification provided he has
the seniority, skill and ability. If he cannot move this way, he may bump to the
next lower pay classification on the basis of seniority, skill and ability. Such
a procedure will be continued down through the classifications until the
employee is placed.
(b) If overtime is necessary in a specific job, the employee assigned to
that job will be given the opportunity to work such overtime. If, however, the
employee refuses the overtime the next employee on the overtime list within the
proper classification will be asked.
1. In the event an overtime job is scheduled for an extended period,
the employee who works such overtime will not be canvassed for
further overtime until other employees in the classification have
worked or refused an equal amount of overtime.
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2. If no employee in a given classification accepts overtime, employees
in the next qualified classification will be canvassed.
Section 3. Where overtime is required, the work will be Distributed equally
within a classification across shifts.
Section 4. When a tool room employee is needed to perform work out of his
classification, the Company will move the least senior employee qualified to do
the job.
(a) If more than one classification is on an overtime basis and additional
employees are necessary in the overtime classifications, the Company may
schedule qualified employees regardless of classification.
Section 5. When there is a reduction in a classification, the most senior
employee reduced will have the first opportunity to return to his classification
when there is an opening.
Section 6. A committee designated by the Union and the Company will make
changes involving the craft trades.
Section 7. Any employee selected for trades upgrading will be required to
take those courses necessary for such upgrading.
Section 8. The Policy Committee Chairperson will be notified when work is to
be sub-contracted.
ARTICLE XIX
Plant Shutdown
Section 1. In the event of a temporary or permanent plant shutdown, the
Company would continue to provide all benefits but not wages for a period not to
exceed four weeks to employees actively employed by the Company immediately
prior to the shutdown.
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Section 2. The Company will notify the Union, sixty (60) days prior to any
temporary plant shutdown, unless an emergency arises which makes such notice
impossible.
Section 3. Those employees with vacation remaining are permitted to change
such vacation to correspond with the plant shutdown dates.
Section 4. During a temporary plant shutdown, any production work performed
will be offered to the most senior qualified employees within the department. If
additional employees are needed from outside the department, they will be
canvassed from the master seniority list.
ARTICLE XX
Termination and Notice
Section 1. This Agreement shall take effect as of 7:00 AM October 26, 1996
and shall continue in full force and effect until 7:00 AM October 23, 1999.
Section 2. (a) If either party shall desire to terminate this Agreement,
such party shall give written notice to that effect to the other party hereto
not less than sixty (60) days prior to October 23, 1999. Negotiations shall
begin within ten (10) days subsequent to the receipt of the notice.
(b) Such notice having been given, unless the parties hereto agree otherwise
in writing, this Agreement shall terminate at 7:00 AM on October 23,1999.
Section 3. The written notice provided for under this Agreement shall be
sent by registered mail. If sent by the Company, the notice shall be addressed
to the Union at its principal office for this district, and if sent by the
Union, the notice shall be addressed to the Company at Detwiler Road,
Kulpsville, Pennsylvania, unless either party shall advise
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(by registered mail) of any change of address to which notice should be sent.
IN WITNESS WHEREOF, The Company and the Union have executed the Agreement by
their duly authorized representatives.
NICE SPECIALTY BEARINGS-DIVISION
Angelo Galli Director-Labor Relations Richard
Richard Erb Vice President-Nice Specialty Bearings
Michael Collins Channel Manager
Anna Koltonuk Sr. Human Resources Administrator
UNITED STEELWORKERS OF AMERICA, AFL-CIO
George F. Becker President
Leo W. Gerald Secretary/Treasurer
Richard Davis Vice President-Administration
L. Lynch Vice President-Human Affairs
Andrew V. Palm District Director
Norman Hayman Staff Representative
John Haney President-Local Union
No. 6326 - Nice Unit
Sharon Miller Vice President-Local Union
No. 6326 - Nice Unit
Gerald D. O'Neill Chairman of Grievance
Committee Local Union
No. 6326 - Nice Unit
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APPENDIX "B"
Memorandum of Understanding
All memos of Understanding will be printed in the Contract Booklet.
Memorandum of Understanding
New pension benefits will be applicable to a ten (10) year employee on leave of
absence at the time the contract is executed and who retires prior to returning
from leave.
Memorandum of Understanding
All Policy agreements now in effect will remain in effect unless changed through
negotiations or by the Union and Company Committees.
Memorandum of Understanding
Any Agreement reached between the parties of a Policy Meeting must be reduced to
writing at the time of Agreement. Without such written confirmation, there will
be no Agreement.
Memorandum of Understanding
An employee will receive his vacation pay in weekly checks. As an example,
should an employee take three (3) consecutive weeks of vacation he would receive
three (3) separate weekly checks.
Memorandum of Understanding
Prior to the plant going out of business, the Company will notify the Union
ninety (90) days in advance.
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Memorandum of Understanding
If an employee has need for an emergency day off during the prime time period,
the Company will continue its past practice. of allowing that day to be post
dated as a vacation day.
Memorandum of Understanding
As long as it is cost effective, janitorial responsibilities for the plant will
be performed by an outside janitorial service. Such duties shall include
cleaning and maintaining lavatory facilities and lockers, emptying dumpsters and
cleaning water fountains.
Memorandum of Understanding
Elimination of Incentive System
The Following provisions have been agreed to:
1. Present incentive employees will be red circled at their current average
hourly rate.
2. The average houny rate is derived from each employee's average hourly
earnings from April through June 1986.
3. For purposes of calculating employee's overtime, holidays and vacation
his individual red circle rate will apply.
4. The red circle will apply for any moves made within a department
including bidding within a department including bidding within a
department to a higher job; however, the red circle rate will not apply
to a downward move within a department if there is more than 20(cents)
5. The foregoing is predicated on the red circle employee maintaining his
productivity, i.e. running the same number of machines, etc., which
created the average hourly earnings at which the employee was red
circled.
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6. If an employee is bumped from his job to another department or is laid
off from the Company due to a reduction in force, the red circle rate
will not apply.
7. If an employee, bids off his, job to another department voluntarily, the
red circle rate will not apply.
8. An employee who is temporarily transferred for any reason will receive
his red circle rate or the rate of the job to which he is transferred
whichever is higher.
9. If an employee who has been bumped or laid off is recalled to the job
from which he was red circled, that employee's red circle rate will be
established;
10. Red circle rates are applicable only to incumbent incentive employees
and may not be transferred to others.
Memorandum of Understanding
1. The parties agree to adopt the N.M.T.A. job evaluation program.
2. The Company agrees to train three (3) bargaining unit members in all
aspects of job evaluation; however, only two (2) employees will
constitute the union's job evaluation committee.
3. All jobs will be jointly evaluated by the Company and the union in
accordance with the plan. No employee's wages shall be reduced as a
result of the application of this program.
Memorandum of Understanding
The Company shall institute a productivity gainsharing plan in the second year
of the labor agreement. The plan will be in the product of ideas formulated by
both the Company and the Union.
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Memorandum of Understanding
Overtime hours scheduled prior to the beginning of a shift are not considered
"as such". An employee must work more than 8 hours in his 24 hour cycle in order
to receive overtime except on Saturday and Sunday.
Memorandum of Understanding
The Company will provide a payroll deduction for employees who live in Townships
requiring a 1% employment tax.
Memorandum of Understanding
Management agrees to provide to the Union annual profit and loss statements for
the duration of this agreement.
Memorandum of Understanding
Employees hired after October 26, 1996, will start at $3.00 per hour lower than
the prevailing wage scale in effect for this labor agreement.
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PAST PRACTICE AGREEMENTS
1. Working of Inventory
When overtime is needed for inventory, other than plant shutdown inventory
on a daily or weekend basis, the following will occur:
When all shifts of a department are involved, employees will first be
canvassed in order of seniority using the shift seniority listing. When less
than all shifts are involved in a department, employees will be canvassed in
seniority order using the departmental seniority listing. If additional
employees are required, they will be canvassed in seniority order using the
plantwide seniority listing. A rotating list will be maintained from one
inventory to another for employees whether in or outside the department.
2. Pre-Inventory Work
When a department is performing pre-inventory work, the employees of the
department involved will perform this work in seniority order.
When all shifts of a department are involved, employees will first be
canvassed in order of seniority using the shift seniority listing. When less
than all shifts are involved in a department, employees will be canvassed in
seniority order using the departmental seniority listing. If additional
employees are required, they will be canvassed in seniority order using the
plantwide seniority listing. A rotating list will be maintained from one
inventory to another for employees whether in or outside the department.
3. "C" Shift
When employees start the "C" shift on Sunday night at 11:00 PM the first
hour worked (11:00 PM to 12:00 AM midnight) will be paid at double time.
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4. Early Start and Night Shift Premium
When the hours of a specific classification on the "B" or "C" shift is to be
changed to an earlier start, those employees affected will receive their
night shift premium.
5. Overtime-Twenty-four Hour Cycle
When overtime is being worked during the week on one specific shift, the
overtime hours involved will be equalized on the remaining shifts.
6. Department-Least Senior Employee
When work is to be performed in a specific department which is not normally
within the job duties of those employees, the least senior employee of the
department will perform the work unless another employee volunteers
(example-cleanup work.)
7. Departmental Posting
When a posting occurs departmentally and no employee bids for the job, the
least senior employee in the base on the shift will be forced to the job and
trained if necessary. This will occur providing the workforce is not
expanding within the department.
8. Transfer-Hours of Work
After the first day that an employee is transferred into another department,
he will work the hours of that department.
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NICE SPECIALTY BEARINGS JOB NUMBERS
The following will be effective October 26,1996
Labor Appendix
Job# Grade "A"
Tool Maker 1201 12 $16.05
Electronic Technician 1202 12 $16.05
Maintenance Mechanic 1101 11 $15.75
Grind Service Person 801 8 $14.85
Auto Service Person 802 8 $14.85
Grind Set-Up & Oper. 701 7 $14.35
Grind Surface & O.D. 702 7 $l4.35
Heat Treat 703 7 $14.35
Quality Assurance 601 6 $14.05
Tool Crib Attendant 602 6 $14.05
Laboratory Attendant 603 6 $14.05
Assembly Set-Up
& Oper. 604 6 $14.05
Lathes 501 5 $13.65
Material Handler 502 5 $13.65
Laborer 401 4 $13.25
Pack 301 3 $12.85
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NICE SPECIALTY BEARINGS JOB NUMBERS
The following will be effective October 25,1997
Labor Appendix
Job# Grade "A"
Tool Maker 1201 12 $16.40
Electronic Technician 1202 12 $16.40
Maintenance Mechanic 1101 11 $16.10
Grind Service Person 801 8 $15.20
Auto Service Person 802 8 $15.20
Grind Set-Up & Oper. 701 7 $14.70
Grind Surface & O.D. 702 7 $14.70
Heat Treat 703 7 $14.70
Quality Assurance 601 6 $14.40
Tool Crib Attendant 602 6 $14.40
Laboratory Attendant 603 6 $14.40
Assembly Set-Up
& Oper. 604 6 $14.40
Lathes 501 5 $14.00
Material Handler 502 5 $14.00
Laborer 401 4 $13.60
Pack 301 3 $13.20
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NICE SPECIALTY BEARINGS JOB NUMBERS
The following will be effective October 24, 1998
Labor Appendix
Job# Grade "A"
Tool Maker 1201 12 $16.75
Electronic Technician 1202 12 $16.75
Maintenance Mechanic 1101 11 $16.45
Grind Service Person 801 8 $15.55
Auto Service Person' 802 8 $15.55
Grind Set, Up & Oper. 701 7 $15.05
Grind Surface & O.D. 702 7 $15.05
Heat Treat 703 7 $15.05
Quality Assurance 601 6 $14.75
Tool Crib Attendant 602 6 $14.75
Laboratory Attendant 603 6 $14.75
Assembly Set-Up
& Oper. 604 6 $14.75
Lathes 501 5 $14.35
Material Handler 502 5 $14.35
Laborer 401 4 $13.95
Pack 301 3 $13.55
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NOTES
67
AGREEMENT
Between
ROLLER BEARING COMPANY OF AMERICA
and
INTERNATIONAL UNION U.A.W.
LOCAL 502
DECEMBER 1, 1996
ARTICLE 1
PARTIES TO THE AGREEMENT
This Agreement is entered into between ROLLER BEARING COMPANY OF AMERICA
("RBC" or the "Company" or the "Employer") and the INTERNATIONAL UNION U.A.W.
and its Local 502 (the "Union").
ARTICLE 2
PHILOSOPHY STATEMENT
This Agreement recognizes the need for a new approach to Union/Management
relations and the more effective use of human resources in the manufacture of
bearings worldwide. It further recognizes the competitiveness in the bearing
industry and the potential for increased global competitive pressures with our
current and future customers. Both parties recognize the need to develop and
maintain an atmosphere of cooperative problem solving to accomplish our mutual
objectives. We understand that our job security depends upon our success in
making quality bearings, in a cost-effective manner, and in satisfying our
customer expectations and commitments.
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We believe that people want to be involved in decisions that affect them, care
about their jobs and each other, take pride in themselves and in their
contributions and want to share in the success of their efforts.
Making progress toward these mutually agreed upon goals will require a
relationship of mutual respect, open communication, shared success, mutual aid,
innovative problem solving, and shared decision-making. The parties agree that
in order for the Union to effectively represent its members, the Union must have
a role in the decision-making process that affects its members. It is the intent
of the UAW and RBC to create a workplace that recognizes the need for people to
be treated with respect and dignity and recognizes that collective bargaining
can be an essential and constructive force in our plant. All parties in this
Agreement will strive to make the West Trenton plant of RBC the best of its kind
in the marketplace; making the highest quality product; a cost effective,
profitable operation; a coveted place to work, and a responsible member of the
community.
It is in this renewed spirit of mutual respect and recognition of each other's
stakes and equities that this Agreement is entered into and agreed upon.
ARTICLE 3
UNION RECOGNITION
The Company recognizes the Union as the exclusive collective bargaining
agent for all the Company's production and maintenance employees at its plant in
West Trenton, New Jersey, in respect to rates of pay, wages, hours of employment
and other conditions of employment, excluding, however, office employees,
supervisors, plant protection employees, crib workers,
4
<PAGE>
laboratory employees, and time study personnel, pursuant and subject to the
provisions of the Labor-Management Relations Act-1947 and amendments thereto.
ARTICLE 4
UNION SECURITY AND CHECK-OFF
To the extent permitted by law, all bargaining unit members shall be
required, as a condition of employment, to become and remain members in good
standing of the Union on and after the thirtieth (30th) day following the
beginning of their employment or the effective date of this Agreement, whichever
is the later, to the extent of paying an initiation fee and membership dues
specified by the Union. No employee shall be discharged by the Company for
failure to maintain good standing in the Union until such employee has received
a written notice from the Union that he is not in good standing, and has at
least seven (7) days thereafter in which to put himself in good standing. For
the purposes of this Article, "good standing with the Union" means that the
employee's dues for any month must be tendered by the last day of the month
following such month.
RBC will provide for check-off of union dues and initiation fees on behalf
of employees who request such a service in accordance with prevailing law. The
Union shall indemnify and save RBC harmless with respect to any claims or
expenses arising out of any action taken as or not taken by RBC for the purpose
of complying with this Article.
ARTICLE 5
NON-DISCRIMINATION
The philosophy and mission of RBC are designed to be in full and complete
compliance with the legal and moral principles of equal opportunity in
employment. Accordingly,
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the Company and the Union pledge, on behalf of themselves, as well as their
officers, members and representatives to treat all persons equally without
regard to their race, color, religion, age, sex, national origin, disability, or
veteran's status. Although the term "he" is used throughout this Agreement, it
is used to represent both male and female employees and is not intended to be
discriminatory or exclusive in any way, but rather to simplify the language for
understanding.
The Company agrees that neither it nor any of its representatives will
intimidate, coerce, interfere with or discriminate against any employee because
of proper activity in behalf of the Union. The Union agrees that it nor any of
its officers or members will threaten, intimidate, coerce or interfere in any
manner with any employee.
ARTICLE 6
STRUCTURE AND DECISION-MAKING PROCESS
The intent of the parties is to create an evolutionary process towards a
goal in which employees will be part of the decision-making process with respect
to producing to schedule, producing a quality product, performing to budget,
housekeeping, health, safety, environmental conformance, maintenance of
equipment, material and inventory control, training, job assignment, repairs,
scrap control, and scheduling time off. It is anticipated that the transition
towards this goal will extend over much, if not all, of the term of this
Agreement. The anticipated transition is outlined in the Memorandum of
Understanding No. 1, attached to this Agreement. This transition may be
accelerated or extended by mutual agreement of the parties.
The parties' goal envisions an organization structured as spelled out
below. It is understood that the transition
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process will be limited to one Work Group sharing the decision-making authority
and the participation management described in the Article, unless mutually
agreed by the Company and the Union. The remainder of the bargaining unit will
also be assigned to product line Work Groups with the work flexibility
associated with that as described in the Memorandum of Understanding No. 1, but
will be managed on more traditional terms.
WORK GROUP MEMBER:
The individual RBC employee.
WORK GROUP:
An integrated group of not more than 20 Work Group Members with a common
manufacturing and support purpose related to a product or products.
The Work Group will have the responsibility and authority to produce
quality products to schedule at competitive costs. It will have responsibility
for both direct and indirect work and, as such, will hold meetings, obtain
supplies, keep records, seek resources as needed, and be responsible for job
preparation and attainment of its own materials and supplies. It will constantly
seek improvement in quality, cost and work environment. The Work Group will also
be responsible for the planning and scheduling of the work and communications
within and outside the group.
WORK GROUP REPRESENTATIVE:
An employee elected by the Work Group to participate with management in
coordinating the administrative functions of the Work Group and report at least
monthly on Work Group progress to the Plant Council. The Plant Council may
recall a Work Group Representative upon petition of at least two-thirds of the
members of the Work Group.
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WORK GROUP SUPERVISOR:
A member of management who will coordinate the activities of the Work
Group. In addition, Work Group Supervisors will be responsible for employment,
termination, and coordination of job transfers, and will do advanced planning
for resources both short and long term, and will determine and plan resources
needed by the Work Groups, including administration, engineering, materials,
financial, etc.
UNION PLANT COMMITTEE:
The Union Plant Committee is elected by the union members according to the
Union bylaws. Membership will consist of a President and one additional member
for every forty (40) employees, with a minimum of no less than three members,
provided, however, that the current five committee members will continue in
office for the balance of their term or until they resign or are removed by the
Union, whichever occurs first. Union Plant Committee members will have top
seniority for layoffs and recall purposes. They will be assigned to serve on the
Plant Council and the other committees created by this Agreement as the Union
sees fit. The Union President or his designee will be afforded up to twenty (20)
hours per week for the purpose of conducting Union business.
PLANT COUNCIL:
A consultative employee group, consisting of three (3) members of the
Union Plant Committee and an equal number of representatives from the Company,
including the Plant Manager or his designee, who participate in decision-making
processes addressing issues affecting the entire plant or which have not been
resolved in the Work Group. Additional members may be added by mutual agreement
of the parties on an ad hoc basis while resolving specific issues. The Plant
Council will meet as often as necessary, but at least weekly.
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In connection with the foregoing and with other issues affecting the
plant, the parties recognize that all functions of management are reserved
exclusively to the Company, except insofar as they are delegated or shared
pursuant to the terms of this Agreement. These functions include the management
of the business, the determination of the products, methods, processes and means
of manufacturing, the establishment of the size and direction of the work force,
the setting of working schedules, the rights to hire, promote, demote, lay off,
transfer, discipline, discharge for proper cause and establishing fair
efficiencies and Shop Rules. The Company will perform these functions in the
spirit of the Philosophy Statement of this Agreement.
Within the Work Groups, decisions on matters within the Groups' authority
which are not otherwise provided for in this Agreement will be made through the
consensus decision-making process outlined below:
a) Such decisions shall be made in the context of the Philosophy Statement and
within the Structure and Decision-Making framework.
b) Decisions should be achieved through the joint efforts of all to discover the
best solution.
c) Decisions must be arrived at promptly.
d) A decision must provide a high level of acceptance for all parties.
e) Once a decision is reached, all parties must be totally committed to the
decision.
f) Any party may object to a proposed decision, in which event the objecting
party must propose concrete alternatives.
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g) In the event an alternative solution is not forthcoming, the objecting party
must re-evaluate its position in the context of the Philosophy Statement.
h) In the event a decision acceptable to all parties is not promptly attainable,
the matter will be referred to the Plant Council.
The Plant Council will also seek to reach decisions on matters within its
authority under this Agreement by means of the consensus decision-making process
outlined above, provided that, if such a decision is not promptly attainable,
the Company shall have the right to take action, subject to the Union's right to
grieve under the Agreement.
ARTICLE 7
WORK PERFORMED OUTSIDE THE BARGAINING UNIT
1. The parties shall conform to the principle that non-bargaining unit employees
shall not perform any operation which would deprive employees of their regular
work. This is not to be interpreted to prevent their necessary function of
instruction and demonstration and of engaging in productive activities where
required in order to handle incidents which affect efficient operation.
2. Non-bargaining unit employees may be used to perform experimental work, with
or without the assistance of employees in the bargaining unit, as management
determines. Experimental work is defined to mean all work involved in the
development of new, different or modified products, parts, tools or equipment.
3. When experimental work is to be performed on a production basis, it will be
assigned to bargaining unit
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employees. Experimental work on a production basis is defined to mean production
of products, parts, tools or equipment after design and testing have been
completed and production for inventory or orders has commenced, and will be
assigned to bargaining unit employees.
ARTICLE 8
TRAINING
Both the Union and the Company recognize that training will be required to
prepare Work Group and Plant Council Members to perform these functions and that
this transformation will require a gradual cultural change, but agree to work
together over the life of this Agreement to obtain the skills necessary to meet
the levels of authority and responsibility described here.
A Training and Education Committee will be established to develop,
schedule and manage the training and education process. Two (2) employees
selected by the UAW N.J. Area Director and two (2) employees selected by the RBC
Plant Manager will constitute the Training and Education Committee. A minimum of
two (2) hours training and/or education will be provided for each employee per
month when averaged on a yearly basis. This minimum training and education
requirement will include either on-the-job training to learn to perform specific
skills and/or classroom training on subjects necessary to conform with the
Philosophy Statement of this Agreement. The Training and Education Committee
will work with the members of the Work Groups to develop, schedule, and
implement training and education programs.
The Training and Education Committee will develop a training and education
plan that will include necessary skills and education for the implementation of
this Agreement.
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This plan will include a schedule of training for all employees in coordination
with the principles of the pay for knowledge and skills process. A skills
assessment of all employees and the requirements for all levels of each
classification will be included in the plan. The Training and Education
Committee will submit its initial plan for six months training and education to
the Plant Council for approval within ninety (90) days of the ratification of
this Agreement. The training and education plan will include the utilization of
a qualified trainer or trainers selected by the Plant Council, whose duties may
also include helping the parties to facilitate the transition process. Expenses
for training and education will be borne by the Company or through grants where
available. After the initial training and education plan, the Committee will
submit a plan every six (6) months for approval. Training will begin within
thirty (30) days of the approval of the initial plan which must be finalized
within two (2) weeks of its submission. In the event the members of the
Committee shall fail to reach consensus on any aspect of the plan, the opposing
views shall be submitted to the Plant Council for determination.
Each Training and Education Plan will include (but will not be limited
to):
* technical skills
* problem-solving
* consensus decision-making
* business basics and philosophy
* trade unionism
* team building
* English as a second language.
Any Skilled Trades components of the training and education plan will be
developed with the assistance of the UAW Skilled Trades Department.
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Each member of the Union Plant Committee will be given a minimum of 60
hours of training in business and economics related studies each year of this
labor agreement, at Company expense. Such training may include visits to other
manufacturing facilities, classroom training, or on-site training, etc. and will
be determined by joint union and management agreement.
Unless deemed otherwise, all training and education approved by the Plant
Council as part of the Training and Education Plan will be mandatory and costs
will be borne by the Company.
ARTICLE 9
PROBATIONARY PERIOD
1. Any new or rehired employee shall be considered on probation with no
seniority for a period of sixty (60) scheduled work days, not including absence
days for any reason. Once the probationary period is satisfactorily completed,
the employee will receive seniority credit dated back to the first day of his
current hiring.
2. The Company may, at any time, transfer, layoff, or discharge a probationary
employee for any reason whatsoever and no claim may be made by the Union or any
of its members that the transfer or discharge of such employee was improper.
Bargaining unit employees will not be asked to pass judgment on the performance
of the probationer.
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ARTICLE 10
SENIORITY
1. Computing Seniority
A. The seniority standing of an employee shall be computed on the basis of
the length of his service, from the date of his last employment with the
Company, subject to the provisions of this Agreement. When more than one
employee is hired on the same date, to establish their seniority position, their
names will be placed on the seniority lists in alphabetical order by last name
(at the time of hire), first name, and middle name.
B. An employee who is transferred to a position not within the Bargaining
Unit and then returned to the Bargaining Unit within six (6) months after
transfer, shall return with full seniority.
C. Service will accumulate during an approved personal leave of absence,
Union leave, family and medical leave, maternity leave, sick leave, military
leave, funeral leave, or jury duty.
2. An employee's length of service and seniority shall be considered ended, and
the employee will have no further recall or other rights as an employee of any
kind or nature, except the right to vacation pay, and insurance continuation, if
such an employee:
A. Voluntarily quits his employment (if rehired by the Company within
three (3) working days after quitting, seniority shall not be affected), or
B. Is discharged for proper cause, or
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C. Is absent for three (3) working days without properly notifying the
Company, unless a satisfactory explanation is given for failure to call. (NOTE:
this does not remove the obligation of calling in on the first day of absence),
or
D. Fails to return to work from layoff within five (5) working days after
proper notification by certified mail, return receipt requested or an accepted
method of overnight delivery by the Company at the last know address as it
appears on the Company records, unless a satisfactory reason is given, or
E. Fails to return to work at the end of an approved leave of absence or
gives a false reason for obtaining a leave of absence, or
F. Passes the time limit for recall from layoffs, or
G. Requests and receives severance pay as a result of a qualified layoff.
ARTICLE 11
LAYOFFS AND RECALL TO WORK
1. Layoff Provisions
A. The Company will give at least seventy-two (72) hours notice prior to
layoff to the employees affected, even if only one employee is affected.
B. When a job is eliminated within a classification in a Work Group, the
least senior employee in that classification in the Work Group will be
displaced.
C. An employee displaced from a classification within a Work Group may
bump on the basis of plant seniority the
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least senior employee in the same or a lower rated classification in another
Work Group. The employee will designate a job choice within 48 hours from the
end of the shift on which he was displaced. Employees can only bump into a
Skilled Trades jobs if they previously held the job.
2. Recall Provisions
A. Recall will be offered to employees on the recall list in reverse order
of layoff when there are no successful bidders for an open job.
B. If an employee on the recall list is offered regular, full-time
re-employment of 60 working days or more on the same job and shift as previously
held, and he refuses to accept it, he will be dropped from the recall list and
no longer have any rights under this Agreement, except the right to any unpaid
vacation and any rights under the benefits plans.
C. If an employee on the recall list is offered regular, full-time
re-employment of 60 working days or more on a different job or shift lower than
his regular job, and he refuses to accept it, he will remain on the recall list
until such time as he is offered another opportunity to return to work. A third
refusal to return to work will cause such employee to be removed from the recall
list and no longer have any rights under this Agreement, except the right to any
unpaid vacation and any rights under the benefits plans.
D. Employees on the recall list are responsible for keeping the Company
notified of any change of address or phone. If the Company cannot contact a
previous employee at the last known address, he will be dropped from the recall
list.
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E. A laid off employee will remain on the recall list according to the
following time limits:
SENIORITY TIME LIMIT
Probationers No Recall
2 years or less 2 years
2 years to 5 years equivalent of seniority
5 years and over 5 years
ARTICLE 12
OPEN JOBS
1. Filling Open Jobs
A. Whenever the Company determines that an open job exists in the
Bargaining Unit (other than a Skilled Trades job):
1) The Company will post notice of such opening for forty-eight (48)
hours. Employees who wish to apply for the opening must do so by putting a job
bid form in the Bid Box during the posting period. Only those employees who
apply during such 48-hour period will be considered for the job and will have a
right to grieve the final selection.
2) Any employee may submit a bid under the provisions of paragraph
1) above on behalf of an employee who is on vacation or leave of absence during
the posting period. Employees on leave of absence will be considered, provided
they will be returning from leave in a reasonable period of time.
3) Applicants will be awarded the open job on the basis of
seniority.
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4) A successful bidder will be transferred to the open job within
forty-five (45) calendar days after he is designated. If he is not so
transferred within thirty (30) calendar days after designation, the employee
will be paid at least the minimum rate of the job.
B. When an open job exists in one of the Skilled Trades classifications,
the posting and bidding procedure outlined in Subsection A above shall apply.
The job will be awarded on the basis of seniority. However, employees who have
previously held the job in the Skilled Trades classification in which the open
job exists, will be given priority. Those employees bidding for the job who have
not previously held the open Skilled Trades job will be required to take a
standard skills assessment test to verify qualification and aptitude for
successful performance. Where no applicant possesses the requisite
qualifications, the Company may determine whether to train or hire on the
outside.
2. Successful applicants will receive a rate of pay commensurate with previous
experience, qualifications, and training.
3. Successful applicants will be trained on the shift where suitable training
conditions exist, and will be moved to the posted shift as soon as practical
after sufficient skill levels are reached.
4. Situations where successful applicants either change their mind about a job
or receive a job failure will be reviewed by the Plant Council and appropriate
actions taken as agreed.
5. If an unqualified candidate is selected for a Skilled Trades position, the
Training and Education Committee will
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develop a two-year apprenticeship program, including classroom and on-the-job
assignments, that will provide comprehensive exposure to all required skills for
successful performance of the job. The program will be submitted to the Plant
Council for review and approval.
ARTICLE 13
SEVERANCE PAY
1. In the event that the Company transfers any equipment or jobs or any part
thereof to another location established by it beyond a twenty-five mile radius
from the center of West Trenton, NJ, and, in the future event, that such
transfer is the immediate cause of, or that such transfer directly or indirectly
results in a layoff of employees, any employee thus laid off shall have the
option to elect to take severance pay in lieu of such layoff subject to the
provisions below:
A. In the event that such transfer as described above, results in a
bumping of employees without a layoff, any such bumped employee who is entitled
under the provisions of this Agreement to another job covered by this Agreement,
which would result in a loss of less than $1.00 per hour in wages below the job
from which he is being bumped or from which he was originally bumped because of
a transfer within the time limit, shall not be entitled to severance pay.
Any such employee thus bumped who is not entitled under the provisions of
this Agreement to another job covered by this Agreement which would result in a
loss of less than $1.00 per hour in wages below the job from which he is being
bumped, or from which he was originally bumped because of a transfer within the
time limit, shall have the option to elect to take severance pay in lieu of the
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job to which he is entitled under the provisions of this Agreement.
B. When a layoff or bumping as a result of a transfer occurs between the
date of the transfer and within the following two years, employees in such
layoffs or bumping with more than one year seniority shall have a claim on
severance pay.
C. When a layoff or bumping, as a result of a transfer, occurs two years
after the date of the transfer, but within five years of the transfer, employees
in such layoff or bumping shall have a claim to severance pay, when the length
of their seniority is more than the time period between the date of the transfer
and the date of the layoff or bumping.
D. When the layoff or bumping as a result of the transfer occurs five
years or more after the date of the transfer, there shall be no claims for
severance pay.
E. Severance Pay
1) To elect to take such severance pay in lieu of layoff or bumping,
the employee must advise the Company of his election in writing, delivered to it
within 90 days after the commencement of the layoff or incident of bumping.
Severance pay shall be computed on the basis of forty hours pay at the
employee's regular straight time hourly rate, at the date of the commencement of
the layoff or incident of bumping, for each year of seniority since the date of
the last hire.
2) The Company will increase the severance pay from 1 week to 2
weeks per year of service whenever productivity increases an average of 1% a
month. Otherwise, severance pay of 1 week will apply.
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Formula:
+ West Trenton Plant Sales Dollars
+ Transfers to Hartsville and Warehouse in Sales Dollars
+/- Change in WIP + Finished Goods Inventory
- ----------------------------------------------------------
= Output
Hours = Total straight time + overtime hours
Output = Productivity Measure Hours
F. Severance pay hereunder shall be paid to an electing employee within
one year after the receipt by the Company of the notice of election and, upon
payment of severance pay in a lump sum, the employee shall thereafter have no
further seniority, recall or other rights as an employee of any kind or nature,
except the right to Vacation pay due to him under Article 22 and the right which
his credited service may have entitled him under the Pension Plan.
G. Seniority employees on extended sick leave have no claim under the
above provisions.
2. Until such a time as the Plant Closing Notification laws go into effect, the
Company will give the employees 45 days advance notice of an imminent plant
closing as the laws' language pertains. When the law goes into effect, it will
comply fully with the language of the law.
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ARTICLE 14
LEAVE OF ABSENCE
1. Types and Conditions of Leave
A. Personal Leave
Upon written application, a leave of absence for a specified purpose, and a
specified period of time may be granted to employees with the mutual consent of
the Company and the Union. A copy of such leave is to be given to the Union.
B. Union Leave
Members of the Union, not to exceed one (1) for every forty (40)
represented employees at any one time, elected or appointed by the Union to
assignments which take them away from their employment with the Company, shall
be given a leave of absence for the period of such Union assignment, and upon
return to work for the Company shall be re-employed on the same job which they
performed at time of leave and at the rate of pay prevailing for that job.
Duly elected Union representatives, not to exceed one (1) for every forty
(40) represented employees at any one time, shall be granted leaves of absence
for short periods to attend Union Conventions and similar Union functions.
The Union will give the Company as much notice as possible whenever more
than two Union representatives will be out of the plant simultaneously.
C. Sick Leave
An employee, who may become ill or injured and qualify for
non-occupational state disability, and has supported his absence with
satisfactory evidence similar to
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that required under the Company's Family and Medical Leave policy, shall, upon
application, be granted an unpaid leave of absence. The employee must provide
medical evidence of continued disability as required.
In all instances, upon returning to work, a statement must be presented
from a qualified physician stating the employee is physically capable of
performing his regular job assignment. The Company reserves the right to obtain
a second opinion from a qualified physician designated by the Company and at the
Company's expense. The employee will return to his previous job provided work is
available and he has the seniority to do so. If the leave was an approved FMLA
Leave for personal disability, he will return to his previous job or a
comparable job. Otherwise, he will be eligible to bump another job, subject to
the seniority provisions of this Agreement, and provided he has the skill and
ability to perform the work.
D. Family and Medical Leave
It is understood that all of the leave provisions herein shall be
administered in a manner consistent with an employee's rights, if any, under
applicable family and medical leave statutes. Likewise, it is the parties'
intent that the Company shall have the right to exercise any rights of an
employer under such applicable statutes.
E. Maternity Leave
Employees absent from work due to pregnancy shall be granted Sick Leave as
described above, provided the required application, approvals, procedures and
proof of medical disability are followed as outlined in the Company's FMLA
Policy and conform to current applicable laws concerning maternity absences. A
leave of absence for pregnancy may be extended up to three (3) months
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following delivery, without loss of seniority or service. In all instances, upon
returning to work following a delivery, a statement must be presented from the
family physician stating the employee is physically capable of performing her
regular job assignment.
F. Funeral Leave
A seniority employee who has a death occur in his immediate family
(father, step-father, mother, step-mother, husband, wife, brother, step-brother,
sister, step-sister, child, father-in-law, mother-in-law) will be excused from
work up to three days. A seniority employee whose grandparent(s) or whose
spouse's grandparent(s) pass away, will be excused from work for one day.
For each such day of absence on which he otherwise would have worked and
does not work, he shall be paid eight times his regular straight time hourly
rate, provided the employee attends the funeral and submits proof of death. In
the case of death in foreign residence, a death certificate is required.
G. Jury Duty
A seniority employee who is called to and reports for jury duty shall be
excused from work on the days on which he serves or where jury duty was canceled
after he reported to serve. In addition, he shall receive for each day of jury
service on which he otherwise would have worked and does not work, eight times
his regular straight time hourly rate.
Such payments shall not exceed a total of twenty (20) days in any calendar
year. Such compensation shall be payable only if the employee gives the Company
prior
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notice of such jury duty call; and presents proper evidence as to the jury duty
performed.
H. Military Leave
The Company will conform to the requirements of any applicable provisions of law
with respect to military training or service.
2. Leave Provisions
A. Any employee on leave may return to work in line with his seniority,
before the expiration of the leave, providing not less than seven (7) calendar
days notice is given to Management.
B. Employees who are approved for Personal Leave will be required to apply
any remaining vacation days to the beginning of the leave period commencing with
the first day of the leave.
C. Employees who are approved for Personal Leave, Union Leave, Sick Leave,
Military Leave (except for yearly two-week encampments), Family and Medical
Leave and Maternity Leave will be granted such leave without pay.
ARTICLE 15
OVERTIME
The regular work week will be scheduled as eight (8) hours a day, forty
(40) hours per week, as long as, in the Plant Council's judgment, it is
practicable and consistent with the efficient operation of the plant.
Overtime opportunities will be substantially equalized within a Production
Work Group, between those employees with the appropriate skill level for the
required work. Work
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Groups will develop and administer their own plans for a fair and consistent
scheduling and regulation of overtime opportunities within the group. The Plant
Council will develop plans for a fair and consistent scheduling and regulation
of overtime opportunities between Work Groups, which will be administered by the
Work Groups.
In the case of Saturday work, announcement prior to 9:00 a.m. on the
previous Thursday will be considered as sufficient. In the event that this work
is canceled after that time, the Company will compensate the affected employee
at the rate of four (4) hours overtime pay.
Employees will be paid time and one-half for:
a) Time worked in excess of eight hours in any continuous twenty-four
hours, beginning with the starting time of the employee's regularly assigned
shift.
b) All work performed in excess of forty (40) hours in any normal work
week
c) All time worked on any shift which starts on Saturday.
Double time shall be paid for:
a) All work performed on Sundays and holidays, except the 1st hour of the
normal night (third) shift and as provided under Article 23.
ARTICLE 16
WAGES AND OTHER COMPENSATION
1. Effective December 1, 1996, a general increase of two percent (2%) will be
applied to all individual rates of pay of each member of the bargaining unit.
Employees who are
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not on the active roll at the time of the general increase will receive the
increase adjustment at the time they return to the active roll.
2. Effective March 3, 1997, a flexibility increase in the amount of thirty-six
cents ($.36) per hour will be applied to the individual rates of pay of each
member of the bargaining unit. Employees who are not on the active roll at the
time of the flexibility increase will receive the increase at the time they
return to the active roll.
3. Effective December 1, 1997, a general increase of three percent (3%) will be
applied to the individual rates of pay of each member of the bargaining unit and
to each rate in Appendix A. Employees who are not on the active roll at the time
of the general increase will receive the increase adjustment at the time they
return to the active roll.
4. Effective December 1, 1998, a general increase of one and one-half percent (1
1/2%) will be applied to the individual rates of pay of each member of the
bargaining unit and to each rate in Appendix A (after including the December 1,
1997, adjustment). Employees who are not on the active roll at the time of the
general increase will receive the increase adjustment at the time they return to
the active roll.
5. Classifications and Pay for Knowledge and Skills
a) The current classification system will remain in effect until such time
that the Plant Council institutes a three-classification and pay for knowledge
and skills system, at which time Appendix A will go into effect.
b) The Training and Education Committee will consult with all interested
parties and will prepare a written
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report, surveying the skills and knowledge currently possessed by the employees
in the bargaining unit.
c) The new system will consist of three classifications:
Production
Skilled Trades (Maintenance)
Skilled Trades (Tool Room)
Furthermore, within each classification, there will be four levels of knowledge
and skills:
Basic
Core
Intermediate
Advanced
Training will be provided in each level, as necessary and as determined by the
Education and Training Committee in consultation with the Work Groups and with
final approval by the Plant Council.
d) Each employee assigned to a Work Group will be required to complete the
Basic and Core levels of training for that group. Intermediate and Advanced
level training shall be voluntary. However, if management of the Work Group
determines that insufficient intermediate and advanced levels of training are
available within the Group, it may resort to necessary measures which may
include transfers.
e) The three-classification and pay for knowledge and skills system is
designed to create greater flexibility and efficiency, and is not designed to
reduce the work force. Therefore, during the term of this Agreement, there will
be no layoffs of bargaining unit employees as a direct result of the institution
of this system. However, it is mutually agreed that
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the Company retains the right to adjust the size of the work force due to
business, market or other such conditions. Moreover, management of the Work
Groups will be free to assign employees in accordance with the knowledge and
skill levels they have attained.
6. Employees who have perfect attendance by working all regularly scheduled
hours (not including overtime) in any specified quarter will earn a $150.00
Perfect Attendance Award for that period. For purposes of this award, perfect
attendance is defined as no available hours missed for unexcused absences,
illness or injury, discipline, leave of absence, or strike.
7. Employees actively at work on March 31 with more than five (5) years
seniority will receive $9 a year for each year of service as a Service Time
Award. Service time will be calculated each year on March 31 and the award will
be paid on April 30.
ARTICLE 17
NEW PRODUCTS
1. When and if, from time to time, the Company, at its discretion, decides to
manufacture a different product, new to the plant, it may create a new Work
Group or otherwise staff the production of such product by means of recalling or
rehiring experienced employees or by means of new hires. If the Company believes
that the skills and/or knowledge needed to produce such product on an efficient
and profitable basis are substantially different than the skills and knowledge
in the existing Work Groups:
a) the Company will install a wage range for the positions;
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b) the wage range will be explained in the Plant Council with the object
of obtaining a consensus agreement. The wage program may be installed by the
Company without a consensus agreement in the Plant Council subject to adjustment
as provided below;
c) when a wage range is installed, the Union may process the issue in
accordance with Article 26 below, including submission to arbitration of a
grievance alleging that such does not bear a fair relationship to the wage
structure in the plant. The decision of the arbitrator, if any, shall be
effective as of the date when the employee(s) commenced manufacturing such
different product.
ARTICLE 18
SHIFT PREMIUM
1. A shift premium of 10% of the regular hourly rate will be paid to all
employees whenever they are assigned to and working on the afternoon and night
shifts for the life of the contract.
2. Where scheduled variations from the regularly scheduled shifts occur, the
jobs involved will be considered as falling on the shift on which a major part
of the job is worked.
3. Any employee who is called in to perform work in the shift preceding or
succeeding his regularly assigned shift, or who holds over beyond his regularly
assigned shift, will be paid the shift premium, if any, applicable to the shift
on which a major portion of his regular scheduled hours are worked. However,
when an employee on the Day Shift or the Afternoon Shift works twelve or more
continuous hours per day, including paid lunch period, he shall be paid the
applicable shift premium for all hours worked over eight.
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4. Shifts shall be identified as follows:
(a) Day Shift - (1st Shift)
When the majority of hours on an employee's regularly assigned shift shall fall
between 7:00 a.m. and 3:00 p.m., inclusive, he shall be considered as working on
the Day Shift.
(b) Afternoon Shift - (2nd Shift)
When the majority of hours on an employee's regularly assigned shift shall fall
between 3:00 p.m. and 11:00 p.m., inclusive, he shall be considered as working
on the Afternoon Shift.
(c) Night Shift - (3rd Shift)
When the majority of hours on an employee's regularly assigned shift shall fall
between 11:00 p.m. and 7:00 a.m., inclusive, he shall be considered as working
on the Night Shift.
5. An employee on 2nd or 3rd shift, who has been awarded a new job on either 2nd
or 3rd shift, and who, for the Company's convenience has been temporarily
transferred to day shift for training, shall receive shift premium during the
period of such training. New employees will only be paid shift premium, when
transferred to the applicable shift(s). Day shift personnel will be paid under
other applicable provisions of the Contract.
ARTICLE 19
PAID BREAK AND LUNCH PERIODS
All employees will receive two (2) Company-paid, twenty (20)-minute paid
breaks each shift. The Work Groups will be responsible for scheduling break
times for the group.
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Employees are encouraged to remain on Company property for the break
times. Those who remain on Company property are not required to clock out,
whereas those who leave the grounds, must clock out and back in upon their
return to the plant.
Employees who remain on Company property must take their breaks only in
the cafeteria, rest rooms, or on the Company grounds and parking lots. They may
not be taken on the manufacturing floor.
All vending machines will be located in the cafeteria and all profits
generated will go to the Union's activity fund to be expended as they decide.
ARTICLE 20
REPORTING PAY
1. Any employee who has not been notified when there is lack of work, and
therefore reports to work as scheduled, shall receive four (4) hours pay at his
regular hourly rate, unless the lack of work is caused by circumstances beyond
the control of the Company, or resulted from a labor dispute, or alternative
work was made available, or the employee could not be reached because of an
outdated phone number.
2. If an employee is asked to return to work after completing his shift and
leaving the plant or he is asked to come in to work when he was not already
scheduled, he will be paid the applicable overtime rate for the work. If the
call back time is less than three hours, he will receive his regular rate of pay
for the difference between the hours worked and three hours.
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ARTICLE 21
TEMPORARY TRANSFERS
Employees may be temporarily transferred to other jobs, within the Work Group
and outside the Work Group, as required to meet production needs. Employees will
not be temporarily transferred between classifications except with the
employee's consent or in order to deal with the production needs of the business
on the last three work days of the production month.
ARTICLE 22
VACATIONS
1. Current Vacation Year is defined as the current twelve months between June 1
and May 31.
2. Vacation pay will be based on the straight time hourly rate and night shift
premium in effect on June 1 of the current vacation year. Vacation pay will be
calculated by multiplying the applicable percentage in the vacation pay schedule
below by the factor for computed clock hour listed below by the straight time
hourly rate and night shift premium in effect on June 1 of the current vacation
year.
A. Vacation Pay Schedule
Eligible Time Off Applicable %
6 mos. less than 1 year 1 week 2
1 year less than 2 years 1 week 2 days 2.8
2 years less than 3 years l week 4 days 3.6
3 years less than 5 years 2 weeks 2 days 4.8
5 years less than 7 years 2 weeks 3 days 5.2
7 years less than 9 years 2 weeks 4 days 5.6
9 years less than 11 years 3 weeks 6.0
11 years less than 13 years 3 weeks 1 day 6.4
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13 years less than 15 years 3 weeks 2 days 6.8
15 years less than 17 years 3 weeks 3 days 7.2
17 years less than 19 years 3 weeks 4 days 7.6
19 years less than 21 years 4 weeks 8.0
21 years less than 23 years 4 weeks 1 day 8.4
23 years and over 4 weeks 2 days 8.8
B. Factor for Computed Clock Hours Calculation
1) Calculation
a) an employee who clocks between 1500 hours and 2000 hours shall be
paid his applicable percentage of 2000 hours times the total of his June 1
regular straight time hourly rate, and applicable shift premium.
b) an employee who clocks more than 2000 hours of work in any of the
above periods, for each such period he shall be paid an applicable percentage of
wages earned during the earnings period.
c) When an employee clocks less than 1500 hours of work in any of
the above periods, for each such period he shall be paid an applicable
percentage of wages earned during the earnings period.
2) For the purpose of computing clocked hours, any hours lost because of a
work week scheduled under forty (40) hours (except as listed i Paragraph 3.a.)
or hours paid for negotiating time and Grievance Meeting Time which fall in the
earnings period shall be counted as clocked hours.
3) Clocked hours shall be computed in full calendar weeks, starting with
the Monday before June 1, (or applicable date in 2A above) or June 1, if it
falls on a Sunday or Monday of the previous vacation year.
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a) Time lost, during the earnings period, in any work week under
forty (40) hours because of a shutdown due to holiday, vacation, power failure,
storm, strike, fire or cause beyond the power of the Company, shall not be
considered clocked hours.
b) Earnings Period covers from June 1 to May 31 of the preceding
vacation year, except as noted in 2A above. Earnings Period shall be computed in
full calendar weeks, in the same manner as clocked hours in 2C.
c) Regular straight time hourly rate is the employee's individual
rate and does not include overtime and night shift premium.
3. Vacation schedules may be canceled in the event of a National Emergency.
Employees affected shall receive vacation pay on the same basis as outlined in
the Vacation Pay Schedule.
4. Whenever advertisement for extra work is posted for the Vacation Period,
those employees who do not have vacation pay due them, will be given preference
to the work. Work will be assigned on a weekly basis in as equitable a means as
practicable. If an employee requests to work in lieu of taking vacation time to
which he is entitled, the Company may agree to pay the appropriate monetary
amount in lieu of time off.
5. Vacation Payment after Separation
A. Employees who die, or go on leave or lay off, on or before May 31 (or
the applicable date in 2A above) of the preceding vacation year shall be issued
the Vacation Pay for which they qualify under the above Sections.
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B. Employees who leave before December 31 of the preceding vacation year
for any reason other than those listed in 5.A above, are not eligible for
Vacation Pay.
C. Anyone leaving the employ of the Company between December 31st of the
preceding vacation year, and the following May 31 (or the applicable date in 2A
above), who qualified for Vacation Pay under Section 1 above, shall receive that
pay based on the applicable percentage of their wages earned between the
previous June 1st and their date of leaving.
D. Anyone retiring between December 31st of the preceding vacation year,
and the following May 31, who qualified for vacation pay under Section 1 above,
shall be issued the vacation pay for which they qualify under the above
sections.
6. An employee who returns to work from a Military Leave and who has not been
back at work for a full year on June 1 of the current vacation year will be paid
his applicable percentage of 2000 hours, times the total of his June 1 regular
straight time hourly rate and applicable shift premium.
7. The summer shutdown will consist of the second and third full weeks of July.
8. Vacation Time:
A. All employees will be expected to take the first two weeks of any
vacation time to which they are entitled during the shutdown period.
B. Employees may take vacation time in excess of the first two weeks anytime
during the year subject to the following provisions:
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1) All full weeks to which an employee is entitled must be taken in
full weekly increments. Individual days may be taken separately. Requests for
full weeks will get priority over requests for individual days.
2) Vacation requests must be submitted through the employee's
Supervisor to Personnel.
a) Requests for full weeks must be submitted at least one full
month in advance.
b) Requests for individual days must be submitted at least one
full week in advance.
3) Any employee who is entitled to more than two weeks vacation may
submit his choice of time off for the upcoming year prior to April 1st of each
year. The Company will notify employees of such vacation approvals by April
15th. Vacation time will be granted up to 20% (or major fraction thereof) for
each class and work group by seniority, unless the Plant Council determines that
a larger percentage may be granted vacation. Any requests received after April
1st will be granted as per above on a first-submitted, first-granted basis.
Vacation requests submitted on the same day will be granted on a seniority
basis.
9. Employees who are scheduled for vacation during a week in which a paid
holiday falls, shall take the day off for the holiday at the end of the
scheduled vacation period. A listed paid holiday which falls during such week
will be paid.
ARTICLE 23
HOLIDAYS
1. Hourly rated employees shall be paid for the following Holidays without work
being performed, provided they meet the
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eligibility requirements described below:
New Year's Day December 24
Good Friday Christmas Day
Memorial Day Three (3) weekdays
Independence Day between Christmas
Labor Day Day and December 31
Thanksgiving Day December 31
Friday after Thanksgiving Day
In applying this procedure, when any of the above enumerated holidays
falls on Sunday and the day following is observed as the holiday by the State or
Federal Government, it shall be paid as such holiday. When any of the above
enumerated holidays falls on Saturday and the previous day is observed as the
holiday by the State or Federal Government, it shall be paid as such holiday.
2. To be eligible for Holiday Pay, an employee must have completed his
probationary period and have worked the last scheduled work day before and the
next scheduled work day after the holiday within the same work week or have an
acceptable explanation for not doing so.
3. Eligible employees shall receive eight (8) hours' pay at their regular
straight time hourly rate exclusive of night shift and overtime premium for each
of the paid holidays.
4. If work is performed on these holidays, employees shall, in addition to the
regular holiday payment, receive twice their regular hourly rate for hours
actually worked, exclusive of night shift and overtime premium. Employees who
have accepted such holiday work assignment and then fail to report for and
perform such work without reasonable explanation, shall not receive pay for the
holiday.
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ARTICLE 24
SAFETY AND HEALTH
1. Return to work from injury and/or illness - Not Work Related
A. An employee who has been incapacitated by injury or by sickness, so
that he is no longer able to do his regular job, and is subsequently able to
return to work with the approval of his personal physician, will be given
preference to a job, provided:
1) Work is available.
2) The selection is subject to the seniority provisions of the
contract, unless, by agreement between the parties, the seniority rules are
waived in such case.
3) He has the current skill and ability to do the job.
4) The rate received will be the rate of the job selected.
B. An employee who has been temporarily incapacitated by injury, or by
sickness may be employed in other work, at the Company's discretion, under the
following conditions:
1) Work is available.
2) He has the current skill and ability to do the job.
3) His personal rate applies for ninety calendar days after which
the rate of the job will apply. If, after 120 calendar days, the employee
continues to be incapacitated, the Company may then otherwise post the job on a
permanent basis.
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C. The Company's discretion in employing incapacitated employees will be
even handed.
2. Procedures for Handling On-the-Job Injuries
A. When injured on the job, employees must use the medical facilities made
available by the Company for all services in connection with the injury. Any
employee who bypasses the Company facilities will act on his own responsibility
insofar as the expense involved.
B. Employees who, while at home, require emergency medical attention for
injuries sustained at work, will report to the Helene Fuld Medical Center
Emergency Room for services.
C. Employees who are injured at their work in the plant and sent to the
hospital, shall, if they are sent home from the hospital, receive pay at their
regular rate for the balance of their shift or time in the hospital, whichever
is less. This applies to the first time they are sent home for such injury.
1) Injuries in plant will be handled efficiently in either hospital
or doctor cases.
2) Doctor visits on day shift will be scheduled to finish not later
than normal quitting time.
3. The Company may elect to provide work for ill or injured employees that meets
the physical restrictions outlined by the Attending Physician. If the decision
of the Attending Physician is disputed, the employee shall submit to an
examination by a physician selected by agreement of the parties. That
physician's decision will settle the issue.
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4. The Company agrees that it will continue to provide sanitary and safety
devices within the plant. The Union agrees that the employees will take proper
care of such equipment.
5. Company Representative and Union President, or his designee, will tour the
shop once per month during working hours to review matters for safety and
health.
6. Safety and Environmental Committee
A. The Company and Union will expand its Safety Committee to include
responsibility for analyzing and correcting unsafe and unhealthful working
conditions inside the plant, insuring that the plant does not pose a threat to
the outside environment, and overseeing training on health, safety, and
environmental issues.
B. The Committee will consist of two (2) persons appointed by the Local
Union President and two (2) persons appointed by the RBC Plant Manager.
C. The Committee will meet at least once per month or as often as
necessary.
D. The Committee will conduct regular inspections of the different areas
of the plant to ensure that conditions are not hazardous. Reports of these
inspections will be given to the Work Groups that were inspected and to the
Plant Council.
E. Employee training required by law regarding Health and Safety will be
separate from the minimum time for training required in the Training and
Education Section of this Agreement. Such training, however, will be part of the
Training and Education Committee's regular plan.
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7. Safety Glasses
A. The Company will provide up to $110 ($25 credit for exam and $85 for
glasses) for each employee purchasing prescription safety glasses once per
contract year. Employees select the doctor of their choice and request a
purchase order. All doctor's and lab visits will be made on the employee's time.
B. The Company will supply non-prescription Safety Glasses.
C. On both types of glasses, employees are responsible for the care of
their safety glasses. The Company will replace any glasses that were broken
during the course of work.
D. Safety glasses are required on the shop floor.
8. Work Shoes - Under the shoe policy, one pair of work shoes per year will be
provided. Payments will be made in accordance with current safety shoe policy.
ARTICLE 25
UNION FACILITIES
The Company agrees to provide the Union with a suitable Bulletin Board on
which it may post notices, provided such Union notices deal with meetings,
election of officers, appointment of committees and other non-controversial
matters concerning the affairs of Local 502, U.A.W.
As soon as practicable after ratification of this Agreement, the Company
will provide the Union officials with access to office space, as well as
telephone and
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computer services, for use in conjunction with performance of their duties under
the terms of the Agreement
ARTICLE 26
DISPUTE RESOLUTION
It is recognized that, from time to time, disputes will arise, and that,
although every effort will be made to resolve issues at the source, resolution
will not always be reached without intervention from others.
Disputes on the shop floor will first be discussed with the affected
employees and supervisors, as appropriate, in an attempt to settle the issue. If
the matter cannot be resolved, the aggrieved employee may request that the
Supervisor call a member of the Union Plant Committee to discuss the issue.
Other disputes will be handled at the level that they arise. All disputes
involving discipline or affecting employment will be reviewed by the Plant
Council.
If the dispute cannot be resolved at the first level, a member of the
Union Plant Committee may submit the dispute as a written grievance, along with
all the facts, to the Plant Council, not more than ten (10) days after the
dispute arose. A meeting will be scheduled within one (1) week of such
submission to review the issues with the Plant Council and the appropriate
parties.
If the Plant Council cannot find resolution of the issue acceptable to the
affected employee, the issue will be discussed in a meeting with the Plant
Council and the UAW International Representative and Division Human Resources
Manager. If the issue cannot be satisfactorily resolved at this meeting, the
Company will respond in writing to the issue within five (5) days after the
meeting. At that time, the party who raised the issue may demand final and
binding
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arbitration. In order to demand arbitration, the party must submit its demand,
in writing, within thirty (30) days after the dispute was submitted as a written
grievance. This thirty (30)-day time limit can only be extended by consensus of
the Plant Council, and then only for thirty (30) additional days. A log will be
kept of all written grievances in order to comply with the timeliness
provisions.
Arbitration will be in accordance with the Rules of Voluntary Labor
Arbitration of the American Arbitration Association and a dispute may be
submitted to arbitration by filing a Demand for Arbitration in accordance with
such rules within thirty (30) days of the submission of the grievance to
arbitration. If made within the scope of the authority of the Arbitrator, the
decision of the Arbitrator upon the issues submitted shall be final and binding
upon the parties to the Agreement.
The compensation and expense of the Arbitrator and the Arbitration
proceedings shall be borne equally by the parties.
ARTICLE 27
LIVING AGREEMENT
In keeping with our Philosophy Statement, this is a "Living Agreement". As a
"Living Agreement," both the Union and Management understand that there may be
issues that arise during the implementation of this Agreement that have not been
addressed or discussed during bargaining. However, it may only be modified
through consensus of the Parties.
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ARTICLE 28
INSURANCE
1. Insurance Benefits - Active Employees
A. Subject to the provisions of this Agreement, the following Insurance
Plans will be procured by the Company to cover all regular employees as long as
this contract is in effect.
1) Group Life Insurance Policy - valued at $15,500 as of December 1,
1996. Coverage will increase to $20,000, effective June 1, 1997.
2) Accidental Death and Dismemberment Benefits - a maximum of
$31,000 as of December 1, 1996, (including the Group Life Insurance coverage
above). Such maximum will increase to $40,000 effective June 1, 1997.
3) HMO (Health maintenance Organization) coverage will be provided
to eligible employees and dependents through US Healthcare or equivalent.
Effective as soon as practicable after ratification of this Agreement, on the
first day of a calendar month, the plan will change to the Patriot V plan.
4) The Company will continue the dental care plan. Such plan shall
be evidenced by a written agreement conforming to the requirements of law and
satisfactory to the parties.
5) The Company will continue a prescription drug plan. Effective as
soon as practicable after ratification of this Agreement, on the first day of a
calendar month, the plan will provide for a $5.00 copayment by employees towards
the cost of a prescription and for exclusion of
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Berrocca Plus and Imitrex injections from coverage. The Plan will provide that
employees may obtain prescriptions for qualified maintenance drugs by mail
without copayment. The Company will select the carrier, but will insure that the
services and the selection of participating druggists will be substantially the
same as previously provided.
B. Employees hired on or after the effective date of this Agreement shall
be eligible for the above Plan after they complete their probationary period.
C. The Company shall receive and retain any divisible surplus, credits or
refunds or reimbursements under whatever name made on any insurance contracts.
D. All administrative expense shall be borne by the Company and the
Company shall determine all administrative procedures which may be required to
execute such a program.
E. A $15.00 per employee per week co-pay for the current medical plan,
including HMO medical insurance benefits, dental benefits and the prescription
drug plan will remain in effect for all active employees and those on the
disability roll or an approved leave of absence. Employees who are on layoff and
eligible to receive benefit continuation will receive that coverage at no cost.
Employees who enroll in the plan will be covered for individual or family
coverage as applicable. The co-pay will be made on a pre-tax basis and will be
automatically deducted from the weekly pay of employees who are enrolled in the
medical benefits plan. Employees will receive Accidental Death and Dismemberment
coverage and the Group Life Insurance coverage at no cost.
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2. Insurance Benefits - Retirees
A. The following identifies requirements for retirement from the Company
with respect to benefit continuation eligibility, benefit coverage, and required
contribution rates:
1) Retirees are defined as employees who terminate their employment
with the Company, and are, at the time of termination, at least age sixty-five
(65) or are eligible for Medicare benefits, and have at least ten (10) years of
service with the Company.
2) Early Retirees are defined as employees who terminate their
employment with the Company, and are, at the time of termination, at least sixty
(60) years of age, and who have at least ten (10) years of service, but are not
yet eligible as Retirees. Early Retirees who leave the Company, but who later
meet the eligibility requirements as Retirees will be considered thereafter to
be eligible for benefit continuation and coverage for Retirees.
B. Early Retirees may continue on the active employee's medical plan
described above, including the dental and prescription drug plans, until age 65
or until such time as they are eligible for Medicare. Such coverage will also
apply to spouses of Retirees where the Retiree is over age sixty-five (65) or is
Medicare eligible and the spouse is under age sixty-five (65) and is not
Medicare eligible. Coverage then ceases when the spouse reaches age 65. Such
continuation of active employee's coverage will be subject to the following
conditions:
(1) A monthly co-pay of $125 per household, payable in advance, for
all employees who retire prior to age 65, or
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(2) Where an Early Retiree is totally disabled, such continuation is
available by paying the active employee's weekly co-pay of $15.00. Such
continuation will be available for a period of up to two (2) years provided the
Early Retiree does not reach age 65 or become eligible for Medicare. After two
years, if the Early Retiree wants to remain in the active employee's plan, he
must pay $125 per month per household in advance. After reaching age 65 or
becoming eligible for Medicare, Retirees will no longer remain in the active
employee's plan, but will be eligible for coverage under the Benefit Plan for
Retirees described below.
C. Retirees over age 65 or who become Medicare eligible are no longer
eligible for coverage under the active employee benefit plans described above
but are eligible for the following coverages:
(1) The Company will procure for eligible Retirees $6,500 group life
insurance coverage.
(2) Retirees and eligible dependents may enroll in the US Healthcare
Patriot V Medicare Supplement Plan (or an equivalent plan).
(3) Provided retirees have enrolled in the HMO Medicare supplement
plan, retirees and eligible dependents are eligible for prescription coverage up
to $1,500 per year, provided that, as soon as practicable after ratification of
this Agreement, on the first day of a calendar month, such $1,500 will be
eliminated.
The medical and prescription drug coverage described above will be provided to
Retirees and eligible dependents at no cost. However, the Company's premium cost
obligation is limited to the rates effective on December 1,
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1996. Therefore, any premium increases over and above such current rates must be
paid by Retirees to be eligible for continued coverage.
D. When HMO Medicare Supplement coverage is not available where a retiree
resides, retirees and eligible dependents will be provided coverage through an
approved AARP or equivalent plan available in the retiree's area of residence.
The Company will pay up to the equivalent amount for the HMO coverage.
Additional costs for the AARP plan beyond the rates for HMO coverage must be
paid by the retiree to continue coverage.
3. Insurance Plans - General Information
A. All insurance as specified above and otherwise will be placed at the
discretion of the Company, including an option to place Temporary Disability
with New Jersey State.
B. The terms of any contract issued by an insurance company shall be
controlling in all matters pertaining to benefits thereunder and it is
understood that the grievance procedure of any collective bargaining agreement
between the parties hereto shall not apply to this plan of insurance or any
insurance plan in connection therewith.
C. All insurance is term insurance without cash, loan or paid up values.
D. All of the benefits provided under the HMO contract to an employee or
his dependents, if any, are subject to the coordination of benefits provisions
of the HMO contract.
E. Where employees with US Healthcare, or equivalent, Family Contract,
have no children under nineteen, the contracts may be converted by the Company
to individual single contracts.
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The Commune will assume responsibility for the coverage which exists under a
current Family Contract, and which is not covered by a single contract.
4. Insurance Plans - Termination of Employment
A. TERMINATION SCHEDULE
Life AD&D/Medical/Dental/
Prescription Drugs
Quit Same day Same day
Discharge Same day Same day
Layoff Six months Six months - Medical
Same day-AD&D
* Leave of Absence
Personal Six months Sixty days
Union Six months Six months
Sick or Injury One year One year
(Non-occupational)
Maternity Six months Nine months from date of
leaving or upon completion of
pregnancy whichever occurs
first.
Sick or Injury Six months Until seniority acquired on
(Occupational) last day worked is equaled by
the period of time involved in
the disability.
Retirement Same day for AD&D only
Strike Suspended Suspended
* Following the applicable period of subsidized coverage by the Company,
employees may pick up Life Insurance premiums through the Company to continue
coverage for the duration of the Leave of Absence.
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B. Employees who are receiving company-subsidized medical and dental
insurance coverage as specified above will be expected to pay the applicable
employee contribution to maintain that coverage. The employee contribution for
the first 30 days will be automatically deducted from pay upon return to work,
by doubling the employee contribution until full payment is made. After the
first month, employees who qualify for more than one month coverage may continue
medical and dental benefits each month by paying the applicable employee monthly
contribution in advance. Once Company-subsidized coverage is ended, employees
may continue coverage under COBRA.
C. Employees who request and receive severance pay in a lump sum as
outlined in this Agreement will thereafter have no further rights to
company-paid benefit continuation as described in this Article, but may continue
coverage under COBRA as outlined in Paragraph 5 below.
D. Employees who are recalled from layoff and are subsequently laid off
again within one month of the recall date, will not be eligible for insurance
continuation as described above, but rather, all insurance will be terminated as
of the last day of work.
E. In no event will Company-paid insurance coverage continue for longer
than the initial six-month period if an employee on the layoff list refuses
recall or is recalled but fails the job to which he is called.
5. Insurance Coverage - Surviving Dependents
The Company will maintain HMO (or equivalent) and Prescription Drug
coverage for surviving spouses of deceased retirees for a period of six months
from the death of the retiree. Current surviving spouses of deceased retirees of
record on December 1, 1994, will retain their
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entitlement to six years' coverage as described in the prior Agreement. The
Company will also maintain HMO (or equivalent) and Prescription Drug coverage
for surviving spouses and eligible dependent children of deceased seniority
employees for a period of six months from the death of the employee.
ARTICLE 29
WAIVER OF ANY CLAUSE
A waiver of any clause in this contract does not mean a permanent waiver.
ARTICLE 30
NO STRIKE-NO LOCKOUT
The Company agrees that there shall be no lockout, and the Union agrees
that there shall be no strike, walk-out, slow-down, stoppage of or other
interference with work, during the term of this Agreement.
ARTICLE 31
DURATION OF AGREEMENT
This Agreement shall remain in full force and effect until midnight, May
31, 1999, and thereafter shall continue from year to year until either party
gives the other ninety (90) days prior written notice of a desire to change,
modify or terminate same. If neither party gives notice to terminate this
Agreement, but one or both of the parties gives notice as aforesaid of an
intention to change or modify any of the terms or provisions of this Agreement,
then within ten (10) days after such notice or not less than thirty (30) days
prior to the expiration of this Agreement, representatives of the Company, and
the Union shall meet to discuss, negotiate, and, if possible, agree upon such
changes. In the event
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such Agreement continue beyond the expiration date of this Agreement, then the
terms and conditions of this Agreement, shall remain in full force and effect
until such time as said negotiations have terminated, either by reason of the
inability of the parties to finally conclude a new Agreement, or because a new
Agreement between the parties has been concluded.
This Agreement shall be binding on the parties hereto, their executors,
administrators, and successors.
IN WITNESS WHEREOF, the duly chosen representatives of the parties hereto
affix their hands and seals this 4th day of April, 1997.
FOR THE UNION: FOR THE COMPANY:
// William Kane // // George Nichols //
// Joseph Csik // // Diane Fulcher //
// Douglas Large // // Barbara Loughlin //
// Michael Kovacs //
// Jeffery Mann //
// Nandor Palmai III //
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Appendix A
Pay for Knowledge and Skills
PRODUCTION JOBS
LEVEL TRAINING PERIOD PAY RATE
(eff. 12/1/96)
Advanced $ 14.50
Intermediate 12 months $ 13.25
Core 12 months $ 12.00
Basic 12 months $ 10.50
Starting Rate 12 months $ 9.00
Hiring Rate 2 months $ 7.50
SKILLED TRADES JOBS
LEVEL TRAINING PERIOD PAY RATE
(eff. 12/1/96)
Advanced $ 16.50
Intermediate 12 months $ 15.37
Core 12 months $ 14.00
Basic 12 months $ 13.00
Starting Rate 12 months $ 12.00
Hiring Rate 2 months $ 10.00
<PAGE>
INDEX
ARTICLE PAGE
1 Parties to the Agreement 3
2 Philosophy Statement 3
3 Union Recognition 4
4 Union Security and Check-off 5
5 Non-Discrimination 5
6 Structure and Decision-Making Process 6
7 Work Performed Outside the Bargaining Unit 10
8 Training 11
9 Probation Period 13
10 Seniority 14
11 Layoffs and Recall to Work 15
12 Open Jobs 17
13 Severance Pay 19
14 Leave of Absence 21
15 Overtime 25
16 Wages and Other Compensation 26
17 New Products 29
18 Shift Premium 30
19 Paid Break and Lunch Periods 31
20 Reporting Pay 32
21 Temporary Transfers 32
22 Vacations 32
23 Holidays 37
24 Safety and Health 38
25 Union Facilities 42
26 Dispute Resolution 42
27 Living Agreement 44
28 Insurance 44
29 Waiver of Any Clause 51
30 No Strike-No Lockout 51
31 Duration of Agreement 52
APPENDIX A
EMPLOYMENT AGREEMENT
with
MICHAEL J. HARTNETT
This Employment Agreement (the "Employment Agreement") is entered
into effective as of this 23rd day of June, 1997 (the "Commencement Date"),
between Roller Bearing Company of America, Inc., a Delaware corporation
("Employer" or the "Company"), and Michael J. Hartnett Ph.D. ("Employee").
Employer hereby employs Employee and Employee hereby accepts employment, on the
terms and conditions hereinafter set forth.
1. Term. Subject to the terms and conditions of this Agreement, the
Company shall employ Employee as its President and Chief Executive Officer, for
a term commencing on the Commencement Date hereof and continuing until June 30,
2002, unless earlier terminated pursuant to the provisions of Section 7 hereof
(the "Term").
2. Duties.
(a) During the Term, Employee agrees to serve Employer as its
President, Chief Executive Officer and Chairman of its Board of Directors (the
"Board"), reporting to the Board, and in such other executive capacities as may
be requested from time to time by the Board or a duly authorized committee
thereof; provided that (i) Employee's duties shall at all times be limited to
those commensurate with the foregoing offices, and (ii) Employee shall not be
obligated, without his consent, to relocate his principal office location from
Fairfield, Connecticut (or the surrounding area), although the foregoing
limitation is not intended to limit Employee's requirement, in the normal course
of business, to travel to the Employer's other business locations. Employee
shall serve, if elected, as a member of the Board, and shall render similar such
services for corporations directly or indirectly controlled by Employer or by
Roller Bearing Holding Company, Inc. ("Employer's Affiliates") as Employer may
from time to time reasonably request (but only such services as shall be
consistent with the duties Employee is to perform for Employer and with
Employee's stature and
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experience). All duties and services contemplated by this Section 2 are
hereinafter referred to as the "Services."
(b) During the Term, Employee will devote his full business time and
attention to, and use his good faith efforts to advance, the business and
welfare of Employer; provided that the foregoing shall not restrict Employee's
rights to engage in passive investment activities, to serve on the boards of
directors of other entities (so long as such activities are not violative of
Section 3 below), or to engage in civic and other similar activities.
3. Confidential Information and Covenant Not to Compete.
(a) Employee hereby agrees that, during the Term and thereafter, he
will not disclose to any Person, or otherwise use or exploit in competition with
Employer or Employer's Affiliates, any of the proprietary or confidential
information or knowledge treated by the Employer or Employer's Affiliates as
confidential, including without limitation, trade secrets, processes, records of
research, information included in proposals, reports, methods, processes,
techniques, computer software or programming, or budgets or other financial
information, regarding Employer or Employer's Affiliates, its or their business,
properties or affairs obtained by him at any time (i) during the Term or (ii)
during any employment of Employee with the Employer or any of Employer's
Affiliates prior to the Commencement Date ("Prior Employment"), except to the
extent required to perform the Services; provided that the foregoing shall not
apply to: (x) information in the public domain other than by reason of a
violation of this Agreement by Employee, or (y) information that Employee is
compelled to disclose by operation of law or legal process (so long as Employee
provides Employer with prior notice of any such compelled disclosure and an
opportunity to defend against such disclosure), or (z) information generally
known to Employee by reason of his particular expertise that is not specific to
the Employer.
(b) Employee hereby agrees that during the Term and for a period of
two years thereafter (the "Non-Compete Term"), he will not (a) engage in or
carry on, directly or indirectly, any Competing Business in any Territory in
which such Competing Business is then engaged in by the Employer or Employer's
Affiliates, (b) allow his name to be used by any Person engaged in any Competing
Business, (c) invest in, directly or indirectly, any Person engaged in any
Competing Business, or (d) serve as an officer or director, employee, agent,
associate or consultant of any Person engaged in a Competing Business (other
than Employer or
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any Employer's Affiliate). Notwithstanding the foregoing, the Non-Compete Term
shall be only the Term hereof in the event Employee's employment hereunder is
terminated by the Employer hereunder without cause (as provided in Section 7(c)
below.) Subject to Section 2(b) hereof, nothing herein shall prohibit the
Employee from (x) investing in any business that is not a Competing Business or
(y) investing in a publicly-held entity if such investment (individually or as
part of a group) is limited to not more than five percent (5%) of the
outstanding equity issue of such entity.
(c) All intellectual properties developed by Employee during the
Term or during any Prior Employment and related to the business (or foreseeable
business prospects) of the Employer shall be for the account of the Employer.
Employee agrees to enter into such agreements (including transfer documents) as
may be reasonably required by Employer to confirm the foregoing.
(d) Employee shall not, during the Non-Compete Term, directly or
indirectly, solicit or induce or attempt to solicit or induce any affiliate,
director, agent, or employee of Employer or any of Employer's Affiliates or
contractor then under contract to the Employer, to terminate his, her or its
employment or other relationship for the purpose of entering into an employment
or other relationship with any of the Employer's competitors or for any other
purpose or no purpose. Employee shall not, during the Non-Compete Term, directly
or indirectly, solicit or induce or attempt to solicit or induce any customer or
supplier of Employer or of any of Employer's Affiliates to terminate his, her or
its relationship for the purpose of entering into a similar relationship with
any competitors of Employer or Employer's Affiliates or for any other purpose or
no purpose.
(e) As used in this Agreement the following terms shall be defined
as follows:
"Person" means any natural person, partnership, corporation, trust,
company or other entity.
"Competing Business" means any business or commercial activity
(including, without limitation, research and development) that is carried on in
any material respect during the Term by Employer or any Employer's Affiliate.
"Territory" means the geographical area in which the Employer or any
of the Employer's Affiliates engages in any business (other than an
insignificant amount of business).
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(f) Employee agrees that the remedy at law for any breach by him of
any of the covenants and agreements set forth in this Section 3 will be
inadequate and will cause immediate and irreparable injury to Employer and that
in the event of any such breach, Employer, in addition to the other remedies
which may be available to it at law, shall be entitled to obtain injunctive
relief prohibiting him (together with all those persons associated with him)
from the breach of such covenants and agreements.
(g) The parties hereto intend that the covenants and agreements
contained in this Section 3 shall be deemed to include a series of separate
covenants and agreements, one for each and every county of the states in which
the Employer or any of the Employer's Affiliates does business. If in any
judicial proceeding a court shall refuse to enforce all of the separate
covenants deemed included in such action, then such unenforceable covenants
shall be deemed eliminated from the provisions hereof for the purposes of such
proceeding to the extent necessary to permit the remaining separate covenants to
be enforced in such proceeding.
4. Indemnification. Employee shall be indemnified by Employer, to
the maximum extent permitted by Delaware law at the time of the assertion,
against any liability against Employee arising out of or relating to his status
as an employee acting within the course and scope of employment, officer or
director of Employer or any Employer's Affiliate at any time during the Term,
whether such liability is asserted during or after the Term.
5. Base Salary and Benefits. During the Term, Employer shall pay
Employee a salary at the rate of thirty one thousand, two hundred fifty dollars
and ($31,250.00) per month payable at least as frequently as monthly and subject
to payroll deductions as may be necessary or customary in respect of Employer's
salaried employees ("Base Salary"). The Base Salary will be subject to an
automatic annual increase effective April 1 of each year during the Term in a
percentage amount equal to the greater of (i) five percent (5%) or (ii) the
annual percentage increase in the All-Items Consumer Price Index for All Urban
Consumers for such year as determined for the month of January. Employee shall
also be entitled to receive the normal executive benefits of Employer and the
benefits set forth in Schedule A hereto (the "Additional Benefits") and to the
following (the "Special Benefits"):
(a) four weeks of paid vacation for each twelve month period during
the Term, to accrue pro rata during the course of each such twelve month period;
and
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(b) medical and hospitalization insurance furnished to all other
executive employees of Employer, as such insurance may be in effect from time to
time (subject always to the right of Employer to amend such insurance).
6. Expenses. Employer will pay or reimburse Employee for such
reasonable travel, entertainment, or other expenses as he may incur on behalf of
Employer during the Term in connection with the performance of his duties
hereunder. Employee shall furnish Employer with such evidence that such expenses
were incurred as Employer may from time to time reasonably require or request.
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7. Termination of Employment. Notwithstanding Section 1 hereof, the
Term may be terminated prior to June 30, 2002, under the following
circumstances:
(a) Death or Total Disability. The Term shall automatically and
immediately terminate upon Employee's death or "Total Disability." For purposes
of this Agreement, "Total Disability" shall mean Employee's physical or mental
incapacitation or disability that renders Employee unable to perform the
Services as performed prior to such incapacitation or disability for a period of
twenty-six (26) consecutive weeks or during any one hundred fifty (150) business
days (whether or not consecutive) during any twelve (12) month period during the
Term.
(b) Termination by Employer for Cause. Employer, at its election,
shall have the right to terminate the Term, by written notice to Employee to
that effect, for "Cause". The term "Cause" shall mean:
(i) any act of fraud, embezzlement, theft or commission of a crime
involving moral turpitude;
(ii) any material breach by Employee of any material covenant,
condition, or agreement in this Agreement ("Employee's Material
Breach"); or
(iii) any chemical dependency by Employee (other than in connection
with medicines prescribed for Employee).
To terminate the Term pursuant to this Section 7(b), Employer shall give written
notice ("Cause Notice") to the Employee specifying the claimed Cause. If
Employee fails to cure the same within thirty (30) days after the receipt of the
applicable Cause Notice (or such longer period as may be reasonably required if
such actions are subject to cure), the Term shall terminate at the end of such
thirty (30) day period or such longer reasonable period, as the case may be.
Notwithstanding anything that may be interpreted to the contrary, it is
expressly agreed that no act of the type contemplated by or described in Section
7(b)(i) shall be capable of being cured by Employee and the Employer may
terminate Employee immediately without the requirement for such cure period.
(c) Termination by Employer Without Cause. Employer shall have the
right, at its election, to terminate the Term at any time for any reason other
than "Cause" upon not less than sixty (60) days prior written notice to
Employee.
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(d) Termination by Employee. Employee shall have the right, at his
election, to terminate the Term at any time by written notice to Employer upon
not less than one hundred twenty (120) days prior written notice; provided,
however, that (i) such notice period shall be thirty (30) days in the case of a
termination for "Good Reason"; and (ii) if such termination is other than for
Good Reason the Term, for purposes of Section 3(b) and (d), shall continue
through June 30, 2002.
(e) Salary and Benefits in Event of Termination. Upon termination of
the Term, the following shall be applicable, notwithstanding anything to the
contrary elsewhere herein:
(i) If the Term is terminated by Employer pursuant to Section 7(b)
or by Employee pursuant to Section 7(d) other than for "Good
Reason," Employee shall thereafter be entitled to the Base Salary,
the Special Benefits and the Additional Benefits only until the
effective date of such termination, unless otherwise agreed by
Employer.
(ii) If the Term is terminated (A) pursuant to Employee's death or
Total Disability pursuant to Section 7(a) hereof, or (B) by the
Employer without Cause pursuant to Section 7(c) hereof, or (C) by
Employee with Good Reason pursuant to Section 7(d) hereof, (x)
Employer shall thereafter pay to Employee the Base Salary due to
Employee for the then remainder of the Term, net of any benefits
paid to Employee pursuant to any policy of disability insurance
maintained by Employer, plus a pro rata portion of the Employee's
annual bonus for the fiscal year of the Employer in which such
termination occurs (provided that in the case of Employee's death or
Total Disability such payment and benefits shall extend for no
longer than two (2) years following such event), and (y) Employee
shall be entitled to the Special Benefits described in Section 5(b)
hereof for the then remainder of the Term.
(f) Good Reason. For purposes of this Agreement, Good Reason shall
mean any of the following which occurs subsequent to the date of this Agreement:
(i) a substantial reduction in the Employee's position, duties,
responsibilities and status with the Company inconsistent with the
Employee's duties, responsibilities and status immediately prior to
a change in the
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Employee's titles or offices, or any removal of the Employee from or
any failure to reelect the Employee to any of such positions, except
in connection with the termination of his employment for disability,
retirement or Cause or by the Employee other than for Good Reason;
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<PAGE>
(ii) a relocation of Employee without his consent to a location more
than 75 miles from the Company's headquarters at Fairfield,
Connecticut;
(iii) any material breach by the Company of any provision of this
Agreement; or
(iv) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company.
(g) Delivery of Records upon Termination. Upon termination of the
Term, Employee will deliver to Employer all records of research, proposals,
reports, memoranda, computer software and programming, budgets and other
financial information, and other materials or records (including any copies
thereof) made, used or obtained by Employee in connection with his employment by
Employer and/or any Employer's Affiliate.
8. Miscellaneous.
(a) Modification and Waiver of Breach. No waiver or modification of
this Employment Agreement shall be binding unless it is in writing signed by the
parties hereto and expressly stating that it is intended to modify this
Agreement. No waiver of a breach hereof shall be deemed to constitute a waiver
of a future breach, whether of a similar or dissimilar nature.
(b) Notices. All notices and other communications required or
permitted under this Employment Agreement shall be in writing, served personally
on, or made by certified or registered United States mail to, the party to be
charged with receipt thereof. Notices and other communications served in person
shall be deemed delivered when so served. Notices and other communications
served by mail shall be deemed delivered hereunder 72 hours after deposit of
such notice or communication in the United States Post Office as certified or
registered mail with postage prepaid and duly addressed to whom such notice or
communications is to be given, in the case of
(i) Employer:
Roller Bearing Holding Company, Inc.
c/o Roller Bearing Company of America, Inc.
60 Round Hill Road
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Fairfield, Connecticut 06430
(ii) Employee:
Michael J. Hartnett
c/o Roller Bearing Company of America, Inc.
60 Round Hill Road
Fairfield, Connecticut 06430
Any party may change said party's address for purposes of this
Section by giving to the party intended to be bound thereby, in the manner
provided herein, a written notice of such change.
(c) Counterparts. This instrument 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 Employment Agreement.
(d) Governing Law. This Employment Agreement shall be construed in
accordance with, and governed by, the internal laws of the State of Delaware
applicable to agreements executed and to be performed in such state without
regard to principles of choice of law or conflicts of laws.
(e) Complete Employment Agreement. This Employment Agreement and its
Exhibits and Schedules, together contain the entire agreement between the
parties hereto with respect to the subject matter of this Employment Agreement
and supersedes all prior and contemporaneous oral and written negotiations,
commitments, writings, and understandings with respect to the subject matter of
Employee's relationship with Employer.
(f) Non-Transferability of Employee's Interest. None of the rights
of Employee to receive any form of compensation payable pursuant to this
Employment Agreement shall be assignable or transferable. Any attempted
assignment, transfer, conveyance, or other disposition of any interest in the
rights of Employee hereunder shall be void.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement on the day and year First above written.
EMPLOYEE: EMPLOYER:
ROLLER BEARING COMPANY OF
AMERICA, INC.
_________________________________ By:_________________________________________
MICHAEL J. HARTNETT Name:_______________________________________
Title:______________________________________
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SCHEDULE A
MICHAEL HARTNETT
EMPLOYEE BENEFITS
1. Continuation of existing life insurance coverage in the amount of
$1,500,000, with Employee's designees as beneficiaries.
2. Executive Medical Coverage ($6000 supplemental coverage).
Dental insurance.
Prescription drug coverage.
The above benefits are subject to change at any time at the
discretion of the Board of Directors of Employer; provided that such coverages
provided to Employee shall at all times be consistent with coverages provided to
others of Employer's executive employees.
3. Disability insurance (as currently provided by Roller Bearing
Company, provided that such insurance may be modified from time to time at the
discretion of the Board of Directors of Employer).
4. Employee shall be entitled to an annual performance bonus with
respect to each fiscal year of the Employer during which Employee remains an
employee of the Company, in an amount determined as a percentage of Employee's
Base Salary, based on the following criteria:
Percentage of Actual EBITDA to Plan Amount of Bonus
----------------------------------- ---------------
Less than 90% Discretion of Board of Directors
90% 75% of Base Salary
100% 100% of Base Salary
110% or higher 150% of Base Salary
The amount payable under this paragraph 3, if any, shall be paid to Employee
within fifteen (15) days following the delivery of the Company's financial
statements for each fiscal year of the Employer during the Term, but in no event
later than one hundred twenty (120) days following the end of such fiscal year.
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"Plan" shall mean the operating plan established by the Employee, in
his status as CEO of Employer and as approved by the Board within thirty (30)
days following the beginning of each fiscal year, as applicable to Employer and
all of Employer's Affiliates and as applicable to the determination of bonuses
payable to others of Employer's (and Employer's Affiliates) employees to the
extent such bonuses are calculated by reference to operating results.
"EBITDA" shall mean the income of the Employer and the Employer's
Affiliates increased by interest, taxes, depreciation and amortization,
calculated in a manner consistent with the calculation of the Plan.
For the purposes hereof, (i) the performance bonus for the fiscal
year ending March 31, 1998 shall encompass the period beginning April 1, 1997
and the Plan for such fiscal year shall be $26,000,000; and (ii) the performance
bonus for the period April 1, 2002 through June 30, 2002 shall be calculated on
the basis of the Plan for fiscal year ending March 31, 2003, pro rated for the
applicable short period.
5. Contributions by Employer to 401(K) or other pension or profit
sharing plans pursuant to arrangements applicable to all executive level
employees.
6. The Employer shall maintain an apartment in Los Angeles for use
by the Employee while on business.
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STOCKHOLDERS' AGREEMENT
This Stockholder's Agreement, dated as of this 23rd day of June, 1997 by
and among Roller Bearing Holding Company, Inc., a Delaware corporation
("Holdings"), OCM Principal Opportunities Fund, L.P., a Delaware limited
partnership ("OCM"), Northstar Investment Management Corporation, a Delaware
Corporation ("Northstar"), Merban Equity, a corporation organized under the laws
of the Canton of Zug, Switzerland ("CSFB"), those individuals listed on Schedule
A hereto (the "CSFB Individuals" and together with CSFB, collectively the "CSFB
Parties" and individually a "CSFB Party"), Dr. Michael J. Hartnett ("Hartnett"
and together with OCM, Northstar and the CSFB Parties, collectively the "Initial
Parties" and individually an "Initial Party") and the Persons who by operation
of Section 2.9 below become a party hereto.
WHEREAS, OCM is the owner of 1,400 shares (the "OCM Shares") of Class A
Voting Common Stock of Holdings, par value $.01 per share ("Class A Common
Stock"); and (i) 1,322 warrants to purchase shares of Class A Common Stock at
$100.00 per share and (ii) 5,469 warrants to purchase shares of Class A Common
Stock at $.01 per share (collectively, the "OCM Warrants");
WHEREAS, Northstar is the owner of 1,262 warrants to purchase shares of
Class A Common Stock at $.01 per share (collectively, the "Northstar Warrants");
WHEREAS, the CSFB Parties collectively are the owners of 752.80 shares
(the "CSFB Shares") of Class A Common Stock and 2,088 warrants to purchase
shares of Class A
<PAGE>
Common Stock at $100.00 per share (the "CSFB Warrants"), all allocated among the
CSFB Parties as set forth on Schedule A hereto;
WHEREAS, Hartnett is the owner of 3,948.8 shares (the "Hartnett Shares"
and collectively with the OCM Shares and the CSFB Shares, the "Shares") of Class
B Supervoting Common Stock of Holdings, par value $.01 per share ("Class B
Common Stock" and collectively with Class A Common Stock, "Common Stock"); and
(i) 8,727.40 warrants to purchase shares of Class B Common Stock at $76.57 per
share and (ii) 1,250 warrants to purchase shares of Class B Common Stock at
$514.00 per share (collectively, the "Hartnett Warrants" and collectively with
the OCM Warrants, the Northstar Warrants and the CSFB Warrants, the "Warrants");
and
WHEREAS, OCM, Northstar, the CSFB Parties and Hartnett (together with any
successors thereto or any Person to whom such parties shall transfer any of the
Securities owned by any of them in a manner permitted by the terms hereof, the
"Parties") desire to set forth their agreements regarding certain matters
relating to their ownership of the Shares and the Warrants (the Shares and the
Warrants, as well as (i) any shares of capital stock or Derivative Securities
that may be issued by Holdings and owned by any of the Parties and (ii) any
shares of Common Stock that may be issued by Holdings to any of the Parties upon
conversion, exchange or exercise of any Warrants or other Derivative Securities,
in each case whether currently owned or hereinafter acquired, being collectively
the "Securities"; and the Securities owned by Hartnett or any person to whom
such Securities are Transferred in a manner permitted hereby, being the
"Hartnett Securities," the Securities owned by OCM or any person to whom such
Securities are Transferred in a manner permitted hereby, being the
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"OCM Securities," the Securities owned by Northstar or any person to whom such
Securities are Transferred in a manner permitted hereby, being the "Northstar
Securities" and the Securities owned by the CSFB Parties or any person to whom
such Securities are Transferred in a manner permitted hereby, being the "CSFB
Securities").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and intending to
be legally bound hereby, the parties hereto agree as follows:
1. DEFINITIONS
As used herein, the following terms shall have the meanings indicated:
1.1 "Affiliate" shall mean a Person controlled by, in control of, or under
common control with, another Person. For purposes of this definition, "control"
(including the correlative terms "controlled by", "in control of" and "under
common control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
1.2 "Board" shall mean the Board of Directors of Holdings.
1.3 "Derivative Securities" shall mean options, warrants (including the
Warrants) and other rights to subscribe for, and securities convertible into or
exchangeable or exercisable for, shares of Common Stock.
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<PAGE>
1.4 "Exercise Price" shall mean, as applicable, the exercise price of
options, warrants or rights to subscribe for shares of Common Stock and the
consideration payable upon the conversion or exchange of securities convertible
into or exchangeable for shares of Common Stock.
1.5 "Fair Market Value" shall mean as to any property on any date, the
fair market value of such property on such date (without regard to any
liabilities to which such property may be subject) as determined in good faith
by the Board, which determination shall, absent manifest error, be binding on
the Parties.
1.6 "Initial Public Offering" shall mean the first underwritten public
offering of equity securities of Holdings pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Act"), for which
Holdings received not less than $25 million in gross proceeds and following
which there is a public market for the securities so offered.
1.7 "Outstanding Shares", including subsets of such term such as
"Outstanding OCM Shares," "Outstanding Northstar Shares," "Outstanding CSFB
Shares" and "Outstanding Hartnett Shares," shall mean, at any given time, the
sum of (i) all outstanding shares of Common Stock (or, as applicable, in respect
of OCM Securities, Northstar Securities, CSFB Securities or Hartnett Securities)
and (ii) the aggregate number of shares of Common Stock (or, as applicable, in
respect of OCM Securities, Northstar Securities, CSFB Securities or Hartnett
Securities) issuable upon the exercise, conversion or exchange, as applicable,
of outstanding Derivative Securities. Whenever in this Agreement reference is
made to
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ownership of Outstanding Shares, such phrase shall mean ownership of the
applicable underlying Common Stock and Derivative Securities in respect thereof.
1.8 "Permitted Transfer" shall mean, a Transfer to a Permitted Transferee.
1.9 "Permitted Transferee" shall mean, with respect to any Person, (i) if
such Person is an individual, (A) a member of the Immediate Family of such
Person, or (B) a trust or other similar legal entity for the primary benefit of
such Person and/or one or more members of his Immediate Family, or (C) a
partnership, limited partnership, limited liability company, corporation or
other entity in which such Person and members of his Immediate Family possess
100% of the outstanding voting securities, (ii) a Transferee in connection with
a Transfer in compliance with Rule 144 under the Act so long as Holdings is
furnished with evidence reasonably satisfactory to it that such Transfer
complied with such Rule, (iii) if such Person is a partnership or limited
liability company, the general partners, limited partners or members thereof to
whom Securities are Transferred on a pro rata basis in accordance with the terms
of the underlying Partnership Agreement or Limited Liability Company Agreement,
(iii) if such Person is a corporation, any wholly owned subsidiary of such
corporation or parent of such corporation that wholly owns such corporation, and
(iv) Transferees pursuant to an effective registration statement under the Act.
For purposes of this definition, "Immediate Family", with respect to any
individual, shall mean his brothers, sisters, spouse, children (including
adopted children), parents, parents-in-law, grandchildren, great grandchildren
and other lineal descendants and spouses of any of the foregoing.
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1.10 "Person" shall mean any natural person, corporation, organization,
partnership, association, joint-stock company, limited liability company, joint
venture, trust or government, or any agency or political subdivision of any
government.
1.11 "Transfer" shall mean any direct or indirect, voluntary or
involuntary, sale assignment, gift, encumbrance or other direct or indirect
transfer (whether outright or conditional) of any Securities or any interest
therein.
1.12 Additional Defined Terms
The following terms are defined elsewhere in this Agreement in the
Sections and on the pages indicated:
Defined Term Section Page
------------ ------- ----
Act 1.6 4
Affiliate 1.1 3
Blue Sky 4.3(c)(vi) 37
Board 1.2 3
Cause 2.3(c)(i)(C) 10
Class A Common Stock Recitations 1
Class B Common Stock Recitations 2
Commission 4.2(a) 31
Common Stock Recitations 2
Compelled Sale 2.6(a) 21
Compelled Sale Notice 2.6(b) 23
Compelled Sale Purchaser 2.6(a) 20
Control 1.1 3
Controlled by 1.1 3
CSFB Introduction 1
CSFB Individuals Introduction 1
CSFB Parties Introduction 1
CSFB Party Introduction 1
CSFB Securities Recitations 3
CSFB Shares Recitations 1
CSFB Warrants Recitations 2
Demand Notice 4.2(a) 31
Debentures 2.4(h)(ii) 14
Demand Registration Period 4.3(a) 33
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Demand Registration Statement 4.2(a) 31
Demand Securities 4.2(a) 31
Demanding Holders 4.2(a) 31
Derivative Securities 1.3 3
Exchange Act 4.3(d) 41
Exercising RFR Participants 2.4(e) 12
Exercise Price 1.4 4
Fair Market Value 1.5 4
First Refusal Notice 2.4(a) 10
Hartnett Introduction 1
Hartnett Employment Agreement 2.3(c)(i)(C) 10
Hartnett Permitted Transfer 2.3(a) 10
Hartnett Securities Recitations 2
Hartnett Shares Recitations 2
Hartnett Transferors 2.6(a) 20
Hartnett Warrants Recitations 2
Holdings Introduction 1
Holdings Non-Exercise Notice 2.4(d) 11
Immediate Family 1.9 5
Indemnified Parties 4.3(d) 41
Indemnifying Party 4.3(f) 45
Initial Parties Introduction 1
Initial Party Introduction 1
Initial Public Offering 1.6 4
Joinder Agreement 2.9(a)(iii) 25
Listed Securities 2.6(a)(i) 21
New Securities 3.1 27
Northstar Introduction 1
Northstar Securities Recitations 3
Northstar Warrants Recitations 1
Non-Tag-Along Party 2.5(a) 15
OCM Introduction 1
OCM Securities Recitations 3
OCM Shares Recitations 1
OCM Warrants Recitations 1
Other Parties 2.6(a) 20
Outstanding CSFB Shares 1.7 4
Outstanding Hartnett Shares 1.7 4
Outstanding Northstar Shares 1.7 4
Outstanding OCM Shares 1.7 4
Outstanding Shares 1.7 4
Participation Right 3.1 27
Parties Recitations 2
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Permitted Transfer 1.8 5
Permitted Transferee 1.9 5
Person 1.10 6
Piggyback Shares 4.1 30
Preemptive Issuance 3.1 26
Preemptive Parties 3.1 27
RBC 2.3(c)(i) 10
Registered Securities 4.3(c)(ii) 35
Registering Parties 4.1 29
Registration Statement 4.1 29
Remaining Shares 2.4(e) 12
Remaining Shares Exercise Notice 2.4(e) 12
Remaining Shares Notice 2.4(e) 12
RFR Offeror 2.4(a) 10
RFR Participants 2.4(a) 11
RFR Purchase Terms 2.4(b) 11
RFR Transferor 2.4(a) 10
Securities Recitations 2
Shares Recitations 2
Suspension Period 4.3(a) 33
Tag-Along Notice 2.5(c) 17
Tag-Along Notice Deadline 2.5(c) 17
Tag-Along Offer Notice 2.5(c) 16
Tag-Along Right 2.5(a) 15
Tag-Along Transferee 2.5(a) 15
Tag-Along Transferee Terms 2.5(c) 17
Tag-Along Transferor 2.5(a) 15
Third Party Securities 4.1 30
Transfer 1.11 6
Under Common Control With 1.1 3
Underwriter's Cutback 4.1 30
Warrants Recitations 2
2. TRANSFER RESTRICTIONS
2.1 Legends. None of the Securities, including shares of Common Stock
underlying the Warrants, will have been registered under the Act. Certificates
representing
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the Shares, the Warrants, and upon exercise of the Warrants, the shares of
Common Stock issuable at such time, shall bear the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("Act"), and may not be
offered or sold except pursuant to (i) an effective registration statement
under the Act or (ii) an exemption from registration under such Act
(which, if requested by the issuer, shall be accompanied by an opinion of
counsel to such effect reasonably satisfactory to the issuer).
2.2 Restrictions on Transfer of OCM Securities, Northstar Securities and
CSFB Securities. Except as otherwise provided for in this Article 2, neither
OCM, Northstar nor any CSFB Party shall Transfer any Securities other than in
compliance with the provisions hereof.
2.3 Restrictions on Transfer of Hartnett Securities. (a) Except as
otherwise provided for in this Article 2, and subject to (b) and (c) below,
Hartnett and his Permitted Transferees (and their Permitted Transferees) shall
not, without the prior written consent of OCM, Transfer Hartnett Securities if,
and to the extent that, (i) following such Transfer, the total Outstanding
Hartnett Shares owned by Hartnett and his Permitted Transferees would be less
than 80% of the total Outstanding Hartnett Shares on the date hereof (as
adjusted to allow for subdivisions and combinations of Common Stock, stock
dividends and other similar dilution events), and (ii) the aggregate gross
proceeds to Hartnett and his Permitted Transferees from such Transfer, when
aggregated with the gross proceeds from prior Transfers of Hartnett Securities
(excluding proceeds from the Transfer of any Hartnett Securities (x) acquired
after the date hereof, or (y) to Permitted Transferees) by Hartnett and
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his Permitted Transferees, are in excess of $1 million (any Transfer permitted
pursuant to the foregoing without OCM's consent is referred to herein as a
"Hartnett Permitted Transfer").
(b) Hartnett shall be permitted to Transfer Hartnett Securities free
of the limitations set forth in this Section 2.3 and free of the rights provided
to others in Section 2.4 in the event that such Transfer is in connection with a
Compelled Sale.
(c) The limitations on Transferability set forth in (a) above shall
terminate and be of no further force and effect (and the sole limitations on
Transferability of the Hartnett Securities shall be solely as set forth in the
other provisions of this Article 2) from and after the first to occur of the
following:
(i) Such time that Hartnett is no longer employed as the Chief
Executive Officer of Holdings and its wholly owned subsidiary Roller Bearing
Company of America, Inc. ("RBC") by reason of his (A) death, (B) physical or
mental disability or (C) involuntary termination of employment other than for
"Cause" as defined in Section 7(b) of the Employment Agreement of even date
herewith between RBC and Hartnett (as such agreement is in effect on the date
hereof the "Hartnett Employment Agreement"), and
(ii) The fifth anniversary of the date hereof.
2.4 Right of First Refusal. No Party may Transfer any Securities except to
Permitted Transferees or otherwise in compliance with this Section 2.4 (except
that Transfers pursuant to Section 2.6 and Transfers by Non-Tag-Along Parties
pursuant to Section 2.5 shall not be subject to this Section 2.4).
(a) A Party desiring to Transfer Securities (the "RFR Transferor")
to a bona fide independent third party (the "RFR Offeror") shall give notice
thereto to Holdings (a
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"First Refusal Notice"). Holdings shall thereupon be obligated promptly to
deliver a copy of the First Refusal Notice to each of the Parties hereto other
than the RFR Transferor (the "RFR Participants").
(b) Any such First Refusal Notice shall contain a true and complete
description of the RFR Offeror's bona fide offer, the proposed purchase price
(allocated as between Shares and Warrants) and all other material terms and
conditions of such offer including the date of the proposed Transfer and all
applicable representations, indemnities and other contract provisions ("RFR
Purchase Terms"). The First Refusal Notice shall constitute an offer by the RFR
Transferor to sell the Securities that are the subject of the First Refusal
Notice at the RFR Purchase Terms.
(c) Holdings shall have the right, exercisable at any time within 10
days after delivery of the First Refusal Notice, to accept the offer made
thereby by furnishing written notice thereof to the RFR Transferor and agreeing
to purchase all and not less than all of the Securities so offered in, and at
the RFR Purchase Terms specified in, the First Refusal Notice.
(d) If Holdings shall not have accepted such offer within such 10
day time period, it shall so notify each of the RFR Participants (the "Holdings
Non-Exercise Notice") and each of the RFR Participants shall thereupon have the
right, exercisable at any time within 20 days after the delivery of the Holdings
Non-Exercise Notice, to exercise its right of first refusal herein by furnishing
written notice thereof to Holdings and to the RFR Transferor and agreeing to
purchase all and not less than all of its pro rata share of the Securities so
offered in, and at the RFR Purchase Terms specified in, the First Refusal
Notice. For the
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purposes hereof, each RFR Participant's pro rata share shall be a fraction, the
numerator of which shall be the number of such RFR Participant's Outstanding
Shares, and the denominator of which shall be the number of all RFR
Participants' Outstanding Shares.
(e) If Holdings shall have delivered a Holdings Non-Exercise Notice
and if not all of the RFR Participants shall have exercised their rights of
first refusal as set forth in (d) above, Holdings shall so notify those RFR
Participants who did exercise their rights of first refusal (the "Exercising RFR
Participants"), which notice (the "Remaining Shares Notice") shall set forth the
aggregate number of Securities with respect to which rights of first refusal
were not exercised by operation of (d) above (the "Remaining Shares"), and the
Exercising RFR Participants shall thereupon have the right, exercisable at any
time within 5 days after the delivery of the Remaining Shares Notice, to
exercise an additional right of first refusal by furnishing written notice
thereof to Holdings and to the RFR Transferor the "Remaining Shares Exercise
Notice") and agreeing to purchase all and not less than all its pro rata share
of the Remaining Shares so offered in, and at the RFR Purchase Terms specified
in, the First Refusal Notice. For the purposes hereof, each Exercising RFR
Participant's pro rata share shall be a fraction, the numerator of which shall
be the number of such Exercising RFR Participant's Outstanding Shares and the
denominator of which shall be the number of all Exercising RFR Participants'
Outstanding Shares. The Exercising RFR Participants may indicate in the
Remaining Shares Exercise Notice their willingness to purchase more than their
pro rata share of the Remaining Shares and if the Exercising RFR Participants do
not all elect to purchase their pro rata shares of the Remaining Shares, the
Exercising RFR Participants electing to purchase more than their pro rata share
of the Remaining Shares (as
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specified in their Remaining Shares Exercise Notice) may do so on a pro rata
basis (determined as among themselves with respect to their Outstanding Shares
as provided above).
(f) Upon accepting any such offer pursuant to (c), (d) or (e) above,
Holdings or, as applicable, the RFR Participants shall deliver payment in the
appropriate amount to the RFR Transferor against (i) delivery of certificates or
other instruments representing the Securities so purchased, appropriately
endorsed by the RFR Transferor and (ii) completion of all documentation
necessary to satisfy all of the RFR Purchase Terms. The closing for the purchase
of Securities pursuant hereto shall occur within 30 days after acceptance by, as
the case may be, Holdings or the last to be given notice of exercise of the RFR
Participants or the Exercising RFR Participants, unless otherwise agreed to as
among the RFR Transferor and the applicable purchasers.
(g) If Holdings, the RFR Participants and the Exercising RFR
Participants shall not have elected to purchase all of the Securities that were
the subject of the First Refusal Notice, the RFR Transferor shall have the
unlimited right at its option, at any time within the 90-day period following
the end of the notice periods set forth in (c), (d) and (e) above either to (i)
sell all of the Securities that were the subject of the First Refusal Notice
free of any obligation to sell any of such Securities to those who exercised
their rights of first refusal, or (ii) sell such of the Securities not purchased
pursuant to the within rights of first refusal (either as a result of the rights
of first refusal not being exercised in full or there having been a default in
the closing therefor), in either case to the RFR Offeror on terms not less
favorable to the RFR Transferor than were set forth in the First Refusal Notice.
Any
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subsequent or other proposed Transfer shall be subject to the rights of first
refusal set forth herein.
(h) Notwithstanding anything contained in Subsections 2.4(b) through
2.4(g) to the contrary:
(i) If the terms specified in the First Refusal Notice provide
for the Purchase Price of the RFR's Transferor's Securities to be paid other
than entirely by cash, the right of first refusal provided above may be
satisfied by payment of cash in an amount equal to the sum of (A) the cash
portion of the consideration specified in the First Refusal Notice and (B) the
Fair Market Value of the non-cash consideration offered by the RFR Offeror.
(ii) The rights of first refusal shall not apply as to (A)
Transfers of Securities (other than Hartnett Securities which shall on all cases
be subject to the within rights regardless of the number thereof) by any Party
that, in the aggregate together with all other Transfers subject to the
exception set forth in this subparagraph (ii), constitute less than 10% of the
total Outstanding Shares owned by such Party on the date hereof (as adjusted to
allow for subdivisions and combinations of common stock, stock dividends and
other similar dilution events), or (B) Transfers occurring within six (6) months
of the date hereof by either OCM or Northstar of Warrants acquired by either, as
the case may be, in connection with its purchase of the 13% Senior Secured
Discount Debentures of Holdings (the "Debentures").
(iii) If OCM or Northstar propose to Transfer OCM Securities
or Northstar Securities (and such Transfer is not subject to (ii)(B) above) and
such Transfer is a component of a transaction including the sale of its
Debentures to the RFR Offeror, then Holdings or the RFR Participants, as the
case may be, may exercise their rights of first refusal
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only by also acquiring the accompanying Debentures subject to all of the RFR
Purchase Terms.
(i) For the purposes of Subsections (c), (d) and (e) above, any
Party who fails to deliver a notice of exercise of its right of first refusal
within the time periods for exercise provided for therein shall be deemed not be
have exercised such right.
2.5 Tag-Along Rights.
(a) Subject to (j) below, if Hartnett (here, the "Tag-Along
Transferor") wishes to Transfer any Securities owned by him (in a transaction in
which, if subject to the provisions of Section 2.4, the rights of first refusal
set forth therein shall not have been fully exercised) to any Person other than
a Permitted Transferee (a "Tag-Along Transferee"), each other Party (each a
"Non-Tag-Along Party") shall have the right (the "Tag-Along Right") to require,
as a condition to such Transfer by the Tag-Along Transferor of those Securities
not purchased pursuant to the rights of first refusal set forth in Section 2.4,
that the Tag-Along Transferee purchase from such Non-Tag-Along Party, at the
same price and on the same terms and conditions as involved in the Transfer by
the Tag-Along Transferor, up to that number of Outstanding Shares owned by such
Non-Tag-Along Party equaling the number derived by multiplying the total number
of Outstanding Shares owned by such Non-Tag-Along Party by a fraction, the
numerator of which is the actual number of Outstanding Shares to be Transferred
to the Tag-Along Transferee by the Tag-Along Transferor as set forth in the
Tag-Along Offer Notice, and the denominator of which is the aggregate number of
Outstanding Shares owned by the Tag-Along Transferor immediately prior to such
Transfer. Notwithstanding the foregoing, in the event the Tag-Along Transferee
is unwilling to purchase
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the sum of the aggregate number of Securities that the Tag-Along Transferor and
the Non-Tag-Along Parties (and each of them) desire to Transfer to the Tag-Along
Transferee pursuant hereto, each Party who desires to Transfer Securities to the
Tag-Along Transferee shall be entitled to Transfer only that number of
Outstanding Shares equal to the number of Outstanding Shares which such Party
desires to Transfer to such Tag-Along Transferee, as set forth in its Tag-Along
Notice or, in the case of the Tag-Along Transferor, in the Tag-Along Offer
Notice, multiplied by a fraction, the numerator of which is the total number of
Outstanding Shares which the Tag-Along Transferee is willing to acquire and the
denominator of which is the total number of Outstanding Shares which the
Tag-Along Transferor and all of the Non-Tag-Along Parties wish to Transfer to
such Tag-Along Transferee (all as set forth, as applicable, in the Tag Along
Offer Notice and the Tag Along Notices).
(b) Unless the Tag-Along Transferee shall agree to the contrary,
prior to any Transfer to the Tag-Along Transferee, the Tag-Along Transferor and
the Non-Tag-Along Parties shall exercise, convert or exchange such number of
their Derivative Securities as may be necessary so that only shares of Common
Stock are Transferred.
(c) Any Tag-Along Transferor who proposes to Transfer any Securities
in a transaction subject to this Section 2.5 shall notify each Non-Tag-Along
Party in writing of each such proposed Transfer (a "Tag-Along Offer Notice").
Such Tag-Along Offer Notice shall set forth: (i) the name of the Tag-Along
Transferee, (ii) the number and nature of the Securities proposed to be
Transferred, (iii) the proposed amount and form of consideration and all other
material terms and conditions of such offer, including the date of the proposed
Transfer and all applicable representations, indemnities and other contract
provisions, offered
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by the Tag-Along Transferee (the "Tag-Along Transferee Terms"), (iv) the total
number and nature of Securities owned by such Tag-Along Transferor and (v) that
the Tag-Along Transferee has been informed of the Tag-Along Right provided for
in this Section 2.5 and has agreed to purchase Securities subject hereto. The
Tag-Along Right may be exercised by any Non-Tag-Along Party by delivery of a
written notice to the Tag-Along Transferor (the "Tag-Along Notice") within 20
days following delivery of the Tag-Along Offer Notice (the "Tag-Along Notice
Deadline"). The failure by any Non-Tag-Along Party to provide the Tag-Along
Notice on or before the Tag-Along Notice Deadline shall be deemed to be an
election by such Non-Tag-Along Party not to exercise the Tag-Along Right with
respect to the transaction described in the Tag-Along Offer Notice.
(d) Upon delivery of a Tag-Along Notice, each participating
Non-Tag-Along Party shall be entitled and obligated to sell to the Tag-Along
Transferee the number of Securities owned by it determined in accordance with
subparagraph (a) of this Section 2.5, subject to the Tag-Along Transfer Terms,
(including the same representations, indemnities and the like made by the
Tag-Along Transferor). Notwithstanding the foregoing, any liability of a
participating Non-Tag-Along Transferee thereunder shall be (i) several (and not
joint and several), (ii) limited to the proceeds actually received by such
participating Non-Tag-Along Party and, (iii) in any event except for any
liability occasioned by the specific wrongdoing of any Person, the liability of
each participating Non-Tag-Along Party and the Tag-Along Transferor shall be
further limited to damages occasioned by the breach of the representations and
warranties made by them (which shall only include representations and warranties
as to their ownership of the Securities being sold and other matters
specifically applicable to them
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and their Securities) and damages arising under any indemnity or escrow
provisions that are limited to their proportion of the aggregate proceeds
received by all of them.
(e) The Non-Tag-Along Parties electing to participate in the sale of
Securities to the Tag-Along Transferee (and each of them) shall execute and
deliver to the Tag-Along Transferor within 5 business days after delivery to
such Non-Tag-Along Parties for such execution, all documents required to be
executed by each such Non-Tag-Along Party in order to consummate such sale,
subject to the limitations on liability contained in Section 2.5(d) above.
Further, and in any event, each of the participating Non-Tag-Along Transferees
hereby appoints the Secretary of Holdings as its attorney-in-fact to execute any
and all documents and instruments and take all actions reasonably necessary to
Transfer the Securities owned by such Non-Tag-Along Party in order to effect the
terms of this Section 2.5, which power of attorney may only be exercised if the
Transfer complies with all of the terms of this Section 2.5. It is understood
and agreed that the appointment of the Secretary of Holdings as the
attorney-in-fact of each of the participating Non-Tag-Along Parties for the
purposes set forth above is coupled with an interest and is irrevocable.
(f) In the event that the Tag-Along Transfer Terms are at any time
changed in any material respect (including any decrease in the applicable
purchase price) prior to the consummation of the Tag-Along Transfer, the
Tag-Along Transferor shall notify each of the Non-Tag-Along Transferees, and
each of the Non-Tag-Along Transferees shall have the right, exercisable at any
time within 20 days following delivery thereof, to withdraw its participation in
the Tag-Along-Transfer by so notifying the Tag-Along-Transferor.
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(g) To the extent that the Non-Tag-Along Parties (or any of them)
elect not to participate in the Transfer described in the Tag-Along Offer
Notice, the Tag-Along Transferor shall have the right at any time within 90 days
following the Tag-Along Notice Deadline to Transfer that number of Securities
proposed to be Transferred, as set forth in the Tag-Along Transfer Notice (and
that are not being sold by participating Non-Tag-Along Parties) to the Tag-Along
Transferee subject to the following:
(i) such Transfer shall be of the number of Securities, to the
Tag-Along Transferee and upon the Tag-Along Transferor Terms, all as
set forth in Tag-Along Notice; and
(ii) such Transfer must in all events be made in compliance
with the provisions hereof.
(h) At the closing of the Transfer of Securities to a Tag-Along
Transferee (of which the Tag-Along Transferor shall give each participating
Non-Tag-Along Party at least 5 business days' prior written notice), the
Tag-Along Transferee shall remit to the Tag-Along Transferor and each
participating Non-Tag-Along Party the consideration for the total sales price of
Securities of such Parties sold pursuant hereto, against delivery by such
Parties of such evidences of ownership of such Parties' Securities as may be
requested by the Tag-Along Transferee, and the compliance by such Parties with
any other conditions to closing generally applicable to the Tag-Along Transferor
and all participating Non-Tag-Along Parties.
(i) If any Transfer contemplated by Sections 2.5(e) and (g) above is
terminated or is otherwise not consummated for any reason (in the case of
Transfers allowed pursuant to Section 2.5(g) within the 90-day period allowed
for such Transfer), the Tag-Along
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Transferor shall, without prejudice to his rights hereunder to deliver a
subsequent Tag-Along Notice, provide written notice of such termination to the
other Parties and shall promptly return to all Non-Tag-Along Parties who elected
to participate in such Transfer all documentation which such Non-Tag-Along
Parties had previously delivered to the Tag-Along Transferor in connection with
such Transfer.
(j) Notwithstanding the foregoing, Hartnett shall have no
obligations under this Section 2.5 in respect of a Hartnett Permitted Transfer;
provided that in the case of Transfers of Hartnett Securities in excess of the
amounts constituting a Hartnett Permitted Transfer (and in which any rights of
first refusal shall not have been fully exercised), the within Tag-Along Rights
shall apply to such excess.
2.6 Right to Compel Sale.
(a) Subject to subparagraph (b) below, if at a time that Hartnett
and his Permitted Transferees have the power to vote with respect to, and the
power to dispose of, Outstanding Shares representing not less than 50% of the
Outstanding Shares owned by Hartnett on the date hereof (as adjusted to allow
for subdivisions and combinations of Common Stock, stock dividends and other
similar dilution events), Hartnett and/or such Permitted Transferees, as
applicable (the "Hartnett Transferors"), wish to sell all, and not less than
all, of the Hartnett Securities then owned by Hartnett and such Permitted
Transferees on such date, to any bona fide independent third party other than an
Affiliate or a Permitted Transferee of Hartnett (the "Compelled Sale
Purchaser"), and if such Compelled Sale Purchaser requires, as a condition to
acquiring such Hartnett Securities upon the terms acceptable to the Hartnett
Transferors, that all other Parties (the "Other Parties") sell to such
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Compelled Sale Purchaser all, and not less than all, of the Securities owned by
the Other Parties, then each of the Other Parties shall be obligated to join and
fully cooperate in the sale together with the concurrent sale by the Hartnett
Transferors (a "Compelled Sale") of all of its respective Securities to the
Compelled Sale Purchaser, subject to the following:
(i) The terms and conditions applicable to the sale of the
Securities owned by the Other Parties shall be identical to those applicable to
the sale of the Hartnett Securities, including, without limitation, the amount
and nature of consideration and the same representations, indemnities and the
like required of the Hartnett Transferors; provided, however, that the Other
Parties shall not be obligated to accept as consideration for their Securities
payment other than in cash and securities that are listed on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ National Market ("Listed
Securities"); provided, further, that (A) the aggregate consideration per Share
(including the Fair Market Value of any Listed Securities) payable to any Other
Party shall be no less than that payable to the Hartnett Transferors, and (B) no
Other Party shall be required to accept a smaller amount of cash (as a
percentage of the total consideration) than the Hartnett Transferors.
Accordingly, the Hartnett Transferors may either reallocate such consideration
so as to satisfy the preceding sentence or, if the Compelled Sale Purchaser is
not paying sufficient cash and Listed Securities to allow such reallocation, the
Hartnett Transferors may themselves pay to the Other Parties cash so as to
comply therewith. For the purposes of this subparagraph (i), the value of the
consideration other than cash being paid by the Compelled Sale Purchaser shall
be the Fair Market Value thereof.
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(ii) Notwithstanding the foregoing, any liability of any Other
Party in connection with such sale shall be (i) several and not joint and
several, (ii) shall be limited to the proceeds actually received by such Other
Party, and, (iii) in any event except for any liability occasioned by the
specific wrongdoing of any Person, the liability of the Hartnett Transferors and
the Other Parties shall be further limited to damages occasioned by the breach
of the representations and warranties made by them (which shall only include
representations and warranties as to their ownership of the Securities being
sold and other matters specifically applicable to them and their Securities) and
damages arising under any indemnity or escrow provisions that are limited to
their proportion of the aggregate proceeds received by all of them.
(iii) The Hartnett Transferors shall be obligated to deliver
to the Other Parties an opinion of counsel to the Company, in form reasonably
acceptable to the Other Parties, to the effect that such Transfer does not
require any registration under the Act or otherwise.
(iv) No Hartnett Transferor who holds any debt or other
securities issued by Holdings or any of its subsidiaries (i.e., securities other
than Common Stock of Holdings) shall, pursuant to the Compelled Sale, receive,
in consideration of such debt or other securities, an amount greater than the
sum of, without duplication, (x) the face amount or liquidation preference of
such securities, plus (y) any accrued but unpaid interest or dividends thereon
(including cumulative dividends, if applicable), plus (z) any prepayment or
redemption premium or penalty set forth in the terms of the agreement evidencing
such securities.
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(b) The Hartnett Transferors shall notify each of the Other Parties
in writing of a Compelled Sale (a "Compelled Sale Notice"), which Compelled Sale
Notice shall set forth all of the material terms and conditions of the Compelled
Sale, including, without limitation, the proposed amount and nature of
consideration and all other material terms and conditions, including the date of
the proposed Transfer and all applicable representations, indemnities and other
contract provisions. The Other Parties (and each of them) shall execute and
deliver to the Hartnett Transferors within 5 business days after delivery to
such Other Parties for such execution, all documents required to be executed by
each such Other Party in order to consummate such Compelled Sale, subject to the
limitations on liability contained in Subsection (a)(ii) above. Further, and in
any event, each of the Other Parties hereby appoints the Secretary of Holdings
as its attorney-in-fact to execute any and all documents and instruments and
take all actions reasonably necessary to Transfer the Securities owned by such
Other Party in order to effect the terms of this Section 2.6, which power of
attorney may only be exercised if the Compelled Sale complies with all of the
terms of this Section 2.6. It is understood and agreed that the appointment of
the Secretary of Holdings as the attorney-in-fact of each of the Other Parties
for the purposes set forth above is coupled with an interest and is irrevocable.
(c) Upon consummation of the sale of the Securities to the Compelled
Sale Purchaser pursuant to the Compelled Sale, the Hartnett Transferors shall
(i) notify the Other Parties of such completion and shall furnish such evidence
of said sale (including time of completion) and of the terms thereof as the any
of the Other Parties may reasonably request,
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and (ii) promptly remit to each of the Other Parties proceeds of such sale
attributable to the sale of such Other Party's Securities.
(d) If any Compelled Sale Offer is withdrawn, or terminated for any
reason, prior to consummation, the Hartnett Transferor shall, without prejudice
to his (or any other Hartnett Transferor's) rights hereunder to deliver a
subsequent Compelled Sale Notice, return to each of the Other Parties all
documentation which such Other Parties had previously delivered to the Hartnett
Transferor in connection with such Compelled Sale Offer.
(e) For the purposes hereof, a Compelled Sale shall be deemed to
include a transaction in which all of the Hartnett Securities are to be acquired
by Holdings pursuant to an arrangement in which one or more of the other holders
of Common Stock elect to retain their ownership, but only if (i) Hartnett has no
continuing interest of any kind or nature whatsoever in Holdings and/or any of
its subsidiaries following such transaction other than (A) any interests
identical in nature to those of all other sellers of Securities, and (B)
pursuant to employment arrangements as are no more favorable to Hartnett than in
existence prior to such transaction, and (ii) Holdings shall have obtained an
opinion from an investment bank or other firm of national reputation in the
valuation of business enterprises that the consideration being paid in such
transaction represents a fair value therefor. In such case, the Compelled Sale
Purchaser shall be Holdings and the Other Parties shall be all of the Parties
other than, if applicable, the holders of Common Stock who elected to retain
their ownership.
2.7 Transfers to Permitted Transferees. Notwithstanding anything contained
in this Article 2 to the contrary, a Party may Transfer any or all Securities
owned by such Party
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to a Permitted Transferee of such Party without regard to the rights or
obligations respecting Transfers set forth in Sections 2.4, 2.5 and 2.6.
2.8 Termination on Initial Public Offering. The restrictions on Transfer
of Securities and the other rights, restrictions and obligations contained in
this Article 2 shall terminate and be of no further force and effect following
an Initial Public Offering.
2.9 Shares of Transferees. (a) Notwithstanding anything contained in
Sections 2.4 and 2.7 above, any Transfer to (i) a RFR Offeror pursuant to
Section 2.4 above (after application of the rights of first refusal set forth
therein), or (ii) another Party exercising its right of first refusal pursuant
to Section 2.4, or (iii) a Transferee pursuant to Section 2.4(h)(ii) or (iii),
or (iv) a Permitted Transferee pursuant to Section 2.7 above, shall be
conditioned in each such case upon any such Transferee first entering into a
joinder agreement (a "Joinder Agreement"), in the form attached hereto as
Exhibit A, pursuant to which such Transferee, and the Securities acquired, shall
become subject to the terms and conditions of this Agreement, including (c)
below.
(b) (i) Upon any Transfer and the execution of a Joinder Agreement,
each Transferee, and the Securities acquired by it, shall be subject to all of
the limitations and obligations set forth in Sections 2.2, 2.3, 2.4, 2.5 and 2.6
hereof, and, except as set forth in (ii) below, shall obtain the benefits and
rights of a Party hereunder, with respect to the Securities so acquired,
pursuant to Sections 2.4, 2.5, 2.7, Article 3 and the provisions of Article 4
hereof other than 4.2.
(ii) Transferees other than Permitted Transferees, Parties who
obtain Securities by operation of their rights of first refusal and Transferees
pursuant to 2.4(h)(ii)(B)
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shall not obtain those benefits and rights set forth in Section 2.4, 2.5, 2.7
and Article 3 hereof.
(c) In the event that any Initial Party Transfers any of its
Securities hereunder, until notice thereof shall have been delivered by the
Initial Party to Holdings and all other Parties (i) any notices to be given to
such Transferees shall be deemed given if delivered to its Initial Party
Transferor, (ii) a notice from any such Transferee shall be deemed delivered
only if delivered by its Initial Party Transferor, (iii) all of the Parties
hereto shall be permitted to rely upon any notice given by an Initial Party as
containing the intentions of its Transferees, and (iv) where applicable such
Transferees shall share any rights contained in this Agreement as they shall
deem appropriate, and as reflected by any notices provided by their Initial
Party Transferor. If any Initial Party transfers all of its Securities it may
designate, by written notice to Holdings and all other Parties, a successor
Person to give and accept notices, on behalf of all Transferees of such Initial
Party, as set forth herein.
2.10 Transfers Not in Compliance Void. Any purported Transfer of
Securities owned by a Party that is not in compliance with this Agreement shall
be null and void and of no force and effect whatsoever. Accordingly, such
Transfer shall not be reflected on the books of Holdings and Holdings will not
recognize any such proposed transferee as the holder of any such Securities.
3. PREEMPTIVE RIGHTS
3.1 Participation Right. If, subsequent to the date hereof, Holdings shall
determine to issue (each such determination, a "Preemptive Issuance") any shares
of Common
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Stock or Derivative Securities ("New Securities"), except as provided in Section
3.5 below each of OCM, Northstar and Hartnett (the "Preemptive Parties") shall
have the right (the "Participation Right") to purchase New Securities of the
same class and series issued in such Preemptive Issuance at the amount per New
Security paid in connection therewith and otherwise upon the same terms and
conditions as the New Securities being issued in the Preemptive Issuance.
3.2 Acquisitions. If the New Securities are being issued to a seller in
connection with an acquisition of stock or assets of another entity being
consummated by Holdings or any of its subsidiaries, the consideration to be paid
by the Preemptive Parties in connection with the exercise of their Participation
Rights shall be equal to the Fair Market Value of the New Securities determined
after giving effect to such acquisition.
3.3 Notices. In the case of a Preemptive Issuance, Holdings shall provide
each Preemptive Party with written notice identifying the New Securities, the
Person to whom the New Securities are being Issued and describing the terms and
amount of the Preemptive Issuance. A Preemptive Party may exercise its
Participation Right by written notice to Holdings within 15 days following
delivery of the notice described in the preceding sentence. The failure by any
Preemptive Party to provide such notice before the expiration of the 15-day
period shall be deemed to be an election by such Preemptive Party not to
exercise its Participation Right with respect to the Issuance. Each Preemptive
Party electing to exercise its rights under this Article 3 shall pay for the New
Securities being purchased within 10 days of delivery of the notice of exercise.
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3.4 Number of New Securities Purchasable. The number of New Securities
each Preemptive Party may purchase under this Article 3 with respect to each
Preemptive Issuance shall be such number so that after exercise of the
Participation Right such Preemptive Party's Outstanding Shares will represent
the same percentage of the total Outstanding Shares following the Preemptive
Issuance as such Preemptive Party's Outstanding Shares represented of the total
Outstanding Shares prior thereto. The number of New Securities purchasable by a
Preemptive Party with respect to any Preemptive Issuance shall be reduced by any
New Securities or shares of Common Stock, Derivative Securities or other rights
received by such Preemptive Party pursuant to any other preemptive rights or
anti-dilution provisions, including, without limitation, the anti-dilution
provisions relating to the OCM Warrants contained in the Warrant Agreement,
dated concurrently herewith, between Holdings and OCM, pursuant to which the OCM
Warrants were issued.
3.5 Exceptions to Participation Right. The Participation Right provided
for in this Article 3 shall not apply to any New Securities being Issued in
connection with, and the term "Preemptive Issuance" shall not include an
Issuance in respect of, (i) the exercise, conversion or exchange of Derivative
Securities outstanding on the date hereof or issued or sold pursuant to any
Participation Right, (ii) a restructuring, including a cancellation or
modification of the terms of any, of the debt of Holdings or any of its
subsidiaries in which lenders or owners of debt securities of Holdings or its
subsidiaries receive equity interests in consideration of such restructuring or
otherwise, (iii) options or warrants to purchase up to 10% of the total
Outstanding Shares on the date hereof (as adjusted to allow for subdivisions and
combinations of Common Stock, stock dividends and other similar dilution events)
granted pursuant to
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management option plans approved by the Board, (iv) other preemptive rights or
anti-dilution provisions in favor of any stockholder or warrantholder of
Holdings, (v) the issuance of Derivative Securities (or the subsequent exercise,
conversion or exchange in respect thereof) as a component of the issuance of
debt by Holdings or its subsidiaries where (A) such Derivative Securities, if
immediately exchanged, converted or exchanged, would represent less than 10% of
the Outstanding Shares, and (B) the requisite return to the purchaser of such
debt includes the value of such Derivative Securities or (vi) an Initial Public
Offering.
3.6 Termination on Initial Public Offering. The Participation Right
provided for in this Article 3 shall terminate and be of no further force and
effect following an Initial Public Offering.
4. REGISTRATION RIGHTS.
4.1 Piggyback Registration. If, at any time Holdings proposes to
file a registration statement or statements under the Act (together with
any registration statement filed pursuant to a demand made under Section
4.2, "Registration Statement") for the public sale of Common Stock for
cash (other than in connection with a merger or pursuant to Form S-4, Form
S-8 or comparable registration statement); it will give written notice by
registered mail, at least 30 days prior to the filing of each such
registration statement, to each Party of its intention to do so. If any
Party (all such Parties collectively with any Parties who have made a
demand pursuant to Section 4.2 if the context so requires, the
"Registering Parties") notifies Holdings within 10 business days after
delivery of any such notice of its desire to include any such Common Stock
(including Common Stock underlying Derivative Securities)
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(all such shares, "Piggyback Shares") in such proposed Registration Statement,
Holdings shall afford such Registering Party the opportunity to have any
Piggyback Shares owned by such Party registered under such Registration
Statement; provided, however, that in the case of an underwritten offering, if
the managing underwriter notifies any Registering Party that the inclusion in
the registration statement of any portion of its Piggyback Shares would have an
adverse effect on such underwritten offering, then the managing underwriter may
limit the number of Piggyback Shares to be included in such registration
statement only to the extent necessary to avoid such adverse effect (an
"Underwriter's Cutback"). Such limit will apply pro rata among the Registering
Parties based upon the number of Piggyback Shares such Parties have requested to
be so included (provided that if the Registration Statement is being filed
pursuant to Section 4.2 below, then, as between the holders of Demand Securities
(as defined below) and the Securities held by other Parties, any Underwriter's
Cutback shall first be applied to such other Parties' Securities); and in the
event securities of Holdings held by any person or entity other than Holdings or
the Parties ("Third Party Securities") are to be included in such underwritten
offering, and the managing underwriter shall have determined to effect an
Underwriter's Cutback, then such limitation shall first be applied to the Third
Party Securities, and then to the Piggyback Shares.
Notwithstanding the provisions of this Section 4.1, Holdings shall have
the right at any time after it shall have given written notice pursuant to this
Section 4.1 (irrespective of whether a written request for inclusion of any such
securities shall have been made) to elect not to file any such proposed
registration statements or to withdraw the same after the filing but prior to
the effective date thereof.
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4.2 Demand Registration.
(a) (i) At any time commencing on the earlier of (A) six months
following the effective date of an Initial Public Offering and (B) the third
anniversary of the date hereof, and expiring five years thereafter and provided,
that such Securities shall not at that time be eligible for sale pursuant to
Rule 144(k) under the Act, the holders of OCM Securities and Northstar
Securities shall have the right, subject to the next two sentences, on one
occasion (which right is in addition to the registration rights under Section
4.1 hereof), exercisable by written notice to Holdings (the "Demand Notice")
given by the holders of a majority (the "Demanding Holders") of the OCM
Securities and Northstar Securities then outstanding that have not been sold
pursuant to a Registration Statement or pursuant to Rule 144(k) and have had all
transfer restrictions contained thereon removed (the "Demand Securities"), to
have Holdings prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement ("Demand Registration Statement") and
such other documents, including a prospectus, as may be necessary in the opinion
of counsel for Holdings, and shall keep such registration statement effective
and the disclosure in such documents current, in order to comply with the
provisions of the Act, so as to permit a public offering and sale of the Demand
Securities by the holders thereof for nine consecutive months.
(ii) A registration requested pursuant to this Section 4.2 shall not be
deemed to have been effected (and thereby the right to make a demand not used)
(A) unless a Registration Statement with respect thereto has become effective,
provided that a registration which does not become effective after Holdings has
filed a Registration Statement with respect thereto
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solely by reason of the refusal to proceed of the holders (other than a refusal
to proceed based upon the advice of counsel relating to a matter with respect to
Holdings) shall be deemed to have been effected by Holdings at the request of
such holders unless the holders of Demand Securities shall have elected to pay
all expenses referred to in Section 4.3(b) in connection with such registration,
(B) if, after it has become effective, such registration becomes subject to any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason and such order, injunction or
requirement is not promptly withdrawn or lifted, or (C) the conditions to
closing specified in the purchase agreement or underwriting agreement entered
into in connection with such registration are not satisfied, other than by
reason of some act or omission by such holders.
(b) Holdings shall have the right, at its option, following receipt
of the demand referred to in Section 4.2(a) above, in lieu of filing a
registration statement referred to in such demand, to undertake the filing of a
registration statement under the Act with the Commission for the sale by
Holdings of securities of Holdings, in which case, the Parties (including OCM
and Northstar) shall be permitted to exercise their rights under Section 4.1
above. Should Holdings exercise its rights under this Section 4.2(b), the rights
of the Demanding Holders to make a demand under Section 4.2(a) above on one
occasion shall not be deemed to have been exercised, and such parties shall
retain such right subject to the limitations contained therein.
(c) In Holdings' discretion, it may include a sale of shares or
shares owned by others or an issuance of shares by Holdings in a registration
pursuant to this Section 4.2. In the event of an Underwriter's Cutback in
connection with a registration pursuant to this
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Section 4.2, such Underwriter's Cutback shall first be applied in respect of the
Piggyback Shares, then in respect of the shares to be included by Holdings,
pursuant to this Section 4.2(c) and lastly in respect of the Demand Securities.
4.3 Covenants With Respect to Registration. In connection with any
registration under Section 4.1 or 4.2 hereof, as applicable, Holdings covenants
and agrees as follows:
(a) Holdings shall prepare and use commercially reasonable efforts
to, not later than 60 days after (or if the 60th day is not a business day, the
first business day thereafter) of delivery of any demand therefor, to cause such
Demand Registration Statement to become effective under the Act within 150 days
(or if the 150th day is not a business day, the first business day thereafter)
after demand therefor and shall keep the Demand Registration Statement effective
for not less than nine months after the date on which notice of the
effectiveness thereof is received (such period being called the "Demand
Registration Period"), and shall furnish holders of Demand Securities such
number of prospectuses as shall reasonably be requested; provided, however, that
Holdings may, at any time, delay the filing or delay or suspend the
effectiveness of such Demand Registration Statement or, without suspending such
effectiveness, instruct Demanding Holders not to sell any securities included in
such demand registration, (i) if Holdings shall have determined that Holdings
would be required to disclose any actions taken or proposed to be taken by
Holdings in good faith and for valid business reasons, including without
limitation, the acquisition or divestiture of assets, which disclosure would
have a material adverse effect on Holdings or on such actions, or (ii) if
required by law, to update the prospectus relating to any such registration to
include updated financial statements or other information (a "Suspension
Period"), by providing such
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Demanding Holders with written notice of such Suspension Period and the reasons
therefor; and provided, further, that the Suspension Periods, in the aggregate,
do not exceed 90 days. Holdings shall provide such notice as soon as practicable
and in any event prior to the commencement of such a Suspension Period. In the
event of a Suspension Period, the nine-month effective period during which a
demand registration is to remain effective pursuant to Section 4.2(a) shall be
tolled until the end of any such Suspension Period.
(b) Holdings shall pay all costs (including fees and expenses of one
counsel to the Registering Parties, but excluding any underwriting or selling
commissions or discounts or other charges of any broker-dealer acting on behalf
of any holder of Demand Securities), fees and expenses in connection with all
registration statements filed pursuant to Sections 4.1 and 4.2 hereof and offers
and sales pursuant thereto including, without limitation, Holdings' legal and
accounting fees, printing expenses, blue sky fees and expenses, registration
fees, filing fees and listing fees.
(c) In connection with any registration contemplated by Section 4.1
or 4.2 hereof, the following provisions shall apply:
(i) Holdings shall (A) furnish to the Registering Parties,
prior to the filing of a Registration Statement with the Commission, a
copy of the Registration Statement and each amendment thereto (including
any incorporated documents) and each supplement, if any, to the prospectus
included therein and any document that is filed after the filing of the
Registration Statement and that is incorporated or would be deemed
incorporated by reference therein, and (B) include the names of the
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Registering Parties who propose to sell securities pursuant to the
Registration Statement as selling security holders.
(ii) Holdings shall promptly give written notice to each
Registering Party:
(A) when the Registration Statement or any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective;
(B) of any request by the Commission or other
governmental authority for amendments or supplements to the
Registration Statement or the prospectus included therein or
for additional information;
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose;
(D) of the receipt by Holdings or its legal counsel of
any notification with respect to the suspension of the
qualification of the Piggyback Shares or Demand Securities (as
applicable, the "Registered Securities") for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(E) of the happening of any event that requires Holdings
to make changes in the Registration Statement or the
prospectus in order that the Registration Statement or the
prospectus does not contain an
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untrue statement of a material fact nor omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading or of the
commencement of any Suspension Period.
(iii) Holdings shall make every reasonable effort to prevent
the issuance of and obtain the withdrawal at the earliest possible time of any
order suspending the effectiveness of the Registration Statement or of the
qualification (or exemption therefrom) of any of the Piggyback Shares or Demand
Securities for sale in any jurisdiction.
(iv) Holdings shall furnish to each Registering Party, without
charge, at least one copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Registering Party so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(v) Holdings shall deliver to each Registering Party, without
charge, as many copies of the prospectus (including each preliminary prospectus)
included in the Registration Statement and any amendment or supplement thereto
as such person may reasonably request. Holdings consents, subject to the
provisions of this Agreement, to the use of the prospectus or any amendment or
supplement thereto included in the Registration Statement by each of the
Registering Parties in connection with the offering and sale of the Registered
Securities covered by such prospectus or any such amendment or supplement.
(vi) Prior to any public offering of the Registered
Securities, pursuant to any Registration Statement, Holdings shall register or
qualify or cooperate with the Registering Parties and their respective counsel
in connection with the registration or qualification of the Registered
Securities covered thereby for offer and sale under the
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securities or "blue sky" laws of such states of the United States as any
Registering Party reasonably requests in writing and do any and all other acts
or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Registered Securities covered by such Registration
Statement; provided, however, that Holdings shall not be required to (i) qualify
generally to do business in any jurisdiction where it is not then so qualified
or (ii) take any action which would subject it to general service of process or
to taxation in any jurisdiction where it is not then so subject.
(vii) Holdings shall cooperate with the Registering Parties to
facilitate the timely preparation and delivery of certificates representing the
Registered Securities to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such names
as the Registering Parties may request (including being eligible for deposit
with The Depository Trust Company) a reasonable period of time prior to sales of
the Registered Securities pursuant to such Registration Statement.
(viii) Upon the occurrence of any event contemplated by
paragraphs (B) through (E) of Section 4.3(c)(ii) above during the period for
which Holdings is required to maintain an effective Registration Statement,
Holdings shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and any other
required document so that, as thereafter delivered to the Registering Parties or
purchasers of Registered Securities covered by such Registration Statement, the
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If Holdings notifies the
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Registering Parties in accordance with paragraphs (B) through (E) of Section
4.3(c)(ii) above to suspend the use of the prospectus until the requisite
changes to the prospectus have been made, then the Registering Parties shall
suspend use of such prospectus, and the period of effectiveness of the
Registration Statement provided for in Section 4.2(a) above shall each be
extended by the number of days from and including the date of the giving of such
notice to and including the date when the Registering Parties shall have
received such amended or supplemented prospectus pursuant to this paragraph.
(ix) Not later than the effective date of the applicable
Registration Statement, Holdings will obtain one CUSIP number for all of the
Registered Securities covered by such Registration Statement.
(x) Holdings may require each Registering Party to furnish to
Holdings such information regarding the Registering Party and the distribution
of the Registered Securities as Holdings may from time to time reasonably
require for inclusion in the Registration Statement, and Holdings may exclude
from such registration the Registered Securities of any Registering Party that
fails to furnish such information within a reasonable time after receiving such
request.
(xi) In the case of any Demand Registration Statement,
Holdings shall (i) make reasonably available for inspection by the Registering
Parties, any underwriter participating in any disposition pursuant to the Demand
Registration Statement and any attorney, accountant or other agent retained by
the Registering Parties or any such underwriter all relevant financial and other
records, pertinent corporate documents and properties of Holdings and its
subsidiaries and (ii) cause Holdings' and its subsidiaries, officers, directors,
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employees, accountants and auditors to supply all relevant information
reasonably requested by the Registering Parties or any such underwriter,
attorney, accountant or agent in connection with the Demand Registration
Statement, in each case as shall be reasonably necessary, in the judgment of the
Registering Parties or any such underwriter, attorney, accountant or agent
referred to in this paragraph, to conduct a reasonable investigation within the
meaning of Section 11 of the Act; provided, however, that the foregoing
inspection and information gathering shall be coordinated on behalf of the
Registering Parties by one counsel designated by and on behalf of all
Registering Parties and one counsel designated by and on behalf of the
underwriters.
(xii) In the case of any Demand Registration Statement,
Holdings, if requested by holders of a majority of the Demand Securities, shall
cause (i) its counsel to deliver an opinion and updates thereof relating to the
Demand Securities to be registered in customary form addressed to holders of the
Demand Securities and the managing underwriters, if any, thereof and dated, in
the case of the initial opinion, the effective date of such Demand Registration
Statement (it being agreed that the matters to be covered by such opinion shall
include, without limitation, the due incorporation and good standing of Holdings
and its subsidiaries; the due authorization, execution, authentication and
issuance, and the validity and enforceability, of the applicable Demand
Securities; the absence of governmental approvals required to be obtained in
connection with the Demand Registration Statement or the offering and sale of
the applicable Demand Securities; the compliance as to form of such Demand
Registration Statement and any documents incorporated by reference therein with
the requirements of the Securities Act; and, as of the date of the opinion and
as of the effective
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date of the Demand Registration Statement or most recent post effective
amendment thereto, as the case may be, the absence from such Demand Registration
Statement and the prospectus included therein, as then amended or supplemented,
and from any documents incorporated by reference therein of an untrue statement
of a material fact or the omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading (in
the case of any such documents, in the light of the circumstances existing at
the time that such documents were filed with the Commission under the Exchange
Act)); (ii) its officers to execute and deliver all customary documents and
certificates and updates thereof reasonably requested by any underwriters of the
applicable Demand Securities and (including, without limitation, an underwriting
agreement in form and substance as is customary in underwritten public
offerings), and (iii) its independent public accountants and the independent
public accountants with respect to any business acquired, to the extent
financial information with respect thereto is included or incorporated by
reference in the Demand Registration Statement to provide to the holders of the
Demand Securities and any underwriter therefor a comfort letter in customary
form and covering matters of the type customarily covered in comfort letters in
connection with primary underwritten offerings, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by Statement
of Auditing Standards No. 72.
(xiii) Holdings shall comply with all applicable rules and
regulations of the Commission and make generally available to its security
holders earnings statements satisfying the provisions of Section 11(a) of the
Act and Rule 158 thereunder (or any similar rule promulgated under the Act) no
later than 45 days after the end of any 12-month period
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(or 90 days after the end of any 12-month period if such period is a fiscal
year) (or in each case within such extended period of time as may be permitted
by the Commission for filing the applicable report with the Commission) (i)
commencing at the end of any fiscal quarter in which Demand Securities are sold
to underwriters in a firm commitment or best efforts underwritten offering and
(ii) if not sold to underwriters in such an offering, commencing on the first
day of the first fiscal quarter of Holdings after the effective date of a
Registration Statement, which statements shall cover said 12-month period.
(xiv) Holdings shall cooperate with each seller of Demand
Securities covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Demand Securities and their respective
counsel in connection with any filings required to be made with the NASD.
(xv) Holdings shall use commercially reasonable efforts to
take all other steps necessary to effect the registration of the Registered
Securities covered by a Registration Statement contemplated hereby.
(d) Holdings agrees to indemnify and hold harmless each Registering
Party, the officers, directors, partners and fiduciaries of each Registering
Party and each person, if any, who controls such Party within the meaning of the
Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the officers, directors, partners and fiduciaries of each such controlling
person (collectively the "Indemnified Parties") from and against any losses,
claims, damages or liabilities, joint or several, or any actions in respect
thereof (including, but not limited to, any losses, claims, damages, liabilities
or actions relating to purchases and sales of the Registered Securities) to
which each Indemnified Party may
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become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to a Registration
Statement, or arise out of, or are based upon, the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse, as incurred,
each Indemnified Party for any legal or other expenses reasonably incurred by it
in connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that (i) Holdings
shall not be liable in any such case to the extent that such loss, claim,
damage, liability or action arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Registration Statement in
reliance upon and in conformity with written information pertaining to such
Registering Party and furnished to Holdings by or on behalf of such Registering
Party specifically for inclusion therein; (ii) with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
prospectus relating to a Registration Statement, the indemnity agreement
contained in this subsection (d) shall not inure to the benefit of any
Registering Party from whom the person asserting any such losses, claims,
damages or liabilities purchased the Registered Securities concerned, to the
extent that a prospectus relating to such Registered Securities was required to
be delivered by such Registering Party under the Securities Act in connection
with such purchase and any
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such loss, claim, damage or liability of such Registering Party results from the
fact that there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Registered Securities to such person, a copy of
the final prospectus, as amended or supplemented, if Holdings had previously
furnished copies thereof to such Registering Party and (iii) the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any underwriter or Registering Party from whom the person
asserting any such loss, claim, damage or liability purchased the Registered
Securities if a copy of the prospectus included in the applicable Registration
Statement (as then amended or supplemented, if such amendment or supplement was
furnished by Holdings) was not sent or given by or on behalf of any underwriter
or Registering Party to such person, if such is required by law, at or prior to
the written confirmation of the sale of such Registered Securities to such
person and if the prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, claim, damage or liability; provided
further, however, that this indemnity agreement will be in addition to any
liability which Holdings may otherwise have to such Indemnified Party. Holdings
shall also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution (in each
case as described in a Registration Statement), their officers and directors and
each person who controls such persons within the meaning of the Securities Act
or the Exchange Act to the same extent as provided above with respect to the
indemnification of the Registering Parties if requested by such holders.
(e) Each Registering Party, severally and not jointly, will
indemnify and hold harmless Holdings and each person, if any, who controls
Holdings within the meaning of
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the Securities Act or the Exchange Act from and against any losses, claims,
damages, liabilities or actions in respect thereof to which Holdings or any such
controlling person may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Registration, or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary to make the statements therein not
misleading (in the case of the prospectus or preliminary prospectus, in light of
the circumstances under which they were made), but in each case only to the
extent that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information pertaining to such Registering Party and furnished to Holdings by or
on behalf of such Registering Party specifically for inclusion therein; and,
subject to the limitation set forth immediately preceding this clause, shall
reimburse, as incurred, Holdings for any legal or other expenses reasonably
incurred by Holdings or any such controlling person in connection with
investigating or defending any loss, claim, damage, liability or action in
respect thereof. This indemnity agreement will be in addition to any liability
which such Registering Party may otherwise have to Holdings or any of its
controlling persons.
(f) Promptly after receipt by an Indemnified Party under Section
4.3(d) or (e) of notice of the commencement of any action or proceeding
(including a governmental investigation), such Indemnified Party will, if a
claim in respect thereof is to be made against
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any person (the "Indemnifying Party") under Section 4.3(d) or (e), notify the
Indemnifying Party of the commencement thereof; but the omission so to notify
the Indemnifying Party will not, in any event, relieve the Indemnifying Party
from any obligations to any Indemnified Party other than the indemnification
obligation provided in paragraph (d) or (e) above unless and to the extent that
the Indemnifying Party has been prejudiced in any material respect by such
failure. In case any such action is brought against any Indemnified Party, and
it notifies the Indemnifying Party of the commencement thereof, the Indemnifying
Party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other Indemnifying Party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such Indemnified
Party (who shall not, except with the consent of the Indemnified Party, be
counsel to the Indemnifying Party), and after notice from the Indemnifying Party
to such Indemnified Party of its election so to assume the defense thereof the
Indemnifying Party will not be liable to such Indemnified Party under Section
4.3(d) or (e) for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such Indemnified Party in connection
with the defense thereof. Notwithstanding the foregoing, an Indemnified Party
shall have the right to employ separate counsel in any such proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party or parties unless (1) the
Indemnifying Party has agreed to pay such fees and expenses; (2) the
Indemnifying Party shall have failed promptly after notice to assume the defense
of such proceeding or shall have failed to employ counsel reasonably
satisfactory to such Indemnified Party; or (3) the named parties to any such
proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying
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Party or any of its affiliates or controlling persons, and such Indemnified
Party shall have been advised in writing by counsel that either (x) a conflict
of interest may exist if such counsel represents such Indemnified Party and the
Indemnifying Party (or such affiliate or controlling person) or (y) there may be
one or more legal defenses available to such Indemnified Party that are
different from or in addition to those available to the Indemnifying Party or
such affiliate or controlling person (in which case, if such Indemnified Party
notifies the Indemnifying Parties in writing that it elects to employ separate
counsel at the expense of the Indemnifying Parties, the Indemnifying Parties
shall not have the right to assume the defense thereof and the fees and expenses
of such counsel shall be at the expense of the Indemnifying Party; it being
understood, however, that the Indemnifying Party shall not, in connection with
any one such proceeding or separate but substantially similar or related
proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for all such Indemnifying Parties. No Indemnifying Party shall be liable
for any settlement of any such proceeding effected without its written consent,
but if settled with its written consent, or if there be a final unappealable
judgment for the plaintiff in any such proceeding, each Indemnifying Party
jointly and severally agrees, subject to the exceptions and limitations set
forth above, to indemnify and hold harmless each indemnified party from and
against any and all losses, claims, damages or liabilities by reason of such
settlement or judgment. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending or
threatened action in respect of which any Indemnified Party is or could have
been a party
46
<PAGE>
sand indemnity could have been sought hereunder by such Indemnified Party unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on any claims that are the subject matter of such action.
(g) If the indemnification provided for in Section 4.3(d) or (e) is
unavailable or insufficient to hold harmless an Indemnified Party thereunder,
then each Indemnifying Party shall contribute to the amount paid or payable by
such Indemnified Party as a result of the losses, claims, damages, liabilities
or actions in respect thereof referred to in Sections 4.3(d) and (e) above in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party or Parties on the one hand and the Indemnified Party on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof) as well
as any other relevant equitable considerations. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by Holdings,
on the one hand, or such Registering Party or such other indemnified person, as
the case may be, on the other, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid by an Indemnified Party as a result of the losses,
claims, damages, liabilities or actions referred to in the first sentence of
this subsection (g) shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any action or claim which is the subject of this Section 4.3(g),
the Registering Party shall not be required to contribute any amount in excess
of the amount by which the net proceeds received by such
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<PAGE>
holders from the sale of Registered Securities pursuant to a Registration
Statement exceeds the amount of damages which such holders have otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The parties agree that it would not be just and equitable if
contribution pursuant to this section were determined by pro rata allocation or
by any other method that does not take account of the equitable considerations
referred to above. For purposes of this subparagraph (g), each person, if any,
who controls such Indemnified Party within the meaning of the Securities Act or
the Exchange Act shall have the same rights to contribution as such Indemnified
Party and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
(h) The agreements contained in Sections 4.3(d) through (g) shall
survive the sale of the Registered Securities pursuant to a Registration
Statement and shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation made by or on
behalf of any indemnified party.
4.4 Extension of Exercise Period. Provided the holders of Demand
Securities shall have timely furnished Holdings with all information and taken
such other actions as may be required by Holdings in order to effect such
registration, if Holdings shall willfully fail to comply with the provisions of
Section 4.3(a), Holdings shall, in addition to any other
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<PAGE>
equitable or other relief available to the holders of Demand Securities, extend
the Exercise Period by such number of days as shall equal the delay caused by
Holdings' failure.
4.5 Definition of Common Stock. For the purposes of this Article 4, the
term "common stock" shall include any securities issued or issuable with respect
to such securities by any of stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise.
4.6 Designation of Underwriters. In connection with any underwritten
public offering pursuant to a Demand Registration, Holdings shall select the
managing underwriter (with the consent of the holders of a majority of the
Demand Securities, such consent not to be unreasonably withheld), and the
holders of a majority of the Demand Securities shall select the co-manager if
one is desired by them (with the consent of Holdings, such consent not to be
unreasonably withheld).
5. SPECIAL OCM PRIVILEGES
5.1 OCM Designee.
(a) Prior to an Initial Public Offering and so long as OCM and its
Permitted Transferees own more than one-third of the Outstanding Shares it owns
on the date hereof (as adjusted to allow for subdivisions and combinations of
Common Stock, stock dividends and other similar dilution events), the other
Parties shall, at any annual meeting of stockholders of Holdings or any special
meeting of stockholders of Holdings called for the purpose of electing
directors, vote their Shares for the election of (i) one member of the
49
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Board designated by OCM, and (ii) if the Board consists of more than seven
members, for one additional member designated by OCM.
(b) Following an Initial Public Offering and, so long as OCM and its
Permitted Transferees continue to own not less than 10% of the Outstanding
Shares, the other Parties shall, at any annual meeting of stockholders of
Holdings or any special meeting of stockholders of Holdings called for the
purpose of electing directors, vote their Shares for the election of one member
of the Board designated by OCM.
(c) Upon the resignation or removal of any member of the Board
designated by OCM, if the conditions specified in Section 5.1(a) or 5.1(b), as
applicable, are satisfied, the other Parties shall vote their Shares for such
replacement director as shall be designated by OCM. No director designated by
OCM may be removed from the Board without the vote or consent of OCM absent
fraud or willful misconduct by such individual.
5.2 Compensation of Designated Director(s). Any member of the Board
designated by OCM shall receive the same fee, reimbursement of expenses and
other compensation, if any, received by the other members of the Board who are
not affiliated with or members of management of Holdings or its subsidiaries.
5.3 Executive Committees. Until an Initial Public Offering, the Board
shall not act through any executive committee or similar body unless one OCM
Board representative is a member thereof.
5.4 RBC Board. Upon the request of OCM, OCM shall have all of the same
rights in respect of the Board of Directors of RBC as are described in Section
5.1 through 5.3 above as to the Board.
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5.5 OCM Issues. Prior to an Initial Public Offering, and so long as OCM
and its Permitted Transferees own more than one-third of the Outstanding Shares
owned by OCM on the date hereof (as adjusted to allow for subdivisions and
combinations of Common Stock, stock dividends and other similar dilution
events), the approval of the director designated by OCM shall be required in
respect of any of the following matters:
(a) Any repeal, alteration, amendment, recision or other
modification to the Certificate of Incorporation or By-laws of the Corporation
if any such action would adversely affect the rights and entitlements of OCM as
set forth in this Agreement, Certificate of Incorporation or such By-laws.
(b) Any modification to the Tax Sharing Agreement, entered into as
of June 23, 1997, by and among Holdings, RBC, Industrial Tectonics Bearings
Corporation, RBC Linear Precision Products, Inc. and RBC Nice Bearings, Inc.
(c) Any transaction between Holdings or any of its Affiliates and
Hartnett other than pursuant to the Hartnett Employment Agreement which provides
material benefit to Hartnett and (i) is on terms less favorable to the
Corporation than could be available through independent Persons, or (ii)
involves the direct or indirect payment to Hartnett of more than $500,000.
(d) Any transaction described in Article Fourth B.(1)(c)(ii) of the
Certificate of Incorporation as in effect on the date hereof.
5.6 Delivery of Financial Information. Prior to an Initial Public
Offering, and so long as OCM and its Permitted Transferees own more than
one-third of the Outstanding Shares owned by OCM on the date hereof (as adjusted
to allow for subdivisions and
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<PAGE>
combinations of Common Stock, stock dividends and other similar dilution
events), upon the request of OCM, the Corporation shall provide to OCM monthly,
quarterly and annual financial statements, but only to the extent, and in such
form, as are normally prepared by the Corporation. The delivery of any such
financial statements shall not be deemed to constitute a representation by
Holdings respecting the accuracy of the information contained therein. Holdings
may condition the delivery thereof upon execution of a confidentiality agreement
in form reasonably acceptable to OCM.
6. TERMINATION; AMENDMENT; WAIVER
6.1 Termination; Amendment.
(a) This Agreement may be terminated and the terms hereof amended at
any time only by the execution of a written instrument signed on behalf of the
owners of 80% of the Outstanding Shares held by the Parties.
(b) In the event of the termination of this Agreement, this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party hereto or any of their directors, officers, partners or
stockholders.
6.2 Waiver. Any agreement on the part of any Party hereto as to any waiver
of any of its rights hereunder shall be valid only if set forth in an instrument
in writing signed on behalf of such Party.
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7. MISCELLANEOUS
7.1 Notices.
(a) Any notice, request, instruction, or other communication to be
given hereunder by any party to another shall be in writing and shall be deemed
to have given if delivered by hand or sent by telecopier (transmission
confirmed), certified or registered mail (return receipt requested), postage
prepaid, or by overnight express service, addressed to the respective party or
parties at the following addresses:
If to Holdings: Roller Bearing Holding Company, Inc.
60 Round Hill Road
P.O. Box 430
Fairfield, Connecticut 06430-0430
Telecopier: 203-256-0775
Attention: Chief Executive Officer
with a copy (which shall
not constitute notice) to: McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Telecopier: 212-547-5444
Attention: C. David Goldman, Esq.
If to OCM: OCM Principal Opportunities Fund, L.P.,
550 South Hope Street
Los Angeles, California 90071
Telecopier: 213-694-1593
Attention: Stephen A. Kaplan
with a copy (which shall
not constitute notice) to: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
Telecopier: 213-687-5600
Attention: Jeffrey H. Cohen, Esq.
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If to Northstar: Northstar Investment Management Corporation
Two Pickwick Plaza
Greenwich, Connecticut 06830-9847
Telecopier: 203-862-8603
Attention: Thomas Ole Dial and Jeffrey Aurigemma
with a copy (which shall
not constitute notice) to: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
Telecopier: 213-687-5600
Attention: Jeffrey H. Cohen, Esq.
If to any CSFB Party: c/o Credit Suisse First Boston
11 Madison Avenue
New York, New York 10010
Telecopier: 212-325-____
Attention: Transaction Advisory Group
and to
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Telecopier: 212-474-3700
Attention: Kris F. Heinzelman, Esq.
If to Hartnett: Dr. Michael J. Hartnett
c/o Roller Bearing Holding
Company, Inc.
60 Round Hill Road
P.O. Box 430
Fairfield, Connecticut 06430-0430
Telecopier: 203-256-0775
with a copy (which shall
not constitute notice) to: McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Telecopier: 212-547-5444
Attention: C. David Goldman, Esq.
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<PAGE>
or to such other address or addresses as any party may designate to the others
by like notice as set forth above. Any notice given hereunder shall be deemed
given and received on the date of hand delivery or transmission by telecopier,
or three days after mailing by certified or registered mail or one day after
delivery to an overnight express service for next day delivery, as the case may
be.
(b) For the purposes of this Agreement all of the CSFB Parties shall
be deemed to be a single Party, such that (i) any notices to be given to any
CSFB Party shall be deemed given if delivered to CSFB, (ii) a notice from any
CSFB Party shall be deemed delivered only if delivered by CSFB, (iii) all of the
Parties hereto other than the CSFB Parties shall be permitted to rely upon any
notice given by CSFB as containing the intentions of all of the CSFB Parties,
and (iv) the CSFB Parties shall share any rights contained in this Agreement as
they shall deem appropriate, and as reflected by any notices provided by CSFB.
7.2 Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the subject matter contemplated hereby.
7.3 Captions. The captions of the various Articles and Sections of this
Agreement have been inserted only for convenience of reference and shall not be
deemed to modify, explain, enlarge or restrict any provision of this Agreement
or affect the construction hereof.
7.4 No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representatives, legal representatives, and successors, any rights or remedies
under or by reason of this Agreement.
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7.5 Remedies Cumulative. No remedy made available by any of the provisions
of this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity.
7.6 Governing Law; Submission to Jurisdiction.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE WITHOUT GIVING EFFECT TO THE RULES OF
SAID STATE GOVERNING THE CONFLICTS OF LAWS.
(b) The Parties hereby agree that any action, proceeding or claim
against it arising out of, or relating in any way to, this Agreement may be
brought and enforced in the courts of the State of New York or of the United
States of America for the Southern District of New York, and irrevocably submits
to such jurisdiction for such purpose. The Parties hereby irrevocably waive any
objection to such exclusive jurisdiction or inconvenient forum. Any such process
or summons to be served upon any of the Parties (at the option of the party
bringing such action, proceeding or claim) may be served by transmitting a copy
thereof, by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 7.1 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Party so served in any action, proceeding or claim. Nothing herein shall affect
the right of any party hereto to serve process in any other manner
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permitted by law or to commence legal proceedings or otherwise proceed against
any other party in any other jurisdiction.
7.7 Assignment. Except as otherwise set forth in this Agreement, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the Parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
7.8 No Inconsistent Agreements. Holdings will not, on or after the date of
this Agreement, enter into any agreement that conflicts with the provisions
hereof. Holdings has not previously entered into any agreement (that is still in
effect) granting any registration rights with respect to its securities to any
Person other than in connection with the offering of the Debentures.
7.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when a counterpart has been signed by each of the parties
and delivered to the other party, it being understood that all parties need not
sign the same counterpart.
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IN WITNESS WHEREOF, the parties hereto have executed this Stockholders'
Agreement on this 23rd day of June, 1997.
ROLLER BEARING HOLDING COMPANY, INC.
By: _________________________________________
Name:
Title:
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
By: Oaktree Capital Management, LLC,
its General Partner
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
NORTHSTAR INVESTMENT MANAGEMENT
CORPORATION
By: _________________________________________
Name:
Title:
_____________________________________________
Michael J. Hartnett
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__________________________________
Mark Kennelley
__________________________________
Mark Patterson
__________________________________
Tim O'Hara
__________________________________
Richard Gallant
__________________________________
Rod Rivera
__________________________________
Vikram Limaye
__________________________________
Michael Maechling
59
<PAGE>
MERBAN EQUITY
By: _________________________
Name:
Title:
60
$ 500,000 New York, New York
June 23, 1997
PROMISSORY NOTE
THIS PROMISSORY NOTE is made in New York, New York, as of June 23, 1997
(this "Note"), for Five Hundred Thousand Dollars ($500,000). Capitalized terms
used herein without definition shall have the meaning ascribed to them in the
Stockholders' Agreement of even date herewith among Roller Bearing Holding
Company, Inc. ("Holdings") and certain of its stockholders, as in effect on the
date herewith.
RECITALS:
This Note is made by Michael J. Hartnett, Ph.D. ("Maker"), and is payable
to Roller Bearing Company of America, Inc., a Delaware Corporation with a
principal place of business at 60 Round Hill Road, Fairfield, Connecticut
("Payee").
This Note evidences the obligation of Maker to pay to Payee the principal
amount of Five Hundred Thousand Dollars ($500,000).
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration the receipt, the adequacy and sufficiency of which are
hereby acknowledged, the Maker makes this Note as follows:
1. Payment.
(a) Maker hereby promises to pay to Payee the then principal balance
hereof as well as any other amounts due hereunder on the earlier to occur of (i)
the first to occur of (A) an Initial Public Offering, or (B) any sale of
business transaction involving Holdings and all of its subsidiaries, taken as a
whole, whether in the nature of a sale of all or substantially all of their
assets; a sale of all of the Securities; or a merger, recapitalization or
reorganization following which the holders of Securities prior to such event no
longer own any Securities or any voting securities in the surviving or successor
entity, and (ii) June 23, 2007.
(b) The Payee shall have no rights of offset under any circumstances
whatsoever, i.e. regardless of the circumstances under which Payee is obligated
to the Maker; pursuant thereto, except as set forth in the first sentence of
this subsection (b), Payee may not satisfy any obligations that it may have to
Maker by offset against, or reduction of, amounts due hereunder.
(c) This Note shall not bear interest.
<PAGE>
2. Pledge. The Maker acknowledges that he is utilizing the proceeds hereof
to acquire 972.763 shares of Class A Common Stock that will have been exchanged
for 972.763 shares of Class B Supervoting Common Stock (the "Pledged Shares").
The Maker hereby confirms his agreement to pledge the Pledged Shares as security
for repayment of amounts due hereunder. Maker hereby agrees to execute such
pledge agreement as the Payee may reasonably request to evidence such pledge.
3. Default and Remedies.
(a) In the event default is made in the payment of this Note and such
default continues for five (5) days after such due date (an "Event of Default"),
Payee shall have the option to exercise any and all rights and remedies
available at law or in equity or under any document or instrument securing this
Note. If suit is brought to collect the amount due under this Note, Payee shall
be entitled to collect from Maker all reasonable costs and expenses of suit,
including, but not limited to, reasonable attorneys' fees.
(b) The remedies of Payee shall be cumulative and concurrent, and may be
pursued singularly, successively or together, at the sole discretion of Payee.
No act or omission or commission of Payee, including specifically any failure to
exercise any right, remedy or recourse, shall be deemed to be a waiver or
release of the same, such waiver or release to be effected only through a
written document executed by Payee and then only to the extent specifically
recited therein.
4. Waiver.
The Maker hereby waives presentment and demand for payment, notice of
dishonor, protest and notice of protest of this Note.
5. Miscellaneous.
(a) The headings of the paragraphs of this Note are inserted for
convenience only and shall not be deemed to constitute a part hereof.
(b) All payments under this Note shall be payable in lawful money of the
United States which shall be legal tender for public and private debts at the
time of payment and shall be paid to Payee at its principal place of business at
60 Round Hill Road, Fairfield, Connecticut.
(c) This Note shall be governed by and construed under the laws of the
State of New York.
(d) This Note shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that Maker
shall not have the right to assign the
<PAGE>
obligations made under this Note without the prior written consent of Payee.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the
date and year first above written.
-----------------------------------
Michael J. Hartnett, Ph.d.
TAX SHARING AGREEMENT
This Tax Sharing Agreement, effective as of June 23, 1997, by and among
Roller Bearing Holding Company, Inc., a Delaware corporation ("Parent"), and
Roller Bearing Company of America, Inc., a Delaware corporation, Industrial
Tectonics Bearings Corporation, a Delaware corporation, RBC Linear Precision
Products, Inc. , a Delaware corporation, and RBC Nice Bearings, Inc., a Delaware
corporation (hereinafter referred to collectively as "Subsidiaries"):
WITNESSETH:
WHEREAS, the parties (each of which is hereinafter sometimes referred to
as a "Member" or, in the plural, as "Members") hereto are members of an
affiliated group of corporations ("Affiliated Group") as defined by Section
1504(a) of the Internal Revenue Code of 1986, as amended ("Code"); and
WHEREAS, it is the intent and desire of the parties hereto that a method
be established for allocating the "consolidated tax liability" (as determined
under Treasury Regulation ss. 1.1502-2), as well as the aggregate Income Tax (as
hereinafter defined) liability of any combined, consolidated or unitary group of
Members which may be due under the provisions of applicable state, local or
foreign tax law, of the Affiliated Group among the appropriate Members; for
reimbursing the Parent for payment of any tax liabilities of the Affiliated
Group and its Members; and to provide for the allocation and payment of any
refund arising from a carryback of net operating losses or tax credits from
subsequent taxable years.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. A consolidated federal income tax return shall be filed by Parent for
the taxable year ended March 31, 1997, and for each subsequent taxable year in
respect of which this Agreement is in effect and for which the Affiliated Group
is required or permitted to file a consolidated federal income tax return. The
Parent and each Subsidiary shall execute and file such consents, elections, and
other documents that may be required or appropriate for the proper filing of
such returns.
2. (a) A combined, consolidated or unitary Income Tax return shall be
filed by Parent or such Member as may be appropriate for any taxable year for
which any two or more Members of the Affiliated Group are required or permitted
to file
<PAGE>
such a combined, consolidated or unitary Income Tax return. The appropriate
Members shall execute and file such consents, elections, and other documents as
may be required or appropriate for the proper filing of such returns.
(b) The term "Income Tax" means any state, local or foreign tax imposed
upon, measured by, or determined by reference to, or one of the bases of which
is, gross or net income, gross or net receipts, or analogous concepts.
3. (a) For purposes of computing each Member's earnings and profits for
tax purposes, the consolidated federal income tax liability of such Affiliated
Group shall be apportioned among the Members in accordance with the method set
forth in Section 1552(a)(1), Treasury Regulation ss. 1.1552-1(a)(1), and
Treasury Regulation ss. 1.1502-33(d)(2)(ii).
(b) Notwithstanding paragraph (a), for purposes of determining the
amount of a Member's payments to Parent under paragraph 5 hereof, each Member's
federal income tax liability for a taxable period shall be the amount which
would be due and payable by such Member if it had filed a separate federal
income tax return for such taxable period. For this purpose, such tax liability
shall be determined by taking into account any net operating loss or capital
loss carryforward of such Member.
(c) For all purposes hereunder, the tax liability shown on any
combined, consolidated or unitary Income Tax return shall be apportioned between
or among the appropriate Members in a similar manner as Federal income tax
liability is apportioned pursuant to this agreement, or if such apportionment is
not possible then in accordance with the provisions of applicable law, if any,
and otherwise in the ratio that the amount of each Member's separate, positive
taxable income (or other base upon which taxation is imposed) bears to the sum
of the separate, positive taxable income (or other base) amounts of all
appropriate Members.
4. The provisions of this Agreement shall be administered by Parent for
the benefit of all the Members.
5. (a) Subject to clause (b) below, for each taxable period during which
income, loss, or credit against tax of any Member is includible in the United
States consolidated federal income tax return of the Affiliated Group, each
Member (other than the Parent) shall pay to Parent an amount equal to its
consolidated federal income tax liability and any state, local or foreign income
tax liability relating to a combined, consolidated, or unitary group, in each
case as determined under paragraph 3(b) of this Agreement. Such payment is due
and payable no later than ten days after delivery of notice of such
-2-
<PAGE>
amounts. The actual amount of tax required to be paid by such Member pursuant to
the preceding sentence is hereinafter referred to as the "Member Payment."
(b) If the sum of the Member Payments made or to be made for a given
taxable year exceeds the consolidated federal tax liability of the Affiliated
Group for such taxable year (the "Excess Amount"), the Parent shall make a
payment to the Members or the Members shall reduce their payments to Parent, as
applicable, pursuant to this Section 5, in an amount equal to the product of (1)
such Member's net operating loss, capital loss or capital loss carryforward, as
applicable (each, a "Loss") or credit against tax (a "Credit"), used to offset
the income of any other Member for such taxable year multiplied by (2) the
highest rate of Federal income tax applicable to corporations, provided that the
aggregate of such payments or reduction of payments shall not exceed the Excess
Amount. In determining whether the Loss or Credit of such Member was used by the
Affiliated Group to offset the income of any other Member, with respect to a
Loss, the provisions of Treasury Regulation ss. 1.1502-21T shall apply and, with
respect to a Credit, Treasury Regulation ss. 1.1502-3 shall apply, in each case,
until such regulation is superseded or finalized at which time such superseding
or finalized regulations shall apply.
6. Parent shall have the right to assess Members their shares of any
estimated tax payments to be made with respect to the projected consolidated
federal income tax liability and any combined, consolidated, or unitary group
state, local or foreign Income Tax liability, for each year. Payment to Parent
shall be due and payable no later than ten days after such assessment. Each
Member will receive appropriate credit for such estimated tax payments in the
year-end computation under this Agreement.
7. If the consolidated federal income tax liability, or the Income Tax
liability of any combined, consolidated, or unitary group, is adjusted for any
taxable period, whether by means of an amended return, claim for refund, audit
by the Internal Revenue Service ("IRS") or other taxing authority, or by a final
judgment by a court of competent jurisdiction or other governmental authority,
the liability of each Member shall be recomputed under paragraphs 1, 2 and 3 of
this Agreement to give effect to such adjustments. In the case of a refund,
Parent shall make payment to each appropriate Member for its share of the
refund, determined in the same manner as in paragraph 5 of this Agreement,
within ten days after the refund is received by Parent, and in the case of an
increase in tax liability, each Member shall pay to Parent its allocable share
of such increased tax liability within ten days after receiving notice of such
liability from Parent. If any interest is to be paid or received as a result of
an income tax deficiency or refund described in
-3-
<PAGE>
this section, such interest shall be allocated among the Members in the ratio
which each Member's change in consolidated federal income tax liability (or the
appropriate combined, consolidated or unitary Income Tax liability) bears to the
total change in consolidated federal income tax liability (or the appropriate
combined, consolidated or unitary Income Tax liability). Any penalty shall be
allocated upon such basis as Parent deems just and proper in view of all
applicable circumstances.
8. This Agreement shall apply to the taxable year ending March 31, 1997,
and all subsequent taxable years, unless all of the Members agree in writing to
terminate the Agreement. Notwithstanding any termination, this Agreement shall
continue in effect with respect to any payment or refunds due for all taxable
periods prior to termination.
9. Parent will have the responsibility for conducting all IRS examinations
for the Affiliated Group, and all audits, inquiries or other proceedings by a
governmental authority involving any combined, consolidated or unitary group
Income Tax returns. All expenses of the examination and of defending any
adjustments or proposed adjustments which are directly identifiable with a
Member shall be billed to such Member. In addition, all costs and expenses not
directly identifiable with any Member will be allocated by Parent in an
equitable manner. Each Member agrees that any adjustment to its taxable income
or loss arising out of an examination of Parent by the IRS or another taxing
authority will be computed on the basis of agreements reached by Parent and the
IRS or such taxing authority, or on the basis of a decision of the Tax Court or
other courts of competent jurisdiction, where applicable. The redetermined tax
liability resulting from such adjustment shall be allocated pursuant to
paragraphs 3 and 7 of this Agreement.
10. Any Member which leaves the Affiliated Group shall be bound by this
Agreement for all taxable periods, or portions thereof, during which such Member
was a Member of the Affiliated Group.
11. The Members hereto specifically recognize that from time to time other
corporations may become Members of the Affiliated Group and hereby agree that
such new Members may become parties to this Agreement by executing the master
copy of this Agreement which shall be maintained at Parent's headquarters.
12. Any alteration, modification, addition, deletion, or other change in
the consolidated income tax return provisions of the Code or the regulations
thereunder, or to the provisions of any state, local or foreign Income Tax law
relating to combined, consolidated or unitary groups, shall automatically be
applicable
-4-
<PAGE>
to this Agreement.
13. Failure of one or more parties hereto to qualify by meeting the
definition of a Member of the "Affiliated Group" shall not operate to terminate
this Agreement with respect to the other parties as long as two or more parties
hereto continue so to qualify.
14. This Agreement cancels and supersedes any and all previously existing
agreements relating to the sharing of any federal, state, local or foreign
income tax liabilities among any and all of the Members of the Affiliated Group.
15. This Agreement shall bind and inure to the respective successors and
assigns of the parties hereto.
16. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused their names to be
subscribed and executed by their respective authorized officers on the dates
indicated, effective as of the date first written above.
ROLLER BEARING HOLDING COMPANY, INC.
By:
------------------------------------
ROLLER BEARING COMPANY OF AMERICA, INC.
By:
------------------------------------
INDUSTRIAL TECTONICS BEARINGS
CORPORATION
By:
------------------------------------
RBC LINEAR PRECISION PRODUCTS, INC.
By:
------------------------------------
RBC NICE BEARINGS, INC.
By:
------------------------------------
-5-
ASSET PURCHASE AGREEMENT
By and Among
SKF USA INC.,
BREMEN BEARINGS, INC.
and
ROLLER BEARING COMPANY OF AMERICA, INC.
Dated as of August 8, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I.
DEFINITIONS.................................................................. 1
1.1 Index of Defined Terms.......................................... 1
1.2. General Defined Terms........................................... 4
ARTICLE II.
TRANSFER OF ASSETS........................................................... 10
2.1. Transfer of Assets by Seller.................................... 10
2.2. Excluded Assets................................................. 12
2.3. Assumption and Satisfaction of Liabilities...................... 12
2.4. Excluded Liabilities............................................ 12
2.5. Assignment of Contracts and Rights.............................. 13
2.6. Closing......................................................... 14
2.7. June 30 Balance Sheet........................................... 15
2.8. Post-Closing Adjustment......................................... 16
2.9. Purchase Price Allocation....................................... 16
2.10. Subsequent Payments............................................. 17
2.11. Interim Period Payments......................................... 17
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER..................................... 19
3.1. Existence and Power............................................. 19
3.2. Authorization................................................... 19
3.3. Governmental Authorization...................................... 20
3.4. Non-Contravention............................................... 20
3.5. Financial Statements; Undisclosed Liabilities................... 20
3.6. Absence of Certain Changes...................................... 21
3.7. Properties; Leases; Tangible Assets............................. 22
3.8. Sufficiency of and Title to the Transferred Assets.............. 23
3.9. Affiliates...................................................... 23
3.10. Inventory....................................................... 24
3.11. Litigation...................................................... 24
3.12. Contracts....................................................... 24
3.13. Permits; Required Consent....................................... 25
3.14. Compliance with Applicable Laws................................. 26
3.15. Employment Agreements; Change in Control,
and Employee Benefits ........................................ 26
3.16. Labor and Employment Matters.................................... 27
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3.17. Intellectual Property........................................... 28
3.18. Advisory Fees................................................... 29
3.19. Environmental Compliance........................................ 29
3.20. Tax Matters..................................................... 29
3.21. Insurance....................................................... 30
3.22. Products........................................................ 30
3.23. Material Disclosures............................................ 30
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER AND RBC.............................. 30
4.1. Organization and Existence...................................... 30
4.2. Corporate Authorization......................................... 31
4.3. Governmental Authorization...................................... 31
4.4. Non-Contravention............................................... 31
4.5. Advisory Fees................................................... 31
4.6. Litigation...................................................... 31
ARTICLE V.
COVENANTS OF SELLER.......................................................... 31
5.1. Compliance with Terms of Required Governmental Approvals and
Required Contractual Consents................................... 31
5.2. Confidentiality................................................. 32
5.3. Taxes........................................................... 32
ARTICLE VI.
COVENANTS OF BUYER AND RBC................................................... 33
6.1. Indiana Responsible Property Transfer Law....................... 33
ARTICLE VII.
COVENANTS OF ALL PARTIES..................................................... 33
7.1. Further Assurances.............................................. 33
7.2. Bulk Sales Laws................................................. 34
7.3. Employees and Employee Benefit Matters.......................... 34
7.4. Allocation of Environmental Liabilities......................... 39
7.5. Product Warranty Claims......................................... 41
7.6. Excluded Product Liability Claims............................... 41
7.7. Excluded Worker's Compensation Claims........................... 41
ARTICLE VIII.
INDEMNIFICATION.............................................................. 42
8.1. Agreement to Indemnify.......................................... 42
8.2. Survival of Representations and Warranties and Covenants........ 43
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8.3. Claims for Indemnification...................................... 44
8.4. Defense of Claims............................................... 44
ARTICLE IX.
COVENANT NOT TO COMPETE...................................................... 46
9.1. Non-Compete..................................................... 46
9.2. Severability.................................................... 47
9.3. Enforcement..................................................... 47
ARTICLE X.
MISCELLANEOUS................................................................ 47
10.1. Notices....................................................... 48
10.2. Amendments; No Waivers........................................ 49
10.3. Expenses...................................................... 49
10.4. Successors and Assigns........................................ 49
10.5. Governing Law................................................. 49
10.6. Counterparts; Effectiveness................................... 49
10.7. Entire Agreement.............................................. 50
10.8. Captions...................................................... 50
10.9. Severability.................................................. 50
10.10. Construction.................................................. 50
10.11. Arbitration of Claims......................................... 50
10.12. Cumulative Remedies........................................... 52
10.13. Third Party Beneficiaries..................................... 52
iii
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") dated as of August
8, 1997 is by and among SKF USA INC., a Delaware corporation ("Seller"), BREMEN
BEARINGS, INC., a Delaware corporation ("Buyer") and a wholly owned subsidiary
of RBC (as defined below), and ROLLER BEARING COMPANY OF AMERICA, INC., a
Delaware corporation ("RBC").
R E C I T A L S
WHEREAS, Seller, through its Bremen Needle Division ("Bremen") is
engaged in the design, development, manufacture, assembly and sale of Products
(the "Business"); and
WHEREAS, Seller desires to sell and transfer to Buyer substantially
all of its assets related to the Business in consideration for the delivery by
Buyer to Seller of the Purchase Price (as defined herein) and on the terms and
conditions set forth herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows.
ARTICLE I.
DEFINITIONS
1.1 Index of Defined Terms. The following is an index of defined
terms utilized in this Agreement:
Defined Term Section Page
- ------------ ------- ----
Affiliate 1.2 4
Agreed Upon Procedures 2.7 15
Agreement Preface 1
Allocation Statement 2.10 16
Annual Financials 3.5 20
Applicable Law 1.2 4
Assumed Liabilities 2.3 12
Benefit Arrangement 1.2 4
Benefit Plan 1.2 5
<PAGE>
Bill of Sale 2.6(c)(vii) 14
Bremen Preface 1
Business Preface 1
Business Day 1.2 5
Buyer Preface 1
Buyer Indemnitees 8.1 42
Buyer's Actuary 7.3 35
Buyer's Auditors 1.2 5
Buyer's Union Plan 7.3 35
Closing 2.6 13
Closing Date 2.6 13
Code 1.2 5
Competitive Activity 9.1 46
Contingent Liabilities 1.2 5
Contracts 1.2 5
Covered Period 9.1 46
Damages 1.2 5
Effective Time 2.6 14
Employee 1.2 5
Employee Benefit Plan 1.2 6
Environmental Condition 1.2 6
Environmental Laws 1.2 6
Environmental Liabilities 1.2 6
Environmental Study 7.4 39
Equipment 2.1 10
ERISA 1.2 6
ERISA Affiliate 1.2 6
Excluded Assets 2.2 11
Excluded Environmental Parcel 7.4(a) 39
Excluded Liabilities 2.4 12
Excluded Product Warranty Claims 7.5 41
Excluded Product Liability Claims 7.6 41
Excluded Worker's Compensation Claims 7.7 42
Existing Known Environmental Conditions 1.2 6
Final Environmental Study 7.4 40
Financials 3.5 20
First Choice 2.7 15
401(k) Plan Employee 7.3 37
GAAP 1.2 7
Governmental Authority 1.2 7
Group Health Plan 1.2 7
Hazardous Substance 1.2 7
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Included Environmental Parcel 7.4(a) 39
Indemnifying Party 1.2 7
Indemnitee 1.2 7
Insurance Policies 3.21 30
Interim Financials 3.5 20
Interim Period 2.6 14
Interim Period Cash Flow Statement 2.11 18
Inventory 2.1 10
IRS 1.2 7
June 30 Balance Sheet 2.7 16
Knowledge 1.2 7
Leased Real Property 3.7 22
Leasehold Assignments 2.6 14
Leases 3.7 23
Liability 1.2 8
Lien 1.2 8
Machine #5 2.10 17
Machine #6 2.10 17
Machine #6 Runoff Date 2.10 17
Machines 2.10 17
Material Adverse Effect 1.2 8
May 31 Balance Sheet 3.5 20
Multiemployer Plan 1.2 8
Net Transferred Asset Value 2.8 16
New Lease 2.6 15
1996 Balance Sheet 3.5 20
Overpayment 2.8 16
Owned Real Property 3.7 22
Permits 3.13 25
Permitted Liens 1.2 8
Person 1.2 9
Personal Property Leases 3.7 22
Premises 2.6 15
Proceedings 3.11 24
Product 1.2 9
Prohibited Transaction 1.2 9
Proposed Interim Period Cash Flow Statement 2.11 18
Proposed June 30 Balance Sheet 2.7 15
Purchase Price 1.2 9
RBC Preface 1
Real Property 3.7 22
Required Contractual Consent 3.13 26
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Required Consents 3.13 26
Required Governmental Approval 3.13 25
Runoff Tests 2.10 17
Salaried Plan 7.3 34
Salaried Plan Employee 7.3 34
Scheduled Contracts 3.12 24
Selected Firm 2.7 16
Seller Preface 1
Seller Environmental Liabilities 7.4 40
Seller Indemnitees 8.1 42
Seller's Actuary 7.3 35
Seller's Auditors 1.2 9
Seller's Contingent Liabilities 1.2 9
Seller's 401(k) Plan 7.3 37
Seller's Union Plan 7.3 35
Study Date 7.4 41
Subsequent Event 7.4 41
Tax 1.2 9
Tax Return 1.2 9
Third Party Claim 8.4 45
Transfer Law 6.1 33
Transferred Assets 2.1 10
Transferred Employee 7.3 34
Union 1.2 9
Union Contract 1.2 9
Union Plan Employee 7.3 35
Unpaid Balance 2.8 16
Warranty 2.10 17
Workpapers 2.7 15
1.2. General Defined Terms. As used herein, the following terms
shall have the meaning indicated:
"Affiliate" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such other Person.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Authority (including any Environmental
Law) applicable to such Person or any of its Affiliates or Plan Affiliates or
any of their respective properties, assets, business operations, officers,
directors, employees, consultants or agents (in connection with such officer's,
director's, employee's,
4
<PAGE>
consultant's or agent's activities on behalf of such Person or any of its
Affiliates or ERISA Affiliates).
"Benefit Arrangement" means any material benefit arrangement, other
than an Employee Benefit Plan, maintained by Seller or any ERISA Affiliate that
covers the employees, former employees, directors, or former directors of Seller
and their beneficiaries with respect to Bremen; such term shall include, without
limitation, the following to the extent material: (i) each employment or
consulting agreement; (ii) each arrangement providing for insurance coverage or
workers' compensation benefits; (iii) each incentive bonus or deferred bonus
arrangement; (iv) each arrangement providing termination allowance, severance or
similar benefits; (v) each equity compensation plan; (vi) each deferred
compensation plan; and (vii) each compensation policy and practice.
"Benefit Plan" means an Employee Benefit Plan or Benefit
Arrangement.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are authorized or required
by law to close.
"Buyer's Auditors" means Ernst & Young.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contingent Liabilities" of a Person at a specific point in time
means Liabilities, regardless of how arising, that have not yet become fixed and
certain as of such time.
"Contracts" means all contracts, agreements, options, leases,
licenses, sales and purchase orders, commitments and other instruments of any
kind, whether written or oral, to which Seller is a party at the Effective Time
with respect to Bremen, including the Scheduled Contracts but excluding any
arrangements with Employees including any Benefit Plan.
"Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, Liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement net of
insurance proceeds actually received, including without limitation (i) interest
on cash disbursements in respect of any of the foregoing at the per annum rate
of interest publicly announced from time to time by Citibank, N.A. as its prime
rate (or reference rate) in effect from time to time, compounded quarterly, from
the date each such cash disbursement is made until the Person incurring the same
shall have been reimbursed in respect thereof and (ii) reasonable costs, fees
and expenses of attorneys, accountants and other agents of such Person incurred
in connection with the defense of the claim giving rise to the Damages or in
seeking indemnification therefor or reimbursement thereof. Any change in the
rate referred to in clause (i) above shall take effect at the opening of
business on the day specified in the public announcement of such change. Without
limiting the generality of the foregoing,
5
<PAGE>
Damages of a Person shall include any amounts paid by such Person pursuant to
any indemnification arrangement.
"Employee" means any Person employed by Seller in connection with
the Business.
"Employee Benefit Plan" means any employee benefit plan, as defined
in Section 3(3) of ERISA, sponsored or contributed to by Seller or any ERISA
Affiliate thereof that covers employees or former employees of Seller with
respect to Bremen.
"Environmental Condition" means a condition of the soil, surface
waters, groundwaters, stream sediments, air and similar environmental media both
on and off a property resulting from any activity, inactivity or operations
occurring on such property, that, by virtue of Environmental Laws or otherwise,
(i) requires investigatory, corrective or remedial measures, and/or (ii)
comprises a basis for claims, demands and/or Liabilities in respect of the
Business or the Leased Real Property.
"Environmental Laws" means all Applicable Laws relating to Hazardous
Substances, occupational health and safety, or the environment including,
without limitation, (i) all Applicable Laws pertaining to reporting, licensing,
permitting, controlling, investigating or remediating emissions, discharges,
releases or threatened releases of Hazardous Substances, chemical substances,
pollutants, contaminants or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature, into the air, surface water, groundwater or
land, (ii) all Applicable Laws relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances, chemical substances, pollutants, contaminants or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature; and
(iii) the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), the Clean Air
Act, the Water Pollution Control Act, the Safe Drinking Water Act, the Toxic
Substance Control Act ("TSCA") and all requirements promulgated pursuant to any
of these or analogous state or local statutes.
"Environmental Liabilities" means (i) Liabilities of a Person that
arise in connection with any proceeding, claim, lawsuit, complaint, citation,
inquiry, demand, notice or action which was or is brought or issued (A) by any
Governmental Authority or (B) by a third party, in either case, pursuant to or
under any Environmental Law or by virtue of an Environmental Condition, or (ii)
Liabilities or costs incurred by a Person that arise in connection with any
investigatory or remedial activities by virtue of an Environmental Condition in
order (A) to comply with any Environmental Law or (B) to minimize any potential
liability to a third party in connection with an Environmental Condition.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
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"ERISA Affiliate" of any Person means any other Person that,
together with such Person as of the relevant measuring date under ERISA, was or
is required to be treated as a single employer under Section 414 of the Code.
"Existing Known Environmental Conditions" means (i) those
Environmental Conditions identified on Schedules 3.19(a), 3.19(b) or 3.19(c) and
(ii) those Environmental Conditions of which Seller has Knowledge on or before
the Closing Date but are not so identified in any such Schedule.
"GAAP" means generally accepted accounting principles in the United
States applied on a consistent basis.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"Group Health Plan" means any group health plan, as defined in
Section 5000(b)(1) of the Code sponsored or contributed to by Seller or any
ERISA Affiliate that covers employees or former employees of Seller with respect
to Bremen.
"Hazardous Substance" means any substance or material: (i) the
presence of which requires investigation or remediation under any Applicable
Law; or (ii) the generation, storage, treatment, transportation, disposal,
remediation, removal, handling or management of which is regulated by any
Environmental Law; or (iii) that is defined as a "hazardous waste" or "hazardous
substance" under any Applicable Law; or (iv) that is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic or mutagenic or
otherwise hazardous and is regulated by any Governmental Authority having or
asserting jurisdiction over the Business or any of the Transferred Assets; or
(v) the presence of which constitutes a nuisance, trespass or other tortious
condition; or (vi) the presence of which on adjacent properties constitutes a
trespass by Seller in relation to the Business; or (vii) without limitation,
that contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenols (PCBS) or asbestos.
"Indemnifying Party" means: (1) Seller when any Buyer or RBC
Indemnitee is asserting a claim under Sections 8.1(a) or 10.11 or (2) Buyer or
RBC jointly or severally when any Seller Indemnitee is asserting a claim under
Sections 8.1(b) or 10.11.
"Indemnitee" means: (1) each of Buyer, RBC and their Affiliates with
respect to any claim for which Seller is an Indemnifying Party under Sections
8.1(a) or 10.11; or (2) Seller and its Affiliates with respect to claims for
which Buyer or RBC is an Indemnifying Party under Sections 8.1(b) or 10.11.
7
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"IRS" means the Internal Revenue Service.
"Knowledge" means: (1) with respect to Seller, the actual knowledge
of the following Persons: Krister Peil, Donald Robison, William McGlocklin,
Thomas Ruth, John Lenart, Jeffrey Derda, Allen Belenson, Rex Thrasher; (2) with
respect to Buyer, the actual knowledge of the following Persons: Michael J.
Hartnett, Michael S. Gostomski, Greg Ceuch, Tom King, Anthony Cavalieri, Joe
Gentile, Ron Lemansky, R. Lawrence Knowlton, Pat Mulligan.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise and whether
or not the same is required to be accrued on the financial statements of such
Person and whether or not the same appears on any Schedule to this Agreement.
"Lien" means, with respect to any asset, any mortgage, title defect
or objection, lien, pledge, charge, security interest, hypothecation,
restriction, encumbrance or charge of any kind in respect of such asset.
"Material Adverse Effect" means a change in, or effect on, the
operations, affairs, prospects, financial condition, results of operations,
assets, Liabilities, reserves or any other aspect of the Business that results
in a material adverse effect on, or a material adverse change in, the
Transferred Assets taken as a whole, or a material adverse effect on the
Business taken as a whole.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 3(37) and 4001(a)(3) of ERISA.
"Permitted Liens" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested in good faith by appropriate
proceedings; (ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons and other Liens
imposed by Applicable Law incurred in the ordinary course of business for sums
not yet delinquent or being contested in good faith, (iii) Liens relating to
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or to
secure the performance of leases, trade contracts or other similar agreements;
and (iv) other Liens set forth on Schedule 1.2(a) hereto. Notwithstanding the
foregoing, the following shall not be Permitted Liens: (a) any Lien arising
under the Code or ERISA with respect to the operation, termination, restoration
or funding of any Benefit Plan sponsored by, maintained by or contributed to by
Seller or any of its ERISA Affiliates or arising in connection with any excise
tax or penalty tax with respect to such Benefit Plan and (b) any Lien
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arising under clause (i) or (ii) above that is the subject of a contest except
and to the extent that the Taxes or sums in questions are reflected as a
Liability on the 1996 Balance Sheet.
"Person" means an individual, corporation, partnership, association,
trust, estate, joint-stock company, limited liability company, joint venture,
trust or other entity or organization, including a Governmental Authority.
"Product" means those precision needle rollers, precision rollers,
thrust bearings and radial bearings set forth in Schedule 1.2(b) hereto.
"Prohibited Transaction" means a transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA, respectively.
"Purchase Price" means the sum of the amounts paid pursuant to
Sections 2.6(b) and 2.10, plus the Unpaid Balance or minus the Overpayment, as
the case may be.
"Seller's Auditors" means Arthur Andersen, LLP.
"Seller's Contingent Liabilities" means those Contingent Liabilities
of Seller relating to the Business prior to the Effective Time that are not
booked as a liability on the June 30 Balance Sheet.
"Tax" means all taxes imposed of any nature including federal,
state, local or foreign net income tax, alternative or add-on minimum tax,
profits or excess profits tax, franchise tax, gross income, adjusted gross
income or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax, FICA or FUTA), real or personal property
tax or ad valorem tax, sales or use tax, excise tax, stamp tax or duty, any
withholding or back up withholding tax, value added tax, severance tax,
prohibited transaction tax, premiums tax, occupation tax, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental authority (domestic or foreign) responsible for the imposition of
any such tax.
"Tax Return" means all returns, reports, forms or other information
required to be filed with respect to any Tax.
"Union" means the International Union, United Automobile, Aerospace
and Agricultural Workers of America, U.A.W. Local 1368.
"Union Contract" means the Agreement between Bremen, Indiana Plant
of SKF USA, Inc. and the Union dated July 20, 1996.
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ARTICLE II.
TRANSFER OF ASSETS
2.1. Transfer of Assets by Seller. Upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Buyer agrees to purchase from Seller
and Seller agrees to sell or cause to be sold to Buyer at the Closing all the
assets, properties, rights, licenses, permits, contracts, causes of action and
claims, of every kind and description as the same shall exist at the Effective
Time (other than the Excluded Assets), wherever located, whether tangible or
intangible, real, personal or mixed, that are used, owned by, leased by or in
the possession of Seller in connection with the Business, whether or not
reflected on the books and records of Seller, including all assets shown on the
May 31 Balance Sheet and not disposed of in the ordinary course of business or
as permitted by this Agreement prior to the Effective Time (the collective
assets, properties, rights, licenses, permits, contracts, causes of action and
claims to be transferred to Buyer by Seller pursuant hereto are referred to
collectively herein as the "Transferred Assets") and including without
limitation all right, title and interest of Seller in, to and under the
following to the extent used, owned by, leased by or in the possession of Seller
in connection with the Business at the Effective Time:
(a) all real property and leases, capitalized or operating, of, and
other interests in, real property of Seller, in each case together with all
buildings, fixtures and improvements erected thereon and appurtenances thereto;
(b) all machinery, equipment, furniture, office equipment, computer
equipment (including all hardware and software), communications equipment,
vehicles, storage tanks, spare and replacement parts, fuel and other tangible
property (and interests in any of the foregoing) of Seller ("Equipment")
including, without limitation, the Equipment set forth on Schedule 2.1 hereto;
(c) all items of inventory, notwithstanding how classified in the
financial records of Seller, including all raw materials, purchased parts,
work-in-process, finished goods, supplies, spare parts and samples
(collectively, the "Inventory");
(d) the Contracts;
(e) to the extent relating to the Business and the conduct thereof
by Buyer following the Effective Time, all prepaid charges and expenses of
Seller, including any such charges and expenses with respect to ad valorem
taxes, leases and rentals and utilities;
(f) all rights of Seller under any insurance policy;
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(g) all of Seller's rights, claims, credits, causes of action or
rights of setoff against third parties relating to the Business or the
Transferred Assets, whether liquidated or unliquidated, fixed or contingent,
including claims pursuant to all warranties, representations and guarantees made
by suppliers, manufacturers, contractors and other third parties in connection
with products or services purchased by or furnished to Seller affecting any of
the Transferred Assets;
(h) all of Seller's patents, copyrights, trademarks, trade names,
service marks, service names, designs, know-how, processes, trade secrets,
inventions, and other proprietary data;
(i) all tools, dies, jigs, molds, patterns, machinery and equipment,
whether owned or leased, whether in the possession of the Seller or vendors;
(j) all rights under agreements with employees and others concerning
confidentiality and assignment of inventions;
(k) all transferable franchises, licenses, permits or other
authorizations issued or granted by any Governmental Authority that are owned
by, granted to or held or used by Seller, whether or not actually utilized by
Seller;
(l) all books, records, files and papers of Seller, whether in hard
copy or computer format, including books of account, invoices, engineering
information, sales and promotional literature, manuals and data, sales and
purchase correspondence, lists of present and former suppliers, personnel and
employment records of present and former employees, and documentation developed
or used for accounting, marketing, engineering, manufacturing or any other
purpose any time prior to the Effective Time;
(m) all lists of present customers and lists of former customers;
(n) all goodwill;
(o) all product designations used in Seller's catalog with respect
to the Products;
(p) all accounts receivable of Seller as of the Effective Time which
remain uncollected as of the Closing Date; and
(q) except as specifically provided in Section 2.2, all other assets
and properties of Seller that exist at the Effective Time, whether tangible or
intangible, real or personal.
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2.2. Excluded Assets. Buyer expressly understands and agrees that
the assets and properties set forth on Schedule 2.2 (the "Excluded Assets")
shall be excluded from the Transferred Assets and shall be retained by Seller.
2.3. Assumption and Satisfaction of Liabilities.
(a) Upon the terms and subject to the conditions of this Agreement
and in reliance upon the representations, warranties and agreements herein set
forth, Buyer agrees, effective at the time of Closing, to assume and in due
course perform, pay and discharge all the Liabilities set forth on Schedule 2.3
(the "Assumed Liabilities"); provided that any such Assumed Liabilities
discharged by Seller during the Interim Period shall be allocated by Buyer and
Seller as set forth in Section 2.11 hereof.
(b) Buyer shall be responsible for all Liabilities and obligations
arising out of the use and ownership of the Transferred Assets by Buyer after
the Effective Time or by the conduct of the Business after the Effective Time
except to the extent such Liabilities and obligations constitute Excluded
Liabilities; provided that any such Liabilities satisfied by Seller during the
Interim Period shall be allocated by Buyer and Seller as set forth in Section
2.11 hereof.
(c) Notwithstanding anything elsewhere contained herein to the
contrary, Buyer shall have the responsibilities associated with being a
successor employer under the Union Contract.
2.4. Excluded Liabilities. Buyer does not hereby assume, and shall
not at any time hereafter (including on or after the Effective Time) become
liable for, any of the Liabilities of Seller or any of its Affiliates or any
ERISA Affiliate of any of the foregoing other than the Assumed Liabilities (the
"Excluded Liabilities"). The Excluded Liabilities shall include, without
limitation, the following Liabilities:
(a) any Liability of any of Seller or any of its Affiliates or any
ERISA Affiliate of any of the foregoing whether currently in existence or
arising hereafter that is not attributable to, or that does not arise out of the
conduct of, the Business;
(b) any Liability whether presently in existence or arising
hereafter relating to an Excluded Asset;
(c) any Seller Environmental Liability;
(d) any Liability whether currently in existence or arising
hereafter relating to fees, commissions or expenses owed to any broker, finder,
investment banker, attorney or other
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intermediary or advisor employed by Seller or any of its Affiliates or their
respective ERISA Affiliates in connection with the transactions contemplated
hereby or otherwise;
(e) any Liability the existence of which constitutes a breach of any
representation or warranty hereunder;
(f) any Seller Contingent Liabilities except Liabilities that Buyer
has expressly agreed to assume pursuant to the terms of this Agreement;
(g) any Liability related to indebtedness of Seller for borrowed
money or capitalized leases, or the guarantee by Seller of the indebtedness of
any other Person, except as set forth on Schedule 2.4(g);
(h) any Liability of Seller arising under this Agreement;
(i) Excluded Product Warranty Claims;
(j) Excluded Product Liability Claims;
(k) any Liability under Contracts with Affiliates of Seller, except
Liabilities under those Contracts identified on Schedule 2.4(k); and
(l) Excluded Worker's Compensation Claims.
2.5. Assignment of Contracts and Rights.
(a) With respect to any material Contract and any claim, right or
benefit arising thereunder or resulting therefrom that constitute Transferred
Assets, promptly after the date hereof, to the extent requested by Buyer, Seller
will use reasonable efforts to obtain the written consent of the other parties
to any such Contract to the assignment thereof to Buyer or written confirmation
from such parties reasonably satisfactory in form and substance to Buyer
confirming that such consent is not required.
(b) If such consent, waiver or confirmation is not obtained with
respect to any such Contract, Seller and Buyer shall cooperate in an arrangement
reasonably satisfactory to Buyer and Seller under which Buyer would obtain, to
the extent practicable, the claims, rights and benefits and assume the
corresponding obligations thereunder in accordance with this Agreement,
including subcontracting, sub-licensing or sub-leasing to Buyer, or under which
Seller would enforce for the benefit of Buyer, with Buyer assuming Seller's
obligations, any and all claims, rights and benefits of Seller against a third
party thereto. Seller will promptly pay to Buyer when received all monies
received by Seller under any Transferred Asset or any claim, right or benefit
arising thereunder not transferred to Buyer pursuant to this Section 2.5(b).
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2.6. Closing.
(a) The closing (the "Closing") of the transactions contemplated by
this Agreement shall take place at the offices of McDermott, Will & Emery, 50
Rockefeller Plaza, New York, New York on August 8, 1997 or such other date as to
which Buyer and Seller may agree (the "Closing Date"). Upon consummation, the
Closing shall be deemed to have taken place as of 12:01 a.m. July 1, 1997 (the
"Effective Time") and Buyer and Seller shall allocate all economic matters
associated with the period between the Effective Time and the Closing Date (the
"Interim Period") as set forth in Section 2.11 hereof.
(b) At the Closing, Buyer shall pay to Seller $3,640,177 (the
"Closing Payment"), computed as shown on Schedule 2.6(b), in cash by wire
transfer of immediately available funds to a bank account or bank accounts
designated in writing by Seller prior to the Closing.
(c) At or prior to the Closing, Buyer shall have received:
(i) an Interim Services Agreement in the form attached as
Exhibit A, duly executed and delivered by Seller (the "Interim Services
Agreement").
(ii) an opinion of counsel from Allen G. Belenson, Esq.,
counsel to Seller, in the form attached hereto as Exhibit B.
(iii) UCC-11 searches with respect to the Transferred Assets.
(iv) UCC-3 termination statements with respect to financing
statements filed against the Business or the Transferred Assets (other than the
Permitted Liens).
(v) patent, trademark and copyright assignments, in form and
substance satisfactory to Buyer, effecting the transfer of the patents,
trademarks and copyrights included in the Transferred Assets.
(vi) assignments (with lessor's consents thereto) of leasehold
interests in a leased real or personal property included in the Transferred
Assets (collectively, the "Leasehold Assignments").
(vii) a bill of sale, grant deed and such other documents of
assignment, transfer and conveyance as Buyer shall reasonably request to
transfer all right, title and interest of Seller in and to the Transferred
Assets to Buyer (collectively, the "Bill of Sale").
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(viii) all material Governmental Approvals for the
transactions contemplated by this Agreement to be obtained by Seller, in form
and substance acceptable to Buyer.
(ix) all material Required Contractual Consents, in form and
substance acceptable to Buyer.
(x) an agreement of Brem, Inc. (A) consenting to the
assignment of its agreement of lease with Seller to Buyer and (B) covenanting to
negotiate in good faith a new agreement of lease (the "New Lease") with respect
to the premises it leases to Seller (the "Premises"), pursuant to which Buyer
will lease the Premises from Brem, Inc. on substantially similar terms
(including, but limited to, the rental cost per square foot of the Premises and
the term of the New Lease) as may be contained in a new lease agreement
negotiated by Buyer with Bremen State Bank, as Trustee, relating to the
remainder of the facility used in the Business, duly executed and delivered by
Brem, Inc.
(xi) a consent to assignment of contract, duly executed and
delivered by SKF de Mexico, S.A. de C.V.
(d) At the Closing, Seller shall have received:
(i) all material Governmental Approvals for the transactions
contemplated by this Agreement to be obtained by Buyer, in form and substance
acceptable to Seller.
(ii) an opinion of counsel from McDermott, Will & Emery,
counsel to Buyer, in the form attached hereto as Exhibit C.
2.7. June 30 Balance Sheet.
(a) Within 30 days after the Closing Date, Seller will prepare and
present to Buyer a balance sheet (the "Proposed June 30 Balance Sheet") setting
forth as of June 30, 1997 the book value of the Transferred Assets and the
Assumed Liabilities. The Proposed June 30 Balance Sheet shall be prepared so
that it presents fairly the book value of the Transferred Assets and Assumed
Liabilities in accordance with GAAP (or on a basis consistent with prior
practices of Seller with the disclosure that such practice is not GAAP), but in
any case using practices and procedures and applying the types of adjustments
described in Schedule 2.6(b) consistent with the preparation of the May 31
Balance Sheet. Seller's Auditors shall perform selected procedures as agreed to
by Buyer and Seller (the "Agreed Upon Procedures") with respect to the Proposed
June 30 Balance Sheet. Buyer and Buyer's Auditors shall have the right to review
and copy, promptly upon request, the workpapers of Seller's Auditors (the
"Workpapers") utilized in performing the Agreed Upon Procedures with respect to
the Proposed June 30 Balance Sheet. The Proposed June
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30 Balance Sheet shall be binding upon the parties to this Agreement unless
Buyer gives written notice of disagreement with any of said values or amounts to
Seller within 15 days after delivery to it of the Proposed June 30 Balance Sheet
and the Workpapers by Seller, specifying in reasonable detail the nature and
extent of such disagreement. If Buyer and Seller mutually agree upon the
Proposed June 30 Balance Sheet within 30 days after Seller's delivery of notice
of its disagreement, such agreement shall be binding upon the parties to this
Agreement. If Buyer and Seller are unable to resolve any such disagreement
within such period, the disagreement shall be referred for final determination
to Price Waterhouse & Company LLC (the "First Choice") or, if such firm is not
available, such other independent accounting firm of national reputation
selected by the mutual agreement of Buyer and Seller (the "Selected Firm"), and
the resolution of that disagreement and the Proposed June 30 Balance Sheet, as
adjusted as a result of such resolution, shall be final and binding upon the
parties hereto for purposes of this Agreement. If Buyer and Seller cannot agree
on the Selected Firm, it shall be chosen by the First Choice and shall be a
nationally recognized firm. The Proposed June 30 Balance Sheet as finally
determined is the "June 30 Balance Sheet."
(b) The fees and disbursements of Seller's Auditors shall be paid by
Seller and the fees and disbursements of Buyer's Auditors shall be paid by
Buyer. The fees and disbursements of the First Choice or the Selected Firm, as
the case may be, shall be paid by Buyer and Seller as the First Choice or the
Selected Firm, as the case may be, shall determine based upon its assessment of
the relative merits of the positions taken by each in any disagreement presented
to such firm.
2.8. Post-Closing Adjustment.
(a) If the Closing Payment is less than the book value of the
Transferred Assets as of June 30, 1997 net of the total amount of the Assumed
Liabilities as of June 30, 1997, as set forth on the June 30 Balance Sheet with
applicable adjustments thereto of the type described in Schedule 2.6(b) (the
"Net Transferred Asset Value") (such deficit being referred to herein as the
"Unpaid Balance"), then, within five Business Days after the final determination
of the June 30 Balance Sheet, Buyer shall deliver to Seller such Unpaid Balance
in cash in immediately available funds by wire transfer to a bank account or
bank accounts designated in writing by Seller prior to the due date thereof.
(b) If the Closing Payment is greater than the Net Transferred Asset
Value (such excess being referred to herein as the "Overpayment"), then, within
five Business Days after the final determination of the June 30 Balance Sheet,
Seller shall deliver to Buyer such Overpayment in cash in immediately available
funds by wire transfer to a bank account or bank accounts designated in writing
by Buyer prior to the due date thereof.
2.9. Purchase Price Allocation. Within 120 days after the Closing
Date, Buyer and Seller shall agree upon the final allocation of the Purchase
Price among the Transferred Assets
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for purposes of complying with Section 1060 of the Code and making any required
filings under state or local law and shall set forth such allocation on a
statement (the "Allocation Statement"). After the Closing, from time to time,
Buyer and Seller shall agree upon revisions to the Allocation Statement for tax
purposes. Buyer and Seller shall report the tax consequences of the transactions
contemplated by this Agreement in a manner consistent with the Allocation
Statement, as it may be revised from time to time, and shall not take any
position inconsistent therewith.
2.10. Subsequent Payments.
(a) Buyer shall pay to Seller $727,255, on the first anniversary of
the date hereof, by wire transfer of immediately available funds to a bank
account or bank accounts designated in writing by Seller prior to the due date
thereof.
(b) Buyer shall pay to Seller $472,903.50, on the first anniversary
of the date hereof, by wire transfer of immediately available funds to a bank
account or bank accounts designated in writing by Seller prior to such date;
provided, however, that such payment shall not become due or payable if the
machine more fully described in Schedule 2.10(b)-(1) ("Machine #5") has not
satisfactorily completed the quality assurance tests set forth in Schedule
2.10(b)-(2) (the "Runoff Tests") prior to such date.
(c) Buyer shall pay to Seller $472,903.50, within 30 days following
the Machine #6 Runoff Date, by wire transfer of immediately available funds to a
bank account or bank accounts designated in writing by Seller prior to the due
date thereof. For the purposes of this subsection (c), "Machine #6 Runoff Date"
shall mean the date the machine more fully described in Schedule 2.10(c)
("Machine #6" and, together with Machine #5, the "Machines") has satisfactorily
completed the Runoff Tests.
(d) Except for (i) the cost of the purchase and installation of two
transformers relating to the Machines and (ii) labor costs of employees of the
Business after the Effective Time in connection with the installation of the
Machines which shall be borne by Buyer, Seller shall bear all costs and expenses
incurred in connection with the installation of, and conduct of the Runoff Tests
of, the Machines.
(e) Coincident with the date each Machine has satisfactorily
completed the Runoff Tests, Seller shall, at its sole expense, provide Buyer
with a warranty that such Machine will operate in accordance with applicable
specifications and otherwise be free of defects in material and workmanship (the
"Warranty") for a period of twelve (12) months from such date or 8,000 working
hours, which ever is first to occur.
(f) If either or both Machines shall fail to satisfy the Runoff
Tests prior to the first anniversary of the date hereof, title to either or both
such Machines shall revert to Seller and Seller shall, at its sole cost and
expense, remove said Machine from the premises of the Business.
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2.11. Interim Period Payments. As indicated above, the Closing shall
be deemed to have taken place as of the Effective Time. In recognition of the
fact that the Seller shall have remained in control of the operations of the
Business between the Effective Time and the Closing Date (the "Interim Period"),
the Buyer and the Seller shall make the following payments, adjustments and
agreements:
(a) Within 30 days after the Closing Date, Seller will prepare and
present to Buyer a statement of the inflow and outflow of cash (the "Proposed
Interim Period Cash Flow Statement") with respect to conduct of the Business
during the Interim Period. The Proposed Interim Period Cash Flow Statement shall
be binding upon the parties to this Agreement unless Buyer gives written notice
of disagreement with any of the amounts reflected thereon to Seller within 15
days after delivery to it of the Proposed Interim Period Cash Flow Statement,
specifying in reasonable detail the nature and extent of such disagreement.
Buyer and Seller shall thereafter negotiate to resolve any such disagreement in
good faith; provided that (i) during such 15 day period Seller shall provide
Buyer with such access to Seller's books and records as Buyer may reasonably
request in order to verify the information within the Proposed Interim Period
Cash Flow Statement, and (ii) such 15 day period shall be extended for up to an
additional 30 days if Buyer determines that it reasonably requires such
additional time to complete such verification. The Proposed Interim Period Cash
Flow Statement as finally determined shall be the "Interim Period Cash Flow
Statement."
(b) (i) If the Interim Period Cash Flow Statement indicates that,
during the Interim Period, the cash inflows exceeded the cash outflows, Seller
shall deliver to Buyer the dollar amount of such excess. Such payment shall be
made within five Business Days of the final determination of the Interim Period
Cash Flow Statement in cash in immediately available funds by wire transfer to a
bank account or bank accounts designated in writing by Seller prior to the due
date thereof.
(ii) If the Interim Period Cash Flow Statement indicates that,
during the Interim Period, the cash outflows exceeded the cash inflows, Buyer
shall deliver to Seller the dollar amount of such excess. Such payment shall be
made within five Business Days of the final determination of the Interim Period
Cash Flow Statement in cash in immediately available funds by wire transfer to a
bank account or bank accounts designated in writing by Buyer prior to the due
date thereof.
(c) The Buyer and Seller agree that the adjustments described in
subparagraphs (a) and (b) are intended to reflect their intent for the
operations of the Business to be for the economic account of Buyer during the
Interim Period. Pursuant thereto,
(i) by reason of the payment described in subparagraph (b),
each of Buyer and Seller shall report the results of operations of the Business
during the Interim Period as being for the account of Buyer,
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(ii) notwithstanding the generality of subparagraph (i) above,
the sole economic adjustments and undertakings respecting the Interim Period
shall be as set forth in this Agreement, and nothing contained herein shall
imply Buyer's agreement to accept responsibility for more Liabilities with
respect to the Interim Period than reflected by the Assumed Liabilities and the
payment set forth in subparagraph (b), and all subject to Seller's
indemnification obligations set forth in Section 8.1(a)(iii) hereof and
(iii) during the Interim Period, Seller shall pay no
Liabilities respecting Bremen or the Business other than Assumed Liabilities or
Liabilities of the Seller described in Section 2.3(b) hereof.
(d) Buyer acknowledges that certain of the Transferred Assets shall
have been disposed of for value in the ordinary course of the Business during
the Interim Period, to be accounted for as set forth in subsection (b) above.
(e) Notwithstanding anything in this Section 2.11 to the contrary,
the proceeds of accounts receivable of the Business as of the Effective Time
that are collected by Seller during the Interim Period shall be "Excluded
Assets" and, therefore, shall not be considered a cash inflow in the preparation
of the Interim Period Cash Flow Statement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated herein, Seller represents and warrants
to Buyer as follows:
3.1. Existence and Power.
(a) Seller is a corporation duly organized and validly existing and
in good standing under the laws of the State of Delaware and has all corporate
power and all governmental licenses, authorizations, consents and approvals
required to carry on the Business as now conducted and to own and operate the
Business as now owned and operated, except for those instances where, in the
aggregate, the failure to have such licenses, authorizations, consents and
approvals is not, and is not reasonably expected to have a Material Adverse
Effect. Seller is qualified to conduct business in each jurisdiction where the
nature of its activities in connection with the conduct of the Business requires
it to be so qualified. Seller is in good standing in each state where it is
qualified, except for those jurisdictions where in the aggregate the failure to
be so does not have, and is not reasonably expected to have, a Material Adverse
Effect.
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3.2. Authorization. The execution, delivery and performance by
Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby are within Seller's corporate powers and have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement has been duly and validly executed and delivered by Seller and
constitutes the legal, valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and subject to general principles of
equity.
3.3. Governmental Authorization. The execution, delivery and
performance by Seller of this Agreement require no action by, consent or
approval of, or filing with, any Governmental Authority other than any actions,
consents, approvals or filings otherwise expressly referred to in this Agreement
or set forth on Schedule 3.3 or Schedule 3.13(b). To the Knowledge of Seller,
there are no facts relating to the identity or circumstances of Seller that
would prevent or materially delay obtaining any of the Required Consents.
3.4. Non-Contravention. The execution, delivery and performance by
Seller of this Agreement do not and will not (a) contravene or conflict with the
Certificate of Incorporation or Bylaws of Seller, true and correct copies of
which have been delivered to Buyer by Seller, (b) assuming receipt of the
Required Consents, contravene or conflict with or constitute a violation of any
provision of any Applicable Law binding upon or applicable to Seller, the
Business or any of the Transferred Assets, (c) assuming receipt of the Required
Consents, constitute a default under or give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to which Seller is
entitled under, any material Contract or any Permit or similar authorization
relating to the Business or included in any of the Transferred Assets or by
which any of the Transferred Assets may be bound, or (d) result in the creation
or imposition of any Lien on any Transferred Asset, other than Permitted Liens.
3.5. Financial Statements; Undisclosed Liabilities.
(a) Attached hereto as Schedule 3.5(a) are true and complete copies
of the unaudited balance sheets of Bremen as at May 31, 1997 (the "May 31
Balance Sheet"), as at December 31, 1996 (the "1996 Balance Sheet") and as at
December 31, 1994 and 1995 and the related unaudited statements of income and
statements of cash flows and changes in the home- office account for the years
ended December 31, 1994, 1995 and 1996 (collectively, the "Annual Financials")
and the related unaudited statement of income and statement of cash flows and
changes in the home office account for the fiscal quarters ended March 31, June
30, September 30 and December 31, 1994, 1995 and 1996 and March 31 and June 30,
1997 (the "Interim Financials" and, together with the Annual Financials, the
"Financials").
(b) The Financials (i) (A) in all cases have been prepared based on
the books and records of Bremen in accordance with the normal accounting
practices of Bremen and Seller;
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(B) in each case other than the May 31 Balance Sheet, consistent with past
practice and with each other; and (C) in all cases present fairly the financial
condition, results of operations and statements of cash flow of Bremen as of the
dates indicated or the periods indicated; and (ii) with respect to contracts and
commitments for the sale of goods or the provision of services by Bremen,
contain and reflect adequate reserves for all reasonably anticipated material
losses and costs and expenses in excess of expected receipts. Any differences
between GAAP and Seller's accounting practices, as well as the estimated
magnitude of such impact on the Financials resulting from such differences, are
set forth on Schedule 3.5(b).
(c) Except as set forth on Schedule 3.5(c), there are no material
Liabilities relating to Bremen other than:
(i) any Liability accrued as a Liability on the 1996 Balance
Sheet; and
(ii) Liabilities specifically disclosed and identified as such
in the schedules to this Agreement.
3.6. Absence of Certain Changes. Except as set forth on Schedule
3.6, since the date of the 1996 Balance Sheet, the Business has been conducted
in the ordinary course, and none of the following events has occurred with
respect to the Business:
(a) any event, occurrence, development or state of circumstances or
facts or change in the Transferred Assets or the Business (including any damage,
destruction or other casualty loss, but excluding any event, occurrence,
development or state of circumstances or facts or change resulting from changes
in general economic conditions) affecting the Business or any Transferred Assets
that has had or that may be reasonably expected to have, either alone or
together with all such events, occurrences, developments, states of
circumstances or facts or changes, a Material Adverse Effect;
(b) (i) any incurrence, assumption or guarantee of any indebtedness
for borrowed money by Seller in connection with the Business or any of the
Transferred Assets, (ii) any incurrence of any Liability relating to a
documentary or standby letter of credit by Seller in connection with the
Business or any of the Transferred Assets, or (iii) any change in any Liability
of Bremen other than in the ordinary course of business, or (iv) any incurrence
of any other Liability by Seller in connection with the Business or any of the
Transferred Assets, other than in the ordinary course of business;
(c) any creation, assumption or sufferance of the existence of any
Lien on any Transferred Asset, other than Permitted Liens;
(d) any transaction or commitment made, or any Contract entered
into, by Seller (including the acquisition or disposition of any Transferred
Assets), or any waiver, amendment,
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termination or cancellation of any Contract by Seller, or any relinquishment of
any rights thereunder by Seller, or of any other right or debt owed to Seller,
other than in each such case actions taken in the ordinary course of business
consistent with past practice;
(e) except for actions taken in the ordinary course of business
consistent with the past practice of Seller that are not, in the aggregate,
material to the Business, any (i) grant of any severance, continuation or
termination pay to any Employee, (ii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any Employee, (iii) increase in benefits payable or potentially
payable under any severance, continuation or termination pay policies or
employment agreements with any Employee, (iv) increase in compensation, bonus or
other benefits payable or potentially payable to any Employee, (v) change in the
terms of any bonus, pension, insurance, health or other Benefit Plan of Seller,
or (vi) representation of Seller to any Employee that Buyer would assume,
continue to maintain or implement any Benefit Plan after the Closing Date;
(f) any loan to or guarantee or assumption of any loan or obligation
on behalf of any Employee, except travel advances occurring in the ordinary
course of business consistent with past practice;
(g) any material change by Seller in its accounting principles,
methods or practices or in the manner it keeps its books and records or any
material change by Seller of its current practices with regards to sales,
receivables, payables or accrued expenses that would affect the timing of
collection of receivables or the payment of payables;
(h) the entering into of any Contract or other arrangement between
Seller and any officer, director, stockholder or Affiliate of Seller or any of
their respective Affiliates, to the extent any such Contract or other
arrangement relates to the conduct of the Business;
(i) any disposition of an asset having either a net book value or a
fair market value in excess of $50,000, other than Inventory disposed of in the
ordinary course of the Business; or
(j) any payment, discharge or satisfaction of any Liabilities of
Seller, other than payments, discharges or satisfactions in the ordinary course
of business.
3.7. Properties; Leases; Tangible Assets.
(a) Schedule 3.7(a) sets forth a true and complete list of all real
property owned by Seller in connection with the Business (the "Owned Real
Property") such list setting forth the location of each parcel of Owned Real
Property, the record owner thereof, the acreage and a brief description of the
nature of the activities of Seller on such Owned Real Property. Seller has a
good and valid title to, or in the case of leasehold properties or properties
held under license and
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identified on Schedule 3.7(a) (the "Leased Real Property" and, collectively with
the Owned Real Property, the "Real Property"), a good and valid leasehold or
license interest in, all of the Real Property, which constitutes all of the real
property used in the Business.
(b) Schedule 3.7(b) sets forth a true and complete list of all
personal property leases or licenses (i) to which Seller is a party or by which
Seller is bound, (ii) that are related to the Business and (iii) that provide
for annual payments by Seller in excess of $10,000 or that contain other
affirmative material obligations that cannot be terminated by Seller within 30
days (the "Personal Property Leases") and all leases or licenses of Leased Real
Property that provide for annual payments by Seller in excess of $10,000 or that
cannot be terminated by Seller within 30 days (the "Real Property Leases" and
collectively with the Personal Property Leases, the "Leases") entered into in
connection with the Business. With respect to the Leases, except as set forth on
Schedule 3.7(b), there exist no defaults by Seller, or, to the Knowledge of
Seller, any default or threatened default by any lessor or third party
thereunder, that has affected or could reasonably be expected to materially
affect the rights and privileges thereunder of Seller. Except as set forth on
Schedule 3.7(b), assuming the Required Consents are obtained, all Leases to
which a Seller is a party with non-Affiliates or by which it is bound may be
assigned, transferred and conveyed to Buyer without default, penalty or
modification thereof.
(c) Except as disclosed in Schedule 3.7(c) or Schedule 3.19(c),
Seller has not received notice of any pending zoning or other land-use
regulation proceedings or any proposed change in any Applicable Laws that could
reasonably be expected to materially and detrimentally affect the use or
operation of the Real Property, nor has Seller received notice of any special
assessment proceedings affecting the Real Property, or applied for any change to
the zoning or land use status of the Real Property.
3.8. Sufficiency of and Title to the Transferred Assets. Seller has
the right to sell, assign, transfer and convey, and upon consummation of the
transactions contemplated by this Agreement, will have sold, assigned,
transferred and conveyed, to Buyer all of the Transferred Assets free and clear
of all Liens, except for Permitted Liens, which Transferred Assets constitute
all of the properties and assets now held or employed by Seller in connection
with the Business (other than the Excluded Assets). Except for the services to
be provided by Seller under the Interim Services Agreement, the Business is a
going concern, and, with the transfer of the Transferred Assets to Buyer
pursuant to this Agreement, Buyer will have all assets necessary to operate the
Business as a going concern with all operations of the Business unimpaired in
any material respect immediately after the Closing.
3.9. Affiliates. Except as set forth in Schedule 3.9, neither Seller
nor any principal stockholder of Seller or any officers or directors of Seller
(or any immediate family member of any such officer or director):
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(a) now has or at any time subsequent to December 31, 1994, had,
either directly or indirectly, an equity or debt interest in any Person which
furnishes or sells or during such period furnished or sold services or products
to Seller relating to Bremen or purchases or during such period purchased from
Seller any goods or services relating to Bremen, or otherwise does or during
such period did business with Seller relating to Bremen of a material nature or
amount; provided, however, that neither Seller, nor any stockholder of Seller
nor any of Seller's officers and directors or other Affiliates shall be deemed
to have such an interest solely by virtue of the ownership of less than five
percent (5%) of the outstanding voting stock or debt securities of any publicly
held company, the stock or debt securities of which are traded on a national
stock exchange or quoted on the National Association of Securities Dealers
Automated Quotation System; or
(b) now is or at any time subsequent to December 31, 1994, was, a
party to any contract, commitment or agreement relating to the Business to which
Seller is or during such period was a party or under which Seller is or was
obligated or bound or to which any of their respective properties may be or may
have been subject, other than through Seller.
3.10. Inventory. Subject to any reserve therefor that is included in
the 1996 Balance Sheet and except as disclosed in Schedule 3.10, the Inventory
which constitutes a portion of the Transferred Assets (a) has been acquired or
manufactured in the ordinary course of business, in accordance with Seller's
normal inventory practices; (b) is of a quality usable (including processing
into merchantable finished inventories for sale in the ordinary course of
business), free of any material defect or deficiency in design, material or
workmanship; (c) is in merchantable and undamaged condition and meets customer
specifications; and (d) is not obsolete.
3.11. Litigation. Except as disclosed on Schedule 3.11, (i) there
are no actions, suits, hearings, arbitrations, proceedings (public or private)
or governmental investigations that have been brought by or against any
Governmental Authority or any other Person (collectively, "Proceedings") pending
or, to Seller's Knowledge, threatened, against or affecting the Business or any
of the Transferred Assets or which seek to enjoin or rescind the transactions
contemplated by this Agreement or otherwise prevent Seller from complying with
the terms and provisions of this Agreement; and (ii) there are no existing
orders, judgments or decrees of any Governmental Authority affecting any of the
Transferred Assets or the Business.
3.12. Contracts.
(a) Schedule 3.12(a) sets forth a complete list of the following
contracts, commitments and obligations (whether written or oral) of Seller that
are in connection with the Business (collectively with the Leases and the
Employment Agreements, the "Scheduled Contracts"):
(i) each Contract between Seller and (A) each present or
former Bremen Employee, (B) any supplier of services or products to Seller
whose dollar volume of sales
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to Seller exceeded $25,000 in 1996, and (C) any Person with respect to
whom the aggregate payments made or to be made to Seller under such
Contract exceeded $25,000 in 1996;
(ii) each other agreement or arrangement of Seller that (y)
requires the payment or incurrence of Liabilities or the rendering of
services by Seller, subsequent to the date of this Agreement of more than
$25,000 and (z) cannot be terminated by Seller within 30 days;
(iii) all Contracts relating to, and evidences of or
guarantees of, or providing security for, indebtedness for borrowed money
or the deferred purchase price of property (whether incurred, assumed,
guaranteed or secured by any asset);
(iv) all partnership, joint venture or other similar
Contracts, arrangements or agreements;
(v) to the extent that any of the following provide for annual
payments by Seller in excess of $25,000 and cannot be terminated by Seller
within 30 days, all license, distribution, commission, marketing, agent,
franchise, technical assistance or similar agreements relating to or
providing for the marketing and/or sale of the products or services to
which Seller is a party or by which Seller is otherwise bound; and
(vi) all other contracts, commitments and obligations that are
not in the ordinary course of the Business.
(b) Except as disclosed in Schedule 3.12(b), each Contract is a
legal, valid and binding obligation of Seller and, to the Knowledge of Seller,
each other party thereto, enforceable (except to the extent such enforceability
may be limited by bankruptcy, equity and creditors' rights generally) against
Seller and to the Knowledge of Seller, each such other party in accordance with
its terms, and neither Seller nor, to the Knowledge of Seller, any other party
thereto is in material default or has failed to perform any material obligation
thereunder. Complete and correct copies of each Scheduled Contract have been
delivered to Buyer.
(c) Schedule 3.12(c) sets forth a list (by name, address and persons
to contact) of the 10 largest customers of the Business for each of the 12-month
periods ended December 31, 1995 and 1996, and the five largest vendors, based on
the dollar amounts paid to such vendors, providing services to the Business for
the 12-month period ended December 31, 1996 together with the approximate dollar
amount of sales or services provided by Seller during said period to such
customers and a summary description of approximate dollar amount of the services
provided to Seller by such vendors.
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3.13. Permits; Required Consent.
(a) Schedule 3.13(a) sets forth all material approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities and all other Persons
necessary for the operation of the Transferred Assets or the Business in
substantially the same manner as currently operated or affecting or relating in
any way to the Business (the "Permits").
(b) Schedule 3.13(b) lists (i) each governmental or other
registration, filing, application, notice, transfer, consent, approval, order,
qualification and waiver (each, a "Required Governmental Approval") required
under Applicable Law to be obtained by Seller by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the loss of any material Permit or otherwise, and (ii) each
Scheduled Contract with respect to which the consent of the other party or
parties thereto must be obtained by Seller by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the invalidity of the transfer of such Scheduled Contract, the
termination thereof, a breach or default thereunder or any other change or
modification to the terms thereof (each, a "Required Contractual Consent" and
collectively with the Required Governmental Approvals, the "Required Consents").
Except as set forth in Schedule 3.13(b) or (b) each Permit is valid and in full
force and effect in all material respects and, assuming the related Required
Consents have been obtained prior to the Closing Date, are or will be
transferable by Seller, and assuming the related Required Consents have been
obtained prior to the Closing Date, none of the Permits will be terminated or
become terminable or impaired in any material respect as a result of the
transactions contemplated hereby.
3.14. Compliance with Applicable Laws. Except as set forth in
Schedule 3.14, the operation of the Business by Seller and the condition of the
Transferred Assets have not violated or infringed, and do not violate or
infringe, any material Applicable Law, or any order, writ, injunction or decree
of any Governmental Authority. Neither Seller nor any officer, agent or employee
of Seller, nor, to the Knowledge of Seller, any distributor, licensee or other
Person acting on behalf of Seller, (a) has made any unlawful domestic or foreign
political contributions, (b) has made any payment or provided services which
were not legal to make or provide or which Seller or any such officer, employee
or other Person should have known were not legal for the payee or recipient of
such services to receive, (c) has had any transactions or payments which are not
recorded in its accounting books and records or disclosed in its financial
statements, (d) has any off-book bank or cash accounts or "slush funds", (e) has
made any payments to governmental officials in their individual capacities for
the purpose of affecting their action or the action of the Governmental
Authority they represent to obtain special concession, or (f) has made illegal
payments to obtain or retain business.
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3.15. Employment Agreements; Change in Control, and Employee
Benefits.
(a) Schedule 3.15(a) sets forth all Benefit Plans. Seller has made
true and correct copies of all governing instruments and related agreements
pertaining to such Benefit Plans available to Buyer.
(b) Except as set forth on Schedule 3.15(b) no individual shall
accrue or receive additional benefits, service or accelerated rights to payments
of benefits under any Benefit Plan, including the right to receive any parachute
payment, as defined in Section 28OG of the Code, or become entitled to
severance, termination allowance or similar payments as a direct result of the
transactions contemplated by this Agreement.
(c) No Employee Benefit Plan has participated in, engaged in or been
a party to any non-exempt Prohibited Transaction, and neither Seller nor any
ERISA Affiliates of Seller has pending, or to any of its Knowledge threatened,
against it any claim for taxes under Chapter 43 of Subtitle D of the Code and
Sections 5000 of the Code, or for penalties under ERISA Section 502(c), (i) or
(l), with respect to any Employee Benefit Plan nor, to the Knowledge of Seller
is there a basis for any such claim. No officer, director or employee of Seller
has committed a material breach of any responsibility or obligation imposed upon
fiduciaries by Title I of ERISA with respect to any Employee Benefit Plan.
(d) There is no material claim pending or to the Knowledge of Seller
threatened, involving any Benefit Plan by any Person against such plan or Seller
or any ERISA Affiliate with respect to Bremen. There is no pending or to the
Knowledge of Seller threatened proceeding involving any Employee Benefit Plan
before the IRS, the United States Department of Labor or any other Governmental
Authority.
(e) Each Benefit Plan has been maintained in all material respects,
by its terms and in operation, in accordance with ERISA and the Code including,
but not limited to, all applicable reporting and disclosure requirements. Seller
and each ERISA Affiliate have made full and timely payment of all amounts
required to be contributed under the terms of each Benefit Plan and Applicable
Law or required to be paid as expenses under such Benefit Plan, and Seller and
each ERISA Affiliate shall continue to do so through the Closing.
(f) With respect to any Group Health Plans maintained by Seller or
its ERISA Affiliates, Seller and its ERISA Affiliates have complied in a
material respects with the provisions of Part 6 Subtitle B of Title I of ERISA
and Section 4980B of the Code. Except as set forth on Schedule 3.15(f), Seller
is not obligated to provide health care benefits of any kind to its retired
employees pursuant to any Employee Benefit Plan, including without limitation
any Group Health Plan, or pursuant to any agreement or understanding.
(g) Seller's Union Plan is qualified under Section 401(a) of the
Code.
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3.16. Labor and Employment Matters.
(a) Except as set forth on Schedule 3.16(a), with respect to the
Business, no collective bargaining agreement exists that is binding on Seller
and, except as described on Schedule 3.16(a), no petition has been filed or
proceedings instituted by an employee or group of employees with any labor
relations board seeking recognition of a bargaining representative. Schedule
3.16(a) describes any organizational effort related to the Business currently
being made or, to Seller's Knowledge, threatened by or on behalf of any labor
union to organize any employees of Bremen.
(b) Except as set forth on Schedule 3.16(a), with respect to the
Business, (i) there is no labor strike, dispute, slow down or stoppage pending
or, to Seller's Knowledge, threatened against or directly affecting the
Business, (ii) grievance or arbitration proceeding arising out of or under any
collective bargaining agreement is pending, and no claims therefor exist; and
(iii) neither Seller, nor of its Affiliates has received any notice or has any
Knowledge of any threatened labor or civil rights dispute, controversy or
grievance or any other unfair labor practice proceeding or breach of contract
claim or action with respect to claims of, or obligations to, any employee or
group of employees of Bremen.
(c) With respect to the Business, Seller has complied and is
currently complying, in all material respects, in respect of all employees of
Bremen, with all Applicable Laws respecting employment and employment practices
and the protection of the health and safety of employees.
(d) With respect to the Business, all individuals who are performing
or have performed services for Seller, or any Affiliate thereof and are or were
classified by Seller or any Affiliate as "independent contractors" qualify for
such classification under Section 530 of the Revenue Act of 1978 or Section 1706
of the Tax Reform Act of 1986, as applicable, except for such instances which
are not, in the aggregate, material.
(e) Schedule 3.16(e) sets forth all Employees of Bremen receiving or
seeking worker's compensation benefits, as well as the following for each such
Employee: (i) brief description of the injury; (ii) weekly compensation; (iii)
estimated benefit period; and (iv) estimate of medical and other expenses
payable.
3.17. Intellectual Property.
(a) Schedule 3.17 sets forth a complete and correct list of each
patent, patent application and docketed invention, trademark, trade name,
trademark or trade name registration or application, copyright or copyright
registration or application for copyright registration, and each license or
licensing agreement for any of the foregoing relating to any Transferred Asset
or held by Seller with respect to the Business (the "Intellectual Property
Rights").
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(b) Except as disclosed in Schedule 3.17, Seller has not during the
three years preceding the date of this Agreement been a party to any Proceeding,
nor to the Knowledge of Seller is any Proceeding threatened as to which there is
a reasonable possibility of a determination adverse to Seller that involved or
may involve a claim of infringement by any Person (including any Governmental
Authority) of any Intellectual Property Right. Except as disclosed in Schedule
3.17 no Intellectual Property Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof by
Seller, or restricting the licensing thereof by Seller to any Person. The use of
the Intellectual Property Rights does not conflict with, infringe upon or
violate any patent, patent license, patent application, trademark, trade name,
trademark or trade name registration, copyright, copyright registration, service
mark, brand mark or brand name or any pending application relating thereto, or
any trade secret, know-how, programs or processes, or any similar rights, of any
Person.
(c) Except as set forth in Schedule 3.17, Seller either owns the
entire right, title and interest in, to and under, or has the legally
enforceable right to use all Transferred Assets.
3.18. Advisory Fees. Except for Rothschild & Company (whose fees and
expenses will be paid by Seller), there is no investment banker, broker, finder
or other intermediary or advisor that has been retained by or is authorized to
act on behalf of Seller or its Affiliates who might be entitled to any fee,
commission or reimbursement of expenses from Buyer or any of its Affiliates upon
consummation of the transactions contemplated by this Agreement.
3.19. Environmental Compliance.
(a) Except as disclosed in Schedule 3.19(a) Seller has obtained all
material approvals, authorizations, certificates, consents, licenses, orders and
permits or other similar authorizations of all Governmental Authorities, or from
any other Person, that are required with respect to the Business or the
Transferred Assets under any Environmental Law. Schedule 3.19(a) sets forth all
permits, licenses and other authorizations issued under any Environmental Law to
Seller relating to the Business or the Transferred Assets.
(b) Except as disclosed in Schedule 3.19(b) Seller is in compliance
in all material respects with all terms and conditions of all approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities (and all other Persons)
required under any Environmental Law that is applicable to the Business or that
relate to the Transferred Assets, and is also in compliance in all material
respects with all other limitations, restrictions, conditions, standards,
requirements, schedules and timetables required or imposed under all
Environmental Laws.
(c) Except as disclosed in Schedule 3.19(c), there are no past or
present events, conditions, circumstances, activities, practices, incidents,
actions, omissions or plans (i.e. including any Environmental Conditions)
relating to or in any way affecting the Business or the Transferred
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Assets or the Leased Real Property that (i) could reasonably be expected to
prevent, or make materially more expensive, continued compliance with any
Environmental Law by Buyer after the Closing, or (ii) that may give rise to any
Environmental Liability, or (iii) that may give rise to any Liability resulting
from exposure to workplace hazards.
3.20. Tax Matters.
Except as set forth on Schedule 3.20:
(a) Seller has timely filed all Tax Returns required to have been
filed by it, and has paid or accrued all Taxes due to any taxing authority with
respect to all taxable periods ending on or prior to the Closing Date, or
otherwise attributable to all periods prior to the Closing Date; and all such
Tax Returns are true, correct and complete in all respects. Seller is not
currently the beneficiary of any extension of time within which to file any Tax
Return.
(b) Seller has not received notice that the IRS or any other taxing
authority has asserted against Seller any deficiency in Taxes or claim for
additional Taxes in connection with any tax period. Except for liens arising
from Taxes which are due but not yet payable, there are no liens for Taxes on
any of Seller's assets;
(c) Seller has withheld and paid over all Taxes required to have
been withheld and paid over in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party;
and
(d) Seller has not been included in any consolidated, combined or
unitary Tax Return provided for under the laws of the United States, any state
or locality with respect to Taxes for any taxable period for which the statute
of limitations has not expired.
3.21. Insurance. Schedule 3.21 sets forth a complete and correct
list of all material insurance policies of any kind currently in force with
respect to the Business (the "Insurance Policies"), including all "occurrence
based" liability policies regardless of the periods to which they relate.
Schedule 3.21 sets forth for each Insurance Policy the type of coverage, the
name of the insureds, the insurer, the premium, the expiration date, the period
to which it relates, the deductibles and loss retention amounts and the amounts
of coverage.
3.22. Products. Schedule 3.22 sets forth an accurate, correct and
complete statement of all written warranties, warranty policies, service and
maintenance agreements of the Business.
3.23. Material Disclosures. No statement, representation or warranty
made by Seller in this Agreement or in any certificate, statement, list,
schedule or other document furnished or to be furnished to Buyer hereunder
contains, or when so furnished will contain, any untrue
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statement of a material fact, or fails to state, or when so furnished will fail
to state, a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER AND RBC
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Buyer and RBC hereby jointly
and severally represent and warrant to Seller that:
4.1. Organization and Existence. Each of Buyer and RBC is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all corporate power and authority to enter
into this Agreement and consummate the transactions contemplated hereby. Each of
Buyer and RBC is duly qualified to do business as a foreign corporation in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary to carry on its
business as now conducted, except for those jurisdictions where the failure to
be so qualified has not been, and may not reasonably be expected to be,
material.
4.2. Corporate Authorization. The execution, delivery and
performance by each of Buyer and RBC of this Agreement and the consummation by
each of Buyer and RBC of the transactions contemplated hereby are within the
corporate powers of each of Buyer and RBC and have been duly authorized by all
necessary corporate action on the part of each of Buyer and RBC. This Agreement
constitutes a legal, valid and binding agreement of each of Buyer and RBC,
enforceable in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and subject to general principles of equity.
4.3. Governmental Authorization. The execution, delivery and
performance by each of Buyer and RBC of this Agreement require no action by,
consent or approval of, or filing with, any Governmental Authority other than as
set forth in this Agreement.
4.4. Non-Contravention. The execution, delivery and performance by
each of Buyer and RBC of this Agreement does not (a) contravene or conflict with
the Certificate of Incorporation or Bylaws of Buyer or RBC, or (b) assuming
compliance with the matters referred to in Section 4.3, contravene or conflict
with or constitute a violation of any provision of any Applicable Law binding
upon or applicable to Buyer or RBC.
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4.5. Advisory Fees. There is no investment banker, broker, finder or
other intermediary or advisor that has been retained by or is authorized to act
on behalf of Buyer or RBC who might be entitled to any fee, commission or
reimbursement of expenses from Seller or any of its Affiliates upon consummation
of the transactions contemplated by this Agreement.
4.6. Litigation. There is no Proceeding pending against, or to the
Knowledge of Buyer or RBC, threatened against or affecting, Buyer or RBC before
any court or arbitrators or any governmental body, agency or official that in
any matter challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
ARTICLE V.
COVENANTS OF SELLER
5.1. Compliance with Terms of Required Governmental Approvals and
Required Contractual Consents. On and after the Closing Date, Seller shall
comply at its own expense with all conditions and requirements affecting Seller
set forth in (a) all Required Governmental Approvals as necessary to keep the
same in full force and effect assuming continued compliance with the terms
thereof by Buyer and (b) all Required Contractual Consents as necessary to keep
the same effective and enforceable against the Persons giving such Required
Contractual Consents assuming continued compliance with the terms thereof by
Buyer.
5.2. Confidentiality.
(a) Seller will, and will cause their representatives to, treat any
data and information obtained with respect to Buyer, RBC or any of their
Affiliates from any representative, officer, director, or employee of Buyer or
RBC, or from any books or records of Buyer or RBC in connection with this
Agreement, confidentially and with commercially reasonable care and discretion,
and will not disclose any such information to third parties; provided, however,
that the foregoing shall not apply to (i) information in the public domain or
that becomes public through disclosure by any party other than Seller or its
Affiliates or representatives, so long as such other party is not in breach of a
confidentiality obligation, (ii) information that may be required to be
disclosed by Applicable Law or (iii) information required to be disclosed to
obtain any Required Consents.
(b) The parties hereto recognize and agree that in the event of a
breach of this Section 5.2, money damages would not be an adequate remedy to
Buyer, RBC or their Affiliates for such breach and, even if money damages were
adequate, it would be impossible to ascertain or measure with any degree of
accuracy the damages sustained therefrom. Accordingly, if there should be a
breach or threatened breach of provisions of this Section 5.2, Buyer, RBC and
their Affiliates shall be entitled to an injunction restraining Seller from any
breach without showing or
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proving actual damage sustained by Buyer, RBC or their Affiliates, as the case
may be. Nothing in the preceding sentence shall limit or otherwise affect any
remedies that Buyer, RBC and their Affiliates may otherwise have under
Applicable Law.
5.3. Taxes.
(a) All sales, value added, use and other Taxes imposed in
connection with or measured by the sale of the Transferred Assets shall be borne
by Buyer. Real property transfer Taxes imposed in connection with the sale of
the Transferred Assets shall be borne equally by Buyer and Seller.
(b) Seller agrees that no new elections with respect to Taxes or any
changes in current elections with respect to Taxes affecting the Transferred
Assets shall be made after the date of this Agreement without the prior written
consent of Buyer.
(c) The Buyer and Seller shall (i) provide to each other such
assistance as may reasonably be requested in connection with the preparation of
any Tax Return relating to the Business and the conduct of any audit or other
examination by any taxing authority or in connection with judicial or
administrative proceedings relating to any liability for Taxes relating to the
Business, (ii) retain all records or other information that may be relevant to
the preparation of any Tax Returns relating to the Business, or the conduct of
any audit or examination, or other tax proceeding relating to the Business, and
(iii) retain all relevant documents, including prior year's Tax Returns relating
to the Business, supporting work schedules and other records or information that
may be relevant to such returns and shall not destroy or otherwise dispose of
any such records without the prior written consent of the other party.
(d) Seller shall provide Buyer with a FIRPTA certificate or similar
document in order to relieve Buyer of any obligations to withhold any portion of
the Purchase Price.
(e) Pursuant to Section 1445(b)(2) of the Code, Seller shall furnish
Buyer an affidavit stating under penalty of perjury Seller's United States
taxpayer identification number and that Seller is not a foreign person.
ARTICLE VI.
COVENANTS OF BUYER AND RBC
6.1. Indiana Responsible Property Transfer Law. Buyer covenants and
agrees that, to the extent the provisions of the Indiana Responsible Property
Transfer Law (the "Transfer Law") apply to the transactions contemplated by this
Agreement, to waive, and pursuant to Section 10(b) of the Transfer Law, it
hereby waives, any right to receive a disclosure document, as
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described in Section 10 of the Transfer Law. Buyer further covenants and agrees
that it shall not seek to void this Agreement and the transactions contemplated
hereby on the grounds that the disclosure document required to be delivered
pursuant to the Transfer Law was not delivered to Buyer by Seller. Buyer makes
the covenants and grants the waivers herein contained with full awareness of the
purpose and intent of the Transfer Law.
ARTICLE VII.
COVENANTS OF ALL PARTIES
7.1. Further Assurances. Subject to the terms and conditions of this
Agreement, each party will use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under Applicable Law to consummate the transactions contemplated by
this Agreement. Buyer, RBC and Seller agree to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be reasonably necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
Following the Closing, Buyer shall make the employees and records of Bremen
reasonably available to Seller during normal business hours; at no charge to
Seller other than for out of pocket expenses incurred by Buyer for items such as
photocopying or travel for the purposes of providing accounting information
reasonably required by Seller, providing testimony or information in connection
with any legal proceeding or for any other appropriate purpose arising out of
Seller's ownership and operation of the Business.
7.2. Bulk Sales Laws. Buyer waives compliance by Seller with the
provisions of (i) Indiana's Department of Revenue Bulk Sales law and (ii) all
applicable provisions of Article 6 of the Uniform Commercial Code as adopted in
any state relating to bulk sales. Seller shall indemnify Buyer for any taxes
owed to the State of Indiana arising out of Seller's failure to comply with the
notification requirement referred to in the preceding sentence. It is understood
and agreed that nothing contained in this Section 7.2 is intended to relieve
Buyer of its obligations described in Section 5.3(a).
7.3. Employees and Employee Benefit Matters.
(a) Effective as of the Closing, each employee of the Business who
is actively employed in the Business on the Closing and not on layoff, leave of
absence, workman's compensation leave or any other leave other than normal
vacation will cease to be an employee of Seller and will, unless such employee
elects otherwise, become an employee of Buyer (each, a "Transferred Employee").
Seller will neither employ nor offer employment to any Transferred Employee
during the eighteen (18) month period following the Closing without the prior
written consent of Buyer. Any employee identified on Schedule 7.3(a), who is not
a Transferred Employee at such time by reason of not being actively employed in
the Business, will cease to be an employee
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of Seller effective as of the date he returns to the Business from layoff or
leave, as the case may be, and such employee shall become a Transferred Employee
effective as of such date, unless he elects otherwise.
(b) Seller currently maintains the following pension plans covering
employees of the Business: the Pension Plan for Salaried Employees of SKF USA
Inc. (the "Salaried Plan") covering designated salaried and other employees of
Seller, including salaried employees of the Business, and the Pension Plan for
Hourly Employees of SKF USA Inc. ("Seller's Union Plan") covering hourly
employees of the Business who are represented by the Union.
(i) With respect to the Salaried Plan:
(A) Within thirty (30) days after, and effective as of,
the Closing, Seller shall execute such amendments to the Salaried Plan as are
necessary to provide that: (i) any individual including a Transferred Employee,
who is an employee of the Business immediately prior to the Closing and who is
covered by the Salaried Plan (a "Salaried Plan Employee") shall cease to be
covered by the Salaried Plan as of the Closing except as to benefits accrued
prior to the Closing; and (ii) the accrued benefit under the Salaried Plan of
any Salaried Plan Employee shall become fully vested as of the Closing. To the
extent permitted by law, each Salaried Plan Employee shall be deemed to have
terminated employment with the Seller as of the Closing for purposes of the
Salaried Plan, and the vested accrued benefit of each such Employee shall
thereafter be distributable in accordance with the terms of the Salaried Plan.
(B) There shall be no transfer of assets or liabilities
of the Salaried Plan to any retirement plan maintained by Buyer; neither Buyer
nor any of its affiliates shall become a sponsor of or otherwise maintain, the
Salaried Plan; and Buyer acknowledges that neither Buyer nor any of its
affiliates shall have any right, title, or interest in any of the assets of the
Salaried Plan.
(ii) With respect to Seller's Union Plan:
(A) Within thirty (30) days after, and effective as of,
the Closing, Seller shall execute such amendments to Seller's Union Plan as are
necessary to provide that any Transferred Employee who is covered by Seller's
Union Plan (a "Union Plan Employee") and any other individual who is an employee
of the Business immediately prior to the Closing and who is covered by Seller's
Union Plan shall cease to be covered by Seller's Union Plan as of the Closing,
except (to the extent required by Section 7.3(b)(ii)(E) or not inconsistent with
Section 7.3(b)(ii)(C)) as to benefits accrued prior to the Closing.
(B) As soon as practicable after (and no later than 30
days after), and effective as of, the Closing, Buyers shall establish a defined
benefit pension plan and trust ("Buyer's Union Plan") for the benefit of the
Union Plan Employees, which shall be intended to
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qualify and to be exempt from tax under sections 401(a) and 501(a) of the Code,
and Buyer shall apply to the Internal Revenue Service for a determination letter
with respect thereto. Buyer's Union Plan shall cover the Union Plan Employees as
of the Closing or, in the case of any Union Plan Employee who becomes a
Transferred Employee after the Closing by reason of the last sentence of Section
7.3(a), as of the date such employee becomes a Transferred Employee, and shall
provide such participants with benefits substantially similar to those provided
by Seller's Union Plan. Buyer's Union Plan shall provide the Union Plan
Employees full credit for eligibility, vesting, and (except with respect to any
of such employees who make the election described in Section 7.3(b)(ii)(E))
benefit accrual purposes with respect to all service with Seller to the extent
such service was credited under the terms of Seller's Union Plan.
(C) As soon as practicable following Seller's receipt of
written evidence of the adoption of Buyer's Union Plan and of a copy of a
favorable determination letter issued by the Internal Revenue Service with
respect to Buyer's Union Plan, and except as otherwise provided in Section
7.3(b)(ii)(E), Seller shall direct the trustees of Seller's Union Plan to
transfer from the trust under Seller's Union Plan to the trust under Buyer's
Union Plan an amount which shall be determined by a certified actuary designated
by the Seller ("Seller's Actuary") and reasonably acceptable to an actuary
designated by the Buyer ("Buyer's Actuary") equal to: (i) the present value of
all accrued benefits, including ancillary benefits, under Seller's Union Plan as
of the Closing with respect to the Union Plan Employees (other than those making
the election described in Section 7.3(b)(ii)(E)); plus (ii) interest accrued
from the Closing to the date of transfer on the amount described in clause (i),
at a rate equal to 8.00 percent per annum, from the Closing to the date of
transfer; less (iii) the amount of any benefit payments made to the Union Plan
Employees (other than those making the election described in Section
7.3(b)(ii)(5)) from Seller's Union Plan after the Closing and prior to the date
of the transfer to Buyer's Union Plan, adjusted (at the interest rate described
in clause (ii) above) to reflect the time of such payments, and reasonable
administrative costs and expenses incurred during such period. The calculation
of the present value of the benefits described in clause (i) above shall be
determined using assumptions described on Schedule 7.3(b). Notwithstanding any
other provision in this Section 7.3(b)(ii)(C), the amount of assets to be
transferred pursuant to this Section 7.3(b)(ii)(C), shall satisfy the
requirements of section 414(l) of the Code and section 208 of the Employee
Retirement Income Security Act of 1974.
(D) At the time of transfer of the amount set forth in
Section 7.3(b)(i)(C) and except as otherwise provided in Section 7.3(b)(ii)(E),
Buyer and Buyer's Union Plan shall assume all liabilities for all accrued
benefits, including all ancillary benefits, under Seller's Union Plan in respect
of the Union Plan Employees, and Seller and Seller's Union Plan shall be
relieved of all liabilities for such benefits, including any liability under any
collective bargaining agreement to provide such benefits. Upon the transfer of
assets in accordance with Section 7.3(b)(ii)(C), Buyer agrees to indemnify and
hold harmless Seller, its officers, directors, employees, agents, and affiliates
from and against any and all costs, damages, losses, expenses, or other
liabilities arising out of or related to Buyer's obligations under this Section
7.3(b)(ii) or
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Buyer's Union Plan, including benefits accrued by the Union Plan Employees prior
to the Closing which are to be provided by Buyer's Union Plan; provided,
however, that Buyer shall not indemnify or hold harmless such parties with
respect to any costs, damages, losses, expenses, or other liabilities that
result, directly or indirectly, from violations of law by such parties which
occurred prior to the Closing.
(E) Notwithstanding any other provision of this Section
7.3(b)(ii) to the contrary, there shall be no transfer under this Section
7.3(b)(ii) of any assets or liabilities with respect to the vested accrued
benefit of any of the Union Plan Employees who are eligible for retirement
benefits as of the Closing Date under Seller's Union Plan and who so elect by
notifying Seller in writing within 30 days after the Closing. To the extent
permitted by Applicable Law, each such employee shall be deemed to have
terminated employment with the Seller as of the Closing for purposes of Seller's
Union Plan, and his vested accrued benefit shall thereafter be distributable in
accordance with the terms of Seller's Union Plan.
(F) Seller and Buyer shall provide each other with such
records and information as may be necessary or appropriate to carry out their
obligations under this Section 7.3(b)(ii) or for the purposes of administering
Buyer's Union Plan (including, without limitation, schedules of the Union Plan
Employees and their service credits and accrued benefits under the Seller's
Union Plan), and they shall cooperate in the filing of documents required in
connection with the transfer of assets and liabilities described herein.
Notwithstanding anything contained herein to the contrary, no such transfer
shall take place until the 31st day following the filing of any Form 5310-A
required in connection therewith.
(c) Seller currently maintains the Pre-Tax Accumulation of Capital
for Employees Plan ("Seller's 401(k) Plan") for its eligible employees,
including eligible employees of the Business. With respect to Seller's 401(k)
Plan:
(i) Within thirty (30) days after, and effective as of the
Closing, Seller shall execute such amendments to Seller's 401(k) Plan as
are necessary to provide that: (1) any individual including a Transferred
Employee, who is an employee of the Business immediately prior to the
Closing and who is covered by Seller's 401(k) Plan (a "401(k) Plan
Employee") shall cease to be covered by Seller's 401(k) Plan as of the
Closing except as to benefits accrued with respect to periods prior to the
Closing; and (2) the accrued benefit under Seller's 401(k) Plan of any
401(k) Plan Employee shall, to the extent permitted by Applicable Law, be
distributable to such employee after the Closing in accordance with Code
section 401(k)(10) and Treas. Reg. ss.ss. 1.401(k)-1(d)(l)(iv) and
1.401(k)-1(d)(4).
(ii) Buyer's 401(k) Plan shall accept a direct rollover of any
amount distributable from Seller's 401(k) Plan to any 401(k) Plan Employee
who becomes an employee of Buyer at or after the Closing and who elects to
have such direct rollover made in accordance with the provisions of
Seller's 401(k) Plan and applicable law.
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(iii) Except as otherwise specifically provided in this
Section 7.3(c), there shall be no transfer of assets or liabilities of
Seller's 401(k) Plan to any retirement plan maintained by Buyer; neither
Buyer nor any of its affiliates shall become a sponsor of, or otherwise
maintain, Seller's 401(k) Plan; and Buyer acknowledges that neither Buyer
nor any of its affiliates shall have any right, title, or interest in any
of the assets of Seller's 401(k) Plan.
(d) Seller will provide former salaried and hourly employees of the
Business who retire prior to the Closing with medical benefit coverage under
Seller's applicable retiree medical benefit plans, which plan shall be the
secondary payor with respect to any plan, arrangement, or agreement under which
such an individual may be covered pursuant to Section 7.3(e)(ii), 7.3(f)(ii), or
7.3(f)(iii).
(e) With respect to salaried employees of the Business:
(i) As of the Closing, Buyer will provide salaried Transferred
Employees (other than those described in Section 7.3(d)) with medical
benefit coverage under Buyer's standard medical benefit plan for its
salaried employees; provided that after the Closing, Buyer shall otherwise
have no obligation to provide such employees with any level of medical
benefit coverage.
(ii) Buyer will not provide medical benefit coverage to any
salaried employee of the Business described in Section 7.3(d) who has
again become an employee of the Business at or after the Closing except as
specifically provided by agreement between Buyer and such employee.
(f) With respect to hourly employees of the Business:
(i) As of the Closing, Buyer will provide hourly Transferred
Employees (other than those described in Section 7.3(d)) with medical
benefit coverage pursuant to the terms of the Union Contract under a
medical benefit plan or plans established or maintained by Buyer.
(ii) Buyer will provide an hourly employee of the Business
described in Section 7.3(d) who has again become an employee of the
Business at or after the Closing with medical benefit coverage pursuant to
the terms of the Union Contract (subject to any modification thereof as
agreed to by Buyer and the Union).
(iii) Buyer will provide hourly Transferred Employees who
retire after the Closing with retiree medical benefit coverage pursuant to
the terms of the union contract applicable to such hourly employees at the
time of their retirement under a retiree medical benefit plan or plans
established or maintained by Buyer. The parties agree that the amount
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of Seller's liability for such coverage attributable to the period prior
to the Closing was $176,000, and that the consideration for Buyer's
agreement herein was taken into account by the parties in their
negotiation of the Purchase Price.
(g) Except as otherwise specifically provided in Sections
7.3(d)-(f), each party reserves the right to change its employee and retiree
medical benefits plans in the future when and as it deems appropriate.
(h) Seller will provide former employees of the Business who retire
prior to the Closing with life insurance coverage under Seller's retiree life
insurance benefit plans.
(i) As of the Closing, Buyer will provide salaried Transferred
Employees with coverage under Buyer's standard life insurance benefit plans for
its salaried employees; provided that after the Closing, Buyer shall otherwise
have no obligation to provide such employees with any level of life insurance
benefits.
(j) Buyer will provide hourly Transferred Employees with life
insurance coverage pursuant to the terms of the Union Contract under a life
insurance plan or plans established or maintained by Buyer.
(k) Except as otherwise provided in Sections 7.3(h)-(j), each party
reserves the right to change its employee and retiree life insurance plans in
the future when and as it seems appropriate.
(l) As of the Closing, Buyer will provide salaried Transferred
Employees with coverage under Buyer's standard vacation benefit plan for its
salaried employees (provided that the eligibility for vacation benefits shall be
determined solely under the terms of Buyer's vacation benefit plan for such
employees). Seller will have no obligation to make any payment to such employees
after the Closing with respect to any vacation pay entitlement.
(m) As of the Closing, Buyer will assume all obligations of Seller
to hourly Transferred Employees for accrued vacation under the Union Contract.
Seller will have no obligation to make any payment to such employees after the
Closing with respect to any vacation pay entitlement.
(n) Seller will bear the entire cost and expense of any severance
payments payable under the terms of any applicable severance plan maintained by
Seller or any Applicable Law to employees of the Business whose employment with
the Business is terminated by Seller before or at the Closing even if such
employees thereafter become employees of Buyer. Buyer will bear the entire cost
and expense of severance payments payable to employees of the Business whose
employment with the Business is terminated by Buyer after the Closing; provided
that such payments shall be paid and determined solely in accordance with
Buyer's severance plan or policy.
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7.4. Allocation of Environmental Liabilities.
(a) At any time within twenty-four (24) months following the
Closing, Seller shall have the right but without obligation to conduct an
environmental investigation (the "Environmental Study") respecting the Leased
Real Property the purpose of which shall be to establish a so-called "base-line"
as of the Study Date of the environmental condition of such portions of the
Leased Real Property designated by the Seller (the portion of the Leased Real
Property not subject to the Environmental Study being the "Excluded
Environmental Parcel" and the portion of the Leased Real Property subject to the
Environmental Study being the "Included Environmental Parcel"). In connection
therewith:
(i) Seller shall be responsible for satisfying the cost of the
Environmental Study,
(ii) the Environmental Study shall be conducted by such
environmental engineers, and subject to such analytic protocol, as Buyer shall
reasonably approve prior to the beginning thereof,
(iii) the Environmental Study shall be conducted at such time
or times, and in such fashion, so as not to interfere unreasonably with the
conduct of the Business, and shall otherwise be subject to such access agreement
as may be reasonably required by Buyer; provided, that such access agreement
shall also provide that Buyer, at its expense, shall provide Seller with such
electricity and water as Seller shall reasonably require in connection with the
Environmental Study,
(iv) during and upon completion of the Environmental Study,
Seller shall provide Buyer with copies of all data collected thereunder and the
written conclusions thereof. In the event that Buyer disagrees with any of the
analyses or conclusions thereof, it shall so notify Seller within 30 days after
delivery thereof, and Buyer and Seller shall thereupon attempt in good faith to
resolve any differences, it being their mutual intent to arrive at a mutually
satisfactory conclusion to the Environmental Study. In the event Buyer and
Seller are unable to reach such conclusion on their own, they shall submit any
dispute for resolution pursuant to a mutually acceptable dispute resolution
process before a panel having expertise in environmental matters. The ultimate
Environmental Study, as approved by Buyer and Seller, shall be referred to
herein as the "Final Environmental Study."
(b) Seller shall in any and all events be responsible for the
following Environmental Liabilities (the "Seller Environmental Liabilities"):
(i) Environmental Liabilities arising out of Existing Known
Environmental Conditions,
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(ii) Environmental Liabilities arising out of Environmental
Conditions identified by the Final Environmental Study as existing on the Study
Date, and
(iii) Prior to the Study Date with respect to the Included
Environmental Parcel, and at all times after the date hereof with respect to the
Excluded Environmental Parcel, and at all times after the date hereof with
respect to the Included Environmental Parcel if no Environmental Study is
conducted, Environmental Liabilities relating to the Business or the Transferred
Assets or otherwise associated with the Leased Real Property whether in
existence on the Closing Date or arising thereafter except Environmental
Liabilities arising from an Environmental Condition caused by a discrete release
or incident occurring after the Closing Date constituting a violation of an
Environmental Law or requiring reporting pursuant to an Environmental Law (a
"Subsequent Event"); provided that, without limiting Buyer's or Seller's
responsibilities hereunder, Buyer shall provide Seller with notice of (A) any
such discrete release or incident occurring between the Closing Date and the
Study Date with respect to the Included Environmental Parcel and at any time
with respect to the Excluded Environmental Parcel of which it obtains Knowledge,
and (B) any other Environmental Conditions with respect to the Included
Environmental Parcel of which the Buyer obtains Knowledge after the Closing Date
that Buyer believes require reporting pursuant to an Environmental Law and which
Buyer believes to have been existing prior to the Closing Date; provided
further, that Seller shall have the burden of proving the existence of a
Subsequent Event.
(c) Buyer shall be responsible for the following Environmental
Liabilities ("Buyer Environmental Liabilities"):
(i) Environmental Liabilities constituting a Subsequent Event,
and
(ii) If an Environmental Study is conducted, Environmental
Liabilities arising out of Environmental Conditions on the Included
Environmental Parcel not identified in the Final Environmental Study as existing
on the Study Date.
(d) The "Study Date" shall mean the date following commencement of
the Environmental Study designated by the environmental engineers engaged to
perform such Environmental Study as an appropriate date to establish a so-called
"base-line" of the environmental conditions of the Included Environmental
Parcel.
7.5. Product Warranty Claims. In the event of any Liability arising
out of, resulting from, or relating to claims seeking return, replacement,
and/or repair of any Products manufactured on or prior to the Closing Date
pursuant either to (i) express Product warranties extended by Seller prior to
the Closing Date or Buyer after the Closing Date (provided that Buyer's
warranties are no more expansive than the warranties extended by Seller prior to
the Closing Date), or (ii) Product warranties or obligations implied or provided
by applicable law (together, the "Excluded Product Warranty Claims") with
respect to any such Products, the following shall apply:
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(a) Buyer shall, on behalf of Seller, satisfy any such Excluded
Product Warranty Claims in the ordinary course of business, and
(b) Seller shall reimburse Buyer all costs incurred by Buyer in
connection therewith, but only to the extent such costs exceed $150,000 in the
aggregate, it being understood that Buyer shall absorb the first $150,000 of
costs associated with Excluded Product Warranty Claims.
7.6. Excluded Product Liability Claims. Seller shall remain
responsible for satisfying all Liabilities arising out of, resulting from, or
relating to product liability claims associated with respect to Products
manufactured on or prior to the Closing Date (and whether or not sold prior to
the Closing Date) ("Excluded Product Liability Claims").
7.7. Excluded Worker's Compensation Claims. Buyer and Seller have
agreed to satisfy any payments required to be made to any Transferred Employee
in respect of injuries to such Employees as follows:
(a) Seller shall satisfy any such payments required in respect of
injuries occurring prior to the Effective Time, it being understood that Buyer
shall have the burden to prove the date on which any such injury occurred.
(b) As to injuries which occurred gradually, that is other than in
respect of a specific event or occurrence (which shall be covered by (a) above),
Buyer shall satisfy any payments required in respect thereof; provided, however,
Seller shall reimburse Buyer an equitable amount thereof, such contribution
amount to be based upon the time period over which such injury occurred, and the
extent to which such time period was prior to the Closing Date vis-a-vis the
extent to which such time period was after the Closing Date. Any dispute
regarding the allocation of liability and Seller's contribution obligations
hereunder shall be resolved by arbitration in accordance with Section 10.11
below.
(c) Buyer shall satisfy any such payments in respect in respect of
injuries occurring after the Effective Time.
For the purposes hereof, Seller's obligations under this Section 7.7
shall hereinafter be referred to as "Excluded Worker's Compensation Claims."
ARTICLE VIII.
INDEMNIFICATION
8.1. Agreement to Indemnify.
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(a) Subject to the limitations provided herein, Buyer, RBC and their
Affiliates (collectively, the "Buyer Indemnitees") shall each be indemnified and
held harmless to the extent set forth in this Article VIII by Seller in respect
of any Damages reasonably and proximately incurred by any Buyer Indemnitee (i)
as a result of any inaccuracy or misrepresentation in or breach of or failure to
perform any representation, warranty, covenant, agreement or obligation of
Seller in this Agreement or any agreement, document or certificate delivered
hereunder, (ii) in connection with any Excluded Liability, or (iii) in
connection with any Liability arising during, or directly or indirectly
associated with, the Interim Period and not constituting an ordinary course
Liability of the type contained in the June 30 Balance Sheet. Notwithstanding
the foregoing, Seller shall not be liable as an Indemnifying Party with respect
to any claim relating to an inaccuracy or misrepresentation in or breach of any
representation or warranty under subsection (a)(i) above if Buyer had Knowledge
of such inaccuracy, misrepresentation or breach on or before the Closing Date.
Further, Seller shall not be liable as an Indemnifying Party until all claims by
the Buyer Indemnitees for indemnification exceed $100,000 in the aggregate, and
thereafter Seller shall be liable, subject to the other limitations provided for
elsewhere in this Agreement, for all indemnification claims; provided, however,
that Seller shall be liable, subject to the other limitations provided for
elsewhere in this Agreement, for all claims by the Buyer Indemnitees, regardless
of amount, arising out of (i) the fraud or willful misconduct of Seller, (ii)
any Lien that does not constitute a Permitted Lien, (iii) any Third Party Claim
or (iv) any Excluded Liability. The aggregate liability of Seller collectively
under this Section 8.1(a) of this Agreement shall not exceed $3,000,000,
provided, however, that there shall be no limit on the aggregate liability of
Seller for Damages incurred by Buyer in connection with: (1) Seller's fraud or
willful misconduct; (2) any Excluded Liability; or (3) a Third Party Claim
arising from an Excluded Liability.
(b) Seller and its Affiliates (collectively the "Seller
Indemnitees") shall each be indemnified and held harmless to the extent set
forth in this Article VIII by Buyer and RBC in respect of any and all Damages
reasonably and proximately incurred by any Seller Indemnitee as a result of (i)
any inaccuracy or misrepresentation in or breach of or failure to perform any
representation, warranty, covenant, agreement or obligation of Buyer or RBC in
this Agreement, (ii) failure of Buyer or RBC to pay and discharge the Assumed
Liabilities or (iii) the conduct of the Business after the Effective Time, but
only to the extent that (A) such Damages are directly attributable to periods
following the Effective Time, (B) such Damages are not proximately caused by
actions of Seller prior to the Effective Time, (C) such Damages do not arise
fr
om an Excluded Liability, (D) if the underlying act or omission giving rise to
such Damages began or occurred prior to the Effective Time and continued after
the Effective Time, such Damages increased following such time that Buyer
obtained Knowledge thereof and failed to take reasonable actions after the
Closing Date in response thereto, and (E) if such Damages arose by reason of
Liabilities incurred during, or with respect to, the Interim Period, they are
not subject to Seller's indemnification responsibilities set forth in subsection
(a)(iii) above.
8.2. Survival of Representations and Warranties and Covenants.
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(a) The representations and warranties contained in this Agreement
shall survive as follows:
(i) Except as otherwise provided in Section 8.2(a)(ii), (iii)
or (iv), all representations and warranties shall expire on the first
anniversary of the Closing Date.
(ii) Notwithstanding Section 8.2(a)(i) the representations and
warranties of Seller as an Indemnifying Party shall survive the Closing
Date until the expiration of any applicable statute of limitations,
including extensions thereof, with respect to: (1) the inaccuracy or
misrepresentation in or breach of any representation or warranty made by
Seller in this Agreement (A) arising out of fraud or willful misconduct or
(B) relating to matters which are the subject of a Third Party Claim
arising from an Excluded Liability; and (2) any inaccuracy or
misrepresentation in or breach of any representation or warranty made in
Sections 3.14, 3.19 and 3.20 regardless of whether such inaccuracy or
misrepresentation or breach arises out of fraud or willful misconduct.
(iii) Notwithstanding Section 8.2(a)(i), the representations
and warranties of Buyer and RBC as Indemnifying Parties shall survive the
Closing Date until the expiration of the applicable statute of
limitations, including extensions thereof, with respect to any inaccuracy
or misrepresentation in or breach of any representation or warranty made
by Buyer or RBC in this Agreement arising out of fraud or willful
misconduct.
(iv) Notwithstanding Section 8.2(a)(i), the representations
and warranties of Seller set forth in Sections 3.1, 3.2, 3.4, 3.8 and 3.11
shall survive without expiration.
Any cause of action for breach of a representation or warranty contained herein
shall expire and terminate unless the party claiming that such breach occurred
delivers to the other party written notice and a reasonably detailed explanation
of the alleged breach on or before 5:00 P.M., New York City time, on the date on
which such representation or warranty expires pursuant to this Section 8.2(a).
(b) The covenants contained in this Agreement shall survive without
expiration unless otherwise expressly provided in such covenant.
8.3. Claims for Indemnification. If any Indemnitee shall believe
that such Indemnitee is entitled to indemnification pursuant to this Article
VIII in respect of any Damages, such Indemnitee shall give the appropriate
Indemnifying Party prompt written notice thereof. Any such notice shall set
forth in renewable detail and to the extent then known the basis for such claim
for indemnification. The failure of such Indemnitee to give notice of any claim
for indemnification promptly shall not adversely affect such Indemnitee's right
to indemnity hereunder except to the extent that such failure materially
adversely affects the right of the Indemnifying Party to assert any reasonable
defense to such claim. Each such claim for indemnity shall expressly state that
the
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Indemnifying Party shall have only the ten (10) Business Day period referred to
in the next sentence to dispute or deny such claim. The Indemnifying Party shall
have ten (10) Business Days following the delivery of such notice to it either
(a) to acquiesce in suc h claim by giving such Indemnitee written notice of such
acquiescence or (b) to object to the claim by giving such Indemnitee written
notice of the objection. If the Indemnifying Party does not object thereto
within such ten (10) Business Day period, such Indemnitee shall be entitled to
be indemnified for all Damages reasonably and proximately incurred by such
Indemnitee in respect of such claim. If the Indemnifying Patty objects to such
claim in a timely manner, and such Indemnitee and the Indemnifying Party are
unable to resolve their dispute within ten (10) Business Days following such
objection (or such additional period of time as may be mutually agreed to by
such Persons), the claim shall be submitted immediately to arbitration pursuant
to Section 10.11.
8.4. Defense of Claims.
(a) In connection with any claim which may give rise to indemnity
under this Article VIII resulting from or arising out of any claim or Proceeding
against an Indemnitee by a Person that is not a party hereto (a "Third Party
Claim"), the Indemnifying Party may, subject to Section 8.4(b), assume the
defense of any such claim or Proceeding (unless such Indemnitee elects not to
seek indemnity hereunder for such claim), upon written notice to the relevant
Indemnitee, if all Indemnifying Parties with respect to such claim or Proceeding
jointly acknowledge to the Indemnitee its right to indemnity pursuant hereto in
respect of the entirety of such claim (as such claim may have been modified
through written agreement of the parties or arbitration hereunder) and provides
assurances, reasonably satisfactory to such Indemnitee, that the Indemnifying
Parties will be financially able to satisfy such claim in full if such claim or
Proceeding is decided adversely. If the Indemnifying Parties assume the defense
of any such claim or Proceeding, the Indemnifying Parties shall select counsel
reasonably acceptable to such Indemnitee to conduct the defense of such claim or
Proceeding, shall take all steps necessary in the defense or settlement thereof
and shall at all times diligently and promptly pursue the resolution thereof. If
the Indemnifying Parties shall have assumed the defense of any claim or
Proceeding in accordance with this Section 8.4, the Indemnifying Parties shall
be authorized to consent to a settlement of, or the entry of any judgment
arising from, any such claim or Proceeding, without the prior written consent of
such Indemnitee; provided, however, that the Indemnifying Parties shall pay or
cause to be paid all amounts arising out of such settlement or judgment
concurrently with the effectiveness thereof; provided, further, that the
Indemnifying Parties shall not be authorized to encumber any of the assets of
any Indemnitee or to agree to any restriction that would apply to any Indemnitee
or to its conduct of business; and provided, further, that a condition to any
such settlement shall be a complete release of such Indemnitee and its
Affiliates, officers, employees, consultants and agents with respect to such
claim. Subject to Section 8.4(b), such Indemnitee shall be entitled to
participate in (but not control) the defense of any such action, with its own
counsel and at its own expense and the Indemnifying Parties shall provide such
Indemnitee with reasonable access to all materials relating to the defense of
the action and otherwise cooperate with such Indemnitee and its counsel in
connection with the Indemnitee's participation in such defense. Each Indemnitee
45
<PAGE>
shall, and shall cause each of its Affiliates, officers, employees, consultants
and agents to, cooperate fully with the Indemnifying Parties in the defense of
any claim or Proceeding being defended by the Indemnifying Parties pursuant to
this Section 8.4. If the Indemnifying Parties do not assume the defense of any
claim or Proceeding resulting therefrom in accordance with the terms of this
Section 8.4(a), such Indemnitee may defend against such claim or Proceeding.
(b) Notwithstanding Section 8.4(a), the Indemnifying Parties may not
assume the defense of any claim or Proceeding and the Indemnitee may at its own
cost and expense assume such defense if in the reasonable opinion of the
Indemnitee, (i) such claim or Proceeding involves an issue or matter that, if
determined adversely to the Indemnitee, is likely to have a material adverse
effect on the business, operations, assets, properties or prospects of the
Indemnitee, or (ii) there is one or more legal defenses available to the
Indemnitee that conflict with those available to an Indemnifying Party. If the
Indemnitee assumes defense of any such claim or Proceeding, (A) the Indemnifying
Parties may participate in, but not control, the defense of such claim or
Proceeding, and (B) if the Indemnitee receives a settlement proposal from the
Person asserting such claim or instituting such Proceeding and is notified by an
Indemnifying Party that such Indemnifying Party wants to accept such settlement
proposal, the liability of the Indemnifying Parties with respect to such claim
or Proceeding shall equal the lesser of (x) the amount offered in such
settlement proposal (y) the amount of actual Damages of the Indemnitee with
respect to such claim or Proceeding or (z) the maximum liability of the
Indemnifying Parties pursuant to Section 8.1(a).
(c) If the Indemnitee elects to defend any claim or Proceeding
pursuant to the last sentence of Section 8.4(a) or pursuant to Section 8.4(b),
the Indemnitee shall conduct such defense in such manner as it shall deem
appropriate, including settling such claim or Proceeding after giving notice of
the same to the Indemnifying Parties, on such terms as such Indemnitee shall
deem appropriate. If the Indemnifying Parties seek to question the manner in
which such Indemnitee defended such claim or Proceeding or the amount of or
nature of any such settlement, the Indemnifying Parties shall have the burden to
prove by a preponderance of the evidence that such Indemnitee did not defend
such claim or Proceeding in a reasonably prudent manner.
ARTICLE IX.
COVENANT NOT TO COMPETE
9.1. Non-Compete. From and after the Closing Date, Seller will not,
and will advise its Affiliates to not, directly or indirectly, individually or
collectively, engage in any Competitive Activity for five (5) years after the
Closing Date (the "Covered Period"); provided, however, that, notwithstanding
the foregoing, (a) neither Seller, nor any of its Affiliates shall be deemed to
be engaged in a Competitive Activity solely by virtue of the ownership without
of less
46
<PAGE>
than twenty percent (20%) of the outstanding voting stock or debt securities of
any publicly held company of which it does not have voting or day-to-day
operational control, the stock or debt securities of which are traded on an
United States of foreign stock exchange or quoted on the National Association of
Securities Dealers Automated Quotation System; (b) Seller and any of its
Affiliates may acquire a Person or business engaged in a Competitive Activity if
(i) in the calendar year immediately preceding the acquisition, the revenues
derived from Competitive Activities do not exceed fifteen percent (15%) of the
total revenues of such Person or business and (ii) the aggregate revenues during
any calendar year during the Covered Period derived from Competitive Activities
of all Persons and businesses acquired in accordance with this Section 9.1(b)
shall not exceed $3,750,000; (c) Seller's Affiliates shall not be deemed to be
engaged in a Competitive Activity solely by virtue of incidental sales
constituting a Competing Activity during the Covered Period that were not known
by such Affiliate otherwise to constitute a violation hereof; and (d) Seller and
its Affiliates shall not be deemed to be engaged in a Competitive Activity by
virtue of their sale or resale of any Product (i) manufactured by Bremen prior
to the Closing Date or (ii) manufactured by Buyer after the Closing Date.
If Seller becomes aware that any one or more of its Affiliates is
engaged in a Competitive Activity, it shall use its best efforts to cause such
Affiliate(s) to cease, forthwith, such Competitive Activity. Upon becoming aware
of such a Competitive Activity, Seller shall promptly notify Buyer of such
Competitive Activity and the nature of its efforts to cause such Competitive
Activity to cease.
For purposes of this Section 9.1, "Competitive Activity" shall mean
(x) the manufacture, distribution or sale of any Product in North America and
(y) the sale to any Person who was, to the Knowledge of Seller, a direct or
indirect customer of Bremen outside of North America at any time within five (5)
years preceding the Closing Date of (A) any Product or (B) any similar or
modified product for the same application as the products identified in the
preceding subsection (A).
9.2. Severability. The invalidity or unenforceability of this
Article IX in any respect shall not affect the validity or enforceability of
this Article IX in any other respect, or of any other provision of this
Agreement. In the event that any provision of this Article IX shall be held
invalid or unenforceable by a court of competent jurisdiction by reason of the
geographic or business scope or the duration thereof or for any other reason,
such invalidity or unenforceability shall attach only to the particular aspect
of such provision found invalid or unenforceable as applied and shall not affect
or render invalid or unenforceable any other provision of this Article IX or the
enforcement of such provision in other circumstances, and, to the fullest extent
permitted by law, this Article IX shall be construed as if the geographic or
business scope or the duration of such provision or other basis on which such
provision has been challenged had been more narrowly drafted so as not to be
invalid or unenforceable.
47
<PAGE>
9.3. Enforcement. Seller acknowledges and agrees that Buyer and its
Affiliates are engaged in a highly competitive business and that the protections
of Buyer and each such Affiliate set forth in this Article IX are fair and
reasonable and are of vital concern to Buyer and its Affiliates. Further, Seller
acknowledges and agrees that monetary damages for any violation of this Article
IX will not adequately compensate Buyer and its Affiliates with respect to any
such violation. Therefore, in the event of a breach by Seller of any of the
terms and provisions contained in this Article IX, Buyer shall be entitled to
obtain damages for any such breach (the amount of such damages being
irrespective of the consideration being allocated to the within provisions)
and/or to enforce the specific performance of this Article IX by Seller and to
enjoin Seller from any further violations. The remedies available to Buyer
pursuant to this Section 9.3 may be exercised cumulatively by Buyer in
conjunction with all other rights and remedies provided by law.
ARTICLE X.
MISCELLANEOUS
10.1. Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) if
personally delivered, when so delivered, (ii) if mailed, two Business Days after
having been sent by registered or certified with return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below,
(iii) if given by telex or telecopier, once such notice or other communication
is transmitted to the telex or telecopier number specified below and the
appropriate answer back or telephonic confirmation is received, provided that
such notice or other communication is promptly thereafter mailed in accordance
with the provisions of clause (ii) above or (iv) if sent through an overnight
delivery service in circumstances to which such service guarantees next day
delivery, the day following being so sent:
If to Seller:
SKF USA Inc.
1100 First Avenue
King of Prussia, PA 19406
Attn: President
Telecopier No.: (610) 265-0404
48
<PAGE>
with a copy to:
SKF USA Inc.
1100 First Avenue
King of Prussia, PA 19406
Attn: Secretary and General Counsel
Telecopier No.: (610) 265-0404
If to Buyer:
Bremen Bearings, Inc.
c/o Roller Bearing Company of America, Inc.
60 Round Hill Road
Fairfield, Connecticut 06430
Attn: Michael Gostomski
Telecopier No: (203) 256-0775
with a copy to:
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Attn: C. David Goldman, Esq.
Telecopier No.: 212-547-5444
Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request demand, claim or other communication shall be deemed
to have been duly given unless and until it actually is received by the
individual for whom it is intended. Any party may change the address to which
notices, requests, demands, claims and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
10.2. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived if and
only if such amendment or waiver is in writing and signed, in the case of an
amendment, by all parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No waiver by a party of any default, misrepresentation or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent occurrence. No failure or delay by a
49
<PAGE>
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
10.3. Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
10.4. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. No party hereto may assign either this Agreement or any
of its rights, interests or obligations hereunder without the prior written
approval of each other party, except that Buyer may assign any and all of its
right, interests and obligations hereunder as security for obligations to its
lenders; provided that Buyer shall not be released from any of its obligations
hereunder by reason of such assignment.
10.5. Governing Law. This Agreement shall be construed in accordance
with and governed by the internal laws (without reference to choice or conflict
of laws) of the Commonwealth of Pennsylvania.
10.6. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other parties hereto.
10.7. Entire Agreement. This Agreement (including the Schedules and
Exhibits referred to herein which are hereby incorporated by reference)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral between the parties with respect to the
subject matter of this Agreement. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
10.8. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
10.9. Severability. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the
50
<PAGE>
transactions contemplated hereby in substantially the same manner as originally
set forth at the later of the date this Agreement was executed or last amended.
10.10. Construction.
(a) 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 shall be applied against either party. Any reference
to any Applicable Law shall be deemed also to refer to all rules and regulations
promulgated thereunder unless the context requires otherwise. Whenever required
by the context, any gender shall include any other gender, the singular shall
include the plural and the plural shall include the singular. The words
"herein," "hereof," "hereunder," and words of similar import refer to the
Agreement as a whole and not to a particular section. Whenever the word
"including" is used in this Agreement, it shall be deemed to mean "including
without limitation," "including, but not limited to" or other words of similar
import such that the items following the word "including" shall be deemed to be
a list by way of illustration only and shall not be deemed to be an exhaustive
list of applicable items in the context thereof.
(b) The parties hereto intend that each representation, warranty,
and covenant contained herein shall have independent significance. If any party
has breached any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) that the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant.
10.11. Arbitration of Claims.
(a) Except as otherwise provided elsewhere in this Agreement, any
dispute or difference between or among the parties arising out of this Agreement
or the transactions contemplated hereby, including without limitation any
dispute between an Indemnitee and any Indemnifying Party under Article VIII
which the parties are unable to resolve themselves shall be submitted to and
resolved by arbitration as herein provided. Within ten (10) Business Days after
expiration of the ten (10) Business Day period referred to in Section 8.3 or
within such other time period as the parties may agree, the Indemnitee and the
Indemnifying Party shall each designate one arbitrator. Within ten (10) Business
Days after the appointment of the two arbitrators, the two arbitrators shall
designate a third arbitrator mutually acceptable to them who shall be a
certified public accountant not affiliated with any party in interest to such
arbitration and the two arbitrators chosen by the Indemnitees and Indemnifying
Party shall each be a retired or former judge of any appellate court of the
State of Delaware, any United States appellate court or the United States
District Court for any Delaware District who is not affiliated with any party in
interest to such arbitration and who has substantial professional experience
with regard to corporate legal matters. If the arbitrator chosen by the
Indemnitee and the arbitrator chosen by the Indemnifying Party fail to agree
upon the third arbitrator within such ten (10) Business Day period, the third
arbitrator shall
51
<PAGE>
be appointed by the American Arbitration Association as soon as practicable and
shall be a certified public accountant who is not affiliated with any party in
interest to such arbitration and who has substantial professional experience
with regard to corporate legal matters.
(b) The three arbitrators shall consider the dispute at issue at
Philadelphia, Pennsylvania at a mutually agreed upon time within thirty (30)
days (or such longer period as may be acceptable to the Indemnitee and the
Indemnifying Party) of the designation of the arbitrators. The arbitrator shall
not have the authority to modify any term or provision of this Agreement. The
arbitration proceeding shall be held in accordance with the rules for commercial
arbitration of the American Arbitration Association in effect on the date of the
initial request by the Indemnitee or Indemnifying Party, as the case may be,
that gave rise to the dispute to be arbitrated (as such rules are modified by
the terms of this Agreement or may be further modified by mutual agreement of
the Indemnitee and Indemnifying Party) and shall include an opportunity for the
parties to conduct discovery in advance of the proceeding, which discovery may
be limited by rules established by the arbitrators. Notwithstanding the
foregoing, the Indemnitee and Indemnifying Party agree that they will attempt
and they intend that they and the arbitrators should use their best efforts in
that attempt, to conclude the arbitration proceeding and have a final decision
from the arbitrators within ninety (90) days from the date of selection of the
arbitrators; provided, however, that the arbitrators shall be entitled to extend
such 90-day period one or more times to the extent necessary for such
arbitrators to place a dollar value on any claim that may be unliquidated. The
arbitrators shall immediately deliver a written decision with respect to the
dispute to each of the parties, who shall promptly act in accordance therewith.
Each Indemnitee and Indemnifying Party to such arbitration agrees that any
decision of the arbitrators shall be final conclusive and binding, absent fraud
or manifest error, and that they will not contest any action by any other party
thereto in accordance with a decision of the arbitrators, except if such factors
are present. It is specifically understood and agreed that any party may enforce
any award rendered pursuant to the arbitration provisions of this Section 10.11
by bringing suit in any court of competent jurisdiction.
(c) All fees, costs and expenses (including attorneys' fees and
expenses) incurred by the party that prevails in any such arbitration commenced
pursuant to this Section 10.11 or any judicial action or proceeding seeking to
enforce the agreement to arbitrate disputes as set forth in this Section 10.11
or seeking to enforce any order or award of any arbitration commenced pursuant
to this Section 10.11 may be used against the party or parties that do not
prevail in such arbitration in such manner as the arbitrators or the court in
such judicial action, as the case may be, may determine to be appropriate under
the circumstances. All costs and expenses attributable to the arbitrators shall
be allocated among the parties to the arbitration in such manner as the
arbitrators shall determine to be appropriate under the circumstances.
10.12. Cumulative Remedies. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
52
<PAGE>
10.13. Third Party Beneficiaries. No provision of this Agreement
shall create any third party beneficiary rights in any Person, including any
employee of Buyer or employee or former employee of Seller or any Affiliate
thereof (including any beneficiary or dependent thereof).
53
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
SELLER:
SKF USA INC.
By:
-------------------------------
Allen G. Belenson
Vice President
BUYER:
BREMEN BEARINGS, INC.
By:
-------------------------------
Michael S. Gostomski
Executive Vice President
RBC:
ROLLER BEARING COMPANY OF
AMERICA, INC.
By:
-------------------------------
Michael S. Gostomski
Executive Vice President
54
<PAGE>
SCHEDULE 2.3
ASSUMED LIABILITIES
(a) Those Liabilities of the Business which are recorded and accrued as a
Liability on the June 30 Balance Sheet.
(b) All Liabilities and obligations of the Business arising after the
Effective Time under Contracts included in the Transferred Assets.
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "BPP ACQUISITION CORPORATION", CHANGING ITS NAME FROM "BPP ACQUISITION
CORPORATION" TO "RBC LINEAR PRECISION PRODUCTS, INC.", FILED IN THIS OFFICE ON
THE TWENTIETH DAY OF MAY, A.D. 1997, AT 3 O'CLOCK P.M.
/s/ Edward J. Freel
[ESTATE SEAL] -----------------------------------
Edward J. Freel, Secretary of State
2633533 8100 AUTHENTICATION: 8484937
971173689 DATE: 05-28-97
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BPP ACQUISITION CORPORATION
(a Delaware corporation)
Michael S. Gostomski hereby certifies as follows:
FIRST: He is the Chief Financial Officer and Secretary of BPP
Acquisition Corporation, a Delaware corporation (the "Corporation").
SECOND: Article I of the Certificate of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:
"The name of this corporation is:
RBC Linear Precision Products, Inc."
THIRD: The foregoing amendment of the Certificate of Incorporation
of the Corporation has been approved by the sole stockholder of the Corporation
by written consent in accordance with Sections 228 and 242 of the Delaware
General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Michael S. Gostomski, its Chief Financial Officer and
Secretary, as of this 15th day of May, 1997.
/s/ Michael S. Gostomski
-------------------------------------
Michael S. Gostomski
Chief Financial Officer and Secretary
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 03:00 pm 05/20/1997
971164960 - 2633533
ROLLER BEARING COMPANY OF AMERICA, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
4/3/93 4/2/94 4/1/95 3/30/96 3/29/97 9/27/96 9/28/97
------------------------------------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Historical
Earnings
Income (loss) before income taxes
and extraordinary charge $3,730 $(7,518) $ 211 $ 3,522 $ 7,864 $2,912 $3,253
Fixed charges, excluding capitalized
interest - see below 3,805 4,762 6,861 6,686 5,711 2,924 5,088
------------------------------------------ --------------
Earnings $7,535 $(2,756) $7,072 $10,208 $13,575 $5,835 $8,341
------------------------------------------ --------------
Fixed Charges
Interest expense, net $3,471 $ 4,333 $6,445 $ 6,165 $ 5,338 $2,747 $4,894
Interest factor included in rentals 334 429 416 521 373 177 194
------------------------------------------ --------------
Fixed charges, excluding capitalized
interest 3,805 4,762 6,861 6,686 5,711 2,924 5,088
Interest capitalized -- -- -- -- -- -- --
------------------------------------------ --------------
Fixed charges $3,805 $ 4,762 $6,861 $ 6,686 $ 5,711 $2,924 $5,088
------------------------------------------ --------------
Ratio of earnings to fixed charges 2.0 (a) 1.0 1.5 2.4 2.0 1.6
========================================== ==============
Pro forma ratio of earnings to fixed
charges assuming the acquisition of LPP
and Nice as of March 31, 1996, and the
acquisition of Bremen as of March 30,
1997
Pro forma earnings before income taxes
and extrordinary charge $10,432 $3,685
Fixed charges, excluding capitalized
interest - see below 6,496 5,200
------- ------
Earnings $16,928 $8,885
------- ------
Fixed charges
Interest expense, net 6,112 5,001
Interest factor included in rentals 384 199
------- ------
Fixed charges, excluding capitalized
interest 6,496 5,200
------- ------
Interest capitalized -- --
------- ------
Fixed charges $ 6,494 $5,200
------- ------
Ratio of earnings to fixed charges 2.6 1.7
======= ======
</TABLE>
(a) Earnings were insufficient to cover charges in fiscal 1994 by $7,518.
<PAGE>
Exhibit 12
Page 2
ROLLER BEARING COMPANY OF AMERICA, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
4/3/93 4/2/94 4/1/95 3/30/96 3/29/97 9/27/96 9/28/97
------------------------------------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Pro forma ratio of earnings to fixed
charges assuming the issuance of the
Recapitalization discussed herein and
the reduction of outstanding debt
Based on historical earnings and
fixed charges of the Company
Earnings, as above $ 13,575 $ 8,341
======== =======
Fixed charges, as above $ 5,711 $ 5,088
Additional interest as a result
of the Recapitalization
discussed herein 12,547 2,963
-------- -------
Pro forma fixed charges $ 18,258 $ 8,051
======== =======
Pro forma ratio of earnings to
fixed charges 0.7 1.0
======== =======
Based on the pro forma combined
results of the Company and its
acquisitions and the combined
fixed charges
Pro forma earnings, as above $ 16,928 $ 8,885
======== ========
Pro forma fixed charges, as above $ 6,496 $ 5,200
Additional interest as a result of
the Recapitalization discussed
herein 12,547 2,963
Reduction of interest expense as
a result of the repayment of the
existing debt (5,271) (1,194)
-------- -------
Pro forma fixed charges $ 13,772 $ 6,969
======== =======
Pro forma ratio of earnings to
fixed charges 1.2 1.3
======== =======
</TABLE>
EXHIBIT 16.1
On June 23, 1997 management of the Roller Bearing Company of America, Inc. (the
"Company") determined that the Company's independent auditors for the fiscal
year commencing March 30, 1997 will be Arthur Andersen, LLP, and accordingly,
has dismissed Ernst & Young LLP as of such date. The reports prepared by Ernst &
Young LLP for fiscal years 1996 and 1997 contained no adverse opinion or
disclaimer of opinion, nor were either of such reports qualified as to
uncertainty, audit scope or accounting principles. During fiscal years 1996 and
1997, and for the period from March 29, 1997 through June 23, 1997, there were
no disagreements between the Company and Ernst & Young LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which if not resolved to the satisfaction of Ernst & Young
LLP, would have caused Ernst & Young LLP to make a reference to the subject
matter of such disagreement in connection with its reports. Arthur Andersen LLP
provided advice to management of the Company in connection with the
Recapitalization.
Exhibit 16.2
We have read Exhibit 16.1 "Statement of Company Regarding Change in Certifying
Accountant" in the Registration Statement (Form S-4 No. 333-33085) of Roller
Bearing Company of America, Inc. for the registration of its $110,000,000 of
Senior Subordinated Notes Due 2007 and are in agreement with the statement
contained in the second and third sentences. We have no basis to agree or
disagree with other statements of the Registrant contained therein.
Ernst & Young LLP
White Plains, New York
October 29, 1997
EXHIBIT 21
Industrial Tectonics Bearings Corporation incorporated in Delaware
RBC Linear Precision Products, Inc., incorporated in Delaware
RBC Nice Bearings, Inc., incorporated in Delaware
Bremen Bearings, Inc., incorporated in Delaware
Exhibit 23.2
CONSENT OF AUDITORS
We consent to the references to our firm under the captions "Experts" and
"Selected Consolidated Historical Financial Information", and to the use of our
report dated May 9, 1997 (except Note 15, as to which the date is May 20, 1997),
in the Registration Statement (Form S-4 No.333-33085) and related prospectus of
Roller Bearing Company of America, Inc. for the registration of its $110,000,000
of Senior Subordinated Notes Due 2007.
Ernst & Young LLP
White Plains, New York
October 29, 1997
Letter Of Transmittal
For Tenders Of
$110,000,000 Aggregate Principal Amount Of
95/8% Senior Subordinated Notes Due 2007
Of
ROLLER BEARING COMPANY OF AMERICA, INC.
Pursuant to the Prospectus
dated ____________, 1997, of ROLLER BEARING COMPANY OF AMERICA, INC.
---------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK TIME, ON
_________________, 199_, UNLESS EXTENDED. TENDERED SECURITIES
MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE
OF THE EXCHANGE OFFER.
---------------------------------------------------------------------
Main Delivery To:
United States Trust Company of New York
By hand or overnight courier:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
By mail:
United States Trust Company of New York
P.O. Box 843 Cooper Station
New York, New York 10276
Attention: Corporate Trust Services
By fax for Eligible Institutions:
(212) 780-0592
<PAGE>
Delivery of this instrument to an address other than as set forth 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.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus dated ______________, 1997 (the "Prospectus"), of Roller Bearing
Company of America, Inc. (the "Issuer"), and this Letter of Transmittal (the
"Letter of Transmittal"), which together constitute the Issuer's offer (the
"Exchange Offer") to exchange an aggregate principal amount of up to
$110,000,000 95/8% Exchange Senior Subordinated Notes Due 2007, Series B (the
"Exchange Notes"), for a like principal amount of the Issuer's issued and
outstanding 95/8% Senior Subordinated Notes Due 2007 (the "Outstanding Notes").
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
_________, 199_, unless the Issuer, in its sole discretion, extends the Exchange
Offer. The Issuer reserves the right, at any time or from time to time, to
extend the period of time during which the Exchange Offer is open at its
discretion, in which event the term "Expiration Date" shall mean the time and
date when the Exchange Offer as so extended shall expire. During any such
extension, all Outstanding Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Issuer. Any Outstanding
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 Issuer expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Outstanding Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified in the Prospectus under the section entitled "The
Exchange Offer--Certain Conditions to the Exchange Offer."
The Issuer shall notify the holders of the Outstanding Notes of any
extension, amendment, non-acceptance or termination by means of a press release
or other public announcement no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
The Exchange Notes will bear interest from the last interest payment date
on which interest was paid on the Outstanding Notes surrendered in exchange
therefor or, if no interest has been paid on such Outstanding Notes, from the
date of original issue of the Outstanding Notes at the same rate and upon the
same terms as the Outstanding Notes. Holders whose Outstanding Notes are
accepted for exchange will not receive interest on such Outstanding Notes for
any period subsequent to the last interest payment date, if any, of the
Outstanding Notes to occur prior to the issue date of the Exchange Notes and
will be deemed to have waived the right to receive any payment in respect of
interest on the Outstanding Notes accrued from and after such interest payment
date, if any.
The Exchange Offer is not conditioned upon any minimum principal amount of
Outstanding Notes being tendered for exchange. However, the Exchange Offer is
subject to certain conditions. Please see the Prospectus under the section
entitled "The Exchange Offer--Certain Conditions to the Exchange Offer".
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Outstanding Notes in any jurisdiction in which the
making or acceptance of the Exchange Offer would not be in compliance with the
laws of such jurisdiction.
This Letter of Transmittal is to be completed by a holder of Outstanding
Notes either if certificates are to be forwarded herewith or if a tender of
certificates for Outstanding Notes, if available, is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in "The Exchange Offer--Procedures for Tendering Outstanding Notes"
section of the Prospectus. Holders of Outstanding Notes whose certificates are
not immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry
2
<PAGE>
tender of their Outstanding Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility (a "Book-Entry Confirmation") and deliver all other
documents required by this Letter of Transmittal to the Exchange Agent on or
prior to the Expiration Date, may tender their Outstanding Notes according to
the guaranteed delivery procedures set forth in the Prospectus under the section
entitled "The Exchange Offer--Guaranteed Delivery Procedures".
Holders who wish to tender their Outstanding Notes must complete this
Letter of Transmittal in its entirety.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOX
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the certificate numbers and
principal amount of Outstanding Notes should be listed on a separate signed
schedule affixed hereto.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES
(See instructions 2, 3 and 8)
- --------------------------------------------------------------------------------------------
Name(s) and Address(es) Outstanding Note(s) Tendered
of Registered Holder(s) (Attach additional signed list if necessary)
(Please fill in if
blank)
- --------------------------------------------------------------------------------------------
Title of Securities Aggregate Principal Principal Amount of
and Certificate Amount of Outstanding Outstanding Notes
Number(s)(1) Notes Tendered(2) (must be in
denominations of $1,000 or
integral multiples
thereof)
<S> <C> <C> <C>
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------------------
</TABLE>
(1) Certificate numbers not required if Outstanding Notes are being tendered
by book-entry transfer.
(2) Unless otherwise indicated, a holder will be deemed to have tendered all
of the Outstanding Notes represented in the Aggregate Principal column.
3
<PAGE>
|_| CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ______________________________________
Account Number: ______________________________________
Transaction Code Number: ______________________________________
|_| CHECK HERE IF TENDERED OUTSTANDING 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:
_____________________________
|_| 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: ________________________________________________
________________________________________________
________________________________________________
4
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE
ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuer the aggregate principal amount of
Outstanding Notes indicated above. 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.
Subject to, and effective upon, the acceptance for exchange of the
Outstanding Notes tendered hereby, the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest in
and to such Outstanding Notes as are being 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 Issuer with respect to the tendered Outstanding Notes with full
power of substitution to (i) deliver certificates for such Outstanding Notes to
the Issuer and deliver all accompanying evidences of transfer and authenticity
to, or upon the order of, the Issuer, (ii) present such Outstanding Notes for
transfer on the books of the Issuer and (iii) receive for the account of the
Issuer all benefits and otherwise exercise all rights of the beneficial
ownership of such Outstanding Notes, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be deemed
to be 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 Outstanding
Notes tendered hereby and that the Issuer 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 accepted by
the Issuer. The undersigned hereby further represents that (i) any Exchange
Notes acquired in exchange for Outstanding Notes tendered hereby will have been
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the undersigned, (ii) neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and (iii)
neither the holder nor any such other person is an "affiliate", as described in
Rule 405 under the Securities Act of 1933 (the "Securities Act"), of the Issuer.
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 the
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Outstanding Notes, it represents that
the Outstanding Notes to be exchanged for Exchange Notes were acquired by it as
a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes pursuant to
the Exchange Offer; 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 Issuer to be necessary or
desirable to complete the assignment, transfer and sale of the Outstanding Notes
tendered hereby. All authority conferred or agreed to be conferred in this
Letter of Transmittal and every obligation of the undersigned hereunder shall be
binding upon the successors, assigns, heirs, executors, administrators, trustees
in bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned. This
tender may be withdrawn only in accordance with the procedures set forth in the
instructions contained in this Letter of Transmittal.
5
<PAGE>
For the purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted validly tendered Outstanding Notes when, as and if the Issuer has given
oral or written notice thereof to the Exchange Agent.
If any tendered Outstanding Notes are not accepted for exchange pursuant
to the Exchange Offer for any reason, certificates for any such unaccepted
Outstanding Notes will be returned (or, in the case of Outstanding Notes
tendered by book-entry transfer through the Book-Entry Transfer Facility, will
be credited to an account maintained at the Book-Entry Transfer Facility),
without expense, to the undersigned at the address shown below or at a different
address as may be indicated herein under the "Special Delivery Instructions" as
promptly as practicable after the Expiration Date.
The undersigned understands that tenders of Outstanding Notes pursuant to
the procedures described under the section entitled "The Exchange
Offer--Procedures for Tendering Outstanding Notes" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Issuer upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the Exchange Notes (and, if applicable,
substitute certificates representing Outstanding Notes for any Outstanding Notes
not exchanged) in the name(s) of the undersigned or, in the case of a book-entry
delivery of Outstanding Notes, please credit the account indicated above
maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise
indicated under the box entitled "Special Delivery Instructions" below, please
send the Exchange Notes (and, if applicable, substitute certificates
representing Outstanding Notes for any Outstanding Notes not exchanged) to the
undersigned at the address shown above in the box entitled "Description of
Outstanding Notes". In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Outstanding Notes
accepted for exchange in the name(s) of, and return any certificates for
Outstanding Notes not tendered or not exchanged to, the person(s) so indicated.
The undersigned understands that the Issuer has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Outstanding Notes from the name of the registered holder(s) thereof if the
Issuer does not accept for exchange any of the Outstanding Notes so tendered.
The undersigned, by completing the box entitled "Description of
Outstanding Notes" above and signing this Letter of Transmittal, will be deemed
to have tendered the Outstanding Notes as set forth in such box above.
6
<PAGE>
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(To be completed by all tendering holders)
(Complete accompanying Substitute Form W-9 on reverse side)
I hereby tender the Outstanding Notes described above in the box entitled
"Description of Outstanding Notes" pursuant to the terms of the Exchange Offer.
, 199
- -------------------------------- ------------------------ --
, 199
- -------------------------------- ------------------------ --
, 199
- -------------------------------- ------------------------ --
Signature(s) of Owner(s) Date
If a holder is tendering any Outstanding Notes, this Letter of Transmittal
must be signed by the registered holder(s) as the name(s) appear(s) on the
certificate(s) for the Outstanding Notes or on a security position listing or by
any person(s) authorized to become registered holder(s) by endorsements and
documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 4.
Name(s): _____________________________________________
(please type or print)
Capacity: _____________________________________________
Address: ______________________________________________
______________________________________________
(include zip code)
SIGNATURE GUARANTEE
(If required by Instruction 4)
Signature(s) guaranteed by an Eligible Institution:
---------------------------------------
(authorized signature)
---------------------------------------
(title)
---------------------------------------
(name of firm)
---------------------------------------
(area code and telephone number)
Dated: __________________, 199_
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 4 and 5)
To be completed ONLY if certificates for Outstanding Notes not exchanged
and/or Exchange Notes are to be issued in the name of and sent to someone other
than the person or person(s) whose signature(s) appear(s) on this Letter of
Transmittal above, or if Outstanding Notes delivered by book-entry transfer
which are not accepted for exchange are to be returned by credit to an account
maintained at the Book-Entry Transfer Facility other than the account indicated
above.
Issue Exchange Notes and/or Outstanding Notes to:
Name: __________________________________________________
(please type or print)
_________________________________________________
(please type or print)
Address: _______________________________________________
_______________________________________________
(include zip code)
________________________________________________________
Employer Identification or Social Security Number
(Complete Substitute Form W-9)
Credit unexchanged Outstanding Notes delivered by book-entry transfer to
the Book-Entry Transfer Facility account set forth below:
_____________________________________________________________
(Book-Entry Transfer Facility account number, if applicable)
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4 and 5)
To be completed ONLY if certificates for Outstanding Notes not exchanged
and/or Exchange Notes are to be sent to someone other than the person or persons
whose signature(s) appear(s) on this Letter of Transmittal above or to such
person or persons at an address other than shown in the box entitled
"Description of Outstanding Notes" on this Letter of Transmittal above.
Mail Exchange Notes and/or Outstanding Notes to:
Name: ________________________________________________
(please type or print)
Address: _____________________________________________
_____________________________________________
(include zip code)
- --------------------------------------------------------------------------------
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY
BOX ABOVE.
THIS LETTER OF TRANSMITTAL MUST BE USED TO FORWARD, AND MUST ACCOMPANY, ALL
CERTIFICATES FOR OUTSTANDING NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER.
9
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Delivery of this Letter of Transmittal and Certificates. This Letter of
Transmittal is to be completed by holders 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--Procedures for Tendering
Outstanding Notes" section of the Prospectus. Certificates for all physically
tendered Outstanding Notes, or Book-Entry Confirmation, as the case may be, as
well as a properly completed and duly executed Letter of Transmittal (or a copy
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. Outstanding Notes tendered hereby must be
in denominations of $1,000 or integral multiples thereof.
The method of delivery of this Letter of Transmittal, the Outstanding
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 Outstanding Notes are sent by
mail, it is suggested that the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Exchange Agent prior to the Expiration
Date. No Letter of Transmittal or Outstanding Notes should be sent to the
Issuer.
Holders who wish to tender their Outstanding Notes and (i) whose
Outstanding Notes are not immediately available, (ii) cannot deliver their
Outstanding Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date or (iii) who cannot
comply with the procedures for book entry tender on a timely basis must tender
their Outstanding Notes according to the guaranteed delivery procedures set
forth in the Prospectus. Pursuant to such procedures: (x) such tender must be
made through an Eligible Institution (as defined below); (y) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by telegram, telex, fax transmission, or mail or hand delivery) setting forth
the name and address of the holder, the certificate number(s) of the Outstanding
Notes to be tendered (except in the case of book-entry tenders) and the
principal amount of Outstanding Notes to be tendered, stating that the tender is
being made thereby and guaranteeing that, within three NYSE trading days after
the Expiration Date, this Letter of Transmittal (or a copy hereof) together with
the certificate(s) representing the Outstanding Notes (except in the case of
book-entry tender(s)) and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and (z) such properly completed
and executed Letter of Transmittal (or a copy thereof), as well as all other
documents required by this Letter of Transmittal and the certificate(s)
representing all tendered Outstanding Notes in proper form for transfer or a
Book-Entry Confirmation with respect to such Outstanding Notes, must be received
by the Exchange Agent within three NYSE trading days after the Expiration Date,
all as provided in the Prospectus under the section entitled "The Exchange
Offer--Guaranteed Delivery Procedures". Any holder who wishes to tender its
Outstanding Notes pursuant to the guaranteed delivery procedures described above
must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery
prior to the Expiration Date. As used in this Letter of Transmittal, "Eligible
Institution" shall mean a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
All questions as to the validity, eligibility (including time of receipt),
acceptance and withdrawal of tendered Outstanding Notes will be determined by
the Issuer in its sole discretion, which determination will be final and
binding. The Issuer reserves the absolute right to reject any and all
10
<PAGE>
Outstanding Notes not properly tendered or any Outstanding Notes the Issuer's
acceptance of which would, in the opinion of counsel for the Issuer, be
unlawful. The Issuer also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Outstanding Notes. The
Issuer's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within such time as
the Issuer shall determine. Neither the Issuer, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Outstanding Notes, nor shall any of them incur any
liability for failure to give such notification. Tenders of Outstanding Notes
will not be deemed to have been made until such defects or irregularities have
been cured or waived. Any Outstanding Notes received by the Exchange Agent that
are not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by the Exchange Agent to the tendering
holders, unless otherwise provided in this Letter of Transmittal, as soon as
practicable following the Expiration Date.
See "The Exchange Offer" in the Prospectus.
2. Tender by Holder. Only a registered holder of Outstanding Notes may tender
such Outstanding Notes in the Exchange Offer. Any beneficial owner whose
Outstanding Notes are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who wishes to tender should contact the
registered holder promptly and instruct such registered holder to tender on
behalf of such beneficial owner. If such beneficial owner wishes to tender on
such owner's own behalf, such owner must, prior to completing and executing this
Letter of Transmittal and delivering such owner's Outstanding Notes, either make
appropriate arrangements to register ownership of the Outstanding Notes in such
owner's name or obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time.
3. Partial Tenders and Withdrawals. Tenders of Outstanding Notes will be
accepted only in denominations of $1,000 and integral multiples thereof. If less
than all of the Outstanding Notes represented by a certificate or owned by a
holder are to be tendered, the tendering holder(s) should fill in the aggregate
principal amount of Outstanding Notes to be tendered in the box above entitled
"Description of Outstanding Notes -- Principal Amount of Outstanding Notes
Tendered". A reissued certificate representing the balance of non-tendered
Outstanding Notes will be sent to such tendering holder (except in the case of
book-entry tenders), unless otherwise provided in the appropriate box on this
Letter of Transmittal, promptly after the Expiration Date. All of the
Outstanding Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
Any holder who has tendered Outstanding Notes may withdraw the tender by
delivering written notice of withdrawal to the Exchange Agent prior to the
Expiration Date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the Exchange Agent at its address set forth on
the first page of this Letter of Transmittal. Any such notice of withdrawal must
(i) specify the name of the person having deposited the Outstanding Notes to be
withdrawn (the "Depositor"); (ii) identify the Outstanding Notes to be withdrawn
(including the certificate number or numbers and principal amount of such
Outstanding Notes (except in the case of book-entry tenders)); (iii) be signed
by the holder in the same manner as the original signature on this Letter of
Transmittal by which such Outstanding Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee (as defined in the Prospectus) register the
transfer of such Outstanding Notes into the name of the person withdrawing the
tender, and (iv) specify the name in which any such Outstanding Notes are to be
registered, if different from that of the Depositor. If Outstanding Notes have
been delivered or otherwise identified to the Exchange Agent, the name of the
registered holder and the certificate numbers of the particular
11
<PAGE>
Outstanding Notes withdrawn must also be furnished to the Exchange Agent as
aforesaid prior to the physical release of the withdrawn Outstanding Notes. If
the Outstanding Notes have been tendered pursuant to the procedures for
book-entry tender set forth in the Prospectus, a notice of withdrawal must
specify, in lieu of certificate numbers, the name and account number at the
Book-Entry Transfer Facility to be credited with the withdrawn Outstanding
Notes. Outstanding Notes properly withdrawn will thereafter be deemed not
validly tendered for purposes of the Exchange Offer; provided, however, that
withdrawn Outstanding Notes may be tendered by again following one of the
procedures herein at any time prior to the Expiration Date. All questions as to
the validity, form and eligibility (including time of receipt) of notice of
withdrawal will be determined by the Issuer, whose determinations will be final
and binding on all parties. Neither the Issuer, the Exchange Agent nor any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification. See "The Exchange Offer -- Withdrawal Rights" in the
Prospectus.
4. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signature. If this Letter of Transmittal is signed by the
registered holder of the Outstanding Notes tendered hereby, the signature must
correspond exactly with the name as written on the face of the certificates (if
applicable) without any change whatsoever.
If any tendered Outstanding Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Outstanding 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 Outstanding Notes specified herein and tendered hereby, no
endorsements of certificates or separate bond powers are required. If, however,
the Exchange Notes are to be issued, or any untendered Outstanding Notes are to
be reissued, to a person other than the registered holder, then endorsements of
any certificates transmitted hereby or separate bond powers are required.
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 bond powers, in
either case signed exactly as the name or names of the registered holder(s)
appear(s) on the certificate(s).
If this Letter of Transmittal or any certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Issuer, proper evidence satisfactory to the Issuer of their authority to so
act must be submitted.
Endorsements on certificates for Outstanding Notes or signatures on bond
powers required by this Instruction 4 must be guaranteed by an Eligible
Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Outstanding Notes are tendered: (i) by a
registered holder of such Outstanding 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
Outstanding Notes) who has not completed the box entitled "Special Issuance
Instructions" on this Letter of Transmittal; or (ii) for the account of an
Eligible Institution.
12
<PAGE>
5. Special Issuance and Delivery Instructions. Tendering holders of Outstanding
Notes should indicate in the applicable box the name and address in or to which
Exchange Notes issued pursuant to the Exchange Offer and/or substitute
certificates evidencing Outstanding Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. Holders tendering Outstanding Notes by book-entry transfer may
request that Outstanding Notes not exchanged be credited to such account
maintained at the Book-Entry Transfer Facility as such holder may designate
hereon. If no such instructions are given, such Outstanding Notes not exchanged
will be returned to the name or address of the person signing this Letter of
Transmittal.
6. Transfer Taxes. The Issuer will pay all transfer taxes, if any, applicable to
the transfer of Outstanding Notes to it or its order pursuant to the Exchange
Offer. If however, Exchange Notes and/or substitute Outstanding Notes not
exchanged 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 Outstanding Notes
tendered hereby, or if tendered Outstanding Notes are registered in the name of
any person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the transfer of Outstanding
Notes to the Issuer or its order pursuant to the Exchange Offer, the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Outstanding Notes specified in this
Letter of Transmittal.
7. Waiver of Conditions. Subject to the terms and conditions set forth in the
Prospectus, the Issuer reserves the absolute right to waive satisfaction of any
or all conditions enumerated in the Prospectus.
8. No Conditional Tenders. No alternative, conditional, irregular or contingent
tenders will be accepted. All tendering holders of Outstanding Notes, by
execution of this Letter of Transmittal, shall waive any right to receive notice
of the acceptance of their Outstanding Notes for exchange.
Neither the Issuer nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
9. Mutilated, Lost, Stolen or Destroyed Outstanding Notes. Any holder whose
Outstanding Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated above for further instructions.
10. Requests for Assistance or Additional Copies. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange
Agent, at the address indicated on the first page of this Letter of Transmittal
or by telephone at (212)852-1663.
13
<PAGE>
IMPORTANT TAX INFORMATION
Under U.S. federal income tax laws, a registered holder of Outstanding
Notes or Exchange Notes is required to provide the Trustee (as payor) with such
holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below or otherwise establish a basis for exemption from backup withholding. If
such holder is an individual, the TIN is his or her social security number. If
the Trustee is not provided with the correct TIN, a $50 penalty may be imposed
by the Internal Revenue Service, and payments made to such holder with respect
to Outstanding Notes or Exchange Notes may be subject to backup withholding.
Certain holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Trustee a properly completed Internal Revenue Service Form W-8, signed under
penalties of perjury, attesting to that holder's exempt status. A Form W-8 can
be obtained from the Trustee.
If backup withholding applies, the Trustee is required to withhold 31% of
any payments made to the holder or other payee. Backup withholding is not an
additional U.S. federal income tax. Rather, the U.S. federal income 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.
Purpose of Substitute Form W-9
To prevent backup withholding on payments made with respect to Outstanding
Notes or Exchange Notes the holder is required to provide the Trustee with: (i)
the holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder is awaiting a
TIN) and that (A) such holder is exempt from backup withholding, (B) the holder
has not been notified by the Internal Revenue Service that the holder is subject
to backup withholding as a result of failure to report all interest or dividends
or (C) the Internal Revenue Service has notified the holder that the holder is
no longer subject to backup withholding and (ii) if applicable, an adequate
basis for exemption.
14
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(see "Important Tax Information" above)
PAYER'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK
- --------------------------------------------------------------------------------
SUBSTITUTE FORM W-9 Part I - PLEASE PROVIDE Social Security Number or
YOUR TIN IN THE BOX AT Employer Identification
Department of the RIGHT AND CERTIFY BY Number
Treasury Internal SIGNING AND DATING BELOW
Revenue Service ___________________________
Social Security Number
Payer's Request for
Taxpayer Identification or_________________________
Number (TIN) Employer Identification
Number
(if awaiting TIN write
"Applied For")
------------------------------------------------------
Part II - For Payees exempt from backup withholding,
see the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9
and complete as instructed therein.
- --------------------------------------------------------------------------------
Certification -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding because (i) I am exempt from backup
withholding, (ii) I have not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as a result of failure to
report all interest or dividends, or (iii) the IRS has notified me that I
am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS: You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
under-reporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS stating that you are no longer
subject to backup withholding, do not cross out item (2).
SIGNATURE: DATE:
----------------------------------- -----------------------
NAME:
-----------------------------------
(Please Print)
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU UNDER THE OUTSTANDING NOTES OR THE EXCHANGE
NOTES.
15
<PAGE>
NOTE: YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN
PART I OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
31% of all reportable payments made to me prior to the time I provide a properly
certified taxpayer identification number to the Exchange Agent will be withheld
until I provide such a number.
SIGNATURE: DATE:
----------------------------------- -----------------------
- --------------------------------------------------------------------------------
IMPORTANT: This Letter of Transmittal or a copy hereof (together with the
Certificates for Outstanding Notes (if applicable)) and all other
required document(s) must be received by the Exchange Agent prior to
the Expiration Date.
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
financial statements for the fiscal year ending March 29, 1997 and the unaudited
sinancial information for the six months ended September 27, 1997 and is
qualified in its' entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001042465
<NAME> Roller Bearing Company of America, Inc.
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> MAR-29-1997 MAR-29-1997
<PERIOD-START> APR-01-1996 APR-01-1997
<PERIOD-END> MAR-29-1997 SEP-27-1997
<CASH> 859 10,020
<SECURITIES> 0 0
<RECEIVABLES> 20,002 20,149
<ALLOWANCES> 236 184
<INVENTORY> 36,852 41,559
<CURRENT-ASSETS> 58,241 72,833
<PP&E> 58,709 72,002
<DEPRECIATION> 18,611 27,413
<TOTAL-ASSETS> 124,513 150,276
<CURRENT-LIABILITIES> 20,605 26,675
<BONDS> 60,315 135,325
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 37,372 (17,552)
<TOTAL-LIABILITY-AND-EQUITY> 124,513 150,276
<SALES> 93,427 60,971
<TOTAL-REVENUES> 93,427 60,971
<CGS> 64,215 43,141
<TOTAL-COSTS> 14,537 8,661
<OTHER-EXPENSES> 1,473 1,022
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,338 4,894
<INCOME-PRETAX> 7,864 3,253
<INCOME-TAX> 3,224 1,334
<INCOME-CONTINUING> 4,640 1,919
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 625
<CHANGES> 0 0
<NET-INCOME> 4,640 1,294
<EPS-PRIMARY> 46,395.72 0
<EPS-DILUTED> 46,395.72 0
</TABLE>
