<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
JORDAN TELECOMMUNICATION PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 3678 36-4173125
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
INCORPORATION OR NUMBER)
ORGANIZATION)
JORDAN TELECOMMUNICATION PRODUCTS, INC.
ARBORLAKE CENTRE, SUITE 550
1751 LAKE COOK ROAD
DEERFIELD, ILLINOIS 60015
(847) 945-5591
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
G. ROBERT FISHER, SECRETARY
JORDAN TELECOMMUNICATION PRODUCTS, INC.
ARBORLAKE CENTRE, SUITE 550
1751 LAKE COOK ROAD
DEERFIELD, ILLINOIS 60015
(847) 945-5591
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
WITH A COPY TO:
PHILIP J. NIEHOFF
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 701-7843
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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- --------------------------------------------------------------------------------
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 7/8% Series B Senior
Notes Due 2007......... $190,000,000 99.2164% $188,511,160 $57,124.59
- --------------------------------------------------------------------------------
11 3/4% Series B Senior
Discount Notes Due
2007................... $120,000,000 70.8619% $ 85,034,280 $25,767.96
- --------------------------------------------------------------------------------
13 1/4% Series B Senior
Exchangeable Preferred
Stock Due 2009......... $ 25,000,000 100% $ 25,000,000 $ 7,575.76
- --------------------------------------------------------------------------------
13 1/4% Series B
Subordinated Preferred
Stock Exchange Notes
due 2009............... $ 25,000,000 -- -- $ -- (2)
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Total................... $90,468.31
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</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee.
(2) Pursuant to paragraph 457(i) no additional consideration will be received
in connection with the exchange, therefore no registration fee will be
required.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 29, 1997
PROSPECTUS
JORDAN TELECOMMUNICATION PRODUCTS, INC.
OFFER TO EXCHANGE ALL OUTSTANDING 9 7/8% SERIES B SENIOR NOTES DUE 2007, 11
3/4% SERIES B SENIOR DISCOUNT NOTES DUE 2007 AND 13 1/4% SERIES B SENIOR
EXCHANGEABLE PREFERRED STOCK DUE 2009, WHICH HAVE EACH BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, FOR ANY AND ALL OUTSTANDING 9 7/8% SERIES A SENIOR
NOTES DUE 2007, 11 3/4% SERIES A SENIOR DISCOUNT NOTES DUE 2007 AND 13 1/4%
SERIES A SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
----------
Jordan Telecommunication Products, Inc., a Delaware corporation ("JTP" or the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (the
"Letter of Transmittal"), which together constitute the "Exchange Offer," to
exchange up to $190 million aggregate principal amount of 9 7/8% Series B
Senior Notes due 2007 (the "New Senior Notes"), $120 million principal amount
at maturity of 11 3/4% Series B Senior Discount Notes (the "New Discount Notes"
and together with the New Senior Notes, the "New Notes") and $25 million
liquidation preference of 13 1/4% Series B Senior Exchangeable Preferred Stock
due 2009 (the "New Senior Preferred Stock") of the Company for a like principal
amount of the Company's issued and outstanding 9 7/8% Series A Senior Notes due
2007 (the "Old Senior Notes" and together with the New Senior Notes, the
"Senior Notes"), 11 3/4% Series A Senior Discount Notes due 2007 (the "Old
Discount Notes" and together with the New Discount Notes, the "Discount Notes;"
the Old Discount Notes and the Old Senior Notes are sometimes collectively
referred to as the "Old Notes" and sometimes collectively with the New Notes,
as the "Notes"), and a like liquidation preference of 13 1/4% Series A Senior
Exchangeable Preferred Stock due 2009 (the "Old Senior Preferred Stock" and
together with the New Senior Preferred Stock, the "Senior Preferred Stock")
with the holders (each holder of Old Notes or Old Senior Preferred Stock, a
"Holder") thereof. The New Notes and New Senior Preferred Stock are sometimes
referred to as the "New Securities" and the Old Notes and Old Senior Preferred
Stock are sometimes referred to as the "Old Securities." The terms of the New
Notes and New Senior Preferred Stock are substantially identical to the terms
of the Old Notes and Old Senior Preferred Stock that are to be exchanged
therefor. See "Description of the Notes" and "Description of Senior Preferred
Stock." Upon the occurrence of a Change of Control (as defined herein), the
Company will be required, subject to certain conditions, to make an offer to
purchase the Notes and Senior Preferred Stock at a price equal to 101% of the
principal amount or the liquidation preference thereof, as applicable, plus
accrued and unpaid interest to the date of purchase. In the event of a Change
of Control, there can be no assurance that the Company will have, or will have
access to, sufficient funds to repurchase the Notes or Senior Preferred Stock
or to pay the holders of the Notes or Senior Preferred Stock. See "Risk
Factors--Change of Control Provisions; Limitations on Rights of Repayment,"
"Description of Notes--Certain Covenants," "--Certain Definitions," "--
Mandatory Offers to Purchase Notes--Change of Control," "Description of Senior
Preferred Stock--Certain Covenants" and "--Redemption of Senior Preferred
Stock--Change of Control."
Prior to the Exchange Offer, there has been no established trading market for
the Old Securities or the New Securities. The Company does not intend to apply
for listing or quotation of the New Securities on any securities exchange or
stock market. Therefore, there can be no assurance as to the liquidity of any
trading market for the New Securities or that an active public market for the
New Securities will develop. Any Old Securities not tendered and accepted in
the Exchange Offer will remain outstanding. To the extent that Old Securities
are tendered and accepted in the Exchange Offer, a Holder's ability to sell
untendered, or tendered but unaccepted, Old Securities could be adversely
affected. Following the consummation of the Exchange Offer, the Holders of Old
Securities will continue to be subject to the existing restrictions on transfer
thereof and the Company will have no further obligations to such Holders to
provide for the registration of the Old Securities under the Securities Act of
1933, as amended (the "Securities Act"). See "Exchange Offer--Consequences of
Not Exchanging Old Securities."
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1997, UNLESS EXTENDED.
(Cover continued on following page)
----------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF
OLD NOTES WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER, SEE "RISK FACTORS"
ON PAGE 16 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------
The date of this Prospectus is , 1997
<PAGE>
The New Notes will be senior unsecured obligations of the Company, will rank
senior in right of payment to any future subordinated indebtedness of the
Company, pari passu in right of payment with all existing and future senior
indebtedness of the Company and effectively subordinated in right of payment
to all existing and future senior secured indebtedness of the Company,
including indebtedness under the New Credit Agreement, to the extent of the
assets securing such indebtedness and to all indebtedness and claims of
creditors of the Company's subsidiaries. The New Senior Preferred Stock will
rank senior in right of payment with respect to all Junior Securities (as
defined herein) and pari passu with respect to all Parity Securities (as
defined herein). As of June 30, 1997, the aggregate principal amount of Senior
Indebtedness of the Company to which the New Notes would have been effectively
subordinated would have been approximately $7.9 million. The Indentures (as
defined herein) will permit the Company and its subsidiaries to incur
additional indebtedness, subject to certain limitations. See "Description of
Notes."
The Company will accept for exchange any and all Old Securities that are
validly tendered and not withdrawn on or prior to 5:00 p.m., New York City
time, on , 1997, unless the Exchange Offer is extended (the
"Expiration Date"). Tenders of Old Securities may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange
Offer is not conditioned upon any minimum principal amount of Old Notes or
liquidation preference of Old Senior Preferred Stock being tendered for
exchange. However, the Exchange Offer is subject to certain customary
conditions which may be waived by the Company. The Company has agreed to pay
the expenses of the Exchange Offer. There will be no cash proceeds to the
Company from the Exchange Offer. See "Use of Proceeds."
The Old Securities were issued and sold on July 25, 1997 (the "Old
Offerings"), in a transaction not registered under the Securities Act in
reliance upon the exemption provided in Section 4(2) of the Securities Act.
Accordingly, the Old Securities may not be reoffered, resold or otherwise
pledged, hypothecated or transferred in the United States unless so registered
or unless an applicable exemption from the registration requirements of the
Securities Act is available. The New Securities are being offered for exchange
in order to satisfy certain obligations of the Company under Registration
Rights Agreements (as defined herein) between the Company and the Initial
Purchasers (as defined herein). The New Securities will be obligations of the
Company evidencing the same indebtedness and equity interests as the Old
Securities, and will be entitled to the benefits of the same Indentures which
govern both the Old Notes and the New Notes and the same Certificate of
Designation (as defined herein) which governs both the Old Senior Preferred
Stock and the New Senior Preferred Stock. The form and terms (including
principal amount, interest rate, dividend payment, maturity and ranking) of
the New Securities are the same as the form and terms of the Old Securities,
except that the New Securities (i) will be registered under the Securities Act
and therefore will not be subject to certain restrictions on transfer
applicable to the Old Securities; (ii) will not be entitled to registration
rights; and (iii) will not provide for any Liquidated Damages (as defined
herein). See "The Exchange Offer--Registration Rights; Liquidated Damages."
The Company is making the Exchange Offer pursuant to the registration
statement of which this Prospectus is a part in reliance upon the position of
the staff of the Securities and Exchange Commission (the "Commission") 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. Based on these
interpretations by the staff of the Commission, the Company believes that the
New Securities issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than (i)
any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act; (ii) an Initial Purchaser who acquired the
Old Securities directly from the Company solely in order to resell pursuant to
Rule 144A of the Securities Act or any other available exemption under the
Securities Act; or (iii) a broker-dealer who acquired the Old Securities as a
result of market making or other trading activities) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes or New Senior Preferred Stock are
acquired in the ordinary course of such holder's business and such holder is
not participating and has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of
such New Securities. Each broker-dealer that receives New Securities for its
own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Securities. 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 New Securities received in exchange for
Old Securities where such Old Securities 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 120 days after the Expiration Date,
it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
<PAGE>
AVAILABLE INFORMATION
The Company has filed the Registration Statement with the Commission,
pursuant to the Securities Act and the rules and regulations promulgated
thereunder, covering the New Securities being offered hereby. This Prospectus
does not contain all the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the New Securities, reference is hereby made to the Registration
Statement. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to in the Registration
Statement are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. Upon consummation of the Exchange Offer, the Company will
become subject to the periodic and other informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Periodic
reports and other information filed by the Company with the Commission may be
inspected at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, New York, New York 10048. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such materials may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.
----------------
The DURA-LINE(R) and SILICORE(R) marks are registered trademarks of the
Company.
i
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to and should
be read in conjunction with the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Unless indicated or the context otherwise requires, the information
in this Prospectus gives effect to the transactions described under "The
Company--Company Formation" and references in this Prospectus to the "Company"
or "JTP" are to Jordan Telecommunication Products, Inc. and its subsidiaries,
including their respective predecessors.
THE COMPANY
Jordan Telecommunication Products, Inc. ("JTP" or the "Company") is a leading
worldwide designer, manufacturer and distributor of products to niche markets
within the rapidly growing telecommunications and data communications
industries. JTP manufactures and markets its products to over 7,500 customers
throughout the world from facilities based in the United States, China, the
Czech Republic, France, India, Israel, Mexico, Russia and the United Kingdom.
The Company's product offerings serve numerous end-use telecommunications
markets and cover a broad range of applications, including, among others: (i)
infrastructure equipment, such as fiber optic cable conduit, power conditioning
systems and cable television ("CATV") components and transmitters used by
wireline and wireless telecommunications, CATV, cellular telephone and personal
communication system ("PCS") service providers; (ii) custom cable assemblies
and specialty wire and cable used by internetworking suppliers and original
equipment manufacturers ("OEMs") in the data processing and telecommunications
industries; and (iii) electronic connectors and components used in mobile
communications, instrumentation, local area networks ("LANs") and computer
equipment. As a result, the Company believes it is well positioned to benefit
from the significant growth taking place in global telecommunications markets.
JTP believes it has distinguished itself through its international presence,
high-quality products and outstanding customer service and field support,
resulting in strong customer relationships with major industry participants and
leading market share positions.
Due to strong industry fundamentals and JTP's solid competitive position, the
Company has achieved significant and consistent growth. Pro forma combined net
sales grew from $140.8 million in 1994 to $213.2 million in 1996, representing
a compound annual growth rate of 23.0%. Pro forma combined EBITDA (as defined
herein) has also grown rapidly, increasing from $29.5 million in 1994 to $40.4
million in 1996. The Company expects its continued growth to result from the
significant expansion in global telecommunications markets driven by: (i)
continuing deregulation, which is allowing numerous new service providers to
enter the marketplace and is increasing the competitive pressure on existing
participants to upgrade and expand their networks; and (ii) increasing consumer
demand for advanced telecommunications services enabled by rapid technological
advancement. To capitalize on these trends, the Company has invested
substantial capital in recent years to develop its overseas manufacturing and
marketing presence. Most recently, the Company has established new
manufacturing facilities in Mexico and China that became operational in late
1996 and in India which is expected to become operational in September 1997. In
addition, JTP anticipates establishing a local sales and/or manufacturing
presence in Spain and Malaysia by late 1997, and in Brazil by early 1998. The
Company anticipates generating significant additional revenues from such
international facilities.
COMPETITIVE STRENGTHS
The Company believes that several characteristics differentiate it from many
of its competitors, including:
Established Global Presence. The Company's products are sold in over 50
countries through a highly trained direct sales force and a global network of
approximately 2,800 distributors and independent
1
<PAGE>
manufacturing representatives. Management believes a key competitive reason for
its success in international markets has been its commitment to establishing
joint ventures and local manufacturing facilities. JTP currently operates 28
manufacturing and distribution facilities in nine countries around the world.
The marketing and cost advantages of such investments in serving fast-growing
markets are substantial and include: (i) close customer contact; (ii) ability
to provide close field support and customer service; (iii) quick delivery time;
(iv) low labor, raw materials and transportation costs; and (v) avoidance of
significant government tariffs and restrictions on foreign imports. The success
of this strategy is evidenced by the Company's recent selection by the Chinese
government as the first approved cable conduit supplier for China Telecom,
positioning the Company to be a major participant in the planned construction
of more than 50 million phone lines in China during the next five years.
Furthermore, by entering markets ahead of major competitors, the Company is
able to achieve "first mover" advantages and entrench itself in markets with
capacity and customer relationships. In addition, the Company believes that its
international experience has allowed it to develop a core competency in
establishing effective operations overseas.
Strong Customer Relationships. By emphasizing product quality, customer
service and field support, the Company has developed strong, long-term
relationships with many of its customers. Customers have turned to the Company
for its ability to reliably deliver small customized product orders in short
lead times as well as to provide large quantities of product under long-term
contracts. The Company's ability to work closely with many of its customers in
the design phase of end-use products further entrenches the Company with its
customer base. Examples of these relationships include the selection of JTP to
be Sprint Corporation's ("Sprint") primary supplier of PCS power conditioning
equipment over the next four years and to be one of Cisco Corporation's
("Cisco") four primary, long-term suppliers of cable assemblies. The Company is
also the primary supplier of cable conduit to the Regional Bell Operating
Companies ("RBOCs"). Such strong ties to major industry participants present an
opportunity for the Company to follow such customers worldwide as they enter
growing international markets. Moreover, these relationships have contributed
to the Company's leadership positions in its niche markets. For example, the
Company estimates that it holds a 50% share of the RBOC cable conduit market
and a 30% share of the market for PCS power conditioning equipment.
Diverse and Stable Customer Base. As a result of its extensive product line
and the wide variety of end-use markets, JTP serves a broad and diverse
customer base. Customers include some of the largest and most sophisticated
suppliers of telecommunications and data communications products in the world,
such as the RBOCs, Applied Materials, Inc. ("Applied Materials"), Cisco, GTE
Corporation ("GTE"), Hewlett-Packard Company ("Hewlett-Packard"), Lucent
Technologies, Inc. ("Lucent"), Motorola, Inc. ("Motorola"), Rostelecom, SPT
Telecom AS ("Czech Telecom"), Sprint, Sun MicroSystems, Inc. ("Sun"), TCI
Communications, Inc. ("TCI"), Telewest Communications plc ("Telewest") and Time
Warner, Inc. ("Time Warner"). The diversity of products, markets and customers
minimizes the Company's exposure to individual end-use technologies, economic
cycles and geographic markets, and provides a stable cash flow stream.
BUSINESS STRATEGY
The Company's goal is to be a leading single-source supplier offering the
breadth of products, services and geographical coverage necessary to meet the
needs of worldwide telecommunications and data communications customers in its
niche markets. The Company intends to reach this goal by capitalizing on its
competitive advantages and implementing the following business strategy through
internal initiatives and the continued pursuit of numerous opportunities for
strategic acquisitions that exist within its highly fragmented markets:
Continue International Expansion. To exploit the significant opportunities in
international markets, the Company will continue to expand its global
manufacturing and marketing presence. JTP is particularly focused on developing
nations that are making large investments in their telecommunications
infrastructures. The Company believes that such countries offer a high growth
potential and favorable competitive dynamics. The Company has invested more
than $35 million in the past several years to develop a strong local presence
in
2
<PAGE>
countries such as China, the Czech Republic, India, Israel, Mexico, Russia and
the United Kingdom, positioning itself for substantial growth in these and
surrounding markets. The Company established its first emerging market
greenfield manufacturing facility in the Czech Republic in November 1993, which
in 1996 generated sales of $22.6 million. More recently, JTP opened
manufacturing plants in Mexico and China in August 1996 and December 1996,
respectively, and a new manufacturing facility in India which is expected to
become operational in September 1997. In addition, the Company anticipates
establishing a local sales and/or manufacturing presence in Spain and Malaysia
by late 1997, and in Brazil by early 1998.
Develop New Products and Markets. The Company will continue to focus on
designing, developing and marketing products that meet the evolving needs of
customers in the high-growth sectors of its markets to maintain its
differentiation. An example of this strategy is the Company's introduction in
March 1997 of transmitters and equipment for multichannel, multipoint
distribution systems ("MMDS"), a wireless television signal technology that has
emerged in recent years as a more economically feasible alternative to
traditional CATV. JTP believes that this technology is particularly applicable
in emerging international markets, such as Brazil, China, India and Russia,
where construction of a traditional cable network in smaller cities and rural
areas can be cost-prohibitive. In only four months since the commercial
introduction of this product in Russia, the Company has received 10 contracts
for more than $3.5 million. The Company has also developed a widely used line
of specialized two-way CATV amplifiers and a line of microminiature coaxial
connectors that meet the miniaturization requirements of the wireless and
cellular communications industry. In addition to internal growth, the Company
believes that significant opportunities exist in acquisitions that enable it to
broaden its product offerings, allowing it to be more of a full-service
"solutions" provider and leverage its existing customer relationships.
Develop and Exploit Synergies Among Subsidiaries. The Company will continue
to actively pursue sales, marketing and manufacturing synergies among its
subsidiaries. For example, Johnson Components, Inc. ("Johnson"), a domestic
subsidiary of the Company, recently began selling products through Vitelec
Electronics Ltd. ("Vitelec"), a foreign subsidiary of the Company, enabling
Johnson to access new international markets and allowing Vitelec to broaden its
product offerings. JTP believes that numerous similar opportunities exist to
add breadth and depth to its product offerings and lower costs through cross-
sourcing of materials and components between subsidiaries. The Company also
intends to exploit cross-selling opportunities by leveraging the established
presence of certain of its products in foreign markets in order to introduce
additional products and increase market penetration. In addition, the Company
believes that significant opportunities exist to share its combined
international experience base among its subsidiaries to facilitate their
expansion into new global markets.
COMPANY FORMATION
The Company was formed (the "Company Formation") by the Company's management
and stockholders of the Company's parent, Jordan Industries, Inc. ("Jordan
Industries"), and certain of their affiliates and engaged in the Old Offerings
in connection with an overall recapitalization and refinancing (the "Jordan
Industries Recapitalization") of Jordan Industries. JTP undertook the Company
Formation as a component of the Jordan Industries Recapitalization for a number
of reasons, including establishing the Company as a stand-alone, industry-
focused company, which is expected to increase its financial flexibility.
Through a series of transactions on July 25, 1997, JTP Industries, Inc. ("JTP
Industries"), a wholly-owned subsidiary of JTP, acquired from Jordan Industries
all of its telecommunications and data communications products businesses (the
"Telecommunications Subsidiaries") for aggregate consideration of $294.0
million. This acquisition was financed with a portion of the net proceeds from
the Notes offered pursuant to the Old Offerings and $47.0 million of Equity
Investment (as defined herein). In addition, JTP assumed $10.0 million of the
Telecommunications Subsidiaries' obligations.
3
<PAGE>
Concurrent with the consummation of the Old Offerings, JTP Industries entered
into a new senior secured bank credit agreement which provides the Company and
its subsidiaries with a revolving credit and letter of credit facility of up to
$110.0 million (the "New Credit Agreement"). The Company has not made any
borrowings under the New Credit Agreement. See "The Company--Company
Formation," "Capitalization" and "Certain Transactions--The Company Formation
and Proceeds From the Old Offerings."
THE EXCHANGE OFFER
Securities Offered............. $190,000,000 principal amount of 9 7/8% Series
B Senior Notes due 2007, $120,000,000
principal amount at maturity of 11 3/4% Series
B Senior Discount Notes due 2007 and
$25,000,000 aggregate liquidation preference
of 13 1/4% Series B Senior Exchangeable
Preferred Stock due 2009. The terms of the New
Securities and the Old Securities are
identical in all material respects, except for
certain transfer restrictions and registration
rights relating to the Old Securities and
except for certain Liquidated Damages
provisions relating to the Old Securities
described below under "--Summary Description
of the New Securities."
Issuance of Old Notes and Old
Senior Preferred Stock;
Registration Rights...........
On July 25, 1997, the Old Senior Notes were
issued to Jefferies & Company, Inc.
("Jefferies"), Donaldson, Lufkin & Jenrette
Securities Corporation and Smith Barney Inc.
(collectively, the "Initial Purchasers"), and
the Old Discount Notes and Old Senior
Preferred Stock (which was sold as part of a
unit (the "Preferred Stock Units") together
with the Common Stock (as defined herein))
were issued to Jefferies. The Old Securities
were placed with "qualified institutional
buyers" (as such term is defined in Rule 144A
promulgated under the Securities Act) and
institutional "accredited investors" (as such
term is defined in Rule 501(A)(1), (2), (3) or
(7) under the Securities Act). In connection
therewith, the Company executed and delivered
for the benefit of the holders of Old
Securities certain registration rights
agreements (the "Registration Rights
Agreements"), pursuant to which the Company
agreed (i) to file a registration statement
(the "Registration Statement") on or prior to
September 23, 1997 with respect to the
Exchange Offer and (ii) to use its best
efforts to cause the Registration Statement to
be declared effective by the Commission on or
prior to November 22, 1997. In certain
circumstances, the Company will be required to
provide a shelf registration statement (the
"Shelf Registration Statement") to cover
resales of the Old Securities by the holders
thereof. If the Company does not comply with
its obligations under the Registration Rights
Agreements, it will be required to pay
Liquidated Damages to holders of the Old
Securities under certain circumstances. See
"The Exchange Offer--Registration Rights;
Liquidated Damages."
4
<PAGE>
The Exchange Offer............. The New Notes are being offered in exchange
for a like principal amount of Old Notes and
the New Senior Preferred Stock is being
offered in exchange for a like aggregate
liquidation preference of Old Senior Preferred
Stock. The issuance of the New Securities is
intended to satisfy the obligations of the
Company contained in the Registration Rights
Agreements. Based upon the position of the
staff of the Commission set forth in no-action
letters issued to third parties in other
transactions substantially similar to the
Exchange Offer, the Company believes that the
New Securities issued pursuant to the Exchange
Offer may be offered for resale, resold and
otherwise transferred by holders thereof
(other than (i) any such holder that is an
"affiliate" of the Company within the meaning
of Rule 405 under the Securities Act; (ii) an
Initial Purchaser who acquired the Old
Securities directly from the Company solely in
order to resell pursuant to Rule 144A of the
Securities Act or any other available
exemption under the Securities Act; or (iii) a
broker-dealer who acquired the Old Securities
as a result of market making or other trading
activities) without further compliance with
the registration and prospectus delivery
requirements of the Securities Act, provided
that such New Securities are acquired in the
ordinary course of such holder's business and
such holder is not participating and has no
arrangement with any person to participate in
a distribution (within the meaning of the
Securities Act) of the New Securities. Each
broker-dealer that receives New Securities for
its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a
prospectus in connection with any resale for
the New Securities. Although there has been no
indication of any change in the staff's
position, there can be no assurance that the
staff of the Commission would make a similar
determination with respect to the resale of
the New Securities. See "Risk Factors."
Procedures for Tendering....... Tendering holders of Old Securities must com-
plete and sign the Letter of Transmittal in
accordance with the instructions contained
therein and forward the same by mail, facsim-
ile or hand delivery, together with any other
required documents, to the applicable Exchange
Agent (as defined herein), either with the Old
Securities to be tendered or in compliance
with the specified procedures for guaranteed
delivery of Old Securities. Holders of the Old
Securities desiring to tender such Old Securi-
ties in exchange for New Securities should al-
low sufficient time to ensure timely delivery.
Certain brokers, dealers, commercial banks,
trust companies and other nominees may also
effect tenders by book-entry transfer. Holders
of Old Securities registered in the name of a
broker, dealer, commercial bank, trust company
or other nominee are urged to contact such
person promptly if they wish to tender Old Se-
curities pursuant to the Exchange Offer. Let-
ters of Transmittal and certificates repre-
5
<PAGE>
senting Old Securities should not be sent to
the Company. Such documents should only be
sent to the Exchange Agent. Questions regard-
ing how to tender and requests for information
should be directed to the Exchange Agent. See
"The Exchange Offer--Procedures for Tendering
Old Securities."
Tenders; Expiration Date; The Exchange Offer will expire on 5:00 p.m.,
Withdrawal.................... New York City time, on , 1997, or such
later date and time to which the Exchange Of-
fer is extended (the "Expiration Date"). The
tender of Old Securities pursuant to the Ex-
change Offer may be withdrawn at any time
prior to the Expiration Date. Certificates
representing Old Securities not accepted for
exchange for any reason will be returned with-
out expense to the tendering holder thereof as
promptly as practicable after the expiration
or termination of the Exchange Offer. See "The
Exchange Offer--Terms of the Exchange Offer;
Period for Tendering Old Securities" and "--
Withdrawal Rights."
Certain Conditions to the The Exchange Offer is subject to certain cus-
Exchange Offer................ tomary conditions, all of which may be waived
by the Company, including the absence of (i)
threatened or pending proceedings seeking to
restrain the Exchange Offer or resulting in a
material delay to the Exchange Offer; (ii) a
general suspension of trading on any national
securities exchange or in the over-the-counter
market; (iii) a banking moratorium; (iv) a
commencement of war, armed hostilities or
other similar international calamity directly
or indirectly involving the United States; and
(v) change or threatened change in the busi-
ness, properties, assets, liabilities, finan-
cial condition, operations, results of opera-
tions or prospects of the Company and its sub-
sidiaries taken as a whole that, in the sole
judgment of the Company, is or may be adverse
to the Company. The Company shall not be re-
quired to accept for exchange, or to issue New
Securities in exchange for, any Old Securi-
ties, if at any time before the acceptance of
such Old Securities for exchange or the ex-
change of the New Securities for such Old Se-
curities, any of the foregoing events occurs
which, in the sole judgment of the Company,
make it inadvisable to proceed with the Ex-
change Offer and/or with such acceptance for
exchange or with such exchange. If the Company
fails to consummate the Exchange Offer because
the Exchange Offer is not permitted by appli-
cable law or Commission policy, it will file
with the Commission a Shelf Registration
Statement to cover resales of the Transfer Re-
stricted Securities (as defined herein) by the
holders thereof who satisfy certain condi-
tions. If the Company fails to consummate the
Exchange Offer or file a Shelf Registration
Statement in accordance with the Registration
Rights Agreements, the Company will pay Liqui-
dated Damages (as defined herein) to each
holder of Transfer Restricted Securities until
the cure of all Registration Defaults (as de-
fined herein). The Exchange Offer is not con-
ditioned upon any minimum aggregate principal
amount of Old Notes or ag-
6
<PAGE>
gregate liquidation preference of Old Senior
Preferred Stock being tendered for exchange.
See "The Exchange Offer--Registration Rights;
Liquidated Damages" and "--Certain Conditions
to the Exchange Offer."
Federal Income Tax For Federal income tax purposes, the exchange
Consequences................... pursuant to the Exchange Offer will not result
in any income, gain or loss to the Holders or
the Company. See "Certain Federal Income Tax
Considerations."
Use of Proceeds................ There will be no proceeds to the Company from
the exchange pursuant to the Exchange Offer.
Appraisal Rights............... Holders of Old Securities will not have dis-
senters' rights or appraisal rights in connec-
tion with the Exchange Offer.
Exchange Agent................. First Trust National Association is serving as
Exchange Agent in connection with the Notes,
and Harris Trust and Savings Bank is serving
as the Exchange Agent in connection with the
Senior Preferred Stock, in the Exchange Offer.
CONSEQUENCES OF NOT EXCHANGING THE OLD SECURITIES
Holders of Old Securities who do not exchange their Old Securities for New
Securities pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Securities as set forth in the legend
thereon as a consequence of the issuance of the Old Securities 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 Old Securities may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register the Old Securities
under the Securities Act. See "Risk Factors--Consequences of Exchange and
Failure to Exchange" and "The Exchange Offer--Consequences of Not Exchanging
Old Securities."
SUMMARY DESCRIPTION OF THE NEW SECURITIES
The terms of the New Securities and the Old Securities are identical in all
material respects, except for certain transfer restrictions and registration
rights relating to the Old Securities and except that, if the Exchange Offer is
not consummated within 30 business days of the Registration Statement of which
this Prospectus is a part being declared effective by the Commission, subject
to certain exceptions, with respect to the first 90-day period immediately
following thereafter, the Company will be obligated to pay Liquidated Damages
to each Holder of Old Notes in an amount equal to $.05 per week for each $1,000
principal amount of Old Notes, and to each Holder of Old Senior Preferred Stock
in an amount equal to $.05 per week for each $1,000 of liquidation preference
of Old Senior Preferred Stock. The amount of the Liquidated Damages will
thereafter increase to $.10 per week for each $1,000 principal amount or
liquidation preference of Old Notes or Old Senior Preferred Stock, as
applicable, until the Exchange Offer is consummated.
The New Senior Notes and New Senior Preferred Stock will bear interest or pay
dividends from the most recent date to which interest or dividends have been
paid on the Old Senior Notes or Old Senior Preferred Stock or, if no interest
or dividends have been paid on the Old Senior Notes or Old Senior Preferred
Stock, from July 25, 1997 and the New Discount Notes will accrete from July 25,
1997. Accordingly, registered Holders of New Senior Notes or New Senior
Preferred Stock on the relevant record date for the first interest or dividend
payment date following the consummation of the Exchange Offer will receive
interest accruing from the most recent date
7
<PAGE>
to which interest or dividends have been paid or, if no interest or dividends
have been paid, from July 25, 1997. Old Senior Notes, Old Discount Notes or Old
Senior Preferred Stock accepted for exchange will cease to accrue interest,
accrete or accrue dividends from and after the date of consummation of the
Exchange Offer. Holders of Old Securities whose Old Securities are accepted for
exchange will not receive any payment in respect of interest or dividends on
such Old Securities otherwise payable on any interest payment date which occurs
on or after consummation of the Exchange Offer.
8
<PAGE>
THE NEW NOTES AND NEW SENIOR PREFERRED STOCK
Issuer......................... Jordan Telecommunication Products, Inc., a
Delaware corporation.
Securities Offered............. $190,000,000 aggregate principal amount of 9
7/8% Series B Senior Notes due 2007 (the "New
Senior Notes").
$120,000,000 principal amount at maturity
($85,034,280 initial Accreted Value (as
defined herein)) of 11 3/4% Series B Senior
Discount Notes due 2007 (the "New Discount
Notes").
$25,000,000 aggregate liquidation preference
of 13 1/4% Series B Senior Exchangeable
Preferred Stock due 2009 (the "New Senior
Preferred Stock").
NEW SENIOR NOTES
Securities Offered............. $190,000,000 aggregate principal amount of 9
7/8% Series B Senior Notes due 2007.
Maturity Date.................. August 1, 2007.
Interest Rate and Payment The New Senior Notes will bear interest at a
Dates.......................... rate of 9 7/8% per annum. Interest on the New
Senior Notes will be payable semi-annually in
cash in arrears on February 1 and August 1 of
each year, commencing February 1, 1998.
Ranking........................ The New Senior Notes will be senior unsecured
obligations of the Company, will rank pari
passu in right of payment with all existing
and future senior indebtedness of the Company
(including the Discount Notes) and senior to
all existing and future subordinated
indebtedness of the Company. In addition, the
Senior Notes will be effectively subordinated
to senior secured indebtedness of the Company,
including indebtedness under the New Credit
Agreement, to the extent of the assets
securing such indebtedness, and to all
indebtedness and claims of creditors of its
subsidiaries. As of June 30, 1997, on a pro
forma basis, the aggregate principal amount of
indebtedness of JTP's subsidiaries to which
the Senior Notes would have been effectively
subordinated would have been approximately
$7.9 million.
Optional Redemption............ The New Senior Notes will be redeemable at the
option of the Company, in whole or in part, on
or after August 1, 2002, at the redemption
prices set forth herein, plus accrued and
unpaid interest, if any, to the date of
redemption. Notwithstanding the foregoing, at
any time or from time to time prior to August
1, 2000, the Company may redeem up to one-
third of the original principal amount of the
New Senior Notes at the redemption price of
109.875% of the principal amount thereof, plus
accrued and unpaid interest, if any, through
the date of redemption, with the net cash
proceeds of one or more Equity Offerings (as
defined herein), provided that at least two-
thirds of the aggregate principal amount of
the New Senior Notes remain outstanding
immediately thereafter.
9
<PAGE>
Change of Control.............. Upon a Change of Control (as defined herein),
the Company will be required to offer to
repurchase all of the outstanding New Senior
Notes at 101% of the principal amount thereof,
together with accrued and unpaid interest, if
any, to the date of repurchase.
Certain Covenants.............. The Senior Note Indenture (as defined herein)
contains certain covenants that limit the
ability of the Company and its Restricted
Subsidiaries to (i) incur additional
indebtedness; (ii) make restricted payments;
(iii) enter into certain transactions with
affiliates; (iv) create certain liens; (v)
sell certain assets; and (vi) merge,
consolidate or sell substantially all of the
Company's assets. All of these limitations are
subject to various qualifications.
For a more detailed description of the terms of the New Senior Notes, see
"Description of Notes."
NEW SENIOR DISCOUNT NOTES
Securities Offered............. $120,000,000 principal amount at maturity
($85,034,280 initial Accreted Value) of 11
3/4% Series B Senior Discount Notes due 2007.
Maturity Date.................. August 1, 2007.
Interest Rate and Payment The New Discount Notes are being sold at a
Dates.......................... substantial discount from their principal
amount at maturity, and there will not be any
payment of interest on the Discount Notes
prior to February 1, 2001. The New Discount
Notes will accrete at a rate of 11 3/4%,
compounded semi-annually, to par by August 1,
2000. Commencing August 1, 2000, the New
Discount Notes will bear interest at a rate of
11 3/4% per annum, payable semi-annually in
cash in arrears on February 1 and August 1,
commencing February 1, 2001.
Original Issue Discount........ For federal income tax purposes, the New
Discount Notes will be treated as having been
issued with "original issue discount." Each
holder of a New Discount Note will be required
to include amounts in gross income for federal
income tax purposes in advance of the receipt
of cash payments to which the income is
attributable. See "Certain Federal Income Tax
Considerations."
Ranking........................ The New Discount Notes will be senior
unsecured obligations of the Company, will
rank pari passu in right of payment with all
existing and future senior indebtedness of JTP
(including the Senior Notes) and senior to all
existing and future subordinated indebtedness
of the Company. In addition, the New Discount
Notes will be effectively subordinated to
senior secured indebtedness of JTP, including
indebtedness under the New Credit Agreement,
to the extent of the assets securing such
indebtedness, and to all indebtedness and
claims of creditors of
10
<PAGE>
the Company's subsidiaries. As of June 30,
1997, on a pro forma basis, the aggregate
principal amount of indebtedness of JTP's
subsidiaries to which the New Discount Notes
would have been effectively subordinated would
have been approximately $7.9 million.
Optional Redemption............ The New Discount Notes will be redeemable at
the option of the Company, in whole or in
part, on or after August 1, 2002, at the
redemption prices set forth herein, plus
accrued and unpaid interest, if any, to the
date of redemption. Notwithstanding the
foregoing, at any time or from time to time
prior to August 1, 2000, the Company may
redeem up to one-third of the original
principal amount of the New Discount Notes at
the redemption price of 111.75% of the
aggregate Accreted Value thereof, with the net
cash proceeds of one or more Equity Offerings,
provided that at least two-thirds of the
aggregate principal amount of the New Discount
Notes remain outstanding immediately
thereafter.
Change of Control.............. Upon a Change of Control, the Company will be
required to offer to repurchase all of the
outstanding New Discount Notes at 101% of the
Accreted Value thereof, together with accrued
and unpaid interest, if any, to the date of
repurchase.
Certain Covenants.............. The Discount Note Indenture (as defined
herein) contains certain covenants that will
limit the ability of the Company and its
Restricted Subsidiaries to (i) incur
additional indebtedness; (ii) make restricted
payments; (iii) enter into certain
transactions with affiliates; (iv) create
certain liens; (v) sell certain assets; and
(vi) merge, consolidate or sell substantially
all of the Company's assets. All of these
limitations are subject to various
qualifications.
For a more detailed description of the terms of the New Discount Notes, see
"Description of Notes."
NEW SENIOR PREFERRED STOCK
Securities Offered............. 25,000 shares of 13 1/4% Series B Senior
Exchangeable Preferred Stock due August 1,
2009.
Dividends...................... Dividends on the New Senior Preferred Stock
will accrue in each period ending on February
1, May 1, August 1, and November 1 of each
year at a rate of 13 1/4% per annum of the
liquidation preference. On or before August 1,
2002 the Company may, at its option, pay
dividends in cash or in additional fully paid
and non-assessable shares of New Senior
Preferred Stock having an aggregate
liquidation preference equal to the amount of
such dividends. Thereafter, dividends may be
paid in cash only.
Liquidation Preference......... $1,000 per share.
11
<PAGE>
Ranking........................ The New Senior Preferred Stock will rank
senior in right of payment with respect to all
Junior Securities (as defined herein) and pari
passu with respect to all Parity Securities
(as defined herein). See "Risk Factors--
Ranking of Senior Notes, Discount Notes,
Senior Preferred Stock and Preferred Stock
Exchange Notes" and "Description of Senior
Preferred Stock."
Mandatory Redemption........... The Company will be obligated to redeem all of
the New Senior Preferred Stock on August 1,
2009 at a redemption price equal to 100% of
the liquidation preference on the date of
redemption, plus an amount in cash equal to
all accrued and unpaid dividends to the date
of redemption.
Optional Redemption............ The New Senior Preferred Stock will be
redeemable at the option of JTP, in whole or
in part, on or after August 1, 2002 at the
redemption prices set forth herein, plus an
amount in cash equal to all accrued and unpaid
dividends to the date of redemption. In
addition, at the option of the Company, the
New Senior Preferred Stock may be redeemed in
whole, but not in part, at any time at the
redemption price set forth herein, plus an
amount in cash equal to all accrued and unpaid
dividends to the date of redemption, with the
net cash proceeds of one or more Equity
Offerings. See "Description of Senior
Preferred Stock--Redemption of Senior
Preferred Stock--Optional Redemption."
Change of Control.............. If a Change of Control occurs, each holder of
New Senior Preferred Stock will have the right
to require the Company to purchase all or any
part of such holder's New Senior Preferred
Stock at an offer price in cash equal to 101%
of the liquidation preference thereof, plus an
amount in cash equal to all accrued and unpaid
dividends per share to the date of purchase.
Certain Covenants.............. The Certificate of Designation contains
customary covenants that limit the ability of
the Company to redeem or repurchase Junior
Securities or Parity Securities and pay
dividends thereon, to merge or consolidate
with any other entity, to sell assets and to
enter into transactions with affiliates. The
Certificate of Designation also requires the
Company to deliver certain reports and
information to the holders of the New Senior
Preferred Stock.
Exchange Feature............... On any scheduled dividend payment date, the
Company may, at its option, exchange all but
not less than all of the shares of New Senior
Preferred Stock then outstanding for the
Company's 13 1/4% Subordinated Preferred Stock
Exchange Notes due 2009.
For a more detailed description of the terms of the New Senior Preferred
Stock, see "Description of Senior Preferred Stock."
PREFERRED STOCK EXCHANGE NOTES
Securities Offered............. 13 1/4% Subordinated Preferred Stock Exchange
Notes due 2009 (the "Preferred Stock Exchange
Notes").
12
<PAGE>
Maturity Date.................. August 1, 2009.
Interest Rate and Payment The Preferred Stock Exchange Notes will bear
Dates.......................... interest at a rate of 13 1/4% per annum.
Interest on the Preferred Stock Exchange Notes
will be payable semi-annually in cash in
arrears on February 1 and August 1 of each
year, commencing with the first such date to
occur after the date of exchange. On or before
August 1, 2002, the Company may, at its
option, pay interest in cash or in additional
Preferred Stock Exchange Notes having an
aggregate principal amount equal to the amount
of such interest. Thereafter, interest may be
paid in cash only.
Ranking........................ The Preferred Stock Exchange Notes will be
subordinated unsecured obligations of the
Company, junior in right of payment to all
existing and future Senior Indebtedness,
including the Senior Notes, the Discount Notes
and the New Credit Agreement, and pari passu
with all other Subordinated Indebtedness of
the Company. At June 30, 1997, on a pro forma
basis, the aggregate amount of outstanding
Senior Indebtedness would have been
approximately $281.4 million. See "Risk
Factors--Ranking of Senior Notes, Discount
Notes, Senior Preferred Stock and Preferred
Stock Exchange Notes," and "Description of
Preferred Stock Exchange Notes."
Optional Redemption............ The Preferred Stock Exchange Notes will be
redeemable at the option of the Company, in
whole or in part, on or after August 1, 2002,
at the redemption prices set forth herein,
plus accrued and unpaid interest, if any, to
the date of redemption. In addition, at any
time, the Company may redeem the Preferred
Stock Exchange Notes in whole, but not in
part, at a redemption price equal to 113.25%
of the principal amount thereof, plus accrued
and unpaid interest, if any, through the date
of redemption, with the net cash proceeds of
one or more Equity Offerings.
Change of Control.............. Upon a Change of Control, the Company will be
required to repurchase all of the outstanding
Preferred Stock Exchange Notes at 101% of the
principal amount thereof, together with
accrued and unpaid interest, if any, to the
date of repurchase.
Certain Covenants.............. The Exchange Note Indenture (as defined
herein) contains certain covenants that limit
the ability of the Company and its Restricted
Subsidiaries to (i) make restricted payments;
(ii) enter into certain transactions with
affiliates; and (iii) merge, consolidate or
sell substantially all of the Company's
assets. All of these limitations are subject
to various qualifications.
For a more detailed description of the terms of the Preferred Stock Exchange
Notes, see "Description of Preferred Stock Exchange Notes."
RISK FACTORS
Holders of the Old Securities should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate
the specific factors set forth under "Risk Factors."
13
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table presents summary (i) historical combined operating and
other data of the Company for the years ended December 31, 1994, 1995 and 1996,
and the six months ended June 30, 1996 and 1997; (ii) historical combined and
pro forma balance sheet data of the Company at June 30, 1997; and (iii) pro
forma combined operating and other data of the Company for the year ended
December 31, 1996 and the six months ended June 30, 1997. The pro forma data is
unaudited. The pro forma information gives effect to the transactions described
in Note 2 to the following table. The pro forma information does not purport to
represent what the consolidated results of the Company would have been had such
transactions actually occurred at the beginning of the relevant period, and
does not purport to project the combined financial position or the combined
results of operations of the Company for the current year or any future period.
The summary historical combined financial information reflects the results of
the Company and its subsidiaries from the date of acquisition of such
subsidiaries. The historical information of the Company at June 30, 1997 and
for the six months ended June 30, 1996 and 1997 was derived from the unaudited
combined financial statements of the Company. The results of operations for the
six months ended June 30, 1997 are not necessarily indicative of the results of
operations to be expected for the full year. The summary financial information
set forth below should be read in conjunction with the financial statements and
the related notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
HISTORICAL COMBINED(1) PRO FORMA COMBINED(2)
------------------------------------------ -----------------------
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30, YEAR ENDED SIX MONTHS
------------------------ ---------------- DECEMBER 31, ENDED JUNE
1994 1995 1996 1996 1997 1996 30, 1997
------- ------- -------- ------- -------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............. $64,690 $96,969 $132,999 $50,917 $107,802 $213,206 $115,713
Gross profit excluding
depreciation......... 25,357 35,368 50,129 21,200 41,022 81,836 43,098
Operating income
(loss)............... 8,388 14,886 13,323 7,739 (1,407) 28,196 13,902
Net income (loss)..... 1,385 4,006 (2,577) 1,498 (8,795) (2,517) (1,598)
OTHER DATA:
EBITDA(3)(5).......... $15,525 $21,558 $ 24,459 $12,868 $ 19,476 $ 40,373 $ 20,127
Capital expenditures.. 3,289 5,415 6,873 2,812 3,103 7,555 3,228
Cash interest expense. 5,778 6,555 11,826 4,356 9,265 19,467 9,734
Total interest
expense(4)........... 5,778 6,555 11,826 4,356 9,265 29,901 14,804
EBITDA to cash
interest
expense(3)(5)........ 2.7x 3.3x 2.1x 2.9x 2.1x 2.1x 2.1x
EBITDA to total
interest
expense(3)(5)........ 2.7x 3.3x 2.1x 2.9x 2.1x 1.4x 1.4x
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1997
--------------------
HISTORICAL PRO
COMBINED FORMA(6)
---------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents(8)............................ $ 3,032 $ 25,077
Total assets............................................ 204,968 236,013
Total debt.............................................. 177,909 281,432
Preferred stock(7)...................................... 1,875 46,823
Stockholders' equity (net capital deficiency)(7)........ (20,694) (138,120)
</TABLE>
14
<PAGE>
- --------
(1) Includes the results of operations and other data of the subsidiaries
comprising the Telecommunications Subsidiaries from their respective dates
of acquisition by Jordan Industries.
(2) Includes the results of operations and other data of the Company and the
Telecommunications Subsidiaries on a combined basis, as if all of the
Telecommunications Subsidiaries were acquired at the beginning of the
relevant period, as further adjusted to reflect the Company Formation and
the elimination or adjustment of certain expenses and fees as described in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Certain Transactions--Services Agreements," "--SAR Payments"
and the Unaudited Pro Forma Combined Financial Statements of JTP and the
related notes thereto appearing elsewhere in this Prospectus.
(3) Pro forma EBITDA represents operating income plus depreciation,
amortization of goodwill and other intangibles, certain other expenses,
including general, administrative and operating expenses associated with
new facility start-ups and non-competition payments paid to the partners of
the Czech Republic joint venture, and margin losses associated with
facility start-ups, as further described in the Unaudited Pro Forma
Combined Financial Statements of JTP and the related notes thereto included
elsewhere in this Prospectus. EBITDA is not included herein as operating
data and should not be construed as an alternative to operating income
(determined in accordance with generally accepted accounting principles
("GAAP")) as an indicator of JTP's operating performance. The Company has
included EBITDA because the Company understands that it is one measure used
by certain investors to determine operating cash flow and historical
ability to service indebtedness. See the Unaudited Pro Forma Combined
Financial Statements of JTP and the related notes thereto appearing
elsewhere in this Prospectus.
(4) Pro forma total interest expense excludes amortization of deferred
financing costs of $0.9 million for the year ended December 31, 1996, and
$0.5 million for the six months ended June 30, 1997.
(5) Historical EBITDA represents operating income plus depreciation,
amortization of goodwill and other intangibles, certain other expenses
associated with the Company's payment and purchase of stock appreciation
rights from the management and prior owners of AIM as described under
"Certain Transactions--SAR Payments," and non-competition payments paid to
the partners of the Czech Republic joint venture. EBITDA is not included
herein as operating data and should not be construed as an alternative to
operating income (determined in accordance with GAAP) as an indicator of
JTP's operating performance. The Company has included EBITDA because the
Company understands that it is one measure used by certain investors to
determine operating cash flow and historical ability to service
indebtedness. See the Unaudited Pro Forma Combined Financial Statements of
JTP and the related notes thereto appearing elsewhere in this Prospectus.
(6) Pro forma balance sheet data at June 30, 1997 reflects the combined
financial position of the Company as of such date, as adjusted to reflect
the Old Offerings and the application of the net proceeds therefrom as
described in "Use of Proceeds," in each case, as if each had occurred on
June 30, 1997.
(7) A portion ($0.1 million) of the issue price of the Preferred Stock Units
offered in the Old Offerings has been allocated to the Common Stock forming
a part of the units which, under GAAP, has decreased the balance of the
Senior Preferred Stock and increased the amount of stockholders' equity
reflected on the balance sheet.
(8) Includes $0.7 million of restricted cash and cash equivalents held as
purchase price adjustments in connection with the acquisition of Bond by
Jordan Industries.
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RISK FACTORS
Holders of the Old Securities should consider carefully the following risk
factors, in addition to the other information set forth in this Prospectus,
before tendering their Old Securities in the Exchange Offer. This Prospectus
contains certain forward-looking statements, including statements containing
the words "believes," "anticipates," "expects" and words of similar import.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: adverse changes in national or local economic conditions, increased
competition, changes in availability, cost and terms of financing, changes in
operating expenses and other factors referenced in this Prospectus. Certain of
these factors are discussed in more detail elsewhere in this Prospectus,
including without limitation, under the captions "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."
Given these uncertainties, prospective investors are cautioned not to place
undue reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the results of
any revisions to any of the forward-looking statements contained in this
Prospectus to reflect future events or developments. The risk factors set
forth below (other than "Consequences of Exchange and Failure to Exchange")
are generally applicable to the Old Securities as well as the New Securities.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Issuance of the New Securities in exchange for the Old Securities pursuant
to the Exchange Offer will be made only after timely receipt by the applicable
Exchange Agent of such Old Securities, a properly completed and duly executed
Letter of Transmittal and all other required documents. Therefore, holders of
the Old Securities desiring to tender such Old Securities in exchange for New
Securities should allow sufficient time to ensure timely delivery. The Company
is under no duty to give notification of defects or irregularities with
respect to tenders of Old Securities for exchange. Holders of Old Securities
who do not exchange their Old Securities for New Securities pursuant to the
Exchange Offer will continue to be subject to the restrictions on transfer of
such Old Securities as set forth in the legend thereon. In general, the Old
Securities may not be offered or sold, unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Securities under the
Securities Act. In addition, upon the consummation of the Exchange Offer
holders of Old Securities which remain outstanding will not be entitled to any
rights to have such Old Securities registered under the Securities Act or to
any rights under the Registration Rights Agreements. To the extent that Old
Securities are tendered and accepted in the Exchange Offer, a holder's ability
to sell untendered, or tendered but unaccepted, Old Securities could be
adversely affected. See "The Exchange Offer--Consequences of Not Exchanging
Old Securities."
Based on interpretations by the staff of the Commission, the Company
believes that the New Securities issued pursuant to the Exchange Offer in
exchange for Old Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act; (ii) an Initial
Purchaser who acquired the Old Securities directly from the Company solely in
order to resell pursuant to Rule 144A of the Securities Act or any other
available exemption under the Securities Act; or (iii) a broker-dealer who
acquired the Old Securities as a result of market making or other trading
activities) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Securities
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 a distribution (within the meaning of the Securities
Act) of such New Securities. The Company has not, however, sought its own no-
action letter from the staff of the Commission. Although there has been no
indication of any change in the staff's position, there can be no assurance
that the staff of the Commission would make a similar determination with
respect to the resale of the New Securities. Any holder that cannot rely upon
such prior staff interpretations must comply with the registration and
prospectus delivery requirements of the
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Securities Act in connection with a secondary resale transaction, unless such
sale is made pursuant to an exemption from such requirements. See "The
Exchange Offer--Purpose of the Exchange Offer."
LEVERAGE AND COVERAGE; NET CAPITAL DEFICIENCY
JTP has substantial indebtedness and debt service obligations. At June 30,
1997, the Company's total indebtedness, including current portion, would have
been approximately $281.4 million and its net capital deficiency would have
been approximately $143.4 million, in each case on a pro forma basis after
giving effect to the Old Offerings, the application of the net proceeds
therefrom, the Company Formation and the Jordan Industries Recapitalization.
In addition, subject to the restrictions under the New Credit Agreement and
the Indentures, the Company and its subsidiaries may incur additional
indebtedness (including additional secured indebtedness and senior
indebtedness) from time to time. See "Use of Proceeds," "Capitalization" and
"Description of Notes--Certain Covenants."
The level of the Company's indebtedness could have important consequences to
holders of the Notes, Senior Preferred Stock and, if issued, Preferred Stock
Exchange Notes, including: (i) a substantial portion of the Company's cash
flow from operations must be dedicated to debt service and will not be
available for other purposes; (ii) JTP's ability to obtain additional debt
financing in the future for working capital, capital expenditures, research
and development or acquisitions may be limited; and (iii) the Company's level
of indebtedness could limit its flexibility in reacting to changes in its
operating environment and in economic conditions generally.
On the basis of its historical financial information, its recent operating
history as discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other factors, the Company believes
that cash flow from operations will be sufficient to cover fixed charges as
they come due for at least the next 12 months. However, if cash flow from
operations declines, fixed charges (including interest on the Notes and, if
issued, Preferred Stock Exchange Notes, and dividends on the Senior Preferred
Stock) and capital expenditures may exceed cash flow. To the extent that cash
flow from operations is insufficient to cover the Company's fixed charges and
fund the Company's capital expenditure requirements, JTP, in order to pay such
expenses, may obtain funds from additional borrowings (which may qualify as
Senior Indebtedness), if permitted, may seek to sell a portion of its business
or other assets, engage in sale/leaseback transactions, raise additional
equity capital and/or acquire other businesses that would provide additional
positive cash flow. No assurance can be given as to the availability of these
or other similar transactions, or that these or similar transactions could be
accomplished on terms favorable to the Company.
The Company's ability to pay principal and interest on the Notes and, if
issued, the Preferred Stock Exchange Notes, and to pay dividends on the Senior
Preferred Stock will depend on the future operating performance and the
financial results of the Company, which will be subject in part to factors
beyond the control of the Company, such as prevailing economic conditions and
financial, business and other factors including, possibly, the availability of
revolving credit borrowings under the New Credit Agreement. The New Credit
Agreement contains restrictions on dividends and other payments, limitations
on the incurrence of additional Indebtedness or liens, limitations on material
acquisitions, limitations on transactions with affiliates and maintenance of
capital funds, and net worth and cash flow coverage ratio requirements. See
"Description of Certain Indebtedness and Other Obligations" and "Description
of Notes." The highly leveraged position of the Company and the restrictive
covenants contained in the Indentures and the New Credit Agreement could
significantly limit JTP's ability to withstand competitive pressures or
adverse economic conditions, make acquisitions or take advantage of business
opportunities that may arise.
RANKING OF SENIOR NOTES, DISCOUNT NOTES, SENIOR PREFERRED STOCK AND PREFERRED
STOCK EXCHANGE NOTES
The Senior Notes and Discount Notes are senior unsecured obligations of the
Company and rank pari passu in right of payment with all Senior Indebtedness
of the Company. The Preferred Stock Exchange Notes, if issued, will be
unsecured obligations of JTP and will be subordinated in right of payment to
all existing and future Senior
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Indebtedness of the Company, including the Senior Notes and the Discount
Notes. In the event of the insolvency, liquidation, reorganization,
dissolution or other winding up of the Company, or upon the maturity of any
Senior Indebtedness, whether by lapse of time, acceleration or otherwise, the
holders of Senior Indebtedness must be paid in full in cash before any payment
of principal or interest in respect of the Preferred Stock Exchange Notes. As
a result, holders of Preferred Stock Exchange Notes may recover ratably less
than general creditors of the Company. The Senior Preferred Stock ranks junior
to all Indebtedness and other obligations of JTP and its subsidiaries. The
Senior Notes, Discount Notes and, if issued, Preferred Stock Exchange Notes
effectively rank junior to any secured Indebtedness of the Company, to the
extent of the assets securing such Indebtedness, and to Indebtedness and
claims of creditors of the Company's subsidiaries, including Indebtedness
incurred under the New Credit Agreement. At June 30, 1997, the aggregate
indebtedness of JTP's subsidiaries was approximately $7.9 million on a pro
forma basis, after giving effect to the Old Offerings, the Company Formation
and the Jordan Industries Recapitalization. See "Description of Notes--
Ranking." The Indentures permit the Company and its subsidiaries to incur
additional indebtedness, including secured indebtedness and indebtedness of
its subsidiaries, subject to certain limitations. See "Terms of the
Acquisitions," "Description of Certain Indebtedness and Other Obligations" and
"Description of Notes--Certain Covenants."
HOLDING COMPANY STRUCTURE; DEPENDENCE ON SUBSIDIARIES; LIMITATIONS ON ACCESS
TO CASH FLOW OF THE SUBSIDIARIES
The Company is structured as a holding company that owns all of the stock of
JTP Industries. JTP Industries owns all of the stock of the Company's
operating subsidiaries. See "The Company--General." JTP's current operations
are conducted exclusively through its subsidiaries, and the Company's only
significant asset is the capital stock of JTP Industries. As a holding
company, the Company is dependent on dividends or other intercompany transfers
of funds from its subsidiaries to meet the Company's debt service, preferred
stock dividends and other obligations. The Notes, Senior Preferred Stock and,
if issued, Preferred Stock Exchange Notes will be obligations exclusively of
the Company and will not be guaranteed by any of the Company's subsidiaries
except under certain limited circumstances. See "Description of Notes--Certain
Covenants--Limitations on Guarantees of Company Indebtedness by Restricted
Subsidiaries." In addition, JTP conducts its business through its
subsidiaries, and all existing and future liabilities of the Company's
subsidiaries, including borrowings under the New Credit Agreement, will be
effectively senior to the Notes, Senior Preferred Stock and, if issued,
Preferred Stock Exchange Notes. Each subsidiary's management is given broad
discretion in conducting the day-to-day operations of such subsidiary, and the
performance of the subsidiaries is largely dependent upon their individual
efforts. Consequently, the Company's cash flow and ability to service its debt
and preferred stock dividend obligations, including the Notes, Senior
Preferred Stock and, if issued, Preferred Stock Exchange Notes, are dependent
upon the earnings of the subsidiaries and the distribution of those earnings
to the Company, or upon loans, advances or other payments made by the
subsidiaries to the Company. Furthermore, the terms of the permitted
Indebtedness of the Company and its Restricted Subsidiaries may have the
effect of limiting the ability of subsidiaries of the Company to pay dividends
to the Company.
ORIGINAL ISSUE DISCOUNT CONSEQUENCES OF THE DISCOUNT NOTES
The Discount Notes were issued at a substantial discount from their
principal amount. Consequently, the holders of the Discount Notes generally
will be required to include amounts in gross income for federal income tax
purposes in advance of receipt of the cash payments to which the income is
attributable. See "Certain Federal Income Tax Considerations" for a more
detailed discussion of the federal income tax consequences to the holders of
the Discount Notes of the purchase, ownership and disposition of the Discount
Notes. If a bankruptcy case is commenced by or against the Company under the
United States Bankruptcy Code after the issuance of the Discount Notes, the
claim of a holder of Discount Notes may be limited to an amount equal to the
sum of (i) the price paid by the holder for the Discount Notes (which price
may be deemed to be the closing price of the Discount Notes on their first day
of trading); and (ii) that portion of the original issue discount which is not
deemed to constitute "unmatured interest" for purposes of the United States
Bankruptcy Code. Any original issue discount that was not amortized as of any
such bankruptcy filing would constitute "unmatured interest."
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The amortization of OID (as defined herein) for purposes of a claim in
bankruptcy may be calculated differently than the amortization of such OID for
tax purposes.
RESTRICTIVE COVENANTS LIMITING THE COMPANY'S ABILITY TO REPAY THE SENIOR
NOTES, DISCOUNT NOTES, SENIOR PREFERRED STOCK AND PREFERRED STOCK EXCHANGE
NOTES
The New Credit Agreement contains covenants that are additional to, or more
restrictive than, those contained in the Indentures and the Certificate of
Designation, certain of which may prohibit the Company and its subsidiaries
from prepaying other indebtedness, including the Notes and, if issued,
Preferred Stock Exchange Notes. The New Credit Agreement also requires JTP to
maintain specified financial ratios and satisfy certain financial condition
tests. The Company's ability to meet those financial ratios and tests can be
affected by events beyond its control, and there can be no assurance that the
Company will meet those ratios and tests. A breach of any of these covenants
could result in a default under the New Credit Agreement. Upon the occurrence
of an event of default under the New Credit Agreement, the lenders thereunder
could elect to declare all amounts outstanding under the New Credit Agreement,
together with accrued interest, to be immediately due and payable. If the
Company were unable to repay those amounts, such lenders could proceed against
the collateral granted to them to secure that indebtedness. If the Senior
Indebtedness were to be accelerated, there can be no assurance that the assets
of the Company would be sufficient to repay in full all Indebtedness of JTP,
including the Notes and, if issued, Preferred Stock Exchange Notes, or to
redeem the Senior Preferred Stock of the Company. Substantially all of the
assets of the Company's subsidiaries are pledged as security under the New
Credit Agreement. See "Description of Certain Indebtedness and Other
Obligations--New Credit Agreement" and "Description of Notes."
CONTROL BY PRINCIPAL STOCKHOLDER; RELATIONSHIP WITH JORDAN INDUSTRIES
Jordan Industries' stockholders and affiliates (collectively, the "Jordan
Group") and management of the Company own 96.5% of the outstanding Common
Stock. In addition, Jordan Industries owns all of the Junior Preferred Stock
of the Company, entitling Jordan Industries to cast 95% of the votes entitled
to be cast on most matters submitted to shareholders for a vote. Accordingly,
the Jordan Group will have sufficient voting power to elect the entire Board
of Directors, exercise control over the business, policies and affairs of the
Company and, in general, determine the outcome of any corporate transaction or
other matters submitted to the stockholders for approval such as (i) any
amendment to the Company's Certificate of Incorporation (the "Certificate of
Incorporation"), including the authorization of additional shares of capital
stock; (ii) any merger, consolidation or sale of all or substantially all of
the assets of JTP; and (iii) any "going private" transaction, and prevent or
cause a change of control of the Company, all of which may adversely affect
the Company and the interests of its other stockholders. The Jordan Group is
expected to maintain a majority ownership interest in the Company for the
foreseeable future. Messrs. Boucher, Jordan, Quinn and Zalaznick, all
directors of the Company, are directors and stockholders of Jordan Industries.
Messrs. Boucher, Jordan and Quinn are also executive officers of Jordan
Industries.
Approximately $284.0 million of net proceeds to JTP from the Old Offerings
and Equity Investment were paid to Jordan Industries as the cash consideration
for the Telecommunications Subsidiaries and the repayment of the intercompany
indebtedness owed by the Telecommunications Subsidiaries to Jordan Industries.
See "The Company--Company Formation." Such funds will not be available to the
Company for other uses such as funding future acquisitions or working capital.
Further, concurrent with the consummation of the Old Offerings, the Company
entered into a number of affiliate transactions with Jordan Industries and The
Jordan Company, an affiliate of Jordan Industries, including the New
Subsidiary Consulting Agreement, the New Subsidiary Advisory Agreement, the JI
Properties Services Agreement, the Tax Sharing Agreement (each as defined
herein) and certain other agreements and transactions. See "Certain
Transactions."
Jordan Industries expects to include the Company in its consolidated group
for Federal income tax purposes. However, if the Junior Preferred Stock ceased
to represent at least 80% of the voting power and 80% of the value of all
outstanding stock of the Company, including the Common Stock, the Company
would be
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deconsolidated from the Jordan Industries group. Deconsolidation will occur,
at the latest, on the fifth anniversary after issuance, when the Junior
Preferred Stock is redeemed according to its terms or discontinues its
participation in the earnings of the Company, although deconsolidation could
occur prior to the fifth anniversary after issuance. Deconsolidation of the
Company from the Jordan Industries group will trigger the recognition of
substantial amounts of deferred intercompany gain that certain of the
subsidiaries of Jordan Industries will realize as a result of the Jordan
Industries Recapitalization. Although Jordan Industries would be primarily
liable for the Federal income tax liability arising from the recognition of
those gains, the Company could have secondary liability for the Federal income
tax on those gains if Jordan Industries failed to pay such tax.
LIMITED OPERATING HISTORY AND LIMITED RELEVANCE OF HISTORICAL FINANCIAL
INFORMATION
The Company was incorporated on July 18, 1997 to consolidate the
subsidiaries of Jordan Industries that are engaged in the manufacture and
distribution of products for use in the rapidly growing telecommunications and
data communications industries. JTP has conducted limited operations to date.
The historical financial information included herein for periods prior to June
30, 1997 is based upon the historical information of AIM, Cambridge, Dura-Line
and, for some periods, Bond, Diversified, Johnson, LoDan, Northern, Viewsonics
and Vitelec (each as defined herein) on a combined basis prior to the
formation of the Company and does not reflect the actual results of
operations, financial position or cash flows of the Company on a stand-alone
basis with its currently owned subsidiaries. As a result, the historical
financial information is of limited relevance in understanding what the
results of operations, financial position or cash flows of JTP would have been
for the historical periods presented had the Company in fact owned all of its
current or planned subsidiaries or had the Company in fact been organized for
such periods. See "Selected Historical Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ACQUISITION STRATEGY
One of the Company's business strategies is to acquire additional
telecommunications and data communications product companies that will
complement the Company's existing operations or provide JTP with an entry into
regions or markets it does not presently serve. Inherent in such a strategy
are certain risks, such as increasing leverage and debt service requirements,
potential exposure to liabilities of acquired companies, and operating
businesses in many geographically diverse markets. There can be no assurance
that the Company will be able to identify suitable acquisition candidates or
successfully acquire or profitably manage additional companies. The Company
competes and will continue to compete with many other buyers, some of which
have greater financial and other resources than those of the Company, for the
acquisition of telecommunications and data communications product companies.
The Company may be required to utilize its cash resources, if available, in
order to continue its acquisition program. If the Company does not have
sufficient cash resources, its growth could be limited unless it is able to
obtain the necessary capital through additional debt or equity financings.
There can be no assurance that JTP will be able to obtain such financing if
and when it is needed or that, if available, it will be available on terms the
Company deems acceptable. As a result, the Company might be unable to
successfully implement its acquisition strategy. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," "Business--Business Strategy" and "Terms of the
Acquisitions."
FRAUDULENT TRANSFER CONSIDERATIONS
Under fraudulent transfer law, if a court were to find, in a lawsuit by an
unpaid creditor or representative of creditors of the Company, that the
Company received less than fair consideration or reasonable equivalent value
for incurring the indebtedness represented by the Notes, or, if issued,
Preferred Stock Exchange Notes, and, at the time of such incurrence, JTP (i)
was insolvent or was rendered insolvent by reason of such incurrence; (ii) was
engaged or about to engage in a business or transaction for which its
remaining property constituted unreasonably small capital; or (iii) intended
to incur, or believed it would incur, debts beyond its ability to pay
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as such debts mature, such court could, among other things, (a) void all or a
portion of the Company's obligations to the holders of the Offered Securities
and/or (b) subordinate the Company's obligations to the holders of the Notes
and, if issued, Preferred Stock Exchange Notes to other existing and future
indebtedness of the Company, the effect of which would be to entitle such
other creditors to be paid in full before any payment could be made on the
Notes and Preferred Stock Exchange Notes. The measure of insolvency for
purposes of determining whether a transfer is avoidable as a fraudulent
transfer varies depending upon the law of the jurisdiction which is being
applied. Generally, however, a debtor would be considered insolvent if the sum
of all of its liabilities were greater than the value of all of its property
at a fair evaluation, or if the present fair saleable value of the debtor's
assets were less than the amount required to repay its probable liability on
its debts as they become absolute and mature. There can be no assurance as to
what standard a court would apply in order to determine solvency.
On the basis of its historical financial information, its recent operating
history as discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other factors, the Company believes
that after giving effect to the Company Formation and the Jordan Industries
Recapitalization, JTP was and will be solvent, did and will have sufficient
capital for the business in which it is engaged and did not and will not have
incurred debts beyond its ability to pay such debts as they mature. There can
be no assurance, however, that a court would necessarily agree with these
conclusions.
CHANGE OF CONTROL PROVISIONS; LIMITATIONS ON RIGHTS OF REPAYMENT
Upon the occurrence of a Change of Control, each holder of Notes, Senior
Preferred Stock and, if issued, Preferred Stock Exchange Notes will have the
right to require the Company to purchase all or part of such holder's Notes,
Senior Preferred Stock or Preferred Stock Exchange Notes, as the case may be.
The Change of Control provisions will not afford any protection in a highly
leveraged transaction, including such a transaction initiated by the Company,
management of the Company or an affiliate of the Company, if such transaction
does not result in a Change of Control. In addition, because the obligations
of JTP with respect to the Notes, Senior Preferred Stock and, if issued,
Preferred Stock Exchange Notes are effectively subordinated to all secured
indebtedness of the Company and all obligations of the Company's subsidiaries,
including the New Credit Agreement, existing or future secured indebtedness of
the Company or obligations of the Company's subsidiaries may prohibit the
Company from repurchasing or redeeming any of the Notes, Senior Preferred
Stock and, if issued, Preferred Stock Exchange Notes, as the case may be, upon
a Change of Control. Moreover, the ability of JTP to repurchase or redeem the
Notes, Senior Preferred Stock and, if issued, Preferred Stock Exchange Notes,
as the case may be, following a Change of Control will be limited by the
Company's then-available resources. Accordingly, the Change of Control
provisions are likely to be of limited usefulness in such situations. See
"Description of Notes--Mandatory Offers to Purchase Notes--Change of Control,"
"--Amendment, Supplement and Waiver" and "Description of Preferred Stock
Exchange Notes--Mandatory Offers to Purchase Preferred Stock Exchange Notes--
Change of Control."
The Change of Control purchase feature of the Notes, Senior Preferred Stock
and Preferred Stock Exchange Notes may in certain circumstances discourage or
make more difficult a sale or takeover of the Company and, thus, the removal
of incumbent management.
TAX CONSEQUENCES OF DEEMED AND STOCK DISTRIBUTIONS WITH RESPECT TO THE SENIOR
PREFERRED STOCK AND ORIGINAL ISSUE DISCOUNT ON PREFERRED STOCK EXCHANGE NOTES;
POTENTIAL FOR UNPLANNED DEEMED DIVIDEND INCOME
If the redemption price of the Senior Preferred Stock exceeds its issue
price by more than a de minimis amount, such excess may be treated as a
constructive distribution with respect to the Senior Preferred Stock of
additional stock over the term of the Senior Preferred Stock using a constant
interest rate method similar to that used for accruing original issue
discount. As a result of the allocation of a portion of the purchase price of
the Preferred Stock Units to the Common Stock, the Senior Preferred Stock
initially purchased by holders may have
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a redemption price that exceeds its issue price by more than a de minimis
amount, resulting in such constructive distribution. In addition, because the
issue price of the Senior Preferred Stock distributed in lieu of payments of
cash dividends will be equal to the fair market value of the Senior Preferred
Stock at the time of distribution, it is possible, depending on its fair
market value at that time, that such Senior Preferred Stock will be issued
with a redemption premium large enough to be considered a dividend as
described above. In such event holders would be required to include such
premium in income as a distribution over some period in advance of receiving
the cash attributable to such income, and such Senior Preferred Stock might
not trade separately, which might adversely affect the liquidity of the Senior
Preferred Stock.
Further, to the extent holders of Senior Preferred Stock receive additional
shares of Senior Preferred Stock as a distribution in respect to such Senior
Preferred Stock, such holders would be required to include in gross income for
federal income tax purposes the fair market value of such stock, even though
such holders have not received such fair market value in cash.
Finally, the Company may, at its option and under certain circumstances,
exchange Preferred Stock Exchange Notes for the Senior Preferred Stock. Any
such exchange will be a taxable event to holders of the Senior Preferred
Stock. Furthermore, the Preferred Stock Exchange Notes may in certain
circumstances be treated as having been issued with original issue discount
("OID") for federal income tax purposes. In such event, holders of Preferred
Stock Exchange Notes will be required to include such OID (as ordinary income)
in income over the life of the Preferred Stock Exchange Notes, in advance of
the receipt of the cash attributable to such income. See "Certain Federal
Income Tax Considerations."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
Many of the facilities at which the Company's products are manufactured and
assembled are located outside of the United States. JTP also provides services
and markets and sells products in many foreign countries. Although JTP has not
experienced significant problems conducting operations outside of the United
States, risks inherent in the Company's international business activities
generally include unexpected changes in regulatory requirements, tariffs and
other trade barriers, changes in local economic or political conditions,
longer accounts receivable payment cycles, difficulties in managing
international operations and protecting proprietary rights, potentially
adverse tax consequences, restrictions on repatriation of earnings and the
burdens of complying with a wide variety of foreign laws. The Company derived
approximately 22% of its total net sales on a pro forma basis from customers
outside of the United States in 1996. The Company intends to continue to
expand its operations outside of the United States and to enter additional
international markets. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business--Manufacturing and
International Operations."
Most of JTP's international sales are currently denominated in foreign
currencies. Decreases in the value of foreign currencies relative to the U.S.
dollar could result in losses from foreign currency translations. The Company
does not currently hedge its foreign exchange exposure. With respect to the
Company's sales that are U.S. dollar-denominated, decreases in the value of
foreign currencies relative to the U.S. dollar could make the Company's
products less price competitive.
COMPETITION
The Company is subject to competition from a substantial number of national,
international and regional competitors, many of which have greater financial,
manufacturing, engineering and other resources than JTP. The Company's
manufacturing operations encounter competition from both domestically
manufactured products and products manufactured outside the United States.
Except for the SILICORE polymer pipe products, certain of its CATV components
and its fiber optic connector technology, the Company's products are generally
not protected by virtue of any proprietary rights such as patents. The Company
competes by providing its customers with reliable, rapid delivery of products
that are priced at competitive levels and meet strict quality control
standards. The Company's competitors can be expected to continue to improve
the design and performance of their products and to introduce new products
with competitive price and performance characteristics. Although
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the Company believes that it has certain advantages over its competitors,
realizing and maintaining such advantages will require continued investment by
the Company in manufacturing, research and development, quality standards,
marketing and customer service and support. There can be no assurance that the
Company will have sufficient resources to continue to make such investments or
that the Company will be successful in maintaining such advantages. Failure to
make such investments or to maintain such advantages could have a material
adverse effect on JTP's business, financial condition and results of
operations. See "Business--Competition."
PRICE FLUCTUATIONS OF RAW MATERIALS
The Company purchases most of the raw materials for its products on the open
market and the Company's sales may be affected by changes in the market price
of such raw materials. The Company does not generally engage in commodity
hedging transactions for raw materials. Although the Company has generally
been able to pass on increases in the price of raw materials to its customers,
there have been delays in JTP's ability to pass on such increases in the past
and there can be no assurance that the Company will be able to do so in the
future, on a timely basis or at all. The results of operations for Dura-Line
Corporation have in the past been affected by fluctuations in the price of its
primary raw material, high density polyethylene ("HDPE"). Additionally,
significant increases in the price of the Company's products due to increases
in the cost of raw materials could have a negative effect on demand for the
Company's products and a material adverse effect on the Company's financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business--Raw
Materials; Suppliers."
ABSENCE OF PUBLIC MARKET FOR THE NEW SECURITIES AND PREFERRED STOCK UNITS AND
COMMON STOCK; RESTRICTIONS ON TRANSFERS
The New Securities are being offered to Holders of the Old Securities. The
Old Securities were issued on July 25, 1997 to a small number of institutional
investors and are eligible for trading in the Private Offering, Resale and
Trading through Automated Linkages (PORTAL) Market, the National Association
of Securities Dealers, Inc.'s screen-based, automated market for trading of
securities eligible for resale under Rule 144A. The New Securities are new
securities for which there currently is no market. Although the Initial
Purchasers have advised the Company that they currently intend to make a
market in the New Securities, they are not obligated to do so and may
discontinue such market making at any time without notice. The Company does
not intend to list the New Securities or the Preferred Stock Units or Common
Stock on any national securities exchange or to seek the admission thereof to
trading in the National Association of Securities Dealers Automated Quotation
System. Accordingly, no assurance can be given that an active market will
develop for any of the New Securities or the Preferred Stock Units or Common
Stock or as to the liquidity of the trading market for any of the New
Securities. If a trading market does not develop or is not maintained, holders
of the New Securities, Preferred Stock Units or Common Stock may experience
difficulty in reselling such securities or may be unable to sell them at all.
If a market for the New Securities develops, any such market may be
discontinued at any time. If a trading market develops for the New Securities,
future trading prices of such New Securities will depend on many factors,
including, among others, prevailing interest rates, the Company's results of
operations and the market for similar securities. Depending on prevailing
interest rates, the market for similar securities and other factors, including
the financial condition of the Company, the New Securities may trade at a
discount from their principal amount or liquidation preference, as applicable.
23
<PAGE>
THE COMPANY
GENERAL
The Company is a leading worldwide designer, manufacturer and distributor of
products to niche markets within the rapidly growing telecommunications and
data communications industries. JTP manufactures and markets its products to
over 7,500 customers throughout the world from facilities based in the United
States, China, the Czech Republic, France, India, Israel, Mexico, Russia and
the United Kingdom. The Company's product offerings serve numerous end-use
telecommunications markets and cover a broad range of applications, including,
among others: (i) infrastructure equipment, such as fiber optic cable conduit,
power conditioning systems and CATV components and transmitters used by
wireline and wireless telecommunications, CATV, cellular telephone and PCS
service providers; (ii) custom cable assemblies and specialty wire and cable
used by internetworking suppliers and OEMs in the data processing and
telecommunications industries; and (iii) electronic connectors and components
used in mobile communications, instrumentation, LANs and computer equipment.
As a result, the Company believes it is well positioned to benefit from the
significant growth taking place in global telecommunications markets. JTP
believes it has distinguished itself through its international presence, high-
quality products and outstanding customer service and field support, resulting
in strong customer relationships with major industry participants and leading
market share positions.
The Company conducts all of its operations through an intermediate holding
company, JTP Industries, and JTP Industries' subsidiaries and each of their
respective subsidiaries.
The Company currently operates in three product groups: (1) infrastructure
products and equipment, which represented 50.7% of pro forma net sales in
1996; (2) custom cable assemblies and specialty wire and cable, which
represented 28.1% of pro forma net sales in 1996; and (3) electronic
connectors and components, which represented 21.2% of pro forma net sales in
1996.
Infrastructure Products and Equipment
Dura-Line Corporation ("Dura-Line"), founded in 1971 and acquired by a
Jordan Industries affiliate in October 1985, is one of the world's leading
suppliers of specialized telecommunications HDPE conduit systems used to
install and protect fiber optic cables, coaxial cables and other telephone,
data transmission and electronic cables. Dura-Line is also a leading supplier
of cable conduit for use in the CATV industry and supplies cable conduit for
electric power cables. Dura-Line's net sales represented 32% of the Company's
net sales in 1996 on a pro forma basis.
Northern Technologies, Inc. ("Northern"), founded in 1985 and acquired by
Jordan Industries in December 1996, designs, manufactures and markets power
conditioning and power protection equipment primarily for telecommunication
applications, such as cellular and PCS networks. Northern also offers a
variety of products including voltage regulators, uninterruptible power
supplies, isolation transformers and grounding devices to protect power-
critical applications. Northern's net sales represented approximately 12% of
the Company's net sales in 1996 on a pro forma basis.
Viewsonics, Inc. ("Viewsonics"), founded in 1974 and acquired by Jordan
Industries in August 1996, designs, manufactures and markets branded CATV
electronic network components and patented electronic security components
primarily for the "drop" or home connection portion of the CATV
infrastructure. Viewsonics' net sales represented 6% of the Company's net
sales in 1996 on a pro forma basis.
Custom Cable Assemblies and Specialty Wire and Cable
Bond Technologies Inc. ("Bond"), founded in 1988 and acquired by Jordan
Industries in September 1996, designs, engineers and manufactures high-quality
custom electronic cable assemblies and sub-assemblies for data communications
and telecommunications customers. Bond's net sales represented approximately
6% of the Company's net sales in 1996 on a pro forma basis. The Company owns
80% of the outstanding common stock of Bond.
24
<PAGE>
Diversified Wire & Cable, Inc. ("Diversified"), founded in 1988 and acquired
by Jordan Industries in June 1996, is a broad line provider and value added
reseller of wire, cable, connectors and custom cable assemblies for the data
communications and telecommunications markets. Diversified's net sales
represented 12% of JTP's net sales in 1996 on a pro forma basis. The Company
owns 87.5% of the outstanding common stock of Diversified.
LoDan West, Inc. ("LoDan") founded in 1967 and acquired by Jordan Industries
in May 1997, designs, engineers and manufactures high-quality custom
electronic cable assemblies, sub-assemblies and electro-mechanical assemblies
to OEMs in the data and telecommunications markets of the electronics
industry. LoDan's net sales represented approximately 10% of the Company's net
sales in 1996 on a pro forma basis.
Electronic Connectors and Components
AIM Electronics Corporation ("AIM"), founded in 1980 and acquired by Jordan
Industries in May 1989, is an importer and producer of electronic connectors,
adaptors, switches, tools and other electronic hardware products for
telecommunications and data communications networks sold to the commercial and
consumer electronics markets. While AIM sells over 3,000 products, electronic
connectors are AIM's primary product. In addition, AIM manufactures and
distributes custom cable assemblies. AIM's net sales represented 7% of the
Company's net sales in 1996 on a pro forma basis.
Cambridge Products Corporation ("Cambridge"), founded in 1972 and acquired
by Jordan Industries in September 1989, is a domestic producer of high-quality
electronic connectors, plugs, adaptors and other accessories. Cambridge is
primarily a designer and marketer of specialty radio frequency ("RF") coaxial
electronic connectors used in radio, mobile communications, television and
computer equipment. Cambridge's net sales represented 4% of JTP's net sales in
1996 on a pro forma basis.
Johnson, founded in 1953 and acquired by Jordan Industries in January 1996,
is a fully integrated manufacturer of high-quality, specialty RF coaxial
connectors and electronic hardware. Johnson's expertise is in manufacturing
miniature, sub-miniature and microminiature RF connectors used primarily in
telecommunications, computer and other related OEM applications. Johnson's net
sales represented 8% of the Company's net sales in 1996 on a pro forma basis.
Vitelec, founded in 1987 and acquired by Jordan Industries in August 1996,
is a United Kingdom-based importer, packager and master distributor of over
700 different connectors, plugs, jacks, sockets, adaptors, terminators,
cabling, converters, cable assemblies and other accessories for data
communications and telecommunications networks sold to the commercial and
consumer electronics markets. Vitelec's net sales represented 3% of the
Company's net sales in 1996 on a pro forma basis.
The foregoing operating subsidiaries and their respective subsidiaries are
sometimes referred to collectively as the "Telecommunications Subsidiaries."
For a more detailed discussion of the terms of the acquisitions of these
operating subsidiaries by Jordan Industries, see "Terms of Acquisitions."
COMPANY FORMATION
The Company was formed by Jordan Industries and the Company's management and
the Jordan Group and engaged in the Old Offerings in connection with the
Jordan Industries Recapitalization. The Company undertook the Company
Formation as a component of the Jordan Industries Recapitalization for a
number of reasons, including establishing the Company as a stand-alone,
industry-focused company, which is expected to increase its financial
flexibility.
The Company purchased the Telecommunications Subsidiaries from Jordan
Industries and repaid indebtedness owed by the Telecommunications Subsidiaries
to Jordan Industries for an aggregate of $294.0 million. This acquisition was
financed with a portion of the net proceeds from the Notes offered pursuant to
the
25
<PAGE>
Old Offerings and $47.0 million of Equity Investment. In addition, JTP assumed
$10.0 million of the Telecommunications Subsidiaries' obligations. The Equity
Investment is comprised of: (i) the sale of the $25.0 million initial
liquidation preference of Senior Preferred Stock offered pursuant to the Old
Offerings; (ii) the sale of $20.0 million initial liquidation preference of
Junior Preferred Stock to Jordan Industries; and (iii) $2.0 million in cash
proceeds from the sale of an aggregate of 999,500 shares of Common Stock to
the Jordan Group, management of the Company, the purchasers of the Preferred
Stock Units pursuant to the Old Offerings and Jefferies & Company, Inc. See
"Certain Transactions." The Company contributed all of the stock of the
Telecommunications Subsidiaries to JTP Industries, a newly formed subsidiary
of the Company. As a result of the Company Formation transactions described
above, JTP owns JTP Industries, which owns the Telecommunications
Subsidiaries.
JTP Industries also entered into a senior secured bank credit agreement with
certain lenders concurrently with the consummation of the Old Offerings, which
provides the Company and its subsidiaries with a revolving credit and letter
of credit facility of up to $110.0 million. The Company has not made any
borrowings under the New Credit Agreement.
The Company and its subsidiaries will continue to be included in Jordan
Industries' consolidated financial statements, and will be part of the Jordan
Industries consolidated group for tax purposes until the redemption of the
Junior Preferred Stock or until such time as they can no longer be
consolidated for federal income tax purposes.
----------------
The Company was incorporated in the State of Delaware on July 18, 1997. Its
principal executive offices are located at ArborLake Centre, Suite 550, 1751
Lake Cook Road, Deerfield, Illinois 60015, and its telephone number is (847)
945-5591.
26
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds in connection with the Exchange
Offer. The net proceeds received by the Company from the Old Offerings and the
Equity Investment (after the deduction of discounts and commissions, fees and
other expenses associated with Old Offerings and the New Credit Agreement)
were approximately $306.0 million. The net proceeds from the Old Offerings
were used by the Company to: (i) fund the cash portion of the purchase price
payable by the Company to Jordan Industries in connection with the Company
Formation; and (ii) repay certain obligations of the Telecommunication
Subsidiaries.
The following table sets forth the sources and uses of consideration by the
Company as a result of the Old Offerings and the Company Formation. JTP
Industries entered into the $110.0 million New Credit Agreement concurrently
with the consummation of the Old Offerings. See "The Company--Company
Formation" and "Description of Certain Indebtedness and Other Obligations--New
Credit Agreement."
<TABLE>
<CAPTION>
SOURCES
- --------
USES
- -----------------------------------
<S> <C>
Acquisition Price(3)........ $294.0
Fees and expenses(4)........ 14.5
Excess cash................. 22.0
------
Total Uses.............. $330.5
======
</TABLE>
(DOLLARS IN MILLIONS)
<TABLE>
<S> <C>
Senior Notes....................... $188.5
Discount Notes..................... 85.0
Assumed obligations(1)............. 10.0
Equity Investment(2)............... 47.0
------
Total Sources.................. $330.5
======
</TABLE>
- --------
(1) The Company assumed approximately $10.0 million of obligations of the
Telecommunications Subsidiaries, including $8.1 million of indebtedness
and an obligation to fund the redemption of $1.9 million of preferred
stock.
(2) The Equity Investment is comprised of: (i) the sale of the $25.0 million
initial liquidation preference of Senior Preferred Stock offered hereby;
(ii) the sale of $20.0 million initial liquidation preference of Junior
Preferred Stock to Jordan Industries; and (iii) $2.0 million in cash
proceeds from the sale of an aggregate of 999,500 shares of Common Stock
to the Jordan Group, management of the Company, the purchasers of the
Preferred Stock Units pursuant to the Old Offerings and Jefferies. See
"Certain Transactions."
(3) The acquisition price (the "Acquisition Price"), which was paid to Jordan
Industries in consideration of the acquisition of the Telecommunication
Subsidiaries, consists of: (i) $284.0 million of cash; and (ii) the
assumption of $10.0 million of obligations of the Telecommunications
Subsidiaries. See "The Company--Company Formation."
(4) Includes estimated placement fees and expenses in connection with the Old
Offerings, fees and expenses in connection with the New Credit Agreement,
fees payable to TJC Management Corp. (an affiliate of The Jordan Company),
and rating agency, legal, accounting, printing and other transaction
expenses in connection with the Company Formation.
DIVIDEND POLICY
The Company has never declared or paid any dividends on its capital stock.
The Company is not required to pay cash dividends on the Senior Preferred
Stock until November 1, 2002. The Company intends to retain future earnings,
if any, for use in its business and does not anticipate paying any cash
dividends in the foreseeable future on the Senior Preferred Stock or on the
Common Stock. In addition, the terms of the Indentures and the terms of the
New Credit Agreement limit the amount of cash dividends the Company may pay
with respect to the Senior Preferred Stock, the Common Stock and other equity
securities both before and after that date. See "The Company," "Description of
Certain Indebtedness and Other Obligations--New Credit Agreement" and
"Description of Notes."
JTP's current operations are conducted exclusively through its subsidiaries.
As a holding company, the Company is dependent on dividends or other
intercompany transfers of funds from which to pay dividends. Although the
Company's subsidiaries are not currently restricted from dividending or
otherwise transferring funds to the Company, the terms of the permitted
indebtedness of the Company and its Restricted Subsidiaries (as defined
herein) may have the effect of limiting the ability of subsidiaries of JTP to
pay dividends to the Company.
27
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 1997, (i) the historical
combined capitalization of the Company; and (ii) the combined capitalization
of the Company on a pro forma basis after giving effect to the Company
Formation and the Old Offerings and the application of the net proceeds
therefrom as described under "Use of Proceeds," as if each had occurred on
June 30, 1997. This table should be read in conjunction with the historical
Combined Financial Statements and the related notes thereto and the Unaudited
Pro Forma Combined Financial Statements and the related notes thereto
appearing elsewhere in this Prospectus. See "The Company--Company Formation."
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------
HISTORICAL PRO
COMBINED FORMA
---------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash and cash equivalents(1) ....................... $ 3,032 $ 25,077
======== ========
Current portion of long-term debt and capital
leases............................................. $ 987 $ 987
======== ========
Long-term debt--less current portion:
New Credit Agreement(2)........................... $ -- $ --
Senior Notes...................................... -- 188,511
Discount Notes.................................... -- 85,034
Intercompany notes(3)............................. 170,022 --
Sellers' notes.................................... 3,000 3,000
Capitalized leases................................ 2,991 2,991
Other long-term debt.............................. 909 909
-------- --------
Total long-term debt--excluding current portion. 176,922 280,445
-------- --------
Dura-Line Preferred Stock(4)........................ 1,875 1,875
Senior Preferred Stock(5)........................... -- 24,948
Junior Preferred Stock.............................. -- 20,000
Stockholders' equity (net capital deficiency)(6)(7). (20,694) (138,120)
-------- --------
Total capitalization............................ $158,103 $189,148
======== ========
</TABLE>
- --------
(1) Includes $0.7 million of restricted cash and cash equivalents held as
purchase price adjustments in connection with the acquisition of Bond by
Jordan Industries.
(2) On July 25, 1997, JTP Industries entered into the New Credit Agreement
which provides the Company with a revolving credit and letter of credit
facility of up to $110.0 million. See "Description of Certain Indebtedness
and Other Obligations--New Credit Agreement."
(3) See "Certain Transactions."
(4) The Company is obligated to fund the redemption of the Dura-Line Preferred
Stock in April 1998. See "Certain Transactions."
(5) A portion ($0.1 million) of the issue price of the Preferred Stock Units
offered in the Old Offerings has been allocated to the shares of Common
Stock forming a part of the units which, under GAAP, has decreased the
balance of the Senior Preferred Stock and increased the amount of
stockholders' equity reflected above.
(6) The pro forma net capital deficiency reflects adjustments for the
difference between the book value of the net assets of the
Telecommunications Subsidiaries and the Acquisition Price. See "Use of
Proceeds."
(7) Fees of $5.5 million related to the Equity Investment have been allocated
to stockholders' equity (net capital deficiency) in accordance with GAAP.
28
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table represents selected historical combined financial
information as of and for the years ended December 31, 1992, 1993, 1994, 1995
and 1996, and the six months ended June 30, 1996 and 1997. The results of
operations includes (i) for the periods prior to and ending on December 31,
1995, the results of AIM, Cambridge and Dura-Line; (ii) for the periods after
December 31, 1995 and prior to and ending on June 30, 1996, the results of
AIM, Cambridge, Dura-Line and Johnson (from the date of its acquisition in
January 1996); and (iii) for the periods after June 30, 1996, the results of
AIM, Cambridge, Dura-Line, Johnson (from the date of its acquisition in
January 1996), Diversified (from the date of its acquisition in June 1996),
Viewsonics (from the date of its acquisition in August 1996), Vitelec (from
the date of its acquisition in August 1996), Bond (from the date of its
acquisition in September 1996), Northern (from the date of its acquisition in
December 1996) and LoDan (from the date of its acquisition in May 1997) in
each case on a combined basis. The statement of operations data and the
balance sheet data as of and for the years ended December 31, 1994, 1995, and
1996 have been derived from audited financial statements included elsewhere in
this Prospectus. The statement of operations data and the balance sheet data
as of and for the year ended December 31, 1993, have been derived from the
audited financial statements of the Company which are not included in this
Prospectus. The statement of operations data and the balance sheet data as of
and for the year ended December 31, 1992 and at and for the six month periods
ended June 30, 1996 and 1997 have been derived from the unaudited financial
statements of the Company. The unaudited financial statements as of and for
the six months ended June 30, 1996 and 1997 are included elsewhere in this
Prospectus.
The historical combined financial information does not reflect the actual
results of operations, financial position or cash flows of the Company on a
stand-alone basis with its currently owned subsidiaries. As a result, the
historical combined financial information may not be indicative of the results
of operations, financial position or cash flows of the Company for the
historical periods presented had the Company in fact owned all of its current
or planned subsidiaries or had the Company in fact been organized for such
periods. See also "Risk Factors--Limited Operating History and Limited
Relevance of Historical Financial Information."
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------------------ ----------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales.............. $55,244 $56,166 $64,690 $96,969 $132,999 $50,917 $107,802
Gross profit excluding
depreciation.......... 23,492 23,923 25,357 35,368 50,129 21,200 41,022
Selling, general and
administrative
expenses excluding
depreciation.......... 7,046 7,929 8,476 12,411 23,446 7,349 20,053
Depreciation and
amortization.......... 6,191 5,493 5,100 5,105 6,642 2,954 4,775
Operating income
(loss)................ 8,809 9,131 8,388 14,886 13,323 7,739 (1,407)
Other (income) and
expenses.............. 31 0 0 0 31 0 (19)
Interest expense (net
of interest income)... 4,608 4,612 5,774 6,399 11,674 4,328 9,178
Income (loss) before
income taxes, minority
interest and
extraordinary (loss).. 4,214 4,519 2,614 8,487 1,618 3,411 (10,566)
Provision for income
taxes................. 2,381 2,498 1,172 4,062 3,647 1,564 (3,031)
Income (loss) before
minority interest and
extraordinary (loss).. 1,833 2,021 1,442 4,425 (2,029) 1,847 (7,535)
Minority interest...... 0 3 (57) (419) (548) (349) (796)
Extraordinary (loss)... 0 0 0 0 0 0 (464)
Net income (loss)...... 1,833 2,024 1,385 4,006 (2,577) 1,498 (8,795)
OTHER OPERATING DATA:
EBITDA(1).............. $15,170 $14,679 $15,525 $21,558 $ 24,459 $12,868 $ 19,476
Capital expenditures... 616 2,450 3,289 5,415 6,873 2,812 3,103
Ratio of earnings to
fixed charges(2)...... 1.9x 2.0x 1.4x 2.3x 1.1x 1.8x --
Ratio of earnings to
combined fixed charges
and preferred stock
dividends(3).......... 1.9x 1.9x 1.4x 2.2x 1.1x 1.8x --
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
-------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 431 $ 372 $ 862 $ 2,798 $ 6,385 $ 2,957 $ 3,032
Total assets........... 53,148 52,958 49,445 62,748 179,646 105,536 204,968
Total debt, excluding
current portion....... 31,209 30,453 46,368 52,009 147,186 85,143 176,922
Preferred stock........ 3,750 3,047 2,695 1,875 1,875 1,875 1,875
Stockholders' equity
(net capital
deficiency)........... 3,327 5,367 (15,163) (11,216) (11,379) (7,953) (20,694)
</TABLE>
- --------
(1) Historical EBITDA represents operating income plus depreciation,
amortization of goodwill and other intangibles, certain other expenses
associated with the Company's payment and purchase of stock appreciation
rights from the management and prior owners of AIM, as described under
"Certain Transactions--SAR Payments," and non-competition payments to the
partners of the Czech Republic joint venture. EBITDA is not included
herein as operating data and should not be construed as an alternative to
operating income (determined in accordance with GAAP) as an indicator of
JTP's operating performance. The Company has included EBITDA because the
Company understands that it is one measure used by certain investors to
determine operating cash flow and historical ability to service
indebtedness. See the Unaudited Pro Forma Combined Financial Statements of
JTP and the related notes thereto appearing elsewhere in this Prospectus.
(2) In the computation of the ratio of earnings to fixed charges, earnings
consist of income before income taxes, minority interest, and
extraordinary (loss), plus fixed charges. Fixed charges consist of
interest expense on indebtedness, plus that portion of lease rental
expense representative of the interest factor. Earnings were insufficient
to cover fixed charges by $10.6 million for the six months ended June 30,
1997.
(3) In the computation of the ratio of earnings to combined fixed charges and
preferred stock dividends, earnings consist of income before income taxes,
minority interest, and extraordinary (loss), plus fixed charges. Combined
fixed charges and preferred stock dividends consist of interest expense on
indebtedness, preferred stock dividend requirements of majority-owned
subsidiaries, plus that portion of lease rental expense representative of
the interest factor. Earnings were insufficient to cover combined fixed
charges and preferred stock dividends by $10.6 million for the six months
ended June 30, 1997.
30
<PAGE>
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's results of operations
and of its liquidity and capital resources should be read in conjunction with
the financial statements and the related notes thereto appearing elsewhere in
this Prospectus.
BASIS OF PRESENTATION
JTP was formed to consolidate the subsidiaries of Jordan Industries that are
engaged in the manufacture and distribution of products for use in the rapidly
growing telecommunications and data communications industries. The historical
financial statements of the Company and the following discussion reflect the
results of operations and financial position of the subsidiaries on a combined
basis prior to the formation of the Company and does not reflect the actual
results of operations, financial position or cash flows of the Company on a
stand-alone basis with its currently owned subsidiaries. The historical
financial statements reflect the results of operations of the subsidiaries
from their date of acquisition by Jordan Industries. As a result, the
historical financial information is of limited relevance in understanding what
the results of operations, financial position or cash flows of the Company
would have been for the historical periods presented had the Company in fact
owned all of its current or planned subsidiaries or had JTP in fact been
organized for such periods.
ACQUISITIONS
A substantial portion of the Company's growth during the past 18 months is
the result of the acquisitions of seven of the Company's ten subsidiaries. The
Company acquired Johnson in January 1996, Diversified in June 1996, Viewsonics
in August 1996, Vitelec in August 1996, Bond in September 1996, Northern in
December 1996 and LoDan in May 1997. Each of these acquisitions has been
accounted for under the purchase method of accounting and are included in the
Company's combined financial statements from their respective dates of
acquisition. As a result of these acquisitions, JTP's combined results for
1994, 1995 and 1996 and for the six months ended June 30, 1996 and 1997 are
not directly comparable.
These acquisitions have had a significant impact on the Company's results of
operations and financial position. Results of operations have been affected by
an increase in (i) amortization of intangibles (including non-competition
agreements, which are typically amortized over a period of five years, and
goodwill) and increased inventory costs and increased depreciation resulting
from purchase accounting adjustments; and (ii) interest expense and deferred
financing and prepayment fees.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Net Sales. Net sales increased $56.9 million or 112% from $50.9 million in
1996 to $107.8 million in 1997. The increase was primarily due to the
acquisition of Diversified, Viewsonics, Vitelec, Bond, Northern and LoDan, all
of which were acquired after the first quarter of 1996, and Johnson which was
acquired near the end of January 1996. Combined, these acquisitions accounted
for approximately $43.2 million or 76% of the increase in sales. The balance
of the sales increase was attributed primarily to higher sales of cable
conduit due to the addition of sales from the Company's new Mexico and China
manufacturing facilities, which began operations in late 1996.
Gross Profit (Excluding Depreciation). Gross profit increased $19.8 million
or 93% from $21.2 million in 1996 to $41.0 million in 1997 reflecting the
higher sales levels from the acquired companies. Gross margins declined from
41.7% in 1996 to 38.0% in 1997. This decline was due primarily to the lower
gross margins of the acquired businesses which averaged 38.7% and the under
absorption of manufacturing overhead costs relating to recently opened
manufacturing facilities in Mexico and China and market development costs
related to India.
31
<PAGE>
Selling, General and Administrative Expenses (Excluding Depreciation).
Selling, general and administrative expenses increased $12.7 million or 173%
from $7.4 million in 1996 to $20.1 million in 1997. This increase was
primarily due to the acquisitions which accounted for $9.5 million of the
increase, and increased overhead to support the higher internal sales levels,
the new facilities in Mexico and China, and further international market
development. Selling, general and administrative expenses as a percentage of
net sales increased from 15.3% to 19.0% due to the inherent cost structure of
the newly acquired companies.
Operating Income. Operating income decreased $9.1 million from $7.7 million
in 1996 to a loss of $1.4 million in 1997. This decrease was due primarily to
a $15.4 million SAR expense relating to the Company's acquisition of Dura-Line
in 1988. Excluding SAR expenses, operating income would have increased $4.6
million or 49% from $9.4 million in 1996 to $14.0 million in 1997. This
increase in operating income (excluding the SAR expense) was due to the
acquisitions, which added $5.4 million, and was partially offset by lower
operating profits in the electronic connector and components segment.
Excluding SAR expenses, operating margins would have declined from 18.6% in
1996 to 13.0% in 1997, due to the lower operating margins of the acquired
businesses, which averaged 12.3%, the under absorbed overhead of the new China
and Mexico facilities and international market development costs not incurred
in 1996.
Fiscal Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Sales. Net sales increased $36.0 million or 37% from $97.0 million in
1995 to $133.0 million in 1996. The increase in sales was due primarily to the
1996 acquisitions of Johnson, Diversified, Viewsonics, Vitelec, and Bond,
which contributed $41.9 million to 1996 net sales, partially offset by lower
sales of cable conduit of $5.9 million despite significant growth in the
Company's overseas cable conduit markets. This decrease was driven largely by
JTP's de-emphasis of its large duct product line, which was sold only in the
United Kingdom, and accounted for an $8.4 million decrease in cable conduit
sales. The Company also experienced decreases in cable conduit sales to large
telecommunications service providers (such as the RBOCs) which had slowed
capital expenditure programs due to regulatory uncertainty prior to the
passage of the Telecom Act. The Company expects these cable conduit sales to
improve as passage of the Telecom Act diminished such regulatory uncertainty
and has allowed new service providers to enter the RBOCs' markets, providing a
significant new customer base and source of growth for the Company.
Gross Profit (Excluding Depreciation). Gross profit increased $14.7 million
or 42% from $35.4 million in 1995 to $50.1 million in 1996, reflecting the
higher sales due to the 1996 acquisitions. Gross margins increased from 36.5%
to 37.7% due to higher gross profits on sales of cable conduit products.
Selling, General and Administrative Expenses (Excluding Depreciation).
Selling, general and administrative expenses increased $11.0 million or 89%
from $12.4 million in 1995 to $23.4 million in 1996 due primarily to the
acquisitions which accounted for $8.7 million of the increase. As a percentage
of net sales, selling, general and administrative expenses increased from
12.8% in 1995 to 17.6% in 1996, primarily reflecting costs incurred to
establish new facilities in Mexico and China, and higher international market
development costs.
Operating Income. Operating income decreased $1.6 million or 11% from $14.9
million in 1995 to $13.3 million in 1996. Operating margins decreased from 15%
in 1995 to 10% in 1996. The decrease is primarily attributable to costs
associated with the Company's development of new overseas markets and new
facilities in Mexico and China and SAR expense of $2.3 million associated with
the Company's acquisition of AIM in 1995. Partially offsetting the decrease
were the 1996 acquisitions, which contributed $3.8 million to operating income
in 1996. Excluding AIM's SAR expense, operating income would have increased
$0.8 million or 5% from 1995.
For a discussion of income taxes, see Note 12 to the Historical Combined
Financial Statements of JTP included elsewhere in this Prospectus.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Sales. Net sales increased $32.3 million or 50% from $64.7 million in
1994 to $97.0 million in 1995. The sales increase was due to increased sales
of cable conduit of $31.2 million, as well as increased connector
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sales of $1.0 million. International sales of cable conduit grew $15.8 million
primarily due to increased sales from the Company's Czech Republic facility as
European countries made significant investments in the telecommunications
infrastructure. Domestic sales of conduit were also up $15.4 million as RBOCs
increased their line capacity, particularly in preparation for the 1996
Olympic Games in Atlanta.
Gross Profit (Excluding Depreciation). Gross profit increased $10.0 million
or 39% from $25.4 million in 1994 to $35.4 million in 1995, primarily
reflecting increased sales levels. Gross margins decreased from 39.2% in 1994
to 36.5% in 1995 due to increased sales of lower margin products.
Selling, General and Administrative Expenses (Excluding Depreciation).
Selling, general and administrative expenses increased $3.9 million or 46%
from $8.5 million in 1994 to $12.4 million in 1995. Selling, general and
administrative expenses as a percentage of sales declined from 13.1% to 12.8%
as fixed overhead costs represented a lower percentage of the higher net
sales.
Operating Income. Operating income increased $6.5 million or 77% from $8.4
million in 1994 to $14.9 million in 1995, primarily as a result of higher net
sales. Operating margin increased from 13.0% to 15.4% reflecting the
improvements in selling, general and administrative expenses as a percentage
of net sales.
For a discussion of income taxes, see Note 12 to the Historical Combined
Financial Statements of JTP included elsewhere in this Prospectus.
LIQUIDITY AND CAPITAL RESOURCES
During 1994, net cash provided by operating activities was $5.7 million.
Cash used in investing activities was $5.6 million, which consisted of capital
expenditures of $3.3 million and the acquisition of Dura-Line common stock for
$2.3 million. Cash provided by financing activities was $0.3 million which
primarily consisted of advances from Jordan Industries.
During 1995, net cash provided by operating activities was $8.0 million.
Cash used in investing activities was $8.7 million, which consisted of capital
expenditures of $5.4 million and the acquisition of Dura-Line common stock for
$3.3 million. Cash provided by financing activities was $2.7 million which
primarily consisted of advances from Jordan Industries.
During 1996, net cash provided by operating activities was $6.3 million.
Cash used in investing activities was $5.3 million, which consisted of capital
expenditures, net of cash held by the Telecommunications Subsidiaries at the
time of their respective acquisitions. Cash provided by financing activities
was $2.2 million which primarily consisted of advances from Jordan Industries.
During the six months ended June 30, 1996, net cash provided in operating
activities was $1.1 million. Cash used in investing activities was $2.8
million, which consisted of capital expenditures. Cash provided by financing
activities was $1.8 million which primarily consisted of borrowings from
Jordan Industries.
During the six months ended June 30, 1997, net cash used in operating
activities was $23.3 million due to the $9.4 million SAR payment relating to
the Company's acquisition of Dura-Line in 1988 and higher working capital
requirements to support sales growth. Cash used in investing activities was
$2.6 million, which consisted of capital expenditures. Cash provided by
financing activities was $21.3 million which primarily consisted of repayments
to Jordan Industries and long-term debt.
On July 25, 1997, the Company issued the Old Securities and obtained the
Equity Investment, which raised approximately $306.0 million (after fees and
expenses) which was used substantially to acquire the Telecommunication
Subsidiaries. See "Use Of Proceeds."
Also on July 25, 1997, JTP Industries, a subsidiary of the Company, entered
into the New Credit Agreement under which JTP Industries is able to borrow up
to approximately $110.0 million to fund acquisitions and provide working
capital and for other general corporate purposes. The New Credit Agreement
provides for a revolving line of credit of $110.0 million over a term of five
years and the agreement is secured by a first priority security
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interest in substantially all of JTP Industries' assets, including a pledge of
all of the stock of the Company's subsidiaries. Payments of principal of and
interest on amounts borrowed under the New Credit Agreement are guaranteed by
the Company's subsidiaries. The Company has not borrowed any amounts under the
New Credit Agreement.
The Company has agreed to repurchase the preferred stock of Dura-Line held
by Dura-Line's president in April 1998 for $1.9 million.
The Company's principal sources of liquidity have been and will continue to
be from cash flow generated from operations and borrowings under the New
Credit Agreement, in addition to excess cash generated by the Old Offerings.
FOREIGN CURRENCY IMPACT
The Company does not currently hedge its foreign currency exposure. The
Company's exposure to decreases in the value of foreign currency is protected
by its investment in manufacturing facilities overseas whose costs, including
labor and raw materials, are also denominated in local currency. Decreases in
the value of foreign currencies relative to the U.S. dollar have not resulted
in significant losses from foreign currency translation. However, there can be
no assurance that foreign currency fluctuations in the future would not have
an adverse effect on the Company's business, financial condition and results
of operations.
SEASONALITY AND INFLATION
The results of the Company's infrastructure products and equipment product
group are adversely affected by winter weather in certain of the geographic
markets in which it operates. The effects of seasonality have been mitigated
by the substantial growth in net sales from period to period due to the
Company's acquisitions.
The impact of inflation on the Company's operations has not been significant
to date. However, there can be no assurance that a high rate of inflation in
the future would not have an adverse effect on the Company's operating
results.
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BUSINESS
GENERAL
The Company is a leading worldwide designer, manufacturer and distributor of
products to niche markets within the rapidly growing telecommunications and
data communications industries. JTP manufactures and markets its products to
over 7,500 customers throughout the world from facilities based in the United
States, China, the Czech Republic, France, India, Israel, Mexico, Russia and
the United Kingdom. The Company's product offerings serve numerous end-use
telecommunications markets and cover a broad range of applications, including,
among others: (i) infrastructure equipment, such as fiber optic cable conduit,
power conditioning systems and CATV components and transmitters used by
wireline telecommunications, CATV, cellular telephone and PCS service
providers; (ii) custom cable assemblies and specialty wire and cable used by
internetworking suppliers and OEMs in the data processing and
telecommunications industries; and (iii) electronic connectors and components
used in mobile communications, instrumentation, LANs and computer equipment.
As a result, the Company believes it is well positioned to benefit from the
significant growth taking place in global telecommunications markets. JTP
believes it has distinguished itself through its international presence, high-
quality products and outstanding customer service and field support, resulting
in strong customer relationships with major industry participants and leading
market share positions.
Due to strong industry fundamentals and JTP's solid competitive position,
the Company has achieved significant and consistent growth. Pro forma combined
net sales grew from $140.8 million in 1994 to $213.2 million in 1996,
representing a compound annual growth rate of 23.0%. Pro forma combined EBITDA
has also grown rapidly, increasing from $29.5 million in 1994 to $40.4 million
in 1996. The Company expects its continued growth to result from the
significant expansion in global telecommunications markets driven by: (i)
continuing deregulation, which is allowing numerous new service providers to
enter the marketplace and is increasing the competitive pressure on existing
participants to upgrade and expand their networks; and (ii) increasing
consumer demand for advanced telecommunications services enabled by rapid
technological advancement. To capitalize on these trends, the Company has
invested substantial capital in recent years to develop its overseas
manufacturing and marketing presence. Most recently, the Company has
established new manufacturing facilities in Mexico and China that became
operational in late 1996 and in India which is expected to become operational
in September 1997. In addition, JTP anticipates establishing a local sales
and/or manufacturing presence in Spain and Malaysia by late 1997, and in
Brazil by early 1998. The Company anticipates generating significant
additional revenues from such international facilities.
COMPETITIVE STRENGTHS
The Company believes several characteristics differentiate it from many of
its competitors, including:
Established Global Presence. The Company's products are sold in over 50
countries through a highly trained direct sales force and a global network of
approximately 2,800 distributors and independent manufacturing
representatives. Management believes a key competitive reason for its success
in international markets has been its commitment to establishing joint
ventures and local manufacturing facilities. JTP currently operates 28
manufacturing and distribution facilities in nine countries around the world.
The marketing and cost advantages of such investments in serving fast-growing
markets are substantial and include: (i) close customer contact; (ii) ability
to provide close field support and customer service; (iii) quick delivery
time; (iv) low labor, raw materials and transportation costs; and (v)
avoidance of significant government tariffs and restrictions on foreign
imports. The success of this strategy is evidenced by the Company's recent
selection by the Chinese government as the first approved cable conduit
supplier for China Telecom, positioning the Company to be a major participant
in the planned construction of more than 50 million phone lines in China
during the next five years. Furthermore, by entering markets ahead of major
competitors, the Company is able to achieve "first mover" advantages and
entrench itself in markets with capacity and customer relationships. In
addition, JTP believes that its international experience has allowed it to
develop a core competency in establishing effective operations overseas.
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Strong Customer Relationships. By emphasizing product quality, customer
service and field support, the Company has developed strong, long-term
relationships with many of its customers. Customers have turned to the Company
for its ability to reliably deliver small customized product orders in short
lead times as well as to provide large quantities of product under long-term
contracts. The Company's ability to work closely with many of its customers in
the design phase of end-use products further entrenches the Company with its
customer base. Examples of these relationships include the selection of JTP to
be Sprint's primary supplier of PCS power conditioning equipment over the next
four years and to be one of Cisco's four primary, long-term suppliers of cable
assemblies. The Company is also the primary supplier of cable conduit to the
RBOCs. Such strong ties to major industry participants present an opportunity
for the Company to follow such customers worldwide as they enter growing
international markets. Moreover, these relationships have contributed to the
Company's leadership positions in its niche markets. For example, the Company
estimates that it holds a 50% share of the RBOC cable conduit market and a 30%
share of the market for PCS power conditioning equipment.
Diverse and Stable Customer Base. As a result of its extensive product line
and the wide variety of end-use markets, JTP serves a broad and diverse
customer base. Customers include some of the largest and most sophisticated
suppliers of telecommunications and data communications products in the world,
such as the RBOCs, Applied Materials, Cisco, GTE, Hewlett-Packard, Lucent,
Motorola, Rostelecom, Czech Telecom, Sprint, Sun, TCI, Telewest and Time
Warner. The diversity of products, markets and customers minimizes the
Company's exposure to individual end-use technologies, economic cycles and
geographic markets, and provides a stable cash flow stream.
BUSINESS STRATEGY
The Company's goal is to be a leading single-source supplier offering the
breadth of products, services and geographical coverage necessary to meet the
needs of the worldwide telecommunications and data communications customers in
its niche markets. The Company intends to reach this goal by capitalizing on
its competitive advantages and implementing the following business strategy
through internal initiatives and the continued pursuit of numerous
opportunities for strategic acquisitions that exist within its highly
fragmented markets:
Continue International Expansion. To exploit the significant opportunities
in international markets, the Company will continue to expand its global
manufacturing and marketing presence. JTP is particularly focused on
developing nations that are making large investments in their
telecommunications infrastructures. The Company believes that such countries
offer a high growth potential and favorable competitive dynamics. The Company
has invested more than $35 million in the past several years to develop a
strong local presence in countries such as China, the Czech Republic, India,
Israel, Mexico, Russia and the United Kingdom, positioning itself for
substantial growth in these and surrounding markets. The Company established
its first emerging market greenfield manufacturing facility in the Czech
Republic in November 1993, which in 1996 generated sales of $22.6 million.
More recently, JTP opened manufacturing plants in Mexico and China in August
1996 and December 1996, respectively, and a new manufacturing facility in
India which is expected to become operational in September 1997. In addition,
the Company anticipates establishing a local sales and/or manufacturing
presence in Spain and Malaysia by late 1997, and in Brazil by early 1998.
Develop New Products and Markets. The Company will continue to focus on
designing, developing and marketing products that meet the evolving needs of
customers in the high-growth sectors of its markets to maintain its
differentiation. An example of this strategy is the Company's introduction in
March 1997 of transmitters and equipment for MMDS, a wireless television
signal technology that has emerged in recent years as a more economically
feasible alternative to traditional CATV. JTP believes that this technology is
particularly applicable in emerging international markets, such as Brazil,
China, India and Russia, where construction of a traditional cable network in
smaller cities and rural areas can be cost-prohibitive. In only four months
since the commercial introduction of this product in Russia, the Company has
received 10 contracts for more than $3.5 million. The Company has also
developed a widely used line of specialized two-way CATV amplifiers and a line
of microminiature coaxial connectors that meet the miniaturization
requirements of the wireless and cellular
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communications industry. In addition to internal growth, the Company believes
that significant opportunities exist in acquisitions that enable it to broaden
its product offerings, allowing it to be more of a full-service "solutions"
provider and leverage its existing customer relationships.
Develop and Exploit Synergies Among Subsidiaries. The Company will continue
to actively pursue sales, marketing and manufacturing synergies among its
subsidiaries. For example, Johnson, a domestic subsidiary of the Company,
recently began selling products through Vitelec, a foreign subsidiary of the
Company, enabling Johnson to access new international markets and allowing
Vitelec to broaden its product offerings. JTP believes that numerous similar
opportunities exist to add breadth and depth to its product offerings and
lower costs through cross-sourcing of materials and components between
subsidiaries. The Company also intends to exploit cross-selling opportunities
by leveraging the established presence of certain of its products in foreign
markets in order to introduce additional products and increase market
penetration. In addition, the Company believes that significant opportunities
exist to share its combined international experience base among its
subsidiaries to facilitate their expansion into new global markets.
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PRODUCT SEGMENTS
JTP has organized itself into three specific groups: (i) infrastructure
products and equipment; (ii) custom cable assemblies and specialty wire
and cable; and (iii) electronic connectors and components as shown in the
table below.
LOGO
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INFRASTRUCTURE PRODUCTS AND EQUIPMENT
JTP provides products and services for the construction, expansion and
maintenance of the "outside plant" portion of the telecommunications and data
communications infrastructure. Primary customers for these products and
services are local, regional and long distance telecommunication service
providers, international telecommunications service providers, cable
television operators, installers of fiber optic and coaxial cable networks,
wireless service providers and OEMs. Demand from these customers has increased
sharply in recent years due to (i) continuing deregulation, which has allowed
numerous new service providers to enter the marketplace and increased the
competitive pressure on existing participants to upgrade and expand their
networks; and (ii) increasing consumer demand for advanced telecommunications
services driven by rapid technological advancement. The Company's products
serve a number of end-use communication markets, employing a variety of
transmission technologies, including telephone, CATV, satellite, cellular and
PCS. As a result, the Company believes it is well-positioned to benefit from
growth in any one sector as well as reduce its exposure to the slowdowns in
any individual market due to continuing regulatory or technological change.
JTP differentiates itself in this product segment by providing broad lines
of innovative products, often employing proprietary technology, that meet the
specialized needs of its customers. The Company's broad international presence
also allows it to provide superior customer service and local manufacturing
capacity flexible enough to handle both large contracts and small orders. JTP
produces infrastructure products and equipment in three product categories:
(i) cable conduit; (ii) power conditioning systems; and (iii) cable television
transmission and connection equipment.
Cable Conduit
Products. The Company is one of the world's leading suppliers of specialized
telecommunications HDPE conduit systems, used to install and protect outside
plant fiber optic cables, coaxial cables and other telephone, data
transmission and electrical cable systems. These conduit systems protect
network infrastructure cables from environmental or accidental physical damage
as well as facilitate and reduce the cost of cable installation and
maintenance. JTP manufactures a wide variety of cable conduit products,
including special fire-resistant and expandable capacity conduit systems. The
majority of the Company's sales to the fiber optic and coaxial conduit market
are comprised of either patented or proprietary products. The Company's
patented SILICORE technology is a solid co-extruded polymer lubricant lining
that accounted for $61.8 million in sales of cable conduit products in 1996.
The low coefficient of friction characteristics of SILICORE allows fiber optic
and other cables to be easily "pulled" or "blown" through the conduit, thus
saving customers significant time and money during installation, repair and
upgrade procedures.
Markets. Cable conduit used specifically for the installation and protection
of fiber optic cables was first introduced in 1982. AT&T Corporation ("AT&T"),
MCI Communications Corporation ("MCI"), Sprint and other U.S. long distance
telecommunications providers used cable conduit to build their primary long-
haul infrastructure networks in the 1980s and early 1990s. More recently,
applications for cable conduit have broadened to include housing an array of
cable types in the CATV and electric power industries and to deploy fiber
optic cable for medium- and short-haul regional telephone networks.
As a result, the annual worldwide deployment of fiber optic cable is
projected by industry sources to increase from 29.0 million fiber kilometers
in 1996 to 65.7 million fiber kilometers in 2001. Consumption of fiber optic
cable in North America is projected to increase by approximately 11% per year
from the end of 1995 through 2001. The Company believes that 40% to 60% of all
fiber optic cable currently being deployed is installed in cable conduit. The
Company also believes that demand for cable conduit will grow faster than
demand for fiber optic cable because customers typically install two to six
extra cable conduits during initial infrastructure construction to accommodate
future network expansion and upgrading. Internationally, the
telecommunications cable conduit market growth rate is expected to exceed that
in the United States, as demand for cable conduit products benefits from the
rapid deployment and upgrading of the telecommunications infrastructure,
especially in emerging markets. Compound annual growth rates for consumption
of fiber optic
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cable from 1995 to 2001 are expected to be approximately 18% in Western
Europe, 41% in Eastern Europe, 22% in the Pacific Rim, 23% in Latin America
and 31% in other emerging markets. This growth is being driven primarily by
the following factors:
. Local and regional telecommunications companies have been steadily
increasing the deployment of fiber optic cable in the United States as
they expand, upgrade and replace their copper cable infrastructure with
fiber optic cable. New market entrants, such as CAPs and competitive
local exchange carriers ("CLECs"), are building local and long distance
fiber optic cable networks to compete with incumbent carriers. RBOCs are
expanding their network to enter the long distance carrier business,
where long distance carriers are building local telecommunication loops
to provide local telecommunication services. In addition to new
construction, substantial amounts of cable conduit are being deployed for
maintenance and capacity expansion.
. CATV operators are upgrading their infrastructure to increase the
capacity of their networks in order to meet consumer demand for new
entertainment and data services and to respond to increased competition
from new competitors such as the RBOCs. As a result, CATV operators
deployed approximately four million cable kilometers of fiber optic cable
worldwide in 1996, an amount that is projected by industry analysts to
exceed eight million cable kilometers a year by 2001.
. Internationally, significant growth is occurring in many developing
countries that are seeking to modernize their economies. As a result,
these countries are making significant investments in their
telecommunications infrastructures. In countries with more modern
economies, telecommunications providers are expanding and upgrading their
networks in response to new competitive pressures due to privatizations
and increased consumer demand for advanced telecommunications products.
Growth. JTP believes it is the leading provider of cable conduit systems and
it is well positioned to benefit from the overall increases in the demand for
fiber optic cable. The Company also believes that its strategic decision in
1991 to dedicate resources to expand its international manufacturing base and
sales of cable conduit products has provided it with a number of competitive
advantages and will allow it to capitalize on the increasing international
demand. As a result, the Company believes that the cable conduit manufacturing
operations it has established in China, the Czech Republic, Israel, Mexico and
the United Kingdom offer significant potential. The Company also believes it
will benefit from its operation in India when it becomes operational in
September 1997 and from planned joint ventures in Brazil, Malaysia and Spain.
Power Conditioning Systems
Products. The Company is a leading supplier of commercial power conditioning
and protection equipment used to protect sensitive equipment against sudden or
extreme increases in voltage or variable electrical power. Such power
"transients" can result from lightning, ground faults and public utility
switching and can cause extensive damage to critical equipment. JTP generates
the majority of its power conditioning sales from products used to protect
equipment on individual towers and sites in PCS and cellular phone networks.
The Company also provides products such as voltage regulators, grounding
devices, uninterruptible power supplies and isolation transformers for use in
a wide variety of critical communication, medical and industrial applications.
JTP believes that its products are the most technologically advanced on the
market, employing patented applications of silicone avalanche diode
technology. The Company also believes that it has differentiated itself though
its ability to provide full turnkey power protection solutions, excellent
product quality and superior customer service, including 24-hour repair
service.
Markets. Nearly 75% of the Company's power conditioning system sales are to
PCS service providers where up-time at individual network sites is critical.
As a result, the Company estimates that it is currently selling to over half
of the major PCS providers from the first two Federal Trade Commission ("FTC")
auctions of PCS licenses. Customers include Sprint Spectrum, the largest PCS
provider in the United States, Western Wireless and Intercell. In 1995, Sprint
signed a five-year contract with the Company to be its exclusive supplier for
power conditioning equipment. PCS markets are expanding rapidly as service
providers have undertaken major efforts
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to construct wireless networks throughout the United States following the FTC
auctions of licenses. Industry sources predict that there will be
approximately 100,000 PCS cell sites in the United States by the year 2000,
serving more than 35 million PCS subscribers (compared to about 60 million
users of cellular analog).
Growth. JTP believes that demand for its products in this segment will
continue to be driven primarily by the continued growth in PCS sites. Cellular
sites are expected to provide another developing market as cellular service
companies increasingly realize the importance of power conditioning equipment.
The worldwide cellular/PCS infrastructure equipment market is projected by
industry analysts to increase from $25.2 billion in 1996 to $49.7 billion in
2000. The Company also expects significant growth from international markets,
where PCS is still undeveloped and the Company can leverage the contacts,
experience and presence of its other subsidiaries. In addition, the Company
believes there are numerous applications of its products that could develop
into larger markets. The Company is currently pursuing opportunities such as
medical devices, "911" emergency services and airport air traffic control
equipment where up-time is critical. The Company intends to continue to
develop and introduce new products to further develop such niche applications.
Cable Television Transmission and Connection Equipment
Products. JTP is an industry leader in high-quality CATV splitters,
amplifiers and patented electronic security components. Used to insure signal
integrity, these devices are attached to the cable "drop line" at the home or
business and connect the user's television or other electronic equipment to
the cable or satellite system. The Company believes its Viewsonics brandname
is one of the strongest in the industry with a reputation for innovation,
quality design and performance that separates it from its competitors and
allows it to focus on product niches that offer higher margins. The Company
has also recently developed products for use in the "head end" transmitters
for MMDS, a wireless alternative to cable television, which the Company
believes has significant potential overseas.
Markets. The Company is a primary supplier to many of the major CATV service
providers such as TCI, Time Warner, Cox Communications, ComCast and
Continental Cablevision. JTP also sells to distributors who supply smaller
CATV service providers. Industry upgrades of the CATV infrastructure to two-
way addressable and high-channel capacity networks are fueling demand for the
Company's products. The Company intends to focus its marketing of MMDS
products in international markets where MMDS presents an economically viable
alternative to building expensive CATV infrastructures.
Growth. The Company expects that the ongoing, wide-scale upgrade by domestic
CATV operators to two-way addressable and high channel capacity networks will
require new versions of its products and generate significant new demand. The
Company intends to meet this demand by continuing to introduce new innovative
products such as two-way amplifiers and diplex filters to block out return
signals. The Company also expects significant growth internationally from its
new MMDS products. JTP has received $3.5 million in orders for its MMDS
systems from 10 municipalities in Russia, only four months after the
commercial introduction of the product. The Company is also developing a
receiver for its MMDS systems for use in consumer households, another market
that it believes holds significant potential.
CUSTOM CABLE ASSEMBLIES AND SPECIALTY WIRE AND CABLE
The Company designs, engineers and manufactures custom cable assemblies,
primarily in data communications and telecommunications industries. The
Company is also a broad line provider and value added reseller of wire and
cable for LANs and custom cable assemblies. The Company differentiates itself
in these markets by providing high-quality products and outstanding service
customized to meet the specific needs of its customers. JTP often works
closely with its customers in the product design phase. As a result, the
Company has built strong, long-term customer relationships, such as its
relationship with Cisco, which chose the Company to be one of four primary
suppliers of cable assemblies.
Products. Cable assemblies include standard and customized battery power
packs, cable and wire assemblies and wire harnesses. These products are
assembled from bulk, coaxial, fiber optic or other cables and discrete
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wire and various electronic connectors which are attached to one or more cable
ends. Used to connect electronic devices to each other and to related
equipment or power sources, the Company's products are found in a broad range
of electronic equipment, including but not limited to, computers and related
peripherals, network bridges and routers, automatic teller machines, telephone
switching equipment and devices, industrial electrical controls and medical
electronic equipment. The Company offers customers sophisticated in-house
product design and technical support capabilities, including support teams
that work closely with the customer through all stages of product planning and
production. The Company believes that this close coordination with its
customers, its adherence to strict quality control standards and its
investment in production facilities and equipment have helped attract and
retain its broad customer base.
JTP also distributes more than 2,600 different types of wire and cable,
including cable for electrical, electronic, telecommunications and data
communications applications. The principal focus of the Company's wire and
cable distribution business is to provide its customers with outstanding
service and rapid and reliable deliveries of specialty wiring and cable
products as well as a variety of value-added services. The Company utilizes a
computerized inventory control system to assist in the marketing of its wire
and cable products and coordinate purchases from suppliers with sales to
customers. As a result, the Company processes and ships more than 80% of its
orders for wire and cable on a 24-hour basis allowing it to serve the needs of
those customers that operate under a just-in-time method of inventory
procurement.
Markets. For its custom cable assembly products, the Company has developed
long-term relationships with a select group of OEMs in the data processing and
telecommunications industries including 3Com Corporation, Applied Materials,
AST Research, Inc., Cisco, Eastman Kodak Company and MCI. Industry sources
estimate that the worldwide cable assembly industry was $9.9 billion in 1995.
This market is expected to reach approximately $11.0 billion in net sales
volume in 1997 and to continue to grow at a compound annual growth rate of 10%
until 1999. These growth rates are driven primarily by growth in end-use
products and a growing trend among high-tech companies to outsource their
cable assembly needs to contract manufacturers. JTP believes the trend towards
outsourcing is fueled by OEMs seeking to: (i) consolidate their supplier base;
(ii) reduce inventories and improve inventory management; (iii) reduce
component costs; (iv) increase flexibility; and (v) improve component product
quality and technical support.
The Company sells its wire and cable products to end-users, installers
and/or OEMs of data networking equipment, including building contractors,
industrial manufacturers and educational institutions, among others. Sales
have been driven by the overall growth in the data communications network
industry (including LAN/WAN equipment). This industry has been experiencing
tremendous growth over the last several years due to advances in technology
and the proliferation of new applications, such as the Internet and intranets.
According to industry sources, the entire data communications networking
equipment industry grew from $14.4 billion in 1990 to $25 billion in 1995, and
is expected to reach almost $50 billion by 1998.
Growth. The Company expects increased demand for its products and services
to come from the continued growth in the overall data communications markets.
In addition, the Company believes that geographical expansion, internally or
through acquisition, presents an opportunity for growth. The Company believes
that its close customer relationships and reputation for quality in its cable
assembly business provide an opportunity to follow its customers as they
expand into international markets. Substantially all of the Company's wire and
cable sales in 1996 were in the Midwest region of the United States. As a
result, JTP will attempt to grow its wire and cable business through expansion
into new U.S. geographic markets, such as its opening of a new wire and cable
facility in Nashville, Tennessee in late 1996.
ELECTRONIC CONNECTORS AND COMPONENTS
The Company designs, develops, manufactures and distributes worldwide a
broad range of electronic connectors for use in growing niche markets in the
telecommunications and data communications industries. The Company has been
successful in targeting a number of markets that typically are not well served
by larger companies in the industry. The Company emphasizes its ability to
provide a high degree of service and expedited
42
<PAGE>
delivery. For example, AIM, Cambridge and Vitelec have order processing
systems that enable each to fill approximately 80% of standard electronic
connectors, components, or assembly orders within 24 hours of receipt of an
order.
Products. Electronic connectors are devices that allow an electric signal to
pass from one device to another. They are used to connect wires, cables,
printed circuit boards, flat cable and other electronic components to each
other and to related equipment. Connectors are found in virtually every
electronic product including computers, printers, modems, VCRs, radios,
medical instruments, cellular telephones and automobiles. The Company offers a
wide range of connectors, including RF and coaxial connectors, plugs, adaptors
and electronic hardware, as well as electronic network and security
components.
Markets. JTP sells its electronic connectors and components to more than
2,400 distributors in the United States and directly to OEMs such as
Cabletron, Digital Equipment Corporation, Hewlett-Packard and International
Business Machines Corporation ("IBM"). The Company has also built a network of
more than 225 distributors internationally to date. Industry sources estimate
that overall electronic connector industry sales were approximately $22.8
billion in 1996 and are projected to be $30.2 billion in 2000. Demand for
connector products has experienced substantial growth in recent years and has
achieved a compounded annual growth rate of 10% during the period from 1993 to
1996. The growth is expected to continue at an average growth rate of 6% to 9%
annually through the year 2000 due to the proliferation of electronic systems
and the development of new electronic products and applications including: (i)
the development of more complex and sophisticated electronic products in
established electronic markets such as wireless communications and personal
computers; (ii) the proliferation of computer usage through networking, server
systems and the advent of multimedia systems; (iii) the increase in global
demand, particularly in emerging markets such as China, Latin America and
India, for telecommunications infrastructure such as fixed line and mobile
telecommunications services; and (iv) the increasing utilization of
electronics systems in products in which such use has been historically absent
or limited, such as automobiles, home appliances and medical equipment. The
worldwide connector industry is highly fragmented with over 1,500 worldwide
manufacturers.
Growth. In addition to the growth it expects from the overall connector
market, the Company expects to increase sales of electronic connectors through
new product development and the development of new distribution channels
through catalog houses. For example, the Company has recently developed and
launched a line of microminiature coaxial connectors to meet the demands for
miniaturization requirements and stringent tolerances of the wireless and
cellular communications markets. The Company also believes there are
tremendous functional synergies between its electronic connector and component
subsidiaries and is already capitalizing on them in the areas of sales,
warehousing and sourcing.
MARKETING AND SUPPORT SERVICES
The Company places a high priority on identifying and responding to its
customers' requirements on a timely basis. In order to ensure that the Company
is best positioned to respond to these requirements, it has developed a sales
and marketing strategy that utilizes a highly trained direct sales force and
approximately 2,800 distributors and independent manufacturing
representatives.
The Company emphasizes close coordination with its customers in the design
and development stages of its customers' products. JTP believes this strategy
helps create demand for its products, facilitates long-term customer
relationships and allows the Company to introduce new products that meet the
specialized needs of its customers. For example, in the cable conduit
business, the Company provides network planning and development assistance at
the inception of a project, engineering and field support during the
installation of its cable conduit products and consulting support after
completion of a project in the event of repairs or upgrades. In the past
several years, the Company has also increased the scope of its marketing
initiatives, both domestically and internationally, to offer training,
sophisticated field testing support and education to end-users as to the
benefits of using its products.
43
<PAGE>
The Company's sales representatives undergo continuous training in order to
enhance both their technical expertise and sales techniques. Because sales
personnel specialize within related product groupings, they are able to
develop a high degree of technical expertise. Sales personnel are compensated
primarily on a commission basis. The Company also uses direct mailings of
brochures and catalogs as well as advertising in trade journals in the
marketing of its products. The Company supports its international operations
by providing product brochures and other information in local languages and
dialects.
The Company also emphasizes superior customer service as part of its overall
marketing strategy. With respect to the Company's electronic connectors and
components, and wire and cable products, JTP services a segment of the market
for these products that demands expedited delivery and outstanding customer
service. The Company is able to ship most of its electronic connectors and
components, and wire and cable products within 24 hours of an order being
placed. The Company has combined the customer support and sales services
functions for certain of these products to reduce the time and effort a
customer must expend to place an order.
MANUFACTURING AND INTERNATIONAL OPERATIONS
The Company currently operates 28 manufacturing and distribution facilities
in nine countries around the world. The Company's products are manufactured
and assembled at Company owned or leased facilities in the United States,
China, the Czech Republic, Mexico, Russia and the United Kingdom, through a
manufacturing joint venture in Israel, and at the facilities of contract
manufacturers in various countries including Korea, Japan, Singapore and
Taiwan. In addition, JTP established a joint venture in India in July 1996
that is expected to begin manufacturing operations in September 1997. The
Company holds a 33% interest in the Israeli joint venture and a majority
interest in the Indian joint venture. The Company derived approximately $47.0
million or 22% of its total 1996 pro forma net sales from customers outside of
the United States.
The Company believes the marketing and cost advantages of a local
manufacturing presence include (i) close customer contact; (ii) ability to
provide close field service and customer support; (iii) quick delivery time;
(iv) low labor, raw materials and transportation costs; and (v) avoidance of
significant government tariffs and restrictions on foreign imports.
Furthermore, by entering markets ahead of major competitors, the Company is
able to achieve "first mover" advantages and entrench itself in markets with
capacity and customer relationships. In addition, the Company believes that
its experience in setting up such companies to date has allowed it to develop
a core competency in evaluating new markets, creating a market presence and
establishing effective operations in foreign countries. JTP has a team of
personnel dedicated to the identification, evaluation and implementation of
operations in new international markets.
The Company employs advanced manufacturing processes in order to manufacture
quality products for customers throughout the world. The Company is committed
to the highest quality standards for its products, a standard maintained in
part by continuous improvements to its production processes and upgrades to
its manufacturing equipment. Currently, over two-thirds of the Company's
facilities are certified by the International Standards Organization ("ISO")
according to its 9000 series of quality standards or are in the process of
obtaining certification.
The Company is subject to risks generally associated with international
operations, including price and exchange controls, limitations on foreign
ownership and other restrictive actions. In addition, fluctuations in currency
exchange rates may affect JTP's financial condition and results of operations.
See "Risk Factors--Risks Associated with International Operations."
COMPETITION
The Company faces substantial competition from a large number of
distributors, suppliers and manufacturers, some of which are larger and have
greater financial resources, broader name recognition and lower costs than the
Company.
44
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The Company's manufacturing operations encounter competition from both
domestically manufactured products and products manufactured outside the
United States. Except for the SILICORE polymer pipe products, certain of its
CATV components and its fiber optic connector technology, the Company's
products are generally not protected by virtue of any proprietary rights such
as patents. The Company competes by providing its customers with reliable,
rapid delivery of products that are priced at competitive levels and meet
strict quality control standards.
The cable conduit market is highly competitive. In the United States, JTP
faces competition from a wide range of companies including national,
international and regional suppliers of cable conduit. In addition to other
independent manufacturers of cable conduit, the Company's competitors,
especially outside of the United States, include manufacturers that produce
pipe and tubing for other uses, such as gas and water transportation.
Competition within the industry is based primarily on quality, price,
production capacity, field support, technical capabilities, service and
reputation.
The Company's custom cable assemblies encounter competition from a broad
range of companies, several of which are much larger and have greater
financial resources than the Company. In addition to other independent
manufacturers of cable assemblies, certain of the Company's competitors
include connector manufacturers which compete primarily on the basis of
certain proprietary connector technology, as well as offshore manufacturers
which compete primarily on the basis of price. Competition within the industry
is based on quality, production capacity, breadth of product line, engineering
support capability, price, local support capability, systems support and
financial strength.
The electronic connector industry is highly fragmented, with more than 1,500
connector manufacturers competing worldwide. As a result, the Company
generally competes with different suppliers in each of the various categories
of the overall market in which the Company operates as well as with certain
large national suppliers. The Company competes within this market primarily on
the basis of quality, reliability, reputation, customer service, delivery time
and price. See "Risk Factors--Competition."
RAW MATERIALS; SUPPLIERS
The Company purchases a wide variety of raw materials for manufacturing its
products, including plastic resins such as HDPE used in manufacturing cable
conduit and in molding connector bodies and inserts, brass used in
manufacturing RF connectors, copper alloys used for contacts and precious
metals, such as gold and palladium, used in plating. All raw materials are
generally readily available throughout the world and most are purchased on the
spot market from a variety of suppliers. JTP is not dependent upon any one
source for any of the raw materials used in manufacturing its products. The
prices at which the Company purchases most of its raw materials are based upon
market prices at the time of purchase. The Company does not enter into
contractual agreements with respect to most of the raw materials it uses.
However, the Company does have a contract with its brass supplier that allows
the Company to return to the supplier, as scrap, up to 50% of the brass it
purchases. As a result, JTP only pays for the brass it actually uses. Many of
the raw materials used by the Company have historically been subject to price
fluctuations. In most cases, the Company is able to pass on to its customers
significant price fluctuations in the market prices of the raw materials used
in its products, although product price increases typically lag behind the
actual increase in raw material prices.
The Company's SILICORE technology includes a patented, solid co-extruded
polymer lubricant lining that uses a silicone-based lubricant which is
marketed and sold under the SILICORE trademark. The Company produces all of
the silicone-based lubricant used in the manufacture of its cable conduit
products.
The Company purchases the electronic connectors, components and materials
that it does not manufacture itself from a large number of suppliers. JTP
believes that the electronic connectors and components and other materials it
requires could be purchased from several domestic and international sources,
so that the Company should be able to obtain replacement sources of supply in
the event of the loss of any current supplier. Although customers often
require that materials produced by a particular supplier be used in
manufacturing their
45
<PAGE>
customized products, in the event of the loss of any such supplier, the
Company believes that customers would be likely to qualify alternative
suppliers or, if necessary, redesign their products to accommodate materials
from replacement suppliers. However, no assurance can be given that the loss
of a key supplier would not have a material adverse effect on the Company. See
"Risk Factors--Price Fluctuations of Raw Materials."
INTELLECTUAL PROPERTY
The Company relies on a combination of patent, copyright, trademark and
trade secret laws and contractual agreements to protect its proprietary
technology and know how. The Company owns and uses trademarks and brandnames
to identify itself as a source of certain goods and services, including the
DURA-LINE and SILICORE trademarks, both of which are registered in the United
States and various foreign countries, and the VIEWSONICS brandname, in which
the Company has common law rights. The Company's SILICORE technology includes
a patented solid co-extruded polymer lubricant lining that uses a silicone-
based lubricant which is marketed and sold under the SILICORE trademark. There
can be no assurance that the Company will be granted additional patents or
that the Company's patents either will be upheld as valid if ever challenged
or will prevent the development of competitive products. The Company's U.S.
patents expire between 2004 and 2010 and the U.S. patent with respect to the
SILICORE lubricant lining expires in 2007. The Company has not sought foreign
patents for most of its technologies, including technologies which have been
patented in the United States, such as the SILICORE lubricant lining, which
may adversely affect the Company's ability to protect its technologies and
products in foreign countries. The Company protects its confidential,
proprietary information as trade secrets.
Except for the SILICORE polymer pipe products, certain of JTP's CATV
components and its fiber optic connector technology, the Company's products
are generally not protected by virtue of any proprietary rights such as
patents. There can be no assurance that the steps taken by JTP to protect its
proprietary rights will be adequate to prevent misappropriation of its
technology and know-how or that the Company's competitors will not
independently develop technologies that are substantially equivalent to or
superior to the Company's technology. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent
as do the laws of the United States. In the Company's opinion, the loss of any
intellectual property asset, other than the DURA-LINE or SILICORE trademarks,
or the patent or manufacturing trade secrets covering the solid co-extruded
polymer lubricant lining used in connection with the SILICORE technology,
would not have a material adverse effect on the conduct of JTP's business.
The Company is also subject to the risk of adverse claims and litigation
alleging infringement of the proprietary rights of others. From time to time,
the Company has received notice of infringement claims from other parties.
Although the Company does not believe it infringes the valid proprietary
rights of others, there can be no assurance against future infringement claims
by third parties with respect to the Company's current or future products. The
resolution of any such infringement claims may require the Company to enter
into license arrangements or result in protracted and costly litigation,
regardless of the merits of such claims.
ENVIRONMENTAL
The Company is subject to numerous U.S. and foreign federal, state,
provincial, local and foreign laws and regulations relating to the storage,
handling, emission and discharge of materials into the environment, including
the U.S. Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), the Clean Water Act, the Clean Air Act, the Emergency Planning and
Community Right-To-Know Act and the Resource Conservation and Recovery Act.
Under CERCLA and analogous state laws a current or previous owner or operator
of real property may be liable for the costs of removal or remediaton of
hazardous or toxic substances on, under or in such property. Such laws
frequently impose cleanup liability regardless of whether the owner or
operator knew of or was responsible for the presence of such hazardous or
toxic substances and regardless of whether the release or disposal of such
substances was legal at the time it occurred. Regulations of particular
46
<PAGE>
significance to the Company's ongoing operations include those pertaining to
handling and disposal of solid and hazardous waste, discharge of process
wastewater and stormwater and release of hazardous chemicals. The Company
believes it is in substantial compliance with such laws and regulations.
The Company generally conducts a Phase I environmental survey on each
acquisition candidate prior to purchasing the company to assess the potential
for the presence of hazardous or toxic substances that may lead to cleanup
liability with respect to such properties. JTP does not currently anticipate
any material adverse effect on its results of operations, financial condition
or competitive position as a result of compliance with federal, state,
provincial, local or foreign environmental laws or regulations. However, some
risk of environmental liability and other costs is inherent in the nature of
the Company's business, and there can be no assurance that material
environmental costs will not arise. Moreover, it is possible that future
developments such as the obligation to investigate or clean up hazardous or
toxic substances at the Company's property for which indemnification is not
available, could lead to material costs of environmental compliance and
cleanup by the Company.
PROPERTIES
The Company's headquarters is located in an approximately 12,750 square foot
office space in Deerfield, Illinois that is provided by Jordan Industries
pursuant to the Transition Agreement (as defined herein). The Transition
Agreement expires in December 2007. The Company anticipates relocating its
headquarters to a new location in the near future. See "Certain Transactions--
Services Agreements."
The principal properties of JTP, the location, user/subsidiary, primary use,
square feet and ownership status thereof, are set forth in the table below:
<TABLE>
<CAPTION>
USER/ SQUARE OWNED/
UNITED STATES LOCATIONS SUBSIDIARY PRIMARY USE FEET LEASED
- ----------------------- ---------- ----------- ------ ------
<S> <C> <C> <C> <C>
Anaheim, CA Bond Manufacturing/ 16,000 Leased
Administration
Fremont, CA Bond Manufacturing/ 17,000 Leased
Administration
San Carlos, CA LoDan Manufacturing/ 22,500 Leased
Administration
San Carlos, CA LoDan Manufacturing 13,500 Leased
Windsor, CT Cambridge Manufacturing 9,000 Leased
Boca Raton, FL Viewsonics Administration/ 14,500 Leased
Distribution/Research
and Development
Sunrise, FL(1) AIM Manufacturing/ 28,000 Leased
Administration/
Distribution
Middlesboro, KY Dura-Line Manufacturing/ 80,000 Owned
Administration
Troy, MI Diversified Manufacturing/ 45,000 Leased
Administration/
Distribution
Waseca, MN Johnson Manufacturing/ 70,000 Sub-leased
Administration
Sparks, NV Dura-Line Manufacturing 35,000 Owned
Knoxville, TN Dura-Line Administration 10,000 Leased
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
UNITED STATES LOCATIONS USER/ SQUARE OWNED/
(CONTINUED) SUBSIDIARY PRIMARY USE FEET LEASED
- ----------------------- ---------- ----------- ------ ------
<S> <C> <C> <C> <C>
Nashville, TN Diversified Distribution/ 7,100 Leased
Sales Office
Austin, TX Bond Manufacturing/ 12,000 Leased
Administration
Liberty Lake, WA(2) Northern Manufacturing/ 22,600 Leased
Administration
<CAPTION>
INTERNATIONAL LOCATIONS
- -----------------------
<S> <C> <C> <C> <C>
Shanghai, China Dura-Line Manufacturing/ 50,000 Owned
Administration
Shanghai, China Dura-Line Sales Office/ 1,000 Leased
Administration
Shanghai, China Viewsonics Manufacturing/ 25,000 Leased
Administration
Zlin, Czech Republic Dura-Line Manufacturing/ 40,000 Owned
Administration
Paris, France Vitelec Sales Office 1,000 Leased
Goa, India Dura-Line Manufacturing/ 48,000 Owned
Administration
New Delhi, India Dura-Line Administration/ 2,000 Leased
Sales Office
Tel Aviv, Israel(3) Dura-Line Manufacturing/ 10,000 Leased
Administration
Mexico City, Mexico Dura-Line Sales Office/ 2,000 Leased
Administration
Queretaro, Mexico Dura-Line Manufacturing/ 43,000 Leased
Administration
St. Petersburg, Russia Viewsonics Manufacturing/ 10,000 Leased
Administration
Bordon, United Kingdom Vitelec Distribution/ 16,500 Owned
Administration/
Assembly
Grimsby, United Kingdom Dura-Line Manufacturing/ 35,000 Owned
Administration
</TABLE>
- --------
(1) AIM's Sunrise, Florida facility is leased from the former vice president
of AIM. The Company believes that the terms of this lease are comparable
to those which would have been obtained by the Company had this lease been
entered into with an unaffiliated third party.
(2) Northern's Liberty Lake, Washington facility is leased from a general
partnership consisting of the former owners. The Company believes that the
terms of this lease are comparable to those which would have been obtained
by the Company had this lease been entered into with an unaffiliated third
party.
(3) This facility is leased by the joint venture in which the Company
participates.
The Company also has sales representatives in field offices in Florida,
Illinois, Ohio, Oregon, Virginia and internationally in Brazil, Bulgaria,
Germany, Malaysia, Romania, Russia and Slovakia.
The Company believes that its existing leased facilities are adequate for
the operations of the Company and its subsidiaries. The Company does not
believe that any single leased facility is material to its operations and
that, if necessary, it could readily obtain a replacement facility.
48
<PAGE>
EMPLOYEES
As of June 30, 1997, JTP (including LoDan) employed an aggregate of
approximately 1,540 employees, including approximately 420 full-time salaried
employees and approximately 1,120 full and part-time hourly employees.
Approximately 80 of the Company's employees are covered by a collective
bargaining agreement which expires in 2000. The Company believes that its
relations with its employees are good.
LITIGATION
The Company is not a party to any pending legal proceeding the resolution of
which, the management of the Company believes, would have a material adverse
effect on JTP's financial condition or results of operations, nor to any other
pending legal proceedings other than ordinary, routine litigation incidental
to its business.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth the names and ages of the Company's directors and
executive officers and the positions they hold as of August 1, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ---- --- ---------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Thomas H. Quinn(2).................. 50 Chairman
Dominic J. Pileggi(2)............... 45 President, Chief Executive Officer and
Director
Michael R. Elia..................... 39 Vice President and Chief Financial
Officer
William C. Ballard(1)............... 56 Director
Jonathan F. Boucher................. 40 Vice President and Director
John W. Jordan, II(2)............... 49 Director
Michael A. Wadsworth(1)............. 54 Director
David W. Zalaznick(1)(2)(3)......... 43 Director
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Executive Committee.
(3) Member of Banking, Finance and Investment Committee.
Set forth below is a brief description of the business experience of each
director and executive officer of the Company.
MR. PILEGGI has served as the Company's President, Chief Executive Officer
and a Director since July 1997. From September 1996 to June 1997, Mr. Pileggi
served as president of the telecommunications group of Jordan Industries. From
1995 to 1996, Mr. Pileggi served as Chief Executive Officer of Casco Inc., an
independent custom molder, and from 1979 to 1995 held several senior
management positions, including divisional president of the largest division
and corporate officer of Thomas and Betts Corporation, a global manufacturer
of electrical and electronic components.
MR. ELIA has served as the Company's Vice President and Chief Financial
Officer since July 1997. From February 1997 to June 1997, Mr. Elia served as
chief financial officer of the telecommunications group of Jordan Industries.
From 1994 to 1996, Mr. Elia served as Corporate Director of Strategic Planning
and Division Vice President and Controller for Fieldcrest Cannon, Inc., a
global manufacturer of textile products. From 1983 to 1994, Mr. Elia held
several financial management positions with Insilco Corporation, a diversified
manufacturer of automotive and electronic products, including Vice President
and Chief Financial Officer of Insilco Technologies Group. Prior to joining
Insilco, Mr. Elia was with Ernst & Young LLP.
MR. BALLARD has served as a Director of the Company since July 1997. Mr.
Ballard has been of counsel to the law firm of Greenbaum, Doll & McDonald in
Louisville, Kentucky since May 1992. From 1970 to April 1992, Mr. Ballard held
various positions with Humana, Inc., an investor-owned hospital company,
including most recently as its Executive Vice President and as a member of its
Board of Directors. Mr. Ballard is a director of American Safety Razor
Company, LG&E Energy Corp., Mid-America Bancorp, Vencor, Inc. and United
Healthcare Corp.
MR. BOUCHER has served as a Vice President and a Director of JTP since July
1997. Since 1983, Mr. Boucher has been a partner of The Jordan Company, a
private merchant banking firm. Mr. Boucher is also a director of Jordan
Industries and American Safety Razor Company as well as other privately held
companies. In January 1997, Welcome Home, Inc., a company of which Mr. Boucher
was a director until December 1996, filed a voluntary petition for bankruptcy.
MR. JORDAN has served as a Director of the Company since July 1997. Mr.
Jordan is a managing partner of The Jordan Company, a private merchant banking
firm which he founded in 1982. Mr. Jordan is also a director
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<PAGE>
of Jordan Industries, Welcome Home, Inc., American Safety Razor Company,
AmeriKing, Inc., Carmike Cinemas, Inc. and Apparel Ventures, Inc. as well as
other privately held companies. In January 1997, Welcome Home, Inc. filed a
voluntary petition for bankruptcy.
MR. QUINN has served as a Director of the Company since July 1997. Since
1988, Mr. Quinn has been President, Chief Operating Officer and a director of
Jordan Industries. From November 1985 to December 1987, Mr. Quinn was Group
Vice President and a corporate officer of Baxter International. From September
1970 to November 1985, Mr. Quinn was employed by American Hospital Supply
Corporation, where he was a Group Vice President and a corporate officer when
it was acquired by Baxter International. Mr. Quinn is also the Chairman of the
Board and Chief Executive Officer of American Safety Razor Company and
AmeriKing, Inc. as well as a director of Welcome Home, Inc. and other privately
held companies. In January 1997, Welcome Home, Inc. filed a voluntary petition
for bankruptcy.
MR. WADSWORTH has served as a Director of the Company since July 1997. Mr.
Wadsworth has served as Director of Athletics of the University of Notre Dame
since 1995 and as a member of the International Advisory Counsel to the
University of Notre Dame since 1994. From August 1989 to March 1995 Mr.
Wadsworth served as the Canadian Ambassador to Ireland. From 1984 to August
1989, Mr. Wadsworth served as Senior Vice President of U.S. operations of Crown
Life Insurance Company and a senior executive officer of its parent, Crown,
Inc.
MR. ZALAZNICK has served as a Director of the Company since July 1997. Since
1982, Mr. Zalaznick has been a managing partner of The Jordan Company, a
private merchant banking firm. Mr. Zalaznick is also a director of Jordan
Industries, Carmike Cinemas, Inc., AmeriKing, Inc., American Safety Razor
Company, Marisa Christina, Inc. and Apparel Ventures, Inc. as well as other
privately held companies.
DIRECTOR COMPENSATION.
Directors who are not employees of JTP receive $20,000 per year for serving
as a director of the Company, plus $1,000 for each meeting of the Board of
Directors or any committee thereof attended in person or by telephone. In
addition, the Company reimburses directors for their travel and other expenses
incurred in connection with attending meetings of the Board of Directors.
EXECUTIVE COMPENSATION
The Company was not organized until July 1997, and therefore had no executive
officers during 1996. The Company expects that each of Messrs. Pileggi and Elia
will receive compensation in excess of $100,000 during 1997. The following
table sets forth a summary of certain information regarding compensation paid
or accrued by Jordan Industries during 1996 to each of Messrs. Pileggi and
Quinn (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER
ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS(1) COMPENSATION
- --------------------------- -------- -------- ------------
<S> <C> <C> <C>
Dominic J. Pileggi(2)........................... $100,000 $50,000 $61,000(3)
President and Chief Executive Officer
Thomas H. Quinn(4).............................. 0 0 0
Chairman of the Board
</TABLE>
- --------
(1) The Company provides bonus compensation based on an individual's
achievement of certain specified objectives, including achieving JTP's
stated earnings before interest, taxes, depreciation and amortization.
(2) For services rendered from September 1, 1996 to December 31, 1997.
(3) Mr. Pileggi's other compensation consisted of relocation costs reimbursed
by the Company.
(4) Does not reflect compensation paid to Mr. Quinn by Jordan Industries.
51
<PAGE>
PRINCIPAL STOCKHOLDERS
The table below sets forth as of July 31, 1997, certain information regarding
beneficial ownership of Common Stock held by (i) each director and each of the
Named Executives; (ii) all directors and executive officers of the Company as a
group; and (iii) each person known by the Company to own beneficially more than
5% of the Common Stock. Each individual or entity named has sole investment and
voting power with respect to shares of Common Stock indicated as beneficially
owned by them, except where otherwise noted.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP(1)
---------------------------
NUMBER OF
SHARES PERCENTAGE
------------ ----------
(ROUNDED)
<S> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Thomas H. Quinn.................................... 89,804.6030 9.0
Dominic J. Pileggi................................. 10,722.2222 1.0
Michael R. Elia.................................... 0 *
William C. Ballard................................. 0 *
Jonathan F. Boucher................................ 52,935.1436 5.3
John W. Jordan, II(2)(3)(4)........................ 379,349.1691 38.0
Michael A. Wadsworth............................... 0 *
David W. Zalaznick(3)(5)........................... 183,073.2676 18.3
All directors and executive officers as a group (8
persons).......................................... 715,884.3054 71.6
OTHER PRINCIPAL STOCKHOLDERS:
Leucadia Investors, Inc............................ 95,566.3378 9.6
Jordan Industries, Inc.(6)......................... 0 *
</TABLE>
- --------
*Represents less than 1% of the outstanding shares of Common Stock.
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage owned
by such person, but not deemed outstanding for the purpose of calculating
the percentage owned by each other person listed. As of July 31, 1997, JTP
had 999,500 shares of Common Stock issued and outstanding.
(2) Includes 8.9820 shares held personally and 379,340.1871 shares held by the
John W. Jordan II Revocable Trust. Does not include 2,777.5927 shares held
by Daly Jordan O'Brien, the sister of Mr. Jordan, 2,777.5927 shares held by
Elizabeth O'Brien Jordan, the mother of Mr. Jordan, or 2,777.5927 shares
held by George Cook Jordan, Jr., the brother of Mr. Jordan.
(3) Does not include 898.0451 shares held by The Jordan/Zalaznick Capital
Company ("JZCC") or 31,431.5758 shares held by Mezzanine Capital & Income
Trust 2001 PLC ("MCIT PLC"), a publicly traded U.K. investment trust
advised by an affiliate of The Jordan Company (which is controlled by
Messrs. Jordan and Zalaznick). Mr. Jordan, Mr. Zalaznick and Leucadia, Inc.
are the sole partners of JZCC.
(4) Does not include 29,171.4943 shares held by The Jordan Family Trust, of
which John W. Jordan II, George Cook Jordan, Jr., and G. Robert Fisher are
the Trustees.
(5) Does not include 737.8205 shares held by Bruce Zalaznick, the brother of
Mr. Zalaznick.
(6) Jordan Industries owns all of the issued and outstanding Junior Preferred
Stock. The Junior Preferred Stock entitles Jordan Industries to 95% of the
voting power as of the date of this Prospectus. See "Description of Capital
Stock--Junior Preferred Stock." The principal address of Jordan Industries
is ArborLake Centre, Suite 550, 1751 Lake Cook Road, Deerfield, IL 60015.
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<PAGE>
The following table furnishes information, as of June 30, 1997, as to the
beneficial ownership of Jordan Industries' common stock by (i) each director
and executive officer of the Company, and (ii) all officers and directors of
the Company as a group.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP
-----------------------
NUMBER OF PERCENTAGE
SHARES OWNED(1)
------------ ----------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
John W. Jordan II (2)(3)(4)............................. 41,820.9087 42.5%
David W. Zalaznick (3)(4)(5)............................ 19,965.0000 20.3%
Thomas H. Quinn......................................... 10,000.0000 10.2%
Jonathan F. Boucher..................................... 5,533.8386 5.6%
Dominic J. Pileygi...................................... 0 *
Michael R. Elia......................................... 0 *
William C. Ballard...................................... 0 *
Michael A. Wadsworth.................................... 0 *
All directors and officers as a group (8 persons)(3).... 77l,319.7473 78.5%
</TABLE>
- --------
*Represents less than 1% of the outstanding shares of common stock of Jordan
Industries.
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage owned
by such person, but not deemed outstanding for the purpose of calculating
the percentage owned by each other person listed. As of June 30, 1997,
there were 98,501.0004 shares of common stock of Jordan Industries issued
and outstanding.
(2) Includes 1 share held personally and 41,819.9087 shares held by John W.
Jordan II Revocable Trust. Does not include 309.2933 shares held by Daly
Jordan O'Brien, the sister of Mr. Jordan, 309.2933 shares held by
Elizabeth O'Brien Jordan, the mother of Mr. Jordan, or 309.2933 shares
held by George Cook Jordan, Jr., the brother of Mr. Jordan.
(3) Does not include 100 shares held by The Jordan Zalaznick Capital Company
(JZCC"). Does not include 3,500 shares of Common Stock held by Mezzanine
Capital & Income Trust 2001 PLC ("MCIT"), a publicly traded U.K.
investment trust advised by an Affiliate of The Jordan Company (controlled
by Messrs. Jordan and Zalaznick). Mr. Jordan, Mr. Zalaznick and Leucadia,
Inc. are the sole partners of JZCC. Mr. Jordan and Mr. Zalaznick own and
manage the advisor to MCIT.
(4) Does not include 3,248.3332 shares held by The Jordan Family Trust, of
which John W. Jordan II, George Cook Jordan, Jr. and G. Robert Fisher are
the trustees.
(5) Does not include 82.1697 shares held by Bruce Zalaznick, the brother of
Mr. Zalaznick.
(6) Excludes 2,541.4237 shares that are held by John W. Jordan II Revocable
Trust, but which may be purchased by Mr. Zalaznick, and must be purchased
by Mr. Zalaznick, under certain circumstances, pursuant to an agreement,
dated as of October 27, 1988, between Mr. Jordan and Mr. Zalaznick.
53
<PAGE>
CERTAIN TRANSACTIONS
The Company Formation and Proceeds From the Old Offerings. The Company was
organized in July 1997 to acquire the Telecommunications Subsidiaries and
other targeted companies focused on the manufacture and distribution of
products for use in the rapidly growing telecommunications and data
communications industries.
Prior to the formation of the Company, the Telecommunications Subsidiaries
were subsidiaries of, and therefore financed and managed by, Jordan
Industries. Financings were made by Jordan Industries pursuant to intercompany
advances and notes (the "Intercompany Notes"), which were used largely to
finance the acquisition of the Telecommunications Subsidiaries and their
businesses. At June 30, 1997, the aggregate principal amount of these
Intercompany Notes was $170.0 million. The Intercompany Notes bore interest at
rates ranging from 10% to 14.5% per annum, payable quarterly in arrears. The
Telecommunications Subsidiaries paid Jordan Industries $5.5 million, $6.2
million, $11.1 million and $8.9 million in interest under the Intercompany
Notes for the years ended December 31, 1994, 1995 and 1996, and the six months
ended June 30, 1997, respectively. Concurrent with the consummation of the Old
Offerings, the Intercompany Notes were repaid by the Telecommunication
Subsidiaries. See "The Company--Company Formation" and "Use of Proceeds."
In connection with the initial capitalization of the Company, JTP issued
2,000 shares of Junior Preferred Stock to Jordan Industries for $20.0 million
in cash and 964,500 shares of Common Stock (representing 96.5% of the
outstanding shares of Common Stock) to the Jordan Group and management of the
Company for total cash consideration of $2.0 million, or $2.07 per share. See
"The Company--Company Formation," and "Description of Capital Stock--Common
Stock."
The Company acquired the Telecommunications Subsidiaries pursuant to a
series of transactions resulting in the payment and distribution to Jordan
Industries, including the payment and discharge of the Intercompany Notes, of
approximately $284.0 million and the assumption of $10.0 million of
obligations of the Telecommunications Subsidiaries, including $8.1 million of
indebtedness and an obligation to fund the redemption of $1.9 million of
preferred stock.
Services Agreements. Prior to the consummation of the Old Offerings, the
Telecommunications Subsidiaries, as subsidiaries of Jordan Industries, were
charged by Jordan Industries (i) annual consulting fees, payable quarterly,
equal to 3.0% of the Company's cash flow (which were $1.4 million, $1.4
million, $2.2 million and $1.5 million for the years ended December 31, 1994,
1995 and 1996 and the six months ended June 30, 1997, respectively); (ii)
investment banking and sponsorship fees of up to 2.0% of the purchase price of
acquisitions or sales involving the Company or any of its subsidiaries or
their respective businesses or properties and financial advisory fees of up to
1.0% of any debt, equity or other financing, in each case, arranged with the
assistance of The Jordan Company (which were $0, $0, $2.0 million and $0 for
the years ended December 31, 1994, 1995 and 1996 and the six months ended June
30, 1997, respectively); and (iii) reimbursement for The Jordan Company's out-
of-pocket costs incurred and indemnities in connection with providing such
services. In connection with the acquisition of LoDan, the Company paid to The
Jordan Company an investment banking fee of $0.3 million following the
consummation of the Old Offerings. Concurrent with the consummation of the Old
Offerings, all management, consulting, investment banking, sponsorship,
financial advisory and similar arrangements between the Company on the one
hand and Jordan Industries, TJC Management Corp. (an affiliate of The Jordan
Company) and The Jordan Company on the other were terminated. In their place
the Company entered into five new types of agreements and arrangements.
First, the Company and each of its subsidiaries (other than certain of the
Bond and Dura-Line subsidiaries) entered into a new advisory agreement (the
"New Subsidiary Advisory Agreement") with Jordan Industries, pursuant to which
the Company and its subsidiaries will pay to Jordan Industries (i) investment
banking and sponsorship fees of up to 2.0% of the purchase price of
acquisitions, joint ventures, minority investments or sales involving the
Company and its subsidiaries or their respective businesses or properties;
(ii) financial advisory fees of up to 1.0% of any debt, equity or other
financing or refinancing involving the Company or such subsidiary, in each
case, arranged with the assistance of The Jordan Company or its affiliates;
and (iii)
54
<PAGE>
reimbursement for The Jordan Company's or Jordan Industries' out-of-pocket
costs in connection with providing such services. The New Subsidiary Advisory
Agreement will contain customary indemnities in favor of Jordan Industries,
The Jordan Company and TJC Management Corp. in connection with such services.
Pursuant to a management agreement between Jordan Industries and TJC
Management Corp. (the "New TJC Management Consulting Agreement"), Jordan
Industries will pay to TJC Management Corp. (i) annual consulting fees,
payable quarterly, equal to $3.0 million; (ii) one-half of the investment
banking, sponsorship and financing fees paid to Jordan Industries pursuant to
the New Subsidiary Advisory Agreement; and (iii) reimbursement of TJC
Management Corp.'s and The Jordan Company's out-of-pocket costs incurred in
connection with providing such services. Each of the New Subsidiary Advisory
Agreement and the New TJC Management Consulting Agreement will expire in
December 2007, but is automatically renewed for successive one-year terms,
unless either party provides written notice of termination 60 days prior to
the scheduled renewal date. In connection with the consummation of the Old
Offerings and the New Credit Agreement, the Company paid fees of approximately
$4.1 million to Jordan Industries pursuant to the New Subsidiary Advisory
Agreement. Messrs. Jordan, Boucher and Zalaznick, directors of JTP, are
partners of The Jordan Company.
Second, the Company and each of its subsidiaries (other than certain of the
Bond and Dura-Line subsidiaries) entered into a management consulting
agreement (the "New Subsidiary Consulting Agreement"), pursuant to which they
will pay to Jordan Industries annual consulting fees of 1.0% of JTP's net
sales for such services, payable quarterly, and will reimburse Jordan
Industries for its out-of-pocket costs related to its services. The New
Subsidiary Consulting Agreement will expire in December 2007, but is
automatically renewed for successive one-year terms, unless either party
provides written notice of termination 60 days prior to the scheduled renewal
date. Pursuant to the New Subsidiary Consulting Agreement, Jordan Industries
(but not Jordan Industries' affiliates) will be obligated to present all
acquisition, business and investment opportunities that relate to
manufacturing, assembly, distribution or marketing of products and services in
the telecommunications and data communications industries to the Company, and
Jordan Industries will not be permitted to pursue such opportunities or
present them to third parties unless JTP determines not to pursue such
opportunities or consents thereto. On a pro forma basis, after giving effect
to the Old Offerings and the New Subsidiary Consulting Agreement, the Company
would have paid $1.4 million, $2.0 million, $2.1 million and $1.1 million for
the years ended December 31, 1994, 1995 and 1996 and the six months ended June
30, 1997, respectively.
Third, the Company and each of its subsidiaries (other than certain of the
Bond and Dura-Line subsidiaries) and Jordan Industries entered into a services
agreement (the "JI Properties Services Agreement") with JI Properties, Inc.
("JI Properties"), a subsidiary of Jordan Industries, pursuant to which JI
Properties will provide certain real estate and other assets, transportation
and related services to JTP. Pursuant to the JI Properties Services Agreement,
the Company will be charged for its allocable portion of such services based
upon its usage of such services and its relative revenues, as compared to
Jordan Industries and its other subsidiaries. On a pro forma basis, after
giving effect to the Old Offerings and the JI Properties Services Agreement,
such charges would have been $0.7 million, $1.0 million, $1.3 million and $0.8
million for the years ended December 31, 1994, 1995 and 1996 and the six
months ended June 30, 1997, respectively. The JI Properties Services Agreement
will expire in December 2007, but is automatically renewed for successive one
year terms, unless either party provides written notice of termination 60 days
prior to the scheduled renewal date.
Fourth, Jordan Industries determined to refine the allocation of its
overhead, general and administrative charges and expenses among Jordan
Industries and its subsidiaries, including the Company, in order to more
closely match these overhead charges with the revenues and usage of corporate
overhead by Jordan Industries and its subsidiaries. On a pro forma basis,
after giving effect to the Company Formation and the corporate expenses
reallocation by Jordan Industries, and prior to any charges or payments under
the New Subsidiary Consulting Agreement, Transition Agreement, JI Properties
Services Agreement, New Subsidiary Advisory Agreement, Tax Sharing Agreement
and directors' fees, the Company's allocable portion of corporate expenses
would have been $1.0 million, $0.9 million, $2.2 million and $1.2 million for
the years ended December 31, 1994, 1995 and 1996 and the six months ended June
30, 1997, respectively, and are expected to be approximately $2.4 million for
1997, assuming no further acquisition or similar activities by the Company in
1997.
55
<PAGE>
Fifth, the Company and Jordan Industries entered into the transition
agreement (the "Transition Agreement") pursuant to which Jordan Industries
will provide office space and certain administrative and accounting services
to the Company to facilitate the transition of the Company as a stand-alone
company. The Company will reimburse Jordan Industries for services provided
pursuant to the Transition Agreement on an allocated cost basis. The
Transition Agreement will expire on December 31, 1997, but is automatically
renewed for successive one year periods (unless either party provides prior
written notice of non-renewal) and may be terminated by the Company on 90
days' written notice.
Tax Sharing Agreement. The Company and each of its subsidiaries are parties
to a tax sharing agreement (the "Tax Sharing Agreement") with Jordan
Industries and each of the other direct and indirect subsidiaries of Jordan
Industries that are consolidated with Jordan Industries for Federal income tax
purposes. Pursuant to the Tax Sharing Agreement, each of the consolidated
subsidiaries of Jordan Industries pays to Jordan Industries, on an annual
basis, an amount determined by reference to the separate return tax liability
of the subsidiary as defined in Treasury Regulation (S) 1.1552-1(a)(2)(ii).
The Company and its subsidiaries paid an aggregate of $1.6 million, $3.5
million, $1.6 million and $0 to Jordan Industries pursuant to the Tax Sharing
Agreement in the years ended December 31, 1994, 1995 and 1996 and the six
months ended June 30, 1997, respectively. These income tax payments reflected
a Federal income tax rate of approximately 34% of each subsidiary's pre-tax
income.
Upon redemption of the Junior Preferred Stock or other circumstances that
cause the Company and its subsidiaries to cease to be tax consolidated
subsidiaries of Jordan Industries, JTP and its subsidiaries will be released
from making any further payments under the Tax Sharing Agreement. While the
release will discharge the Company and its subsidiaries from making future
income tax payments to Jordan Industries, the Company and its subsidiaries
will remain contingently liable to Jordan Industries under the Tax Sharing
Agreement in respect of any increases in their separate return tax liability
for periods prior to the consummation of the Old Offerings. The Company is not
aware of any such liabilities.
Management Arrangements. In connection with the initial capitalization of
the Company, see "The Company--Company Formation," Mr. Pileggi acquired 10,000
shares (1.1% of the shares outstanding) of Common Stock for $20,740 in cash.
The Company has a five-year call option on these shares at Mr. Pileggi's
original cost, exercisable only if his employment terminates, provided that
30% of his shares will cease to be subject to the call option on September 1,
1998, an additional 10% of the shares will cease to be subject to the call
option on each of September 1, 1999 and 2000, and the remaining 50% of the
shares will cease to be subject to the call option on September 1, 2001.
Acquisition Consideration. In connection with acquiring the Company's
subsidiaries, the sellers of the subsidiaries, who usually include the
subsidiary's management, often receive sellers' notes, stock or stock
appreciation rights and special bonus plans in respect of those subsidiaries.
The Company expects to continue using such devices and incentives, when
appropriate, in making future acquisitions and providing incentives for
subsidiary management. See "Terms of the Acquisitions."
SAR Payments. In April 1997, the Company paid and purchased stock
appreciation rights and related interests at Dura-Line, AIM and Cambridge. At
Dura-Line, the Company paid $9.4 million to purchase Dura-Line stock
appreciation rights from the president and chief financial officer of Dura-
Line, and agreed to redeem, in April 1998, $1.9 million of Dura-Line preferred
stock held by the president and chief financial officer of Dura-Line. See
"Description of Certain Indebtedness and Other Obligations--Dura-Line
Preferred Stock and SARs Redemption Agreement."At AIM and Cambridge, the
Company paid $3.1 million to purchase AIM and Cambridge stock appreciation
rights (based upon 20% of AIM and Cambridge appreciation from 1989 to 1996)
from the estates of the former presidents of AIM and Cambridge. Each of these
payments and purchases in respect of the stock appreciation rights was
expensed for financial reporting purposes.
Guaranty. In connection with the acquisition of Diversified, Diversified
issued sellers' notes in the aggregate principal amount of $1.5 million. The
principal amount of the sellers' notes is guaranteed by Jordan Industries. See
"Description of Certain Indebtedness and Other Obligations--Sellers' Notes."
56
<PAGE>
Directors and Officers Indemnification. JTP and each of its directors have
entered into indemnification agreements. The indemnification agreements
provide that the Company will indemnify the directors against certain
liabilities (including settlements) and expenses actually and reasonably
incurred by them in connection with any threatened or pending legal action,
proceeding or investigation (other than actions brought by or in the right of
the Company) to which any of them is, or is threatened to be, made a party by
reason of their status as a director, officer or agent of the Company, or
serving at the request of the Company in any other capacity for or on behalf
of JTP; provided that (i) such director acted in good faith and in a manner
not opposed to the best interests of the Company; (ii) with respect to any
criminal proceedings had no reasonable cause to believe his or her conduct was
unlawful; (iii) such director is not finally adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the Company,
unless the court rules in light of the circumstances the director is
nevertheless entitled to indemnification; and (iv) the indemnification does
not relate to any liability arising under Section 16(b) of the Exchange Act,
or the rules or regulations promulgated thereunder. With respect to any action
brought by or in the right of the Company, directors may also be indemnified
to the extent not prohibited by applicable laws or as determined by a court of
competent jurisdiction, against expenses actually and reasonably incurred by
them in connection with such action if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests
of the Company.
Future Arrangements. The Company has adopted a policy to provide that future
transactions between JTP and its officers, directors and other affiliates
(including Jordan Industries) must (i) be approved by a majority of the
members of the Board of Directors and by a majority of the disinterested
members of the Board of Directors; and (ii) be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties.
57
<PAGE>
TERMS OF THE ACQUISITIONS
GENERAL
Pursuing strategic acquisitions of and joint ventures with companies
involved in the manufacture and distribution of products for use in the
rapidly growing telecommunications and data communications industries is
critical to JTP's growth strategy. Often, the companies targeted for
acquisition by the Company are owned and managed by entrepreneurial
individuals who are retained by the Company to manage the acquired business
after the acquisition. In order to complete the acquisition of such companies
and to provide ongoing incentives to the continuing executives, the Company
may structure its acquisitions so that the purchase price includes a
performance-based component. The performance-based component of the purchase
price can take a variety of forms including additional purchase price
arrangements, a minority stock interest or stock appreciation rights.
An additional purchase price arrangement typically provides for a part of
the purchase price for the acquired company to be determined based on the
future performance of the acquired company as determined based on negotiated
future performance objectives. If the performance objectives are met, the
deferred purchase price payment is made.
In the future, JTP may offer the sellers and continuing executives the
opportunity to invest in a minority stock interest in the acquired company.
The Company typically offers the minority investment opportunity in the
acquired company for the fair market value of the investment at the time of
the acquisition. The Company has not issued and does not intend in the future
to issue greater than a 20% minority stock interest in any acquired company.
Alternatively, the Company may provide stock appreciation rights, as
appropriate, in connection with acquisitions as an incentive to retain
executives.
Stock appreciation rights provide for cash payments based upon the measured
appreciation of a minority percentage of the subsidiaries' stock over a period
of time. Appreciation is generally measured over three to five years by a
formula that establishes a valuation by reference to a specified multiple
multiplied by the average cash flow of the fiscal year in which the right is
exercised and the preceding fiscal year minus the purchase price of the
acquired company. The Company does not intend to grant stock appreciation
rights relating to greater than a 20% stock interest in any acquired company.
ACQUISITION HISTORY
Seven of the Company's subsidiaries were acquired by Jordan Industries
during 1996 and the first half of 1997. Following is a brief summary of the
terms of those acquisitions (purchase price amounts include costs and fees
related to such acquisitions).
Johnson. Jordan Industries purchased the net assets of Johnson on January
23, 1996 for $16.1 million in cash.
Diversified. Jordan Industries purchased the stock of Diversified on June
25, 1996 for $17.0 million consisting of $15.5 million of cash and a $1.5
million subordinated seller note. See "Description of Certain Indebtedness and
Other Obligations--Sellers' Notes." Immediately after Jordan Industries
purchased Diversified, Diversified sold 1,250 shares of its common stock
(representing 12.5% of its outstanding common stock) to the former owners and
current management of Diversified for $0.3 million. Certain sellers of
Diversified are entitled to additional payments for their stock, contingent
upon operating results (as defined in the purchase agreement). The maximum
contingent consideration to be paid is $3.2 million. The deferred purchase
price payment will be payable over the four years following the date of
Diversified's acquisition by Jordan Industries.
Viewsonics. On August 1, 1996, Jordan Industries purchased the net assets of
Viewsonics for $15.0 million in cash. The former owner of Viewsonics is
entitled to additional payments for the net assets acquired by Jordan
Industries, contingent upon operating results (as defined in the purchase
agreement). The maximum contingent
58
<PAGE>
consideration to be paid is $5.0 million. The deferred purchase price payment,
if any, will be payable over the four years following the date of Viewsonics'
acquisition by Jordan Industries.
Vitelec. On August 5, 1996, Jordan Industries purchased the stock of Vitelec
for $14.0 million in cash. In connection with the acquisition of Vitelec, the
sellers received stock appreciation rights providing them with 10% of the
increase in the value of the outstanding common stock of Vitelec from the date
of the acquisition to a date chosen by the sellers, which must be between July
2000 and July 2004. The increase in value of the common stock at any time is
measured by reference to a multiple of Vitelec's average cash flow for the
current and immediately preceding year. The contingent payment is payable over
three years from the date valuation.
Bond. On September 20, 1996, Jordan Industries purchased the Bond
Technologies Group, which consists of an 80% interest in Bond Technologies,
Inc., an 80% interest in Cable Spec, Ltd., a limited partnership, an 80%
interest in Balance Manufacturing Services of Southern California and a 51%
interest in BSM, Inc. for $8.6 million in cash. The purchase price included
cash balances that are restricted in their use. The restricted balances, which
totaled $0.7 million at March 31, 1997, are held in escrow with instructions
to pay the balances to the previous owners of Bond at a predetermined date if
certain earnings levels are achieved.
Northern. On December 31, 1996, Jordan Industries purchased the stock of
Northern for a total purchase price of $21.5 million in cash.
LoDan. On May 30, 1997, Jordan Industries purchased the assets of LoDan for
$17.0 million, consisting of $15.5 million in cash and a seller note in the
principal amount of $1.5 million. See "Description of Certain Indebtedness and
Other Obligations--Sellers' Notes."
In connection with the acquisitions of the Company's subsidiaries, as is
customary in transactions of this type, each of the sellers agreed to
indemnify JTP for certain liabilities of the acquired company for periods
prior to the closing of the acquisition. However, the indemnities are subject
to a number of exceptions, qualifications and deductibles and there can be no
assurance that, if the Company were to incur liabilities relating to any of
the acquired companies for periods prior to the closing of the acquisition,
the seller would in fact be liable to indemnify the Company, or that, even if
liable, the seller would ultimately satisfy its indemnification obligations to
the Company. As a result, there can be no assurance that the Company will not
suffer losses as a result of liabilities of the acquired companies for periods
prior to the acquisition when the companies were not owned or managed by the
Company.
59
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS AND OTHER OBLIGATIONS
The following is a summary of important terms of certain indebtedness and
other obligations of the Company.
NEW CREDIT AGREEMENT
On July 25, 1997, JTP Industries entered into the New Credit Agreement under
which JTP Industries is able to borrow up to approximately $110.0 million to
fund acquisitions and provide working capital and for other general corporate
purposes. The New Credit Agreement provides for a revolving line of credit of
$110.0 million over a term of four years and that the agreement is secured by
a first priority security interest in substantially all of JTP Industries'
assets, including a pledge of all of the stock of the Company's subsidiaries.
Payments of principal of and interest on amounts borrowed under the New Credit
Agreement is guaranteed by the Company's subsidiaries. The Company has not
made any borrowings under the New Credit Agreement. See "Management Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
SELLERS' NOTES
In connection with the acquisition of Diversified, Diversified issued
subordinated promissory notes to the sellers in the aggregate principal amount
of $1.5 million. The Diversified sellers' notes bear interest at a rate of 8%
per annum and mature in 2004. One-half of the aggregate principal amount of
the Diversified sellers' notes is due in 2003 and the remaining one-half is
due in 2004. Diversified has the right to prepay the sellers' note. The
aggregate principal amount of the Diversified sellers' notes are guaranteed by
Jordan Industries.
In connection with the acquisition of LoDan, LoDan issued a subordinated
promissory note to LoDan's seller in the principal amount of $1.5 million.
This note bears interest at 8% per annum and matures in 1999. One-half of the
principal amount of the LoDan note is due in 1998 and the remaining one-half
is due in 1999.
CAPITAL LEASES
At June 30, 1997, the Company had capital leases of $3.0 million outstanding
secured by interests in certain of the Company's equipment. Interest rates on
the capital leases range from 7.7% to 10.8% and mature in installments through
2001. For a schedule of capital lease payment obligations, see Note 10 to the
Company's Combined Financial Statements.
OTHER INDEBTEDNESS
Dura-Line maintains $1.1 million in notes payable due in monthly
installments through 1999 bearing interest at rates ranging from 5.7% to 8.3%.
The notes are secured by an interest in certain of Dura-Line's equipment.
Diversified maintains $0.1 million in notes payable due in monthly
installments through 2001 bearing interest at rates ranging from 7.7% to 9.9%.
The notes are secured by an interest in certain of Diversified's equipment.
Dura-Line has available a line of credit from a commercial lender in Prague,
Czech Republic in the amount of $0.8 million. At June 30, 1997, Dura-Line had
no outstanding borrowings under this line of credit. The line of credit bears
interest at a rate of 1.25% above the Prague Inter-Bank Offered Rate (9.75% as
of June 30, 1997). The line of credit facility is secured by the assets of
Dura-Line's Czech subsidiary and is guaranteed with a standby letter of credit
issued by Dura-Line.
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SUBSIDIARY EARN-OUT AGREEMENTS
Pursuant to earn-out agreements entered into in connection with the
acquisition of certain of the Telecommunications Subsidiaries, the management
of the subsidiaries has the opportunity to earn bonuses based on the EBIT (as
defined in the agreements) growth of their respective subsidiaries for up to
four fiscal years. The cumulative maximum payout pursuant to these earn-out
agreements is approximately $8.2 million.
DURA-LINE PREFERRED STOCK AND SARS REDEMPTION AGREEMENT
Dura-Line has outstanding 187.5 shares of its 7% cumulative preferred stock
(the "Dura-Line Preferred Stock") with an aggregate liquidation preference of
$1.9 million issued to certain former common stockholders of Dura-Line. The
former stockholders were also granted SARs exercisable upon the occurrence of
certain extraordinary corporate transactions. On April 10, 1997, Dura-Line
entered into an agreement (the "Redemption Agreement") pursuant to which Dura-
Line paid the former stockholders $9.4 million in cash and gave the former
stockholders a promissory note for $4.7 million in consideration for the
former stockholders' SARs. The promissory note bears interest at the rate of
8%, is payable in annual installments and matures on April 10, 2001. Dura-Line
is required by the Redemption Agreement to redeem the remaining shares of
Dura-Line Preferred Stock on April 10, 1998 for $1.9 million. The holders of
the Dura-Line Preferred Stock agreed to forego the payment of accumulated and
unpaid dividends of $0.7 million. If prior to April 30, 1998, Jordan
Industries receives offering proceeds from an initial public offering of Dura-
Line common stock, Jordan Industries is required to pay the former
stockholders an additional $2.3 million. If Jordan Industries does not receive
proceeds from an initial public offering of Dura-Line common stock prior to
April 30, 1998, the former stockholders will receive 25% of Dura-Line's 1997
gross profit (as defined in the Redemption Agreement) in excess of $30.0
million. As consideration for signing the Redemption Agreement, the former
Stockholders will receive total non-compete payments of $0.4 million over the
13-month period beginning April 10, 1997.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being made by the Company to satisfy its obligations
pursuant to the Registration Rights Agreements, which require the Company to
use its best efforts to effect the Exchange Offer. See "--Registration Rights;
Liquidated Damages."
The Company is making the Exchange Offer in reliance upon the position of
the staff of the Commission 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 on these interpretations by the
staff of the Commission, the New Securities issued pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by holders
thereof (other than (i) any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act; (ii) an Initial
Purchaser who acquired the Old Securities directly from the Company solely in
order to resell pursuant to Rule 144A of the Securities Act or any other
available exemption under the Securities Act; or (iii) a broker-dealer who
acquired the Old Securities as a result of market making or other trading
activities) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Securities are
acquired in the ordinary course of such holder's business and such holder is
not participating and has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of
such New Securities. Any Holder who tenders Old Securities in the Exchange
Offer for the purpose of participating in a distribution of the New Securities
could not rely on such interpretations by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction, unless such
sale is made pursuant to an exemption from such requirements.
Holders of Old Securities not tendered will not have any further
registration rights and the Old Securities not exchanged will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
markets for the Old Securities could be adversely affected.
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD SECURITIES AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING ALL OR ANY PORTION OF THEIR OLD SECURITIES PURSUANT TO THE
EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OLD SECURITIES MUST MAKE THEIR OWN DECISION WHETHER
TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE PRINCIPAL
AMOUNT OF OLD NOTES OR LIQUIDATION PREFERENCE OF OLD SENIOR PREFERRED STOCK TO
TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND
CONSULTING THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND
REQUIREMENTS.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the issuance of the Old Securities, the Company entered
into Registration Rights Agreements with the Initial Purchasers of the Old
Securities.
Holders of New Securities (other than as set forth below) are not entitled
to any registration rights with respect to the New Securities. Pursuant to the
Registration Rights Agreements, Holders of Old Securities are entitled to
certain registration rights. Under the Registration Rights Agreements, the
Company has agreed, for the benefit of the Holders of the Old Securities, that
it will, at its cost, (i) within 60 days after the date of the original issue
of the Old Securities file the Registration Statement with the Commission; and
(ii) within 120 days after the date of original issuance of the Old
Securities, use its best efforts to cause such Registration Statement to be
declared effective under the Securities Act. The Registration Statement of
which this Prospectus is a part constitutes the Registration Statement. If (i)
the Company is not permitted to consummate the Exchange Offer
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because the Exchange Offer is not permitted by applicable law or Commission
policy; or (ii) any Holder of Transfer Restricted Securities (as defined
herein) notifies the Company within the specified time period that (A) due to
a change in law or policy it is not entitled to participate in the Exchange
Offer, (B) due to a change in law or policy it may not resell the New
Securities acquired by it in the Exchange Offer to the public without
delivering a prospectus and the prospectus contained in the Registration
Statement is not appropriate or available for such resales by such holder or
(C) it is a broker-dealer and acquired the Old Securities directly from the
Company or an affiliate of the Company, the Company will file with the
Commission a Shelf Registration Statement to cover resales of the Transfer
Restricted Securities by the Holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. The Company will use its best efforts to cause the
applicable registration statement to be declared effective as promptly as
possible by the Commission. For purposes of the foregoing, "Transfer
Restricted Securities" means each Old Security, until (i) the date of which
such Transfer Restricted Security has been exchanged by a person other than a
broker-dealer for a New Security in the Exchange Offer; (ii) following the
exchange by a broker-dealer in the Exchange Offer of a Transfer Restricted
Security for a New Security, the date on which such New Security 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 Registration Statement; (iii)
the date on which such Transfer Restricted 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 Transfer
Restricted Security is distributed pursuant to Rule 144 under the Act.
The Registration Rights Agreements also provide that, (i) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to issue
on or prior to 30 business days after the date on which the Registration
Statement was declared effective by the Commission, New Securities in exchange
for all Transfer Restricted Securities tendered prior thereto in the Exchange
Offer; and (ii) if obligated to file the Shelf Registration Statement, the
Company will file the Shelf Registration Statement with the Commission on or
prior to 60 days after such filing obligation arises (and in any event by
October 23, 1997) and use its best efforts to cause the Shelf Registration
Statement to be declared effective by the Commission on or prior to 120 days
after such obligation arises. The Company shall use its best efforts to keep
such Shelf Registration Statement continuously effective, supplemented and
amended until July 25, 2000 or such shorter period that will terminate when
all the Notes or Senior Preferred Stock covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement. If (a)
the Company fails to file any of the registration statements required by the
Registration Rights Agreements on or before the date specified for such
filing; (b) any of such registration statements are not declared effective by
the Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"); (c) the Company fails to consummate the Exchange
Offer within 30 business days of the Effectiveness Target Date with respect to
the Registration Statement; or (d) the Shelf Registration Statement or the
Registration Statement is declared effective but thereafter, subject to
certain exceptions, ceases to be effective or usable in connection with
resales of Transfer Restricted Securities during the periods specified in the
Registration Rights Agreements without being succeeded within 30 days by any
additional Registration Statement filed and declared effective (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then the Company will pay Liquidated Damages to each Holder of Transfer
Restricted Securities, with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to
$.05 per week for each $1,000 principal amount of Notes or each $1,000
liquidation preference of Senior Preferred Stock, as applicable, held by such
Holder. After such period, the amount of the Liquidated Damages will increase
to $.10 per week for each $1,000 principal amount of Notes or liquidation
preference of Senior Preferred Stock, as applicable, until all Registration
Defaults have been cured. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
Holders of Transfer Restricted Securities will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreements in order to have their
Transfer Restricted Securities included in the Shelf Registration Statement
and benefit from the provisions regarding Liquidated Damages set forth above.
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The summary herein of certain provisions of the Registration Rights
Agreements does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreements, copies of which are filed as exhibits to the Registration
Statement of which this Prospectus constitutes a part.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD SECURITIES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, which together constitute the
Exchange Offer, the Company will accept for exchange Old Securities 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 , 1997; provided, however, that if the Company,
in its sole discretion, has extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended. The Company may extend the Exchange
Offer at any time and from time to time by giving oral or written notice to
the applicable Exchange Agent and by timely public announcement. Without
limiting the manner in which the Company may choose to make any public
announcement and subject to applicable law, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
During any extension of the Exchange Offer, all Old Securities previously
tendered pursuant to the Exchange Offer will remain subject to the Exchange
Offer. The Company intends to conduct the Exchange Offer in accordance with
the applicable requirements of the Exchange Act and the rules and regulations
thereunder.
As of the date of this Prospectus, $190,000,000 aggregate principal amount
of Old Notes, $120,000,000 aggregate principal amount at maturity of Old
Discount Notes and $25,000,000 aggregate liquidation preference of Old Senior
Preferred Stock is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1997, to all Holders of
Old Securities known to the Company. The Company's obligation to accept Old
Securities for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth below under "--Certain Conditions to the Exchange
Offer."
The terms of the New Securities and the Old Securities are identical in all
material respects, except for certain transfer restrictions and registration
rights relating to the Old Securities and rights to receive Liquidated
Damages. See "--Registration Rights; Liquidated Damages." The Old Notes were,
and the New Notes will be, issued under the Indentures and all such Notes are
entitled to the benefits of the Indentures. The Old Senior Preferred Stock
was, and the New Senior Preferred Stock will be, issued pursuant to the
Certificate of Designation and all of the Senior Preferred Stock is entitled
to the benefits of the Certificate of Designation.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof and Old Senior
Preferred Stock tendered in the Exchange Offer must be in denominations of
whole shares. Any Old Notes or Old Senior Preferred Stock not accepted for
exchange for any reason will be returned without expense to the tendering
Holder thereof as promptly as practicable after the expiration or termination
of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Securities 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 amendment,
nonacceptance or termination to the Holders of the Old Notes or Old Senior
Preferred Stock as promptly as practicable. Any amendment to the Exchange
Offer will not limit the right of Holders to withdraw tendered Old Securities
prior to the Expiration Date. See "--Withdrawal Rights."
PROCEDURES FOR TENDERING OLD SECURITIES
The tender to the Company of Old Securities by a Holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of
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Transmittal. Except as set forth below, a Holder who wishes to tender Old
Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to First Trust National
Association and a Holder who wishes to tender Old Senior Preferred Stock for
exchange pursuant to the Exchange Offer must transmit a properly completed and
duly executed Letter of Transmittal, to Harris Trust and Savings Bank (First
Trust National Association and Harris Trust and Savings Bank are the "Exchange
Agents" and each individually is an "Exchange Agent") at the proper address
set forth below under under "--Exchange Agents" on or prior to the Expiration
Date. In addition, either (i) certificates for such Old Notes or Old Senior
Preferred Stock must be received by the applicable Exchange Agent along with
the Letter of Transmittal; or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Securities, if such
procedure is available, into the applicable 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
applicable Exchange Agent prior to the Expiration Date; or (iii) the Holder
must comply with the guaranteed delivery procedures described below. THE
METHOD OF DELIVERY OF OLD NOTES OR OLD SENIOR PREFERRED STOCK, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDERS. 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 OLD NOTES OR OLD SENIOR PREFERRED STOCK SHOULD BE SENT TO THE
COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Securities surrendered for exchange
pursuant thereto are tendered (i) by a registered Holder of the Old Securities
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal; or (ii) for the
account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by a firm 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 Old Securities are registered in
the name of a person other than the signer of the Letter of Transmittal, the
Old Securities surrendered for exchange must be endorsed by, or be accompanied
by, a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered Holder with the signature thereon guaranteed by an
Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Securities tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and
all tenders of any particular Old Securities not properly tendered or to not
accept any particular Old Securities which acceptance might, in the judgment
of the Company or its counsel, be unlawful. The Company also reserves the
absolute right to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Old Securities either before or after the
Expiration Date (including the right to waive the ineligibility of any Holder
who seeks to tender Old Securities in the Exchange Offer). The interpretation
of the terms and conditions of the Exchange Offer as to any particular Old
Securities 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, all defects or irregularities in
connection with tenders of Old Securities for exchange must be cured within
such reasonable period of time as the Company shall determine. None of the
Company, either Exchange Agent nor any other person shall be under any duty to
give notification of any defect or irregularity with respect to any tender of
Old Securities for exchange, nor shall any of them incur any liability for
failure to give such notification. The Exchange Agents intend to use
reasonable efforts to give notification of such defects and irregularities.
If the Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Securities, such Old Securities 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 Old Securities.
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If the Letter of Transmittal or any Old Securities or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of a corporation 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.
By tendering, each Holder will represent to the Company that, among other
things, the New Securities acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Securities, whether or not such person is the Holder, and such person has no
arrangement with any person to participate in the distribution of the New
Securities. If any Holder or any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company, is engaged in or
intends to engage in or has an arrangement or understanding with any person to
participate in a distribution of such New Securities to be acquired pursuant
to the Exchange Offer, or acquired the Old Securities as a result of market
making or other trading activities, such Holder or any such other person (i)
could not rely on the applicable interpretations of the staff of the
Commission; and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Securities for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Securities. 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.
ACCEPTANCE OF OLD SECURITIES FOR EXCHANGE; DELIVERY OF NEW SECURITIES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old
Securities properly tendered and will issue the New Securities promptly after
acceptance of the Old Securities. See "--Certain Conditions to the Exchange
Offer." For purposes of the Exchange Offer, the Company shall be deemed to
have accepted properly tendered Old Securities for exchange when, as and if
the Company has given oral or written notice thereof to the applicable
Exchange Agent, with written confirmation of any oral notice to be given
promptly thereafter.
For each Old Security accepted for exchange, the Holder of such Old Security
will receive a New Security having a principal amount or liquidation
preference equal to that of the surrendered Old Security. Accordingly,
registered Holders of New Securities on the relevant record date for the first
interest payment date or dividend payment date following the consummation of
the Exchange Offer will receive interest accruing from the most recent date to
which interest has been paid on the Old Senior Notes or dividends have been
paid on the Old Senior Preferred Stock, or, if no interest has been paid on
the Old Senior Notes or no dividends have been paid on the Old Senior
Preferred Stock, from July 25, 1997. New Discount Notes will accrete from July
25, 1997. Old Securities accepted for exchange will cease to accrue interest,
accrete, or accrue dividends from and after the date of consummation of the
Exchange Offer. Holders of Old Securities whose Old Securities are accepted
for exchange will not receive any payment in respect of accrued interest or
dividends on such Old Securities otherwise payable on any interest payment
date or dividend payment date, the record date for which occurs on or after
consummation of the Exchange Offer.
In all cases, issuance of New Securities for Old Securities that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the applicable Exchange Agent of (i) certificates for such
Old Securities or a timely Book-Entry Confirmation of such Old Securities into
the applicable Exchange Agent's account at the Book-Entry Transfer Facility;
(ii) a properly completed and duly executed Letter of Transmittal; and (iii)
all other required documents. If any tendered Old Securities are not accepted
for any reason set forth in the terms and conditions of the Exchange Offer, or
if Old Securities are submitted for a greater amount than the Holder desires
to exchange, such unaccepted or nonexchanged Old Securities will be returned
without expense to the tendering Holder thereof (or, in the case of Old
Securities tendered by book-entry transfer into the applicable Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
procedures described below, such nonexchanged Old Securities will be credited
to an account maintained with such Book-Entry Transfer Facility) designated by
the tendering Holder as promptly as practicable after the expiration or
termination of the Exchange Offer.
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BOOK-ENTRY TRANSFER
The Exchange Agents will make requests to establish accounts with respect to
the Old Securities 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 Old Securities by causing
the Book-Entry Transfer Facility to transfer such Old Securities into the
applicable Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Old Securities may be effected through book-
entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal
or facsimile thereof, with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by the
applicable Exchange Agent at the address set forth below under "--Exchange
Agents" on or prior to the Expiration Date or the guaranteed delivery
procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Securities desires to tender such Old
Securities and the Old Securities are not immediately available, or time will
not permit such Holder's Old Securities or other required documents to reach
the applicable 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 applicable Exchange Agent has received from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form of the corresponding exhibit to the Registration
Statement of which this Prospectus constitutes a part (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the Holder of Old Securities and the amount of Old Securities
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Securities, 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 applicable Exchange Agent; and (iii) the certificates for all physically
tendered Old Securities, 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 applicable Exchange Agent within
three NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Securities 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 applicable Exchange Agent at the proper address set forth
below under "--Exchange Agents." Any such notice of withdrawal must specify
the name of the person having tendered the Old Securities to be withdrawn,
identify the Old Securities to be withdrawn (including the amount of such Old
Securities), and (where certificates for Old Securities have been transmitted)
specify the name in which such Old Securities are registered, if different
from that of the withdrawing Holder. If certificates for Old Securities have
been delivered or otherwise identified to the applicable Exchange Agent, then,
prior to the release of such certificates the withdrawing Holder must also
submit the serial numbers of the particular certificates to be withdrawn and a
signed notice of withdrawal with signatures guaranteed by an Eligible
Institution unless such Holder is an Eligible Institution. If Old Securities
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Old Securities and otherwise comply with the procedures of such facility. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall
be final and binding on all parties. Any Old Securities so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Old Securities which
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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 Old Securities tendered by book-entry transfer into the applicable
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Old Securities will be
credited to an account with such Book-Entry Transfer Facility specified by the
Holder) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Securities may be
retendered by following one of the procedures described above under "--
Procedures for Tendering Old Securities" at any time on or prior to the
Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Securities in exchange
for, any Old Securities and may terminate or amend the Exchange Offer, if at
any time before the acceptance of such Old Securities for exchange or the
exchange of the New Securities for such Old Securities, any of the following
events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof; or (ii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of
the Old Securities pursuant to the Exchange Offer; or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of
the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the sole judgment of the
Company might directly or indirectly result in any of the consequences
referred to in clauses (i) or (ii) above or, in the sole judgment of the
Company, might result in the holders of New Securities having obligations
with respect to resales and transfers of New Securities which are greater
than those described in the interpretation of the Commission referred to on
the cover page of this Prospectus, or would otherwise make it inadvisable
to proceed with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market; (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer; (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit; or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
sole judgment of the Company, is or may be adverse to the Company, or the
Company shall have become aware of facts that, in the sole judgment of the
Company, have or may have an adverse effect on the value of the Old
Securities or the New Securities.
Holders of Old Securities will have registration rights and the right to
Liquidated Damages as described above under "--Registration Rights; Liquidated
Damages" if the Company fails to consummate the Exchange Offer.
To the Company's knowledge as of the date of this Prospectus, none of the
above events has occurred.
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
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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 Old Securities
tendered, and no New Securities will be issued in exchange for any such Old
Securities, 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 Indentures under the Trust Indenture Act (as
defined herein).
EXCHANGE AGENTS
First Trust National Association has been appointed as the Exchange Agent for
the Notes and Harris Trust and Savings Bank has been appointed as the Exchange
Agent for the Senior Preferred Stock for the Exchange Offer. All executed
Letters of Transmittal and Notices of Guaranteed Delivery should be directed to
the proper Exchange Agent at the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or
of the Letter of Transmittal and requests for Notices of Guaranteed Delivery
should be directed to the proper Exchange Agent addressed as follows:
For Notes:
Deliver to: First Trust National Association, Exchange Agent:
By Registered or Certified Mail, Overnight Courier or Hand:
First Trust National
Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attn: Specialized Finance Corporate Trust Department
Fourth Floor
By Facsimile:
(612) 244-1537
Confirm by Telephone:
(612) 244-8162
For Senior Preferred
Stock:
Deliver to: Harris Trust and Savings Bank, Exchange Agent
By Registered or Certified Mail: By Overnight Courier or Hand:
Harris Trust and Savings Bank Harris Trust and Savings Bank
c/o Harris Trust Company of New York c/o Harris Trust Company of New York
P. O. Box 1010 77 Water Street
Wall Street Station 4th Floor
New York, NY 10268 New York, NY 10004
By Facsimile:
(212) 701-7636
Confirm by Telephone:
(212) 701-7624
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<PAGE>
DELIVERY OF A LETTER OF TRANSMITTAL FOR NOTES TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE FOR FIRST TRUST NATIONAL ASSOCIATION OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE FOR FIRST TRUST
NATIONAL ASSOCIATION DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF
TRANSMITTAL. DELIVERY OF A LETTER OF TRANSMITTAL FOR SENIOR PREFERRED STOCK TO
AN ADDRESS OTHER THAN AS SET FORTH ABOVE FOR HARRIS TRUST AND SAVINGS BANK OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE FOR
HARRIS TRUST AND SAVINGS BANK DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH
LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
The Company will, however, pay the Exchange Agents reasonable and customary
fees for their services and will reimburse them for reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Old Notes or Old Senior Preferred Stock,
and in handling tenders for their customers. The expenses to be incurred in
connection with the Exchange Offer, including the fees and expenses of the
Exchange Agents and printing, accounting, registration, and legal fees, will
be paid by the Company and are estimated to be approximately $100,000.
TRANSFER TAXES
Holders who tender their Old Securities for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register New Securities in the name of, or request
that Old Securities not tendered or not accepted in the Exchange Offer be
returned to, a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax thereon.
APPRAISAL RIGHTS
HOLDERS OF OLD NOTES OR OLD SENIOR PREFERRED STOCK WILL NOT HAVE DISSENTERS'
RIGHTS OR APPRAISAL RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.
CONSEQUENCES OF NOT EXCHANGING OLD SECURITIES
Holders of Old Securities who do not exchange their Old Securities for New
Securities pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Securities as set forth in the legend
thereon as a consequence of the issuance of the Old Securities 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 Old Securities may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the Old
Securities under the Securities Act. Based upon no-action letters issued by
the staff of the Commission to third parties, the Company believes the New
Securities issued pursuant to the Exchange Offer in exchange for the Old
Securities may be offered for resale, resold or otherwise transferred by a
Holder thereof (other than any (i) Holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act); (ii) an
Initial Purchaser who acquired the Old Securities directly from the Company
solely in order to resell pursuant to Rule 144A of the Securities Act or any
other available exemption under the Securities Act; or (iii) a broker-dealer
who acquired the Old Securities as a result of market making or other trading
activities) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Securities are
acquired in the ordinary course of such holder's business and such holder is
not participating and has no arrangement or
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understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Securities. 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. Each Holder, other than a
broker-dealer, must acknowledge that it is not engaged in, and does not intend
to engage in, a distribution of New Securities, and has no arrangement or
understanding to participate in a distribution of New Securities. If any
Holder is an affiliate of the Company, is engaged in or intends to engage in
or has any arrangement or understanding with respect to the distribution of
the New Securities to be acquired pursuant to the Exchange Offer, or acquired
the Old Securities as a result of market making or other trading activities,
such Holder (i) could not rely on the relevant determinations of the staff of
the Commission; and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any secondary
resale transaction. Each broker-dealer that receives New Securities for its
own account in exchange for Old Securities must acknowledge that such Old
Securities were acquired by such broker-dealer 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 New Securities. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New Securities may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
an exemption from registration or qualification is available and is complied
with. The Company has agreed to register or qualify the sale of the New
Securities in such jurisdictions only in limited circumstances and subject to
certain conditions.
ACCOUNTING TREATMENT
The exchange of the New Securities for the Old Securities will have no
impact on the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized.
Expenses of the Exchange Offer and expenses related to the Old Securities will
be amortized, pro rata, over the term of the New Securities.
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<PAGE>
DESCRIPTION OF NOTES
The Old Senior Notes were and the New Senior Notes will be issued pursuant
to an indenture (the "Senior Note Indenture"), dated as of July 25, 1997,
between the Company and First Trust National Association, as trustee (the
"Senior Note Trustee"). The Old Discount Notes were and the New Discount Notes
will be issued pursuant to an indenture (the "Discount Note Indenture" and,
together with the Senior Note Indenture, the "Indentures"), dated as of July
25, 1997, between the Company and First Trust National Association, as trustee
(the "Discount Note Trustee" and, together with the Senior Note Trustee, the
"Trustees"). The terms of the Notes include those stated in the Indentures and
those made part of the Indentures by reference to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), as in effect on the date of
original issuance of the Notes. The Notes are subject to all such terms, and
holders of the Notes are referred to the Indentures and the Trust Indenture
Act for a statement thereof. The following summary of certain provisions of
the Indentures does not purport to be complete and is qualified in its
entirety by reference to the Indentures, including the definitions therein of
certain terms used below.
GENERAL
Payment of, premium, if any, interest and Liquidated Damages on, the Notes
will be payable, and the Notes may be presented for registration of transfer
or exchange, at the respective offices of the Paying Agent and Registrar in
New York, New York (the "Paying Agent"). Holders of Notes must surrender their
Notes to the Paying Agent to collect principal payments, and the Company may
pay principal, interest and Liquidated Damages, if any, by check and may mail
interest checks to a holder's registered address; provided that all payments
with respect to Global Securities and Certificated Securities, the holders of
whom have given wire transfer instructions to the Company, will be required to
be made by wire transfer of immediately available funds to the accounts
specified by the holders thereof. The Paying Agent may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge
payable in connection with certain transfers or exchanges. See "Transfer and
Exchange." Each Trustee will initially act as Paying Agent. The Company may
change the Paying Agent without prior notice to holders of Notes, and, under
certain circumstances, the Company or any of its subsidiaries may act as
Paying Agent under either or both Indentures.
The Company's operations are conducted exclusively through its subsidiaries.
As a consequence, JTP's ability to service its Indebtedness (including the
Notes) is dependent upon the Company's receipt of funds from its subsidiaries.
See "Risk Factors--Holding Company Structure; Dependence on Subsidiaries;
Limitations on Access to Cash Flow of the Subsidiaries."
TERMS OF THE NOTES
The Old Senior Notes and Old Discount Notes were and the New Senior Notes
and the New Discount Notes will be senior unsecured obligations of the
Company, will rank senior in right of payment to all Subordinated Indebtedness
of the Company, and will rank pari passu in right of payment with all Senior
Indebtedness of the Company. The Old Senior Notes and Old Discount Notes were
and the New Senior Notes and the New Discount Notes will effectively rank
junior to any Indebtedness of the Company's subsidiaries, including borrowings
under the New Credit Agreement. The Old Senior Notes were and the New Senior
Notes will be limited to $190,000,000 in aggregate principal amount. The
Senior Notes will bear interest at 9 7/8% per annum. Interest on each of the
Senior Notes is payable semi-annually in cash on February 1 and August 1 in
each year to holders of record of Senior Notes at the close of business on the
January 15 or July 15 next preceding the interest payment date. Interest will
initially accrue from the date of issuance and the first interest payment date
will be February 1, 1998. Interest will be computed on the basis of a 360-day
year of twelve 30-day months. The Senior Notes will mature on August 1, 2007
and will be issued in denominations of $1,000 and integral multiples thereof.
The Old Discount Notes were and the New Discount Notes will be limited to
$120,000,000 aggregate principal amount at maturity ($85,034,280 initial
Accreted Value that will fully accrete to face amount on August 1, 2000).
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<PAGE>
The price to the public for the Discount Notes represents a yield to maturity
of 11 3/4%, computed on the basis of semiannual compounding. Although for U.S.
federal income tax purposes a significant amount of original issue discount,
taxable as ordinary income, will be recognized by a holder of Discount Notes
as such discount is amortized from the date of issuance of the Discount Notes,
no cash interest will be payable with respect to the Discount Notes prior to
August 1, 2000, except upon redemption or purchase of the Discount Notes by
the Company. Commencing August 1, 2000, interest will accrue on the Discount
Notes at the rate of 11 3/4% per annum, payable semi-annually in cash on
February 1, and August 1, in each year to holders of record of Discount Notes
at the close of business on the January 15 or July 15 next preceding the
interest payment date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months. The Discount Notes will mature on August 1, 2007
and will be issued in denominations of $1,000 and integral multiples thereof.
REDEMPTION OF NOTES
Optional Redemption. The Senior Notes may not be redeemed at the option of
the Company prior to August 1, 2002 other than out of the net proceeds of one
or more Equity Offerings, as and to the extent described below. During the 12-
month period beginning August 1 of the years indicated below, the Senior Notes
will be redeemable, at the option of the Company, in whole or in part, on at
least 30 but not more than 60 days' notice to each holder of Senior Notes to
be redeemed, at the redemption prices (expressed as percentages of the
principal amount) set forth below, plus any accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................... 104.9375%
2003........................................................... 102.4688%
2004 and thereafter............................................ 100.0000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to August 1, 2000,
the Company may (but shall not have the obligation to) redeem up to one-third
of the original aggregate principal amount of the Senior Notes, with the
proceeds of one or more Equity Offerings at a redemption price of 109.875% of
the principal amount of Senior Notes, plus any accrued and unpaid interest and
Liquidated Damages, if any, to the date of redemption; provided that at least
$126.7 million aggregate principal amount of the Senior Notes remain
outstanding immediately after any such redemption; and provided, further, that
any such redemption shall occur within 60 days of the date of the closing of
any such Equity Offering. The restrictions on optional redemptions contained
in the Senior Note Indenture do not limit the Company's right to separately
make open market, privately negotiated or other purchases of Senior Notes from
time to time.
The Discount Notes may not be redeemed at the option of the Company prior to
August 1, 2002, other than out of the net proceeds of one or more Equity
Offerings, as and to the extent described below. During the 12-month period
beginning August 1 of the years indicated below, the Discount Notes will be
redeemable at the option of the Company, in whole or in part, on at least 30
but not more than 60 days' notice to each holder of Discount Notes to be
redeemed, at the redemption prices (expressed as percentages of the Accreted
Value) set forth below, plus any accrued and unpaid interest and Liquidated
Damages, if any, from August 1, 2000 to the redemption date if such redemption
occurs after August 1, 2000:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................... 105.8750%
2003........................................................... 102.9375%
2004 and thereafter............................................ 100.0000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to August 1, 2000,
the Company may (but shall not have the obligation to) redeem up to one-third
of the original aggregate principal amount of the Discount Notes with the
proceeds of one or more Equity Offerings at a redemption price of 111.75% of
the Accreted Value of
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<PAGE>
Discount Notes, plus any accrued and unpaid interest and Liquidated Damages,
if any, to the date of redemption, provided, that at least $80 million
aggregate principal amount of the Discount Notes remain outstanding
immediately after such redemption; and provided further, that any such
redemption shall occur within 60 days of the date of closing of any such
Equity Offering. The restrictions on optional redemptions contained in the
Discount Note Indenture do not limit the Company's right to separately make
open market, privately negotiated or other purchases of Discount Notes from
time to time.
Mandatory Redemption. Except as set forth below under "--Mandatory Offers to
Purchase Notes -- Change of Control" and "--Asset Sales," the Company is not
required to make any mandatory redemption, purchase or sinking fund payments
with respect to the Notes.
MANDATORY OFFERS TO PURCHASE NOTES
Change of Control. Upon the occurrence of a Change of Control, each holder
of Notes shall have the right to require the Company to purchase all or any
part (equal to $1,000 or an integral multiple thereof) of such holder's Notes
pursuant to an Offer (as defined herein) at a purchase price equal to 101% of
the aggregate principal amount of the Senior Notes, plus any accrued and
unpaid interest and Liquidated Damages, if any, to the date of purchase, and
101% of the Accreted Value of the Discount Notes at the date of purchase, plus
any accrued and unpaid interest and Liquidated Damages, if any, from August 1,
2000 to the date of purchase if such purchase occurs after August 1, 2000.
If there is a Change of Control, any Indebtedness outstanding under the New
Credit Agreement could be accelerated. Consequently, upon a Change of Control,
the Company expects to refinance the New Credit Agreement. Moreover, there can
be no assurance that sufficient funds will be available at the time of any
Change of Control to make any required repurchases of the Notes.
Except as described above, the Indentures do not contain provisions that
permit the holders of the Notes to require the Company to purchase or redeem
the Notes in the event of a takeover, recapitalization, spin-off, business
combination or similar restructuring or transaction, including any such
transaction involving the Company and its Affiliates.
Asset Sales. Each Indenture provides that the Company may not, and may not
permit any Restricted Subsidiary to, directly or indirectly, consummate an
Asset Sale (including the sale of any of the Capital Stock of any Restricted
Subsidiary) providing for Net Proceeds in excess of $2,500,000 unless at least
75% of the Net Proceeds from such Asset Sale are applied (in any manner
otherwise permitted by the Indenture) to one or more of the following purposes
in such combination as the Company shall elect: (a) an investment in another
asset or business in the same line of business as, or a line of business
similar to that of, the line of business of the Company and its Restricted
Subsidiaries at the time of the Asset Sale; provided, that such investment
occurs on or prior to the 365th day following the date of such Asset Sale (the
"Asset Sale Disposition Date"); (b) to reimburse the Company or its
Subsidiaries for expenditures made, and costs incurred, to repair, rebuild,
replace or restore property subject to loss, damage or taking, to the extent
that the Net Proceeds consist of insurance proceeds received on account of
such loss, damage or taking; (c) the purchase, redemption or other prepayment
or repayment of outstanding Senior Indebtedness of the Company or Indebtedness
of the Company's Restricted Subsidiaries on or prior to the 365th day
following the Asset Sale Disposition Date; or (d) an Offer expiring on or
prior to the Purchase Date (as defined herein). The Indentures also provide
that the Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, consummate an Asset Sale unless 75% of the
consideration received therefor by the Company or such Restricted Subsidiary
is in the form of cash, cash equivalents or marketable securities; provided
that, solely for purposes of calculating such 75% of the consideration, the
amount of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto, excluding
contingent liabilities and trade payables), of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Notes) that are assumed by the transferee of any such assets and (y) any notes
or other obligations received by the Company or any such Restricted Subsidiary
from such transferee that are promptly, but in no event more than 30 days
after
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<PAGE>
receipt, converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash and cash
equivalents for purposes of this provision. Any Net Proceeds from any Asset
Sale that are not applied or invested as provided in clause (a), (b) or (c) of
this paragraph shall constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10,000,000 under an
Indenture (such date being an "Asset Sale Trigger Date"), the Company shall
make an Offer to all holders of Notes issued pursuant to such Indenture to
purchase the maximum principal amount of Notes then outstanding under such
Indentures that may be purchased out of Excess Proceeds, at an offer price in
cash in an amount equal to, in the case of the Senior Notes, 100% of principal
amount thereof plus any accrued and unpaid interest and Liquidated Damages, if
any, to the Purchase Date, and in the case of the Discount Notes, 100% of
Accreted Value thereof, plus any accrued and unpaid Liquidated Damages, if
any, plus any accrued and unpaid interest from August 1, 2000 to the Purchase
Date if such purchase occurs after August 1, 2000 in accordance with the
procedures set forth in the Indentures. Notwithstanding the foregoing, to the
extent that any or all of the Net Proceeds of an Asset Sale are prohibited or
delayed by applicable local law from being repatriated to the United States,
the portion of such proceeds so affected will not be required to be applied as
described in this or the preceding paragraph, but may be retained for so long,
but only for so long, as the applicable local law prohibits repatriation to
the United States.
To the extent that any Excess Proceeds remain after completion of an Offer
for Notes, the Company may use such remaining amount for general corporate
purposes. If the aggregate principal amount of Notes surrendered by holders
thereof exceeds the amount of Excess Proceeds, the Trustee under the
applicable Indenture shall select the Notes to be purchased as described below
under "--Selection and Notice." Upon completion of an Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
Funding repurchases of Notes by the Company upon an Asset Sale will not be
permitted under the terms of the New Credit Agreement. Accordingly, the
Company would need to seek the consent of its lenders under the New Credit
Agreement in order to repurchase Notes with any Net Proceeds. See "Risk
Factors--Holding Company Structure; Dependence on Subsidiaries; Limitations on
Access to Cash Flow of the Subsidiaries."
Procedures for Offers. Within 30 days following any Change of Control or
Asset Sale Trigger Date, subject to the provisions of the Indentures, the
Company shall mail a notice to each holder of Notes at such holder's
registered address stating: (a) that an offer ("Offer") is being made pursuant
to a Change of Control or an Asset Sale, as the case may be, the length of
time the Offer shall remain open and the amount of the Change of Control Offer
or the Asset Sale Offer, as the case may be, and the maximum principal amount
of Notes that will be accepted for payment pursuant to such Offer; (b) the
purchase price, the amount of accrued and unpaid interest and Liquidated
Damages, if any, at the purchase date, and the purchase date (which shall be
no earlier than 30 days or later than 40 days from the date such notice is
mailed (the "Purchase Date")); and (c) such other information required by the
Indentures and applicable law and regulations.
On any Purchase Date, the Company will, to the extent lawful and required by
the applicable Indentures and such Offer, (1) in the case of an Offer
resulting from a Change of Control, accept for payment all Notes or portions
thereof tendered pursuant to such Offer, in the case of an Offer resulting
from an Asset Sale Trigger Date, accept for payment the maximum aggregate
principal amount of Notes or portions thereof tendered pursuant to such Offer
that can be purchased out of Excess Proceeds from such Asset Sale Trigger
Date; (2) deposit with the Paying Agent the aggregate purchase price of all
Notes or portions thereof accepted for payment and any accrued and unpaid
interest and Liquidated Damages, if any, on such Notes as of the Purchase
Date; and (3) deliver or cause to be delivered to the applicable Trustee the
Notes so accepted together with an officer's certificate stating the Notes or
portions thereof tendered to the Company. The Paying Agent shall promptly mail
to each holder of Notes so accepted payment in an amount equal to the purchase
price for such Notes and any accrued and unpaid interest and Liquidated
Damages, if any, on such Notes as of the Purchase Date, and the applicable
Trustee shall promptly authenticate and mail (or cause to be transferred by
book-entry) to such holder a new Note equal in principal amount to any
unpurchased portion of the Notes and any Note not accepted for
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<PAGE>
payment in whole or in part shall be promptly returned to the holder, provided
that each such new Note shall be in a principal amount of $1,000 or integral
multiples thereof. The Company will publicly announce the results of the Offer
on or as soon as practicable after the Purchase Date.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations to the extent such laws and regulations are
applicable to any Offer. To the extent that the provisions of any of the
securities laws or regulations conflict with provisions of the Indentures, the
Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the Indentures by
virtue thereof.
Selection and Notice. In the event of a redemption or purchase of less than
all of the Notes, the Notes to be redeemed or purchased will be chosen by the
Trustee pro rata, by lot or any other method that the Trustee considers fair
and appropriate and, if the Notes are listed on any securities exchange, by a
method that complies with the requirements of such exchange, provided that, if
less than all of a holder's Note is to be redeemed or accepted for payment,
only principal amounts of $1,000 or multiples thereof may be selected for
redemption or accepted for payment. If the Company is not able to purchase all
of the Notes tendered pursuant to an Offer resulting from a Change of Control,
it will purchase Senior Notes and Discount Notes pro rata. On and after any
redemption or purchase date, interest and Liquidated Damages, if any, shall
cease to accrue on the Notes or portions thereof called for redemption or
accepted for payment. Notice of any redemption or offer to purchase will be
mailed at least 30 days but not more than 60 days before the redemption or
purchase date to each holder of Notes to be redeemed or purchased at such
holder's registered address.
RANKING
The Senior Notes and the Discount Notes will rank senior in right of payment
to all Indebtedness of the Company which, pursuant to its terms or the terms
of any agreement or instrument pursuant to which it is issued, is subordinated
in right of payment to any other Indebtedness of the Company, and will rank
pari passu in right of payment with all unsecured Indebtedness of the Company
which, pursuant to its terms or the terms of any agreement or instrument
pursuant to which it is issued, is not subordinated in right of payment to any
other Indebtedness of the Company. The Senior Notes and the Discount Notes
will be effectively subordinated to secured Indebtedness of the Company to the
extent of the assets securing such Indebtedness.
CERTAIN COVENANTS
The Indentures contain, among other things, the following covenants:
Limitation on Restricted Payments. Each Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on
account of the Company's or such Restricted Subsidiary's Capital Stock or
other Equity Interests (other than dividends or distributions payable in
Capital Stock or other Equity Interests (other than Disqualified Stock) of the
Company or a Restricted Subsidiary and other than dividends or distributions
payable by a Restricted Subsidiary to another Restricted Subsidiary or to the
Company); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any of its Restricted Subsidiaries (other
than any such Equity Interest purchased from the Company or any Restricted
Subsidiary for fair market value (as determined by the Board of Directors in
good faith)); (iii) voluntarily prepay Indebtedness that is subordinated to
the Notes issued under such Indentures, whether any such subordinated
indebtedness is outstanding on, or issued after, the date of original issuance
of the Notes, except as specifically permitted by the covenants of the
Indentures as described herein; or (iv) make any Restricted Investment (all
such dividends, distributions, purchases, redemptions, acquisitions,
retirements, prepayments and Restricted Investments being collectively
referred to as "Restricted Payments"), if, at the time of such Restricted
Payment:
(a) a Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof; or
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<PAGE>
(b) immediately after such Restricted Payment and after giving effect
thereto on a Pro Forma Basis, the Company shall not be able to issue $1.00
of additional Indebtedness pursuant to the first sentence of the
"Limitation on Incurrence of Indebtedness" covenant; or
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after the date of original issuance of the Notes,
without duplication, exceeds the sum of: (1) 50% of the aggregate
Consolidated Net Income (including, for this purpose, gains from Asset
Sales and, to the extent not included in Consolidated Net Income, any gain
from a sale or disposition of a Restricted Investment) of the Company (or,
in case such aggregate is a loss, 100% of such loss) for the period (taken
as one accounting period) from the beginning of the first fiscal quarter
commencing immediately after the date of original issuance of the Notes and
ended as of the Company's most recently ended fiscal quarter at the time of
such Restricted Payment, plus (2) 100% of the aggregate net cash proceeds
and the fair market value of any property or securities (as determined by
the Board of Directors in good faith) received by the Company from the
issue or sale of Capital Stock or other Equity Interests of the Company
subsequent to the date of original issuance of the Notes (other than (x)
Capital Stock or other Equity Interests issued or sold to a Restricted
Subsidiary and (y) the issuance or sale of Disqualified Stock), plus (3)
$5,000,000, plus (4) the amount by which the principal amount of and any
accrued interest on: (A) Indebtedness which is not subordinated in right of
payment to any other Indebtedness of the Company, or (B) any Indebtedness
of the Restricted Subsidiaries is reduced on the Company's consolidated
balance sheet upon the conversion or exchange subsequent to the date of
original issuance of the Notes of any such Indebtedness of the Company or
any Restricted Subsidiary (not held by the Company or any Restricted
Subsidiary) for Capital Stock or other Equity Interests (other than
Disqualified Stock) of the Company or any Restricted Subsidiaries (less the
amount of any cash, or the fair market value of any other property or
securities (as determined by the Board of Directors in good faith),
distributed by the Company or any Restricted Subsidiary (to persons other
than the Company or any other Restricted Subsidiary) upon such conversion
or exchange), plus (5) if any Non-Restricted Subsidiary is redesignated as
a Restricted Subsidiary, the value of the deemed Restricted Payment
resulting therefrom and determined in accordance with the second sentence
of the "Designation of Restricted and Non-Restricted Subsidiaries"
covenant; provided, however, that for purposes of this clause (5), the
value of any redesignated Non-Restricted Subsidiary shall be reduced by the
amount that any such redesignation replenishes or increases the amount of
Restricted Investments permitted to be made pursuant to clause (ii) of the
next sentence.
Notwithstanding the foregoing, each of the Indentures shall not prohibit as
Restricted Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
comply with all covenants of such Indenture (including, but not limited to,
the "Limitation on Restricted Payment" covenant);
(ii) making Restricted Investments at any time, and from time to time, in
an aggregate outstanding amount of $40,000,000 after the date of original
issuance of the Notes (it being understood that if any Restricted
Investment made after the date of original issuance of the Notes pursuant
to this clause (ii) is sold, transferred or otherwise conveyed to any
person other than the Company or a Restricted Subsidiary, the portion of
the net cash proceeds or fair market value of securities or properties paid
or transferred to the Company and its Restricted Subsidiaries in connection
with such sale, transfer or conveyance that relates or corresponds to the
repayment or return of the original cost of such a Restricted Investment
will replenish or increase the amount of Restricted Investments permitted
to be made pursuant to this clause (ii), so that up to $40,000,000 of
Restricted Investments may be outstanding under this clause (ii) at any
given time; provided that without otherwise limiting this clause (ii), any
Restricted Investment in a Subsidiary made pursuant to this clause (ii) is
made for fair market value (as determined by the Board of Directors in good
faith);
(iii) the repurchase, redemption or acquisition of the Company's stock
from the executives, management and employees or consultants of the Company
or its Subsidiaries pursuant to the terms of any subscription, stockholder
or other agreement or plan, up to an aggregate amount not to exceed
$5,000,000;
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(iv) any loans, advances, distributions or payments from the Company to
its Restricted Subsidiaries, or any loans, advances, distributions or
payments by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary, pursuant to intercompany Indebtedness, intercompany management
agreements, intercompany tax sharing agreements, and other intercompany
agreements and obligations;
(v) the purchase, redemption, retirement or other acquisition of (a) any
Indebtedness which is not subordinated in right of payment to any other
Indebtedness of the Company, and any Indebtedness of a Restricted
Subsidiary required by its terms to be purchased, redeemed, retired or
acquired with the net proceeds from asset sales (as defined in the
instrument evidencing such Indebtedness) or upon a change of control (as
defined in the instrument evidencing such Indebtedness) and (b) the Notes
pursuant to "Change of Control," or "Asset Sales" or "Optional Redemption"
provisions of the Indentures;
(vi) dividends and redemptions in respect of the Dura-Line Preferred
Stock pursuant to the Dura-Line Agreement;
(vii) to the extent constituting Restricted Payments, payments under the
Tax Sharing Agreement, New Subsidiary Consulting Agreement, Transition
Agreement and the JI Properties Services Agreement;
(viii) to the extent constituting Restricted Payments, payments under the
New Subsidiary Advisory Agreement, provided that such payments will not be
made and shall be accrued so long as any Default or Event of Default shall
have occurred and be continuing or shall occur as a consequence thereof,
and the Company's Obligations to pay such fees under the New Subsidiary
Advisory Agreement shall be subordinated expressly to the Company's
Obligations in respect of the Notes, and (b) indemnities, expenses and
other amounts under the New Subsidiary Advisory Agreement;
(ix) the redemption, repurchase, retirement or the acquisition of any
Capital Stock or other Equity Interests of the Company or any Restricted
Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other
Capital Stock or other Equity Interests of the Company or any Restricted
Subsidiary (other than any Disqualified Stock); provided that any net cash
proceeds that are utilized for any such redemption, repurchase, retirement
or other acquisition, and any Net Income resulting therefrom, shall be
excluded from clauses (c)(1) and (c)(2) of the preceding paragraph;
(x) the defeasance, redemption or repurchase of Indebtedness with the net
cash proceeds from an issuance of permitted Refinancing Indebtedness or the
substantially concurrent sale (other than to a Subsidiary of the Company)
of Capital Stock or other Equity Interests of the Company or of a
Restricted Subsidiary (other than Disqualified Stock); provided that any
net cash proceeds that are utilized for any such defeasance, redemption or
repurchase, and any Net Income resulting therefrom, shall be excluded from
clauses (c)(1) and (c)(2) of the preceding paragraph;
(xi) payment of fees, expenses and indemnities in respect of the
Company's and its Subsidiaries' directors and such payments to Parent (and
its parent companies) in respect of their directors, provided the aggregate
amount of such fees payable to all such directors does not exceed $250,000
in any fiscal year;
(xii) Restricted Investments received in consideration for the sale,
transfer or disposition by the Company or any Restricted Subsidiary of any
business, properties or assets belonging thereto, provided, that the
Company complies with the "Asset Sale" provisions of the Indentures;
(xiii) any Restricted Investment constituting securities or instruments
of a person issued in exchange for trade or other claims against such
person in connection with a financial reorganization or restructuring of
such person;
(xiv) to the extent constituting Restricted Payments, payments and
transactions in connection with the Old Offerings or the Company Formation
as described in this Prospectus; or
(xv) any Restricted Investment constituting an equity investment in a
Receivables Subsidiary; provided, that the aggregate amount of such equity
investments do not exceed $1,000,000.
Limitation on Incurrence of Indebtedness. The Indentures provide that the
Company will not, and will not permit any Restricted Subsidiary to, issue any
Indebtedness (other than the Indebtedness represented by the
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Notes) unless the Company's Cash Flow Coverage Ratio for its four full fiscal
quarters next preceding the date such additional Indebtedness is issued would
have been at least 2.0 to 1 determined on a Pro Forma Basis.
The foregoing limitations will not apply to the issuance of:
(i) Indebtedness of the Company and/or its Restricted Subsidiaries as
measured on such date of issuance in an aggregate principal amount
outstanding on any such date of issuance not exceeding up to the greater of
(a) $110.0 million aggregate principal amount pursuant to the New Credit
Agreement and (b) an aggregate principal amount up to the sum of: (A) 85%
of the book value of the Company's and its Restricted Subsidiaries'
Receivables on a consolidated basis, and (B) 65% of the book value of the
Company's and its Restricted Subsidiaries' inventories on a consolidated
basis;
(ii) Indebtedness of the Company and its Restricted Subsidiaries pursuant
to any Receivables Financing;
(iii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with leases, sale and leaseback transactions, purchase money
obligations, capital expenditures or similar financing transactions
relating to: (A) their properties, assets and rights as of the date of
original issuance of the Notes up to $20,000,000 in aggregate principal
amount, or (B) their properties, assets and rights acquired after the date
of original issuance of the Notes; provided that the aggregate principal
amount of such Indebtedness under this clause (iii)(B) does not exceed 100%
of the cost of such properties, assets and rights;
(iv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount up to $25,000,000 (all or any
portion of which may be issued as additional Indebtedness under the New
Credit Agreement); and
(v) Other Permitted Indebtedness.
Limitation on Liens. The Indentures provide that the Company shall not, and
shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Lien (other than
Permitted Liens) upon any property or asset now owned or hereafter acquired by
them, or any income or profits therefrom or assign or convey any right to
receive income therefrom; provided, however, that in addition to creating
Permitted Liens on its properties or assets, the Company and any of its
Restricted Subsidiaries may create any Lien upon any of their properties or
assets (including, but not limited to, any Capital Stock of its Subsidiaries)
if the Notes are equally and ratably secured.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indentures provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective, any encumbrance or
restriction on the ability of any Restricted Subsidiary to: (a) pay dividends
or make any other distributions on its Capital Stock or any other interest or
participation in, or measured by, its profits, owned by the Company or any
Restricted Subsidiary, or pay any Indebtedness owed to, the Company or any
Restricted Subsidiary; (b) make loans or advances to the Company; or (c)
transfer any of its properties or assets to the Company, except for such
encumbrances or restrictions existing under or by reason of:
(i) applicable law;
(ii) Indebtedness permitted (A) under the first sentence of the
"Limitation on Incurrence of Indebtedness" covenant, (B) under clauses (i),
(ii) and (iv) of the second paragraph of the "Limitation on Incurrence of
Indebtedness" covenant and clauses (i), (v), (vi), (vii), (ix), (x), (xi),
(xii) and (xiv) of the definition of Other Permitted Indebtedness, or (C)
Restricted Payments and agreements or instruments evidencing the Restricted
Payments permitted under the "Limitation on Restricted Payments" covenant;
(iii) customary provisions restricting subletting or assignment of any
lease or license of the Company or any Restricted Subsidiary;
(iv) customary provisions of any franchise, distribution or similar
agreement;
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(v) any instrument governing Indebtedness or any other encumbrance or
restriction of a person acquired by the Company or any Restricted
Subsidiary at the time of such acquisition, which encumbrance or
restriction is not applicable to any person, or the properties or assets of
any person, other than the person, or the property or assets of the person,
so acquired;
(vi) Indebtedness or other agreements existing on the date of original
issuance of the Notes;
(vii) any Refinancing Indebtedness of Indebtedness described in clauses
(i), (ii), (iii) and (iv) of the second paragraph of the "Limitation on
Incurrence of Indebtedness" covenant; and clauses (i), (v), (vi), (vii),
(ix), (x), (xi), (xii) and (xiv) of the definition of Other Permitted
Indebtedness; provided, that the encumbrances and restrictions created in
connection with such Refinancing Indebtedness are no more restrictive in
any material respect with regard to the interests of the holders of Notes
than the encumbrances and restrictions in the refinanced Indebtedness;
(viii) any restrictions, with respect to a Restricted Subsidiary, imposed
pursuant to an agreement that has been entered into for the sale or
disposition of the stock, business, assets or properties of such Restricted
Subsidiary;
(ix) the terms of any Indebtedness of the Company incurred in connection
with the "Limitation on Incurrence of Indebtedness" covenant; provided that
the terms of such Indebtedness constitute no greater encumbrance or
restriction on the ability of any Restricted Subsidiary to pay dividends or
make distributions, make loans or advances or transfer properties or assets
than is otherwise permitted by this covenant; and
(x) the terms of purchase money obligations, but only to the extent such
purchase money obligations restrict or prohibit the transfer of the
property so acquired.
Nothing contained in this covenant shall prevent the Company from entering
into any agreement or instrument providing for the incurrence of Permitted
Liens or restricting the sale or other disposition of property or assets of
the Company or any of its Restricted Subsidiaries that are subject to
Permitted Liens.
Limitation on Transactions With Affiliates. Each Indenture provides, except
as otherwise set forth in such Indenture, that neither the Company nor any of
its Restricted Subsidiaries may make any loan, advance, guarantee or capital
contribution to, or for the benefit of, or sell, lease, transfer or dispose of
any properties or assets to, or for the benefit of, or purchase or lease any
property or assets from, or enter into any or amend any contract, agreement or
understanding with, or for the benefit of, an Affiliate (each such transaction
or series of related transactions that are part of a common plan are referred
to as an "Affiliate Transaction"), except in good faith and on terms that are
no less favorable to the Company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction on an arm's
length basis from an unrelated person.
Each Indenture further provides that the Company will not, and will not
permit any Restricted Subsidiary to, engage in any Affiliate Transactions
involving aggregate payments or other transfers by the Company and its
Restricted Subsidiaries in excess of $5,000,000 (including cash and non-cash
payments and benefits valued at their fair market value by the Board of
Directors in good faith) unless the Company delivers to the Trustee:
(i) a resolution of the Board of Directors stating that the Board of
Directors (including a majority of the disinterested directors, if any),
has, in good faith, determined that such Affiliate Transaction complies
with the provisions of the Indentures; and
(ii) (A) with respect to any Affiliate Transaction involving the
incurrence of Indebtedness, a written opinion of a nationally recognized
investment banking or accounting firm, experienced in the review of similar
types of transactions, (B) with respect to any Affiliate Transaction
involving the transfer of real property, fixed assets or equipment, either
directly or by a transfer of 50% or more of the Capital Stock of a
Restricted Subsidiary which holds any such real property, fixed assets or
equipment, a written appraisal from a nationally recognized appraiser,
experienced in the review of similar types of transactions or (C) with
respect to any Affiliate Transaction not otherwise described in (A) and (B)
above, or in lieu of the opinions and appraisals referred to in (A) and (B)
above, a written certification from a nationally recognized
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professional or firm experienced in evaluating similar types of
transactions, in each case, stating that the terms of such transaction are
fair to the Company or such Restricted Subsidiary, as the case may be, and
the holders of the Notes from a financial point of view.
Notwithstanding the foregoing, this Affiliate Transactions covenant will not
apply to:
(i) transactions between the Company and any Restricted Subsidiary or
between Restricted Subsidiaries;
(ii) payments under the New Subsidiary Advisory Agreement, the New
Subsidiary Consulting Agreement, the Transition Agreement, the JI
Properties Services Agreement and the Tax Sharing Agreement, provided, that
any amendments, supplements, modifications, substitutions, renewals or
replacements of the foregoing agreements are approved by a majority of the
Board of Directors (including a majority of the disinterested directors, if
any) as fair to the Company and the holders of the Notes;
(iii) any Restricted Payments permitted pursuant to the "Limitation on
Restricted Payments" covenant;
(iv) reasonable compensation paid to officers, employees or consultants
of the Company or any Subsidiary as determined in good faith by the
Company's Board of Directors or executives;
(v) transactions in connection with a Receivables Financing; or
(vi) payments and transactions in connection with the Old Offerings and
the Company Formation as described in this Prospectus.
Limitation on Guarantees of Company Indebtedness by Restricted Subsidiaries.
The Company will not permit any Restricted Subsidiary, directly or indirectly,
to guarantee any Indebtedness of the Company other than the Notes (the "Other
Company Indebtedness"), unless (A) such Restricted Subsidiary
contemporaneously executes and delivers a supplemental indenture to each
Indenture providing for a guarantee of payment of the Notes then outstanding
under such Indenture by such Restricted Subsidiary to the same extent as the
guarantee (the "Other Company Indebtedness Guarantee") of the Other Company
Indebtedness (including waiver of subrogation, if any) and (B) if the Other
Company Indebtedness guaranteed by such Restricted Subsidiary is (i) Senior
Indebtedness, the guarantee for the Notes shall be pari passu in right of
payment with the Other Company Indebtedness Guarantee; and (ii) Subordinated
Indebtedness, the guarantee of the Notes shall be senior in right of payment
to the Other Company Indebtedness Guarantee; provided that the foregoing will
not limit or restrict guarantees issued by Restricted Subsidiaries in respect
of Indebtedness of other Restricted Subsidiaries.
Each guarantee of the Senior Notes and the Discount Notes created by a
Restricted Subsidiary pursuant to the provisions described in the foregoing
paragraph shall be in form and substance satisfactory to the Trustees and
shall provide, among other things, that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer permitted by the Indentures of (a) all of the Company's Capital Stock
in such Restricted Subsidiary, or (b) the sale of all or substantially all of
the assets of the Restricted Subsidiary and upon the application of the Net
Proceeds from such sale in accordance with the requirements of the "Asset
Sales" provisions described herein; or (ii) the release or discharge of the
Other Company Indebtedness Guarantee that resulted in the creation of such
guarantee of the Notes, except a discharge or release by or as a result of
payment under such Other Company Indebtedness Guarantee.
Designation of Restricted and Non-Restricted Subsidiaries. The Indentures
provide that, subject to the exceptions described below, from and after the
date of original issuance of the Notes, the Company may designate any existing
or newly formed or acquired Subsidiary as a Non-Restricted Subsidiary;
provided that (i) either (A) the Subsidiary to be so designated has total
assets of $1,000,000 or less or (B) immediately before and after giving effect
to such designation on a Pro Forma Basis, (1) the Company could incur $1.00 of
additional Indebtedness pursuant to the first sentence of the "Limitation on
Incurrence of Indebtedness" covenant determined on a Pro Forma Basis; and (2)
no Default or Event of Default shall have occurred and be continuing, or shall
occur as a consequence thereof, and (ii) all transactions between the
Subsidiary to be so designated and its Affiliates remaining in effect are
permitted pursuant to the "Limitation on Transactions with Affiliates"
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covenant. Any investment made by the Company or any Restricted Subsidiary in a
Subsidiary which is redesignated from a Restricted Subsidiary to a Non-
Restricted Subsidiary shall be considered as having been a Restricted Payment
(to the extent not previously included as a Restricted Payment) made on the
day such Subsidiary is designated as a Non-Restricted Subsidiary in the amount
of the greater of (i) the fair market value (as determined by the Board of
Directors of the Company in good faith) of the Equity Interests of such
Subsidiary held by the Company and its Restricted Subsidiaries on such date;
and (ii) the amount of the Investments determined in accordance with GAAP made
by the Company and any of its Restricted Subsidiaries in such Subsidiary.
A Non-Restricted Subsidiary may be redesignated as a Restricted Subsidiary.
The Company may not, and may not permit any Restricted Subsidiary to, take any
action or enter into any transaction or series of transactions that would
result in a Person becoming a Restricted Subsidiary (whether through an
acquisition, the redesignation of a Non-Restricted Subsidiary or otherwise,
but not including through the creation of a new Restricted Subsidiary) unless,
immediately before and after giving effect to such action, transaction or
series of transactions on a Pro Forma Basis, (a) the Company could incur at
least $1.00 of additional Indebtedness pursuant to the first sentence of
"Limitation on Incurrence of Indebtedness" and (b) no Default or Event of
Default shall have occurred and be continuing or shall occur as a consequence
thereof.
The designation of a Subsidiary as a Restricted Subsidiary or the removal of
such designation is required to be made by a resolution adopted by a majority
of the Board of Directors of the Company stating that the Board of Directors
has made such designation in accordance with the Senior Note Indenture, and
the Company is required to deliver to the Senior Note Trustee such resolution
together with an Officers' Certificate certifying that the designation
complies with the Senior Note Indenture. Such designation will be effective as
of the date specified in the applicable resolution, which may not be before
the date the applicable Officers' Certificate is delivered to the Senior Note
Trustee.
The sale and transfer of a foreign Restricted Subsidiary to a Non-Restricted
Subsidiary and the subsequent redesignation of such foreign Restricted
Subsidiary as a Non-Restricted Subsidiary as contemplated by the definition of
"Restricted Subsidiary" will not be considered a redesignation of a Restricted
Subsidiary for purposes of this covenant.
MERGER OR CONSOLIDATION
Each Indenture provides that the Company shall not consolidate or merge with
or into, or sell, lease, convey or otherwise dispose of all or substantially
all of its assets to, any Person (any such consolidation, merger or sale being
a "Disposition") unless: (a) the successor corporation of such Disposition or
the person to which such Disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state thereof
or the District of Columbia; (b) the successor corporation of such Disposition
or the corporation to which such Disposition shall have been made expressly
assumes the Obligations of the Company, pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustees, under such Indenture and
the related Notes; (c) immediately after such Disposition, no Default or Event
of Default shall exist; and (d) the corporation formed by or surviving any
such Disposition, or the corporation to which such Disposition shall have been
made, shall (i) have Consolidated Net Worth (immediately after the Disposition
but prior to giving effect on a Pro Forma Basis to any purchase accounting
adjustments or Restructuring Charges resulting from the Disposition) equal to
or greater than the Consolidated Net Worth of the Company immediately
preceding the Disposition, (ii) be permitted immediately after the Dispostion
by the terms of such Indenture to issue at least $1.00 of additional
Indebtedness determined on a Pro Forma Basis pursuant to the first sentence
under "Limitation on Incurrence of Indebtedness," and (iii) have a Cash Flow
Coverage Ratio, for the four fiscal quarters immediately preceding the
applicable Disposition, determined on a Pro Forma Basis, equal to or greater
than the actual Cash Flow Coverage Ratio of the Company for such four quarter
period. The limitations in each Indenture on the Company's ability to make a
Disposition described in this paragraph do not restrict the Company's ability
to sell less than all or substantially all of its assets, such sales being
governed by the "Asset Sales" provisions of each Indenture as described
herein.
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Prior to the consummation of any proposed Disposition, the Company shall
deliver to the Trustees an officers' certificate to the foregoing effect and
an opinion of counsel stating that the proposed Disposition and such
supplemental indenture comply with the Indentures.
PROVISION OF FINANCIAL INFORMATION TO HOLDERS OF NOTES
So long as the Notes are outstanding, whether or not the Company is subject
to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall submit for filing with the Commission the annual reports,
quarterly reports and other documents that the Company would have been
required to file with the Commission pursuant to Section 13 or 15(d) if the
Company were subject to such reporting requirements. The Company will also
provide to all holders of Notes and file with the Trustees copies of such
annual reports, quarterly reports and other documents required to be furnished
to stockholders generally under the Exchange Act. In addition, the Company has
agreed that, for so long as any Notes remain outstanding, they will furnish to
the holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
Each Indenture will provide that an Event of Default is: (a) a default for
30 days in payment of interest on, or Liquidated Damages, if any, with respect
to the applicable Notes; (b) a default in payment when due at maturity, upon
redemption or otherwise, of principal or premium, if any, with respect to the
applicable Notes; (c) the failure of the Company to comply with any of its
other agreements or covenants in, or provisions of, such Indenture or the
Notes outstanding under such Indenture and the Default continues for the
period, if applicable, and after the notice specified in the next paragraph;
(d) a default by the Company or any Restricted Subsidiary under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by the Company or
any Restricted Subsidiary (or the payment of which is guaranteed by the
Company or any Restricted Subsidiary), whether such Indebtedness or guarantee
now exists or shall be created hereafter, if (1) either (A) such default
results from the failure to pay principal of or interest on any such
Indebtedness at the Stated Maturity thereof or upon such Indebtedness becoming
due upon the redemption thereof or otherwise and such default continues for 30
days beyond any applicable grace period, or (B) as a result of such default
the maturity of such Indebtedness has been accelerated prior to its expressed
maturity, and (2) the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to pay
principal or interest thereon, at final maturity, or, because of the
acceleration of the maturity thereof, aggregates in excess of $10,000,000; (e)
a failure by the Company or any Restricted Subsidiary to pay final judgments
(not covered by insurance) aggregating in excess of $10,000,000 which
judgments a court of competent jurisdiction does not rescind, annul or stay
within 45 days after their entry and the Default continues for the period and
after the notice specified in the next paragraph; and (f) certain events of
bankruptcy or insolvency involving the Company or any Significant Subsidiary.
In the case of any Event of Default pursuant to clause (a) or (b) above
occurring by reason of any willful action (or inactions) taken (or not taken)
by or on behalf of the Company with the intention of avoiding payment of the
premium that the Company would have to pay pursuant to a redemption of Senior
Notes as described under "--Redemption of Notes--Optional Redemption," an
equivalent premium shall also become and be immediately, due and payable to
the extent permitted by law.
A Default under clause (c) (other than an Event of Default arising under the
"Merger or Consolidation," covenant which shall be an Event of Default with
the notice but without the passage of time specified in this paragraph) or
clause (e) is not an Event of Default under either Indenture until the Trustee
for such Indenture or the holders of at least 25% in principal amount of the
Notes then outstanding under such Indenture notifies the Company of the
Default and the Company does not cure the Default within 45 days after receipt
of the notice. A Default or Event of Default under clause (f) of the preceding
paragraph will result in the Notes automatically becoming due and payable
without further action or notice.
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Upon the occurrence of an Event of Default (other than one specified in
clause (f) of the preceding paragraph), the Senior Note Trustee or the holders
of at least 25% in principal amount of the then outstanding Senior Notes may
declare all Senior Notes to be due and payable immediately and, upon such
declaration, the principal of, premium and Liquidated Damages, if any, and any
accrued and unpaid interest on, all Senior Notes shall be due and payable
immediately. Upon the occurrence of an Event of Default, the Discount Note
Trustee or the holders of at least 25% in principal amount of the Discount
Notes then outstanding may declare all Discount Notes to be due and payable
immediately and, upon such declaration, the Accreted Value of the Discount
Notes, plus any accrued and unpaid interest from August 1, 2000 to the date of
any such declaration if such declaration occurs after August 1, 2000 shall be
due and payable immediately. In the event of an Event of Default arising from
certain events of bankruptcy or insolvency (as specified in clause (f) of the
preceding paragraph), the principal of, and any accrued and unpaid interest
on, all Senior Notes and the Accreted Value of all Discount Notes, plus any
accrued and unpaid interest from August 1, 2000 to the date of any such event
if such event occurs after August 1, 2000, shall ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Trustees or any holders of Notes. The holders of a majority in
principal amount of the Notes then outstanding under an Indenture, by notice
to the Trustee for such Indenture, may rescind any declaration of acceleration
of such Notes and its consequences (if the rescission would not conflict with
any judgment or decree) if all existing Events of Default (other than the
nonpayment of principal of or interest on such Notes that shall have become
due by such declaration) shall have been cured or waived. In the event of a
declaration of acceleration of the Discount Notes because of an Event of
Default specified in clause (d) in the first paragraph of "Events of Default
and Remedies" has occurred and is continuing, such declaration of acceleration
shall be automatically annulled if the holders of the Indebtedness described
in such clause (d) have rescinded the declaration of acceleration in respect
of such Indebtedness within 30 business days thereof and if (i) the annulment
of such acceleration would not conflict with any judgment or decree of a court
of competent jurisdiction; (ii) all existing Events of Default, except non-
payment of principal or interest that shall have become due solely because of
the acceleration, have been cured or waived; and (iii) the Company has
delivered an Officers' Certificate to the Discount Note Trustee to the effect
of clauses (i) and (ii). Subject to certain limitations, holders of a majority
in principal amount of the Notes then outstanding under an Indenture may
direct the Trustee for such Indenture in its exercise of any trust or power.
Holders of the Notes may not enforce the Indentures, except as provided
therein. A Trustee may withhold from holders of Notes notice of any continuing
Default or Event of Default (except a Default or an Event of Default in
payment of principal, premium, if any, or interest) if the Trustee determines
that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the Notes then
outstanding under an Indenture may on behalf of all holders of such Notes
waive any existing Default or Event of Default under such Indenture and its
consequences, except a continuing Default in the payment of the principal of,
or premium, if any, or interest on, such Notes, which may only be waived with
the consent of each holder of the Notes affected.
The Company is required to deliver to the Trustees annually a statement
regarding compliance with the Indentures and, upon an officer of the Company
becoming aware of any Default or Event of Default, a statement specifying such
Default or Event of Default.
NO PERSONAL LIABILITY OF OFFICERS, DIRECTORS, EMPLOYEES AND STOCKHOLDERS
No officer, employee, director or stockholder of the Company shall have any
liability for any Obligations of the Company under the Notes or the
Indentures, or for any claim based on, in respect of, or by reason of, such
Obligations or the creation of any such Obligation, except, in the case of a
Subsidiary, for an express guarantee or an express creation of any Lien by
such Subsidiary of the Company's Obligations under the Notes issued in
accordance with the Indentures. Each holder of the Notes by accepting a Note
waives and releases all such liability, and such waiver and release are part
of the consideration for issuance of the Notes. The foregoing waiver may not
be effective to waive liabilities under the Federal securities laws, and the
Commission is of the view that such a waiver is against public policy.
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SATISFACTION AND DISCHARGE OF THE INDENTURES
The Company at any time may terminate all its obligations under the Notes
and the Indentures ("legal defeasance"), except for certain obligations
(including those with respect to the defeasance trust (as defined herein) 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
(1) its obligations under the "Change of Control" and "Asset Sales" provisions
described herein and the covenants described under "Certain Covenants," and
certain other covenants in the Indentures, (2) the operation of clauses (c),
(d), (e) and (f) contained in the first paragraph of the "Events of Default
and Remedies" provisions described herein and (3) the limitations contained in
clauses (c) and (d) under the "Merger or Consolidation" provisions described
herein (collectively, a "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 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 shall not be accelerated
because of an Event of Default specified in clauses (c), (d), (e) or (f) in
the first paragraph under the "Events of Default and Remedies" provisions
described herein or because of the Company's failure to comply with clauses
(c) and (d) under the "Merger or Consolidation" provisions described herein.
To exercise either defeasance option with respect to the Notes outstanding
under an Indenture, the Company must irrevocably deposit in trust (the
"defeasance trust") with the Trustee for such Indenture money or U.S.
government obligations for the payment of principal of, and premium, interest
and Liquidated Damages, if any, on, such Notes to redemption or maturity, as
the case may be, and must comply with certain other conditions, including the
passage of 91 days and delivering to such Trustee an opinion of counsel to the
effect that holders of such Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance and
will be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been in 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).
TRANSFER AND EXCHANGE
Holders of Notes may transfer or exchange their Notes in accordance with the
Indentures, but the Paying Agent may require a holder, among other things, to
furnish appropriate endorsements and transfer documents, and to pay any taxes
and fees required by law or permitted by the Indentures, in connection with
any such transfer or exchange. Neither the Company nor the Paying Agent is
required to issue, register the transfer of, or exchange (i) any Notes
selected for redemption or purchase, or (ii) any Notes for a period of 15 days
before a selection of such Notes to be redeemed or purchased or between a
record date and the next succeeding interest payment date.
The registered holder of a Note will be treated as its owner for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, each Indenture may be amended or supplemented
with the consent of the holders of at least a majority in principal amount of
the Notes then outstanding under such Indenture, and any existing Default or
Event of Default (other than a payment default) or compliance with any
provision may be waived with the consent of the holders of a majority in
principal amount of the Notes then outstanding under such Indenture. Without
the consent of any holder of Notes, the Company and the Trustees may amend or
supplement the Indentures or the Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place
of certificated Notes, to provide for the assumption of the Company's
obligations in the case of a Disposition, to comply with the Trust Indenture
Act, or to make any change that does not materially adversely affect the
rights of any holder of Notes.
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Without the consent of each holder of Notes affected, the Company may not
(i) reduce the principal amount of Notes whose consent is necessary to effect
an amendment to an Indenture or waiver under an Indenture; (ii) reduce the
rate of or change the interest payment time of such Notes, or alter the
redemption provisions with respect thereto (other than the provisions relating
to the covenants described above under the caption "--Mandatory Offers to
Purchase Notes--Change of Control" and "--Asset Sales") or the price at which
the Company is required to offer to purchase such Notes; (iii) reduce the
principal of or change the fixed maturity of such Notes; (iv) make such Notes
payable in money other than stated in such Notes; (v) make any change in the
provisions concerning waiver of Defaults or Events of Default by holders of
such Notes, or rights of holders of such Notes to receive payment of principal
or interest; or (vi) waive any default in the payment of principal of, or
premium, if any, or interest on, such Notes.
CONCERNING THE TRUSTEES
Each Indenture will contain certain limitations on the rights of the
applicable Trustee, if it becomes a creditor of the Company, to obtain payment
of claims in certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. Each Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest (as defined in the Trust Indenture Act) it must eliminate
such conflict or resign.
The holders of a majority in principal amount of the Notes then outstanding
under an Indenture will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee
for that Indenture, subject to certain exceptions. Each Indenture provides
that if an Event of Default occurs (and has not been cured), the applicable
Trustee will be required, in the exercise of its power, to use the degree of
care of a prudent person in similar circumstances in the conduct of its own
affairs. Subject to the provisions of each Indenture, the applicable Trustee
will be under no obligation to exercise any of its rights or powers under its
Indenture at the request of any of the holders of the Notes issued under such
Indenture, unless such holders shall have offered to the Trustee security and
indemnity satisfactory to it.
CERTAIN DEFINITIONS
Set forth below are certain of the defined terms used in the Indentures.
Reference is made to the Indentures for the definition of all other terms.
"Accreted Value" means with respect to any Discount Note (i) as of any date
prior to August 1, 2000, the sum of (a) the initial offering price of the
Discount Notes, and (b) the portion of the original issue discount on such
Discount Note (which for this purpose shall be deemed to be the excess of the
principal amount over the initial offering price) that has been amortized with
respect to such Discount Note through such date, such original issue discount
to be amortized at the rate of 11 3/4% per annum (such percentage being
expressed as a percentage of the sum of the initial offering price plus
previously amortized original issue discount) using semi-annual compounding of
such rate on each August 1 and February 1, commencing from the date of
original issuance of the Discount Notes through such date, and (ii) on and
after August 1, 2000 the principal amount of such Discount Note.
"Affiliate" means any of the following: (i) any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company; (ii) any spouse, immediate family member or other
relative who has the same principal residence as any person described in
clause (i) above; (iii) any trust in which any such persons described in
clause (i) or (ii) above has a beneficial interest; and (iv) any corporation
or other organization of which any such persons described above collectively
own 50% or more of the equity of such entity.
"Asset Sale" means the sale, lease, conveyance or other disposition by the
Company or a Restricted Subsidiary of assets or property whether owned on the
date of original issuance of the Notes or thereafter acquired, in a single
transaction or in a series of related transactions, that are outside of the
ordinary course of
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business of the Company or such Restricted Subsidiary; provided that Asset
Sales will not include such sales, leases, conveyances or dispositions in
connection with (i) the sale or disposition of any Restricted Investment; (ii)
the sale or lease of equipment, inventory, accounts receivable or other assets
in the ordinary course of business; (iii) Receivables Financings; (iv) the
surrender or waiver of contract rights or the settlement, release or surrender
of contract, tort or other claims of any kind; (v) the grant of any license of
patents, trademarks, registration therefor and other similar intellectual
property; (vi) a transfer of assets by the Company or a Restricted Subsidiary
to any of the Company, a Restricted Subsidiary or a Non-Restricted Subsidiary;
(vii) the designation of a Restricted Subsidiary as a Non-Restricted
Subsidiary pursuant to the "Designation of Restricted and Non-Restricted
Subsidiaries" covenant, other than a Subsidiary excluded from the definition
of Restricted Subsidiary by clause (ii)(y) of such definition; (viii) the
sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company as permitted under "Merger or Consolidation;" or
(ix) Restricted Payments permitted by the "Limitations on Restricted Payments"
covenant.
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
"Capital Stock" means any and all shares, interests, participations or other
equivalents (however designated) of corporate stock, including any preferred
stock.
"Cash Flow" means, for any given period and person, the sum of, without
duplication, Consolidated Net Income, plus (a) the portion of Net Income
attributable to the minority interests in its Subsidiaries, to the extent not
included in calculating Consolidated Net Income, plus (b) provision for taxes
based on income or profits to the extent such income or profits were included
in computing Consolidated Net Income, plus (c) Consolidated Interest Expense,
to the extent deducted in computing Consolidated Net Income, plus (d) the
amortization of all intangible assets, to the extent such amortization was
deducted in computing Consolidated Net Income (including, but not limited to,
inventory write-ups, goodwill, debt and financing costs, and Incentive
Arrangements), plus (e) any non-capitalized costs incurred in connection with
financings, acquisitions or dispositions (including, but not limited to,
financing and refinancing fees, including those in connection with the Old
Offerings and the Company Formation, in each case to the extent deducted in
computing Consolidated Net Income), plus (f) all depreciation and all other
non-cash charges to the extent deducted in computing Consolidated Net Income,
plus (g) interest income, to the extent such income was not included in
computing Consolidated Net Income, plus (h) all dividend payments on preferred
stock (whether or not paid in cash) to the extent deducted in computing
Consolidated Net Income, plus (i) any extraordinary or non-recurring charge or
expense arising out of the implementation of SFAS 106 or SFAS 109 to the
extent deducted in computing Consolidated Net Income, plus (j) to the extent
not covered in clause (e) above, fees paid or payable in respect of the New
TJC Management Consulting Agreement to the extent deducted in computing
Consolidated Net Income, plus (k) the net loss of any person, other than those
of a Restricted Subsidiary, to the extent deducted in computing Consolidated
Net Income, plus (1) net losses in respect of any discontinued operations as
determined in accordance with GAAP, to the extent deducted in computing
Consolidated Net Income; provided, however, that if any such calculation
includes any period during which an acquisition or sale of a person or the
incurrence or repayment of Indebtedness occurred, then such calculation for
such period shall be made on a Pro Forma Basis.
"Cash Flow Coverage Ratio" means, for any given period and person, the ratio
of: (i) Cash Flow, divided by (ii) the sum of Consolidated Interest Expense
and the amount of all dividend payments on any series of preferred stock of
such person (except for dividends paid or payable in additional shares of
Capital Stock (other than Disqualified Stock)) in each case, without
duplication; provided, however, that if any such calculation includes any
period during which an acquisition or sale of a person or the incurrence or
repayment of Indebtedness occurred, then such calculation for such period
shall be made on a Pro Forma Basis.
"Change of Control" means the occurrence of any of the following: (i) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), excluding the Jordan Stockholders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire,
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whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the total Voting Stock of
the Company; or (ii) the Company consolidates with, or merges with or into,
another person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any person, or any
person consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where (A) the outstanding Voting Stock of the
Company is converted into or exchanged for (1) Voting Stock (other than
Disqualified Stock) of the surviving or transferee corporation or (2) cash,
securities and other property in an amount which could be paid by the Company
as a Restricted Payment under the Indenture and (B) immediately after such
transaction no "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), excluding the Jordan Stockholders, is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the surviving or
transferee corporation; or (iii) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by
such Board of Directors or whose nomination for election by the stockholders
of the Company was approved by a vote of a majority of the directors then
still in office who are entitled to vote to elect such new director and were
either directors at the beginning of such period or persons whose election as
directors or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then
in office.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Notes to require the Company to repurchase such Notes as a result of
a sale, lease, transfer, conveyance or other disposition of less than all of
the assets of the Company and its Subsidiaries to another person may be
uncertain.
"Commission" means the Securities and Exchange Commission.
"Consolidated Interest Expense" means, for any given period and person, the
aggregate of the interest expense in respect of all Indebtedness of such
person and its Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP (including amortization of original issue
discount on any such Indebtedness, all non-cash interest payments, the
interest portion of any deferred payment obligation and the interest component
of capital lease obligations, but excluding amortization of deferred financing
fees if such amortization would otherwise be included in interest expense);
provided, however, that for the purpose of the Cash Flow Coverage Ratio,
Consolidated Interest Expense shall be calculated on a Pro Forma Basis;
provided further, that any premiums, fees and expenses (including the
amortization thereof) payable in connection with the Offerings and the Company
Formation and the application of the net proceeds therefrom or any other
refinancing of Indebtedness will be excluded.
"Consolidated Net Income" means, for any given period and person, the
aggregate of the Net Income of such person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided,
however, that: (i) the Net Income of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, and (ii) Consolidated Net Income of any person will not
include, without duplication, any deduction for: (A) any increased
amortization or depreciation resulting from the write-up of assets pursuant to
Accounting Principles Board Opinion Nos. 16 and 17, as amended or supplemented
from time to time, (B) the amortization of all intangible assets (including
amortization attributable to inventory write-ups, goodwill, debt and financing
costs, and Incentive Arrangements), (C) any non-capitalized transaction costs
incurred in connection with financings, acquisitions or divestitures
(including, but not limited to, financing and refinancing fees), (D) any
extraordinary or nonrecurring charges relating to any premium or penalty paid,
write-off of deferred financing costs, or other financial recapitalization
charges in connection with redeeming or retiring any Indebtedness prior to its
stated maturity, and (E) any Restructuring Charges; provided,
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however, that for purposes of determining the Cash Flow Coverage Ratio,
Consolidated Net Income shall be calculated on a Pro Forma Basis.
"Consolidated Net Worth" with respect to any person means, as of any date,
the consolidated equity of the common stockholders of such person (excluding
the cumulated foreign currency translation adjustment), all determined on a
consolidated basis in accordance with GAAP, but without any reduction in
respect of the payment of dividends on any series of such person's preferred
stock if such dividends are paid in additional shares of Capital Stock (other
than Disqualified Stock); provided, however, that Consolidated Net Worth shall
also include, without duplication: (a) the amortization of all write-ups of
inventory; (b) the amortization of all intangible assets (including
amortization of goodwill, debt and financing costs, and Incentive
Arrangements); (c) any non-capitalized transaction costs incurred in
connection with financings, acquisitions or divestitures (including, but not
limited to, financing and refinancing fees); (d) any increased amortization or
depreciation resulting from the write-up of assets pursuant to Accounting
Principles Board Opinion Nos. 16 and 17, as amended and supplemented from time
to time; (e) any extraordinary or nonrecurring charges or expenses relating to
any premium or penalty paid, write-off of deferred financing costs, or other
financial recapitalization charges incurred in connection with redeeming or
retiring any Indebtedness prior to its stated maturity; (f) any Restructuring
Charges; and (g) any extraordinary or non-recurring charge arising out of the
implementation of SFAS 106 or SFAS 109; provided, however, that, in
determining Consolidated Net Worth for purposes of the provisions of the
Indentures relating to "Merger and Consolidation," Consolidated Net Worth
shall be calculated on a Pro Forma Basis.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) Indebtedness evidenced by (A) the
Notes and (B) the New Credit Agreement if such Indebtedness constitutes Senior
Indebtedness, irrespective of amount, and (ii) any other Senior Indebtedness
issued under a credit agreement or other credit facility (x) in an aggregate
outstanding principal amount of at least $50,000,000 (or, in the case of any
revolving credit agreement or other committed credit facility, having an
aggregate commitment of at least $50,000,000), and (y) that is specifically
designated by the Company in the instrument creating or evidencing such Senior
Indebtedness as "Designated Senior Indebtedness."
"Discount Notes" means the 11 3/4% Senior Discount Notes due 2007 of the
Company.
"Disqualified Stock" means any Capital Stock that by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part on, or
prior to, the maturity date of (i) the Senior Notes in the case of the Senior
Note Indenture; and (ii) the Discount Notes in the case of the Discount Note
Indenture.
"Dura-Line Agreement" means the Preferred Stock Agreement, among Dura-Line
and certain other persons, as in effect on the date of the original issuance
of the Notes.
"Equity Interests" means Capital Stock or partnership interests or warrants,
options or other rights to acquire Capital Stock or partnership interests (but
excluding (i) any debt security that is convertible into or exchangeable for
Capital Stock or partnership interests, and (ii) any other Indebtedness or
Obligations); provided, however, that Equity Interests will not include any
Incentive Arrangements or obligations or payments thereunder.
"Equity Offering" means a public or private offering by the Company and/or
its Subsidiaries for cash of Capital Stock or other Equity Interests and all
warrants, options or other rights to acquire Capital Stock, other than (i) an
offering of Disqualified Stock or (ii) Incentive Arrangements or obligations
or payments thereunder.
"GAAP" means generally accepted accounting principles, consistently applied,
as of the date of original issuance of the Notes. All financial and accounting
determinations and calculations under the Indentures will be made in
accordance with GAAP.
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"Hedging Obligations" means, with respect to any person, the Obligations of
such persons under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements; (ii) foreign exchange
contracts, currency swap agreements or similar agreements; and (iii) other
agreements or arrangements designed to protect such person against
fluctuations, or otherwise to establish financial hedges in respect of
exchange rates, currency rates or interest rates.
"Incentive Arrangements" means any earn-out agreements, stock appreciation
rights, "phantom" stock plans, employment agreements, non-competition
agreements, subscription and stockholders agreements and other incentive and
bonus plans and similar arrangements made in connection with acquisitions of
persons or businesses by the Company or any Restricted Subsidiary or the
retention of executives, officers or employees by the Company or any
Restricted Subsidiary.
"Indebtedness" means, with respect to any Person, any indebtedness, whether
or not contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the balance deferred and unpaid
of the purchase price of any property (including pursuant to capital leases),
except any such balance that constitutes an accrued expense or a trade
payable, and any Hedging Obligations, if and to the extent such indebtedness
(other than a Hedging Obligation) would appear as a liability upon a balance
sheet of such person prepared on a consolidated basis in accordance with GAAP,
and also includes, to the extent not otherwise included, the guarantee of
items which would be included within this definition; provided, however, that
"Indebtedness" will not include any Incentive Arrangements or obligations or
payments thereunder.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy or similar case or proceeding, or any reorganization, receivership,
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, or (ii) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company.
"Investment" means any capital contribution to, or other debt or equity
investment in, any Person.
"issue" means create, issue, assume, guarantee, incur or otherwise become
directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
person existing at the time such person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed
to be issued by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary. For this definition, the terms "issuing," "issuer," "issuance" and
"issued" have meanings correlative to the foregoing.
"Issue Date" means the date on which Notes were first issued.
"Jordan Stockholders" means John W. Jordan, II, and/or his heirs, executors
and administrators, and/or The John W. Jordan, II Revocable Trust, The Jordan
Family Trust and/or any other trust established by John W. Jordan, II whose
beneficiaries are John W. Jordan, II and/or his lineal descendants or other
relatives, as well as Jordan Industries, Inc., The Jordan Company and
Jordan/Zalaznick Capital Corporation and their respective affiliates,
principals, partners and employees, family members of any of the foregoing and
trusts for the benefit of any of the foregoing, including, without limitation,
MCIT PLC and Leucadia National Corporation and their respective Subsidiaries.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell and any filing of or
agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP, excluding, however, any gain
or loss, together with any related provision for taxes,
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realized in connection with any Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate amount
of cash proceeds (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, and including
any amounts received as disbursements or withdrawals from any escrow or
similar account established in connection with any such Asset Sale, but, in
either such case, only as and when so received) received by the Company or any
of its Restricted Subsidiaries in respect of such Asset Sale, net of: (i) the
cash expenses of such Asset Sale (including, without limitation, the payment
of principal, premium, if any, and interest on Indebtedness required to be
paid as a result of such Asset Sale (other than the Notes) and legal,
accounting, management, advisory and investment banking fees and sales
commissions); (ii) taxes paid or payable as a result thereof; (iii) any
portion of cash proceeds that the Company determines in good faith should be
reserved for post-closing adjustments, it being understood and agreed that on
the day that all such post-closing adjustments have been determined, the
amount (if any) by which the reserved amount in respect of such Asset Sale
exceeds the actual post-closing adjustments payable by the Company or any of
its Restricted Subsidiaries shall constitute Net Proceeds on such date; (iv)
any relocation expenses and pension, severance and shutdown costs incurred as
a result thereof; and (v) any deduction or appropriate amounts to be provided
by the Company or any of its Restricted Subsidiaries as a reserve in
accordance with GAAP against any liabilities associated with the asset
disposed of in such transaction and retained by the Company or such Restricted
Subsidiary after such sale or other disposition thereof, including, without
limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with such transaction.
"New Credit Agreement" means the credit agreement, dated July 25, 1997,
entered into by certain of the Company's Restricted Subsidiaries and certain
other subsidiaries and the lenders party thereto in their capacities as
lenders thereunder and BankBoston, N.A., as agent, together with all loan
documents and instruments thereunder (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including,
without limitation, increasing the amount of available borrowings thereunder,
and all Obligations with respect thereto, in each case, to the extent
permitted by the "Limitation on Incurrence of Indebtedness" covenant, or
adding Subsidiaries of the Company as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
"Non-Restricted Subsidiary" means any Subsidiary of the Company, other than
a Restricted Subsidiary.
"Notes" means the Senior Notes and/or the Discount Notes, as appropriate.
"Obligations" means, with respect to any Indebtedness, all principal,
interest, premium, penalties, fees, indemnities, expenses (including legal
fees and expenses), reimbursement obligations and other liabilities payable to
the holder of such Indebtedness under the documentation governing such
Indebtedness, and any other claims of such holder arising in respect of such
Indebtedness.
"Other Permitted Indebtedness" means:
(i) Indebtedness of the Company and its Restricted Subsidiaries existing
as of the date of original issuance of the Notes and all related
Obligations as in effect on such date (including the Notes);
(ii) Indebtedness of the Company and its Restricted Subsidiaries in
respect of bankers acceptances and letters of credit (including, without
limitation, letters of credit in respect of workers' compensation claims)
issued in the ordinary course of business, or other Indebtedness in respect
of reimbursement-type obligations regarding workers' compensation claims;
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(iii) Refinancing Indebtedness; provided that: (A) the principal amount
of such Refinancing Indebtedness shall not exceed the outstanding principal
amount of Indebtedness (including unused commitments) so extended,
refinanced, renewed, replaced, substituted or refunded plus any amounts
incurred to pay premiums, fees and expenses in connection therewith; (B)
the Refinancing Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed, replaced, substituted or
refunded; and (C) in the case of Refinancing Indebtedness of Subordinated
Indebtedness, such Refinancing Indebtedness shall be subordinated to the
Notes at least to the same extent as the Subordinated Indebtedness being
extended, refinanced, renewed, replaced, substituted or refunded;
(iv) intercompany Indebtedness of and among the Company and its
Restricted Subsidiaries (excluding guarantees by Restricted Subsidiaries of
Indebtedness of the Company not issued in compliance with "Limitation on
Guarantees of Company Indebtedness by Restricted Subsidiaries" covenant);
(v) Indebtedness of the Company and its Restricted Subsidiaries incurred
in making permitted Restricted Payments under clause (iv), (v) or (viii) of
the second sentence of the "Limitation on Restricted Payments" covenant;
(vi) Indebtedness of any Non-Restricted Subsidiary created after the date
of original issuance of the Notes; provided that such Indebtedness is
nonrecourse to the Company and its Restricted Subsidiaries and neither the
Company nor any of its Restricted Subsidiaries have any Obligations with
respect to such Indebtedness;
(vii) Indebtedness of the Company and its Restricted Subsidiaries under
Hedging Obligations;
(viii) Indebtedness of the Company and its Restricted Subsidiaries
arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts, which will not be, and will not be deemed to be,
inadvertent) drawn against insufficient funds in the ordinary course of
business;
(ix) Indebtedness of any person at the time it is acquired as a
Restricted Subsidiary; provided that such Indebtedness was not issued by
such person in connection with or in anticipation of such acquisition and
that such Indebtedness is nonrecourse to the Company and any other
Restricted Subsidiary and the Company and such other Restricted
Subsidiaries have no Obligations with respect to such Indebtedness;
(x) guarantees by Restricted Subsidiaries of Indebtedness of any
Restricted Subsidiary if the Indebtedness so guaranteed is permitted under
the Indentures;
(xi) guarantees by a Restricted Subsidiary of Indebtedness of the Company
if the Indebtedness so guaranteed is permitted under the Indentures and the
Notes are guaranteed by such Restricted Subsidiary to the extent required
by the "Limitation on Guaranties of Company Indebtedness by Restricted
Subsidiaries" covenant;
(xii) guarantees by the Company of Indebtedness of any Restricted
Subsidiary if the Indebtedness so guaranteed is permitted under the
Indentures;
(xiii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with performance, surety, statutory, appeal or similar bonds in
the ordinary course of business; and
(xiv) Indebtedness of the Company and its Restricted Subsidiaries in
connection with agreements providing for indemnification, purchase price
adjustments and similar obligations in connection with the sale or
disposition of any of their business, properties or assets.
"Permitted Liens" means:
(a) with respect to the Company and the Restricted Subsidiaries, (1)
Liens for taxes, assessments, governmental charges or claims which are
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have
been made therefor; (2) statutory Liens of landlords and carriers',
warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other
like Liens arising in
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the ordinary course of business and with respect to amounts not yet
delinquent or being contested in good faith by appropriate proceedings, if
a reserve or other appropriate provision, if any as shall be required in
conformity with GAAP shall have been made therefor; (3) Liens incurred on
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (4) Liens incurred on deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance and return of money bonds and other
obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (5)
easements, rights-of-way, zoning or other restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or any
of its Restricted Subsidiaries incurred in the ordinary course of business;
(6) Liens (including extensions, renewals and replacements thereof) upon
property acquired (the "Acquired Property") after the date of original
issuance of the Notes; provided that: (A) any such Lien is created solely
for the purpose of securing Indebtedness representing, or issued to
finance, refinance or refund, the cost (including the cost of construction)
of the Acquired Property, (B) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of the cost of the Acquired
Property, (C) such Lien does not extend to or cover any property other than
the Acquired Property and any improvements on such Acquired Property, and
(D) the issuance of the Indebtedness to purchase the Acquired Property is
permitted by the "Limitation on Incurrence of Indebtedness" covenant; (7)
Liens in favor of customs and revenue authorities arising as a matter of
law to secure payment of customs duties in connection with the importation
of goods; (8) judgment and attachment Liens not giving rise to an Event of
Default; (9) leases or subleases granted to others not interfering in any
material respect with the business of the Company or any of its Restricted
Subsidiaries; (10) Liens securing Indebtedness under Hedging Obligations;
(11) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or its Restricted Subsidiaries; (12) Liens arising out of consignment or
similar arrangements for the sale of goods entered into by the Company or
its Restricted Subsidiaries in the ordinary course of business; (13) any
interest or title of a lessor in property subject to any capital lease
obligation or operating lease; (14) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (15) Liens existing
on the date of original issuance of the Notes and any extensions, renewals
or replacements thereof; (16) any Lien granted to the Trustees under the
Indentures and any substantially equivalent Lien granted to any trustee or
similar institution under any indenture for Senior Indebtedness permitted
by the terms of the Indentures; and (17) additional Liens at any one time
outstanding in respect of properties or assets the aggregate fair market
value of which does not exceed $10,000,000 (the fair market value to be
determined on the date such Lien is granted on such properties or assets);
(b) with respect to the Restricted Subsidiaries, (1) Liens securing
Restricted Subsidiaries' reimbursement Obligations with respect to letters
of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof; (2) Liens securing
Indebtedness issued by Restricted Subsidiaries if such Indebtedness is (A)
under the New Credit Agreement, or (B) permitted by the first sentence of
the "Limitation on Incurrence of Indebtedness" covenant, clauses (i), (ii),
(iii) or (iv) of the second sentence of the "Limitation on Incurrence of
Indebtedness" covenant, or clauses (i), (iii) (to the extent the
Indebtedness subject to such Refinancing Indebtedness was subject to Liens)
(vii), (ix) or (x) of the definition of Other Permitted Indebtedness; (3)
Liens securing intercompany Indebtedness issued by any Restricted
Subsidiary to the Company or another Restricted Subsidiary; and (4) Liens
securing guarantees by Restricted Subsidiaries of Indebtedness issued by
the Company if such guarantees are permitted by clause (xi) (but only in
respect of the property, rights and assets of the Restricted Subsidiaries
issuing such guarantees) of the definition of Other Permitted Indebtedness;
and
(c) with respect to the Company, (1) Liens securing Indebtedness issued
by the Company under the New Credit Agreement if such Indebtedness is
permitted by the "Limitation on Incurrence of Indebtedness" covenant
(including, but not limited to, Indebtedness issued by the Company under
the New Credit Agreement pursuant to clause (i) and/or clause (v) of the
second sentence of "Limitation on Incurrence of Indebtedness" covenant);
(2) Liens securing Indebtedness of the Company if such
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Indebtedness is permitted by clauses (i), (iii) (to the extent the
Indebtedness subject to such Refinancing Indebtedness was subject to Liens)
or (vii) of the definition of Other Permitted Indebtedness; (3) Liens
securing guarantees by the Company of Indebtedness issued by Restricted
Subsidiaries if such Indebtedness is permitted by the "Limitation on
Incurrence of Indebtedness" covenant (including, but not limited to,
Indebtedness issued by Restricted Subsidiaries under the New Credit
Agreement pursuant to clause (i) and/or clause (v) of the second sentence
of the "Limitation on Incurrence of Indebtedness" covenant) and if such
guarantees are permitted by clause (xii) (but only in respect of
Indebtedness issued by the Restricted Subsidiaries under the New Credit
Agreement pursuant to the "Limitation on Incurrence of Indebtedness"
covenant) of the definition of Other Permitted Indebtedness; and (4) Liens
securing the Company's reimbursement obligations with respect to letters of
credit that encumber documents and other property relating to such letters
of credit and the products and proceeds thereof; provided, however, that,
notwithstanding any of the foregoing, the Permitted Liens referred to in
clause (c) of this definition shall not include any Lien on Capital Stock
of Restricted Subsidiaries held by the Company (as distinguished from Liens
on Capital Stock of Restricted Subsidiaries held by other Restricted
Subsidiaries) other than Liens securing (A) Indebtedness of the Company
issued under the New Credit Agreement pursuant to the "Limitation on
Incurrence of Indebtedness" covenant and any permitted Refinancing
Indebtedness of such Indebtedness, and (B) guarantees by the Company of
Indebtedness issued by Restricted Subsidiaries under the Credit Agreement
or the New Credit Agreement pursuant to the "Limitation on Incurrence of
Indebtedness" covenant and any permitted Refinancing Indebtedness of such
Indebtedness.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Income, Cash Flow, and Consolidated Interest Expense in connection with the
Cash Flow Coverage Ratio (including in connection with the "Limitation on
Restricted Payments" covenant, the incurrence of Indebtedness pursuant to the
first sentence of the "Limitation on Incurrence of Indebtedness" covenant and
Consolidated Net Worth for purposes of the "Merger or Consolidation"
covenant), giving pro forma effect to (x) any acquisition or sale of a person,
business or asset, related incurrence, repayment or refinancing of
Indebtedness or other related transactions, including any related
restructuring charges in respect of restructurings, consolidations,
compensation or headcount reductions or other cost savings which would
otherwise be accounted for as an adjustment permitted by Regulation S-X under
the Securities Act or on a pro forma basis under GAAP, or (y) any incurrence,
repayment or refinancing of any Indebtedness and the application of the
proceeds therefrom, in each case, as if such acquisition or sale and related
transactions, restructurings, consolidations, cost savings, reductions,
incurrence, repayment or refinancing were realized on the first day of the
relevant period permitted by Regulation S-X under the Securities Act or on a
pro forma basis under GAAP. Furthermore, in calculating the Cash Flow Coverage
Ratio, (1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the determination date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the determination date;
(2) if interest on any Indebtedness actually incurred on the determination
date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the determination date will be deemed to
have been in effect during the relevant period; and (3) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to interest rate swaps
or similar interest rate protection Hedging Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Receivables" means, with respect to any person or entity, all of the
following property and interests in property of such person or entity, whether
now existing or existing in the future or hereafter acquired or arising: (i)
accounts; (ii) accounts receivable (including, without limitation, all rights
to payment created by or arising from sales of goods, leases of goods or
leased or the rendition of services rendered no matter how evidenced, whether
or not earned by performance); (iii) all unpaid seller's or lessor's rights
(including, without limitation, recession, replevin, reclamation and stoppage
in transit, relating to any of the foregoing or arising therefrom); (iv) all
rights to any goods or merchandise represented by any of the foregoing
(including, without limitation, returned or repossessed goods); (v) all
reserves and credit balances with respect to any such accounts receivable or
account debtors; (vi) all letters of credit, security or guarantees for any of
the foregoing; (vii) all insurance
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policies or reports relating to any of the foregoing; (viii) all collection or
deposit accounts relating to any of the foregoing; (ix) all proceeds of any of
the foregoing; and (x) all books and records relating to any of the foregoing.
"Receivables Financing" means (i) the sale or other disposition of
Receivables arising in the ordinary course of business, or (ii) the sale or
other disposition of Receivables arising in the ordinary course of business to
a Receivables Subsidiary followed by a financing transaction in connection
with such sale or disposition of such Receivables.
"Receivables Subsidiary" means a Subsidiary of the Company that is
exclusively engaged in Receivables Financings and activities reasonably
related thereto.
"Refinancing Indebtedness" means (i) Indebtedness of the Company and its
Restricted Subsidiaries issued or given in exchange for, or the proceeds of
which are used to, extend, refinance, renew, replace, substitute or refund any
Indebtedness permitted under the Indentures or any Indebtedness issued to so
extend, refinance, renew, replace, substitute or refund such Indebtedness;
(ii) any refinancings of Indebtedness issued under the New Credit Agreement;
and (iii) any additional Indebtedness issued to pay premiums and fees in
connection with clauses (i) and (ii).
"Restricted Investment" means any Investment in any person, provided that
Restricted Investments will not include: (i) Investments in marketable
securities and other negotiable instruments to the extent permitted by the
Indentures; (ii) any Incentive Arrangements; (iii) Investments by any
Restricted Subsidiary in the Company; or (iv) Investments by the Company or
any Restricted Subsidiary in any Restricted Subsidiary (provided that any
Investment in a Restricted Subsidiary was made for fair market value (as
determined by the Board of Directors in good faith). The amount of any
Restricted Investment shall be the amount of cash and the fair market value at
the time of transfer of all other property (as determined by the Board of
Directors in good faith) initially invested or paid for such Restricted
Investment, plus all additions thereto, without any adjustments for increases
or decreases in value of, or write-ups, write-downs or write-offs with respect
to, such Restricted Investment.
"Restricted Subsidiary" means: (i) any Subsidiary of the Company existing on
the date of original issuance of the Notes, and (ii) any other Subsidiary of
the Company formed, acquired or existing after the date of original issuance
of the Notes that is designated as a "Restricted Subsidiary" by the Company
pursuant to a resolution approved by a majority of the Board of Directors;
provided, however, that the term "Restricted Subsidiary" shall not include (x)
any Restricted Subsidiary of the Company that has been redesignated by the
Company pursuant to a resolution approved by a majority of the Board of
Directors as a Non-Restricted Subsidiary in accordance with the "Designation
of Restricted and Non-Restricted Subsidiaries" covenant unless such Subsidiary
shall have subsequently been redesignated a Restricted Subsidiary or (y) any
Restricted Subsidiary of the Company that is organized under the laws of a
foreign jurisdiction and whose stock or ownership interests are sold or
transferred to a Non-Restricted Subsidiary of the Company pursuant to one or
more transactions that comply with the "Asset Sale" covenant and the
"Affiliate Transactions" covenant which is, at or after the time of such sale
or transfer, by a resolution approved by a majority of the Board of Directors,
designated a Non-Restricted Subsidiary.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or headcount reduction, or any other cost savings, of any persons
or businesses either alone or together with the Company or any Restricted
Subsidiary, as permitted by GAAP or Regulation S-X under the Securities Act.
"Senior Indebtedness" means: (i) all Obligations consisting of the principal
of and premium, if any, and accrued and unpaid interest (including post-
petition interest accruing on and after the commencement of any Insolvency or
Liquidation Proceeding, whether or not such interest is allowed in such
proceeding), whether existing on the date of original issuance of the Notes or
thereafter issued, in respect of: (A) Indebtedness of the Company for money
borrowed, and (B) Indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which the Company is responsible or
liable; (ii) all capitalized lease obligations
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of the Company; (iii) all Obligations of the Company: (A) for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (B) constituting Hedging Obligations, or (C)
issued as the deferred purchase price of property and all conditional sale
Obligations of the Company and all Obligations of the Company under any title
retention agreement; (iv) all guarantees of the Company with respect to
Obligations of other persons of the type referred to in clauses (ii) and (iii)
and with respect to the payment of dividends of other persons; and (v) all
Obligations of the Company consisting of modifications, renewals, extensions,
replacements and refundings of any Obligations described in clauses (i), (ii),
(iii) or (iv) unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such
Obligations are subordinated or junior in right of payment to the Notes;
provided, however, that Senior Indebtedness shall not be deemed to include:
(1) any Obligation of the Company to any Subsidiary, (2) any liability for
federal, state, local or other taxes owed or owing by the Company, (3) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including guarantees thereof or instruments evidencing
such liabilities), (4) any Indebtedness, guarantee or Obligation of the
Company that is contractually subordinate or junior in any respect to any
other Indebtedness, guarantee or Obligation of the Company, or (5) any
Indebtedness to the extent the same is incurred in violation of the Indenture.
Senior Indebtedness shall include all Obligations in respect of the Notes and
the Indentures.
"Senior Notes" means the 9 7/8% Senior Notes due 2007 of the Company.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"Significant Subsidiary" means (i) any Restricted Subsidiary of the Company
that would be a "significant subsidiary" as defined in clause (2) of the
definition of such term in Rule 1-02 of Regulation S-X under the Securities
Act and the Exchange Act, and (ii) any other Restricted Subsidiary of the
Company that is material to the business, earnings, prospects, assets or
condition, financial or otherwise, of the Company and its Restricted
Subsidiaries taken as a whole.
"Stated Maturity" means with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subordinated Indebtedness" means all Obligations of the type referred to in
clauses (i) through (v) of the definition of Senior Indebtedness, if it is
provided in the instrument creating or evidencing the same or pursuant to
which the same is outstanding that such Obligations are subordinate or junior
in right of payment to Senior Indebtedness.
"Subsidiary" of any person means any entity of which the Equity Interests
entitled to cast at least a majority of the votes that may be cast by all
Equity Interests having ordinary voting power for the election of directors or
other governing body of such entity are owned by such person (regardless of
whether such Equity Interests are owned directly by such person or through one
or more Subsidiaries).
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect the board of directors.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the then outstanding
principal amount of such Indebtedness into (ii) the sum of the product(s)
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payment of principal,
including payment at final maturity, in respect thereof, by (b) the number of
years (calculated to the nearest one-twelfth) which will elapse between such
date and the making of such payment.
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DESCRIPTION OF SENIOR PREFERRED STOCK
The Old Senior Preferred Stock was offered pursuant to the Old Offerings as
part of a unit (the "Preferred Stock Units") together with common stock of the
Company, $.01 par value per share (the "Common Stock"). Each Preferred Stock
Unit offered in the Old Offerings consisted of $1,000 aggregate liquidation
preference of Senior Preferred Stock and one share of Common Stock of JTP. The
Senior Preferred Stock and the Common Stock comprising each Preferred Stock
Unit are not separately tradeable until the earliest to occur of (i) August 1,
1998; (ii) such earlier date as may be determined by Jefferies; (iii) in the
event of a Change of Control, the date on which the Company mails notice
thereof to holders of the Senior Preferred Stock; (iv) in the event that the
Company elects to exchange the Senior Preferred Stock for Preferred Stock
Exchange Notes, the date on which the Company mails notice thereof to holders
of the Senior Preferred Stock; (v) in the event that the Company elects to
redeem the Senior Preferred Stock pursuant to the second paragraph set forth
under "--Redemption of Senior Preferred Stock," the date on which JTP mails
notice thereof to holders of the Senior Preferred Stock; and (vi) the date on
which the Company consummates a public offering of Common Stock (such earliest
date being the "Preferred Stock Separation Date"). It is expected that the
Preferred Stock Units will separate in connection with the Exchange Offer.
Thereafter, shares of Common Stock will continue to constitute restricted
securities and, consequently, will only be transferable if subsequently
registered under the Securities Act or an exemption from registration is
available. The Senior Preferred Stock is being registered as part of the
Exchange Offer.
SENIOR PREFERRED STOCK
The summary contained herein of certain provisions of the Senior Preferred
Stock does not purport to be complete and is qualified in its entirety by
reference to the provisions of the Certificate of Designation creating the
Senior Preferred Stock (the "Certificate of Designation"). The definitions of
certain terms used in the Certificate of Designation and in the following
summary are substantially the same as those used in the Indentures. See
"Description of Notes--Certain Definitions."
GENERAL
Subject to certain conditions, the Senior Preferred Stock is exchangeable
for Preferred Stock Exchange Notes at the option of the Company on any
dividend payment date. The Old Senior Preferred Stock is, and the New Senior
Preferred Stock when issued in the Exchange Offer will be, fully paid and non-
assessable, and the holders thereof do not have any subscription or preemptive
rights related thereto.
RANKING
The Old Senior Preferred Stock was and the New Senior Preferred Stock will,
with respect to dividend distributions and distributions upon the liquidation,
winding-up or dissolution of the Company, rank (i) senior to all classes of
Common Stock and to each series of Preferred Stock existing on the date of
this Prospectus (including the Junior Preferred Stock) and each other class of
capital stock or series of Preferred Stock issued by the Company established
after the date of this Prospectus the terms of which do not expressly provide
that such class or series will rank senior to or on a parity with the Senior
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up or dissolution of the Company (collectively referred
to with the Common Stock as "Junior Securities"); (ii) subject to certain
conditions, on a parity with any class of capital stock or series of Preferred
Stock issued by the Company, which is established after the date of this
Prospectus by the Board of Directors, the terms of which expressly provide
that such class or series will rank on a parity with the Senior Preferred
Stock as to dividend distributions and distributions upon the liquidation,
winding-up or dissolution of JTP (collectively referred to as "Parity
Securities"); and (iii) subject to certain conditions, junior to each class of
capital stock or series of Preferred Stock issued by the Company, which is
established after the date of this Prospectus by the Board of Directors, the
terms of which expressly provide that such class or series will rank senior to
the Senior Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up or dissolution of the Company (collectively referred
to as "Senior Securities"). In addition, creditors and stockholders of the
Company's subsidiaries will have priority over the Senior Preferred Stock with
respect to claims on the assets of such subsidiaries. The Senior Preferred
Stock will be subject to the issuance of series of Junior Securities, Parity
Securities and Senior Securities, provided that the Company may not issue any
new
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class of Parity Securities or Senior Securities without the approval of the
holders of at least 50% of the shares of Senior Preferred Stock then
outstanding, voting or consenting, as the case may be, together as one class,
except that without the approval of the holders of Senior Preferred Stock, the
Company may issue and have outstanding shares of Parity Securities issued from
time to time in exchange for, or the proceeds of which are used to redeem or
repurchase, any or all of the shares of Senior Preferred Stock or other Parity
Securities.
DIVIDENDS
Holders of Senior Preferred Stock will be entitled to receive, when, as and
if declared by the Board of Directors, out of funds legally available
therefor, dividends on the Senior Preferred Stock at a rate per annum equal to
13 1/4% of the liquidation preference per share of Senior Preferred Stock. All
dividends will be cumulative, whether or not earned or declared, on a daily
basis from the date of issuance of the Senior Preferred Stock and will be
payable on February 1, May 1, August 1 and November 1 of each year, commencing
on November 1, 1997. On or before August 1, 2002, JTP may, at its option, pay
dividends in cash or in additional fully paid and non-assessable shares of
Senior Preferred Stock having an aggregate liquidation preference equal to the
amount of such dividends. After August 1, 2002, dividends may be paid only in
cash. It is not expected that the Company will pay any dividends in cash for
any period ending on or prior to August 1, 2002. The terms of the Company's
debt instruments, including the Indentures and the New Credit Agreement
restrict the payment of cash dividends by the Company, and future agreements
may also restrict such payments. See "Risk Factors--Restrictive Covenants
Limiting the Company's Ability to Repay the Senior Notes, Discount Notes,
Senior Preferred Stock and Preferred Stock Exchange Notes," "Description of
Certain Indebtedness and Other Obligations" and "Description of Notes--Certain
Covenants." If any dividend (or portion thereof) payable on any dividend
payment date after August 1, 2002 is not declared or paid in full in cash on
such dividend payment date, the amount of such dividend that is payable and
that is not paid in cash on such date will increase at the rate of 13 1/4% per
annum from such dividend payment date until declared and paid in full.
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Parity Securities for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid in full
or declared and, if payable in cash, a sum in cash set apart for such payment
on the Senior Preferred Stock. If full dividends are not so paid, the Senior
Preferred Stock will share dividends pro rata with the Parity Securities. No
dividends may be paid or set apart for such payment on Junior Securities
(except dividends on Junior Securities in additional shares of Junior
Securities) and no Junior Securities or Parity Securities may be repurchased,
redeemed or otherwise retired nor may funds be set apart for payment with
respect thereto, if full cumulative dividends have not been paid on the Senior
Preferred Stock.
REDEMPTION OF SENIOR PREFERRED STOCK
Optional Redemption. The Senior Preferred Stock may be redeemed (subject to
contractual and other restrictions with respect thereto and to the legal
availability of funds therefor) at any time on or after August 1, 2002, in
whole or in part, at the option of the Company, at the redemption prices
(expressed as a percentage of the liquidation preference thereof) set forth
below, plus an amount in cash equal to all accumulated and unpaid dividends
(including an amount in cash equal to a prorated dividend for the period from
the dividend payment date immediately prior to the redemption date to the
redemption date), if redeemed during the 12-month period beginning August 1 of
each of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................... 106.6250%
2003........................................................... 104.4167%
2004........................................................... 102.2083%
2005 and thereafter............................................ 100.0000%
</TABLE>
In addition, JTP may redeem the Senior Preferred Stock in whole, but not in
part, at a redemption price equal to 113.25% of the liquidation preference
thereof, plus an amount in cash equal to all accumulated and unpaid dividends
(including an amount in cash equal to a prorated dividend for the period from
the dividend
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<PAGE>
payment date immediately prior to the redemption date to the redemption date),
with the proceeds of an Equity Offering, provided that such redemption shall
occur within 60 days of the date of the closing of such Equity Offering.
No optional redemption may be authorized or made (i) unless prior thereto
full unpaid cumulative dividends shall have been paid or a sum set apart for
such payment on the Senior Preferred Stock; or (ii) at less than 101% of the
liquidation preference of the Senior Preferred Stock at any time when the
Company is making or purchasing shares of Senior Preferred Stock under an
Offer in accordance with the provisions of "--Change of Control."
In the event of partial redemptions of Senior Preferred Stock, the shares to
be redeemed will be determined pro rata or by lot, as determined by the
Company. The terms of the Company's debt instruments, including the Indentures
and the New Credit Agreement, restrict the ability of the Company to redeem
the Senior Preferred Stock, and future agreements may similarly restrict
redemptions of Senior Preferred Stock by JTP. See "Description of Certain
Indebtedness and Other Obligations" and "Description of Notes--Certain
Covenants."
Mandatory Redemption. On August 1, 2009, the Company will be required to
redeem (subject to contractual and other restrictions with respect thereto and
to the legal availability of funds therefor) all outstanding shares of Senior
Preferred Stock at a price equal to the then effective liquidation preference
thereof, plus an amount in cash equal to all accumulated and unpaid dividends
(including an amount in cash equal to a prorated dividend for the period from
the dividend payment date immediately prior to the redemption date to the
redemption date).
Procedure for Redemption. On and after a redemption date, unless the Company
defaults in the payment of the applicable redemption price, dividends will
cease to accrue on shares of Senior Preferred Stock called for redemption and
all rights of holders of such shares will terminate except for the right to
receive the redemption price, without interest. The Company will send a
written notice of redemption by first class mail to each holder of record of
shares of Senior Preferred Stock, not fewer than 30 days nor more than 60 days
prior to the date fixed for such redemption. Shares of Senior Preferred Stock
issued and reacquired will, upon compliance with the applicable requirements
of Delaware law, have the status of authorized but unissued shares of
Preferred Stock of the Company undesignated as to series and may with any and
all other authorized but unissued shares of Preferred Stock of the Company be
designated or redesignated and issued or reissued, as the case may be, as part
of any series of Preferred Stock of the Company, except that any issuance or
reissuance of shares of Senior Preferred Stock must be in compliance with the
Certificate of Designation.
Change of Control. Upon the occurrence of a Change of Control, each holder
of Senior Preferred Stock will have the right to require the Company to
purchase all or any part of such holder's Senior Preferred Stock pursuant to
an Offer at a purchase price equal to 101% of the liquidation preference
thereof, plus an amount in cash equal to all accumulated and unpaid dividends
per share (including an amount in cash equal to a prorated dividend for the
period from the dividend payment date immediately prior to the repurchase date
to the repurchase date). Notice of an Offer must be mailed within 30 days
following a Change of Control, must remain open for at least 30 and not more
than 40 days and must comply with the requirements of Rule 14e-1 under the
Exchange Act and any other applicable securities laws and regulations.
None of the provisions of the Certificate of Designation relating to a
purchase upon a Change of Control are waivable by the Board of Directors. The
Company could, in the future, enter into certain transactions, including
certain recapitalizations of JTP, that would not constitute a Change of
Control, but would increase the amount of indebtedness outstanding at such
time. If a Change of Control were to occur, the Company could be obligated to
offer to repurchase all of the securities issued under the Indentures and to
repay all outstanding obligations, if any, under the New Credit Agreement, and
there can be no assurance that the Company would have sufficient funds to pay
the purchase price for all shares of Senior Preferred Stock that the Company
is required to purchase. In addition, certain events that may obligate the
Company to offer to repurchase all of the securities issued under the
Indentures or to repay all outstanding obligations, if any, under the New
Credit Agreement may not constitute a Change of Control under the Certificate
of Designation.
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<PAGE>
Except as described under "--Change of Control," the Certificate of
Designation does not contain provisions that permit the holders of Senior
Preferred Stock to require JTP to redeem the Senior Preferred Stock in the
event of a takeover, recapitalization or similar restructuring, including an
issuer recapitalization or similar transaction with management. Consequently,
the Change of Control provisions will not afford any protection in a highly
leveraged transaction, including such a transaction initiated by the Company,
management of the Company or an affiliate of the Company, if such transaction
does not result in a Change of Control. The Change of Control provisions may
not be waived by the Board of Directors without the consent of the holders of
at least a majority of the outstanding Senior Preferred Stock. See "--Voting
Rights."
In the event that the Company were required to purchase outstanding shares
of Senior Preferred Stock pursuant to an Offer, the Company expects that it
would need to seek third-party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that JTP would be able to obtain such financing. In addition, the
Company's ability to purchase the Senior Preferred Stock may be limited by
other then-existing borrowing agreements, including the Indentures and the New
Credit Agreement. See "Description of Notes--Certain Covenants" and
"Description of Certain Indebtedness and Other Obligations."
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, holders of Senior Preferred Stock will be entitled to be paid,
out of the assets of the Company available for distribution, the liquidation
preference per share, plus an amount in cash equal to all accumulated and
unpaid dividends thereon to the date fixed for liquidation, dissolution or
winding-up (including an amount equal to a prorated dividend for the period
from the last dividend payment date to the date fixed for liquidation,
dissolution or winding-up), before any distribution is made on any Junior
Securities, including, without limitation, the Common Stock and the Junior
Preferred Stock. If, upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the amounts payable with respect to
the Senior Preferred Stock and all other Parity Securities are not paid in
full, the holders of the Senior Preferred Stock and the Parity Securities will
share equally and ratably in any distribution of assets of JTP in proportion
to the full liquidation preference and accumulated and unpaid dividends to
which each is entitled. After payment of the full amount of the liquidation
preferences and accumulated and unpaid dividends to which they are entitled,
the holders of shares of Senior Preferred Stock will not be entitled to any
further participation in any distribution of assets of the Company. However,
neither the 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 Company nor the consolidation or merger of the Company with
or into one or more corporations will be deemed to be a liquidation,
dissolution or winding-up of the Company.
The Certificate of Designation does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the Senior
Preferred Stock, although such liquidation preference will be substantially in
excess of the par value of such shares of Senior Preferred Stock. In addition,
the Company is not aware of any provision of Delaware law or any controlling
decision of the courts of the State of Delaware (the state of incorporation of
JTP) that requires a restriction upon the surplus of the Company solely
because the liquidation preference of the Senior Preferred Stock will exceed
its par value. Consequently, there will be no restriction upon the surplus of
the Company solely because the liquidation preference of the Senior Preferred
Stock will exceed the par value and there will be no remedies available to
holders of the Senior Preferred Stock before or after the payment of any
dividend, other than in connection with the liquidation of the Company, solely
by reason of the fact that such dividend would reduce the surplus of the
Company to an amount less than the difference between the liquidation
preference of the Senior Preferred Stock and its par value.
VOTING RIGHTS
Holders of the Senior Preferred Stock will have no voting rights with
respect to general corporate matters except as provided by law or as set forth
in the Certificate of Designation. The Certificate of Designation provides
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<PAGE>
that (a) if (i) dividends on the Senior Preferred Stock are in arrears and
unpaid (and, in the case of dividends payable after August 1, 2002, are not
paid in cash) for four consecutive quarterly periods; (ii) the Company fails
to discharge any redemption obligation with respect to the Senior Preferred
Stock (whether or not JTP is permitted to do so by the terms of the
Indentures, the New Credit Agreement or any other obligation of the Company);
(iii) the Company fails to make an Offer to purchase all of the outstanding
shares of Senior Preferred Stock following a Change of Control (whether or not
the Company is permitted to do so by the terms of the Indentures, the New
Credit Agreement or any other obligation of the Company); (iv) a breach or
violation of the provisions described under the caption "--Certain Covenants"
occurs and the breach or violation continues for a period of 30 days or more;
or (v) a default occurs on the obligation to pay principal of, interest on or
any other payment obligation when due (a "Payment Default") at final maturity
on one or more classes of Indebtedness of JTP or any Subsidiary of the
Company, whether such Indebtedness exists on the Senior Preferred Stock Issue
Date or is incurred thereafter, having individually or in the aggregate an
outstanding principal amount of $10,000,000 or more, or any other Payment
Default occurs on one or more such classes of Indebtedness having individually
or in the aggregate an outstanding principal amount of $10,000,000 or more and
such class or classes of Indebtedness are declared due and payable prior to
their respective maturities, then the number of directors constituting the
Board of Directors will be adjusted to permit the holders of the majority of
the then outstanding Senior Preferred Stock, voting separately as a class, to
elect two directors, and (b) the approval of holders of a majority of the
outstanding shares of Senior Preferred Stock, voting as a separate class, will
be required for (i) any merger, consolidation or sale of assets of the
Company, except as permitted pursuant to the covenant entitled "Merger or
Consolidation;" and (ii) any modification of the Preferred Stock Exchange
Indenture. Each such event described in clause (a) above is referred to herein
as a "Voting Rights Triggering Event." Voting rights arising as a result of a
Voting Rights Triggering Event will continue until such time as all dividends
in arrears on the Senior Preferred Stock are paid in full (and after August 1,
2002, paid in cash) and any failure, breach or default referred to in clause
(a) is remedied.
In addition, the Certificate of Designation provides that, except as stated
above under "--Ranking," the Company will not authorize any class of Senior
Securities or Parity Securities without the affirmative vote or consent of
holders of at least a majority of the shares of Senior Preferred Stock then
outstanding, voting or consenting as the case may be, as one class. The
Certificate of Designation also provides that the Company may not amend the
Certificate of Designation so as to affect adversely the specified rights,
preferences, privileges or voting rights of holders of shares of the Senior
Preferred Stock, or authorize the issuance of any additional shares of Senior
Preferred Stock, without the affirmative vote or consent of the holders of at
least a majority of the then outstanding shares of Senior Preferred Stock,
voting or consenting, as the case may be, as one class. The Certificate of
Designation also provides that, except as set forth above, (a) the creation,
authorization or issuance of any shares of Junior Securities, Parity
Securities or Senior Securities or (b) the increase or decrease in the amount
of authorized capital stock of any class, including any Preferred Stock, shall
not require the consent of the holders of Senior Preferred Stock and shall not
be deemed to affect adversely the rights, preferences, privileges or voting
rights of holders of shares of Senior Preferred Stock.
Under Delaware law, holders of Senior Preferred Stock will be entitled to
vote as a class upon a proposed amendment to the Certificate of Incorporation,
whether or not entitled to vote thereon by the Certificate of Incorporation,
if the amendment would increase or decrease the par value of the shares of
such class, or alter or change the powers, preferences or special rights of
the shares or such class so as to affect them adversely.
CERTAIN COVENANTS
Merger or Consolidation. The provisions of the Certificate of Designation
relating to mergers and consolidations are substantially the same as the
provisions of the Indentures relating to such matters. See "Description of
Notes--Certain Covenants."
Junior Payments. The Certificate of Designation provides that the Company
will not, directly or indirectly, (i) declare or pay any dividend or make any
distribution on account of any Junior Securities (other than dividends
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<PAGE>
or distributions payable in Junior Securities (other than Disqualified
Stock)); (ii) purchase, redeem or otherwise acquire or retire for value any
Junior Securities; or (iii) make any Restricted Investment (all such
dividends, distributions, purchases, redemptions, acquisitions, retirements
and Restricted Investments being collectively referred to as "Junior
Payments"), if, at the time of such Junior Payment:
(a) a Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof; or
(b) all dividends on the Senior Preferred Stock payable on dividend
payment dates after August 1, 2002, have not been declared and paid in
cash.
Notwithstanding the foregoing, the Certificate of Designation permits Junior
Payments under circumstances substantially the same as the provisions of the
Indentures relating to Restricted Payments.
Transactions with Affiliates. The provisions of the Certificate of
Designation relating to transactions with Affiliates are substantially the
same as the provisions of the Indentures relating to such matters. See
"Description of Notes--Certain Covenants."
Reports. The provisions of the Certificate of Designation relating to the
provision of reports and information by the Company are substantially the same
as the provisions of the Indentures relating to such matters. See "Description
of Notes--Provision of Financial Information to Holders of Notes."
EXCHANGE
The Company may at its option exchange all, but not less than all, of the
then outstanding shares of Senior Preferred Stock into Preferred Stock
Exchange Notes on any dividend payment date, provided that on the date of such
exchange: (a) there are no contractual impediments to such exchange; (b) there
are legally available funds sufficient therefor; (c) a registration statement
relating to the Preferred Stock Exchange Notes shall have been declared
effective under the Securities Act prior to such exchange and shall continue
to be in effect on the date of such exchange or the Company shall have
obtained a written opinion of counsel that an exemption from the registration
requirements of the Securities Act is available for such exchange, and that
upon receipt of such Preferred Stock Exchange Notes pursuant to such exchange
made in accordance with such exemption, the holders (assuming such holder is
not an Affiliate of the Company) thereof will not be subject to any
restrictions imposed by the Securities Act upon the resale thereof and such
exemption is relied upon by JTP for such exchange; (d) the Preferred Stock
Exchange Indenture and the trustee thereunder shall have been qualified under
the Trust Indenture Act; (e) immediately after giving effect to such exchange,
no Default or Event of Default (each as defined in the Preferred Stock
Exchange Indenture) would exist under the Preferred Stock Exchange Indenture;
and (f) the Company shall have delivered a written opinion of counsel, dated
the date of exchange, regarding the satisfaction of the conditions set forth
in clauses (a), (b), (c) and (d) and certain other matters. The Company shall
send a written notice of exchange by mail to each holder of record of shares
of Senior Preferred Stock, which notice shall state, among other things, (i)
that the Company is exercising its option to exchange the Senior Preferred
Stock for Preferred Stock Exchange Notes pursuant to the Certificate of
Designation; and (ii) the date of exchange (the "Preferred Stock Exchange
Date"), which date shall not be less than 30 days nor more than 60 days
following the date on which such notice is mailed. On the Preferred Stock
Exchange Date, holders of outstanding shares of Senior Preferred Stock will be
entitled to receive a principal amount of Preferred Stock Exchange Notes equal
to the liquidation preference per share, plus an amount in cash equal to all
accrued and unpaid dividends (including an amount in cash equal to a prorated
dividend for the period from the dividend payment date immediately prior to
the Preferred Stock Exchange Date to the Preferred Stock Exchange Date), as
provided below.
The Preferred Stock Exchange Notes will be issued in registered form,
without coupons. Preferred Stock Exchange Notes issued in exchange for Senior
Preferred Stock will be issued in principal amounts of $1,000 and integral
multiples thereof to the extent possible, and will also be issued in principal
amounts less than $1,000 so
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<PAGE>
that each holder of Senior Preferred Stock will receive certificates
representing the entire amount of Preferred Stock Exchange Notes to which his
shares of Senior Preferred Stock entitle him, provided that the Company may,
at its option, pay cash in lieu of issuing Preferred Stock Exchange Notes in a
principal amount less than $1,000. On and after the Preferred Stock Exchange
Date, dividends will cease to accrue on the outstanding shares of Senior
Preferred Stock, and all rights of the holders of Senior Preferred Stock
(except the right to receive the Preferred Stock Exchange Notes, an amount in
cash equal to the accrued and unpaid dividends to the Preferred Stock Exchange
Date and if the Company so elects, cash in lieu of any Preferred Stock
Exchange Notes which is an amount that is not an integral multiple of $1,000)
will terminate. The person entitled to receive the Preferred Stock Exchange
Notes issuable upon such exchange will be treated for all purposes as the
registered holder of such Preferred Stock Exchange Notes.
The New Credit Agreement and the Indentures contain limitations with respect
to JTP's ability to issue the Preferred Stock Exchange Notes, and any future
credit agreements or other agreements relating to indebtedness to which the
Company becomes a party may contain similar limitations. See "Description of
Certain Indebtedness and Other Obligations" and "Description of Notes--Certain
Covenants."
The Company intends to comply with the provisions of Rule 13e-4 promulgated
pursuant to the Exchange Act in connection with any exchange, to the extent
applicable.
Registrar and Transfer Agent. Harris Trust and Savings Bank is the registrar
and transfer agent for the Senior Preferred Stock (the "Transfer Agent" and
collectively with the registrar and transfer agent for the Common Stock, the
"Transfer Agents").
DESCRIPTION OF PREFERRED STOCK EXCHANGE NOTES
The Preferred Stock Exchange Notes, if issued, will be issued under the
Exchange Note Indenture between the Company and First Trust National
Association, as trustee. The terms of the Preferred Stock Exchange Notes
include those stated in the Exchange Note Indenture and those made part of the
Exchange Note Indenture by reference to the Trust Indenture Act. The Preferred
Stock Exchange Notes will be subject to all such terms, and prospective
holders of the Preferred Stock Exchange Notes are referred to the Exchange
Note Indenture and the Trust Indenture Act for a statement of such terms. The
following summary of certain provisions of the Exchange Note Indenture does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the Trust Indenture Act and to all of the provisions of the
Exchange Note Indenture, including the definitions of certain terms therein
and those terms made a part of the Exchange Note Indenture by reference to the
Trust Indenture Act. The definitions of certain terms used in the Exchange
Note Indenture and in the following summary are substantially the same as
those used in the Indentures. See "Description of Notes--Certain Definitions."
GENERAL
The Preferred Stock Exchange Notes, if issued, will be general unsecured
obligations of the Company, subordinated to all existing and future Senior
Indebtedness (which, for purposes of the Preferred Stock Exchange Notes will
include Senior Subordinated Indebtedness), including the Senior Notes, the
Discount Notes and Indebtedness under the New Credit Agreement. The Preferred
Stock Exchange Notes will be issued in fully registered form only in
denominations of $1,000 and integral multiples thereof (other than as
described in "Description of Senior Preferred Stock--Exchange" or with respect
to additional Preferred Stock Exchange Notes issued in lieu of cash interest
as described herein).
Principal of, and premium, if any, and interest on the Preferred Stock
Exchange Notes will be payable, and the Preferred Stock Exchange Notes may be
presented for registration of transfer or exchange, at the office of the
Paying Agent in New York, New York. Holders of Preferred Stock Exchange Notes
must surrender their Preferred Stock Exchange Notes to the Paying Agent to
collect principal payments, and JTP may pay principal
103
<PAGE>
and interest by check and may mail checks to a holder's registered address;
provided that all payments with respect to Preferred Stock Exchange Notes, the
holders of which have given wire transfer instructions to the Company, will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the holders thereof. The Paying Agent may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection with certain transfers or exchanges. See "--Other
Provisions of the Exchange Note Indenture" and "Book Entry; Delivery and
Form." The Trustee will initially act as Paying Agent and Registrar. The
Company may change any Paying Agent and Registrar without prior notice to
holders of the Preferred Stock Exchange Notes, and the Company or any of its
Subsidiaries may act as Paying Agent or Registrar.
The Preferred Stock Exchange Notes will mature on August 1, 2009. Each
Preferred Stock Exchange Note will bear interest at the rate of 13 1/4% per
annum from the Exchange Note Issue Date or from the most recent interest
payment date to which interest has been paid or provided for. Interest will be
payable semi-annually in cash (or, on or prior to August 1, 2002, in
additional Preferred Stock Exchange Notes, at the option of the Company) in
arrears on February 1 and August 1 of each year, commencing with the first
such date after the Exchange Note Issue Date. Interest on the Preferred Stock
Exchange Notes will be computed on the basis of a 360-day year of twelve 30-
day months and the actual number of days elapsed.
SUBORDINATION AND RANKING
The Preferred Stock Exchange Notes will be subordinated to the prior payment
when due of the principal of, and premium, if any, and interest on, all
existing and future Senior Indebtedness of the Company, and will rank pari
passu in right of payment to all other Subordinated Indebtedness of JTP. The
Preferred Stock Exchange Notes will also effectively rank junior to all
indebtedness of the Company's subsidiaries. As of June 30, 1997, on a pro
forma basis after giving effect to the Old Offerings and the application of
the net proceeds therefrom, the aggregate principal amount of Senior
Indebtedness of the Company and indebtedness of the Company's subsidiaries
would have been approximately $281.4 million. The Exchange Note Indenture
permits the Company and its Subsidiaries to incur additional Indebtedness,
including Senior Indebtedness, subject to certain limitations. In addition,
under the terms of the Exchange Note Indenture, JTP's Subsidiaries may incur
certain Indebtedness pursuant to agreements that may restrict the ability of
such Subsidiaries to make dividends or other intercompany transfers to the
Company necessary to service the Company's obligations, including its
obligations under the Preferred Stock Exchange Notes. Any failure by the
Company to satisfy its obligations with respect to the Preferred Stock
Exchange Notes at maturity (with respect to payments of principal) or prior
thereto (with respect to payments of interest or required repurchases) would
constitute a default under the Exchange Note Indenture and the New Credit
Agreement and could cause a default under agreements governing other
indebtedness of the Company and its Subsidiaries. See "Risk Factors--Holding
Company Structure; Dependence on Subsidiaries; Limitations on Access to Cash
Flow of the Subsidiaries," "Description of Certain Indebtedness and Other
Obligations" and "--Certain Covenants."
Upon (a) any distribution to creditors of the Company in a liquidation or
dissolution of JTP or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property; or
(b) an assignment for the benefit of creditors or any marshaling of the
Company's assets and liabilities, the holders of Senior Indebtedness will be
entitled to receive payment in full of all Obligations due in respect of such
Senior Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Indebtedness) before
holders of the Preferred Stock Exchange Notes will be entitled to receive any
payment with respect to the Preferred Stock Exchange Notes. Until all
Obligations with respect to Senior Indebtedness are paid in full, any
distribution to which holders of the Preferred Stock Exchange Notes would be
entitled shall be made to holders of Senior Indebtedness. However, holders of
the Preferred Stock Exchange Notes may receive securities that are
subordinated, at least to the same extent as the Preferred Stock Exchange
Notes are subordinated to Senior Indebtedness and any securities issued in
exchange for Senior Indebtedness.
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In addition, the Company may not make any payment upon or in respect of the
Preferred Stock Exchange Notes (except in such subordinated securities) if (a)
a default in the payment of any principal, premium, if any, interest or other
Obligations with respect to any Designated Senior Indebtedness occurs and is
continuing beyond any applicable grace period (whether upon maturity, as a
result of acceleration or otherwise); or (b) any other default occurs and is
continuing with respect to any Designated Senior Indebtedness that permits
holders of such Designated Senior Indebtedness to accelerate its maturity, and
the Company and the Trustee receive a notice of such default (a "Payment
Blockage Notice") from the holders, or from the trustee, agent or other
representative of the holders, of any such Designated Senior Indebtedness.
Payments on the Preferred Stock Exchange Notes may and shall be resumed upon
the earlier of (i) the date upon which the default is cured or waived; or (ii)
in the case of a default referred to in clause (b) above, 179 days after the
date on which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Indebtedness has been accelerated. No new
period of payment blockage may be commenced within 360 days after the receipt
by the Trustee of any prior Payment Blockage Notice. No nonpayment default
that existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default shall have been cured or waived for a
period of not less than 180 days.
The Exchange Note Indenture will further require that the Company promptly
notify holders of Senior Indebtedness if payment on the Preferred Stock
Exchange Notes is accelerated because of an Event of Default. In addition, the
subordination provisions of the Exchange Note Indenture may not be amended
without the consent of all holders of Designated Senior Indebtedness.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, holders of the Preferred Stock Exchange Notes may
recover less ratably than other creditors of the Company.
REDEMPTION OF PREFERRED STOCK EXCHANGE NOTES
Optional Redemption. The Preferred Stock Exchange Notes may not be redeemed
at the option of the Company prior to August 1, 2002 other than out of the net
proceeds of one or more Equity Offerings, as and to the extent described
below. During the 12-month period beginning on August 1 of the years indicated
below, the Preferred Stock Exchange Notes will be redeemable, at the option of
the Company, in whole or in part, on at least 30 but not more than 60 days'
notice to each holder of Preferred Stock Exchange Notes to be redeemed, at the
redemption prices (expressed as percentages of the principal amount) set forth
below, plus any accrued and unpaid interest to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................... 106.6250%
2003........................................................... 104.4167%
2004........................................................... 102.2083%
2005 and thereafter............................................ 100.0000%
</TABLE>
In addition, at any time, the Company may redeem the Preferred Stock
Exchange Notes in whole, but not in part, at a redemption price equal to
113.25% of the principal amount thereof, plus accrued and unpaid interest
thereon to the applicable redemption date, with the proceeds of an Equity
Offering, provided that such redemption shall occur within 60 days of the date
of the closing of such Equity Offering.
Mandatory Redemption. Except as set forth under "--Mandatory Offer to
Purchase Preferred Stock Exchange Notes," JTP is not required to make any
mandatory redemption, purchase or sinking fund payments with respect to the
Preferred Stock Exchange Notes.
MANDATORY OFFER TO PURCHASE PREFERRED STOCK EXCHANGE NOTES
Change of Control. Upon the occurrence of a Change of Control, each holder
of Preferred Stock Exchange Notes shall have the right to require the Company
to purchase all or any part (equal to $1,000 or an integral
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multiple thereof) of such holder's Preferred Stock Exchange Notes pursuant to
an Offer (as defined herein) at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus any accrued and unpaid interest to
the date of purchase. The Company shall furnish to the Trustee, at least two
Business Days before notice of an Offer is mailed to all holders of Preferred
Stock Exchange Notes pursuant to the procedures described below under "--
Procedures for Offers," notice that the Offer is being made. Transactions
constituting a Change of Control are not limited to hostile takeover
transactions not approved by the current management of the Company. Except as
described under "--Change of Control," the Exchange Note Indenture does not
contain provisions that permit the holders of Preferred Stock Exchange Notes
to require the Company to purchase or redeem the Preferred Stock Exchange
Notes in the event of a takeover, recapitalization or similar restructuring,
including an issuer recapitalization or similar transaction with management.
Consequently, the Change of Control provisions will not afford any
protection in a highly leveraged transaction, including such a transaction
initiated by the Company, management of JTP or an affiliate of the Company, if
such transaction does not result in a Change of Control. In addition, because
the obligations of the Company with respect to the Preferred Stock Exchange
Notes are effectively subordinated to all secured Indebtedness of the Company
and all obligations of the Company's subsidiaries, existing or future secured
Indebtedness of JTP or obligations of the Company's subsidiaries may prohibit
the Company from repurchasing the Preferred Stock Exchange Notes upon a Change
of Control. Moreover, the ability of the Company to repurchase Preferred Stock
Exchange Notes following a Change of Control will be limited by the Company's
then-available resources. The Change of Control provisions may not be waived
by the Board of Directors of the Company or the Trustee without the consent of
holders of at least a majority in principal amount of the Preferred Stock
Exchange Notes. See "Description of Notes--Amendment, Supplement and Waiver."
JTP expects that prepayment of the Preferred Stock Exchange Notes following
a Change of Control would, and the exercise by holders of Preferred Stock
Exchange Notes of the right to require the Company to purchase Preferred Stock
Exchange Notes may, constitute a default under the New Credit Agreement or
other Indebtedness of the Company. The Exchange Note Indenture provides that,
prior to the mailing of the notice referred to below, but in any event within
30 days following any Change of Control, the Company covenants to (i) repay in
full and terminate all commitments under Indebtedness under the New Credit
Agreement and all other Senior Indebtedness the terms of which require
repayment upon a Change of Control or offer to repay in full and terminate all
commitments under all Indebtedness under the New Credit Agreement and all
other such Senior Indebtedness and to repay the Indebtedness owed to each
lender which has accepted such offer; or (ii) obtain the requisite consents
under the New Credit Agreement and all such other Senior Indebtedness to
permit the repurchase of the Preferred Stock Exchange Notes as provided below.
The Company shall first comply with the covenant in the immediately preceding
sentence before it shall be required to repurchase Preferred Stock Exchange
Notes pursuant to the provisions described below. JTP's failure to comply with
this covenant shall constitute an Event of Default described in clause (c) and
not in clause (b) under "--Events of Default and Remedies" below. In the event
a Change of Control occurs, the Company will likely be required to refinance
the Indebtedness outstanding under the New Credit Agreement, the Senior Notes
and the Preferred Stock Exchange Notes. If there is a Change of Control, any
Indebtedness under the New Credit Agreement could be accelerated. There can be
no assurance that sufficient funds will be available at the time of any Change
of Control to make any required repurchases of the Senior Notes and the
Preferred Stock Exchange Notes given the Company's high leverage. The
financing of the purchases of Senior Notes and Preferred Stock Exchange Notes
could additionally result in a default under the New Credit Agreement or other
indebtedness of the Company. The occurrence of a Change of Control may also
have an adverse impact on the ability of JTP to obtain additional financing in
the future. The ability of holders of Preferred Stock Exchange Notes to
require that the Company purchase Preferred Stock Exchange Notes upon a Change
of Control may deter persons from effecting a takeover of the Company. Except
as described above with respect to a Change of Control, the Exchange Note
Indenture does not contain provisions that permit the holders of Preferred
Stock Exchange Notes to require that the Company purchase or redeem the
Preferred Stock Exchange Notes in the event of a takeover, recapitalization or
similar restructuring. See "Risk Factors--Leverage and Coverage" and "--
Holding Company Structure; Dependence on Subsidiaries; Limitations on Access
to Cash Flow of the Subsidiaries."
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Procedures for Offers. Within 30 days following any Change of Control or
Asset Sale Trigger Date, subject to the provisions of the Exchange Note
Indenture, the Company shall mail to each holder of Preferred Stock Exchange
Notes at such holder's registered address a notice stating: (a) that an offer
(an "Offer") is being made pursuant to a Change of Control or an Asset Sale
Trigger Date, as the case may be, the length of time the Offer shall remain
open and the maximum principal amount of Preferred Stock Exchange Notes that
will be accepted for payment pursuant to such Offer; (b) the purchase price,
the amount of accrued and unpaid interest as of the purchase date, and the
purchase date (which shall be no earlier than 30 days and no later than 40
days from the date such notice is mailed (the "Purchase Date")); and (c) such
other information required by the Exchange Note Indenture and applicable law
and regulations.
On the Purchase Date for any Offer, the Company will, to the extent required
by the Exchange Note Indenture and such Offer, (1) in the case of an Offer
resulting from a Change of Control, accept for payment all Preferred Stock
Exchange Notes or portions thereof tendered pursuant to such Offer and, in the
case of an Offer resulting from an Asset Sale Trigger Date, accept for payment
the maximum principal amount of Preferred Stock Exchange Notes or portions
thereof tendered pursuant to such Offer that can be purchased out of the
Excess Proceeds; (2) deposit with the Paying Agent the aggregate purchase
price of all Preferred Stock Exchange Notes or portions thereof accepted for
payment and any accrued and unpaid interest on such Preferred Stock Exchange
Notes as of the Purchase Date; and (3) deliver or cause to be delivered to the
Trustee all Preferred Stock Exchange Notes tendered pursuant to the Offer. The
Paying Agent shall promptly mail to each holder the Preferred Stock Exchange
Notes or portions thereof accepted for payment an amount equal to the purchase
price for such Preferred Stock Exchange Notes plus any accrued and unpaid
interest thereon, and the Trustee shall promptly authenticate and mail (or
cause to be transferred by book-entry) to such holder of Preferred Stock
Exchange Notes accepted for payment in part a new Exchange Note equal in
principal amount to any unpurchased portion of the Preferred Stock Exchange
Notes and any Exchange Note not accepted for payment in whole or in part shall
be promptly returned to the holder thereof. JTP will publicly announce the
results of the Offer on or as soon as practicable after the Purchase Date.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rule 14e-1, in connection with an
Offer required to be made by the Company to repurchase the Preferred Stock
Exchange Notes as a result of a Change of Control or an Asset Sale Trigger
Date. To the extent that the provisions of any securities laws or regulations
conflict with provisions of the Exchange Note Indenture, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under the Exchange Note Indenture by
virtue thereof.
Selection and Notice. In the event of a redemption or purchase of less than
all of the Preferred Stock Exchange Notes, the Preferred Stock Exchange Notes
to be redeemed or purchased will be chosen by the Trustee pro rata, by lot or
by any other method that the Trustee considers fair and appropriate and, if
the Preferred Stock Exchange Notes are listed on any securities exchange, by a
method that complies with the requirements of such exchange; provided that, if
less than all of a holder's Preferred Stock Exchange Notes are to be redeemed
or accepted for payment, only principal amounts of $1,000 or multiples thereof
may be selected for redemption or accepted for payment. On and after any
redemption or purchase date, interest shall cease to accrue on the Preferred
Stock Exchange Notes or portions thereof called for redemption or accepted for
payment. Notice of any redemption or offer to purchase will be mailed at least
30 days but not more than 60 days before the redemption or purchase date to
each holder of Preferred Stock Exchange Notes to be redeemed or purchased at
such holder's registered address.
CERTAIN COVENANTS
The Exchange Note Indenture contains, among other things, the following
covenants:
Limitation on Restricted Payments. The Exchange Note Indenture contains
provisions relating to the making of Restricted Payments that are
substantially the same as the provisions of the Indentures relating to such
matters. See "Description of Notes--Certain Covenants."
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Limitation on Transactions With Affiliates. The Exchange Note Indenture
contains provisions relating to transactions with Affiliates that are
substantially the same as the provisions of the Indentures relating to such
matters. See "Description of Notes--Certain Covenants."
MERGER OR CONSOLIDATION
The Exchange Note Indenture contains provisions relating to mergers and
consolidations that are substantially the same as the provisions of the
Indentures relating to such matters. See "Description of Notes--Certain
Covenants."
PROVISION OF FINANCIAL INFORMATION TO HOLDERS OF PREFERRED STOCK EXCHANGE
NOTES
So long as the Preferred Stock Exchange Notes are outstanding, whether or
not the Company is subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall submit for filing with the
Commission the annual reports, quarterly reports and other documents relating
to the Company and its Restricted Subsidiaries that JTP would have been
required to file with the Commission pursuant to Section 13 or 15(d) if the
Company were subject to such reporting requirements. The Company will also
provide to all holders of Preferred Stock Exchange Notes and file with the
Trustee copies of such annual reports, quarterly reports and other documents
required to be furnished to stockholders generally under the Exchange Act.
EVENTS OF DEFAULT AND REMEDIES
The Exchange Note Indenture contains provisions relating to Events of
Default that are substantially the same as the provisions of the Indentures
relating to such matters. See "Description of Notes--Events of Default and
Remedies."
OTHER PROVISIONS OF THE EXCHANGE NOTE INDENTURE
The Exchange Note Indenture includes other provisions that are substantially
the same with respect to the Preferred Stock Exchange Notes as those with
respect to the Notes set forth under "Description of Notes--No Personal
Liability of Officers, Directors, Employees and Stockholders," "--Satisfaction
and Discharge of the Indentures," "--Transfer and Exchange," "--Amendment,
Supplement and Waiver" and "--Concerning the Trustee."
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DESCRIPTION OF CAPITAL STOCK
The following summarizes certain provisions of the Certificate of
Incorporation and the By-Laws. Such summaries do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
of the provisions of the Certificate of Incorporation and the By-Laws,
including the definitions therein of certain terms.
GENERAL
The authorized capital stock of the Company consists of 1,000,000 shares of
Common Stock, 1,000,000 shares of preferred stock, $.01 par value per share
(the "Preferred Stock"), of which the Senior Preferred Stock constitute a
series, and 2,000 shares of Junior Preferred Stock. There is currently 999,500
shares of Common Stock, 25,000 shares of Senior Preferred Stock and 2,000
shares of Junior Preferred Stock outstanding. All outstanding shares of Common
Stock are fully paid and nonassessable.
COMMON STOCK
Each holder of shares of Common Stock is entitled to one vote per share on
all matters to be voted on by stockholders. The holders of Common Stock are
entitled to dividends and other distributions if, as and when declared by the
Board of Directors out of assets legally available therefor, subject to the
rights of holders of Preferred Stock and the restrictions, if any, imposed by
other indebtedness of the Company outstanding from time to time. See "Dividend
Policy."
Upon the liquidation, dissolution or winding up of JTP, the holders of
shares of Common Stock would be entitled to share ratably in the distribution
of all of the Company's assets after satisfaction of all its liabilities and
the payment of the liquidation preference of any outstanding shares of
Preferred Stock. The holders of Common Stock have no preemptive or other
subscription rights to purchase shares of capital stock of the Company, nor
are such holders entitled to the benefits of any sinking fund provisions.
PREFERRED STOCK
The Certificate of Incorporation authorizes the Board of Directors to create
and issue up to 1,000,000 shares of Preferred Stock in one or more series and
determine the rights and preferences of each series, to the extent permitted
by the Certificate of Incorporation and applicable law. Among other rights,
the Board of Directors may determine, without the further vote or action by
the Company's stockholders, (i) the number of shares constituting the series
and the distinctive designation of the series; (ii) the rate of dividends of
the series, and whether (and if so, on what terms and conditions) dividends
shall be cumulative (and if so, whether unpaid dividends shall compound or
accrue interest) or shall be payable in preference or in any other relation to
the dividends payable on any other class or classes of capital stock or any
other series; (iii) whether the series shall have voting rights in addition to
the voting rights provided by law and, if so, the terms and extent of such
voting rights; (iv) whether the shares of the series must or may be redeemed
and, if so, the terms and conditions of such redemption (including, without
limitation, the dates upon or after which the shares of the series must or may
be redeemed and the price or prices at which they must or may be redeemed,
which price or prices may be different in different circumstances or at
different redemption dates); (v) whether the shares of the series shall be
convertible or exchangeable and, if so, the terms and conditions of such
conversion or exchange (including without limitation the price or prices or
the rate or rates of conversion or exchange or any terms for adjustment
thereof); (vi) the amounts, if any, payable upon the shares of the series in
the event of voluntary liquidation, dissolution or winding up of the Company
in preference of shares of any other class or series and whether the shares of
the series shall be entitled to participate generally in distributions on the
Common Stock under such circumstances; (vii) the amounts, if any, payable upon
the shares of the series in the event of involuntary liquidation, dissolution
or winding up of JTP in preference of shares of any other class or series and
whether the shares of the series shall be entitled to participate generally in
distributions in the Common Stock under such
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circumstances; (viii) whether the shares of the series shall be entitled to
the benefits of a sinking fund for the redemption or purchase of the shares;
and (ix) any other relative rights, preferences, limitations and powers of the
series. Except for any difference so provided by the Board of Directors, the
shares of all series of Preferred Stock will rank on a parity with respect to
the payment of dividends and the distribution of assets upon liquidation. The
Board has designated 100,000 shares of Preferred Stock as Senior Preferred
Stock.
JUNIOR PREFERRED STOCK
Ranking. The Junior Preferred Stock ranks, with respect to dividend
distributions and distributions upon the liquidation, winding-up or
dissolution of the Company, (i) senior to the Common Stock and to each class
of capital stock or series of Preferred Stock established after the date of
this Offering Circular the terms of which do not expressly provide that such
class or series will rank senior to or on a parity with the Junior Preferred
Stock; (ii) subject to certain conditions, on a parity with any class of
capital stock or series of Preferred Stock, the terms of which expressly
provide that such class or series will rank on a parity with the Junior
Preferred Stock; and (iii) subject to certain conditions, junior to the Senior
Preferred Stock and each class of capital stock or series of Preferred Stock,
the terms of which expressly provide that such class or series will rank
senior to the Junior Preferred Stock.
Dividends. Commencing on the earlier to occur of the Mandatory Redemption
Date or the Early Redemption Date, holders of Junior Preferred Stock will be
entitled to receive, when, as and if declared by the Board of Directors, out
of funds legally available therefor, dividends on the Junior Preferred Stock
at a rate per annum equal to 10% of the liquidation preference per share of
Junior Preferred Stock. All dividends will be cumulative whether or not earned
or declared on a daily basis from the date of issuance of the Junior Preferred
Stock and will be payable quarterly in arrears on March 31, June 30, September
30 and December 31 of each year following the date dividends commence
accruing. Dividends, if and when declared, may be paid only in cash. The
Company does not anticipate paying cash dividends on the Junior Preferred
Stock should dividends become payable prior to September 30, 2002.
Mandatory Redemption. The Company will be obligated to redeem all
outstanding shares of Junior Preferred Stock (i) on August 1, 2002 (subject to
contractual and other restrictions with respect thereto and to the legal
availability of funds therefor) at a price equal to the then effective
Liquidation Value (as hereinafter defined) thereof, plus an amount in cash
equal to all accumulated and unpaid dividends (including an amount in cash
equal to a prorated dividend for the period from the dividend payment date
immediately prior to the redemption date to the redemption date), provided,
however, that if such redemption is not made because it would result in a
default or event of default under any Financing Obligation (as defined in the
Certificate of Incorporation), the Company will be obligated to make such
redemption upon the earlier of (x) the date on which such payment would no
longer result in any default or event of default under any Financing
Obligation and (y) August 1, 2010 (the "Final Redemption Date"); and (ii) the
closing of an Early Redemption Event (the "Early Redemption Date") at the
Early Redemption Price (as hereinafter defined) as of such closing; provided,
however, that if the Company fails to pay the Early Redemption Price for all
of the outstanding shares of Junior Preferred Stock upon an Early Redemption
Event because the payment thereof would result in a default or event of
default under any Financing Obligation, the Company will be obligated to make
such payment upon the earlier of (x) the date when such payment would no
longer result in any default or event of default under any Financing
Obligation, or (y) the Final Redemption Date.
Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding-up of JTP, holders of Junior Preferred Stock will be
entitled to be paid, out of the assets of the Company available for
distribution, the Liquidation Value per share, plus an amount in cash equal to
all accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal to a
prorated dividend for the period from the last dividend payment date to the
date fixed for liquidation, dissolution or winding-up), before any
distribution is made on any Junior Securities, including, without limitation,
Common Stock.
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Voting Rights. The holders of the Junior Preferred Stock are entitled to
vote on the election of directors and on each matter which the stockholders of
the Company shall be entitled to vote, voting together with the Common Stock
as a single class, with the holders of each share of Junior Preferred Stock
being entitled to 9,500 votes for each share held, entitling the holders of
the Junior Preferred Stock to 95% of the total combined voting power of the
Common Stock and the Junior Preferred Stock.
CERTAIN DEFINITIONS
"Early Redemption Event" means any of the following which occur prior to
August 1, 2002: (i) the sale by the Company or its stockholders of shares of
Common Stock pursuant to a registration statement (other than a registration
statement on Form S-4 or S-8, or any successor form thereto) that is filed and
declared effective under the Securities Act which provides for an aggregate
public offering involving gross proceeds of at least $25,000,000; (ii) the
closing of any merger, combination, consolidation or similar business
transaction involving the Company in which the holders of Common Stock
immediately prior to such closing are not the holders, directly or indirectly,
of a majority of the ordinary voting securities of the surviving person in
such transaction immediately after such closing; (iii) the closing of any sale
or transfer by JTP of all or substantially all of its assets to an acquiring
person in which the holders of Common Stock immediately prior to such closing
are not the holders of a majority of the ordinary voting securities of the
acquiring person immediately after such closings; or (iv) the closing of any
sale by the holders of Common Stock of an amount of Common Stock that equals
or exceeds a majority of the shares of Common Stock immediately prior to such
closing to a person in which the holders of the Common Stock immediately prior
to such closing are not the holders of a majority of the ordinary voting
securities of such person immediately after such closing.
"Early Redemption Price" shall equal the sum of (i) the Liquidation Value of
the Junior Preferred Stock immediately prior to the closing of the Early
Redemption Event plus (ii) the present value of 95% of the projected Net
Income (Loss) (as defined in the Certificate of Incorporation) of the Company
for the period between such closing and August 1, 2002, with such present
value determined using a discount rate equal to the weighted average cost of
indebtedness representing borrowed money of the Company at the time of the
Early Redemption Event, provided, that the amount in this clause (ii) will not
be less than zero. The projected Net Income (Loss) will be (i) determined by
the Board of Directors in its reasonable good faith based upon the projections
of the Company's financial results which shall be calculated on the basis of
management's good faith and reasonable assumptions; and (ii) calculated
without giving effect to the Early Redemption Event and any related
refinancing, recapitalization or other transactions.
"Liquidation Value" of all of the shares of Junior Preferred Stock will be
equal to the sum of (i) $20.0 million plus (ii) (A) for the period from the
date of issuance through August 1, 2002, plus or minus 95% of the cumulative
Net Income (Loss) for such period and (B) for the period from August 1, 2002
and thereafter, the amount of any preferred dividends thereon not paid on any
dividend payment date, whether or not declared, which shall be added to the
Liquidation Value at such dividend payment date; provided that, and
notwithstanding the foregoing, upon, in connection with and after the Early
Redemption Date, the Liquidation Value of the Junior Preferred Stock shall be
the Early Redemption Price and the amount of any preferred dividends thereon
not paid on any subsequent dividend payment date, whether or not declared,
which shall be added to such Liquidation Value as of such dividend payment
date. The Liquidation Value of each share of Junior Preferred Stock will be
the result of the Liquidation Value of all of the outstanding Junior Preferred
Stock divided by the number of outstanding shares of Junior Preferred Stock.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTIFICATE OF INCORPORATION AND BY-
LAWS
The Certificate of Incorporation and the By-Laws and Section 203 of the
Delaware General Corporation Law ("DGCL") contain certain provisions that may
make more difficult the acquisition of control of the Company by means of a
tender offer, open market purchase, proxy fight or otherwise. These provisions
are designed to encourage persons seeking to acquire control of the Company to
negotiate with the Board of
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Directors. However, these provisions could have the effect of discouraging a
prospective acquiror from making a tender offer or otherwise attempting to
obtain control of JTP. To the extent that these provisions discourage takeover
attempts, they could deprive stockholders of opportunities to realize takeover
premiums for their shares or could depress the market price of the shares.
Delaware General Corporation Law and Business Combination Provision. Section
203 of the DGCL, prohibits certain "business combination" transactions between
a corporation that has elected to be governed by such section, such as the
Company, and any "interested stockholder" for a period of three years after
the date on which the latter became an interested stockholder, unless (1)
prior to that date either the proposed business combination or the proposed
acquisition of stock resulting in its becoming an interested stockholder is
approved by the Board of Directors; (2) in the same transaction in which it
becomes an interested stockholder, the interested stockholder acquires at
least 85% of those shares of the voting stock of the corporation that are not
held by the directors, officers or certain employee stock plans; or (3) the
business combination with the interested stockholder is approved by the Board
of Directors and also approved at a stockholders' meeting by the affirmative
vote of the holders of at least two-thirds of the outstanding shares of the
corporation's voting stock other than shares held by the interested
stockholder. An "interested stockholder" is defined in Section 203 of the
DGCL, with certain exceptions, as any person that (i) is the owner of 15% or
more of the outstanding voting stock of a corporation; or (ii) is an affiliate
or associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which the determination is to be made
as to such person's status as an interested stockholder.
Availability of Shares of Capital Stock for Future Issuance. The
availability for issuance of shares of Preferred Stock and Common Stock by the
Company without further action by stockholders (except as may be required by
applicable stock exchange or NASDAQ Stock Market regulations, if the shares of
Common Stock are then listed on such exchange or stock market) could be viewed
as enabling the Board of Directors to make more difficult a change in control
of the Company, including by issuing warrants or rights to acquire shares of
Preferred Stock or Common Stock to discourage or defeat unsolicited stock
accumulation programs and acquisition proposals and by issuing shares in a
private placement or public offering to dilute or deter stock ownership of
persons seeking to obtain control of the Company. JTP has no present plans to
issue any shares of Preferred Stock or Common Stock other than as offered
hereby.
Special Meetings. The Certificate of Incorporation provides that, except as
otherwise required by law, special meetings of the stockholders can only be
called by a majority of the entire Board of Directors, the Chairman of the
Board of Directors or the Chief Executive Officer of the Company. Any call for
a special meeting must specify the matters to be acted upon at the meeting.
Other Constituencies Provision. The Certificate of Incorporation provides
that, in addition to any other consideration that the Board of Directors may
lawfully take into account, in determining whether to take or refrain from
taking corporate action on any matter, including proposing any matter to the
stockholders of the Company, the Board of Directors may take into account the
long-term as well as short-term interests of the Company and its stockholders
(including the possibility that these interests may be best served by the
continued independence of the Company), customers, employees and other
constituencies of the Company and its subsidiaries, including the effect upon
communities in which JTP and its subsidiaries do business. In considering the
foregoing and other pertinent factors, the Board of Directors is not required,
in considering the best interest of the Company, to regard any particular
corporate interest of any particular group affected by such action as
controlling.
The foregoing provisions of the Certificate of Incorporation may be changed
only by the affirmative vote of the holders of two-thirds of the votes that
could be cast by the holders of all shares of capital stock of the Company
entitled to vote on such matters at a meeting duly called for such purpose.
Stockholder Proposals. The By-Laws provide that, if a stockholder desires to
submit a proposal at an annual or special stockholders' meeting or to nominate
persons for election to the Board of Directors, the stockholder
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must submit written notice to the Company at least 60 days prior to the
anniversary date of the prior meeting or within ten days after notice of a
special meeting is sent or given to stockholders by the Company. The notice
must describe the proposal or nomination and set forth the name and address
of, the number of shares of stock held of record and beneficially by, the
stockholder. Notices of stockholder proposals must set forth the reasons for
conducting such business and any material interest of the stockholder in such
business. Director nomination notices must set forth the name and address of
the nominee, arrangements between the stockholder and the nominee and other
information as would be required under Regulation 14A of the Exchange Act. The
presiding officer of the meeting may refuse to acknowledge a proposal or
nomination not made in compliance with the procedures contained in the By-
Laws.
The advance notice requirements regulating stockholder nominations and
proposals may have the effect of precluding a contest for the election of
directors or the introduction of a stockholder proposal if the established
procedures are not followed.
The foregoing provisions of the By-Laws may be changed by the stockholders
only upon the affirmative vote of the holders of two-thirds of the votes that
could be cast by the holders of all shares of capital stock of JTP entitled to
vote on such matters at a meeting duly called for such purpose.
Registrar and transfer agent. Harris Trust and Savings Bank is the registrar
and transfer agent for the Common Stock.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth in the next paragraph, the New Securities to be
exchanged as set forth herein will initially be issued in the form of one or
more registered Global New Securities (the "Global New Securities"), each of
which will be deposited on the Expiration Date with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of Cede
& Co., as nominee of the Depositary (the "Global New Security Holder"). The
following are summaries of certain rules and operating procedures of the
Depositary which affect the Global New Securities.
New Securities that are issued as described below under "--Certificated New
Securities" will be issued in the form of registered definitive certificates
(the "Certificated New Securities"). Such Certificated New Securities may,
unless the Global New Security has previously been exchanged for Certificated
New Securities, be exchanged for an interest in the Global New Security
representing the principal amount of New Securities being transferred.
The Depositary has advised the Company that it is a limited-purpose trust
company created to hold securities for its participating organizations
(collectively, the "Participants" or the "Depositary's Participants") and to
facilitate the clearance and settlement of transactions in such securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants) that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global New Securities, the Depositary will
credit the accounts of Participants designated by the Initial Purchasers with
portions of the Global New Securities; and (ii) ownership of the New
Securities will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depositary (with respect
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to the interests of the Depositary's Participants), the Depositary's
Participants and the Depositary's Indirect Participants. The laws of some
states require that certain persons take physical delivery in definitive form
of securities that they own. Consequently, the ability to transfer New
Securities will be limited to such extent.
So long as the Global New Security Holder is the registered owner of any New
Securities, the Global New Security Holder will be considered the sole owner
of such securities. Except as provided below, owners of beneficial interests
in a Global New Security will not be entitled to have securities represented
by such Global New Security registered in their names, will not receive or be
entitled to receive physical delivery of Certificated New Securities, and will
not be considered the owners or Holders thereof under the Indentures or the
Certificate of Designation, as the case may be, for any purpose. As a result,
the ability of a person having a beneficial interest in securities represented
by a Global New Security to pledge such interest to persons or entities that
do not participate in the Depositary's system or to otherwise take actions in
respect of such interest, may be affected by the lack of a physical
certificate evidencing such interest. Accordingly, each QIB owning a
beneficial interest in a Global New Security must rely on the procedures of
the Depositary and, if such QIB is not a Participant or an Indirect
Participant, on the procedures of the Participant through which such QIB owns
its interest, to exercise any rights of a holder of such Global New Security.
Neither the Company, the Trustees nor Transfer Agents will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of Notes, Senior Preferred Stock or Common Stock, or
for maintaining, supervising or reviewing any records of the Depositary
relating to such securities.
Payments in respect of the Notes, Senior Preferred Stock or Common Stock
reistered in the name of a Global Holder on the applicable record date will be
payable by the Trustees or the Transfer Agents to or at the direction of such
Global Holder in its capacity as the registered holder. The Company, the
Trustees and the Transfer Agents may treat the persons in whose names the
Notes or shares of Senior Preferred Stock, and Common Stock including the
Global Securities, are registered as the owners thereof for the purpose of
receiving such payments and for all other purposes. Consequently, neither the
Company, the Trustees nor the Transfer Agents have or will have any
responsibility or liability for the payment of such amounts to beneficial
owners of such securities. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes, Senior
Preferred Stock or Common Stock will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Certificated New Securities
Subject to certain conditions, any person having a beneficial interest in
the Global New Security may, upon request to the Trustees or Transfer Agents,
exchange such beneficial interest for New Securities in the form of
Certificated New Securities. Upon any such issuance, the Trustees or Transfer
Agents are required to register such Certificated New Securities in the name
of, and cause the same to be delivered to, such person or persons (or the
nominee of any thereof). If (i) the Company notifies the Trustees or the
Transfer Agents in writing that the Depositary is no longer willing or able to
act as a depository and the Company is unable to locate a qualified successor
within 90 days; or (ii) the Company, at its option, notifies the Trustees or
the Transfer Agents in writing that it elects to cause the issuance of the
Notes, Senior Preferred Stock or Common Stock in definitive form then, upon
surrender by the relevant Global New Security Holder of its Global New
Security, Notes, Senior Preferred Stock or Common Stock in such form will be
issued to each person that such Global New Security Holder and the Depositary
identifies as the beneficial owner of the related securities. In addition,
subject to certain conditions, any person having a beneficial interest in the
Global New Security may, upon request to the Trustees or the Transfer Agents,
exchange such beneficial interest for Notes, Senior Preferred Stock or Common
Stock in definitive form. Upon any such issuance, the Trustees or the Transfer
Agents are required to register such securities in the name of, and cause the
same to be delivered to, such person or persons (or the nominee of any
thereof). Such securities would be issued in fully registered form.
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Same-Day Settlement and Payment
The Indentures or the Certificate of Designation, as the case may be, will
require that payments in respect of the Notes or Senior Preferred Stock
represented by the Global New Securities (including principal, premium,
interest and dividends) be made by wire transfer of immediately available
funds to the accounts specified by the Global New Security Holder. With
respect to Certificated New Securities, the Company will make all payments of
principal, premium, interest and dividends 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.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately following the Old Offerings, there were 999,500 shares of Common
Stock issued and outstanding. All of such shares are "restricted securities"
within the meaning of Rule 144 and may not be publicly resold, except in
compliance with the registration requirements of the Securities Act or
pursuant to an exemption from registration, including that provided by Rule
144. This Exchange Offer does not cover the shares of Common Stock forming
part of the Preferred Stock Units; consequently, all outstanding shares of
Common Stock are, and will continue to be, restricted securities.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted" shares
for at least one year, including a person who may be deemed an affiliate of
the Company, is entitled to sell within any three-month period a number of
shares of Common Stock that does not exceed the greater of 1% of the then-
outstanding shares of Common Stock of the Company, or the average weekly
trading volume of Common Stock during the four calendar weeks preceding the
date on which notice of the sale is filed with the Commission. Sales under
Rule 144 are subject to certain restrictions relating to manner of sale,
notice and the availability of current public information about the Company. A
person who is not an "affiliate" of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned shares for at least two
years, would be entitled to sell such shares under Rule 144(k) without regard
to the volume limitations, manner of sale provisions or notice or other
requirements of Rule 144. In addition, any employee, director or officer of,
or consultant to, the Company who purchased his or her shares pursuant to a
written compensatory plan or contract may be entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permit non-affiliates
to sell their Rule 701 shares without having to comply with the public
information, holding period, volume limitation or notice provisions of Rule
144, and permit affiliates to sell their Rule 701 shares without having to
comply with Rule 144's holding period restrictions, in each case commencing
October 19, 1997.
Prior to the date of this Prospectus, there has been no public market for
the Common Stock. JTP does not presently intend to apply for listing of the
Common Stock on a national securities exchange or for quotation on an
automated interdealer quotation system. As a result, it may be difficult for
holders of Common Stock to sell their shares. No prediction can be made as to
the effect, if any, that future sales of shares, or the availability of shares
for future sale, will have on the market price of the Common Stock prevailing
from time to time. Sales of substantial amounts of Common Stock, or the
perception that such sales could occur, could adversely affect the prevailing
market price of the Common Stock. See "Risk Factors--Absence of Public Market
for the New Securities and Preferred Stock Units and Common Stock;
Restrictions on Transfer."
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following discussion is a summary of the material United States federal
income tax considerations relevant to the purchase, ownership and disposition
of the Offered Securities by holders acquiring Offered Securities on original
issue for cash, but does not purport to be a complete analysis of all
potential tax effects. The discussion is based upon the Internal Revenue Code
of 1986, as amended (the "Code"), Treasury regulations, Internal Revenue
Service ("Service") rulings and pronouncements and judicial decisions all in
effect as of the date hereof, all of which are subject to change at any time,
and any such change may be applied retroactively in a manner that could
adversely affect a holder of the Offered Securities. See "Possible Legislative
Changes." The discussion does not address all of the federal income tax
consequences that may be relevant to a holder in light of such holder's
particular circumstances or to holders subject to special rules, such as
certain financial institutions, insurance companies, dealers in securities,
foreign corporations, nonresident alien individuals and persons holding the
Offered Securities as part of a "straddle," "hedge" or "conversion
transaction." Moreover, the effect of any applicable state, local or foreign
tax laws is not discussed. The discussion deals only with Offered Securities
held as "capital assets" within the meaning of section 1221 of the Code.
The Company has not sought and will not seek any rulings from the Service
with respect to the position of JTP discussed below. There can be no assurance
that the Service will not take a different position concerning the tax
consequences of the purchase, ownership or disposition of the Offered
Securities or that any such position would not be sustained.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO
THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER
TAX LAWS.
CONSEQUENCES OF EXCHANGE OFFER TO EXCHANGING AND NONEXCHANGING HOLDERS
The exchange of an Old Security for a New Security pursuant to the Exchange
Offer will not be taxable to the exchanging Holders for Federal income tax
purposes. As a result (i) an exchanging Holder will not recognize any gain or
loss on the exchange; (ii) the holding period for the New Security will
include the holding period for the Old Security; (iii) the basis of the New
Security will be the same as the basis for the Old Security; and (iv) the
original issue discount on the New Discount Notes will be the same as on the
Old Discount Notes.
The Exchange Offer will result in no Federal income tax consequences to a
nonexchanging Holder.
The treatment of interest and original issue discount described below with
respect to the Senior Notes and Discount Notes is based in part upon the
assumption that as of the date of issuance of the Old Securities, the
possibility that liquidated damages would be paid to holders of such Notes
pursuant to a Registration Default was remote. The Service may take a
different position, which could affect the timing and character of interest
income by holders of such Notes.
SENIOR NOTES
Subject to the aggregation rules described below, a holder of Senior Notes
will be required for federal income tax purposes to report stated interest on
the Senior Notes as income in accordance with the holder's method of
accounting for tax purposes. A substantial portion of the Senior Notes and
Discount Notes were purchased by investors who purchased both Senior Notes and
the Discount Notes in the Old Offerings. Therefore, certain aggregation rules
contained in the applicable Treasury Regulations (the "OID Regulations") could
be interpreted to require that Senior Notes and Discount Notes purchased by
the same investor in the Old Offerings be treated as a single debt instrument,
although the Company does not intend to aggregate the Senior Notes and
Discount Notes in such a manner. For purposes of calculating and amortizing
any original issue discount, such single debt instrument would be treated as
having a single issue price, maturity date, stated redemption price at
maturity and yield to maturity. If such aggregation rules were to apply,
Senior Notes purchased in the Old
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Offerings by investors who also purchased Discount Notes in the Old Offerings
would be treated as a portion of a debt instrument issued with original issue
discount, and would be subject to the treatment described below under "--
Discount Notes--Original Issue Discount."
DISCOUNT NOTES
Original Issue Discount. Because the Discount Notes have been issued at a
discount from their "stated redemption price at maturity," the Discount Notes
have original issue discount ("OID") for federal income tax purposes. For
federal income tax purposes, OID on a Discount Note is the excess of the
stated redemption price at maturity of the Discount Note over its issue price.
The issue price of each Discount Note is the first price at which a
substantial amount of the Discount Notes was sold for money, which was $708.62
per $1,000 of principal amount at maturity. The stated redemption price at
maturity of a Discount Note will be the sum of all payments to be made on such
Discount Note other than "qualified stated interest" payments. Qualified
stated interest is stated interest that is unconditionally payable at least
annually at a single fixed rate that appropriately takes into account the
length of the interval between payments. The interest payments on the Discount
Notes will not constitute qualified stated interest, and thus will be included
along with principal in the stated redemption price at maturity of the
Discount Notes. As a result, each Discount Note will bear OID in an amount
equal to the excess of (i) the sum of its principal amount and all stated
interest payments over (ii) its issue price.
A holder will be required to include OID in income periodically over the
term of a Discount Note before receipt of the cash or other payment
attributable to such income. In general, a holder must include in gross income
for federal income tax purposes the sum of the daily portions of OID with
respect to the Discount Notes for each day during the taxable year or portion
of a taxable year on which such holder holds the Discount Note ("Accrued
OID"). The daily portion is determined by allocating to each day of any
accrual period within a taxable year a pro rata portion of an amount equal to
the adjusted issue price of the Discount Note at the beginning of the accrual
period multiplied by the yield to maturity of the Discount Note. For purposes
of computing OID, the Company will use six-month accrual periods which end on
the days in the calendar year corresponding to the maturity date of the
Discount Notes and the date six months prior to such maturity date, with the
exception of an initial long accrual period. The adjusted issue price of a
Discount Note at the beginning of any accrual period is the issue price of the
Discount Note increased by the Accrued OID for all prior accrual periods (less
any cash payments on the Discount Notes other than qualified stated interest).
Under these rules, holders will have to include in gross income increasingly
greater amounts of OID in each successive accrual period. Each payment made
under a Discount Note (except for payments of qualified stated interest) will
be treated first as a payment of OID to the extent of OID that has accrued as
of the date of payment and has not been allocated to prior payments and second
as a payment of principal.
Optional Redemption. JTP's option to redeem the Discount Notes at any time
after August 1, 2002 should be treated as a "call option" within the meaning
of the OID Regulations. See "Description of Notes--Redemption of Notes--
Optional Redemption." As a result, the Company would be presumed under the OID
Regulations to exercise its option to redeem the Discount Notes if by
utilizing the date of exercise of a call option as the maturity date and the
amount for which the Discount Notes could be redeemed in accordance with the
terms of the redemption feature (that is, the principal amount plus redemption
premium, if any, plus accrued interest) as the stated redemption price at
maturity the yield on the Discount Notes would be lower than such yield would
be if the option was not exercised. Because the exercise by the Company of its
call option at any time after August 1, 2002 and before August 1, 2004 would
result in higher yield than if such call option were not exercised, such call
option should be presumed to not be exercised under the OID Regulations.
In addition to the option redemption described above, a holder will have the
right to tender Discount Notes to the Company for redemption should JTP
experience a Change of Control. See "Description of Notes-- Mandatory Offer to
Purchase Notes." Such additional redemption rights should not affect, and will
be treated by the Company as not affecting, the determination of the yield or
maturity of the Discount Notes.
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TAXABLE DISPOSITION OF NOTES
Generally, any sale or redemption of Notes will result in taxable gain or
loss equal to the difference between the amount of cash or other property
received (except to the extent the consideration received is attributable to
qualified stated interest not previously taken into account, which
consideration is treated as interest received) and the holder's adjusted tax
basis in the Note. A holder's adjusted tax basis for determining gain or loss
on the sale or other taxable disposition of a Note will initially equal the
cost of the Note to such holder and will be increased by any Accrued OID with
respect to any Note includable in such holder's gross income and decreased by
the amount of any cash payments received with such holder regardless of whether
such payments are denominated as interest (other than payments of qualified
stated interest). Any gain or loss upon a sale or disposition of a Note by an
original holder will generally be capital gain or loss. The recently enacted
Taxpayer Relief Act of 1997 made certain changes to the Code with respect to
taxation of capital gains of taxpayers other than corporations. In general, the
maximum tax rate for non-corporate taxpayers on long term capital gains has
been lowered to 20% from the previous 28% rate for most capital assets
(including the New Securities) held for more than 18 months. For taxpayers in
the 15% regular tax bracket, the maximum tax rate on long term capital gains is
now 10%. These rate reductions are effective retroactively to any sale made
after May 6, 1997. Capital assets sold after July 28, 1997, must be held for
more than 18 months, rather than for more than one year, in order for gain on
the sale of such assets to qualify as long term capital gain. Capital assets
sold after May 6, 1997 but before July 29, 1997 qualify for the new 20% rate so
long as they were held for more than one year. Capital gain on assets sold on
or after July 29, 1997, having a holding period of more than one year but not
more than 18 months will be taxed as "mid-term gain" at a 28% rate.
PREFERRED STOCK UNITS
Allocation of Basis. Each holder of a Preferred Stock Unit will have an
aggregate tax basis in the unit equal to the amount of cash paid by the holder
of such unit. For federal income tax purposes, a holder's aggregate tax basis
in the Preferred Stock Units will be allocated between the Senior Preferred
Stock and the Common Stock represented by such units based on their relative
fair market values at the time of the issuance. The Company will determine and
provide holders with its estimate of the fair market values of the Senior
Preferred Stock and Common Stock and the holders will allocate the basis of the
Preferred Stock Units between the Senior Preferred Stock and Common Stock, in
proportion to their relative fair market values. There can be no assurance,
however, that the Service will respect the Company's determination.
Classification of Senior Preferred Stock. Although the characterization of an
instrument as debt or equity is a facts and circumstances determination that
cannot be predicted with certainty, the Senior Preferred Stock should be
treated as equity for federal income tax purposes. Accordingly, the Company
intends to treat the Senior Preferred Stock as equity for federal income tax
purposes, and the remainder of this discussion assumes that such treatment will
be respected.
Distributions on Senior Preferred Stock and Common Stock. Distributions on
Senior Preferred Stock, whether paid in cash or in additional shares of Senior
Preferred Stock, or cash distributions on the Common Stock, if any, will be
taxable as ordinary dividend income to the extent that the cash amount or the
fair market value of any Senior Preferred Stock distributed on the Senior
Preferred Stock or the cash amount distributed on the Common Stock does not
exceed JTP's current or accumulated earnings and profits (as determined for
federal income tax purposes). To the extent that the amount of such
distributions paid on the Senior Preferred Stock or Common Stock exceeds the
Company's current or accumulated earnings and profits (as determined for
federal income tax purposes), the distributions will be treated as a return of
capital, thus reducing the holder's adjusted tax basis in such Senior Preferred
Stock or Common Stock. The amount of any such excess distribution that is
greater than the holder's adjusted basis in the Senior Preferred Stock or
Common Stock will be taxed as capital gain. There can be no assurance that the
Company will have sufficient earnings and profits (as determined for federal
income tax purposes) to cause distributions on Senior Preferred Stock or Common
Stock to be treated as dividends for federal income tax purposes. For purposes
of the remainder of this discussion, the term "dividend" refers to a
distribution paid out of allocable earnings and profits, unless the context
indicates otherwise.
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A stockholder's initial tax basis in any additional shares of Senior
Preferred Stock distributed by the Company will be equal to the fair market
value of such additional shares on their date of distribution. A stockholder's
holding period for such additional shares will commence with their
distribution, and will not include his holding period for the shares of Senior
Preferred Stock with respect to which the additional shares are distributed.
To the extent that dividends are treated as ordinary income, dividends
received by corporate holders will be eligible for the 70% dividends-received
deduction under Section 243 of the Code, subject to limitations generally
applicable to the dividends-received deductions, including those contained in
Sections 246 and 246A of the Code and the corporate alternative minimum tax.
The 70% dividends-received deduction may be reduced if a holder's shares of
Senior Preferred Stock or Common Stock are debt financed. Under Section 246(c)
of the Code, the 70% dividends-received deduction will not be available with
respect to stock that is held for 45 days or less (90 days in the case of a
dividend on preferred stock attributable to a period or periods aggregating
more than 366 days). The length of time that a holder is deemed to have held
stock for these purposes is reduced to periods during which the holder's risk
of loss with respect to the stock is diminished by reason of the existence of
certain options, contracts to sell, short sales or similar transactions.
Section 246(c) also denies the 70% dividends-received deduction to the extent
that a corporate holder is under an obligation, with respect to substantially
similar or related property, to make payments corresponding to the dividend
received. The Clinton Administration has proposed legislation which would, if
enacted, affect the availability of the dividends-received deduction for
dividends on Senior Preferred Stock or Common Stock. See "--Possible
Legislative Changes."
Under Section 1059 of the Code, the tax basis of Senior Preferred Stock or
Common Stock that has been held by a corporate shareholder for two years or
less (ending on the earliest of the date on which the Company declares,
announces or agrees to the payment of an actual or constructive dividend) is
reduced (but not below zero) by the non-taxed portion of an "extraordinary
dividend" for which a dividends-received deduction is allowed, with such
reduction treated as occurring at the beginning of the ex-dividend date of such
dividend, provided, however, that in the case of certain redemptions of Senior
Preferred Stock or Common Stock, amounts of redemption proceeds that are
treated as a dividend (as described below under "--Redemption, Sale or Exchange
of Senior Preferred Stock or Common Stock") are, to the extent they otherwise
meet the definition of "extraordinary dividend," treated as an extraordinary
dividend without regard to the period of time such stock was held. To the
extent a corporate holder's tax basis would have been reduced below zero but
for the foregoing limitation, such holder must treat such amount as gain
recognized on the sale or exchange of such Senior Preferred Stock or Common
Stock for the taxable year in which such dividend is received. Generally, an
"extraordinary dividend" is a dividend that (i) equals or exceeds, in the case
of Senior Preferred Stock, 5%, in the case of Common Stock, 10%, of the
holder's basis in such stock, (treating all dividends having ex-dividend dates
within a 85-day period as a single dividend); or (ii) exceeds 20% of the
holder's adjusted basis in the Senior Preferred Stock or Common Stock (treating
all dividends having ex-dividend dates within a 365-day period as a single
dividend). If an election is made by the holder, under certain circumstances
the fair market value of Senior Preferred Stock or Common Stock as of the day
before the ex-dividend date may be substituted for the holder's basis in
applying these tests.
Special rules exist with respect to extraordinary dividends for "qualified
preferred dividends," which are any fixed dividends payable with respect to any
share of stock which (i) provides for fixed preferred dividends payable not
less frequently than annually; and (ii) is not in arrears as to dividends at
the time the holder acquires such stock. A qualified preferred dividend does
not include any dividend payable with respect to any share if the actual rate
of return of such stock for the period the stock has been held by the holder
receiving the dividend exceeds 15%.
Redemption Premium on Senior Preferred Stock. If the redemption price of
redeemable preferred stock exceeds its issue price by more than a de minimis
amount, such excess may be treated as a constructive distribution of additional
stock on preferred stock over the term of the preferred stock using a constant
interest rate method similar to that described above for accruing original
issue discount. See the discussion above under "--Discount Notes--Original
Issue Discount." A preferred stock discount will generally be considered de
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minimis as long as it is less than the redemption price of the preferred stock
multiplied by 1/4 of 1% multiplied by the number of years until the issuer must
redeem the preferred stock. Although not entirely clear, the Company believes
that for purposes of determining the issue price of the Senior Preferred Stock
initially issued, a Preferred Stock Unit is considered an investment unit
consisting of the Senior Preferred Stock and Common Stock, and the issue price
of the Senior Preferred Stock is determined by allocating the issue price of a
Preferred Stock Unit between the Senior Preferred Stock and the Common Stock
based on the relative fair market values of the Senior Preferred Stock and the
Common Stock. See discussion above under "--Allocation of Basis." There can be
no assurance, however, that the Service will not challenge such allocation.
As a result of the allocation of a portion of the purchase price of the
Preferred Stock Units to the Common Stock, the Senior Preferred Stock initially
purchased by holders may have a redemption price that exceeds its issue price
by more than a de minimis amount, resulting in a constructive distribution
under the above rules. In addition, because the issue price of the Senior
Preferred Stock distributed in lieu of payments of cash dividends will be equal
to its fair market value at the time of distribution, it is possible, depending
on its fair market value at that time, that such Senior Preferred Stock will be
issued with a redemption premium large enough to be considered a dividend under
the above rules. In such event, as noted above, holders would be required to
include such premium in income as a distribution over some period in advance of
receiving the cash attributable to such income and such Senior Preferred Stock
might not trade separately, which might adversely affect the liquidity of the
Senior Preferred Stock.
In addition to the mandatory redemption feature, the Senior Preferred Stock
is also redeemable (either in whole or in part, or in whole but not in part
under certain circumstances) at the option of JTP on or after July , 2002.
Furthermore, each holder of the Senior Preferred Stock has the right to require
the Company to repurchase the Senior Preferred Stock upon the occurrence of a
Change of Control. Although such optional redemption or holder put may result
in constructive distributions to the holders under certain circumstances, the
Company believes that neither the optional redemption nor the holder put of the
Senior Preferred Stock will be subject to those rules.
Redemption, Sale or Exchange of Senior Preferred Stock or Common Stock. A
redemption of shares of Senior Preferred Stock in exchange for Preferred Stock
Exchange Notes or shares of Senior Preferred Stock or Common Stock for cash,
and a sale of Senior Preferred Stock or Common Stock will be taxable events.
A redemption of shares of Senior Preferred Stock or Common Stock for cash
will generally be treated as a sale or exchange if the holder does not own,
actually or constructively within the meaning of Section 318 of the Code, any
stock of the Company other than the Senior Preferred Stock. If a holder does
own, actually or constructively, such other stock (including stock redeemed), a
redemption of Senior Preferred Stock or Common Stock may be treated as a
dividend to the extent of the Company's current or accumulate earnings and
profits (as determined for federal income tax purposes). Such dividend
treatment would not be applied if the redemption is "substantially
disproportionate" with respect to the holder under Section 302(b)(2) of the
Code or is "not essentially equivalent to a dividend" with respect to a holder
under Section 302(b)(1) of the Code. A distribution to a holder will be "not
essentially equivalent to a dividend" if it results in a "meaningful reduction"
in the holder's stock interest in JTP. For these purposes, a redemption of
Senior Preferred Stock or Common Stock for cash that results in a reduction in
the proportionate interest in the Company (taking into account any constructive
ownership) of a holder whose relative stock interest in the Company is minimal
and who exercises no control over corporate affairs should be regarded as a
meaningful reduction in the holder's stock interest in the Company.
If the redemption of the Senior Preferred Stock or Common Stock for cash is
not treated as a distribution taxable as a dividend or if the Senior Preferred
Stock or Common Stock is sold, the redemption or sale would result in capital
gain or loss equal to the difference between the amount of cash and the fair
market value of other proceeds received in such sale or redemption and the
holder's adjusted tax basis in the Senior Preferred Stock or Common Stock sold
or redeemed. For a description of the treatment of capital gain, see "--Taxable
Disposition of Notes."
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A redemption of Senior Preferred Stock in exchange for Preferred Stock
Exchange Notes will be subject to the same general rules as a redemption for
cash, except that the holder would have capital gain or loss equal to the
difference between the issue price of the Preferred Stock Exchange Notes
received and the holder's adjusted tax basis in the Senior Preferred Stock
redeemed. The issue price of the Preferred Stock Exchange Notes would be
determined in the manner described below for purposes of computing original
issue discount (if any) on the Preferred Stock Exchange Notes. See the
discussion below under "--Preferred Stock Exchange Notes--Original Issue
Discount."
If a redemption of Senior Preferred Stock or Common Stock is treated as a
distribution that is taxable as a dividend, the amount of the distribution will
be measured by the amount of cash received by the holder. The holder's adjusted
tax basis in the redeemed Senior Preferred Stock or Common Stock will be
transferred to any remaining stock holdings in the Company. If the holder does
not retain any stock ownership in the Company, the holder may lose such basis
entirely. Under the "extraordinary dividend" provision of Section 1059 of the
Code, a corporate holder may, under certain circumstances, be required to
reduce its basis in its remaining shares of stock of JTP (and possibly
recognize gain upon such distribution) to the extent the holder claims the 70%
dividends-received deduction with respect to the dividend.
PREFERRED STOCK EXCHANGE NOTES
Original Issue Discount. If the Senior Preferred Stock is exchanged for
Preferred Stock Exchange Notes at a time when the stated redemption price at
maturity of the Preferred Stock Exchange Notes exceeds their issue price by
more than a de minimis amount, the Preferred Stock Exchange Notes will be
treated as having OID equal to the entire amount of such excess. OID will
generally be considered de minimis as long as it is less than the stated
redemption price at maturity of the Preferred Stock Exchange Notes multiplied
by 1/4 of 1% multiplied by the number of years to maturity. If the Preferred
Stock Exchange Notes are deemed to be traded on an established securities
market on or at any time during the 60-day period ending 30 days after their
issue date, the issue price of the Preferred Stock Exchange Notes will be their
fair market value as determined as of their issue date. Subject to certain
limitations described in the regulations, the Preferred Stock Exchange Notes
will be deemed to be traded on an established securities market if, among other
things, price quotations are readily available from dealers, brokers or
traders. Similarly, if the Senior Preferred Stock, but not the Preferred Stock
Exchange Notes issued and exchanged therefor, is deemed to be traded on an
established securities market at the time of the exchange, then the issue price
of each Preferred Stock Exchange Note should be the fair market value of the
Senior Preferred Stock exchanged therefor at the time of the exchange. The
Senior Preferred Stock will generally be deemed to be traded on an established
securities market if it appears on a system of general circulation that
provides a reasonable basis to determine fair market value based either on
recent price quotations or recent sales transactions. In the event that neither
Senior Preferred Stock nor the Preferred Stock Exchange Notes are deemed to be
traded on an established securities market, the issue price of the Preferred
Stock Exchange Notes will be their stated principal amount or, in the event the
Preferred Stock Exchange Notes do not bear "adequate stated interest" within
the meaning of Section 1274 of the Code, their "imputed principal amount,"
which is generally the sum of the present values of all payments due under the
Preferred Stock Exchange Notes, discounted from the date of payment to their
issue date at the appropriate "applicable federal rates."
The stated redemption price at maturity of the Preferred Stock Exchange Notes
would equal the total of all payments required to be made thereon, other than
payments of qualified stated interest. Qualified stated interest generally is
stated interest that is unconditionally payable in cash or property (other than
debt instruments of the issuer) at least annually at a single fixed rate.
Therefore, Preferred Stock Exchange Notes that are issued when the Company has
the option to pay interest thereon for certain periods in additional Preferred
Stock Exchange Notes should be treated as having been issued without any
qualified stated interest. Accordingly, the sum of all interest payable
pursuant to the stated interest rate on such Preferred Stock Exchange Notes
over the entire term should be treated as OID and accrued into income under a
constant yield method by the holder, and the holder should not treat the
receipt of stated interest on the Preferred Stock Exchange Notes as interest
for federal income tax purposes. See "--Discount Notes--Original Issue
Discount."
121
<PAGE>
An additional Preferred Stock Exchange Note (a "Secondary Note") issued in
payment of interest with respect to an initially issued Preferred Stock
Exchange Note (an "Initial Note") will not be considered as a payment made on
the Initial Note and will be aggregated with the Initial Note for purposes of
computing and accruing OID on the Initial Note. As between the Initial Note and
the Secondary Note, the Company will allocate the adjusted issue price of the
Initial Note between the Initial Note and the Secondary Note in proportion to
their respective principal amounts. That is, upon its issuance of a Secondary
Note with respect to an Initial Note, the Company intends to treat the Initial
Note and the Secondary Note derived from the Initial Note as initially having
the same adjusted issue price and inherent amount of OID per dollar of
principal amount. The Initial Note and the Secondary Note derived therefrom
will be treated as having the same yield to maturity. Similar treatment will be
applied when additional Preferred Stock Exchange Notes are issued on Secondary
Notes.
In the event the Preferred Stock Exchange Notes are not issued with OID,
because they are issued at a time when the Company does not have the option to
pay interest thereon in additional Preferred Stock Exchange Notes, and the
redemption price of the Preferred Stock Exchange Notes does not exceed their
issue price by more than a de minimis amount, stated interest should be
included in income by a holder in accordance with his method of accounting.
Bond Premium. If the Senior Preferred Stock is exchanged for Preferred Stock
Exchange Notes at a time when the issue price of the Preferred Stock Exchange
Notes exceeds the amount payable at the maturity date (or earlier call date, if
appropriate) of the Preferred Stock Exchange Notes, such excess will be
deductible by the holder of the Preferred Stock Exchange Notes as amortizable
bond premium over the term of the Preferred Stock Exchange Notes (taking into
account earlier call dates, as appropriate), under a yield-to-maturity formula,
only if an election by the holder under Section 171 of the Code is made or is
already in effect. An election under Section 171 is available only if the
Preferred Stock Exchange Notes are held as capital assets. This election is
revocable only with the consent of the Service and applies to all obligations
owned or subsequently acquired by the holder. To the extent the excess is
deducted as amortizable bond premium, the holder's adjusted tax basis in the
Preferred Stock Exchange Notes will be reduced.
Redemption or Sale of Preferred Stock Exchange Notes. Generally, any
redemption or sale of Preferred Stock Exchange Notes by a holder would result
in taxable gain or loss equal to the difference between the amount of cash
received (except to the extent that cash received is attributable to accrued,
but previously untaxed, interest) and the holder's tax basis in the Preferred
Stock Exchange Notes. The tax basis of a holder who receives a Preferred Stock
Exchange Note in exchange for Senior Preferred Stock will generally be equal to
the issue price of the Preferred Stock Exchange Note on the date the Preferred
Stock Exchange Note is issued plus any OID on the Preferred Stock Exchange Note
included in the holder's income prior to sale or redemption of the Preferred
Stock Exchange Note, reduced by any amortizable bond premium applied against
the holder's income prior to sale or redemption of the Preferred Stock Exchange
Note and payments other than payments of "qualified stated interest." Such gain
or loss would be capital gain or loss.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO JTP AND TO CORPORATE HOLDERS
The Discount Notes and, in certain circumstances, the Preferred Stock
Exchange Notes would constitute "applicable high yield discount obligations"
("AHYDOs") if the yield to maturity of such Discount Notes or Preferred Stock
Exchange Notes were equal to or greater than the sum of the relevant applicable
federal rate (the "AFR") plus five percentage points. The relevant AFR for debt
instruments issued in July 1997 is 6.87% compounded semi-annually. Because the
yield to maturity on the Discount Notes is 11.75%, the yield to maturity on the
Discount Notes does not equal or exceed the sum of the AFR plus five percentage
points. If the yield to maturity on the Preferred Stock Exchange Notes were to
equal or exceed the sum of the AFR plus five percentage points, in certain
circumstances, the Preferred Stock Exchange Notes would constitute AHYDOs.
Therefore, a portion of the tax deductions that would otherwise be available to
the Company in respect of the Preferred Stock Exchange Notes would be deferred,
which, in turn, would reduce the after-tax cash flows of the Company. If the
Preferred Stock Exchange Notes were to constitute AHYDOs, the Company would not
be entitled to deduct OID that accrues with respect to such Preferred Stock
Exchange Notes until amounts attributable to OID are paid in
122
<PAGE>
cash. If the yield to maturity of the Preferred Stock Exchange Notes were to
equal or exceed the sum of the relevant AFR plus six percentage points (the
"Excess Yield"), the "disqualified portion" of the OID accruing on the
Preferred Stock Exchange Notes would be characterized as a non-deductible
dividend with respect to the Company and also may be treated as a dividend
distribution solely for purposes of the dividends-received deduction of
Sections 243, 246 and 246A of the Code with respect to holders which are
corporations. In general, the "disqualified portion" of OID for any accrual
period will be equal to the product of (i) a percentage determined by dividing
the Excess Yield by the yield to maturity; and (ii) the OID for the accrual
period. Subject to otherwise applicable limitations, such a corporate holder
would be entitled to a dividends-received deduction with respect to the
disqualified portion of the accrued OID if the Company has sufficient current
or accumulated "earnings and profits." To the extent that JTP's earnings and
profits are insufficient, any portion of the OID that otherwise would have been
recharacterized as a dividend for purposes of the dividends-received deduction
will continue to be taxed as ordinary OID income in accordance with the rules
described above in "--Discount Notes--Original Issue Discount." It is
impossible to determine at the present time whether the Preferred Stock
Exchange Notes will have a yield to maturity that equals or exceeds the sum of
the AFR plus five or six percentage points.
POSSIBLE LEGISLATIVE CHANGES
On a number of recent occasions, most recently in February, 1997, the Clinton
Administration has proposed tax law changes that, if enacted into law
substantially as proposed, would affect the tax treatment of corporate holders
of Senior Preferred Stock or Preferred Stock Exchange Notes that are treated as
AHYDOs. In particular, the Clinton Administration has proposed to eliminate the
70% and the 80% dividends-received deduction for certain debt-like preferred
stock, effective for stock issued more than 30 days after the date of enactment
of such legislation. The Clinton Administration also has proposed to reduce the
70% dividends-received deduction to 50% for dividends received or accrued more
than 30 days after such date of enactment, and would modify in certain respects
the holding period requirement for qualifying for the dividends-received
deductions. It cannot be predicted with certainty whether these proposals will
be introduced in Congress as proposed legislation, or if introduced, whether,
or in what form, such proposed legislation may be enacted and, if enacted, what
the effective date or dates would be. Corporate holders of Senior Preferred
Stock or Preferred Stock Exchange Notes are urged to consult their own tax
advisors regarding the possible effects of this proposed legislation.
BACKUP WITHHOLDING
A holder may be subject, under certain circumstances, to backup withholding
at a 31% rate with respect to the Offered Securities. This withholding
generally applies only if the holder (i) fails to furnish his or her social
security or other taxpayer identification number ("TIN"); (ii) furnishes an
incorrect TIN; (iii) is notified by the Service that he or she has failed to
report properly payments of interest and dividends and the Service has notified
JTP that he or she is subject to backup withholding; or (iv) fails, under
certain circumstances, to provide a certified statement, signed under penalty
of perjury, that the TIN provided is his or her correct number and that he or
she is subject to backup withholding. Any amount withheld from payment to a
holder under the backup withholding rules is allowable as a credit against such
holder's federal income tax liability, provided that the required information
is furnished to the Service. Certain holders (including, among others,
corporations and foreign individuals who comply with certain certification
requirements) are not subject to backup withholding. Holders should consult
their tax advisors as to their qualifications for exemption from backup
withholding and the procedure for obtaining such an exemption.
INFORMATION REPORTING
The Company is required to furnish certain information to the Service and
will furnish annually record holders of the New Securities information with
respect to dividends or interest paid, or OID accruing, as the case may be, on
the New Securities during the calendar year. The information with respect to
OID accruing on the Discount Notes will be based on the adjusted issue price of
the Discount Notes and will be applicable if the holder is an original holder
of the Discount Notes who purchased the Discount Notes at the issue price.
123
<PAGE>
Subsequent holders who purchase Discount Notes for an amount other than the
adjusted issue price and/or on a date other than the last day of an accrual
period will be required to determine for themselves the amount of OID, if any,
they are required to include in gross income for federal income tax purposes.
SUBSEQUENT PURCHASERS
The foregoing does not discuss special rules which may affect the treatment
of purchasers that acquire the Offered Securities other than through purchasing
the Offered Securities at the time of original issuance at the issue price,
including those provisions of the Code relating to the treatment of "market
discount" and "acquisition premium." For example, the market discount
provisions of the Code may require a subsequent purchaser of a Note at a market
discount to treat all or a portion of any gain recognized upon sale or other
disposition of the Note as ordinary income and to defer a portion of any
interest expense that would otherwise be deductible on any indebtedness
incurred or maintained to purchase or carry such Note until the holder disposes
of the Note in a taxable transaction.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own account as a
result of market-making activities or other trading activities in connection
with the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Securities. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Securities received in exchange for Old
Securities where such Old Securities were acquired as a result of market-making
activities or other trading activities. The Company has agreed that for a
period of 120 days after the Expiration Date, it will make available a
prospectus meeting the requirements of the Securities Act to any broker-dealer
for use in connection with any such resale. In addition, until , 1997,
all dealers effecting transactions in the New Securities may be required to
deliver a prospectus.
The Company will receive no proceeds in connection with the Exchange Offer.
New Securities received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Securities or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer or the purchasers of any such New Securities. Any broker-dealer that
resells New Securities that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Securities may be deemed to be an "underwriter" within the meaning
of the Securities Act and any profit on any such resale of New Securities and
any commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Exchange Offer
(including the reimbursement for reasonable expenses of one counsel for the
holders of the Notes and one counsel for the holders of the Preferred Stock)
other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the New Securities (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the New Securities will be passed upon
for the Company by Mayer, Brown & Platt, Chicago, Illinois. Mayer, Brown &
Platt also represents Jordan Industries and The Jordan Company and its
affiliates from time to time in connection with its various acquisitions and
divestitures.
124
<PAGE>
EXPERTS
The combined financial statements of the JTP Companies as of December 31,
1995 and 1996, and for each of the three years in the period ended December 31,
1996, 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 which, as to 1996, is based in part on the reports of Coopers &
Lybrand LLP, independent auditors; McFarland & Alton P.S., independent
auditors; and Mellen, Smith, & Pivoz, P.C., independent auditors.
The combined financial statements of Viewsonics, Inc. and Shanghai Viewsonics
Electronic Co., Ltd. as of December 31, 1995, and for the year then ended,
appearing in this Prospectus and Registration Statement, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report 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.
The combined financial statements of LoDan West, Inc. and L/D West, Inc. as
of December 31, 1996, and for the year then ended, appearing in this Prospectus
and Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report 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.
The financial statements of E.F. Johnson Company--Components Division as of
December 31, 1994, November 26, 1995, and January 23, 1996, and for the year
ended December 31, 1994, the period ended November 26, 1995, and the period
ended January 23, 1996, appearing in this Prospectus and Registration
Statement, have been audited by Price Waterhouse, 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.
The financial statements of Diversified Wire & Cable, Inc. as of September
30, 1993, 1994, and 1995, and for the fiscal years ended September 30, 1993,
1994, and 1995, appearing in this Prospectus and Registration Statement, have
been audited by Mellen, Smith & Pivoz, P.C., 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.
The financial statements of Vitelec Electronics Limited as of December 31,
1995, and for the fiscal year then ended, appearing in this Prospectus and
registration statement, have been audited by Roberts Redman Mead, certified
accountants, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The financial Statements of Northern Technologies, Inc. as of December 31,
1995 and 1996, and for each of the two years in the period ended December 31,
1996, appearing in this Prospectus and Registration Statement, have been
audited by McFarland & Alton, P.S., 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.
125
<PAGE>
JORDAN TELECOMMUNICATION PRODUCTS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Unaudited Pro Forma Combined Financial Statements....................... P-1
Unaudited Pro Forma Combined Statements of Operations and Other Data for
the year ended December 31, 1996....................................... P-2
Unaudited Pro Forma Combined Statements of Operations and Other Data for
the six months ended June 30, 1997..................................... P-3
Unaudited Pro Forma Combined Balance Sheet as of June 30, 1997.......... P-6
JTP COMPANIES
Report of Independent Auditors.......................................... F-1
Independent Auditors' Report............................................ F-2
Report of Independent Accountants....................................... F-3
Independent Auditor's Report............................................ F-4
Combined Balance Sheets as of December 31, 1995 and 1996 and (unaudited)
as of June 30, 1997.................................................... F-5
Combined Statements of Operations for the three years in the period
ended December 31, 1996 and (unaudited) for the six months ended June
30, 1996 and 1997...................................................... F-6
Combined Statements of Changes in Shareholders' Equity (Net Capital
Deficiency) for the three years in the period ended December 31, 1996
and (unaudited) for the six months ended June 30, 1997................. F-7
Combined Statements of Cash Flows for the three years in the period
ended December 31, 1996 and (unaudited) for the six months ended June
30, 1996 and 1997...................................................... F-8
Notes to Combined Financial Statements.................................. F-9
E. F. JOHNSON COMPANY--COMPONENTS DIVISION (A DIVISION OF E.F. JOHNSON
COMPANY)
Report of Independent Accountants....................................... F-26
Balance Sheets as of December 31, 1994, November 26, 1995 and January
23, 1996............................................................... F-27
Statements of Operations for the year ended December 31, 1994, the
eleven months ended November 26, 1995, and the two months ended January
23, 1996............................................................... F-28
Statements of Cash Flows for the year ended December 31, 1994, the
eleven months ended November 26, 1995, and the two months ended January
23, 1996............................................................... F-29
Notes to Financial Statements........................................... F-30
DIVERSIFIED WIRE & CABLE, INC.
Independent Auditors' Report............................................ F-34
Balance Sheets as of September 30, 1993, 1994, and 1995 and (unaudited)
as of June 24, 1996.................................................... F-35
Statements of Income for the years ended September 30, 1993, 1994, and
1995 and (unaudited) for the period ended June 24, 1996................ F-36
Statements of Changes In Stockholders' Equity for the years ended
September 30, 1993, 1994, and 1995 and (unaudited) for the period ended
June 24, 1996.......................................................... F-37
Statements of Cash Flows for the years ended September 30, 1993, 1994,
and 1995 and (unaudited) for the period ended June 24, 1996............ F-38
Notes to Financial Statements........................................... F-39
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
Report of Independent Auditors.......................................... F-42
Combined Balance Sheets as of December 31, 1995 and (unaudited) as of
July 31, 1996.......................................................... F-43
</TABLE>
I-1
<PAGE>
<TABLE>
<S> <C>
Combined Statements of Income for the year ended December 31, 1995 and
(unaudited) for the period ended July 31, 1996......................... F-44
Combined Statements of Stockholder's Equity for the year ended December
31, 1995 and (unaudited) for the period ended July 31, 1996............ F-45
Combined Statements of Cash Flows for the year ended December 31, 1995
and (unaudited) for the period ended July 31, 1996..................... F-46
Notes to Combined Financial Statements.................................. F-47
VITELEC ELECTRONICS LIMITED
Auditors' Report to the Shareholders of Vitelec Electronics Limited..... F-51
Profit and Loss Accounts for the years ended December 31, 1994 and 1995
and (unaudited) for the period ended August 5, 1996.................... F-52
Balances Sheets as of December 31, 1994 and 1995 and (unaudited) as of
August 5, 1996......................................................... F-53
Cash Flow Statements for the years ended December 31, 1994 and 1995 and
(unaudited) for the period ended August 5, 1996........................ F-54
Notes to the Accounts................................................... F-56
NORTHERN TECHNOLOGIES, INC.
Independent Auditor's Report............................................ F-61
Balance Sheets as of December 31, 1995 and 1996......................... F-62
Statements of Income for the years ended December 31, 1995 and 1996..... F-63
Statements of Stockholders' Equity for the fiscal years ended December
31, 1995 and 1996...................................................... F-64
Statements of Cash Flows for the years ended December 31, 1995 and 1996. F-65
Notes to Financial Statements........................................... F-66
LODAN WEST, INC. AND L/D WEST, INC.
Report of Independent Auditors.......................................... F-71
Combined Balance Sheets as of December 31, 1996 and (unaudited) as of
May 30, 1997........................................................... F-72
Combined Statements of Income and Retained Earnings for the year ended
December 31, 1996 and (unaudited) for the period ended May 30, 1997.... F-73
Combined Statements of Cash Flows for the year ended December 31, 1996
and (unaudited) for the period ended May 30, 1997...................... F-74
Notes to Combined Financial Statements.................................. F-75
</TABLE>
I-2
<PAGE>
UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined statements of operations for the
year ended December 31, 1996, the six months ended June 30, 1997, and the
combined balance sheet as of June 30, 1997 reflect pro forma adjustments for
(a) the formation of the Company, and the acquisitions of Dura-Line, AIM,
Cambridge, Johnson, Diversified, Viewsonics, Vitelec, Bond, Northern and LoDan
from Jordan Industries and the purchase accounting and other acquisition
adjustments relating thereto and (b) the completion of the Company Formation,
in each case, as if they occurred at the beginning of the relevant period or
as of the relevant date. Unaudited pro forma adjustments are based upon
historical information, preliminary estimates and certain assumptions
management deems appropriate. The unaudited pro forma combined financial data
presented herein are not necessarily indicative of the results JTP would have
obtained had such events occurred at the beginning of the period, as assumed,
or of the future results of the Company. The pro forma combined financial
statements should be read in conjunction with the other financial statements
and notes thereto appearing elsewhere in this Prospectus.
P-1
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS AND OTHER DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------
COMPANY PRO FORMA PRO
HISTORICAL(1) ADJUSTMENTS(2) ADJUSTMENTS FORMA(3)
------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Net sales(4)................ $132,999 $81,615 $ (1,408) $213,206
Cost of sales excluding
depreciation(5)............ 82,870 51,290 (2,790) 131,370
-------- ------- -------- --------
Gross profit excluding
depreciation............... 50,129 30,325 1,382 81,836
Selling, general and
administrative expenses
excluding depreciation(6).. 23,446 14,961 1,051 39,458
Depreciation and
amortization............... 6,642 2,515 0 9,157
Other (income) and
expenses(6)(9)............. 4,494 73 (1,674) 2,893
Management fees(7).......... 2,224 0 (92) 2,132
-------- ------- -------- --------
Operating income............ 13,323 12,776 2,097 28,196
Interest expense (net of
interest income)(8)........ 11,674 0 19,127 30,801
Other expense............... 31 26 0 57
-------- ------- -------- --------
Income (loss) before income
taxes and minority
interest................... 1,618 12,750 (17,030) (2,662)
Provision (benefit) for
income taxes(10)........... 3,647 5,100 (9,812) 1,065
-------- ------- -------- --------
Income (loss) before
minority interest.......... (2,029) 7,650 (7,218) (1,597)
Minority interest(11)....... (548) (372) 0 (920)
-------- ------- -------- --------
Net income (loss)........... $ (2,577) $ 7,278 $ (7,218) $ (2,517)
======== ======= ======== ========
OTHER DATA:
EBITDA(12).................. $ 24,459 $15,364 $ 550 $ 40,373
Capital expenditures........ 6,873 682 -- 7,555
Cash interest expense....... 11,825 -- 7,642 19,467
Total interest expense(13).. 11,825 -- 18,076 29,901
Senior preferred stock
dividends.................. -- -- 3,481 3,481
EBITDA to cash interest
expense.................... 2.1x -- -- 2.1x
EBITDA to total interest
expense.................... 2.1x -- -- 1.4x
Ratio of earnings to fixed
charges(14)................ 1.1 --
Ratio of earnings to
combined fixed charges and
preferred stock
dividends(15).............. 1.1 --
</TABLE>
P-2
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS AND OTHER DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
-------------------------------------------------
COMPANY PRO FORMA PRO
HISTORICAL(1) ADJUSTMENTS(2) ADJUSTMENTS FORMA(3)
------------ -------------- ----------- --------
<S> <C> <C> <C> <C>
Net sales(4)................ $107,802 $9,510 $(1,599) $115,713
Cost of sales excluding
depreciation(5)............ 66,780 7,009 (1,174) 72,615
-------- ------ ------- --------
Gross profit excluding
depreciation............... 41,022 2,501 (425) 43,098
Selling, general and
administrative expenses
excluding depreciation(6).. 20,053 1,414 347 21,814
Depreciation and
amortization............... 4,775 220 0 4,995
Other (income) and
expense(6)(9).............. 16,108 (3) (14,875) 1,230
Management fees(7).......... 1,493 0 (336) 1,157
-------- ------ ------- --------
Operating income............ (1,407) 870 14,439 13,902
Interest expense (net of
interest income)(8)........ 9,178 0 6,076 15,254
Other (income) and expense.. (19) 3 0 (16)
-------- ------ ------- --------
Income (loss) before income
taxes, minority interest
and extraordinary (loss)
items...................... (10,556) 867 8,363 (1,336)
Provision (benefit) for
income taxes(10)........... (3,031) 347 2,150 (534)
-------- ------ ------- --------
Income (loss) before
minority interest and
extraordinary item (loss).. (7,535) 520 6,213 (802)
Minority interest(11)....... (796) 0 0 (796)
Extraordinary (loss)(16).... (464) 0 464 0
-------- ------ ------- --------
Net income (loss)........... $ (8,795) $ 520 $ 6,677 $ (1,598)
======== ====== ======= ========
OTHER DATA:
EBITDA(12).................. $ 19,476 $1,087 $ (436) $ 20,127
Capital expenditures........ 3,103 125 -- 3,228
Cash interest expense....... 9,265 -- 469 9,734
Total interest expense(13).. 9,265 -- 5,539 14,804
Senior preferred stock
dividends.................. -- -- 1,684 1,684
EBITDA to cash interest
expense.................... 2.1x -- -- 2.1x
EBITDA to total interest
expense.................... 2.1x -- -- 1.4x
Ratio of earnings to fixed
charges(14)................ -- --
Ratio of earnings to
combined fixed charges and
preferred stock
dividends(15).............. -- --
</TABLE>
- --------
(1) Historical results of operations includes: (i) for the period ending on
December 31, 1996, the results of AIM, Cambridge, Dura-Line, Johnson
(from the date of its acquisition in January 1996), Diversified (from the
date of its acquisition in June 1996), Viewsonics (from the date of its
acquisition in August 1996), Vitelec (from the date of its acquisition in
August 1996), Bond (from the date of its acquisition in September 1996),
and Northern (from the date of its acquisition in December 1996); and
(ii) the historical results of operations for the six months ending on
June 30, 1997 also include the results of LoDan (from the date of its
acquisition in May 1997), in each case on a combined basis.
(2) Reflects the acquired subsidiaries results of operations prior to
acquisition as well as incremental goodwill amortization and depreciation
as a result of these acquisitions.
(3) Reflects the results of operations for AIM, Bond, Cambridge, Diversified,
Dura-Line, Johnson, LoDan, Northern, Viewsonics, and Vitelec as if owned
from the beginning of the period and the preceding pro forma adjustments
as if each occurred at the beginning of the relevant period.
(4) Adjustments to net sales include the elimination of sales relating to
Dura-Line's Retube product line which was not acquired pursuant to the
Company Formation of $1.4 million for the period ended December 31, 1996,
and $1.6 million for the six months ended June 30, 1997.
P-3
<PAGE>
(5) Adjustments to cost of sales excluding depreciation include the
elimination of: (i) the costs of sales relating to Dura-Line's Retube
products line which was not acquired as part of the Company Formation of
$0.8 million for the period ended December 31, 1996 and $1.0 million for
the six months ended June 30, 1997; and (ii) the elimination of purchase
accounting adjustments to the inventories of Viewsonics in connection
with its acquisition by Jordan Industries of $1.9 million for the period
ended December 31, 1996, and $0.2 million for the six months ended June
30, 1997.
(6) Adjustments to selling, general, and administrative expenses before
depreciation include: (i) the elimination of selling, general and
administrative expenses relating to Dura-Line's divested Retube product
line of $0.8 million for period ended December 31, 1996 and $0.7 million
for the six months ended June 30, 1997; (ii) the reclassification to
other operating expenses relating to the start-up of new facilities in
Mexico, India, China, Malaysia and Spain of $1.6 million for the period
ended December 31, 1996 and $0.7 million for the six months ended June
30, 1997; and (iii) an adjustment for shared general, administrative and
overhead expenses of Jordan Industries and estimated costs of the JTP
Corporate Group of $3.5 million for the year ended December 31, 1996,
(see "Certain Transactions--Services Agreements") and $1.7 million for
the six month period ended June 30, 1997.
(7) Adjustments to Management fees reflect the elimination and termination of
the historical advisory and management fees paid to Jordan Industries
under the JI Agreement and the recording of management fees pursuant to
the New Advisory Agreement and JI Property Services Agreement (see
"Certain Transactions--Services Agreements").
(8) Interest expense is adjusted to reflect the Old Offerings.
(9) In addition to footnote (6), adjustments to other operating expenses
reflect (a) the elimination of expenses associated with the Company's
payment and purchase of stock appreciation rights from AIM's and Dura-
Line's management and prior owners of $3.4 million for the year ended
December 31, 1996 and $15.4 million for the six months ended June 30,
1997; (b) implementation of director fees of $0.1 million for the year
ended December 31, 1996 and for the six months ended June 30, 1997,
respectively.
(10) Pro forma net (loss) income reflects income taxes at a tax rate of 40%.
(11) Certain management and prior owners of Dura-Line Czech Republic, Bond and
Diversified hold minority interests in their respective subsidiaries of
30%, 20% and 12.5%, respectively.
(12) EBITDA for any relevant period represents operating income plus (a)
depreciation, amortization of goodwill and other intangibles; (b) other
operating expenses (as described in Note 9); and (c) margin losses
associated with the start-up of new facilities of $0.1 million for the
period ended December 31, 1996. EBITDA is not included herein as
operating data and should not be construed as an alternative to operating
income (determined in accordance with GAAP) as an indicator of JTP's
operating performance. The Company has included EBITDA because it is
relevant for determining compliance under the Indentures and because the
Company understands that it is one measure used by certain investors to
determine operating cash flow and historical ability to service
indebtedness.
(13) Pro forma total interest expense excludes deferred financing costs of
$0.9 million for the year ended December 31, 1996 and $0.5 million for
the six month period ended June 30, 1997.
(14) The ratio of earnings to fixed charges reflects the ratio of earnings to
fixed charges, with earnings consisting of loss before taxes, minority
interest, extraordinary (loss), plus fixed charges and fixed charges
consisting of interest expense on indebtedness, amortization of financing
costs and debt discount, plus that portion of lease rental expense
representative of the interest factor.
Pro forma earnings were insufficient to cover fixed charges by $2.7
million and $1.3 million for the year ended December 31, 1996 and the six
months ended June 30, 1997, respectively. However, these deficiencies
reflect non-cash charges for depreciation and amortization of goodwill and
other intangibles and amortization of financing costs and debt discount of
$10.1 million and $5.4 million for the respective periods.
P-4
<PAGE>
(15) In the computation of the ratio of earnings to combined fixed charges and
preferred stock dividends, earnings consist of loss before income taxes,
minority interest, extraordinary (loss) plus fixed charges. Combined
fixed charges and preferred stock dividends consist of interest expense
on indebtedness, amortization of financing costs and debt discount,
preferred stock dividend requirements of majority-owned subsidiaries,
plus that portion of lease rental expense representative of the interest
factor.
Pro forma earnings were insufficient to cover combined fixed charges and
preferred stock dividends by $8.5 million and $4.1 million for the year
ended December 31, 1996 and for the six months ended June 30, 1997,
respectively. However, this deficiency reflects non-cash charges for
depreciation and amortization of goodwill and other intangibles, and
amortization of financing costs and debt discount of $10.1 million and
$5.4 million for the respective periods.
(16) Dura-Line's Reno, Nevada production facility flooded on January 1, 1997.
Uninsured property damage and lost production totaled $464 and has been
recorded as an extraordinary item in the six month period ended June 30,
1997.
P-5
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
AT JUNE 30, 1997
----------------------------------------------
COMPANY
HISTORICAL OFFERINGS(1) PRO FORMA
---------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...... $ 3,032 $ 22,045 $ 25,077
Accounts receivables--net...... 35,546 0 35,546
Inventories.................... 34,077 0 34,077
Prepaid expenses and other
current assets................ 4,878 0 4,878
-------- -------- --------
Total current assets......... 77,533 22,045 99,578
Property and equipment, net...... 29,299 0 29,299
Intangibles, net................. 80,440 0 80,440
Other assets..................... 17,696 9,000 (2) 26,696
-------- -------- --------
Total assets................. $204,968 $ 31,045 $236,013
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities.............. $ 38,476 0 $ 38,476
Current portion of long-term
obligations..................... 987 0 987
Long-term obligations
New Credit Agreement........... 0 0 0
Senior Notes................... 0 188,511 188,511
Subordinated Notes............. 0 0 0
Discount Notes................. 0 85,034 (3) 85,034
Notes Due Affiliates........... 170,022 (170,022) 0
Sellers' Notes................. 3,000 0 3,000
Other Debt..................... 3,900 0 3,900
-------- -------- --------
Total long-term obligations.. 176,922 103,523 280,445
Other non-current liabilities and
deferred income taxes........... 5,266 0 5,266
Minority interest................ 2,136 0 2,136
Dura-Line Preferred Stock........ 1,875 0 1,875
Senior Preferred Stock........... 0 24,948 (3) 24,948
Junior Preferred Stock........... 0 20,000 20,000
Stockholders' equity (net capital
deficiency)..................... (20,694) (117,426)(2)(3)(4) (138,120)
-------- -------- --------
Total liabilities and
stockholders' equity........ $204,968 $ 31,045 $236,013
======== ======== ========
</TABLE>
- --------
(1) Gives effect to the Old Offerings, the application of the net proceeds
therefrom and the Company Formation, as if all such transactions occurred
on June 30, 1997. See "Use of Proceeds" and "Certain Transactions--The
Company Formation and Proceeds from the Old Offerings."
(2) Total fees of $14.5 million relating to the Old Offerings have been
allocated to other assets, $9.0 million, and net capital deficiency of
($5.5 million), in accordance with GAAP.
(3) A portion ($0.1 million) of the issue price of the Preferred Stock Units
offered hereby has been allocated to the Common Stock forming a part of
the units which, under GAAP, has decreased the balance of the Senior
Preferred Stock and increased the amount of stockholders' equity reflected
on the balance sheet.
(4) The pro forma net capital deficiency reflects adjustments for the
difference between the book value of the net assets of the
Telecommunications Subsidiaries and the Acquisition Price. See "Use of
Proceeds."
P-6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Boards of Directors and Shareholders
JTP Companies
We have audited the accompanying combined balance sheets of the JTP
Companies as of December 31, 1995 and 1996, and the related combined
statements of operations, changes in shareholders' equity (net capital
deficiency), and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
JTP Companies' management. Our responsibility is to express an opinion on
these financial statements based on our audits. We did not audit the financial
statements of certain combined companies whose statements reflect total assets
constituting 35% in 1996, and net sales constituting 13% in 1996, of the
related combined totals. Those statements were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it relates to
data included for these combined companies is based solely on the reports of
the other auditors.
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, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the combined financial position of the JTP Companies at December 31,
1995 and 1996, and the combined results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
April 25, 1997
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Diversified Wire & Cable, Inc.
Troy, Michigan
We have audited the accompanying balance sheet of Diversified Wire & Cable,
Inc. as of December 31, 1996 and the related statement of operations, changes
in stockholders' equity and cash flows for the period June 25, 1996
(Commencement of Operations) through December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion the financial statements referred to above present fairly, in
all material respects, the financial position of Diversified Wire & Cable,
Inc. as of December 31, 1996, and the results of its operations, the changes
in stockholders' equity and its cash flows for the period June 25, 1996
through December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ Mellen, Smith & Pivoz, P.C.
-------------------------------------
Bingham Farms, Michigan
February 13, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of Bond Holdings, Inc.
We have audited the consolidated balance sheet of Bond Holdings, Inc. and
Subsidiaries as of December 31, 1996, and the related consolidated statements
of income, stockholder's deficit and cash flows for the period from inception
(September 20, 1996) through December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Bond
Holdings, Inc. and Subsidiaries as of December 31, 1996, and the consolidated
results of their operations and their cash flows for the period from inception
(September 20, 1996) through December 31, 1996 (not included separately
herein), in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand LLP
-------------------------------------
Newport Beach, California
April 11, 1997
F-3
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Northern Technologies Holdings, Inc.
Deerfield, Illinois
We have audited the accompanying consolidated balance sheet of Northern
Technologies Holdings, Inc. as of December 31, 1996. This financial statement
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of Northern
Technologies Holdings, Inc. as of December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ McFarland & Alton P.S.
-------------------------------------
April 25, 1997
Spokane, Washington
F-4
<PAGE>
JTP COMPANIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 (UNAUDITED)
------------------ JUNE 30
ASSETS 1995 1996 1997
------ -------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................... $ 2,798 $ 6,385 $ 2,302
Restricted cash............................. -- 708 730
Accounts receivable, net of allowance of
$432, $501 and $468 at December 31, 1995
and 1996 and June 30, 1997, respectively... 13,218 30,255 35,546
Inventories................................. 11,305 25,750 34,077
Prepaid expenses and other current assets... 512 4,830 4,878
-------- -------- --------
Total current assets...................... 27,833 67,928 77,533
Property, plant, and equipment, net........... 16,739 29,046 29,299
Goodwill, net................................. 7,649 71,097 80,440
Other assets, net............................. 10,527 11,575 17,696
-------- -------- --------
Total assets.............................. $ 62,748 $179,646 $204,968
======== ======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Note payable................................ $ 527 $ -- $ --
Accounts payable............................ 8,745 16,799 15,651
Accrued expenses and other current
liabilities................................ 3,320 9,941 12,676
Payables to parent.......................... 3,171 6,794 10,149
Current portion of long-term debt........... 774 1,855 987
-------- -------- --------
Total current liabilities................. 16,537 35,389 39,463
Capital lease obligations..................... 3,397 3,234 2,991
Long-term debt................................ 1,168 2,572 3,909
Notes payable to parent....................... 47,444 141,380 170,022
Other noncurrent liabilities.................. 2,836 4,845 5,266
Minority interest............................. 707 1,730 2,136
7% Dura-Line cumulative preferred stock at
liquidation value of $10,000 per share:
issued and outstanding--187.5 shares......... 1,875 1,875 1,875
Shareholders' equity (net capital deficiency):
Common stock................................ 78 88 88
Additional paid-in capital.................. -- 1,990 1,990
Retained earnings (accumulated deficit)..... (11,294) (13,457) (22,772)
-------- -------- --------
Total shareholders' equity (net capital
deficiency).............................. (11,216) (11,379) (20,694)
-------- -------- --------
Total liabilities and shareholders' equity
(net capital deficiency)................. $ 62,748 $179,646 $204,968
======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
JTP COMPANIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31 JUNE 30
-------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales....................... $64,690 $96,969 $132,999 $50,917 $107,802
Cost of sales, excluding
depreciation................... 39,333 61,601 82,870 29,717 66,780
Selling, general, and
administrative expense,
excluding depreciation......... 10,228 13,508 26,857 7,349 20,053
Depreciation.................... 1,807 2,621 4,071 1,767 2,461
Amortization of goodwill and
other intangibles.............. 3,293 2,484 2,571 1,187 2,314
Management fees and other....... 1,641 1,869 3,307 3,158 17,601
------- ------- -------- ------- --------
Operating income (loss)......... 8,388 14,886 13,323 7,739 (1,407)
Other (income) and expense:
Interest expense.............. 5,778 6,555 11,826 4,356 9,265
Interest income............... (4) (156) (152) (28) (87)
Other......................... -- -- 31 -- (19)
------- ------- -------- ------- --------
Total other expense............. 5,774 6,399 11,705 4,328 9,159
------- ------- -------- ------- --------
Income (loss) before income
taxes, minority interest, and
extraordinary (loss)........... 2,614 8,487 1,618 3,411 (10,566)
Provision for income taxes...... 1,172 4,062 3,647 1,564 (3,031)
------- ------- -------- ------- --------
Income (loss) before minority
interest and extraordinary
(loss)......................... 1,442 4,425 (2,029) 1,847 (7,535)
Minority interest............... 57 419 548 349 796
------- ------- -------- ------- --------
Income (loss) before
extraordinary (loss)........... 1,385 4,006 (2,577) 1,498 (8,331)
Extraordinary (loss)............ -- -- -- -- (464)
------- ------- -------- ------- --------
Net income (loss)............... $ 1,385 $ 4,006 $ (2,577) $ 1,498 $ (8,795)
======= ======= ======== ======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
JTP COMPANIES
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (NET CAPITAL
DEFICIENCY)
(DOLLARS AND NUMBERS OF SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------------------------------------------------------
DURA-LINE AIM CAMBRIDGE JOHNSON DIVERSIFIED VIEWSONICS JTPG
------------- ------------- ------------- ------------- ------------- ------------- ------------
NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER
OF OF OF OF OF OF OF
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1994 76.0 $76 1.0 $ 1 .5 $ 1 -- $-- -- $-- -- $-- -- $--
Net income -- -- -- -- -- -- -- -- -- -- -- -- -- --
Cumulative
translation
adjustment -- -- -- -- -- -- -- -- -- -- -- -- -- --
Dividends
declared on
preferred stock
of Dura-Line -- -- -- -- -- -- -- -- -- -- -- -- -- --
Dura-Line
recapitalization -- -- -- -- -- -- -- -- -- -- -- -- -- --
---- --- --- --- --- --- --- ---- ---- ---- --- ---- --- ----
Balance at
December 31,
1994 76.0 76 1.0 1 .5 1 -- -- -- -- -- -- -- --
Net income -- -- -- -- -- -- -- -- -- -- -- -- -- --
Cumulative
translation
adjustment -- -- -- -- -- -- -- -- -- -- -- -- -- --
Dividends
declared on
preferred stock
of Dura-Line -- -- -- -- -- -- -- -- -- -- -- -- -- --
---- --- --- --- --- --- --- ---- ---- ---- --- ---- --- ----
Balance at
December 31,
1995 76.0 76 1.0 1 .5 1 -- -- -- -- -- -- -- --
Issuance of
common stock -- -- -- -- -- -- .5 -- 10.0 10 .1 -- 1.0 --
Net (loss) -- -- -- -- -- -- -- -- -- -- -- -- -- --
Cumulative
translation
adjustment -- -- -- -- -- -- -- -- -- -- -- -- --
---- --- --- --- --- --- --- ---- ---- ---- --- ---- --- ----
Balance at
December 31,
1996 76.0 76 1.0 1 .5 1 .5 -- 10.0 10 .1 -- 1.0 --
Net (loss)
(unaudited) -- -- -- -- -- -- -- -- -- -- -- -- -- --
Cumulative
translation
adjustment
(unaudited) -- -- -- -- -- -- -- -- -- -- -- -- -- --
---- --- --- --- --- --- --- ---- ---- ---- --- ---- --- ----
Balance at
June 30,
1997
(unaudited) 76.0 $76 1.0 $ 1 .5 $ 1 .5 $-- 10.0 $ 10 .1 $-- 1.0 $--
==== === === === === === === ==== ==== ==== === ==== === ====
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------------------------
ADDITIONAL
PAID-IN
BOND NORTHERN CAPITAL TOTAL
------------- ------------- ----------- RETAINED SHAREHOLDERS'
NUMBER NUMBER EARNINGS EQUITY
OF OF (ACCUMULATED (NET CAPITAL
SHARES AMOUNT SHARES AMOUNT DIVERSIFIED DEFICIT) DEFICIENCY)
------ ------ ------ ------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1994 -- $-- -- $-- $ -- $ 5,287 $ 5,365
Net income -- -- -- -- -- 1,385 1,385
Cumulative
translation
adjustment -- -- -- -- -- 248 248
Dividends
declared on
preferred stock
of Dura-Line -- -- -- -- -- (139) (139)
Dura-Line
recapitalization -- -- -- -- -- (22,022) (22,022)
--- ---- --- ---- ------ -------- --------
Balance at
December 31,
1994 -- -- -- -- -- (15,241) (15,163)
Net income -- -- -- -- -- 4,006 4,006
Cumulative
translation
adjustment -- -- -- -- -- (14) (14)
Dividends
declared on
preferred stock
of Dura-Line -- -- -- -- -- (45) (45)
--- ---- --- ---- ------ -------- --------
Balance at
December 31,
1995 -- -- -- -- -- (11,294) (11,216)
Issuance of
common stock .1 -- 1.0 -- 1,990 -- 2,000
Net (loss) -- -- -- -- -- (2,577) (2,577)
Cumulative
translation
adjustment -- -- -- -- -- 414 414
--- ---- --- ---- ------ -------- --------
Balance at
December 31,
1996 .1 -- 1.0 -- 1,990 (13,457) (11,379)
Net (loss)
(unaudited) -- -- -- -- -- (8,795) (8,795)
Cumulative
translation
adjustment
(unaudited) -- -- -- -- -- (520) (520)
--- ---- --- ---- ------ -------- --------
Balance at
June 30,
1997
(unaudited) .1 $-- 1.0 $-- $1,990 $(22,772) $(20,694)
=== ==== === ==== ====== ======== ========
</TABLE>
See accompanying notes.
F-7
<PAGE>
JTP COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
YEAR ENDED DECEMBER 31 ENDED JUNE 30,
------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss)................ $ 1,385 $ 4,006 $(2,577) $ 1,498 $(8,795)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and amortization.. 5,100 5,105 6,642 2,954 4,774
Benefit from deferred income
taxes......................... (491) (538) (1,188) (267) (5,694)
Minority interest.............. 57 419 548 252 700
Changes in operating assets and
liabilities:
Accounts receivable............ (2,558) (3,182) 1,103 1,194 (3,567)
Inventories.................... (1,776) (2,475) 54 (543) (4,429)
Prepaid expenses and other
current assets................ 173 (156) (943) 471 61
Noncurrent assets.............. (340) (1,026) 287 (1,922) (1,028)
Accounts payable, accrued
expenses, and other current
liabilities................... 2,664 4,559 (4,607) (3,201) (3,062)
Noncurrent liabilities......... 1,219 1,366 3,285 (81) 3,800
Payables to Jordan............. 355 (115) 3,668 773 (6,087)
Other.......................... (55) (7) 41 0 62
------- ------- ------- ------- -------
Net cash provided by operating
activities...................... 5,733 7,956 6,313 1,128 (23,265)
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures........... (3,277) (5,400) (6,523) (2,812) (3,103)
Cash acquired from Jordan
acquisitions.................. -- -- 1,244 22 547
Acquisition of Dura-Line common
stock and other............... (2,252) (3,332) -- -- --
------- ------- ------- ------- -------
Net cash used in investing
activities.................. (5,529) (8,732) (5,279) (2,790) (2,556)
CASH FLOWS FROM FINANCING
ACTIVITIES
Repayment of long-term debt...... (876) (1,427) (1,698) (600) (1,395)
Net advances from Jordan......... 334 2,673 2,834 2,428 22,534
Other borrowings................. 828 1,466 857 -- 121
Proceeds from issuance of
Diversified common stock........ -- -- 250 -- --
------- ------- ------- ------- -------
Net cash provided by financing
activities...................... 286 2,712 2,243 1,828 21,260
Effect of exchange rate changes
on cash and cash equivalents.... -- -- 310 (7) 478
------- ------- ------- ------- -------
Net increase in cash and cash
equivalents..................... 490 1,936 3,587 159 (4,083)
Cash and cash equivalents at
beginning of period............. 372 862 2,798 2,798 6,385
------- ------- ------- ------- -------
Cash and cash equivalents at end
of period....................... $ 862 $ 2,798 $ 6,385 $ 2,957 $ 2,302
======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the period for:
Interest....................... $ 1,342 $ 2,423 $ 1,198 $ 400 $ 357
======= ======= ======= ======= =======
Income taxes, net.............. $ 1,730 $ 4,265 $ 2,103 $ 902 $ 579
======= ======= ======= ======= =======
Noncash investing activities:
Capital leases................. $ -- $ 3,867 $ 686 $ 349 $ 571
======= ======= ======= ======= =======
Jordan acquisitions............ $ -- $ -- $92,334 $33,165 $17,000
======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
F-8
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The unaudited combined financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual combined
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the JTP Companies believe these disclosures are adequate
to make the information presented not misleading. In the opinion of
management, all adjustments necessary for a fair presentation for the periods
presented have been reflected and are of a formal recurring nature.
Results of operations for the six months ended June 30, 1996 and 1997 are
not necessarily indicative of the results that may be achieved for the entire
years ended December 31, 1996 and 1997, respectively.
The accompanying combined financial statements include the accounts of Dura-
Line Corporation and Subsidiaries (Dura-Line); AIM Electronics Corporation
(AIM); Cambridge Products Corporation (Cambridge); Johnson Components, Inc.
(Johnson); Diversified Wire & Cable, Inc. (Diversified); Viewsonics, Inc. and
Subsidiary (Viewsonics); Jordan Telecommunications Product Group, Inc., and
Subsidiaries (JTPG); Bond Holdings, Inc. and Subsidiaries (Bond); and Northern
Technologies Holdings, Inc. and Subsidiary (Northern); collectively the JTP
Companies. All of the JTP Companies are wholly owned subsidiaries of Jordan
Industries, Inc. (Jordan) except for Diversified which is 87.5% owned by
Jordan. All significant intercompany balances and transactions have been
eliminated in combination.
Dura-Line was founded in 1971 and was acquired by Jordan in October 1985.
The company is a leading manufacturer and supplier of high density
polyethylene (HDPE) plastic ducts used to install, house, and protect fiber-
optic, coaxial, and other cables. Dura-Line also manufactures other plastic
piping for potable water and heating systems. The company is headquartered in
Knoxville, Tennessee, and operates manufacturing facilities in the United
States, the United Kingdom, the Czech Republic, Mexico, Israel, China, and
India and sells its products principally to telecommunications and cable
television companies.
AIM was founded in 1981 and was acquired by Jordan in May 1989. The company
is an importer and manufacturer of electronic connectors, adapters, switches,
tools, custom cable assemblies, and other electronic hardware products for
telecommunications and data communications networks sold to the commercial and
consumer electronics markets. AIM's products, excluding custom cable
assemblies, are primarily manufactured in Asia.
Cambridge was founded in 1972 and was acquired by Jordan in September 1989.
The company is a domestic manufacturer of high-quality electronic connectors,
plugs, adapters, and other accessories. Cambridge also designs and markets
specialty radio-frequency coaxial electronic connectors for radio, mobile
communications, television, and computer equipment.
Johnson, formerly the Components Division of E. F. Johnson Company, Inc.,
was purchased by Jordan in January 1996. The company is a high-quality, fully-
integrated domestic manufacturer of radio-frequency coaxial connectors and
electronic hardware. Johnson specializes in manufacturing miniature and
subminiature radio-frequency connectors used primarily in telecommunication,
computer, and other OEM applications which require high frequency ranges.
Diversified was founded in 1988 and was purchased (87.5%) by Jordan in June
1996. The company is a broad-line provider and value-added reseller of wire,
cable, and custom cable assemblies. Diversified's products are used in local-
area-networks, custom cable assemblies, electrical applications, sound and
security applications, and various other OEM and miscellaneous applications.
F-9
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Viewsonics was founded in 1974 and was purchased by Jordan in August 1996.
The company designs, manufactures, and markets branded cable television
components, electronic network components, and electronic security components
primarily for the home connection portion of the cable television
infrastructure. Viewsonics' products are primarily manufactured by its wholly
owned subsidiary, Shanghai Viewsonics Electronic Co., Ltd., located in
Shanghai, China.
JTPG, a wholly owned subsidiary of Jordan, through its wholly owned
subsidiary, Jordan Telecommunications Product Group-Europe, Inc. (JTPGE),
purchased Vitelec Electronics Ltd. (Vitelec) in August 1996. JTPG and JTPGE
have no operations.
Vitelec, located in Hampshire, England, was founded in 1987 and is an
importer, packager, and master distributor of radio-frequency connectors,
plugs, jacks, sockets, adapters, and terminators sold to the commercial and
consumer electronics markets. Vitelec's radio-frequency products are
manufactured for them in Asia. Vitelec also distributes local-area-network and
wide-area-network cabling, connectors, converters, and accessories for data
communication networks.
Bond was incorporated as a holding company in August 1996 to acquire the
Bond Technologies Group. The Bond Technologies Group consists of: an 80%
interest in Bond Technologies, Inc., which was organized and incorporated
under the laws of the state of California in 1988 and has manufacturing plants
in Anaheim and Fremont, California; an 80% interest in Cable Spec, Ltd. (dba
Bond Technologies, Ltd.), a limited partnership organized under the laws of
the state of Texas in July 1995 and which has a manufacturing plant in Austin,
Texas; and an 80% interest in Balance Manufacturing Services of Southern
California, Inc., and a 51% interest in BSM, Inc., which were incorporated in
the state of California in 1995 and 1994, respectively. Balance Manufacturing
Services of Southern California, Inc. and BSM, Inc. function as the sales
representatives for Bond Technologies Group in southern California and
northern California, respectively.
Bond designs, engineers, and manufactures high-quality custom electronic
cables and connector subassemblies for original equipment manufacturers in the
data and telecommunication segments of the electronics industry. Current sales
are predominantly within the United States.
Northern was incorporated as a holding company in December 1996 to acquire
Northern Technologies, Inc. Northern Technologies, Inc. was founded in 1985
and designs, manufactures, and markets power conditioning and power protection
equipment primarily for telecommunications applications. The company also
offers a variety of other products including voltage regulators,
uninteruptable power supplies, isolation transformers, and grounding devices
to protect any power-critical application.
DURA-LINE SUBSIDIARIES/INVESTMENT IN AFFILIATE
On December 9, 1988, Dura-Line Limited, a wholly owned subsidiary of Dura-
Line, was incorporated in the United Kingdom to manufacture and supply HDPE
plastic conduit systems to the United Kingdom and European markets. Dura-Line
Limited began operations in March 1989.
On April 29, 1993, Dura-Line (Israel) Ltd., a joint venture between Dura-
Line and two Israeli companies, was established in Israel to manufacture and
supply HDPE plastic conduit systems to the Middle East market. Dura-Line
(Israel) Ltd., 33 1/3% owned by Dura-Line, commenced operations in December
1993.
On July 23, 1993, Dura-Line CT s.r.o, a limited liability company, was
established in the Czech Republic to manufacture and supply HDPE plastic
conduit systems to the Central European markets. Dura-Line CT's net profits
and losses are split 70% to Dura-Line and 30% to the former shareholders of
Compuplast-Technology, A.S. The company commenced operations in November 1993.
F-10
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
On February 21, 1995, Dura-Line Mexico S.A. de C.V., a wholly owned
subsidiary of Dura-Line, was incorporated in Mexico to manufacture and supply
HDPE plastic conduit systems to Central and South American markets. Dura-Line
Mexico S.A. de C.V. began operations in August 1996.
On December 28, 1995, Dura-Line Shanghai Plastics Company, Ltd., a
Contractual Cooperative Joint Venture with a Chinese company, was established
to manufacture and supply HDPE plastic conduit systems to China and other Asia
markets. Dura-Line owns 100% of the equity in Dura-Line Shanghai Plastics and
began operations in October 1996.
On August 19, 1996, Bharti Dura-Line Private Ltd., a joint venture with
Bharti Telecom, was incorporated in India to manufacture and supply HDPE
plastic conduit systems to India and neighboring countries. Dura-Line owns 50%
plus one share of the joint venture and as of December 31, 1996, has not
commenced operations.
COMMON STOCK
Common stock consists of the following:
<TABLE>
<CAPTION>
PAR VALUE
(IN DOLLARS SHARES SHARES SHARES
PER SHARE) AUTHORIZED ISSUED OUTSTANDING
----------- ---------- ------ -----------
<S> <C> <C> <C> <C>
December 31, 1995
Dura-Line........................... $1.00 100,000 76,000 76,000
Aim................................. 1.00 1,000 1,000 1,000
Cambridge........................... 1.00 30,000 500 500
December 31, 1996
Dura-Line........................... 1.00 100,000 76,000 76,000
Aim................................. 1.00 1,000 1,000 1,000
Cambridge........................... 1.00 30,000 500 500
Johnson............................. 1.00 10,000 500 500
Diversified......................... 1.00 10,000 10,000 10,000
Viewsonics.......................... 1.00 10,000 100 100
JTPG................................ .01 1,000 1,000 1,000
Bond................................ 1.00 10,000 100 100
Northern............................ .01 100,000 1,000 1,000
</TABLE>
JORDAN ACQUISITIONS
On January 23, 1996, Jordan purchased the net assets of Johnson. The
purchase price of $16,121, including costs incurred directly related to the
transaction, was allocated to working capital of $1,616, property, plant, and
equipment of $4,660, and noncompete agreements of $1,050, and resulted in an
excess purchase price over net identifiable assets of $8,795. The acquisition
was financed with cash.
On June 25, 1996, Jordan purchased the stock of Diversified. The purchase
price of $17,044, including costs incurred directly related to the
transaction, was allocated to working capital of $534, property, plant, and
equipment of $607, noncompete agreements of $500, other assets of $27, capital
leases of $194, and resulted in an excess purchase price over net identifiable
assets of $15,570. The acquisition was financed with cash and a $1,500
subordinated seller note. Immediately after Diversified was purchased by
Jordan, Diversified sold 1,250 shares of its common stock to the former owners
and current members of Diversified management for $250.
Certain sellers of Diversified are entitled to additional payments for their
stock, contingent upon operating results as defined in the purchase agreement.
The maximum contingent consideration to be paid is $3,200.
F-11
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
On August 1, 1996, Jordan purchased the net assets of Viewsonics. The
purchase price of $15,000, including costs incurred directly related to the
transaction, was allocated to working capital of $6,378, property, plant, and
equipment of $446, and resulted in an excess purchase price over net
identifiable assets of $8,176. The acquisition was financed with cash.
The former owner of Viewsonics is entitled to additional payments for the
net assets acquired by Jordan, contingent upon operating results as defined in
the purchase agreement. The maximum contingent consideration to be paid is
$5,000.
On August 5, 1996, Jordan purchased the stock of Vitelec through its wholly
owned subsidiaries, JTPG and JTPGE. The purchase price of $14,040, including
costs incurred directly related to the transaction, was allocated to working
capital of $962, property, plant, and equipment of $1,054, and resulted in an
excess purchase price over net identifiable assets of $12,024. The acquisition
was financed with cash.
On September 20, 1996, Jordan purchased Bond Technologies Group. The
purchase price of $8,629, which included costs incurred directly related to
the transaction, was allocated to working capital of $2,099, property, plant,
and equipment of $902, noncompete agreements of $800, other assets of $54,
debt assumed of $53, and resulted in an excess purchase price over net
identifiable assets of $4,827. The acquisition was financed with cash.
The purchase price included cash balances that are restricted in their use.
The restricted balances, which total $708 as of December 31, 1996, are held in
an escrow account with instructions that the balances be paid to the previous
owners of Bond's underlying companies at a predetermined date if certain
earnings levels are achieved. Based on current projections, Bond does not
anticipate paying the sellers. However, it is at least reasonably possible
that this estimate may change in the near term which would result in Bond
having to pay the sellers up to the entire amount of the restricted cash.
On December 31, 1996, Jordan purchased 100% of the stock of Northern
Technologies, Inc., through its wholly owned subsidiary, Northern. The
purchase price of $21,500, including estimated costs incurred directly related
to the transaction, was allocated to working capital of $5,082, property,
plant, and equipment of $887, noncompetition agreements of $500, long-term
assets of $234, long-term liabilities of $188, and resulted in an excess
purchase price over net identifiable assets of $14,985. Northern has agreed to
purchase raw materials during 1997 at the current market price of $2,271 as of
December 31, 1996. The acquisition was financed with cash.
Unaudited annual pro forma information with respect to the JTP Companies as
if the 1996 acquisitions had occurred on January 1, 1995 and 1996, is as
follows:
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED DECEMBER 31
-----------------------
1995 1996
----------- -----------
<S> <C> <C>
Net sales........................................ $ 178,678 $ 193,474
Income before income taxes and minority interest. 11,370 7,669
Net income....................................... 7,013 3,132
</TABLE>
F-12
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The JTP Companies consolidate all majority-owned subsidiaries and limited
partnerships where the specific JTP Company is the general partner with a
controlling interest. Investments in 20%- to 50%-owned affiliates are
accounted for using the equity method. All significant intercompany balances
and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
All highly liquid debt instruments purchased with an initial maturity of
three months or less are considered to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Inventories are
primarily valued at either average or first in, first out (FIFO) cost.
Depreciation and Amortization
Property, Plant, and Equipment--Depreciation and amortization of property,
plant, and equipment is calculated using estimated useful lives, or over the
lives of the underlying leases, if less, using straight-line or accelerated
methods. The useful lives of plant and equipment for the purpose of computing
book depreciation are as follows:
<TABLE>
<S> <C>
Machinery and equipment........................................ 3-10 years
Buildings and improvements..................................... 7-35 years
Furniture and fixtures......................................... 5-10 years
</TABLE>
Goodwill--Goodwill is being amortized on the straight-line basis principally
over 40 years. At December 31, 1995 and 1996, goodwill is net of accumulated
amortization of $1,683 and $2,715, respectively.
Foreign Currency Translation
In accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation," assets and liabilities of Dura-Line's,
Viewsonics', and JTPG's foreign operations are translated from foreign
currencies into U.S. dollars at year-end rates while income and expenses are
translated at the weighted-average exchange rates for the year. Gains or
losses resulting from the translations of foreign currency financial
statements are deferred and classified as a separate component of
shareholders' equity.
Long-Lived Assets
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
requires, among other things, that companies consider whether indicators of
impairment of long-lived assets held for use are present, that if such
indicators are present the companies determine whether the sum of the
estimated undiscounted future cash flows attributable to such assets is less
than their carrying amounts, and if so, the companies recognize an impairment
loss based on the excess of the carrying amount of the assets over their fair
value.
Accordingly, the JTP Companies evaluated the ongoing value of their
property, plant, and equipment and other long-lived assets as of December 31,
1996. From this evaluation, the JTP Companies determined that there were no
indications of impairment significant enough to warrant recognition of an
impairment loss, and as such, no impairment loss has been recognized for the
year ended December 31, 1996.
F-13
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Income Taxes
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," provides that deferred tax assets and liabilities be determined based
on the difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. A valuation allowance is provided when it
is more likely than not that some portion of the deferred tax assets arising
from temporary differences and net operating losses will not be realized.
Dura-Line and JTPG have not provided for income taxes on undistributed
earnings of foreign subsidiaries to the extent the undistributed earnings are
considered to be permanently reinvested.
Risk and Uncertainties
The JTP Companies operate in seven countries. In each country, the business
is subject to varying degrees of risk and uncertainty. The JTP Companies
insure their business and assets in each country against insurable risks in a
manner that they deem appropriate. Because of their diversity, the JTP
Companies believe that the risk of loss from noninsurable events in their
businesses in any one country would not have a material adverse effect on
their operations as a whole.
AIM, Viewsonics, and Bond are economically dependent on a limited number of
suppliers, some of which are located in Asia. If these suppliers become unable
to meet materials requirements, sales could be adversely affected. However,
AIM, Viewsonics, and Bond management believe that sufficient inventory levels
are maintained, and alternative sources of supply would be available, to
prevent a materially adverse impact on the respective results of operations.
Dura-Line's domestic employees represent approximately 50% of Dura-Line's
total worldwide employment as of December 31, 1996. Approximately 36% of Dura-
Line's domestic employees, or approximately 18% of Dura-Line's total
employees, are subject to a collective bargaining agreement which expired on
April 18, 1997. Negotiations for a new agreement are currently under way.
Plastic resins are Dura-Line's principal raw materials. The price of plastic
resins is subject to worldwide market forces of supply and demand. Prices can
be volatile, and fluctuations influence Dura-Line's financial results.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The JTP Companies' financial instruments include cash equivalents, trade
accounts receivable, accounts payable, accrued expenses, and notes payable to
Jordan. The fair values of all financial instruments were not materially
different from their carrying values at December 31, 1995 and 1996.
Research and Development Costs
Research and development costs are expensed as incurred.
F-14
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
3. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
DECEMBER 31 (UNAUDITED)
--------------- JUNE 30,
1995 1996 1997
------- ------- -----------
<S> <C> <C> <C>
Raw materials................................. $ 7,425 $10,738 $12,963
Work in process............................... 144 1,559 2,243
Finished goods................................ 3,736 13,453 18,871
------- ------- -------
$11,305 $25,750 $34,077
======= ======= =======
</TABLE>
4. OTHER ASSETS
Stock appreciation rights agreements, customer lists, noncompete agreements,
trade names, and supplier relations are amortized on the straight-line basis
over their estimated useful lives, ranging from one to fifteen years. At
December 31, 1995 and 1996, these items are shown net of accumulated
amortization of $15,733 and $21,484, respectively.
Other assets consist of:
<TABLE>
<CAPTION>
DECEMBER 31
---------------
1995 1996
------- -------
<S> <C> <C>
Stock appreciation rights agreements..................... $ 3,162 $ 2,418
Customer lists........................................... 1,679 1,478
Noncompete agreements.................................... 974 3,302
Trade names.............................................. 1,632 1,778
Supplier relations....................................... 1,220 1,129
Deferred taxes........................................... -- 438
Other.................................................... 1,860 1,032
------- -------
$10,527 $11,575
======= =======
</TABLE>
5. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment, at cost, consists of:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1996
-------- --------
<S> <C> <C>
Land.................................................. $ 842 $ 899
Machinery and equipment............................... 18,520 31,447
Buildings and improvements............................ 7,331 8,378
Furniture and fixtures................................ 965 3,395
Leasehold improvements................................ -- 621
-------- --------
27,658 44,740
Accumulated depreciation and amortization............. (10,919) (15,694)
-------- --------
$ 16,739 $ 29,046
======== ========
</TABLE>
F-15
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued liabilities consist of:
<TABLE>
<CAPTION>
DECEMBER 31
-------------
1995 1996
------ ------
<S> <C> <C>
Accrued vacation........................................... $ 84 $ 445
Accrued bonuses............................................ 1,004 --
Accrued income taxes....................................... 1,404 1,829
Accrued warranties......................................... -- 220
Accrued commissions........................................ 59 356
Accrued payroll and payroll taxes.......................... 218 1,414
Accrued royalties.......................................... 501 941
Accrued stock appreciation rights.......................... -- 2,922
Accrued legal and accounting fees.......................... -- 145
Accrued other expenses..................................... 50 1,622
Deferred taxes............................................. -- 47
------ ------
$3,320 $9,941
====== ======
</TABLE>
7. OPERATING LEASES
Certain land, buildings, and equipment are leased under noncancelable
operating leases. Certain leases for facilities contain renewal options and
require additional payments for maintenance charges and are subject to
periodic escalation charges.
Total minimum rental commitments under noncancelable operating leases at
December 31, 1996 are:
<TABLE>
<S> <C>
1997.............................................................. $ 1,339
1998.............................................................. 1,473
1999.............................................................. 1,165
2000.............................................................. 989
2001.............................................................. 794
Thereafter........................................................ 6,037
-------
$11,797
=======
</TABLE>
Northern rents its current facility from a partnership in which an officer
of Northern is a partner. The lease calls for monthly rental payments of
approximately $9, with annual 5% increases effective each January. The lease
expires in 2002.
Rental expense amounted to $301, $399, and $897 for 1994, 1995, and 1996,
respectively.
8. BENEFIT PLANS
Certain JTP Companies participate in the Jordan Industries, Inc. 401(k)
Savings Plan (401(k) Plan), a defined-contribution benefit plan for salaried
and hourly employees. In order to participate in the 401(k) Plan, employees
must be at least 21 years old and have worked at least 1,000 hours during the
first 12 months of employment. Each employee may contribute from 1% to 15% of
such employee's before-tax wages into the 401(k) Plan.
F-16
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
9. LINE OF CREDIT
Dura-Line has available a line of credit from ABN AMRO Bank N.V. of Prague,
Czech Republic in the amount of $800. At December 31, 1996, Dura-Line had no
outstanding borrowings on this line of credit. At December 31, 1995, Dura-Line
had outstanding borrowings on this line of credit of $527. The line of credit
carries an interest rate of 1.25% above PRIBOR (Prague Inter-Bank Offered
Rate); the applicable rate was 12.5% at December 31, 1995. The facility is
secured by the assets of Dura-Line CT s.r.o. and is guaranteed with a standby
letter of credit issued by Dura-Line.
10. DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1995 1996
------- --------
<S> <C> <C>
Notes payable (A)...................................... $ 1,232 $ 3,623
Capital lease obligations (B).......................... 4,107 4,038
Notes due to parent (C)................................ 47,444 141,380
------- --------
52,783 149,041
Current portion........................................ (774) (1,855)
------- --------
$52,009 $147,186
======= ========
</TABLE>
Aggregate maturities of long-term debt at December 31, 1996, excluding notes
due to parent, are as follows:
<TABLE>
<S> <C>
1997............................................................... $1,855
1998............................................................... 998
1999............................................................... 1,958
2000............................................................... 1,298
2001............................................................... 52
Thereafter......................................................... 1,500
------
$7,661
======
</TABLE>
- --------
(A) Dura-Line maintains $1,141 in notes payable due in monthly installments
through 1999 and bearing interest at rates ranging from 5.7% to 8.3%. The
notes are secured by equipment.
Diversified maintains $125 in notes payable due in monthly installments
through 2001 and bearing interest at rates ranging from 7.7% to 9.9%. The
notes are secured by equipment.
Diversified maintains $1,500 in notes payable to the sellers. The notes
accrue interest at an annual rate of 8%, which is payable annually. One-
half of the principal is due in 2003 with the remaining one-half due in
2004. Diversified has the right to prepay the principal. The notes are
subordinated to any indebtedness to Jordan or an affiliate.
Vitelec has a $857 note payable to an officer of Vitelec. The note is non-
interest-bearing and is due in 1997. Interest has not been imputed on the
note due to its very short term. The note is unsecured.
F-17
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(B) Interest rates on capital leases range from 7.7% to 10.8% and mature in
installments through 2001. Leases are secured by the underlying assets.
The future minimum lease payments as of December 31, 1996 under capital
leases consist of the following:
<TABLE>
<S> <C>
1997.............................................................. $1,199
1998.............................................................. 1,140
1999.............................................................. 1,122
2000.............................................................. 1,383
2001.............................................................. 53
------
4,897
Amount representing interest...................................... (859)
------
Present value of future minimum lease payments.................... $4,038
======
</TABLE>
The present value of the future minimum lease payments approximates the book
value of property, plant, and equipment under capital leases at December
31, 1996.
(C) The JTP Companies maintain notes payable to Jordan. The notes are interest
bearing at rates ranging from 10% and 14.5%, are due upon demand, and are
secured by all the assets of the respective JTP Companies. Jordan does not
intend to demand payment on these notes prior to January 1, 1998.
11. DURA-LINE RECAPITALIZATION AGREEMENT WITH JORDAN
On April 1, 1994, Dura-Line declared a common stock dividend in the amount
of $22,022. The dividend was paid by forgiving a $5,487 note receivable from
Jordan and entering into a $16,535 demand promissory note payable to Jordan.
12. INCOME TAXES
Income before income taxes and minority interest consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
----------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
From U.S. operations.............................. $2,753 $9,003 $1,513
From foreign operations........................... (139) (516) 105
------ ------ ------
Total income before income taxes and minority
interest......................................... $2,614 $8,487 $1,618
====== ====== ======
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
----------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current:
Federal......................................... $1,375 $3,744 $2,374
Foreign......................................... 230 654 2,311
State and local................................. 58 202 150
------ ------ ------
1,663 4,600 4,835
Deferred.......................................... (491) (538) (1,188)
------ ------ ------
Total provision for income taxes.............. $1,172 $4,062 $3,647
====== ====== ======
</TABLE>
F-18
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Deferred income taxes consist of:
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1995 1996
------ ------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation and amortization................... $1,248 $1,689
Equity investment in Dura-Line (Israel) Ltd................... 130 86
Foreign currency translation adjustment....................... -- 43
Insurance proceeds receivable................................. -- 90
Other......................................................... 13 31
------ ------
1,391 1,939
Deferred tax assets:
Accrued stock appreciation rights............................. 1,028 2,273
U.S. net operating loss carryforwards......................... 3,367 3,748
Foreign net operating loss carryforwards...................... -- 224
Uniform capitalization of inventory........................... 85 187
Book over tax depreciation and amortization................... -- 659
Accrued vacation.............................................. 31 179
Accrued warranties............................................ -- 138
Accrued bonuses............................................... 361 --
Foreign currency translation adjustment....................... 209 --
Other......................................................... 59 209
------ ------
5,140 7,617
Valuation allowance for deferred tax assets..................... (3,165) (3,903)
------ ------
Net deferred tax assets......................................... $ 584 $1,775
====== ======
</TABLE>
The increase in the valuation allowance during 1995 and 1996 was $190 and
$738, respectively.
The JTP Companies are included in the consolidated income tax returns of
Jordan, but have computed their provisions for income taxes on a separate
return basis in accordance with Statement of Financial Accounting Standards
No. 109. A tax-sharing agreement exists between the JTP Companies and Jordan
under which the JTP Companies receive benefit for net operating losses against
taxable income of profitable entities included in the consolidated tax group.
At December 31, 1995 and 1996, the JTP Companies have U.S. net operating loss
carryforwards under the tax-sharing agreement of $2,758 and $2,493,
respectively. The U.S. net operating loss carryforwards expire in various
years from 2005 to 2011. The foreign net operating loss of $617 can be carried
forward indefinitely.
F-19
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The provision for income taxes differs from the amount of income tax
provision computed by applying the United States federal income tax rate to
income before income taxes and minority interest. A reconciliation of the
differences is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
---------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Computed statutory tax provision........................ $ 889 $2,886 $ 550
Increase (decrease) resulting from:
Nondeductible depreciation and amortization........... 62 88 109
Higher effective income taxes of other countries...... 55 66 448
State and local taxes................................. 6 302 96
Foreign subsidiary losses without a current-year tax
benefit.............................................. 36 811 1,630
U.S. losses without a current-year tax benefit........ 118 72 527
Adjustments to prior-year tax liabilities............. -- -- 400
Other, net............................................ 6 (163) (113)
------ ------ ------
Provision for income taxes.............................. $1,172 $4,062 $3,647
====== ====== ======
</TABLE>
13. RELATED PARTY TRANSACTIONS
Jordan provides consulting services to the JTP Companies in exchange for
annual fees which are payable in accordance with terms stipulated in the
management consulting agreement between the JTP Companies and Jordan.
Management fees paid by the JTP Companies for such services amounted to
$1,356, $1,399, and $2,224 for the years ended December 31, 1994, 1995 and
1996, respectively, and amounted to $466 and $711 for the quarters ended March
31, 1996 and 1997, respectively.
Northern had $397 due from an officer as of December 31, 1996. The amount
was repaid subsequent to year-end.
On a monthly basis, the JTP Companies are charged interest on their notes
payable to Jordan (see Note 10). Interest expense amounted to $5,491, $6,235,
and $11,063 for the years ended December 31, 1994, 1995, and 1996,
respectively, and amounted to $1,931 and $4,190 for the quarters ended March
31, 1996 and 1997, respectively.
14. ACQUISITION OF DURA-LINE COMMON STOCK
In March 1992, Dura-Line entered into an agreement whereby it acquired
24,000 shares of its common stock in exchange for 375 shares of preferred
stock. One-half of the preferred shares (187.5 shares) have been redeemed at
the liquidation value of $1,875. An additional $1,875, representing the
remaining one-half of the preferred shares (187.5 shares), has been recorded
as preferred stock which carries a cumulative dividend of 7% per annum. There
was $621 of preferred stock dividends in arrears at December 31, 1996. No
dividends can be paid on Dura-Line's common stock until the dividends in
arrears are paid.
In conjunction with the exchange, the selling shareholders entered into
covenants not to compete for $2,679. The agreements call for Dura-Line to pay
this amount over a five-year period which began in 1992. At December 31, 1995
and 1996, approximately $325 and $81 remains to be paid on these agreements,
respectively.
The selling shareholders were also granted stock appreciation rights
totaling $5,952 as part of the noncompete agreements; $3,162 and $2,418 of
these stock appreciation rights remain unamortized as of December 31, 1995 and
1996, respectively.
F-20
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Additionally, the former shareholders were granted stock appreciation rights
exercisable in full or in part on the occurrence of the disposition by merger
or otherwise, in one or more transactions of: (a) more than 50% of the voting
power and/or value of the capital stock of the subsidiary, or (b) all or
substantially all the business or assets of the subsidiary. The value of the
stock appreciation rights is based on the ultimate sales price of the stock or
assets of Dura-Line and is essentially 15% of the ultimate sales price of the
stock or assets sold, less $15,625. No liability has been recorded relative to
these rights as of December 31, 1996.
On April 10, 1997, Dura-Line paid the former shareholders pursuant to an
agreement (The Redemption Agreement), as if Dura-Line was sold for $110,000.
The former shareholders received $9,438 in cash and a deferred payment of
$4,719 over five years at 8% interest. The Redemption Agreement also requires
that the $1,875 of remaining preferred stock be redeemed one year from the
date of the agreement.
If at any time prior to April 30, 1998, Jordan has received offering
proceeds from the registration of any shares of common stock of Dura-Line (the
IPO), Jordan will pay the former shareholders an additional $2,250.
If Jordan has not received proceeds from the IPO, the former shareholders
will receive a special bonus of 25% of Dura-Line's 1997 gross profit (as
defined) in excess of $30,000.
As consideration for the signing of the Redemption Agreement, the former
shareholders will receive total non-compete payments of $352 payable over the
next 13 months.
15. STOCK APPRECIATION RIGHTS
In connection with Jordan's acquisitions of AIM and Cambridge in 1989, the
seller of these companies was granted stock appreciation rights in respect of
the appreciation of these companies. The formula used to value these rights is
calculated by determining 20% of a multiple of average cash flow of these
companies for the two years preceding the date when these rights are exercised
less the indebtedness of these companies. The seller passed away during the
third quarter of 1996. The seller's estate has exercised these rights. The
total amount owed under these rights is approximately $6,260 as of December
31, 1996; $2,849 was accrued for these rights as of December 31, 1995. Payment
of these rights is amortized over five years, such that one-third is payable
upon exercise, and two-thirds is payable in five equal installments over five
years.
16. CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the JTP Companies to
concentration of credit risk consist principally of cash and cash equivalents
and accounts receivable. The JTP Companies place cash and cash equivalents
with high-quality financial institutions which are principally federally
insured up to prescribed limits.
The JTP Companies closely monitor the credit quality of their customers and
maintain allowances for potential credit losses which, historically, have been
within the range of managements' expectations.
17. RESTRICTED SUBSIDIARIES
The JTP Companies are subsidiaries of Jordan and are "Restricted
Subsidiaries" of Jordan under the JII Indentures relating to the Senior Notes
and Senior Subordinated Discount Debentures of Jordan (the JII Indentures).
The Senior Notes and Senior Subordinated Discount Debentures balances at
December 31, 1996, were $275,000 and $111,092, respectively. As a result,
certain covenants in the JII Indentures are applicable to
F-21
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
the JTP Companies and their subsidiaries and will limit their ability to make
dividends, distributions, and investments in entities that are not "Restricted
Subsidiaries," incur indebtedness, grant liens, enter into affiliate
transactions, and enter into agreements which limit the JTP Companies', and
their subsidiaries', ability to make dividends and distributions and make
asset sales. The JII indentures are also collateralized by all of the assets
of the JTP Companies.
18. SEGMENT DATA
The JTP Companies manufacture and supply a diversity of products in three
primary business segments within the telecommunications and datacommunications
industry. The segments and products are discussed below:
INFRASTRUCTURE PRODUCTS AND EQUIPMENT
Infrastructure Products and Equipment is made up of three operating units:
Dura-Line Corporation and Subsidiaries (Dura-Line), Viewsonics, Inc. and
Subsidiary (Viewsonics) and Northern Technologies Holdings, Inc. and
Subsidiary (Northern). The businesses in this segment manufacture cable
conduit, amplifiers and splitters, and power conditioning systems.
Dura-Line's businesses manufacture high-density polyethylene (HDPE) plastic
ducts used to install, house, and protect fiber-optic, coaxial, and other
cables. The company also manufactures other plastic piping for potable water
and heating systems. The majority of Dura-Line's sales are comprised of either
patented or proprietary products. The company markets products with its
patented silicone-based lining under the same SILICORE. The permanent low
coefficient of friction characteristic of SILICORE allows fiber optic and
other cables to be easily pulled or blown through the conduit, saving
significant time and money during installation, repair, and upgrade
procedures. The company manufactures several different types of SILICORE
products including ribbed, corrugated, smoothwall, aerial and preinstalled
fiber optic cable, coaxial cable, and service wire.
Dura-Line has cable conduit manufacturing operations in the United States,
China, the Czech Republic, Mexico, and the United Kingdom and manufacturing
joint ventures in Israel and India. Over the past three years, international
sales have been increasing as a percent of Dura-Line's sales and in 1996 were
approximately 48% of revenues.
Viewsonics designs, manufactures, and markets broad band electronic network
infrastructure components and patented electronic security components,
primarily for the "drop" or home connection portion of the CATV network. The
company currently sells 50% of its CATV electronic network infrastructure
components directly to multisystem CATV operators and 50% of its products to
distributors. Foreign sales accounted for approximately 24% of Viewsonics
sales in 1996.
On December 31, 1996, Jordan, through its wholly owned subsidiary Northern,
acquired Northern Technologies, Inc., which designs, manufactures, and markets
power conditioning and power protection equipment primarily for
telecommunications applications. The company offers a variety of products
including voltage regulators, uninteruptable power supplies (UPSs), isolation
transformers, and grounding devices to protect any critical application. No
results of operations from Northern are included in this segment; however,
total assets do reflect the result of this acquisition.
ELECTRONIC CONNECTORS AND COMPONENTS
Electronic Connectors and Components consists of three operating units, AIM
Electronics Corporation (AIM), Cambridge Products Corporation (Cambridge), and
Johnson Components, Inc. (Johnson), which
F-22
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
manufacture and distribute a wide variety of electronic connectors including
RF and coaxial connectors, plugs, adapters, and electronic hardware, as well
as electronic network and security components for use in the
telecommunications and datacommunications industries.
AIM is supplier of electronic connectors and related electronic components.
The company imports and produces a large variety of electronic connectors,
adapters, plugs, jacks, switches, tools, cable assemblies, and other
electronic hardware products for datacommunications and telecommunications
networks. The company sells it products in the commercial and consumer
electronics market throughout the world, directly and through a network of
manufacturers' representatives. The company markets over 3,000 of its products
under the house label AIM. The company markets its cable assemblies under the
name Prestige.
Cambridge is a domestic manufacturer of high-quality electronic connectors,
plugs, adapters, and other accessories. The company also designs and markets
specialty radio-frequency coaxial electronic connectors for radio, mobile
communications, television, and computer equipment.
Johnson manufacturers RF coaxial connectors and electronic hardware. The
company is a vertically integrated manufacturer specializing in miniature and
subminiature RF connectors used primarily in telecommunications,
datacommunications, and other OEM applications that require miniaturization
and high frequency ranges, including the wireless telecommunications industry.
Approximately 98% of the company's RF coaxial connectors are made of brass, a
lower cost alternative to stainless steel that offers comparable performance
characteristics.
CUSTOM CABLE ASSEMBLIES AND SPECIALTY WIRE AND CABLE
Custom Cable Assemblies and Specialty Wire and Cable includes two operating
units, Bond Holdings, Inc. (Bond) and Diversified Wire & Cable, Inc.
(Diversified), which design, engineer, manufacture, and distribute high-
quality custom electronic cables and connector subassemblies for
datacommunications and telecommunications customers. Bond designs, engineers,
and manufactures high-quality custom electronic cable assemblies and connector
subassemblies for original equipment manufacturers (OEMs) in the data and
telecommunications segment of the electronics industry.
The company's products are manufactured to customers' specifications and are
used to connect electronic devices to each other and related equipment.
Similar to other custom cable assembly manufacturers, Bond derived
approximately 34% of its sales from two customers.
Diversified is a broad-line provider and value-added reseller of wire,
cable, and customer cable assemblies. The company's products are used in
local-area-networks (LANs), custom cable assemblies, electrical applications,
sound and security applications, and various other OEM and miscellaneous
applications. The company processes and ships over 80% of its orders for wire
and cable on a 24-hour basis and 100% of its orders for wire and cable within
one week. In late 1996, the company opened a facility in Nashville, Tennessee,
to expand its geographical coverage and improve its proximity to customers.
Intersegment sales exist between AIM and Cambridge. These sales are
eliminated in combination and are not presented in segment disclosures. Export
sales are not significant on a combined basis. No single customer accounts for
10% or more of a segment of combined net sales.
Operating income by business segment is defined as net sales less operating
costs and expenses, excluding interest and income taxes.
F-23
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Identifiable assets are those used by each segment in its operations.
Summary financial information by business segment included in the financial
statements of the JTP Companies is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
NET SALES
Infrastructure Products and Equipment.................. $44,800 $76,033 $ 75,179
Electronic Connectors and Components................... 19,890 20,936 40,275
Custom Cable Assemblies and Specialty Wire and Cable... -- -- 17,545
------- ------- --------
$64,690 $96,969 $132,999
======= ======= ========
OPERATING INCOME
Infrastructure Products and Equipment.................. $ 5,540 $11,004 $ 7,099
Electronic Connectors and Components................... 2,848 3,882 5,577
Custom Cable Assemblies and Specialty Wire and Cable... -- -- 647
------- ------- --------
$ 8,388 $14,886 $ 13,323
======= ======= ========
DEPRECIATION AND AMORTIZATION
Infrastructure Products and Equipment.................. $ 2,845 $ 3,766 $ 3,836
Electronic Connectors and Components................... 2,255 1,339 2,321
Custom Cable Assemblies and Specialty Wire and Cable... -- -- 485
------- ------- --------
$ 5,100 $ 5,105 $ 6,642
======= ======= ========
CAPITAL EXPENDITURES
Infrastructure Products and Equipment.................. $ 3,184 $ 5,200 $ 5,543
Electronic Connectors and Components................... 93 200 849
Custom Cable Assemblies and Specialty Wire and Cable... -- -- 131
------- ------- --------
$ 3,277 $ 5,400 $ 6,523
======= ======= ========
IDENTIFIABLE ASSETS
Infrastructure Products and Equipment.................. $30,581 $44,378 $ 89,984
Electronic Connectors and Components................... 18,864 18,370 54,872
Custom Cable Assemblies and Specialty Wire and Cable... -- -- 34,790
------- ------- --------
$49,445 $62,748 $179,646
======= ======= ========
</TABLE>
F-24
<PAGE>
JTP COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONCLUDED)
(DOLLARS IN THOUSANDS)
Summary financial information by geographic area included in the financial
statements of the JTP Companies is as follows:
<TABLE>
<CAPTION>
UNITED
1994 STATES EUROPE COMBINED
- ---- ------- ------- --------
<S> <C> <C> <C>
Net sales.............................................. $50,850 $13,840 $64,690
Operating income....................................... 6,462 1,926 8,388
Identifiable assets.................................... 39,242 10,203 49,445
</TABLE>
<TABLE>
<CAPTION>
UNITED
1995 STATES EUROPE COMBINED
- ---- ------- ------- --------
<S> <C> <C> <C>
Net sales.............................................. $66,914 $30,055 $96,969
Operating income....................................... 10,588 4,298 14,886
Identifiable assets.................................... 40,743 22,005 62,748
</TABLE>
<TABLE>
<CAPTION>
UNITED SOUTH
1996 STATES EUROPE AMERICA ASIA COMBINED
- ---- -------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C>
Net sales............................. $ 97,369 $34,152 $1,137 $ 341 $132,999
Operating income...................... 7,751 6,587 (725) (290) 13,323
Identifiable assets................... 136,339 35,055 3,879 4,373 179,646
</TABLE>
Production facilities are located in the United States, the United Kingdom,
Israel, the Czech Republic, Mexico, India, and China. The operations in India
were incorporated in 1996 and have not yet begun production.
19. SUBSEQUENT EVENT
Dura-Line's Reno, Nevada, production facility flooded on January 1, 1997.
Uninsured property damage and lost production totaled approximately $400 and
will be recorded as an extraordinary charge in 1997.
20. SUBSEQUENT EVENT (UNAUDITED)
On May 30, 1997, Jordan Industries purchased the assets of LoDan which
designs, engineers and manufactures high-quality custom electronic cable
assemblies, sub-assemblies and electro-mechanical assemblies to original
equipment manufacturers in the data and telecommunications markets of the
electronics industry.
The purchase price of $17,000, including estimated costs incurred directly
related to the transaction, was allocated to working capital of $5,066,
property, plant and equipment of $783, noncompetition agreement of $250,
noncurrent assets of $41, and resulted in an excess purchase price over net
identifiable assets of $10,860. The acquisition was financed with cash.
F-25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
E.F. Johnson Company
In our opinion, the accompanying balance sheets and the related statements
of operations and of cash flows present fairly, in all material respects, the
financial position of E.F. Johnson Company--Components Division (a division of
E.F. Johnson Company) as of December 31, 1994, November 26, 1995 and January
23, 1996, and the results of its operations and its cash flows for the year
ended December 31, 1994, the eleven month period ended November 26, 1995 and
the two month period ended January 23, 1996 in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Minneapolis, Minnesota
August 28, 1996
F-26
<PAGE>
E.F. JOHNSON COMPANY--COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
------------ ------------ -----------
ASSETS
------
<S> <C> <C> <C>
Current assets:
Accounts receivable.................... $1,554 $1,579 $1,420
Inventory.............................. 2,297 2,191 2,421
Deferred tax asset..................... 191 226 198
------ ------ ------
Total current assets................. 4,042 3,996 4,039
Machinery and equipment, net............. 3,591 3,264 3,336
------ ------ ------
Total assets......................... $7,633 $7,260 $7,375
====== ====== ======
<CAPTION>
LIABILITIES AND DIVISION EQUITY
-------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable....................... $ 673 $ 844 $1,337
Accrued compensation and benefits...... 411 647 639
Accrued commissions payable............ 72 68 59
Other liabilities...................... 118 174 190
------ ------ ------
Total current liabilities............ 1,274 1,733 2,225
Deferred tax liability................... 1,038 873 846
Commitments (Note 7)
Division equity.......................... 5,321 4,654 4,304
------ ------ ------
Total liabilities and Division
equity.............................. $7,633 $7,260 $7,375
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-27
<PAGE>
E.F. JOHNSON COMPANY--COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN TWO MONTHS
YEAR ENDED MONTHS ENDED ENDED
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
------------ ------------ -----------
<S> <C> <C> <C>
Net sales:
Third party customers................... $13,801 $14,001 $2,245
To Parent............................... 2,367 2,158 195
------- ------- ------
16,168 16,159 2,440
------- ------- ------
Cost of sales:
Third party customers................... 8,844 8,641 1,424
To Parent............................... 1,539 1,403 127
------- ------- ------
10,383 10,044 1,551
------- ------- ------
Gross margin.......................... 5,785 6,115 889
------- ------- ------
Operating expenses:
Selling and marketing................... 1,666 1,750 267
Engineering............................. 498 483 84
Allocations from Parent company......... 667 591 106
------- ------- ------
Total operating expenses.............. 2,831 2,824 457
------- ------- ------
Operating income.......................... 2,954 3,291 432
Interest expense.......................... 237 -- --
------- ------- ------
Income before income taxes................ 2,717 3,291 432
Provision for income taxes................ (1,034) (1,251) (165)
------- ------- ------
Net income................................ $ 1,683 $ 2,040 $ 267
======= ======= ======
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE>
E.F. JOHNSON COMPANY--COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS TWO MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
------------ ------------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................ $ 1,683 $ 2,040 $ 267
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation........................ 910 958 183
Deferred income taxes............... 53 (200) 1
Loss on sale of property............ 2 -- --
Changes in components of working
capital:
(Increase) decrease in
receivables...................... (485) (25) 159
Decrease (increase) in
inventories...................... 347 106 (230)
Increase in accounts payable...... 355 171 493
(Decrease) increase in accrued
liabilities...................... (99) 288 (1)
------- ------- -----
Net cash provided by operating
activities..................... 2,766 3,338 872
------- ------- -----
Cash flows from investing activities:
Capital expenditures.................. (507) (656) (261)
Proceeds from sale of property........ 13 25 6
------- ------- -----
Net cash used by investing
activities..................... (494) (631) (255)
------- ------- -----
Cash flows from financing activities:
Decrease in advances from Parent...... (4,041) -- --
Investment by (distributions to)
Parent, net.......................... 1,769 (2,707) (617)
------- ------- -----
Net cash used by financing
activities..................... (2,272) (2,707) (617)
------- ------- -----
Net change in cash...................... -- -- --
Cash--beginning of period............... -- -- --
------- ------- -----
Cash--end of period..................... $ -- $ -- $ --
======= ======= =====
</TABLE>
See accompanying notes to financial statements.
F-29
<PAGE>
E.F. JOHNSON COMPANY--COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
E.F. Johnson Company--Components Division (the Division) is a division of
E.F. Johnson Company (the Parent). The Division manufactures RF connectors,
cable assemblies, electronic circuit hardware, spacers and test plugs and
jacks, as well as components designed to specific customer requirements.
Basis of Presentation
These financial statements present the assets, liabilities and results of
operations of the Division. The Parent's year end is December 31. The
financial statements as of and for the eleven month period ended November 25,
1995 were prepared for purposes of a letter of intent entered into in
conjunction with the sale of the Division (see Note 7). The financial
statements as of and for the two month period ended January 23, 1996 were
prepared to present the Division's results of operations subsequent to the
signing of the letter of intent and through the sale transaction closing date.
Costs related to functions performed by the Parent and certain other costs
which are attributable to the Division are allocated to the Division by the
Parent. Costs related to these functions, as further described at Note 5,
include computer support, legal, insurance, human resources, financial and
other administrative services.
The Division is part of a consolidated group and as such has extensive
dealings with related entities. Management considers that the intercompany
charges, including the allocation of common costs from the Parent,
appropriately reflect the cost of services provided. However, the terms of
transactions were determined between related parties and may, therefore,
differ from terms which would have occurred between wholly unrelated parties
and may also differ from the costs which would have been incurred had the
Division operated as a completely autonomous entity.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Division's financial instruments consist primarily of inventories,
short-term trade receivables and payables for which the current carrying
amounts approximate fair market value.
Inventories
Inventories are stated at the lower of cost or market, cost being determined
by the first-in, first-out (FIFO) method.
Machinery and Equipment
Machinery and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over estimated useful
lives which range from three to seven years.
F-30
<PAGE>
E.F. JOHNSON COMPANY--COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
Revenue Recognition
Revenue is recognized upon shipment of products. Rebates are granted to
certain distributors based on contractual formulas which consider the annual
sales volume to the distributors of Division product. Estimates of such
rebates are recorded as a reduction of sales at the time the product is
shipped by the Division.
Income Taxes
The Company is included in the consolidated federal income tax return filed
by the Parent. There is no tax sharing agreement between the Division and its
Parent. For financial statement purposes, the tax provision was computed as if
the Company filed a separate tax return using the liability method under
Financial Accounting Standard No. 109, "Accounting for Income Taxes." Income
taxes payable are recorded as a component of the investment by/distributions
to Parent in division equity.
Retirement Benefits
The Parent has a defined contribution qualified retirement savings and
profit sharing plan which covers all of its employees. The Company's profit
sharing contributions are discretionary. No profit sharing contributions were
authorized for 1994 and 1995. The Division's contributions to the retirement
savings plan during the year ended December 31, 1994, the eleven month period
ended November 26, 1995 and the two month period ended January 23, 1996 were
$45, $48 and $5, respectively.
Concentration of Credit Risk and Major Customers
Financial instruments which potentially subject the Division to
concentrations of credit risk consist principally of trade accounts
receivables; however, this risk is limited by the large number of customers in
the Division's customer base. Sales to Parent accounted for 15%, 13% and 8% of
net sales during the year ended December 31, 1994, the eleven month period
ended November 26, 1995 and the two month period ended January 23, 1996,
respectively.
NOTE 2--INVENTORY
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
------------ ------------ -----------
<S> <C> <C> <C>
Finished goods...................... $ 954 $ 901 $ 989
Work in process..................... 849 847 926
Raw materials....................... 494 443 506
------ ------ ------
Total inventories............... $2,297 $2,191 $2,421
====== ====== ======
</TABLE>
NOTE 3--MACHINERY AND EQUIPMENT
Machinery and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
------------ ------------ -----------
<S> <C> <C> <C>
Machinery and equipment............ $5,297 $5,828 $6,193
Furniture and fixtures............. 362 326 315
Construction in process............ -- 115 13
------ ------ ------
5,659 6,269 6,521
Less: Accumulated depreciation..... (2,068) (3,005) (3,185)
------ ------ ------
Total machinery and equipment,
net........................... $3,591 $3,264 $3,336
====== ====== ======
</TABLE>
F-31
<PAGE>
E.F. JOHNSON COMPANY--COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
NOTE 4--DIVISION EQUITY
Division equity consists of the following:
<TABLE>
<S> <C>
Balance at December 31, 1993...................................... $1,869
Net income...................................................... 1,683
Investment by Parent, net....................................... 1,769
------
Balance at December 31, 1994...................................... 5,321
Net income...................................................... 2,040
Distributions to Parent, net.................................... (2,707)
------
Balance at November 26, 1995...................................... 4,654
Net income...................................................... 267
Distributions to Parent, net.................................... (617)
------
Balance at January 23, 1996....................................... $4,304
======
</TABLE>
Investments by/distributions to Parent represent the change in net assets of
the Division, net of income during each respective period.
NOTE 5--ALLOCATED COSTS
Services provided to the Division by the Parent include expenses incurred
and paid by the Parent on the Division's behalf, charges for periodic Parent
services provided at rates which management considers to reflect the
incremental cost of providing these services, and allocations of costs based
upon utilization of shared services by the Division. In addition, interest
expense was charged on advances from Parent at the Parent's average borrowing
rate. Management considers that these allocations are reasonable given the
services provided. Costs related to functions performed by the Parent and
certain other costs which are attributable to the Division are allocated to
the Division by the Parent as follows:
<TABLE>
<CAPTION>
ELEVEN TWO MONTHS
YEAR ENDED MONTHS ENDED ENDED
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
------------ ------------ -----------
<S> <C> <C> <C>
Operating expenses:
Management compensation.......... $202 $241 $ 40
Computer support................. 65 47 11
Legal services................... 5 8 2
Insurance........................ 34 24 3
Finance, human resources and
other administrative support
services........................ 361 271 50
---- ---- ----
$667 $591 $106
==== ==== ====
</TABLE>
F-32
<PAGE>
E.F. JOHNSON COMPANY--COMPONENTS DIVISION
(A DIVISION OF E.F. JOHNSON COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
(IN THOUSANDS)
NOTE 6--INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
ELEVEN TWO
YEAR ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal.......................... $ 826 $1,222 $138
State............................ 155 229 26
------ ------ ----
981 1,451 164
Deferred........................... 53 (200) 1
------ ------ ----
$1,034 $1,251 $165
====== ====== ====
</TABLE>
The Company's effective income tax rate varies from the federal statutory
tax rate as follows:
<TABLE>
<CAPTION>
ELEVEN TWO
YEAR ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Federal statutory tax rate........ 34.0% 34.0% 34.0%
Increase in tax rate resulting
from:
State taxes, net of federal tax
benefit........................ 4.0 4.0 4.0
Other, net...................... 0.1 -- 0.2
---- ---- ----
Effective tax rate................ 38.1% 38.0% 38.2%
==== ==== ====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of asset and liabilities for financial reporting
and income tax purposes. Significant components of the Division's deferred tax
assets and liabilities consist of the following:
<TABLE>
<CAPTION>
ELEVEN TWO
YEAR ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, NOVEMBER 26, JANUARY 23,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Deferred income tax assets:
Inventory....................... $ 80 $ 66 $ 70
Accruals........................ 111 160 128
------- ----- -----
191 226 198
Deferred income tax liabilities: (1,038) (873) (846)
------- ----- -----
Machinery and equipment......... $ (847) $(647) $(648)
======= ===== =====
</TABLE>
NOTE 7--SUBSEQUENT EVENT
During 1995, the Company entered into a letter of intent to sell the
Division's assets. The transaction was completed on January 23, 1996.
Prior to the sale of the Division's assets, substantially all assets of the
Division were pledged as collateral under the parent's revolving credit
facility and bank term debt agreement. Concurrent with the sale, the Division
obtained a release of its assets as collateral under the bank agreements.
F-33
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Diversified Wire & Cable, Inc.
Troy, Michigan
We have audited the accompanying balance sheets of Diversified Wire & Cable,
Inc. as of September 30, 1993, 1994 and 1995, and the related statements of
income and changes in stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Diversified Wire & Cable,
Inc. as of September 30, 1993, 1994 and 1995, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Mellen, Smith & Pivoz
Bingham Farms, Michigan
March 23, 1996
F-34
<PAGE>
DIVERSIFIED WIRE & CABLE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, (UNAUDITED)
--------------------------------- JUNE 24,
ASSETS 1993 1994 1995 1996
------ ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Current assets
Cash and money market.......... $ 48,630 $ 137,297 $ 420,698 $ 21,944
Accounts receivable--Trade
(Less allowance for doubtful
accounts of $37,000 in 1993,
$50,000 in 1994, $25,000 in
1995 and $33,700 in 1996)
(Note 2)...................... 1,904,348 1,814,852 3,353,281 3,249,772
Current portion of note
receivable--Employee (Note 8). -- 17,848 19,640 18,611
Inventory (Notes 1, 2 and 3)... 747,935 1,577,551 1,783,598 2,001,119
Prepaid expenses............... 9,803 28,920 33,070 56,905
Corporate taxes recoverable
(Note 1)...................... 59,568 -- -- 258,613
---------- ---------- ---------- ----------
Total current assets......... 2,770,284 3,576,468 5,610,287 5,606,964
---------- ---------- ---------- ----------
Property and equipment (Notes 1,
2 and 3)
Furniture, fixtures and
equipment..................... 330,911 404,764 518,941 641,152
Transportation equipment....... 157,309 181,814 281,508 262,523
Leasehold improvements......... 12,563 25,144 87,300 87,300
---------- ---------- ---------- ----------
500,783 611,722 887,749 990,975
Less--Accumulated depreciation. 295,745 366,890 451,065 491,304
---------- ---------- ---------- ----------
Net property and equipment... 205,038 244,832 436,684 499,671
---------- ---------- ---------- ----------
Other assets
Long-term portion of note
receivable--Employee (Note 8). -- 26,684 12,461
Deposits....................... 12,225 16,677 23,933 22,529
Closing costs (Net of
amortization) (Note 1)........ -- 13,333 8,333 4,583
---------- ---------- ---------- ----------
Total other assets........... 12,225 56,694 44,727 27,112
---------- ---------- ---------- ----------
Total assets................. $2,987,547 $3,877,994 $6,091,698 $6,133,747
========== ========== ========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
<S> <C> <C> <C> <C>
Current liabilities
Short-term debt (Note 2)....... $ 775,000 $ 820,443 $2,365,443 $2,274,263
Current portion of long-term
debt (Note 3)................. 61,863 240,855 68,795 87,213
Accounts payable............... 1,108,741 1,984,502 1,881,641 1,719,638
Accrued expenses............... -- -- -- 67,241
Accrued payroll................ 139,037 186,572 247,724 683,592
Accrued and withheld payroll
taxes......................... 136,780 15,743 105,286 49,627
Corporate taxes payable........ 19,500 283,868 278,608 --
Sales tax payable.............. 19,020 25,244 30,113 20,760
---------- ---------- ---------- ----------
Total liabilities............ 2,259,941 3,557,227 4,977,610 4,902,334
---------- ---------- ---------- ----------
Long-term liabilities
Long-term debt--Net of current
portion (Note 3).............. 50,277 264,151 77,402 107,256
Notes payable--Officers (Note
5)............................ 18,988 2,696 1,276 --
---------- ---------- ---------- ----------
Total long-term liabilities.. 69,265 266,847 78,678 107,256
---------- ---------- ---------- ----------
Total liabilities............ 2,329,206 3,824,074 5,056,288 5,009,590
---------- ---------- ---------- ----------
Stockholders' equity (Notes 9 and
10)
Common stock--$1 par value;
Authorized--50,000 shares;
Issued and Outstanding--32,105
shares in 1993, and 24,605
shares in 1994, 1995 and 1996. 32,105 24,605 24,605 24,605
Additional paid-in capital..... 15,395 372,500 372,500 372,500
Retained earnings (deficit).... 610,841 (343,185) 638,305 727,052
---------- ---------- ---------- ----------
Total stockholders' equity... 658,341 53,920 1,035,410 1,124,157
---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity........ $2,987,547 $3,877,994 $6,091,698 $6,133,747
========== ========== ========== ==========
</TABLE>
See auditors' report and notes to financial statements.
F-35
<PAGE>
DIVERSIFIED WIRE & CABLE, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------- (UNAUDITED)
1993 1994 1995 PERIOD
----------- ----------- ----------- ENDED JUNE 24,
AMOUNT AMOUNT AMOUNT 1996
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Sales.................... $13,784,785 $17,057,119 $25,167,605 $17,929,559
Cost of goods sold....... 9,183,254 11,645,756 17,338,618 12,109,997
----------- ----------- ----------- -----------
Gross profit............. 4,601,531 5,411,363 7,828,987 5,819,562
Operating expenses....... 4,515,553 4,475,342 6,178,747 5,575,514
----------- ----------- ----------- -----------
Operating income......... 85,978 936,021 1,650,240 244,048
----------- ----------- ----------- -----------
Other income (expense)
Interest income........ 284 2,638 7,303 (155,168)
Interest expense....... (36,404) (71,952) (155,329) 7,472
Gain (Loss) on disposal
of fixed assets....... (4,605) (9,128) 1,776 (6,305)
----------- ----------- ----------- -----------
Total other income
(expense)........... (40,725) (78,442) (146,250) (154,001)
----------- ----------- ----------- -----------
Income before provision
for income tax.......... 45,253 857,579 1,503,990 90,047
Provision for income tax. 17,000 337,000 522,500 1,300
----------- ----------- ----------- -----------
Net income............... $ 28,253 $ 520,579 $ 981,490 $ 88,747
=========== =========== =========== ===========
</TABLE>
See auditors' report and notes to financial statements.
F-36
<PAGE>
DIVERSIFIED WIRE & CABLE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995 AND (UNAUDITED) FOR THE PERIOD
ENDED JUNE 24, 1996
<TABLE>
<CAPTION>
RETAINED
COMMON PAID IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Beginning stockholders' equity--
October 1, 1992................. $ 32,105 $ 15,395 $ 582,588 $ 630,088
Add: Net income for the year
ended September 30, 1993........ -- -- 28,253 28,253
-------- -------- ----------- -----------
Ending stockholders' equity--
September 30, 1993.............. 32,105 15,395 610,841 658,341
Less: Stock redemption (Note 9).. (10,000) (15,395) (1,474,605) (1,500,000)
Add: Stock issuance (Note 10).... 2,500 372,500 -- 375,000
Add: Net income for the year
ended September 30, 1994........ -- -- 520,579 520,579
-------- -------- ----------- -----------
Ending stockholders' equity--
September 30, 1994.............. 24,605 372,500 (343,185) 53,920
Add: Net income for the year
ended September 30, 1995........ -- -- 981,490 981,490
-------- -------- ----------- -----------
Ending stockholders' equity--
September 30, 1995.............. 24,605 372,500 638,305 1,035,410
Add: Net income for the period
ended June 24, 1996 (Unaudited). -- -- 88,747 88,747
-------- -------- ----------- -----------
Ending stockholders' equity--June
24, 1996 (Unaudited)............ $ 24,605 $372,500 $ 727,052 $ 1,124,157
======== ======== =========== ===========
</TABLE>
See auditors' report and notes to financial statements.
F-37
<PAGE>
DIVERSIFIED WIRE & CABLE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED SEPTEMBER 30, PERIOD ENDED
--------------------------------- JUNE 24,
1993 1994 1995 1996
-------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income.................. $ 28,253 $ 520,579 $ 981,490 $ 88,747
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization............. 81,077 96,459 101,835 96,385
Recognition of bad debt... 51,272 45,785 16,179 8,700
(Gain) Loss on disposal of
fixed asset.............. 4,605 9,128 (1,776) 6,305
(Increase) Decrease in:
Accounts receivable..... (328,741) 43,711 (1,554,608) 96,609
Inventory............... (258,407) (829,616) (206,047) (217,521)
Prepaid expenses........ (770) (19,117) (4,150) (23,835)
Corporate taxes
recoverable............ (17,568) 59,568 -- (258,613)
Increase (Decrease) in:
Accounts payable........ 208,348 875,761 (102,861) (162,003)
Accrued expenses........ 173,659 (73,502) 150,695 447,450
Corporate taxes payable. (1,500) 264,368 (5,260) (278,608)
Sales tax payable....... 6,900 6,224 4,869 (9,353)
-------- ----------- ---------- ---------
Net cash provided
(used) by operating
activities........... (52,872) 999,348 (619,634) (205,737)
-------- ----------- ---------- ---------
Cash flows from investing
activities:
Purchases of property and
equipment.................. (128,946) (99,602) (291,910) (122,854)
Payment of security
deposits................... (795) (4,452) (7,256) --
(Increase) Decrease in note
receivable--Employee....... -- (44,532) 12,430 13,490
Proceeds from sale of fixed
asset...................... 36,500 -- 5,000 6,000
Decrease in other assets.... -- -- -- 1,404
(Increase) in other note
receivable................. -- -- -- (1,800)
-------- ----------- ---------- ---------
Net cash (used) by
investing activities. (93,241) (148,586) (281,736) (103,760)
-------- ----------- ---------- ---------
Cash flows from financing
activities:
Increase in short-term
debt--Net.................. 125,000 45,443 1,545,000 (91,180)
Proceeds from long-term
debt....................... 86,236 525,487 94,636 60,000
Payments on long-term debt.. (68,934) (176,733) (453,445) (56,801)
Payment of closing costs.... -- (15,000) --
Decrease in notes payable--
Officers................... (37,012) (16,292) (1,420) (1,276)
Issuance of capital stock... -- 375,000 --
Redemption of capital stock. -- (1,500,000) --
-------- ----------- ---------- ---------
Net cash provided
(used) by financing
activities........... 105,290 (762,095) 1,184,771 (89,257)
-------- ----------- ---------- ---------
Net increase (decrease) in
cash and cash equivalents.... (40,823) 88,667 283,401 (398,754)
Cash and cash equivalents--
Beginning of year............ 89,453 48,630 137,297 420,698
-------- ----------- ---------- ---------
Cash and cash equivalents--End
of year...................... $ 48,630 $ 137,297 $ 420,698 $ 21,944
======== =========== ========== =========
Supplemental disclosures of
cash flow information
Cash paid during the year
for:
Interest.................. $ 36,404 $ 63,534 $ 148,634 $ 156,779
======== =========== ========== =========
Income taxes.............. $ 35,000 $ 50,000 $ 554,066 $ 467,521
======== =========== ========== =========
Supplemental schedule of non-
cash investing and financing
transactions
Long-term debt incurred for
the acquisition of fixed
assets..................... $ 55,301 $ 67,551 $ -- $ --
======== =========== ========== =========
Debt retired in
consideration of sale of
fixed asset................ $ -- $ 23,439 $ -- $ --
======== =========== ========== =========
</TABLE>
See auditors' report and notes to financial statements.
F-38
<PAGE>
DIVERSIFIED WIRE & CABLE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in
the preparation of these financial statements.
The unaudited financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes these disclosures are adequate to make the information
presented not misleading. In the opinion of management, all adjustments
necessary for a fair presentation for the period presented have been reflected
and are of a formal recurring nature.
Results of operations for the period from October 1, 1995 to June 24, 1996
are not necessarily indicative of the results that may be achieved for the
entire fiscal year ending September 30, 1996.
Nature of Operations
The Company is engaged in the acquisition and sale of electrical and
electronic wiring and cable throughout the United States of America. The
Company began operations on February 2, 1988.
Inventory Valuation
Inventory is valued at the lower of cost (first-in, first-out) or market.
Manufacturing and goods available for sale inventory consisted of the
following:
<TABLE>
<CAPTION>
(UNAUDITED)
1993 1994 1995 1996
-------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Goods available for sale...... $747,935 $1,577,551 $1,778,542 $2,001,119
Work-in-process............... -- -- 1,081 --
Raw materials................. -- -- 3,975 --
-------- ---------- ---------- ----------
$747,935 $1,577,551 $1,783,598 $2,001,119
======== ========== ========== ==========
</TABLE>
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed
primarily using an accelerated method. Amortization of closing costs is
computed on a straight-line basis over three years. Depreciation and
amortization expense amounted to $81,077, $96,459 and $101,835 for the years
ended September 30, 1993, 1994 and 1995, respectively.
Income Taxes
The provision for income tax is based upon pre-tax accounting income as
adjusted for certain expenses which are not deductible for income tax
purposes.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
F-39
<PAGE>
DIVERSIFIED WIRE & CABLE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
NOTE 2--SHORT-TERM DEBT
The Company has available a revolving credit line up to $3,000,000, with
Comerica Bank. Outstanding debt under the line of credit amounted to $775,000,
$820,443 and $2,365,443 for the years ended September 30, 1993, 1994 and 1995,
respectively and is payable on demand. Interest on outstanding indebtedness is
payable at a rate of one-half percent over the bank's prime rate. The debt is
secured by accounts receivable, inventory and equipment.
NOTE 3--LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1993 1994 1995
------- -------- --------
<S> <C> <C> <C>
Notes payable--Comerica Bank, payable in monthly
installments currently totalling $7,068, including
interest at rates ranging from 6.75% to 9.92%.
Secured by equipment............................... $47,018 $ 88,434 $146,197
Notes repaid at September 30, 1995.................. 65,122 416,572 --
------- -------- --------
112,140 505,006 146,197
Less current portion................................ 61,863 240,855 68,795
------- -------- --------
Long-term portion................................... $50,277 $264,151 $ 77,402
======= ======== ========
</TABLE>
The aggregate maturities of long-term debt are as follows for the years
ending September 30:
<TABLE>
<S> <C>
1996............................ $ 68,795
1997............................ 55,199
1998............................ 22,203
--------
$146,197
========
</TABLE>
NOTE 4--COMMITMENTS AND CONTINGENT LIABILITIES
The Company conducts its operations from facilities that are leased under
non-cancelable operating leases expiring in April, 1999 and August, 1998.
There is an option to renew the first lease for an additional three years.
Included in the financial statements is rent expense of $57,000, $101,341 and
$141,467 for the years ended September 30, 1993, 1994 and 1995, respectively.
The future minimum rental payments required under the above operating leases
for the years ending September 30, are as follows:
<TABLE>
<S> <C>
1996............................ $244,140
1997............................ $244,140
1998............................ $234,444
1999............................ $ 63,893
</TABLE>
At September 30, 1995, the Company is the guarantor of a loan in the amount
of $301,761 for a shareholder.
F-40
<PAGE>
DIVERSIFIED WIRE & CABLE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--NOTES PAYABLE--OFFICERS
Notes Payable--Officers are unsecured loans with repayment terms undefined.
Interest accrues at 10% per annum and is paid annually. These notes are
subordinated to the Comerica Bank line of credit (See Note 2).
NOTE 6--RETIREMENT PLAN
The Company has adopted a plan under Internal Revenue Code Section 401(k)
which allows an employee to elect to defer a portion of his compensation. This
plan covers substantially all employees.
NOTE 7--CONCENTRATION OF CREDIT RISK
The Company places its cash deposits primarily with one financial
institution. From time to time the amount on deposit at that institution
exceeds the maximum federally insured amount.
NOTE 8--NOTE RECEIVABLE--EMPLOYEE
The note receivable represents a loan to an employee with interest accrued
at 7% per annum on the unpaid balance. The outstanding balances at September
30, 1993, 1994 and 1995 were $0, $44,532 and $32,101, respectively, with
monthly payments of $1,637. The note is secured by the employee's residence.
NOTE 9--STOCK REDEMPTION
On June 9, 1994, the Company redeemed 10,000 shares of stock from a retiring
stockholder.
NOTE 10--STOCK ISSUANCE
Effective June 9, 1994 the Company issued 2,500 shares of stock for
$375,000.
NOTE 11--LETTERS OF CREDIT
At September 30, 1995, the Company had outstanding a $41,500 letter of
credit to secure the Company's potential liability under its self insured
medical plan.
F-41
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Boards of Directors
Viewsonics, Inc. and
Shanghai Viewsonics Electronic Co., Ltd.
We have audited the accompanying combined balance sheet of Viewsonics, Inc.
and Shanghai Viewsonics Electronic Co., Ltd. as of December 31, 1995, and the
related combined statements of income, stockholder's equity, and cash flows
for the year then ended. These financial statements are the responsibility of
the Companies' management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Viewsonics, Inc.
and Shanghai Viewsonics Electronic Co., Ltd. at December 31, 1995, and the
combined results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
April 10, 1996
F-42
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER JULY 31
31 1995 1996
---------- -----------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash................................................... $ 484,884 $ 620,932
Accounts receivable, less allowance of $9,161.......... 1,218,410 1,488,355
Accounts receivable from related entity................ 75,305 36,277
Inventories............................................ 2,567,198 5,678,514
Other current assets................................... 18,051 --
---------- ----------
Total current assets................................. 4,363,848 7,824,028
Property, equipment, and leasehold improvements--Net..... 456,666 445,713
Other assets............................................. 12,516 14,529
---------- ----------
$4,833,030 $8,284,270
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
Current liabilities:
Accounts payable....................................... $ 442,938 $ 820,332
Accrued expenses....................................... 398,259 429,884
---------- ----------
Total current liabilities............................ 841,197 1,250,216
Stockholder's equity:
Common stock........................................... 501 501
Additional paid-in capital............................. 614,499 614,499
Retained earnings...................................... 3,372,658 6,416,446
Foreign currency translation adjustment................ 4,175 2,608
---------- ----------
Total stockholder's equity........................... 3,991,833 7,034,054
---------- ----------
$4,833,030 $8,284,270
========== ==========
</TABLE>
See accompanying notes.
F-43
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED PERIOD ENDED
DECEMBER 31 JULY 31
1995 1996
----------- ------------
<S> <C> <C>
Net sales.............................................. $10,997,478 $8,069,407
Cost of sales.......................................... 4,867,307 3,276,123
----------- ----------
Gross profit........................................... 6,130,171 4,793,284
Selling, general, and administrative expenses.......... 2,974,998 1,762,562
----------- ----------
Operating income....................................... 3,155,173 3,030,722
Interest income........................................ 48,938 13,066
----------- ----------
Net income............................................. $ 3,204,111 $3,043,788
=========== ==========
</TABLE>
See accompanying notes.
F-44
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
COMBINED STATEMENT OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON PAID-IN RETAINED TRANSLATION STOCKHOLDER'S
STOCK CAPITAL EARNINGS ADJUSTMENT EQUITY
------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1994................... $501 $304,499 $ 4,069,643 $ 4,849 $ 4,379,492
Capital contribution.... -- 310,000 -- -- 310,000
Cash dividends paid..... -- -- (3,901,096) -- (3,901,096)
Foreign currency
translation adjustment. -- -- -- (674) (674)
Net income.............. -- -- 3,204,111 -- 3,204,111
---- -------- ----------- ------- -----------
Balance at December 31,
1995................... 501 614,499 3,372,658 4,175 3,991,833
Foreign currency
translation adjustment
(unaudited)............ -- -- -- (1,567) (1,567)
Net income (unaudited).. -- -- 3,043,788 -- 3,043,788
---- -------- ----------- ------- -----------
Balance at July 31, 1996
(unaudited)............ $501 $614,499 $ 6,416,446 $ 2,608 $ 7,034,054
==== ======== =========== ======= ===========
</TABLE>
See accompanying notes.
F-45
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED PERIOD
DECEMBER ENDED
31, JULY 31,
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income......................................... $ 3,204,111 $ 3,043,788
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 148,387 86,559
Provision for bad debts.......................... 4,711 --
Changes in operating assets and liabilities:
Accounts receivable............................ (251,571) (269,945)
Accounts receivable from related entity........ (75,305) 39,078
Inventories.................................... (989,526) (3,111,316)
Other current assets........................... (9,460) 18,051
Other assets................................... 5,687 (2,013)
Accounts payable............................... 106,596 377,394
Accrued expenses............................... 204,491 31,625
----------- -----------
Net cash provided by operating activities.... 2,348,121 213,221
Cash flows from investing activities
Purchases of property, equipment, and leasehold
improvements...................................... (184,716) (75,606)
----------- -----------
Net cash used for investing activities....... (184,716) (75,606)
Cash flows from financing activities
Capital contribution............................... 310,000 --
Dividends paid..................................... (3,901,096) --
----------- -----------
Net cash used for financing activities............. (3,591,096) --
Effect of exchange rate changes on cash............ (674) (1,567)
----------- -----------
(Decrease) increase in cash........................ (1,428,365) 136,048
Cash at beginning of period........................ 1,913,249 484,884
----------- -----------
Cash at end of period.............................. $ 484,884 $ 620,932
=========== ===========
</TABLE>
See accompanying notes.
F-46
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Viewsonics, Inc. (VSI) and Shanghai Viewsonics Electronic Co., Ltd. (SVECL),
collectively referred to as the "Companies," are commonly controlled. VSI
designs, manufactures, and markets branded cable television electronic network
component and security electronic network component products primarily to
customers located throughout the United States.
VSI is economically dependent on SVECL, an affiliate located in Shanghai,
China, which sells 100% of its production to VSI. Although there are a limited
number of manufacturers of the products currently purchased from SVECL, VSI
management believes that other suppliers could provide similar products.
However, the time required to locate and qualify other suppliers, and the
nature of their terms (which would likely not be comparable to those currently
in place) could cause a delay in filling orders and may be financially
disruptive to VSI.
The unaudited combined financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual combined
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Companies believe these disclosures are adequate to
make the information presented not misleading. In the opinion of management,
all adjustments necessary for a fair presentation for the period presented
have been reflected and are of a formal recurring nature.
Results of operations for the period from January 1, 1996 to July 31, 1996
are not necessarily indicative of the results that may be achieved for the
entire year ending December 31, 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Combination
The combined financial statements include the accounts of VSI and SVECL.
Significant intercompany accounts and transactions have been eliminated in the
combined financial statements.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by
the first in, first out (FIFO) method.
Property, Equipment, and Leasehold Improvements
Property and equipment are stated at cost, less accumulated depreciation.
Provisions for depreciation of property and equipment are determined using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are stated at cost, less accumulated amortization. Leasehold
improvements are amortized on a straight-line basis over the shorter of the
lease term or the life of the respective asset.
Research and Development Cost
Research and development costs related to both present and future products
are expensed as incurred.
F-47
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Advertising Costs
Advertising costs are expensed as incurred.
Income Taxes
VSI is taxed as an S corporation under applicable provisions of the Internal
Revenue Code and, therefore, is generally not liable for federal and certain
state income taxes, as the income of VSI is included in the taxable income of
its stockholder.
SVECL is governed by the Income Tax Law of the People's Republic of China
(the PRC) concerning Enterprises with Foreign Investment and Foreign
Enterprises and various local income tax laws of the PRC (the FIE Income Tax
Laws). Pursuant to the FIE Income Tax Laws, the income of SVECL is fully
exempted from income tax for two years commencing from the first profitable
year of operations, followed by a 50% exemption for the next three years,
after which the income of SVECL will be taxable at a rate which is currently
27%.
No income tax provision has been recorded, as SVECL incurred a loss for the
year ended December 31, 1995 and has incurred losses since its inception.
Financial Instruments
Cash and trade receivables may subject the Companies to credit risk. VSI
holds cash at highly rated financial institutions which are federally insured
up to prescribed limits. Cash balances may exceed the federally insured limits
at any given time.
During 1995, VSI's two largest customers accounted for approximately 27% of
sales. These same customers accounted for approximately 36% of VSI's December
31, 1995 accounts receivable. VSI closely monitors the credit quality of its
customers and maintains an allowance for potential credit losses which,
historically, have been within the range of management's expectations.
Foreign Currency Translation
The accounts of SVECL are translated into U.S. dollars from the functional
local currency in accordance with Statement of Financial Accounting Standards
(SFAS) No. 52.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JULY 31,
1995 1996
------------ -----------
<S> <C> <C>
Raw materials................................... $ 371,929 $ 734,094
Work in process................................. 77,971 153,895
Finished goods.................................. 2,857,513 5,640,007
Inventory obsolescence reserve.................. (740,215) (849,482)
---------- ----------
$2,567,198 $5,678,514
========== ==========
</TABLE>
F-48
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
Property, equipment, and leasehold improvements consist of the following as
of December 31, 1995:
<TABLE>
<S> <C>
Equipment....................................................... $698,984
Furniture and fixtures.......................................... 127,506
Vehicles........................................................ 51,176
Leasehold improvements.......................................... 51,102
--------
928,768
Less: Accumulated depreciation and amortization................. 472,102
--------
$456,666
========
</TABLE>
5. STOCKHOLDER'S EQUITY
Common Stock and Additional Paid-in Capital
<TABLE>
<S> <C>
VSI
Common stock; $1 par value; 1,000 shares authorized; 501 shares
issued and outstanding......................................... $ 501
Additional paid-in capital...................................... 4,499
SVECL
Additional paid-in capital (registered capital)................. 610,000
--------
$615,000
========
</TABLE>
SVECL was registered on August 16, 1993 under the Laws of the PRC on
enterprises operated exclusively with foreign capital. The tenure of the
Company is for a period of 30 years.
The registered capital of the Company is $610,000. Since SVECL is a "Limited
Liability Company" under PRC Law, it does not issue stock of any class.
Retained Earnings
As stipulated in the relevant regulations applicable to wholly foreign-owned
investment enterprises established in PRC, SVECL is required to appropriate
10% of its profit after tax, after offsetting accumulated deficit, determined
in accordance with the PRC's accounting principles and financial regulations,
to the general reserve fund until such reserve reaches 50% of the registered
capital of SVECL. The general reserve fund would not be available for
distribution as dividends.
SVECL has not generated any profit as of December 31, 1995 and, accordingly,
there were no profit distributions or appropriations to the general reserve
fund.
6. COMMITMENTS
The Companies lease manufacturing, office, and storage facilities and
certain equipment under noncancelable operating leases expiring in various
years through 2000. The leases require the Companies to pay real estate taxes
and maintenance costs.
F-49
<PAGE>
VIEWSONICS, INC. AND SHANGHAI VIEWSONICS ELECTRONIC CO., LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Commitments for future minimum payments under noncancelable leases are as
follows as of December 31, 1995:
<TABLE>
<S> <C>
1996..................................... $260,692
1997..................................... 262,774
1998..................................... 356,066
1999..................................... 11,193
2000..................................... 1,106
</TABLE>
Rental expense for the year ended December 31, 1995 was approximately
$239,000.
7. FOREIGN CURRENCY
In April 1995, the National Foreign Exchange Training Center is Shanghai
(the exchange center) commenced operations. Enterprises operating in the PRC
can enter into exchange transactions at the exchange center through the Bank
of China or other authorized institutions. Payments for imported materials are
subject to the availability of foreign currency, which depends on the foreign
currency denominated earnings of the enterprises, or must be arranged through
the exchange center. Approval for exchange at the exchange center is granted
to enterprises in the PRC for valid reasons such as purchases of imported
materials and remittance of earnings. While conversion of Renminbi into United
States dollars or other foreign currencies can generally be effected at the
exchange center, there is no guarantee that it can be effected at all times.
SVECL has not had and does not believe it will have any difficulty in
exchanging its currency (Renminbi) for U.S. dollars at the rate of exchange
quoted by the People's Bank of China.
F-50
<PAGE>
AUDITORS' REPORT TO THE SHAREHOLDERS OF VITELEC ELECTRONICS LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 1995
US GAAP EDITION
We have audited this special edition of the financial statements on pages F-
52 to F-60 which have been amended for US GAAP and which have been prepared
under the historical cost convention and the accounting policies set out on
page F-56.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The company's directors are responsible for the preparation of financial
statements. It is our responsibility to form an independent opinion, based on
our audit, on those statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with United States Generally Accepted
Auditing Standards. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgments made
by the directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the company's circumstances
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
state of the company's affairs at 31st December 1995 and of its result for the
year then ended and have been properly prepared in accordance with the
provisions of the Companies Act 1985 applicable to medium and small companies.
/s/ Roberts Redman Mead
Certified
Accountants
Registered Auditors
4 Lenten Street
Alton
Hampshire GU34 1HG.
Date: 20th June 1996
F-51
<PAGE>
VITELEC ELECTRONICS LIMITED
PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE
FOR THE YEAR ENDED PERIOD ENDED
DECEMBER 31, AUGUST 5,
----------------------------------- ---------------
1994 1995 1996
NOTES (Pounds) (Pounds) (Pounds)
----- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Turnover................ 2 3,084,444 4,472,275 2,406,016
Cost of sales........... 1,396,059 2,195,746 972,477
----------------- ----------------- ---------------
Gross profit............ 1,688,385 2,276,529 1,433,539
Administration costs.... 679,908 1,145,919 617,918
----------------- ----------------- ---------------
Operating profit........ 3/4 1,008,477 1,130,610 815,621
Interest receivable
(payable).............. 5 22,593 56,012 (286)
----------------- ----------------- ---------------
Profit on Ordinary
Activities Before
Taxation............... 1,031,070 1,186,622 815,335
Tax on ordinary
activities............. 6 338,825 390,968 262,844
----------------- ----------------- ---------------
Profit for the year..... 692,245 795,654 552,491
Dividends............... 7 75,000 75,000 2,000,000
----------------- ----------------- ---------------
Retained profit (loss)
for the period......... 617,245 720,654 (1,447,509)
Retained profit brought
forward................ 883,418 1,500,663 2,221,317
----------------- ----------------- ---------------
Retained profit carried
forward................ (Pounds)1,500,663 (Pounds)2,221,317 (Pounds)773,808
================= ================= ===============
</TABLE>
CONTINUING OPERATIONS
None of the company's activities were acquired or discontinued during the
above two financial years.
CRS3 PRIMARY STATEMENT OF RECOGNISED GAINS AND LOSSES MADE DURING THE YEAR
The Company made no recognised gains or losses in 1994 or in 1995 other than
the profit/(loss) for the year.
F-52
<PAGE>
VITELEC ELECTRONICS LIMITED
BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF 31ST DECEMBER (UNAUDITED) AS OF
--------------------------------------------------------- AUGUST 5,
1994 1995 1996
---------------------------- ---------------------------- -----------------
NOTES (Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
----- --------- ----------------- --------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Fixed assets............
Tangible assets....... 8 520,325 493,294 676,000
Current assets
Stocks................ 9 565,257 472,859 645,000
Debtors............... 10 935,694 1,011,952 705,000
Cash at bank and in
hand................. 687,448 1,639,383 281,000
--------- --------- -----------------
2,188,399 3,124,194 1,631,000
Creditors--amounts
falling due within one
year................... 11 (807,971) (996,081) (1,133,102)
--------- --------- -----------------
Net current assets...... 1,380,428 2,128,113 497,102
----------------- ----------------- -----------------
Net assets.............. (Pounds)1,900,753 (Pounds)2,621,407 (Pounds)1,173,898
================= ================= =================
Financed by:
Capital and reserves
Called up share
capital.............. 12 100,000 100,000 100,000
Share premium......... 13 300,090 300,090 300,090
Profit and loss
account.............. 14 1,500,663 2,221,317 773,808
----------------- ----------------- -----------------
(Pounds)1,900,753 (Pounds)2,621,407 (Pounds)1,173,898
================= ================= =================
</TABLE>
Approved by the Board of Directors on 29th January 1996
/s/ J Young
_____________________________________
J Young
/s/ H J Wells
_____________________________________
H J Wells
F-53
<PAGE>
VITELEC ELECTRONICS LIMITED
CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
(UNAUDITED) FOR
THE PERIOD ENDED
FOR THE YEAR ENDED DECEMBER 31 AUGUST 5
-------------------------------------------- ------------------
1995
1994 --------------------------- 1996
(Pounds) (Pounds) (Pounds) (Pounds)
--------------- ---------- --------------- ------------------
<S> <C> <C> <C> <C>
Operating activities
Cash received from
customers............ 3,461,521 4,372,239 3,250,770
Cash paid to
suppliers............ (2,832,159) (2,451,306) (1,822,552)
Cash paid for salaries
and wages............ (298,320) (543,602) (404,169)
--------------- ---------- ------------------
Net cash inflow from
operating
activities......... 331,042 1,377,331 1,024,049
--------------- ------------------
Returns on investments &
servicing of finance
Interest received..... 22,593 56,021 --
Interest paid......... -- -- (286)
Dividends paid........ (75,000) (75,000) (2,000,000)
--------------- ---------- ------------------
Net cash outflow
from returns on
investments and
servicing of
finance............ (52,407) (18,988) (2,000,286)
--------------- ------------------
Taxation
UK Corporation tax
paid................. (146,964) (333,924) (199,440)
--------------- ------------------
Investing activities
Sale of fixed assets.. 5,000 12,290 20,000
Acquisition of fixed
assets............... (88,872) (84,774) (202,706)
--------------- ---------- ------------------
Net cash outflow
from investing
activities......... (83,872) (72,484) (182,706)
--------------- --------------- ------------------
Net cash inflow
(outflow) before
financing.......... 47,799 951,935 (1,358,383)
Financing
Issue of share
capital.............. 400,000 -- --
--------------- ---------- ------------------
Net cash inflow from
financing.......... 400,000 -- --
--------------- --------------- ------------------
Increase (Decrease)
in cash and cash
equivalents........ (Pounds)447,799 (Pounds)951,935 (Pounds)(1,358,383)
=============== =============== ==================
</TABLE>
F-54
<PAGE>
VITELEC ELECTRONICS LIMITED
NOTES TO THE CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
(UNAUDITED) FOR
THE PERIOD ENDED
FOR THE YEAR ENDED 31ST DECEMBER AUGUST 5,
---------------------------------- -----------------
1994 1995 1996
(Pounds) (Pounds) (Pounds)
--------------- ----------------- -----------------
<S> <C> <C> <C>
Reconciliation of
operating profit to
net cash inflow from
operating activities
Operating profit..... 1,008,477 1,130,610 815,621
Depreciation charges. 44,057 95,708 57,163
Profit (loss) on sale
of tangible fixed
assets.............. 1,105 3,226 (120,567)
Increase/decrease in
stocks.............. (411,473) 92,398 (172,141)
Increase/decrease in
debtors............. (513,521) (76,258) 306,952
Increase/decrease in
creditors........... 202,397 131,647 137,021
--------------- ----------------- -----------------
Net cash flow from
operating
activities........ (Pounds)331,042 (Pounds)1,377,331 (Pounds)1,024,049
=============== ================= =================
Analysis of changes in
cash and cash
equivalents during the
year
At 1st January 1995.. 239,649 687,448 1,639,383
Net cash inflow
(outflow)........... 447,799 951,935 (1,358,383)
--------------- ----------------- -----------------
At 31st December
1995................ (Pounds)687,448 (Pounds)1,639,383 (Pounds)281,000
=============== ================= =================
</TABLE>
<TABLE>
<CAPTION>
CHANGE
1994 1995 IN YEAR
(Pounds) (Pounds) (Pounds)
-------- --------- --------
<S> <C> <C> <C>
Analysis of the balances of cash and cash
equivalents as shown in the balance sheet
Cash at bank and in hand........................ 687,448 1,639,383 951,935
======= ========= =======
</TABLE>
F-55
<PAGE>
VITELEC ELECTRONICS LIMITED
NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES
The unaudited financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although Vitelec
believes these disclosures are adequate to make the information presented not
misleading. In the opinion of management, all adjustments necessary for a fair
presentation for the period presented have been reflected and are of a formal
recurring nature.
Results of operations for the period from January 1, 1996 to August 5, 1996
are not necessarily indicative of the results that may be achieved for the
entire year ending December 31, 1996.
1.1 Accounting conventions
The financial statements have been prepared in accordance with the Companies
Act 1985 as amended and with applicable Accounting Standards.
1.2 Turnover
This represents the invoiced amount of goods sold and services provided,
excluding value added tax.
1.3 Depreciation of tangible assets
Provision is made for depreciation on all tangible assets, other than
freehold land, at rates calculated to write off the cost of each asset over
its expected useful life as follows:
<TABLE>
<S> <C>
Freehold buildings...................... 4% per annum on cost
Leasehold buildings..................... evenly over the term of the lease
Office equipment........................ 25% on the reducing balance
Plant and machinery..................... 25% on the reducing balance
Motor vehicles.......................... 25% on the reducing balance
</TABLE>
1.4 Stocks
Stock and work in progress are valued at the lower of cost and net
realisable value, after making due allowance for obsolete and slow moving
items.
1.5 Research and development
Expenditure on research and development is written off as incurred.
1.6 Deferred taxation
Provision is made by the liability method for all timing differences which
are expected to be reversed in the foreseeable future.
1.7 Foreign currencies
Transactions in foreign currencies are recorded at the rate of exchange at
the time of the transaction.
Assets and liabilities denominated in foreign currencies are translated at
the rate of exchange ruling at the balance sheet date.
All exchange differences are taken to the profit and loss account in the
year in which they arise.
F-56
<PAGE>
VITELEC ELECTRONICS LIMITED
NOTES TO THE ACCOUNTS--(CONTINUED)
2. TURNOVER
An analysis of turnover by geographical market is given below:
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
----------------- -----------------
<S> <C> <C>
United Kingdom........................ 2,360,647 3,569,080
European Economic Community........... 377,083 519,811
Rest of the World..................... 346,714 383,384
----------------- -----------------
(Pounds)3,084,444 (Pounds)4,472,275
================= =================
</TABLE>
3. OPERATING PROFIT
This is stated after charging (crediting):
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
-------- --------
<S> <C> <C>
Staff costs (see note 4)................................ 309,266 591,806
Auditors' remuneration.................................. 3,000 4,800
Depreciation............................................ 44,057 95,708
Adjustment on disposal of fixed assets.................. 1,105 3,226
</TABLE>
4. EMPLOYEE INFORMATION
4.1 Staff costs:
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
--------------- ---------------
<S> <C> <C>
Wages and salaries........................ 256,183 484,232
Social security costs..................... 25,235 48,535
Other pension costs....................... 6,000 6,000
--------------- ---------------
(Pounds)306,266 (Pounds)591,806
=============== ===============
</TABLE>
4.2 The average weekly number of employees during the year was made up as
follows:
<TABLE>
<CAPTION>
1994 1995
NO. NO.
---- ----
<S> <C> <C>
Office and management........................................... 8 17
Packaging and Assembly.......................................... 3 4
--- ---
11 21
=== ===
</TABLE>
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
-------------- --------------
<S> <C> <C>
4.3 Directors' remuneration..................... (Pounds)46,667 (Pounds)80,000
============== ==============
</TABLE>
4.4 Directors' emoluments:
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
-------------- --------------
<S> <C> <C>
Fees and salaries......................... 46,667 80,000
Pension contributions..................... 6,000 6,000
-------------- --------------
(Pounds)52,667 (Pounds)86,000
============== ==============
Further details, excluding pension
contributions:
Chairman (also Highest paid director)... 46,667 80,000
============== ==============
</TABLE>
F-57
<PAGE>
VITELEC ELECTRONICS LIMITED
NOTES TO THE ACCOUNTS--(CONTINUED)
5. INTEREST RECEIVABLE
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
-------------- --------------
<S> <C> <C>
Bank interest............................... 22,593 56,012
-------------- --------------
(Pounds)22,593 (Pounds)56,012
============== ==============
</TABLE>
6. TAXATION
6.1 The tax charge on the Profit on ordinary activities for the year was as
follows:
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
--------------- ---------------
<S> <C> <C>
U.K. corporation tax at 32% (1994--
32%)................................. 343,230 400,274
--------------- ---------------
343,230 400,274
Taxation (over)/underprovided in
previous years:
Corporation tax..................... (4,405) (9,306)
--------------- ---------------
(Pounds)338,825 (Pounds)390,968
=============== ===============
</TABLE>
6.2 The company is a close company within the terms of section 414 of the
Income and Corporation Taxes Act 1988.
7. DIVIDENDS
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
-------- --------
<S> <C> <C>
Interim dividend paid:
75p per share......................................... 75,000 75,000
====== ======
</TABLE>
8. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
LAND AND OFFICE PLANT AND
BUILDINGS EQUIPMENT EQUIPMENT MOTOR VEHICLES TOTAL
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
--------------- --------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Cost:
At 1st January 1995... 329,001 233,584 17,890 96,722 677,197
Additions............. -- 30,133 4,501 50,140 84,774
Disposals............. (10,000) -- -- (35,609) (45,609)
--------------- --------------- ------------- -------------- ---------------
At 31st December 1995. 319,001 263,717 22,391 111,253 716,362
--------------- --------------- ------------- -------------- ---------------
Depreciation:
At 1st January 1995... 29,790 78,235 11,780 39,957 159,762
Charge for year....... 8,707 59,455 2,652 22,585 93,399
Disposals............. (3,096) -- -- (26,997) (30,093)
--------------- --------------- ------------- -------------- ---------------
At 31st December 1995. 35,401 137,690 14,432 35,545 223,068
--------------- --------------- ------------- -------------- ---------------
Net book value at 31st
December 1995........... (Pounds)283,600 (Pounds)126,027 (Pounds)7,959 (Pounds)75,708 (Pounds)493,294
=============== =============== ============= ============== ===============
Net book value at 31st
December 1994........... (Pounds)299,211 (Pounds)155,349 (Pounds)6,110 (Pounds)56,765 (Pounds)517,435
=============== =============== ============= ============== ===============
</TABLE>
The net book values of land and building comprises:
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
-------- --------
<S> <C> <C>
Freehold................................................ 291,875 283,600
Short leasehold......................................... 7,336 --
======= =======
</TABLE>
F-58
<PAGE>
VITELEC ELECTRONICS LIMITED
NOTES TO THE ACCOUNTS--(CONTINUED)
9. STOCKS
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31 AUGUST 5,
------------------------------- ---------------
1994 1995 1996
(Pounds) (Pounds) (Pounds)
--------------- --------------- ---------------
<S> <C> <C> <C>
The amounts attributable to
the different categories are
as follows:
Finished goods................ 565,257 472,859 645,000
--------------- --------------- ---------------
(Pounds)565,257 (Pounds)472,859 (Pounds)645,000
=============== =============== ===============
</TABLE>
10. DEBTORS
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
--------------- -----------------
<S> <C> <C>
Trade debtors........................... 888,723 988,759
Social security and other taxes......... 31,157 --
Prepayments............................. 15,814 23,193
--------------- -----------------
(Pounds)935,694 (Pounds)1,011,952
=============== =================
</TABLE>
11. CREDITORS--AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
--------------- ---------------
<S> <C> <C>
Trade creditors........................... 389,036 383,933
Corporation tax........................... 343,230 400,274
Other taxes and social security costs..... 16,144 64,348
Directors' current accounts............... -- 67,500
Other creditors........................... 13,242 33,747
Accruals.................................. 46,319 46,279
--------------- ---------------
(Pounds)807,971 (Pounds)996,081
=============== ===============
</TABLE>
12. SHARE CAPITAL
<TABLE>
<CAPTION>
ALLOTTED, ISSUED
AND FULLY PAID
-----------------
AUTHORISED 1994 1995
(Pounds) (Pounds) (Pounds)
---------- -------- --------
<S> <C> <C> <C>
100,000 Ordinary shares of (Pounds)1 each... 200,000 100,000 100,000
</TABLE>
13. SHARE PREMIUM ACCOUNT
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
--------------- ---------------
<S> <C> <C>
Balance as at 1st January................ -- 300,090
Premium on issue of 10 ordinary shares... 399,990 --
Bonus issue on ordinary shares........... (99,900) --
--------------- ---------------
At 31st December......................... (Pounds)300,090 (Pounds)300,090
=============== ===============
</TABLE>
F-59
<PAGE>
VITELEC ELECTRONICS LIMITED
NOTES TO THE ACCOUNTS--(CONTINUED)
14. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS FUNDS
<TABLE>
<CAPTION>
1994 1995
(Pounds) (Pounds)
----------------- -----------------
<S> <C> <C>
Profit/(loss) for the year after
taxation......................... 692,245 795,654
Dividends paid & proposed......... (75,000) (75,000)
Transfer (to)/from reserves....... -- --
----------------- -----------------
617,245 720,654
Opening shareholders' funds....... 1,283,508 1,900,753
----------------- -----------------
Closing shareholders' funds....... (Pounds)1,900,753 (Pounds)2,621,407
================= =================
</TABLE>
15. COMMITMENTS AND CONTINGENT LIABILITIES
Capital Commitments
The company has contracted to spend approximately (Pounds)185,000 on a new
building due to be completed in March 1996.
Contingent Liabilities
There are contingent liabilities at 31st December 1995 in respect of the
following:--
<TABLE>
<S> <C>
Customs & Excise guarantee................................. (Pounds)60,000
</TABLE>
F-60
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Northern Technologies, Inc.
Liberty Lake, Washington
We have audited the accompany balance sheets of Northern Technologies, Inc.
as of December 31, 1995 and 1996, and the related statements of income,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Northern Technologies,
Inc. as of December 31, 1995 and 1996, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ McFarland & Alton Ps
Spokane, Washington
February 7, 1997
F-61
<PAGE>
NORTHERN TECHNOLOGIES, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
ASSETS 1995 1996
------ ---------- -----------
<S> <C> <C>
Current Assets
Cash.................................................. $ 282 $ 3,816
Accounts receivable, less allowance for doubtful
accounts 1995 $-0-;
1996 $47,035 (Note 5)................................ 1,530,189 9,359,929
Note receivable, current.............................. 1,199 --
Other receivables (Note 10)........................... -- 561,741
Inventory (Notes 2 and 5)............................. 1,420,868 1,936,048
Prepaid expenses...................................... 54,840 54,047
Income taxes receivable............................... 247,846 --
---------- -----------
Total current assets................................ 3,255,224 11,915,581
---------- -----------
Property and equipment, at cost
Machinery and equipment............................... 394,033 427,672
Office furniture and equipment........................ 507,586 592,675
Leasehold improvements................................ 281,929 281,929
---------- -----------
1,183,548 1,302,276
Less accumulated depreciation......................... 556,314 713,953
---------- -----------
627,234 588,323
---------- -----------
Other assets
Notes receivable...................................... 5,442 --
Covenant not to compete (Note 3)...................... 16,666 --
Cash value of life insurance.......................... 46,560 43,443
Deferred income taxes (Note 4)........................ 150,515 190,113
---------- -----------
219,183 233,556
---------- -----------
$4,101,641 $12,737,460
========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities
Excess of outstanding checks over bank balance........ $ 389,640 $ 85,127
Note payable (Note 5)................................. 559,500 --
Accounts payable and accrued expenses................. 491,026 6,367,940
Employee profit sharing plan payable (Note 6)......... 172,024 212,731
Income taxes payable.................................. -- 105,277
Estimated warranty liability, current................. 16,354 63,312
Deferred warranty revenue, current.................... 126,782 156,240
---------- -----------
Total current liabilities........................... 1,755,326 6,990,627
---------- -----------
Noncurrent liabilities, less current portion
Estimated warranty liability.......................... 32,988 126,623
Deferred warranty revenue............................. 114,573 61,453
---------- -----------
147,561 188,076
---------- -----------
Commitments and contingencies
(Notes 7, 11, 12, and 13)
Stockholders' equity
Common stock, $.01 par value, 2,000,000 shares
authorized and 1,817,831 shares issued............... 17,678 18,178
Additional paid-in capital............................ 447,248 577,748
Retained earnings..................................... 2,427,801 5,697,732
---------- -----------
2,892,727 6,293,658
Less cost of shares purchased for the Treasury 1995,
856,756 shares;
1996, 876,399 shares................................. 693,973 734,901
---------- -----------
2,198,754 5,558,757
---------- -----------
$4,101,641 $12,737,460
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-62
<PAGE>
NORTHERN TECHNOLOGIES, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Net sales............................................... $9,531,781 $26,171,026
Cost of sales........................................... 3,656,257 15,936,250
---------- -----------
Gross profit........................................ 5,875,524 10,234,776
Other operating revenue................................. 82,621 82,384
---------- -----------
5,958,145 10,317,160
---------- -----------
Selling, general, and administrative expenses:
Selling............................................... 2,834,184 3,122,088
General and administrative............................ 2,067,101 2,162,861
Research and development.............................. 293,736 463,015
---------- -----------
5,195,021 5,747,964
---------- -----------
Income from operations.............................. 763,124 4,569,196
Financial expense, net (Note 8)......................... 39,820 55,180
---------- -----------
Income from operations before taxes................. 723,304 4,514,016
Federal income taxes (Note 4)........................... 245,588 1,244,085
---------- -----------
Net income.......................................... $ 477,716 $ 3,269,931
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-63
<PAGE>
NORTHERN TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
COMMON ADDITIONAL
STOCK PAID-IN RETAINED TREASURY
ISSUED CAPITAL EARNINGS STOCK TOTAL
------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1994..................... $17,678 $447,248 $1,950,085 $(687,158) $1,727,853
Purchase of 1,172 shares
of treasury stock...... -- -- -- (6,815) (6,815)
Net income.............. -- -- 477,716 -- 477,716
------- -------- ---------- --------- ----------
Balance, December 31,
1995..................... 17,678 447,248 2,427,801 (693,973) 2,198,754
------- -------- ---------- --------- ----------
Net income.............. -- -- 3,269,931 -- 3,269,931
Exercise of employee
stock options (Note 7). 500 130,500 -- -- 131,000
Purchase of 19,643
shares of treasury
stock.................. -- -- -- (40,928) (40,928)
------- -------- ---------- --------- ----------
500 130,500 3,269,931 (40,928) 3,360,003
------- -------- ---------- --------- ----------
Balance, December 31,
1996..................... $18,178 $577,748 $5,697,732 $(734,901) $5,558,757
======= ======== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-64
<PAGE>
NORTHERN TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
-------- ----------
<S> <C> <C>
Cash flows from operating activities
Net income............................................. $477,716 $3,269,931
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization........................ 155,702 194,483
Provision for doubtful accounts...................... -- 47,035
(Gain) loss on sale of fixed assets.................. (8,671) 5,622
Deferred income taxes................................ (47,764) (39,598)
(Increase) decrease in:
Receivable and prepaid expenses.................... 448,856 (8,437,723)
Inventory.......................................... (46,742) (515,180)
Income taxes receivable............................ (247,846) 247,846
Increase (decrease) in:
Accounts payable and accrued expenses.............. (237,107) 5,876,914
Employee profit sharing plan payable............... 7,024 40,707
Income tax payable................................. (347,412) 105,277
Estimated warranty liability....................... 33,367 140,593
Deferred warranty revenue.......................... 33,418 (23,662)
-------- ----------
Net cash provided by operating activities........ 220,541 912,245
-------- ----------
Cash flows from investing activities
Proceeds from sale of property and equipment........... 9,495 --
Principal payments received on note receivable......... 560 6,641
Change in cash value of life insurance................. (15,233) 3,117
Purchase of property and equipment..................... (323,206) (144,528)
-------- ----------
Net cash used by investing activities............ (328,384) (134,770)
-------- ----------
Cash flows from financing activities
Net proceeds from issuance of common stock............. -- 131,000
Excess of outstanding checks over bank balance......... 13,457 (304,513)
Net payments on revolving credit agreement............. 59,500 (559,500)
Purchase of common stock for Treasury.................. (6,815) (40,928)
-------- ----------
Net cash provided (used) by financing activities. 66,142 (773,941)
-------- ----------
Net increase (decrease) in cash.................. (41,701) 3,534
Cash at beginning of year................................ 41,983 282
-------- ----------
Cash at end of year...................................... $ 282 $ 3,816
======== ==========
Supplemental disclosures of cash flows information
Interest paid during the year.......................... $ 31,090 $ 34,643
======== ==========
Taxes paid during the year............................. $888,610 $ 930,560
======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-65
<PAGE>
NORTHERN TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Northern Technologies, Inc., the Company, is an Idaho corporation engaged in
the manufacture and sale of power surge protection equipment. Its facilities
are located in Liberty Lake, Washington. The Company incorporated under the
laws of the state of Idaho on February 1, 1985. Effective December 31, 1996,
one hundred percent of the outstanding stock is owned by Northern Technologies
Holdings, Inc. The Company continues as a wholly-owned subsidiary of Northern
Technologies Holdings, Inc. operating under the name Northern Technologies,
Inc.
The accounting policies relative to the carrying value of property and
equipment and other assets are indicated in the captions on the balance
sheets. Other significant accounting policies are as follows:
Valuation of accounts receivable:
The Company uses the allowance method of recognizing uncollectible accounts.
Inventories:
Inventories are stated at the lower of average cost (first-in, first-out) or
market. Cost is determined on the full absorption method.
Depreciation:
Depreciation is provided principally by using accelerated methods for both
book and tax purposes over the estimated useful lives of the depreciable
assets in years prior to 1996. In 1996, depreciation is provided on asset
additions using a straight-line method over the estimated useful life of the
asset. The use of accelerated methods of depreciation does not depart
materially from generally accepted accounting principles.
Warranty:
The Company provides a one to three year warranty on sales of surge
protectors and an optional extended one to three year warranty policy. The
warranties cover any defects in material and workmanship.
Reclassifications:
Certain items in the 1995 financial statements have been reclassified to
conform with the current year presentation.
Income taxes:
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets relate primarily to
accrued vacation, estimated warranty claims, and deferred warranty revenue.
Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the
deferred tax will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.
Fair value of financial instruments:
The Company's financial instruments consist of cash, excess of outstanding
checks over bank balance, and a note payable. The carrying amount approximates
fair value due to the short maturity of these instruments.
F-66
<PAGE>
NORTHERN TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Accounting estimates:
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Significant estimates in the financial statements include the provision for
the estimated warranty liability and the depreciation of property and
equipment.
NOTE 2. INVENTORIES
The components of inventories at December 31, 1995 and 1996, are as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Finished goods...................................... $ 274,296 $ 383,224
Work in process..................................... 98,870 205,471
Raw materials....................................... 1,047,702 1,347,353
---------- ----------
$1,420,868 $1,936,048
========== ==========
</TABLE>
NOTE 3. COVENANT NOT TO COMPETE
The covenant not to compete is the result of an agreement with a terminated
employee. The covenant is being amortized over three years using the straight-
line method. The covenant not to compete is as follows at December 31:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Covenant not to compete............................... $ 50,000 $ 50,000
Amortization.......................................... (33,334) (50,000)
-------- --------
$ 16,666 $ --
======== ========
</TABLE>
NOTE 4. INCOME TAXES
The components of the net deferred tax asset recorded in the accompanying
balance sheets at December 31, 1995 and 1996, are:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Accrued vacation..................................... $ 19,954 $ 16,310
Bad debt reserve..................................... -- 15,992
Estimated warranty liability......................... 16,776 64,578
Deferred warranty revenue............................ 82,061 74,015
Uniform capitalization............................... 22,657 11,885
Covenant not to compete.............................. 9,067 13,601
-------- --------
Total deferred tax assets.......................... $150,515 $196,381
======== ========
Deferred tax liabilities:
Tax depreciation greater than book................... $ -- $ 6,268
-------- --------
Total deferred tax liabilities..................... $ -- $ 6,268
======== ========
Net deferred tax asset............................. $150,515 $190,113
======== ========
</TABLE>
F-67
<PAGE>
NORTHERN TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The components of the provision for income tax for the years ended December
31, 1995 and 1996, are:
<TABLE>
<CAPTION>
1995 1996
-------- ----------
<S> <C> <C>
Deferred federal income tax........................ $(47,764) $ (39,598)
Current year provision............................. 293,352 1,283,683
-------- ----------
$245,588 $1,244,085
======== ==========
</TABLE>
The income tax provision (benefit) differs from the amount of income tax
determined by applying the federal income tax rate to pretax income from
continuing operations for the years ended December 31, 1995 and 1996, due to
the following:
<TABLE>
<CAPTION>
1995 1996
-------- ----------
<S> <C> <C>
Computed expected tax expense...................... $245,923 $1,534,765
Increase (decrease) in income taxes resulting from:
Deductible compensation from exercise of stock
options......................................... -- (307,583)
Nondeductible expenses........................... 17,679 21,627
Prior year under (over) accrual.................. (4,799) 2,435
Research and development credit.................. (13,215) (7,159)
-------- ----------
$245,588 $1,244,085
======== ==========
</TABLE>
NOTE 5. NOTE PAYABLE
Note payable is as follows at December 31:
<TABLE>
<CAPTION>
1995 1996
-------- ----
<S> <C> <C>
Operating line of credit with U.S. Bank with interest at
U.S. Bank of Washington, National Association's prime
borrower rate (8.25% at December 31, 1996). The line is
collateralized by accounts receivable and inventory. The
total line of credit available is $3,000,000 at December
31, 1996................................................ $559,500 $--
</TABLE>
NOTE 6. EMPLOYEE PROFIT SHARING PLAN AND TRUST
In 1990 the Company rolled over its contributory, trusteed, stock bonus plan
into an IRS qualified 401(k) plan covering all full time employees with one
year or more of service. The Company's contribution, payable in cash, is
limited to 15% of participants' base salary. Participants' interest become
fully vested after 6 years and may be withdrawn upon termination, or upon
attaining age 65, whichever occurs first. The Company's contribution to the
plan aggregated $206,878 for 1995 and $222,012 in 1996.
NOTE 7. STOCK OPTION
During 1994 a stock option agreement was reached between the Company and a
corporate officer whereby the Company agreed to sell up to fifty thousand
shares of common stock to the employee at a price of $2.62 per share. All
options were exercised during 1996.
F-68
<PAGE>
NORTHERN TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8. FINANCIAL (INCOME) EXPENSE, NET
The components of financial (income) expense are as follows for the years
ended December 31:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Interest income.......................................... $ (760) $ --
Interest expense......................................... 31,090 34,643
Service charge expense................................... 9,490 20,537
------- -------
Financial expense, net............................... $39,820 $55,180
======= =======
</TABLE>
NOTE 9. ENGINEERING--RESEARCH AND DEVELOPMENT
Company-funded research and development costs are expensed as incurred.
Total research and development costs charged to expense for the years ended
December 31, 1995 and 1996, are $293,736 and $463,015, respectively.
NOTE 10. RELATED PARTY TRANSACTIONS
Since November 1992, Northern Technologies, Inc. has rented its current
premises from Sigma Partners, a partnership owned, in part, by an officer of
Northern Technologies, Inc. The 1996 monthly lease expense was $8,885. The
lease calls for annual 5% increases effective each January. Rent paid to Sigma
Partners for the years ended December 31, 1995 and 1996, was $103,044 and
$108,678, respectively.
Included in other receivables was $397,421 due from an officer of the
Company. This amount was repaid subsequent to year end.
NOTE 11. OPERATING LEASES
The Company leases its facility on a ten year lease from Sigma Partners (see
Note 10). The lease expires on October 31, 2002. Additionally, the Company
rents certain office equipment under a five-year operating lease. The
following is a schedule by years of future minimum rental payments required
under operating leases as of December 31, 1996.
<TABLE>
<S> <C>
Years ending December 31:
1997.......................... $115,977
1998.......................... 121,575
1999.......................... 127,452
2000.......................... 133,623
2001.......................... 140,103
Later years................... 125,013
--------
Total minimum lease payments
required................... $763,743
--------
</TABLE>
For the years ended December 31, 1995 and 1996, rent expense paid by the
Company totaled $106,914 and $118,892, respectively.
NOTE 12. COMMITMENT
The Company has agreed to purchase raw materials during 1997 at the current
market price of $2,271,235 as of December 31, 1996.
F-69
<PAGE>
NORTHERN TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13. CONCENTRATIONS
Major customers:
During the years ended December 31, 1995 and 1996, the Company recognized
sales to the following major customers exceeding ten percent of net sales:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------
NET SALES ACCOUNTS RECEIVABLE
---------------------- ---------------------
PERCENT OF PERCENT OF
AMOUNT TOTAL AMOUNT TOTAL
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Company A............... $1,065,036 11.17 $ 519 .03
Company B............... 1,011,552 10.61 13,241 .87
Other customers......... 7,455,193 78.22 1,516,429 99.10
----------- ------ ---------- ------
$9,531,781 100.00 $1,530,189 100.00
=========== ====== ========== ======
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------- --- --- ---
NET SALES ACCOUNTS RECEIVABLE
---------------------- --------------------- --- ---
PERCENT OF PERCENT OF
AMOUNT TOTAL AMOUNT TOTAL
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Company A............... $14,399,263 55.02 $6,762,771 72.25
Other customers......... 11,771,763 44.98 2,597,158 27.75
----------- ------ ---------- ------
$26,171,026 100.00 $9,359,929 100.00
=========== ====== ========== ======
</TABLE>
F-70
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Boards of Directors
LoDan West, Inc. and L/D West, Inc.
We have audited the accompanying combined balance sheet of LoDan West, Inc.
and L/D West, Inc. as of December 31, 1996, and the related combined
statements of income and retained earnings and cash flows for the year ended
December 31, 1996. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of LoDan West, Inc.
and L/D West, Inc. as of December 31, 1996, and the combined results of their
operations and their cash flows for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
May 7, 1997
F-71
<PAGE>
LODAN WEST, INC. AND L/D WEST, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, MAY 30,
ASSETS 1996 1997
------ ------------ -----------
<S> <C> <C>
Current assets:
Cash................................................ $ 55,195 $ 306,998
Accounts receivable, less allowance for doubtful
accounts of $22,000 as of May 30, 1997 and December
31, 1996........................................... 1,632,694 1,679,387
Inventories......................................... 3,136,055 3,897,588
Prepaid expenses and other.......................... 162,626 118,924
---------- ----------
Total current assets.............................. 4,986,570 6,002,897
Property and equipment--Net........................... 716,314 783,442
Other noncurrent assets............................... 43,771 41,355
---------- ----------
Total assets...................................... $5,746,655 $6,827,694
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable.................................... $ 668,548 $1,063,236
Accrued expenses and other.......................... 156,125 190,941
Revolving credit facility........................... 1,060,000 870,000
Current portion of note payable..................... 142,860 344,238
---------- ----------
Total current liabilities......................... 2,027,533 2,468,415
Note payable, less current portion.................... 250,798 --
Stockholders' equity:
Common stock........................................ 689,379 689,379
Retained earnings................................... 2,778,945 3,669,900
---------- ----------
Total stockholders' equity........................ 3,468,324 4,359,279
---------- ----------
Total liabilities and stockholders' equity........ $5,746,655 $6,827,694
========== ==========
</TABLE>
See accompanying notes.
F-72
<PAGE>
LODAN WEST, INC. AND L/D WEST, INC.
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED PERIOD ENDED
DECEMBER MAY 30,
31, 1996 1997
----------- ------------
<S> <C> <C>
Net sales............................................. $20,919,895 $9,510,300
Cost of sales......................................... 15,351,339 7,052,948
----------- ----------
Gross profit.......................................... 5,568,556 2,457,352
Selling, general, and administrative expenses......... 4,040,105 1,439,105
----------- ----------
Operating income...................................... 1,528,451 1,018,247
Other (expense):
Interest expense.................................... (120,257) (56,093)
----------- ----------
Income before income taxes............................ 1,408,194 962,154
Provision for income taxes............................ 104,803 71,199
----------- ----------
Net income............................................ 1,303,391 890,955
Retained earnings--Beginning of period................ 1,675,554 2,778,945
Dividends paid........................................ (200,000) --
----------- ----------
Retained earnings--End of period...................... $ 2,778,945 $3,669,900
=========== ==========
</TABLE>
See accompanying notes.
F-73
<PAGE>
LODAN WEST, INC. AND L/D WEST, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED PERIOD ENDED
DECEMBER 31, MAY 30,
1996 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income......................................... $1,303,391 $890,955
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 156,328 74,416
Changes in operating assets and liabilities:
Accounts receivable............................ 164,816 (46,693)
Inventories.................................... 43,814 (761,533)
Prepaid expenses and other..................... (71,340) 43,702
Accounts payable............................... (1,378,061) 394,688
Accrued expenses and other..................... 12,285 34,816
Other noncurrent assets........................ (12,870) 2,416
---------- --------
Net cash provided by operating activities.... 218,363 632,767
Cash flows from investing activities.................
Purchases of property and equipment................ (310,941) (141,544)
---------- --------
Net cash used in investing activities........ (310,941) (141,544)
Cash flows from financing activities.................
Borrowings from (payments on) revolving credit
facility.......................................... 137,000 (190,000)
Proceeds from debt issuance--Note payable.......... 500,000 --
Payments on notes payable.......................... (335,733) (49,420)
Payments on notes payable to related parties....... (45,000) --
Dividends paid..................................... (200,000) --
---------- --------
Net cash provided by financing activities.... 56,267 (239,420)
---------- --------
(Decrease) increase in cash.......................... (36,311) 251,803
Cash at beginning of period.......................... 91,506 55,195
---------- --------
Cash at end of period................................ $ 55,195 $306,998
========== ========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest......................................... $ 120,257 $ 56,093
========== ========
Income taxes..................................... $ 117,416 $ 75,123
========== ========
</TABLE>
See accompanying notes.
F-74
<PAGE>
LODAN WEST, INC. AND L/D WEST, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
LoDan West, Inc. (LoDan West) and L/D West, Inc. (L/D West) (LoDan West and
L/D West are collectively referred to hereafter as the Companies) are each
wholly owned by related individuals. LoDan West assembles and distributes
electro-mechanical connectors and cable interconnection systems. L/D West
distributes components used in the assembly of electro-mechanical connectors
and cable interconnection systems. The Companies conduct business from two
manufacturing and distribution centers located in San Carlos, California.
The accompanying combined financial statements include the accounts of LoDan
West and L/D West. Transactions and accounts existing between the Companies
have been eliminated in the combined financial statements.
The Companies grant credit to customers in the electronics industry
throughout the United States, but primarily in northern California.
Consequently, the Companies' ability to collect amounts due is affected by
economic conditions in the electronics industry.
Net sales to two customers accounted for approximately 47% of the Companies'
total net sales for the year ended December 31, 1996. At December 31, 1996,
amounts due from these customers comprised approximately 58% of the Companies'
accounts receivable balance.
The unaudited combined financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual combined
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Companies believe these disclosures are adequate to
make the information presented not misleading. In the opinion of management,
all adjustments necessary for a fair presentation for the period presented
have been reflected and are of a formal recurring nature.
Results of operations for the period from January 1, 1997 to May 30, 1997
are not necessarily indicative of the results that may be achieved for the
entire year ended December 31, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by
the first in, first out (FIFO) method.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized using the
straight-line method over the shorter of the lease term or their estimated
productive lives. Amortization of leasehold improvements is included in
depreciation expense.
The useful lives of property and equipment for the purpose of computing book
depreciation are as follows:
<TABLE>
<S> <C>
Machinery and equipment..................................... 7 years
Computer equipment.......................................... 5 years
Furniture and fixtures...................................... 7 years
Vehicles.................................................... 5 years
Leasehold improvements...................................... Life of lease
</TABLE>
INCOME TAXES
LoDan West has elected to have its income taxed as an S corporation under
applicable provisions of the Internal Revenue Code and, therefore, is
generally not subject to federal income taxes. The Company is subject to
certain state income taxes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-75
<PAGE>
LODAN WEST, INC. AND L/D WEST, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, MAY 30,
1996 1997
------------ -----------
<S> <C> <C>
Raw materials.................................... $1,842,295 $2,919,611
Work in process.................................. 471,214 658,000
Finished goods................................... 822,546 319,977
---------- ----------
$3,136,055 $3,897,588
========== ==========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Machinery and equipment...................................... $ 697,741
Computer equipment........................................... 244,544
Furniture and fixtures....................................... 172,333
Vehicles..................................................... 59,272
Leasehold improvements....................................... 28,202
---------
1,202,092
Less: Accumulated depreciation and amortization.............. (485,778)
---------
$ 716,314
=========
</TABLE>
5. INDEBTEDNESS
LoDan West is party to a Loan and Security Agreement (Agreement) with a
bank. Under the terms of the Agreement, the Company may borrow up to the
lesser of $1,750,000 or the borrowing base, as defined, under a revolving
credit arrangement. Borrowings bear interest at the bank's base rate plus 1%
(9.25% at December 31, 1996), are collateralized by substantially all of LoDan
West's assets, and are guaranteed by the stockholder. The Agreement expires 30
days after written notice is provided by either party. LoDan West had $196,000
of additional borrowings available under the Agreement at December 31, 1996.
The Agreement includes various financial covenants, including annual
limitations on purchases of property and equipment, and minimum ratios of cash
flow to fixed charges, liabilities to net worth, and quick ratio, all as
defined.
In April 1997, the Agreement was amended to change the interest rate on
borrowings to the bank's base rate plus 0.75%, remove the guarantee from the
stockholder, and modify certain of the financial covenants.
LoDan West also has a note payable to a bank in monthly installments of
$11,905, plus accrued interest at 8.1% per annum, through September 1999. The
outstanding principal balance was $393,658 at December 31, 1996.
F-76
<PAGE>
LODAN WEST, INC. AND L/D WEST, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Current:
Federal income taxes....................................... $ 66,119
State income taxes......................................... 38,684
--------
$104,803
========
</TABLE>
7. COMMON STOCK
Common stock consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
LoDan West, Inc.
Common stock; no par value; 1,000,000 shares authorized;
1,000 shares issued and outstanding...................... $679,379
L/D West, Inc.
Common stock; no par value; 1,000,000 shares authorized;
100,000 shares issued and outstanding...................... 10,000
--------
$689,379
========
</TABLE>
8. LEASES
The Companies rent office and warehouse space under noncancelable operating
lease agreements that expire June 2001 and August 2005. These agreements
provide for annual increases to monthly rent payments based on increases in
the Consumer Price Index.
Minimum future lease payments under these agreements are as follows at
December 31, 1996:
<TABLE>
<S> <C>
1997.......................... $ 484,380
1998.......................... 484,380
1999.......................... 484,380
2000.......................... 484,380
2001.......................... 410,670
Thereafter.................... 1,235,520
----------
$3,583,710
==========
</TABLE>
9. BENEFIT PLANS
LoDan West has a profit-sharing plan which covers all employees who have
satisfied certain eligibility requirements. LoDan West's contributions to its
profit-sharing trust fund are based solely on management's discretion. Profit-
sharing contributions for 1996 were $94,974.
LoDan West also maintains a 401(k) defined-contribution benefit plan which
covers all employees who have satisfied certain eligibility requirements.
Employer matching contributions into this plan were $5,026 in 1996.
F-77
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS
OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................... 1
Risk Factors.............................................................. 16
The Company............................................................... 24
Use of Proceeds........................................................... 27
Dividend Policy........................................................... 27
Capitalization............................................................ 28
Selected Historical Financial
Information.............................................................. 29
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 31
Business.................................................................. 35
Management................................................................ 50
Principal Stockholders.................................................... 52
Certain Transactions...................................................... 53
Terms of the Acquisitions................................................. 57
Description of Certain Indebtedness and Other Obligations................. 59
The Exchange Offer........................................................ 61
Description of Notes...................................................... 71
Description of Senior Preferred Stock..................................... 96
Description of Preferred Stock Exchange Notes............................. 102
Description of Capital Stock.............................................. 108
Book-Entry; Delivery and Form............................................. 112
Shares Eligible for Future Sale........................................... 114
Certain Federal Income Tax Considerations................................. 115
Plan of Distribution...................................................... 123
Legal Matters............................................................. 124
Experts................................................................... 124
Index to Financial Statements............................................. I-1
</TABLE>
UNTIL . (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) DEALERS AFFECTING TRANSAC-
TIONS IN THE NEW SECURITIES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OF-
FER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS OBLIGATION 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
JORDAN
TELECOMMUNICATION
PRODUCTS, INC.
$190,000,000
9 7/8% SERIES B SENIOR NOTES DUE 2007
$120,000,000
11 3/4% SERIES B SENIOR DISCOUNT NOTES DUE 2007
$25,000,000
13 1/4% SERIES B SENIOR EXCHANGEABLE
PREFERRED STOCK DUE 2009
---------------
PROSPECTUS
---------------
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The Delaware General Corporation Law (Section 145) gives Delaware
corporations broad powers to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
by reason of the fact that the person is or was a director, officer, employee
or agent of the registrant, or is or was serving at the request of the
registrant as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, so long as such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the registrant. For actions or suits by or in the right of the
registrant, no indemnification is permitted in respect of any claim, issue or
matter as to which such person is adjudged to be liable to the registrant,
unless, and only to the extent that, the Delaware Court of Chancery or the
court in which such action or suit was brought determines 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
deems proper.
Section 145 also authorizes the registrant to buy directors' and officers'
liability insurance and gives a director, officer, employee or agent of the
registrant who has been successful on the merits or otherwise in defense of
any action, suit or proceeding of a type referred to in the preceding
paragraph the right to be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection therewith.
Any indemnification (unless ordered by a court) will be made by the registrant
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 the person has met the applicable standard of conduct
set forth above. Such determination shall be made (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (3)
by the stockholders, Such indemnification is not exclusive of any other rights
to which those indemnified may be entitled under any by-laws, agreement, vote
of stockholders or otherwise.
(b) The Certificate of Incorporation of the registrant requires, and the By-
Laws of the registrant provides for, indemnification of directors, officers,
employees and agents to the full extent permitted by law.
(c) The Purchase Agreement and the Registration Rights Agreements (which are
included as Exhibits 1 and 4.11-4.13 to this registration statement) provide
for the indemnification under certain circumstances of the registrant, its
directors and certain of its officers by the Initial Purchasers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
A list of Exhibits filed herewith is contained on the Exhibit Index and is
incorporated herein by reference.
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted
because they are not required, amounts which would otherwise be required to be
shown with respect to any item are not material, are inapplicable, or the
required information has already been provided elsewhere in the registration
statement.
II-1
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus file
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) 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
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The registrant has not entered into any arrangement or understanding
with any person to distribute the securities to be received in the Exchange
Offer and to the best of the registrant's information and belief, each person
participating in the Exchange Offer is acquiring the securities in its
ordinary course of business and has no arrangement or understanding with any
person to participate in the distribution of the securities to be received in
the Exchange Offer. In this regard, the registrant will make each person
participating in the Exchange Offer aware (through the Exchange Offer
Prospectus or otherwise) that if the Exchange Offer is being registered for
the purpose of secondary resales, any securityholder using the exchange offer
to participate in a distribution of the securities to be acquired in the
registered exchange offer (1) could not rely on the staff position enunciated
in Exxon Capital Holdings Corporation (available April 13, 1989) or similar
letters and (2) must comply with registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. The registrant acknowledges that such a secondary resale
transaction should be covered by an effective registration statement
containing the selling securityholder information required by Item 507 of
Regulation S-K.
II-2
<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 CHICAGO,
STATE OF ILLINOIS, ON AUGUST 28, 1997.
Jordan Telecommunication Products,
Inc.
/s/ Dominic J. Pileggi
By___________________________________
Dominic J. Pileggi
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS DOMINIC J. PILEGGI, THOMAS H. QUINN, MICHAEL R.
ELIA AND JONATHAN BOUCHER, AND EACH OF THEM SINGLY, HIS TRUE AND LAWFUL
ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL
CAPACITIES, TO SIGN ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE
AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND ANY AND ALL DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM ANY AND
ALL ACTS AND THINGS 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, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND
AGENTS, OR ANY OF THEM, OR HIS SUBSTITUTE OR NOMINEE, MAY LAWFULLY DO OR CAUSE
TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON AUGUST 28, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Thomas H. Quinn Chairman and a Director
___________________________________________
Thomas H. Quinn
/s/ Dominic J. Pileggi President, Chief Executive Officer and a
___________________________________________ Director (Principal Executive Officer)
Dominic J. Pileggi
/s/ Michael R. Elia Vice President and Chief Financial Officer
___________________________________________ (Principal Financial and Accounting
Michael R. Elia Officer)
/s/ Jonathan F. Boucher Vice President and a Director
___________________________________________
Jonathan F. Boucher
/s/ William C. Ballard Director
___________________________________________
William C. Ballard
/s/ John W. Jordan II Director
___________________________________________
John W. Jordan II
Director
___________________________________________
David W. Zalaznick
/s/ Michael A. Wadsworth Director
___________________________________________
Michael A. Wadsworth
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
1 Purchase Agreement, dated July 21, 1997, by and among
Jordan Telecommunication Products, Inc., Jefferies &
Company, Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and Smith Barney Inc.
3.1 Certificate of Incorporation of Jordan Telecommunication
Products, Inc.
3.2 Bylaws of Jordan Telecommunication Products, Inc.
4.1 Series A and Series B 9 7/8% Senior Notes due 2007
Indenture, dated July 25, 1997, between Jordan
Telecommunication Products, Inc. and First Trust National
Association, as Trustee
4.2 Series A and Series B 11 3/4% Senior Discount Notes due
2007 Indenture, dated July 25, 1997, between Jordan
Telecommunication Products, Inc. and First Trust National
Association, as Trustee
*4.3 Series A and Series B 13 1/4% Subordinated Preferred Stock
Exchange Notes due 2009 Indenture, dated July 25, 1997,
between Jordan Telecommunication Products, Inc. and First
Trust National Association, as Trustee
4.4 Global Series A 9 7/8% Senior Note due 2007
*4.5 Form of Global Series B 9 7/8% Senior Note due 2007
(included in Exhibit 4.1)
4.6 Global Series A 11 3/4% Senior Discount Note due 2007
*4.7 Form of Global 11 3/4% Series B Senior Discount Note due
2007 (included in Exhibit 4.2)
4.8 Global Series A 13 1/4% Senior Exchangeable Preferred Stock
due 2009 Certificate
*4.9 Form of Global Series B 13 1/4% Senior Exchangeable
Preferred Stock due 2009 Certificate
4.10 Form of Global Series A and Series B 13 1/4% Subordinated
Preferred Stock Exchange Notes (included in Exhibit 4.3)
4.11 $190,000,000 9 7/8% Series A Senior Notes due 2007
Registration Rights Agreement, dated July 25, 1997, by and
among Jordan Telecommunication Products, Inc., Jefferies &
Company, Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and Smith Barney Inc.
4.12 $120,000,000 11 3/4% Series A Senior Discount Notes due
2007 Registration Rights Agreement, dated July 25, 1997,
between Jordan Telecommunication Products, Inc. and
Jefferies & Company, Inc.
4.13 $25,000,000 13 1/4% Series A Senior Exchangeable Preferred
Stock due 2009 Registration Rights Agreement, dated July
25, 1997, between Jordan Telecommunications Products, Inc.
and Jefferies & Company, Inc.
4.14 Subscription Agreement, dated July 21, 1997, by and among
Jordan Telecommunication Products, Inc. and the investors
listed thereto
4.15 Management Subscription Agreement, dated July 21, 1997,
between Jordan Telecommunication Products, Inc. and Dominic
Pileggi
4.16 Stockholders Agreement, dated July 21, 1997, by and among
Jordan Telecommunication Products, Inc. and the
Stockholders listed thereto
5 Opinion of Mayer, Brown & Platt
10.1 Revolving Credit Agreement, dated July 25, 1997, by and
among JTP Industries, Inc., the lenders listed thereto and
BankBoston, N.A., as Agent
*10.2 Tax Sharing Agreement, dated June 29, 1994 and Additional
Subsidiary Agreement dated July 25, 1997 by and among the
signatories thereto
10.3 Properties Services Agreement, dated July 25, 1997, by and
among JI Properties, Inc. and Jordan Industries, Inc. and
the other signatories thereto
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
10.4 Transition Agreement, dated July 25, 1997, between Jordan
Telecommunication Products, Inc. and Jordan Industries,
Inc.
10.5 New Subsidiary Advisory Agreement, dated July 25, 1997, by
and among Jordan Telecommunication Products, Inc. and
Jordan Industries, Inc. and the other signatories thereto
10.6 New Subsidiary Consulting Agreement, dated July 25, 1997,
by and among Jordan Telecommunication Products, Inc. and
Jordan Industries, Inc. and the other signatories thereto
10.7 Form of Indemnification Agreement, dated July 25, 1997,
between Jordan Telecommunication Products, Inc. and its
directors
12 Statement re: Computation of Ratios
21 Subsidiaries of Jordan Telecommunication Products, Inc.
(included in Exhibit 1)
23.1 Consent of Mayer, Brown & Platt (included in the opinion
filed as Exhibit 5)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Mellon, Smith & Pivoz, P.C.
23.4 Consent of Coopers & Lybrand LLP
23.5 Consent of McFarland & Alton P.S.
23.6 Consent of Price Waterhouse LLP
*23.7 Consent of Roberts Redman Mead
24 Power of Attorney (included on the signature page in Part
II of the Registration Statement)
25.1 Statement of Eligibility of Trustee for 9 7/8% Senior Notes
due 2007, 11 3/4% Discount Notes due 2007 and 13 1/4%
Subordinated Preferred Stock Exchange Notes due 2009
27 Financial Data Schedule
99.1 Form of Letter of Transmittal for Notes
99.2 Form of Letter of Transmittal for Senior Preferred Stock
</TABLE>
- --------
*To be filed by Amendment
<PAGE>
Exhibit 1
JORDAN TELECOMMUNICATION PRODUCTS, INC.
$190,000,000 9 7/8% Senior Notes due 2007
$120,000,000 11 3/4% Senior Discount Notes
due 2007
25,000 Units consisting of 25,000 shares of 13 1/4% Senior Exchangeable
Preferred Stock
due 2009 with 25,000 shares of Common Stock
PURCHASE AGREEMENT
------------------
July 21, 1997
JEFFERIES & COMPANY, INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SMITH BARNEY INC.
c/o Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
Jordan Telecommunication Products, Inc., a Delaware corporation (the
"Issuer"), hereby agrees with you as follows:
1. Issuance of Securities. The Issuer proposes to issue and sell (i)
to Jefferies & Company, Inc. ("Jefferies"), Donaldson, Lufkin & Jenrette
Securities Corporation and Smith Barney Inc. (each a "Purchaser" and together,
the "Purchasers") $190,000,000 aggregate principal amount of 9 7/8% Senior Notes
due 2007 (the "Senior Notes") and (ii) to Jefferies $120,000,000 principal
amount at maturity of 11 3/4% Senior Discount Notes due 2007 (the "Discount
Notes") and 25,000 Units each consisting of one share of 13 1/4% Senior
Exchangeable Preferred Stock due 2009 (the "Senior Preferred Stock") with one
share of common stock, par
<PAGE>
value $.01 per share (the "Common Stock"), of the Issuer (the "Preferred Stock
Units" and, together with the Senior Notes and the Discount Notes, the "Offered
Securities").
The Senior Notes will be issued pursuant to an indenture (the "Senior
Notes Indenture") to be dated as of July 25, 1997, between the Issuer and The
First Trust National Association, as trustee (the "Senior Notes Trustee"). The
Discount Notes will be issued pursuant to an indenture (the "Discount Notes
Indenture" and, together with the Senior Notes Indenture, the "Indentures"), to
be dated as of July 25, 1997, between the Issuer and The First Trust National
Association, as trustee (the "Discount Notes Trustee"). The terms of the Senior
Preferred Stock will be set forth in the Issuer's Certificate of Designation
relating thereto (the "Certificate of Designation") and the Senior Preferred
Stock will be exchangeable at the option of the Issuer, in whole but not in
part, on any dividend payment date into the Issuer's 13 1/4% Subordinated
Preferred Stock Exchange Notes Due 2009 (the "Exchange Notes"). The Exchange
Notes will, if and when issued, be issued under an indenture (the "Exchange
Notes Indenture"), to be dated as of the date of first issuance of the Exchange
Notes, between the Issuer and The First Trust National Association, as trustee
(the "Exchange Notes Trustee" and, together with the Senior Notes Trustee and
the Discount Notes Trustee, the "Trustees").
The Senior Notes will be offered and sold to the Purchasers, and the
Discount Notes and the Preferred Stock Units will be offered and sold to
Jefferies, pursuant to an exemption from the registration requirements under the
Securities Act of 1933, as amended (the "Act"). The Issuer has prepared a
preliminary offering circular, dated June 24, 1997 (the "Preliminary Offering
Circular"), and a final offering circular, dated July 21, 1997 (the "Offering
Circular"), relating to the offer and sale of the Senior Notes, the Discount
Notes and the Preferred Stock Units (the "Offerings").
Concurrent with the consummation of the Offerings, JTP Industries,
Inc., a wholly-owned subsidiary of the Issuer ("JTP Industries"), will enter
into a senior bank credit agreement which is expected to provide the Issuer and
its Subsidiaries (defined below) with a revolving credit and letter of credit
facility of up to $110,000,000 (the "New Credit Agreement").
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Offered
Securities shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, AS-
2
<PAGE>
SIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS
TWO YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER
RULE 144(K) AS PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED
SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH JORDAN TELECOMMUNICATION
PRODUCTS, INC. (THE "ISSUER") OR ANY AFFILIATE OF THE ISSUER WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A)
TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE ACT) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(A)(1), (2), (3) OR (7) UNDER THE ACT THAT IS PURCHASING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT,
SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING
CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
3
<PAGE>
2. Agreements to Sell and Purchase. On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions hereof, the Issuer shall (i) issue and sell to the
Purchasers and each Purchaser, severally and not jointly, shall purchase from
the Issuer the principal amount of the Senior Notes set forth opposite the names
of the Purchasers in Schedule I hereto and (ii) issue and sell to Jefferies and
Jefferies shall purchase from the Issuer $120,000,000 principal amount of the
Discount Notes and 25,000 Preferred Stock Units. The purchase price for the
Senior Notes shall be 97.2164% of the principal amount thereof, the purchase
price for the Discount Notes shall be 68.7360% of the principal amount thereof
and the purchase price for the Preferred Stock Units shall be $24,000,000.
3. Terms of Offerings. The Purchasers have advised the Issuer that
the Purchasers will make offers to sell (the "Exempt Resales") some or all of
the Offered Securities purchased by the Purchasers hereunder on the terms set
forth in the Offering Circular, as amended or supplemented, solely to (i)
persons whom the Purchasers reasonably believe to be "qualified institutional
buyers" as defined in Rule 144A under the Act ("QIBs") and (ii) a limited number
of institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3)
or (7) under the Act ("Accredited Investors") (such persons specified in clauses
(i) and (ii) being referred to herein as the "Eligible Purchasers").
Holders of the Senior Notes (including subsequent transferees) will
have the registration rights set forth in the registration rights agreement (the
"Senior Notes Registration Rights Agreement"), to be executed on and dated as of
the Closing Date (defined below). Holders of the Discount Notes (including
subsequent transferees) will have the registration rights set forth in the
registration rights agreement (the "Discount Notes Registration Rights
Agreement"), to be executed on and dated as of the Closing Date. Holders of the
Senior Preferred Stock (including subsequent transferees) will have the
registration rights set forth in the registration rights agreement (the
"Preferred Stock Registration Rights Agreement" and, together with the Senior
Notes Registration Rights Agreement and the Discount Notes Registration Rights
Agreement, the "Registration Rights Agreements"), to be executed on and dated as
of the Closing Date. Pursuant to the Registration Rights Agreements, the Issuer
will agree, among other things, to file with the Securities and Exchange
Commission (the "Commission") (i) a registration statement under the Act (the
"Exchange Offer Registration Statement") relating to, among other things, (i)
the 9 7/8% Series B Senior Notes due 2007 of the Issuer (the "Exchange Senior
Notes"), (ii) the 11 3/4% Series B Senior Discount Notes due 2007 of the Issuer
(the "Exchange Discount Notes") and (iii) the 13 1/4% Series B Senior
Exchangeable Preferred Stock Due 2009 of the Issuer (the "Exchange Senior
Preferred Stock" and, together with the Exchange Senior Notes and the Exchange
Discount Notes, the "Exchange Securities") identical in all material respects to
the Senior Notes, the Discount Notes and the Senior Preferred Stock (except that
the Exchange Securities shall have been registered pursuant to such
4
<PAGE>
registration statement) to be offered in exchange for the Senior Notes, the
Discount Notes and the Senior Preferred Stock (such offer to exchange being
referred to as the "Registered Exchange Offer") and/or (ii) under certain
circumstances, a shelf registration statement pursuant to Rule 415 under the Act
(the "Shelf Registration Statement") relating to the resale by certain holders
of the Senior Notes, the Discount Notes and the Senior Preferred Stock.
This Agreement, the Senior Notes Indenture, the Discount Notes
Indenture, the Exchange Notes Indenture, the Certificate of Designation, the
Registration Rights Agreements, the Deposit Agreement, the Senior Notes, the
Discount Notes, the Senior Preferred Stock, the Common Stock, the New Credit
Agreement and all other documents or instruments executed by the Issuer or any
of the Subsidiaries in connection with the transactions contemplated hereby and
thereby are referred to herein as the "Documents." The transactions
contemplated by the Documents, including without limitation, the Offerings and
the use of the proceeds therefrom as described in the Offering Circular, and the
Company Formation as described in the Offering Circular under the captions "The
Company -- Company Formation" and "Certain Transactions -- The Company Formation
and Proceeds from the Offerings," are collectively referred to herein as the
"Transactions."
4. Delivery and Payment. Delivery to the Purchasers of and payment
for the Offered Securities shall be made at a Closing (the "Closing") to be held
at 9:00 a.m., New York City time, on July 25, 1997 (the" Closing Date") at the
offices of Mayer, Brown & Platt, 190 South LaSalle Street, Chicago, Illinois
60603. The Closing Date and the location of delivery of and the form of payment
for the Offered Securities may be varied by agreement between the Purchasers and
the Issuer.
The Issuer shall deliver to the Purchasers (i) one or more
certificates representing (a) the Senior Notes, (b) the Discount Notes and (c)
the Senior Preferred Stock (together with the Common Stock until the Preferred
Stock Separation Date, as defined herein) (collectively, the "Global
Securities"), each in definitive form, registered in the name of Cede & Co., as
nominee of The Depository Trust Company ("DTC"), or such other names as the
Purchasers may request upon at least one business day's notice to the Issuer, in
an amount corresponding to the aggregate principal amount or liquidation
preference, as applicable, of the Senior Notes, the Discount Notes and the
Senior Preferred Stock (together with the Common Stock), sold pursuant to Exempt
Resales to QIBs and (ii) one or more certificates representing (a) the Senior
Notes, (b) the Discount Notes and (c) the Senior Preferred Stock (together with
the Common Stock until the Preferred Stock Separation Date) (collectively, the
"Individual Securities"), each in definitive form, registered in such names and
denominations as the Purchasers may so request, in an aggregate amount
corresponding to the aggregate principal amount or liquidation preference, as
applicable, of the Senior Notes, the Discount Notes and the Senior Preferred
Stock (together with the Common Stock) sold pursuant to Exempt Resales to
Accredited
5
<PAGE>
Investors, in each case against payment by the Purchasers of the purchase price
therefor by immediately available Federal funds bank wire transfer to such bank
account as the Issuer shall designate at least two business days prior to the
Closing.
The Global Securities and the Individual Securities in definitive form
shall be made available to the Purchasers for inspection at the New York offices
of Mayer, Brown & Platt (or such other place as shall be acceptable to the
Purchasers) not later than 9:30 a.m. on the business day immediately preceding
the Closing Date.
5. Agreements of the Issuer. The Issuer hereby agrees:
(a) To (i) advise the Purchasers promptly after obtaining
knowledge (and, if requested by the Purchasers, confirm such advice in
writing) of (A) the issuance by any state securities commission of any stop
order suspending the qualification or exemption from qualification of any
of the Offered Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purpose by any state securities
commission or other regulatory authority, or (B) the happening of any
event, during the period that is reasonably necessary for Exempt Resales,
that makes any statement of a material fact made in the Offering Circular
untrue or that requires the making of any additions to or changes in the
Offering Circular in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading, (ii) use
reasonable efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption from qualification of any of the
Offered Securities under any state securities or Blue Sky laws, and (iii)
if at any time any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption
from qualification of any of the Offered Securities under any such laws,
use its reasonable efforts to obtain the withdrawal or lifting of such
order at the earliest possible time.
(b) To (i) furnish the Purchasers, without charge, as many
copies of the Offering Circular, and any amendments or supplements thereto,
as the Purchasers may reasonably request and (ii) promptly prepare, upon
the Purchasers' request, any amendment or supplement to the Offering
Circular that the Purchasers deem may be reasonably necessary in connection
with Exempt Resales (and the Issuer hereby consents to the use of the
Preliminary Offering Circular and the Offering Circular, and any amendments
and supplements thereto, by the Purchasers in connection with Exempt
Resales).
(c) Not to amend or supplement the Offering Circular prior to
the Closing Date unless the Purchasers shall previously have been advised
thereof and shall not have objected thereto in writing within five business
days after being furnished a
6
<PAGE>
copy thereof (unless in the opinion of counsel to the Issuer such amendment
or supplement is required by law).
(d) For so long as is reasonably necessary for Exempt Resales,
(i) if any event shall occur as a result of which, in the reasonable
judgment of the Issuer or the Purchasers, it becomes necessary or advisable
to amend or supplement the Offering Circular in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary to amend or supplement the
Offering Circular to comply with Applicable Law (defined below), forthwith
to prepare an appropriate amendment or supplement to the Offering Circular
(in form and substance reasonably satisfactory to the Purchasers) so that
(A) as so amended or supplemented the Offering Circular will not include an
untrue statement of material fact or omit to state 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 (B) the
Offering Circular will comply with Applicable Law and (ii) if it becomes
necessary or advisable to amend or supplement the Offering Circular so that
the Offering Circular will contain all of the information specified in, and
meet the requirements of, Rule 144A(d)(4) of the Act, forthwith to prepare
an appropriate amendment or supplement to the Offering Circular (in form
and substance reasonably satisfactory to the Purchasers) so that the
Offering Circular, as so amended or supplemented, will contain the
information specified in, and meet the requirements of, such rule.
(e) To cooperate with the Purchasers and their counsel in
connection with the qualification of the Offered Securities under the
securities or Blue Sky laws of such jurisdictions as the Purchasers may
request and continue such qualification in effect so long as reasonably
required for Exempt Resales; provided, that the Issuer shall not be
required in connection therewith to file any general consent to service of
process or to qualify as a foreign corporation in any jurisdiction where it
is not now so qualified or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so subject.
(f) Whether or not any of the Transactions are consummated or
this Agreement is terminated, to pay (i) all costs, expenses, fees and
taxes incident to (A) the preparation, printing and distribution of the
Preliminary Offering Circular and the Offering Circular and all amendments
and supplements thereto (including, without limitation, financial
statements and exhibits), (B) the printing and delivery of all preliminary
and final Blue Sky memoranda and all other agreements, memoranda,
correspondence and other documents prepared and delivered in connection
herewith, (C) the issuance and delivery of the Offered Securities,
including the fees of the Trustees and the Registrar and Transfer Agent
(defined below) and the cost of its personnel,
7
<PAGE>
(D) furnishing such copies of the Preliminary Offering Circular and the
Offering Circular, and all amendments and supplements thereto, as may
reasonably be requested for use by the Purchasers, and (E) the preparation
of the Senior Notes, the Discount Notes, the Senior Preferred Stock and the
Common Stock (including, without limitation, printing and engraving
thereof), (ii) all fees and expenses of the Issuer's counsel and
accountants, (iii) all expenses and listing fees in connection with the
application for quotation of the Senior Notes, the Discount Notes, the
Preferred Stock Units, the Senior Preferred Stock and the Common Stock in
the National Association of Securities Dealers, Inc. ("NASD") Automated
Quotation System - Private Offerings, Resales and Trading through Automated
Linkages ("PORTAL") Market, (iv) all fees and expenses (including fees and
expenses of counsel) in connection with approval of the Offered Securities
by DTC for "book-entry" transfer and (v) all fees charged by rating
agencies in connection with the rating of the Senior Notes and the Discount
Notes, if any.
(g) To use the proceeds from the sale of the Offered
Securities, together with the proceeds from certain other Transactions, in
the manner described in the Offering Circular under the caption "Use of
Proceeds."
(h) To the extent it may lawfully do so, not to insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension, usury or other law, wherever enacted, now or at
any time hereafter in force, that would prohibit or forgive the payment of
all or any portion of the principal of or interest or dividends, as
applicable, on the Senior Notes, the Discount Notes or the Senior Preferred
Stock, or that may affect the covenants or the performance of the
Indentures or the Certificate of Designation (and, to the extent it may
lawfully do so, the Issuer hereby expressly waives all benefit or advantage
of any such law, and covenants that it shall not, by resort to any such
law, hinder, delay or impede the execution of any power granted to the
Trustees pursuant to the Indentures or the Registrar and Transfer Agent
pursuant to the Certificate of Designation but shall suffer and permit the
execution of every such power as though no such law had been enacted).
(i) To use its best efforts to do and perform all things
required to be done and performed by the Issuer under this Agreement prior
to and after the Closing Date.
(j) Not to, and to ensure that none of its affiliates (as
defined in Rule 501(b) of the Act) will, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any "security" (as
defined in the Act) that would be integrated with the sale of the Offered
Securities in a manner that would require the registration under the Act of
the sale to the Purchasers or to the Eligible Purchasers of the Offered
Securities.
8
<PAGE>
(k) For so long as any of the Offered Securities, the Senior
Preferred Stock or the Common Stock remain outstanding, during any period
in which the Issuer is not subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to make available,
upon request, to any owner of the Offered Securities, the Senior Preferred
Stock or the Common Stock in connection with any sale thereof and any
prospective Eligible Purchaser of such Offered Securities, the Senior
Preferred Stock and the Common Stock from such owner, the information
required by Rule 144A(d)(4) under the Act.
(l) To comply with the representation letter of the Issuer to
DTC relating to the approval of such of the Offered Securities, the Senior
Preferred Stock and the Common Stock as the Issuer and the Purchasers agree
shall be eligible with DTC for "book entry" transfer.
(m) To use its best efforts to effect the inclusion of the
Senior Notes, the Discount Notes, the Preferred Stock Units, the Senior
Preferred Stock and the Common Stock in PORTAL.
(n) Except in connection with the Registered Exchange Offer or
the filing of the Shelf Registration Statement, not to, and not to
authorize or permit any person acting on its behalf to, (i) distribute any
offering material in connection with the offering and sale of the Offered
Securities other than the Preliminary Offering Circular and the Offering
Circular and any amendments and supplements to the Offering Circular
prepared in compliance with Section 5(c) hereof or (ii) solicit any offer
to buy or offer to sell the Offered Securities by means of any form of
general solicitation or general advertising (including, without limitation,
as such terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.
(o) That the Senior Preferred Stock and the Common Stock that
comprise the Preferred Stock Units will not be separately transferable
until the earliest to occur of (i) August 1, 1998; (ii) such earlier date
as may be determined by Jefferies; (iii) the date on which the Issuer mails
notice of a Change of Control (as defined in the Certificate of
Designation) to holders of the Senior Preferred Stock pursuant to the
Certificate of Designation; (iv) in the event that the Issuer elects to
exchange the Senior Preferred Stock for Exchange Notes pursuant to the
Certificate of Designation, the date on which the Issuer mails notice
thereof to the holders of the Senior Preferred Stock; (v) in the event that
the Issuer elects to redeem the Senior Preferred Stock pursuant to
Certificate of Designation, the date on which the Issuer mails notice
thereof to the holders of the Senior Preferred Stock; and (vi) the date on
which the Issuer consummates
9
<PAGE>
a public offering of Common Stock (the earliest such date being the
"Preferred Stock Separation Date").
6. Representations and Warranties of the Issuer. The Issuer
represents and war rants to the Purchasers that:
(a) The Preliminary Offering Circular as of its date did not,
and the Offering Circular as of its date does not and as of the Closing
Date will not, and each supplement or amendment thereto as of its date will
not, contain any untrue statement of a material fact or omit to state any
material fact (except, in the case of the Preliminary Offering Circular,
for pricing terms and other financial terms intentionally left blank)
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not mis leading, other than
information furnished in writing to the Issuer by such Purchaser expressly
for use in the Offering Circular or the Preliminary Offering Circular. No
injunction or order has been issued that either (i) asserts that any of the
Transactions is subject to the registration requirements of the Act or (ii)
would prevent or suspend the issuance or sale of the Offered Securities or
the use of the Preliminary Offering Circular, the Offering Circular, or any
amendment or supplement thereto, in any jurisdiction. Each of the
Preliminary Offering Circular and the Offering Circular as of their
respective dates contained, and the Offering Circular as amended or
supplemented as of the Closing Date will contain, all the information
specified in, and meet the requirements of, Rule 144A(d)(4) under the Act,
if applicable. Except as disclosed in the Offering Circular, there are no
related party transactions that would be required to be disclosed in the
Offering Circular if the Offering Circular were a prospectus included in a
Registration Statement on Form S-1 under the Act. Except as disclosed in
the Offering Circular, there are not contracts that would be required to be
disclosed in the Offering Circular if the Offering Circular were a
prospectus included in a Registration Statement on Form S-1 under the Act.
(b) The Senior Notes, the Discount Notes, the Preferred Stock
Units, the Preferred Stock, the Common Stock and, if issued, the Exchange
Notes are eligible for trading under Rule 144A.
(c) Each of the Issuer and each Subsidiary (i) has been duly
organized, is validly existing and is in good standing under the laws of
its jurisdiction of organization, (ii) has all requisite power and
authority to carry on its business and to own, lease and operate its
properties and assets as described in the Offering Circular and (iii) is
duly qualified or licensed to do business and is in good standing as a
foreign corporation authorized to do business in each jurisdiction in which
the nature of such businesses or the ownership or leasing of such
properties requires such qualification, except where the
10
<PAGE>
failure to be in good standing or so qualified could not, singly or in the
aggregate, have a material adverse effect on (i) the properties, business,
prospects, operations, earnings, assets, liabilities or condition
(financial or otherwise) of the Issuer and the Subsidiaries, taken as a
whole, or (ii) the ability of the Issuer or the Subsidiaries to perform
their obligations under any of the Documents (a "Material Adverse Effect").
(d) Immediately following the Closing, (i) the only direct or
indirect subsidiaries of the Issuer of which the Issuer owns, directly or
indirectly, more than 50% of the voting power (collectively, the
"Subsidiaries"), will be the corporations identified on Schedule 6(d), and
(ii) except as set forth in Schedule 6(d), Part 1, the Issuer will directly
or indirectly beneficially own 100% of the outstanding shares of capital
stock of each Subsidiary, free and clear of Liens (as defined in the
Indentures) other than any Liens pursuant to the New Credit Agreement, and
all of such shares of capital stock will be duly authorized and validly
issued, fully paid and nonassessable and not issued in violation of, or
subject to, any preemptive or similar rights. Except as expressly disclosed
in the Offering Circular, there are no outstanding (x) securities
convertible into or exchangeable for any capital stock of the Issuer or any
of the Subsidiaries, (y) options, warrants or other rights to purchase or
subscribe to capital stock of the Issuer or any of the Subsidiaries or
securities convertible into or ex changeable for capital stock of the
Issuer or any of the Subsidiaries or (z) contracts, commit ments,
agreements, understandings, arrangements, calls or claims of any kind
relating to the issuance of any capital stock of the Issuer or any of the
Subsidiaries, any such convertible or exchangeable securities or any such
options, warrants or rights. Immediately following the Closing, the Issuer
will not directly or indirectly own any capital stock or other equity
interest in any person other than as set forth in Schedule 6(d) Part 1 and
Part 2.
(e) Immediately following the Closing, the total authorized
capital stock of the Issuer shall consist of 2,002,000 shares of capital
stock, $.01 par value per share, consist ing of 1,000,000 shares of common
stock, 999,500 of which shall be issued and outstanding, 2,000 shares of
Junior Preferred Stock, which shall all be issued and outstanding,
1,000,000 shares of preferred stock, including 50,000 shares of Senior
Preferred Stock, 25,000 of which shall be issued and outstanding. All of
the outstanding shares of capital stock of the Issuer have been duly
authorized and validly issued, are fully paid and nonassessable, and were
not issued in violation of, and are not subject to, any preemptive or
similar rights. The table under the caption "Capitalization" in the
Offering Circular (including the footnotes thereto) presents fairly, as of
its date, (i) the historical combined capitalization of the Issuer and its
Subsidiaries, and (ii) the combined capitalization of the Issuer and its
Subsidiaries on a pro forma basis after giving effect to the Transactions,
the acquisition of LoDan West, Inc. and the Offerings and the application
of the net proceeds therefrom as described under "Use of Proceeds" in the
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Offering Circular. Except as set forth in such table, immediately following
the Closing, neither the Issuer nor any of the Subsidiaries shall have any
liabilities, absolute, accrued or contingent other than (x) liabilities
that are reflected in the Financial Statements (defined below), or (y)
liabilities incurred subsequent to the date thereof in the ordinary course
of business, consistent with past practice, that could not, singly or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(f) Neither the Issuer nor any of the Subsidiaries has entered
into any agreement that conflicts with or will in any way impair the rights
granted to the Purchasers pursuant to the Registration Rights Agreements.
(g) The Issuer and the Subsidiaries have or will have all
requisite power and authority to enter into, deliver and perform its
obligations under the Documents to which it is a party and to consummate
the Transactions. Each of the Documents has been or will be duly and
validly authorized by the Issuer and the Subsidiaries, that is, or will be,
a party thereto, and this Agreement is, and when executed and delivered on
the Closing Date each other Document will be, a legal, valid and binding
obligation of the Issuer and the Subsidiaries, that is a party hereto or
thereto, enforceable against each such person in accordance with its terms,
except as such enforceability may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws, (ii) limited by
general principles of equity (whether considered in a proceeding at law or
equity) and (iii) limited by securities laws prohibiting or limiting the
availability of, and public policy against, indemnification or
contribution. When executed and delivered, each Document will conform in
all material respects to the description thereof in the Offering Circular.
On the Closing Date, the Indentures will conform to the requirements of the
Trust Indenture Act of 1939, as amended (the "TIA"), applicable to an
indenture that is required to be qualified under the TIA.
(h) The Senior Notes and the Discount Notes have been duly and
validly authorized by the Issuer for issuance and sale to the Purchasers
pursuant to this Agreement and, when executed and authenticated in
accordance with the terms of the Indentures and delivered to and paid for
by the Purchasers in accordance with the terms hereof, will be legal, valid
and binding obligations of the Issuer, enforceable against the Issuer in
accordance with their terms, except as such enforceability may be (i)
subject to applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws, (ii) limited by general principles of equity (whether
considered in a proceeding at law or equity) and (iii) limited by
securities laws prohibiting or limiting the availability of, and public
policy against, indemnification or contribution.
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(i) The Certificate of Designation has been duly authorized and
executed by the Issuer and duly filed with the Secretary of State of the
State of Delaware. The shares of Senior Preferred Stock have been duly and
validly authorized by the Issuer for issuance and sale to Jefferies
pursuant to this Agreement and, when issued by the Issuer and delivered and
paid for by Jefferies in accordance with the terms hereof, will have been
validly issued, fully paid and nonassessable and free of any preemptive or
similar rights. The certificate of incorporation of the Issuer, by virtue
of the Certificate of Designation, sets forth the rights, preferences and
provisions of the Senior Preferred Stock, and the holders thereof will be
entitled to the benefits of the provisions set forth in the Certificate of
Designation as provided therein. Harris Trust and Savings Bank has agreed
to be the registrar and transfer agent for the Senior Preferred Stock (the
"Registrar and Transfer Agent").
(j) All of the outstanding shares of capital stock of the
Issuer have been duly authorized and validly issued, are fully paid and
nonassessable and are free of any preemptive or similar rights. The shares
of Common Stock to be issued and sold by the Issuer have been duly
authorized and, when issued and delivered to Jefferies against payment
therefor in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable and free of any preemptive or similar rights; and
the capital stock of the Issuer conforms in all material respects to the
description thereof in the Offering Circular. The Registrar and Transfer
Agent has agreed to be the registrar and transfer agent for the Common
Stock.
(k) The Exchange Securities have been duly and validly
authorized by the Issuer and, when executed, authenticated or
countersigned, registered and delivered in accordance with the terms of the
Certificate of Designation or the Indentures and the Registration Rights
Agreements, will be legal, valid and binding obligations of the Issuer,
enforceable against the Issuer in accordance with their terms, except as
such enforceability may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws, (ii) limited by
general principles of equity (whether considered in a proceeding at law or
equity) and (iii) limited by securities laws prohibiting or limiting the
availability of, and public policy against, indemnification or
contribution.
(l) The Exchange Notes have been duly and validly authorized by
the Issuer and, when executed, authenticated and delivered in accordance
with the terms of the Exchange Notes Indenture, will be legal, valid and
binding obligations of the Issuer, enforce able against the Issuer in
accordance with their terms, except as such enforceability may be (i)
subject to applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws, (ii) limited by general principles of equity (whether
considered in a
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proceeding at law or equity) and (iii) limited by securities laws
prohibiting or limiting the availability of, and public policy against,
indemnification or contribution.
(m) Neither the Issuer nor any of the Subsidiaries is (i) in
violation of its re spective charter or by-laws (collectively, "Charter
Documents"), (ii) other than violations that are not reasonably likely to,
singly or in the aggregate, result in a Material Adverse Effect, in
violation of any Federal, state, local or foreign statute, law (including,
without limitation, common law) or ordinance, or any judgment, decree,
rule, regulation or order (collectively, "Applicable Law") of any
government, governmental or regulatory agency or body, court or arbitrator,
domestic or foreign (each, a "Governmental Authority") or (iii) other than
breaches or defaults that are not reasonably likely to, singly or in the
aggregate, result in a Material Adverse Effect, in breach of or default
under (with the passage of time or otherwise) any bond, debenture, note or
other evidence of indebtedness, indenture, mortgage, deed of trust, lease
or any other agreement or instrument to which any such person is a party or
by which any of them or their respective property is bound (collectively,
"Applicable Agreements"). There exists no condition that, with the passage
of time or otherwise, would constitute a violation of such Charter
Documents or Applicable Laws or a breach of or default under any Applicable
Agreement or result in the imposition of any penalty or the acceleration of
any indebtedness, other than breaches, violations, penalties, defaults or
conditions which are not reasonably likely to, singly or in the aggregate,
result in a Material Adverse Effect.
(n) Neither the execution, delivery or performance of the
Documents nor the consummation of the Transactions shall conflict with,
violate, constitute a breach of or a default (with the passage of time or
otherwise) under, require the consent of any person (other than consents
already obtained) under, result in the imposition of a Lien (other than
under the New Credit Agreement) on any assets of the Issuer or any of the
Subsidiaries, or result in an acceleration of indebtedness pursuant to (i)
the Charter Documents of the Issuer or any of the Subsidiaries, (ii) any
Applicable Agreement, other than such breaches, violations or defaults that
are not reasonably likely to, singly or in the aggregate, result in a
Material Adverse Effect or (iii) any Applicable Law, other than such
breaches, violation or defaults that are not reasonably likely to, singly
or in the aggregate, result in a Material Adverse Effect. The execution,
delivery and performance of this Agreement, the Registration Rights
Agreements and the Indentures by the Issuer, compliance by the Issuer with
the provisions of this Agreement, the Indentures, the Registration Rights
Agreements, the Senior Notes, the Discount Notes and the Preferred Stock
Units and the issuance, sale and subsequent registration of the Senior
Notes, the Discount Notes and the Preferred Stock Units will not conflict
with or constitute a breach of any of the terms or provisions of, or a
default under, or result in the imposition of a
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lien or encumbrance on any properties of the Issuer or any of the
Subsidiaries, or an acceleration of indebtedness pursuant to, (i) the
charter or by laws of the Issuer or any of the Subsidiaries, (ii) any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which the Issuer or any of the Subsidiaries is a party or by
which any of them or their property is bound, or (iii) any law or
administrative regulation applicable to the Issuer or any of the
Subsidiaries or any of their assets or properties, or any judgment, order
or decree of any court or governmental agency or authority to which the
Issuer or any of the Subsidiaries was or is now a party or to which any of
them or their respective properties are subject. No consent, approval,
authorization or order of, or filing or registration with, any regulatory
body, administrative agency, or other governmental agency (except as
securities or blue sky laws of the various states may require) that has not
been made or obtained is required for the execution, delivery and
performance of this Agreement, the Indentures and the Registration Rights
Agreements and sale of the Senior Notes, the Discount Notes and the
Preferred Stock Units pursuant to this Agreement. No consents or waivers
from any person are required to consummate the issuance, sale and
subsequent registration of the Exchange Securities pursuant to this
Agreement and the Registration Rights Agreements other than such consents
and waivers as have been or will be obtained. After giving effect to the
Transactions, no Default or Event of Default (as defined in the Indentures)
will exist.
(o) No permit, authorization, approval, consent, license or
order of, or filing, registration or qualification with, any Governmental
Authority (collectively, "Permits") and no approval or consent of any other
person, is required in connection with, or as a condition to, the
execution, delivery or performance of any of the Documents or the
consummation of any of the Transactions, other than such Permits (i) as
have been made or obtained on or prior to the Closing Date, (ii) as are not
required to be made or obtained on or prior to the Closing Date that will
be made or obtained when required, (iii) the failure of which to make or
obtain is not reasonably likely, singly or in the aggregate, to result in a
Material Adverse Effect or (iv) as may be required under the securities or
Blue Sky laws of any jurisdiction other than the Federal jurisdiction of
the United States.
(p) Except as adequately disclosed in the Offering Circular,
there is no action, claim, suit or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
domestic or foreign (collectively, "Proceedings"), pending or threat ened,
that either (i) seeks to restrain, enjoin, prevent the consummation of, or
otherwise challenge any of the Documents or any of the Transactions, or
(ii) could, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Neither the Issuer nor any of the Subsidiaries is
subject to any judgment, order,
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decree, rule or regulation of any Governmental Authority that is reasonably
likely to, singly or in the aggregate, have a Material Adverse Effect.
(q) The Issuer and each of the Subsidiaries has such Permits as
are necessary to own, lease and operate the properties and to conduct the
businesses described in the Offering Circular other than those the failure
of which to have is not reasonably likely, singly or in the aggregate, to
result in a Material Adverse Effect. All such Permits are in full force and
effect. No event has occurred which allows, or after notice or lapse of
time would allow, the imposition of any material penalty, revocation or
termination by the issuer thereof or which results in any material
impairment of the rights of the holder of any such Permits. Neither the
Issuer nor any of the Subsidiaries has any reason to believe that any
issuer is considering limiting, suspending or revoking any such Permit.
(r) Except as set forth in the Offering Circular, or with such
exceptions as, singly or in the aggregate, are not reasonably likely to
have a Material Adverse Effect, (i) the Issuer and each of the Subsidiaries
has good and marketable title, free and clear of all liens, claims,
encumbrances and restrictions except liens for taxes not yet due and
payable, to all property and assets described in the Offering Circular as
being owned by them and (ii) the Issuer and the Subsidiaries enjoy peaceful
and undisturbed possession under all such leases to which any of them is a
party as lessee. All Applicable Agreements are in full force and effect and
are legal, valid and binding obligations, and no default has occurred or is
continuing thereunder, other than such defaults that are not reasonably
likely to, singly or in the aggregate, have a Material Adverse Effect. The
Issuer and the Subsidiaries maintain insur ance covering their properties,
operations, personnel and businesses against such losses and risks as they
reasonably deem adequate in accordance with customary industry practice.
Any such insurance is outstanding and duly in force.
(s) All material tax returns required to be filed by the Issuer
and the Subsidiaries in any jurisdiction (including foreign jurisdictions)
have been filed and, when filed, all such returns were true, correct and
complete in all material respects, and all taxes, assessments, fees and
other charges (including, without limitation, withholding taxes, penalties,
interest and additions to taxes) shown on such returns have been paid,
other than those being contested in good faith by appropriate proceedings,
or those that are currently payable without penalty or interest and in each
case, for which an adequate reserve or accrual has been established on the
books and records of the Issuer or its predecessors in accordance with
generally accepted accounting principles of the United States, consistently
applied ("GAAP"). There are no actual or proposed additional tax
assessments for any fiscal period against the Issuer or any of the
Subsidiaries that are
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reasonably likely to, singly or in the aggregate, have a Material Adverse
Effect. The charges, accruals and reserves on the books of each of the
Issuer and the Subsidiaries in respect of any tax liability for any years
not finally determined are adequate to meet any assessments or re-
assessments for additional income tax for any years not finally determined.
(t) The Issuer and the Subsidiaries own, or are licensed under,
and have the right to use, all patents, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or proce dures),
trademarks, service marks and trade names (collectively, "Intellectual
Property") currently used in, or necessary for the conduct of, their
businesses as set forth in the Offering Circular, with such exceptions as
are not reasonably likely, singly or in the aggregate, to have a Material
Adverse Effect. No claims have been asserted by any person and there is no
proceeding pending or, to the Issuer's knowledge, threatened before any
court or Governmental Authority, challenging the use of any such
Intellectual Property by the Issuer or any of the Subsidiaries or
questioning the validity or enforceability of any item of Intellectual
Property owned or used by Issuer or any Subsidiary, or license or other
agreement related thereto, and there is no valid basis for any such claim
(other than any claims that are not reasonably likely to, singly or in the
aggregate, have a Material Adverse Effect). The loss of any Intellectual
Property asset, other than the DURA-LINE and SILICORE trademarks, or the
patent or manufacturing trade secrets covering the solid co-extruded
polymer lubricant lining used in connection with the SILICORE technology,
would not have a Material Adverse Effect. All Intellectual Property assets
which are material to the businesses of the Issuer and the Subsidiaries as
currently conducted and as described in the Offering Circular are valid and
enforceable. To the Issuer's knowledge, the conduct of the businesses of
the Issuer and the Subsidiaries as currently conducted and as described in
the Offering Circular does not infringe on the Intellectual Property rights
of any other person, and no Person is infringing upon the Intellectual
Property rights of the Issuer or any Subsidiary, in any material respect.
(u) Each of the Issuer and the Subsidiaries maintains a system
of internal accounting controls sufficient to provide reasonable assurance
that (i) material transactions are executed in accordance with management's
general or specific authorization, (ii) material transactions are recorded
as necessary to permit preparation of financial statements in conformity
with GAAP, and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any material differences.
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(v) Each of (i) the audited combined financial statements of
the Issuer and the Subsidiaries, including their respective predecessors,
and related notes contained in the Offering Circular (the "Audited
Financial Statements") and (ii) the unaudited historical combined financial
statements of the Issuer and the Subsidiaries, including their respective
predecessors, and related notes contained in the Offering Circular (the
"Interim Financial Statements" and, together with the Audited Financial
Statements, the "Financial Statements") present fairly in all material
respects the combined financial position, results of operations and cash
flows of the Issuer and its Subsidiaries, as of the respective dates and
for the respective periods to which they apply, and have been prepared in
accordance with GAAP, and the requirements of Regulation S-X that would be
applicable if the Offering Circular were a prospectus included in a
registration statement on Form S-1 filed under the Act, except as disclosed
therein. The summary and selected historical financial data included in the
Offering Circular have been prepared on a basis consistent with that of the
Financial Statements and present fairly in all material respects the
combined financial position and results of operations of the Issuer and the
Subsidiaries as of the respective dates and for the respective periods
indicated. Each of (i) the audited combined financial statements of persons
other than the Issuer and related notes contained in the Offering Circular
and (ii) the unaudited historical combined financial statements of such
persons and related notes contained in the Offering Circular present fairly
in all material respects the combined financial position, results of
operations and cash flows of such persons, as of the respective dates and
for the respective periods to which they apply, and have been prepared in
accordance with GAAP and the requirements of Regulation S-X that would be
applicable if the Offering Circular were a prospectus included in a
registration statement on Form S-1 filed under the Act, except as disclosed
therein. The pro forma combined financial statements and related notes
included in the Offering Circular (i) comply in all material respects with
the rules and guidelines of the Commission with respect to pro forma
financial statements except as disclosed in the Offering Circular, (ii)
present fairly in all material respects the pro forma financial position
and results of operations of the Issuer and its Subsidiaries on a combined
basis as of the dates and for the periods indicated, after giving effect to
the Transactions, (iii) have been prepared on a basis consistent with the
Financial Statements, except for the pro forma adjustments specified
therein, and (iv) are based on good faith, reasonable estimates and
assumptions of the Issuer. The summary pro forma financial information
included in the Offering Circular has been derived from such pro forma
financial statements and present fairly in all material respects the pro
forma combined financial position and results of operations of the Issuer
and its Subsidiaries, including their respective predecessors, as of the
respective dates and for the respective periods indicated. All other
financial and statistical data included in the Offering Circular are fairly
and accurately presented in all material respects and are derived from and
prepared
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on a basis consistent with, the Financial Statements and the books and
records of the Issuer and its Subsidiaries. Ernst & Young LLP are
independent public accountants with respect to the Issuer and its
Subsidiaries.
(w) Subsequent to the respective dates as of which information
is given in the Offering Circular, except as adequately disclosed in the
Offering Circular, (i) neither the Issuer nor any of the Subsidiaries has
incurred any liabilities, direct or contingent, that are material, singly
or in the aggregate, to the Issuer and the Subsidiaries on a consolidated
basis, or has entered into any material transactions not in the ordinary
course of business, (ii) there has not been any decrease in the capital
stock of any of them or any increase in long-term indebtedness or any
material increase in short-term indebtedness of the Issuer and the
Subsidiaries on a consolidated basis, or any payment of or declaration to
pay any dividends or any other distribution by the Issuer, and (iii) there
has not been any material adverse change in the properties, business,
prospects, operations, earnings, assets, liabilities or condition
(financial or otherwise) of the Issuer and the Subsidiaries taken as a
whole (each of clauses (i), (ii) and (iii), a "Material Adverse Change").
There is no event known to the Issuer that is reasonably likely to occur,
which if it were to occur, would be reasonably likely to, singly or in the
aggregate, have a Material Adverse Effect, except such events that have
been adequately disclosed in the Offering Circular.
(x) Prior to and after the issuance of the Offered Securities
and after giving effect to the Transactions, (i) the present fair saleable
value of the assets of the Issuer exceeded and will exceed the amount that
will be required to be paid on, or in respect of, the Issuer's debts and
other liabilities (including contingent liabilities) as they become
absolute and matured, (ii) the assets of the Issuer do not constitute and
will not constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted, and (iii) the Issuer does not
intend to, and does not believe that it will, incur debts or other
liabilities beyond its ability to pay such debts and liabilities as they
mature. The Issuer does not intend to permit any of the Subsidiaries to
incur debts or other liabilities beyond their respective ability to pay
such debts and liabilities as they mature.
(y) Except as contemplated by this Agreement, neither the
Issuer nor any of its Affiliates has (i) taken, directly or indirectly, any
action designed to cause or to result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of any of them to facilitate the
sale or resale of any of the Offered Securities or (ii) except as disclosed
in the Offering Circular, (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting
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purchases of, any of the Offered Securities or (B) paid or agreed to pay to
any person any compensation for soliciting another to purchase any other
securities of any of them.
(z) No registration under the Act, and no qualification of the
Indentures under the TIA is required for the sale of the Offered Securities
to the Purchasers as contem plated hereby or for the Exempt Resales,
assuming (i) that the Eligible Purchasers who buy the Offered Securities in
the Exempt Resales are QIBs or Accredited Investors, (ii) the accuracy of
the Purchasers' representations contained herein regarding the absence of
general solicitation in connection with the sale of the Offered Securities
to the Purchasers and the Exempt Resales, and (iii) the accuracy of the
representations made by each Accredited Investor who purchases the Offered
Securities pursuant to an Exempt Resale as set forth in the letters of
representation in the form of Annex A to the Offering Circular. No form of
general solicitation or general advertising was used by the Issuer or any
of its Affiliates or any of their representatives (other than the
Purchasers) in connection with the offer and sale of any of the Offered
Securities or in connection with Exempt Resales. No securities of the same
class as any of the Offered Securities have been offered, issued or sold by
the Issuer or any of its Affiliates within the six-month period immediately
prior to the date hereof.
(aa) No condition exists or event or transaction has occurred
in connection with any employee benefit plan that could result in the
Issuer or any such "Affiliate" incurring any liability, fine or penalty
that could, singly or in the aggregate, have a Material Adverse Effect.
With respect to any employee pension benefit plan that is subject to Title
IV of the Employee Retirement Income Security Act of 1974, as amended, or
the rules and regulations promulgated thereunder ("ERISA"), (i) the fair
market value of the assets of such employee pension benefit plan equals or
exceeds the present value of the liabilities of such pension plan (as
determined in accordance with the actuarial methods and assumptions set
forth in the latest actuarial report for such employee pension benefit
plan), except where the failure to so equal or exceed would not, singly or
in the aggregate, have a Material Adverse Effect and (ii) there exists no
accumulated funding deficiency which could, singly or in the aggregate,
have a Material Adverse Effect. The terms "employee benefit plan,"
"employee pension benefit plan," and "party in interest" shall have the
meanings assigned to such terms in Section 3 of ERISA, the term "Affiliate"
shall have the meaning assigned to such term in Section 407(d)(7) of ERISA,
and the term "disqualified person" shall have the meaning assigned to such
term in section 4975 of the Internal Revenue Code of 1986, as amended, or
the rules, regulations and published interpretations promulgated thereunder
(the "Code").
(bb) None of the Transactions will violate or result in a
violation of Section 7 of the Exchange Act (including, without limitation,
Regulation T (12 C.F.R.
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Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R.
Part 224) of the Board of Governors of the Federal Reserve System). Neither
the Issuer nor any of the Subsidiaries is subject to regulation, or shall
become subject to regulation upon the consummation of the Transactions,
under the Investment Company Act of 1940, as amended, and the rules and
regulations and interpretations promulgated thereunder, the Public Utility
Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act, the Commodity Exchange Act or any Federal or state
statute or regulation limiting its ability to incur or assume indebtedness
for borrowed money.
(cc) Neither the Issuer nor any of the Subsidiaries has dealt
with any broker, finder, commission agent or other person (other than the
Purchasers) in connection with the Transactions and neither the Issuer nor
any of the Subsidiaries is under any obligation to pay any broker's fee or
commission in connection with such transactions (other than commissions and
fees to the Purchasers as set forth in the Offering Circular).
(dd) Neither the Issuer nor any Subsidiary is engaged in any
unfair labor practice. Except as adequately disclosed in the Offering
Circular, there is (i) no unfair labor practice complaint or other
proceeding pending or, to the knowledge of the Issuer after due inquiry,
threatened against the Issuer or any of the Subsidiaries before the
National Labor Re lations Board or any state, local or foreign labor
relations board or any industrial tribunal, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agree ment is
so pending or threatened, (ii) no strike, labor dispute, slowdown or
stoppage pending or, to the knowledge of the Issuer after due inquiry,
threatened against the Issuer or any of the Subsidiaries, and (iii) no
union representation question existing with respect to the employees of the
Issuer or any of the Subsidiaries, and, to the Issuer's knowledge after due
inquiry, no union organizing activities are taking place that could, singly
or in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(ee) Except as adequately disclosed in the Offering Circular is
not reasonably likely to, singly or in the aggregate, have a Material
Adverse Effect:
(1) each of the Issuer and the Subsidiaries (i) has obtained
all Permits that are required with respect to the operation of its
business, property and assets under the Environmental Laws (as defined
below) and are in material compliance with all terms and conditions of
such required Permits, and (ii) is in material compliance with all
Environmental Laws (including, without limitation, compliance with
standards, schedules and timetables therein);
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(2) no real property or facility presently, or to the
Issuer's knowledge, formerly owned, used, operated, leased, managed or
controlled by the Issuer or any of the Subsidiaries is listed or
proposed for listing on the National Priorities List or the
Comprehensive Environmental Response, Compensation, and Liability
Informa tion System, both promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or on any other state or local list established
pursuant to any Environmental Law, and neither the Issuer nor any of
the Subsidiaries has received any notification of potential or actual
liability or request for information under CERCLA or any comparable
state or local law;
(3) there have been no releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escap ing, leaching, disposing or dumping, on-
site or, to the knowledge of the Issuer and the Subsidiaries after due
inquiry, off-site) of Hazardous Materials (as defined below) by the
Issuer or any of the Subsidiaries at, on, under, from or into any
facility or real property owned, operated, leased, managed or
controlled by any such person that are likely to give rise to a
material liability under any Environmental Law;
(4) to the Issuer's knowledge, there are no events,
activities, practices, incidents, investigations, notices, contractual
obligations or actions or conditions, circumstances or plans that may
interfere with or prevent compliance by the Issuer or any of the
Subsidiaries with any Environmental Law, or that may give rise to any
material liability under any Environmental Laws; and
(5) in the ordinary course of their businesses, the Issuer
and each of the Subsidiaries conduct a periodic review of the effect
of Environmental Laws on the business, operations and properties of
the Issuer and each of the Subsidiaries in the course of which they
identify and evaluate associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for
cleanup, closure of properties or compliance with Environmental Laws
or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third parties).
On the basis of such review, the Issuer and each of the Subsidiaries
have reasonably concluded that such associated costs and liabilities
could not reasonably be expected, singly or in the aggregate, to have
a Material Adverse Effect on the Issuer and each of the Subsidiaries,
taken as a whole.
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"Environmental Laws" means all Applicable Laws, now in
effect, relating to pollution or protection of human health or the
environment, including, without limitation, laws relating to (1)
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous
constituents, substances or wastes, including, without limitation,
asbestos or asbestos-containing materials, polychlorinated biphenyls,
petroleum or any constituents relating to or arising out of any oil
production activities, including crude oil or any fraction thereof, or
any petroleum product or other wastes, chemicals or substances
regulated by any Environmental Law (collectively referred to as
"Hazardous Materials"), into the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata), (2) the manufacture, processing, distribu tion,
use, generation, treatment, storage, disposal, transport or handling
of Hazardous Materials and (3) underground storage tanks, and related
piping, and emissions, dis charges, releases or threatened releases
therefrom.
(ff) No statement, representation or warranty made by the Issuer
or any of the Subsidiaries, in any of the Documents or in any certificate
or document required by any of the Documents to be delivered to the
Purchasers was or will be, when made, inaccurate, untrue or incorrect in
any material respect.
7. Representations and Warranties of the Purchasers. Each of the
Purchasers, jointly and severally, represents and warrants with respect to
itself only that:
(a) It is a QIB.
(b) It (i) is not acquiring the Offered Securities with a view
to any distribution thereof that would violate the Act or the securities
laws of any state of the United States or any other applicable jurisdiction
and (ii) will be soliciting offers for the Offered Securities only from,
and will be reoffering and reselling the Offered Securities only to (A)
persons in the United States whom it reasonably believes to be QIBs in
reliance on the exemption from the registration requirements of the Act
provided by Rule 144A, and (B) a limited number of Accredited Investors
that execute and deliver to the Issuer and the Purchasers a letter contain
ing certain representations and agreements in the form attached as Annex A
to the Offering Circular.
(c) No form of general solicitation or general advertising in
violation of the Act has been or will be used by such Purchasers or any of
their representatives in connection with the offer and sale of any of the
Offered Securities.
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(d) In connection with the Exempt Resales, it will solicit
offers to buy the Offered Securities only from, and will offer and sell the
Offered Securities only to, Eligible Purchasers who, in purchasing such
Offered Securities will be deemed to have represented and agreed (i) if
such Eligible Purchasers are QIBs, that they are purchasing the Offered
Securities for their own accounts or accounts with respect to which they
exercise sole invest ment discretion and that they or such accounts are
QIBs, (ii) that such Offered Securities will not have been registered under
the Act and may be resold, pledged or otherwise transferred only (A) to a
person who the seller reasonably believes is a QIB in a transaction meeting
the requirements of Rule 144A, in a transaction meeting the requirements of
Rule 144 or in accordance with another exemption from the registration
requirements of the Act, (B) to the Issuer and (C) pursuant to an effective
registration statement, and, in each case, in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction, and (iii) that the holder will, and each
subsequent holder is required to, notify any purchaser from it of the
security evidenced thereby of the resale restrictions set forth in (ii)
above.
8. Indemnification.
(a) The Issuer shall, without limitation as to time, indemnify
and hold harmless each Purchaser and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act) any of the Purchasers (any of such persons being hereinafter
referred to as a "controlling person"), and the respective officers,
directors, partners, employees, representatives and agents of the
Purchasers and any such controlling person (collectively, the "Issuer
Indemnified Parties"), to the fullest extent lawful, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and reasonable attorneys' fees) and
expenses (including, without limitation, costs and expenses incurred in
connection with investigating, preparing, pursuing or defending against any
of the foregoing) (collectively, "Losses"), as incurred, directly or
indirectly caused by, related to, based upon, arising out of or in connec
tion with (i) any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Circular or the
Offering Circular (or any amendment or supplement thereto), or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (ii) any act,
omission, transaction or event contemplated by the Documents; provided,
that the Issuer shall not be liable to any Issuer Indemnified Party for any
Losses that (i) arise solely from the gross negligence or willful
misconduct of such Issuer Indemnified Party, (ii) are caused by any such
untrue statement or omission or alleged untrue statement or omission based
upon information relating to such Purchaser furnished in writing to the
Issuer (or reviewed and approved in writing) by a Purchaser expressly for
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use in the Preliminary Offering Circular or the Offering Circular, (iii)
result solely from an untrue statement or alleged untrue statement or
omission or alleged omission made in the Preliminary Offering Circular or
the Offering Circular and such Issuer Indemnified Party or the related
Purchaser failed to send a copy of the Offering Circular as then amended or
supplemented, with or prior to the delivery of written confirmation of the
sale by such Purchaser to the person asserting the claim from which such
Losses arise, the Offering Circular, as then amended or supplemented, would
have corrected such untrue statement or alleged untrue statement or
omission or alleged omission and the Issuer has delivered the Offering
Circular, as then amended or supplemented, to the Purchasers pursuant to
this Agreement, or (iv) result from the use by the Issuer Indemnified Party
or the related Purchaser of the Offering Circular when the Issuer has
notified such Purchaser in writing that the Offering Circular contains an
untrue statement or omission of a fact or circumstance requiring an
amendment to the Offering Circular. The Issuer shall notify the Purchasers
promptly of the institution, threat or assertion of any Proceeding of which
the Issuer or any Subsidiary is aware in connection with the matters
addressed by this Agreement which involves the Issuer, any of the
Subsidiaries or any of the indemnified parties.
(b) Each Purchaser shall, severally and not jointly, without
limitation as to time, indemnify and hold harmless the Issuer, and its
directors, officers, and any person controlling the Issuer (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) (any
such persons being hereinafter referred to as a "controlling person"), and
the directors and officers of such controlling persons (the "Purchaser
Indemnified Parties" and, together with the Issuer Indemnified Parties, the
"Indemnified Parties"), to the fullest extent lawful, from and against any
and all Losses arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in the Preliminary Offering Circular
or the Offering Circular (or any amendment or supplement thereto), or any
omission or alleged omission to state therein a 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, but only with
respect to information relating to such Purchaser furnished in writing (or
reviewed and approved in writing) by such Purchaser expressly for use in
the Preliminary Offering Circular or the Offering Circular (or any
amendment or supplement thereto); provided, however, that in no event shall
the liability of each such Purchaser exceed the total discounts and
commissions received by such Purchaser with respect to the Senior Notes
purchased by it.
(c) If any Proceeding shall be brought or asserted against any
person entitled to indemnification hereunder, such Indemnified Party shall
give prompt written notice to the indemnifying party; provided, that the
failure to so notify the indemnifying
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party shall not re lieve the indemnifying party from any obligation or
liability except to the extent (but only to the extent) that it shall be
finally determined by a court of competent jurisdiction (which
determination is not subject to appeal) that the indemnifying party has
been prejudiced mate rially by such failure.
No indemnifying party shall consent to entry of any judgment in
or enter into any settlement of any pending or threatened Proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Party is a party thereto) unless such
judgment or settlement includes, as an unconditional term thereof, the
giving by the claimant or plaintiff to each Indemnified Party of a release,
in form and sub stance satisfactory to the Indemnified Party, from all
Losses that may arise from such Proceeding or the subject matter thereof
(whether or not any Indemnified Party is a party thereto).
(d) If the indemnification provided for in this Section 8 is
unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section
8 would otherwise apply by its terms (other than by reason of exceptions
provided in this Section 8), then each indemnifying party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses (i) in such
proportion as is appropriate to reflect the relative benefits received by
the Issuer, on the one hand, and the Purchasers, on the other hand, from
the offering of the Senior Notes and Jefferies from the offering of the
Discount Notes and the Preferred Stock Units 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 re
ferred to in clause (i) above but also the relative fault of the Issuer, on
the one hand, and the Purchasers, on the other hand, in connection with the
actions, statements or omissions that resulted in such Losses, as well as
any other relevant equitable considerations. The relative benefits received
by the Issuer, on the one hand, and the Purchasers, on the other hand,
shall be deemed to be in the same proportion as the total net proceeds from
the offering (before deducting expenses) received by the Issuer, and the
total discounts and commissions received by the Purchasers, bear to the
total price of the Senior Notes (with respect to the Purchasers) and the
Discount Notes and the Preferred Stock Units (with respect to Jefferies) in
Exempt Resales in each case as set forth in the table on the cover page of
the Offering Circular. The relative fault of the Issuer, on the one hand,
and the Purchasers, on the other hand, shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact
relates to information supplied by the Issuer, on the one hand, or the
Purchasers, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The
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<PAGE>
amount paid or payable by an Indemnified Party as a result of any Losses
shall be deemed to include any legal or other fees or expenses incurred by
such party in connection with any Proceeding, to the extent such party
would have been indemnified for such fees or expenses if the
indemnification provided for in this Section 8 was available to such party.
Each party hereto agrees that it would not be just and equitable
if contribution pursuant to this Section 8(c) were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 8(c), the
Purchasers shall not be required to contribute, in the aggregate, any
amount in excess of the amount by which the total discounts and commissions
received by such Purchasers with respect to the Senior Notes and received
by Jefferies with respect to the Discount Notes and the Preferred Stock
Units exceeds the amount of any damages that such Purchasers 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 Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The indemnity and contribution agreements contained in this
Section 8 are in addition to any liability that the indemnifying party may
otherwise have to the Indemnified Parties.
9. Conditions.
(a) The obligation of the Purchasers to purchase the Senior
Notes and of Jefferies to purchase the Discount Notes and the Preferred
Stock Units under this Agreement is subject to the satisfaction or waiver
of each of the following conditions:
(i) All the representations and warranties of the Issuer
contained in this Agreement shall be true and correct in all material
respects (other than representations and warranties with a materiality
qualifier, which shall be true and correct as written) at and as of the
Closing Date after giving effect to the Transactions with the same force
and effect as if made on and as of such date. On or prior to the Closing
Date, the Issuer and the Subsidiaries and, to the knowledge of the Issuer,
each other party to the Documents (other than the Purchasers) shall have
performed or complied in all material respects with all of the agreements
and satisfied in all material respects all conditions on their respective
parts to be performed, complied with or satisfied at or prior to the
Closing Date pursuant to the Documents.
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(ii) The Offering Circular shall have been printed and
copies made available to the Purchasers not later than 12:00 noon, New York
City time, on the second business day following the date of this Agreement
or at such later date and time as Jefferies may approve.
(iii) No injunction, restraining order or order of any
nature by a Governmental Authority shall have been issued as of the Closing
Date that would prevent or interfere with the consummation of any of the
Transactions; and no stop order suspending the qualification or exemption
from qualification of any of the Offered Securities in any jurisdiction
shall have been issued and no Proceeding for that purpose shall have been
commenced or be pending or contemplated.
(iv) No action shall have been taken and no Applicable
Law shall have been enacted, adopted or issued that would, as of the
Closing Date, prevent the consummation of any of the Transactions. No
Proceeding shall be pending or threatened other than Proceedings that (A)
if adversely determined could not, singly or in the aggregate, adversely
affect the issuance or marketability of the Offered Securities and (B)
could not be expected to have a Material Adverse Effect.
(v) Since the date as of which information is given in
the Offering Circular, there shall not have been any Material Adverse
Change.
(vi) The Senior Notes, the Discount Notes, the Preferred
Stock Units, the Senior Preferred Stock and the Common Stock shall have
been designated PORTAL securities in accordance with the rules and
regulations adopted by the NASD relating to trading in the PORTAL market,
and the Senior Notes and the Discount Notes shall have received ratings of
B+ and B+, and B3 and B3, from Standard & Poor's Corporation and Moody's
Investors Service, Inc., respectively, which ratings shall be in effect on
the Closing Date and shall not have been amended or made subject to any
notice of potential downgrade or action of similar import.
(vii) The Purchasers shall have received on the Closing
Date (A) certificates dated the Closing Date, signed by (1) the Chief
Executive Officer and (2) the principal financial or accounting officer of
the Issuer, on behalf of the Issuer, (x) confirming the matters set forth
in paragraphs (i) through (v) and (xi) of this Section 9(a) and (y)
certifying as to such other matters as the
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<PAGE>
Purchasers may reasonably request, (B) a certificate, dated the Closing
Date, signed by the Secretary of the Issuer, certifying such matters as the
Purchasers may reasonably request and (C) a certificate of solvency, dated
the Closing Date, signed by the principal financial or accounting officer
of the Issuer substantially in the form previously approved by the
Purchasers.
(viii) The Purchasers shall have received:
(1) an opinion of Mayer, Brown & Platt, special counsel to
the Issuer ("Mayer, Brown"), dated the Closing Date, in the form of
Exhibit A hereto;
(2) an opinion of Bryan Cave LLP, special counsel to the
Issuer ("Bryan Cave"), dated the Closing Date, in the form of Exhibit
B hereto; and
(3) an opinion of Skadden, Arps, Slate, Meagher & Flom LLP,
dated the Closing Date, in form and substance reasonably satisfactory
to the Purchas ers covering such matters as are customarily covered in
such opinions.
(ix) The Purchasers shall have received from Ernst & Young
LLP (A) a customary comfort letter, dated the date of the Offering
Circular, in form and substance reasonably satisfactory to the
Purchasers, with respect to the financial statements and certain
financial information contained in the Offering Circular, and (B) a
customary comfort letter, dated the Closing Date, in form and
substance reasonably satisfactory to the Purchasers, to the effect
that they reaffirm the statements made in the letter furnished
pursuant to clause (A), except that the specified date referred to
shall be a date not more than five days prior to the Closing Date.
(x) The Documents to be executed and delivered on or prior
to the Closing Date shall have been executed and delivered by all
parties thereto and the Purchasers shall have received a fully
executed original or a copy of the fully executed original of each
Document.
(xi) On or prior to the Closing Date, the Transactions to be
consummated on or prior to the Closing Date shall have been duly
consummated. The Pur chasers shall have received copies of all
opinions delivered by Mayer, Brown and Bryan Cave under or in
connection with the Transactions consummated on the Closing Date, and
letters to the effect that the Purchasers may rely on such opinions,
as if addressed to the Purchasers.
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<PAGE>
(xii) Counsel to the Purchasers shall have been furnished
with such documents as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in this
Section 9.
(b) The obligation of the Issuer to sell the Offered Securities
under this Agreement is subject to the satisfaction or waiver of each of
the following conditions:
(i) The Purchasers shall have delivered payment to the
Issuer for the Offered Securities pursuant to Sections 2 and 4 of this
Agreement.
(ii) All of the representations and warranties of the
Purchasers in this Agreement shall be true and correct in all material
respects at and as of the Closing Date, with the same force and effect as
if made on and as of such date.
(iii) No injunction, restraining order or order of any
nature by a Governmental Authority shall have been issued as of the Closing
Date that would prevent or interfere with the issuance and sale of the
Offered Securities; and no stop order suspending the qualification or
exemption from qualification of any of the Offered Securities in any juris
diction shall have been issued and no Proceeding for that purpose shall
have been commenced or be pending or contemplated as of the Closing Date.
10. Termination. (a) The Purchasers may terminate this Agreement at
any time prior to the Closing Date by written notice to the Issuer if any of the
following has occurred:
(i) since the date as of which information is given in
the Offering Circular, any material adverse effect or development involving
a prospective adverse effect on the properties, business, prospects,
operations, earnings, assets, liabilities or condition (financial or
otherwise), of the Issuer or any Subsidiary, whether or not arising in the
ordinary course of business, that could, in the Purchasers' judgment, (i)
make it impracticable or inadvisable to proceed with the offering or
delivery of the Offered Securities on the terms and in the manner
contemplated in the Offering Circular or (ii) materially impair the
investment quality of any of the Offered Securities;
(ii) the failure of the Issuer to satisfy the conditions
contained in Section 9(a) hereof on or prior to the Closing Date;
(iii) any outbreak or escalation of hostilities or other
national or international calamity or crisis or material adverse change in
economic conditions in or the financial markets of the United States or
elsewhere, if the
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<PAGE>
effect of such out break, escalation, calamity, crisis or material adverse
change in the economic conditions in or in the financial markets of the
United States or elsewhere could make it, in the Purchasers' judgment,
impracticable or inadvisable to market or proceed with the offering or
delivery of the Offered Securities on the terms and in the manner
contemplated in the Offering Circular or to enforce contracts for the sale
of any of the Offered Securities;
(iv) the suspension or limitation of trading generally in
securities on the New York Stock Exchange, the American Stock Exchange or
the Nasdaq National Market or any setting of limitations on prices for
securities on any such exchange or the Nasdaq National Market;
(v) the enactment, publication, decree or other
promulgation after the date hereof of any Applicable Law that in the
Purchasers' opinion materially and adversely affects, or could materially
and adversely affect, the properties, business, prospects, operations,
earnings, assets, liabilities or condition (financial or otherwise) of the
Issuer and its Subsidiaries on a consolidated basis;
(vi) any securities of the Issuer or the Subsidiaries or
Jordan Industries, Inc., the corporate parent of the Issuer, or any of its
subsidiaries or affiliates shall have been downgraded or placed on any
"watch list" for possible downgrading by any "nationally recognized
statistical rating organization," as such term is defined for purposes of
Rule 431(g)(2) under the Act; or
(vii) the declaration of a banking moratorium by any Govern
mental Authority; or the taking of any action by any Governmental Authority
after the date hereof in respect of its monetary or fiscal affairs that in
the Purchasers' opinion could have a material adverse effect on the
financial markets in the United States or elsewhere.
(b) The indemnities and contribution and expense reimbursement
provisions set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
the Purchasers, (ii) acceptance of the Offered Securities, and payment for them
hereunder, and (iii) any termination of this Agreement (other than pursuant to
Section 11). Without limiting the foregoing, notwithstanding any termination of
this Agreement (other than pursuant to Section 11), the Issuer shall be liable
(i) for all expenses that they have agreed to pay pursuant to Section 5(f)
hereof, and (ii) pursuant to Section 8 hereof.
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11. Default by Purchasers. If any of the Purchasers shall fail or
refuse to purchase the Offered Securities that it has agreed to purchase
hereunder on the Closing Date and arrangements satisfactory to the Issuer for
the purchase of such Offered Securities are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of the
Issuer or the non-defaulting Purchaser, except as otherwise provided in Section
10(b) hereof. Nothing herein shall relieve a defaulting Purchaser from
liability for its default.
12. Miscellaneous.
(a) Notices given pursuant to any provision of this Agreement
shall be addressed as follows: (i) if to the Issuer, ArborLake Centre, 1751
Lake Cook Road, Suite 550, Deerfield, Illinois 60015 Attention: Chief
Executive Officer, with a copy to Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois 60603, Attention: Philip J. Niehoff, Esq. and
(ii) if to the Purchasers, to Jefferies & Company, Inc., 11100 Santa Monica
Boulevard, 10th Floor, Los Angeles, California 90025, Attention: Jerry M.
Gluck, Esq., with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 919
Third Avenue, New York, New York 10022, Attention: Alan G. Straus, Esq.
(provided that any notice pursuant to Section 8 hereof will be mailed,
delivered, telegraphed or telecopied and confirmed to the party to be
notified and its counsel), or in any case to such other address as the
person to be notified may have requested in writing.
(b) This Agreement has been and is made solely for the benefit
of and shall be binding upon the Issuer, the Purchasers and, to the extent
provided in Section 8 hereof, the controlling persons officers, directors,
partners, employees, representatives and agents referred to in Section 8
and their respective heirs, executors, administrators, successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser
of any of the Offered Securities from the Purchasers merely because of such
purchase. Notwithstanding the foregoing, it is expressly understood and
agreed that each purchaser who purchases the Offered Securities from the
Purchasers is intended to be a beneficiary of the Issuer's covenants
contained in the Registration Rights Agreements to the same extent as if
the Senior Notes, the Discount Notes and the Preferred Stock Units were
sold and those covenants were made directly to such purchaser by the
Issuer, and each such purchaser shall have the right to take action against
the Issuer to enforce, and obtain damages for any breach of, those
covenants.
(c) THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE
RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO PRINCI-
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PLES OF CONFLICTS OF LAW. THE ISSUER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE ISSUER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. THE ISSUER IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT
IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE ISSUER AT THE ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF THE PURCHASERS TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE ISSUER IN
ANY OTHER JURISDICTION.
(d) This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
(e) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants
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and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(g) This Agreement may be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may be given,
provided that the same are in writing and signed by each of the signatories
hereto.
(h) The indemnities and contribution and expense reimbursement
provisions set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery and
payment for the Offered Securities, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of any party
hereto, (ii) acceptance of the Offered Securities, and payment for them
hereunder, and (iii) any termination of this Agreement (other than pursuant
to Section 11).
34
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Issuer and the Purchasers.
Very truly yours,
JORDAN TELECOMMUNICATION PRODUCTS, INC.
By: /s/ Dominic J. Pileggi
---------------------------------------------
Name: Dominic J. Pileggi
Title: President and Chief Executive Officer
Accepted and Agreed to:
JEFFERIES & COMPANY, INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SMITH BARNEY INC.
By: JEFFERIES & COMPANY, INC.
By: /s/ M. Brent Stevens
--------------------------------
Name: M. Brent Stevens
Title: Managing Director
35
<PAGE>
Exhibit A
[Attach Mayer, Brown Opinion]
B-1
<PAGE>
Exhibit B
[Attach Bryan Cave Opinion]
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount Principal Amount Number of Preferred
of Senior Notes of Discount Notes Stock Units
Initial Purchasers To Be Purchased To Be Purchased To Be Purchased
- ------------------ --------------- --------------- ---------------
<S> <C> <C> <C>
Jefferies & Company, Inc...... $133,000,000 $120,000,000 25,000
Donaldson, Lufkin & Jenrette
Securities Corporation..... 38,000,000
Smith Barney Inc.............. 19,000,000
----------- ----------- ------
Total.................... $190,000,000 $120,000,000 25,000
=========== =========== ======
</TABLE>
<PAGE>
SCHEDULE 6(D) -- Part 1
<TABLE>
<CAPTION>
Subsidiaries of the Issuer Percentage Ownership/1/ Jurisdiction of Organization
- -------------------------- ----------------------- ----------------------------
<S> <C> <C>
JTP Industries, Inc. Delaware
Adapt Communication Supply
Co. - S. Fl., Inc. Florida
AIM Electronics Corporation Delaware
Balance Manufacturing Services
of Southern California, Inc. 80% California
Balance Manufacturing
Services, Inc. 80% Texas
Bond Holdings, Inc. Delaware
Bond Technologies Inc. 80% California
BSM, Inc. 51% California
Cable Spec. Ltd. 79.2% Texas
Cambridge Products Corporation Delaware
Diversified Wire & Cable, Inc. 87.5% Delaware
Dura-Line Mexico S.A. de C.V. Mexico
Dura-Line C.T. s.r.o. 75% Czech Republic
Dura-Line Limited United Kingdom
Dura-Line International, Inc. Delaware
Dura-Line Shanghai Plastics
Co., Ltd. China
Dura-Line Corporation Delaware
Johnson Components, Inc. Delaware
Jordan Telecommunications
Product Group - Europe, Inc. Delaware
LoDan West, Inc. Delaware
Northern Technologies
Holdings, Inc. Delaware
Northern Technologies, Inc. Idaho
Old Jordan Telecommunications
Product Group, Inc. Delaware
Shanghai Viewsonics Electronic
Co., Ltd. China
Viewsonics, Inc. Delaware
Vitelec Electronics Ltd. United Kingdom
</TABLE>
- ---------------------------
/1/ Ownership 100% unless indicated.
<PAGE>
SCHEDULE 6(D) -- Part 2
<TABLE>
<CAPTION>
Subsidiaries of the Issuer Percentage Ownership/1/ Jurisdiction of Organization
- -------------------------- -------------------- ----------------------------
<S> <C> <C>
Dura-Line (Israel) Ltd. 33% Israel
</TABLE>
- ------------------------
/1/ Ownership 100% unless indicated
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
JORDAN TELECOMMUNICATION PRODUCTS, INC.
FIRST: The name of the Corporation is "Jordan Telecommunication Products,
Inc."
SECOND: The address of the Corporation's registered office in the State of
Delaware is c/o The Corporation Trust Company, 1209 Orange Street, in the city
of Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The nature or purpose of the business to be conducted or promoted
by 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, as amended (the "GCL").
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 1,102,000 shares consisting of:
(i) One hundred thousand (100,000) shares of Common Stock, par value $.01
per share (the "Common Stock");
(ii) One million (1,000,000) shares of Blank Check Preferred Stock, par
value $.01 per share (the "Blank Check Preferred Stock" and, together with the
Junior Preferred Stock (defined below), the "Preferred Stock"); and
(iii) Two thousand (2,000) shares of Junior Preferred Stock, par value $.01
per share (the "Junior Preferred Stock").
A statement of the powers, designations, preferences, and relative
participating, optional or other special rights and the qualifications,
limitations and restrictions of the Common Stock and the Preferred Stock is as
follows:
I. Common Stock.
(a) General. The Common Stock shall be subject to the terms of the
Preferred Stock. Each share of Common Stock shall be equal to each other share
of Common Stock. The holders of Common Stock have no preemptive or other
subscription rights to purchase
<PAGE>
shares of capital stock of the Corporation, nor are such holders entitled to the
benefits of any sinking fund provisions.
(b) Dividends. The holders of Common Stock are entitled to dividends and
other distributions if, as and when declared by the Board of Directors out of
assets legally available therefor, subject to the rights of holders of Preferred
Stock and the restrictions, if any, imposed by other indebtedness of the
Corporation outstanding from time to time. No dividend or other distribution
shall be paid upon, or declared or set apart for, any share of Common Stock of
the Corporation for any dividend period unless at the same time a dividend or
distribution for the same period shall be paid upon, or declared and set apart
for, all shares of Common Stock then issued and outstanding, in the same amount
with respect to each issued and outstanding share of Common Stock.
(c) Liquidation Rights. In the event of a voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Corporation and
after payment in full of all amounts owed to the holders of capital stock of the
Corporation ranking senior to the Common Stock to which they are entitled as a
result of such liquidation, dissolution or winding-up of the affairs of the
Corporation, the holders of Common Stock shall be entitled to share in the
distribution of any remaining assets available for distribution to the holders
of Common Stock ratably in proportion to the total number of shares of Common
Stock then issued and outstanding.
(d) Voting Rights. The holders of Common Stock shall be entitled to one
vote per share in voting or consenting to the election of directors and for all
other corporate purposes to the extent authorized by this Certificate of
Incorporation or law.
II. Blank Check Preferred Stock.
(a) General. The Board of Directors is authorized, to the extent permitted
by this Certificate of Incorporation and applicable law, to provide for the
issuance of the Blank Check Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof.
Except for any difference so provided by the Board of Directors, the shares of
all series of Blank Check Preferred Stock will rank on a parity with respect to
the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding-up of the affairs of the Corporation.
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following:
(i) The number of shares constituting the series and the distinctive
designation of the series;
-2-
<PAGE>
(ii) The rate of dividends of the series, and whether (and if so, on what
terms and conditions) dividends shall be cumulative (and if so, whether unpaid
dividends shall compound or accrue interest) or shall be payable in preference
or in any other relation to the dividends payable on any other class or classes
of capital stock or any other series of Blank Check Preferred Stock;
(iii) Whether that series shall have voting rights in addition to the
voting rights provided by law and, if so, the terms and extent of such voting
rights;
(iv) Whether the shares must or may be redeemed and, if so, the terms and
conditions of such redemption (including, without limitation, the dates upon or
after which the shares of the series must or may be redeemed and the price or
prices at which they must or may be redeemed, which price or prices may be
different in different circumstances or at different redemption dates);
(v) Whether the shares shall be issued with the privilege of conversion or
exchange and, if so, the terms and conditions of such conversion or exchange
(including without limitation the price or prices or the rate or rates of
conversion or exchange or any terms for adjustment thereof);
(vi) The amounts, if any, payable upon the shares of the series in the
event of voluntary liquidation, dissolution or winding up of the affairs of the
Corporation in preference of shares of any other class or series and whether the
shares of the series shall be entitled to participate generally in distributions
on the Common Stock under such circumstances;
(vii) The amounts, if any, payable upon the shares of the series in the
event of involuntary liquidation, dissolution or winding up of the affairs of
the Corporation in preference of shares of any other class or series and whether
the shares of the series shall be entitled to participate generally in
distributions in the Common Stock under such circumstances;
(viii) Whether the shares of the series shall be entitled to the benefits
of a sinking fund for the redemption or purchase of the shares (the term
"sinking fund" being understood to include any similar fund, however
designated); and
(ix) Any other relative rights, preferences, limitations and powers of the
series.
III. Junior Preferred Stock.
(a) Ranking. The Junior Preferred Stock ranks, with respect to dividend
distributions and distributions upon the liquidation, dissolution and winding-up
of the affairs of the Corporation, (i) senior to the Common Stock and to each
class or series of capital stock, the terms of which do not expressly provide
that it ranks senior to or on a parity with the Junior Preferred Stock; (ii)
except as provided in this Certificate
-3-
<PAGE>
of Incorporation, on a parity with any class or series of capital stock, the
terms of which expressly provide that such class or series will rank on a parity
with the Junior Preferred Stock; and (iii) except as provided in this
Certificate of Incorporation, junior to each class or series of capital stock,
the terms of which expressly provide that such class or series will rank senior
to the Junior Preferred Stock.
(b) Dividends. Subject to paragraphs (d), (f) and (g) below, and
commencing upon the earlier to occur of the Mandatory Redemption Date or the
Early Redemption Date (as hereinafter defined) if, at such Date, the Junior
Preferred Stock is not redeemed in full in accordance with paragraph (d) below,
whether or not due to any default or event of default under any Financing
Obligations (as hereinafter defined), the holders of Junior Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available therefor, and the Board of Directors
shall declare and pay (or accrue and add to the then Liquidation Value of each
share of Junior Preferred Stock, as provided below), dividends on the Junior
Preferred Stock at a rate per annum equal to 10% of the Liquidation Value of
each share of Junior Preferred Stock, payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year ("Dividend Payment Date"),
commencing on September 30, 1997, provided that if dividends are due and payable
for a period of less than a full quarter, the dividend payable for such period
shall be prorated based upon the actual number of days in such period.
Dividends on the Junior Preferred Stock shall be cumulative and payable, whether
or not earned or declared from the date of issuance of the Junior Preferred
Stock for the first dividend period and from the most recent Dividend Payment
Date for subsequent dividend periods. Dividends, if declared by the Board of
Directors on Junior Preferred Stock, shall be paid only in cash.
(c) Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holder of each share of
Junior Preferred Stock shall be entitled, after any distribution or payment is
made upon any capital stock of the Corporation ranking senior to the Junior
Preferred Stock and before any distribution or payment is made upon any shares
of Common Stock or any other class of stock of the Corporation, to be paid, out
of the assets of the Corporation available for distribution, an amount in cash
equal to the sum of the Liquidation Value per share plus all accumulated and
unpaid dividends thereon to the date fixed for liquidation, dissolution or
winding-up, including a prorated dividend for the period from the last Dividend
Payment Date to the date fixed for liquidation, dissolution or winding-up (such
sum being herein called the "Junior Preferred Stock Liquidation Payment"), and
the holders of Junior Preferred Stock shall not be entitled to any further
distribution or payment. If upon such liquidation, dissolution or winding-up of
the Corporation, whether voluntary or involuntary, the assets of the Corporation
to be distributed among the holders of the capital stock of the Corporation
shall be insufficient to permit payment to the holders of Junior Preferred Stock
of the amount distributable as aforesaid, then the entire assets of the
Corporation to be distributed to
-4-
<PAGE>
the holders of the Junior Preferred Stock shall be distributed ratably among the
holders of the Junior Preferred Stock in proportion to the Junior Preferred
Stock Liquidation Payment due under this paragraph (c) to each such holder.
Upon any such liquidation, dissolution or winding-up of the Corporation, but
only after each holder of the Junior Preferred Stock shall have been paid in
full the Junior Preferred Stock Liquidation Payment to which such holder is
entitled, the remaining assets of the Corporation shall be distributed to the
holders of the Common Stock. Written notice of such liquidation, dissolution or
winding-up, stating a payment date, the amount of the Junior Preferred Stock
Liquidation Payment and the place where the amounts distributed shall be
payable, shall be given by mail, postage prepaid, not less than ten days prior
to the payment date stated therein, to the holders of record of the Junior
Preferred Stock, such notice to be addressed to each stockholder at his or its
post office address as shown by the records of the Corporation. Neither the
consolidation nor merger of the Corporation into or with any other corporation
or corporations, nor the sale or transfer by the Corporation of all or any part
of its assets, nor the reduction of the capital stock of the Corporation, shall
be deemed to be a liquidation, dissolution or winding-up of the Corporation
within the meaning of any of the provisions of this paragraph (c).
(d) Redemption.
1. Redemption Price. Subject to paragraph (g) and subparagraph (d)(4),
the Junior Preferred Stock shall be redeemable as provided in this
paragraph (d) by paying for each share an amount in cash on the redemption
date equal to the sum of the then effective Liquidation Value thereof plus
all accrued and unpaid dividends, including a prorated dividend for the
period from the Dividend Payment Date immediately prior to the redemption
date to the redemption date (such sum being herein called the "Redemption
Price"). Subject to subparagraph (d)(4) below, redemption payments shall be
accrued but not paid if the payment thereof would result in a default or
event of default under any agreement, instrument or commitment (a
"Financing Obligation") of the Corporation, any subsidiary of the
Corporation or Jordan Industries, Inc. (for so long as the Company is
reported as a subsidiary of Jordan Industries, Inc. in connection with its
financial statements) for borrowed money or any other extensions of credit,
whether now existing or hereafter created, including but not limited to any
default or event of default under the Credit Agreement (as hereinafter
defined), the Discount Note Indenture (as hereinafter defined), the Senior
Subordinated Note Indenture (as hereinafter defined) or the Jordan
Industries Indentures (as hereinafter defined) for so long as the Company
is reported as a subsidiary of Jordan Industries, Inc. in connection with
its financial statements).
2. Redeemed or Otherwise Acquired Shares to be Retired. Any shares of
Junior Preferred Stock redeemed pursuant to this paragraph (d) or otherwise
acquired by the Corporation in any manner whatsoever shall be
-5-
<PAGE>
permanently retired immediately on the acquisition thereof and shall not under
any circumstances be reissued.
3. Shares to be Redeemed. In case of a redemption of only a part of the
outstanding shares of the Junior Preferred Stock, there shall be so redeemed
from each registered holder as nearly as practicable, that proportion of all of
the shares of Junior Preferred Stock to be redeemed which the number of shares
held of record by such holder bears to the total number of shares of Junior
Preferred Stock at the time outstanding.
4. Mandatory Redemptions.
(A) On August 1, 2002 (the "Mandatory Redemption Date), the
Corporation shall purchase and redeem all of the outstanding shares of
Junior Preferred Stock for their Redemption Price as of August 1, 2002
(subject to contractual and other restrictions with respect thereto and to
the legal availability of funds therefor), provided, however, that if the
Corporation fails to redeem all outstanding shares of Junior Preferred
Stock on the Mandatory Redemption Date because such redemption would result
in a default or event of default under any Financing Obligation, the Junior
Preferred Stock will thereafter be subject to preferred dividends pursuant
to paragraph (b) and the Corporation shall have the obligation to make such
redemption upon the earlier of (x) the date on which such payment would no
longer result in any default or event of default under any Financing
Obligation and (y) August 1, 2010 (the "Final Redemption Date").
(B) On the closing of Early Redemption Event (as hereinafter defined)
(the "Early Redemption Date"), the Corporation shall purchase and redeem
all of the outstanding shares of Junior Preferred Stock at the Junior
Preferred Early Redemption Price (as hereinafter defined) as of such
closing; provided, however, that if the Corporation fails to pay the Junior
Preferred Early Redemption Price for all of the outstanding shares of
Junior Preferred Stock upon an Early Redemption Event because the payment
thereof would result in a default or event of default under any Financing
Obligation, the Junior Preferred Stock will thereafter be subject to
preferred dividends pursuant to paragraph (b) and the Corporation shall
have the obligation to make such payment upon the earlier of (x) the date
when such payment would no longer result in any default or event of default
under any Financing Obligation, or (y) the Final Redemption Date.
5. Optional Redemptions. The Junior Preferred Stock shall not be subject
to optional redemption or repurchase by the Corporation.
-6-
<PAGE>
(e) Notice of Redemption. Notice of each redemption of Junior Preferred
Stock pursuant to paragraph (d), specifying the date and place of redemption and
the number of shares which are to be redeemed, shall be mailed to each holder of
record of shares to be redeemed at such holder's address as shown by the records
of the Corporation not more than ninety nor less than thirty days prior to the
date on which such redemption is to be made.
(f) Dividends After Redemption Date. Notice of redemption having been so
mailed or a redemption having occurred, and provision for payment of the
Redemption Price or the Junior Preferred Early Redemption Price, as applicable,
for such shares on the specified redemption date having been made by the
Corporation, then, unless default be made in the payment of the Redemption Price
or the Junior Preferred Early Redemption Price, as applicable, for such shares
when and as due (i) the shares of Junior Preferred Stock designated for
redemption shall not be entitled to any dividends accruing after the redemption
date specified, (ii) on such redemption date all rights of the respective
holders of such shares, as shareholders of the Corporation by reason of the
ownership of such shares, shall cease, except the right to receive the
Redemption Price or the Junior Preferred Early Redemption Price, as applicable,
for such shares without interest upon presentation, and (iii) such shares shall
not after such redemption date be deemed to be outstanding. In case less than
all the shares represented by any such certificate are redeemed, a new
certificate shall be issued without cost to the holder thereof representing the
unredeemed shares.
(g) All Past Dividends Must Be Declared Prior to Redemption. Except as set
forth in this paragraph (g), the Corporation shall not purchase, or redeem
shares of any Junior Preferred Stock or pay or distribute dividends on the
Junior Preferred Stock, unless (i) the capital stock of the Corporation ranking
senior to the Junior Preferred Stock has been previously or concurrently
redeemed in full, and (ii) all dividends on all Junior Preferred Stock for all
past periods shall have been declared and paid (or accrued and added to the
Liquidation Value of each share, as provided above). If applicable laws
relating to the sources of funds for the payment of accrued and unpaid dividends
on any shares of Junior Preferred Stock would prohibit the payment in full on a
Redemption Date or Early Redemption Date, as applicable, of the dividends for
any shares of Junior Preferred Stock required to be redeemed by paragraph (d),
(i) notwithstanding any provision herein to the contrary, the aggregate
Redemption Price or Junior Preferred Early Redemption Price, as applicable,
payable in respect of all shares of Junior Preferred Stock to be redeemed shall
be deemed reduced by the amount of accrued and unpaid dividends that the
Corporation is prohibited by law from paying, (ii) shares of Junior Preferred
Stock to be redeemed on the Redemption Date or Early
-7-
<PAGE>
Redemption Date, as applicable, shall otherwise be redeemed in accordance with
the requirements of this paragraph (g), and (iii) the amount of such unpayable
accrued and unpaid dividends shall be added in equal amounts per share to the
accrued and unpaid dividends on the shares of Junior Preferred Stock remaining
outstanding in the hands of the holder thereof. If applicable laws would
prohibit the payment in full on the Redemption Date or Early Redemption Date, as
applicable, of the Redemption Price, or Junior Preferred Early Redemption Price,
as applicable, for the shares of Junior Preferred Stock required to be redeemed
pursuant to paragraph (d), (a) no such shares shall be redeemed, (b) the
Corporation shall nevertheless, to the extent legally permissible, pay to the
holders of such shares on the Final Redemption Date the highest permissible
amount per share up to an amount equal to the Junior Preferred Stock Liquidation
Payment less $1.00, (c) the Redemption Price or Junior Preferred Early
Redemption Price, as applicable, and the Junior Preferred Stock Liquidation
Payment of each such share shall thereupon be reduced by the amount per share so
paid pursuant to the immediately preceding clause (b), (d) the Corporation shall
purchase and redeem all such shares on the soonest next date on which dividends
are required to be paid pursuant to paragraph (b) and on which the Corporation
is no longer prohibited by law from paying in full the Redemption Price for such
shares, and (e) the obligation of the Corporation to pay dividends under
paragraph (b) shall continue until all outstanding shares of Junior Preferred
Stock are redeemed in accordance with clause (d), except that dividends
thereafter payable with respect to outstanding shares of Junior Preferred Stock
shall be reduced by the same percentage reduction as the percentage reduction in
the Redemption Price or Junior Preferred Early Redemption Price, as applicable,
that takes place pursuant to this paragraph (g). In no event shall the
Corporation purchase or redeem the last share of Junior Preferred Stock held by
any holder unless the Corporation shall have paid to the last holder of Junior
Preferred Stock all accrued and unpaid dividends on all shares of Junior
Preferred Stock held by such holder at any time.
(h) Voting Rights. In addition to the requirements of applicable law, the
holders of the Junior Preferred Stock shall be entitled to vote on the election
of directors and on each matter which the stockholders of the Corporation shall
be entitled to vote, voting together with the Common Stock as a single class,
with the holders of each share of Junior Preferred Stock being entitled to 950
votes for each share of Junior Preferred Stock held, so that the holders of
Junior Preferred Stock are entitled to 95% of the total combined voting power of
the Common Stock and Junior Preferred Stock.
-8-
<PAGE>
Definitions.
"Credit Agreement" means the credit agreement to be dated as of July 25,
1997 between the Corporation and The First National Bank of Boston, as may be
amended, modified, extended, restated, replaced or supplemented, from time to
time, and any documents governing refinancings and extensions of amounts
borrowed thereunder.
"Discount Note Indenture" means the indenture in respect of the 11.75%
Discount Notes due 2007, as such indenture may be amended, refinanced or
replaced.
"Early Redemption Event" means any of the following which occur prior to
August 1, 2002: (i) the sale by the Corporation or its stockholders of shares
of Common Stock pursuant to a registration statement (other than a registration
statement on Form S-4 or S-8, or any successor form thereto) that is filed and
declared effective under the Securities Act of 1933, as amended, and provides
for an aggregate public offering involving gross proceeds of at least
$25,000,000; (ii) the closing of any merger, combination, consolidation or
similar business transaction involving the Corporation in which the holders of
Common Stock immediately prior to such closing are not the holders, directly or
indirectly, of a majority of the ordinary voting securities of the surviving
person in such transaction immediately after such closing; (iii) the closing of
any sale or transfer by the Corporation of all or substantially all of its
assets to an acquiring person in which the holders of Common Stock immediately
prior to such closing are not the holders of a majority of the ordinary voting
securities of the acquiring person immediately after such closings; or (iv) the
closing of any sale by the holders of Common Stock of an amount of Common Stock
that equals or exceeds a majority of the shares of Common Stock immediately
prior to such closing to a person in which the holders of the Common Stock
immediately prior to such closing are not the holders of a majority of the
ordinary voting securities of such person immediately after such closing.
"Junior Preferred Early Redemption Price" shall equal the sum of (i) the
Liquidation Value of the Junior Preferred Stock immediately prior to the closing
of the Early Redemption Event plus (ii) the present value of 95% of the
projected Net Income (Loss) (as defined herein) of the Corporation for the
period between such closing and August 1, 2002, with such present value
determined using a discount rate equal to the weighted average cost of
indebtedness representing borrowed money of the Corporation at the time of the
Early Redemption Event, provided, that the amount in this clause (ii) will not
be less than zero. The projected Net Income (Loss) will be (i) determined by the
Board of Directors of the Corporation in its reasonable good faith based upon
the projections of the Corporation's financial results which shall be calculated
on the basis of management's good faith and reasonable assumptions and (ii)
calculated without giving effect to the Early Redemption Event and any related
refinancing, recapitalization or other transactions.
"Jordan Industries Indentures" means each of Jordan Industries, Inc.'s
Indentures, dated July 15, 1993, in respect of the 10-3/8% Senior Notes due 2005
and the 11-3/4% Senior Subordinated Discount Debentures due 2005, and dated
April 2, 1997, in respect of the 11-
-9-
<PAGE>
3/4% Series A and Series B Senior Subordinated Discount Debentures due 2009, as
each such Indentures are amended, refinanced or replaced.
"Liquidation Value" of all of the shares of Junior Preferred Stock will be
equal to the sum of (i) $20.0 million plus (ii) (A) for the period from date of
issuance through August 1, 2002, plus or minus 95% of the cumulative Net Income
(Loss) for such period, so that, if such Net Income (Loss) is positive and
reflects profits, the Liquidation Value will be increased on a dollar-for-dollar
basis and if such Net Income (Loss) is negative and reflects losses, the
Liquidation Value will be decreased on a dollar-for-dollar basis, and (B) for
the period from August 1, 2002 and thereafter, the amount of any preferred
dividends thereon not paid on any Dividend Payment Date, whether or not
declared, which shall be added to the Liquidation Value at such Dividend Payment
Date; provided that, and notwithstanding the foregoing, upon, in connection with
and after the Early Redemption Date, the Liquidation Value of the Junior
Preferred Stock shall be the Early Redemption Price and the amount of any
preferred dividends thereon not paid on any subsequent Dividend Payment Date,
whether or not declared, which shall be added to such Liquidation Value as of
such Dividend Payment Date. The Liquidation Value of each share of Junior
Preferred Stock will be the result of the Liquidation Value of all of the
outstanding Junior Preferred Stock divided by the number of outstanding shares
of Junior Preferred Stock.
"Net Income (Loss)" means, for any period, the cumulative consolidated net
income (or net loss), of the Corporation and its subsidiaries, after (i) giving
effect to preferred dividends (whether accrued or paid) in respect of the Blank
Check Preferred Stock; (ii) excluding any effect, reduction or charge to
preferred dividends (whether accrued or paid) in respect of the Junior Preferred
Stock; and (iii) excluding any effect, reduction or charge relating to the Early
Redemption Transaction and related refinancing, recapitalization or other
transactions. Net Income (Loss) will be determined by the Board of Directors of
the Corporation by reference to the consolidated financial statements of the
Corporation for the applicable period, prepared in accordance with generally
accepted accounting principles, consistently applied.
"Senior Note Indenture" means the indenture in respect of the 9.875% Senior
Notes due 2007, as such indenture may be amended, refinanced or replaced.
FIFTH: At all meetings of stockholders, each stockholder shall be entitled
to vote, in person or by proxy, the shares of voting stock owned by such
stockholders of record on the record date for the meeting. When a quorum is
present or represented at any meeting, the vote of the holders of a majority in
interest of the stockholders present in person or by proxy at such meeting and
entitled to vote thereon shall decide any question, matter or proposal brought
before such meeting unless the question is one upon which, by express provision
of law, this Certificate of Incorporation or the By-laws applicable thereto, a
different vote is required, in which case such express provision shall govern
and control the decision of such question. The stockholders may not take action
by written consent in lieu of an annual or special meeting of the stockholders.
-10-
<PAGE>
SIXTH:
-----
1. Number of Directors. The number of directors of the Corporation shall
be fixed from time to time by the vote of a majority of the entire Board of
Directors, but such number shall in no case be less than one (1) nor more than
thirteen (13). Any such determination made by the Board of Directors shall
continue in effect unless and until changed by the Board of Directors, but no
such changes shall affect the term of any directors then in office.
2. Term of Office; Quorum; Vacancies. A director shall hold office until
the annual meeting for the year in which his or her term expires and until his
or her successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office. Subject
to the By-laws, a majority of the entire Board of Directors shall constitute a
quorum for the transaction of business. Any vacancies and newly created
directorships resulting from an increase in the number of directors shall be
filled by a majority of the Board of Directors then in office even though less
than a quorum and shall hold office until his successor is elected and qualified
or until his earlier death, resignation, retirement, disqualification or removal
from office.
Advance notice of nominations for the election of directors, other than
nominations by the Board of Directors or a committee thereof, shall be given to
the Corporation in the manner provided in the By-laws.
3. Removal. Subject to the By-laws and the Stockholders Agreement, to be
dated as of July 25, 1997, by and among the Corporation and certain of the
Corporation's Stockholders (the "Stockholders Agreement"), any director may be
removed upon the affirmative vote of the holders of a majority of the votes
which could be cast by the holders of all outstanding shares of capital stock
entitled to vote for the election of directors, voting together as a class,
given at a duly called annual or special meeting of stockholders.
SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders
of the Corporation, subject to the terms and conditions of the Stockholders
Agreement and the By-laws of Corporation, to make, adopt, alter, amend,
change, add to or repeal the By-laws of the Corporation.
(3) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers
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and do all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the provisions of the GCL, this
Certificate of Incorporation, and any By-laws adopted by the stockholders;
provided, however, that no By-laws hereafter adopted by the stockholders
shall invalidate any prior act of the directors which would have been valid
if such By-laws had not been adopted.
EIGHTH: In addition to any other consideration that the directors may
lawfully take into account, in determining whether to take or refrain from
taking corporate action on any matter, including proposing any matter to the
stockholders of the Corporation, the directors may take into account the long-
term as well as short-term interests of the Corporation and its stockholders
(including the possibility that such interests may be best served by the
continued independence of the Corporation), customers, employees and other
constituencies of the Corporation and any subsidiaries, including the effect
upon communities in which the Corporation and any subsidiaries do business. In
considering the foregoing and other pertinent factors, the directors are not
required, in considering the best interest of the Corporation, to regard any
particular corporate interest of any particular group affected by such action as
controlling.
NINTH:
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1. Stockholder Meetings; Keeping of Books and Records. Meetings of
stockholders may be held within or outside the State of Delaware as the By-laws
may provide. The books of the Corporation may be kept (subject to any provision
contained in the GCL) outside the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors or in the By-laws
of the Corporation.
2. Special Stockholders Meetings. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by law, may only be
called by the Chairman of the Board of Directors or the Chief Executive Officer
of the Corporation, if one is elected, and shall be called by the Secretary at
the direction of a majority of the entire Board of Directors. Any call for a
special meeting must specify the matters to be acted upon at the meeting.
3. No Written Ballot. Elections of directors need not be by written
ballot unless the By-laws of the Corporation shall so provide.
TENTH:
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1. Limits on Director Liability. Directors of the Corporation shall have
no personal liability to the Corporation or its stockholders for monetary
damages for breach of a fiduciary duty as a director; provided that nothing
contained in this Article TENTH shall eliminate or limit the liability of a
director (i) for any breach of a 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 knowing violations of law, (iii) under Section
174 of the GCL, or
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(iv) for any transaction from which a director derived an improper personal
benefit. If the GCL is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then by virtue of this Article
TENTH the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the GCL, as so amended.
2. Indemnification.
---------------
(a) The Corporation shall indemnify, in accordance with the By-laws of the
Corporation and to the fullest extent permitted from time to time by the GCL or
any other applicable laws as presently or hereafter in effect, 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, including, without limitation, an action by or in the right of
the Corporation, by reason of his acting as a director or officer of the
Corporation (and the Corporation, in the discretion of the Board of Directors,
may so indemnify a person by reason of the fact that he is or was an employee or
agent of the Corporation or is or was serving at the request of the Corporation
in any other capacity for or on behalf of the Corporation) against any liability
or expense actually and reasonably incurred by such person in respect thereof;
provided, however, the Corporation shall be required to indemnify an officer or
director in connection with an action, suit or proceeding (or part thereof)
initiated by such person only if (i) such action, suit or proceeding (or part
thereof) was authorized by the Board of Directors and (ii) the indemnification
does not relate to any liability arising under Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any rules or regulations promulgated
thereunder. Such indemnification is not exclusive of any other right to
indemnification provided by law or otherwise. The right to indemnification
conferred by this Section 2 shall be deemed to be a contract between the
Corporation and each person referred to herein.
(b) If a claim under subdivision (a) of this paragraph 2 of this Article
TENTH is not paid in full by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
any undertaking required by the By-laws of the Corporation has been tendered to
the Corporation) that the claimant has not met the standards of conduct which
make it permissible under the GCL and subdivision (a) of this paragraph 2 of
this Article TENTH for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors, legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the GCL, nor an actual determination by the Corporation (including
its Board of Directors, legal counsel, or its stockholders) that the claimant
has not met such applicable standard of conduct,
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<PAGE>
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(c) Indemnification shall include payment by the Corporation of expenses
in defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by the person indemnified to
repay such payment if it is ultimately determined that such person is not
entitled to indemnification under this Article TENTH, which undertaking may be
accepted without reference to the financial ability of such person to make such
repayment.
(d) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article TENTH shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of this Certificate of
Incorporation, by-law agreement, contract, vote of stockholders or disinterested
directors, or otherwise.
3. Insurance. The Corporation shall have the power (but not the
obligation) to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss incurred by such person in any
such capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
this Article TENTH or the GCL.
4. Other Rights. The rights and authority conferred in this Article TENTH
shall not be exclusive of any other right which any person may otherwise have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-law, agreement, contract, vote of stockholders or
disinterested directors or otherwise.
5. Additional Indemnification. The Corporation may, by action of its
Board of Directors, provide indemnification to such of the directors, officers,
employees and agents of the Corporation to such extent and to such effect as the
Board of Directors shall determine to be appropriate and authorized by the GCL.
6. Effect of Amendments. Neither the amendment, change, alteration nor
repeal of this Article TENTH, nor the adoption of any provision of this
Certificate of Incorporation or the By-laws of the Corporation, nor, to the
fullest extent permitted by GCL, any modification of law, shall eliminate or
reduce the effect of this Article TENTH or the rights or any protection afforded
under this Article TENTH in respect of any acts or omissions occurring prior to
such amendment, repeal, adoption or modification.
ELEVENTH: Subject to the Corporation's Stockholders Agreement, the
Corporation reserves the right to repeal, alter, change or amend any provision
contained in this Certificate of Incorporation in the manner now or hereafter
prescribed by statute and all rights conferred
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upon stockholders herein are granted subject to this reservation. No repeal,
alteration or amendment of this Certificate of Incorporation shall be made
unless the same is first approved by the Board of Directors of the Corporation
pursuant to a resolution adopted by the directors then in office in accordance
with the By-laws and applicable law and thereafter approved by the stockholders.
For purposes of the foregoing sentence and in addition to any other vote
required by law, the affirmative vote of the holders of shares of capital stock
having at least two-thirds of the votes which could be cast by the holders of
all shares of capital stock entitled to vote thereon (or such greater proportion
as may be required by law), voting together as a single class, at a duly
constituted meeting of stockholders called expressly for such purpose, shall be
required to repeal, alter or amend any provision of, or adopt any provision
inconsistent with, Articles SIXTH, EIGHTH, NINTH or this Article ELEVENTH.
TWELFTH: 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 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 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 matter 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 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.
THIRTEENTH: The Corporation has elected to be governed by Section 203 of
the GCL.
FOURTEENTH: The name and mailing address of the incorporator is as
follows:
Howard L. Rosenberg
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
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<PAGE>
IN WITNESS WHEREOF, the undersigned, being the sole incorporator
hereinabove named, does hereby certify that the facts hereinabove stated are
truly set forth and, accordingly, hereby executes this Certificate of
Incorporation this 18th day of July, 1997.
By: /s/ Howard L. Rosenberg
--------------------------------
Howard L. Rosenberg
Incorporator
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<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BEFORE PAYMENT OF CAPITAL
OF
JORDAN TELECOMMUNICATION PRODUCTS, INC.
The undersigned, being the President of Jordan Telecommunication Products,
Inc., a corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware
DOES HEREBY CERTIFY:
FIRST: That Article Fourth of the Certificate of Incorporation be and it
hereby is amended in its entirety to read as follows:
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 2,002,000 shares consisting of:
(i) One million (1,000,000) shares of Common Stock, par value $.01
per share (the "Common Stock");
(ii) One million (1,000,000) shares of Blank Check Preferred Stock,
par value $.01 per share (the "Blank Check Preferred Stock" and, together
with the Junior Preferred Stock (defined below), the "Preferred Stock");
and
(iii) Two thousand (2,000) shares of Junior Preferred Stock, par
value $.01 per share (the "Junior Preferred Stock").
A statement of the powers, designations, preferences, and relative
participating, optional or other special rights and the qualifications,
limitations and restrictions of the Common Stock and the Preferred Stock is as
follows:
<PAGE>
I. Common Stock.
------------
(a) General. The Common Stock shall be subject to the terms of the
Preferred Stock. Each share of Common Stock shall be equal to each other share
of Common Stock. The holders of Common Stock have no preemptive or other
subscription rights to purchase shares of capital stock of the Corporation, nor
are such holders entitled to the benefits of any sinking fund provisions.
(b) Dividends. The holders of Common Stock are entitled to dividends and
other distributions if, as and when declared by the Board of Directors out of
assets legally available therefor, subject to the rights of holders of Preferred
Stock and the restrictions, if any, imposed by other indebtedness of the
Corporation outstanding from time to time. No dividend or other distribution
shall be paid upon, or declared or set apart for, any share of Common Stock of
the Corporation for any dividend period unless at the same time a dividend or
distribution for the same period shall be paid upon, or declared and set apart
for, all shares of Common Stock then issued and outstanding, in the same amount
with respect to each issued and outstanding share of Common Stock.
(c) Liquidation Rights. In the event of a voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Corporation and
after payment in full of all amounts owed to the holders of capital stock of the
Corporation ranking senior to the Common Stock to which they are entitled as a
result of such liquidation, dissolution or winding-up of the affairs of the
Corporation, the holders of Common Stock shall be entitled to share in the
distribution of any remaining assets available for distribution to the holders
of Common Stock ratably in proportion to the total number of shares of Common
Stock then issued and outstanding.
(d) Voting Rights. The holders of Common Stock shall be entitled to one
vote per share in voting or consenting to the election of directors and for all
other corporate purposes to the extent authorized by this Certificate of
Incorporation or law.
II. Blank Check Preferred Stock.
---------------------------
(a) General. The Board of Directors is authorized, to the extent
permitted by this Certificate of Incorporation and applicable law, to provide
for the issuance of the Blank Check Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof.
Except for any difference so provided by the Board of Directors, the shares of
all series of Blank Check Preferred Stock will rank on a parity with respect to
the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding-up of the affairs of the Corporation.
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<PAGE>
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following:
(i) The number of shares constituting the series and the distinctive
designation of the series;
(ii) The rate of dividends of the series, and whether (and if so, on
what terms and conditions) dividends shall be cumulative (and if so, whether
unpaid dividends shall compound or accrue interest) or shall be payable in
preference or in any other relation to the dividends payable on any other class
or classes of capital stock or any other series of Blank Check Preferred Stock;
(iii) Whether that series shall have voting rights in addition to the
voting rights provided by law and, if so, the terms and extent of such voting
rights;
(iv) Whether the shares must or may be redeemed and, if so, the terms
and conditions of such redemption (including, without limitation, the dates upon
or after which the shares of the series must or may be redeemed and the price or
prices at which they must or may be redeemed, which price or prices may be
different in different circumstances or at different redemption dates);
(v) Whether the shares shall be issued with the privilege of conversion
or exchange and, if so, the terms and conditions of such conversion or exchange
(including without limitation the price or prices or the rate or rates of
conversion or exchange or any terms for adjustment thereof);
(vi) The amounts, if any, payable upon the shares of the series in the
event of voluntary liquidation, dissolution or winding up of the affairs of the
Corporation in preference of shares of any other class or series and whether the
shares of the series shall be entitled to participate generally in distributions
on the Common Stock under such circumstances;
(vii) The amounts, if any, payable upon the shares of the series in the
event of involuntary liquidation, dissolution or winding up of the affairs of
the Corporation in preference of shares of any other class or series and whether
the shares of the series shall be entitled to participate generally in
distributions in the Common Stock under such circumstances;
(viii) Whether the shares of the series shall be entitled to the benefits
of a sinking fund for the redemption or purchase of the shares (the term
"sinking fund" being understood to include any similar fund, however
designated); and
(ix) Any other relative rights, preferences, limitations and powers of
the series.
III. Junior Preferred Stock.
----------------------
(a) Ranking. The Junior Preferred Stock ranks, with respect to
dividend distributions and distributions upon the liquidation, dissolution
and winding-up of the
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affairs of the Corporation, (i) senior to the Common Stock and to each
class or series of capital stock, the terms of which do not expressly
provide that it ranks senior to or on a parity with the Junior Preferred
Stock; (ii) except as provided in this Certificate of Incorporation, on a
parity with any class or series of capital stock, the terms of which
expressly provide that such class or series will rank on a parity with the
Junior Preferred Stock; and (iii) except as provided in this Certificate of
Incorporation, junior to each class or series of capital stock, the terms
of which expressly provide that such class or series will rank senior to
the Junior Preferred Stock.
(b) Dividends. Subject to paragraphs (d), (f) and (g) below, and
commencing upon the earlier to occur of the Mandatory Redemption Date or
the Early Redemption Date (as hereinafter defined) if, at such Date, the
Junior Preferred Stock is not redeemed in full in accordance with paragraph
(d) below, whether or not due to any default or event of default under any
Financing Obligations (as hereinafter defined), the holders of Junior
Preferred Stock shall be entitled to receive, when, as and if declared by
the Board of Directors, out of funds legally available therefor, and the
Board of Directors shall declare and pay (or accrue and add to the then
Liquidation Value of each share of Junior Preferred Stock, as provided
below), dividends on the Junior Preferred Stock at a rate per annum equal
to 10% of the Liquidation Value of each share of Junior Preferred Stock,
payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year ("Dividend Payment Date"), commencing on September
30, 1997, provided that if dividends are due and payable for a period of
less than a full quarter, the dividend payable for such period shall be
prorated based upon the actual number of days in such period. Dividends on
the Junior Preferred Stock shall be cumulative and payable, whether or not
earned or declared from the date of issuance of the Junior Preferred Stock
for the first dividend period and from the most recent Dividend Payment
Date for subsequent dividend periods. Dividends, if declared by the Board
of Directors on Junior Preferred Stock, shall be paid only in cash.
(c) Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holder of each share
of Junior Preferred Stock shall be entitled, after any distribution or
payment is made upon any capital stock of the Corporation ranking senior to
the Junior Preferred Stock and before any distribution or payment is made
upon any shares of Common Stock or any other class of stock of the
Corporation, to be paid, out of the assets of the Corporation available for
distribution, an amount in cash equal to the sum of the Liquidation Value
per share plus all accumulated and unpaid dividends thereon to the date
fixed for liquidation, dissolution or winding-up, including a prorated
dividend for the period from the last Dividend Payment Date to the date
fixed for liquidation, dissolution or winding-up (such sum being herein
called the "Junior Preferred Stock Liquidation Payment"), and the holders
of Junior Preferred Stock shall not be entitled to any further distribution
or payment. If upon such liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, the assets of the
Corporation to be distributed among the holders of the
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<PAGE>
capital stock of the Corporation shall be insufficient to permit payment to
the holders of Junior Preferred Stock of the amount distributable as
aforesaid, then the entire assets of the Corporation to be distributed to
the holders of the Junior Preferred Stock shall be distributed ratably
among the holders of the Junior Preferred Stock in proportion to the Junior
Preferred Stock Liquidation Payment due under this paragraph (c) to each
such holder. Upon any such liquidation, dissolution or winding-up of the
Corporation, but only after each holder of the Junior Preferred Stock shall
have been paid in full the Junior Preferred Stock Liquidation Payment to
which such holder is entitled, the remaining assets of the Corporation
shall be distributed to the holders of the Common Stock. Written notice of
such liquidation, dissolution or winding-up, stating a payment date, the
amount of the Junior Preferred Stock Liquidation Payment and the place
where the amounts distributed shall be payable, shall be given by mail,
postage prepaid, not less than ten days prior to the payment date stated
therein, to the holders of record of the Junior Preferred Stock, such
notice to be addressed to each stockholder at his or its post office
address as shown by the records of the Corporation. Neither the
consolidation nor merger of the Corporation into or with any other
corporation or corporations, nor the sale or transfer by the Corporation of
all or any part of its assets, nor the reduction of the capital stock of
the Corporation, shall be deemed to be a liquidation, dissolution or
winding-up of the Corporation within the meaning of any of the provisions
of this paragraph (c).
(d) Redemption.
1. Redemption Price. Subject to paragraph (g) and subparagraph
(d)(4), the Junior Preferred Stock shall be redeemable as provided in
this paragraph (d) by paying for each share an amount in cash on the
redemption date equal to the sum of the then effective Liquidation
Value thereof plus all accrued and unpaid dividends, including a
prorated dividend for the period from the Dividend Payment Date
immediately prior to the redemption date to the redemption date (such
sum being herein called the "Redemption Price"). Subject to
subparagraph (d)(4) below, redemption payments shall be accrued but
not paid if the payment thereof would result in a default or event of
default under any agreement, instrument or commitment (a "Financing
Obligation") of the Corporation, any subsidiary of the Corporation or
Jordan Industries, Inc. (for so long as the Company is reported as a
subsidiary of Jordan Industries, Inc. in connection with its financial
statements) for borrowed money or any other extensions of credit,
whether now existing or hereafter created, including but not limited
to any default or event of default under the Credit Agreement (as
hereinafter defined), the Discount Note Indenture (as hereinafter
defined), the Senior Subordinated Note Indenture (as hereinafter
defined) or the Jordan Industries Indentures (as hereinafter defined)
for so long as the Company is reported as a subsidiary of Jordan
Industries, Inc. in connection with its financial statements).
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<PAGE>
2. Redeemed or Otherwise Acquired Shares to be Retired. Any
shares of Junior Preferred Stock redeemed pursuant to this paragraph
(d) or otherwise acquired by the Corporation in any manner whatsoever
shall be permanently retired immediately on the acquisition thereof
and shall not under any circumstances be reissued.
3. Shares to be Redeemed. In case of a redemption of only a
part of the outstanding shares of the Junior Preferred Stock, there
shall be so redeemed from each registered holder as nearly as
practicable, that proportion of all of the shares of Junior Preferred
Stock to be redeemed which the number of shares held of record by such
holder bears to the total number of shares of Junior Preferred Stock
at the time outstanding.
4. Mandatory Redemptions.
(A) On August 1, 2002 (the "Mandatory Redemption Date), the
Corporation shall purchase and redeem all of the outstanding
shares of Junior Preferred Stock for their Redemption Price as of
August 1, 2002 (subject to contractual and other restrictions
with respect thereto and to the legal availability of funds
therefor), provided, however, that if the Corporation fails to
redeem all outstanding shares of Junior Preferred Stock on the
Mandatory Redemption Date because such redemption would result in
a default or event of default under any Financing Obligation, the
Junior Preferred Stock will thereafter be subject to preferred
dividends pursuant to paragraph (b) and the Corporation shall
have the obligation to make such redemption upon the earlier of
(x) the date on which such payment would no longer result in any
default or event of default under any Financing Obligation and
(y) August 1, 2010 (the "Final Redemption Date").
(B) On the closing of Early Redemption Event (as
hereinafter defined) (the "Early Redemption Date"), the
Corporation shall purchase and redeem all of the outstanding
shares of Junior Preferred Stock at the Junior Preferred Early
Redemption Price (as hereinafter defined) as of such closing;
provided, however, that if the Corporation fails to pay the
Junior Preferred Early Redemption Price for all of the
outstanding shares of Junior Preferred Stock upon an Early
Redemption Event because the payment thereof would result in a
default or event of default under any Financing Obligation, the
Junior Preferred Stock will thereafter be subject to preferred
dividends pursuant to paragraph (b) and the Corporation shall
have the obligation to make such payment upon the earlier of (x)
the date when such payment would no longer result in any default
or event of default under any Financing Obligation, or (y) the
Final Redemption Date.
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5. Optional Redemptions. The Junior Preferred Stock shall not
be subject to optional redemption or repurchase by the Corporation.
(e) Notice of Redemption. Notice of each redemption of Junior
Preferred Stock pursuant to paragraph (d), specifying the date and
place of redemption and the number of shares which are to be redeemed,
shall be mailed to each holder of record of shares to be redeemed at
such holder's address as shown by the records of the Corporation not
more than ninety nor less than thirty days prior to the date on which
such redemption is to be made.
(f) Dividends After Redemption Date. Notice of redemption having
been so mailed or a redemption having occurred, and provision for
payment of the Redemption Price or the Junior Preferred Early
Redemption Price, as applicable, for such shares on the specified
redemption date having been made by the Corporation, then, unless
default be made in the payment of the Redemption Price or the Junior
Preferred Early Redemption Price, as applicable, for such shares when
and as due (i) the shares of Junior Preferred Stock designated for
redemption shall not be entitled to any dividends accruing after the
redemption date specified, (ii) on such redemption date all rights of
the respective holders of such shares, as shareholders of the
Corporation by reason of the ownership of such shares, shall cease,
except the right to receive the Redemption Price or the Junior
Preferred Early Redemption Price, as applicable, for such shares
without interest upon presentation, and (iii) such shares shall not
after such redemption date be deemed to be outstanding. In case less
than all the shares represented by any such certificate are redeemed,
a new certificate shall be issued without cost to the holder thereof
representing the unredeemed shares.
(g) All Past Dividends Must Be Declared Prior to Redemption.
Except as set forth in this paragraph (g), the Corporation shall not
purchase, or redeem shares of any Junior Preferred Stock or pay or
distribute dividends on the Junior Preferred Stock, unless (i) the
capital stock of the Corporation ranking senior to the Junior
Preferred Stock has been previously or concurrently redeemed in full,
and (ii) all dividends on all Junior Preferred Stock for all past
periods shall have been declared and paid (or accrued and added to the
Liquidation Value of each share, as provided above). If applicable
laws relating to the sources of funds for the payment of accrued and
unpaid dividends on any shares of Junior Preferred Stock would
prohibit the payment in full on a Redemption Date or Early Redemption
Date, as applicable, of the dividends for any shares of Junior
Preferred Stock required to be redeemed by paragraph (d), (i)
notwithstanding any provision herein to the contrary, the aggregate
Redemption Price or Junior Preferred Early Redemption Price, as
applicable, payable in respect of all shares of Junior Preferred Stock
to be redeemed shall be deemed reduced by the amount of accrued and
unpaid dividends that the Corporation is prohibited by law from
paying, (ii) shares
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<PAGE>
of Junior Preferred Stock to be redeemed on the Redemption Date or
Early Redemption Date, as applicable, shall otherwise be redeemed in
accordance with the requirements of this paragraph (g), and (iii) the
amount of such unpayable accrued and unpaid dividends shall be added
in equal amounts per share to the accrued and unpaid dividends on the
shares of Junior Preferred Stock remaining outstanding in the hands of
the holder thereof. If applicable laws would prohibit the payment in
full on the Redemption Date or Early Redemption Date, as applicable,
of the Redemption Price, or Junior Preferred Early Redemption Price,
as applicable, for the shares of Junior Preferred Stock required to be
redeemed pursuant to paragraph (d), (a) no such shares shall be
redeemed, (b) the Corporation shall nevertheless, to the extent
legally permissible, pay to the holders of such shares on the Final
Redemption Date the highest permissible amount per share up to an
amount equal to the Junior Preferred Stock Liquidation Payment less
$1.00, (c) the Redemption Price or Junior Preferred Early Redemption
Price, as applicable, and the Junior Preferred Stock Liquidation
Payment of each such share shall thereupon be reduced by the amount
per share so paid pursuant to the immediately preceding clause (b),
(d) the Corporation shall purchase and redeem all such shares on the
soonest next date on which dividends are required to be paid pursuant
to paragraph (b) and on which the Corporation is no longer prohibited
by law from paying in full the Redemption Price for such shares, and
(e) the obligation of the Corporation to pay dividends under paragraph
(b) shall continue until all outstanding shares of Junior Preferred
Stock are redeemed in accordance with clause (d), except that
dividends thereafter payable with respect to outstanding shares of
Junior Preferred Stock shall be reduced by the same percentage
reduction as the percentage reduction in the Redemption Price or
Junior Preferred Early Redemption Price, as applicable, that takes
place pursuant to this paragraph (g). In no event shall the
Corporation purchase or redeem the last share of Junior Preferred
Stock held by any holder unless the Corporation shall have paid to the
last holder of Junior Preferred Stock all accrued and unpaid dividends
on all shares of Junior Preferred Stock held by such holder at any
time.
(h) Voting Rights. In addition to the requirements of applicable
law, the holders of the Junior Preferred Stock shall be entitled to
vote on the election of directors and on each matter which the
stockholders of the Corporation shall be entitled to vote, voting
together with the Common Stock as a single class, with the holders of
each share of Junior Preferred Stock being entitled to 9500 votes for
each share of Junior Preferred Stock held, so that the holders of
Junior Preferred Stock are entitled to 95% of the total combined
voting power of the Common Stock and Junior Preferred Stock.
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<PAGE>
Definitions.
-----------
"Credit Agreement" means the credit agreement to be dated as of July 25,
1997 between the Corporation and The First National Bank of Boston, as may be
amended, modified, extended, restated, replaced or supplemented, from time to
time, and any documents governing refinancings and extensions of amounts
borrowed thereunder.
"Discount Note Indenture" means the indenture in respect of the 11.75%
Discount Notes due 2007, as such indenture may be amended, refinanced or
replaced.
"Early Redemption Event" means any of the following which occur prior to
August 1, 2002: (i) the sale by the Corporation or its stockholders of shares of
Common Stock pursuant to a registration statement (other than a registration
statement on Form S-4 or S-8, or any successor form thereto) that is filed and
declared effective under the Securities Act of 1933, as amended, and provides
for an aggregate public offering involving gross proceeds of at least
$25,000,000; (ii) the closing of any merger, combination, consolidation or
similar business transaction involving the Corporation in which the holders of
Common Stock immediately prior to such closing are not the holders, directly or
indirectly, of a majority of the ordinary voting securities of the surviving
person in such transaction immediately after such closing; (iii) the closing of
any sale or transfer by the Corporation of all or substantially all of its
assets to an acquiring person in which the holders of Common Stock immediately
prior to such closing are not the holders of a majority of the ordinary voting
securities of the acquiring person immediately after such closings; or (iv) the
closing of any sale by the holders of Common Stock of an amount of Common Stock
that equals or exceeds a majority of the shares of Common Stock immediately
prior to such closing to a person in which the holders of the Common Stock
immediately prior to such closing are not the holders of a majority of the
ordinary voting securities of such person immediately after such closing.
"Junior Preferred Early Redemption Price" shall equal the sum of (i) the
Liquidation Value of the Junior Preferred Stock immediately prior to the closing
of the Early Redemption Event plus (ii) the present value of 95% of the
projected Net Income (Loss) (as defined herein) of the Corporation for the
period between such closing and August 1, 2002, with such present value
determined using a discount rate equal to the weighted average cost of
indebtedness representing borrowed money of the Corporation at the time of the
Early Redemption Event, provided, that the amount in this clause (ii) will not
be less than zero. The projected Net Income (Loss) will be (i) determined by the
Board of Directors of the Corporation in its reasonable good faith based upon
the projections of the Corporation's financial results which shall be calculated
on the basis of management's good faith and reasonable assumptions and (ii)
calculated without giving effect to the Early Redemption Event and any related
refinancing, recapitalization or other transactions.
"Jordan Industries Indentures" means each of Jordan Industries, Inc.'s
Indentures, dated July 15, 1993, in respect of the 10-3/8% Senior Notes due 2005
and the 11-3/4% Senior Subordinated Discount Debentures due 2005, and dated
April 2, 1997, in respect of the 11-3/4%
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<PAGE>
Series A and Series B Senior Subordinated Discount Debentures due 2009, as each
such Indentures are amended, refinanced or replaced.
"Liquidation Value" of all of the shares of Junior Preferred Stock will be
equal to the sum of (i) $20.0 million plus (ii) (A) for the period from date of
issuance through August 1, 2002, plus or minus 95% of the cumulative Net Income
(Loss) for such period, so that, if such Net Income (Loss) is positive and
reflects profits, the Liquidation Value will be increased on a dollar-for-dollar
basis and if such Net Income (Loss) is negative and reflects losses, the
Liquidation Value will be decreased on a dollar-for-dollar basis, and (B) for
the period from August 1, 2002 and thereafter, the amount of any preferred
dividends thereon not paid on any Dividend Payment Date, whether or not
declared, which shall be added to the Liquidation Value at such Dividend Payment
Date; provided that, and notwithstanding the foregoing, upon, in connection with
and after the Early Redemption Date, the Liquidation Value of the Junior
Preferred Stock shall be the Early Redemption Price and the amount of any
preferred dividends thereon not paid on any subsequent Dividend Payment Date,
whether or not declared, which shall be added to such Liquidation Value as of
such Dividend Payment Date. The Liquidation Value of each share of Junior
Preferred Stock will be the result of the Liquidation Value of all of the
outstanding Junior Preferred Stock divided by the number of outstanding shares
of Junior Preferred Stock.
"Net Income (Loss)" means, for any period, the cumulative consolidated net
income (or net loss), of the Corporation and its subsidiaries, after (i) giving
effect to preferred dividends (whether accrued or paid) in respect of the Blank
Check Preferred Stock; (ii) excluding any effect, reduction or charge to
preferred dividends (whether accrued or paid) in respect of the Junior Preferred
Stock; and (iii) excluding any effect, reduction or charge relating to the Early
Redemption Transaction and related refinancing, recapitalization or other
transactions. Net Income (Loss) will be determined by the Board of Directors of
the Corporation by reference to the consolidated financial statements of the
Corporation for the applicable period, prepared in accordance with generally
accepted accounting principles, consistently applied.
"Senior Note Indenture" means the indenture in respect of the 9.875% Senior
Notes due 2007, as such indenture may be amended, refinanced or replaced.
SECOND: That the corporation has not received any payment for any of its
stock.
THIRD: That the amendment was duly adopted in accordance with the
provisions of (S)241 of the General Corporation Law of the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this certificate as of the
23rd day of July, 1997.
JORDAN TELECOMMUNICATION PRODUCTS, INC.
By: /s/ Dominic J. Pileggi
-----------------------------------
Dominic J. Pileggi, President
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<PAGE>
JORDAN TELECOMMUNICATION PRODUCTS, INC.
CERTIFICATE OF DESIGNATION OF THE POWERS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS OF 13 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Jordan Telecommunication Products, Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Company (the "Board of Directors") by its Certificate
of Incorporation (hereafter referred to as the "Certificate of Incorporation"),
and pursuant to the provisions of Section 151 of the General Corporation Law of
the State of Delaware, said Board of Directors, pursuant to a meeting held on
July 21, 1997, duly approved and adopted the following resolution (the
"Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issue of 13 1/4% Senior
Exchangeable Preferred Stock, par value $0.01 per share, with a liquidation
preference of $1,000.00 per share, consisting of 100,000 shares, having the
designations, preferences, relative, participating, optional and other
special rights and the qualifications, limitations and restrictions thereof
that are set forth in the Certificate of Incorporation and in this
Resolution as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of preferred stock of the Company a class of preferred stock
consisting of two series of preferred stock, one designated as the "13 1/4%
Senior Exchangeable Preferred Stock" (the "Series A Senior Preferred Stock") and
the other designated as the "13 1/4 Series B Senior Exchangeable Preferred
Stock" (the "Series B Senior Preferred Stock"). The number of shares
constituting each series shall be 50,000 shares, consist-
<PAGE>
ing an initial issuance of 25,000 shares of Series A Senior Preferred Stock plus
25,000 shares of Series A Senior Preferred Stock that may be issued in lieu of
cash dividends thereon if the Company elects to pay dividends in additional
shares. The 50,000 shares of Series B Senior Preferred Stock shall consist of
shares available for issuance in exchange for shares of the Series A Senior
Preferred Stock and for payment of dividends thereon in lieu of cash dividends.
All of such shares of Series A Senior Preferred Stock and Series B Senior
Preferred Stock are referred to as the "Senior Preferred Stock." The liquidation
preference of the Senior Preferred Stock shall be $1,000.00 per share.
(b) Rank. The Senior Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding-up or dissolution
of the Company, rank senior to (i) all classes of common stock of the Company,
(ii) the Junior Preferred Stock of the Company and (iii) each other class of
capital stock or series of Preferred Stock of the Company hereafter created by
the Board of Directors the terms of which do not expressly provide that it ranks
senior to or on a parity with the Senior Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up or dissolution
of the Company (collectively referred to with the Common Stock of the Company as
"Junior Securities"). The Senior Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding-up or dissolution
of the Company, rank on a parity with any class of capital stock or series of
Preferred Stock hereafter created by the Board of Directors, the terms of which
expressly provide that such class or series shall rank on a parity with the
Senior Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up or dissolution of the Company (collectively referred to
as "Parity Securities"); provided that any such Parity Securities that were not
approved by the Holders in accordance with paragraph (f)(ii)(A) hereof shall be
deemed to be Junior Securities and not Parity Securities. The Senior Preferred
Stock shall, with respect to dividend distributions and distributions upon the
liquidation, winding-up or dissolution of the Company, rank junior to each class
of capital stock or series of Preferred Stock hereafter created which has been
approved by the Holders of the Senior Preferred Stock in accordance with
paragraph
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<PAGE>
(f)(ii)(B) hereof and which expressly provides that it ranks senior to the
Senior Preferred Stock as to dividend distributions or distributions upon the
liquidation, winding-up or dissolution of the Company (collectively referred to
as "Senior Securities").
3
<PAGE>
(c) Dividends.
---------
(i) Beginning on the Senior Preferred Stock Issue Date, the Holders
of the outstanding shares of Senior Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, dividends on each share of Senior Preferred Stock,
at a rate per annum equal to 13 1/4% of the liquidation preference per share of
the Senior Preferred Stock. All dividends shall be cumulative, whether or not
earned or declared, on a daily basis from the Senior Preferred Stock Issue Date
and shall be payable quarterly in arrears on each Dividend Payment Date,
commencing on the first Dividend Payment Date after the Senior Preferred Stock
Issue Date, provided that if any dividend payable on any Dividend Payment Date
on or before August 1, 2002 is not declared and paid in full in cash on such
Dividend Payment Date, the amount payable as dividends on such Dividend Payment
Date that is not paid in cash on such Dividend Payment Date shall be paid by the
Company in additional fully paid and non-assessable shares (including
fractional shares, if applicable) of Senior Preferred Stock having an aggregate
liquidation preference equal to the amount of such dividends (rounded to the
nearest whole cent). After August 1, 2002, dividends shall be paid only in cash.
If any dividend (or portion thereof) payable on any Dividend Payment Date after
August 1, 2002 is not declared or paid in full in cash on such Dividend Payment
Date, the amount of such dividend that is payable and that is not paid in cash
on such date shall increase at the rate of 13 1/4% per annum, compounded
quarterly, from such Dividend Payment Date until declared and paid in full. Each
distribution in the form of a dividend (whether in cash or in additional shares
of Senior Preferred Stock) shall be payable to Holders of record as they appear
on the stock books of the Company on such record dates, not less than 10 nor
more than 60 days preceding the related Dividend Payment Date, as shall be fixed
by the Board of Directors. Dividends shall cease to accumulate in respect of
shares of the Senior Preferred Stock on the Exchange Date or on the date of
their earlier redemption unless the Company shall have failed to
4
<PAGE>
issue the appropriate aggregate principal amount of Exchange Notes (as
defined in paragraph (g)(i)(A) hereof) in respect of the Senior Preferred
Stock on the Exchange Date or shall have failed to pay the relevant
redemption price on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Senior
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Company to pay or set apart for payment, any dividends on
shares of the Senior Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption pursuant to paragraph
(e)(i) may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to Holders of record on such date, not more
than 45 days prior to the payment thereof, as may be fixed by the Board of
Directors.
(v) No full dividends shall be declared by the Board of Directors or
paid or funds set apart for the payment of dividends by the Company on any
Parity Securities for any period unless full cumulative dividends shall
have been or contemporaneously are declared and paid in full, or declared
and (in the case of dividends payable in cash) a sum in cash set apart
sufficient for such payment, on the Senior Preferred Stock for all
Dividend Periods terminating on or prior to the date of payment of such
full dividends on such Parity Securities. If any dividends are not paid
in full, as aforesaid, upon the shares of the Senior Preferred Stock and
any other Parity Securities, all dividends declared upon shares of the
Senior Preferred Stock and any other Parity Securities shall be declared
pro rata so that the amount of dividends declared per share on the Senior
Preferred Stock and such Parity Securities shall in all cases bear to each
other the same ratio
5
<PAGE>
that accrued dividends per share on the Senior Preferred Stock and such
Parity Securities bear to each other.
(vi) (A) Holders of shares of the Senior Preferred Stock shall
be entitled to receive the dividends provided for in paragraph (c)(i)
hereof in preference to and in priority over any dividends upon any of the
Junior Securities.
(B) So long as any shares of Senior Preferred Stock are
outstanding, the Company shall not declare, pay or set apart for payment
any dividend on any of the Junior Securities or make any payment on
account of, or set apart for payment money for a sinking or other similar
fund for, the purchase, redemption or other retirement of, any of the
Junior Securities or any warrants, rights, calls or options exercisable
for or convertible into any of the Junior Securities, or make any
distribution in respect thereof, either directly or indirectly, and
whether in cash, obligations or shares of the Company or other property
(other than dividends on Junior Securities paid in additional shares of
Junior Securities), and shall not permit any corporation or other entity
directly or indirectly controlled by the Company to purchase or redeem
any of the Junior Securities or any such warrants, rights, calls or
options unless full cumulative dividends determined in accordance herewith
have been paid in full on the Senior Preferred Stock.
(C) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not make any payment on account of, or set
apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Parity Securities
or any warrants, rights, calls or options exercisable for or convertible
into any of the Parity Securities, and shall not permit any corporation or
other entity directly or indirectly controlled by the Company to purchase
or redeem any of the Parity Securities or any such warrants, rights, calls
or options unless the dividends determined in accordance herewith on the
Senior Preferred Stock have been paid in full.
6
<PAGE>
(vii) Dividends payable on shares of the Senior Preferred Stock
for any period less than a year shall be computed on the basis of a 360-day
year of twelve 30-day months and the actual number of days elapsed in the
period for which payable. If any Dividend Payment Date occurs on a day that
is not a Business Day, any accrued dividends otherwise payable on such
Dividend Payment Date shall be paid on the next succeeding Business Day.
(d) Liquidation Preference.
-----------------------
(i) Upon any voluntary or involuntary liquidation, dissolution
or winding-up of the affairs of the Company, the Holders of shares of
Senior Preferred Stock then outstanding shall be entitled to be paid, out
of the assets of the Company available for distribution to its
stockholders, $1,000.00 per share of Senior Preferred Stock, plus an amount
in cash equal to all accumulated and unpaid dividends thereon to the date
fixed for liquidation, dissolution or winding-up (including an amount equal
to a prorated dividend for the period from the last Dividend Payment Date
to the date fixed for liquidation, dissolution or winding-up), before any
payment shall be made or any assets distributed to the holders of any of
the Junior Securities, including, without limitation, Common Stock and
Junior Preferred Stock of the Company. Except as provided in the preceding
sentence, Holders of shares of Senior Preferred Stock shall not be
entitled to any distribution in the event of liquidation, dissolution or
winding-up of the affairs of the Company. If the assets of the Company are
not sufficient to pay in full the liquidation preference payable to the
Holders of outstanding shares of the Senior Preferred Stock and all Parity
Securities, then the holders of all such shares shall share equally and
ratably in such distribution of assets of the Company in accordance with
the amounts which would be payable on such distribution if the amount to
which the Holders of outstanding shares of Senior Preferred Stock and the
holders of outstanding shares of all Parity Securities are entitled were
paid in full.
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<PAGE>
(ii) After payment of the full amount of the liquidation
preferences and all accumulated and unpaid dividends to which they are
entitled, the holders of shares of the Senior Preferred Stock shall not be
entitled to any further participation in any distribution of assets of the
Company.
(iii) For the purposes of this paragraph (d), neither the 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 Company nor the con solidation or merger of the Company with or into
one or more corporations shall be deemed to be a liquidation, dissolution
or winding-up of the affairs of the Company (unless such sale, conveyance,
exchange or transfer is in connection with a dissolution or winding-up of
the business of the Company).
(e) Redemption.
----------
(i) Optional Redemption. (A) The Company may (subject to
contractual and other restrictions with respect thereto and the legal
availability of funds therefor), at the option of the Board of Directors,
redeem at any time on or after August 1, 2002, from any source of funds
legally available therefor, in whole or in part, in the manner provided in
paragraph (e)(iii) hereof, any or all of the shares of the Senior Preferred
Stock, at the redemption prices (expressed as a percentage of the
liquidation preference thereof) set forth below plus, without duplication,
an amount in cash equal to all accumulated and unpaid dividends per share
(including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date) (the "Optional Redemption Price"), if redeemed during
the 12-month period beginning on
8
<PAGE>
August 1 of each of the years indicated below:
Year Percentage
---- ----------
2002.......................... 106.6250%
2003.......................... 104.4167%
2004.......................... 102.2083%
2005 and thereafter........... 100.0000%
provided that no optional redemption pursuant to this paragraph (e)(i)(A) shall
be authorized or made (i) unless prior thereto full unpaid cumulative dividends
for all Dividend Periods terminating on or prior to the Redemption Date and for
an amount equal to a prorated dividend for the period from the Dividend Payment
Date immediately prior to the Redemption Date to the Redemption Date shall have
been or immediately prior to the Redemption Notice (as defined in paragraph
(e)(iii)(A) hereof), are declared and paid in cash or declared and a sum set
apart sufficient for such cash payment on the Redemption Date, on the
outstanding shares of the Senior Preferred Stock or (ii) at less than 101% of
the liquidation preference of the Senior Preferred Stock at any time when the
Company is making or purchasing shares of Senior Preferred Stock under an Offer
(as defined in paragraph (h)(ii) hereof) in accordance with the provisions of
paragraph (h) hereof.
(B) In addition, at any time, the Company may redeem, in the manner
provided in paragraph (e)(iii) hereof, shares of the Senior Preferred Stock in
whole, but not in part, at a redemption price equal to 113.25% of the
liquidation preference thereof, plus an amount in cash equal to all accumulated
and unpaid dividends per share (including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date) (the "Contingent Redemption Price"),
with the proceeds of an Equity Offering, provided that such redemption occurs
within 60 days after consummation of such Equity Offering; and provided,
further, that no optional redemption pursuant to this paragraph (e)(i)(B) shall
be authorized or made unless prior thereto full unpaid cumulative divi-
9
<PAGE>
dends for all Dividend Periods terminating on or prior to the Redemption Date
and for an amount equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Redemption Date to the Redemption Date
shall have been or immediately prior to the Redemption Notice are declared and
paid in cash or declared and a sum set apart sufficient for such cash payment on
the Redemption Date, on the outstanding shares of the Senior Preferred Stock.
(C) In the event of a redemption pursuant to paragraph (e)(i)(A)
hereof of only a portion of the then outstanding shares of the Senior Preferred
Stock, the Company shall effect such redemption as it determines, pro rata
according to the number of shares held by each Holder of the Senior Preferred
Stock or by lot, as may be determined by the Company in its sole discretion.
(ii) Mandatory Redemption. On August 1, 2009, the Company shall
redeem (subject to contractual and other restrictions with respect thereto and
to the legal availability of funds therefor) from any source of funds legally
available therefor, in a manner provided in paragraph (e)(iii) hereof, all of
the shares of the Senior Preferred Stock then outstanding at a redemption price
equal to 100% of the liquidation preference per share, plus an amount in cash
equal to all accumulated and unpaid dividends per share (including an amount in
cash equal to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date) (the "Mandatory
Redemption Price").
(iii) Procedures for Redemption. (A) At least 30 days and not more
than 60 days prior to the date fixed for any redemption of the Senior Preferred
Stock, written notice (the "Redemption Notice") shall be given by first-class
mail, postage prepaid, to each Holder of record on the record date fixed for
such redemption of the Senior Preferred Stock at such Holder's address as the
same appears on the stock register of the Company, provided that no failure to
give such notice nor any deficiency therein shall affect the validity of the
procedure
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<PAGE>
for the redemption of any shares of Senior Preferred Stock to be redeemed except
as to the Holder or Holders to whom the Company has failed to give said notice
or except as to the Holder or Holders whose notice was defective. The Redemption
Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i)(A),
(e)(i)(B) or (e)(ii) hereof;
(2) the Optional Redemption Price, the Contingent Redemption Price or
the Mandatory Redemption Price, as the case may be;
(3) whether all (in the case of a redemption pursuant to paragraph
(e)(i)(A)) or less than all the outstanding shares of the Senior Preferred Stock
are to be redeemed and the total number of shares of the Senior Preferred Stock
being redeemed;
(4) the number of shares of Senior Preferred Stock held, as of the
appropriate record date, by the Holder that the Company intends to redeem;
(5) the date fixed for redemption;
(6) that the Holder is to surrender to the Company, at the place or
places where certificates for shares of Senior Preferred Stock are to be
surrendered for redemption, in the manner and at the price designated, the
certificate or certificates representing the shares of Senior Preferred Stock
to be redeemed; and
(7) that dividends on the shares of the Senior Preferred Stock to be
redeemed shall cease to accrue on such Redemption Date unless the Company
defaults in the payment of the Optional Redemption Price, the Contingent
Redemption Price or the Mandatory Redemption Price, as the case may be.
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<PAGE>
(B) Each Holder of Senior Preferred Stock shall surrender the
certificate or certificates representing such shares of Senior Preferred Stock
to the Company, duly endorsed, in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full Optional Redemption
Price, Contingent Redemption Price or Mandatory Redemption Price, as the case
may be, for such shares shall be payable in cash to the Person whose name
appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired. In the event that less
than all of the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(C) Unless the Company defaults in the payment in full of the
applicable redemption price, dividends on the Senior Preferred Stock called for
redemption shall cease to accumulate on the Redemption Date, and the Holders of
such redemption shares shall cease to have any further rights with respect
thereto on the Redemption Date, other than the right to receive the Optional
Redemption Price, the Contingent Redemption Price or the Mandatory Redemption
Price, as case may be, without interest.
(f) Voting Rights.
-------------
(i) The Holders of shares of the Senior Preferred Stock, except as
otherwise required under Delaware law or as set forth in paragraphs (ii) and
(iii) below and in paragraph (m) hereof, shall not be entitled or permitted to
vote on any matter required or permitted to be voted upon by the stockholders
of the Company.
(ii) (A) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not authorize any class of Parity Securities
without the affirmative vote or consent of Holders of at least a majority of the
outstanding shares of Senior Preferred Stock, voting or consenting, as the case
may be, separately as one class, given in person or by proxy, either in writing
or by resolu-
12
<PAGE>
tion adopted at an annual or special meeting, except that without the approval
of Holders of the Senior Preferred Stock, the Company may authorize or issue
shares of Parity Securities in exchange for, or the proceeds of which are used
to redeem or repurchase, any or all shares of Senior Preferred Stock then
outstanding, provided that (1) in the case of Parity Securities issued in
exchange for, or the proceeds of which are used to redeem or repurchase, less
than all shares of Senior Preferred Stock then outstanding, the aggregate
liquidation preference of such Parity Securities shall not exceed the aggregate
liquidation preference of, premium and accrued and unpaid dividends on, and
expenses in connection with the refinancing of, the Senior Preferred Stock so
exchanged, redeemed or repurchased and (2) such Parity Securities shall not be
mandatorily redeemable prior to August 1, 2009.
(B) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not authorize any class of Senior Securities
without the affirmative vote or consent of Holders of at least a majority of the
outstanding shares of Senior Preferred Stock, voting or consenting, as the case
may be, separately as one class, given in person or by proxy, either in writing
or by resolution adopted at an annual or special meeting.
(C) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not amend this Certificate of Designation so as
to affect adversely the specified rights, preferences, privileges or voting
rights of Holders of shares of Senior Preferred Stock or to authorize the
issuance of any additional shares of Senior Preferred Stock without the
affirmative vote or consent of Holders of at least a majority of the outstanding
shares of Senior Preferred Stock, voting or consenting, as the case may be,
separately as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(D) Prior to the exchange of Senior Preferred Stock for Exchange
Notes, the Company shall not amend or modify the indenture for the Exchange
Notes in the form as executed on the Senior
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Preferred Stock Issue Date (the "Exchange Notes Indenture") (except as expressly
provided therein) without the affirmative vote or consent of Holders of at least
a majority of the outstanding shares of Senior Preferred Stock, voting or
consenting, as the case may be, as one class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special meeting.
(E) Except as set forth in paragraphs (f)(ii)(A) and (f)(ii)(B)
above, (1) the creation, authorization or issuance of any shares of any Junior
Securities, Parity Securities or Senior Securities, or (2) the increase or
decrease in the amount of authorized capital stock of any class, including any
preferred stock, shall not require the consent of Holders of Senior Preferred
Stock and shall not, unless not complying with paragraphs (f)(ii)(A) and
(f)(ii)(B) above, be deemed to affect adversely the rights, preferences,
privileges or voting rights of Holders of shares of Senior Preferred Stock.
(iii) (A) If (1) dividends on the Senior Preferred Stock are in
arrears and unpaid (and, in the case of dividends payable after August 1, 2002,
are not paid in cash) for four consecutive quarterly periods (a "Dividend
Default"); (2) the Company fails to discharge any redemption obligation of the
Senior Preferred Stock when required (a "Redemption Default"), whether or not
the Company is permitted to do so by the terms of the Indentures, the New Credit
Agreement or any other obligation of the Company; (3) the Company fails to make
an Offer to purchase all outstanding shares of Senior Preferred Stock following
a Change of Control if such offer to purchase is required to be made pursuant to
paragraph (h) hereof (a "Change of Control Default"), whether or not the
Company is permitted to do so by the terms of the Indentures, the New Credit
Agreement or any other obligation of the Company; (4) the Company breaches or
violates one of the provisions set forth in paragraph (m) hereof and the breach
or violation continues for a period of 30 days or more (a "Restriction
Default"); or (5) a default occurs on the obligation to pay principal of,
interest on or any other payment obligation when due (a "Payment
14
<PAGE>
Default") at final maturity on one or more classes of Indebtedness of the
Company or any Subsidiary of the Company, whether such Indebtedness exists on
the Senior Preferred Stock Issue Date or is incurred thereafter, having
individually or in the aggregate an outstanding principal amount of $10,000,000
or more, or any other Payment Default occurs on one or more such classes of
Indebtedness having individually or in the aggregate an outstanding principal
amount of $10,000,000 or more, and such class or classes of Indebtedness are
declared due and payable prior to their respective maturities, then, in any such
case, the number of directors constituting the Board of Directors shall be
adjusted as set forth in the Certificate of Incorporation to permit the Holders
of the majority of the then outstanding Senior Preferred Stock, voting
separately as one class, to elect two directors. Subject to Section (f)(iii)(B)
below, Holders of a majority of the issued and outstanding shares of the Senior
Preferred Stock, voting separately as one class, shall have the exclusive right
to elect two directors at a meeting therefor called upon occurrence of such
Dividend Default, Redemption Default, Change of Control Default, Restriction
Default or Payment Default, as the case may be, and at every subsequent meeting
at which the terms of office of the directors so elected by the Holders of the
Senior Preferred Stock expire (other than as described in (f)(iii)(B) below).
Each such event described in clauses (1), (2), (3), (4) and (5) is a "Voting
Rights Triggering Event."
(B) The right of the Holders of Senior Preferred Stock voting
separately as one class to elect members of the Board of Directors as set forth
in paragraph (f)(iii)(A) above shall continue (1) in the event such right arises
due to a Dividend Default, until such time as all accumulated dividends that are
in arrears on the Senior Preferred Stock are paid in full (and, in the case of
dividends payable after August 1, 2002, are paid in cash); and (2) in the event
such right arises due to a Redemption Default, a Change of Control Default, a
Restriction Default or a Payment Default, until such time as the Company
remedies any such failure, breach or default, at which time the term of any
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directors elected pursuant to paragraph (f)(iii)(A) shall terminate, subject
always to the same provisions for the renewal and divestment of such special
voting rights in the case of any future Voting Rights Triggering Event. At any
time after voting power to elect directors shall have become vested in the
Holders of shares of the Senior Preferred Stock pursuant to this paragraph
(f)(iii), or if such voting power to elect directors is continuing and vacancies
shall exist in the offices of directors elected by the Holders of shares of the
Senior Preferred Stock, a proper officer of the Company may, and upon the
written request of the Holders of record of at least 20% of the shares of Senior
Preferred Stock then outstanding addressed to the Secretary of the Company
shall, call a special meeting of the Holders of Senior Preferred Stock for the
purpose of electing the directors which such Holders are entitled to elect. If
such meeting shall not be called by the proper officer of the Company within 20
days after personal service of said written request upon the Secretary of the
Company, or within 20 days after mailing the same within the United States by
certified mail, addressed to the Secretary of the Company at its principal
executive offices, then the Holders of record of at least 20% of the outstanding
shares of the Senior Preferred Stock may designate in writing one of their
number to call such meeting at the expense of the Company, and such meeting may
be called by the Person so designated upon the notice required for the annual
meeting of stockholders of the Company and shall be held at the place for
holding the annual meeting of stockholders or such other place in the United
States as shall be designated in such notice. Notwithstanding the provisions of
this paragraph (f)(iii)(B), no such special meeting shall be called if any such
request is received less than 30 days before the date fixed for the next ensuing
annual or special meeting of stockholders of the Company. Any Holder of shares
of the Senior Preferred Stock so designated shall have, and the Company shall
provide, access to the lists of Holders of shares of the Senior Preferred Stock
for purposes of calling a meeting pursuant to the provisions of this paragraph
(f)(iii)(B).
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<PAGE>
(C) At any meeting held for the purpose of electing directors at
which the Holders of Senior Preferred Stock shall have the right, voting
separately as one class, to elect directors as aforesaid, the presence in person
or by proxy of the Holders of at least a majority of the outstanding Senior
Preferred Stock shall be required to constitute a quorum of such Senior
Preferred Stock.
(D) Any vacancy occurring in the office of a director elected by
the Holders of shares of the Senior Preferred Stock may be filled by the
remaining director elected by the Holders of shares of the Senior Preferred
Stock unless and until such vacancy shall be filled by the Holders of shares of
the Senior Preferred Stock.
(iv) In any case in which the Holders of shares of the Senior
Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of shares of the Senior Preferred Stock
shall be entitled to one vote for each share of Senior Preferred Stock held.
(g) Exchange.
--------
(i) Requirements. (A) The Company may at its option exchange all, but
not less than all, of the then outstanding shares of Senior Preferred Stock into
the Company's 13 1/4% Subordinated Preferred Stock Exchange Notes due 2009 (the
"Exchange Notes") on any Dividend Payment Date, provided that on the date of
such exchange: (1) there shall be no contractual impediments to such exchange;
(2) there shall be legally available funds sufficient therefor (including,
without limitation, legally available funds sufficient therefor under Sections
160 and 170 (or any successor provisions) of the Delaware General Corporation
Law); (3) either (a) a registration statement relating to the Exchange
Debentures shall have been declared effective under the Securities Act of 1933,
as amended (the "Securities Act"), prior to such exchange and shall continue to
be in effect on the date of such exchange or (b)(i) the Company shall have
obtained a written opinion of counsel of national prominence with regard to
securities matters that an exemption from the registra-
17
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tion requirements of the Securities Act is available for such exchange and that
upon receipt of such Exchange Notes pursuant to such exchange made in accordance
with such exemption, the holders (assuming such holder is not an Affiliate of
the Company) thereof shall not be subject to any restrictions imposed by the
Securities Act upon the resale thereof and (ii) such exemption is relied upon
by the Company for such exchange; (4) the Exchange Notes Indenture and the
Trustee shall have been qualified under the Trust Indenture Act of 1939, as
amended; (5) immediately after giving effect to such exchange, no Default or
Event of Default (each as defined in the Exchange Notes Indenture) would exist
under the Exchange Notes Indenture; and (6) the Company shall have delivered to
the Trustee a written opinion of counsel, dated the date of exchange, regarding
the satisfaction of the conditions set forth in clauses (1), (2), (3) and (4).
In the event that the issuance of the Exchange Notes is not permitted on the
date of exchange or any of the conditions set forth in clauses (1) through (6)
of the preceding sentence are not satisfied on the date of exchange, the Company
shall use its best efforts to satisfy such conditions and effect such exchange
as soon as practicable.
The Company shall send a written notice (the "Exchange Notice") of
exchange by mail to each Holder, which notice shall state: (v) that the Company
is exercising its option to exchange the Senior Preferred Stock for Exchange
Notes pursuant to this Certificate of Designation; (w) the date fixed for
exchange (the "Exchange Date"), which date shall not be less than 30 days nor
more than 60 days following the date on which the Exchange Notice is mailed
(except as provided in the last sentence of this paragraph); (x) that the Holder
is to surrender to the Company, at the place or places where certificates for
shares of Senior Preferred Stock are to be surrendered for exchange, in the
manner designated in the Exchange Notice, the certificate or certificates
representing the shares of Senior Preferred Stock to be exchanged; (y) that
dividends on the shares of Senior Preferred Stock to be exchanged shall cease to
accrue on the Exchange Date whether or not certificates for shares of Senior
Preferred
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<PAGE>
Stock are surrendered for exchange on the Exchange Date unless the Company shall
default in the delivery of Exchange Notes; and (z) that interest on the
Exchange Notes shall accrue from the Exchange Date whether or not certificates
for shares of Senior Preferred Stock are surrendered for exchange on the
Exchange Date. On the Exchange Date, if the conditions set forth in clauses (1)
through (6) above are satisfied, the Company shall issue Exchange Notes in
exchange for the Senior Preferred Stock as provided in the next paragraph.
(B) Upon any exchange pursuant to paragraph (g)(i)(A), Exchange
Notes shall be issued in exchange for Senior Preferred Stock, in registered
form without coupons, in an amount equal to the liquidation preference thereof,
plus an amount in cash equal to all accumulated and unpaid dividends (including
an amount in cash equal to a prorated dividend for the period from the
immediately preceding Dividend Payment Date to the Exchange Date). Exchange
Notes will be issued in principal amounts of $1,000 and integral multiples
thereof to the extent possible, and will also be issued in principal amounts
less than $1,000 so that each Holder of Senior Preferred Stock will receive
certificates representing the entire amount of Exchange Notes to which his
shares of Senior Preferred Stock entitles him, provided that the Company may, at
its option, pay cash in lieu of issuing Exchange Notes in a principal amount of
less than $1,000.
(ii) Procedure for Exchange. (A) On or before the date fixed for
exchange, each Holder of Senior Preferred Stock shall surrender the certificate
or certificates representing such shares of Senior Preferred Stock, in the
manner and at the place designated in the Exchange Notice. The Company shall
cause the Exchange Notes to be executed on the Exchange Date and, upon surrender
in accordance with the Exchange Notice of the certificates for any shares of
Senior Preferred Stock so exchanged (properly endorsed or assigned for
transfer, if the notice shall so state), such shares shall be exchanged by the
Company into Exchange Notes. The Company shall pay interest on the Exchange
Notes at
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<PAGE>
the rate and on the date or dates specified therein from the Exchange Date.
(B) If notice has been mailed as aforesaid, and if before the
Exchange Date (1) the Exchange Notes Indenture shall have been duly executed
and delivered by the Company and the Trustee and (2) all Exchange Notes
necessary for such exchange shall have been duly executed by the Company and
delivered to the Trustee with irrevocable instructions to authenticate the
Exchange Notes necessary for such exchange, then on the Exchange Date,
dividends shall cease to accrue on the outstanding shares of Senior Preferred
Stock and all of the rights of the Holders of shares of the Senior Preferred
Stock as stockholders of the Company shall cease (except the right to receive
Exchange Notes), and the Person or Persons entitled to receive the Exchange
Notes issuable upon exchange shall be treated for all purposes as the registered
holder or holders of such Exchange Notes as of the Exchange Date.
(h) Change of Control.
-----------------
(i) Subject to paragraph (h)(v) hereof, upon the occurrence of a
Change of Control, each Holder of Senior Preferred Stock shall have the right to
require the Company to purchase all or any part of such Holder's Senior
Preferred Stock pursuant to an Offer at a purchase price equal to 101% of the
liquidation preference thereof plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends per share (including an amount in
cash equal to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the Change of Control Payment Date (as defined in paragraph
(h)(ii)(B) hereof) to the Change of Control Payment Date) (the "Change of
Control Payment").
(ii) Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder stating: (A) that an offer ("Offer") is being
made pursuant to this Certificate of Designation and that, to the extent lawful,
all shares of Senior Preferred Stock tendered shall be accepted for
20
<PAGE>
payment; (B) the purchase price and the purchase date, which shall be no
earlier than 30 days nor later than 40 days from the date such notice is
mailed (the "Change of Control Payment Date"); (C) that any shares of
Senior Preferred Stock not tendered shall continue to accrue dividends in
accordance with the terms of this Certificate of Designation; (D) that,
unless the Company defaults in the payment of the Change of Control
Payment, all shares of Senior Preferred Stock accepted for payment
pursuant to the Offer shall cease to accrue dividends after the Change of
Control Payment Date; and (E) a description of the procedures to be
followed by such Holder in order to have its shares of Senior Preferred
Stock repurchased.
(iii) On the Change of Control Payment Date, (A) the Company
shall, to the extent lawful, (1) accept for payment shares of Senior
Preferred Stock tendered pursuant to the Offer and (2) promptly mail to
each Holder of shares of Senior Preferred Stock so accepted payment in an
amount equal to the purchase price for such shares and (B) unless the
Company defaults in the payment for the shares of Senior Preferred Stock
tendered pursuant to the Offer, dividends shall cease to accrue with
respect to the shares of Senior Preferred Stock tendered and all rights of
Holders of such tendered shares shall terminate, except for the right to
receive payment therefor, on the Change of Control Payment Date. The
Company shall publicly announce the results of the Offer on or as soon as
practicable after the Change of Control Payment Date.
(iv) The Company shall comply with Rule 14e-1 under the
Exchange Act and any securities laws and regulations, to the extent such
laws and regulations are applicable to the repurchase of shares of the
Senior Preferred Stock in connection with a Change of Control.
(i) Conversion or Exchange. The Holders of shares of Senior Preferred
Stock shall not have any rights hereunder to convert such shares into or
exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Company.
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<PAGE>
(j) Preemptive Rights. No shares of Senior Preferred Stock shall have
any rights of preemption whatsoever as to any securities of the Company, or any
warrants, rights or options issued or granted with respect thereto, regardless
of how such securities or such warrants, rights or options may be designated,
issued or granted.
(k) Reissuance of Senior Preferred Stock. Shares of Senior Preferred
Stock that have been issued and reacquired in any manner, including shares
purchased or redeemed or exchanged, shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized but unissued
shares of Preferred Stock of the Company undesignated as to series and may be
designated or redesignated and issued or reissued, as the case may be, as part
of any series of Preferred Stock of the Company, provided that any issuance of
such shares as Senior Preferred Stock must be in compliance with the terms
hereof.
(l) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(m) Certain Additional Provisions.
-----------------------------
(i) Merger or Consolidation. Without the consent of Holders of a
majority of the outstanding shares of Senior Preferred Stock, voting as a
separate class, the Company shall not consolidate or merge with or into, or
sell, lease, convey or otherwise dispose of all or substantially all of its
assets to, any Person (any such consolidation, merger or sale being a
"Disposition") unless: (a) the successor corporation of such Disposition or the
Person to which such Disposition shall have been made is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia; (b) the Senior Preferred Stock shall be converted into or
exchanged for and shall become shares of such successor, transferee or resulting
corporation, having in respect of such successor, transferee or resulting
corporation substantially the same powers, preferences and
22
<PAGE>
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereon, that the Senior
Preferred Stock had immediately prior to such Disposition; (c) immediately
after such Disposition, no Voting Rights Triggering Event shall have
occurred and be continuing; (d) the corporation formed by or surviving any
such Disposition, or the corporation to which such Disposition shall have
been made, shall have Consolidated Net Worth (immediately after the
Disposition but prior to giving any pro forma effect to purchase accounting
adjustments or Restructuring Charges resulting from the Disposition) equal
to or greater than the Consolidated Net Worth of the Company immediately
preceding the Disposition; and (e) prior to the consummation of any
proposed Disposition, the Company shall have delivered to the transfer
agent and registrar an officers' certificate and an opinion of counsel to
the effect that such Disposition complies with the terms of this
Certificate of Designation and that all conditions precedent to such
Disposition have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of
all or substantially all of the properties or assets of one or more
Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
(ii) Junior Payments. The Company shall not, directly or
indirectly, (i) declare or pay any dividend or make any distribution on
account of any Junior Securities (other than dividends or distributions
payable in Junior Securities (other than Disqualified Stock)), (ii)
purchase, redeem or otherwise acquire or retire for value any Junior
Securities or (iii) make any Restricted Investment (all such dividends,
distributions, purchases, redemptions, acquisitions, retirements and
Restricted Investments being collectively referred to as "Junior
Payments"), if, at the time of such Junior Payment:
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<PAGE>
(A) a Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof; or
(B) all dividends on the Senior Preferred Stock payable on
Dividend Payment Dates after August 1, 2002, have not been declared and
paid in cash.
Notwithstanding the foregoing, this Certificate of Designation
shall not prohibit as Junior Payments:
(A) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
comply with all of the provisions hereof (including, but not limited to,
this paragraph (m)(ii));
(B) making Restricted Investments at any time, and from time to
time, in an aggregate outstanding amount of $40,000,000 after the Senior
Preferred Stock Issue Date (it being understood that if any Restricted
Investment made after the Senior Preferred Stock Issue Date pursuant to
this clause (B) is sold, transferred or otherwise conveyed to any Person
other than the Company or a Restricted Subsidiary, the portion of the net
cash proceeds or fair market value of securities or properties paid or
transferred to the Company and its Restricted Subsidiaries in connection
with such sale, transfer or conveyance that relates or corresponds to the
repayment or return of the original cost of such a Restricted Investment
will replenish or increase the amount of Restricted Investments permitted
to be made pursuant to this clause (B), so that up to $40,000,000 of
Restricted Investments may be outstanding under this clause (B) at any
given time; provided that, without otherwise limiting this clause (B), any
Restricted Investment in a Subsidiary made pursuant to this clause (B) is
made for fair market value (as determined by the Board of Directors in good
faith);
(C) the repurchase, redemption or acquisition of the Company's
stock from the execu-
24
<PAGE>
tives, management and employees or consultants of the Company or its
Subsidiaries pursuant to the terms of any subscription, stockholder or
other agreement or plan, up to an aggregate amount not to exceed
$5,000,000;
(D) any loans, advances, distributions or payments from the
Company to its Restricted Subsidiaries, or any loans, advances,
distributions or payments by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary, in each case pursuant to intercompany
Indebtedness, intercompany management agreements, intercompany tax sharing
agreements, and other intercompany agreements and obligations;
(E) dividends and redemptions in respect of the Dura-Line
Preferred Stock pursuant to the Dura-Line Agreement;
(F) to the extent constituting Junior Payments, payments under
the Tax Sharing Agreement, New Subsidiary Consulting Agreement, Transition
Agreement and the JI Properties Services Agreement;
(G) to the extent constituting Junior Payments, (a) payments
under the New Subsidiary Advisory Agreement, provided that such payments
will not be made and shall be accrued so long as any Voting Rights
Triggering Event shall have occurred and be continuing or shall occur as a
consequence thereof, and (b) indemnities, expenses and other amounts under
the New Subsidiary Advisory Agreement;
(H) the redemption, repurchase, retirement or other acquisition
of any Junior Securities in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company)
of other Junior Securities of the Company or any Restricted Subsidiary
(other than any Disqualified Stock);
(I) the defeasance, redemption or repurchase of Indebtedness
with the net cash proceeds from an issuance of permitted Refinancing
Indebtedness or the substantially concurrent sale
25
<PAGE>
(other than to a Subsidiary of the Company) of Capital Stock or other
Equity Interests of the Company or any Restricted Subsidiary (other than
Disqualified Stock);
(J) payment of fees, expenses and indemnities in respect of the
Company's and its Subsidiaries' directors and such payments to Jordan
Industries, Inc., an Illinois corporation and corporate parent of the
Company, in respect of their directors, provided the aggregate amount of
such fees payable to all such directors does not exceed $250,000 in any
fiscal year;
(K) Restricted Investments received in consideration for the
sale, transfer or disposition by the Company or any Restricted Subsidiary
of any business, properties or assets belonging thereto, provided, that
the Company complies with Section 4.14 (the "Asset Sale" provisions) of the
Indentures; and provided further, that this clause (K) shall not be deemed
to permit the direct or indirect acquisition by the Company or any
Restricted Subsidiary of any Restricted Investment through an acquisition
of any business, properties or assets of any other Person, for cash or
other properties or assets, except to the extent that the direct acquisi-
tion of such Restricted Investment is otherwise permitted by this paragraph
(m)(ii);
(L) any Restricted Investment constituting securities or
instruments of a person issued in exchange for trade or other claims
against such person in connection with a financial reorganization or
restructuring of such person;
(M) to the extent constituting Junior Payments, payments and
transactions in connection with the Offerings or the Company Formation;
(N) any Restricted Investment constituting an equity investment
in a Receivables Subsidiary; provided, that the aggregate amount of such
equity investments do not exceed $1,000,000; or
(O) the payment of liquidated damages in accordance with
paragraph (c)(viii) hereof.
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<PAGE>
(iii) Transactions with Affiliates.
----------------------------
(A) Except as otherwise set forth herein, neither the Company
nor any of its Restricted Subsidiaries shall make any loan, advance, guar-
antee or capital contribution to, or for the benefit of, or sell, lease,
transfer or dispose of any properties or assets to, or for the benefit of,
or purchase or lease any property or assets from, or enter into or amend
any contract, agreement or understanding with, or for the benefit of, an
Affiliate (each such transaction or series of related transactions that
are part of a common plan are referred to as an "Affiliate Transaction"),
except in good faith and on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction on an arm's length basis from an
unrelated Person.
(B) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Affiliate Transactions involving aggregate
payments or other transfers by the Company and its Restricted Subsidiaries
in excess of $5,000,000 (including cash and non-cash payments and benefits
valued at their fair market value by the Board of Directors of the Company
in good faith) unless the Board of Directors of the Company (including a
majority of the disinterested directors, if any) determines, in good faith,
that such Affiliate Transaction complies with the provisions hereof; and
(ii)(A) with respect to any Affiliate Transaction involving the incurrence
of Indebtedness, the Company receives a written opinion of a nationally
recognized investment banking or accounting firm experienced in the
review of similar types of transactions, (B) with respect to any Affiliate
Transaction involving the transfer of real property, fixed assets or
equipment, either directly or by a transfer of 50% or more of the Capital
Stock of a Restricted Subsidiary which holds any such real property,
fixed assets or equipment, the Company receives a written appraisal from a
nationally recognized appraiser experienced in the review of similar types
of transactions or (C) with respect to any Affiliate Transaction not
otherwise described in (A)
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<PAGE>
and (B) above, the Company receives a written certification from a
nationally recognized professional or firm experienced in evaluating
similar types of transactions, in each case, stating that the terms of such
transaction are fair to the Company or such Restricted Subsidiary, as the
case may be, from a financial point of view.
(C) Notwithstanding paragraphs (iii)(A) and (iii)(B) above, this
paragraph (m)(iii) shall not apply to: (i) transactions between the Company
and any Restricted Subsidiary or between Restricted Subsidiaries; (ii)
payments under the New Subsidiary Advisory Agreement, the New Subsidiary
Consulting Agreement, the Transition Agreement, the JI Properties Services
Agreement and the Tax Sharing Agreement, provided, that any amendments,
supplements, modifications, substitutions, renewals or replacements of the
foregoing agreements are approved by a majority of the Board of Directors
(including a majority of the disinterested directors, if any) as fair to
the Company and the holders of the Senior Preferred Stock; (iii) any other
payments or transactions permitted pursuant to paragraph (m)(ii) above;
(iv) reasonable compensation paid to officers, employees or consultants of
the Company or any Restricted Subsidiary as determined in good faith by the
Company's Board of Directors or executives; (v) transactions in connection
with a Receivables Financing; or (vi) payments and transactions in
connection with the Offerings and the Company Formation.
(iv) Reports. So long as any shares of Senior Preferred Stock are
outstanding, the Company shall file with the Commission the annual reports,
quarterly reports and the information, documents and other reports required
to be filed by the Company with the Commission pursuant to Sections 13 or
15(d) of the Exchange Act, whether or not the Company has or is required to
have a class of securities registered under the Exchange Act, at the time
it is or would be required to file the same with the Commission and within
15 days after it is or would be required to file such reports, information
or documents with the Commission shall mail such reports, information and
documents to the Holders at their
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<PAGE>
addresses set forth in the register of Senior Preferred Stock maintained by
the transfer agent and registrar.
(n) Definitions. As used in this Certificate of Designation, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Affiliate" means any of the following: (i) any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, (ii) any spouse, immediate family member or other
relative who has the same principal residence as any Person described in clause
(i) above, (iii) any trust in which any such Persons described in clause (i) or
(ii) above has a beneficial interest, and (iv) any corporation or other
organization of which any such Persons described above collectively own 50% or
more of the equity of such entity.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, including any
preferred stock.
"Change of Control" means the occurrence of any of the following: (i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), excluding the Jordan Stockholders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the Company; and (ii)
the Company consolidates with, or merges with or into, another Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the out-
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<PAGE>
standing Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where (A) the
outstanding Voting Stock of the Company is converted into or exchanged for (1)
Voting Stock (other than Disqualified Stock) of the surviving or transferee
corporation or (2) cash, securities and other property in an amount which could
be paid by the Company as a Junior Payment under this Certificate of Designation
and (B) immediately after such transaction no "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act), excluding the Jordan
Stockholders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total Voting Stock of the
surviving or transferee corporation; and (iii) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of a majority of the directors then still in
office who are entitled to vote to elect such new director and were either
directors at the beginning of such period or Persons whose election as directors
or nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
"Commission" means the Securities and Exchange Commission.
"Company Formation" means the formation of the Company by the
Company's management and stockholders of the Company's parent, Jordan
Industries, Inc., and certain of their affiliates.
"Consolidated Net Worth" with respect to any Person means, as of any
date, the consolidated equity of the common stockholders of such Person
(excluding the cumulated foreign currency translation adjustment), all
determined on a consolidated basis in accordance with GAAP, but without any
reduction in respect of the payment
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<PAGE>
of dividends on any series of such Person's preferred stock if such dividends
are paid in additional shares of Capital Stock (other than Disqualified Stock);
provided, however, that Consolidated Net Worth shall also include, without
duplication: (a) the amortization of all write-ups of inventory, (b) the
amortization of all intangible assets (including amortization of goodwill, debt
and financing costs, and Incentive Arrangements), (c) any non-capitalized
transaction costs incurred in connection with financings, acquisitions or
divestitures (including, but not limited to, financing and refinancing fees),
(d) any increased amortization or depreciation resulting from the write-up of
assets pursuant to Accounting Principles Board Opinion Nos. 16 and 17, as
amended and supplemented from time to time, (e) any extraordinary or
nonrecurring charges or expenses relating to any premium or penalty paid, write-
off or deferred financing costs, or other financial recapitalization charges
incurred in connection with redeeming or retiring any Indebtedness prior to its
stated maturity, (f) any Restructuring Charges, and (g) any extraordinary or
non-recurring charge arising out of the implementation of SFAS 106 or SFAS 109;
provided, however, that in determining Consolidated Net Worth for purposes of
the provisions of this Certificate of Designation relating to "Merger or
Consolidation," Consolidated Net Worth shall be calculated on a Pro Forma Basis.
"Disqualified Stock" means any Capital Stock that by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part on, or prior to, the
mandatory redemption date of the Senior Preferred Stock or the maturity date of
the Exchange Notes.
"Dividend Payment Date" means February 1, May 1, August 1 and November
1 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"Dura-Line Agreement" means the Preferred Stock Agreement, among
Dura-Line Corporation ("Dura-Line") and certain other persons, as in effect on
the Senior Preferred Stock Issue Date.
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"Dura-Line Preferred Stock" means the 187.5 shares outstanding of
Dura-Line's 7% cumulative preferred stock with an aggregate liquidation
preference of $1.9 million issued to former common stockholders of Dura-Line.
"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible into, or
exchangeable for, Capital Stock or partnership interests, and (ii) any other
Indebtedness or Obligation) provided, however, that Equity Interests will not
include any Incentive Arrangements or obligations or payments thereunder.
"Equity Offering" means a public or private offering by the Company
and/or its Subsidiaries for cash of Capital Stock or other Equity Interests and
all warrants, options or other rights to acquire Capital Stock, other than (i)
an offering of Disqualified Stock or (ii) Incentive Arrangements or obligations
or payments thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Date" means a date on which shares of Senior Preferred Stock
are exchanged by the Company for Exchange Notes.
"Exchange Offer" shall have the meaning ascribed to such term in the
Registration Rights Agreement.
"Exchange Offer Registration Statement" shall have the meaning
ascribed to such term in the Registration Rights Agreement.
"GAAP" means generally accepted accounting principles, consistently
applied, as of the Senior Preferred Stock Issue Date. All financial and
accounting determinations and calculations under this Certificate of Designation
will be made in accordance with GAAP.
"Hedging Obligations" means, with respect to any Person, the
Obligations of such Persons under (i) interest rate swap agreements, interest
rate cap agree-
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ments and interest rate collar agreements, (ii) foreign exchange contracts,
currency swap agreements or similar agreements, and (iii) other agreements or
arrangements designed to protect such Person against fluctuations, or otherwise
to establish financial hedges in respect of, exchange rates, currency rates or
interest rates.
"Holder" means a holder of shares of Senior Preferred Stock.
"Incentive Arrangements" means any earn-out agreements, stock
appreciation rights, "phantom" stock plans, employment agreements, non-
competition agreements, subscription and stockholders agreements and other
incentive and bonus plans and similar arrangements made in connection with
acquisitions of Persons or businesses by the Company or the Restricted
Subsidiaries or the retention of executives, officers or employees by the
Company or the Restricted Subsidiaries.
"Indebtedness" means, with respect to any Person, any indebtedness,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the deferred and unpaid balance
of the purchase price of any property (including pursuant to capital leases),
except any such balance that constitutes an accrued expense or a trade payable,
and any Hedging Obligations, if and to the extent such indebtedness (other than
a Hedging Obligation) would appear as a liability upon a balance sheet of such
Person prepared on a consolidated basis in accordance with GAAP, and also
includes, to the extent not otherwise included, the guarantee of items that
would be included within this definition; provided, however, that "Indebtedness"
will not include any Incentive Arrangements or obligations or payments
thereunder.
"Indentures" mean (i) the indenture governing the Company's 9% Senior
Notes due 2007 between the Company and First Trust National Association, as
trustee, and (ii) the indenture governing the Company's 11 3/4% Senior Discount
Notes due 2007 between the Company and First Trust National Association, as
trustee.
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<PAGE>
"Initial Dividend Period" means the dividend period commencing on the
Senior Preferred Stock Issue Date and ending on the day before the first
Dividend Payment Date to occur thereafter.
"Investment" means any capital contribution to, or other debt or
equity investment in, any Person.
"issue" means create, issue, assume, guarantee, incur or otherwise
become directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be issued
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
For this definition, the terms "issuing," "issuer," "issuance" and "issued" have
meanings correlative to the foregoing.
"JI Properties Services Agreement" means the services agreement, dated
July 25, 1997, between the Company and Jordan Industries, Inc., as in effect on
the Senior Preferred Stock Issue Date.
"Jordan Stockholders" means John W. Jordan, II, and/or his heirs,
executors and administrators, The John W. Jordan, II Revocable Trust, The Jordan
Family Trust and/or any other trust established by John W. Jordan, II whose
beneficiaries are John W. Jordan, II and/or his lineal descendants or other
relatives, Jordan Industries, Inc., The Jordan Company and Jordan/Zalaznick
Capital Corporation and their respective affiliates, principals, partners and
employees, family members of any of the foregoing and trusts for the benefit of
any of the foregoing, including, without limitation, MCIT PLC and Leucadia
National Corporation and their respective Subsidiaries.
"Junior Preferred Stock" means the $20,000,000 initial liquidation
preference of junior preferred stock, $.01 par value per share, of the Issuer to
be sold to Jordan Industries, Inc. in connection with the Company Formation.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York
34
<PAGE>
or at a place of payment are authorized by law, regulation or executive order
to remain closed. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
"New Subsidiary Advisory Agreement" means the advisory agreements,
dated July 25, 1997, between the Company and each of its Subsidiaries and Jordan
Industries, Inc. as in effect on the Senior Preferred Stock Issue Date.
"New Subsidiary Consulting Agreement" means the management consulting
agreement, dated July 25, 1997, between the Company and each of its
Subsidiaries and Jordan Industries, Inc., as in effect on the Senior Preferred
Stock Issue Date.
"New Credit Agreement" means the credit agreement to be entered into
by the Company and/or certain of its Restricted Subsidiaries and certain
subsidiaries and the lenders party thereto in their capacities as lenders
thereunder and The First National Bank of Boston, N.A., as agent, together with
all loan documents and instruments thereunder (including, without limitation,
any guarantee agreements and security documents) in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including,
without limitation, increasing the amount of available borrowings thereunder,
and all Obligations with respect thereto, in each case, to the extent permitted
by the Indentures, or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness
under such agreement or any successor or replacement agreement and whether by
the same or any other agent, lender or group of lenders.
"Non-Restricted Subsidiary" means any Subsidiary of the Company, other
than a Restricted Subsidiary.
"Obligations" means, with respect to any Indebtedness, all principal,
interest, premium, penalties, fees, indemnities, expenses (including legal fees
and
35
<PAGE>
expenses), reimbursement obligations and other liabilities payable to the
holder of such Indebtedness under the documentation governing such Indebtedness,
and any other claims of such holder arising in respect of such Indebtedness.
"Offering Circular" means the Offering Circular, dated July 21, 1997,
relating to the Offerings by the Company.
"Offerings" means the Units Offering together with the offerings of
$190,000,000 aggregate principal amount of the Company's 9% Senior Notes due
2007 and $120,000,000 principal amount at maturity of the Company's 11 3/4%
Senior Discount Notes due 2007.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Worth for purposes of paragraph (m)(i) hereof, giving pro forma effect to (x)
any acquisition or sale of a Person, business or asset, related incurrence,
repayment or refinancing of Indebtedness or other related transactions,
including any Restructuring Charges which would otherwise be accounted for as an
adjustment permitted by Regulation S-X under the Securities Act or on a pro
forma basis under GAAP, or (y) any incurrence, repayment or refinancing of any
Indebtedness and the application of the proceeds therefrom, in each case, as if
such acquisition or sale and related transactions, restructurings,
consolidations, cost savings, reductions, incurrence, repayment or refinancing
were realized on the first day of the relevant period permitted by Regulation
S-X under the Securities Act or on a pro forma basis under GAAP.
"Quarterly Dividend Period" shall mean the quarterly period commencing
on each February 1, May 1, August 1 and November 1 and ending on the day before
the following Dividend Payment Date.
"Receivables" means, with respect to any person or entity, all of the
following property and interests in
36
<PAGE>
property of such person or entity, whether now existing or existing in the
future or hereafter acquired or arising: (i) accounts; (ii) accounts receivable
(including, without limitation, all rights to payment created by or arising from
sales of goods, leases of goods or leased or the rendition of services rendered
no matter how evidenced, whether or not earned by performance); (iii) all
unpaid seller's or lessor's rights (including without limitation, recession,
replevin, reclamation and stoppage in transit, relating to any of the foregoing
or arising therefrom); (iv) all rights to any goods or merchandise represented
by any of the foregoing (including, without limitation, returned or repossessed
goods); (v) all reserves and credit balances with respect to any such accounts
receivable or account debtors; (vi) all letters of credit, security or
guarantees for any of the foregoing; (vii) all insurance policies or reports
relating to any of the foregoing; (viii) all collection or deposit accounts
relating to any of the foregoing; (ix) all proceeds of any of the foregoing; and
(x) all books and records relating to any of the foregoing.
"Receivables Financing" means (i) the sale or other disposition of
Receivables arising in the ordinary course of business, or (ii) the sale or
other disposition of Receivables arising in the ordinary course of business to a
Receivables Subsidiary followed by a financing transaction in connection with
such sale or disposition of such Receivables.
"Receivables Subsidiary" means a Subsidiary of the Company that is
exclusively engaged in Receivables Financings and activities reasonably related
thereto.
"Redemption Date" with respect to any shares of Senior Preferred
Stock, means the date on which such shares of Senior Preferred Stock are
redeemed by the Company.
"Refinancing Indebtedness" means (i) Indebtedness of the Company and
its Restricted Subsidiaries issued or given in exchange for, or the proceeds of
which are used to, extend, refinance, renew, replace, substitute or refund any
Indebtedness permitted under the Indentures or any Indebtedness issued to so
extend, refinance, renew, replace, substitute or refund such Indebtedness; (ii)
any refinancings of Indebtedness
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<PAGE>
issued under the New Credit Agreement; and (iii) any additional Indebtedness
issued to pay premiums and fees in connection with clauses (i) and (ii).
"Registrable Securities" shall have the meaning ascribed to such term
in the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of July 25, 1997, by and among the Company and Jefferies &
Company, Inc. with respect to the Senior Preferred Stock, a copy of which is
available to each Holder without charge upon request from the secretary of the
Company.
"Restricted Investment" means any Investment in any Person, provided
that Restricted Investments will not include: (i) Investments in marketable
securities and other negotiable instruments permitted by this Certificate of
Designation; (ii) any Incentive Arrangements; (iii) Investments in the Company;
or (iv) Investments in any Restricted Subsidiary (provided that any Investment
in a Restricted Subsidiary was made for fair market value (as determined by the
Board of Directors in good faith). The amount of any Restricted Investment shall
be the amount of cash and the fair market value at the time of transfer of all
other property (as determined by the Board of Directors in good faith) initially
invested or paid for such Restricted Investment, plus all additions thereto,
without any adjustments for increases or decreases in value of, or write-ups,
write-downs or write-offs with respect to, such Restricted Investment.
"Restricted Subsidiary" means: (i) any Subsidiary of the Company
existing on the Senior Preferred Stock Issue Date, and (ii) any other Subsidiary
of the Company formed, acquired or existing after the Senior Preferred Stock
Issue Date that is designated as a "Restricted Subsidiary" by the Company
pursuant to a resolution approved by a majority of the Board of Directors,
provided, however, that the term Restricted Subsidiary shall not include (x) any
Restricted Subsidiary of the Company that has been redesignated by the Company
pursuant to a resolution approved by a majority of the Board of Directors as a
Non-Restricted Subsidiary in accordance with the terms of the Indenture unless
such Subsidiary shall have subsequently been redesignated a Restricted
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Subsidiary in accordance with clause (ii) of this definition or (y) any
Restricted Subsidiary of the Company that is organized under the laws of a
foreign jurisdiction and whose stock or ownership interests are sold or trans-
ferred to a Non-Restricted Subsidiary of the Company pursuant to one or more
transactions that comply with the Indentures which is, at or after the time of
such sale or transfer, designated by a resolution approved by a majority of the
Board of Directors designated a Non-Restricted Subsidiary.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or headcount reduction, or any other cost savings, of any Persons
or businesses either alone or together with the Company or any Restricted
Subsidiary, as permitted by GAAP or Regulation S-X under the Securities Act.
"Senior Preferred Stock Issue Date" means the date on which the Senior
Preferred Stock is originally issued by the Company under this Certificate of
Designation.
"Shelf Registration" shall have the meaning ascribed to such term in
the Registration Rights Agreement.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"Subsidiary" of any Person means any entity of which the Equity
Interests entitled to cast at least a majority of the votes that may be cast by
all Equity Interests having ordinary voting power for the election of directors
or other governing body of such entity are owned by such Person (regardless of
whether such Equity Interests are owned directly by such Person or through one
or more Subsidiaries).
"Tax Sharing Agreement" means the tax sharing agreement between the
Company and each of its Subsidiaries and Jordan Industries, Inc. and each of
the other direct and indirect Subsidiaries of Jordan Industries,
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<PAGE>
Inc. that are consolidated with Jordan Industries, Inc. for Federal income tax
purposes, as in effect on the Senior Preferred Stock Issue Date.
"Transition Agreement" means the transition agreement dated as of July
25, 1997, between the Company and Jordan Industries, Inc. as in effect on Senior
Preferred Stock Issue Date.
"Trustee" means the party named as such in the Exchange Notes
Indenture until a successor replacement in accordance with the applicable
provisions of the Exchange Notes Indenture and thereafter means the successor
serving thereunder.
"Units Offering" means the offer and sale of Units, consisting of
$25,000,000 aggregate liquidation preference of the Senior Preferred Stock and
25,000 shares of Common Stock, par value $.01 per share, of the Company, as
contemplated by the Offering Circular.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect the board of directors.
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IN WITNESS WHEREOF, Jordan Telecommunication Products, Inc. has caused
this Certificate of Designation to be signed by Dominic Pileggi, in his capacity
as Chief Executive Officer and attested to by Michael R. Elia in his capacity as
Assistant Secretary, on this 24th day of July 1997.
JORDAN TELECOMMUNICATION PRODUCTS,
INC.
By: /s/ Dominic Pileggi
--------------------------------------
Name: Dominic Pileggi
Title: President and Chief Executive
Officer
Attest:
By: /s/ Michael R. Elia
---------------------------
Name: Michael R. Elia
Title: Assistant Secretary
(Corporate Seal)
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<PAGE>
Exhibit 3.2
================================================================================
JORDAN TELECOMMUNICATION PRODUCTS, INC.
Incorporated under the laws
of the State of Delaware
_________________________
BY-LAWS
_________________________
As effective on July 21, 1997
================================================================================
<PAGE>
JORDAN TELECOMMUNICATION PRODUCTS, INC.
ARTICLE I
Offices
-------
SECTION 1. Registered Office. The registered office of JORDAN
TELECOMMUNICATION PRODUCTS, INC.(the "Corporation") in the State of Delaware
shall be at Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, and the registered agent in charge thereof shall be The
Corporation Trust Company.
SECTION 2. Other Offices. The Corporation may also have an office or
offices at any other place or places within or outside the State of Delaware.
ARTICLE II
Meeting of Stockholders
-----------------------
SECTION 1. Annual Meetings. The annual meeting of the stockholders for
the election of directors, and for the transaction of such other business as may
properly come before the meeting, shall be held at such place, date and hour as
shall be fixed by the Board of Directors (the "Board") and designated in the
notice or waiver of notice thereof.
SECTION 2. Special Meetings. Except as otherwise required by law, special
meetings of the stockholders may be called only in accordance with the
provisions of the Certificate of Incorporation (the "Certificate").
SECTION 3. Notice of Meetings. Except as otherwise required by law or by
the Certificate or these By-laws, notice of each annual or special meeting of
the stockholders shall be given to each stockholder of record entitled to vote
at such meeting not less than 10 nor more than 60 days before the day on which
the meeting is to be held, by delivering written notice thereof to him
personally, or by mailing a copy of such notice, postage prepaid, directly to
him at his address as it appears in the records of the Corporation, or by
transmitting such notice thereof to him at such address by telegraph, cable or
other telephonic transmission. Every such notice shall state the place, the date
and hour of the meeting, and, in case of a special meeting, the purpose or
purposes for which the meeting is called. Except as otherwise required by law,
notice of any meeting of stockholders shall not be required be given to any
stockholder who shall attend such meeting in person or by proxy, or who shall,
in person or by attorney thereunto authorized, waive such notice in writing,
either before or after such meeting. Except as otherwise provided in these By-
laws, neither the business to be transacted at, nor the purpose of, any meeting
of the stockholders need be specified in any such notice or
<PAGE>
waiver of notice. Notice of any adjourned meeting of stockholders shall not be
required to be given, except when expressly required by law.
SECTION 4. Quorum. At each meeting of the stockholders, except where
otherwise provided by the Certificate or these By-laws, the holders of a
majority of the issued and outstanding shares of stock of the Corporation
entitled to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum for the transaction of business, except as otherwise
required by law, these By-laws or the Certificate. In the absence of a quorum a
majority in interest of the stockholders present in person or represented by
proxy and entitled to vote, or, in the absence of all the stockholders entitled
to vote, any officer entitled to preside at, or act as secretary of, such
meeting, shall have the power to adjourn the meeting to another time and/or
place, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At any such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally called. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
SECTION 5. Organization. At each meeting of the stockholders, one of the
following shall act as chairman of the meeting and preside thereat, in the
following order of precedence:
(a) the Chairman;
(b) the President;
(c) any officer of the Corporation designated by the Board to act as
chairman of such meeting and to preside thereat; or
(d) a stockholder of record who shall be chosen chairman of such meeting
by a majority in voting interest of the stockholders present in person or by
proxy and entitled to vote thereat.
The Secretary or, if he shall be presiding over such meeting in accordance
with the provisions of this Section 5 or if he shall be absent from such
meeting, the person (who shall be an Assistant Secretary, if an Assistant
Secretary has been appointed and is present) whom the chairman of such meeting
shall appoint, shall act as secretary of such meeting and keep the minutes
thereof.
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<PAGE>
SECTION 6. Order of Business. The order of business at each meeting of
the stockholders shall be determined by the chairman of such meeting, but such
order of business may be changed by a majority in voting interest of those
present in person or by proxy at such meeting and entitled to vote thereat.
SECTION 7. Voting. Except as may otherwise be required by law or these
By-laws, stockholders shall have the voting rights specified in the Certificate.
SECTION 8. Informal Action by Stockholders. Any action required or
permitted to be taken by the stockholders must be effected at a duly called
annual or special meeting of such stockholders and may not be effected by a
consent in writing by any such stockholders.
SECTION 9. Voting Procedures and Inspections of Elections.
(a) The Corporation shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at the meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict impartiality
and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares outstanding
and the voting power of each, (ii) determine the shares represented at a meeting
and the validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares represented at the meeting, and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of the duties of
the inspectors.
(c) The date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting shall be announced at
the meeting. No ballot, proxies or votes, nor any revocations thereof or changes
thereto, shall be accepted by the inspectors after the closing of the polls
unless the Delaware Court of Chancery upon application by a stockholder shall
determine otherwise.
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<PAGE>
(d) In determining the validity and counting of proxies and ballots, the
inspectors shall be limited to an examination of the proxies, any envelopes
submitted with those proxies, any information provided in accordance with (S)
212(c)(2) of the Delaware General Corporation Law, ballots and the regular books
and records of the Corporation, except that the inspectors may consider other
reliable information for the limited purpose of reconciling proxies and ballots
submitted by or on behalf of banks, brokers, their nominees or similar persons
which represent more votes than the holder of a proxy is authorized by the
record owner to cast or more votes than the stockholder holds of record. If the
inspectors consider other reliable information for the limited purpose permitted
in this Section 9, the inspectors at the time they make their certification
pursuant to subsection (b)(v) of this Section 9 shall specify the precise
information considered by them including the person or persons from whom they
obtained the information, when the information was obtained, the means by which
the information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
SECTION 10. Advance Notification of Proposals at Stockholders' Meetings.
If a stockholder desires to submit a proposal for consideration at an annual or
special stockholders' meeting, or to nominate persons for election as directors
at any stockholders' meeting duly called for the election of directors, written
notice of such stockholders' intent to make such a proposal or nomination must
be given and received by the Secretary of the Corporation at the principal
executive offices of the Corporation either by personal delivery or by United
States mail not later than (i) with respect to an annual meeting of
stockholders, 60 days prior to the anniversary date of the immediately preceding
annual meeting, and (ii) with respect to a special meeting of stockholders, the
close of business on the tenth day following the date on which notice of such
meeting is first sent or given to stockholders. Each notice shall describe the
proposal or nomination in sufficient detail for the proposal or nomination to be
summarized on the agenda for the meeting and shall set forth: (i) the name and
address, as it appears on the books of the Corporation, of the stockholder who
intends to make the proposal or nomination; (ii) a representation that the
stockholder is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
present such proposal or nomination; and (iii) the class and number of shares of
the Corporation which are held of record and beneficially by the stockholder. In
addition, in the case of a stockholder proposal, the notice shall set forth the
reasons for conducting such proposed business at the meeting and any material
interest of the stockholder in such business. In the case of a nomination of any
person for election as a director, the notice shall set forth:
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(i) the name and address of any person to be nominated; (ii) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (iii) such
other information regarding such nominee proposed by such stockholder as would
be required to be included in a proxy statement filed pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended; and (iv) the consent of
each nominee to serve as a director of the Corporation if so elected. The
presiding officer of the annual or special meeting shall, if the facts warrant,
refuse to acknowledge a proposal or nomination not made in compliance with the
foregoing procedure, and any such proposal or nomination not properly brought
before the meeting shall not be considered.
The provisions of this Section 10 may be changed by the stockholders only
upon the affirmative vote of the holders of two-thirds of the votes that could
be cast by the holders of all shares of capital stock of the Corporation
entitled to vote on such matters at a meeting duly called for such purpose.
SECTION 11. Advisory Stockholder Votes. In order for the stockholders to
adopt or approve any precatory proposal submitted to them for the purpose of
requesting the Board to take certain actions, a majority of the outstanding
stock of the Corporation entitled to vote thereon must be voted in favor of the
proposal in accordance with Section 7 of this Article II.
SECTION 12. List of Stockholders. It shall be the duty of the Secretary
or other officer of the Corporation who shall have charge of its stock ledger to
prepare and make, at least 10 days before every meeting of the stockholders, a
complete list of the stockholders entitled to vote thereat, 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 any such meeting,
during ordinary business hours, for a period of at least 10 days prior to such
meeting, either at a place within the city where such 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. Such list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE III
Board of Directors
------------------
SECTION 1. General Powers. The business, property and affairs of the
Corporation shall be managed by or under the
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direction of the Board, which may exercise all such powers of the Corporation
and do all such lawful acts and things as are not by law or by the Certificate
directed or required to be exercised or done by the stockholders.
SECTION 2. Number and Term of Office. The number of directors shall be
fixed from time to time by the Board, subject to the terms of the Certificate.
Directors need not be stockholders. Each director shall hold office until his
successor is elected and qualified, or until his earlier death, resignation,
retirement, disqualification or removal in the manner hereinafter provided.
SECTION 3. Election of Directors. At each meeting of the stockholders for
the election of directors at which a quorum is present, the persons receiving
the greatest number of votes, up to the number of directors to be elected, of
the stockholders present in person or by proxy and entitled to vote thereon,
shall be the directors; provided that for purposes of such vote no stockholder
shall be allowed to cumulate his votes.
SECTION 4. Resignation and Vacancies. Any director may resign at any time
by giving written notice to the Board, the Chairman, the President or the
Secretary. Such resignation shall take effect at the time specified therein or,
if the time be not specified, upon receipt thereof; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Except as otherwise required by law, vacancies on the Board will be filled
in accordance with the Certificate.
SECTION 5. Meetings.
(a) Annual Meetings. As soon as practicable after each annual election
of directors, the Board shall meet for the purpose of organization and the
transaction of other business, unless it shall have transacted all such
business by written consent pursuant to Section 6 of this Article III.
(b) Other Meetings. Other meetings of the Board shall be held at such
times and places as the Board, the Chairman, the President or any two
directors shall from time to time determine.
(c) Notice of Meetings. Notice shall be given to each director of each
meeting, including the time, place and purpose of such meeting. Notice of
each such meeting shall be mailed to each director, addressed to him at his
residence or usual place of business, at least two days
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before the date on which such meeting is to be held, or shall be sent to him at
such place by telegraph, cable, wireless or other form of recorded
communication, or be delivered personally or by telephone not later than the day
before the day on which such meeting is to be held, but notice need not be given
to any director who shall attend such meeting. A written waiver of notice,
signed by the person entitled thereto, whether before or after the time of the
meeting stated therein, shall be deemed equivalent to notice.
(d) Place of Meetings. The Board may hold its meetings at such place or
places within or outside the State of Delaware as the Board may from time to
time determine, or as shall be designated in the respective notices or waivers
of notice thereof.
(e) Quorum and Manner of Acting. A majority of the total number of
directors then in office shall be present in person at any meeting of the Board
in order to constitute a quorum for the transaction of business at such meeting,
and the vote of a majority of those directors present at any such meeting at
which a quorum is present shall be necessary for the passage of any resolution
or act of the Board, except as otherwise expressly required by law, the
Certificate or these By-laws. In the absence of a quorum for any such meeting, a
majority of the directors present thereat may adjourn such meeting from time to
time until a quorum shall be present. A director who is in attendance at a
meeting of the Board but who abstains from the vote on any matter by announcing
his abstention to the person acting as secretary of the meeting and not voting
on such matter shall not be deemed present at such meeting for purposes of the
preceding sentence with respect to such vote, but shall be deemed present at
such meeting for all other purposes.
(f) Organization. At each meeting of the Board, one of the following shall
act as chairman of the meeting and preside thereat, in the following order of
precedence:
(1) the Chairman;
(2) the President (if a director); or
(3) a person designated by the Board.
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary, if an Assistant Secretary has been appointed and is
present) whom the chairman of the meeting shall appoint shall act as secretary
of such meeting and keep the minutes thereof.
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SECTION 6. Directors' Consent in Lieu of Meeting. Unless otherwise
restricted by the Certificate or these By-laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by all the members
of the Board or committee, as the case may be, and such consent is filed with
the minutes of proceedings of the Board or committee.
SECTION 7. Action by Means of Conference Telephone or Similar
Communications Equipment. Any one or more members of the Board or any committee
thereof, may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting.
SECTION 8. Committees. The Board, by resolution adopted by a majority of
the whole Board, may designate one or more committees, each such committee to
consist of one or more directors. Except as expressly limited by law or the
Certificate, any such committee shall have and may exercise such powers as the
Board may determine and specify in the resolution designating such committee.
The Board, by resolution adopted by a majority of the whole Board, also may
designate one or more additional directors as alternate members of any such
committee to replace any absent or disqualified member of any meeting of the
committee, and at any time may change the membership of any committee or amend
or rescind the resolution designating the committee. In the absence or
disqualification of a member or alternate member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another director to act at the meeting in the place of any such absent or
disqualified member, provided that the director so appointed meets any
qualifications stated in the resolution designating the committee. Each
committee shall keep a record of proceedings and report the same to the Board to
such extent and in such form as the Board may require. Unless otherwise provided
in the resolution designating a committee, a majority of all of the members of
any such committee may select its Chairman, fix its rules or procedure, fix the
time and place of its meetings and specify what notice of meetings, if any,
shall be given.
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ARTICLE IV
Officers
--------
SECTION 1. Executive Officers. The principal officers of the Corporation
shall be a Chairman, a President, a Secretary and a Treasurer, and may include
such other officers as the Board may appoint pursuant to Section 3 of this
Article IV. Any two or more offices may be held by the same person.
SECTION 2. Authority and Duties. All officers, as between themselves and
the Corporation, shall have such authority and perform such duties in the
management of the Corporation as may be provided in these By-laws or, to the
extent so provided, by the Board.
SECTION 3. Other Officers. The Corporation may have such other officers,
agents and employees as the Board may deem necessary, including one or more
Assistant Secretaries, one or more Assistant Treasurers and one or more Vice-
presidents, each of whom shall hold office for such period, have such authority,
and perform such duties as the Board, the Chairman, or the President may from
time to time determine. The Board may delegate to any principal officer the
power to appoint and define the authority and duties of, or remove, any such
officers, agents or employees.
SECTION 4. Term of Office, Resignation and Removal. All officers shall be
elected or appointed by the Board and shall hold office for such term as may be
prescribed by the Board. Each officer shall hold office until his successor has
been elected or appointed and qualified or until his earlier death or
resignation or removal in the manner hereinafter provided. The Board may require
any officer to give security for the faithful performance of his duties.
Any officer may resign at any time by giving written notice to the Board,
the Chairman, the President or the Secretary. Such resignation shall take effect
at the time specified therein or, if the time be not specified, at the time it
is accepted by action of the Board. Except as aforesaid, the acceptance of such
resignation shall not be necessary to make it effective.
All officers and agents elected or appointed by the Board shall be subject
to removal at any time by the Board with or without cause, subject to any
agreements to the contrary.
SECTION 5. Vacancies. If the office of Chairman, President, Secretary or
Treasurer becomes vacant for any reason, the Board shall fill such vacancy, and
if any other office becomes vacant, the Board may fill such vacancy. Except as
otherwise provided in these By-laws, any officer so appointed or
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elected by the Board shall serve only until such time as the unexpired term of
his predecessor shall have expired unless reelected or reappointed by the Board.
SECTION 6. The Chairman. The Chairman shall be the chief executive officer
of the Corporation. He shall have general and active management and control of
the business and affairs of the Corporation subject to the control of the Board,
and shall see that all orders and resolutions of the Board are carried into
effect. The Chairman shall preside at meetings of the Board and of the
stockholders at which he is present, and shall give counsel and advice to the
Board and the officers of the Corporation on all subjects concerning the welfare
of the Corporation and the conduct of its business. He shall perform such other
duties as the Board may from time to time determine.
SECTION 7. The President. The President shall be the chief operating
officer and, in the event that the office of Chairman is or becomes vacant, the
chief executive officer of the Corporation. The President shall have general
charge and supervision of the operation of the business and affairs of the
Corporation. He shall from time to time make such reports of the affairs of the
Corporation as the Board may require and shall perform such other duties as may
from time to time be assigned to him by the Board or the Chairman.
SECTION 8. The Secretary. The Secretary shall, to the extent practicable,
attend all meetings of the Board and all meetings of the stockholders and shall
record the minutes of all proceedings in a book to be kept for that purpose. He
may give, or cause to be given, notice of all meetings of the stockholders and
of the Board, and shall perform such other duties as may be prescribed by the
Board, the Chairman or the President, under whose supervision he shall act. He
shall keep in safe custody the seal of the Corporation and affix the same to any
duly authorized instrument requiring it and, when so affixed, it may be attested
by his signature or by the signature of the Treasurer or, if appointed, an
Assistant Secretary or an Assistant Treasurer. The Board may give general
authority to any other officer to affix the seal of the Corporation and to
attest such affixing of the seal. He shall keep in safe custody the certificate
books and stockholder records and such other books and records as the Board may
direct, and shall perform all other duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the Board,
the Chairman or the President.
SECTION 9. The Treasurer. The Treasurer shall have the care and custody of
the corporate funds and other valuable effects, including securities, and shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the
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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. The Treasurer shall disburse the funds of the Corporation as may
be ordered by the Board, taking proper vouchers for such disbursements, and
shall render to the Chairman, President and directors, at the regular meetings
of the Board, or whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the Corporation, and
shall perform all other duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Board, the
Chairman or the President.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
----------------------------------------------
SECTION 1. Execution of Documents. The Board shall designate, by either
specific or general resolution, the officers, employees and agents of the
Corporation who shall have the power to execute and deliver deeds, contracts,
mortgages, bonds, debentures, checks, drafts and other orders for the payment of
money and other documents for and in the name of the Corporation, and may
authorize such officers, employees and agents to delegate such power (including
authority to redelegate) by written instrument to other officers, employees or
agents of the Corporation; and, unless so designated or expressly authorized by
these By-laws, no officer, employee or agent shall have any power or authority
to bind the Corporation by any contract or engagement, to pledge its credit or
to render it liable pecuniarily for any purpose or to any amount.
SECTION 2. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation or
otherwise as the Board or Treasurer, or any other officer of the Corporation to
whom power in this respect shall have been given by the Board, shall select.
SECTION 3. Proxies in Respect of Stock or Other Securities of Other
Corporations. The Board shall designate the officers of the Corporation who
shall have authority from time to time to appoint an agent or agents of the
Corporation to exercise in the name and on behalf of the Corporation the powers
and rights which the Corporation may have as the holder of stock or other
securities in any other corporation, and to vote or consent in respect of such
stock or securities. Such designated officers may instruct the person or
persons so appointed as to the manner of exercising such powers and rights, and
such designated officers may execute or cause to be executed in the name and on
behalf of the Corporation and under its corporate seal or otherwise, such
written proxies, powers of attorney or other
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instruments as they may deem necessary or proper in order that the Corporation
may exercise its said powers and rights.
ARTICLE VI
Shares and Their Transfer; Fixing Record Date
---------------------------------------------
SECTION 1. Certificates for Shares. Every owner of stock of the Corporation
shall be entitled to have a certificate certifying the number and class of
shares owned by him in the Corporation, which shall be in such form as shall be
prescribed by the Board. The Board may provide by resolution or resolutions that
some or all of any or all classes or series of the Corporation's stock shall be
uncertificated shares. Each certificate for shares shall be numbered and issued
in consecutive order. Certificates of stock in the Corporation, if any, shall be
signed by, or in the name of, the Corporation by the Chairman, or the President
or any Vice President and by the Treasurer (or an Assistant Treasurer, if
appointed) or the Secretary (or an Assistant Secretary, if appointed). Where a
certificate is countersigned by a transfer agent, other than the Corporation or
an employee of the Corporation, or by a registrar, the signatures of the
Chairman or the President or a Vice President and the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary may be facsimiles. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, the
certificate may be issued by the Corporation with the same effect as if such
officer, transfer agent or registrar were such officer, transfer agent or
registrar at the date of its issue.
SECTION 2. Transfer of Stock.
(a) The transfer of stock and certificates of stock which represent
the stock of the Corporation shall be governed by Article 8 of Subtitle I
of Title 6 of the Delaware Code (the Uniform Commercial Code), as amended
from time to time.
(b) Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it
shall be the duty of the Corporation to issue a new certificate of stock or
uncertificated shares in place of any certificate therefor issued by the
Corporation to the person entitled thereto, cancel the old certificate and
record the transaction in its stock transfer books.
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SECTION 3. Addresses of Stockholders. Each stockholder shall designate to
the Secretary an address at which notices of meetings and all other corporate
notices may be served or mailed to him, and, if any stockholder shall fail to
designate such address, corporate notices may be served upon him by mail
directed to him at his post office address, if any, as the same appears on the
share record books of the Corporation or at his last known post office address.
SECTION 4. Replacement. In case of the loss, destruction, mutilation or
theft of a certificate for any stock of the Corporation, a new certificate of
stock or uncertificated shares in place of any certificate therefor issued by
the Corporation may be issued upon satisfactory proof of such loss, destruction,
mutilation or theft and upon such terms as the Board of Directors may prescribe.
The Board of Directors may in its discretion require the owner of the lost,
destroyed, mutilated or stolen certificate, or his legal representative, to give
the Corporation a bond, in such sum and in such form and with such surety or
sureties as it may direct, to indemnify the Corporation against any claim that
may be made against it with respect to the certificate alleged to have been
lost, destroyed, mutilated or stolen.
SECTION 5. Regulations. The Board may make such rules and regulations as
it may deem expedient, not inconsistent with these By-laws, concerning the
issue, transfer and registration of certificates for stock of the Corporation.
SECTION 6. Fixing Date for Determination of Stockholders of Record.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date
is adopted by the Board, and which record date shall be not more than 60
nor less than 10 days before the date of such meeting. If no record date is
fixed by the Board, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is given, or,
if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
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(b) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of
business on the day on which the Board adopts the resolution relating
thereto.
ARTICLE VII
Seal
----
The Board may provide a corporate seal, which shall be in the form of a
circle and shall bear the full name of the Corporation and the words and figures
"Corporate Seal - 1988 Delaware." The seal may be used by causing it or a
facsimile thereof, to be impressed or affixed or in any other manner reproduced.
ARTICLE VIII
Fiscal Year
-----------
The fiscal year of the Corporation shall be the calendar year unless
otherwise determined by the Board.
ARTICLE IX
Indemnification and Insurance
-----------------------------
SECTION 1. Indemnification.
(a) 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, including all appeals (other than an
action, suit or proceeding by or in the right of the Corporation) by reason
of the fact that he is or was a director or officer of the Corporation (and
the Corporation, in the discretion of the Board, may so indemnify a person
by reason of the fact that he is or was an employee or agent of the
Corporation or is or was serving at the request of the Corporation in any
other capacity for or on behalf of the Corporation), against expenses
(including attorneys' fees), judgments, decrees, fines, penalties and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted
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in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful; provided, however, the Corporation shall be required
to indemnify an officer or director in connection with an action, suit or
proceeding initiated by such person only if such action, suit or proceeding
was authorized by the Board. 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 or in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) 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, including all appeals, 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 or officer of the Corporation (and the Corporation,
in the discretion of the Board, may so indemnify a person by reason of the
fact that he is or was an employee or agent of the Corporation or is or was
serving at the request of the Corporation in any other capacity for or on
behalf of the Corporation), 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 finally
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 in
which such action or suit was brought, or any other court of competent
jurisdiction, 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 as such court shall deem proper. Notwithstanding the foregoing,
the Corporation shall be required to indemnify an officer or director in
connection with an action, suit or proceeding initiated by such person only
if such action, suit or proceeding was authorized by the Board.
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(c) 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 subsections (a) and (b) of
this Section 1, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
(d) Except in a situation governed by subsection (c) of this Section
1, any indemnification under subsections (a) and (b) of this Section 1
(unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this Section 1. Such determination shall be made
(1) by the Board by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) 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
(3) by the stockholders. The determination required by clauses (1) and (2)
of this subsection (d) may in either event be made by the written consent
of the majority required by each clause.
(e) Expenses (including attorneys' fees) of each officer and directory
hereunder indemnified actually and reasonably incurred in defending any
civil, criminal, administrative or investigative action, suit or proceeding
or threat thereof shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in the Article. Such expenses (including
attorneys' fees) incurred by employees and agents may be so paid upon the
receipt of the aforesaid undertaking and such terms and conditions, if any,
as the Board deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article IX shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of
expenses may be entitled under any law, by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding
such office.
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(g) For purposes of this Article IX, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article IX with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(h) For purposes of this Article IX, references to "other capacities"
shall include serving as a trustee or agent for any employee benefit plan;
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person
with respect to an 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 IX.
(i) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article IX shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(j) The right to indemnification conferred by this Article IX shall be
deemed to be a contract between the Corporation and each person referred to
herein until amended or repealed, but no amendment to or repeal of these
provisions shall apply to or have any effect on the right to
indemnification of any person with respect to any liability or alleged
liability of such person for or with respect to
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any act or omission of such person occurring prior to such amendment or
repeal.
SECTION 2. Insurance. 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 the General Corporation Law of the State
of Delaware.
ARTICLE X
Amendment
---------
These By-laws may be altered, amended or repealed or new By-laws may be
adopted by the Board, subject to the provisions of these By-laws and the
Certificate. The fact that the power to amend, alter, repeal or adopt the By-
laws has been conferred upon the Board shall not divest the stockholders of the
same powers.
-18-
<PAGE>
Exhibit 4.1
================================================================================
Jordan Telecommunication Products, Inc.
----------------------------
SERIES A AND SERIES B
9 7/8% SENIOR NOTES DUE 2007
----------------------------
------------------
INDENTURE
DATED AS OF JULY 25, 1997
------------------
FIRST TRUST NATIONAL ASSOCIATION
Trustee
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE............................ 1
SECTION 1.1 DEFINITIONS................................................. 25
SECTION 1.2 OTHER DEFINITIONS........................................... 26
SECTION 1.3 INCORPORATION BY
REFERENCE OF
TRUST INDENTURE ACT.................................... 26
SECTION 1.4 RULES OF CONSTRUCTION....................................... 26
ARTICLE 2
THE SENIOR NOTES.......................... 27
SECTION 2.1 FORM AND DATING............................................. 28
SECTION 2.2 EXECUTION AND AUTHENTICATION................................ 29
SECTION 2.3 REGISTRAR AND PAYING AGENT.................................. 29
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST......................... 30
SECTION 2.5 HOLDER LISTS................................................ 40
SECTION 2.6 TRANSFER AND EXCHANGE....................................... 40
SECTION 2.7 REPLACEMENT SENIOR NOTES.................................... 41
SECTION 2.8 OUTSTANDING SENIOR NOTES.................................... 41
SECTION 2.9 TREASURY SENIOR NOTES....................................... 41
SECTION 2.10 TEMPORARY SENIOR NOTES...................................... 42
SECTION 2.11 CANCELLATION................................................ 42
SECTION 2.12 DEFAULTED INTEREST.......................................... 42
SECTION 2.13 RECORD DATE................................................. 43
SECTION 2.14 CUSIP NUMBER................................................ 44
ARTICLE 3
OPTIONAL REDEMPTION AND
MANDATORY OFFERS TO PURCHASE.................... 45
SECTION 3.1 NOTICES TO TRUSTEE.......................................... 46
SECTION 3.2 SELECTION OF
SENIOR NOTES TO BE
REDEEMED OR PURCHASED.................................. 46
SECTION 3.3 NOTICE OF REDEMPTION........................................ 47
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.............................. 47
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE................................. 48
SECTION 3.6 SENIOR NOTES REDEEMED IN PART............................... 51
SECTION 3.7 OPTIONAL REDEMPTION PROVISIONS.............................. 51
SECTION 3.8 MANDATORY PURCHASE PROVISIONS............................... 53
ARTICLE 4
COVENANTS.............................. 54
SECTION 4.1 PAYMENT OF SENIOR NOTES..................................... 54
SECTION 4.2 SEC REPORTS................................................. 59
SECTION 4.3 COMPLIANCE CERTIFICATE...................................... 59
SECTION 4.4 STAY, EXTENSION AND USURY LAWS.............................. 60
SECTION 4.5 LIMITATION ON RESTRICTED PAYMENTS........................... 62
SECTION 4.6 CORPORATE EXISTENCE......................................... 62
SECTION 4.7 LIMITATION ON INCURRENCE OF INDEBTEDNESS.................... 63
SECTION 4.8 LIMITATION ON TRANSACTIONS WITH AFFILIATES.................. 64
SECTION 4.9 LIMITATION ON LIENS......................................... 65
SECTION 4.10 COMPLIANCE WITH LAWS, TAXES................................. 66
SECTION 4.11 LIMITATION ON
DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES................................ 68
SECTION 4.12 MAINTENANCE OF OFFICE OR AGENCIES........................... 69
SECTION 4.13 CHANGE OF CONTROL........................................... 71
SECTION 4.14 LIMITATION ON ASSET SALES................................... 72
SECTION 4.15 LIMITATION ON
GUARANTEES OF COMPANY IN
DEBTEDNESS BY RESTRICTED
SUBSIDIARIES........................................... 72
SECTION 4.16 DESIGNATION OF RESTRICTED
AND NON-RESTRICTED
SUBSIDIARIES........................................... 75
ARTICLE 5
SUCCESSORS............................. 76
SECTION 5.1 MERGER OR CONSOLIDATION..................................... 76
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED........................... 76
</TABLE>
ii
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<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 6
DEFAULTS AND REMEDIES........................ 77
SECTION 6.1 EVENTS OF DEFAULT............................................ 77
SECTION 6.2 ACCELERATION................................................. 77
SECTION 6.3 OTHER REMEDIES............................................... 78
SECTION 6.4 WAIVER OF PAST DEFAULTS...................................... 79
SECTION 6.5 CONTROL BY MAJORITY.......................................... 79
SECTION 6.6 LIMITATION ON SUITS.......................................... 80
SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT......................... 81
SECTION 6.8 COLLECTION SUIT BY TRUSTEE................................... 82
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM............................. 82
SECTION 6.10 PRIORITIES................................................... 83
SECTION 6.11 UNDERTAKING FOR COSTS........................................ 83
ARTICLE 7
TRUSTEE................................ 84
SECTION 7.1 DUTIES OF TRUSTEE............................................ 85
SECTION 7.2 RIGHTS OF TRUSTEE............................................ 86
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE................................. 86
SECTION 7.4 TRUSTEE'S DISCLAIMER......................................... 87
SECTION 7.5 NOTICE TO HOLDERS OF
DEFAULTS AND EVENTS OF
DEFAULT................................................. 87
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS................................ 88
SECTION 7.7 COMPENSATION AND INDEMNITY................................... 90
SECTION 7.8 REPLACEMENT OF TRUSTEE....................................... 90
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC............................. 91
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION................................ 91
SECTION 7.11 PREFERENTIAL COLLECTION OF
CLAIMS AGAINST THE
COMPANY................................................. 92
ARTICLE 8
DISCHARGE OF INDENTURE....................... 92
SECTION 8.1 DISCHARGE OF LIABILITY ON
SENIOR NOTES; DEFEASANCE................................ 94
SECTION 8.2 CONDITIONS TO DEFEASANCE..................................... 94
SECTION 8.3 APPLICATION OF TRUST MONEY................................... 95
</TABLE>
iii
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<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 8.4 REPAYMENT TO THE COMPANY.................................... 95
SECTION 8.5 INDEMNITY FOR GOVERNMENT OBLIGATIONS........................ 96
SECTION 8.6 REINSTATEMENT............................................... 96
ARTICLE 9
AMENDMENTS............................. 97
SECTION 9.1 AMENDMENTS AND SUPPLEMENTS
PERMITTED WITHOUT CONSENT
OF HOLDERS............................................. 97
SECTION 9.2 AMENDMENTS AND SUPPLEMENTS
REQUIRING CONSENT OF
HOLDERS................................................ 98
SECTION 9.3 COMPLIANCE WITH TIA......................................... 98
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS........................... 99
SECTION 9.5 NOTATION ON OR EXCHANGE OF SENIOR NOTES..................... 99
SECTION 9.6 TRUSTEE PROTECTED........................................... 99
ARTICLE 10
MISCELLANEOUS............................ 99
SECTION 10.1 TRUST INDENTURE ACT CONTROLS................................ 99
SECTION 10.2 NOTICES..................................................... 100
SECTION 10.3 COMMUNICATION BY
HOLDERS WITH
OTHER HOLDERS.......................................... 100
SECTION 10.4 CERTIFICATE AND OPINION AS TO
CONDITIONS PRECEDENT................................... 100
SECTION 10.5 STATEMENTS REQUIRED IN
CERTIFICATE OR OPINION................................. 100
SECTION 10.6 RULES BY TRUSTEE AND AGENTS................................. v
SECTION 10.7 LEGAL HOLIDAYS....................................................
SECTION 10.8 NO RECOURSE AGAINST OTHERS........................................
SECTION 10.9 COUNTERPARTS......................................................
SECTION 10.10 VARIABLE PROVISIONS...............................................
SECTION 10.11 GOVERNING LAW.....................................................
</TABLE>
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SECTION 10.12 NO ADVERSE INTERPRETATION OF
OTHER AGREEMENTS.......................................
SECTION 10.13 SUCCESSORS..................................................
SECTION 10.14 SEVERABILITY................................................
SECTION 10.15 TABLE OF CONTENTS, HEADINGS, ETC............................
EXHIBIT A FORM OF SENIOR NOTE.........................................
EXHIBIT B CERTIFICATE TO BE DELIVERED UPON
EXCHANGE OR REGISTRATION OF
TRANSFER OF SENIOR NOTES...............................
EXHIBIT C FORM OF CERTIFICATE TO BE DELIVERED
BY INSTITUTIONAL ACCREDITED INVESTORS..................
</TABLE>
v
<PAGE>
CROSS-REFERENCE TABLE
Trust Indenture
Act Section................................................. Indenture Section
310(a)(1)................................................... 7.10
(a)(2)................................................ 7.10
(a)(3)................................................ N.A.
(a)(4)................................................ N.A.
(a)(5)................................................. 7.10
(b)................................................... 7.10
(c)................................................... N.A.
311(a)...................................................... 7.11
(b)................................................... 7.11
(c)................................................... N.A.
312(a)...................................................... 2.5
(b)................................................... 10.3
(c)................................................... 10.3
313(a)...................................................... 7.6
(b)(1)................................................ N.A.
(b)(2)................................................ 7.6; 10.2
(c)................................................... 7.6
(d)................................................... 7.6
314(a)...................................................... 4.2; 10.2
(a)(1)................................................ N.A.
(a)(2)................................................ N.A.
(a)(3)................................................ N.A.
(a)(4)................................................ 10.5
(b)................................................... N.A.
(c)(1)................................................ 10.4
(c)(2)................................................ 10.4
(c)(3)................................................ N.A.
(d)................................................... N.A.
(e)................................................... 10.5
(f)................................................... N.A.
315(a)...................................................... 7.1
(b)................................................... 7.5
(c)................................................... 7.1
(d)................................................... 7.1
(e)................................................... 6.11
316(a)(last sentence)....................................... 2.9
(a)(1)(A)............................................. 6.5
(a)(1)(B)............................................. 6.4
(a)(2)................................................ N.A.
(b)................................................... 6.4; 6.7
(c)................................................... 2.13
317(a)(1)................................................... 6.8
(a)(2)................................................ 6.9
(b)................................................... 2.4
318(a)...................................................... 10.1
vi
0132099.01-New York Server 7a Draft July 18, 1997 - 2:31 pm
<PAGE>
This Indenture, dated as of July 25, 1997, is between Jordan
Telecommunication Products, Inc., a Delaware corporation (the "Company"), and
First Trust National Association, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the holders of the Company's 9 7/8% Series A Senior
Notes due 2007 (the "Series A Senior Notes") and the Company's 9 7/8% Series B
Senior Notes due 2007 (the "Series B Senior Notes," and, together with the
Series A Senior Notes, the "Senior Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1 DEFINITIONS.
"Accreted Value" means with respect to any Discount Note (i) as of any date
prior to August 1, 2000, the sum of (a) the initial offering price of the
Discount Notes, and (b) the portion of the original issue discount on such
Discount Note (which for this purpose shall be deemed to be the excess of the
principal amount over the initial offering price) that has been amortized with
respect to such Discount Note through such date, such original issue discount to
be amortized at the rate of 11 3/4% per annum (such percentage being expressed
as a percentage of the sum of the initial offering price plus previously
amortized original issue discount) using semi-annual compounding of such rate on
each August 1 and February 1, commencing from the date of original issuance of
the Discount Notes through such date, and (ii) on and after August 1, 2000 the
principal amount of such Discount Note.
"Affiliate" means any of the following: (i) any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, (ii) any spouse, immediate family member or other
relative who has the same principal residence as any Person described in clause
(i) above, (iii) any trust in which any such Persons described in clause (i) or
(ii) above has a beneficial interest, and (iv) any corporation or other
organization of which any such Persons described
<PAGE>
above collectively own 50% or more of the equity of such entity.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means the sale, lease, conveyance or other disposition by the
Company or a Restricted Subsidiary of assets or property whether owned on the
date of original issuance of the Senior Notes or thereafter acquired, in a
single transaction or in a series of related transactions, that are outside of
the ordinary course of business of the Company or such Restricted Subsidiary;
provided that Asset Sales will not include such sales, leases, conveyances or
dispositions in connection with (i) the sale or disposition of any Restricted
Investment, (ii) the sale or lease of equipment, inventory, accounts receivable
or other assets in the ordinary course of business, (iii) Receivables
Financings, (iv) the surrender or waiver of contract rights or the settlement,
release or surrender of contract, tort or other claims of any kind, (v) the
grant of any license of patents, trademarks, registration therefor and other
similar intellectual property, (vi) a transfer of assets by the Company or a
Restricted Subsidiary to any of the Company, a Restricted Subsidiary or a Non-
Restricted Subsidiary, (vii) the designation of a Restricted Subsidiary as a
Non-Restricted Subsidiary pursuant to Section 4.16, other than a Subsidiary
excluded from the definition of Restricted Subsidiary by clause (ii)(B) of such
definition, (viii) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company as permitted under Section 5.l,
or (ix) Restricted Payments permitted by Section 4.5.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
"Business Day" means any day other than a Legal Holiday.
2
<PAGE>
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, including any
preferred stock.
"Cash Flow" means, for any given period and Person, the sum of, without
duplication, Consolidated Net Income, plus (a) the portion of Net Income
attributable to the minority interests in its Subsidiaries, to the extent not
included in calculating Consolidated Net Income, plus (b) provision for taxes
based on income or profits to the extent such income or profits were included in
computing Consolidated Net Income, plus (c) Consolidated Interest Expense, to
the extent deducted in computing Consolidated Net Income, plus (d) the
amortization of all intangible assets, to the extent such amortization was
deducted in computing Consolidated Net Income (including, but not limited to,
inventory write-ups, goodwill, debt and financing costs, and Incentive
Arrangements), plus (e) any non-capitalized transaction costs incurred in
connection with financings, acquisitions or dispositions (including, but not
limited to, financing and refinancing fees, including those in connection with
the Offering and the Company Formation, in each case, to the extent deducted in
computing Consolidated Net Income), plus (f) all depreciation and all other non-
cash charges, to the extent deducted in computing Consolidated Net Income, plus
(g) interest income, to the extent such income was not included in computing
Consolidated Net Income, plus (h) all dividend payments on preferred stock
(whether or not paid in cash) to the extent deducted in computing Consolidated
Net Income, plus (i) any extraordinary or non-recurring charge or expense
arising out of the implementation of SFAS 106 or SFAS 109 to the extent deducted
in computing Consolidated Net Income, plus (j) to the extent not covered in
clause (e) above, fees paid or payable in respect of the New TJC Management
Consulting Agreement to the extent deducted in computing Consolidated Net
Income, plus (k) the net loss of any Person, other than those of a Restricted
Subsidiary, to the extent deducted in computing Consolidated Net Income, plus
(1) net losses in respect of any discontinued operations as determined in
accordance with GAAP, to the extent deducted in computing Consolidated Net
Income; provided, however, that if any such calculation includes any period
during which an acquisition or sale of a Person or the incurrence or repayment
of Indebtedness
3
<PAGE>
occurred, then such calculation for such period shall be made on a Pro Forma
Basis.
"Cash Flow Coverage Ratio" means, for any given period and Person, the
ratio of: (i) Cash Flow, divided by (ii) the sum of Consolidated Interest
Expense and the amount of all dividend payments on any series of preferred
stock of such Person (except for dividends paid or payable in additional shares
of Capital Stock (other than Disqualified Stock)), in each case, without
duplication; provided, however, that if any such calculation includes any period
during which an acquisition or sale of a Person or the incurrence or repayment
of Indebtedness occurred, then such calculation for such period shall be made on
a Pro Forma Basis.
"Change of Control" means the occurrence of any of the following: (i) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), excluding the Jordan Stockholders, is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total Voting Stock of the Company; or (ii) the Company
consolidates with, or merges with or into, another Person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where (A) the
outstanding Voting Stock of the Company is converted into or exchanged for (1)
Voting Stock (other than Disqualified Stock) of the surviving or transferee
corporation or (2) cash, securities and other property in an amount which could
be paid by the Company as a Restricted Payment under the Indenture and (B)
immediately after such transaction no "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), excluding the Jordan
Stockholders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securi-
4
<PAGE>
ties that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the surviving or
transferee corporation; or (iii) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of a majority of the directors then still in
office who are entitled to vote to elect such new director and were either
directors at the beginning of such period or Persons whose election as directors
or nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
"Commission" means the Securities and Exchange Commission.
"Company" means Jordan Telecommunication Products, Inc., a Delaware
corporation.
"Company Formation" means the formation of the Company by the Company's
management and stockholders of Jordan Industries, Inc. and certain of their
affiliates in connection with an overall recapitalization and refinancing of
Jordan Industries, Inc.
"Consolidated Interest Expense" means, for any given period and Person, the
aggregate of the interest expense in respect of all Indebtedness of such Person
and its Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP (including amortization of original issue discount on any
such Indebtedness, all non-cash interest payments, the interest portion of any
deferred payment obligation and the interest component of capital lease
obligations, but excluding amortization of deferred financing fees if such
amortization would otherwise be included in interest expense); provided,
however, that for the purpose of the Cash Flow Coverage Ratio, Consolidated
Interest Expense shall be calculated on a Pro Forma Basis; provided further,
that any premiums, fees and expenses (including the amortization thereof)
payable in connection with the Offering and the Company Formation and the
application of the net proceeds
5
<PAGE>
therefrom or any other refinancing of Indebtedness will be excluded.
"Consolidated Net Income" means, for any given period and Person, the
aggregate of the Net Income of such Person and its Subsidiaries for such period,
on a consolidated basis, determined in accordance with GAAP; provided, however,
that: (i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, and (ii) Consolidated Net Income of any Person will not include,
without duplication, any deduction for: (A) any increased amortization or
depreciation resulting from the write-up of assets pursuant to Accounting
Principles Board Opinion Nos. 16 and 17, as amended or supplemented from time to
time, (B) the amortization of all intangible assets (including amortization
attributable to inventory write-ups, goodwill, debt and financing costs, and
Incentive Arrangements), (C) any non-capitalized transaction costs incurred in
connection with financings, acquisitions or divestitures (including, but not
limited to, financing and refinancing fees), (D) any extraordinary or
nonrecurring charges relating to any premium or penalty paid, write-off of
deferred financing costs, or other financial recapitalization charges in
connection with redeeming or retiring any Indebtedness prior to its stated
maturity, and (E) any Restructuring Charges; provided, however, that for
purposes of determining the Cash Flow Coverage Ratio, Consolidated Net Income
shall be calculated on a Pro Forma Basis.
"Consolidated Net Worth" with respect to any Person means, as of any date,
the consolidated equity of the common stockholders of such Person (excluding the
accumulated foreign currency translation adjustment), all determined on a
consolidated basis in accordance with GAAP, but without any reduction in respect
of the payment of dividends on any series of such Person's preferred stock if
such dividends are paid in additional shares of Capital Stock (other than
Disqualified Stock); provided, however, that Consolidated Net Worth shall also
include, without duplication: (a) the amortization of all write-ups of
inventory, (b) the amortization of all intangible assets (including amortization
of goodwill, debt and financing costs, and Incentive Arrangements), (c) any non-
capitalized transaction costs incurred in connection with financings,
acquisitions or divestitures (including,
6
<PAGE>
but not limited to, financing and refinancing fees), (d) any increased
amortization or depreciation resulting from the write-up of assets pursuant to
Accounting Principles Board Opinion Nos. 16 and 17, as amended and supplemented
from time to time, (e) any extraordinary or nonrecurring charges or expenses
relating to any premium or penalty paid, write-off of deferred financing costs,
or other financial recapitalization charges incurred in connection with
redeeming or retiring any Indebtedness prior to its stated maturity, (f) any
Restructuring Charges, and (g) any extraordinary or non-recurring charge arising
out of the implementation of SFAS 106 or SFAS 109; provided, however, that in
determining Consolidated Net Worth for purposes of Section 5.1, Consolidated Net
Worth shall be calculated on a Pro Forma Basis.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Definitive Senior Notes" means Senior Notes that are in the form of
Exhibit A attached hereto (but without including the text referred to in
footnotes 1 and 2 thereto).
"Depositary" means, with respect to the Senior Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.3 hereof as
the Depositary with respect to the Senior Notes, until a successor shall have
been appointed and become such pursuant to Section 2.6 of this Indenture, and,
thereafter, "Depositary" shall mean or include such successor.
"Discount Notes" means the 11 3/4% Senior Discount Notes due 2007 of the
Company.
"Discount Notes Indenture" means the indenture, dated July 25, 1997,
between the Company and First Trust National Association, as trustee, relating
to the Discount Notes, as such indenture may be amended or supplemented from
time to time.
"Disqualified Stock" means any Capital Stock that by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder
7
<PAGE>
thereof, in whole or in part on, or prior to, the maturity date of the Senior
Notes.
"Dura-Line Agreement" means the Preferred Stock Agreement among Dura-Line
Corporation and certain other persons, as in effect on the date of the original
issuance of the Senior Notes.
"Dura-Line Preferred Stock" means the 187.5 shares outstanding of Dura-Line
Corporation's 7% cumulative preferred stock with an aggregate liquidation
preference of $1.9 million issued to former common stockholders of Dura-Line
Corporation.
"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible into or
exchangeable for, Capital Stock or partnership interests, and (ii) any other
Indebtedness or Obligation) provided, however, that Equity Interests will not
include any Incentive Arrangements or obligations or payments thereunder.
"Equity Offering" means a public or private offering by the Company and/or
its Subsidiaries for cash of Capital Stock or other Equity Interests and all
warrants, options or other rights to acquire Capital Stock, other than (i) an
offering of Disqualified Stock or (ii) Incentive Arrangements or obligations or
payments thereunder.
"Exchange Offer" means the offer by the Company to Holders to exchange
Series B Senior Notes for Series A Senior Notes.
"GAAP" means generally accepted accounting principles, consistently
applied, as of the date of original issuance of the Senior Notes. All financial
and accounting determinations and calculations under the Indenture will be made
in accordance with GAAP.
"Global Senior Note" means a Senior Note that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 2
to the form of the Senior Note attached hereto as Exhibit A.
8
<PAGE>
"Hedging Obligations" means, with respect to any Person, the Obligations of
such Persons under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements, and (iii) other
agreements or arrangements designed to protect such Person against fluctuations,
or otherwise to establish financial hedges in respect of exchange rates,
currency rates or interest rates.
"Holder" means a Person in whose name a Senior Note is registered.
"Incentive Arrangements" means any earn-out agreements, stock appreciation
rights, "phantom" stock plans, employment agreements, non-competition
agreements, subscription and stockholders agreements and other incentive and
bonus plans and similar arrangements made in connection with acquisitions of
Persons or businesses by the Company or any Restricted Subsidiary or the
retention of executives, officers or employees by the Company or any Restricted
Subsidiary.
"Indebtedness" means, with respect to any Person, any indebtedness, whether
or not contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the balance deferred and unpaid
of the purchase price of any property (including pursuant to capital leases),
except any such balance that constitutes an accrued expense or a trade payable,
and any Hedging Obligations, if and to the extent such indebtedness (other than
a Hedging Obligation) would appear as a liability upon a balance sheet of such
Person prepared on a consolidated basis in accordance with GAAP, and also
includes, to the extent not otherwise included, the guarantee of items which
would be included within this definition; provided, however, that "Indebtedness"
will not include any Incentive Arrangements or obligations or payments
thereunder.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy or similar case or proceeding,
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or any reorganization, receivership, liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, or (ii) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of the
Company.
"Investment" means any capital contribution to, or other debt or equity
investment in, any Person.
"Issue" means create, issue, assume, guarantee, incur or otherwise become
directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
issued by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary. For this definition, the terms "issuing," "issuer," "issuance" and
"issued" have meanings correlative to the foregoing.
"Jordan Stockholders" means John W. Jordan, II, and/or his heirs, executors
and administrators, The John W. Jordan, II Revocable Trust, The Jordan Family
Trust and/or any other trust established by John W. Jordan, II whose
beneficiaries are John W. Jordan, II and/or his lineal descendants or other
relatives, Jordan Industries, Inc., The Jordan Company and Jordan/Zalaznick
Capital Corporation and their respective affiliates, principals, partners and
employees, family members of any of the foregoing and trusts for the benefit of
any of the foregoing, including, without limitation, MCIT PLC and Leucadia
National Corporation and their respective Subsidiaries.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the city in which the principal corporate
trust office of the Trustee is located or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
10
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"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 4 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, excluding, however, any gain
or loss, together with any related provision for taxes, realized in connection
with any Asset Sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate amount
of cash proceeds (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, and including
any amounts received as disbursements or withdrawals from any escrow or similar
account established in connection with any such Asset Sale, but, in either such
case, only as and when so received) received by the Company or any of its
Restricted Subsidiaries in respect of such Asset Sale, net of: (i) the cash
expenses of such Asset Sale (including, without limitation, the payment of
principal, premium, if any, and interest on, Indebtedness required to be paid as
a result of such Asset Sale (other than the Senior Notes) and legal, accounting,
management, advisory and investment banking fees and sales commissions), (ii)
taxes paid or payable as a result thereof, (iii) any portion of cash proceeds
that the Company determines in good faith should be reserved for post-closing
adjustments, it being understood and agreed that on the day that all such post-
closing adjustments have been determined, the amount (if any) by which the
reserved amount in respect of such Asset Sale exceeds the actual postclosing
adjustments
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payable by the Company or any of its Restricted Subsidiaries shall constitute
Net Proceeds on such date, (iv) any relocation expenses and pension, severance
and shutdown costs incurred as a result thereof, and (v) any deduction or
appropriate amounts to be provided by the Company or any of its Restricted
Subsidiaries as a reserve in accordance with GAAP against any liabilities
associated with the asset disposed of in such transaction and retained by the
Company or such Restricted Subsidiary after such sale or other disposition
thereof, including, without limitation, pension and other post-employment
benefit liabilities and liabilities related to environmental matters or against
any indemnification obligations associated with such transaction.
"New Credit Agreement" means the credit agreement, dated the date hereof,
entered into by certain of the Company's Restricted Subsidiaries and certain
other subsidiaries and the lenders party thereto in their capacities as
lenders thereunder and BankBoston, N.A., as agent, together with all loan
documents and instruments thereunder (including, without limitation, any
guarantee agreements, including the guarantee by the Company, and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including, without limitation, increasing
the amount of available borrowings thereunder, and all Obligations with respect
thereto, in each case, to the extent permitted by Section 4.7, or adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"New Subsidiary Advisory Agreement" means the advisory agreement, dated
July 25, 1997, between the Company and each of its Subsidiaries and Jordan
Industries, as in effect on the date of the original issuance of the Senior
Notes.
"New Subsidiary Consulting Agreement" means the management consulting
agreement, dated July 25, 1997, between the Company and each of its
Subsidiaries and Jordan
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Industries, as in effect on the date of the original issuance of the Senior
Notes.
"New TJC Management Consulting Agreement" means the Management Consulting
Agreement, dated as of July 25, 1997, between the Company and TJC Management
Corporation, as in effect on the date of original issuance of the Senior Notes.
"Non-Restricted Subsidiary" means any Subsidiary of the Company, other than
a Restricted Subsidiary.
"Obligations" means, with respect to any Indebtedness, all principal,
interest, premium, penalties, fees, indemnities, expenses (including legal fees
and expenses), reimbursement obligations and other liabilities payable to the
holder of such Indebtedness under the documentation governing such Indebtedness,
and any other claims of such holder arising in respect of such Indebtedness.
"Offering" means the offer and sale of, among other securities, the Senior
Notes as contemplated by the Offering Circular.
"Offering Circular" means the Offering Circular, dated July 21, 1997,
relating to the Company's offering and placement of, among other securities, the
Senior Notes.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Section 10.4
hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 10.5 hereof.
The
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counsel may be an employee of or counsel to the Company, any Subsidiary of the
Company or the Trustee.
"Other Permitted Indebtedness" means: (i) Indebtedness of the Company and
its Restricted Subsidiaries existing as of the date of original issuance of the
Senior Notes and all related Obligations as in effect on such date (including
the Senior Notes and the Discount Notes); (ii) Indebtedness of the Company and
its Restricted Subsidiaries in respect of bankers acceptances and letters of
credit (including, without limitation, letters of credit in respect of workers'
compensation claims) issued in the ordinary course of business, or other
Indebtedness in respect to reimbursement-type obligations regarding workers'
compensation claims; (iii) Refinancing Indebtedness, provided that: (A) the
principal amount of such Refinancing Indebtedness shall not exceed the
outstanding principal amount of Indebtedness (including unused commitments) so
extended, refinanced, renewed, replaced, substituted or refunded plus any
amounts incurred to pay premiums, fees and expenses in connection therewith, (B)
the Refinancing Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed, replaced, substituted or
refunded; and (C) in the case of Refinancing Indebtedness of Subordinated
Indebtedness, such Refinancing Indebtedness shall be subordinated to the Senior
Notes at least to the same extent as the Subordinated Indebtedness being
extended, refinanced, renewed, replaced, substituted or refunded; (iv) inter-
company Indebtedness of and among the Company and its Restricted Subsidiaries
(excluding guarantees by Restricted Subsidiaries of Indebtedness of the Company
not issued in compliance with Section 4.15); (v) Indebtedness of the Company and
its Restricted Subsidiaries incurred in making permitted Restricted Payments
under Section 4.5(b)(iv), (v) and (viii); (vi) Indebtedness of any Non-
Restricted Subsidiary created after the date of original issuance of the Senior
Notes, provided that such Indebtedness is nonrecourse to the Company and its
Restricted Subsidiaries and neither the Company nor any of its Restricted
Subsidiaries have any Obligations with respect to such Indebtedness; (vii)
Indebtedness of the Company and its Restricted Subsidiaries under Hedging
Obligations; (viii) Indebtedness of the Company and its Restricted Subsidiaries
arising from the honoring by a bank
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or other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts, which will not be, and
will not be deemed to be, inadvertent) drawn against insufficient funds in the
ordinary course of business; (ix) Indebtedness of any Person at the time it is
acquired as a Restricted Subsidiary, provided that such Indebtedness was not
issued by such Person in connection with or in anticipation of such acquisition
and that such Indebtedness is nonrecourse to the Company and any other
Restricted Subsidiary and the Company and such other Restricted Subsidiaries
have no Obligations with respect to such Indebtedness; (x) guarantees by
Restricted Subsidiaries of Indebtedness of any Restricted Subsidiary if the
Indebtedness so guaranteed is permitted under the Indenture; (xi) guarantees by
a Restricted Subsidiary of Indebtedness of the Company if the Indebtedness so
guaranteed is permitted under the Indenture and the Senior Notes are guaranteed
by such Restricted Subsidiary to the extent required by Section 4.15; (xii)
guarantees by the Company of Indebtedness of any Restricted Subsidiary if the
Indebtedness so guaranteed is permitted under the Indenture; (xiii) Indebtedness
of the Company and its Restricted Subsidiaries in connection with performance,
surety, statutory, appeal or similar bonds in the ordinary course of business;
and (xiv) Indebtedness of the Company and its Restricted Subsidiaries in
connection with agreements providing for indemnification, purchase price
adjustments and similar obligations in connection with the sale or disposition
of any of their business, properties or assets.
"Permitted Liens" means:
(a) with respect to the Company and the Restricted Subsidiaries, (i)
Liens for taxes, assessments, governmental charges or claims which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor; (ii)
statutory Liens of landlords and carriers, warehousemen's, mechanics',
suppliers', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate proceedings, if a reserve or other
appropriate provision, if any
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<PAGE>
as shall be required in conformity with GAAP shall have been made therefor;
(iii) Liens incurred on deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security; (iv) Liens incurred on deposits made to secure the performance
of tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance and return of money bonds and other
obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v) easements,
rights-of-way, zoning or other restrictions, minor defects or irregularities in
title and other similar charges or encumbrances not interfering in any material
respect with the business of the Company or any of its Restricted Subsidiaries
incurred in the ordinary course of business; (vi) Liens (including extensions,
renewals and replacements thereof) upon property acquired (the "Acquired
Property") after the date of original issuance of the Senior Notes, provided
that: (A) any such Lien is created solely for the purpose of securing
Indebtedness representing, or issued to finance, refinance or refund, the cost
(including the cost of construction) of the Acquired Property, (B) the principal
amount of the Indebtedness secured by such Lien does not exceed 100% of the cost
of the Acquired Property, (C) such Lien does not extend to or cover any property
other than the Acquired Property and any improvements on such Acquired Property,
and (D) the issuance of the Indebtedness to purchase the Acquired Property is
permitted by Section 4.7; (vii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (viii) judgment and attachment Liens
not giving rise to an Event of Default; (ix) leases or subleases granted to
others not interfering in any material respect with the business of the Company
or any of its Restricted Subsidiaries; (x) Liens securing Indebtedness under
Hedging Obligations; (xi) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements of the
Company or its Restricted Subsidiaries; (xii) Liens arising out of consignment
or similar arrangements for the sale of goods entered into by the Company or its
Restricted Subsidiaries in the ordinary course of business; (xiii) any interest
or title of a lessor in property subject to any capital lease obligation or
operating lease; (xiv) Liens arising from filing Uniform Commercial
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Code financing statements regarding leases; (xv) Liens existing on the date of
original issuance of the Senior Notes and any extensions, renewals or
replacements thereof; (xvi) any Lien granted to the Trustee and any
substantially equivalent Lien granted to any trustee or similar institution
under any indenture for Senior Indebtedness; and (xvii) additional Liens at any
one time outstanding in respect of properties or assets the aggregate fair
market value of which does not exceed $10,000,000 (the fair market value to be
determined on the date such Lien is granted on such properties or assets);
(b) with respect to the Restricted Subsidiaries, (i) Liens securing
Restricted Subsidiaries' reimbursement Obligations with respect to letters of
credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (ii) Liens securing Indebtedness
issued by Restricted Subsidiaries if such Indebtedness is (A) under the New
Credit Agreement, or (B) permitted by Section 4.7(a), clauses (i), (ii), (iii)
or (iv) of Section 4.7(b), or clauses (i), (iii) (to the extent the
Indebtedness subject to such Refinancing Indebtedness was subject to Liens),
(vii),(ix) or (x) of the definition of Other Permitted Indebtedness; (iii) Liens
securing intercompany Indebtedness issued by any Restricted Subsidiary to the
Company or another Restricted Subsidiary; and (iv) Liens securing guarantees by
Restricted Subsidiaries of Indebtedness issued by the Company if such
guarantees are permitted by clause (xi) (but only in respect of the property,
rights and assets of the Restricted Subsidiaries issuing such guarantees) of
the definition of Other Permitted Indebtedness;
(c) with respect to the Company, (i) Liens securing Indebtedness issued by
the Company under the New Credit Agreement if such Indebtedness is permitted by
Section 4.7 (including, but not limited to, Indebtedness issued by the Company
under the New Credit Agreement pursuant to clause (i) and/or clause (iv) of
Section 4.7(b)); (ii) Liens securing Indebtedness of the Company if such
Indebtedness is permitted by clauses (i), (iii) (to the extent the Indebtedness
subject to such Refinancing Indebtedness was subject to Liens) or (vii) of the
definition of Other Permitted Indebtedness; (iii) Liens securing guarantees by
the Company of Indebtedness issued
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<PAGE>
by Restricted Subsidiaries if such Indebtedness is permitted by Section 4.7
(including, but not limited to, Indebtedness issued by Restricted Subsidiaries
under the New Credit Agreement pursuant to clause (i) and/or clause (v) of
Section 4.7(b)) and if such guarantees are permitted by clause (xii) (but only
in respect of Indebtedness issued by the Restricted Subsidiaries under the New
Credit Agreement pursuant to Section 4.7) of the definition of Other Permitted
Indebtedness; and (iv) Liens securing the Company's reimbursement obligations
with respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof;
provided, however, that, notwithstanding any of the foregoing, the Permitted
Liens referred to in clause (c) of this definition shall not include any Lien on
Capital Stock of Restricted Subsidiaries held directly by the Company (as
distinguished from Liens on Capital Stock of Restricted Subsidiaries held by
other Restricted Subsidiaries) other than Liens securing (A) Indebtedness of
the Company issued under the New Credit Agreement pursuant to Section 4.7 and
any permitted Refinancing Indebtedness of such Indebtedness, and (B) guarantees
by the Company of Indebtedness issued by Restricted Subsidiaries under the
Credit Agreement or the New Credit Agreement pursuant to Section 4.7 and any
permitted Refinancing Indebtedness of such Indebtedness.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Income, Cash Flow and Consolidated Interest Expense in connection with the Cash
Flow Coverage Ratio (including in connection with Section 4.5, the incurrence
of Indebtedness pursuant to Section 4.7(a) and Consolidated Net Worth for
purposes of Section 5.1), giving pro forma effect to (x) any acquisition or sale
of a Person, business or asset, related incurrence, repayment or refinancing of
Indebtedness or other related transactions, including any related restructuring
charges in respect of restructurings, consolidations, compensation or headcount
reductions or other cost savings which
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would otherwise be accounted for as an adjustment permitted by Regulation S-X
under the Securities Act or on a pro forma basis under GAAP, or (y) any
incurrence, repayment or refinancing of any Indebtedness and the application
of the proceeds therefrom, in each case, as if such acquisition or sale and
related transactions, restructurings, consolidations, cost savings, reductions,
incurrence, repayment or refinancing were realized on the first day of the
relevant period permitted by Regulation S-X under, the Securities Act or on a
pro forma basis under GAAP. Furthermore, in calculating the Cash Flow Coverage
Ratio, (1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the determination date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the determination date;
(2) if interest on any Indebtedness actually incurred on the determination date
may optionally be determined at an interest rate based upon a factor of a prime
or similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the determination date will be deemed to have been in
effect during the relevant period; and (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to interest rate swaps or similar
interest rate protection Hedging Obligations, shall be deemed to accrue at the
rate per annum resulting after giving effect to the operation of such
agreements.
"Properties Services Agreement" means the services agreement, dated July
25, 1997, between the Company and Jordan Industries, Inc., as in effect on the
date of original issuance of the Senior Notes.
"Purchasers" means Jefferies & Company, Inc., Donaldson, Lufkin & Jenrette
Securities Corporation and Smith Barney Inc.
"Receivables" means, with respect to any Person, all of the following
property and interests in property of such Person, whether now existing or
existing in the future or hereafter acquired or arising: (i) accounts, (ii)
accounts receivable (including, without limitation, all rights to payment
created by or arising from sales of goods, leases of goods or leased or the
rendition of
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services rendered no matter how evidenced, whether or not earned by
performance), (iii) all unpaid seller's or lessor's rights (including, without
limitation, recession, replevin, reclamation and stoppage in transit, relating
to any of the foregoing or arising therefrom), (iv) all rights to any goods or
merchandise represented by any of the foregoing (including, without limitation,
returned or repossessed goods), (v) all reserves and credit balances with
respect to any such accounts receivable or account debtors, (vi) all letters of
credit, security or guarantees for any of the foregoing, (vii) all insurance
policies or reports relating to any of the foregoing, (viii) all collection or
deposit accounts relating to any of the foregoing, (ix) all proceeds of any of
the foregoing, and (x) all books and records relating to any of the foregoing.
"Receivables Financing" means (i) the sale or other disposition of
Receivables arising in the ordinary course of business, or (ii) the sale or
other disposition of Receivables arising in the ordinary course of business to a
Receivables Subsidiary followed by a financing transaction in connection with
such sale or disposition of such Receivables.
"Receivables Subsidiary" means a Subsidiary of the Company that is
exclusively engaged in Receivables Financings and activities reasonably related
thereto.
"Refinancing Indebtedness" means (i) Indebtedness of the Company and its
Restricted Subsidiaries issued or given in exchange for, or the proceeds of
which are used to, extend, refinance, renew, replace, substitute or refund any
Indebtedness permitted under this Indenture or any Indebtedness issued to so
extend, refinance, renew, replace, substitute or refund such Indebtedness, (ii)
any refinancings of Indebtedness issued under the New Credit Agreement, and
(iii) any additional Indebtedness issued to pay premiums and fees in connection
with clauses (i) and (ii).
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of July 25, 1997, by and among the Company and the Purchasers, with
respect to the Senior Notes.
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"Restricted Investment" means any Investment in any Person, provided that
Restricted Investments will not include: (i) Investments in marketable
securities and other negotiable instruments to the extent permitted by Section
4.5(b)(ii) of this Indenture; (ii) any Incentive Arrangements; (iii) Investments
by any Restricted Subsidiary in the Company; or (iv) Investments by the Company
or any Restricted Subsidiary in any Restricted Subsidiary (provided that any
Investment in a Restricted Subsidiary was made for fair market value (as
determined by the Board of Directors in good faith). The amount of any
Restricted Investment shall be the amount of cash and the fair market value at
the time of transfer of all other property (as determined by the Board of
Directors in good faith) initially invested or paid for such Restricted
Investment, plus all additions thereto, without any adjustments for increases or
decreases in value of, or write-ups, write-downs or write-offs with respect to,
such Restricted Investment.
"Restricted Subsidiary" means: (i) any Subsidiary of the Company existing
on the date of original issuance of the Senior Notes, and (ii) any other
Subsidiary of the Company formed, acquired or existing after the date of
original issuance of the Senior Notes that is designated as a "Restricted
Subsidiary" by the Company pursuant to a resolution approved by a majority of
the Board of Directors, provided, however, that the term "Restricted
Subsidiary" shall not include (A) any Restricted Subsidiary of the Company that
has been redesignated by the Company pursuant to a resolution approved by a
majority of the Board of Directors as a Non-Restricted Subsidiary in accordance
with Section 4.16 unless such Subsidiary shall have subsequently been
redesignated a Restricted Subsidiary or (B) any Restricted Subsidiary of the
Company that is organized under the laws of a foreign jurisdiction and whose
stock or ownership interests are sold or transferred to a Non-Restricted
Subsidiary of the Company pursuant to one or more transactions that comply with
Sections 4.8 and 4.14 which is, at or after the time of such sale or transfer,
by a resolution approved by a majority of the Board of Directors, designated a
Non-Restricted Subsidiary.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or
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headcount reduction, or any other cost savings, of any Persons or businesses
either alone or together with the Company or any Restricted Subsidiary, as
permitted by GAAP or Regulation S-X under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means: (i) all Obligations (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on any Indebtedness of the
Company, whether outstanding on the date of issuance of the Senior Notes or
thereafter created, incurred or assumed, of the following types: (A) all
Indebtedness of the Company (including without limitation the Senior Notes) for
money borrowed, and (B) all Indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which the Company is responsible
or liable; (ii) all capitalized lease obligations of the Company; (iii) all
Obligations of the Company: (A) for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (B)
constituting Hedging Obligations, or (C) issued as the deferred purchase price
of property and all conditional sale Obligations of the Company and all
Obligations of the Company under any title retention agreement; (iv) all
guarantees of the Company with respect to Obligations of other Persons of the
type referred to in clauses (ii) and (iii) and with respect to the payment of
dividends of other Persons; and (v) all Obligations of the Company consisting of
modifications, renewals, extensions, replacements and refundings of any
Obligations described in clauses (i), (ii), (iii) or (iv) unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is expressly provided that such Obligations are subordinated or
junior in right of payment to the Senior Notes; provided, however, that Senior
Indebtedness shall not be deemed to include: (1) any Obligation of the Company
to any Subsidiary, (2) any liability for federal, state, local or other taxes
owed or owing by the Company, (3) any accounts payable or other liability to
trade creditors arising in the ordinary course of business (includ-
22
<PAGE>
ing guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness, guarantee or Obligation of the Company that is contractually
subordinated or junior in any respect to any other Indebtedness, guarantee or
Obligation of the Company, or (5) any Indebtedness to the extent the same is
incurred in violation of the Indenture. Senior Indebtedness shall include all
Obligations in respect of the Senior Notes and the Indenture.
"Senior Notes" means the Series A Notes and the Series B Notes.
"Series A Notes" means the Company's 9-7/8% Series A Notes due 2007.
"Series B Notes" means the Company's 9-7/8% Series B Notes due 2007.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"Significant Subsidiary" means (i) any Restricted Subsidiary of the Company
that would be a "significant subsidiary" as defined in clause (2) of the
definition of such term in Rule 1-02 of Regulation S-X under the Securities Act
and the Exchange Act, and (ii) any other Restricted Subsidiary of the Company
that is material to the business, earnings, prospects, assets or condition,
financial or otherwise, of the Company and its Restricted Subsidiaries, taken as
a whole.
"Subordinated Indebtedness" means all Obligations of the type referred to
in clauses (i) through (v) of the definition of Senior Indebtedness, if the
instrument creating or evidencing the same, or pursuant to which the same is
outstanding, designates such Obligations as subordinated or junior in right of
payment to Senior Indebtedness.
"Stated Maturity" means with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not
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include any contingent obligations to repay, redeem or repurchase any such
interest or principal prior to the date originally scheduled for the payment
thereof.
"Subsidiary" of any Person means any entity of which the Equity Interests
entitled to cast at least a majority of the votes that may be cast by all Equity
Interests having ordinary voting power for the election of directors or other
governing body of such entity are owned by such Person (regardless of whether
such Equity Interests are owned directly by such Person or through one or more
Subsidiaries).
"Tax Sharing Agreement" means the tax sharing agreement between the Company
and each of its Subsidiaries and Jordan Industries, Inc. and each of the other
direct and indirect Subsidiaries of Jordan Industries, Inc. that are
consolidated with Jordan Industries, Inc. for Federal income tax purposes, as in
effect on the date of original issuance of the Senior Notes.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb), as amended, as in effect on the date of original issuance of the
Senior Notes.
"Transition Agreement" means the transition agreement, dated as of July 25,
1997, between the Company and Jordan Industries, as in effect on the date of
original issuance of the Senior Notes.
"Transfer Restricted Senior Notes" means securities that bear or are
required to bear the legend set forth in Section 2.6.
"Trustee" means First Trust National Association until a successor replaces
it in accordance with the applicable provisions of this Indenture, and
thereafter means the successor.
"U.S. Government Obligations" means direct obligations of the United States
of America for the payment of which the full faith and credit of the United
States of America is pledged, provided that no U.S. Government Obligation shall
be callable at the issuer's option.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the
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general voting power under ordinary circumstances to elect the board of
directors.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the then outstanding
principal amount of such Indebtedness into (ii) the sum of the product(s)
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) which will elapse between such date and
the making of such payment.
SECTION 1.2 OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction.................................................. 4.8
"Asset Sale Disposition Date"........................................... 4.14
"Asset Sale Trigger Date"............................................... 4.14
"covenant defeasance option"............................................ 8.1
"Disposition"........................................................... 5.1
"DTC"................................................................... 2.3
"Event of Default"...................................................... 6.1
"Excess Proceeds"....................................................... 4.14
"legal defeasance option"............................................... 8.1
"Notice of Default"..................................................... 6.1
"Offer"................................................................. 3.8
"Other Indebtedness".................................................... 4.15
"Other Company Indebtedness Guarantee".................................. 4.15
"Paying Agent".......................................................... 2.3
"Purchase Date"......................................................... 3.8
"Registrar"............................................................. 2.3
"Restricted Payments"................................................... 4.5
"Successor Corporation"................................................. 5.1
"Trustee Expenses"...................................................... 6.8
</TABLE>
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in, and made a part of, this Indenture. Any terms
incorporated by reference in this Indenture that are defined by the
25
<PAGE>
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them therein.
SECTION 1.4 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined
herein has the meaning assigned to it under GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in
the plural include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE SENIOR NOTES
SECTION 2.1 FORM AND DATING.
The Senior Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is part of this Indenture. The
Senior Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Senior Note shall be dated the date of its
authentication. The Senior Notes shall be in denominations of $1,000 and
integral multiples thereof.
The terms and provisions contained in the Senior Notes shall constitute,
and are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
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<PAGE>
Each Global Senior Note shall represent such of the outstanding Senior
Notes as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Senior Notes from time to time
endorsed thereon and that the aggregate amount of outstanding Senior Notes
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Senior Note to reflect the amount of any increase or decrease in the amount of
outstanding Senior Notes represented thereby shall be made by the Trustee or the
Senior Note Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.6.
SECTION 2.2 EXECUTION AND AUTHENTICATION.
One Officer shall sign the Senior Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Senior Notes
and may be in facsimile form.
If an Officer whose signature is on a Senior Note no longer holds that
office at the time a Senior Note is authenticated, the Senior Note shall
nevertheless be valid.
A Senior Note shall not be valid until authenticated by the manual
signature of an authorized signatory of the Trustee, and the Trustee's signature
shall be conclusive evidence that the Senior Note has been authenticated under
this Indenture. The form of Trustee's certificate of authentication to be borne
by the Senior Notes shall be substantially as set forth in Exhibit A.
The Trustee shall, upon a written order of the Company signed by two
Officers directing the Trustee to authenticate the Senior Notes and certifying
that all conditions precedent to the issuance of the Senior Notes contained
herein have been complied with, authenticate Senior Notes for original issuance
up to an aggregate principal amount stated in paragraph 4 of the Senior Notes
(the aggregate principal amount of outstanding Senior Notes may not exceed that
amount at any time, except as provided in Section 2.7).
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<PAGE>
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Senior Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Senior Notes whenever the Trustee may
do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same
rights as an Agent to deal with the Company or an Affiliate of the Company.
SECTION 2.3 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (the "Registrar") where
Senior Notes may be presented for registration of transfer or for exchange and
an office or agency (the "Paying Agent") where Senior Notes may be presented for
payment. The Registrar shall keep a register of the Senior Notes and of their
transfer and exchange. The Company may appoint one or more co-registrars and
one or more additional paying agents. The term "Registrar" includes any co-
registrar, and the term "Paying Agent" includes any additional paying agent. The
Company may change any Paying Agent or Registrar without prior notice to any
Holder. The Company shall notify in writing the Trustee and the Trustee shall
notify the Holders in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company shall
enter into an appropriate agency agreement with any Agent not a party to this
Indenture, and such agreement shall incorporate the TIA's provisions and
implement the provisions of this Indenture that relate to such Agent.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Senior Notes.
The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Senior Notes and
as Senior Note Custodian with respect to the Global Senior Notes. The Company or
any of its Subsidiaries may act as Paying Agent, Registrar or co-registrar. If
the Company fails to appoint or maintain a Registrar and Paying Agent, the
Trustee shall act as such, and shall be entitled to appropriate compensation in
accordance with Section 7.7.
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SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the Holders' benefit or
the Trustee all money the Paying Agent holds for redemption or purchase of the
Senior Notes or for the payment of principal of, or premium, if any, or interest
on, or Liquidated Damages, if any, with respect to the Senior Notes, and will
promptly notify the Trustee of any Default by the Company in providing the
Paying Agent with sufficient funds to (i) purchase Senior Notes tendered
pursuant to an Offer arising under Section 4.13, (ii) redeem Senior Notes called
for redemption, or (iii) make any payment of principal, premium, interest or
Liquidated Damages due on the Senior Notes. While any such Default continues,
the Trustee may require the Paying Agent to pay all money it holds to the
Trustee and to account for any funds disbursed. The Company at any time may
require the Paying Agent to pay all money it holds to the Trustee and to account
for any funds disbursed. Upon payment over to the Trustee, the Paying Agent (if
other than the Company or any of its Subsidiaries) shall have no further
liability for the money it delivered to the Trustee. If the Company or any of
its Subsidiaries acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the Holders' benefit or the Trustee all money it holds as Paying
Agent.
SECTION 2.5 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require that sets forth the names and addresses of, and
the aggregate principal amount of Senior Notes held by, each Holder, and the
Company shall otherwise comply with section 312(a) of the TIA.
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<PAGE>
SECTION 2.6 TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Definitive Senior Notes. When
Definitive Senior Notes are presented by a Holder to the Registrar with a
request:
(x) to register the transfer of the Definitive Senior Notes; or
(y) to exchange such Definitive Senior Notes for an equal principal
amount of Definitive Senior Notes of other authorized
denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Senior Notes presented or surrendered for register of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing;
and
(ii) in the case of a Definitive Senior Note that is a Transfer
Restricted Senior Note, such request shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Senior Note is being delivered
to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification to that
effect from such Holder (in substantially the form of
Exhibit B hereto); or
(B) if such Transfer Restricted Senior Note is being transferred
(1) to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule 144A
under the Securities Act or (2) pursuant to an exemption
from regis-
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<PAGE>
tration in accordance with Rule 144 under the Securities Act
(and based on an opinion of counsel if the Company so
requests) or (3) pursuant to an effective registration
statement under the Securities Act, a certification to that
effect from such Holder (in substantially the form of
Exhibit B hereto); or
(C) if such Transfer Restricted Senior Note is being transferred
to an institutional "accredited investor," within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act pursuant to a private placement exemption
from the registration requirements of the Securities Act
(and based on an opinion of counsel if the Company so
requests), a certification to that effect from such Holder
(in substantially the form of Exhibit B hereto) and a
certification from the applicable transferee (in
substantially the form of Exhibit C hereto); or
(D) if such Transfer Restricted Senior Note is being transferred
in reliance on another exemption from the registration
requirements of the Securities Act (and based on an opinion
of counsel if the Company so requests), a certification to
that effect from such Holder (in substantially the form of
Exhibit B hereto).
(b) Transfer of a Definitive Senior Note for a Beneficial Interest in
a Global Senior Note. A Definitive Senior Note may not be exchanged for a
beneficial interest in a Global Senior Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive Senior
Note, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, together with:
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<PAGE>
(i) if such Definitive Senior Note is a Transfer Restricted Senior
Note, a certification from the Holder thereof (in substantially the form of
Exhibit B hereto) to the effect that such Definitive Senior Note is being
transferred by such Holder to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in accordance with Rule 144A under
the Securities Act; and
(ii) whether or not such Definitive Senior Note is a Transfer
Restricted Senior Note, written instructions from the Holder thereof
directing the Trustee to make, or to direct the Senior Note Custodian to
make, an endorsement on the Global Senior Note to reflect an increase in
the aggregate principal amount of the Senior Notes represented by the
Global Senior Note,
the Trustee shall cancel such Definitive Senior Note in accordance with Section
2.11 and cause, or direct the Senior Note Custodian to cause, in accordance with
the standing instructions and procedures existing between the Depositary and the
Senior Note Custodian, the aggregate principal amount of Senior Notes
represented by the Global Senior Note to be increased accordingly. If no Global
Senior Notes are then outstanding, the Company shall issue and, upon receipt of
an authentication order in accordance with Section 2.2, the Trustee shall
authenticate a new Global Senior Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Senior Notes. The transfer and
exchange of Global Senior Notes or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture and the
procedures of the Depositary therefor, which shall include restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act.
(d) Transfer of a Beneficial Interest in a Global Senior Note for a
Definitive Senior Note.
(i) Any Person having a beneficial interest in a Global Senior
Note may upon request exchange such beneficial interest for a Definitive
Senior Note. Upon receipt by the Trustee of written
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<PAGE>
instructions or such other form of instructions as is customary for the
Depositary, from the Depositary or its nominee on behalf of any Person
having a beneficial interest in a Global Senior Note, and, in the case of a
Transfer Restricted Senior Note, the following additional information and
documents (all of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial
owner, a certification to that effect from such Person (in
substantially the form of Exhibit B hereto); or
(B) if such beneficial interest is being transferred (1) to a
"qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under
the Securities Act or (2) pursuant to an exemption from
registration in accordance with Rule 144 under the Securities
Act (and based on an opinion of counsel if the Company so
requests) or (3) pursuant to an effective registration
statement under the Securities Act, a certification to that
effect from the transferor (in substantially the form of
Exhibit B hereto); or
(C) if such beneficial interest is being transferred to an
institutional "accredited investor," within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act
pursuant to a private placement exemption from the
registration requirements of the Securities Act (and based on
an opinion of counsel if the Company so requests), a
certification to that effect from such Holder (in
substantially the form of Exhibit B hereto) and a
certification from the applica-
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<PAGE>
ble transferee (in substantially the form of Exhibit C
hereto); or
(D) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of
the Securities Act (and based on an opinion of counsel if
the Company so requests), a certification to that effect
from such Holder (in substantially the form of Exhibit B
hereto).
The Trustee or the Senior Note Custodian, at the direction of the
Trustee, shall, in accordance with the standing instructions and
procedures existing between the Depositary and the Senior Note
Custodian, cause the aggregate principal amount of Global Senior
Notes to be reduced accordingly and, following such reduction,
the Company shall execute and, upon receipt of an authentication
order in accordance with Section 2.2 hereof, the Trustee shall
authenticate and deliver to the transferee a Definitive Senior
Note in the appropriate principal amount.
(ii) Definitive Senior Notes issued in exchange for a beneficial
interest in a Global Senior Note pursuant to this Section 2.6(d) shall be
registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall
deliver in accordance with the standard procedures of the Depositary such
Definitive Senior Notes to the Persons in whose names such Senior Notes are
so registered.
(e) Restrictions on Transfer and Exchange of Global Senior Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.6), a Global Senior Note may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the
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<PAGE>
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
(f) Authentication of Definitive Senior Notes in Absence of
Depositary. If at any time:
(i) the Depositary for the Senior Notes notifies the Company that
the Depositary is unwilling or unable to continue as Depositary for the
Global Senior Notes and a successor Depositary for the Global Senior Notes
is not appointed by the Company within 90 days after delivery of such
notice; or
(ii) The Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Senior Notes
under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.2, authenticate and deliver,
Definitive Senior Notes in an aggregate principal amount equal to the principal
amount of the Global Senior Notes in exchange for such Global Senior Notes and
registered in such names as the Depositary shall instruct the Trustee or the
Company in writing.
(g) Legends.
(i) Except for any Transfer Restricted Senior Note sold or
transferred (including any Transfer Restricted Senior Note represented by a
Global Senior Note) as described in (ii) below, each Senior Note
certificate evidencing Global Senior Notes and Definitive Senior Notes (and
all Senior Notes issued in exchange therefor or substitution thereof) shall
bear legends in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND
THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
35
<PAGE>
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, OR (c) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON
AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY
OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Senior
Note (including any Transfer Restricted Senior Note represented by a Global
Senior Note) pursuant to an effective registration statement under the
Securities Act, pursuant to Rule 144 under the Securities Act or pursuant
to an opinion of counsel reasonably satisfactory to the Company and the
Registrar that no legend is required:
(A) in the case of any Transfer Restricted Senior Note that is a
Definitive Senior Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Senior Note for
a Definitive Senior Note that does not bear the legend set
forth in
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<PAGE>
(i) above and rescind any restriction on the transfer of
such Transfer Restricted Senior Note; and
(B) in the case of any Transfer Restricted Senior Note
represented by a Global Senior Note, such Transfer
Restricted Senior Note shall not be required to bear the
legend set forth in (i) above if all other interests in such
Global Senior Note have been or are concurrently being sold
or transferred pursuant to Rule 144 under the Securities Act
or pursuant to an effective registration statement under the
Securities Act, but such Transfer Restricted Senior Note
shall continue to be subject to the provisions of Section
2.6(c); provided, however, that with respect to any request
for an exchange of a Transfer Restricted Senior Note that is
represented by a Global Senior Note for a Definitive Senior
Note that does not bear the legend set forth in (i) above,
which request is made in reliance upon Rule 144, the Holder
there of shall certify in writing to the Registrar that such
request is being made pursuant to Rule 144 (such
certification to be substantially in the form of Exhibit B
hereto).
(iii) Notwithstanding the foregoing, upon consummation of the
Exchange Offer, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.2, the Trustee shall
authenticate, Series B Senior Notes in exchange for Series A Senior Notes
accepted for exchange in the Exchange Offer, which Series B Senior Notes
shall not bear the legend set forth in (i) above, and the Registrar shall
rescind any restriction on the transfer of such Senior Notes, in each case
unless the Holder of such Series A Senior Notes is either (A) a broker-
dealer, (B) a Person participating in the distribution of the Series A
Senior Notes or (C) a Person who is an affiliate (as de-
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<PAGE>
fined in Rule 144A) of the Company. The Company shall identify to the
Trustee such Holders of the Senior Notes in a written certification signed
by an Officer of the Company and, absent certification from the Company to
such effect, the Trustee shall assume that there are no such Holders.
(h) Cancellation and/or Adjustment of Global Senior Notes. At such
time as all beneficial interests in Global Senior Notes have been exchanged for
Definitive Senior Notes, redeemed, repurchased or cancelled, all Global Senior
Notes shall be returned to or retained and cancelled by the Trustee in
accordance with Section 2.11. At any time prior to such cancellation, if any
beneficial interest in a Global Senior Note is exchanged for Definitive Senior
Notes, redeemed, repurchased or cancelled, the principal amount of Senior Notes
represented by such Global Senior Note shall be reduced accordingly and an
endorsement shall be made on such Global Senior Note, by the Trustee or the
Senior Notes Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive Senior
Notes and Global Senior Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or "exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 3.7, 4.13, 4.14 and 9.5).
(iii) Neither the Company nor the Registrar shall be required to
register the transfer of or exchange any Senior Note selected for
redemption in whole or in part, except the unredeemed portion of any Senior
Note being redeemed in part.
(iv) All Definitive Senior Notes and Global Senior Notes issued
upon any registration of
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<PAGE>
transfer or exchange of Definitive Senior Notes or Global Senior Notes in
accordance with this Indenture (including any increase in the aggregate
principal amount of the Senior Notes represented by the Global Senior Note
pursuant to subsection (b) above) shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same benefits under
this Indenture, as the Definitive Senior Notes or Global Senior Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required to issue Senior Notes and
the Registrar shall not be required to register the transfer of or to
exchange Senior Notes during a period beginning at the opening of business
15 days before the day of any selection of Senior Notes for redemption
under Section 3.2 and ending at the close of business on the day of
selection, or to register the transfer of or to exchange a Senior Note
between a record date and the next succeeding interest payment date.
(vi) Prior to due presentment for the registration of a transfer
of any Senior Note, the Trustee, any Agent and the Company may deem and
treat the Person in whose name any Senior Note is registered as the
absolute owner of such Senior Note for the purpose of receiving payment of
principal of, premium, if any, accrued and unpaid interest, and Liquidated
Damages, if any, on such Senior Notes, and neither the Trustee, any Agent
nor the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Definitive Senior Notes and
Global Senior Notes in accordance with the provisions of Section 2.2.
SECTION 2.7 REPLACEMENT SENIOR NOTES.
If any mutilated Senior Note is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Senior Note, the Company shall issue and the Trustee, upon the
Company's written order signed by two Officers, shall authenticate a replacement
Senior Note if the Trustee's requirements are met. If the Trustee or the
Company requires it, the Holder must supply an indem-
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<PAGE>
nity bond that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent or any authenticating agent from any
loss that any of them may suffer if a Senior Note is replaced. The Company and
the Trustee may charge for their expenses in replacing a Senior Note. Every
replacement Senior Note is an additional Obligation of the Company.
SECTION 2.8 OUTSTANDING SENIOR NOTES.
------------------------
The Senior Notes outstanding at any time are all the Senior Notes the
Trustee has authenticated except for those it has cancelled, those delivered to
it for cancellation, those representing reductions in the interest in a Global
Senior Note effected by the Trustee in accordance with the provisions hereof,
and those described in this Section as not outstanding.
If a Senior Note is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that a bona
fide purchaser holds the replaced Senior Note.
If the entire principal of, and premium, if any, and accrued interest on,
and Liquidated Damages, if any, with respect to any Senior Note is considered
paid under Section 4.1, it ceases to be outstanding and interest and Liquidated
Damages on it cease to accrue.
Subject to Section 2.9, a Senior Note does not cease to be outstanding
because the Company or an Affiliate holds the Senior Note.
SECTION 2.9 TREASURY SENIOR NOTES.
---------------------
In determining whether the Holders of the required principal amount of
Senior Notes have concurred in any direction, waiver or consent, Senior Notes
owned by the Company or an Affiliate shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Senior Notes that a Trust Officer of the Trustee knows are so owned shall be so
disregarded. Notwithstanding the foregoing, Senior Notes that the Company or an
Affiliate offers to purchase or acquires pursuant to an Offer, exchange offer,
tender
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<PAGE>
offer or otherwise shall not be deemed to be owned by the Company or an
Affiliate until legal title to such Senior Notes passes to the Company or such
Affiliate, as the case may be.
SECTION 2.10 TEMPORARY SENIOR NOTES.
----------------------
Until Definitive Senior Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Senior Notes. Temporary
Senior Notes shall be substantially in the form of Definitive Senior Notes but
may have variations that the Company considers appropriate for temporary Senior
Notes. Without unreasonable delay, the Company shall prepare and the Trustee,
upon receipt of the Company's written order signed by two Officers which shall
specify the amount of temporary Senior Notes to be authenticated and the date on
which the temporary Senior Notes are to be authenticated, shall authenticate
Definitive Senior Notes and deliver them in exchange for temporary Senior Notes.
Until such exchange, Holders of temporary Senior Notes shall be entitled to the
same rights, benefits and privileges as Definitive Senior Notes.
SECTION 2.11 CANCELLATION.
------------
The Company at any time may deliver Senior Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Senior Notes surrendered to them for registration of transfer, exchange,
replacement, payment (including all Senior Notes called for redemption and all
Senior Notes accepted for payment pursuant to an Offer) or cancellation, and the
Trustee shall cancel all such Senior Notes and shall destroy all cancelled
Senior Notes (subject to the Exchange Act's record retention requirements) and
deliver a certificate of their destruction to the Company unless by written
order, signed by two Officers of the Company, the Company shall direct that
cancelled Senior Notes be returned to it. The Company may not issue new Senior
Notes to replace any Senior Notes that have been cancelled by the Trustee or
that have been delivered to the Trustee for cancellation. If the Company or an
Affiliate acquires any Senior Notes (other than by redemption or pursuant to an
Offer), such acquisition shall not operate as a redemption or satisfaction of
the Indebtedness represented by such Senior Notes unless and until such
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Senior Notes are delivered to the Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST.
------------------
If the Company defaults in a payment of interest on the Senior Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to Holders on a subsequent
special record date, in each case at the rate provided in the Senior Notes. The
Company shall fix or cause to be fixed each such special record date and payment
date. As early as practicable prior to the special record date, the Company (or
the Trustee, in the name of and at the expense of the Company) shall mail a
notice that states the special record date, the related payment date and the
amount of interest to be paid.
SECTION 2.13 RECORD DATE.
-----------
The record date for purposes of determining the identity of Holders of
Senior Notes entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in section 316(c) of the TIA.
SECTION 2.14 CUSIP NUMBER.
------------
A "CUSIP" number shall be printed on the Senior Notes, and the Trustee
shall use the CUSIP number in notices of redemption, purchase or exchange as a
convenience to Holders, provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Senior Notes and that reliance may be placed
only on the other identification numbers printed on the Senior Notes. The
Company shall promptly notify the Trustee of any change in the CUSIP number.
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ARTICLE 3
OPTIONAL REDEMPTION AND
MANDATORY OFFERS TO PURCHASE
SECTION 3.1 NOTICES TO TRUSTEE.
------------------
If the Company elects to redeem Senior Notes pursuant to Section 3.7,
it shall furnish to the Trustee, at least 40 days prior to the redemption date
and at least 10 days prior to the date that notice of the redemption is to be
mailed by the Company to Holders, an Officers' Certificate stating that the
Company has elected to redeem Senior Notes pursuant to Section 3.7(a) or 3.7(b),
as the case may be, the date notice of redemption is to be mailed to Holders,
the redemption date, the aggregate principal amount of Senior Notes to be
redeemed, the redemption price for such Senior Notes and the amount of accrued
and unpaid interest on and Liquidated Damages, if any, with respect to such
Senior Notes as of the redemption date. If the Trustee is not the Registrar, the
Company shall, concurrently with delivery of its notice to the Trustee of a
redemption, cause the Registrar to deliver to the Trustee a certificate (upon
which the Trustee may rely) setting forth the name of, and the aggregate
principal amount of Senior Notes held by, each Holder.
If the Company is required to offer to purchase Senior Notes pursuant
to Section 4.13 or 4.14, it shall furnish to the Trustee, at least 2 Business
Days before notice of the Offer is to be mailed to Holders, an Officers'
Certificate setting forth that the Offer is being made pursuant to Section 4.13
or 4.14, as the case may be, the Purchase Date, the maximum principal amount of
Senior Notes the Company is offering to purchase pursuant to the Offer, the
purchase price for such Senior Notes, and the amount of accrued and unpaid
interest on and Liquidated Damages, if any, with respect to such Senior Notes as
of the Purchase Date.
The Company will also provide the Trustee with any additional
information that the Trustee reasonably requests in connection with any
redemption or Offer.
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SECTION 3.2 SELECTION OF SENIOR NOTES TO BE REDEEMED OR PURCHASED.
-----------------------------------------------------
If less than all outstanding Senior Notes are to be redeemed or if
less than all Senior Notes tendered pursuant to an Offer are to be accepted for
payment, the Trustee shall select the outstanding Senior Notes to be redeemed or
accepted for payment pro rata, by lot or by a method that complies with the
requirements of any stock exchange on which the Senior Notes are listed and that
the Trustee considers fair and appropriate. If the Company elects to mail notice
of a redemption to Holders, the Trustee shall at least 5 business days prior to
the date notice of redemption is to be mailed, (i) select the Senior Notes to be
redeemed from Senior Notes outstanding not previously called for redemption and
(ii) notify the Company of the names of each Holder of Senior Notes selected for
redemption, the principal amount of Senior Notes held by each such Holder and
the principal amount of such Holder's Senior Notes that are to be redeemed. If
less than all Senior Notes tendered pursuant to an Offer on the Purchase Date
are to be accepted for pay ment, the Trustee shall select on or promptly after
the Purchase Date the Senior Notes to be accepted for payment. The Trustee
shall select for redemption or purchase Senior Notes or portions of Senior
Notes in principal amounts of $1,000 or integral multiples of $1,000; except
that if all of the Senior Notes of a Holder are selected for redemption or
purchase, the aggregate principal amount of the Senior Notes held by such
Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except
as provided in the preceding sentence, provisions of this Indenture that apply
to Senior Notes called for redemption or tendered pursuant to an offer also
apply to portions of Senior Notes called for redemption or tendered pursuant to
an Offer. The Trustee shall notify the Company promptly of the Senior Notes or
portions of Senior Notes to be called for redemption or selected for purchase.
SECTION 3.3 NOTICE OF REDEMPTION.
--------------------
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption to each Holder of Senior Notes or
portions thereof that are to be redeemed.
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The notice shall identify the Senior Notes or portions thereof to be
redeemed and shall state:
(1) the redemption date;
(2) the redemption price for the Senior Notes and separately stating
the amount of unpaid and accrued interest on, and Liquidated Damages, if any,
with respect to, such Senior Notes as of the date of redemption;
(3) if any Senior Note is being redeemed in part, the portion of the
principal amount of such Senior Notes to be redeemed and that, after the
redemption date, upon surrender of such Senior Note, a new Senior Note or
Senior Notes in principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Senior Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price for, and any accrued and unpaid
interest on, and Liquidated Damages, if any, with respect to such Senior Notes;
(6) that, unless the Company defaults in making such redemption
payment, interest on Senior Notes called for redemption ceases to accrue on and
after the redemption date;
(7) the paragraph of the Senior Notes pursuant to which the Senior
Notes called for redemption are being redeemed; and
(8) the CUSIP number; provided that no representation is made as to
the correctness or accuracy of the CUSIP number listed in such notice and
printed on the Senior Notes.
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At the Company's request, the Trustee shall (at the Company's expense)
give the notice of redemption in the Company's name at least 30 but not more
than 60 days before a redemption; provided, however, that the Company shall
deliver to the Trustee, at least 45 days prior to the redemption date and at
least 10 days prior to the date that notice of the redemption is to be mailed to
Holders, an Officers' Certificate that (i) requests the Trustee to give notice
of the redemption to Holders, (ii) sets forth the information to be provided to
Holders in the notice of redemption, as set forth in the preceding paragraph,
(iii) states that the Company has elected to redeem Senior Notes pursuant to
Section 3.7(a) or 3.7(b), as the case may be, and (iv) sets forth the aggregate
principal amount of Senior Notes to be redeemed and the amount of accrued and
unpaid interest and Liquidated Damages, if any, thereon as of the redemption
date. If the Trustee is not the Registrar, the Company shall, concurrently with
any such request, cause the Registrar to deliver to the Trustee a certificate
(upon which the Trustee may rely) setting forth the name of, the address of, and
the aggregate principal amount of Senior Notes held by, each Holder.
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.
------------------------------
Once notice of redemption is mailed, Senior Notes called for
redemption become due and payable on the redemption date at the price set forth
in the Senior Note. Upon surrender to the Trustee or Paying Agent, such Senior
Notes called for redemption shall be paid at the redemption price (which shall
include accrued interest thereon to the redemption date) but installments of
interest, the maturity of which is on or prior to the redemption date, shall be
payable to Holders of record at the close of business on the relevant record
dates.
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.
---------------------------
On or prior to any redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price
of, and accrued interest on, and Liquidated Damages, if any, with respect to all
Senior Notes to be redeemed on that date. The Trustee or the Paying Agent shall
return to the Company any money that the Company deposited with the Trustee or
the Paying Agent in excess of the amounts
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necessary to pay the redemption price of, and accrued interest on, and
Liquidated Damages, if any, with respect to all Senior Notes to be redeemed.
If the Company complies with the preceding paragraph, interest on the
Senior Notes to be redeemed will cease to accrue on such Senior Notes on the
applicable redemption date, whether or not such Senior Notes are presented for
payment. If a Senior Note is redeemed on or after an interest record date but
on or prior to the related interest payment date, then any accrued and unpaid
interest and Liquidated Damages, if any, shall be paid to the Person in whose
name such Senior Note was registered at the close of business on such record
date. If any Senior Note called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest will be paid on the unpaid principal, premium,
if any, interest and Liquidated Damages, if any, from the redemption date until
such principal, premium, interest and Liquidated Damages, if any, is paid, at
the rate of interest provided in the Senior Notes and Section 4.1.
SECTION 3.6 SENIOR NOTES REDEEMED IN PART.
-----------------------------
Upon surrender of a Senior Note that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder at the Company's
expense a new Senior Note equal in principal amount to the unredeemed portion
of the Senior Note surrendered.
SECTION 3.7 OPTIONAL REDEMPTION PROVISIONS.
------------------------------
(a) Except as provided in Section 3.7(b), the Senior Notes may not be
redeemed at the option of the Company prior to August 1, 2002. During the
twelve (12) month period beginning on August 1 of the years indicated below, the
Senior Notes will be redeemable at the option of the Company, in whole or in
part, on at least 30 but not more than 60 days' notice to each Holder of Senior
Notes to be redeemed, at the redemption prices (expressed as percentages of the
principal amount) set forth below, plus any accrued and unpaid interest and
Liquidated Damages, if any, from August 1, 2000 to the redemption date:
47
<PAGE>
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002................................ 104.9375%
2003................................ 102.4688%
2004 and thereafter................. 100.000 %
</TABLE>
(b) Notwithstanding the foregoing, at any time on or prior to August
1, 2000, the Company may (but shall not have the obligation to) redeem up to
one-third of the original aggregate principal amount of the Senior Notes with
the proceeds of one or more Equity Offerings at a redemption price of 109.875%
of the principal amount thereof, plus any accrued and unpaid interest and
Liquidated Damages, if any, to the date of redemption; provided that at least
$126,666,667 of the aggregate principal amount of the Senior Notes originally
issued remain out standing immediately after any such redemption; and provided,
further, that any such redemption shall occur within 60 days of the date of the
closing of any such Equity Offering.
SECTION 3.8 MANDATORY PURCHASE PROVISIONS.
-----------------------------
(a) Within 30 days following any Change of Control or Asset Sale
Trigger Date, the Company shall mail a notice to each Holder at such Holder's
registered address stating (i) that an offer ("Offer") is being made pursuant to
Section 4.13 or Section 4.14, as the case may be, the length of time the Offer
shall remain open, the amount of the Offer and the maximum aggregate principal
amount of Senior Notes that will be accepted for payment pursuant to such Offer;
(ii) the purchase price for the Senior Notes (as set forth in Section 4.13 or
Section 4.14, as the case may be), the amount of accrued and unpaid interest on,
and Liquidated Damages, if any, with respect to, such Senior Notes as of the
purchase date, and the purchase date (which shall be no earlier than 30 days or
later than 40 days from the date such notice is mailed (the "Purchase Date"));
(iii) that any Senior Note not accepted for payment will continue to accrue
interest and Liquidated Damages, if any; (iv) that, unless the Company fails to
deposit with the Paying Agent on the Purchase Date an amount sufficient to
purchase all Senior Notes accepted for payment, interest shall cease to accrue
on such Senior Notes after the Purchase Date; (v) that Holders electing to
tender any Senior Note or por-
48
<PAGE>
tion thereof will be required to surrender their Senior Note, with a form
entitled "Option of Holder to Elect Purchase" completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the
Business Day preceding the Purchase Date, provided that Holders electing to
tender only a portion of any Senior Note must tender a principal amount of
$1,000 or integral multiples thereof; (vi) that Holders will be entitled to
withdraw their election to tender Senior Notes, if the Paying Agent receives,
not later than the close of business on the third Business Day preceding the
Purchase Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Senior Notes delivered for
purchase, and a statement that such Holder is withdrawing his election to have
such Senior Note purchased; and (vii) that Holders whose Senior Notes are
accepted for payment in part will be issued new Senior Notes equal in principal
amount to the unpurchased portion of Senior Notes surrendered; provided that
only Senior Notes in a principal amount of $1,000 or integral multiples thereof
will be accepted for payment in part.
(b) On any Purchase Date, the Company shall, to the extent lawful and
required by this Indenture and such Offer, (i) in the case of an Offer resulting
from a Change of Control, accept for payment all Senior Notes or portions
thereof tendered pursuant to such Offer and, in the case of an Offer resulting
from an Asset Sale Trigger Date, accept for payment the maximum aggregate
principal amount of Senior Notes or portions thereof tendered pursuant to such
Offer that can be purchased out of Excess Proceeds from such Asset Sale Trigger
Date, (ii) deposit with the Paying Agent the aggregate purchase price of all
Senior Notes or portions thereof accepted for payment and any accrued and unpaid
interest and Liquidated Damages, if any, on such Senior Notes as of the Purchase
Date, and (iii) deliver or cause to be delivered to the Trustee all Senior Notes
so accepted together with an Officers' Certificate stating the Senior Notes or
portions thereof tendered to the Company.
(c) With respect to any Offer, if less than all of the Senior Notes
tendered pursuant to an Offer are to be purchased by the Company, the Trustee
shall select on the Purchase Date the Senior Notes or portions thereof to be
accepted for payment pursuant to Section 3.2.
49
<PAGE>
(d) Promptly after consummation of an Offer, (i) the Paying Agent
shall mail (or cause to be transferred by book entry) to each Holder of Senior
Notes or portions thereof accepted for payment an amount equal to the purchase
price for, plus any accrued and unpaid interest on, and Liquidated Damages, if
any, with respect to such Senior Notes as of the Purchase Date, (ii) with
respect to any tendered Senior Note not accepted for pay payment in whole or in
part, the Trustee shall return such Senior Note to the Holder thereof, and (iii)
with respect to any Senior Note accepted for payment in part, the Trustee shall
authenticate and mail to each such Holder a new Senior Note equal in principal
amount to the unpurchased portion of the tendered Senior Note, provided that
each such new Senior Note shall be in a principal amount of $1,000 or integral
multiples thereof.
(e) The Company will publicly announce the results of the Offer on or
as soon as practicable after the Purchase Date.
(f) The Company shall comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations to the extent such laws and
regulations are applicable to any Offer. To the extent that the provision of
any of the securities laws or regulations con conflict with provisions of this
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Indenture by virtue thereof.
(g) With respect to any Offer, if the Company deposits prior to 10:00
a.m. New York City time with the Paying Agent on the Purchase Date an amount in
available funds sufficient to purchase all Senior Notes accepted for payment,
interest shall cease to accrue on such Senior Notes after the Purchase Date;
provided, however, that if the Company fails to deposit such amount on the
Purchase Date, interest shall continue to accrue on such Senior Notes until such
deposit is made.
50
<PAGE>
ARTICLE 4
COVENANTS
SECTION 4.1 PAYMENT OF SENIOR NOTES.
-----------------------
The Company shall pay the principal of, and premium, if any, and
accrued and unpaid interest on the Senior Notes on the dates and in the manner
provided in the Senior Notes. Holders of Senior Notes must surrender their
Senior Notes to the Paying Agent to collect principal pal payments. Principal
of, premium, if any, and accrued and unpaid interest, and Liquidated Damages, if
any, shall be considered paid on the date due if the Paying Agent (other than
the Company or any of its Subsidiaries ), the Global Senior Note Holder or each
Holder that has specified an account, holds, as of 10:00 a.m. New York City
time, money the Company deposited in immediately available funds designated for
and sufficient to pay in cash all principal, premium, if any, and accrued and
unpaid interest on, and Liquidated Damages, if any, then due; provided that, to
the extent that the Holders have not specified accounts, such amounts shall be
considered paid on the date due if the Company mails a check for such amounts on
such date. The Paying Agent shall return to the Company, no later than five days
following the date of payment, any money (including accrued interest) that
exceeds the amount of principal, premium, if any, accrued and unpaid interest,
and Liquidated Damages, if any, paid on the Senior Notes. The Company shall pay
all Liquidated Damages, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement. If any Liquidated
Damages become payable, the Company shall not later than three Business Days
prior to the date that any payment of Liquidated Damages is due (i) deliver an
Officers' Certificate to the Trustee setting forth the amount of Liquidated
Damages payable to Holders and (ii) instruct the Paying Agent to pay such amount
of Liquidated Damages to Holders entitled to receive such Liquidated Damages.
To the extent lawful, the Company shall pay interest (including Post-
Petition Interest) on (i) overdue principal and premium at the then applicable
interest rate on the Senior Notes, compounded semiannually and (ii) over due
installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the
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<PAGE>
same rate as set forth in clause (i), compounded semiannually.
To the extent any payment on the Senior Notes, whether by or on behalf of
the Company, as proceeds of security or enforcement of any right of setoff or
otherwise, is declared to be fraudulent or preferential, set aside or required
to be paid to a trustee, receiver or other similar party under any bankruptcy,
insolvency, receivership or similar law, then if such payment is recovered by,
or paid over to, such trustee, receiver or other similar party, the Senior Notes
or part thereof originally intended to be satisfied by such payment shall be
deemed to be reinstated and outstanding as if such payment had not occurred.
SECTION 4.2 SEC REPORTS.
-----------
(a) The Company shall file with the Trustee, within 15 days after it
files them with the SEC, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) that the Company is required
to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If the
Company is not subject to the requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the Trustee, within 15 days after it
would have been required to file with the SEC, financial statements, including
any notes thereto (and with respect to annual reports, an auditor's report by a
firm of established national reputation), and a "Management's Discussion and
Analysis of Financial Condition and Results of Operations," both comparable to
that which the Company would have been required to include in such annual
reports, information, documents or other reports if the Company were subject to
the requirements of Section 13 or 15(d) of the Exchange Act. Subsequent to the
qualification of this Indenture under the TIA, the Company also shall comply
with the provisions of section 314(a) of the TIA.
(b) If the Company is required to furnish annual or quarterly reports
to its stockholders pursuant to the Exchange Act, the Company shall cause any
annual report furnished to its stockholders generally and any quarterly or other
financial reports it furnishes to its stockholders generally to be filed with
the Trustee and
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the Company shall mail to the Holders at their addresses appearing in the
register of Senior Notes maintained by the Registrar. If the Company is not
required to furnish annual or quarterly reports to its stockholders pursuant to
the Exchange Act, the Company shall cause its financial statements referred to
in Section 4.2(a), including any notes thereto (and with respect to annual
reports, an auditors' report by a firm of established national reputation), and
a "Management's Discussion and Analysis of Financial Condition and Results of
Operations," to be so mailed to the Holders within 120 days after the end of
each of the Company's fiscal years and within 60 days after the end of each of
the first three fiscal quarters of each year. The Company shall cause to be
disclosed in a statement accompanying any annual report or comparable
information as of the date of the most recent financial statements in each such
report or comparable information the amount available for payments pursuant to
Section 4.5. As of the date hereof, the Company's fiscal year ends on December
31.
(c) If the Company is not subject to the requirements of Section 13
or 15(d) of the Exchange Act, for so long as any Senior Notes remain
outstanding, the Company shall furnish to the Holders, securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(d) Notwithstanding anything herein to the contrary, the Trustee
shall have no duty to review such documents for purposes of determining their
compliance with any provision of this Indenture.
SECTION 4.3 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 a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determine whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that, to the best of
his or her knowledge, the Company has kept, observed, performed and fulfilled
each and
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every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company has taken or proposes to take with respect thereto) and that,
to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of, premium,
if any, and accrued and unpaid interest on, and Liquidated Damages, if any, with
respect to the Senior Notes are prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto.
So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the financial statements
delivered pursuant to Section 4.2 shall be accompanied by a written statement
of the Company's independent public accountants (who shall be a firm of
established national reputation reasonably satisfactory to the Trustee) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention that would lead them to believe that the
Company has violated any provisions of Section 4.1, 4.5, 4.6, 4.7, 4.8, 4.9, 4.
10, 4.11, 4.12, 4.13, 4.14, 4.15 or 4.16 or of Article 5 or, if any such
violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
The Company shall, so long as any of the Senior Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.4 STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law
54
<PAGE>
wherever enacted, now or at any time hereafter in force, that might affect the
covenants or the performance of this Indenture; and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
has been enacted.
SECTION 4.5 LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, (i) declare or pay any dividend or make
any distribution on account of the Company's or such Restricted Subsidiary's
Capital Stock or other Equity Interests (other than dividends or distributions
payable in Capital Stock or other Equity Interests (other than Disqualified
Stock) of the Company or a Restricted Subsidiary and other than dividends or
distributions payable by a Restricted Subsidiary to another Restricted
Subsidiary or to the Company); (ii) purchase, redeem or other wise acquire or
retire for value any Equity Interests of the Company or any of its Restricted
Subsidiaries (other than any such Equity Interest purchased from the Company or
any Restricted Subsidiary for fair market value (as determined by the Board of
Directors in good faith)); (iii) voluntarily prepay Subordinated Indebtedness,
whether any such Subordinated Indebtedness is outstanding on, or issued after,
the date of original issuance of the Senior Notes, except as specifically
permitted by the covenants of this Indenture; or (iv) make any Restricted
Investment (all such dividends, distributions, purchases, redemptions,
acquisitions, retirements, prepayments and Restricted Investments being
collectively referred to as "Restricted Payments"), if, at the time of such
Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof; or
(B) immediately after such Restricted Payment and after giving effect
thereto on a Pro Forma Basis, the Company shall not be able
55
<PAGE>
to issue $1.00 of additional Indebtedness pursuant to Section
4.7(a); or
(C) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after the date of original issuance of
the Senior Notes, without duplication, exceeds the sum of: (1)
50% of the aggregate Consolidated Net Income (including, for
this purpose, gains from Asset Sales and, to the extent not
included in Consolidated Net Income, any gain from a sale or
disposition of a Restricted Investment) of the Company (or, in
case such aggregate is a loss, 100% of such loss) for the period
(taken as one accounting period) from the beginning of the first
fiscal quarter commencing immediately after the date of original
issuance of the Senior Notes and ended as of the Company's most
recently ended fiscal quarter at the time of such Restricted
Payment, plus (2) 100% of the aggregate net cash proceeds and the
fair market value of any property or securities (as determined by
the Board of Directors in good faith) received by the Company
from the issue or sale of Capital Stock or other Equity Interests
of the Company subsequent to the date of original issuance of
the Senior Notes (other than (x) Capital Stock or other Equity
Interests issued or sold to a Restricted Subsidiary and (y) the
issuance or sale of Disqualified Stock), plus (3) $5,000,000,
plus (4) the amount by which the principal amount of and any
accrued interest on either (A) Senior Indebtedness of the
Company, or (B) any Indebtedness of the Restricted Subsidiaries
is reduced on the Company's consolidated balance sheet upon the
conversion or exchange subsequent to the date of original
issuance of the Senior Notes of any such Indebtedness of the
Company or any Restricted Subsidiary (not held by the Company or
any Restricted Subsidiary) for Capital Stock or other Equity
Interests (other than Disqualified Stock) of the
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Company or any Restricted Subsidiaries (less the amount of any
cash, or the fair market value of any other property or
securities (as determined by the Board of Directors in good
faith), distributed by the Company or any Restricted Subsidiary
(to Persons other than the Company or any other Restricted
Subsidiary) upon such conversion or exchange), plus (5) if any
Non-Restricted Subsidiary is redesignated as a Restricted
Subsidiary, the value of the deemed Restricted Payment resulting
therefrom and determined in accordance with the second sentence
of Section 4.16; provided, however, that for purposes of this
clause (5), the value of any redesignated Non-Restricted
Subsidiary shall be reduced by the amount that any such
redesignation replenishes or increases the amount of Restricted
Investments permitted to be made pursuant to Section 4.5(b)(ii).
(b) Notwithstanding Section 4.5(a), the following Restricted
Payments may be made: (i) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of declaration such payment would
comply with all the provisions hereof (including, but not limited to, this
Section 4.5); (ii) making Restricted Investments at any time, and from time to
time, in an aggregate outstanding amount of $40,000,000 after the date of
original issuance of the Senior Notes (it being understood that if any
Restricted Investment made after the date of original issuance of the Senior
Notes pursuant to this Section 4.5(b)(ii) is sold, transferred or otherwise
conveyed to any Person other than the Company or a Restricted Subsidiary, the
portion of the net cash proceeds or fair market value of securities or
properties paid or transferred to the Company and its Restricted Subsidiaries in
connection with such sale, transfer or conveyance that relates or corresponds to
the repayment or return of the original cost of such a Restricted Investment
will replenish or increase the amount of Restricted Investments permitted to be
made pursuant to this clause (ii), so that up to $40,000,000 of Restricted
Investments may be outstanding under this Section 4.5(b)(ii) at any given time;
provided that without otherwise limiting this clause (ii) any Restricted In-
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vestment in a Restricted Subsidiary made pursuant to this Section 4.5(b)(ii) is
made for fair market value (as determined by the Board of Directors in good
faith); (iii) the repurchase, redemption or acquisition of the Company's stock
from the executives, management and employees or consultants of the Company or
its Subsidiaries pursuant to the terms of any subscription, stockholder or
other agreement or plan, up to an aggregate amount not to exceed $5,000,000;
(iv) any loans, advances, distributions or payments from the Company to its
Restricted Subsidiaries, or any loans, advances, distributions or payments by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary,
pursuant to intercompany Indebtedness, intercompany management agreements,
intercompany tax sharing agreements and other intercompany agreements and
obligations; (v) the purchase, redemption, retirement or other acquisition of
(A) any Senior Indebtedness of the Company and any Indebtedness of a Restricted
Subsidiary required by its terms to be purchased, redeemed, retired or acquired
with the net proceeds from asset sales (as defined in the instrument evidencing
such Indebtedness) or upon a change of control (as defined in the instrument
evidencing such Indebtedness) and (B) the Senior Notes pursuant to Sections
3.7, 4.13 and 4.14; (vi) dividends and redemptions in respect of the Dura-Line
Preferred Stock pursuant to the Dura-Line Agreement; (vii) to the extent
constituting Restricted Payments, payments under the Tax Sharing Agreement, New
Subsidiary Consulting Agreement, Transition Agreement and the Properties
Services Agreement; (viii) to the extent constituting Restricted Payments, (A)
payments under the New Subsidiary Advisory Agreement, provided that such
payments will not be made and shall be accrued so long as any Default or Event
of Default shall have occurred and be continuing or shall occur as a consequence
thereof, and the Company's Obligations to pay such fees under the New Subsidiary
Advisory Agreement shall be subordinated expressly to the Company's Obligations
in respect of the Senior Notes, and (B) indemnities, expenses and other amounts
under the New Subsidiary Advisory Agreement; (ix) the redemption, repurchase,
retirement or the acquisition of any Capital Stock or other Equity Interests of
the Company or any Restricted Subsidiary in exchange for, or out of the proceeds
of, the substantially concurrent sale (other than to a Subsidiary of the
Company) of other Capital Stock or other Equity Interests of the Company or any
Restricted Subsid-
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iary (other than any Disqualified Stock); provided that any net cash proceeds
that are utilized for any such redemption, repurchase, retirement or other
acquisition, and any Net Income resulting therefrom, shall be excluded from this
Section 4.5(a)(iv)(c) (1) and (c)(2); (x) the defeasance, redemption or
repurchase of Indebtedness with the net cash proceeds from an issuance of
permitted Refinancing Indebtedness or the substantially concurrent sale (other
than to a Subsidiary of the Company) of Capital Stock or other Equity Interests
of the Company or any Restricted Subsidiary (other than Disqualified Stock);
provided that any net cash proceeds that are utilized for any such defeasance,
redemption or repurchase, and any Net Income resulting therefrom, shall be
excluded from this Section 4.5(a)(iv)(c)(1) and (c)(2); (xi) payments of fees,
expenses and indemnities in respect of the Company's and its Subsidiaries'
directors and such payments to Jordan Industries, Inc., an Illinois corporation
and corporate parent of the Company, in respect of their directors, provided
that the aggregate amount of such fees payable to all such directors does not
exceed $250,000 in any fiscal year; (xii) Restricted Investments received in
consideration for the sale, transfer or disposition by the Company or any
Restricted Subsidiary of any business, properties or assets belonging thereto,
provided that the Company complies with Section 4.14; (xiii) any Restricted
Investment constituting securities or instruments of a Person issued in
exchange for trade or other claims against such Person in connection with a
financial reorganization or restructuring of such Person; (xiv) to the extent
constituting Restricted Payments, payments and transactions in connection with
the Offering or the Company Formation; or (xv) any Restricted Investment
constituting an equity investment in a Receivables Subsidiary, provided that
the aggregate amount of such equity investments does not exceed $1,000,000.
SECTION 4.6 CORPORATE EXISTENCE.
Subject to Section 4.14 and Article 5, the Company shall do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence and the corporate, partnership or other existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of each of its Restricted Subsidiaries and the rights
(char-
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ter and statutory), licenses and franchises of the Company and each of
its Restricted Subsidiaries; provided, however, that the Company shall not be
required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any Restricted Subsidiary, if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Restricted Subsidiaries
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders.
SECTION 4.7 LIMITATION ON INCURRENCE OF INDEBTEDNESS.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, issue any Indebtedness (other than the Indebtedness represented
by the Senior Notes and the Discount Notes) unless the Company's Cash Flow
Coverage Ratio for its four full fiscal quarters next preceding the date such
additional Indebtedness is issued would have been at least 2.0 to 1 determined
on a Pro Forma Basis.
(b) Section 4.7(a) shall not apply to the issuance of (i)
Indebtedness of the Company and/or its Restricted Subsidiaries as measured on
such date of issuance in an aggregate principal amount outstanding on any such
date of issuance not exceeding up to the greater of (A) $110,000,000 aggregate
principal amount pursuant to the New Credit Agreement and (B) an aggregate
principal amount up to the sum of: (1) 85% of the book value of the Company's
and its Restricted Subsidiaries' Receivables on a consolidated basis and (2) 65%
of the book value of the Company's and its Restricted Subsidiaries' inventories
on a consolidated basis; (ii) Indebtedness of the Company and its Restricted
Subsidiaries pursuant to any Receivables Financing; (iii) Indebtedness of the
Company and its Restricted Subsidiaries in connection with capital leases, sale
and leaseback transactions, purchase money obligations, capital expenditures or
similar financing transactions relating to: (A) their properties, assets and
rights as of the date of original issuance of the Senior Notes up to $20,000,000
in aggregate principal amount or (B) their properties, assets and rights
acquired after the date of original issuance of the Senior Notes, provided that
the aggregate principal amount of such Indebtedness under this Section
4.7(b)(iii)(B) does
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not exceed 100% of the cost of such properties, assets and rights; (iv)
additional Indebtedness of the Company and its Restricted Subsidiaries in an
aggregate principal amount up to $25,000,000 (all or any portion of which may be
issued as additional Indebtedness under the New Credit Agreement); and (v) Other
Permitted Indebtedness.
(c) Notwithstanding Sections 4.7(a) and (b), no Restricted Subsidiary
shall under any circumstances issue a guarantee of any Indebtedness of the
Company except for guarantees issued by Restricted Subsidiaries pursuant to
Section 4.15, provided, however, that the foregoing will not limit or restrict
guarantees issued by Restricted Subsidiaries in respect of Indebtedness of other
Restricted Subsidiaries.
SECTION 4.8 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) Except as otherwise set forth herein, neither the Company nor
any of its Restricted Subsidiaries shall make any loan, advance, guarantee or
capital contribution to, or for the benefit of, or sell, lease, transfer or
dispose of any properties or assets to, or for the benefit of, or purchase or
lease any property or assets from, or enter into or amend any contract,
agreement or understanding with, or for the benefit of, an Affiliate (each such
transaction or series of related transactions that are part of a common plan, an
"Affiliate Transaction"), except in good faith and on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction on an arm's length basis
from an unrelated Person.
(b) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Affiliate Transactions involving aggregate
payments or other transfers by the Company and its Restricted Subsidiaries in
excess of $5,000,000 (including cash and non-cash payments and benefits valued
at their fair market value by the Board of Directors in good faith), unless the
Company delivers to the Trustee: (i) a resolution of the Board of Directors
stating that the Board of Directors (including a majority of the disinterested
directors, if any) has, in good faith, determined that such Affiliate
Transaction complies with the provisions of this Indenture; and (ii)(A) with
respect to any Affiliate Transaction involv-
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ing the incurrence of Indebtedness, a written opinion of a nationally recognized
investment banking or accounting firm experienced in the review of similar types
of transactions, (B) with respect to any Affiliate Transaction involving the
transfer of real property, fixed assets or equipment, either directly or by a
transfer of 50% or more of the Capital Stock of a Restricted Subsidiary which
holds any such real property, fixed assets or equipment, a written appraisal
from a nationally recognized appraiser experienced in the review of similar
types of transactions or (C) with respect to any Affiliate Transaction not
otherwise described in (A) or (B) above, or in lieu of the opinions and
appraisals referred to in (A) and (B) above, a written certification from a
nationally recognized professional or firm experienced in evaluating similar
types of transactions, in each case, stating that the terms of such transaction
are fair to the Company or such Restricted Subsidiary, as the case may be, and
the Holders of the Senior Notes from a financial point of view.
(c) Notwithstanding Sections 4.8(a) and (b), this Section 4.8 shall
not apply to: (i) transactions between the Company and any Restricted
Subsidiary or between Restricted Subsidiaries; (ii) payments expressly due under
the New Subsidiary Advisory Agreement, the New Subsidiary Consulting Agreement,
the Transition Agreement, the Properties Services Agreement and the Tax Sharing
Agreement; provided that any amendments, supplements, modifications,
substitutions, renewals or replacements of the foregoing agreements are
approved by a majority of the Board of Directors (including a majority of
disinterested directors, if any) as fair to the Company and the Holders of the
Senior Notes; (iii) any Restricted Payments permitted pursuant to Section 4.5;
(iv) reasonable compensation paid to officers, employees or consultants of the
Company or any Subsidiary as determined in good faith by the Company's Board of
Directors or executives; (v) transactions in connection with a Receivables
Financing; or (vi) payments and transactions in connection with the Offering and
the Company Formation.
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SECTION 4.9 LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) upon any property or asset now owned
or hereafter acquired by them, or any income or profits therefrom, or assign or
convey any right to receive income therefrom; provided, however, that in
addition to creating Permitted Liens on their properties or assets, the Company
and any of its Restricted Subsidiaries may create any Lien upon any of their
properties or assets (including, but not limited to, any Capital Stock of its
Subsidiaries) if the Senior Notes are equally and ratably secured.
SECTION 4.10 COMPLIANCE WITH LAWS, TAXES.
The Company shall, and shall cause each of its Restricted Subsidiaries
to, comply with all statutes, laws, ordinances, or government rules and
regulations to which it is subject, the non-compliance with which would
materially adversely affect the business, prospects, earnings, properties,
assets or condition, financial or otherwise, of the Company and its Restricted
Subsidiaries taken as a whole.
The Company shall, and shall cause each of its Restricted Subsidiaries
to, pay prior to delinquency all taxes, assessments and governmental levies,
except those contested in good faith by appropriate proceedings.
SECTION 4.11 LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective, any encumbrance or restriction on the ability of any
Restricted Subsidiary to: (i) pay dividends or make any other distributions on
its Capital Stock or any other interest or participation in, or measured by,
its profits, owned by the Company or any Restricted Subsidiary, or pay any
Indebtedness owed to, the Company or any Restricted Subsidiary; (ii) make loans
or
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advances to the Company; or (iii) transfer any of its properties or assets to
the Company, except for such encumbrances or restrictions existing under or by
reason of: (A) applicable law; (B) Indebtedness permitted (1) under Section
4.7(a), (2) under Sections 4.7(b)(i), (ii) and (iv) and clauses (i), (v), (vi),
(vii), (ix), (x), (xi), (xii) and (xiv) of the definition of Other Permitted
Indebtedness, or (3) Restricted Payments and agreements or instruments
evidencing the Restricted Payments permitted under Section 4.5; (C) customary
provisions restricting subletting or assignment of any lease or license of the
Company or any Restricted Subsidiary; (D) customary provisions of any franchise,
distribution or similar agreement; (E) any instrument governing Indebtedness or
any other encumbrance or restriction of a Person acquired by the Company or any
Restricted Subsidiary at the time of such acquisition, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired; (F) Indebtedness or other agreements existing on the date of original
issuance of the Senior Notes; (G) any Refinancing Indebtedness of Indebtedness
described in Sections 4.7(b)(i), (ii), (iii) and (iv) and clauses (i), (v),
(vi), (vii), (ix), (x), (xi), (xii) and (xiv) of the definition of Other
Permitted Indebtedness; provided that the encumbrances and restrictions created
in connection with such Refinancing Indebtedness are no more restrictive in any
material respect with regard to the interests of the Holders of Senior Notes
than the encumbrances and restrictions in the refinanced Indebtedness; (H) any
restrictions, with respect to a Restricted Subsidiary, imposed pursuant to an
agreement that has been entered into for the sale or disposition of the stock,
business, assets or properties of such Restricted Subsidiary; (I) the terms of
any Indebtedness of the Company incurred in connection with Section 4.7,
provided that the terms of such Indebtedness constitute no greater encumbrance
or restriction on the ability of any Restricted Subsidiary to pay dividends or
make distributions, make loans or advances or transfer properties or assets than
is otherwise permitted by this Section 4.11; and (J) the terms of purchase
money obligations, but only to the extent such purchase money obligations
restrict or prohibit the transfer of the property so acquired.
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(b) Nothing contained in this Section 4.11 shall prevent the Company
from entering into any agreement or instrument providing for the incurrence of
Permitted Liens or restricting the sale or other disposition of property or
assets of the Company or any of its Restricted Subsidiaries that are subject to
Permitted Liens.
SECTION 4.12 MAINTENANCE OF OFFICE OR AGENCIES.
The Company shall maintain in the Borough of Manhattan, the City of New
York an office or an agency (which may be an office of any Agent) where Senior
Notes may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Senior Notes and
this Indenture may be served. The Company shall give prompt written notice to
the Trustee of any change in the location of such office or agency. If at any
time the Company shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office.
The Company may also from time to time designate one or more other offices
or agencies where the Senior Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
located at First Trust National Association, 100 Wall Street, 20th Floor, New
York, New York 10005, as one such office or agency of the Company in accordance
with Section 2.3.
SECTION 4.13 CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of
Senior Notes shall have the right to require the Company to purchase all or any
part (equal to
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$1,000 or an integral multiple thereof) of such Holder's Senior Notes pursuant
to an Offer at a purchase price equal to 101% of the aggregate principal amount
thereof, plus any accrued and unpaid interest and Liquidated Damages, if any, to
the date of purchase. Although the failure of the Company to purchase all
Senior Notes tendered in such an Offer shall be a Default, if the Company is
unable to purchase all Senior Notes tendered in such an Offer, the Company shall
nevertheless purchase the maximum principal amount of Senior Notes that it is
able to purchase at that time.
(b) Prior to the mailing of the notice referred to in Section
3.8(a), but in any event within 30 days following any Change of Control, the
Company shall (i) repay in full and terminate all commitments under Indebtedness
under the New Credit Agreement and all other Senior Indebtedness the terms of
which require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the New Credit Agreement
and all such other Senior Indebtedness and to repay the Indebtedness owed to
each lender which has accepted such offer or (ii) obtain the requisite consents
under the New Credit Agreement and all such other Senior Indebtedness to permit
the repurchase of the Senior Notes as provided in Section 3.8(b). The Company
shall first comply with Section 4.13(b)(ii) before it shall be required to
repurchase Senior Notes pursuant to the provisions in Section 3.8. The
Company's failure to comply with this Section 4.13(b) shall constitute an Event
of Default described in clause (iii) and not in clause (ii) under Section
6.1(a).
(c) In the event of a Change of Control, the Company shall not offer
to purchase or redeem any Subordinated Indebtedness required or entitled by its
terms to be redeemed or purchased until the Change of Control Offer for the
Senior Notes has been consummated and all Senior Notes tendered pursuant to such
Offer have been accepted for payment.
SECTION 4.14 LIMITATION ON ASSET SALES.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale (including the
sale of any of the Capital Stock of any Restricted Subsidiary)
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providing for Net Proceeds in excess of $2,500,000 unless at least 75% of the
Net Proceeds from such Asset Sale are applied (in any manner otherwise permitted
by this Indenture) to one or more of the following purposes in such combination
as the Company shall elect: (i) an investment in another asset or business in
the same line of business as, or a line of business similar to that of, the line
of business of the Company and its Restricted Subsidiaries at the time of the
Asset Sale; provided that such investment occurs on or prior to the 365th day
following the date of such Asset Sale (the "Asset Sale Disposition Date"), (ii)
to reimburse the Company or its Subsidiaries for expenditures made, and costs
incurred, to repair, rebuild, replace or restore property subject to loss,
damage or taking, to the extent that the Net Proceeds consist of insurance
proceeds received on account of such loss, damage or taking, (iii) the purchase,
redemption or other prepayment or repayment of outstanding Senior Indebtedness
of the Company or Indebtedness of the Company's Restricted Subsidiaries on or
prior to the 365th day following the Asset Sale Disposition Date or (iv) an
Offer expiring on or prior to the Purchase Date.
(b) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale unless at least
75% of the consideration thereof received by the Company or such Restricted
Subsidiary is in the form of cash, cash equivalents or marketable securities;
provided that, solely for purposes of calculating such 75% of the consideration,
the amount of (i) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto, excluding
contingent liabilities and trade payables), of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Senior Notes) that are assumed by the transferee of any such assets and (ii) any
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are promptly, but in no event more than 30
days after receipt, converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received), shall be deemed to be cash and cash
equivalents for purposes of this provision. Any Net Proceeds from any Asset Sale
that are not applied or invested as provided in Section 4.14(a) shall
constitute "Excess Proceeds."
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(c) When the aggregate amount of Excess Proceeds exceeds $10,000,000
(such date being an "Asset Sale Trigger Date"), the Company shall make an Offer
to all Holders of Senior Notes to purchase the maximum principal amount of the
Senior Notes then outstanding that may be purchased out of Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus any accrued and unpaid interest and Liquidated Damages, if any, to
the Purchase Date, in accordance with the procedures set forth in this
Indenture.
(d) To the extent that substantially concurrently with being required
to make an Offer to the holders of the Senior Notes on account of an Asset
Sale, the Company is required to make a similar Offer to holders of any other
Indebtedness ranking pari passu with the Senior Notes (including without
limitation the Discount Notes), the Excess Proceeds allocable to each such Offer
shall be allocated as nearly as practicable pro rata as between the Discount
Notes and the Senior Notes in accordance with the respective aggregate principal
amount or Accreted Value thereof, as the case may be.
(e) To the extent that any Excess Proceeds remain after completion of
an Offer, the Company may use such remaining amount for general corporate
purposes.
(f) If the aggregate principal amount of Senior Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Senior Notes to be purchased on a pro rata basis, by lot or by a method that
complies with the requirements of any stock exchange on which the Senior Notes
are listed and that the Trustee considers fair and appropriate.
(g) Upon completion of an Offer related to an Asset Sale, the amount
of Excess Proceeds shall be reset at zero.
(h) Notwithstanding the foregoing, to the extent that any or all of
the Net Proceeds of an Asset Sale is prohibited or delayed by applicable local
law from being repatriated to the United States, the portion of such Net
Proceeds so affected will not be required to be applied pursuant to Section
4.14, but may be retained for so long, but only for so long, as the applicable
local law prohibits repatriation to the United States.
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The Company will promptly take all reasonable actions required by the applicable
local law to permit such repatriation, and once such repatriation of any
affected Net Proceeds is not prohibited under applicable local law, such
repatriation will be immediately effected and such repatriated Net Proceeds will
be applied in the manner set forth above as if such Asset Sale had occurred on
the date of repatriation.
SECTION 4.15 LIMITATION ON GUARANTEES OF COMPANY INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES.
(a) The Company shall not permit any Restrict ed Subsidiary, directly
or indirectly, to guarantee any Indebtedness of the Company other than the
Senior Notes (the "Other Company Indebtedness"), unless (i) such Restricted
Subsidiary contemporaneously executes and delivers a supplemental indenture to
the Indenture providing for a guarantee of payment of the Senior Notes then
outstanding by such Restricted Subsidiary to the same extent as the guarantee
(the "Other Company Indebtedness Guarantee") of the Other Company Indebtedness
(including waiver of subrogation, if any) and (ii) if the Other Company
Indebtedness guaranteed by such Restricted Subsidiary is (A) Senior
Indebtedness, the guarantee for the Senior Notes shall be pari passu in right of
payment with the Other Company Indebtedness Guarantee and (B) Subordinated
Indebtedness, the guarantee for the Senior Notes shall be senior in right of
payment to the Other Company Indebtedness Guarantee; provided that the foregoing
will not limit or restrict guarantees issued by Restricted Subsidiaries in
respect of Indebtedness of other Restricted Subsidiaries.
(b) Each guarantee of the Senior Notes created by a Restricted
Subsidiary pursuant to Section 4.15(a) shall be in accordance with Section
4.15(a), shall be delivered to the Trustee and shall provide, among other
things, that it shall be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer permitted by this Indenture
of (A) all of the Company's Capital Stock in such Restricted Subsidiary or (B)
the sale of all or substantially all of the assets of the Restricted Subsidiary
and upon the application of the Net Proceeds from such sale in accordance with
the requirements of Section 4.14, or (ii) the release or discharge of the
Other Company Indebtedness Guarantee that
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resulted in the creation of such guarantee of the Senior Notes, except a
discharge or release by or as a result of payment under such Other Company
Indebtedness Guarantee.
SECTION 4.16 DESIGNATION OF RESTRICTED AND NON-RESTRICTED SUBSIDIARIES.
(a) From and after the date of original issuance of the Senior
Notes, the Company may designate any existing or newly formed or acquired
Subsidiary as a Non-Restricted Subsidiary, provided that (i) either (A) the
Subsidiary to be so designated has total assets of $1,000,000 or less or (B)
immediately before and after giving effect to such designation on a Pro Forma
Basis, (1) the Company could incur $1.00 of additional Indebted ness pursuant to
Section 4.7(a) determined on a Pro Forma Basis; and (2) no Default or Event of
Default shall have occurred and be continuing, or shall occur as a consequence
thereof, and (ii) all transactions between the Subsidiary to be so designated
and its Affiliates remaining in effect are permitted pursuant to Section 4.8.
Any Investment made by the Company or any Restricted Subsidiary in a Subsidiary
which is redesignated from a Restricted Subsidiary to a Non-Restricted
Subsidiary shall be considered as having been a Restricted Payment (to the
extent not previously included as a Restricted Payment) made on the day such
Subsidiary is designated as a Non-Restricted Subsidiary in the amount of the
greater of (i) the fair market value (as determined by the Board of Directors of
the Company in good faith) of the Equity Interests of such Subsidiary held by
the Company and its Restricted Subsidiaries on such date, and (ii) the amount of
the Investments determined in accordance with GAAP made by the Company and any
of its Restricted Subsidiaries in such Subsidiary.
(b) A Non-Restricted Subsidiary may be redesignated as a Restricted
Subsidiary. The Company shall not, and shall not permit any Restricted
Subsidiary to, take any action or enter into any transaction or series of
transactions that would result in a Person becoming a Restricted Subsidiary
(whether through an acquisition, the redesignation of a Non-Restricted
Subsidiary or otherwise, but not including through the creation of a new
Restricted Subsidiary) unless, immediately before and after giving effect to
such action, transaction or series of transactions on a Pro Forma Basis, (i) the
Company
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could incur at least $1.00 of additional Indebtedness pursuant to Section 4.7(a)
and (ii) no Default or Event of Default shall have occurred and be continuing or
shall occur as a consequence thereof.
(c) The designation of a Subsidiary as a Restricted Subsidiary or the
removal of such designation is required to be made by a resolution adopted by a
majority of the Board of Directors of the Company stating that the Board of
Directors has made such designation in accordance with this Indenture, and the
Company is required to deliver to the Trustee such resolution together with an
Officers' Certificate certifying that the designation complies with this
Indenture. Such designation shall be effective as of the date specified in the
applicable resolution, which may not be before the date the applicable
Officers' Certificate is delivered to the Trustee.
(d) The sale and transfer of all of the Equity Interests in a foreign
Restricted Subsidiary to a Non-Restricted Subsidiary and the subsequent
redesignation of such foreign Restricted Subsidiary as a Non-Restricted
Subsidiary as contemplated by the definition of "Restricted Subsidiary" will
not be considered a redesignation of a Restricted Subsidiary for purposes of
this Section 4.16.
ARTICLE 5
SUCCESSORS
SECTION 5.1 MERGER OR CONSOLIDATION.
(a) The Company shall not consolidate or merge with or into, or sell,
lease, convey or otherwise dispose of all or substantially all of its assets to,
any Person(any such consolidation, merger or sale being a "Disposition") unless
(i) the successor corporation of such Disposition or the Person to which such
Disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the successor corporation of such Disposition or the corporation to which
such Disposition shall have been made expressly assumes the Obligations of the
Company, pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trust-
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ee, under the Indenture and the Senior Notes; (iii) immediately after such
Disposition, no Default or Event of Default shall exist; and (iv) the
corporation formed by or surviving any such Disposition, or the corporation to
which such Disposition shall have been made, shall (A) have Consolidated Net
Worth (immediately after the Disposition but prior to giving effect on a Pro
Forma Basis to any purchase accounting adjustments or Restructuring Charges
resulting from the Disposition) equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the Disposition, (B) be permitted
immediately after the Disposition by the terms of this Indenture to issue at
least $1.00 of additional Indebted ness determined on a Pro Forma Basis pursuant
to Section 4.7(a), and (C) have a Cash Flow Coverage Ratio, for the four fiscal
quarters immediately preceding the applicable Disposition, determined on a Pro
Forma Basis, equal to or greater than the actual Cash Flow Coverage Ratio of the
Company for such four quarter period. The limitations in this Section 5.1(a) on
the Company's ability to make a Disposition do not restrict the Company's
ability to sell less than all or substantially all of its assets, such sales
being governed by Section 4.14.
(b) Prior to the consummation of any proposed Disposition, the
Company shall deliver to the Trustee an Officers' Certificate to the foregoing
effect and an Opinion of Counsel stating that the proposed Disposition and such
supplemental indenture comply with this Indenture.
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any Disposition, the Successor Corporation resulting from such
Disposition shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such Successor has been named as the Company here in; provided, however, that
neither the Company nor any Successor Corporation shall be released from its
Obligation to pay the principal of, premium, if any, and accrued and unpaid
interest on, and Liquidated Damages, if any, with respect to the Senior Notes.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT.
(a) An Event of Default is:
(i) a default for 30 days in payment of interest on, or
Liquidated Damages, if any, with respect to, the Senior Notes;
(ii) a default in payment when due at maturity, upon redemption
or otherwise, of principal or premium, if any, with respect to, the Senior
Notes;
(iii) the failure of the Company to comply with any of its other
agreements or covenants in, or provisions of, this Indenture or the Senior
Notes outstanding and the Default continues for the period, if applicable,
and after the notice specified in Section 6.1(b);
(iv) a default by the Company or any Restricted Subsidiary
under any mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any Restricted Subsidiary (or the payment of
which is guaranteed by the Company or any Restricted Subsidiary), whether
such Indebtedness or guarantee now exists or shall be created hereafter, if
(A) either (1) such default results from the failure to pay principal of or
interest on any such Indebtedness at the Stated Maturity thereof or upon
such Indebted ness becoming due upon the redemption thereof or otherwise
and such default continues for 30 days beyond any applicable grace period
or (2) as a result of such default the maturity of such Indebtedness has
been accelerated prior to its expressed maturity, and (B) the principal
amount of such Indebtedness, together with the principal amount of any
other such Indebtedness in default for failure to pay principal or interest
thereon, at final maturity, or because of the acceleration of the maturity
thereof, aggregates in excess of $10,000,000;
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(v) a failure by the Company or any Restricted Subsidiary to pay
final judgments (not covered by insurance) aggregating in excess of $10,000,000
which judgments a court of competent jurisdiction does not rescind, annual or
stay within 45 days after their entry and the Default continues for the period
and after the notice specified in Section 6.1(b);
(vi) in existence when 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 all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors; and
(vii) in existence when 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 all or substantially all of the property of the Company
or any Significant Subsidiary, or
(C) orders the liquidation of the Company or any Significant
Subsidiary,
and any such order or decree remains unstayed and in effect for 60
days.
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(b) A Default or Event of Default under Section 6.1(a)(iii) (other
than an Event of Default arising under Section 5.1 which shall be an Event of
Default with the notice but without the passage of time specified in this
Section 6.1(b)) or Section 6.1(a)(v) is not an Event of Default under this
Indenture until the Trustee or the Holders of at least 25% in principal amount
of the Senior Notes then outstanding notify the Company of the Default and the
Company does not cure the Default within 45 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied, and state that
the notice is a "Notice of Default."
(c) In the case of any Event of Default pursuant to Section 6.1(a)
or Section 6.1(b) occurring by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding
payment of the premium that the Company would have to pay if the Company then
had elected to redeem the Senior Notes pursuant to paragraph 5 of the Senior
Notes, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law, anything in this Indenture or in the
Senior Notes contained to the contrary notwithstanding.
(d) The Trustee shall not be charged with knowledge of any Default or
Event of Default unless written notice thereof shall have been given to a Trust
Officer at the Corporate Trust Office of the Trustee by the Company or any other
Person.
SECTION 6.2 ACCELERATION.
------------
(a) Upon the occurrence of an Event of Default (other than an Event
of Default under Section 6.1(a)(vi) or (vii)), the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Senior Notes may declare
all Senior Notes to be due and payable immediately and, upon such declaration,
the principal of, premium, if any, and any accrued and unpaid interest on, and
Liquidated Damages, if any, with respect to all Senior Notes shall be due and
payable immediately; provided, however, that if an Event of Default arises under
Section 6.1(a)(vi) or (vii), the principal of, and any accrued and unpaid
interest on, all Senior Notes, shall ipso facto become and be immediately due
and payable
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without any declaration or other act on the part of the Trustee or any Holders
of Senior Notes.
(b) The Holders of a majority in principal amount of the Senior Notes
then outstanding, by notice to the Trustee, may rescind any declaration of
acceleration of such Senior Notes and its consequences (if the rescission would
not conflict with any judgment or decree) if all existing Events of Default
(other than the nonpayment of principal of or interest on such Senior Notes that
shall have become due by such declaration) shall have been cured or waived.
(c) If there has been a declaration of acceleration of the Senior
Notes because an Event of Default under Section 6.1(a)(iv) has occurred and is
continuing, such declaration of acceleration shall be automatically annulled if
the holders of the Indebtedness described in Section 6.1(a)(iv) have rescinded
the declaration of acceleration in respect of such Indebtedness within 30
Business Days thereof and if (i) the annulment of such acceleration would not
conflict with any judgment or decree of a court of competent jurisdiction, (ii)
all existing Events of Default, except non-payment of principal or interest
that shall have become due solely because of the acceleration, have been cured
or waived, and (iii) the Company has delivered an Officers' Certificate to the
Trustee to the effect of clauses (i) and (ii) above.
SECTION 6.3 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, premium, if
any, or any accrued and unpaid interest on, or Liquidated Damages, if any, with
respect to the Senior Notes or to enforce the performance of any provision of
the Senior Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Senior Notes or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
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SECTION 6.4 WAIVER OF PAST DEFAULTS.
-----------------------
The holders of a majority in aggregate principal amount of the Senior
Notes then outstanding by notice to the Trustee may on behalf of all Holders of
Senior Notes waive any existing Default or Event of Default under this Indenture
and its consequences, except a continuing Default in the payment of the
principal of, premium, if any, and interest on, and Liquidated Damages, if any,
with respect to such Senior Notes, which may only be waived with the consent of
each Holder of Senior Notes affected. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; provided that no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
SECTION 6.5 CONTROL BY MAJORITY.
-------------------
Subject to Section 7.1(e), the Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it by this Indenture. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that the Trustee determines may be unduly prejudicial to the rights
of other Holders or would involve the Trustee in personal liability.
SECTION 6.6 LIMITATION ON SUITS.
-------------------
A Holder may pursue a remedy with respect to this Indenture or the
Senior Notes only if (i) the Holder gives to the Trustee notice of a continuing
Event of Default; (ii) the Holders of at least 25% in principal amount of the
then outstanding Senior Notes make a request to the Trustee to pursue the
remedy; (iii) such Holder or Holders offer to the Trustee indemnity satis-
factory to the Trustee against any loss, liability or expense; (iv) the Trustee
does not comply with the request within 60 days after receipt of the request
and the offer of indemnity; and (v) during such 60-day period the Holders of a
majority in principal amount of the then outstanding Senior Notes do not give
the Trustee a direction inconsistent with the request.
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A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Holders of the Senior Notes may not enforce this Indenture, except as
provided herein.
SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of, premium, if any, and any accrued
and unpaid interest on, and Liquidated Damages, if any, with respect to a Senior
Note, on or after a respective due date expressed in the Senior Note, or to
bring suit for the enforcement of any such payment on or after such respective
date, shall not be impaired or affected without the consent of the Holder.
SECTION 6.8 COLLECTION SUIT BY TRUSTEE.
--------------------------
If an Event of Default specified in Section 6.1(a)(i) or (ii) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for (i) the principal,
premium and Liquidated Damages, if any, and interest remaining unpaid on the
Senior Notes, (ii) interest on overdue principal and premium, if any, and, to
the extent lawful, interest, and (iii) such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel ("Trustee Expenses").
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable to have the claims of the Trustee
(including any claim for Trustee Expenses) and the Holders allowed in any
Insolvency or Liquidation Proceeding or other judicial proceeding relative to
the Company (or any other obligor upon the Senior Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
to Holders any money or other property payable or deliverable on any such claims
and each Holder authorizes any Custodian in any such Insolvency or Liquidation
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Proceeding or other judicial proceeding to make such payments to the Trustee,
and if the Trustee shall consent to the making of such payments directly to the
Holders any such Custodian is hereby authorized to make such payments directly
to the Holders, and to pay to the Trustee any amount due to it hereunder for
Trustee Expenses, and any other amounts due the Trustee under Section 7.7. To
the extent that the payment of any such Trustee Expenses, and any other amounts
due the Trustee under Section 7.7 out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties which the Holders may be entitled to receive in
such proceeding, whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Senior Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any Insolvency or
Liquidation Proceeding.
SECTION 6.10 PRIORITIES.
----------
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: to Holders for amounts due and unpaid on the Senior Notes for
principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to
the amounts due and payable on the Senior Notes for principal,
premium and Liquidated Damages, if any, and interest,
respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders.
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SECTION 6.11 UNDERTAKING FOR COSTS.
---------------------
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7,
or a suit by Holders of more than 10% in principal amount of the then
outstanding Senior Notes.
ARTICLE 7
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE.
-----------------
(a) If an Event of Default occurs (and has not been cured) the Trustee
shall (i) exercise the rights and powers vested in it by this Indenture, and
(ii) use the same degree of care and skill in exercising such rights and powers
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee's duties shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the
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Trustee shall examine the certificates and opinions to determine whether
they conform to this Indenture's requirements.
(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:
(i) this paragraph does not limit the effect of Section 7.1(b);
(ii) 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
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction it
receives pursuant to Section 6.5.
(d) Whether or not expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), (c) and (e) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders unless such Holders shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money it
receives except as the Trustee may agree in writing with the Company. Money the
Trustee holds in trust need not be segregated from other funds except to the
extent required by law.
SECTION 7.2 RIGHTS OF TRUSTEE.
-----------------
(a) The Trustee may rely on any document it believes to be genuine and
to have been signed or presented by the proper Person. The Trustee shall not be
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obligated to investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may reasonably
require an Officers' Certificate or an Opinion of Counsel, or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(c) The Trustee may act through 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, except to the extent that such action or omission to act constitutes
negligence or wilful misconduct on the part of the Trustee.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer.
(f) Except with respect to Section 4.1, the Trustee shall have no duty
to inquire as to the performance by the Company with respect to the covenants
contained in Article 4. In addition, the Trustee shall not be deemed to have
knowledge of a Default or Event of Default except (i) any Default or Event of
Default occur ring pursuant to Sections 4.1, 6.1(a)(i) or 6.1(a)(ii), or (ii)
any Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
----------------------------
The Trustee in its individual or any other capacity may become the owner or
pledgee of Senior Notes and may otherwise deal with the Company or an Affiliate
with the same rights it would have if it were not Trustee. However, if the
Trustee acquires any conflicting interest it
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must eliminate such conflict within 90 days, apply to the Commission for
permission to continue as Trustee or resign. Any Agent may do the same with
like rights. The Trustee is also subject to Sections 7.10 and 7.11.
SECTION 7.4 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 Senior Notes, it shall
not be accountable for the Company's use of the proceeds from the Senior Notes
or for any money paid to the Company or upon the Company's direction under any
provisions hereof, it shall not be responsible for the use or application of any
money any Paying Agent other than the Trustee receives, and it shall not be
responsible for any statement or recital herein or any statement in the Senior
Notes or any other document furnished or issued in connection with the sale of
the Senior Notes or pursuant to this Indenture, other than its certificate of
authentication.
SECTION 7.5 NOTICE TO HOLDERS OF DEFAULTS AND EVENTS OF DEFAULT.
---------------------------------------------------
If a Default or Event of Default occurs and is continuing and if it is
actually known to the Trustee, the Trustee shall mail to Holders a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment on any Senior Note (including any
failure to redeem Senior Notes called for redemption or any failure to purchase
Senior Notes tendered pursuant to an Offer that are required to be purchased by
the terms of this Indenture), 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 Holders' interests.
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS.
-----------------------------
Within 60 days after each May 15 beginning with May 15, 1998, the
Trustee shall mail to Holders a brief report dated as of such reporting date
that complies with section 313(a) of the TIA (but if no event described in
section 313(a) of the TIA has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with section
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313(b)(2) of the TIA. The Trustee shall also transmit by mail all reports as
required by section 313(c) of the TIA.
Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to Holders shall be filed with
the SEC and each national securities exchange on which the Senior Notes are
listed. The Company shall notify the Trustee when the Senior Notes are listed
on any national securities exchange.
SECTION 7.7 COMPENSATION AND INDEMNITY.
--------------------------
The Company shall pay to the Trustee (in its capacities as Trustee,
Paying Agent and/or Registrar) from time to time reasonable compensation for its
services hereunder. 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 disbursements, advances, fees and
expenses it incurs or makes in addition to the compensation for its services.
Such expenses shall include the reasonable compensation, disbursements and
expenses of the Trustee's agents and counsel.
The Company shall indemnify and hold harmless the Trustee (in its
capacities as Trustee, Paying Agent and/or Registrar) against any and all
losses, liabilities or expenses the Trustee incurs arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, except as set forth below. 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 shall reasonably
cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The Company's Obligations under this Section 7.7 shall survive the
satisfaction and discharge of this Indenture.
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The Company need not reimburse any expense or indemnify against any
loss or liability the Trustee incurs through negligence or bad faith.
To secure the Company's payment of its Obligations in this Section,
the Trustee shall have a Lien prior to the Senior Notes on all money or property
the Trustee holds or collects. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(a)(vii) or (viii) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute administrative expenses under any
Bankruptcy Law.
SECTION 7.8 REPLACEMENT OF TRUSTEE.
----------------------
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign and be discharged from the trust hereby created
by so notifying the Company. The Holders of a majority in principal amount of
the then outstanding Senior Notes may remove the Trustee by so notifying the
Trustee and the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(iii) a Custodian or public officer takes charge of the Trustee
or its property; or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the
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Company shall promptly appoint a successor Trustee, provided that the Holders of
a majority in principal amount of the then outstanding Senior Notes may appoint
a successor Trustee to replace any successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Senior Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
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
appointment to Holders. The retiring Trustee shall promptly transfer all
property it holds as Trustee to the successor Trustee, provided all sums owing
to the retiring Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.7. Notwithstanding replacement of the Trustee
pursuant to this Section 7.8, the Company's obligations under Section 7.7 shall
continue for the retiring Trustee's benefit with respect to expenses and
liabilities it incurred prior to being replaced.
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
--------------------------------
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
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SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
-----------------------------
The Trustee shall at all times (i) be a corporation organized and
doing business under the laws of the United States of America, of any state
thereof, or the District of Columbia authorized under such laws to exercise
corporate trustee power, (ii) be subject to supervision or examination by
federal or state authority, (iii) have a combined capital and surplus of at
least $25,000,000, or be a member of a bank holding company which has a
combined capital and surplus of at least $100,000,000, as set forth in its most
recent published annual report of condition, and (iv) satisfy the requirements
of sections 310(a)(1), (2) and (5) of the TIA. The Trustee is subject to
section 310(b) of the TIA.
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
-----------------------------------------------------
The Trustee is subject to section 311(a) of the TIA, excluding any
creditor relationship listed in section 311(b) of the TIA. A Trustee who has
resigned or been removed shall be subject to section 311(a) of the TIA to the
extent indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1 DISCHARGE OF LIABILITY ON SENIOR NOTES; DEFEASANCE.
--------------------------------------------------
(a) When (i) the Company delivers to the Trustee all outstanding
Senior Notes (other than Senior Notes replaced pursuant to Section 2.7) for
cancellation, or (ii) all outstanding Senior Notes have become due and payable
and the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity all outstanding Senior Notes, including interest, premium and
Liquidated Damages thereon (other than Senior Notes replaced pursuant to Section
2.7), and if in either case the Company pays all other sums payable under this
Indenture by the Company, then this Indenture shall, subject to Sections 8.1(c)
and 8.6, cease to be of further effect.
(b) Subject to Sections 8.1(c), 8.2 and 8.6, the Company at any time
may terminate (i) all its obliga-
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tions under the Senior Notes and this Indenture ("legal defeasance option") or
(ii) its obligations under Sections 4.2, 4.3, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10,
4.11, 4.13, 4.14, 4.15 and 4.16, and the operation of Sections 5.1(a)(iii),
5.1(a)(iv), or 6.1(a)(iii) through (a)(vi) ("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
Senior Notes may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Senior Notes
shall not be accelerated because of an Event of Default specified in 6.1(a)(iii)
through (a)(vi) or because of the Company's failure to comply with Section
5.1(a)(iii) and 5.1(a)(iv).
Upon satisfaction of the conditions set forth herein and upon the
Company's request (and at the Company's expense), the Trustee shall acknowledge
in writing the discharge of those obligations that the Company has terminated.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 4.1, 4.4, 7.7, 7.8, 8.4, 8.5
and 8.6, and the Trustee's and the Paying Agent's obligations in Section 8.4
shall survive until the Senior Notes have been paid in full. Thereafter, the
Company's obligations in Sections 7.7 and 8.5 and the Company's, the Trustee's
and the Paying Agent's obligations in Section 8.4 shall survive.
SECTION 8.2 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 (the "defeasance
trust") with the Trustee money or U.S. Government Obligations
sufficient for the payment in full of the principal of,
premium, if any, and any accrued and unpaid interest on, and
Liquidated Damages, if any, with respect to the Senior Notes
then outstanding, as of the
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maturity date, the redemption date or the Purchase Date, 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 of 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 when due principal of, premium, if any, and any
accrued and unpaid interest on, and Liquidated Damages, if any,
with respect to all the Senior Notes to maturity or redemption, as
the case may be;
(3) since the Company's irrevocable deposit provided for in Section
8.2(l), 91 days have passed;
(4) no Default has occurred and is continuing on the date of such
deposit and after giving effect to it;
(5) the deposit does not constitute a default under any other
agreement binding on the Company;
(6) 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, as amended;
(7) 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) under applicable federal
income tax law, in either case, to the effect that, and based
thereon such Opinion of Counsel shall
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confirm that, the Holders will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit and
defeasance and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have
been the case if such defeasance had not occurred;
(8) 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 Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and
covenant defeasance and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would
have been the case if such covenant 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); and
(9) 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 Senior Notes contemplated
by this Article 8 have been satisfied.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption or purchase of Senior Notes at a
future date in accordance with Article 3.
SECTION 8.3 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, premium, if any,
and any accrued
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and unpaid interest on, and Liquidated Damages, if any, with respect to the
Senior Notes.
SECTION 8.4 REPAYMENT TO THE COMPANY.
After the Senior Notes have been paid in full, the Trustee and the Paying
Agent shall promptly turn over to the Company any excess money or securities
they hold.
The Trustee and the Paying Agent shall pay to the Company upon written
request by the Company any money they hold for the payment of principal,
premium, interest or Liquidated Damages that remains unclaimed for 1 year after
the date upon which such payment shall have become due; provided, however, that
the Company shall have either caused notice of such payment to be mailed to each
Holder entitled thereto no less than 30 days prior to such repayment or within
such period shall have published such notice in a financial newspaper of
widespread circulation published in The City of New York (including, without
limitation, The Wall Street Journal). After payment to the Company, Holders
entitled to the money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another Person, and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
SECTION 8.5 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 8.6 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 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 Senior Notes 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
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U.S. Government Obligations in accordance with this Article 8; provided,
however, that, if the Company has made any payment of principal of, premium, if
any, and any accrued and unpaid interest on, and Liquidated Damages, if any,
with respect to any Senior Notes because of the reinstatement of its
Obligations, the Company shall be subrogated to the Holders' rights to receive
such payment from the money or U.S. Government Obligations the Trustee or Paying
Agent holds.
ARTICLE 9
AMENDMENTS
SECTION 9.1 AMENDMENTS AND SUPPLEMENTS PERMITTED WITHOUT CONSENT OF HOLDERS.
Notwithstanding Section 9.2, the Company and the Trustee may amend or
supplement this Indenture or the Senior Notes without the consent of any Holder
(a) to cure any ambiguity, defect or inconsistency; (b) to provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes; (c) to provide for the assumption of the Company's Obligations in the
event of a Disposition pursuant to Article 5; (d) to comply with the SEC's
requirements to effect or maintain the qualification of this Indenture under the
TIA; (e) to provide for additional Guarantees with respect to the Senior Notes;
or (f) to make any change that does not materially adversely affect any Holder's
legal rights under this Indenture.
Upon the Company's request, after receipt by the Trustee of a resolution of
the Board of Directors authorizing the execution of any amended or supplemental
indenture and the documents described in Section 9.6, the Trustee shall join
with the Company in the execution of any amended or supplemental indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be contained in any such
amended or supplemental indenture, but the Trustee shall not be obligated to
enter into an amended or supplemental indenture that affects its own rights,
duties or immunities under this Indenture or otherwise.
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SECTION 9.2 AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT OF HOLDERS.
Subject to Section 6.7, the Company and the Trustee may amend or supplement
this Indenture or the Senior Notes with the written consent of the Holders of at
least a majority in principal amount of the then outstanding Senior Notes
(including consents obtained in connection with a tender offer or exchange offer
for the Senior Notes). Subject to Sections 6.4 and 6.7, the Holders of a
majority in principal amount of the Senior Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for the
Senior Notes) may also waive any existing Default or Event of Default (other
than a payment Default) and its consequences or compliance in a particular
instance by the Company with any provision of this Indenture or the Senior
Notes.
Upon the Company's request and after receipt by the Trustee of a resolution
of the Board of Directors authorizing the execution of any supplemental
indenture, evidence of the Holders' consent, and the documents described in
Section 9.6, the Trustee shall join with the Company in the execution of such
amended or supplemental indenture unless such amended or supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders under this Section
to approve the particular form of any proposed amendment or waiver, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to each Holder affected thereby a notice briefly describing
the amendment, supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such amended or supplemental indenture or waiver. Without
the consent of each Holder affected, an amendment, supplement or waiver under
this Section may not (1) reduce the principal amount of Senior Notes whose
Holders must consent to an amendment, supplement or waiver; (2)
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reduce the rate of or change the time for payment of interest, including default
interest as set forth in Section 4.1, or Liquidated Damages on any Senior Note
or alter the redemption or purchase provisions with respect thereto or the price
at which the Company is required to offer to purchase any Senior Note; (3)
reduce the principal of or change the fixed maturity of any Senior Note; (4)
make any Senior Note payable in money other than that stated in the Senior Note;
(5) make any change in Section 6.4 or 6.7 or in this sentence of this Section
9.2; or (6) waive a default in the payment of the principal of, or premium, if
any, or any accrued and unpaid interest on, or Liquidated Damages, if any, with
respect to, or redemption or purchase payment with respect to, any Senior Note
(except a rescission of acceleration of the Senior Notes by the Holders of at
least a majority in aggregate principal amount of the then outstanding Senior
Notes and a waiver of the payment default that resulted from such acceleration).
SECTION 9.3 COMPLIANCE WITH TIA.
Every amendment or supplement to this Indenture or the Senior Notes shall
be set forth in an amended supplemental indenture that complies with the TIA as
then in effect.
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Senior Note is a continuing consent by the Holder and every
subsequent Holder of a Senior Note or portion of a Senior Note that evidences
the same Indebtedness as the consenting Holder's Senior Note, even if notation
of the consent is not made on any Senior Note. However, any such Holder or
subsequent Holder may revoke the consent as to his or her Senior Note or portion
of a Senior Note if the Trustee receives the notice of revocation before the
date on which the Trustee receives an Officers' Certificate certifying that the
Holders of the requisite principal amount of Senior Notes have consented to the
amendment or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders of Senior Notes entitled to consent to any
amendment or
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waiver. If a record date is fixed, then, notwithstanding the provisions of the
immediately preceding paragraph, those Persons who were Holders of Senior Notes
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to consent to such amendment or waiver or to revoke any
consent previously given, whether or not such Persons continue to be Holders of
Senior Notes after such record date. No consent shall be valid or effective for
more than 90 days after such record date unless consents from Holders of the
principal amount of Senior Notes required hereunder for such amendment or
waiver to be effective shall have also been given and not revoked within such
90-day period.
After an amendment or waiver becomes effective it shall bind every Holder,
unless it is of the type described in any of clauses (1) through (6) of Section
9.2. In such case, the amendment or waiver shall bind each Holder who has
consented to it and every subsequent Holder of a Senior Note that evidences the
same debt as the consenting Holder's Senior Note.
SECTION 9.5 NOTATION ON OR EXCHANGE OF SENIOR NOTES.
The Trustee may (at the Company's expense) place an appropriate notation
about an amendment, supplement or waiver on any Senior Note thereafter
authenticated. The Company in exchange for all Senior Notes may issue and the
Trustee shall authenticate new Senior Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Senior Note shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.6 TRUSTEE PROTECTED.
The Trustee shall sign any amendment or supplemental indenture 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 or supplemental
indenture, the Trustee shall be entitled to receive and, subject to Section 7.1,
shall be fully protected in relying upon, an Officers' Certificate and Opinion
of Counsel as conclusive evidence that such amendment or supplemental indenture
is authorized or
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permitted by this Indenture, that it is not inconsistent herewith, and that it
will be valid and binding upon the Company in accordance with its terms. The
Company may not sign an amendment or supplemental indenture until the Board of
Directors approves it.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 TRUST INDENTURE ACT CONTROLS.
----------------------------
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of section 318(c) of the TIA, the imposed duties
shall control.
SECTION 10.2 NOTICES.
-------
Any notice or communication by the Company or the Trustee to the other is
duly given if in writing and delivered in person, mailed by registered or
certified mail, postage prepaid, return receipt requested or delivered by
telecopier or overnight air courier guaranteeing next day delivery to the
other's address:
If to the Company:
Jordan Telecommunication Products
Group, Inc.
ArborLake Centre, Suite 550
1751 Lake Cook Road
Deerfield, Illinois 60015
Attention: Chief Financial Officer
Telecopier No.: (847) 945-9645
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603-3441
Attention: Philip J. Niehoff, Esq.
Telecopier No.: (312) 701-7711
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If to the Trustee:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Rick Prokosch
Telecopier No.: (612) 244-0711
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; the date receipt is acknowledged, if mailed by registered or
certified mail; when answered back, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first-class mail
to his or her address shown on the register kept by the Registrar. Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
SECTION 10.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
-------------------------------------------
Holders may communicate pursuant to section 312(b) of the TIA with other
Holders with respect to their rights under this Indenture or the Senior Notes.
The Company, the Trustee, the Registrar and any other Person shall have the
protection of section 312(c) of the TIA.
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SECTION 10.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements set
forth in Section 10.5) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel (which shall include the statements set
forth in Section 10.5) stating that, in the opinion of such counsel, all such
conditions precedent provided for in this Indenture relating to the proposed
action have been complied with.
SECTION 10.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
---------------------------------------------
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to section 314(a)(4) of the TIA) shall include:
(1) a statement that the Person 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 Person, 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, in such Person's opinion, such
condition or covenant has been complied with.
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SECTION 10.6 RULES BY TRUSTEE AND AGENTS.
---------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.7 LEGAL HOLIDAYS.
--------------
If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
SECTION 10.8 NO RECOURSE AGAINST OTHERS.
--------------------------
No officer, employee, director, stockholder or Subsidiary of the Company
shall have any liability for any Obligations of the Company under the Senior
Notes or this Indenture, or for any claim based on, in respect of, or by reason
of, such Obligations or the creation of any such Obligation, except, in the case
of a Subsidiary, for an express guarantee or an express creation of any Lien by
such Subsidiary of the Company's Obligations under the Senior Notes. Each Holder
by accepting a Senior Note waives and releases all such liability, and such
waiver and release is part of the consideration for the issuance of the Senior
Notes. The foregoing waiver may not be effective to waive liabilities under the
Federal securities law and the Commission is of the view that such a waiver is
against public policy.
SECTION 10.9 COUNTERPARTS.
------------
This Indenture may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute one
and the same agreement.
SECTION 10.10 VARIABLE PROVISIONS.
-------------------
The Company initially appoints the Trustee as Paying Agent, Registrar and
authenticating agent.
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The first compliance certificate to be delivered by the Company to the
Trustee pursuant to Section 4.3 shall be for the fiscal year ending on December
31, 1997
SECTION 10.11 GOVERNING LAW.
-------------
The internal laws of the State of New York shall govern this Indenture and
the Senior Notes, without regard to the conflict of laws provisions thereof.
SECTION 10.12 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any of its Subsidiaries, and no other indenture,
loan or debt agreement may be used to interpret this Indenture.
SECTION 10.13 SUCCESSORS.
----------
All agreements of the Company in this Indenture and the Senior Notes shall
bind its successor. All agreements of the Trustee in this Indenture shall bind
its successor.
SECTION 10.14 SEVERABILITY.
------------
If any provision in this Indenture or in the Senior Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.15 TABLE OF CONTENTS, HEADINGS, ETC.
--------------------------------
The Table of Contents, Cross-Reference Table and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
[NEXT PAGE IS THE SIGNATURE PAGE]
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Dated as of July 25, 1997
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
By: /s/ Dominic J. Pileggi
-------------------------------
Name: Dominic J. Pileggi
Title: President and Chief
Executive Officer
Dated as of July 25, 1997
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By: /s/ Richard Prokosch
-------------------------------
Name: Richard Prokosch
Title: Trust Officer
<PAGE>
EXHIBIT A
(Face of Senior Note)
9 7/8% Series [A/B] Senior Note due 2007
No. $
CUSIP No.
JORDAN TELECOMMUNICATION PRODUCTS, INC.
promises to pay to
or registered assigns,
the principal sum of
Dollars on August 1, 2007.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Dated: ________ __, ____
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
By:
------------------------------
Name:
Title:
Trustee's Certificate of Authentication
Dated: _______ __, ____
This is one of the [Global]
Senior Notes referred to in the
within-mentioned Indenture:
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
A-1
<PAGE>
By: __________________________
(Authorized Signatory)
A-2
<PAGE>
[Unless and until it is exchanged in whole or in part for Senior Notes in
definitive form, this Senior Note may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. The Depository Trust Company shall act as the Depositary until a
successor shall be appointed by the Company and the Registrar. Unless this
certificate is presented by an authorized representative of The Depository Trust
Company (55 Water Street, New York, New York) ("DTC"), to the issuer or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as may be
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY Person IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]/1/
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHER WISE TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED
STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, OR (c) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
- ----------
/1/ This paragraph should be included only if the Senior Note is issued in
global form.
A-3
<PAGE>
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER PROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
Additional provisions of this Senior Note are set forth on the other side
of this Senior Note.
A-4
<PAGE>
(Back of Senior Note)
9 7/8% SERIES [A/B] SENIOR NOTE DUE 2007
1. Interest. Jordan Telecommunication Products, Inc. (the "Company")
promises to pay interest on the principal amount of the Senior Notes at the rate
and in the manner specified below. Interest on the Senior Notes will accrue at
9 7/8% per annum from the date this Senior Note is issued until maturity. The
Company will pay Liquidated Damages pursuant to Section 5 of the Registration
Rights Agreement referred to below. Interest and Liquidated Damages, if any,
will be payable semiannually in cash in arrears on February 1 and August 1 of
each year, or if any such day is not a Business Day on the next succeeding
Business Day (each, an "Interest Payment Date"). Interest on the Senior Notes
will accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from the date of original issuance; provided that the
first Interest Payment Date shall be February 1, 1998. The Company shall pay
interest on overdue principal and premium, if any, from time to time on demand
at the interest rate then in effect and shall pay interest on overdue
installments of interest and Liquidated Damages, if any, (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Senior Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered holders of Senior Notes at the close of business on the record date
for the next Interest Payment Date even if such Senior Notes are cancelled after
such record date and on or before such Interest Payment Date. Holders must
surrender Senior Notes to a Paying Agent to collect principal payments on such
Senior Notes. The Company will pay principal, premium, if any, interest and
Liquidated Damages, if any, in money of the United States that at the time of
payment is legal tender for payment of public and private debts. The Company
will pay principal, premium, if any, interest and Liquidated Damages, if any, by
wire transfer of immediately available funds to the accounts specified by the
Holders or, if no such account is specified, by mailing a check to each such
Holder's registered address; provided that payment by wire transfer of
immediately available funds will be required
A-5
<PAGE>
with respect to principal, premium, if any, interest and Liquidated Damages, if
any, on all Global Senior Notes.
3. Paying Agent and Registrar. First Trust National Association (the
"Trustee") will initially act as the Paying Agent and Registrar. The Company
may appoint additional paying agents or co-registrars, and change the Paying
Agent, any additional paying agent, the Registrar or any co-registrar without
prior notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
4. Indenture. The Company issued the Senior Notes under an Indenture,
dated as of July 25, 1997 (the "Indenture"), among the Company and the Trustee.
The terms of the Senior Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of the original issuance
of the Senior Notes (the "Trust Indenture Act"). The Senior Notes are subject
to, and qualified by, all such terms, certain of which are summarized herein,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of such terms (all capitalized terms not defined herein shall have the
meanings assigned them in the Indenture). The Senior Notes are unsecured senior
obligations of the Company limited to $190,000,000 in aggregate principal
amount.
5. Optional Redemption. (a) Except as described in paragraph 5(b) below,
the Senior Notes may not be redeemed at the option of the Company prior to
August 1, 2002. During the twelve (12) month period beginning August 1 of the
years indicated below, the Senior Notes will be redeemable at the option of the
Company, in whole or in part, on at least 30 but not more than 60 days' notice
to each Holder of Senior Notes to be redeemed, at the redemption prices
(expressed as percentages of the principal amount) set forth below, plus any
accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002.......................... 104.9375%
2003.......................... 102.4688%
2004 and thereafter........... 100.0000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to August 1, 2000, the
Company may (but shall not have the obligation to) redeem up to one-third of the
original aggregate principal amount of the Senior Notes with the proceeds
A-6
<PAGE>
of one or more Equity Offerings at a redemption price of 109.875% of the
principal amount thereof, plus any accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption; provided that at least two-thirds of
the aggregate principal amount of the Senior Notes originally issued remain
outstanding immediately after any such redemption; and provided, further, that
any such redemption shall occur within 60 days of the date of the closing of
such Equity Offering.
6. Mandatory Redemption. Subject to the Company's obligation to make an
offer to purchase Senior Notes under certain circumstances pursuant to Sections
4.13 and 4.14 of the Indenture (as described in paragraph 7 below), the Company
is not required to make any mandatory redemption, purchase or sinking fund
payments with respect to the Senior Notes.
7. Mandatory Offers to Purchase Senior Notes. (a) Upon the occurrence of a
Change of Control, each Holder of Senior Notes shall have the right to require
the Company to purchase all or any part (equal to $1,000 or an integral
multiple thereof) of such Holder's Senior Notes pursuant to an Offer (as defined
herein) at a purchase price equal to 101% of the aggregate principal amount
thereof, plus any accrued and unpaid interest and Liquidated Damages, if any, to
the date of purchase.
(b) If the Company or any Restricted Subsidiary consummates one or
more Asset Sales and does not use all of the Net Proceeds from such Asset Sales
as provided in the Indenture, the Company will be required, under certain
circumstances, to utilize the Excess Proceeds from such Asset Sales to make an
Offer (as defined herein) to purchase Senior Notes at a purchase price equal to
100% of the principal amount of the Senior Notes, plus any accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase. If the Excess
Proceeds are insufficient to purchase all Senior Notes tendered pursuant to any
Asset Sale Offer, the Trustee shall select the Senior Notes to be purchased in
accordance with the terms of the Indenture.
(c) Holders may tender all or, subject to paragraph 8 below, any
portion of their Senior Notes in a Change of Control Offer or Asset Sale Offer
(collectively, an "Offer") by completing the form below entitled "OPTION OF
HOLDER TO ELECT PURCHASE."
A-7
<PAGE>
(d) The Company shall comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations to the extent such laws and
regulations are applicable to any Offer. To the extent that the provisions of
any of such securities laws or regulations conflict with provisions of this
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Indenture by virtue thereof.
8. Notice of Redemption or Purchase. Notice of an optional redemption or an
Offer will be mailed to each Holder at its registered address at least 30 days
but not more than 60 days before the date of redemption or purchase. Senior
Notes may be redeemed or purchased in part, but only in whole multiples of
$1,000 unless all Senior Notes held by a Holder are to be redeemed or purchased.
On or after any date on which Senior Notes are redeemed or purchased, interest
ceases to accrue on the Senior Notes or portions thereof called for redemption
or accepted for purchase on such date.
9. Denominations, Transfer, Exchange. The Senior Notes are in registered
form without coupons in denominations of $1,000 and integral multiples thereof.
The transfer of Senior Notes may be registered and Senior Notes may be
exchanged as provided in the Indenture. Holders seeking to transfer or exchange
their Senior Notes may be required, 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. The Paying Agent need not exchange or
register the transfer of any Senior Note or portion of a Senior Note selected
for redemption or tendered pursuant to an Offer. Also, it need not exchange or
register the transfer of any Senior Notes for a period of 15 Business Days
before a selection of Senior Notes to be redeemed or purchased or between a
record date and the next succeeding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Senior Note may be
treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions, the Indenture or
the Senior Notes may be amended or supplemented with the consent of the Holders
of at least a majority in principal amount of the then outstanding Senior Notes,
and any existing Default (except a payment Default) may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Senior Notes.
A-8
<PAGE>
Without the consent of any Holder, the Indenture or the Senior Notes may be
amended to: cure any ambiguity, defect or inconsistency; provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes; pro vide for the assumption of the Company's obligations in the event of
a merger or consolidation of the Company in which the Company is not the
surviving corporation or a sale of substantially all of the Company's assets to
such other corporation; comply with the Securities and Exchange Commission's
requirements to effect or maintain the qualification of the Indenture under the
Trust Indenture Act; provide for additional Guarantees with respect to the
Senior Notes; or, make any change that does not materially adversely affect any
Holder's rights under the Indenture.
12. Defaults and Remedies. Events of Default include: default for 30 days
in payment of interest on, or Liquidated Damages, if any, with respect to, the
Senior Notes; default in payment when due of principal or premium, if any, with
respect to the Senior Notes; failure by the Company for 45 days after notice to
it to comply with any of its other agreements or covenants in, or provisions of,
the Indenture or the Senior Notes; certain defaults under and acceleration prior
to maturity of, or failure to pay at maturity, certain other Indebtedness;
certain final judgments that remain undischarged; and certain events of
bankruptcy or insolvency involving the Company or any Restricted Subsidiary that
is a Significant Subsidiary. If an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the Senior
Notes may declare all the Senior Notes to be immediately due and payable in an
amount equal to the principal of, premium, if any, and any accrued and unpaid
interest on, and Liquidated Damages, if any, with respect to such Senior Notes;
provided, however, that in the case of an Event of Default arising from certain
events of bankruptcy or insolvency, the principal of, premium, if any, and any
accrued and unpaid interest on, and Liquidated Damages, if any, with respect to
the Senior Notes becomes due and payable immediately without further action or
notice. Subject to certain exceptions, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power, provided that the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of Holders unless such Holders have offered to the Trustee security and
indemnity satisfactory to it. Holders may not enforce the Indenture or the
Senior Notes except as provided in the Indenture. The Trustee may with-
A-9
<PAGE>
hold from Holders notice of any continuing default (except a payment Default) if
it determines that withholding notice is in their interests. The Company must
furnish an annual compliance certificate to the Trustee.
13. Trustee Dealings with the Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or any Affiliate, and may otherwise deal with the
Company or any Affiliate, as if it were not Trustee.
14. No Recourse Against Others. No officer, employee, director, stockholder
or Subsidiary of the Company shall have any liability for any Obligations of the
Company under the Senior Notes or the Indenture, or for any claim based on, in
respect of, or by reason of, such Obligations or the creation of any such
Obligation, except, in the case of a Subsidiary, for an express guarantee or an
express creation of any Lien by such Subsidiary of the Company's Obligations
under the Senior Notes. Each Holder by accepting a Senior Note waives and
releases all such liability, and such waiver and release is part of the
consideration for the issuance of the Senior Notes. The foregoing waiver may not
be effective to waive liabilities under the Federal securities law and the
Commission is of the view that such a waiver is against public policy.
15. Holders' Compliance with Registration Rights Agreement. Each Holder of
a Senior Note, by his acceptance thereof, acknowledges and agrees to the
provisions of the Registration Rights Agreement, dated as of July 25, 1997,
among the Company and the parties named on the signature page thereof (the
"Registration Rights Agreement"), including but not limited to the obligations
of the Holders with respect to a registration and the indemnification of the
Company and the Purchasers (as defined therein) to the extent provided therein.
16. Successor Substituted. Upon the consolidation or merger by the Company
with or into another corporation, or upon the sale, lease, conveyance or other
disposition of all or substantially all of its assets to another corporation, in
accordance with the Indenture, the corporation surviving any such merger or
consolidation (if not the Company) or the corporation to which such assets were
sold or transferred to shall succeed to, and be substituted for, and may
exercise every right and power of the Company under the Indenture
A-10
<PAGE>
with the same effect as if such surviving or other corporation had been named
as the Company in the Indenture.
17. Governing Law. This Senior Note shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to the
conflict of laws provisions thereof.
18. Authentication. This Senior Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
19. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
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 Senior Notes and have directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Senior Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers printed on the Senior Notes.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement, which
has in it the text of this Senior Note in larger type. Request may be made to:
Jordan Telecommunication Products, Inc.
ArborLake Centre, Suite 550
1751 Lake Cook Road
Deerfield, Illinois 60015
Attention: Chief Financial Officer
A-11
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below:
(I) or (we) assign and transfer this Senior Note to:
_____________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_____________________________________________
_____________________________________________
_____________________________________________
(Print or type assignee's name,
address and zip code)
and irrevocably appoint ________________________________________________________
___________________________ as agent to transfer this Senior Note 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 Senior
Note)
Signature Guarantee:
__________________________
A-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Senior Note purchased by the Company pursuant to
Section 4.13 of the Indenture, check the box: [_]
If you elect to have this Senior Note purchased by the Company pursuant to
Section 4.14 of the Indenture, check the box: [_]
If you elect to have only part of this Senior Note purchased by the Company
pursuant to Section 4.13 or 4.14 of the Indenture, state the amount (multiples
of $1000 only):
$__________________
Date:_____________ Your Signature:________________________________________
(Sign exactly as your name appears
on the other side of this Senior Note)
Signature Guarantee:
__________________________
Signature Guarantee:
___________________________
A-13
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SENIOR NOTES/2/
The following exchanges of a part of this Global Senior Note for Definitive
Senior Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Senior Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Senior
Date of Exchange this Global Senior Note this Global Senior Note (or increase) Note Custodian
- ---------------- ----------------------- ----------------------- ------------------------ ---------------------
<S> <C> <C> <C> <C>
</TABLE>
- -----------------------
/2/ This should be included only if the Senior Note is issued in global form.
A-14
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SENIOR NOTES
______________, ______
Re: 9 7/8% Series [A/B] Senior Notes due 2007 of Jordan Telecommunication
Products, Inc.
This Certificate relates to $______ principal amount of Senior Notes held in
/*/ _____ book-entry or /*/ _____ definitive form by _____ (the "Transferor").
The Transferor/*/:
[_] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Senior Note held by the Depositary a
Senior Note or Senior Notes in definitive, registered form equal to its
beneficial interest in such Global Senior Note (or the portion thereof indicated
above); or
[_] has requested the Trustee by written order to exchange or register the
transfer of a Senior Note or Senior Notes.
In connection with such request and in respect of each such Senior Note,
the Transferor does hereby certify that the Transferor is familiar with the
Indenture relating to the above captioned Senior Notes and that the transfer of
this Senior Note does not require registration under the Securities Act (as
defined below) because:/*/
[_] Such Senior Note is being acquired for the Transferor's own account
without transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture).
[_] Such Senior Note is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance on Rule 144A.
- -----------------
/*/Check applicable box.
B-1
<PAGE>
[_] Such Senior Note is being transferred (i) in accordance with Rule 144
under the Securities Act (and based on an opinion of counsel if the Company so
requests) or (ii) pursuant to an effective registration statement under the
Securities Act.
[_] Such Senior Note is being transferred to an institutional accredited
investor within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act pursuant to a private placement exemption from the registration
requirements of the Securities Act (and based on an opinion of counsel if the
Company so requests together with a certification in substantially the form of
Exhibit C to the Indenture).
[_] Such Senior Note is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).
-----------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
--------------------------------------
Name:
Title:
Address:
B-2
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED BY
INSTITUTIONAL ACCREDITED INVESTORS
-----------, ------
__________________, as Registrar
Attention: Corporate Trust Department
Ladies and Gentlemen:
In connection with our proposed purchase of certain 9 7/8% Series [A/B]
Senior Notes due 2007 (the "Senior Notes") of Jordan Telecommunication Products,
Inc., a Delaware corporation (the "Company"), we represent that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act (an "Institutional
Accredited Investor"), or an entity in which all of the equity owners are
Institutional Accredited Investors;
(ii) any purchase of Senior Notes will be for our own account or
for the account of one or more other Institutional Accredited Investors as
to which we exercise sole investment discretion;
(iii) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and risks of
purchasing Senior Notes and we and any accounts for which we are acting are
able to bear the economic risks of our or their investment;
(iv) we are not acquiring Senior Notes with a view to any
distribution thereof in a transaction that would violate the Securities Act
or the securities laws of any State of the United States or any other
applicable jurisdiction; provided that the disposition of our property and
the property of any accounts for which we are acting as fiduciary shall
remain at all times within our control; and
C-1
<PAGE>
(v) we acknowledge that we have had access to such financial and
other information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers thereto, as
we deem necessary in connection with our decision to purchase Senior Notes.
We understand that the Senior Notes have not been registered under the
Securities Act, and we agree, on our own behalf and on behalf of each account
for which we acquire any Senior Notes, that such Senior Notes may be offered,
resold, pledged or otherwise transferred only (i) to a person whom we reasonably
believe to be a qualified institutional buyer (as defined in Rule 144A under
the Securities Act) in a transaction meeting the requirements of Rule 144A, in a
transaction meeting the requirements of Rule 144 under the Securities Act, (ii)
to the Company or (iii) pursuant to an effective registration statement, and, in
each case, in accordance with any applicable securities laws of any State of the
United States or any other applicable jurisdiction. We understand that the
registrar will not be required to accept for registration of transfer any Senior
Notes, except upon presentation of evidence satisfactory to the Company that the
foregoing restrictions on transfer have been complied with. We further
understand that the Senior Notes purchased by us will be in the form of
definitive physical certificates and that such certificates will bear a legend
reflecting the substance of this paragraph. We further agree to provide to any
person acquiring any of the Senior Notes from us a notice advising such person
that resales of the Senior Notes are restricted as stated herein.
We acknowledge that you, the Company and others will rely upon our
confirmations, acknowledgements and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
C-2
<PAGE>
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.
Very truly yours,
--------------------------------
[Name of Transferor]
By:
--------------------------------
Name:
Title:
Address:
C-3
<PAGE>
================================================================================
Exhibit 4.2
Jordan Telecommunication Products, Inc.
_______________________________
SERIES A AND SERIES B
11 3/4% SENIOR DISCOUNT NOTES DUE 2007
_______________________________
_________________
INDENTURE
DATED AS OF JULY 25, 1997
_________________
FIRST TRUST NATIONAL ASSOCIATION
Trustee
===============================================================================
<PAGE>
This Indenture, dated as of July 25, 1997, is between Jordan
Telecommunication Products, Inc., a Delaware corporation (the "Company"), and
First Trust National Association, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the holders of the Company's 11-3/4% Series A
Discount Notes due 2007 (the "Series A Discount Notes") and the Company's 11-
3/4% Series B Discount Notes due 2007 (the "Series B Discount Notes," and,
together with the Series A Discount Notes, the "Discount Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1 DEFINITIONS.
"Accreted Value" means with respect to any Discount Note (i) as of any date
prior to August 1, 2000, the sum of (a) the initial offering price of the
Discount Notes, and (b) the portion of the original issue discount on such
Discount Note (which for this purpose shall be deemed to be the excess of the
principal amount over the initial offering price) that has been amortized with
respect to such Discount Note through such date, such original issue discount to
be amortized at the rate of 11-3/4% per annum (such percentage being expressed
as a percentage of the sum of the initial offering price plus previously
amortized original issue discount) using semi-annual compounding of such rate on
each August 1 and February 1, commencing from the date of original issuance of
the Discount Notes through such date, and (ii) on and after August 1, 2000 the
principal amount of such Discount Note.
"Affiliate" means any of the following: (i) any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, (ii) any spouse, immediate family member or other
relative who has the same principal residence as any Person described in clause
(i) above, (iii) any trust in which any such Persons described in clause (i) or
(ii) above has a beneficial interest, and (iv) any corporation or other
organization of which any such Persons described
<PAGE>
above collectively own 50% or more of the equity of such entity.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means the sale, lease, conveyance or other disposition by the
Company or a Restricted Subsidiary of assets or property whether owned on the
date of original issuance of the Discount Notes or thereafter acquired, in a
single transaction or in a series of related transactions, that are outside of
the ordinary course of business of the Company or such Restricted Subsidiary;
provided that Asset Sales will not include such sales, leases, conveyances or
dispositions in connection with (i) the sale or disposition of any Restricted
Investment, (ii) the sale or lease of equipment, inventory, accounts receivable
or other assets in the ordinary course of business, (iii) Receivables
Financings, (iv) the surrender or waiver of contract rights or the settlement,
release or surrender of contract, tort or other claims of any kind, (v) the
grant of any license of patents, trade marks, registration therefor and other
similar intellectual property, (vi) a transfer of assets by the Company or a
Restricted Subsidiary to any of the Company, a Restricted Subsidiary or a Non-
Restricted Subsidiary, (vii) the designation of a Restricted Subsidiary as a
Non-Restricted Subsidiary pursuant to Section 4.16, other than a Subsidiary
excluded from the definition of Restricted Subsidiary by clause (ii)(B) of such
definition, (viii) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company as permitted under Section 5.l,
or (ix) Restricted Payments permitted by Section 4.5.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
"Business Day" means any day other than a Legal Holiday.
2
<PAGE>
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, including any
preferred stock.
"Cash Flow" means, for any given period and Person, the sum of, without
duplication, Consolidated Net Income, plus (a) the portion of Net Income
attributable to the minority interests in its Subsidiaries, to the extent not
included in calculating Consolidated Net Income, plus (b) provision for taxes
based on income or profits to the extent such income or profits were included in
computing Consolidated Net Income, plus (c) Consolidated Interest Expense, to
the extent deducted in computing Consolidated Net Income, plus (d) the
amortization of all intangible assets, to the extent such amortization was
deducted in computing Consolidated Net Income (including, but not limited to,
inventory write-ups, goodwill, debt and financing costs, and Incentive
Arrangements), plus (e) any non-capitalized transaction costs incurred in
connection with financings, acquisitions or dispositions (including, but not
limited to, financing and refinancing fees, including those in connection with
the Offering and the Company Formation, in each case, to the extent deducted in
computing Consolidated Net Income), plus (f) all depreciation and all other non-
cash charges, to the extent deducted in computing Consolidated Net Income, plus
(g) interest income, to the extent such income was not included in computing
Consolidated Net Income, plus (h) all dividend payments on preferred stock
(whether or not paid in cash) to the extent deducted in computing Consolidated
Net Income, plus (i) any extraordinary or non-recurring charge or expense
arising out of the imple mentation of SFAS 106 or SFAS 109 to the extent
deducted in computing Consolidated Net Income, plus (j) to the extent not
covered in clause (e) above, fees paid or payable in respect of the New TJC
Management Consulting Agreement to the extent deducted in computing Consoli
dated Net Income, plus (k) the net loss of any Person, other than those of a
Restricted Subsidiary, to the extent deducted in computing Consolidated Net
Income, plus (1) net losses in respect of any discontinued operations as
determined in accordance with GAAP, to the extent deducted in computing
Consolidated Net Income; provided, however, that if any such calculation
includes any period during which an acquisition or sale of a Person or the
incurrence or repayment of Indebtedness
3
<PAGE>
occurred, then such calculation for such period shall be made on a Pro Forma
Basis.
"Cash Flow Coverage Ratio" means, for any given period and Person, the
ratio of: (i) Cash Flow, divided by (ii) the sum of Consolidated Interest
Expense and the amount of all dividend payments on any series of preferred
stock of such Person (except for dividends paid or payable in additional shares
of Capital Stock (other than Disqualified Stock)), in each case, without
duplication; provided, however, that if any such calculation includes any period
during which an acquisition or sale of a Person or the incurrence or repayment
of Indebtedness occurred, then such calculation for such period shall be made on
a Pro Forma Basis.
"Change of Control" means the occurrence of any of the following: (i) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), excluding the Jordan Stockholders, is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total Voting Stock of the Company; or (ii) the Company
consolidates with, or merges with or into, another Person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where (A) the
outstanding Voting Stock of the Company is converted into or exchanged for (1)
Voting Stock (other than Disqualified Stock) of the surviving or transferee
corporation or (2) cash, securities and other property in an amount which could
be paid by the Company as a Restricted Payment under the Indenture and (B)
immediately after such transaction no "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), excluding the Jordan
Stockholders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securi-
4
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ties that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the surviving or
transferee corporation; or (iii) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of a majority of the directors then still in
office who are entitled to vote to elect such new director and were either
directors at the beginning of such period or Persons whose election as directors
or nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
"Commission" means the Securities and Exchange Commission.
"Company" means Jordan Telecommunication Products, Inc., a Delaware
corporation.
"Company Formation" means the formation of the Company by the Company's
management and stockholders of Jordan Industries, Inc. and certain of their
affiliates in connection with an overall recapitalization and refinancing of
Jordan Industries, Inc.
"Consolidated Interest Expense" means, for any given period and Person, the
aggregate of the interest expense in respect of all Indebtedness of such Person
and its Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP (including amortization of original issue discount on any
such Indebtedness, all non-cash interest payments, the interest portion of any
deferred payment obligation and the interest component of capital lease
obligations, but excluding amortization of deferred financing fees if such
amortization would otherwise be included in interest expense); provided,
however, that for the purpose of the Cash Flow Coverage Ratio, Consolidated
Interest Expense shall be calculated on a Pro Forma Basis; provided further,
that any premiums, fees and expenses (including the amortization thereof)
payable in connection with the Offering and the Company Formation and the
application of the net proceeds
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therefrom or any other refinancing of Indebtedness will be excluded.
"Consolidated Net Income" means, for any given period and Person, the
aggregate of the Net Income of such Person and its Subsidiaries for such period,
on a consolidated basis, determined in accordance with GAAP; provided, however,
that: (i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, and (ii) Consolidated Net Income of any Person will not include,
without duplication, any deduction for: (A) any increased amortization or
depreciation resulting from the write-up of assets pursuant to Accounting
Principles Board Opinion Nos. 16 and 17, as amended or supplemented from time
to time, (B) the amortization of all intangible assets (including amortization
attributable to inventory write-ups, goodwill, debt and financing costs, and
Incentive Arrangements), (C) any non-capitalized transaction costs incurred in
connection with financings, acquisitions or divestitures (including, but not
limited to, financing and refinancing fees), (D) any extraordinary or
nonrecurring charges relating to any premium or penalty paid, write-off of
deferred financing costs, or other financial recapitalization charges in
connection with redeeming or retiring any Indebtedness prior to its stated
maturity, and (E) any Restructuring Charges; provided, however, that for
purposes of determining the Cash Flow Coverage Ratio, Consolidated Net Income
shall be calculated on a Pro Forma Basis.
"Consolidated Net Worth" with respect to any Person means, as of any date,
the consolidated equity of the common stockholders of such Person (excluding the
cumulated foreign currency translation adjustment), all determined on a
consolidated basis in accordance with GAAP, but without any reduction in respect
of the payment of dividends on any series of such Person's preferred stock if
such dividends are paid in additional shares of Capital Stock (other than
Disqualified Stock); provided, however, that Consolidated Net Worth shall also
include, without duplication: (a) the amortization of all write-ups of
inventory, (b) the amortization of all intangible assets (including amortization
of goodwill, debt and financing costs, and Incentive Arrangements), (c) any non-
capitalized transaction costs incurred in connection with financings,
acquisitions or divestitures (including,
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<PAGE>
but not limited to, financing and refinancing fees), (d) any increased
amortization or depreciation resulting from the write-up of assets pursuant to
Accounting Principles Board Opinion Nos. 16 and 17, as amended and supplemented
from time to time, (e) any extraordinary or nonrecurring charges or expenses
relating to any premium or penalty paid, write-off of deferred financing costs,
or other financial recapitalization charges incurred in connection with
redeeming or retiring any Indebtedness prior to its stated maturity, (f) any
Restructuring Charges, and (g) any extraordinary or non-recurring charge arising
out of the implementation of SFAS 106 or SFAS 109; provided, however, that in
determining Consolidated Net Worth for purposes of Section 5.1, Consolidated Net
Worth shall be calculated on a Pro Forma Basis.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Definitive Discount Notes" means Discount Notes that are in the form of
Exhibit A attached hereto (but without including the text referred to in
footnotes 1 and 2 thereto).
"Depositary" means, with respect to the Discount Notes issuable or issued
in whole or in part in global form, the Person specified in Section 2.3 hereof
as the Depositary with respect to the Discount Notes, until a successor shall
have been appointed and become such pursuant to Section 2.6 of this Indenture,
and, thereafter, "Depositary" shall mean or include such successor.
"Discount Notes" means the Series A Notes and the Series B Notes.
"Disqualified Stock" means any Capital Stock that by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part on, or prior to, the
maturity date of the Discount Notes.
"Dura-Line Agreement" means the Preferred Stock Agreement among Dura-Line
Corporation and certain other
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persons, as in effect on the date of the original issuance of the Discount
Notes.
"Dura-Line Preferred Stock" means the 187.5 shares outstanding of Dura-Line
Corporation's 7% cumulative preferred stock with an aggregate liquidation
preference of $1.9 million issued to former common stockholders of Dura-Line
Corporation.
"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible into or
exchangeable for, Capital Stock or partnership interests, and (ii) any other
Indebtedness or Obligation) provided, however, that Equity Interests will not
include any Incentive Arrangements or obligations or payments thereunder.
"Equity Offering" means a public or private offering by the Company and/or
its Subsidiaries for cash of Capital Stock or other Equity Interests and all
warrants, options or other rights to acquire Capital Stock, other than (i) an
offering of Disqualified Stock or (ii) Incentive Arrangements or obligations or
payments thereunder.
"Exchange Offer" means the offer by the Company to Holders to exchange
Series B Discount Notes for Series A Discount Notes.
"GAAP" means generally accepted accounting principles, consistently
applied, as of the date of original issuance of the Discount Notes. All
financial and accounting determinations and calculations under the Indenture
will be made in accordance with GAAP.
"Global Discount Note" means a Discount Note that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 2
to the form of the Discount Note attached hereto as Exhibit A.
"Hedging Obligations" means, with respect to any Person, the Obligations of
such Persons under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements, and (iii) other
agreements or arrangements
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<PAGE>
designed to protect such Person against fluctuations, or otherwise to establish
financial hedges in respect of exchange rates, currency rates or interest rates.
"Holder" means a Person in whose name a Discount Note is registered.
"Incentive Arrangements" means any earn-out agreements, stock appreciation
rights, "phantom" stock plans, employment agreements, non-competition
agreements, subscription and stockholders agreements and other incentive and
bonus plans and similar arrangements made in connection with acquisitions of
Persons or businesses by the Company or any Restricted Subsidiary or the
retention of executives, officers or employees by the Company or any Restricted
Subsidiary.
"Indebtedness" means, with respect to any Person, any indebtedness, whether
or not contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the balance deferred and unpaid
of the purchase price of any property (including pursuant to capital leases),
except any such balance that constitutes an accrued expense or a trade payable,
and any Hedging Obligations, if and to the extent such indebtedness (other than
a Hedging Obligation) would appear as a liability upon a balance sheet of such
Person prepared on a consolidated basis in accordance with GAAP, and also
includes, to the extent not otherwise included, the guarantee of items which
would be included within this definition; provided, however, that "Indebtedness"
will not include any Incentive Arrangements or obligations or payments
thereunder.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy or similar case or proceeding, or any reorganization, receivership,
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, or (ii) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company.
9
<PAGE>
"Investment" means any capital contribution to, or other debt or equity
investment in, any Person.
"issue" means create, issue, assume, guarantee, incur or otherwise become
directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be issued
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
For this definition, the terms "issuing," "issuer," "issuance" and "issued" have
meanings correlative to the foregoing.
"Jordan Stockholders" means John W. Jordan, II, and/or his heirs, executors
and administrators, The John W. Jordan, II Revocable Trust, The Jordan Family
Trust and/or any other trust established by John W. Jordan, II whose
beneficiaries are John W. Jordan, II and/or his lineal descendants or other
relatives, Jordan Industries, Inc., The Jordan Company and Jordan/Zalaznick
Capital Corporation and their respective affiliates, principals, partners and
employees, family members of any of the foregoing and trusts for the benefit of
any of the fore going, including, without limitation, MCIT PLC and Leucadia
National Corporation and their respective Subsidiaries.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the city in which the principal corporate
trust office of the Trustee is located or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell and any filing of or
agreement to give any financing statement under the
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Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 4 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, excluding, however, any gain or
loss, together with any related provision for taxes, realized in connection with
any Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate amount
of cash proceeds (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, and including
any amounts received as disbursements or withdrawals from any escrow or similar
account established in connection with any such Asset Sale, but, in either such
case, only as and when so received) received by the Company or any of its
Restricted Subsidiaries in respect of such Asset Sale, net of: (i) the cash
expenses of such Asset Sale (including, without limitation, the payment of
principal, premium, if any, and interest on, Indebtedness required to be paid as
a result of such Asset Sale (other than the Discount Notes) and legal,
accounting, management, advisory and investment banking fees and sales
commissions), (ii) taxes paid or payable as a result thereof, (iii) any portion
of cash proceeds that the Company determines in good faith should be reserved
for post-closing adjustments, it being understood and agreed that on the day
that all such post-closing adjustments have been determined, the amount (if
any) by which the reserved amount in respect of such Asset Sale exceeds the
actual post-closing adjustments payable by the Company or any of its Restricted
Subsidiaries shall constitute Net Proceeds on such date, (iv) any relocation
expenses and pension, severance and shutdown costs incurred as a result thereof,
and (v) any deduction or appropriate amounts to be provided by the Company or
any of its Restricted Subsidiaries as a reserve in accordance with GAAP against
any liabilities associated with the asset disposed of in such
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<PAGE>
transaction and retained by the Company or such Restricted Subsidiary after
such sale or other disposition thereof, including, without limitation, pension
and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
such transaction.
"New Credit Agreement" means the credit agreement, dated the date hereof,
entered into by certain of the Company's Restricted Subsidiaries and certain
other subsidiaries and the lenders party thereto in their capacities as
lenders thereunder and BankBoston, N.A., as agent, together with all loan
documents and instruments thereunder (including, without limitation, any
guarantee agreements, including the guarantee by the Company, and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including, without limitation, increasing
the amount of available borrowings thereunder, and all Obligations with respect
thereto, in each case, to the extent permitted by Section 4.7, or adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"New Subsidiary Advisory Agreement" means the advisory agreement, dated
July 25, 1997, between the Company and each of its Subsidiaries and Jordan
Industries, as in effect on the date of the original issuance of the Discount
Notes.
"New Subsidiary Consulting Agreement" means the management consulting
agreement, dated July 25, 1997, between the Company and each of its
Subsidiaries and Jordan Industries, as in effect on the date of the original
issuance of the Discount Notes.
"New TJC Management Consulting Agreement" means the Management Consulting
Agreement, dated as of July 25, 1997, between the Company and TJC Management
Corporation, as in effect on the date of original issuance of the Discount
Notes.
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"Non-Restricted Subsidiary" means any Subsidiary of the Company, other than
a Restricted Subsidiary.
"Obligations" means, with respect to any Indebtedness, all principal,
interest, premium, penalties, fees, indemnities, expenses (including legal fees
and expenses), reimbursement obligations and other liabilities payable to the
holder of such Indebtedness under the documentation governing such Indebtedness,
and any other claims of such holder arising in respect of such Indebtedness.
"Offering" means the offer and sale of, among other securities, the
Discount Notes as contemplated by the Offering Circular.
"Offering Circular" means the Offering Circular, dated July 21, 1997,
relating to the Company's offering and placement of, among other securities, the
Discount Notes.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Section 10.4
hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 10.5 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Other Permitted Indebtedness" means: (i) Indebtedness of the Company and
its Restricted Subsidiaries existing as of the date of original issuance of the
Discount Notes and all related Obligations as in effect on such date (including
the Senior Notes and the Discount Notes); (ii) Indebtedness of the Company and
its Re-
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stricted Subsidiaries in respect of bankers acceptances and letters of credit
(including, without limitation, letters of credit in respect of workers'
compensation claims) issued in the ordinary course of business, or other
Indebtedness in respect to reimbursement-type obligations regarding workers'
compensation claims; (iii) Refinancing Indebtedness, provided that: (A) the
principal amount of such Refinancing Indebtedness shall not exceed the
outstanding principal amount of Indebtedness (including unused commitments) so
extended, refinanced, renewed, replaced, substituted or refunded plus any
amounts incurred to pay premiums, fees and expenses in connection therewith, (B)
the Refinancing Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed, replaced, substituted or
refunded; and (C) in the case of Refinancing Indebtedness of Subordinated
Indebtedness, such Refinancing Indebtedness shall be subordinated to the
Discount Notes at least to the same extent as the Subordinated Indebtedness
being extended, refinanced, renewed, replaced, substituted or refunded; (iv)
intercompany Indebtedness of and among the Company and its Restricted
Subsidiaries (excluding guarantees by Restricted Subsidiaries of Indebtedness of
the Company not issued in compliance with Section 4.15); (v) Indebtedness of the
Company and its Restricted Subsidiaries incurred in making permitted Restricted
Payments under Section 4.5(b)(iv), (v) and (viii); (vi) Indebtedness of any Non-
Restricted Subsidiary created after the date of original issuance of the
Discount Notes, provided that such Indebtedness is nonrecourse to the Company
and its Restricted Subsidiaries and neither the Company nor any of its
Restricted Subsidiaries have any Obligations with respect to such Indebtedness;
(vii) Indebtedness of the Company and its Restricted Subsidiaries under Hedging
Obligations; (viii) Indebtedness of the Company and its Restricted Subsidiaries
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts, which will not be, and will not be deemed to be, inadvertent) drawn
against insufficient funds in the ordinary course of business; (ix) Indebtedness
of any Person at the time it is acquired as a Restricted Subsidiary, provided
that such Indebtedness was not issued by such Person in connection with or in
anticipation of such acquisition and that such Indebtedness is
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nonrecourse to the Company and any other Restricted Subsidiary and the Company
and such other Restricted Subsidiaries have no Obligations with respect to such
Indebtedness; (x) guarantees by Restricted Subsidiaries of Indebtedness of any
Restricted Subsidiary if the Indebtedness so guaranteed is permitted under the
Indenture; (xi) guarantees by a Restricted Subsidiary of Indebtedness of the
Company if the Indebtedness so guaranteed is permitted under the Indenture and
the Discount Notes are guaranteed by such Restricted Subsidiary to the extent
required by Section 4.15; (xii) guarantees by the Company of Indebtedness of any
Restricted Subsidiary if the Indebtedness so guaranteed is permitted under the
Indenture; (xiii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with performance, surety, statutory, appeal or similar bonds in the
ordinary course of business; and (xiv) Indebtedness of the Company and its
Restricted Subsidiaries in connection with agreements providing for
indemnification, purchase price adjustments and similar obligations in
connection with the sale or disposition of any of their business, properties or
assets.
"Permitted Liens" means:
(a) with respect to the Company and the Restricted Subsidiaries, (i) Liens
for taxes, assessments, governmental charges or claims which are being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor; (ii) statutory
Liens of landlords and carriers, warehousemen's, mechanics', suppliers',
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any as shall be required in conformity with GAAP shall have been
made therefor; (iii) Liens incurred on deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security; (iv) Liens incurred on deposits made to secure
the performance of tenders, bids, leases, statutory obligations, surety and
appeal bonds, government contracts, performance and return of money bonds and
other obligations of a like nature incurred in the ordi-
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nary course of business (exclusive of obligations for the payment of borrowed
money); (v) easements, rights-of-way, zoning or other restrictions, minor
defects or irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or any of
its Restricted Subsidiaries incurred in the ordinary course of business; (vi)
Liens (including extensions, renewals and replacements thereof) upon property
acquired (the "Acquired Property") after the date of original issuance of the
Discount Notes, provided that: (A) any such Lien is created solely for the
purpose of securing Indebtedness representing, or issued to finance, refinance
or refund, the cost (including the cost of construction) of the Acquired
Property, (B) the principal amount of the Indebtedness secured by such Lien does
not exceed 100% of the cost of the Acquired Property, (C) such Lien does not
extend to or cover any property other than the Acquired Property and any
improvements on such Acquired Property, and (D) the issuance of the Indebtedness
to purchase the Acquired Property is permitted by Section 4.7; (vii) Liens in
favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods; (viii)
judgment and attachment Liens not giving rise to an Event of Default; (ix)
leases or subleases granted to others not interfering in any material respect
with the business of the Company or any of its Restricted Subsidiaries; (x)
Liens securing Indebtedness under Hedging Obligations; (xi) Liens encumbering
deposits made to secure obligations arising from statutory, regulatory,
contractual or warranty requirements of the Company or its Restricted
Subsidiaries; (xii) Liens arising out of consignment or similar arrangements for
the sale of goods entered into by the Company or its Restricted Subsidiaries in
the ordinary course of business; (xiii) any interest or title of a lessor in
property subject to any capital lease obligation or operating lease; (xiv) Liens
arising from filing Uniform Commercial Code financing statements regarding
leases; (xv) Liens existing on the date of original issuance of the Discount
Notes and any extensions, renewals or replacements thereof; (xvi) any Lien
granted to the Trustee and any substantially equivalent Lien granted to any
trustee or similar institution under any indenture for Senior Indebtedness; and
(xvii) additional Liens at any one time outstanding in respect of properties or
assets the aggregate fair market value of which does not exceed
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<PAGE>
$10,000,000 (the fair market value to be determined on the date such Lien is
granted on such properties or assets);
(b) with respect to the Restricted Subsidiaries, (i) Liens securing
Restricted Subsidiaries' reimbursement Obligations with respect to letters of
credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (ii) Liens securing Indebtedness
issued by Restricted Subsidiaries if such Indebtedness is (A) under the New
Credit Agreement, or (B) permitted by Section 4.7(a), clauses (i), (ii), (iii)
or (iv) of Section 4.7(b), or clauses (i), (iii) (to the extent the Indebtedness
subject to such Refinancing Indebtedness was subject to Liens), (vii), (ix) or
(x) of the definition of Other Permitted Indebtedness; (iii) Liens securing
intercompany Indebtedness issued by any Restricted Subsidiary to the Company or
another Restricted Subsidiary; and (iv) Liens securing guarantees by Restricted
Subsidiaries of Indebtedness issued by the Company if such guarantees are
permitted by clause (xi) (but only in respect of the property, rights and assets
of the Restricted Subsidiaries issuing such guarantees) of the definition of
Other Permitted Indebtedness;
(c) with respect to the Company, (i) Liens securing Indebtedness issued by
the Company under the New Credit Agreement if such Indebtedness is permitted by
Section 4.7 (including, but not limited to, Indebtedness issued by the Company
under the New Credit Agreement pursuant to clause (i) and/or clause (iv) of
Section 4.7(b)); (ii) Liens securing Indebtedness of the Company if such
Indebtedness is permitted by clauses (i), (iii) (to the extent the Indebtedness
subject to such Refinancing Indebtedness was subject to Liens) or (vii) of the
definition of Other Permitted Indebtedness; (iii) Liens securing guarantees by
the Company of Indebtedness issued by Restricted Subsidiaries if such
Indebtedness is permitted by Section 4.7 (including, but not limited to,
Indebtedness issued by Restricted Subsidiaries under the New Credit Agreement
pursuant to clause (i) and/or clause (v) of Section 4.7(b)) and if such
guarantees are permitted by clause (xii) (but only in respect of Indebtedness
issued by the Restricted Subsidiaries under the New Credit Agreement pursuant to
Section 4.7) of the definition of Other Permitted Indebtedness; and (iv)
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<PAGE>
Liens securing the Company's reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof;
provided, however, that, notwithstanding any of the foregoing, the Permitted
Liens referred to in clause (c) of this definition shall not include any Lien on
Capital Stock of Restricted Subsidiaries held directly by the Company (as
distinguished from Liens on Capital Stock of Restricted Subsidiaries held by
other Restricted Subsidiaries) other than Liens securing (A) Indebtedness of the
Company issued under the New Credit Agreement pursuant to Section 4.7 and any
permitted Refinancing Indebtedness of such Indebtedness, and (B) guarantees by
the Company of Indebtedness issued by Restricted Subsidiaries under the Credit
Agreement or the New Credit Agreement pursuant to Section 4.7 and any permitted
Refinancing Indebtedness of such Indebtedness.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Income, Cash Flow and Consolidated Interest Expense in connection with the Cash
Flow Coverage Ratio (including in connection with Section 4.5, the incurrence of
Indebtedness pursuant to Section 4.7(a) and Consolidated Net Worth for purposes
of Section 5.1), giving pro forma effect to (x) any acquisition or sale of a
Person, business or asset, related incurrence, repayment or refinancing of
Indebtedness or other related transactions, including any related restructuring
charges in respect of restructurings, consolidations, compensation or headcount
reductions or other cost savings which would otherwise be accounted for as an
adjustment permitted by Regulation S-X under the Securities Act or on a pro
forma basis under GAAP, or (y) any incurrence, repayment or refinancing of any
Indebtedness and the application of the proceeds therefrom, in each case, as if
such acquisition or sale and related transactions, restructurings,
consolidations, cost savings, reductions, incurrence, repayment or refinancing
were realized on the first day of the relevant period permitted by Regulation
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S-X under, the Securities Act or on a pro forma basis under GAAP. Furthermore,
in calculating the Cash Flow Coverage Ratio, (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the determination date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the determination date; (2) if interest on any
Indebtedness actually incurred on the determination date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the determination date will be deemed to have been in effect during
the relevant period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to interest rate swaps or similar interest rate
protection Hedging Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.
"Properties Services Agreement" means the services agreement, dated July
25, 1997, between the Company and Jordan Industries, Inc., as in effect on the
date of original issuance of the Discount Notes.
"Purchaser" means Jefferies & Company, Inc.
"Receivables" means, with respect to any Person, all of the following
property and interests in property of such Person, whether now existing or
existing in the future or hereafter acquired or arising: (i) accounts, (ii)
accounts receivable (including, without limitation, all rights to payment
created by or arising from sales of goods, leases of goods or leased or the
rendition of services rendered no matter how evidenced, whether or not earned by
performance), (iii) all unpaid seller's or lessor's rights (including, without
limitation, recession, replevin, reclamation and stoppage in transit, relating
to any of the foregoing or arising therefrom), (iv) all rights to any goods or
merchandise represented by any of the foregoing (including, without limitation,
returned or repossessed goods), (v) all reserves and credit balances with
respect to any such accounts receivable or account debtors, (vi) all letters of
credit, security or guarantees for any of the foregoing, (vii)
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<PAGE>
all insurance policies or reports relating to any of the foregoing, (viii) all
collection or deposit accounts relating to any of the foregoing, (ix) all
proceeds of any of the foregoing, and (x) all books and records relating to any
of the foregoing.
"Receivables Financing" means (i) the sale or other disposition of
Receivables arising in the ordinary course of business, or (ii) the sale or
other disposition of Receivables arising in the ordinary course of business to a
Receivables Subsidiary followed by a financing transaction in connection with
such sale or disposition of such Receivables.
"Receivables Subsidiary" means a Subsidiary of the Company that is
exclusively engaged in Receivables Financings and activities reasonably related
thereto.
"Refinancing Indebtedness" means (i) Indebtedness of the Company and its
Restricted Subsidiaries issued or given in exchange for, or the proceeds of
which are used to, extend, refinance, renew, replace, substitute or refund any
Indebtedness permitted under this Indenture or any Indebtedness issued to so
extend, refinance, renew, replace, substitute or refund such Indebtedness, (ii)
any refinancings of Indebtedness issued under the New Credit Agreement, and
(iii) any additional Indebtedness issued to pay premiums and fees in connection
with clauses (i) and (ii).
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of July 25, 1997, by and among the Company and the Purchaser, with
respect to the Discount Notes.
"Restricted Investment" means any Investment in any Person, provided that
Restricted Investments will not include: (i) Investments in marketable
securities and other negotiable instruments to the extent permitted by Section
4.5(b)(ii) of this Indenture; (ii) any Incentive Arrangements; (iii) Investments
by any Restricted Subsidiary in the Company; or (iv) Investments by the Company
or any Restricted Subsidiary in any Restricted Subsidiary (provided that any
Investment in a Restricted Subsidiary was made for fair market value (as
determined by the Board of Directors in good faith). The amount of any
Restricted Investment shall be the amount of cash and the
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<PAGE>
fair market value at the time of transfer of all other property (as determined
by the Board of Directors in good faith) initially invested or paid for such
Restricted Investment, plus all additions thereto, without any adjustments for
increases or decreases in value of, or write-ups, write-downs or write-offs with
respect to, such Restricted Investment.
"Restricted Subsidiary" means: (i) any Subsidiary of the Company existing
on the date of original issuance of the Discount Notes, and (ii) any other
Subsidiary of the Company formed, acquired or existing after the date of
original issuance of the Discount Notes that is designated as a "Restricted
Subsidiary" by the Company pursuant to a resolution approved by a majority of
the Board of Directors, provided, however, that the term "Restricted Subsidiary"
shall not include (A) any Restricted Subsidiary of the Company that has been
redesignated by the Company pursuant to a resolution approved by a majority of
the Board of Directors as a Non-Restricted Subsidiary in accordance with Section
4.16 unless such Subsidiary shall have subsequently been redesignated a
Restricted Subsidiary or (B) any Restricted Subsidiary of the Company that is
organized under the laws of a foreign jurisdiction and whose stock or ownership
interests are sold or transferred to a Non-Restricted Subsidiary of the Company
pursuant to one or more transactions that comply with Sections 4.8 and 4.14
which is, at or after the time of such sale or transfer, by a resolution
approved by a majority of the Board of Directors, designated a Non-Restricted
Subsidiary.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or headcount reduction, or any other cost savings, of any Persons
or businesses either alone or together with the Company or any Restricted
Subsidiary, as permitted by GAAP or Regulation S-X under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means: (i) all Obligations (including any interest
accruing subsequent to the filing
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<PAGE>
of a petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on any Indebtedness of the Company, whether outstanding on the
date of issuance of the Discount Notes or thereafter created, incurred or
assumed, of the following types: (A) all Indebtedness of the Company (including
without limitation the Discount Notes) for money borrowed, and (B) all
Indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which the Company is responsible or liable; (ii) all
capitalized lease obligations of the Company; (iii) all Obligations of the
Company: (A) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (B) constituting Hedging
Obligations, or (C) issued as the deferred purchase price of property and all
conditional sale Obligations of the Company and all Obligations of the Company
under any title retention agreement; (iv) all guarantees of the Company with
respect to Obligations of other Persons of the type referred to in clauses (ii)
and (iii) and with respect to the payment of dividends of other Persons; and (v)
all Obligations of the Company consisting of modifications, renewals,
extensions, replacements and refundings of any Obligations described in clauses
(i), (ii), (iii) or (iv) unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is expressly provided that
such Obligations are subordinated or junior in right of payment to the Discount
Notes; provided, however, that Senior Indebtedness shall not be deemed to
include: (1) any Obligation of the Company to any Subsidiary, (2) any liability
for federal, state, local or other taxes owed or owing by the Company, (3)
any accounts payable or other liabiity to trade creditors arising in the
ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities), (4) any Indebtedness, guarantee or Obligation of
the Company that is contractually subordinated or junior in any respect to any
other Indebtedness, guarantee or Obligation of the Company, or (5) any
Indebtedness to the extent the same is incurred in violation of the Indenture.
Senior Indebtedness shall include all Obligations in respect of the Discount
Notes and the Indenture.
"Senior Notes" means the 9 7/8% Senior Notes due 2007 of the Company.
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<PAGE>
"Senior Notes Indenture" means the indenture, dated July 25, 1997, between
the Company and First Trust National Association, as trustee, relating to the
Senior Notes, as such indenture may be amended or supplemented from time to
time.
"Series A Notes" means the Company's 11 3/4% Series A Notes due 2007.
"Series B Notes" means the Company's 11 3/4% Series B Notes due 2007.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"Significant Subsidiary" means (i) any Restricted Subsidiary of the Company
that would be a "significant subsidiary" as defined in clause (2) of the
definition of such term in Rule 1-02 of Regulation S-X under the Securities Act
and the Exchange Act, and (ii) any other Restricted Subsidiary of the Company
that is material to the business, earnings, prospects, assets or condition,
financial or otherwise, of the Company and its Restricted Subsidiaries, taken as
a whole.
"Subordinated Indebtedness" means all Obligations of the type referred to
in clauses (i) through (v) of the definition of Senior Indebtedness, if the
instrument creating or evidencing the same, or pursuant to which the same is
outstanding, designates such Obligations as subordinated or junior in right of
payment to Senior Indebtedness.
"Stated Maturity" means with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" of any Person means any entity of which the Equity Interests
entitled to cast at least a majority
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<PAGE>
of the votes that may be cast by all Equity Interests having ordinary voting
power for the election of directors or other governing body of such entity are
owned by such Person (regardless of whether such Equity Interests are owned
directly by such Person or through one or more Subsidiaries).
"Tax Sharing Agreement" means the tax sharing agreement between the Company
and each of its Subsidiaries and Jordan Industries, Inc. and each of the other
direct and indirect Subsidiaries of Jordan Industries, Inc. that are
consolidated with Jordan Industries, Inc. for Federal income tax purposes, as in
effect on the date of original issuance of the Discount Notes.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-
77bbbb), as amended, as in effect on the date of original issuance of the
Discount Notes.
"Transition Agreement" means the transition agreement, dated as of July 25,
1997, between the Company and Jordan Industries, as in effect on the date of
original issuance of the Discount Notes.
"Transfer Restricted Discount Notes" means securities that bear or are
required to bear the legend set forth in Section 2.6.
"Trustee" means First Trust National Association until a successor replaces
it in accordance with the applicable provisions of this Indenture, and
thereafter means the successor.
"U.S. Government Obligations" means direct obligations of the United States
of America for the payment of which the full faith and credit of the United
States of America is pledged, provided that no U.S. Government Obligation shall
be callable at the issuer's option.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect the board of directors.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the then outstanding
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<PAGE>
principal amount of such Indebtedness into (ii) the sum of the product(s)
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) which will elapse between such date and
the making of such payment.
<TABLE>
<CAPTION>
SECTION 1.2 OTHER DEFINITIONS.
<S> <C>
Defined in
Term Section
"Affiliate Transaction..................................................... 4.8
"Asset Sale Disposition Date".............................................. 4.14
"Asset Sale Trigger Date".................................................. 4.14
"covenant defeasance option"............................................... 8.1
"Disposition".............................................................. 5.1
"DTC"...................................................................... 2.3
"Event of Default"......................................................... 6.1
"Excess Proceeds".......................................................... 4.14
"legal defeasance option".................................................. 8.1
"Notice of Default"........................................................ 6.1
"Offer".................................................................... 3.8
"Other Indebtedness"....................................................... 4.15
"Other Company Indebtedness Guarantee"..................................... 4.15
"Paying Agent"............................................................. 2.3
"Purchase Date"............................................................ 3.8
"Registrar"................................................................ 2.3
"Restricted Payments"...................................................... 4.5
"Successor Corporation".................................................... 5.1
"Trustee Expenses"......................................................... 6.8
</TABLE>
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in, and made a part of, this Indenture. Any terms
incorporated by reference in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them therein.
SECTION 1.4 RULES OF CONSTRUCTION.
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Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined herein has the meaning
assigned to it under GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE DISCOUNT NOTES
SECTION 2.1 FORM AND DATING.
The Discount Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is part of this Indenture. The
Discount Notes may have notations, legends or endorsements required by law,
stock exchange rule or usage. Each Discount Note shall be dated the date of
its authentication. The Discount Notes shall be in denominations of $1,000 and
integral multiples thereof.
The terms and provisions contained in the Discount Notes shall constitute,
and are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
Each Global Discount Note shall represent such of the outstanding Discount
Notes as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Discount Notes from time to time
endorsed thereon and that the aggregate amount of outstanding Discount Notes
represented thereby may from time to time be reduced or increased, as appro-
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<PAGE>
priate, to reflect exchanges and redemptions. Any endorsement of a Global
Discount Note to reflect the amount of any increase or decrease in the amount of
outstanding Discount Notes represented thereby shall be made by the Trustee or
the Discount Note Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.6.
SECTION 2.2 EXECUTION AND AUTHENTICATION.
One Officer shall sign the Discount Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Discount
Notes and may be in facsimile form.
If an Officer whose signature is on a Discount Note no longer holds that
office at the time a Discount Note is authenticated, the Discount Note shall
nevertheless be valid.
A Discount Note shall not be valid until authenticated by the manual
signature of an authorized signatory of the Trustee, and the Trustee's signature
shall be conclusive evidence that the Discount Note has been authenticated under
this Indenture. The form of Trustee's certificate of authentication to be borne
by the Discount Notes shall be substantially as set forth in Exhibit A.
The Trustee shall, upon a written order of the Company signed by two
Officers directing the Trustee to authenticate the Discount Notes and certifying
that all conditions precedent to the issuance of the Discount Notes contained
herein have been complied with, authenticate Discount Notes for original
issuance up to an aggregate principal amount stated in paragraph 4 of the
Discount Notes (the aggregate principal amount of outstanding Discount Notes may
not exceed that amount at any time, except as provided in Section 2.7).
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Discount Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Discount Notes whenever the Trustee may
do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent
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<PAGE>
has the same rights as an Agent to deal with the Company or an Affiliate of the
Company.
SECTION 2.3 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (the "Registrar") where
Discount Notes may be presented for registration of transfer or for exchange and
an office or agency (the "Paying Agent") where Discount Notes may be presented
for payment. The Registrar shall keep a register of the Discount Notes and of
their transfer and exchange. The Company may appoint one or more co-registrars
and one or more additional paying agents. The term "Registrar" includes any co-
registrar, and the term "Paying Agent" includes any additional paying agent. The
Company may change any Paying Agent or Registrar without prior notice to any
Holder. The Company shall notify in writing the Trustee and the Trustee shall
notify the Holders in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company shall
enter into an appropriate agency agreement with any Agent not a party to this
Indenture, and such agreement shall incorporate the TIA's provisions and
implement the provisions of this Indenture that relate to such Agent.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Discount Notes.
The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Discount Notes
and as Discount Note Custodian with respect to the Global Discount Notes. The
Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-
registrar. If the Company fails to appoint or maintain a Registrar and Paying
Agent, the Trustee shall act as such, and shall be entitled to appropriate
compensation in accordance with Section 7.7.
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the Holders' benefit or
the
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<PAGE>
Trustee all money the Paying Agent holds for redemption or purchase of the
Discount Notes or for the payment of principal of, or premium, if any, or
interest on, or Liquidated Damages, if any, with respect to the Discount Notes,
and will promptly notify the Trustee of any Default by the Company in providing
the Paying Agent with sufficient funds to (i) purchase Discount Notes tendered
pursuant to an Offer arising under Section 4.13, (ii) redeem Discount Notes
called for redemption, or (iii) make any payment of principal, premium, interest
or Liquidated Damages due on the Discount Notes. While any such Default
continues, the Trustee may require the Paying Agent to pay all money it holds to
the Trustee and to account for any funds disbursed. The Company at any time may
require the Paying Agent to pay all money it holds to the Trustee and to account
for any funds disbursed. Upon payment over to the Trustee, the Paying Agent (if
other than the Company or any of its Subsidiaries) shall have no further
liability for the money it delivered to the Trustee. If the Company or any of
its Subsidiaries acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the Holders' benefit or the Trustee all money it holds as Paying
Agent.
SECTION 2.5 HOLDER LISTS.
------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require that sets forth the names and addresses of, and
the aggregate principal amount of Discount Notes held by, each Holder, and the
Company shall otherwise comply with section 312(a) of the TIA.
SECTION 2.6 TRANSFER AND EXCHANGE.
---------------------
(a) Transfer and Exchange of Definitive Discount Notes. When
Definitive Discount Notes are presented by a Holder to the Registrar with a
request:
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<PAGE>
(x) to register the transfer of the Definitive Discount Notes; or
(y) to exchange such Definitive Discount Notes for an equal principal
amount of Definitive Discount Notes of other authorized
denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Discount Notes presented or surrendered for register of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed
by such Holder or by his attorney, duly authorized in writing; and
(ii) in the case of a Definitive Discount Note that is a
Transfer Restricted Discount Note, such request shall be accompanied by the
following additional information and documents, as applicable:
(A) if such Transfer Restricted Discount Note is being delivered
to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification to that
effect from such Holder (in substantially the form of
Exhibit B hereto); or
(B) if such Transfer Restricted Discount Note is being
transferred (1) to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act or (2)
pursuant to an exemption from registration in accordance
with Rule 144 under the Securities Act (and based on an
opinion of counsel if the Company so requests) or (3)
pursuant to an effective registration statement under the
Securities Act, a certifi-
30
<PAGE>
cation to that effect from such Holder (in substantially the
form of Exhibit B hereto); or
(C) if such Transfer Restricted Discount Note is being
transferred to an institutional "accredited investor,"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act pursuant to a private placement exemption
from the registration requirements of the Securities Act
(and based on an opinion of counsel if the Company so
requests), a certification to that effect from such Holder
(in substantially the form of Exhibit B hereto) and a
certification from the applicable transferee (in
substantially the form of Exhibit C hereto); or
(D) if such Transfer Restricted Discount Note is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act (and based
on an opinion of counsel if the Company so requests), a
certification to that effect from such Holder (in
substantially the form of Exhibit B hereto).
(b) Transfer of a Definitive Discount Note for a Beneficial Interest
in a Global Discount Note. A Definitive Discount Note may not be exchanged for
a beneficial interest in a Global Discount Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Discount Note, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Trustee, together with:
(i) if such Definitive Discount Note is a Transfer Restricted
Discount Note, a certification from the Holder thereof (in substantially
the form of Exhibit B hereto) to the effect that such Definitive Discount
Note is being transferred by such Holder to a "qualified institutional
buyer" (as
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<PAGE>
defined in Rule 144A under the Securities Act) in accordance with Rule 144A
under the Securities Act; and
(ii) whether or not such Definitive Discount Note is a Transfer
Restricted Discount Note, written instructions from the Holder thereof
directing the Trustee to make, or to direct the Discount Note Custodian to
make, an endorsement on the Global Discount Note to reflect an increase in
the aggregate principal amount of the Discount Notes represented by the
Global Discount Note,
the Trustee shall cancel such Definitive Discount Note in accordance with
Section 2.11 and cause, or direct the Discount Note Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Discount Note Custodian, the aggregate principal amount of
Discount Notes represented by the Global Discount Note to be increased
accordingly. If no Global Discount Notes are then outstanding, the Company
shall issue and, upon receipt of an authentication order in accordance with
Section 2.2, the Trustee shall authenticate a new Global Discount Note in the
appropriate principal amount.
(c) Transfer and Exchange of Global Discount Notes. The transfer and
exchange of Global Discount Notes or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture and the
procedures of the Depositary therefor, which shall include restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act.
(d) Transfer of a Beneficial Interest in a Global Discount Note for
a Definitive Discount Note.
(i) Any Person having a beneficial interest in a Global
Discount Note may upon request exchange such beneficial interest for a
Definitive Discount Note. Upon receipt by the Trustee of written
instructions or such other form of instructions as is customary for the
Depositary, from the Depositary or its nominee on behalf of any Person
having a beneficial interest in a Global Discount Note, and, in the case of
a Transfer Restricted Discount Note,
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<PAGE>
the following additional information and documents (all of which may be
submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial
owner, a certification to that effect from such Person (in
substantially the form of Exhibit B hereto); or
(B) if such beneficial interest is being transferred (1) to a
"qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under
the Securities Act or (2) pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act (and based on an opinion of counsel if the
Company so requests) or (3) pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from the transferor (in
substantially the form of Exhibit B hereto); or
(C) if such beneficial interest is being transferred to an
institutional "accredited investor," within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act
pursuant to a private placement exemption from the
registration requirements of the Securities Act (and based
on an opinion of counsel if the Company so requests), a
certification to that effect from such Holder (in
substantially the form of Exhibit B hereto) and a
certification from the applicable transferee (in
substantially the form of Exhibit C hereto); or
(D) if such beneficial interest is being transferred in reliance
on another exemption from the registration re-
33
<PAGE>
quirements of the Securities Act (and based on an opinion of
counsel if the Company so requests), a certification to that
effect from such Holder (in substantially the form of
Exhibit B hereto).
The Trustee or the Discount Note Custodian, at the direction of
the Trustee, shall, in accordance with the standing instructions
and procedures existing between the Depositary and the Discount
Note Custodian, cause the aggregate principal amount of Global
Discount Notes to be reduced accordingly and, following such
reduction, the Company shall execute and, upon receipt of an
authentication order in accordance with Section 2.2 hereof, the
Trustee shall authenticate and deliver to the transferee a
Definitive Discount Note in the appropriate principal amount.
(ii) Definitive Discount Notes issued in exchange for a
beneficial interest in a Global Discount Note pursuant to this Section
2.6(d) shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its direct
or indirect participants or otherwise, shall instruct the Trustee. The
Trustee shall deliver in accordance with the standard procedures of the
Depositary such Definitive Discount Notes to the Persons in whose names
such Discount Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Discount Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.6), a Global Discount Note may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Discount Notes in Absence of
Depositary. If at any time:
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<PAGE>
(i) the Depositary for the Discount Notes notifies the Company
that the Depositary is unwilling or unable to continue as Depositary for
the Global Discount Notes and a successor Depositary for the Global
Discount Notes is not appointed by the Company within 90 days after
delivery of such notice; or
(ii) The Company, at its sole discretion, notifies the Trustee
in writing that it elects to cause the issuance of Definitive Discount
Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.2, authenticate and deliver,
Definitive Discount Notes in an aggregate principal amount equal to the
principal amount of the Global Discount Notes in exchange for such Global
Discount Notes and registered in such names as the Depositary shall instruct the
Trustee or the Company in writing.
(g) Legends.
-------
(i) Except for any Transfer Restricted Discount Note sold or
transferred (including any Transfer Restricted Discount Note represented by
a Global Discount Note) as described in (ii) below, each Discount Note
certificate evidencing Global Discount Notes and Definitive Discount Notes
(and all Discount Notes issued in exchange therefor or substitution
thereof) shall bear legends in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND
THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVI-
35
<PAGE>
DENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, OR (c) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Discount Note
(including any Transfer Restricted Discount Note represented by a Global
Discount Note) pursuant to an effective registration statement under the
Securities Act, pursuant to Rule 144 under the Securities Act or pursuant to an
opinion of counsel reasonably satisfactory to the Company and the Registrar
that no legend is required:
(A) in the case of any Transfer Restricted Discount Note that is a
Definitive Discount Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Discount Note for a
Definitive Discount Note that does not bear the legend set forth
in (i) above and rescind any restriction on the transfer of such
Transfer Restricted Discount Note; and
(B) in the case of any Transfer Restricted Discount Note represented
by a
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Global Discount Note, such Transfer Restricted Discount Note
shall not be required to bear the legend set forth in (i)
above if all other interests in such Global Discount Note
have been or are concurrently being sold or transferred
pursuant to Rule 144 under the Securities Act or pursuant to
an effective registration statement under the Securities
Act, but such Transfer Restricted Discount Note shall
continue to be subject to the provisions of Section 2.6(c);
provided, however, that with respect to any request for an
exchange of a Transfer Restricted Discount Note that is
represented by a Global Discount Note for a Definitive
Discount Note that does not bear the legend set forth in (i)
above, which request is made in reliance upon Rule 144, the
Holder thereof shall certify in writing to the Registrar
that such request is being made pursuant to Rule 144 (such
certification to be substantially in the form of Exhibit B
hereto).
(iii) Notwithstanding the foregoing, upon consummation of the
Exchange Offer, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.2, the Trustee shall
authenticate, Series B Discount Notes in exchange for Series A Discount
Notes accepted for exchange in the Exchange Offer, which Series B Discount
Notes shall not bear the legend set forth in (i) above, and the Registrar
shall rescind any restriction on the transfer of such Discount Notes, in
each case unless the Holder of such Series A Discount Notes is either (A) a
broker-dealer, (B) a Person participating in the distribution of the Series
A Discount Notes or (C) a Person who is an affiliate (as defined in Rule
144A) of the Company. The Company shall identify to the Trustee such
Holders of the Discount Notes in a written certification signed by an
Officer of the Company and, absent certification from the Company to such
ef-
<PAGE>
fect, the Trustee shall assume that there are no such Holders.
(h) Cancellation and/or Adjustment of Global Discount Notes. At such
time as all beneficial interests in Global Discount Notes have been exchanged
for Definitive Discount Notes, redeemed, repurchased or cancelled, all Global
Discount Notes shall be returned to or retained and cancelled by the Trustee in
accordance with Section 2.11. At any time prior to such cancellation, if any
beneficial interest in a Global Discount Note is exchanged for Definitive
Discount Notes, redeemed, repurchased or cancelled, the principal amount of
Discount Notes represented by such Global Discount Note shall be reduced
accordingly and an endorsement shall be made on such Global Discount Note, by
the Trustee or the Discount Notes Custodian, at the direction of the Trustee, to
reflect such reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive
Discount Notes and Global Discount Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or "exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 3.7, 4.13, 4.14 and 9.5).
(iii) Neither the Company nor the Registrar shall be required to
register the transfer of or exchange any Discount Note selected for
redemption in whole or in part, except the unredeemed portion of any
Discount Note being redeemed in part.
(iv) All Definitive Discount Notes and Global Discount Notes
issued upon any registration of transfer or exchange of Definitive Discount
Notes or Global Discount Notes in accordance with this
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<PAGE>
Indenture (including any increase in the aggregate principal amount of the
Discount Notes represented by the Global Discount Note pursuant to
subsection (b) above) shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Definitive Discount Notes or Global Discount Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required to issue Discount Notes
and the Registrar shall not be required to register the transfer of or to
exchange Discount Notes during a period beginning at the opening of
business 15 days before the day of any selection of Discount Notes for
redemption under Section 3.2 and ending at the close of business on the day
of selection, or to register the transfer of or to exchange a Discount Note
between a record date and the next succeeding interest payment date.
(vi) Prior to due presentment for the registration of a transfer
of any Discount Note, the Trustee, any Agent and the Company may deem and
treat the Person in whose name any Discount Note is registered as the
absolute owner of such Discount Note for the purpose of receiving payment
of principal of, premium, if any, accrued and unpaid interest, and
Liquidated Damages, if any, on such Discount Notes, and neither the
Trustee, any Agent nor the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Definitive Discount Notes
and Global Discount Notes in accordance with the provisions of Section 2.2.
SECTION 2.7 REPLACEMENT DISCOUNT NOTES.
If any mutilated Discount Note is surrendered to the Trustee, or the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Discount Note, the Company shall issue and the
Trustee, upon the Company's written order signed by two Officers, shall
authenticate a replacement Discount Note if the Trustee's requirements are met.
If the Trustee or the Company requires it, the Holder must supply an indem-
39
<PAGE>
nity bond that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent or any authenticating agent from any
loss that any of them may suffer if a Discount Note is replaced. The Company and
the Trustee may charge for their expenses in replacing a Discount Note. Every
replacement Discount Note is an additional Obligation of the Company.
SECTION 2.8 OUTSTANDING DISCOUNT NOTES.
The Discount Notes outstanding at any time are all the Discount Notes the
Trustee has authenticated except for those it has cancelled, those delivered to
it for cancellation, those representing reductions in the interest in a Global
Discount Note effected by the Trustee in accordance with the provisions hereof,
and those de scribed in this Section as not outstanding.
If a Discount Note is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that a bona
fide purchaser holds the replaced Discount Note.
If the entire principal of, and premium, if any, and accrued interest on,
and Liquidated Damages, if any, with respect to any Discount Note is considered
paid under Section 4.1, it ceases to be outstanding and interest and Liquidated
Damages on it cease to accrue.
Subject to Section 2.9, a Discount Note does not cease to be outstanding
because the Company or an Affiliate holds the Discount Note.
SECTION 2.9 TREASURY DISCOUNT NOTES.
In determining whether the Holders of the required principal amount of
Discount Notes have concurred in any direction, waiver or consent, Discount
Notes owned by the Company or an Affiliate shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Discount Notes that a Trust Officer of the Trustee knows are so owned shall be
so disregarded. Notwithstanding the foregoing, Discount Notes that the Company
or an Affiliate offers to purchase or acquires pursuant to an Offer, exchange
40
<PAGE>
offer, tender offer or otherwise shall not be deemed to be owned by the Company
or an Affiliate until legal title to such Discount Notes passes to the Company
or such Affiliate, as the case may be.
SECTION 2.10 TEMPORARY DISCOUNT NOTES.
Until Definitive Discount Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Discount Notes. Temporary
Discount Notes shall be substantially in the form of Definitive Discount Notes
but may have variations that the Company considers appropriate for temporary
Discount Notes. Without unreasonable delay, the Company shall prepare and the
Trustee, upon receipt of the Company's written order signed by two Officers
which shall specify the amount of temporary Discount Notes to be authenticated
and the date on which the temporary Discount Notes are to be authenticated,
shall authenticate Definitive Discount Notes and deliver them in exchange for
temporary Discount Notes. Until such exchange, Holders of temporary Discount
Notes shall be entitled to the same rights, benefits and privileges as
Definitive Discount Notes.
SECTION 2.11 CANCELLATION.
The Company at any time may deliver Discount Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Discount Notes surrendered to them for registration of transfer, exchange,
replacement, payment (including all Discount Notes called for redemption and all
Discount Notes accepted for payment pursuant to an Offer) or cancellation, and
the Trustee shall cancel all such Discount Notes and shall destroy all cancelled
Discount Notes (subject to the Exchange Act's record retention requirements) and
deliver a certificate of their destruction to the Company unless by written
order, signed by two Officers of the Company, the Company shall direct that
cancelled Discount Notes be returned to it. The Company may not issue new
Discount Notes to replace any Discount Notes that have been cancelled by the
Trustee or that have been delivered to the Trustee for cancellation. If the
Company or an Affiliate acquires any Discount Notes (other than by redemption
or pursuant to an Offer), such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Discount Notes unless and
41
<PAGE>
until such Discount Notes are delivered to the Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Discount Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to Holders on a subsequent
special record date, in each case at the rate provided in the Discount Notes.
The Company shall fix or cause to be fixed each such special record date and
payment date. As early as practicable prior to the special record date, the
Company (or the Trustee, in the name of and at the expense of the Company) shall
mail a notice that states the special record date, the related payment date and
the amount of interest to be paid.
SECTION 2.13 RECORD DATE.
The record date for purposes of determining the identity of Holders of
Discount Notes entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in section 316(c) of the TIA.
SECTION 2.14 CUSIP NUMBER.
A "CUSIP" number shall be printed on the Discount Notes, and the Trustee
shall use the CUSIP number in notices of redemption, purchase or exchange as a
convenience to Holders, provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Discount Notes and that reliance may be placed
only on the other identification numbers printed on the Discount Notes. The
Company shall promptly notify the Trustee of any change in the CUSIP number.
42
<PAGE>
ARTICLE 3
OPTIONAL REDEMPTION AND
MANDATORY OFFERS TO PURCHASE
SECTION 3.1 NOTICES TO TRUSTEE.
If the Company elects to redeem Discount Notes pursuant to Section
3.7, it shall furnish to the Trustee, at least 40 days prior to the redemption
date and at least 10 days prior to the date that notice of the redemption is to
be mailed by the Company to Holders, an Officers' Certificate stating that the
Company has elected to redeem Discount Notes pursuant to Section 3.7(a) or
3.7(b), as the case may be, the date notice of redemption is to be mailed to
Holders, the redemption date, the aggregate principal amount of Discount Notes
to be redeemed, the redemption price for such Discount Notes and the amount of
accrued and unpaid interest on and Liquidated Damages, if any, with respect to
such Discount Notes as of the redemption date. If the Trustee is not the
Registrar, the Company shall, concurrently with delivery of its notice to the
Trustee of a redemption, cause the Registrar to deliver to the Trustee a
certificate (upon which the Trustee may rely) setting forth the name of, and the
aggregate principal amount of Discount Notes held by, each Holder.
If the Company is required to offer to purchase Discount Notes
pursuant to Section 4.13 or 4.14, it shall furnish to the Trustee, at least 2
Business Days before notice of the Offer is to be mailed to Holders, an
Officers' Certificate setting forth that the Offer is being made pursuant to
Section 4.13 or 4.14, as the case may be, the Purchase Date, the maximum
principal amount of Discount Notes the Company is offering to purchase pursuant
to the Offer, the purchase price for such Discount Notes, and the amount of
accrued and unpaid interest on and Liquidated Damages, if any, with respect to
such Discount Notes as of the Purchase Date.
The Company will also provide the Trustee with any additional
information that the Trustee reasonably requests in connection with any
redemption or Offer.
43
<PAGE>
SECTION 3.2 SELECTION OF DISCOUNT NOTES TO BE REDEEMED OR PURCHASED.
If less than all outstanding Discount Notes are to be redeemed or if
less than all Discount Notes tendered pursuant to an Offer are to be accepted
for payment, the Trustee shall select the outstanding Discount Notes to be
redeemed or accepted for payment pro rata, by lot or by a method that complies
with the requirements of any stock exchange on which the Discount Notes are
listed and that the Trustee considers fair and appropriate. If the Company
elects to mail notice of a redemption to Holders, the Trustee shall at least 5
business days prior to the date notice of redemption is to be mailed, (i) select
the Discount Notes to be redeemed from Discount Notes outstanding not
previously called for redemption and (ii) notify the Company of the names of
each Holder of Discount Notes selected for redemption, the principal amount of
Discount Notes held by each such Holder and the principal amount of such
Holder's Discount Notes that are to be redeemed. If less than all Discount
Notes tendered pursuant to an Offer on the Purchase Date are to be accepted for
payment, the Trustee shall select on or promptly after the Purchase Date the
Discount Notes to be accepted for payment. The Trustee shall select for
redemption or purchase Discount Notes or portions of Discount Notes in principal
amounts of $1,000 or integral multiples of $1,000; except that if all of the
Discount Notes of a Holder are selected for redemption or purchase, the
aggregate principal amount of the Discount Notes held by such Holder, even if
not a multiple of $1,000, shall be redeemed or purchased. Except as provided
in the preceding sentence, provisions of this Indenture that apply to Discount
Notes called for redemption or tendered pursuant to an offer also apply to
portions of Discount Notes called for redemption or tendered pursuant to an
Offer. The Trustee shall notify the Company promptly of the Discount Notes or
portions of Discount Notes to be called for redemption or selected for purchase.
SECTION 3.3 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption to each Holder of Discount Notes
or portions thereof that are to be redeemed.
44
<PAGE>
The notice shall identify the Discount Notes or portions thereof to be
redeemed and shall state:
(1) the redemption date;
(2) the redemption price for the Discount Notes and separately
stating the amount of unpaid and accrued interest on, and
Liquidated Damages, if any, with respect to, such Discount Notes
as of the date of redemption;
(3) if any Discount Note is being redeemed in part, the portion of
the principal amount of such Discount Notes to be redeemed and
that, after the redemption date, upon surrender of such Discount
Note, a new Discount Note or Discount Notes in principal amount
equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Discount Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price for, and any
accrued and unpaid interest on, and Liquidated Damages, if any,
with respect to such Discount Notes;
(6) that, unless the Company defaults in making such redemption
payment, interest on Discount Notes called for redemption ceases
to accrue on and after the redemption date;
(7) the paragraph of the Discount Notes pursuant to which the
Discount Notes called for redemption are being redeemed; and
(8) the CUSIP number; provided that no representation is made as to
the correctness or accuracy of the CUSIP number listed in such
notice and printed on the Discount Notes.
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<PAGE>
At the Company's request, the Trustee shall (at the Company's expense) give
the notice of redemption in the Company's name at least 30 but not more than 60
days before a redemption; provided, however, that the Company shall deliver to
the Trustee, at least 45 days prior to the redemption date and at least 10 days
prior to the date that notice of the redemption is to be mailed to Holders, an
Officers' Certificate that (i) requests the Trustee to give notice of the
redemption to Holders, (ii) sets forth the information to be provided to Holders
in the notice of redemption, as set forth in the preceding paragraph, (iii)
states that the Company has elected to redeem Discount Notes pursuant to Section
3.7(a) or 3.7(b), as the case may be, and (iv) sets forth the aggregate
principal amount of Discount Notes to be redeemed and the amount of accrued and
unpaid interest and Liquidated Damages, if any, thereon as of the redemption
date. If the Trustee is not the Registrar, the Company shall, concurrently with
any such request, cause the Registrar to deliver to the Trustee a certificate
(upon which the Trustee may rely) setting forth the name of, the address of, and
the aggregate principal amount of Discount Notes held by, each Holder.
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Discount Notes called for redemption
become due and payable on the redemption date at the price set forth in the
Discount Note. Upon surrender to the Trustee or Paying Agent, such Discount
Notes called for redemption shall be paid at the redemption price (which shall
include accrued interest thereon to the redemption date) but installments of
interest, the maturity of which is on or prior to the redemption date, shall be
payable to Holders of record at the close of business on the relevant record
dates.
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.
On or prior to any redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price
of, and accrued interest on, and Liquidated Damages, if any, with respect to all
Discount Notes to be redeemed on that date. The Trustee or the Paying Agent
shall return to the Company any money that the Company deposited with the
Trustee or the Paying Agent in excess of the amounts
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<PAGE>
necessary to pay the redemption price of, and accrued interest on, and
Liquidated Damages, if any, with respect to all Discount Notes to be redeemed.
If the Company complies with the preceding paragraph, interest on the
Discount Notes to be redeemed will cease to accrue on such Discount Notes on the
applicable redemption date, whether or not such Discount Notes are presented for
payment. If a Discount Note is redeemed on or after an interest record date but
on or prior to the related interest payment date, then any accrued and unpaid
interest and Liquidated Damages, if any, shall be paid to the Person in whose
name such Discount Note was registered at the close of business on such record
date. If any Discount Note called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest will be paid on the unpaid principal, premium,
if any, interest and Liquidated Damages, if any, from the redemption date until
such principal, premium, interest and Liquidated Damages, if any, is paid, at
the rate of interest provided in the Discount Notes and Section 4.1.
SECTION 3.6 DISCOUNT NOTES REDEEMED IN PART.
Upon surrender of a Discount Note that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder at the Company's
expense a new Discount Note equal in principal amount to the unredeemed portion
of the Discount Note surrendered.
SECTION 3.7 OPTIONAL REDEMPTION PROVISIONS.
(a) Except as provided in Section 3.7(b), the Discount Notes may not
be redeemed at the option of the Company prior to August 1, 2002. During the
twelve (12) month period beginning on August 1 of the years indicated below, the
Discount Notes will be redeemable at the option of the Company, in whole or in
part, on at least 30 but not more than 60 days' notice to each Holder of
Discount Notes to be redeemed, at the redemption prices (expressed as
percentages of the Accreted Value) set forth below, plus, if such redemption
occurs after August 1, 2000, any accrued and unpaid interest and Liquidated
Damages, if any, from August 1, 2000 to the redemption date:
47
<PAGE>
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002......................... 105.8750%
2003......................... 102.9375%
2004 and thereafter.......... 100.000 %
</TABLE>
(b) Notwithstanding the foregoing, at any time on or prior to August
1, 2000, the Company may (but shall not have the obligation to) redeem up to
one-third of the original aggregate principal amount of the Discount Notes with
the proceeds of one or more Equity Offerings at a redemption price of 111.75% of
the Accreted Value thereof, plus any accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption; provided that at least $80 million
of the aggregate principal amount of the Discount Notes originally issued remain
outstanding immediately after any such redemption; and provided, further, that
any such redemption shall occur within 60 days of the date of the closing of any
such Equity Offering.
SECTION 3.8 MANDATORY PURCHASE PROVISIONS.
(a) Within 30 days following any Change of Control or Asset Sale
Trigger Date, the Company shall mail a notice to each Holder at such Holder's
registered address stating (i) that an offer ("Offer") is being made pursuant to
Section 4.13 or Section 4.14, as the case may be, the length of time the Offer
shall remain open, the amount of the Offer and the maximum aggregate principal
amount of Discount Notes that will be accepted for payment pursuant to such
Offer; (ii) the purchase price for the Discount Notes (as set forth in Section
4.13 or Section 4.14, as the case may be), the amount of accrued and unpaid
interest on, and Liquidated Damages, if any, with respect to, such Discount
Notes as of the purchase date, and the purchase date (which shall be no earlier
than 30 days or later than 40 days from the date such notice is mailed (the
"Purchase Date")); (iii) that any Discount Note not accepted for payment will
continue to accrue interest and Liquidated Damages, if any; (iv) that, unless
the Company fails to deposit with the Paying Agent on the Purchase Date an
amount sufficient to purchase all Discount Notes accepted for payment, interest
shall cease to accrue on such Discount Notes after the Purchase Date; (v) that
Holders electing to tender any
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<PAGE>
Discount Note or portion thereof will be required to surrender their Discount
Note, with a form entitled "Option of Holder to Elect Purchase" completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the Business Day preceding the Purchase Date, provided that Holders
electing to tender only a portion of any Discount Note must tender a principal
amount of $1,000 or integral multiples thereof, (vi) that Holders will be
entitled to withdraw their election to tender Discount Notes, if the Paying
Agent receives, not later than the close of business on the third Business Day
preceding the Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Discount Notes
delivered for purchase, and a statement that such Holder is withdrawing his
election to have such Discount Note purchased; and (vii) that Holders whose
Discount Notes are accepted for payment in part will be issued new Discount
Notes equal in principal amount to the unpurchased portion of Discount Notes
surrendered; provided that only Discount Notes in a principal amount of $1,000
or integral multiples thereof will be accepted for payment in part.
(b) On any Purchase Date, the Company shall, to the extent lawful and
required by this Indenture and such Offer, (i) in the case of an Offer resulting
from a Change of Control, accept for payment all Discount Notes or portions
thereof tendered pursuant to such Offer and, in the case of an Offer resulting
from an Asset Sale Trigger Date, accept for payment the maximum aggregate
principal amount of Discount Notes or portions thereof tendered pursuant to such
Offer that can be purchased out of Excess Proceeds from such Asset Sale Trigger
Date, (ii) deposit with the Paying Agent the aggregate purchase price of all
Discount Notes or portions thereof accepted for payment and any accrued and
unpaid interest and Liquidated Damages, if any, on such Discount Notes as of the
Purchase Date, and (iii) deliver or cause to be delivered to the Trustee all
Discount Notes so accepted together with an Officers' Certificate stating the
Discount Notes or portions thereof tendered to the Company.
(c) With respect to any Offer, if less than all of the Discount Notes
tendered pursuant to an Offer are to be purchased by the Company, the Trustee
shall select on the Purchase Date the Discount Notes or por-
49
<PAGE>
tions thereof to be accepted for payment pursuant to Section 3.2.
(d) Promptly after consummation of an Offer, (i) the Paying Agent
shall mail (or cause to be transferred by book entry) to each Holder of
Discount Notes or portions thereof accepted for payment an amount equal to the
purchase price for, plus any accrued and unpaid interest on, and Liquidated
Damages, if any, with respect to such Discount Notes as of the Purchase Date,
(ii) with respect to any tendered Discount Note not accepted for payment in
whole or in part, the Trustee shall return such Discount Note to the Holder
thereof, and (iii) with respect to any Discount Note accepted for payment in
part, the Trustee shall authenticate and mail to each such Holder a new Discount
Note equal in principal amount to the unpurchased portion of the tendered
Discount Note, provided that each such new Discount Note shall be in a principal
amount of $1,000 or integral multiples thereof.
(e) The Company will publicly announce the results of the Offer on or
as soon as practicable after the Purchase Date.
(f) The Company shall comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations to the extent such laws and
regulations are applicable to any Offer. To the extent that the provisions of
any of the securities laws or regulations conflict with provisions of this
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Indenture by virtue thereof.
(g) With respect to any Offer, if the Company deposits prior to 10:00
a.m. New York City time with the Paying Agent on the Purchase Date an amount in
available funds sufficient to purchase all Discount Notes accepted for payment,
interest shall cease to accrue on such Discount Notes after the Purchase Date;
provided, however, that if the Company fails to deposit such amount on the
Purchase Date, interest shall continue to accrue on such Discount Notes until
such deposit is made.
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<PAGE>
ARTICLE 4
COVENANTS
SECTION 4.1 PAYMENT OF DISCOUNT NOTES.
The Company shall pay the principal of, and any premium due on the Discount
Notes, and interest that accrues on the Discount Notes after August 1, 2000, on
the dates and in the manner provided in the Discount Notes. Holders of Discount
Notes must surrender their Discount Notes to the Paying Agent to collect
principal payments. Principal of, premium, if any, and accrued and unpaid
interest, and Liquidated Damages, if any, shall be considered paid on the date
due if the Paying Agent (other than the Company or any of its Subsidiaries), the
Global Discount Note Holder or each Holder that has specified an account, holds,
as of 10:00 a.m. New York City time, money the Company deposited in immediately
available funds designated for and sufficient to pay in cash all principal,
premium, if any, and accrued and unpaid interest on, and Liquidated Damages, if
any, then due; provided that, to the extent that the Holders have not specified
accounts, such amounts shall be considered paid on the date due if the Company
mails a check for such amounts on such date. The Paying Agent shall return to
the Company, no later than five days following the date of payment, any money
(including accrued interest) that exceeds the amount of principal, premium, if
any, accrued and unpaid interest, and Liquidated Damages, if any, paid on the
Discount Notes. The Company shall pay all Liquidated Damages, if any, in the
same manner on the dates and in the amounts set forth in the Registration Rights
Agreement. If any Liquidated Damages become payable, the Company shall not later
than three Business Days prior to the date that any payment of Liquidated
Damages is due (i) deliver an Officers' Certificate to the Trustee setting forth
the amount of Liquidated Damages payable to Holders and (ii) instruct the
Paying Agent to pay such amount of Liquidated Damages to Holders entitled to
receive such Liquidated Damages.
To the extent lawful, the Company shall pay interest (including Post-
Petition Interest) on (i) overdue principal and premium at the then applicable
interest rate on the Discount Notes, compounded semiannually and (ii) overdue
installments of interest and Liquidated Damages
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(without regard to any applicable grace period) at the same rate as set forth in
clause (i), compounded semiannually.
To the extent any payment on the Discount Notes, whether by or on behalf of
the Company, as proceeds of security or enforcement of any right of setoff or
otherwise, is declared to be fraudulent or preferential, set aside or required
to be paid to a trustee, receiver or other similar party under any bankruptcy,
insolvency, receivership or similar law, then if such payment is recovered by,
or paid over to, such trustee, receiver or other similar party, the Discount
Notes or part thereof originally intended to be satisfied by such payment shall
be deemed to be reinstated and outstanding as if such payment had not occurred.
SECTION 4.2 SEC REPORTS.
(a) The Company shall file with the Trustee, within 15 days after it
files them with the SEC, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) that the Company is required
to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If the
Company is not subject to the requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the Trustee, within 15 days after it
would have been required to file with the SEC, financial statements, including
any notes thereto (and with respect to annual reports, an auditor's report by a
firm of established national reputation), and a "Management's Discussion and
Analysis of Financial Condition and Results of Operations," both comparable to
that which the Company would have been required to include in such annual
reports, information, documents or other reports if the Company were subject to
the requirements of Section 13 or 15(d) of the Exchange Act. Subsequent to the
qualification of this Indenture under the TIA, the Company also shall comply
with the provisions of section 314(a) of the TIA.
(b) If the Company is required to furnish annual or quarterly reports
to its stockholders pursuant to the Exchange Act, the Company shall cause any
annual report furnished to its stockholders generally and any
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quarterly or other financial reports it furnishes to its stockholders generally
to be filed with the Trustee and the Company shall mail to the Holders at their
addresses appearing in the register of Discount Notes maintained by the
Registrar. If the Company is not required to furnish annual or quarterly reports
to its stockholders pursuant to the Exchange Act, the Company shall cause its
financial statements referred to in Section 4.2(a), including any notes thereto
(and with respect to annual reports, an auditors' report by a firm of
established national reputation), and a "Management's Discussion and Analysis
of Financial Condition and Results of Operations," to be so mailed to the
Holders within 120 days after the end of each of the Company's fiscal years and
within 60 days after the end of each of the first three fiscal quarters of each
year. The Company shall cause to be disclosed in a statement accompanying any
annual report or comparable information as of the date of the most recent
financial statements in each such report or comparable information the amount
available for payments pursuant to Section 4.5. As of the date hereof, the
Company's fiscal year ends on December 31.
(c) If the Company is not subject to the requirements of Section 13
or 15(d) of the Exchange Act, for so long as any Discount Notes remain
outstanding, the Company shall furnish to the Holders, securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(d) Notwithstanding anything herein to the contrary, the Trustee shall
have no duty to review such documents for purposes of determining their
compliance with any provision of this Indenture.
SECTION 4.3 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 a review
of the activities of the Company and its Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers with a
view to determine whether the Company has kept, observed, performed and
fulfilled its obligations under this Indenture, and further stating, as to each
such Officer signing such certificate,
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that, to the best of his or her knowledge, the Company has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
is not in default in the performance or observance of any of the terms,
provisions and conditions hereof (or, if a Default or Event of Default shall
have occurred, describing all such Defaults or Events of Default of which he or
she may have knowledge and what action the Company has taken or proposes to take
with respect thereto) and that, to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of the
principal of, premium, if any, and accrued and unpaid interest on, and
Liquidated Damages, if any, with respect to the Discount Notes are prohibited or
if such event has occurred, a description of the event and what action the
Company is taking or proposes to take with respect thereto.
So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the financial statements
delivered pursuant to Section 4.2 shall be accompanied by a written statement
of the Company's independent public accountants (who shall be a firm of
established national reputation reasonably satisfactory to the Trustee) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention that would lead them to believe that the
Company has violated any provisions of Section 4.1, 4.5, 4.6, 4.7, 4.8, 4.9,
4.10, 4.11, 4.12, 4.13, 4.14, 4.15 or 4.16 or of Article 5 or, if any such
violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
The Company shall, so long as any of the Discount Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.4 STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon,
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plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that might affect the covenants or the performance of this Indenture;
and the Company (to the extent it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law has been enacted.
SECTION 4.5 LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, (i) declare or pay any dividend or make
any distribution on account of the Company's or such Restricted Subsidiary's
Capital Stock or other Equity Interests (other than dividends or distributions
payable in Capital Stock or other Equity Interests (other than Disqualified
Stock) of the Company or a Restricted Subsidiary and other than dividends or
distributions payable by a Restricted Subsidiary to another Restricted
Subsidiary or to the Company); (ii) purchase, redeem or otherwise acquire or
retire for value any Equity Interests of the Company or any of its Restricted
Subsidiaries (other than any such Equity Interest purchased from the Company or
any Restricted Subsidiary for fair market value (as determined by the Board of
Directors in good faith)); (iii) voluntarily prepay Subordinated Indebtedness,
whether any such Subordinated Indebtedness is outstanding on, or issued after,
the date of original issuance of the Discount Notes, except as specifically
permitted by the covenants of this Indenture; or (iv) make any Restricted
Investment (all such dividends, distributions, purchases, redemptions,
acquisitions, retirements, prepayments and Restricted Investments being
collectively referred to as "Restricted Payments"), if, at the time of such
Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof; or
(B) immediately after such Restricted Payment and after giving effect
thereto on a Pro
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Forma Basis, the Company shall not be able to issue $1.00 of
additional Indebtedness pursuant to Section 4.7(a); or
(C) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after the date of original issuance of
the Discount Notes, without duplication, exceeds the sum of: (1)
50% of the aggregate Consolidated Net Income (including, for this
purpose, gains from Asset Sales and, to the extent not included in
Consolidated Net Income, any gain from a sale or disposition of a
Restricted Investment) of the Company (or, in case such aggregate
is a loss, 100% of such loss) for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing immediately after the date of original issuance of the
Discount Notes and ended as of the Company's most recently ended
fiscal quarter at the time of such Restricted Payment, plus (2)
100% of the aggregate net cash proceeds and the fair market value
of any property or securities (as determined by the Board of
Directors in good faith) received by the Company from the issue or
sale of Capital Stock or other Equity Interests of the Company
subsequent to the date of original issuance of the Discount Notes
(other than (x) Capital Stock or other Equity Interests issued or
sold to a Restricted Subsidiary and (y) the issuance or sale of
Disqualified Stock), plus (3) $5,000,000, plus (4) the amount by
which the principal amount of and any accrued interest on either
(A) Senior Indebtedness of the Company, or (B) any Indebtedness of
the Restricted Subsidiaries is reduced on the Company's
consolidated balance sheet upon the conversion or exchange
subsequent to the date of original issuance of the Discount Notes
of any such Indebtedness of the Company or any Restricted
Subsidiary (not held by the Company or any Restricted Subsidiary)
for Capital Stock or other
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Equity Interests (other than Disqualified Stock) of the Company
or any Restricted Subsidiaries (less the amount of any cash, or
the fair market value of any other property or securities (as
determined by the Board of Directors in good faith), distributed
by the Company or any Restricted Subsidiary (to Persons other
than the Company or any other Restricted Subsidiary) upon such
conversion or exchange), plus (5) if any Non-Restricted
Subsidiary is redesignated as a Restricted Subsidiary, the value
of the deemed Restricted Payment resulting therefrom and
determined in accordance with the second sentence of Section
4.16; provided, however, that for purposes of this clause (5),
the value of any redesignated Non-Restricted Subsidiary shall be
reduced by the amount that any such redesignation replenishes or
increases the amount of Restricted Investments permitted to be
made pursuant to Section 4.5(b)(ii).
(b) Notwithstanding Section 4.5(a), the following Restricted
Payments may be made: (i) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of declaration such payment would
comply with all the provisions hereof (including, but not limited to, this
Section 4.5); (ii) making Restricted Investments at any time, and from time to
time, in an aggregate outstanding amount of $40,000,000 after the date of
original issuance of the Discount Notes (it being understood that if any
Restricted Investment made after the date of original issuance of the Discount
Notes pursuant to this Section 4.5(b)(ii) is sold, transferred or otherwise
conveyed to any Person other than the Company or a Restricted Subsidiary, the
portion of the net cash proceeds or fair market value of securities or
properties paid or transferred to the Company and its Restricted Subsidiaries in
connection with such sale, transfer or conveyance that relates or corresponds to
the repayment or return of the original cost of such a Restricted Investment
will replenish or increase the amount of Restricted Investments permitted to be
made pursuant to this clause (ii), so that up to $40,000,000 of Restricted
Investments may be outstanding under this Sec-
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tion 4.5(b)(ii) at any given time; provided that without otherwise limiting this
clause (ii) any Restricted Investment in a Restricted Subsidiary made pursuant
to this Section 4.5(b)(ii) is made for fair market value (as determined by the
Board of Directors in good faith); (iii) the repurchase, redemption or
acquisition of the Company's stock from the executives, management and employees
or consultants of the Company or its Subsidiaries pursuant to the terms of any
subscription, stockholder or other agreement or plan, up to an aggregate amount
not to exceed $5,000,000; (iv) any loans, advances, distributions or payments
from the Company to its Restricted Subsidiaries, or any loans, advances,
distributions or payments by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary, pursuant to intercompany Indebtedness,
intercompany management agreements, intercompany tax sharing agreements and
other intercompany agreements and obligations; (v) the purchase, redemption,
retirement or other acquisition of (A) any Senior Indebtedness of the Company
and any Indebtedness of a Restricted Subsidiary required by its terms to be
purchased, redeemed, retired or acquired with the net proceeds from asset sales
(as defined in the instrument evidencing such Indebtedness) or upon a change of
control (as defined in the instrument evidencing such Indebtedness) and (B) the
Discount Notes pursuant to Sections 3.7, 4.13 and 4.14; (vi) dividends and
redemptions in respect of the Dura-Line Preferred Stock pursuant to the Dura-
Line Agreement; (vii) to the extent constituting Restricted Payments, payments
under the Tax Sharing Agreement, New Subsidiary Consulting Agreement, Transition
Agreement and the Properties Services Agreement; (viii) to the extent
constituting Restricted Payments, payments under the New Subsidiary Advisory
Agreement, provided that such payments will not be made and shall be accrued so
long as any Default or Event of Default shall have occurred and be continuing or
shall occur as a consequence thereof, and the Company's Obligations to pay such
fees under the New Subsidiary Advisory Agreement shall be subordinated expressly
to the Company's Obligations in respect of the Discount Notes, and (B)
indemnities, expenses and other amounts under the New Subsidiary Advisory
Agreement; (ix) the redemption, repurchase, retirement or the acquisition of any
Capital Stock or other Equity Interests of the Company or any Restricted
Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Sub-
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sidiary of the Company) of other Capital Stock or other Equity Interests of the
Company or any Restricted Subsidiary (other than any Disqualified Stock);
provided that any net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition, and any Net Income resulting
therefrom, shall be excluded from this Section 4.5(a)(iv)(c) (1) and (c)(2); (x)
the defeasance, redemption or repurchase of Indebtedness with the net cash
proceeds from an issuance of permitted Refinancing Indebtedness or the
substantially concurrent sale (other than to a Subsidiary of the Company) of
Capital Stock or other Equity Interests of the Company or any Restricted
Subsidiary (other than Disqualified Stock), provided that any net cash proceeds
that are utilized for any such defeasance, redemption or repurchase, and any
Net Income resulting therefrom, shall be excluded from this Section
4.5(a)(iv)(c)(1) and (c)(2); (xi) payments of fees, expenses and indemnities in
respect of the Company's and its Subsidiaries' directors and such payments to
Jordan Industries, Inc., an Illinois corporation and corporate parent of the
Company, in respect of their directors, provided that the aggregate amount of
such fees payable to all such directors does not exceed $250,000 in any fiscal
year; (xii) Restricted Investments received in consideration for the sale,
transfer or disposition by the Company or any Restricted Subsidiary of any
business, properties or assets belonging thereto, provided that the Company
complies with Section 4.14; (xiii) any Restricted Investment constituting
securities or instruments of a Person issued in exchange for trade or other
claims against such Person in connection with a financial reorganization or
restructuring of such Person; (xiv) to the extent constituting Restricted
Payments, payments and transactions in connection with the Offering or the
Company Formation; or (xv) any Restricted Investment constituting an equity
investment in a Receivables Subsidiary, provided that the aggregate amount of
such equity investments does not exceed $1,000,000.
SECTION 4.6 CORPORATE EXISTENCE.
-------------------
Subject to Section 4.14 and Article 5, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate, partnership or other existence of each of
its Restricted Subsidiaries in accor-
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dance with the respective organizational documents of each of its Restricted
Subsidiaries and the rights (charter and statutory), licenses and franchises of
the Company and each of its Restricted Subsidiaries; provided, however, that
the Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any Restricted
Subsidiary, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Restricted Subsidiaries taken as a whole, and that the loss thereof is not
adverse in any material respect to the Holders.
SECTION 4.7 LIMITATION ON INCURRENCE OF INDEBTEDNESS.
----------------------------------------
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, issue any Indebted ness (other than the Indebtedness represented
by the Senior Notes and the Discount Notes) unless the Company's Cash Flow
Coverage Ratio for its four full fiscal quarters next preceding the date such
additional Indebtedness is issued would have been at least 2.0 to 1 determined
on a Pro Forma Basis.
(b) Section 4.7(a) shall not apply to the issuance of (i)
Indebtedness of the Company and/or its Restricted Subsidiaries as measured on
such date of issuance in an aggregate principal amount outstanding on any such
date of issuance not exceeding up to the greater of (A) $110,000,000 aggregate
principal amount pursuant to the New Credit Agreement and (B) an aggregate
principal amount up to the sum of: (1) 85% of the book value of the Company's
and its Restricted Subsidiaries' Receivables on a consolidated basis and (2) 65%
of the book value of the Company's and its Restricted Subsidiaries' inventories
on a consolidated basis; (ii) Indebtedness of the Company and its Restricted
Subsidiaries pursuant to any Receivables Financing; (iii) Indebtedness of the
Company and its Restricted Subsidiaries in connection with capital leases, sale
and leaseback transactions, purchase money obligations, capital expenditures or
similar financing transactions relating to: (A) their properties, assets and
rights as of the date of original issuance of the Discount Notes up to
$20,000,000 in aggregate principal amount or (B) their properties, assets and
rights acquired after the date of original issuance of the Dis-
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count Notes, provided that the aggregate principal amount of such Indebtedness
under this Section 4.7(b)(iii)(B) does not exceed 100% of the cost of such
properties, assets and rights; (iv) additional Indebtedness of the Company and
its Restricted Subsidiaries in an aggregate principal amount up to $25,000,000
(all or any portion of which may be issued as additional Indebtedness under the
New Credit Agreement); and (v) Other Permitted Indebtedness.
(c) Notwithstanding Sections 4.7(a) and (b), no Restricted Subsidiary
shall under any circumstances issue a guarantee of any Indebtedness of the
Company except for guarantees issued by Restricted Subsidiaries pursuant to
Section 4.15, provided, however, that the foregoing will not limit or restrict
guarantees issued by Restricted Subsidiaries in respect of Indebtedness of other
Restricted Subsidiaries.
SECTION 4.8 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
------------------------------------------
(a) Except as otherwise set forth herein, neither the Company nor
any of its Restricted Subsidiaries shall make any loan, advance, guarantee or
capital contribution to, or for the benefit of, or sell, lease, transfer or
dispose of any properties or assets to, or for the benefit of, or purchase or
lease any property or assets from, or enter into or amend any contract,
agreement or understanding with, or for the benefit of, an Affiliate (each such
transaction or series of related transactions that are part of a common plan, an
"Affiliate Transaction"), except in good faith and on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction on an arm's length basis
from an unrelated Person.
(b) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Affiliate Transactions involving aggregate
payments or other transfers by the Company and its Restricted Subsidiaries in
excess of $5,000,000 (including cash and non-cash payments and benefits valued
at their fair market value by the Board of Directors in good faith), unless the
Company delivers to the Trustee: (i) a resolution of the Board of Directors
stating that the Board of Directors (including a majority of the disinterested
directors, if any) has,
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in good faith, determined that such Affiliate Transaction complies with the
provisions of this Indenture; and (ii)(A) with respect to any Affiliate
Transaction involving the incurrence of Indebtedness, a written opinion of a
nationally recognized investment banking or accounting firm experienced in the
review of similar types of transactions, (B) with respect to any Affiliate
Transaction involving the transfer of real property, fixed assets or equipment,
either directly or by a transfer of 50% or more of the Capital Stock of a
Restricted Subsidiary which holds any such real property, fixed assets or
equipment, a written appraisal from a nationally recognized appraiser
experienced in the review of similar types of transactions or (C) with respect
to any Affiliate Transaction not otherwise described in (A) or (B) above, or in
lieu of the opinions and appraisals referred to in (A) and (B) above, a written
certification from a nationally recognized professional or firm experienced in
evaluating similar types of transactions, in each case, stating that the terms
of such transaction are fair to the Company or such Restricted Subsidiary, as
the case may be, and the Holders of the Discount Notes from a financial point of
view.
(c) Notwithstanding Sections 4.8(a) and (b), this Section 4.8 shall
not apply to: (i) transactions between the Company and any Restricted
Subsidiary or between Restricted Subsidiaries; (ii) payments expressly due under
the New Subsidiary Advisory Agreement, the New Subsidiary Consulting Agreement,
the Transition Agreement, the Properties Services Agreement and the Tax Sharing
Agreement; provided that any amendments, supplements, modifications,
substitutions, renewals or replacements of the foregoing agreements are
approved by a majority of the Board of Directors (including a majority of
disinterested directors, if any) as fair to the Company and the Holders of the
Discount Notes; (iii) any Restricted Payments permitted pursuant to Section 4.5;
(iv) reasonable compensation paid to officers, employees or consultants of the
Company or any Subsidiary as determined in good faith by the Company's Board of
Directors or executives; (v) transactions in connection with a Receivables
Financing; or (vi) payments and transactions in connection with the Offering and
the Company Formation.
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SECTION 4.9 LIMITATION ON LIENS.
-------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) upon any property or asset now owned
or hereafter acquired by them, or any income or profits therefrom, or assign or
convey any right to receive income therefrom; provided, however, that in
addition to creating Permitted Liens on their properties or assets, the Company
and any of its Restricted Subsidiaries may create any Lien upon any of their
properties or assets (including, but not limited to, any Capital Stock of its
Subsidiaries) if the Discount Notes are equally and ratably secured.
SECTION 4.10 COMPLIANCE WITH LAWS, TAXES.
---------------------------
The Company shall, and shall cause each of its Restricted Subsidiaries to,
comply with all statutes, laws, ordinances, or government rules and regulations
to which it is subject, the non-compliance with which would materially adversely
affect the business, prospects, earnings, properties, assets or condition,
financial or otherwise, of the Company and its Restricted Subsidiaries taken as
a whole.
The Company shall, and shall cause each of its Restricted Subsidiaries to,
pay prior to delinquency all taxes, assessments and governmental levies, except
those contested in good faith by appropriate proceedings.
SECTION 4.11 LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
------------------------------------------------------
AFFECTING RESTRICTED SUBSIDIARIES.
---------------------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective, any encumbrance or restriction on the ability of any
Restricted Subsidiary to: (i) pay dividends or make any other distributions on
its Capital Stock or any other interest or participation in, or measured by, its
profits, owned by the Company or any Restricted Subsidiary, or pay any
Indebtedness owed to, the Company or any Restricted Subsidiary; (ii) make loans
or advances to the Company; or (iii) transfer any of its properties or assets to
the Company, except for such encumbrances or restrictions existing under or by
reason
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of: (A) applicable law; (B) Indebtedness permitted (1) under Section
4.7(a), (2) under Sections 4.7(b)(i), (ii) and (iv) and clauses (i), (v), (vi),
(vii), (ix), (x), (xi), (xii) and (xiv) of the definition of Other Permitted
Indebtedness, or (3) Restricted Payments and agreements or instruments
evidencing the Restricted Payments permitted under Section 4.5; (C) customary
provisions restricting subletting or assignment of any lease or license of the
Company or any Restricted Subsidiary; (D) customary provisions of any franchise,
distribution or similar agreement; (E) any instrument governing Indebtedness or
any other encumbrance or restriction of a Person acquired by the Company or any
Restricted Subsidiary at the time of such acquisition, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired; (F) Indebtedness or other agreements existing on the date of original
issuance of the Discount Notes; (G) any Refinancing Indebtedness of Indebtedness
described in Sections 4.7(b)(i), (ii), (iii) and (iv) and clauses (i), (v),
(vi), (vii), (ix), (x), (xi), (xii) and (xiv) of the definition of Other
Permitted Indebtedness; provided that the encumbrances and restrictions created
in connection with such Refinancing Indebtedness are no more restrictive in any
material respect with regard to the interests of the Holders of Discount Notes
than the encumbrances and restrictions in the refinanced Indebtedness; (H) any
restrictions, with respect to a Restricted Subsidiary, imposed pursuant to an
agreement that has been entered into for the sale or disposition of the stock,
business, assets or properties of such Restricted Subsidiary; (I) the terms of
any Indebtedness of the Company incurred in connection with Section 4.7,
provided that the terms of such Indebtedness constitute no greater encumbrance
or restriction on the ability of any Restricted Subsidiary to pay dividends or
make distributions, make loans or advances or transfer properties or assets than
is otherwise permitted by this Section 4.11; and (J) the terms of purchase
money obligations, but only to the extent such purchase money obligations
restrict or prohibit the transfer of the property so acquired.
(b) Nothing contained in this Section 4.11 shall prevent the Company
from entering into any agreement or instrument providing for the incurrence of
Permitted Liens or restricting the sale or other disposition
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of property or assets of the Company or any of its Restricted Subsidiaries that
are subject to Permitted Liens.
SECTION 4.12 MAINTENANCE OF OFFICE OR AGENCIES.
---------------------------------
The Company shall maintain in the Borough of Manhattan, the City of New
York an office or an agency (which may be an office of any Agent) where Discount
Notes may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Discount Notes and
this Indenture may be served. The Company shall give prompt written notice to
the Trustee of any change in the location of such office or agency. If at any
time the Company shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office.
The Company may also from time to time designate one or more other offices
or agencies where the Discount Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
located at First Trust National Association, 100 Wall Street, 20th Floor, New
York, New York 10005, as one such office or agency of the Company in accordance
with Section 2.3.
SECTION 4.13 CHANGE OF CONTROL.
-----------------
(a) Upon the occurrence of a Change of Control, each Holder of
Discount Notes shall have the right to require the Company to purchase all or
any part (equal to $1,000 or an integral multiple thereof) of such Holder's
Discount Notes pursuant to an Offer at a purchase price equal to 101% of the
Accreted Value thereof at the date of purchase, plus any accrued and unpaid
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interest and Liquidated Damages, if any, from August 1, 2000 to the date of
purchase if such purchase occurs after August 1, 2000. Although the failure of
the Company to purchase all Discount Notes tendered in such an Offer shall be a
Default, if the Company is unable to purchase all Discount Notes tendered in
such an Offer, the Company shall nevertheless purchase the maximum principal
amount of Discount Notes that it is able to purchase at that time.
(b) Prior to the mailing of the notice referred to in Section 3.8(a),
but in any event within 30 days following any Change of Control, the Company
shall (i) repay in full and terminate all commitments under Indebtedness under
the New Credit Agreement and all other Senior Indebtedness the terms of which
require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the New Credit Agreement
and all such other Senior Indebtedness and to repay the Indebtedness owed to
each lender which has accepted such offer or (ii) obtain the requisite consents
under the New Credit Agreement and all such other Senior Indebtedness to permit
the repurchase of the Discount Notes as provided in Section 3.8(b). The Company
shall first comply with Section 4.13(b)(ii) before it shall be required to
repurchase Discount Notes pursuant to the provisions in Section 3.8. The
Company's failure to comply with this Section 4.13(b) shall constitute an Event
of Default described in clause (iii) and not in clause (ii) under Section
6.1(a).
(c) In the event of a Change of Control, the Company shall not offer
to purchase or redeem any Subordinated Indebtedness required or entitled by its
terms to be redeemed or purchased until the Change of Control Offer for the
Discount Notes has been consummated and all Discount Notes tendered pursuant to
such Offer have been accepted for payment.
SECTION 4.14 LIMITATION ON ASSET SALES.
-------------------------
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale (including the
sale of any of the Capital Stock of any Restricted Subsidiary) providing for Net
Proceeds in excess of $2,500,000 unless at least 75% of the Net Proceeds from
such Asset Sale are
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applied (in any manner otherwise permitted by this Indenture) to one or more of
the following purposes in such combination as the Company shall elect: (i) an
investment in another asset or business in the same line of business as, or a
line of business similar to that of, the line of business of the Company and its
Restricted Subsidiaries at the time of the Asset Sale; provided that such
investment occurs on or prior to the 365th day following the date of such Asset
Sale (the "Asset Sale Disposition Date"), (ii) to reimburse the Company or its
Subsidiaries for expenditures made, and costs incurred, to repair, rebuild,
replace or restore property subject to loss, damage or taking, to the extent
that the Net Proceeds consist of insurance proceeds received on account of such
loss, damage or taking, (iii) the purchase, redemption or other prepayment or
repayment of outstanding Senior Indebtedness of the Company or Indebtedness of
the Company's Restricted Subsidiaries on or prior to the 365th day following the
Asset Sale Disposition Date or (iv) an Offer expiring on or prior to the
Purchase Date.
(b) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale unless at least
75% of the consideration thereof received by the Company or such Restricted
Subsidiary is in the form of cash, cash equivalents or marketable securities;
provided that, solely for purposes of calculating such 75% of the consideration,
the amount of (i) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto, excluding
contingent liabilities and trade payables), of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Senior Notes) that are assumed by the transferee of any such assets and (ii) any
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are promptly, but in no event more than 30
days after receipt, converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received), shall be deemed to be cash and cash
equivalents for purposes of this provision. Any Net Proceeds from any Asset Sale
that are not applied or invested as provided in Section 4.14(a) shall constitute
"Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10,000,000
(such date being an "Asset Sale
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Trigger Date"), the Company shall make an Offer to all Holders of Discount Notes
to purchase the maximum Accreted Value of the Discount Notes then outstanding
that may be purchased out of Excess Proceeds, at an offer price in cash in an
amount equal to 100% of Accreted Value thereof, plus any accrued and unpaid
Liquidated Damages, if any, plus, if such purchase occurs after August 1, 2000,
any accrued and unpaid interest from August 1, 2000 to the date of purchase, in
accordance with the procedures set forth in this Indenture.
(d) To the extent that substantially concurrently with being required
to make an Offer to the holders of the Discount Notes on account of an Asset
Sale the Company is required to make a similar Offer to holders of any other
Indebtedness (including without limitation the Senior Notes), the Excess
Proceeds allocable to each such Offer shall be allocated as nearly as
practicable pro rata as between the Discount Notes and the Senior Notes in
accordance with the respective aggregate principal amount or Accreted Value
thereof, as the case may be.
(e) To the extent that any Excess Proceeds remain after completion of
an Offer, the Company may use such remaining amount for general corporate
purposes.
(f) If the aggregate principal amount of Discount Notes surrendered
by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall
select the Discount Notes to be purchased on a pro rata basis, by lot or by a
method that complies with the requirements of any stock exchange on which the
Discount Notes are listed and that the Trustee considers fair and appropriate.
(g) Upon completion of an Offer related to an Asset Sale, the amount
of Excess Proceeds shall be reset at zero.
(h) Notwithstanding the foregoing, to the extent that any or all of
the Net Proceeds of an Asset Sale is prohibited or delayed by applicable local
law from being repatriated to the United States, the portion of such Net
Proceeds so affected will not be required to be applied pursuant to Section
4.14, but may be retained for so long, but only for so long, as the applicable
local law prohibits repatriation to the United States.
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The Company will promptly take all reasonable actions required by the applicable
local law to permit such repatriation, and once such repatriation of any
affected Net Proceeds is not prohibited under applicable local law, such
repatriation will be immediately effected and such repatriated Net Proceeds will
be applied in the manner set forth above as if such Asset Sale had occurred on
the date of repatriation.
SECTION 4.15 LIMITATION ON GUARANTEES OF COMPANY INDEBTEDNESS BY RESTRICTED
--------------------------------------------------------------
SUBSIDIARIES.
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(a) The Company shall not permit any Restricted Subsidiary, directly
or indirectly, to guarantee any Indebtedness of the Company other than the
Discount Notes (the "Other Company Indebtedness"), unless (i) such Restricted
Subsidiary contemporaneously executes and delivers a supplemental indenture to
the Indenture providing for a guarantee of payment of the Discount Notes then
outstanding by such Restricted Subsidiary to the same extent as the guarantee
(the "Other Company Indebtedness Guarantee") of the Other Company Indebtedness
(including waiver of subrogation, if any) and (ii) if the Other Company
Indebtedness guaranteed by such Restricted Subsidiary is (A) Senior
Indebtedness, the guarantee for the Discount Notes shall be pari passu in right
of payment with the Other Company Indebtedness Guarantee and (B) Subordinated
Indebtedness, the guarantee for the Discount Notes shall be senior in right of
payment to the Other Company Indebtedness Guarantee; provided that the foregoing
will not limit or restrict guarantees issued by Restricted Subsidiaries in
respect of Indebtedness of other Restricted Subsidiaries.
(b) Each guarantee of the Discount Notes created by a Restricted
Subsidiary pursuant to Section 4.15(a) shall be in accordance with Section
4.15(a), shall be delivered to the Trustee and shall provide, among other
things, that it shall be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer permitted by this Indenture
of (A) all of the Company's Capital Stock in such Restricted Subsidiary or (B)
the sale of all or substantially all of the assets of the Restricted Subsidiary
and upon the application of the Net Proceeds from such sale in accordance with
the requirements of Section 4.14, or (ii) the release or discharge of the Other
Company Indebtedness
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Guarantee that resulted in the creation of such guarantee of the Discount Notes,
except a discharge or release by or as a result of payment under such Other
Company Indebtedness Guarantee.
SECTION 4.16 DESIGNATION OF RESTRICTED AND NON-RESTRICTED SUBSIDIARIES.
(a) From and after the date of original issuance of the Discount
Notes, the Company may designate any existing or newly formed or acquired
Subsidiary as a Non-Restricted Subsidiary, provided that (i) either (A) the
Subsidiary to be so designated has total assets of $1,000,000 or less or (B)
immediately before and after giving effect to such designation on a Pro Forma
Basis, (1) the Company could incur $1.00 of additional Indebtedness pursuant to
Section 4.7(a) determined on a Pro Forma Basis; and (2) no Default or Event of
Default shall have occurred and be continuing, or shall occur as a consequence
thereof, and (ii) all transactions between the Subsidiary to be so designated
and its Affiliates remaining in effect are permitted pursuant to Section 4.8.
Any Investment made by the Company or any Restricted Subsidiary in a Subsidiary
which is redesignated from a Restricted Subsidiary to a Non-Restricted
Subsidiary shall be considered as having been a Restricted Payment (to the
extent not previously included as a Restricted Payment) made on the day such
Subsidiary is designated as a Non-Restricted Subsidiary in the amount of the
greater of (i) the fair market value (as determined by the Board of Directors of
the Company in good faith) of the Equity Interests of such Subsidiary held by
the Company and its Restricted Subsidiaries on such date, and (ii) the amount of
the Investments determined in accordance with GAAP made by the Company and any
of its Restricted Subsidiaries in such Subsidiary.
(b) A Non-Restricted Subsidiary may be redesignated as a Restricted
Subsidiary. The Company shall not, and shall not permit any Restricted
Subsidiary to, take any action or enter into any transaction or series of
transactions that would result in a Person becoming a Restricted Subsidiary
(whether through an acquisition, the redesignation of a Non-Restricted
Subsidiary or otherwise, but not including through the creation of a new
Restricted Subsidiary) unless, immediately before and after giving effect to
such action, transaction or series
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of transactions on a Pro Forma Basis, (i) the Company could incur at least $1.00
of additional Indebtedness pursuant to Section 4.7(a) and (ii) no Default or
Event of Default shall have occurred and be continuing or shall occur as a
consequence thereof.
(c) The designation of a Subsidiary as a Restricted Subsidiary or the
removal of such designation is required to be made by a resolution adopted by a
majority of the Board of Directors of the Company stating that the Board of
Directors has made such designation in accordance with this Indenture, and the
Company is required to deliver to the Trustee such resolution together with an
Officers' Certificate certifying that the designation complies with this
Indenture. Such designation shall be effective as of the date specified in the
applicable resolution, which may not be before the date the applicable
Officers' Certificate is delivered to the Trustee.
(d) The sale and transfer of all of the Equity Interests in a foreign
Restricted Subsidiary to a Non-Restricted Subsidiary and the subsequent
redesignation of such foreign Restricted Subsidiary as a Non-Restricted
Subsidiary as contemplated by the definition of "Restricted Subsidiary" will
not be considered a redesignation of a Restricted Subsidiary for purposes of
this Section 4.16.
ARTICLE 5
SUCCESSORS
SECTION 5.1 MERGER OR CONSOLIDATION.
(a) The Company shall not consolidate or merge with or into, or sell,
lease, convey or otherwise dispose of all or substantially all of its assets to,
any Person(any such consolidation, merger or sale being a "Disposition") unless
(i) the successor corporation of such Disposition or the Person to which such
Disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the successor corporation of such Disposition or the corporation to which
such Disposition shall have been made expressly assumes the Obligations of the
Company, pursuant to a supplemental
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indenture in a form reasonably satisfactory to the Trustee, under the Indenture
and the Discount Notes; (iii) immediately after such Disposition, no Default or
Event of Default shall exist; and (iv) the corporation formed by or surviving
any such Disposition, or the corporation to which such Disposition shall have
been made, shall (A) have Consolidated Net Worth (immediately after the
Disposition but prior to giving effect on a Pro Forma Basis to any purchase
accounting adjustments or Restructuring Charges resulting from the Disposition)
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the Disposition, (B) be permitted immediately after the Disposition by
the terms of this Indenture to issue at least $1.00 of additional Indebtedness
determined on a Pro Forma Basis pursuant to Section 4.7(a), and (C) have a Cash
Flow Coverage Ratio, for the four fiscal quarters immediately preceding the
applicable Disposition, determined on a Pro Forma Basis, equal to or greater
than the actual Cash Flow Coverage Ratio of the Company for such four quarter
period. The limitations in this Section 5.1(a) on the Company's ability to make
a Disposition do not restrict the Company's ability to sell less than all or
substantially all of its assets, such sales being governed by Section 4.14.
(b) Prior to the consummation of any proposed Disposition, the
Company shall deliver to the Trustee an Officers' Certificate to the foregoing
effect and an Opinion of Counsel stating that the proposed Disposition and such
supplemental indenture comply with this Indenture.
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any Disposition, the Successor Corporation resulting from such
Disposition shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such Successor has been named as the Company herein; provided, however, that
neither the Company nor any Successor Corporation shall be released from its
Obligation to pay the principal of, premium, if any, and accrued and unpaid
interest on, and Liquidated Damages, if any, with respect to the Discount Notes.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT.
(a) An Event of Default is:
(i) a default for 30 days in payment of interest on, or
Liquidated Damages, if any, with respect to, the Discount Notes;
(ii) a default in payment when due at maturity, upon redemption
or otherwise, of principal or premium, if any, with respect to, the
Discount Notes;
(iii) the failure of the Company to comply with any of its other
agreements or covenants in, or provisions of, this Indenture or the
Discount Notes outstanding and the Default continues for the period, if
applicable, and after the notice specified in Section 6.1(b);
(iv) a default by the Company or any Restricted Subsidiary
under any mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any Restricted Subsidiary (or the payment of
which is guaranteed by the Company or any Restricted Subsidiary), whether
such Indebtedness or guarantee now exists or shall be created hereafter, if
(A) either (1) such default results from the failure to pay principal of or
interest on any such Indebtedness at the Stated Maturity thereof or upon
such Indebtedness becoming due upon the redemption thereof or otherwise
and such default continues for 30 days beyond any applicable grace period
or (2) as a result of such default the maturity of such Indebtedness has
been accelerated prior to its expressed maturity, and (B) the principal
amount of such Indebtedness, together with the principal amount of any
other such Indebtedness in default for failure to pay principal or interest
thereon, at final maturity, or because of the acceleration of the maturity
thereof, aggregates in excess of $10,000,000;
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(v) a failure by the Company or any Restricted Subsidiary to
pay final judgments (not covered by insurance) aggregating in excess of
$10,000,000 which judgments a court of competent jurisdiction does not
rescind, annual or stay within 45 days after their entry and the Default
continues for the period and after the notice specified in Section 6.1(b);
(vi) in existence when 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 all
or substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
and
(vii) in existence when 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 all or substantially all of the property
of the Company or any Significant Subsidiary, or
(C) orders the liquidation of the Company or any Significant
Subsidiary,
and any such order or decree remains un stayed and in effect for
60 days.
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(b) A Default or Event of Default under Section 6.1(a)(iii) (other
than an Event of Default arising under Section 5.1 which shall be an Event of
Default with the notice but without the passage of time specified in this
Section 6.1(b)) or Section 6.1(a)(v) is not an Event of Default under this
Indenture until the Trustee or the Holders of at least 25% in Accreted Value of
the Discount Notes then outstanding notify the Company of the Default and the
Company does not cure the Default within 45 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied, and state that
the notice is a "Notice of Default."
(c) In the case of any Event of Default pursuant to Section 6.1(a)
or Section 6.1(b) occurring by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding
payment of the premium that the Company would have to pay if the Company then
had elected to redeem the Discount Notes pursuant to paragraph 5 of the Discount
Notes, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law, anything in this Indenture or in the
Discount Notes contained to the contrary notwithstanding.
(d) The Trustee shall not be charged with knowledge of any Default or
Event of Default unless written notice thereof shall have been given to a Trust
Officer at the Corporate Trust Office of the Trustee by the Company or any other
Person.
SECTION 6.2 ACCELERATION.
(a) Upon the occurrence of an Event of Default (other than an Event
of Default under Section 6.1(a)(vi) or (vii)), the Trustee or the Holders of at
least 25% in Accreted Value of the then outstanding Discount Notes may declare
all Discount Notes to be due and payable immediately and, upon such declaration,
the Accreted Value thereof and any accrued and unpaid interest from August 1,
2000 to the date of any such declaration if such declaration occurs after August
1, 2000 shall be due and payable immediately.
(b) If an Event of Default arises under Section 6.1(a)(vi) or (vii),
the Accreted Value of all Discount Notes, plus any accrued and unpaid interest
from
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August 1, 2000 to the date of any such event if such event occurs after
August 1, 2000, shall 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 Discount Notes.
(c) The Holders of a majority in principal amount of the Discount
Notes then outstanding, by notice to the Trustee, may rescind any declaration of
acceleration of such Discount Notes and its consequences (if the rescission
would not conflict with any judgment or decree) if all existing Events of
Default (other than the nonpayment of principal of or interest on such Discount
Notes that shall have become due by such declaration) shall have been cured or
waived.
(d) If there has been a declaration of acceleration of the Discount
Notes because an Event of Default under Section 6.1(a)(iv) has occurred and is
continuing, such declaration of acceleration shall be automatically annulled if
the holders of the Indebtedness described in Section 6.1(a)(iv) have rescinded
the declaration of acceleration in respect of such Indebtedness within 30
Business Days thereof and if (i) the annulment of such acceleration would not
conflict with any judgment or decree of a court of competent jurisdiction, (ii)
all existing Events of Default, except non-payment of principal or interest
that shall have become due solely because of the acceleration, have been cured
or waived, and (iii) the Company has delivered an Officers' Certificate to the
Trustee to the effect of clauses (i) and (ii) above.
SECTION 6.3 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, premium, if any, or any
accrued and unpaid interest on, or Liquidated Damages, if any, with respect to
the Discount Notes or to enforce the performance of any provision of the
Discount Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Discount Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not
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impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.4 WAIVER OF PAST DEFAULTS.
The holders of a majority in aggregate Accreted Value of the Discount Notes
then outstanding by notice to the Trustee may on behalf of all Holders of
Discount Notes waive any existing Default or Event of Default under this
Indenture and its consequences, except a continuing Default in the payment of
the principal of, premium, if any, and interest on, and Liquidated Damages, if
any, with respect to such Discount Notes, which may only be waived with the
consent of each Holder of Discount Notes affected. Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; provided that
no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereon.
SECTION 6.5 CONTROL BY MAJORITY.
Subject to Section 7.1(e), the Holders of a majority in Accreted Value of
the then outstanding Discount Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it by this Indenture. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture, that
the Trustee determines may be unduly prejudicial to the rights of other Holders
or would involve the Trustee in personal liability.
SECTION 6.6 LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the Discount
Notes only if (i) the Holder gives to the Trustee notice of a continuing Event
of Default; (ii) the Holders of at least 25% in principal amount of the then
outstanding Discount Notes make a request to the Trustee to pursue the remedy;
(iii) such Holder or Holders offer to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense; (iv) the Trustee does not comply
with the request within 60 days after receipt of the request and the
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offer of indemnity; and (v) during such 60-day period the Holders of a majority
in principal amount of the then outstanding Discount Notes do not give the
Trustee a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Holders of the Discount Notes may not enforce this Indenture, except
as provided herein.
SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of, premium, if any, and any accrued and
unpaid interest on, and Liquidated Damages, if any, with respect to a Discount
Note, on or after a respective due date expressed in the Discount Note, or to
bring suit for the enforcement of any such payment on or after such respective
date, shall not be impaired or affected without the consent of the Holder.
SECTION 6.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(a)(i) or (ii) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for (i) the principal, premium
and Liquidated Damages, if any, and interest remaining unpaid on the Discount
Notes, (ii) interest on overdue principal and premium, if any, and, to the
extent lawful, interest, and (iii) such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel ("Trustee Expenses").
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable to have the claims of the Trustee (including any
claim for Trustee Expenses) and the Holders allowed in any Insolvency or
Liquidation Proceeding or other judicial proceeding relative to the Company (or
any other obligor
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upon the Discount Notes), its creditors or its property and shall be entitled
and empowered to collect, receive and distribute to Holders any money or other
property payable or deliverable on any such claims and each Holder authorizes
any Custodian in any such Insolvency or Liquidation Proceeding or other judicial
proceeding to make such payments to the Trustee, and if the Trustee shall
consent to the making of such payments directly to the Holders any such
Custodian is hereby authorized to make such payments directly to the Holders,
and to pay to the Trustee any amount due to it hereunder for Trustee Expenses,
and any other amounts due the Trustee under Section 7.7. To the extent that the
payment of any such Trustee Expenses, and any other amounts due the Trustee
under Section 7.7 out of the estate in any such proceeding, shall be denied for
any reason, payment of the same shall be secured by a Lien on, and shall be paid
out of, any and all distributions, dividends, money, securities and other
properties which the Holders may be entitled to receive in such proceeding,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Discount
Notes or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any Insolvency or Liquidation Proceeding.
SECTION 6.10 PRIORITIES.
----------
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: to Holders for amounts due and unpaid on the Discount Notes
for principal, premium and Liquidated Damages, if any, and
interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the
Discount Notes for principal, premium and Liquidated Damages,
if any, and interest, respectively; and
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Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders.
SECTION 6.11 UNDERTAKING FOR COSTS.
---------------------
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7,
or a suit by Holders of more than 10% in principal amount of the then
outstanding Discount Notes.
ARTICLE 7
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE.
-----------------
(a) If an Event of Default occurs (and has not been cured) the
Trustee shall (i) exercise the rights and powers vested in it by this Indenture,
and (ii) use the same degree of care and skill in exercising such rights and
powers as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee's duties shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
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(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether they conform to this Indenture's requirements.
(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:
(i) this paragraph does not limit the effect of Section 7.1(b);
(ii) 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
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction it
receives pursuant to Section 6.5.
(d) Whether or not expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), (c) and (e) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders unless such Holders shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money it
receives except as the Trustee may agree in writing with the Company. Money the
Trustee holds in trust need not be segregated from other funds except to the
extent required by law.
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SECTION 7.2 RIGHTS OF TRUSTEE.
-----------------
(a) The Trustee may rely on any document it believes to be genuine
and to have been signed or presented by the proper Person. The Trustee shall
not be obligated to investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
reasonably require an Officers' Certificate or an Opinion of Counsel, or both.
The Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Trustee may consult with counsel and advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through 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, except to the extent that such action or omission to act constitutes
negligence or wilful misconduct on the part of the Trustee.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer.
(f) Except with respect to Section 4.1, the Trustee shall have no duty
to inquire as to the performance by the Company with respect to the covenants
contained in Article 4. In addition, the Trustee shall not be deemed to have
knowledge of a Default or Event of Default except (i) any Default or Event of
Default occurring pursuant to Sections 4.1, 6.1(a)(i) or 6.1(a)(ii), or (ii)
any Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
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SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
----------------------------
The Trustee in its individual or any other capacity may become the owner or
pledgee of Discount Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. However, if
the Trustee acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue as Trustee or
resign. Any Agent may do the same with like rights. The Trustee is also subject
to Sections 7.10 and 7.11.
SECTION 7.4 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 Discount Notes, it shall not
be accountable for the Company's use of the proceeds from the Discount Notes or
for any money paid to the Company or upon the Company's direction under any
provisions hereof, it shall not be responsible for the use or application of any
money any Paying Agent other than the Trustee receives, and it shall not be
responsible for any statement or recital herein or any statement in the Discount
Notes or any other document furnished or issued in connection with the sale of
the Discount Notes or pursuant to this Indenture, other than its certificate of
authentication.
SECTION 7.5 NOTICE TO HOLDERS OF DEFAULTS AND EVENTS OF DEFAULT.
---------------------------------------------------
If a Default or Event of Default occurs and is continuing and if it is
actually known to the Trustee, the Trustee shall mail to Holders a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment on any Discount Note (including any
failure to redeem Discount Notes called for redemption or any failure to
purchase Discount Notes tendered pursuant to an Offer that are required to be
purchased by the terms of this Indenture), 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 Holders' interests.
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS.
-----------------------------
Within 60 days after each May 15 beginning with May 15, 1998, the Trustee
shall mail to Holders a brief
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report dated as of such reporting date that complies with section 313(a) of the
TIA (but if no event described in section 313(a) of the TIA has occurred within
the twelve months preceding the reporting date, no report need be transmitted).
The Trustee also shall comply with section 313(b)(2) of the TIA. The Trustee
shall also transmit by mail all reports as required by section 313(c) of the
TIA.
Commencing at the time this Indenture is qualified under the TIA, a copy of
each report at the time of its mailing to Holders shall be filed with the SEC
and each national securities exchange on which the Discount Notes are listed.
The Company shall notify the Trustee when the Discount Notes are listed on any
national securities exchange.
SECTION 7.7 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee (in its capacities as Trustee, Paying
Agent and/or Registrar) from time to time reasonable compensation for its
services hereunder. 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 disbursements, advances, fees and
expenses it incurs or makes in addition to the compensation for its services.
Such expenses shall include the reasonable compensation, disbursements and
expenses of the Trustee's agents and counsel.
The Company shall indemnify and hold harmless the Trustee (in its
capacities as Trustee, Paying Agent and/or Registrar) against any and all
losses, liabilities or expenses the Trustee incurs arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, except as set forth below. 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 shall reasonably
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need not
pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
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The Company's Obligations under this Section 7.7 shall survive the
satisfaction and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against any loss or
liability the Trustee incurs through negligence or bad faith.
To secure the Company's payment of its Obligations in this Section, the
Trustee shall have a Lien prior to the Discount Notes on all money or property
the Trustee holds or collects. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(a)(vii) or (viii) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute administrative expenses under any Bankruptcy
Law.
SECTION 7.8 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign and be discharged from the trust hereby created by
so notifying the Company. The Holders of a majority in Accreted Value of the
then outstanding Discount Notes may remove the Trustee by so notifying the
Trustee and the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(iii) a Custodian or public officer takes charge of the Trustee or
its property; or
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(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee, provided that the Holders of a majority in Accreted Value of the then
outstanding Discount Notes may appoint a successor Trustee to replace any
successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Discount
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
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 appointment to
Holders. The retiring Trustee shall promptly transfer all property it holds as
Trustee to the successor Trustee, provided all sums owing to the retiring
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.7. Notwithstanding replacement of the Trustee pursuant to this Section 7.8,
the Company's obligations under Section 7.7 shall continue for the retiring
Trustee's benefit with respect to expenses and liabilities it incurred prior to
being replaced.
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
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SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times (i) be a corporation organized and doing
business under the laws of the United States of America, of any state thereof,
or the District of Columbia authorized under such laws to exercise corporate
trustee power, (ii) be subject to supervision or examination by federal or state
authority, (iii) have a combined capital and surplus of at least $25,000,000, or
be a member of a bank holding company which has a combined capital and surplus
of at least $100,000,000, as set forth in its most recent published annual
report of condition, and (iv) satisfy the requirements of sections 310(a)(1),
(2) and (5) of the TIA. The Trustee is subject to section 310(b) of the TIA.
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to section 311(a) of the TIA, excluding any creditor
relationship listed in section 311(b) of the TIA. A Trustee who has resigned or
been removed shall be subject to section 311(a) of the TIA to the extent
indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1 DISCHARGE OF LIABILITY ON DISCOUNT NOTES; DEFEASANCE.
(a) When (i) the Company delivers to the Trustee all outstanding
Discount Notes (other than Discount Notes replaced pursuant to Section 2.7)
for cancellation, or (ii) all outstanding Discount Notes have become due
and payable and the Company irrevocably deposits with the Trustee funds
sufficient to pay at maturity all outstanding Discount Notes, including
interest, premium and Liquidated Damages thereon (other than Discount Notes
replaced pursuant to Section 2.7), and if in either case the Company pays
all other sums payable under this Indenture by the Company, then this
Indenture shall, subject to Sections 8.1(c) and 8.6, cease to be of further
effect.
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(b) Subject to Sections 8.1(c), 8.2 and 8.6, the Company at any time
may terminate (i) all its obligations under the Discount Notes and this
Indenture ("legal defeasance option") or (ii) its obligations under
Sections 4.2, 4.3, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.13, 4.14, 4.15
and 4.16, and the operation of Sections 5.1(a)(iii), 5.1(a)(iv), or
6.1(a)(iii) through (a)(vi) ("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
Discount Notes may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Discount Notes
shall not be accelerated because of an Event of Default specified in 6.1(a)(iii)
through (a)(vi) or because of the Company's failure to comply with Section
5.1(a)(iii) and 5.1(a)(iv).
Upon satisfaction of the conditions set forth herein and upon the Company's
request (and at the Company's expense), the Trustee shall acknowledge in writing
the discharge of those obligations that the Company has terminated.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 4.1, 4.4, 7.7, 7.8, 8.4,
8.5 and 8.6, and the Trustee's and the Paying Agent's obligations in
Section 8.4 shall survive until the Discount Notes have been paid in full.
Thereafter, the Company's obligations in Sections 7.7 and 8.5 and the
Company's, the Trustee's and the Paying Agent's obligations in Section 8.4
shall survive.
SECTION 8.2 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 (the "defeasance
trust") with the Trustee money or U.S. Government Obligations sufficient
for the payment in full of the principal of, premium, if any, and any
accrued and unpaid interest on, and Liqui-
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dated Damages, if any, with respect to the Discount Notes then outstanding, as
of the maturity date, the redemption date or the Purchase Date, 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 of 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 when due principal of, premium,
if any, and any accrued and unpaid interest on, and Liquidated Damages, if
any, with respect to all the Discount Notes to maturity or redemption, as
the case may be;
(3) since the Company's irrevocable deposit provided for in Section
8.2(l), 91 days have passed;
(4) no Default has occurred and is continuing on the date of such
deposit and after giving effect to it;
(5) the deposit does not constitute a default under any other
agreement binding on the Company;
(6) 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, as amended;
(7) 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) under applicable federal income tax law,
in
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either case, to the effect that, and based thereon such Opinion of Counsel
shall confirm that, the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance and
will be subject to federal income tax on the same amount, in the same
manner and at the same times as would have been the case if such defeasance
had not occurred;
(8) 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
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and covenant defeasance and will be
subject to federal income tax on the same amount, in the same manner and at
the same times as would have been the case if such covenant 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); and
(9) 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 Discount Notes contemplated by this Article
8 have been satisfied.
Before or after a deposit, the Company may make arrangements satisfactory
to the Trustee for the redemption or purchase of Discount Notes at a future date
in accordance with Article 3.
SECTION 8.3 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 pay-
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ment of principal of, premium, if any, and any accrued and unpaid interest on,
and Liquidated Damages, if any, with respect to the Discount Notes.
SECTION 8.4 REPAYMENT TO THE COMPANY.
After the Discount Notes have been paid in full, the Trustee and the Paying
Agent shall promptly turn over to the Company any excess money or securities
they hold.
The Trustee and the Paying Agent shall pay to the Company upon written
request by the Company any money they hold for the payment of principal,
premium, interest or Liquidated Damages that remains unclaimed for 1 year after
the date upon which such payment shall have become due; provided, however, that
the Company shall have either caused notice of such payment to be mailed to each
Holder entitled thereto no less than 30 days prior to such repayment or within
such period shall have published such notice in a financial newspaper of
widespread circulation published in The City of New York (including, without
limitation, The Wall Street Journal). After payment to the Company, Holders
entitled to the money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another Person, and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
SECTION 8.5 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 8.6 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 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 Discount Notes shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article 8 until such time as the Trustee
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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 principal of, premium, if any, and any accrued
and unpaid interest on, and Liquidated Damages, if any, with respect to any
Discount Notes because of the reinstatement of its Obligations, the Company
shall be subrogated to the Holders' rights to receive such payment from the
money or U.S. Government Obligations the Trustee or Paying Agent holds.
ARTICLE 9
AMENDMENTS
SECTION 9.1 AMENDMENTS AND SUPPLEMENTS PERMITTED WITHOUT CONSENT OF HOLDERS.
Notwithstanding Section 9.2, the Company and the Trustee may amend or
supplement this Indenture or the Discount Notes without the consent of any
Holder (a) to cure any ambiguity, defect or inconsistency; (b) to provide for
uncertificated Discount Notes in addition to or in place of certificated
Discount Notes; (c) to provide for the assumption of the Company's Obligations
in the event of a Disposition pursuant to Article 5; (d) to comply with the
SEC's requirements to effect or maintain the qualification of this Indenture
under the TIA; (e) to provide for additional Guarantees with respect to the
Discount Notes; or (f) to make any change that does not materially adversely
affect any Holder's legal rights under this Indenture.
Upon the Company's request, after receipt by the Trustee of a resolution of
the Board of Directors authorizing the execution of any amended or supplemental
indenture and the documents described in Section 9.6, the Trustee shall join
with the Company in the execution of any amended or supplemental indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be contained in any such
amended or supplemental indenture, but the Trustee shall not be obligated to
enter into an amended or supplemental indenture that affects its own rights,
duties or immunities under this Indenture or otherwise.
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SECTION 9.2 AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT OF HOLDERS.
Subject to Section 6.7, the Company and the Trustee may amend or supplement
this Indenture or the Discount Notes with the written consent of the Holders of
at least a majority in Accreted Value of the then outstanding Discount Notes
(including consents obtained in connection with a tender offer or exchange offer
for the Discount Notes). Subject to Sections 6.4 and 6.7, the Holders of a
majority in Accreted Value of the Discount Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for the
Discount Notes) may also waive any existing Default or Event of Default (other
than a payment Default) and its consequences or compliance in a particular
instance by the Company with any provision of this Indenture or the Discount
Notes.
Upon the Company's request and after receipt by the Trustee of a resolution
of the Board of Directors authorizing the execution of any supplemental
indenture, evidence of the Holders' consent, and the documents described in
Section 9.6, the Trustee shall join with the Company in the execution of such
amended or supplemental indenture unless such amended or supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders under this Section
to approve the particular form of any proposed amendment or waiver, but it shall
be sufficient if such consent approves the substance thereof
After an amendment or waiver under this Section becomes effective, the
Company shall mail to each Holder affected thereby a notice briefly describing
the amendment, supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such amended or supplemental indenture or waiver. Without
the consent of each Holder affected, an amendment, supplement or waiver under
this Section may not (1) reduce the principal amount of Discount Notes whose
Holders must consent to an amendment, supplement or
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waiver; (2) reduce the rate of or change the time for payment of interest,
including default interest as set forth in Section 4.1, or Liquidated Damages on
any Discount Note or alter the redemption or purchase provisions with respect
thereto or the price at which the Company is required to offer to purchase any
Discount Note; (3) reduce the principal of or change the fixed maturity of any
Discount Note; (4) make any Discount Note payable in money other than that
stated in the Discount Note; (5) make any change in Section 6.4 or 6.7 or in
this sentence of this Section 9.2; or (6) waive a default in the payment of the
principal of, or premium, if any, or any accrued and unpaid interest on, or
Liquidated Damages, if any, with respect to, or redemption or purchase payment
with respect to, any Discount Note (except a rescission of acceleration of the
Discount Notes by the Holders of at least a majority in aggregate Accreted Value
of the then outstanding Discount Notes and a waiver of the payment default that
resulted from such acceleration).
SECTION 9.3 COMPLIANCE WITH TIA.
Every amendment or supplement to this Indenture or the Discount Notes shall
be set forth in an amended supplemental indenture that complies with the TIA as
then in effect.
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Discount Note is a continuing consent by the Holder and every
subsequent Holder of a Discount Note or portion of a Discount Note that
evidences the same Indebtedness as the consenting Holder's Discount Note, even
if notation of the consent is not made on any Discount Note. However, any such
Holder or subsequent Holder may revoke the consent as to his or her Discount
Note or portion of a Discount Note if the Trustee receives the notice of
revocation before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Discount Notes have consented to the amendment or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders of Discount Notes entitled to consent to any
amendment or
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waiver. If a record date is fixed, then, notwithstanding the provisions of the
immediately preceding paragraph, those Persons who were Holders of Discount
Notes at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to consent to such amendment or waiver or to revoke
any consent previously given, whether or not such Persons continue to be Holders
of Discount Notes after such record date. No consent shall be valid or effective
for more than 90 days after such record date unless consents from Holders of the
Accreted Value of Discount Notes required hereunder for such amendment or waiver
to be effective shall have also been given and not revoked within such 90-day
period.
After an amendment or waiver becomes effective it shall bind every Holder,
unless it is of the type described in any of clauses (1) through (6) of Section
9.2. In such case, the amendment or waiver shall bind each Holder who has
consented to it and every subsequent Holder of a Discount Note that evidences
the same debt as the consenting Holder's Discount Note.
SECTION 9.5 NOTATION ON OR EXCHANGE OF DISCOUNT NOTES.
The Trustee may (at the Company's expense) place an appropriate notation
about an amendment, supplement or waiver on any Discount Note thereafter
authenticated. The Company in exchange for all Discount Notes may issue and the
Trustee shall authenticate new Discount Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Discount Note shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.6 TRUSTEE PROTECTED.
The Trustee shall sign any amendment or supplemental indenture 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 or supplemental
indenture, the Trustee shall be entitled to receive and, subject to Section 7.1,
shall be fully protected in relying upon, an Officers' Certificate and Opinion
of Counsel as conclusive evidence that such amendment or supplemental indenture
is authorized or
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permitted by this Indenture, that it is not inconsistent herewith, and that it
will be valid and binding upon the Company in accordance with its terms. The
Company may not sign an amendment or supplemental indenture until the Board of
Directors approves it.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 TRUST INDENTURE ACT CONTROLS.
----------------------------
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of section 318(c) of the TIA, the imposed
duties shall control.
SECTION 10.2 NOTICES.
-------
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in person, mailed by registered or
certified mail, postage prepaid, return receipt requested or delivered by
telecopier or overnight air courier guaranteeing next day delivery to the
other's address:
If to the Company:
Jordan Telecommunication Products
Group, Inc.
ArborLake Centre, Suite 550
1751 Lake Cook Road
Deerfield, Illinois 60015
Attention: Chief Financial Officer
Telecopier No.: (847) 945-9645
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603-3441
Attention: Philip J. Niehoff, Esq.
Telecopier No.: (312) 701-7711
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If to the Trustee:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Rick Prokosch
Telecopier No.: (612) 244-0711
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; the date receipt is acknowledged, if mailed by registered
or certified mail; when answered back, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first-class
mail to his or her address shown on the register kept by the Registrar. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 10.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
-------------------------------------------
Holders may communicate pursuant to section 312(b) of the TIA with
other Holders with respect to their rights under this Indenture or the Discount
Notes. The Company, the Trustee, the Registrar and any other Person shall have
the protection of section 312(c) of the TIA.
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SECTION 10.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements set
forth in Section 10.5) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel (which shall include the statements set
forth in Section 10.5) stating that, in the opinion of such counsel, all such
conditions precedent provided for in this Indenture relating to the proposed
action have been complied with.
SECTION 10.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to section 314(a)(4) of the TIA) shall include:
(1) a statement that the Person 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 Person, 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, in such Person's opinion, such
condition or covenant has been complied with.
98
<PAGE>
SECTION 10.6 RULES BY TRUSTEE AND AGENTS.
---------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.7 LEGAL HOLIDAYS.
--------------
If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
SECTION 10.8 NO RECOURSE AGAINST OTHERS.
--------------------------
No officer, employee, director, stockholder or Subsidiary of the Company
shall have any liability for any Obligations of the Company under the Discount
Notes or this Indenture, or for any claim based on, in respect of, or by reason
of, such Obligations or the creation of any such Obligation, except, in the case
of a Subsidiary, for an express guarantee or an express creation of any Lien by
such Subsidiary of the Company's Obligations under the Discount Notes. Each
Holder by accepting a Discount Note waives and releases all such liability, and
such waiver and release is part of the consideration for the issuance of the
Discount Notes. The foregoing waiver may not be effective to waive liabilities
under the Federal securities law and the Commission is of the view that such a
waiver is against public policy.
SECTION 10.9 COUNTERPARTS.
------------
This Indenture may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
SECTION 10.10 VARIABLE PROVISIONS.
-------------------
The Company initially appoints the Trustee as Paying Agent, Registrar and
authenticating agent.
99
<PAGE>
The first compliance certificate to be delivered by the Company to the
Trustee pursuant to Section 4.3 shall be for the fiscal year ending on December
31, 1997
SECTION 10.11 GOVERNING LAW.
-------------
The internal laws of the State of New York shall govern this Indenture
and the Discount Notes, without regard to the conflict of laws provisions
thereof.
SECTION 10.12 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries, and no other
indenture, loan or debt agreement may be used to interpret this Indenture.
SECTION 10.13 SUCCESSORS.
----------
All agreements of the Company in this Indenture and the Discount Notes
shall bind its successor. All agreements of the Trustee in this Indenture
shall bind its successor.
SECTION 10.14 SEVERABILITY.
------------
If any provision in this Indenture or in the Discount Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.15 TABLE OF CONTENTS, HEADINGS, ETC.
--------------------------------
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
[NEXT PAGE IS THE SIGNATURE PAGE]
100
<PAGE>
Dated as of July 25, 1997
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
By: /s/ Dominic J. Pileggi
--------------------------------------
Name: Dominic J. Pileggi
Title: President and Chief
Executive Officer
Dated as of July 25, 1997
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By: /s/ Richard Prokosch
--------------------------------------
Name: Richard Prokosch
Title: Trust Officer
<PAGE>
EXHIBIT A
(Face of Discount Note)
11 3/4% Series [A/B] Discount Note due 2007
No. $
CUSIP No.
JORDAN TELECOMMUNICATION PRODUCTS, INC.
promises to pay to
or registered assigns,
the principal sum of
Dollars on August 1, 2007.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Dated: ________ __, ____
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
By:
--------------------------------------
Name:
Title:
Trustee's Certificate of Authentication
Dated: _______ __, ____
This is one of the [Global]
Discount Notes referred to in the
within-mentioned Indenture:
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
A-1
<PAGE>
as Trustee
By:
---------------------------
(Authorized Signatory)
A-2
<PAGE>
[Unless and until it is exchanged in whole or in part for Discount Notes in
definitive form, this Discount Note may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. The Depository Trust Company shall act as the Depositary until a
successor shall be appointed by the Company and the Registrar. Unless this
certificate is presented by an authorized representative of The Depository Trust
Company (55 Water Street, New York, New York) ("DTC"), to the issuer or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as may be
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY Person IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]/1/
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED
STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, OR (c) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO RE-
- ------------------------
/1/ This paragraph should be included only if the Discount Note is issued in
global form.
A-3
<PAGE>
QUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER PROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
Additional provisions of this Discount Note are set forth on the other side
of this Discount Note.
A-4
<PAGE>
(Back of Discount Note)
11 3/4% SERIES [A/B] DISCOUNT NOTE DUE 2007
1. Interest. Jordan Telecommunication Products, Inc. (the "Company")
promises to pay interest on the principal amount of the Discount Notes at the
rate and in the manner specified below. Interest will not accrue on the
Discount Notes prior to August 1, 2000. Thereafter, interest on the Discount
Notes will accrue at 11 3/4% per annum until maturity. The Company will pay
Liquidated Damages pursuant to Section 5 of the Registration Rights Agreement
referred to below. Interest and Liquidated Damages, if any, will be payable
semiannually in cash in arrears on February 1 and August 1 of each year, or if
any such day is not a Business Day on the next succeeding Business Day (each, an
"Interest Payment Date"). Interest on the Discount Notes will accrue from the
most recent date on which interest has been paid or, if no interest has been
paid, from the date of original issuance; provided that the first Interest
Payment Date shall be February 1, 2001. The Company shall pay interest on
overdue principal and premium, if any, from time to time on demand at the
interest rate then in effect and shall pay interest on overdue installments of
interest and Liquidated Damages, if any, (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment. The Company will pay interest on the Discount Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered holders of Discount Notes at the close of business on the record date
for the next Interest Payment Date even if such Discount Notes are cancelled
after such record date and on or before such Interest Payment Date. Holders
must surrender Discount Notes to a Paying Agent to collect principal payments on
such Discount Notes. The Company will pay principal, premium, if any, interest
and Liquidated Damages, if any, in money of the United States that at the time
of payment is legal tender for payment of public and private debts. The Company
will pay principal, premium, if any, interest and Liquidated Damages, if any, by
wire transfer of immediately available funds to the accounts specified by the
Holders or, if no such account is specified, by mailing a check to each such
Holder's registered address; provided that payment by wire transfer of
immediately available funds will be re-
A-5
<PAGE>
quired with respect to principal, premium, if any, interest and Liquidated
Damages, if any, on all Global Discount Notes.
3. Paying Agent and Registrar. First Trust National Association (the
"Trustee") will initially act as the Paying Agent and Registrar. The Company
may appoint additional paying agents or co-registrars, and change the Paying
Agent, any additional paying agent, the Registrar or any co-registrar without
prior notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
4. Indenture. The Company issued the Discount Notes under an Indenture,
dated as of July 25, 1997 (the "Indenture"), among the Company and the Trustee.
The terms of the Discount Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of the original issuance
of the Discount Notes (the "Trust Indenture Act"). The Discount Notes are
subject to, and qualified by, all such terms, certain of which are summarized
herein, and Holders are referred to the Indenture and the Trust Indenture Act
for a statement of such terms (all capitalized terms not defined herein shall
have the meanings assigned them in the Indenture). The Discount Notes are
unsecured senior obligations of the Company limited to $120,000,000 in aggregate
principal amount.
5. Optional Redemption. (a) Except as described in paragraph 5(b) below,
the Discount Notes may not be redeemed at the option of the Company prior to
August 1, 2002. During the twelve (12) month period beginning August 1 of the
years indicated below, the Discount Notes will be redeemable at the option of
the Company, in whole or in part, on at least 30 but not more than 60 days'
notice to each Holder of Discount Notes to be redeemed, at the redemption prices
(expressed as percentages of the Accreted Value) set forth below, plus any
accrued and unpaid interest and Liquidated Damages, if any, from August 1, 2000
to the date of redemption if such redemption occurs after August 1, 2000:
Year Percentage
---- ----------
2002........................... 105.8750%
2003........................... 102.9375%
2004 and thereafter............ 100.0000%
A-6
<PAGE>
(b) Notwithstanding the foregoing, at any time prior to August 1, 2000,
the Company may (but shall not have the obligation to) redeem up to one-third of
the original aggregate principal amount of the Discount Notes with the proceeds
of one or more Equity Offerings at a redemption price of 111.75% of the Accreted
Value thereof, plus any accrued and unpaid interest and Liquidated Damages, if
any, to the date of redemption; provided that at least $80 million aggregate
principal amount of the Discount Notes remain outstanding immediately after any
such redemption; and provided, further, that any such redemption shall occur
within 60 days of the date of the closing of such Equity Offering.
6. Mandatory Redemption. Subject to the Company's obligation to make an
offer to purchase Discount Notes under certain circumstances pursuant to
Sections 4.13 and 4.14 of the Indenture (as described in paragraph 7 below), the
Company is not required to make any mandatory redemption, purchase or sinking
fund payments with respect to the Discount Notes.
7. Mandatory Offers to Purchase Discount Notes. (a) Upon the occurrence of
a Change of Control, each Holder of Discount Notes shall have the right to
require the Company to purchase all or any part (equal to $1,000 or an integral
multiple thereof) of such Holder's Discount Notes pursuant to an Offer (as
defined herein) at a purchase price equal to 101% of the Accreted Value thereof
at the date of purchase, plus any accrued and unpaid interest and Liquidated
Damages, if any, from August 1, 2000 to the date of purchase if such purchase
occurs after August 1, 2000.
(b) If the Company or any Restricted Subsidiary consummates one or
more Asset Sales and does not use all of the Net Proceeds from such Asset Sales
as provided in the Indenture, the Company will be required, under certain
circumstances, to utilize the Excess Proceeds from such Asset Sales to make an
Offer (as defined herein) to purchase Discount Notes at a purchase price equal
to 100% of the Accreted Value of the Discount Notes, plus any accrued and unpaid
interest and Liquidated Damages, if any, from August 1, 2000 to the date of
purchase if such purchase occurs after August 1, 2000. If the Excess Proceeds
are insufficient to purchase all Discount Notes tendered pursuant to any Asset
Sale Offer, the Trustee shall select the Discount Notes to be purchased in
accordance with the terms of the Indenture.
A-7
<PAGE>
(c) Holders may tender all or, subject to paragraph 8 below, any
portion of their Discount Notes in a Change of Control Offer or Asset Sale Offer
(collectively, an "Offer") by completing the form below entitled "OPTION OF
HOLDER TO ELECT PURCHASE."
(d) The Company shall comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations to the extent such laws and
regulations are applicable to any Offer. To the extent that the provisions of
any of such securities laws or regulations conflict with provisions of this
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Indenture by virtue thereof.
8. Notice of Redemption or Purchase. Notice of an optional redemption or
an Offer will be mailed to each Holder at its registered address at least 30
days but not more than 60 days before the date of redemption or purchase.
Discount Notes may be redeemed or purchased in part, but only in whole multiples
of $1,000 unless all Discount Notes held by a Holder are to be redeemed or
purchased. On or after any date on which Discount Notes are redeemed or
purchased, interest ceases to accrue on the Discount Notes or portions thereof
called for redemption or accepted for purchase on such date.
9. Denominations, Transfer, Exchange. The Discount Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples thereof. The transfer of Discount Notes may be registered and
Discount Notes may be exchanged as provided in the Indenture. Holders seeking to
transfer or exchange their Discount Notes may be required, 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. The Paying Agent need
not exchange or register the transfer of any Discount Note or portion of a
Discount Note selected for redemption or tendered pursuant to an Offer. Also, it
need not exchange or register the transfer of any Discount Notes for a period of
15 Business Days before a selection of Discount Notes to be redeemed or
purchased or between a record date and the next succeeding Interest Payment
Date.
10. Persons Deemed Owners. The registered Holder of a Discount Note may
be treated as its owner for all purposes.
A-8
<PAGE>
11. Amendments and Waivers. Subject to certain exceptions, the Indenture
or the Discount Notes may be amended or supplemented with the consent of the
Holders of at least a majority in Accreted Value of the then outstanding
Discount Notes, and any existing Default (except a payment Default) may be
waived with the consent of the Holders of a majority in Accreted Value of the
then outstanding Discount Notes. Without the consent of any Holder, the
Indenture or the Discount Notes may be amended to: cure any ambiguity, defect or
inconsistency; provide for uncertificated Discount Notes in addition to or in
place of certificated Discount Notes; provide for the assumption of the
Company's obligations in the event of a merger or consolidation of the Company
in which the Company is not the surviving corporation or a sale of substantially
all of the Company's assets to such other corporation; comply with the
Securities and Exchange Commission's requirements to effect or maintain the
qualification of the Indenture under the Trust Indenture Act; provide for
additional Guarantees with respect to the Discount Notes; or, make any change
that does not materially adversely affect any Holder's rights under the
Indenture.
12. Defaults and Remedies. Events of Default include: default for 30 days
in payment of interest on, or Liquidated Damages, if any, with respect to, the
Discount Notes; default in payment when due of principal or premium, if any,
with respect to the Discount Notes; failure by the Company for 45 days after
notice to it to comply with any of its other agreements or covenants in, or
provisions of, the Indenture or the Discount Notes; certain defaults under and
acceleration prior to maturity of, or failure to pay at maturity, certain other
Indebtedness; certain final judgments that remain undischarged; and certain
events of bankruptcy or insolvency involving the Company or any Restricted
Subsidiary that is a Significant Subsidiary. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in Accreted Value of
the Discount Notes may declare all the Discount Notes to be immediately due and
payable in an amount equal to the Accreted Value thereof, plus any accrued and
unpaid interest from August 1, 2000 to the date of any such declaration if such
declaration occurs after August 1, 2000; provided, however that in the case of
an Event of Default arising from certain events of bankruptcy or insolvency, the
Accreted Value of all Discount Notes, plus any accrued and unpaid interest from
August 1, 2000 to the date of any such event if such event occurs after August
1, 2000, shall ipso facto become and be immediately due and payable without
further action or notice. Subject to cer-
A-9
<PAGE>
tain exceptions, Holders of a majority in Accreted Value of the then outstanding
Discount Notes may direct the Trustee in its exercise of any trust or power,
provided that the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of Holders unless such
Holders have offered to the Trustee security and indemnity satisfactory to it.
Holders may not enforce the Indenture or the Discount Notes except as provided
in the Indenture. The Trustee may withhold from Holders notice of any continuing
default (except a payment Default) if it determines that withholding notice is
in their interests. The Company must furnish an annual compliance certificate to
the Trustee.
13. Trustee Dealings with the Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or any Affiliate, and may otherwise deal with the
Company or any Affiliate, as if it were not Trustee.
14. No Recourse Against Others. No officer, employee, director,
stockholder or Subsidiary of the Company shall have any liability for any
Obligations of the Company under the Discount Notes or the Indenture, or for any
claim based on, in respect of, or by reason of, such Obligations or the creation
of any such Obligation, except, in the case of a Subsidiary, for an express
guarantee or an express creation of any Lien by such Subsidiary of the Company's
Obligations under the Discount Notes. Each Holder by accepting a Discount Note
waives and releases all such liability, and such waiver and release is part of
the consideration for the issuance of the Discount Notes. The foregoing waiver
may not be effective to waive liabilities under the Federal securities law and
the Commission is of the view that such a waiver is against public policy.
15. Holders' Compliance with Registration Rights Agreement. Each Holder
of a Discount Note, by his acceptance thereof, acknowledges and agrees to the
provisions of the Registration Rights Agreement, dated as of July 25, 1997,
among the Company and the parties named on the signature page thereof (the
"Registration Rights Agreement"), including but not limited to the obligations
of the Holders with respect to a registration and the indemnification of the
Company and the Purchaser (as defined therein) to the extent provided therein.
A-10
<PAGE>
16. Successor Substituted. Upon the consolidation or merger by the
Company with or into another corporation, or upon the sale, lease, conveyance or
other disposition of all or substantially all of its assets to another
corporation, in accordance with the Indenture, the corporation surviving any
such merger or consolidation (if not the Company) or the corporation to which
such assets were sold or transferred to shall succeed to, and be substituted
for, and may exercise every right and power of the Company under the Indenture
with the same effect as if such surviving or other corporation had been named as
the Company in the Indenture.
17. Governing Law. This Discount Note shall be governed by and construed
in accordance with the internal laws of the State of New York without regard to
the conflict of laws provisions thereof.
18. Authentication. This Discount Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
19. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
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 Discount Notes and have directed the Trustee
to use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Discount Notes or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers printed on the Discount
Notes.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement, which
has in it the text of this Discount Note in larger type. Request may be made to:
Jordan Telecommunication Products, Inc.
ArborLake Centre, Suite 550
1751 Lake Cook Road
A-11
<PAGE>
Deerfield, Illinois 60015
Attention: Chief Financial Officer
A-12
<PAGE>
ASSIGNMENT FORM
To assign this Discount Note, fill in the form below:
(I) or (we) assign and transfer this Discount Note to:
_____________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_____________________________________________
_____________________________________________
_____________________________________________
(Print or type assignee's name,
address and zip code)
and irrevocably appoint ________________________________________________________
__________________________ as agent to transfer this Discount Note 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 Discount Note)
Signature Guarantee:
__________________________
A-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Discount Note purchased by the Company pursuant
to Section 4.13 of the Indenture, check the box: [ ]
If you elect to have this Discount Note purchased by the Company pursuant
to Section 4.14 of the Indenture, check the box: [ ]
If you elect to have only part of this Discount Note purchased by the
Company pursuant to Section 4.13 or 4.14 of the Indenture, state the amount
(multiples of $1000 only):
$__________________
Date:_____________ Your Signature:_______________________________________
(Sign exactly as your name appears
on the other side of this Discount Note)
Signature Guarantee:
__________________________
Signature Guarantee:
___________________________
A-14
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE DISCOUNT NOTES/2/
The following exchanges of a part of this Global Discount Note for
Definitive Discount Notes have been made:
<TABLE>
<CAPTION>
Signature of
Principal Amount of authorized officer
Amount of decrease in Amount of increase in this Global Discount Note of Trustee
Principal Amount of Principal Amount of following such or Discount
Date of Exchange this Global Discount Note this Global Discount Note decrease (or increase) Note Custodian
- ---------------- ------------------------- ------------------------- -------------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
/2/ This should be included only if the Discount Note is issued in global form.
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF DISCOUNT NOTES
______________, ______
Re: 11 3/4% Series [A/B] Discount Notes due 2007 of Jordan Telecommunication
Products, Inc.
This Certificate relates to $______ principal amount of Discount Notes held in
/*/ _______ book-entry or /*/ _____ definitive form by _____ (the "Transferor").
The Transferor/*/:
[ ] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Discount Note held by the Depositary a
Discount Note or Discount Notes in definitive, registered form equal to its
beneficial interest in such Global Discount Note (or the portion thereof
indicated above); or
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Discount Note or Discount Notes.
In connection with such request and in respect of each such Discount
Note, the Transferor does hereby certify that the Transferor is familiar with
the Indenture relating to the above captioned Discount Notes and that the
transfer of this Discount Note does not require registration under the
Securities Act (as defined below) because:/*/
[ ] Such Discount Note is being acquired for the Transferor's own
account without transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture).
[ ] Such Discount Note is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance on Rule 144A.
_________________________
/*/ Check applicable box.
B-1
<PAGE>
[ ] Such Discount Note is being transferred (i) in accordance with
Rule 144 under the Securities Act (and based on an opinion of counsel if the
Company so requests) or (ii) pursuant to an effective registration statement
under the Securities Act.
[ ] Such Discount Note is being transferred to an institutional
accredited investor within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (and based on an opinion of
counsel if the Company so requests together with a certification in
substantially the form of Exhibit C to the Indenture).
[ ] Such Discount Note is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).
___________________________
[INSERT NAME OF TRANSFEROR]
By:
___________________________
Name:
Title:
Address:
B-2
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED BY
INSTITUTIONAL ACCREDITED INVESTORS
___________, _____
__________________, as Registrar
Attention: Corporate Trust Department
Ladies and Gentlemen:
In connection with our proposed purchase of certain 11 3/4% Series
[A/B] Discount Notes due 2007 (the "Discount Notes") of Jordan Telecommunication
Products, Inc., a Delaware corporation (the "Company"), we represent that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act (an "Institutional
Accredited Investor"), or an entity in which all of the equity owners are
Institutional Accredited Investors;
(ii) any purchase of Discount Notes will be for our own account or
for the account of one or more other Institutional Accredited Investors as to
which we exercise sole investment discretion;
(iii) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing
Discount Notes and we and any accounts for which we are acting are able to bear
the economic risks of our or their investment;
(iv) we are not acquiring Discount Notes with a view to any
distribution thereof in a transaction that would violate the Securities Act or
the securities laws of any State of the United States or any other applicable
jurisdiction; provided that the disposition of our property and the property of
any accounts for which we are acting as fiduciary shall remain at all times
within our control; and
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(v) we acknowledge that we have had access to such financial and
other information, and have been afforded the opportunity to ask such questions
of representatives of the Company and receive answers thereto, as we deem
necessary in connection with our decision to purchase Discount Notes.
We understand that the Discount Notes have not been registered under
the Securities Act, and we agree, on our own behalf and on behalf of each
account for which we acquire any Discount Notes, that such Discount Notes my be
offered, resold, pledged or otherwise transferred only (i) to a person whom we
reasonably believe to be a qualified institutional buyer (as defined in Rule
144A under the Securities Act) in a transaction meeting the requirements of Rule
144A, in a transaction meeting the requirements of Rule 144 under the Securities
Act, (ii) to the Company or (iii) pursuant to an effective registration
statement, and, in each case, in accordance with any applicable securities laws
of any State of the United States or any other applicable jurisdiction. We
understand that the registrar will not be required to accept for registration of
transfer any Discount Notes, except upon presentation of evidence satisfactory
to the Company that the foregoing restrictions on transfer have been complied
with. We further understand that the Discount Notes purchased by us will be in
the form of definitive physical certificates and that such certificates will
bear a legend reflecting the substance of this paragraph. We further agree to
provide to any person acquiring any of the Discount Notes from us a notice
advising such person that resales of the Discount Notes are restricted as stated
herein.
We acknowledge that you, the Company and others will rely upon our
confirmations, acknowledgements and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
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THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
Very truly yours,
----------------------------------
[Name of Transferor]
By:
----------------------------------
Name:
Title:
Address:
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TABLE OF CONTENTS
PAGE
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PAGE
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ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE.................. 1
SECTION 1.1 DEFINITIONS................................................. 1
SECTION 1.2 OTHER DEFINITIONS........................................... 25
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE
ACT......................................................... 26
SECTION 1.4 RULES OF CONSTRUCTION....................................... 26
ARTICLE 2 THE DISCOUNT NOTES.......................................... 26
SECTION 2.1 FORM AND DATING............................................. 26
SECTION 2.2 EXECUTION AND AUTHENTICATION................................ 27
SECTION 2.3 REGISTRAR AND PAYING AGENT.................................. 28
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST......................... 29
SECTION 2.5 HOLDER LISTS................................................ 29
SECTION 2.6 TRANSFER AND EXCHANGE....................................... 30
(a) Transfer and Exchange of Definitive Dis-
count Notes............................................ 30
(b) Transfer of a Definitive Discount Note
for a Beneficial Interest in a Global
Discount Note.......................................... 31
(c) Transfer and Exchange of Global Discount
Notes.................................................. 32
(d) Transfer of a Beneficial Interest in a
Global Discount Note for a Definitive
Discount Note.......................................... 33
(e) Restrictions on Transfer and Exchange of
Global Discount Notes.................................. 35
(f) Authentication of Definitive Discount
Notes in Absence of Depositary......................... 35
(g) Legends................................................ 35
(h) Cancellation and/or Adjustment of Global
Discount Notes......................................... 38
(i) General Provisions Relating to Transfers
and Exchanges.......................................... 38
SECTION 2.7 REPLACEMENT DISCOUNT NOTES.................................. 40
SECTION 2.8 OUTSTANDING DISCOUNT NOTES.................................. 40
SECTION 2.9 TREASURY DISCOUNT NOTES..................................... 41
SECTION 2.10 TEMPORARY DISCOUNT NOTES.................................... 41
SECTION 2.11 CANCELLATION................................................ 41
SECTION 2.12 DEFAULTED INTEREST.......................................... 42
SECTION 2.13 RECORD DATE................................................. 42
SECTION 2.14 CUSIP NUMBER................................................ 42
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ARTICLE 3 OPTIONAL REDEMPTION AND MANDATORY OFFERS TO
PURCHASE.................................................... 43
SECTION 3.1 NOTICES TO TRUSTEE.......................................... 43
SECTION 3.2 SELECTION OF DISCOUNT NOTES TO BE REDEEMED OR
PURCHASED................................................... 44
SECTION 3.3 NOTICE OF REDEMPTION........................................ 45
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.............................. 46
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE................................. 46
SECTION 3.6 DISCOUNT NOTES REDEEMED IN PART............................. 47
SECTION 3.7 OPTIONAL REDEMPTION PROVISIONS.............................. 47
SECTION 3.8 MANDATORY PURCHASE PROVISIONS............................... 48
ARTICLE 4 COVENANTS................................................... 51
SECTION 4.1 PAYMENT OF DISCOUNT NOTES................................... 51
SECTION 4.2 SEC REPORTS................................................. 51
SECTION 4.3 COMPLIANCE CERTIFICATE...................................... 53
SECTION 4.4 STAY, EXTENSION AND USURY LAWS.............................. 54
SECTION 4.5 LIMITATION ON RESTRICTED PAYMENTS........................... 54
SECTION 4.6 CORPORATE EXISTENCE......................................... 59
SECTION 4.7 LIMITATION ON INCURRENCE OF INDEBTEDNESS.................... 59
SECTION 4.8 LIMITATION ON TRANSACTIONS WITH AFFILIATES.................. 60
SECTION 4.9 LIMITATION ON LIENS......................................... 62
SECTION 4.10 COMPLIANCE WITH LAWS, TAXES................................. 62
SECTION 4.11 LIMITATION ON DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING RESTRICTED SUBSIDIAR-
IES......................................................... 63
SECTION 4.12 MAINTENANCE OF OFFICE OR AGENCIES........................... 64
SECTION 4.13 CHANGE OF CONTROL........................................... 65
SECTION 4.14 LIMITATION ON ASSET SALES................................... 66
SECTION 4.15 LIMITATION ON GUARANTEES OF COMPANY INDEBTED-
NESS BY RESTRICTED SUBSIDIARIES............................. 68
SECTION 4.16 DESIGNATION OF RESTRICTED AND NON-RESTRICTED
SUBSIDIARIES................................................ 69
ARTICLE 5 SUCCESSORS.................................................. 71
SECTION 5.1 MERGER OR CONSOLIDATION..................................... 71
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED........................... 72
ARTICLE 6 DEFAULTS AND REMEDIES....................................... 72
SECTION 6.1 EVENTS OF DEFAULT........................................... 72
SECTION 6.2 ACCELERATION................................................ 75
SECTION 6.3 OTHER REMEDIES.............................................. 76
SECTION 6.4 WAIVER OF PAST DEFAULTS..................................... 76
</TABLE>
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SECTION 6.5 CONTROL BY MAJORITY........................................ 77
SECTION 6.6 LIMITATION ON SUITS........................................ 77
SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT....................... 77
SECTION 6.8 COLLECTION SUIT BY TRUSTEE................................. 78
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM........................... 78
SECTION 6.10 PRIORITIES................................................. 79
SECTION 6.11 UNDERTAKING FOR COSTS...................................... 79
ARTICLE 7 TRUSTEE.................................................... 80
SECTION 7.1 DUTIES OF TRUSTEE.......................................... 80
SECTION 7.2 RIGHTS OF TRUSTEE.......................................... 81
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE............................... 82
SECTION 7.4 TRUSTEE'S DISCLAIMER....................................... 82
SECTION 7.5 NOTICE TO HOLDERS OF DEFAULTS AND EVENTS OF
DEFAULT.................................................... 83
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS.............................. 83
SECTION 7.7 COMPENSATION AND INDEMNITY................................. 84
SECTION 7.8 REPLACEMENT OF TRUSTEE..................................... 85
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC........................... 86
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.............................. 86
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE
COMPANY.................................................... 87
ARTICLE 8 DISCHARGE OF INDENTURE..................................... 87
SECTION 8.1 DISCHARGE OF LIABILITY ON DISCOUNT NOTES;
DEFEASANCE................................................. 87
SECTION 8.2 CONDITIONS TO DEFEASANCE................................... 88
SECTION 8.3 APPLICATION OF TRUST MONEY................................. 90
SECTION 8.4 REPAYMENT TO THE COMPANY................................... 90
SECTION 8.5 INDEMNITY FOR GOVERNMENT OBLIGATIONS....................... 91
SECTION 8.6 REINSTATEMENT.............................................. 91
ARTICLE 9 AMENDMENTS................................................. 92
SECTION 9.1 AMENDMENTS AND SUPPLEMENTS PERMITTED WITHOUT
CONSENT OF HOLDERS......................................... 92
SECTION 9.2 AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT
OF HOLDERS................................................. 92
SECTION 9.3 COMPLIANCE WITH TIA........................................ 94
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS.......................... 94
SECTION 9.5 NOTATION ON OR EXCHANGE OF DISCOUNT NOTES.................. 95
SECTION 9.6 TRUSTEE PROTECTED.......................................... 95
ARTICLE 10 MISCELLANEOUS.............................................. 96
</TABLE>
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SECTION 10.1 TRUST INDENTURE ACT CONTROLS............................... 96
SECTION 10.2 NOTICES.................................................... 96
SECTION 10.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS................ 97
SECTION 10.4 CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.................................................. 97
SECTION 10.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.............. 98
SECTION 10.6 RULES BY TRUSTEE AND AGENTS................................ 98
SECTION 10.7 LEGAL HOLIDAYS............................................. 99
SECTION 10.8 NO RECOURSE AGAINST OTHERS................................. 99
SECTION 10.9 COUNTERPARTS............................................... 99
SECTION 10.10 VARIABLE PROVISIONS........................................ 99
SECTION 10.11 GOVERNING LAW.............................................. 99
SECTION 10.12 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.............. 100
SECTION 10.13 SUCCESSORS................................................. 100
SECTION 10.14 SEVERABILITY............................................... 100
SECTION 10.15 TABLE OF CONTENTS, HEADINGS, ETC........................... 100
EXHIBIT A
FORM OF DISCOUNT NOTE................................................ A-1
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF DISCOUNT NOTES........................ B-1
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED BY
INSTITUTIONAL ACCREDITED INVESTORS................................... C-1
</TABLE>
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CROSS-REFERENCE TABLE
Trust Indenture
Act Section................................................. Indenture Section
310(a)(1).................................................... 7.10
(a)(2)................................................. 7.10
(a)(3)................................................. N.A.
(a)(4)................................................. N.A.
(a)(5)................................................. 7.10
(b).................................................... 7.10
(c).................................................... N.A.
311(a)....................................................... 7.11
(b).................................................... 7.11
(c).................................................... N.A.
312(a)....................................................... 2.5
(b).................................................... 10.3
(c).................................................... 10.3
313(a)....................................................... 7.6
(b)(1)................................................. N.A.
(b)(2)................................................. 7.6; 10.2
(c).................................................... 7.6
(d).................................................... 7.6
314(a)....................................................... 4.2; 10.2
(a)(1)................................................. N.A.
(a)(2)................................................. N.A.
(a)(3)................................................. N.A.
(a)(4)................................................. 10.5
(b).................................................... N.A.
(c)(1)................................................. 10.4
(c)(2)................................................. 10.4
(c)(3)................................................. N.A.
(d).................................................... N.A.
(e).................................................... 10.5
(f).................................................... N.A.
315(a)....................................................... 7.1
(b).................................................... 7.5
(c).................................................... 7.1
(d).................................................... 7.1
(e).................................................... 6.11
316(a)(last sentence)........................................ 2.9
(a)(1)(A).............................................. 6.5
(a)(1)(B).............................................. 6.4
(a)(2)................................................. N.A.
(b).................................................... 6.4; 6.7
(c).................................................... 2.13
317(a)(1).................................................... 6.8
(a)(2)................................................. 6.9
(b).................................................... 2.4
318(a)....................................................... 10.1
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<PAGE>
Exhibit 4.4
9 7/8% Series A Senior Note due 2007
No. G-1 $188,125,000
CUSIP No. 480767AA0
JORDAN TELECOMMUNICATION PRODUCTS, INC.
promises to pay to -- Cede & Co.
or registered assigns,
the principal sum of One Hundred Eighty Eight Million, One Hundred Twenty Five
Thousand Dollars
on August 1, 2007.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
<PAGE>
Dated: July 25, 1997
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
By: /s/ Dominic J. Pileggi
----------------------
Name: Dominic J. Pileggi
Title: President and Chief
Executive Officer
Trustee's Certificate of Authentication
Dated: July 25, 1997
This is one of the
Senior Notes referred to in the
within-mentioned Indenture:
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By: /s/ Richard Prokosch
-------------------------
(Authorized Signatory)
2
<PAGE>
Unless and until it is exchanged in whole or in part for Senior
Notes in definitive form, this Senior Note may not be transferred
except as a whole by the Depositary to a nominee of the Depositary or
by a nominee of the Depositary to the Depositary or another nominee of
the Depositary or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. The Depository
Trust Company shall act as the Depositary until a successor shall be
appointed by the Company and the Registrar. Unless this certificate is
presented by an authorized representative of The Depository Trust
Company (55 Water Street, New York, New York)("DTC"), to the issuer or
its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such
other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be
requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY Person
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND
THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, OR (c) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
PROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE.
Additional provisions of this Senior Note are set forth on the other
side of this Senior Note.
3
<PAGE>
(Back of Senior Note)
9 7/8% SERIES A SENIOR NOTE DUE 2007
1. Interest. Jordan Telecommunication Products, Inc. (the "Company")
promises to pay interest on the principal amount of the Senior Notes at the rate
and in the manner specified below. Interest on the Senior Notes will accrue at
9 7/8% per annum from the date this Senior Note is issued until maturity. The
Company will pay Liquidated Damages pursuant to Section 5 of the Registration
Rights Agreement referred to below. Interest and Liquidated Damages, if any,
will be payable semiannually in cash in arrears on February 1 and August 1 of
each year, or if any such day is not a Business Day on the next succeeding
Business Day (each, an "Interest Payment Date"). Interest on the Senior Notes
will accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from the date of original issuance; provided that the
first Interest Payment Date shall be February 1, 1998. The Company shall pay
interest on overdue principal and premium, if any, from time to time on demand
at the interest rate then in effect and shall pay interest on overdue
installments of interest and Liquidated Damages, if any, (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Senior Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered holders of Senior Notes at the close of business on the record date
for the next Interest Payment Date even if such Senior Notes are cancelled after
such record date and on or before such Interest Payment Date. Holders must
surrender Senior Notes to a Paying Agent to collect principal payments on such
Senior Notes. The Company will pay principal, premium, if any, interest and
Liquidated Damages, if any, in money of the United States that at the time of
payment is legal tender for payment of public and private debts. The Company
will pay principal, premium, if any, interest and Liquidated Damages, if any,
by wire transfer of immediately available funds to the accounts specified by the
Holders or, if no such
<PAGE>
account is specified, by mailing a check to each such Holder's registered
address; provided that payment by wire transfer of immediately available funds
will be required with respect to principal, premium, if any, interest and
Liquidated Damages, if any, on all Global Senior Notes.
3. Paying Agent and Registrar. First Trust National Association (the
"Trustee") will initially act as the Paying Agent and Registrar. The Company may
appoint additional paying agents or co-registrars, and change the Paying Agent,
any additional paying agent, the Registrar or any co-registrar without prior
notice to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Senior Notes under an Indenture,
dated as of July 25, 1997 (the "Indenture"), among the Company and the Trustee.
The terms of the Senior Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of the original issuance
of the Senior Notes (the "Trust Indenture Act"). The Senior Notes are subject
to, and qualified by, all such terms, certain of which are summarized herein,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of such terms (all capitalized terms not defined herein shall have the
meanings assigned them in the Indenture). The Senior Notes are unsecured senior
obligations of the Company limited to $190,000,000 in aggregate principal
amount.
5. Optional Redemption. a. Except as described in paragraph 5(b) below,
the Senior Notes may not be redeemed at the option of the Company prior to
August 1, 2002. During the twelve (12) month period beginning August 1 of the
years indicated below, the Senior Notes will be redeemable at the option of the
Company, in whole or in part, on at least 30 but not more than 60 days' notice
to each Holder of Senior Notes to be redeemed, at the redemption prices
(expressed as percentages of the principal amount) set forth below, plus any
accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption:
2
<PAGE>
Year Percentage
---- ----------
2002........................ 104.9375%
2003........................ 102.4688%
2004 and thereafter......... 100.0000%
b. Notwithstanding the foregoing, at any time prior to August 1, 2000,
the Company may (but shall not have the obligation to) redeem up to one-third of
the original aggregate principal amount of the Senior Notes with the proceeds of
one or more Equity Offerings at a redemption price of 109.875% of the principal
amount thereof, plus any accrued and unpaid interest and Liquidated Damages, if
any, to the date of redemption; provided that at least two-thirds of the
aggregate principal amount of the Senior Notes originally issued remain
outstanding immediately after any such redemption; and provided, further, that
any such redemption shall occur within 60 days of the date of the closing of
such Equity Offering.
6. Mandatory Redemption. Subject to the Company's obligation to make
an offer to purchase Senior Notes under certain circumstances pursuant to
Sections 4.13 and 4.14 of the Indenture (as described in paragraph 7 below),
the Company is not required to make any mandatory redemption, purchase or
sinking fund payments with respect to the Senior Notes.
7. Mandatory Offers to Purchase Senior Notes. a. Upon the occurrence
of a Change of Control, each Holder of Senior Notes shall have the right to
require the Company to purchase all or any part (equal to $1,000 or an integral
multiple thereof) of such Holder's Senior Notes pursuant to an Offer (as defined
herein) at a purchase price equal to 101% of the aggregate principal amount
thereof, plus any accrued and unpaid interest and Liquidated Damages, if any, to
the date of purchase.
b. If the Company or any Restricted Subsidiary consummates one or
more Asset Sales and does not use all of the Net Proceeds from such Asset Sales
as provided in the Indenture, the Company will be required, under certain
circumstances, to utilize the Excess Proceeds from such Asset Sales to make an
Offer (as defined herein) to purchase Senior Notes at a purchase price equal to
100% of the principal amount of the Senior Notes, plus any accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase. If the Excess
Proceeds are
3
<PAGE>
insufficient to purchase all Senior Notes tendered pursuant to any Asset Sale
Offer, the Trustee shall select the Senior Notes to be purchased in accordance
with the terms of the Indenture.
c. Holders may tender all or, subject to paragraph 8 below, any
portion of their Senior Notes in a Change of Control Offer or Asset Sale Offer
(collectively, an "Offer") by completing the form below entitled "OPTION OF
HOLDER TO ELECT PURCHASE."
d. The Company shall comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations to the extent such laws and
regulations are applicable to any Offer. To the extent that the provisions of
any of such securities laws or regulations conflict with provisions of this
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Indenture by virtue thereof.
8. Notice of Redemption or Purchase. Notice of an optional redemption or
an Offer will be mailed to each Holder at its registered address at least 30
days but not more than 60 days before the date of redemption or purchase.
Senior Notes may be redeemed or purchased in part, but only in whole multiples
of $1,000 unless all Senior Notes held by a Holder are to be redeemed or
purchased. On or after any date on which Senior Notes are redeemed or purchased,
interest ceases to accrue on the Senior Notes or portions thereof called for
redemption or accepted for purchase on such date.
9. Denominations, Transfer, Exchange. The Senior Notes are in registered
form without coupons in denominations of $1,000 and integral multiples thereof.
The transfer of Senior Notes may be registered and Senior Notes may be exchanged
as provided in the Indenture. Holders seeking to transfer or exchange their
Senior Notes may be required, 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. The Paying Agent need not exchange or
register the transfer of any Senior Note or portion of a Senior Note selected
for redemption or tendered pursuant to an Offer. Also, it need not exchange or
register the transfer of any Senior Notes for a period of 15 Business
4
<PAGE>
Days before a selection of Senior Notes to be redeemed or purchased or between a
record date and the next succeeding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Senior Note may be
treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions, the Indenture
or the Senior Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Senior Notes, and any existing Default (except a payment Default) may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Senior Notes. Without the consent of any Holder, the Indenture or
the Senior Notes may be amended to: cure any ambiguity, defect or inconsistency;
provide for uncertificated Senior Notes in addition to or in place of
certificated Senior Notes; provide for the assumption of the Company's
obligations in the event of a merger or consolidation of the Company in which
the Company is not the surviving corporation or a sale of substantially all of
the Company's assets to such other corporation; comply with the Securities and
Exchange Commission's requirements to effect or maintain the qualification of
the Indenture under the Trust Indenture Act; provide for additional Guarantees
with respect to the Senior Notes; or, make any change that does not materially
adversely affect any Holder's rights under the Indenture.
12. Defaults and Remedies. Events of Default include: default for 30 days
in payment of interest on, or Liquidated Damages, if any, with respect to, the
Senior Notes; default in payment when due of principal or premium, if any, with
respect to the Senior Notes; failure by the Company for 45 days after notice to
it to comply with any of its other agreements or covenants in, or provisions of,
the Indenture or the Senior Notes; certain defaults under and acceleration prior
to maturity of, or failure to pay at maturity, certain other Indebtedness;
certain final judgments that remain undischarged; and certain events of
bankruptcy or insolvency involving the Company or any Restricted Subsidiary that
is a Significant Subsidiary. If an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in
5
<PAGE>
principal amount of the Senior Notes may declare all the Senior Notes to be
immediately due and payable in an amount equal to the principal of, premium, if
any, and any accrued and unpaid interest on, and Liquidated Damages, if any,
with respect to such Senior Notes; provided, however, that in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, the
principal of, premium, if any, and any accrued and unpaid interest on, and
Liquidated Damages, if any, with respect to the Senior Notes becomes due and
payable immediately without further action or notice. Subject to certain
exceptions, Holders of a majority in principal amount of the then outstanding
Senior Notes may direct the Trustee in its exercise of any trust or power,
provided that the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of Holders unless such
Holders have offered to the Trust ee security and indemnity satisfactory to it.
Holders may not enforce the Indenture or the Senior Notes except as provided in
the Indenture. The Trustee may withhold from Holders notice of any continuing
default (except a payment Default) if it determines that withholding notice is
in their interests. The Company must furnish an annual compliance certificate to
the Trustee.
13. Trustee Dealings with the Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or any Affiliate, and may otherwise deal with the
Company or any Affiliate, as if it were not Trustee.
14. No Recourse Against Others. No officer, employee, director,
stockholder or Subsidiary of the Company shall have any liability for any
Obligations of the Company under the Senior Notes or the Indenture, or for any
claim based on, in respect of, or by reason of, such Obligations or the creation
of any such Obligation, except, in the case of a Subsidiary, for an express
guarantee or an express creation of any Lien by such Subsidiary of the Company's
Obligations under the Senior Notes. Each Holder by accepting a Senior Note
waives and releases all such liability, and such waiver and release is part of
the consideration for the issuance of the Senior Notes. The foregoing waiver may
not be effective to waive liabilities under the Federal securities law and the
Commission is of the view that such a waiver is against public policy.
6
<PAGE>
15. Holders' Compliance with Registration Rights Agreement. Each Holder of
a Senior Note, by his acceptance thereof, acknowledges and agrees to the
provisions of the Registration Rights Agreement, dated as of July 25, 1997,
among the Company and the parties named on the signature page thereof (the
"Registration Rights Agreement"), including but not limited to the obligations
of the Holders with respect to a registration and the indemnification of the
Company and the Purchasers (as defined therein) to the extent provided therein.
16. Successor Substituted. Upon the consolidation or merger by the Company
with or into another corporation, or upon the sale, lease, conveyance or other
disposition of all or substantially all of its assets to another corporation,
in accordance with the Indenture, the corporation surviving any such merger or
consolidation (if not the Company) or the corporation to which such assets were
sold or transferred to shall succeed to, and be substituted for, and may
exercise every right and power of the Company under the Indenture with the same
effect as if such surviving or other corporation had been named as the Company
in the Indenture.
17. Governing Law. This Senior Note shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to the
conflict of laws provisions thereof.
18. Authentication. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
19. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
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 Senior Notes and have directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the
7
<PAGE>
Senior Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers printed on the Senior Notes.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement, which
has in it the text of this Senior Note in larger type. Request may be made to:
Jordan Telecommunication Products, Inc.
ArborLake Centre, Suite 550
1751 Lake Cook Road
Deerfield, Illinois 60015
Attention: Chief Financial Officer
8
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below:
(I) or (we) assign and transfer this Senior Note to:
_____________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_____________________________________________
_____________________________________________
_____________________________________________
(Print or type assignee's name,
address and zip code)
and irrevocably appoint ______________________________________________________
________________________ as agent to transfer this Senior Note 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 Senior Note)
Signature Guarantee:
__________________________
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Senior Note purchased by the Company pursuant to
Section 4.13 of the Indenture, check the box: [_]
If you elect to have this Senior Note purchased by the Company pursuant to
Section 4.14 of the Indenture, check the box: [_]
If you elect to have only part of this Senior Note purchased by the Company
pursuant to Section 4.13 or 4.14 of the Indenture, state the amount (multiples
of $1000 only):
$__________________
Date:_____________ Your Signature:_____________________________________
(Sign exactly as your name appears on
the other side of this Senior Note)
Signature Guarantee:
__________________________
Signature Guarantee:
___________________________
<PAGE>
Exhibit 4.6
11 3/4% Series A Discount Note due 2007
No. G-1 $119,250,000
CUSIP No. 480767AC6
JORDAN TELECOMMUNICATION PRODUCTS, INC.
promises to pay to--Cede & Co.--
or registered assigns,
the principal sum of One Hundred Nineteen Million Two Hundred Fifty Thousand
Dollars
on August 1, 2007.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
<PAGE>
Dated: July 25, 1997
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
By: /s/ Dominic J. Pileggi
---------------------------
Name: Dominic J. Pileggi
Title: President and Chief
Executive Officer
Trustee's Certificate of Authentication
Dated: July 25, 1997
This is one of the Global
Discount Notes referred to in the
within-mentioned Indenture:
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By: /s/ Richard Prokosch
--------------------------
(Authorized Signatory)
2
<PAGE>
Unless and until it is exchanged in whole or in part for Discount Notes in
definitive form, this Discount Note may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. The Depository Trust Company shall act as the Depositary until a
successor shall be appointed by the Company and the Registrar. Unless this
certificate is presented by an authorized representative of The Depository Trust
Company (55 Water Street, New York, New York) ("DTC"), to the issuer or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as may be
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY Person IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED
STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTI-
TUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, OR (c) IN
ACCORDANCE WITH ANOTHER EXEMP-
3
<PAGE>
TION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY
OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER PROM IT OF
THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE.
Additional provisions of this Discount Note are set forth on the other side
of this Discount Note.
4
<PAGE>
11 3/4% SERIES A DISCOUNT NOTE DUE 2007
1. Interest. Jordan Telecommunication Products, Inc. (the "Company")
promises to pay interest on the principal amount of the Discount Notes at the
rate and in the manner specified below. Interest on the Discount Notes will not
accrue prior to August 1, 2000. Thereafter, interest on the Discount Notes will
accrue at 11 3/4% per annum until maturity. The Company will pay Liquidated
Damages pursuant to Section 5 of the Registration Rights Agreement referred to
below. Interest and Liquidated Damages, if any, will be payable semiannually in
cash in arrears on February 1 and August 1 of each year, or if any such day is
not a Business Day on the next succeeding Business Day (each, an "Interest
Payment Date"). Interest on the Discount Notes will accrue from the most recent
date on which interest has been paid or, if no interest has been paid, from the
date of original issuance; provided that the first Interest Payment Date shall
be February 1, 2001. The Company shall pay interest on overdue principal and
premium, if any, from time to time on demand at the interest rate then in effect
and shall pay interest on overdue installments of interest and Liquidated
Damages, if any, (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Discount Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered holders of Discount Notes at the close of business on the record date
for the next Interest Payment Date even if such Discount Notes are cancelled
after such record date and on or before such Interest Payment Date. Holders must
surrender Discount Notes to a Paying Agent to collect principal payments on such
Discount Notes. The Company will pay principal, premium, if any, interest and
Liquidated Damages, if any, in money of the United States that at the time of
payment is legal tender for payment
5
<PAGE>
of public and private debts. The Company will pay principal, premium, if any,
interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders or, if no such account
is specified, by mailing a check to each such Holder's registered address;
provided that payment by wire transfer of immediately available funds will be
required with respect to principal, premium, if any, interest and Liquidated
Damages, if any, on all Global Discount Notes.
3. Paying Agent and Registrar. First Trust Nation al Association (the
"Trustee") will initially act as the Paying Agent and Registrar. The Company may
appoint additional paying agents or co-registrars, and change the Paying Agent,
any additional paying agent, the Registrar or any co-registrar without prior
notice to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Discount Notes under an Indenture,
dated as of July 25, 1997 (the "Indenture"), among the Company and the Trustee.
The terms of the Discount Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of the original issuance
of the Discount Notes (the "Trust Indenture Act"). The Discount Notes are
subject to, and qualified by, all such terms, certain of which are summarized
herein, and Holders are referred to the Indenture and the Trust Indenture Act
for a statement of such terms (all capitalized terms not defined herein shall
have the meanings assigned them in the Indenture). The Discount Notes are
unsecured senior obligations of the Company limited to $120,000,000 in aggregate
principal amount.
5. Optional Redemption. a. Except as described in paragraph 5(b) below,
the Discount Notes may not be redeemed at the option of the Company prior to
August 1, 2002. During the twelve (12) month period beginning August 1 of the
years indicated below, the Discount Notes will be redeemable at the option of
the Company, in whole
6
<PAGE>
or in part, on at least 30 but not more than 60 days' notice to each Holder of
Discount Notes to be redeemed, at the redemption prices (expressed as
percentages of the Accreted Value) set forth below, plus any accrued and unpaid
interest and Liquidated Damages, if any, from August 1, 2000 to the date of
redemption if such redemption occurs after August 1, 2000:
Year Percentage
---- ----------
2002 .................... 105.8750%
2003 .................... 102.9375%
2004 and thereafter...... 100.0000%
b. Notwithstanding the foregoing, at any time prior to August 1, 2000,
the Company may (but shall not have the obligation to) redeem up to one-third of
the original aggregate principal amount of the Discount Notes with the proceeds
of one or more Equity Offerings at a redemption price of 111.75% of the Accreted
Value thereof, plus any accrued and unpaid interest and Liquidated Damages, if
any, to the date of redemption; provided that at least $80 million aggregate
principal amount of the Discount Notes remain outstanding immediately after any
such redemption; and provided, further, that any such redemption shall occur
within 60 days of the date of the closing of such Equity Offering.
6. Mandatory Redemption. Subject to the Company's obligation to make an
offer to purchase Discount Notes under certain circumstances pursuant to
Sections 4.13 and 4.14 of the Indenture (as described in paragraph 7 be low),
the Company is not required to make any mandatory redemption, purchase or
sinking fund payments with respect to the Discount Notes.
7. Mandatory Offers to Purchase Discount Notes. a. Upon the occurrence of
a Change of Control, each Holder of Discount Notes shall have the right to
require the Company to purchase all or any part (equal to $1,000 or an integral
multiple thereof) of such Holder's Discount Notes pursuant to an Offer (as
defined herein) at a purchase price equal to 101% of the Accreted Value there of
at the date of purchase, plus any accrued and unpaid interest and Liquidated
Damages, if any, from August 1,
7
<PAGE>
2000 to the date of purchase if such purchase occurs after August 1, 2000.
b. If the Company or any Restricted Subsidiary consummates one or more
Asset Sales and does not use all of the Net Proceeds from such Asset Sales as
provided in the Indenture, the Company will be required, under certain
circumstances, to utilize the Excess Proceeds from such Asset Sales to make an
Offer (as defined herein) to purchase Discount Notes at a purchase price equal
to 100% of the Accreted Value of the Discount Notes, plus any accrued and unpaid
interest and Liquidated Damages, if any, from August 1, 2000 to the date of
purchase if such purchase occurs after August 1, 2000. If the Excess Proceeds
are insufficient to purchase all Discount Notes tendered pursuant to a Asset
Sale Offer, the Trustee shall select the Discount Notes to be purchased in
accordance with the terms of the Indenture.
c. Holders may tender all or, subject to paragraph 8 below, any portion
of their Discount Notes in a Change of Control Offer or Asset Sale Offer
(collectively, an "Offer") by completing the form below entitled "OPTION OF
HOLDER TO ELECT PURCHASE."
d. The Company shall comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations to the extent such laws and
regulations are applicable to any Offer. To the extent that the provisions of
any of such securities laws or regulations conflict with provisions of this
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Indenture by virtue thereof.
8. Notice of Redemption or Purchase. Notice of an optional redemption or
an Offer will be mailed to each Holder at its registered address at least 30
days but not more than 60 days before the date of redemption or purchase.
Discount Notes may be redeemed or purchased in part, but only in whole multiples
of $1,000 unless all Discount Notes held by a Holder are to be redeemed or
purchased. On or after any date on which Discount Notes are redeemed or
purchased, interest ceases to accrue on
8
<PAGE>
the Discount Notes or portions thereof called for redemption or accepted for
purchase on such date.
9. Denominations, Transfer, Exchange. The Discount Notes are in registered
form without coupons in denominations of $1,000 and integral multiples thereof.
The transfer of Discount Notes may be registered and Discount Notes may be
exchanged as provided in the Indenture. Holders seeking to transfer or exchange
their Discount Notes may be required, 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. The Paying Agent need not exchange or
register the transfer of any Discount Note or portion of a Discount Note
selected for redemption or tendered pursuant to an Offer. Also, it need not
exchange or register the transfer of any Discount Notes for a period of 15
Business Days before a selection of Discount Notes to be redeemed or purchased
or between a record date and the next succeeding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Discount Note may be
treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions, the Indenture or
the Discount Notes may be amended or supplemented with the consent of the
Holders of at least a majority in Accreted Value of the then outstanding
Discount Notes, and any existing Default (except a payment Default) may be
waived with the consent of the Holders of a majority in Accreted Value of the
then outstanding Discount Notes. Without the consent of any Holder, the
Indenture or the Discount Notes may be amended to: cure any ambiguity, defect or
inconsistency; provide for uncertificated Discount Notes in addition to or in
place of certificated Discount Notes; provide for the assumption of the
Company's obligations in the event of a merger or consolidation of the Company
in which the Company is not the surviving corporation or a sale of substantially
all of the Company's assets to such other corporation; comply with the
Securities and Exchange Commission's requirements to effect or maintain the
qualification of the Indenture under the Trust Indenture
9
<PAGE>
Act; provide for additional Guarantees with respect to the Discount Notes; or,
make any change that does not materially adversely affect any Holder's rights
under the Indenture.
12. Defaults and Remedies. Events of Default include: default for 30 days
in payment of interest on, or Liquidated Damages, if any, with respect to, the
Discount Notes; default in payment when due of principal or premium, if any,
with respect to the Discount Notes; failure by the Company for 45 days after
notice to it to comply with any of its other agreements or covenants in, or
provisions of, the Indenture or the Discount Notes; certain defaults under and
acceleration prior to maturity of, or failure to pay at maturity, certain other
Indebtedness; certain final judgments that remain undischarged; and certain
events of bankruptcy or insolvency involving the Company or any Restricted
Subsidiary that is a Significant Subsidiary. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in Accreted Value of
the Discount Notes may declare all the Discount Notes to be immediately due and
payable in an amount equal to the Accreted Value thereof, plus any accrued and
unpaid interest from August 1, 2000 to the date of any such declaration if such
declaration occurs after August 1, 2000; provided, however that in the case of
an Event of Default arising from certain events of bankruptcy or insolvency, the
Accreted Value of all Discount Notes, plus any accrued and unpaid interest from
August 1, 2000 to the date of any such event if such event occurs after August
1, 2000, shall ipso facto become and be immediately due and payable without
further action or notice. Subject to certain exceptions, Holders of a majority
in Accreted Value of the then outstanding Discount Notes may direct the Trustee
in its exercise of any trust or power, provided that the Trustee will be under
no obligation to exercise any of its rights or powers under the Indenture at the
request of Holders unless such Holders have offered to the Trustee security and
indemnity satisfactory to it. Holders may not enforce the Indenture or the
Discount Notes except as provided in the Indenture. The Trustee may withhold
from Holders notice of any continuing default (except a payment Default) if it
determines that withholding notice is
10
<PAGE>
in their interests. The Company must furnish an annual compliance certificate
to the Trustee.
13. Trustee Dealings with the Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or any Affiliate, and may otherwise deal with the
Company or any Affiliate, as if it were not Trustee.
14. No Recourse Against Others. No officer, employee, director,
stockholder or Subsidiary of the Company shall have any liability for any
Obligations of the Company under the Discount Notes or the Indenture, or for any
claim based on, in respect of, or by reason of, such Obligations or the creation
of any such Obligation, except, in the case of a Subsidiary, for an express
guarantee or an express creation of any Lien by such Subsidiary of the Company's
Obligations under the Discount Notes. Each Holder by accepting a Discount
Note waives and releases all such liability, and such waiver and release is part
of the consideration for the issuance of the Discount Notes. The foregoing
waiver may not be effective to waive liabilities under the Federal securities
law and the Commission is of the view that such a waiver is against public
policy.
15. Holders' Compliance with Registration Rights Agreement. Each
Holder of a Discount Note, by his acceptance thereof, acknowledges and agrees
to the provisions of the Registration Rights Agreement, dated as of July 25,
1997, among the Company and the parties named on the signature page thereof (the
"Registration Rights Agreement"), including but not limited to the obligations
of the Holders with respect to a registration and the indemnification of the
Company and the Purchasers (as defined herein) to the extent provided therein.
16. Successor Substituted. Upon the consolidation or merger by the
Company with or into another corporation, or upon the sale, lease, conveyance
or other disposition of all or substantially all of its assets to another
corporation, in accordance with the Indenture, the corporation surviving any
such merger or consolidation (if not the Company) or the corporation to which
11
<PAGE>
such assets were sold or transferred to shall succeed to, and be substituted
for, and may exercise every right and power of the Company under the Indenture
with the same effect as if such surviving or other corporation had been named as
the Company in the Indenture.
17. Governing Law. This Discount Note shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to the
conflict of laws provisions thereof.
18. Authentication. This Discount Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
19. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
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 Discount Notes and have directed the Trustee
to use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Discount Notes or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers printed on the Discount
Notes.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement, which
has in it the text of this Discount Note in larger type. Request may be made to:
Jordan Telecommunication Products, Inc.
ArborLake Centre, Suite 550
1751 Lake Cook Road
Deerfield, Illinois 60015
Attention: Chief Financial Officer
12
<PAGE>
ASSIGNMENT FORM
To assign this Discount Note, fill in the form below:
(I) or (we) assign and transfer this Discount Note to:
_____________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_____________________________________________
_____________________________________________
_____________________________________________
(Print or type assignee's name,
address and zip code)
and irrevocably appoint _________________________________
__________________________ as agent to transfer this Dis count Note 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 Discount Note)
Signature Guarantee:
__________________________
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Discount Note purchased by the Company pursuant
to Section 4.13 of the Indenture, check the box: [ ]
If you elect to have this Discount Note purchased by the Company pursuant
to Section 4.14 of the Indenture, check the box: [ ]
If you elect to have only part of this Discount Note purchased by the
Company pursuant to Section 4.13 or 4.14 of the Indenture, state the amount
(multiples of $1000 only):
$__________________
Date:_____________ Your Signature:_____________________
(Sign exactly as your name appears on the
other side of this Discount Note)
Signature Guarantee:
__________________________
Signature Guarantee:
___________________________
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE DISCOUNT NOTES
The following exchanges of a part of this Global Discount Note for
Definitive Discount Notes have been made:
<TABLE>
<CAPTION>
Signature of
Principal Amount of this authorized officer of
Amount of decrease in Amount of increase in Global Discount Note Trustee
Principal Amount of Principal Amount of following such or Discount
Date of Exchange this Global Discount Note this Global Discount Note decrease (or increase) Note Custodian
- ---------------- ------------------------- ------------------------- ------------------------ --------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit 4.8
[FRONT OF CERTIFICATE]
FORMED UNDER THE LAWS SHARES OF PREFERRED STOCK
OF THE STATE OF DELAWARE
NUMBER 1 24,750 SHARES
Par Value $0.01
CUSIP 480767 30 0
SEE REVERSE FOR CERTAIN
RESTRICTIONS AND IMPORTANT
INFORMATION
JORDAN TELECOMMUNICATION PRODUCTS, INC.
13 1/4% Senior Exchangeable Preferred Stock due 2009
("Senior Preferred Stock")
Under the terms of a Deposit Agreement, dated as of July 25, 1997 (the "Deposit
Agreement"), among Jordan Telecommunication Products, Inc. (the "Company") and
Harris Trust and Savings Bank, as Depositary, the Company has deposited with the
Depositary, one share of Common Stock for each $1,000 liquidation preference
represented by the shares of Senior Preferred Stock represented by this
Certificate. Prior to the close of business on the earliest to occur of (i)
August 1, 1998; (ii) such earlier date as may be determined by Jefferies &
Company, Inc.; (iii) the date on which the Company mails notice of a Change of
Control (as defined in the Certificate of Designation) to holders of the Senior
Preferred Stock; (iv) in the event that the Company elects to exchange the
Senior Preferred Stock for Preferred Stock Exchange Notes pursuant to the
Certificate of Designation, the date on which the Company mails notice thereof
to holders of the Senior Preferred Stock; (v) in the event the Company elects to
redeem the Senior Preferred Stock pursuant to the Certificate of Designation the
date on which the Company mails notice thereof to holders of the Senior
Preferred Stock; and (vi) the date on which the Company consummates a public
offering of Common Stock (the earliest of such date being the "Separation
Date"), the registered owner of these shares of Senior Preferred Stock (the
"Holder") shall be deemed to be the beneficial owner of such shares of Common
Stock ("Deposited Common Stock"). From and after the Separation Date, the
Senior Preferred Stock shall be transferable separately (subject, in each case,
to such other restrictions on transfer, if any, as shall be applicable to the
Senior Preferred Stock or the Common Stock, as the case may be, in accordance
with any Applicable Law (as defined in the Deposit Agreement) or agreement). As
soon as practicable after the Separation Date, the Depositary shall request the
Company's then designated Registrar
<PAGE>
with respect to the Common Stock to deliver or mail to the Holder as of the
close of business on the Separation Date, at the address of such Holder as such
address shall appear on the Register (as defined in the Deposit Agreement),
certificates representing all the Deposited Common Stock which shall be
registered in the name of such Holder. The interest of the Holder thereof in
the Deposited Common Stock is not transferable prior to the close of business on
the Separation Date, except by and in connection with the transfer of these
shares of Senior Preferred Stock, and every transfer hereof by the Holder hereof
shall affect transfer of the interest of such holder in the Deposited Common
Stock. Subsequent to the close of business on the Separation Date, the Holder
of these shares of Senior Preferred Stock is not, by virtue of being such
Holder, the beneficial owner of any Deposited Common Stock. By accepting these
shares of Senior Preferred Stock, the Holder hereof shall be bound by all the
terms and provisions of said Deposit Agreement as fully and effectually as if he
had executed and delivered the same.
This certifies that
Cede & Co.
is the owner of Twenty-Four Thousand Seven Hundred Fifty and xx/100
FULLY PAID AND NON-ASSESSABLE SHARES OF SENIOR PREFERRED STOCK DUE 2009,
LIQUIDATION PREFERENCE $1,000 PER SHARE, OF
Jordan Telecommunication Products, Inc., a corporation formed under the laws of
the State of Delaware, transferable on the books of the Corporation by the
holder hereof in person or by its duly authorized Attorney upon the surrender of
this Certificate properly endorsed.
The Shares represented by this Certificate are subject to the Company's
Charter, Bylaws and Deposit Agreement as amended from time to time. The Company
will mail to the holder of this Certificate a copy of the Deposit Agreement
without charge after receipt of a written request therefor. This Certificate is
not valid unless countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signature
of its duly authorized officer.
DATED: July 25, 1997
/s/ Dominic J. Pileggi
----------------------
PRESIDENT
COUNTERSIGNED AND REGISTERED:
HARRIS TRUST AND SAVINGS BANK
TRANSFER AGENT AND REGISTRAR
/s/ Charles Zade
----------------
BY SECRETARY
AUTHORIZED SIGNATURE
<PAGE>
[BACK OF CERTIFICATE]
IMPORTANT NOTICE
----------------
JORDAN TELECOMMUNICATION PRODUCTS, INC.
THE CERTIFICATE OF INCORPORATION ON FILE IN THE OFFICE OF THE SECRETARY OF
STATE OF DELAWARE SETS FORTH A FULL STATEMENT OF (A) ALL OF THE DESIGNATIONS,
PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS,
LIMITATIONS AS TO DIVIDENDS AND OTHER DISTRIBUTIONS, QUALIFICATIONS, AND TERMS
AND CONDITIONS OF REDEMPTION, AND OTHER RELATIVE RIGHTS OF THE SHARES OF EACH
CLASS OF STOCK AUTHORIZED TO BE ISSUED AND (B) THE AUTHORITY OF THE BOARD OF
DIRECTORS TO ISSUE ANY PREFERRED OR SPECIAL CLASS IN SERIES, THE DIFFERENCES IN
THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES TO THE
EXTENT THEY HAVE BEEN SET AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET THE
RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES OF PREFERRED STOCK. THE
CORPORATION WILL FURNISH A COPY OF SUCH STATEMENT TO ANY HOLDER OF STOCK WITHOUT
CHARGE ON REQUEST TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in UNIF GIFT MIN ACT - _________________________
common (Cust) (Minor)
TEN ENT -- as tenants by under Uniform Gifts
the entireties to Minors Act
JT TEN -- as joint tenants _________________________
with the right (State)
of survivorship UNIF TRF MIN ACT - ________________________
and not as (Cust) (Minor)
tenants in (until age ____) under
common Uniform Transfers to
Minors Act
________________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, _________________________________________ hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
__________________________________________________________________________shares
represented by this Certificate, and do hereby irrevocably constitute
and appoint_____________________________________________________________Attorney
- --------------------------------------------------------------------------------
to transfer the shares on the books of the Corporation with full power of
substitution in the premises.
Dated _____________________________
----------------------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the face of
this Certificate in every particular, without
alteration or enlargement or any change whatever.
EACH HOLDER OF A CERTIFICATE, BY HIS ACCEPTANCE THEREOF, ACKNOWLEDGES AND
AGREES TO THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT, DATED AS OF JULY
25, 1997, AMONG THE COMPANY AND THE PARTIES NAMED ON THE SIGNATURE PAGE THEREOF
(THE "REGISTRATION RIGHTS AGREEMENT"), INCLUDING, BUT NOT LIMITED TO THE
OBLIGATIONS OF THE HOLDERS WITH RESPECT TO A REGISTRATION AND THE
INDEMNIFICATION OF THE COMPANY AND THE PURCHASERS (AS DEFINED THEREIN) TO THE
EXTENT PROVIDED THEREIN. THE COMPANY SHALL FURNISH TO ANY HOLDER OF A
CERTIFICATE UPON WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE REGISTRATION
RIGHTS AGREEMENT. REQUESTS MAY BE MADE TO: JORDAN TELECOMMUNICATION PRODUCTS,
ARBORLAKE CENTRE, 1751 LAKE COOK ROAD, SUITE 300, DEERFIELD, ILLINOIS 60015.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR PREFERRED STOCK IN
DEFINITIVE FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TRUST COMPANY ("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. THE DEPOSITARY SHALL ACT AS DEPOSITARY
UNTIL A SUCCESSOR SHALL BE APPOINTED BY THE COMPANY AND THE REGISTRAR. UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY
TO THE ISSUER OR ITS AGENT FOR
<PAGE>
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE
& CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY), 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.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE THAT IS TWO YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER
BE PROVIDED UNDER RULE 144(K) AS PERMITTING RESALES BY NON-AFFILIATES OF
RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY)
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT) THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
RULE 501(A)(1), (2), (3) OR (7) UNDER THE ACT THAT IS PURCHASING THE SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO , OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE ACT OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT,
SUBJECT TO THE COMPANY'S AND THE REGISTRAR'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE.
<PAGE>
Exhibit 4.11
JORDAN TELECOMMUNICATION PRODUCTS, INC.
$190,000,000 9 7/8% Series A Senior Notes due 2007
REGISTRATION RIGHTS AGREEMENT
-----------------------------
July 25, 1997
JEFFERIES & COMPANY, INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SMITH BARNEY INC.
c/o Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
JORDAN TELECOMMUNICATION PRODUCTS, INC., a Delaware corporation (the
"Company"), is issuing and selling to Jefferies & Company, Inc., Donaldson,
Lufkin & Jenrette Securities Corporation and Smith Barney Inc. (collectively,
the "Purchasers") upon the terms set forth in a purchase agreement, dated as of
July 21, 1997 (the "Purchase Agreement"), $190,000,000 aggregate principal
amount of its 9 7/8% Series A Senior Notes due 2007 (the "Notes"). As an
inducement to the Purchasers to enter into the Purchase Agreement, the Company
agrees with the Purchasers, for the benefit of the holders of the Securities
(defined below) (including, without limitation, the Purchasers), as follows:
<PAGE>
1. Definitions
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Advice: See Section 6.
Agreement: This Registration Rights Agreement.
Applicable Period: See Section 2.
Business Days: Any day other than (i) Saturday or Sunday, or (ii) a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.
Closing Date: July 25, 1997.
Effectiveness Date: The 120th day following the Closing Date.
Effectiveness Period: See Section 3.
Event Date: See Section 4.
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2.
Exchange Offer Registration Statement: See Section 2.
Exchange Securities: 9 7/8% Series B Senior Notes due 2007 of the
Company identical in all material respects to the Notes, except for references
to series and restrictive legends.
Filing Date: The 60th day following the Closing Date.
Holder: Each holder of Registrable Securities.
2
<PAGE>
indemnified party: See Section 8.
indemnifying parties: See Section 8.
Indenture: The Indenture, dated the date hereof, between the Company and
First Trust National Association, as trustee, pursuant to which the Notes are
being issued, as amended or supplemented from time to time, in accordance with
the terms thereof.
Initial Shelf Registration: See Section 3.
Losses: See Section 8.
NASD: The National Association of Securities Dealers, Inc.
Participating Broker-Dealer: See Section 2.
Person: An individual, trustee, corporation, partnership, joint stock
company, joint venture, trust, unincorporated organization or government or any
agency or political subdivision thereof, union, business association, firm or
other entity.
Private Exchange: See Section 2.
Private Exchange Securities: See Section 2.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities covered by such Registration
Statement, and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
Registrable Securities: The (i) Notes, (ii) Private Exchange Securities
and (iii) Exchange Securities received in the Exchange Offer that may not be
sold without restriction under federal or state securities law.
3
<PAGE>
Registration Statement: Any registration statement of the Company that
covers any of the Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or any similar rule (other than Rule 144A) or regulation
hereafter adopted by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be amended
from time to time, or any similar rule (other than Rule 144) or regulation
hereafter adopted by the SEC.
Rule 415: Rule 415 under the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
SEC.
SEC: The Securities and Exchange Commission.
Securities: The Notes, the Private Exchange Securities and the Exchange
Securities, collectively.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2.
Shelf Registration: The Initial Shelf Registration and any Subsequent
Shelf Registration.
Special Counsel: Counsel chosen by the holders of a majority in aggregate
principal amount of Securities.
Subsequent Shelf Registration: See Section 3.
TIA: The Trust Indenture Act of 1939, as amended.
4
<PAGE>
Trustee: The trustee under the Indenture and, if any, the trustee under
any indenture governing the Exchange Securities or the Private Exchange
Securities.
Underwritten Registration or Underwritten Offering: A registration in which
securities of the Company are sold to an underwriter for reoffering to the
public.
Weekly Liquidated Damages Amount: See Section 4.
2. Exchange Offer
(a) The Company shall (i) prepare and file with the SEC promptly after the
date hereof, but in no event later than the Filing Date, a registration
statement (the "Exchange Offer Registration Statement") on an appropriate form
under the Securities Act with respect to a proposed offer (the "Exchange Offer")
to the Holders to issue and deliver to such Holders, in exchange for the Notes,
a like aggregate principal amount of Exchange Securities, (ii) use its best
efforts to cause the Exchange Offer Registration Statement to become effective
as promptly as practicable after the filing thereof, but in no event later than
the Effectiveness Date, (iii) use its best efforts to keep the Exchange Offer
Registration Statement effective until the consummation of the Exchange Offer
pursuant to its terms, and (iv) unless the Exchange Offer would not be permitted
by a policy of the SEC, commence the Exchange Offer and use its best efforts to
issue, on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement is declared effective, Exchange Securities in
exchange for all Notes tendered prior thereto pursuant to the Exchange Offer.
The Exchange Offer shall not be subject to any conditions, other than that the
Exchange Offer does not violate Applicable Law or any applicable interpretation
of the staff of the SEC.
(b) The Exchange Securities shall be issued under, and entitled to the
benefits of, the Indenture or a trust indenture that is identical to the
Indenture (other than references to series, provisions with regard to
restrictive legends and such changes as are necessary to comply with any
requirements of the SEC to effect or maintain the qualification thereof under
the TIA).
(c) In connection with the Exchange Offer, the Company shall:
5
<PAGE>
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate letter
of transmittal that is an exhibit thereto and related documents;
(ii) use its best efforts to keep the Exchange Offer open for not
less than 20 Business Days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law);
(iii) utilize the services of a depository for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York;
(iv) permit Holders to withdraw tendered Notes at any time prior to
12:00 midnight, New York time, on the last Business Day on which the Exchange
Offer shall remain open; and
(v) otherwise comply in all material respects with all laws
applicable to the Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer, the
Company shall:
(i) accept for exchange all Notes validly tendered and not validly
withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so accepted
for exchange; and
(iii) use its best efforts to cause the Trustee promptly to
authenticate and deliver to each Holder of Notes, Exchange Securities equal in
aggregate principal amount to the Notes of such Holder so accepted for
exchange.
(e) Interest on each Exchange Security and Private Exchange Security will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the date of original issue of the Notes. Each Exchange Security and
Private Exchange Security shall bear interest at the rate set forth thereon;
provided that interest with respect to the period prior to the issuance thereof
shall accrue at the rate or rates borne by the Notes from time to time during
such period.
6
<PAGE>
(f) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
containing a summary statement of the positions taken or policies made by the
staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Securities received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of Distribution"
section shall also allow the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including (without
limitation) all Participating Brokers-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Securities. The Company shall use its best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
Prospectus to be lawfully delivered by all Persons subject to the prospectus
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
Securities; provided that such period shall not exceed 180 days after
consummation of the Exchange Offer (as such period may be extended pursuant to
the last paragraph of Section 6 hereof (the "Applicable Period")).
(g) If, prior to consummation of the Exchange Offer, the Purchasers hold
any Securities acquired by them and having the status as an unsold allotment in
the initial distribution, the Company shall, upon the request of the Purchasers,
simultaneously with the delivery of the Exchange Securities in the Exchange
Offer, issue (pursuant to the same indenture as the Exchange Securities) and
deliver to the Purchasers, in exchange for the Securities held by the Purchasers
(the "Private Exchange"), a like principal amount of debt securities of the
Company that are identical to the Exchange Securities (the "Private Exchange
Securities"). The Private Exchange Securities shall bear the same CUSIP number
as the Exchange Securities.
(h) The Company may require each Holder participating in the Exchange
Offer to represent to the Company that at the time of the consummation of the
Exchange Offer (i) any Exchange Securities received by such Holder in the
Exchange Offer will be acquired in the ordinary course of its business, (ii)
such Holder will have no arrangement or understanding with any Person to
participate in the distribution of the Exchange Securities within the meaning of
the Securities Act or resale of the Exchange Securities in violation of the
Securities Act, (iii) 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
Securities, (iv) if such Holder is a
7
<PAGE>
broker-dealer that will receive Exchange Securities for its own account in
exchange for Notes that were acquired as a result of market-making or other
trading activities, that it will deliver a prospectus, as required by law, in
connection with any resale of such Exchange Securities, and (v) if such Holder
is an affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act applicable to it.
(i) If (i) prior to the consummation of the Exchange Offer, either the
Company or a majority of the holders of Registrable Securities determines in its
or their reasonable judgment that (A) the Exchange Securities would not, upon
receipt, be tradeable by the Holders thereof without restriction under the
Securities Act and the Exchange Act and without material restrictions under
applicable Blue Sky or state securities laws, or (B) the interests of the
Holders under this Agreement, taken as a whole, would be materially adversely
affected by the consummation of the Exchange Offer, (ii) applicable
interpretations of the staff of the SEC would not permit the consummation of the
Exchange Offer prior to the Effectiveness Date, (iii) subsequent to the
consummation of the Private Exchange, the Purchasers so request, (iv) the
Exchange Offer is not consummated within 150 days of the Closing Date for any
reason or (v) in the case of any Holder not permitted to participate in the
Exchange Offer or of any Holder participating in the Exchange Offer that
receives Exchange Securities that may not be sold without restriction under
state and federal securities laws and, in either case contemplated by this
clause (v), such Holder notifies the Company within one year of the consummation
of the Exchange Offer, then the Company shall promptly deliver to the Holders
(or in the case of any occurrence of the event described in clause (v) hereof,
to any such Holder) and the Trustee notice thereof (the "Shelf Notice") and
shall file an Initial Shelf Registration pursuant to Section 3.
3. Shelf Registration
If a Shelf Notice is required to be delivered pursuant to Section
2(i)(i), (ii) or (iv), then this section shall apply to all Registrable
Securities. Otherwise, upon consummation of the Exchange Offer in accordance
with Section 2, the provisions of this section shall apply solely with respect
to (i) Notes held by any Holder thereof not permitted to participate in the
Exchange Offer, (ii) Notes held by the Purchasers and (iii) Exchange Securities
that are not freely tradeable as contemplated by Section 2(i)(v) hereof.
8
<PAGE>
(a) Initial Shelf Registration. The Company shall, under the
circumstances set forth in Section 2(i), prepare and file with the SEC a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Securities (the "Initial Shelf
Registration"). The Company shall use its best efforts to file the Initial Shelf
Registration within 20 days of the delivery of the Shelf Notice or as promptly
as possible following the request of the Purchasers or, if later, by the Filing
Date. The Initial Shelf Registration shall be an appropriate form permitting
registration of such Registrable Securities for resale by such Holders in the
manner or manners designated by a majority in principal amount of the securities
then outstanding (including, without limitation, one or more under written
offerings). The Company shall (i) not permit any securities other than the
Registrable Securities to be included in any Shelf Registration, and (ii) use
its best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act as promptly as practicable after the filing
thereof and to keep the Initial Shelf Registration continuously effective under
the Securities Act until the date that is 24 months from the Effectiveness Date
(subject to extension pursuant to the last paragraph of Section 6 hereof) (the
"Effectiveness Period"), or such shorter period ending when (i) all Registrable
Securities covered by the Initial Shelf Registration have been sold or (ii) a
Subsequent Shelf Registration covering all of the Registrable Securities has
been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If any Shelf Registration ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the securities registered thereunder), the
Company shall use its reasonable best efforts to obtain the prompt withdrawal of
any order suspending the effectiveness thereof, and in any event shall within 30
days of such cessation of effectiveness amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Securities (a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Company
shall use its best efforts to cause the Subsequent Shelf Registration to be
declared effective as soon as practicable after such filing and to keep such
Subsequent Shelf Registration continuously effective for a period equal to the
number of days in the Effectiveness Period less the aggregate number of days
during which the Initial Shelf Registration, and any Subsequent Shelf
Registration, was previously effective.
9
<PAGE>
4. Liquidated Damages.
(a) The Company acknowledges and agrees that the Holders will suffer
damages, and that it would not be feasible to ascertain the extent of such
damages with precision, if the Company fails to fulfill its obligations
hereunder. Accordingly, in the event of such failure, the Company agrees to pay
liquidated damages to each Holder under the circumstances and to the extent set
forth below:
(i) if neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration has been filed with the SEC on or prior to the Filing
Date; or
(ii) if neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to the
Effective ness Date; or
(iii) if the Company has not exchanged Exchange Securities for all
Notes validly tendered in accordance with the terms of the Exchange Offer within
30 business days after the date on which an Exchange Offer Registration
Statement is declared effective by the SEC; or
(iv) if a Shelf Registration is filed and declared effective by the
SEC but thereafter ceases to be effective without being succeeded within 30 days
by a Subsequent Shelf Registration filed and declared effective, other than as a
result of a change in applicable laws or a published change in SEC policy such
that the Company, using reasonable efforts, is not able to have the Subsequent
Shelf Registration declared effective;
(each of the foregoing an "Event," and the date on which the Event occurs being
referred to herein as an "Event Date").
Upon the occurrence of any Event, the Company shall pay, or cause to
be paid, in addition to amounts otherwise due under the Indenture and the
Registrable Securities, as liquidated damages, and not as a penalty, to each
Holder of a Registrable Security, an additional amount (the "Weekly Liquidated
Damages Amount") equal to (A) for each weekly period beginning on the Event Date
for the first 90-day period immediately following such Event Date, $.05 per week
per $1,000 principal amount of Registrable Securities held by such Holder, and
(B) for each weekly period beginning with the first full week after the 90-day
10
<PAGE>
period set forth in the foregoing clause (A), $.10 per week per $1,000 principal
amount of Registrable Securities held by such Holder; provided that such
liquidated damages will, in each case, cease to accrue (subject to the
occurrence of another Event) on the date on which all Events have been cured. An
Event under clause (i) above shall be cured on the date that either the Exchange
Offer Registration Statement or the Initial Shelf Registration is filed with the
SEC; an Event under clause (ii) above shall be cured on the date that either the
Exchange Offer Registration Statement or the Initial Shelf Registration is
declared effective by the SEC; an Event under clause (iii) above shall be cured
on the earlier of the date (A) the Exchange Offer is consummated with respect to
all Notes validly tendered or (B) the Company delivers a Shelf Notice to the
Holders; and an Event under clause (iv) above shall be cured on the earlier of
(A) the date on which the applicable Shelf Registration is no longer subject to
an order suspending the effectiveness thereof or proceedings relating thereto or
(B) a new Subsequent Shelf Registration is declared effective.
(b) The Company shall notify the Trustee within five Business Days
after each Event Date. The Company shall pay the liquidated damages due on the
Registrable Securities by depositing with the Trustee, in trust, for the benefit
of the Holders thereof, by 12:00 noon, New York City time, on or before the
applicable semi-annual interest payment date for the Registrable Securities,
immediately avail able funds in sums sufficient to pay the liquidated damages
then due. The liquidated damages amount due shall be payable on each interest
payment date to the record Holder of Registrable Securities entitled to receive
the interest payment to be made on such date as set forth in the Indenture.
5. [Intentionally left blank]
6. Registration Procedures
-----------------------
In connection with the registration of any Securities pursuant to
Sections 2 or 3 hereof, the Company shall effect such registrations to permit
the sale of such Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall:
(a) Prepare and file with the SEC, as soon as practicable after the
date hereof but in any event on or prior to the Filing Date, or such later date
as is provided for in Section 3, a Registration Statement or Registration
Statements as pre scribed by Section 2 or 3, and use its best efforts to cause
each such Registration Statement to become effective and remain effective as
provided
11
<PAGE>
herein; provided, that, if (i) such filing is pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall, if requested, furnish to
and afford the Holders of the Registrable Securities covered by such
Registration Statement, their Special Counsel, each Participating Broker-Dealer,
the managing underwriters, if any, and their counsel, a reasonable opportunity
to review and make available for inspection by such Persons copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed, such financial and other
information and books and records of the Company, and cause the officers,
directors and employees of the Company, Company counsel and independent
certified public accountants of the Company, to respond to such inquiries, as
shall be necessary, in the reasonable opinion of respective counsel to such
Holders, Participating Broker-Dealer and underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company may, prior
to furnishing any such information, require each Holder, its counsel, each
Participating Broker-Dealer, the managing underwriters and their counsel to
execute a confidentiality agreement reasonably satisfactory to the Company to
keep confidential any non-public information relating to the Company received
by such person and not disclose such information (other than to an Affiliate or
prospective purchaser who agrees to respect the confidentiality provisions of
this Section 6(a)) until such information has been made generally available to
the public unless the release of such information is required by law or is
necessary to respond to inquiries of regulatory authorities (including the
National Association of Insurance Commissioners, or similar organizations or
their successors). The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which the
Holders must be afforded an opportunity to review prior to the filing of such
document, if the Holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement, their Special
Counsel, any Participating Broker-Dealer or the managing underwriters, if any,
or their counsel shall reasonably object in writing.
(b) Provide an indenture trustee for the Registrable Securities or the
Exchange Securities, as the case may be, and cause the Indenture (or other
indenture relating to the Registrable Securities) to be qualified under the TIA
not later than the effective date of the first Registration Statement; and in
connection there with, to effect such changes to such indenture as may be
required for such
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indenture to be so qualified in accordance with the terms of the TIA; and
execute, and use its best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(c) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods required
hereby; cause the related Prospectus to be supplemented by any Prospectus
supplement required by Applicable Law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply in all material respects with the provisions of the
Securities Act and the Exchange Act applicable thereto with respect to the
disposition of all securities covered by such Registration Statement, as so
amended, or in such Prospectus, as so supplemented, in accordance with the
intended methods of distribution set forth in such Registration Statement or
Prospectus as so amended.
(d) Furnish to such selling Holders and Participating Broker-Dealers
who so request (i) upon the Company's receipt, a copy of the order of the SEC
declaring such Registration Statement and any post-effective amendment thereto
effective and (ii) such reasonable number of copies of such Registration
Statement and of each amendment and supplement thereto (in each case including
any documents incorporated therein by reference and all exhibits), (iii) such
reasonable number of copies of the Prospectus included in such Registration
Statement (including each preliminary Prospectus), and such reasonable number of
copies of the final Prospectus as filed by the Company pursuant to Rule 424(b)
under the Securities Act, in conformity with the requirements of the Securities
Act, and (iv) such other documents (including any amendments required to be
filed pursuant to clause (c) of this Section), as any such Person may reasonably
request. The Company hereby consents to the use of the Prospectus by each of the
selling Holders of Registrable Securities or each such Participating Broker-
Dealer, as the case may be, and the underwriters or agents, if any, and dealers
(if any), in connection with the offering and sale of the Registrable Securities
covered by, or the sale by Participating Broker-Dealers of the Exchange
Securities pursuant to, such Prospectus and any amendment thereto.
(e) If (A) a Shelf Registration is filed pursuant to Section 3 or (B)
a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
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Applicable Period, notify the selling Holders of Registrable Securities, their
Special Counsel, each Participating Broker-Dealer and the managing underwriters,
if any, promptly (but in any event within two Business Days), and confirm such
notice in writing, (i) when a Prospectus has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective under the Securities Act, (ii) of the issuance by the SEC of any stop
order suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any Prospectus or the initiation of any
proceedings for that purpose, (iii) if, at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Securities, the representations and warranties of the Company
contained in any agreement (including any underwriting agreement) contemplated
by Section 6(n) below cease to be true and correct in any material respect, (iv)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of a Registration Statement
or any of the Registrable Securities or the Exchange Securities to be sold by
any Participating Broker-Dealer for offer or sale in any jurisdiction, or the
contemplation, initiation or threatening of any proceeding for such purpose, (v)
of the happening of any event that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(f) Use its best efforts to register or qualify, and, if applicable,
to cooperate with the selling Holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, Securities to be included in a Registration Statement for
offer and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any selling Holder, Participating Broker-Dealer or
the managing underwriters reasonably request in writing; and, if Securities are
offered other than through an Underwritten Offering, the Company shall cause its
counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 6(f) at the
expense of the Company; keep each such registration or qualification (or
exemption therefrom) effective during the period such Registra-
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tion Statement is required to be kept effective and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions
of the Securities covered by the applicable 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, (ii) take action
that would subject it to general service of process in any jurisdiction where it
is not so subject or (iii) subject it to taxation in excess of a nominal dollar
amount in any such jurisdiction where it is not then subject.
(g) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Securities for sale in any
jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible time.
(h) If (A) a Shelf Registration is filed pursuant to Section 3 or (B)
a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, and if requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Securities, (i) promptly incorporate in a Prospectus or post-effective amendment
such information as the managing underwriters, if any, or such Holders
reasonably request to be included therein required to comply with any Applicable
Law and (ii) make all required filings of such Prospectus or such post-effective
amendment as soon as practicable after the Company has received notification of
such matters required by Applicable Law to be incorporated in such Prospectus or
post-effective amendment.
(i) If (A) a Shelf Registration is filed pursuant to Section 3 or (B)
a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, cooperate with the selling Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends, other than as required by applicable
law, and shall be in a form eligible for deposit with The Depository Trust
Company ("DTC"); and enable such Registrable Securities to be in such
denominations and registered in
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such names as the managing underwriters, if any, or Holders may reasonably
request.
(j) If (i) a Shelf Registration is filed pursuant to Section 3 or
(ii) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, upon the occurrence of any event contemplated by Section
6(e)(v) or 6(e)(vi) above, as promptly as practicable prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder
or to the purchasers of the Exchange Securities to whom such Prospectus will be
delivered by a Participating Broker-Dealer, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) Use its best efforts to cause the Securities covered by a
Registration Statement to be rated with the appropriate rating agencies, if
appropriate, if so requested by the Holders of a majority in aggregate
principal amount of Securities covered by such Registration Statement or the
managing underwriters, if any.
(l) Prior to the effective date of the first Registration Statement
relating to the Securities, (i) provide the applicable trustee with printed
certificates for the Securities in a form eligible for deposit with DTC and (ii)
provide a CUSIP number for each of the Securities.
(m) Use its best efforts to cause all Securities covered by such
Registration Statement to be listed on each securities exchange, if any, on
which similar debt securities issued by the Company are then listed.
(n) If a Shelf Registration is filed pursuant to Section 3, enter
into such agreements (including an underwriting agreement in form, scope and
substance as is customary in Underwritten Offerings) and take all such other
actions in connection therewith (including those reasonably requested by the
managing underwriters, if any, or the Holders of a majority of the Registrable
Securities being sold) in order to expedite or facilitate the registration or
the
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<PAGE>
disposition of such Registrable Securities, and in such connection, whether or
not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, (i) make such representations and
warranties to the Holders and the underwriters, if any, with respect to the
business of the Company and its Subsidiaries, and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and scope as are custom-
arily made by issuers to underwriters in Underwritten Offerings, and confirm the
same if and when reasonably requested; (ii) obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters, if
any, and the Holders of a majority in principal amount of the Registrable
Securities being sold), addressed to each selling Holder and each of the
underwriters, if any, covering the matters customarily covered in opinions
requested in Underwritten Offerings; (iii) obtain "cold comfort" letters and
updates thereof (which letters and updates (in form, scope and substance) shall
be reasonably satisfactory to the managing underwriters) from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any Subsidiary of the Company or of
any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters and each selling Holder, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with Underwritten Offerings and
such other matters as reasonably requested by underwriters; and (iv) deliver
such documents and certificates as may be reasonably requested by the Holders of
a majority in principal amount of the Registrable Securities being sold and the
managing underwriters, if any, to evidence the continued validity of the
representations and warranties of the Company and its Subsidiaries made pursuant
to clause (i) above and to evidence compliance with any conditions contained in
the underwriting agreement or other similar agreement entered into by the
Company.
(o) Comply with all applicable rules and regulations of the SEC and make
generally available to its security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing on the first day of the
fiscal quarter following each fiscal quarter in which Registrable 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
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first fiscal quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
(p) Upon consummation of an Exchange Offer or Private Exchange,
obtain an opinion of counsel to the Company (in form, scope and substance
reasonably satisfactory to the Purchasers), addressed to all Holders
participating in the Exchange Offer or Private Exchange, as the case may be, to
the effect that (i) the Company has duly authorized, executed and delivered the
Exchange Securities or the Private Exchange Securities, as the case may be, and
the Indenture and (ii) the Exchange Securities or the Private Exchange
Securities, as the case may be, and the Indenture constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforcement may be
subject to (x) applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and (y) general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
(q) If an Exchange Offer or Private Exchange is to be consummated,
upon delivery of the Registrable Securities by such Holders to the Company (or
to such other Person as directed by the Company) in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, the Company
shall mark, or cause to be marked, on such Registrable Securities that such
Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be; in no event
shall such Registrable Securities be marked as paid or otherwise satisfied.
(r) Cooperate with each seller of Registrable Securities covered by
any Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD.
(s) Use its best efforts to take all other steps necessary to effect
the registration of the Registrable Securities covered by a Registration
Statement contemplated hereby.
As a condition to its participation in the Exchange Offer or a Shelf
Registration pursuant to the terms of this Agreement, each Holder of Registrable
Securities shall furnish, upon the written request of the Company, a written
representation to the Company (which may be contained in the letter of transmit-
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<PAGE>
tal contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of the Company, (B) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Securities to be issued in
the Exchange Offer and (C) it is acquiring the Exchange Securities or the
Private Exchange Securities, as applicable, in its ordinary course of business.
Notwithstanding anything to the contrary contained herein, if (A) the
Board of Directors of the Company determines in good faith that it is in the
best interests of the Company not to disclose the existence of or facts
surrounding any proposed or pending material corporate transaction involving the
Company or its subsidiaries and (B) the Company notifies the Holders within two
Business Days after the Board of Directors makes such determination, the Company
may allow the Shelf Registration Statement to fail to be effective and usable as
a result of such nondisclosure for up to 60 days during the Effectiveness
Period, but in no event for any period in excess of 30 consecutive days;
provided, however, that the Effectiveness Period shall be extended by the number
of days during which such registration statement was not effective or usable
pursuant to the foregoing provisions; provided, further, that the Company shall
be required to pay any applicable liquidated damages pursuant to Section 4
during any such period.
Each Holder and each Participating Broker-Dealer agrees by acquisition
of such Registrable Securities or Exchange Securities of any Participating
Broker-Dealer that, upon receipt of written notice from the Company of the
happen ing of any event of the kind described in Section 6(e)(ii), 6(e)(iv),
6(e)(v) or 6(e)(vi), such Holder will forthwith discontinue disposition (in the
jurisdictions specified in a notice of a Section 6(e)(iv) event, and elsewhere
in a notice of a Section 6(e)(ii), 6(e)(v) or 6(e)(vi) event) of such Securities
covered by such Registration Statement or Prospectus until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
6(j), or until it is advised in writing (the "Advice") by the Company that
offers or sales in a particular jurisdiction may be resumed or that the use of
the applicable Prospectus may be resumed, as the case may be, and has received
copies of any amendments or supplements thereto. If the Company shall give such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of such
Securities covered by such Registration Statement shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 6(j) or
(y) the Advice.
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7. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation:
(i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the
NASD and (B) fees and expenses of compliance with state securities or Blue
Sky laws (including, without limitation, reasonable fees and disbursements
of counsel in connection with Blue Sky qualifications of the Registrable
Securities or Exchange Securities and determination of the eligibility of
the Registrable Securities or Exchange Securities for investment under the
laws of such jurisdictions (x) where the Holders are located, in the case
of the Exchange Securities, or (y) as provided in Section 6(f), in the case
of Registrable Securities or Exchange Securities to be sold by a
Participating Broker-Dealer during the Applicable Period));
(ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities or Exchange Securities
in a form eligible for deposit with DTC and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriters, if any,
or, in respect of Registrable Securities or Exchange Securities to be sold
by a Participating Broker-Dealer during the Applicable Period, by the
Holders of a majority in aggregate principal amount of the Registrable
Securities included in any Registration Statement or of such Exchange
Securities, as the case may be);
(iii) messenger, telephone, duplication, word processing and
delivery expenses incurred by the Company in the performance of its
obligations hereunder;
(iv) fees and disbursements of counsel for the Company;
(v) fees and disbursements of all independent certified public
accountants referred to in Section 6(n)(iii) (including, without
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limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance);
(vi) Securities Act liability insurance, if the Company so desires
such insurance;
(vii) fees and expenses of all other Persons retained by the Company;
expenses of the Company (including, without limitation, all salaries and
expenses of officers and employees of the Company performing legal or
accounting duties); and the expense of any annual audit; and
(viii) rating agency fees and the fees and expenses incurred in
connection with the listing of the Securities to be registered on any
securities exchange.
(b) The Company shall reimburse the Holders for the reasonable fees and
disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Registrable Securities to be included in any Registration Statement which
counsel shall be reasonably satisfactory to the Company.
8. Indemnification
---------------
(a) Indemnification by the Company. The Company shall, without limitation
as to time, indemnify and hold harmless each Holder and each Participating
Broker-Dealer selling Exchange Securities during the Applicable Period, each
Person who controls each such Holder (within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act) and the officers,
directors, partners, employees, representatives and agents of each such Holder,
Participating Broker-Dealer and controlling person, to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable costs of preparation and reasonable
attorneys' fees) and expenses (including, without limitation, reasonable costs
and expenses incurred in connection with investigating, preparing, pursuing or
defending against any of the foregoing) (collectively, "Losses"), as incurred,
directly or indirectly caused by, related to, based upon, arising out of or in
connection with any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of prospectus, or in
any amendment or supplement thereto, or in any preliminary prospectus, or any
21
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omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar as such
Losses are based upon information relating to such Holder or Participating
Broker-Dealer and furnished in writing to the Company (or reviewed and approved
in writing) by such Holder or Participating Broker-Dealer expressly for use
therein; provided, however, that the Company shall not be liable to any
Indemnified Party to the extent that any such Losses arise solely out of an
untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus, or Prospectus that has been amended or
supplemented, if (i) such Indemnified Party or related Holder of a Registrable
Security failed to send or deliver a copy of the Prospectus, as then amended or
supplemented, with or prior to the delivery of written confirmation of the sale
by such Indemnified Party or the related Holder of a Registrable Security to the
person asserting the claim from which such Losses arise, (ii) the Prospectus, as
amended or supplemented, would have corrected such untrue statement or alleged
untrue statement or omission or alleged omission, and (iii) the Company has
complied with its obligations under Section 6(e) hereof; provided, further, that
the Company shall not be liable to any Indemnified Party to the extent that any
such Losses are a result of the use by the Indemnified Party of any Prospectus,
when, upon receipt of a notice from the Company of the existence of any fact of
the kind described in Section 6(e) and as contemplated by the last paragraph of
Section 6, the Indemnified Party or the related Holder was not permitted to do
so. The Company shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers, directors, agents and employees and each Person
who controls such Persons (within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act) to the same extent as provided above
with respect to the indemnification of the Holders or the Participating Broker-
Dealer.
(b) Indemnification by Holder of Registrable Securities. In connection
with any Registration Statement, Prospectus or form of prospectus, any amendment
or supplement thereto, or any preliminary prospectus in which a Holder is
participating, such Holder shall furnish to the Company in writing such
information as the Company reasonably requests for use in connection with any
Registration State Statement, Prospectus or form of prospectus, any amendment or
supplement thereto, or any preliminary prospectus and shall, without limitation
as to time, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person, if any, who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20(a) of the Exchange
22
<PAGE>
Act), and the directors, officers, agents or employees of such controlling
persons, to the fullest extent lawful, from and against all Losses arising out
of or based upon any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading to the extent, but only
to the extent, that such untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact is contained in
any information so furnished in writing by such Holder to the Company expressly
for use therein. In no event shall the liability of any selling Holder be
greater in amount than the dollar amount of the proceeds (net of payment of all
expenses) received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"indemnified party"), such indemnified party shall promptly notify the party or
parties from which such indemnity is sought (the "indemnifying parties") in
writing; provided that the failure to so notify the indemnifying parties shall
not relieve the indemnifying parties from any obligation or liability except to
the extent (but only to the extent) that it shall be finally determined by a
court of competent jurisdiction (which determination is not subject to appeal)
that the indemnifying parties have been prejudiced materially by such failure.
The indemnifying party shall have the right, exercisable by giving written
notice to an indemnified party, within 20 business days after receipt of written
notice from such indemnified party of such Proceeding, to assume, at its
expense, the defense of any such Proceeding, provided that 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; or (2) the
indemnifying party shall have failed promptly 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 party or any of its affiliates or controlling persons, and such
indemnified party shall have been advised by counsel that there may be one or
more defenses available to such indemnified party that are in addition to, or in
conflict with, those defenses
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<PAGE>
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 reasonable fees and expenses of such counsel
shall be at the expense of the indemnify ing 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 such indemnified
party).
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 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 by reason of such
settlement or judgment. The indemnifying party shall not consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
indemnified party of a release, in form and substance reasonably satisfactory to
the indemnified party, from all liability in respect of such Proceeding for
which such indemnified party would be entitled to indemnification hereunder
(whether or not any indemnified party is a party thereto).
(d) Contribution. If the indemnification provided for in this Section
8 is unavailable to an indemnified party or is insufficient to hold such
indemnified party harmless for any Losses in respect of which this Section 8
would otherwise apply by its terms (other than by reason of exceptions provided
in this Section 8), then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have a joint and several obligation
to contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of a material
fact or omission or alleged
24
<PAGE>
omission to state a material fact relates to information supplied by such
indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
statement or omission. The amount paid or payable by an indemnified party as a
result of any Losses shall be deemed to include any legal or other fees or
expenses incurred by such party in connection with any Proceeding, to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in Section 8(a) or 8(b) was available to such
party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 8(d), an indemnifying
party that is a selling Holder shall not be required to contribute, in the
aggregate, any amount in excess of such Holder's Maximum Contribution Amount. A
selling Holder's "Maximum Contribution Amount" shall equal the excess of (i) the
aggregate proceeds received by such Holder pursuant to the sale of such
Registrable Securities over (ii) the aggregate amount of damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 8
are in addition to any liability that the indemnifying parties may have to the
indemnified parties.
9. Rule 144 and Rule 144A
The Company covenants that it shall (a) file the reports required to
be filed by it (if so required) under the Securities Act and the Exchange Act in
a timely manner and, if at any time any such Person is not required to file such
reports, it will, upon the request of any Holder, make publicly available other
information necessary to permit sales pursuant to Rule 144 and Rule 144A and (b)
take such further action as any Holder may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act pursuant to the exemptions
provided by Rule 144 and Rule 144A. Upon the request of any Holder, the
25
<PAGE>
Company shall deliver to such Holder a written statement as to whether they have
complied with such information and requirements.
10. Underwritten Registrations
--------------------------
If any of the Registrable Securities covered by any Shelf Registration
are to be sold in an Underwritten Offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Securities included in such offering and shall be reasonably acceptable to the
Company.
No Holder of Registrable Securities may participate in any Under
written Registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, underwriting
agreements, powers of attorney, lock-up letters and other documents reasonably
required under the terms of such underwriting arrangements.
11. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights provided herein, in the Indenture or, in the case of the
Purchasers, in the Purchase Agreement, or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not entered into, as
of the date hereof, and shall not enter into, after the date of this Agreement,
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof.
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<PAGE>
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding aggregate principal amount of
Registrable Securities; provided that Section 8 shall not be amended, modified
or supplemented, and waivers or consents to departures from this proviso may not
be given, unless the Company has obtained the written consent of each Holder.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders whose securities are being sold pursuant to a Registration Statement and
that does not directly or indirectly affect the rights of other Holders may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Securities being sold by such Holders pursuant to such Registration
Statement, provided that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(d) Notices. All notices and other communications (including, without
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, certified first-
class mail, return receipt requested, next-day air courier or facsimile:
(i) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
11(d), which address initially is, with respect to each Holder, the address
of such Holder maintained by the Registrar under the Indenture, with a copy
to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York 10022, telecopy number (212) 735-2000, Attention: Alan G. Straus,
Esq.; and
(ii) if to the Company, initially ArborLake Center, 1751 Lake
Cook Road, Suite 550, Deerfield, Illinois 60015, telecopy number (847) 945-
9909, Attention: Chief Executive Officer, and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 11(d), with copies to Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois 60603, telecopy number (312) 701-7711, Attention:
Philip J. Niehoff, Esq.
27
<PAGE>
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FED FEDERAL COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF
THE AFORE SAID COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT
MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT
IT MAY NOW OR HERE AFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT
28
<PAGE>
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY
IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS SAID ADDRESS, SUCH
SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY
IN ANY OTHER JURISDICTION.
(i) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
that may be hereafter declared invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Company in
respect of securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Attorneys' Fees. In any Proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the courts, shall be
entitled to
29
<PAGE>
recover reasonable attorneys' fees in addition to its costs and expenses and any
other available remedy.
(l) Securities Held by the Company or its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
(other than Holders deemed to be such affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(m) Third Party Beneficiaries. Each purchaser who purchases the Notes
from the Purchasers is intended to be a beneficiary of the Company's covenants
contained herein to the same extent as if the Notes were sold and those
covenants were made directly to such purchaser by the Company.
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
By: /s/ Dominic J. Pileggi
----------------------------
Name: Dominic J. Pileggi
Title: President and Chief
Executive Officer
ACCEPTED AND AGREED TO:
JEFFERIES & COMPANY, INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SMITH BARNEY INC.
By: JEFFERIES & COMPANY, INC.
By: /s/ M. Brent Stevens
--------------------------
Name: M. Brent Stevens
Title: Managing Director
<PAGE>
Exhibit 4.12
JORDAN TELECOMMUNICATION PRODUCTS, INC.
$120,000,000 11 3/4% Series A Senior Discount Notes due 2007
REGISTRATION RIGHTS AGREEMENT
-----------------------------
July 25, 1997
JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
JORDAN TELECOMMUNICATION PRODUCTS, INC., a Dela ware corporation (the
"Company"), is issuing and selling to Jefferies & Company, Inc. (the
"Purchaser") upon the terms set forth in a purchase agreement, dated as of July
21, 1997 (the "Purchase Agreement"), $120,000,000 principal amount at maturity
($85,034,280 initial Accreted Value (as defined herein)) of its 11 3/4% Series A
Senior Discount Notes due 2007 (the "Notes"). As an inducement to the Purchaser
to enter into the Purchase Agreement, the Company agrees with the Purchaser, for
the benefit of the holders of the Securities (defined below) (including, without
limitation, the Purchaser), as follows:
1. Definitions
-----------
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Accreted Value: With respect to any Note, means (i) as of any date
prior to August 1, 2000, the sum of (a) the initial offering price of such
<PAGE>
Note, and (b) the portion of the original issue discount on such Note (which for
this purpose shall be deemed to be the excess of the principal amount over the
initial offering price) that has been amortized with respect to such Note
through such date, such original issue discount to be amortized at the rate of
11 3/4% per annum (such percentage being expressed as a percentage of the sum of
the initial offering price plus previously amortized original issue discount)
using semi-annual compounding of such rate on each August 1 and February 1,
commencing from the date of original issuance of the Notes through such date,
and (ii) on and after August 1, 2000 the principal amount of such Note.
Advice: See Section 6.
Agreement: This Registration Rights Agreement.
Applicable Period: See Section 2.
Business Days: Any day other than (i) Saturday or Sunday, or (ii) a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.
Closing Date: July 25, 1997.
Effectiveness Date: The 120th day following the Closing Date.
Effectiveness Period: See Section 3.
Event Date: See Section 4.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2.
Exchange Offer Registration Statement: See Section 2.
Exchange Securities: 11 3/4% Series B Senior Discount Notes due 2007
of the Company identical in all material respects to the Notes, except for refer
ences to series and restrictive legends.
Filing Date: The 60th day following the Closing Date.
2
<PAGE>
Holder: Each holder of Registrable Securities.
indemnified party: See Section 8.
indemnifying parties: See Section 8.
Indenture: The Indenture, dated the date hereof, between the Company
and First Trust National Association, as trustee, pursuant to which the Notes
are being issued, as amended or supplemented from time to time, in accordance
with the terms thereof.
Initial Shelf Registration: See Section 3.
Losses: See Section 8.
NASD: The National Association of Securities Dealers, Inc.
Participating Broker-Dealer: See Section 2.
Person: An individual, trustee, corporation, partnership, joint stock
company, joint venture, trust, unincorporated organization or government or any
agency or political subdivision thereof, union, business association, firm or
other entity.
Private Exchange: See Section 2.
Private Exchange Securities: See Section 2.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities covered by such Registration
Statement, and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
3
<PAGE>
Registrable Securities: The (i) Notes, (ii) Private Exchange
Securities and (iii) Exchange Securities received in the Exchange Offer that may
not be sold without restriction under federal or state securities law.
Registration Statement: Any registration statement of the Company that
covers any of the Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
SEC: The Securities and Exchange Commission.
Securities: The Notes, the Private Exchange Securities and the
Exchange Securities, collectively.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2.
Shelf Registration: The Initial Shelf Registration and any Subsequent
Shelf Registration.
Special Counsel: Counsel chosen by the holders of a majority in
aggregate principal amount of Securities.
Subsequent Shelf Registration: See Section 3.
4
<PAGE>
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if any, the trustee
under any indenture governing the Exchange Securities or the Private Exchange
Securities.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
Weekly Liquidated Damages Amount: See Section 4.
2. Exchange Offer
(a) The Company shall (i) prepare and file with the SEC promptly
after the date hereof, but in no event later than the Filing Date, a
registration statement (the "Exchange Offer Registration Statement") on an
appropriate form under the Securities Act with respect to a proposed offer (the
"Exchange Offer") to the Holders to issue and deliver to such Holders, in
exchange for the Notes, a like aggregate principal amount of Exchange
Securities, (ii) use its best efforts to cause the Exchange Offer Registration
Statement to become effective as promptly as practicable after the filing
thereof, but in no event later than the Effectiveness Date, (iii) use its best
efforts to keep the Exchange Offer Registration Statement effective until the
consummation of the Exchange Offer pursuant to its terms, and (iv) unless the
Exchange Offer would not be permitted by a policy of the SEC, commence the
Exchange Offer and use its best efforts to issue, on or prior to 30 business
days after the date on which the Exchange Offer Registration Statement is
declared effective, Exchange Securities in exchange for all Notes tendered prior
thereto pursuant to the Exchange Offer. The Exchange Offer shall not be subject
to any conditions, other than that the Exchange Offer does not violate
Applicable Law or any applicable interpretation of the staff of the SEC.
(b) The Exchange Securities shall be issued under, and entitled to
the benefits of, the Indenture or a trust indenture that is identical to the
Indenture (other than references to series, provisions with regard to
restrictive legends and such changes as are necessary to comply with any
requirements of the SEC to effect or maintain the qualification thereof under
the TIA).
(c) In connection with the Exchange Offer, the Company shall:
5
<PAGE>
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal that is an exhibit thereto and related documents;
(ii) use its best efforts to keep the Exchange Offer open for
not less than 20 Business Days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law);
(iii) utilize the services of a depository for the Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(iv) permit Holders to withdraw tendered Notes at any time
prior to 12:00 midnight, New York time, on the last Business Day on which the Ex
change Offer shall remain open; and
(v) otherwise comply in all material respects with all laws
applicable to the Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer, the
Company shall:
(i) accept for exchange all Notes validly tendered and not
validly withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(iii) use its best efforts to cause the Trustee promptly to
authenticate and deliver to each Holder of Notes, Exchange Securities equal in
aggregate principal amount to the Notes of such Holder so accepted for exchange.
(e) Interest on each Exchange Security and Private Exchange Security
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the date of original issue of the Notes. Each Exchange Security
and Private Exchange Security shall bear interest at the rate set forth thereon;
provided that interest with respect to the period prior to the issuance thereof
shall accrue at the rate or rates borne by the Notes from time to time during
such period.
6
<PAGE>
(f) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
containing a summary statement of the positions taken or policies made by the
staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Securities received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of Distribution"
section shall also allow the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including (without
limitation) all Participating Brokers-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Securities. The Company shall use its best efforts to keep the Ex
change Offer Registration Statement effective and to amend and supplement the
Prospectus to be lawfully delivered by all Persons subject to the prospectus
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
Securities; provided that such period shall not exceed 180 days after
consummation of the Exchange Offer (as such period may be extended pursuant to
the last paragraph of Section 6 hereof (the "Applicable Period")).
(g) If, prior to consummation of the Exchange Offer, the Purchaser
holds any Securities acquired by it and having the status as an unsold allotment
in the initial distribution, the Company shall, upon the request of the
Purchaser, simultaneously with the delivery of the Exchange Securities in the
Exchange Offer, issue (pursuant to the same indenture as the Exchange
Securities) and deliver to the Purchaser, in exchange for the Securities held by
the Purchaser (the "Private Exchange"), a like principal amount of debt
securities of the Company that are identical to the Exchange Securities (the
"Private Exchange Securities"). The Private Exchange Securities shall bear the
same CUSIP number as the Exchange Securities.
(h) The Company may require each Holder participating in the Exchange
Offer to represent to the Company that at the time of the consummation of the
Exchange Offer (i) any Exchange Securities received by such Holder in the
Exchange Offer will be acquired in the ordinary course of its business, (ii)
such Holder will have no arrangement or understanding with any Person to
participate in the distribution of the Exchange Securities within the meaning of
the Securities Act or resale of the Exchange Securities in violation of the
Securities Act, (iii) 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
Securities, (iv) if such Holder is a
7
<PAGE>
broker-dealer that will receive Exchange Securities for its own account in
exchange for Notes that were acquired as a result of market-making or other
trading activities, that it will deliver a prospectus, as required by law, in
connection with any resale of such Exchange Securities, and (v) if such Holder
is an affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act applicable to it.
(i) If (i) prior to the consummation of the Exchange Offer, either
the Company or a majority of the holders of Registrable Securities determines in
its or their reasonable judgment that (A) the Exchange Securities would not,
upon receipt, be tradeable by the Holders thereof without restriction under the
Securities Act and the Exchange Act and without material restrictions under
applicable Blue Sky or state securities laws, or (B) the interests of the
Holders under this Agreement, taken as a whole, would be materially adversely
affected by the consummation of the Exchange Offer, (ii) applicable
interpretations of the staff of the SEC would not permit the consummation of the
Exchange Offer prior to the Effectiveness Date, (iii) subsequent to the
consummation of the Private Exchange, the Purchaser so requests, (iv) the Ex
change Offer is not consummated within 150 days of the Closing Date for any
reason or (v) in the case of any Holder not permitted to participate in the
Exchange Offer or of any Holder participating in the Exchange Offer that
receives Exchange Securities that may not be sold without restriction under
state and federal securities laws and, in either case contemplated by this
clause (v), such Holder notifies the Company within one year of the consummation
of the Exchange Offer, then the Company shall promptly deliver to the Holders
(or in the case of any occurrence of the event described in clause (v) hereof,
to any such Holder) and the Trustee notice thereof (the "Shelf Notice") and
shall file an Initial Shelf Registration pursuant to Section 3.
3. Shelf Registration
If a Shelf Notice is required to be delivered pursuant to Section
2(i)(i), (ii) or (iv), then this section shall apply to all Registrable
Securities. Otherwise, upon consummation of the Exchange Offer in accordance
with Section 2, the provisions of this section shall apply solely with respect
to (i) Notes held by any Holder thereof not permitted to participate in the
Exchange Offer, (ii) Notes held by the Purchaser and (iii) Exchange Securities
that are not freely tradeable as contemplated by Section 2(i)(v) hereof.
8
<PAGE>
(a) Initial Shelf Registration. The Company shall, under the
circumstances set forth in Section 2(i), prepare and file with the SEC a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Securities (the "Initial Shelf
Registration"). The Company shall use its best efforts to file the Initial Shelf
Registration within 20 days of the delivery of the Shelf Notice or as promptly
as possible following the request of the Purchaser or, if later, by the Filing
Date. The Initial Shelf Registration shall be an appropriate form permitting
registration of such Registrable Securities for resale by such Holders in the
manner or manners designated by a majority in principal amount of the securities
then outstanding (including, without limitation, one or more under written
offerings). The Company shall (i) not permit any securities other than the
Registrable Securities to be included in any Shelf Registration, and (ii) use
its best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act as promptly as practicable after the filing
thereof and to keep the Initial Shelf Registration continuously effective under
the Securities Act until the date that is 24 months from the Effectiveness Date
(subject to extension pursuant to the last paragraph of Section 6 hereof) (the
"Effectiveness Period"), or such shorter period ending when (i) all Registrable
Securities covered by the Initial Shelf Registration have been sold or (ii) a
Subsequent Shelf Registration covering all of the Registrable Securities has
been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If any Shelf Registration ceases
to be effective for any reason at any time during the Effectiveness Period
(other than because of the sale of all of the securities registered thereunder),
the Company shall use its reasonable best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within 30 days of such cessation of effectiveness amend the Shelf
Registration in a manner reasonably expected to obtain the withdrawal of the
order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Securities (a "Subsequent Shelf Registration"). If a Subsequent Shelf
Registration is filed, the Company shall use its best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Subsequent Shelf Registration continuously
effective for a period equal to the number of days in the Effectiveness Period
less the aggregate number of days during which the Initial Shelf Registration,
and any Subsequent Shelf Registration, was previously effective.
9
<PAGE>
4. Liquidated Damages.
------------------
(a) The Company acknowledges and agrees that the Holders will suffer
damages, and that it would not be feasible to ascertain the extent of such
damages with precision, if the Company fails to fulfill its obligations
hereunder. Accordingly, in the event of such failure, the Company agrees to pay
liquidated damages to each Holder under the circumstances and to the extent set
forth below:
(i) if neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration has been filed with the SEC on or prior to the Filing
Date; or
(ii) if neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to the
Effectiveness Date; or
(iii) if the Company has not exchanged Exchange Securities for all
Notes validly tendered in accordance with the terms of the Exchange Offer within
30 business days after the date on which an Exchange Offer Registration
Statement is declared effective by the SEC; or
(iv) if a Shelf Registration is filed and declared effective by the
SEC but thereafter ceases to be effective without being succeeded within 30 days
by a Subsequent Shelf Registration filed and declared effective, other than as a
result of a change in applicable laws or a published change in SEC policy such
that the Company, using reasonable efforts, is not able to have the Subsequent
Registration declared effective;
(each of the foregoing an "Event," and the date on which the Event occurs being
referred to herein as an "Event Date").
Upon the occurrence of any Event, the Company shall pay, or cause to
be paid, in addition to amounts otherwise due under the Indenture and the
Registrable Securities, as liquidated damages, and not as a penalty, to each
Holder of a Registrable Security, an additional amount (the "Weekly Liquidated
Damages Amount") equal to (A) for each weekly period beginning on the Event Date
for the first 90-day
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period immediately following such Event Date, $.05 per week per $1,000 principal
amount of Registrable Securities held by such Holder, and (B) for each weekly
period beginning with the first full week after the 90-day period set forth in
the foregoing clause (A), $.10 per week per $1,000 principal amount of
Registrable Securities held by such Holder; provided that such liquidated
damages will, in each case, cease to accrue (subject to the occurrence of
another Event) on the date on which all Events have been cured. An Event under
clause (i) above shall be cured on the date that either the Exchange Offer
Registration Statement or the Initial Shelf Registration is filed with the SEC;
an Event under clause (ii) above shall be cured on the date that either the
Exchange Offer Registration Statement or the Initial Shelf Registration is
declared effective by the SEC; an Event under clause (iii) above shall be cured
on the earlier of the date (A) the Exchange Offer is consummated with respect to
all Notes validly tendered or (B) the Company delivers a Shelf Notice to the
Holders; and an Event under clause (iv) above shall be cured on the earlier of
(A) the date on which the applicable Shelf Registration is no longer subject to
an order suspending the effectiveness thereof or proceedings relating thereto or
(B) a new Subsequent Shelf Registration is declared effective.
(b) The Company shall notify the Trustee within five Business Days
after each Event Date. The Company shall pay the liquidated damages due on the
Registrable Securities by depositing with the Trustee, in trust, for the benefit
of the Holders thereof, by 12:00 noon, New York City time, on or before the
applicable semi-annual interest payment date for the Registrable Securities,
immediately avail able funds in sums sufficient to pay the liquidated damages
then due. The liquidated damages amount due shall be payable on each interest
payment date to the record Holder of Registrable Securities entitled to receive
the interest payment to be made on such date as set forth in the Indenture.
5. [Intentionally left blank]
6. Registration Procedures
-----------------------
In connection with the registration of any Securities pursuant to
Sections 2 or 3 hereof, the Company shall effect such registrations to permit
the sale of such Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall:
(a) Prepare and file with the SEC, as soon as practicable after the
date hereof but in any event on or prior to the Filing Date, or such later date
as is provided for in Section 3, a Registration Statement or Registration
Statements as prescribed by Section 2 or 3, and use its best efforts to cause
each such Registration Statement to become effective and remain effective as
provided
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herein; provided, that, if (i) such filing is pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall, if requested, furnish to
and afford the Holders of the Registrable Securities covered by such
Registration Statement, their Special Counsel, each Participating Broker-Dealer,
the managing underwriters, if any, and their counsel, a reasonable opportunity
to review and make available for inspection by such Persons copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed, such financial and other
information and books and records of the Company, and cause the officers,
directors and employees of the Company, Company counsel and independent
certified public accountants of the Company, to respond to such inquiries, as
shall be necessary, in the reasonable opinion of respective counsel to such
Holders, Participating Broker-Dealer and underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company may, prior
to furnishing any such information, require each Holder, its counsel, each
Participating Broker-Dealer, the managing underwriters and their counsel to
execute a confidentiality agreement reasonably satisfactory to the Company to
keep confidential any non-public information relating to the Company received
by such person and not disclose such information (other than to an Affiliate or
prospective purchaser who agrees to respect the confidentiality provisions of
this Section 6(a)) until such information has been made generally available to
the public unless the release of such information is required by law or is
necessary to respond to inquiries of regulatory authorities (including the
National Association of Insurance Commissioners, or similar organizations or
their successors). The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which the
Holders must be afforded an opportunity to review prior to the filing of such
document, if the Holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement, their Special
Counsel, any Participating Broker-Dealer or the managing underwriters, if any,
or their counsel shall reasonably object in writing.
(b) Provide an indenture trustee for the Registrable Securities or
the Exchange Securities, as the case may be, and cause the Indenture (or other
indenture relating to the Registrable Securities) to be qualified under the TIA
not later than the effective date of the first Registration Statement; and in
connection there with, to effect such changes to such indenture as may be
required for such
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<PAGE>
indenture to be so qualified in accordance with the terms of the TIA; and
execute, and use its best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(c) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods required
hereby; cause the related Prospectus to be supplemented by any Prospectus
supplement required by Applicable Law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply in all material respects with the provisions of the
Securities Act and the Exchange Act applicable thereto with respect to the
disposition of all securities covered by such Registration Statement, as so
amended, or in such Prospectus, as so supplemented, in accordance with the
intended methods of distribution set forth in such Registration Statement or
Prospectus as so amended.
(d) Furnish to such selling Holders and Participating Broker-Dealers
who so request (i) upon the Company's receipt, a copy of the order of the SEC
declaring such Registration Statement and any post-effective amendment thereto
effective and (ii) such reasonable number of copies of such Registration
Statement and of each amendment and supplement thereto (in each case including
any documents incorporated therein by reference and all exhibits), (iii) such
reasonable number of copies of the Prospectus included in such Registration
Statement (including each preliminary Prospectus), and such reasonable number of
copies of the final Prospectus as filed by the Company pursuant to Rule 424(b)
under the Securities Act, in conformity with the requirements of the Securities
Act, and (iv) such other documents (including any amendments required to be
filed pursuant to clause (c) of this Section), as any such Person may reasonably
request. The Company hereby consents to the use of the Prospectus by each of the
selling Holders of Registrable Securities or each such Participating Broker-
Dealer, as the case may be, and the underwriters or agents, if any, and dealers
(if any), in connection with the offering and sale of the Registrable Securities
covered by, or the sale by Participating Broker-Dealers of the Exchange
Securities pursuant to, such Prospectus and any amendment thereto.
(e) If (A) a Shelf Registration is filed pursuant to Section 3 or (B)
a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
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<PAGE>
Applicable Period, notify the selling Holders of Registrable Securities, their
Special Counsel, each Participating Broker-Dealer and the managing underwriters,
if any, promptly (but in any event within two Business Days), and confirm such
notice in writing, (i) when a Prospectus has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective under the Securities Act, (ii) of the issuance by the SEC of any stop
order suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any Prospectus or the initiation of any
proceedings for that purpose, (iii) if, at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Securities, the representations and warranties of the Company
contained in any agreement (including any underwriting agreement) contemplated
by Section 6(n) below cease to be true and correct in any material respect, (iv)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of a Registration Statement
or any of the Registrable Securities or the Exchange Securities to be sold by
any Participating Broker-Dealer for offer or sale in any jurisdiction, or the
contemplation, initiation or threatening of any proceeding for such purpose, (v)
of the happening of any event that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(f) Use its best efforts to register or qualify, and, if applicable,
to cooperate with the selling Holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, Securities to be included in a Registration Statement for
offer and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any selling Holder, Participating Broker-Dealer or
the managing underwriters reasonably request in writing; and, if Securities are
offered other than through an Underwritten Offering, the Company shall cause its
counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 6(f) at the
expense of the Company; keep each such registration or qualification (or
exemption therefrom) effective during the period such Registra-
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<PAGE>
tion Statement is required to be kept effective and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions
of the Securities covered by the applicable 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, (ii) take action
that would subject it to general service of process in any jurisdiction where it
is not so subject or (iii) subject it to taxation in excess of a nominal dollar
amount in any such jurisdiction where it is not then subject.
(g) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Securities for sale in any
jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible time.
(h) If (A) a Shelf Registration is filed pursuant to Section 3 or (B)
a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, and if requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Securities, (i) promptly incorporate in a Prospectus or post-effective amendment
such information as the managing underwriters, if any, or such Holders
reasonably request to be included therein required to comply with any Applicable
Law and (ii) make all required filings of such Prospectus or such post-effective
amendment as soon as practicable after the Company has received notification of
such matters required by Applicable Law to be incorporated in such Prospectus or
post-effective amendment.
(i) If (A) a Shelf Registration is filed pursuant to Section 3 or (B)
a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, cooperate with the selling Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends, other than as required by applicable
law, and shall be in a form eligible for deposit with The Depository Trust
Company ("DTC"); and enable such Registrable Securities to be in such
denominations and registered in
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<PAGE>
such names as the managing underwriters, if any, or Holders may reasonably
request.
(j) If (i) a Shelf Registration is filed pursuant to Section 3 or
(ii) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, upon the occurrence of any event contemplated by Section
6(e)(v) or 6(e)(vi) above, as promptly as practicable prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder
or to the purchasers of the Exchange Securities to whom such Prospectus will be
delivered by a Participating Broker-Dealer, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) Use its best efforts to cause the Securities covered by a
Registration Statement to be rated with the appropriate rating agencies, if
appropriate, if so requested by the Holders of a majority in aggregate
principal amount of Securities covered by such Registration Statement or the
managing underwriters, if any.
(l) Prior to the effective date of the first Registration Statement
relating to the Securities, (i) provide the applicable trustee with printed
certificates for the Securities in a form eligible for deposit with DTC and (ii)
provide a CUSIP number for each of the Securities.
(m) Use its best efforts to cause all Securities covered by such
Registration Statement to be listed on each securities exchange, if any, on
which similar debt securities issued by the Company are then listed.
(n) If a Shelf Registration is filed pursuant to Section 3, enter
into such agreements (including an underwriting agreement in form, scope and
substance as is customary in Underwritten Offerings) and take all such other
actions in connection therewith (including those reasonably requested by the
managing underwriters, if any, or the Holders of a majority of the Registrable
Securities being sold) in order to expedite or facilitate the registration or
the
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<PAGE>
disposition of such Registrable Securities, and in such connection, whether or
not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, (i) make such representations and
warranties to the Holders and the underwriters, if any, with respect to the
business of the Company and its Subsidiaries, and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated
reference therein, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in Underwritten Offerings, and
confirm the same if and when reasonably requested; (ii) obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and the Holders of a majority in principal amount of the
Registrable Securities being sold), addressed to each selling Holder and each of
the underwriters, if any, covering the matters customarily covered in opinions
requested in Underwritten Offerings; (iii) obtain "cold comfort" letters and
updates thereof (which letters and updates (in form, scope and substance) shall
be reasonably satisfactory to the managing underwriters) from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any Subsidiary of the Company or of
any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters and each selling Holder, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with Underwritten Offerings and
such other matters as reasonably requested by underwriters; and (iv) deliver
such documents and certificates as may be reasonably requested by the Holders of
a majority in principal amount of the Registrable Securities being sold and the
managing underwriters, if any, to evidence the continued validity of the
representations and warranties of the Company and its Subsidiaries made pursuant
to clause (i) above and to evidence compliance with any conditions contained in
the underwriting agreement or other similar agreement entered into by the
Company.
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to its security holders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing on the first day of the
fiscal quarter following each fiscal quarter in which Registrable 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
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first fiscal quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
(p) Upon consummation of an Exchange Offer or Private Exchange,
obtain an opinion of counsel to the Company (in form, scope and substance
reasonably satisfactory to the Purchaser), addressed to all Holders
participating in the Exchange Offer or Private Exchange, as the case may be, to
the effect that (i) the Company has duly authorized, executed and delivered the
Exchange Securities or the Private Exchange Securities, as the case may be, and
the Indenture and (ii) the Exchange Securities or the Private Exchange
Securities, as the case may be, and the Indenture constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforcement may be
subject to (x) applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and (y) general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
(q) If an Exchange Offer or Private Exchange is to be consummated,
upon delivery of the Registrable Securities by such Holders to the Company (or
to such other Person as directed by the Company) in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, the Company
shall mark, or cause to be marked, on such Registrable Securities that such
Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be; in no event
shall such Registrable Securities be marked as paid or otherwise satisfied.
(r) Cooperate with each seller of Registrable Securities covered by
any Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD.
(s) Use its best efforts to take all other steps necessary to effect
the registration of the Registrable Securities covered by a Registration
Statement contemplated hereby.
As a condition to its participation in the Exchange Offer or a Shelf
Registration pursuant to the terms of this Agreement, each Holder of Registrable
Securities shall furnish, upon the written request of the Company, a written
representation to the Company (which may be contained in the letter of transmit-
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tal contemplated by the Exchange Offer Registration Statement) to the effect
that (A) it is not an affiliate of the Company, (B) it is not engaged in, and
does not intend to engage in, and has no arrangement or understanding with any
person to participate in, a distribution of the Securities to be issued in the
Exchange Offer and (C) it is acquiring the Exchange Securities or the Private
Exchange Securities, as applicable, in its ordinary course of business.
Notwithstanding anything to the contrary contained herein, if (A) the
Board of Directors of the Company determines in good faith that it is in the
best interests of the Company not to disclose the existence of or facts
surrounding any proposed or pending material corporate transaction involving the
Company or its subsidiaries and (B) the Company notifies the Holders within two
Business Days after the Board of Directors makes such determination, the Company
may allow the Shelf Registration Statement to fail to be effective and usable as
a result of such nondisclosure for up to 60 days during the Effectiveness
Period, but in no event for any period in excess of 30 consecutive days;
provided, however, that the Effectiveness Period shall be extended by the number
of days during which such registration statement was not effective or usable
pursuant to the foregoing provisions; provided, further, that the Company shall
be required to pay any applicable liquidated damages pursuant to Section 4
during any such period.
Each Holder and each Participating Broker-Dealer agrees by acquisition
of such Registrable Securities or Exchange Securities of any Participating
Broker-Dealer that, upon receipt of written notice from the Company of the
happen ing of any event of the kind described in Section 6(e)(ii), 6(e)(iv),
6(e)(v) or 6(e)(vi), such Holder will forthwith discontinue disposition (in the
jurisdictions specified in a notice of a Section 6(e)(iv) event, and elsewhere
in a notice of a Section 6(e)(ii), 6(e)(v) or 6(e)(vi) event) of such Securities
covered by such Registration Statement or Prospectus until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
6(j), or until it is advised in writing (the "Advice") by the Company that
offers or sales in a particular jurisdiction may be resumed or that the use of
the applicable Prospectus may be resumed, as the case may be, and has received
copies of any amendments or supplements thereto. If the Company shall give such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and includ ing the date
of the giving of such notice to and including the date when each seller of such
Securities covered by such Registration Statement shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 6(j) or
(y) the Advice.
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7. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation:
(i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the
NASD and (B) fees and expenses of compliance with state securities or Blue
Sky laws (including, without limitation, reasonable fees and disbursements
of counsel in connection with Blue Sky qualifications of the Registrable
Securities or Exchange Securities and determination of the eligibility of
the Registrable Securities or Exchange Securities for investment under the
laws of such jurisdictions (x) where the Holders are located, in the case
of the Exchange Securities, or (y) as provided in Section 6(f), in the case
of Registrable Securities or Exchange Securities to be sold by a
Participating Broker-Dealer during the Applicable Period));
(ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities or Exchange Securi-ties
in a form eligible for deposit with DTC and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriters, if any,
or, in respect of Registrable Securities or Exchange Securities to be sold
by a Participating Broker-Dealer during the Applicable Period, by the
Holders of a majority in aggregate principal amount of the Registrable
Securities included in any Registration Statement or of such Exchange
Securities, as the case may be);
(iii) messenger, telephone, duplication, word processing and
delivery expenses incurred by the Company in the performance of its
obligations hereunder;
(iv) fees and disbursements of counsel for the Company;
(v) fees and disbursements of all independent certified public
accountants referred to in Section 6(n)(iii) (including, without
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limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance);
(vi) Securities Act liability insurance, if the Company so
desires such insurance;
(vii) fees and expenses of all other Persons retained by the
Company; internal expenses of the Company (including, without limitations,
salaries and expenses of officers and employees of the Company performing
legal or accounting duties); and the expense of any annual audit; and
(viii) rating agency fees and the fees and expenses incurred in
connection with the listing of the Securities to be registered on any
securities exchange.
(b) The Company shall reimburse the Holders for the reasonable fees
and disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Registrable Securities to be included in any Registration Statement which
counsel shall be reasonably satisfactory to the Company.
8. Indemnification
(a) Indemnification by the Company. The Company shall, without
limitation as to time, indemnify and hold harmless each Holder and each
Participating Broker-Dealer selling Exchange Securities during the Applicable
Period, each Person who controls each such Holder (within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act) and the officers,
directors, partners, employees, representatives and agents of each such Holder,
Participating Broker-Dealer and controlling person, to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable costs of preparation and reasonable
attorneys' fees) and expenses (including, without limitation, reasonable costs
and expenses incurred in connection with investigating, preparing, pursuing or
defending against any of the foregoing) (collectively, "Losses"), as incurred,
directly or indirectly caused by, related to, based upon, arising out of or in
connection with any untrue or alleged untrue statement of a material fact con-
tained in any Registration Statement, Prospectus or form of prospectus, or in
any amendment or supplement thereto, or in any preliminary prospectus, or any
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omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar as such
Losses are based upon information relating to such Holder or Participating
Broker-Dealer and furnished in writing to the Company (or reviewed and approved
in writing) by such Holder or Participating Broker-Dealer expressly for use
therein; provided, however, that the Company shall not be liable to any
Indemnified Party to the extent that any such Losses arise solely out of an
untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus, or Prospectus that has been amended or
supplemented, if (i) such Indemnified Party or related Holder of a Registrable
Security failed to send or deliver a copy of the Prospectus, as then amended or
supplemented, with or prior to the delivery of written confirmation of the sale
by such Indemnified Party or the related Holder of a Registrable Security to the
person asserting the claim from which such Losses arise, (ii) the Prospectus, as
amended or supplemented, would have corrected such untrue statement or alleged
untrue statement or omission or alleged omission, and (iii) the Company has
complied with its obligations under Section 6(e) hereof; provided, further, that
the Company shall not be liable to any Indemnified Party to the extent that any
such Losses are a result of the use by the Indemnified Party of any Prospectus,
when, upon receipt of a notice from the Company of the existence of any fact of
the kind described in Section 6(e) and as contemplated by the last paragraph of
Section 6, the Indemnified Party or the related Holder was not permitted to do
so. The Company shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers, directors, agents and employees and each Person
who controls such Persons (within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act) to the same extent as provided above
with respect to the indemnification of the Holders or the Participating Broker-
Dealer.
(b) Indemnification by Holder of Registrable Securities. In
connection with any Registration Statement, Prospectus or form of prospectus,
any amendment or supplement thereto, or any preliminary prospectus in which a
Holder is participating, such Holder shall furnish to the Company in writing
such information as the Company reasonably requests for use in connection with
any Registration Statement, Prospectus or form of prospectus, any amendment or
supplement thereto, or any preliminary prospectus and shall, without limitation
as to time, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person, if any, who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20(a) of the Exchange
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Act), and the directors, officers, agents or employees of such controlling
persons, to the fullest extent lawful, from and against all Losses arising out
of or based upon any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading to the extent, but only
to the extent, that such untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact is contained in
any information so furnished in writing by such Holder to the Company expressly
for use therein. In no event shall the liability of any selling Holder be
greater in amount than the dollar amount of the proceeds (net of payment of all
expenses) received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"indemnified party"), such indemnified party shall promptly notify the party or
parties from which such indemnity is sought (the "indemnifying parties") in
writing; provided that the failure to so notify the indemnifying parties shall
not relieve the indemnifying parties from any obligation or liability except to
the extent (but only to the extent) that it shall be finally determined by a
court of competent jurisdiction (which determination is not subject to appeal)
that the indemnifying parties have been prejudiced materially by such failure.
The indemnifying party shall have the right, exercisable by giving
written notice to an indemnified party, within 20 business days after receipt of
written notice from such indemnified party of such Proceeding, to assume, at its
expense, the defense of any such Proceeding, provided that 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; or (2) the
indemnifying party shall have failed promptly 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 party or any of its affiliates or controlling persons, and such
indemnified party shall have been advised by counsel that there may be one or
more defenses available to such indemnified party that are in addition to, or in
conflict with, those defenses
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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 reasonable 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 such
indemnified party).
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 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 by reason of such
settlement or judgment. The indemnifying party shall not consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
indemnified party of a release, in form and substance reasonably satisfactory to
the indemnified party, from all liability in respect of such Proceeding for
which such indemnified party would be entitled to indemnification hereunder
(whether or not any indemnified party is a party thereto).
(d) Contribution. If the indemnification provided for in this Section
8 is unavailable to an indemnified party or is insufficient to hold such
indemnified party harmless for any Losses in respect of which this Section 8
would otherwise apply by its terms (other than by reason of exceptions provided
in this Section 8), then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have a joint and several obligation
to contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of a material
fact or omission or alleged
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omission to state a material fact relates to information supplied by such
indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
statement or omission. The amount paid or payable by an indemnified party as a
result of any Losses shall be deemed to include any legal or other fees or
expenses incurred by such party in connection with any Proceeding, to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in Section 8(a) or 8(b) was available to such
party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 8(d), an indemnifying
party that is a selling Holder shall not be required to contribute, in the
aggregate, any amount in excess of such Holder's Maximum Contribution Amount. A
selling Holder's "Maximum Contribution Amount" shall equal the excess of (i) the
aggregate proceeds received by such Holder pursuant to the sale of such
Registrable Securities over (ii) the aggregate amount of damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 8
are in addition to any liability that the indemnifying parties may have to the
indemnified parties.
9. Rule 144 and Rule 144A
The Company covenants that it shall (a) file the reports required to
be filed by it (if so required) under the Securities Act and the Exchange Act in
a timely manner and, if at any time any such Person is not required to file such
reports, it will, upon the request of any Holder, make publicly available other
information necessary to permit sales pursuant to Rule 144 and Rule 144A and (b)
take such further action as any Holder may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act pursuant to the exemptions
provided by Rule 144 and Rule 144A. Upon the request of any Holder, the
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Company shall deliver to such Holder a written statement as to whether they have
complied with such information and requirements.
10. Underwritten Registrations
If any of the Registrable Securities covered by any Shelf Registration
are to be sold in an Underwritten Offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Securities included in such offering and shall be reasonably acceptable to the
Company.
No Holder of Registrable Securities may participate in any Under
written Registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, underwriting
agreements, powers of attorney, lock-up letters and other documents reasonably
required under the terms of such underwriting arrangements.
11. Miscellaneous
(a) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights provided herein, in the Indenture or, in the case of the
Purchaser, in the Purchase Agreement, or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not entered into, as
of the date hereof, and shall not enter into, after the date of this Agreement,
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof.
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(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding aggregate principal amount of
Registrable Securities; provided that Section 8 shall not be amended, modified
or supplemented, and waivers or consents to departures from this proviso may not
be given, unless the Company has obtained the written consent of each Holder.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders whose securities are being sold pursuant to a Registration Statement and
that does not directly or indirectly affect the rights of other Holders may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Securities being sold by such Holders pursuant to such Registration
Statement, provided that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(d) Notices. All notices and other communications (including, without
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, certified first-
class mail, return receipt requested, next-day air courier or facsimile:
(i) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
11(d), which address initially is, with respect to each Holder, the address
of such Holder maintained by the Registrar under the Indenture, with a copy
to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York 10022, telecopy number (212) 735-2000, Attention: Alan G. Straus,
Esq.; and
(ii) if to the Company, initially ArborLake Center, 1751 Lake
Cook Road, Suite 550, Deerfield, Illinois 60015, telecopy number (847) 945-
9909, Attention: Chief Executive Officer, and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 11(d), with copies to Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois 60603, telecopy number (312) 701-7711, Attention:
Philip J. Niehoff, Esq.
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All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN
IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT
MAY NOW OR HERE AFTERHAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT
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IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY
IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS SAID ADDRESS, SUCH
SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN
ANY OTHER JURISDICTION.
(i) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
that may be hereafter declared invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement, and is intended to be a complete and exclu-
sive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Company in
respect of securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Attorneys' Fees. In any Proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the courts, shall be
entitled to
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<PAGE>
recover reasonable attorneys' fees in addition to its costs and expenses and any
other available remedy.
(l) Securities Held by the Company or its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
(other than Holders deemed to be such affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(m) Third Party Beneficiaries. Each purchaser who purchases the Notes
from the Purchaser is intended to be a beneficiary of the Company's covenants
contained herein to the same extent as if the Notes were sold and those
covenants were made directly to such purchaser by the Company.
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REGISTRATION RIGHTS AGREEMENT
-----------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
By: /s/ Dominic J. Pileggi
---------------------------
Name: Dominic J. Pileggi
Title: President and Chief
Executive Officer
ACCEPTED AND AGREED TO:
JEFFERIES & COMPANY, INC.
By: /s/ M. Brent Stevens
---------------------
Name: M. Brent Stevens
Title: Managing Director
<PAGE>
EXHIBIT 4.13
JORDAN TELECOMMUNICATION PRODUCTS, INC.
$25,000,000 13 1/4% Series A Senior Exchangeable Preferred Stock due 2009
REGISTRATION RIGHTS AGREEMENT
-----------------------------
July 25, 1997
JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
JORDAN TELECOMMUNICATION PRODUCTS, INC., a Delaware corporation (the
"Company"), is issuing and selling to Jefferies & Company, Inc. (the
"Purchaser") upon the terms set forth in a purchase agreement, dated as of July
21, 1997 (the "Purchase Agreement"), $25,000,000 aggregate liquidation
preference of its 13 1/4% Series A Senior Exchangeable Preferred Stock due 2009
(the "Preferred Stock"). As an inducement to the Purchaser to enter into the
Purchase Agreement, the Company agrees with the Purchaser, for the benefit of
the holders of the Securities (defined below) (including, without limitation,
the Purchaser), as follows:
1. Definitions
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Advice: See Section 6.
<PAGE>
Agreement: This Registration Rights Agreement.
Applicable Period: See Section 2.
Business Days: Any day other than (i) Saturday or Sunday, or (ii) a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.
Certificate of Designation: The Certificate of Designation of the
Powers, Preferences and Relative, Participating, Optional and other Special
Rights of the Preferred Stock and Qualification, Limitations and Restrictions
thereof filed by the Company with the Secretary of State of the State of
Delaware on July 24, 1997.
Closing Date: July 25, 1997.
Effectiveness Date: The 120th day following the Closing Date.
Effectiveness Period: See Section 3.
Event Date: See Section 4.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2.
Exchange Offer Registration Statement: See Section 2.
Exchange Securities: 13 1/4% Series B Senior Exchangeable Preferred
Stock due 2009 of the Company identical in all material respects to the
Preferred Stock, except for references to series and restrictive legends and, if
the Company shall issue any of its Subordinated Exchange Notes, 13 1/4% Series B
Subordinated Preferred Stock Exchange Notes due 2009 of the Company identical in
all material respects to the Subordinated Exchange Notes, except for references
to series and restrictive legends.
Filing Date: The 60th day following the Closing Date.
Holder: Each holder of Registrable Securities.
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indemnified party: See Section 8.
indemnifying parties: See Section 8.
Initial Shelf Registration: See Section 3.
Losses: See Section 8.
NASD: The National Association of Securities Dealers, Inc.
Participating Broker-Dealer: See Section 2.
Person: An individual, trustee, corporation, partnership, joint stock
company, joint venture, trust, unincorporated organization or government or any
agency or political subdivision thereof, union, business association, firm or
other entity.
Private Exchange: See Section 2.
Private Exchange Securities: See Section 2.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities covered by such Registration
Statement, and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
Registrable Securities: The (i) Preferred Stock, (ii) Private
Exchange Securities and (iii) Exchange Securities received in the Exchange Offer
that may not be sold without restriction under federal or state securities law;
provided, that if the Company shall issue any of its 13 1/4% Subordinated
Preferred Stock Exchange Notes (the "Subordinated Exchange Notes") for any
shares of Preferred Stock, such Subordinated Exchange Notes shall be Registrable
Securities hereunder.
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<PAGE>
Registrar and Transfer Agent: The Registrar and Transfer Agent with
respect to the Preferred Stock, which initially shall be Harris Trust and
Savings Bank.
Registration Statement: Any registration statement of the Company that
covers any of the Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
SEC: The Securities and Exchange Commission.
Securities: The Preferred Stock, the Subordinated Exchange Notes, the
Private Exchange Securities and the Exchange Securities, collectively.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2.
Shelf Registration: The Initial Shelf Registration and any Subsequent
Shelf Registration.
Special Counsel: Counsel chosen by the holders of a majority in
aggregate liquidation preference of Securities (or, in the case of the
Subordinated Exchange Notes, principal amount).
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<PAGE>
Subsequent Shelf Registration: See Section 3.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
Weekly Liquidated Damages Amount: See Section 4.
2. Exchange Offer
(a) The Company shall (i) prepare and file with the SEC promptly
after the date hereof, but in no event later than the Filing Date, a
registration statement (the "Exchange Offer Registration Statement") on an
appropriate form under the Securities Act with respect to a proposed offer (the
"Exchange Offer") to the Holders to issue and deliver to such Holders, in
exchange for the shares of Preferred Stock, a like aggregate liquidation
preference of Exchange Securities, (ii) use its best efforts to cause the
Exchange Offer Registration Statement to become effective as promptly as
practicable after the filing thereof, but in no event later than the
Effectiveness Date, (iii) use its best efforts to keep the Exchange Offer
Registration Statement effective until the consummation of the Exchange Offer
pursuant to its terms, and (iv) unless the Exchange Offer would not be permitted
by a policy of the SEC, commence the Exchange Offer and use its best efforts to
issue, on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement is declared effective, Exchange Securities in
exchange for all shares of Preferred Stock tendered prior thereto pursuant to
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate Applicable Law or any
applicable interpretation of the staff of the SEC.
(b) The Exchange Securities shall be issued under, and entitled to
the benefits of, the Certificate of Designation.
(c) In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate letter
of transmittal that is an exhibit thereto and related documents;
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<PAGE>
(ii) use its best efforts to keep the Exchange Offer open for
not less than 20 Business Days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law);
(iii) utilize the services of a depository for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York;
(iv) permit Holders to withdraw tendered shares of Preferred
Stock at any time prior to 12:00 midnight, New York time, on the last Business
Day on which the Exchange Offer shall remain open; and
(v) otherwise comply in all material respects with all laws
applicable to the Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer, the
Company shall:
(i) accept for exchange all shares of Preferred Stock validly
tendered and not validly withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Registrar and Transfer Agent for
cancellation all shares of Preferred Stock so accepted for exchange; and
(iii) use its best efforts to cause the Registrar and Transfer
Agent promptly to countersign and deliver to each Holder of shares of Preferred
Stock, Exchange Securities equal in aggregate liquidation preference to the
shares of Preferred Stock of such Holder so accepted for exchange.
(e) Dividends on each Exchange Security and Private Exchange Security
will accrue from the last dividend payment date on which dividends were paid on
the shares of Preferred Stock surrendered in exchange therefor or, if no
dividends have been paid on the shares Preferred Stock, from the date of
original issue of the shares of Preferred Stock. Each Exchange Security and
Private Ex change Security shall accrue dividends at the rate set forth thereon;
provided that dividends with respect to the period prior to the issuance thereof
shall accrue at the rate or rates borne by the shares of Preferred Stock from
time to time during such period.
(f) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribu-
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<PAGE>
tion," containing a summary statement of the positions taken or policies made by
the staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Securities received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of Distribution"
section shall also allow the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including (without
limitation) all Participating Brokers-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Securities. The Company shall use its best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
Prospectus to be lawfully delivered by all Persons subject to the prospectus
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
Securities; provided that such period shall not exceed 180 days after
consummation of the Exchange Offer (as such period may be extended pursuant to
the last paragraph of Section 6 hereof (the "Applicable Period")).
(g) If, prior to consummation of the Exchange Offer, the Purchaser
holds any Securities acquired by it and having the status as an unsold allotment
in the initial distribution, the Company shall, upon the request of the
Purchaser, simultaneously with the delivery of the Exchange Securities in the
Exchange Offer, issue (pursuant to the same Certificate of Designation as the
Exchange Securities) and deliver to the Purchaser, in exchange for the
Securities held by the Purchaser (the "Private Exchange"), a like aggregate
liquidation preference of preferred securities of the Company that are identical
to the Exchange Securities (the "Private Exchange Securities"). The Private
Exchange Securities shall bear the same CUSIP number as the Exchange Securities.
(h) The Company may require each Holder participating in the Exchange
Offer to represent to the Company that at the time of the consummation of the
Exchange Offer (i) any Exchange Securities received by such Holder in the
Exchange Offer will be acquired in the ordinary course of its business, (ii)
such Holder will have no arrangement or understanding with any Person to
participate in the distribution of the Exchange Securities within the meaning of
the Securities Act or resale of the Exchange Securities in violation of the
Securities Act, (iii) 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
Securities, (iv) if such Holder is a broker-dealer that will receive Exchange
Securities for its own account in exchange for shares of Preferred Stock that
were acquired as a result of market-
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<PAGE>
making or other trading activities, that it will deliver a prospectus, as
required by law, in connection with any resale of such Exchange Securities, and
(v) if such Holder is an affiliate, that it will comply with the registration
and prospectus delivery requirements of the Securities Act applicable to it.
(i) If (i) prior to the consummation of the Exchange Offer,
either the Company or a majority of the holders of Registrable Securities deter
mines in its or their reasonable judgment that (A) the Exchange Securities would
not, upon receipt, be tradeable by the Holders thereof without restriction under
the Securities Act and the Exchange Act and without material restrictions under
applicable Blue Sky or state securities laws, or (B) the interests of the
Holders under this Agreement, taken as a whole, would be materially adversely
affected by the consummation of the Exchange Offer, (ii) applicable
interpretations of the staff of the SEC would not permit the consummation of the
Exchange Offer prior to the Effectiveness Date, (iii) subsequent to the
consummation of the Private Exchange, the Purchaser so requests, (iv) the
Exchange Offer is not consummated within 150 days of the Closing Date for any
reason or (v) in the case of any Holder not permitted to participate in the
Exchange Offer or of any Holder participating in the Exchange Offer that
receives Exchange Securities that may not be sold without restriction under
state and federal securities laws and, in either case contemplated by this
clause (v), such Holder notifies the Company within one year of the consummation
of the Exchange Offer, then the Company shall promptly deliver to the Holders
(or in the case of any occurrence of the event described in clause (v) hereof,
to any such Holder) and the Registrar and Transfer Agent notice thereof (the
"Shelf Notice") and shall file an Initial Shelf Registration pursuant to Section
3.
3. Shelf Registration
If a Shelf Notice is required to be delivered pursuant to Section
2(i)(i), (ii) or (iv), then this section shall apply to all Registrable
Securities. Otherwise, upon consummation of the Exchange Offer in accordance
with Section 2, the provisions of this section shall apply solely with respect
to (i) shares of Preferred Stock held by any Holder thereof not permitted to
participate in the Ex change Offer, (ii) shares of Preferred Stock held by the
Purchaser and (iii) Ex change Securities that are not freely tradeable as
contemplated by Section 2(i)(v) hereof.
(a) Initial Shelf Registration. The Company shall, under the
circumstances set forth in Section 2(i), prepare and file with the SEC a
Registra-
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tion Statement for an offering to be made on a continuous basis pursuant to Rule
415 covering all of the Registrable Securities (the "Initial Shelf
Registration"). The Company shall use its best efforts to file the Initial Shelf
Registration within 20 days of the delivery of the Shelf Notice or as promptly
as possible following the request of the Purchaser or, if later, by the Filing
Date. The Initial Shelf Registration shall be an appropriate form permitting
registration of such Registrable Securities for resale by such Holders in the
manner or manners designated by a majority in liquidation preference of the
securities then outstanding (including, without limitation, one or more
underwritten offerings). The Company shall (i) not permit any securities other
than the Registrable Securities to be included in any Shelf Registration, and
(ii) use its best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act as promptly as practicable after the filing
thereof and to keep the Initial Shelf Registration continuously effective under
the Securities Act until the date that is 24 months from the Effectiveness Date
(subject to extension pursuant to the last paragraph of Section 6 hereof) (the
"Effectiveness Period"), or such shorter period ending when (i) all Registrable
Securities covered by the Initial Shelf Registration have been sold or (ii) a
Subsequent Shelf Registration covering all of the Registrable Securities has
been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If any Shelf Registration
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Company shall use its reasonable best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof, and in any
event shall within 30 days of such cessation of effectiveness amend the Shelf
Registration in a manner reasonably expected to obtain the withdrawal of the
order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Securities (a "Subsequent Shelf Registration"). If a Subsequent Shelf
Registration is filed, the Company shall use its best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Subsequent Shelf Registration continuously
effective for a period equal to the number of days in the Effectiveness Period
less the aggregate number of days during which the Initial Shelf Registration,
and any Subsequent Shelf Registration, was previously effective.
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<PAGE>
4. Liquidated Damages.
(a) The Company acknowledges and agrees that the Holders will
suffer damages, and that it would not be feasible to ascertain the extent of
such damages with precision, if the Company fails to fulfill its obligations
hereunder. Accordingly, in the event of such failure, the Company agrees to pay
liquidated damages to each Holder under the circumstances and to the extent set
forth below:
(i) if neither the Exchange Offer Registration Statement nor
the Initial Shelf Registration has been filed with the SEC on or prior to the
Filing Date; or
(ii) if neither the Exchange Offer Registration Statement nor
the Initial Shelf Registration is declared effective by the SEC on or prior to
the Effectiveness Date; or
(iii) if the Company has not exchanged Exchange Securities for
all shares of Preferred Stock validly tendered in accordance with the terms of
the Exchange Offer within 30 business days after the date on which an Exchange
Offer Registration Statement is declared effective by the SEC; or
(iv) if a Shelf Registration is filed and declared effective by
the SEC but thereafter ceases to be effective without being succeeded within 30
days by a Subsequent Shelf Registration filed and declared effective, other than
as a result of a change in applicable laws or a published change in SEC policy
such that the Company, using reasonable efforts, is not able to have the
Subsequent Shelf Registration declared effective;
(each of the foregoing an "Event," and the date on which the Event occurs being
referred to herein as an "Event Date").
Upon the occurrence of any Event, the Company shall pay, or cause
to be paid, in addition to amounts otherwise due under the Certificate of
Designation and the Registrable Securities, as liquidated damages, and not as a
penalty, to each Holder of a Registrable Security, an additional amount (the
"Weekly Liquidated Damages Amount") equal to (A) for each weekly period
beginning on the Event Date for the first 90-day period immediately following
such Event Date, $.05 per week per $1,000 liquidation preference of Registrable
Securities held by such Holder, and (B) for each weekly period beginning with
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<PAGE>
the first full week after the 90-day period set forth in the foregoing clause
(A), $.10 per week per $1,000 liquidation preference of Registrable Securities
held by such Holder; provided that such liquidated damages will, in each case,
cease to accrue (subject to the occurrence of another Event) on the date on
which all Events have been cured. An Event under clause (i) above shall be cured
on the date that either the Exchange Offer Registration Statement or the Initial
Shelf Registration is filed with the SEC; an Event under clause (ii) above shall
be cured on the date that either the Exchange Offer Registration Statement or
the Initial Shelf Registration is declared effective by the SEC; an Event under
clause (iii) above shall be cured on the earlier of the date (A) the Exchange
Offer is consummated with respect to all shares of Preferred Stock validly
tendered or (B) the Company delivers a Shelf Notice to the Holders; and an Event
under clause (iv) above shall be cured on the earlier of (A) the date on which
the applicable Shelf Registration is no longer subject to an order suspending
the effectiveness thereof or proceedings relating thereto or (B) a new
Subsequent Shelf Registration is declared effective.
(b) The Company shall notify the Registrar and Transfer Agent
within five Business Days after each Event Date. The Company shall pay the
liquidated damages due on the Registrable Securities by depositing with the
Registrar and Transfer Agent, in trust, for the benefit of the Holders thereof,
by 12:00 noon, New York City time, on or before the applicable quarterly
dividend payment date for the Registrable Securities, immediately available
funds in sums sufficient to pay the liquidated damages then due. The liquidated
damages amount due shall be payable on each dividend payment date to the record
Holder of Registrable Securities entitled to receive the dividend payment to be
made on such date as set forth in the Certificate of Designation.
5. [Intentionally left blank]
6. Registration Procedures
In connection with the registration of any Securities pursuant to
Sections 2 or 3 hereof, the Company shall effect such registrations to permit
the sale of such Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall:
(a) Prepare and file with the SEC, as soon as practicable after
the date hereof but in any event on or prior to the Filing Date, or such later
date as is provided for in Section 3, a Registration Statement or Registration
State-
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<PAGE>
ments as prescribed by Section 2 or 3, and use its best efforts to cause each
such Registration Statement to become effective and remain effective as provided
herein; provided, that, if (i) such filing is pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall, if requested, furnish to
and afford the Holders of the Registrable Securities covered by such
Registration Statement, their Special Counsel, each Participating Broker-Dealer,
the managing underwriters, if any, and their counsel, a reasonable opportunity
to review and make available for inspection by such Persons copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed, such financial and other
information and books and records of the Company, and cause the officers,
directors and employees of the Company, Company counsel and independent
certified public accountants of the Company, to respond to such inquiries, as
shall be necessary, in the reasonable opinion of respective counsel to such
Holders, Participating Broker-Dealer and underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company may, prior
to furnishing any such information, require each Holder, its counsel, each
Participating Broker-Dealer, the managing underwriters and their counsel to
execute a confidentiality agreement reasonably satisfactory to the Company to
keep confidential any non-public information relating to the Company received by
such person and not disclose such information (other than to an Affiliate or
prospective purchaser who agrees to respect the confidentiality provisions of
this Section 6(a)) until such information has been made generally available to
the public unless the release of such information is required by law or is
necessary to respond to inquiries of regulatory authorities (including the
National Association of Insurance Commissioners, or similar organizations or
their successors). The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which the
Holders must be afforded an opportunity to review prior to the filing of such
document, if the Holders of a majority in aggregate liquidation preference of
the Registrable Securities covered by such Registration Statement, their Special
Counsel, any Participating Broker-Dealer or the managing underwriters, if any,
or their counsel shall reasonably object in writing.
(b) Provide a registrar and transfer agent for the Registrable
Securities or the Exchange Securities, as the case may be.
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<PAGE>
(c) Prepare and file with the SEC such amendments and post-
effective amendments to the Registration Statement as may be necessary to keep
such Registration Statement continuously effective for the time periods required
hereby; cause the related Prospectus to be supplemented by any Prospectus
supplement required by Applicable Law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply in all material respects with the provisions of the
Securities Act and the Exchange Act applicable thereto with respect to the
disposition of all securities covered by such Registration Statement, as so
amended, or in such Prospectus, as so supplemented, in accordance with the
intended methods of distribution set forth in such Registration Statement or
Prospectus as so amended.
(d) Furnish to such selling Holders and Participating Broker-
Dealers who so request (i) upon the Company's receipt, a copy of the order of
the SEC declaring such Registration Statement and any post-effective amendment
thereto effective and (ii) such reasonable number of copies of such Registration
Statement and of each amendment and supplement thereto (in each case including
any documents incorporated therein by reference and all exhibits), (iii) such
reasonable number of copies of the Prospectus included in such Registration
Statement (including each preliminary Prospectus), and such reasonable number of
copies of the final Prospectus as filed by the Company pursuant to Rule 424(b)
under the Securities Act, in conformity with the requirements of the Securities
Act, and (iv) such other documents (including any amendments required to be
filed pursuant to clause (c) of this Section), as any such Person may reasonably
request. The Company hereby consents to the use of the Prospectus by each of the
selling Holders of Registrable Securities or each such Participating Broker-
Dealer, as the case may be, and the underwriters or agents, if any, and dealers
(if any), in connection with the offering and sale of the Registrable Securities
covered by, or the sale by Participating Broker-Dealers of the Exchange
Securities pursuant to, such Prospectus and any amendment thereto.
(e) If (A) a Shelf Registration is filed pursuant to Section 3
or (B) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, notify the selling Holders of Registrable Securities, their
Special Counsel, each Participating Broker-Dealer and the managing underwriters,
if any, promptly (but in any event within two Business Days), and confirm such
notice in writing, (i) when a Prospectus has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has
13
<PAGE>
become effective under the Securities Act, (ii) of the issuance by the SEC of
any stop order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of any Prospectus or the initiation
of any proceedings for that purpose, (iii) if, at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Securities, the representations and warranties of the Company
contained in any agreement (including any underwriting agreement) contemplated
by Section 6(n) below cease to be true and correct in any material respect, (iv)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of a Registration Statement
or any of the Registrable Securities or the Exchange Securities to be sold by
any Participating Broker-Dealer for offer or sale in any jurisdiction, or the
contemplation, initiation or threatening of any proceeding for such purpose, (v)
of the happening of any event that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(f) Use its best efforts to register or qualify, and, if
applicable, to cooperate with the selling Holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, Securities to be included in a Registration Statement for
offer and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any selling Holder, Participating Broker-Dealer or
the managing underwriters reasonably request in writing; and, if Securities are
offered other than through an Underwritten Offering, the Company shall cause its
counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 6(f) at the expense
of the Company; keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Securities
covered by the applicable 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, (ii) take action that would
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<PAGE>
subject it to general service of process in any jurisdiction where it is not so
subject or (iii) subject it to taxation in excess of a nominal dollar amount in
any such jurisdiction where it is not then subject.
(g) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Securities for sale in any
jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible time.
(h) If (A) a Shelf Registration is filed pursuant to Section 3
or (B) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, and if requested by the managing underwriters, if any, or the
Holders of a majority in aggregate liquidation preference of the Registrable
Securities, (i) promptly incorporate in a Prospectus or post-effective amendment
such information as the managing underwriters, if any, or such Holders
reasonably request to be included therein required to comply with any Applicable
Law and (ii) make all required filings of such Prospectus or such post-effective
amendment as soon as practicable after the Company has received notification of
such matters required by Applicable Law to be incorporated in such Prospectus or
post-effective amendment.
(i) If (A) a Shelf Registration is filed pursuant to Section 3
or (B) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, cooperate with the selling Holders and the managing under
writers, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends, other than as required by applicable
law, and shall be in a form eligible for deposit with The Depository Trust
Company ("DTC"); and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters, if any,
or Holders may reasonably request.
(j) If (i) a Shelf Registration is filed pursuant to Section 3
or (ii) a Prospectus contained in an Exchange Offer Registration Statement filed
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<PAGE>
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, upon the occurrence of any event contemplated by Section
6(e)(v) or 6(e)(vi) above, as promptly as practicable prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder
or to the purchasers of the Exchange Securities to whom such Prospectus will be
delivered by a Participating Broker-Dealer, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) Use its best efforts to cause the Securities covered by a
Registration Statement to be rated with the appropriate rating agencies, if
appropriate, if so requested by the Holders of a majority in aggregate
liquidation preference of Securities covered by such Registration Statement or
the managing underwriters, if any.
(l) Prior to the effective date of the first Registration
Statement relating to the Securities, (i) provide the applicable registrar and
transfer agent with printed certificates for the Securities in a form eligible
for deposit with DTC and (ii) provide a CUSIP number for each of the Securities.
(m) Use its best efforts to cause all Securities covered by such
Registration Statement to be listed on each securities exchange, if any, on
which similar preferred securities issued by the Company are then listed.
(n) If a Shelf Registration is filed pursuant to Section 3,
enter into such agreements (including an underwriting agreement in form, scope
and substance as is customary in Underwritten Offerings) and take all such other
actions in connection therewith (including those reasonably requested by the
managing underwriters, if any, or the Holders of a majority of the Registrable
Securities being sold) in order to expedite or facilitate the registration or
the disposition of such Registrable Securities, and in such connection, whether
or not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, (i) make such representations and
warranties to the Holders and the underwriters, if any, with respect to the
business of the Company and its Subsidiaries, and the Registration Statement,
Prospectus and documents, if
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<PAGE>
any, incorporated or deemed to be incorporated by reference therein, in each
case, in form, substance and scope as are customarily made by issuers to
underwriters in Underwritten Offerings, and confirm the same if and when
reasonably requested; (ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and the Holders of
a majority in liquidation preference of the Registrable Securities being sold),
addressed to each selling Holder and each of the underwriters, if any, covering
the matters customarily covered in opinions requested in Underwritten Offerings;
(iii) obtain "cold comfort" letters and updates thereof (which letters and
updates (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters) from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any Subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each of the underwriters
and each selling Holder, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with Underwritten Offerings and such other matters as reasonably requested by
underwriters; and (iv) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority in liquidation preference of
the Registrable Securities being sold and the managing underwriters, if any, to
evidence the continued validity of the representations and warranties of the
Company and its Subsidiaries made pursuant to clause (i) above and to evidence
compliance with any conditions contained in the underwriting agreement or other
similar agreement entered into by the Company.
(o) Comply with all applicable rules and regulations of the SEC
and make generally available to its security holders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no later
than 45 days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i) commencing on the first
day of the fiscal quarter following each fiscal quarter in which Registrable
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 the Company after the
effective date of a Registration Statement, which statements shall cover said
12-month periods.
(p) Upon consummation of an Exchange Offer or Private Exchange,
obtain an opinion of counsel to the Company (in form, scope and substance
reasonably satisfactory to the Purchaser), addressed to all Holders par-
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ticipating in the Exchange Offer or Private Exchange, as the case may be, to the
effect that (i) the Company has duly authorized, executed and delivered the
Exchange Securities or the Private Exchange Securities, as the case may be, and
the Indenture and (ii) the Exchange Securities or the Private Exchange
Securities, as the case may be, constitute legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except as such enforcement may be subject to (x) applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and (y) general principles of equity
(regardless of whether such enforcement is sought in a proceeding in equity or
at law).
(q) If an Exchange Offer or Private Exchange is to be
consummated, upon delivery of the Registrable Securities by such Holders to the
Company (or to such other Person as directed by the Company) in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be, the
Company shall mark, or cause to be marked, on such Registrable Securities that
such Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be; in no event
shall such Registrable Securities be marked as paid or otherwise satisfied.
(r) Cooperate with each seller of Registrable Securities covered
by any Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD.
(s) Use its best efforts to take all other steps necessary to
effect the registration of the Registrable Securities covered by a Registration
Statement contemplated hereby.
As a condition to its participation in the Exchange Offer or a
Shelf Registration pursuant to the terms of this Agreement, each Holder of
Registrable Securities shall furnish, upon the written request of the Company, a
written representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of the Company, (B) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Securities to be issued in
the Exchange Offer and (C) it is acquiring the Exchange Securities or the
Private Exchange Securities, as applicable, in its ordinary course of business.
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<PAGE>
Notwithstanding anything to the contrary contained herein, if (A)
the Board of Directors of the Company determines in good faith that it is in the
best interests of the Company not to disclose the existence of or facts
surrounding any proposed or pending material corporate transaction involving the
Company or its subsidiaries and (B) the Company notifies the Holders within two
Business Days after the Board of Directors makes such determination, the Company
may allow the Shelf Registration Statement to fail to be effective and usable as
a result of such nondisclosure for up to 60 days during the Effectiveness
Period, but in no event for any period in excess of 30 consecutive days;
provided, however, that the Effectiveness Period shall be extended by the number
of days during which such registration statement was not effective or usable
pursuant to the foregoing provisions; provided, further, that the Company shall
be required to pay any applicable liquidated damages pursuant to Section 4
during any such period.
Each Holder and each Participating Broker-Dealer agrees by
acquisition of such Registrable Securities or Exchange Securities of any
Participating Broker-Dealer that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 6(e)(ii),
6(e)(iv), 6(e)(v) or 6(e)(vi), such Holder will forthwith discontinue
disposition (in the jurisdictions specified in a notice of a Section 6(e)(iv)
event, and elsewhere in a notice of a Section 6(e)(ii), 6(e)(v) or 6(e)(vi)
event) of such Securities covered by such Registration Statement or Prospectus
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 6(j), or until it is advised in writing (the
"Advice") by the Company that offers or sales in a particular jurisdiction may
be resumed or that the use of the applicable Prospectus may be resumed, as the
case may be, and has received copies of any amendments or supplements thereto.
If the Company shall give such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of such Securities covered by such Registration Statement
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 6(j) or (y) the Advice.
7. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation:
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<PAGE>
(i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the
NASD and (B) fees and expenses of compliance with state securities or Blue
Sky laws (including, without limitation, reasonable fees and disbursements
of counsel in connection with Blue Sky qualifications of the Registrable
Securities or Exchange Securities and determination of the eligibility of
the Registrable Securities or Exchange Securities for investment under the
laws of such jurisdictions (x) where the Holders are located, in the case
of the Exchange Securities, or (y) as provided in Section 6(f), in the case
of Registrable Securities or Exchange Securities to be sold by a
Participating Broker-Dealer during the Applicable Period));
(ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities or Exchange Securities
in a form eligible for deposit with DTC and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriters, if any,
or, in respect of Registrable Securities or Exchange Securities to be sold
by a Participating Broker-Dealer during the Applicable Period, by the
Holders of a majority in aggregate liquidation preference of the
Registrable Securities included in any Registration Statement or of such
Exchange Securities, as the case may be);
(iii) messenger, telephone, duplication, word processing and
delivery expenses incurred by the Company in the performance of its
obligations hereunder;
(iv) fees and disbursements of counsel for the Company;
(v) fees and disbursements of all independent certified public
accountants referred to in Section 6(n)(iii) (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance);
(vi) Securities Act liability insurance, if the Company so
desires such insurance;
(vii) fees and expenses of all other Persons retained by the
Company; internal expenses of the Company (including, without limitation,
all salaries and expenses of officers and employees of the
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<PAGE>
Company performing legal or accounting duties); and the expense of any
annual audit; and
(viii) rating agency fees and the fees and expenses incurred in
connection with the listing of the Securities to be registered on any
securities exchange.
(b) The Company shall reimburse the Holders for the reasonable
fees and disbursements of not more than one counsel (in addition to appropriate
local counsel) chosen by the Holders of a majority in aggregate principal
liquidation preference of the Registrable Securities to be included in any
Registration Statement which counsel shall be reasonably satisfactory to the
Company.
8. Indemnification
(a) Indemnification by the Company. The Company shall, without
limitation as to time, indemnify and hold harmless each Holder and each
Participating Broker-Dealer selling Exchange Securities during the Applicable
Period, each Person who controls each such Holder (within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act) and the officers,
directors, partners, employees, representatives and agents of each such Holder,
Participating Broker-Dealer and controlling person, to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable costs of preparation and reasonable
attorneys' fees) and expenses (including, without limitation, reasonable costs
and expenses incurred in connection with investigating, preparing, pursuing or
defending against any of the foregoing) (collectively, "Losses"), as incurred,
directly or indirectly caused by, related to, based upon, arising out of or in
connection with any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of prospectus, or in
any amendment or supplement thereto, or in any preliminary prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar as such
Losses are based upon information relating to such Holder or Participating
Broker-Dealer and furnished in writing to the Company (or reviewed and approved
in writing) by such Holder or Participating Broker-Dealer expressly for use
therein; provided, however, that the Company shall not be liable to any
Indemnified Party to the extent that any such Losses arise solely out of an
untrue statement or alleged untrue statement or omission or alleged omission
made in
21
<PAGE>
any preliminary prospectus, or Prospectus that has been amended or supplemented,
if (i) such Indemnified Party or related Holder of a Registrable Security failed
to send or deliver a copy of the Prospectus, as then amended or supplemented,
with or prior to the delivery of written confirmation of the sale by such
Indemnified Party or the related Holder of a Registrable Security to the person
asserting the claim from which such Losses arise, (ii) the Prospectus, as
amended or supplemented, would have corrected such untrue statement or alleged
untrue statement or omission or alleged omission, and (iii) the Company has
complied with its obligations under Section 6(e) hereof; provided, further, that
the Company shall not be liable to any Indemnified Party to the extent that any
such Losses are a result of the use by the Indemnified Party of any Prospectus,
when, upon receipt of a notice from the Company of the existence of any fact of
the kind described in Section 6(e) and as contemplated by the last paragraph of
Section 6, the Indemnified Party or the related Holder was not permitted to do
so. The Company shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers, directors, agents and employees and each Person
who controls such Persons (within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act) to the same extent as provided above
with respect to the indemnification of the Holders or the Participating Broker-
Dealer.
(b) Indemnification by Holder of Registrable Securities. In
connection with any Registration Statement, Prospectus or form of prospectus,
any amendment or supplement thereto, or any preliminary prospectus in which a
Holder is participating, such Holder shall furnish to the Company in writing
such information as the Company reasonably requests for use in connection with
any Registration Statement, Prospectus or form of prospectus, any amendment or
supplement thereto, or any preliminary prospectus and shall, without limitation
as to time, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person, if any, who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20(a) of the Exchange
Act), and the directors, officers, agents or employees of such controlling
persons, to the fullest extent lawful, from and against all Losses arising out
of or based upon any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading to the extent, but only
to the extent, that such untrue statement or alleged untrue statement of a
material fact or omission or alleged
22
<PAGE>
omission of a material fact is contained in any information so furnished in
writing by such Holder to the Company expressly for use therein. In no event
shall the liability of any selling Holder be greater in amount than the dollar
amount of the proceeds (net of payment of all expenses) received by such Holder
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"indemnified party"), such indemnified party shall promptly notify the party or
parties from which such indemnity is sought (the "indemnifying parties") in
writing; provided that the failure to so notify the indemnifying parties shall
not relieve the indemnifying parties from any obligation or liability except to
the extent (but only to the extent) that it shall be finally determined by a
court of competent jurisdiction (which determination is not subject to appeal)
that the indemnifying parties have been prejudiced materially by such failure.
The indemnifying party shall have the right, exercisable by giving
written notice to an indemnified party, within 20 business days after receipt of
written notice from such indemnified party of such Proceeding, to assume, at its
expense, the defense of any such Proceeding, provided that 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; or (2) the
indemnifying party shall have failed promptly 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 party or any of its affiliates or controlling persons, and such
indemnified party shall have been advised by counsel that there may be one or
more defenses available to such indemnified party that are in addition to, or in
conflict with, those defenses 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 reasonable 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
23
<PAGE>
and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for such indemnified party).
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 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 by reason of such
settlement or judgment. The indemnifying party shall not consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
indemnified party of a release, in form and substance reasonably satisfactory to
the indemnified party, from all liability in respect of such Proceeding for
which such indemnified party would be entitled to indemnification hereunder
(whether or not any indemnified party is a party thereto).
(d) Contribution. If the indemnification provided for in this Section
8 is unavailable to an indemnified party or is insufficient to hold such
indemnified party harmless for any Losses in respect of which this Section 8
would otherwise apply by its terms (other than by reason of exceptions provided
in this Section 8), then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have a joint and several obligation
to contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent any such statement or omission. The amount paid or payable by
an indemnified party as a result of any Losses shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
Proceeding, to the extent such party would have been indemnified for such fees
or expenses if the indemnification provided for in Section 8(a) or 8(b) was
available to such party.
24
<PAGE>
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8(d), an indemnifying party that
is a selling Holder shall not be required to contribute, in the aggregate, any
amount in excess of such Holder's Maximum Contribution Amount. A selling
Holder's "Maximum Contribution Amount" shall equal the excess of (i) the
aggregate proceeds received by such Holder pursuant to the sale of such
Registrable Securities over (ii) the aggregate amount of damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 8
are in addition to any liability that the indemnifying parties may have to the
indemnified parties.
9. Rule 144 and Rule 144A
The Company covenants that it shall (a) file the reports required to
be filed by it (if so required) under the Securities Act and the Exchange Act in
a timely manner and, if at any time any such Person is not required to file such
reports, it will, upon the request of any Holder, make publicly available other
information necessary to permit sales pursuant to Rule 144 and Rule 144A and (b)
take such further action as any Holder may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act pursuant to the exemptions
provided by Rule 144 and Rule 144A. Upon the request of any Holder, the Company
shall deliver to such Holder a written statement as to whether they have
complied with such information and requirements.
10. Underwritten Registrations
If any of the Registrable Securities covered by any Shelf Registration
are to be sold in an Underwritten Offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate liquidation preference of such
25
<PAGE>
Registrable Securities included in such offering and shall be reasonably
acceptable to the Company.
No Holder of Registrable Securities may participate in any
Underwritten Registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, underwriting
agreements, powers of attorney, lock-up letters and other documents reasonably
required under the terms of such underwriting arrangements.
11. Miscellaneous
(a) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights provided herein, in the Certificate of Designation or, in
the case of the Purchaser, in the Purchase Agreement, or granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not entered into, as
of the date hereof, and shall not enter into, after the date of this Agreement,
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding aggregate liquidation preference
of Registrable Securities; provided that Section 8 shall not be amended,
modified or supplemented, and waivers or consents to departures from this
proviso may not be given, unless the Company has obtained the written consent of
each Holder. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
26
<PAGE>
rights of Holders whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of at least a majority in aggregate liquidation
preference of the Registrable Securities being sold by such Holders pursuant to
such Registration Statement, provided that the provisions of this sentence may
not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications (including, without
limitation, any notices or other communications to the Registrar and Transfer
Agent) provided for or permitted hereunder shall be made in writing by hand-
delivery, certified first-class mail, return receipt requested, next-day air
courier or facsimile:
(i) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
11(d), which address initially is, with respect to each Holder, the address
of such Holder maintained by the Registrar under the Indenture, with a copy
to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York 10022, telecopy number (212) 735-2000, Attention: Alan G. Straus,
Esq.; and
(ii) if to the Company, initially ArborLake Center, 1751 Lake
Cook Road, Suite 550, Deerfield, Illinois 60015, telecopy number (847)
945-9909, Attention: Chief Executive Officer, and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 11(d), with copies to Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois 60603, telecopy number (312) 701-7711, Attention:
Philip J. Niehoff, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Registrar and
Transfer Agent at the following address: 311 West Monroe Street, Chicago,
Illinois 60606. Attention: Charles Zade.
27
<PAGE>
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
THE COMPANY IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS SAID
ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF
28
<PAGE>
ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHER WISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
(i) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Company in
respect of securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Attorneys' Fees. In any Proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the courts, shall be
entitled to recover reasonable attorneys' fees in addition to its costs and
expenses and any other available remedy.
(l) Securities Held by the Company or its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
(other than Holders deemed to be such affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
29
<PAGE>
(m) Third Party Beneficiaries. Each purchaser who purchases shares of
Preferred Stock from the Purchaser is intended to be a beneficiary of the
Company's covenants contained herein to the same extent as if the shares of
Preferred Stock were sold and those covenants were made directly to such
purchaser by the Company.
(n) Substitution of Subordinated Exchange Notes. If the Company shall
exchange its Subordinated Exchange Notes for Preferred Stock, the terms of this
Agreement applicable to the Preferred Stock shall be equally applicable to the
Subordinated Exchange Notes, except that (i) references to liquidation
preference shall thereafter be deemed to be references to principal amount and
(ii) references to the Certificate of Designation shall thereafter be deemed to
be references to the indenture pursuant to which the Subordinated Exchange Notes
are issued.
30
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
By: /s/ Dominic J. Pileggi
-------------------------------
Name: Dominic J. Pileggi
Title: President and Chief
Executive Officer
ACCEPTED AND AGREED TO:
JEFFERIES & COMPANY, INC.
By: /s/ M. Brent Stevens
-----------------------
Name: M. Brent Stevens
Title: Managing Director
31
<PAGE>
Exhibit 4.14
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT, dated as of July 21, 1997 (this "Agreement"),
is made by and among JORDAN TELECOMMUNICATIONS PRODUCTS, INC., a Delaware
corporation (the "Company") whose address is c/o Jordan Industries, Inc.,
ArborLake Centre, Suite 550, 1750 Lake Cook Road, Deerfield, Illinois 60015, and
the persons whose names are set forth at the end of this Agreement
(collectively, the "Stockholders").
1. Stock Subscriptions.
-------------------
(a) Each Stockholder herewith subscribes for the number of shares of the
Company's Common Stock, $0.01 par value per share (the "Stock"), set forth
opposite such Shareholder's name on Exhibit 1 hereto, for the purchase price set
forth opposite such Shareholder's name on Exhibit 1 hereto. As indicated on
Exhibit 1, certain Stockholders shall pay 100% of the purchase price owing by
such Stockholder by delivering a check made to the order of Company and dated as
of the date hereof. Certain other Stockholders, as indicated on Exhibit 1, shall
pay 50% of the purchase price owing by such Stockholder by delivering a check
made to the order of Company and dated as of the date hereof. The remaining 50%
of the purchase price for such other Stockholders shall be paid by wire transfer
of immediately available funds by Jordan Industries, Inc., an Illinois
corporation ("JII"). Each such other Stockholder shall deliver JII a note,
substantially in the form of Exhibit 2 hereto (each a "Note"). In support of
such Note, each such other Stockholder shall also execute and deliver on the
date hereof a pledge agreement, substantially in the form of Exhibit 3 hereto
(each a "Pledge Agreement"), pledging the Stock purchased by such other
Stockholder hereunder to JII in accordance with the terms of such Pledge
Agreement.
(b) Each Stockholder nominates The Jordan Company ("TJC") to hold the
Securities the Stockholder subscribes for under this Agreement. TJC acknowledges
to the Stockholders and the Company that the Securities subscribed for under
this Agreement will be distributed by TJC to the Stockholders pursuant to such
agreements as exist between the Stockholders and TJC.
(c) Each Stockholder acknowledges to the Company and the other Stockholders
that he understands and agrees, as follows:
THE STOCK HAS NOT BEEN REGISTERED UNDER FEDERAL OR STATE SECURITIES LAWS.
THE STOCK IS VERY SPECULATIVE AND RISKY. THERE IS NO PUBLIC OR OTHER MARKET FOR
THE STOCK NOR IS ANY LIKELY TO DEVELOP. THE COMPANY HAS LITTLE FINANCIAL HISTORY
AND THE COMPANY AND ITS SUBSIDIARY HAVE BORROWED SUBSTANTIALLY ALL OF THE FUNDS
AVAILABLE TO IT TO COMMENCE ITS BUSINESS. EACH STOCKHOLDER ACKNOWLEDGES THAT THE
STOCKHOLDER MAY AND CAN AFFORD TO LOSE HIS ENTIRE INVESTMENT AND THAT THE
STOCKHOLDER UNDERSTANDS THE STOCKHOLDER MAY HAVE TO HOLD THIS INVESTMENT
INDEFINITELY.
<PAGE>
(d) Each certificate evidencing Stock being issued pursuant to this
Agreement shall bear legends reflecting (i) this Agreement's existence and (ii)
the fact that said Stock has not been registered under Federal or state
securities laws and is subject to limitations on transfer set forth herein and
in the Stockholders Agreement, dated as of July 21, 1997, by and among the
Company and certain of the Company's stockholders (as amended or modified in
accordance with its terms, the "Stockholders Agreement"). Each Stockholder
acknowledges that the effect of these legends, among other things, is or may be
to limit or destroy the value of the certificate for purposes of sale or for use
as loan collateral. Each Stockholder consents that "stop transfer" instructions
may be noted against the Stock sold to him hereunder. Each Stockholder
acknowledges that he is required to become a party to the Stockholders'
Agreement as a condition to purchasing the Stock hereunder.
2. Proposed Transactions.
---------------------
(a) This Agreement summarizes certain pertinent documents as well as
applicable laws and regulations. While the Company believes that these summaries
fairly reflect and summarize such matters, each Stockholder acknowledges that
such summaries are not complete and are qualified by reference to the complete
texts thereof of the documents, laws and regulations so summarized.
(b) Each Stockholder acknowledges to the Company and the other
Stockholders that the Stockholder has received or has had ample opportunity to
review and understand the current form of each of the following documents:
A. The Certificate of Incorporation of the Company;
B. The Bylaws of the Company;
C. The draft Offering Circular, dated June 24, 1997, describing the
proposed public offering of Senior Notes due 2006, Senior Subordinated
Discount Debentures due 2007, Senior Exchangeable Preferred Stock due
2009 and Common Stock;
D. The Stockholders' Agreement, including all exhibits and schedules
thereto; and
E. This Agreement and all exhibits and schedules hereto.
The documents referred to in A through E are hereinafter collectively
referred to as the "Operative Documents."
The Company has afforded such Stockholder and such Stockholder's advisors,
if any, the opportunity to discuss an investment in the Stock and to ask
questions of representatives of the Company concerning the terms and conditions
of the offering of the Stock and the Operative Documents, and such
representatives have provided answers to all such questions concerning the
offering of the Stock and the Operative Documents. Such Stockholder has
consulted its own financial, tax, accounting and legal advisors, if any, as to
such Stockholder's investment in the Stock and the consequences thereof and
risks associated therewith and the Operative Documents.
-2-
<PAGE>
Such Stockholder and such Stockholder's advisors, if any, has examined or has
had the opportunity to examine before the date hereof the Operative Documents
and all information that the advisor or Stockholder deems to be material to an
understanding of the Company, the proposed business of the Company, and the
offering of the Stock. Such Stockholder also acknowledges that there have been
no general or public solicitations or advertisements or other broadly
disseminated disclosures (including, without limitation, any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or advertising) by
or on behalf of the Company regarding an investment in the Stock.
3. Stockholder Representations and Warranties.
------------------------------------------
(a) Each Stockholder represents to the Company and the other Stockholders
that such Stockholder is an "accredited investor" as defined in Regulation D
under the Securities Act of 1933, as amended, and/or is a sophisticated,
experienced, professional investor.
(b) Each Stockholder represents that such Stockholder has had an
opportunity to select and consult with such attorneys, tax advisors, business
consultants and any other person(s) the Stockholder wished to confer with since
the time when the proposed transaction and the Stockholder's participation was
first discussed with the Stockholder. Each Stockholder acknowledges that the
Company has made available to the Stockholder prior to the signing of this
Agreement and sale of any Stock hereunder, the opportunity to ask questions of
any person authorized to act on behalf of the Company concerning any aspect of
the investment and to obtain any additional information, to the extent the
Company possesses such information or can acquire it without unreasonable effort
or expense, necessary to verify the accuracy of the information.
(c) Each Stockholder agrees that the Stockholder will not transfer any
Stock if such transfer would result in a default by the Company under the
provisions of the Operative Documents.
4. Risk Factors.
------------
Each Stockholder acknowledges to the Company and the other Stockholders
that the Stockholder knows and understands that it is unlikely that dividends
will be paid on the Stock. There is no legal requirement or promise made by the
Company to declare or pay such dividends and such dividends may not in any event
be paid if such payment would violate any term of the Operative Documents.
Certain of the Operative Documents severely restrict the ability of the Company
to make any dividend or redemption payments in any case and such payment may be
restricted by future agreements or instruments binding on the Company. Such
dividends and redemption payments may be made only from funds available for such
use as provided by applicable law.
Each Stockholder acknowledges that any financial projections or forecasts
delivered to the Stockholder are only forecasts prepared by management, which
are subject to many assumptions
-3-
<PAGE>
and factors beyond the Company's control, and that there are no assurances that
the forecasts will be realized.
Each Stockholder acknowledges to the Company and the other Stockholders
that the Stockholder knows and understands that an investment in the Stock of
the Company is a speculative investment which involves a high risk of loss and
that on and after the date hereof, there will be no public market for the Stock
and the Company does not contemplate that a public market will develop.
5. Securities Law and Other Matters.
--------------------------------
(a) Each Stockholder represents and warrants to the Company and the other
Stockholders that the Stockholder has not used any "purchaser's representative"
(as that term is used in Regulation D under the Securities Act of 1933, as
amended) in connection with this transaction. Each Stockholder represents and
warrants to the Company and the other Stockholders that neither TJC, Jordan
Industries, Inc. ("JII"), Jordan/Zalaznick Capital Company ("JZCC") nor any of
their respective principals, partners, stockholders, directors, officers,
employees, representatives or agents, has acted as a representative of said
Stockholder in the subject transaction. Each Stockholder hereby releases TJC,
JII, JZCC and each of their respective partners, principals, stockholders
directors, officers, employees, agents and representatives from and against any
claim in respect of each Stockholder's subscription for the Stock and any
related transaction hereunder or under the Operative Documents. Each Stockholder
represents that such Stockholder has substantial knowledge and experience in
financial, investment and business matters, and specifically in the business of
the Company, and has the requisite knowledge and experience to evaluate the
risks and merits of this investment. Each Stockholder represents and warrants
that the decision of such Stockholder to purchase the Stock hereunder has been
made by such Stockholder independent of any other Stockholder and independent of
any statements, disclosures or judgments as to the properties, business,
prospects or condition (financial or otherwise) of the Company which may have
been made or given by any Stockholder or other person. Each Stockholder
represents and warrants to the Company and the Stockholders that the Stockholder
can and will bear the economic risks of his investment in the Company and
acknowledges that the Stockholder is able to hold the Company's unregistered
Stock indefinitely and is able to sustain a complete loss if the securities
become worthless.
(b) Each Stockholder acknowledges to the Company and the other
Stockholders that the Stock being purchased hereunder has not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), on the
ground that the sales of Stock pursuant to this Agreement are exempt under
Section 4(2) of the Securities Act as not constituting a distribution, and that
the Company's reliance on such exemption is predicated in part on each
Stockholder's representation which the Stockholder herewith makes that the Stock
has been acquired solely by and for the account of such Stockholder for
investment purposes only, and is not being purchased for subdivision,
fractionalization, resale or distribution. Such Stockholder has no contract,
undertaking, agreement or arrangement with any other Stockholder to sell,
transfer or pledge to such other Stockholder or anyone else the Stock (or any
part thereof) which such Stockholder has purchased hereunder. Such Stockholder
has no present plans or intentions to enter into any such contract, undertaking,
agreement or arrangement. The Stock has not been registered or qualified
-4-
<PAGE>
for resale under applicable securities laws, and may not be sold except pursuant
to such registration or qualification thereunder or an exemption therefrom. Such
Stockholder has adequate means of providing for the Stockholder's current needs
and possible contingencies and has a net worth equal to at least three times the
Stockholder's investment in the Stock. Each Stockholder further acknowledges to
the Company that the Stock being sold to the Stockholder must be held
indefinitely unless it is subsequently registered under the Securities Act or a
transfer is made pursuant to an exemption from such registration, for example,
pursuant to Rule 144. Each Stockholder further represents and warrants to the
Company and the other Stockholders that such Stockholder's financial condition
is such that the Stockholder is not under any present necessity or constraint,
and does not foresee in the future any necessity or constraint, to dispose of
these shares to satisfy any existing or contemplated debt or undertaking.
(c) In the event that in the future the Company engages in any negotiation
or transaction (including a merger or consolidation or other reorganization by
or of the Company) in which Regulation D promulgated by the Securities and
Exchange Commission may or will be available to the Company, each of the
Stockholders who is not then a professional investor agrees irrevocably (and
with the knowledge and intention that the other holders of the Company's stock
of all classes will rely thereon in making their respective present investment
decisions) that the Stockholder will, within 5 business days of notice from the
Company, which may be given in the sole discretion of the Company, appoint a
purchaser's representative or representatives who shall be qualified and
acceptable to the Company and any other person(s) who is (are) involved in the
proposed transaction so that the maximum benefits of Regulation D shall be
available to the Company and all of its Stockholders. Any Stockholder who does
not perform this covenant shall be liable to the Company and all of the
Company's other stockholders for any damage or loss that may or might be
incurred thereby.
6. Holdback.
--------
Each Stockholder agrees that until July 31, 2002, the Stockholder will not,
directly or indirectly, sell, assign, transfer, grant a participation in, pledge
or otherwise dispose of the Stock or any interest therein purchased by the
Stockholder pursuant to this Agreement, other than to the Company pursuant to
the Pledge Agreement delivered by the Stockholder hereunder; provided, however,
that this paragraph 6 may be modified or waived at any time by the Company's
Board of Directors in its sole discretion.
7. Stockholders Agreement.
----------------------
Each Stockholder hereby agrees to become party to, and that the Stock will
be subject to, the Company's Stockholders Agreement, in the form attached as
Exhibit 4 hereto.
8. Registration Rights.
-------------------
The Stock has not been registered under Federal or state securities laws
and, in consequence thereof, all of the Stock must be held indefinitely unless
(a) subsequently registered under applicable Federal and state securities laws
or (b) exemptions from such registration are
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<PAGE>
available at the time of a proposed sale or transfer thereof. The Company has no
present intention to file a registration statement under either Federal or state
law.
9. Legend.
------
All certificates representing shares of the Stockholder Stock shall be
endorsed as follows:
"THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON
COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS AGREEMENT, DATED
JULY 21, 1997, AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS AND
THE SUBSCRIPTION AGREEMENT, DATED JULY 21, 1997, AMONG THE COMPANY AND
CERTAIN INVESTORS THEREIN. REFERENCE ALSO IS MADE TO THE RESTRICTIVE
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE
COMPANY. A COPY OF THE ABOVE REFERENCED AGREEMENTS ARE ON FILE AT THE
OFFICE OF THE COMPANY C/O JORDAN INDUSTRIES, INC., ARBORLAKE CENTRE,
SUITE 550, 1750 LAKE COOK ROAD, DEERFIELD, ILLINOIS 60015.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN
EXEMPTION FROM REGISTRATION, UNDER SAID ACT."
10. Miscellaneous Provisions and Definitions.
----------------------------------------
(a) Subject to the conditions of transfer of Stock hereunder, this
Agreement shall be binding upon and shall inure to the benefit of each
individual Stockholder and the Stockholder's respective heirs, executors,
administrators, assigns and legal representatives and to the Company and its
respective successors and assigns, by way of merger, consolidation or operation
of law or otherwise. Once a Stockholder of the Company is no longer a
Stockholder of the Company, all rights and benefits previously enjoyed by such
party pursuant to the terms of this Agreement shall automatically terminate with
respect to such party.
(b) Prior to consummation of any transfer of shares of Stock held by any
Stockholder permitted under the Stockholders' Agreement, except for transfers
pursuant to Rule 144 or a public offering, such party shall cause the transferee
to execute an agreement in which the transferee agrees to be bound by the terms
of this Agreement.
(c) The language used in this Agreement will be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction will be applied against any person.
(d) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS,
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<PAGE>
EXCEPT THAT NO DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER
THAN THAT OF ILLINOIS, AND NO DEFENSE, COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR
ALLOWED BY THE LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE
ENACTMENT, MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE OF
ANY FOREIGN JURISDICTION, BE INTERPOSED IN ANY ACTION HEREON. THE PARTIES HERETO
AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS AGREEMENT
MAY BE COMMENCED IN THE COURTS OF THE STATE OF ILLINOIS OR THE UNITED STATES
DISTRICT COURTS IN THE NORTHERN DISTRICT OF ILLINOIS. STOCKHOLDER AND THE
COMPANY CONSENT TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH
COURTS AND WAIVE ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. THE CHOICE OF
FORUM SET FORTH IN THIS SECTION 10(d) SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION
UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER JURISDICTION.
(e) THE PARTIES HERETO AGREE THAT ANY DISPUTE BETWEEN OR AMONG THE PARTIES
TO THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, SHALL BE SUBMITTED TO, AND
RESOLVED EXCLUSIVELY PURSUANT TO ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION
SHALL TAKE PLACE IN CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE
LAW OF THE STATE OF ILLINOIS. DECISIONS PURSUANT TO SUCH ARBITRATION SHALL BE
FINAL, CONCLUSIVE AND BINDING ON THE PARTIES SUBJECT TO CONFIRMATION,
MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. (S) 1 ET SEQ. UPON THE CONCLUSION
OF ARBITRATION, THE PARTIES TO THIS AGREEMENT MAY APPLY TO ANY COURT OF THE TYPE
DESCRIBED IN SECTION 10(d) TO ENFORCE THE DECISION PURSUANT TO SUCH ARBITRATION.
IN CONNECTION WITH THE FOREGOING, THE PARTIES HEREBY WAIVE ANY RIGHTS TO A JURY
TRIAL TO RESOLVE ANY DISPUTES OR CLAIMS RELATING TO THIS AGREEMENT AND THE
AGREEMENTS AND TRANSACTIONS CONTEMPLATED HEREBY.
(f) All personal pronouns used in this Agreement, whether masculine,
feminine or neuter gender, shall include all other genders if the context so
requires; the singular shall include the plural, and vice versa.
(g) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
(h) The words "sale", "sell", "transfer" and the like shall include any
disposition by way of transfer, with or without consideration, to any person for
any purpose and shall include, but shall not be limited in any way to,
redemption (of other than its preferred stock) by the
-7-
<PAGE>
issuer, private or public sale or exchanges of securities or any other similar
transaction involving Stock.
(i) In case any one or more of the provisions or parts of a provision
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement or any other jurisdiction, but this Agreement shall
be reformed and construed in any such jurisdiction as if such invalid or illegal
or unenforceable provision or part of a provision had never been contained
herein and such provision or part shall be reformed so that it would be valid,
legal and enforceable to the maximum extent permitted in such jurisdiction.
(j) This Agreement constitutes the entire agreement by and among the
parties with respect to the subject matter hereof and may not be modified
orally, but only by a writing subscribed by the party charged therewith.
(k) Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action necessary to
effectuate the terms and purposes of this Agreement.
(l) Whenever notice is required to be given by any party hereunder, such
notice shall be deemed sufficient when delivered to the Company at its address
above (which is also the address of The Jordan Company) and to each of the other
Stockholders at his address below or to such other address as the Stockholder
shall have furnished.
(m) Each party shall be entitled to rely conclusively upon any notice
received, or the failure to receive any notice, from any other party with
respect to rights and obligations under this Agreement.
-8-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has signed this Subscription
Agreement:
JORDAN TELECOMMUNICATIONS
PRODUCTS, INC.
By: /s/ Thomas H. Quinn
------------------------------------
Name: Thomas H. Quinn
Title: Chairman
MEZZANINE CAPITAL & INCOME
TRUST 2001 PLC
By: /s/ James E. Jordan
------------------------------------
Name: James E. Jordan
Title: Authorized Representative
LEUCADIA INVESTORS, INC.
By: /s/ Joseph S. Steinberg
------------------------------------
Name: Joseph S. Steinberg
Title: Vice President
JORDAN/ZALAZNICK CAPITAL
COMPANY
By: /s/ John W. Jordan II
------------------------------------
Name: John W. Jordan II
Title: Authorized Representative
JOHN W. JORDAN, II REVOCABLE
TRUST
/s/ John W. Jordan II
-----------------------------------------
John W. Jordan, II
Trustee
<PAGE>
THE JORDAN FAMILY TRUST
/s/ John W. Jordan II
-----------------------------------------
John W. Jordan, II
Trustee
/s/ John W. Jordan II
-----------------------------------------
John W. Jordan, II
/s/ David W. Zalaznick
-----------------------------------------
David W. Zalaznick
/s/ Jonathan F. Boucher
-----------------------------------------
Jonathan F. Boucher
/s/ John R. Lowden
-----------------------------------------
John R. Lowden
/s/ Adam E. Max
-----------------------------------------
Adam E. Max
/s/ Thomas H. Quinn
-----------------------------------------
Thomas H. Quinn
/s/ James E. Jordan Jr.
-----------------------------------------
James E. Jordan, Jr.
/s/ Paul Rodzevik
-----------------------------------------
Paul Rodzevik
<PAGE>
G. ROBERT FISHER IRREVOCABLE
GIFT TRUST, UTI DATED
DECEMBER 26, 1990
/s/ G. Robert Fisher
-----------------------------------------
G. Robert Fisher
Trustee
/s/ Daly Jordan O'Brien
-----------------------------------------
Daly Jordan O'Brien
/s/ George C. Jordan Jr.
-----------------------------------------
George C. Jordan, Jr.
/s/ Elizabeth O'Brien Jordan
-----------------------------------------
Elizabeth O'Brien Jordan
/s/ Bruce H. Zalaznick
-----------------------------------------
Bruce H. Zalaznick
<PAGE>
JII PARTNERS LIMITED PARTNERSHIP
By Jordan Industries, Inc.,
its General Partner
By: /s/ John W. Jordan II
------------------------------------
Name: John W. Jordan II
Title: Chairman
/s/ A. Richard Caputo Jr.
-----------------------------------------
A. Richard Caputo, Jr.
/s/ Douglas Zych
-----------------------------------------
Douglas Zych
<PAGE>
Exhibit 4.15
MANAGEMENT SUBSCRIPTION AGREEMENT
---------------------------------
MANAGEMENT SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of July 21,
1997, by and between Jordan Telecommunications Products, Inc., a Delaware
corporation (the "Company"), and Dominic J. Pileggi, the President and Chief
Executive Officer of the Company (the "Purchaser").
WHEREAS, the Purchaser desires to subscribe for and acquire from the
Company, and the Company desires to issue and sell to the Purchaser, 10,722.2222
shares (the "Shares") of Common Stock, par value $0.01 per share, of the Company
(the "Common Stock") on the terms set forth herein.
NOW, THEREFORE, in order to implement the foregoing and in consideration of
the mutual representations, warranties, covenants and agreements contained
herein, the parties hereto agree as follows:
1. Subscription for and Purchase of Shares.
1.1. Purchase of Shares. (a) Upon the terms and subject to the
conditions set forth in this Agreement, the Purchaser hereby subscribes for and
agrees to purchase, and the Company hereby agrees to issue and sell to the
Purchaser, the Shares. The purchase price for the Shares is payable through the
Purchaser's payment to the Company of cash in the amount of $21,444.44.
(b) The Purchaser acknowledges to the Company that he understands
and agrees, as follows:
THE SHARES HAVE NOT BEEN REGISTERED UNDER FEDERAL OR STATE SECURITIES LAWS.
THE SHARES ARE A HIGHLY SPECULATIVE AND RISKY INVESTMENT. THERE IS NO
PUBLIC OR OTHER MARKET FOR THE SHARES NOR IS ANY LIKELY TO DEVELOP. THE
COMPANY HAS NO PREVIOUS FINANCIAL HISTORY AND HAS BORROWED SUBSTANTIALLY
ALL OF THE FUNDS AVAILABLE TO IT TO OPERATE ITS BUSINESS. THE PURCHASER
ACKNOWLEDGES THAT HE MAY AND CAN AFFORD TO LOSE HIS ENTIRE INVESTMENT AND
THAT HE UNDERSTANDS HE MAY HAVE TO HOLD THIS INVESTMENT INDEFINITELY.
(c) Each certificate evidencing the Shares being issued pursuant
to this Agreement shall bear legends reflecting (i) this Agreement's existence
and (ii) the fact that the Shares have
<PAGE>
not been registered under Federal or state securities laws and are subject to
limitations on transfer set forth herein. The Purchaser acknowledges that the
effect of these legends, among other things, is or may be to significantly limit
or diminish the value of the Shares for purposes of sale or for use as loan
collateral. The Purchaser consents to the notation of "stop transfer"
instructions against the Shares being purchased hereunder.
1.2. Pledge of Shares. The Company hereby acknowledges and agrees
that the Shares being purchased hereunder will be pledged to Jordan Industries,
Inc., a Delaware corporation ("Jordan Industries"), as collateral security for,
among other things, the obligation of the Purchaser to pay the principal of and
interest on the promissory note in the form attached hereto as Exhibit A (the
"Promissory Note"), which shall be duly executed and delivered by the Purchaser
to Jordan Industries on the date hereof, pursuant to the terms of a Stock Pledge
Agreement in the form attached hereto as Exhibit B (the "Pledge Agreement"),
which shall be duly executed and delivered by the Purchaser to Jordan Industries
on the date hereof.
1.3. Document Access. The Company has afforded the Purchaser and his
advisors, if any, the opportunity to discuss an investment in the Shares and to
ask questions of representatives of the Company concerning the terms and
conditions of the sale of the Shares, and such representatives have provided
answers to all such questions concerning the sale of the Shares. The Purchaser
has consulted his own financial, tax, accounting and legal advisors, if any, as
to the Purchaser's investment in the Shares and the consequences thereof and
risks associated therewith. The Purchaser and his advisors, if any, have
examined or have had the opportunity to examine before the date hereof all
documents and other information that the Purchaser deems to be material to an
understanding of the business, operations and financial condition of the Company
and the investment in the Shares contemplated hereby.
1.4. Representations and Warranties of the Purchaser. The Purchaser
represents, warrants and covenants to the Company as follows:
(a) the Purchaser has full power and authority to execute and
deliver this Agreement, the Promissory Note and the Pledge Agreement and to
perform his obligations hereunder and thereunder and this Agreement, the
Promissory Note and the Pledge Agreement have been duly executed and delivered
by the Purchaser and are valid, binding and enforceable against the Purchaser in
accordance with their respective terms;
(b) none of the execution, delivery or performance of this
Agreement, the Promissory Note and the Pledge Agreement by
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<PAGE>
the Purchaser will result in any material breach of any terms or provisions of,
or constitute a material default under, any material contract, agreement or
instrument to which the Purchaser is a party or by which the Purchaser is bound;
and
(c) The Purchaser will complete, execute and file a form of
election under Section 83(b) of the Internal Revenue Code of 1986, as amended,
with the Internal Revenue Service not later than thirty (30) days after the date
hereof.
2. Investment Representations of the Purchaser.
2.1. Investment Intention. The Purchaser hereby represents and
warrants to the Company that the Purchaser is acquiring the Shares for
investment solely for his own account and not with a view to, or for resale in
connection with, the distribution or other disposition thereof.
2.2. Legend. Each certificate representing Shares shall bear
substantially the following legend:
"THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON
COMPLIANCE WITH, THE PROVISIONS OF A MANAGEMENT SUBSCRIPTION
AGREEMENT, DATED AS OF JULY 21, 1997, BETWEEN THE COMPANY AND THE
ORIGINAL PURCHASER OF THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE
(THE "SUBSCRIPTION AGREEMENT"). THE SUBSCRIPTION AGREEMENT GRANTS
CERTAIN REPURCHASE RIGHTS TO THE COMPANY (OR ITS ASSIGNEES) UPON
TERMINATION OF SUCH PURCHASER'S SERVICE WITH THE COMPANY. A COPY OF
THE ABOVE REFERENCED AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT,
OR AN EXEMPTION FROM REGISTRATION, UNDER SAID ACT."
2.3. Risk Factors.
(a) The Purchaser acknowledges that he knows and understands that
the Company borrowed a substantial portion of the funds used to effect the
acquisition of the Company's subsidiaries. It is unlikely that dividends will be
paid on the Shares; there is no legal requirement or promise made by the Company
to declare or pay such dividends and such dividends may not in any event be paid
if such payment would violate any term of any agreement binding on the Company.
The ability of the Company to make any dividend or
-3-
<PAGE>
other payments or distributions in respect of the Shares is restricted by
various agreements and instruments binding on the Company and may be restricted
by future agreements or instruments binding on the Company. If the Purchaser
ceases to be an employee of the Company, the Shares may be subject to certain
rights of the Company to repurchase such Shares under this Agreement. Under the
repurchase payment terms, the Purchaser may not receive full cash payment in
return for his Shares for several years. Furthermore, the Purchaser acknowledges
that he has pledged, pursuant to the Pledge Agreement, the Shares held by him
for the benefit of the Company to secure payment of the amounts due under the
Promissory Note. Under the terms of the Pledge Agreement, the Purchaser may
forfeit his Shares upon certain defaults under the Promissory Note or the Pledge
Agreement.
(b) The Purchaser acknowledges that any financial projections or
forecasts with respect to the Company are subject to many assumptions and
factors beyond the Company's control, and that there are no assurances that
these projections forecasts will be realized. The Purchaser further acknowledges
that any pending or prospective acquisition with respect to the Company are only
possibilities that management has considered, which may never be pursued by the
Company or, if pursued are subject to many conditions and factors outside of the
control of the Company and may never be consummated.
(c) The Purchaser acknowledges that he knows and understands that
his purchase of the Shares is a speculative investment which involves a high
risk of loss and that on and after the date hereof, there will be no public
market for the Shares, and that such a public market may never develop.
(d) The Purchaser understands that Jordan Industries and its
affiliates own in excess of a majority of the outstanding capital stock of the
Company and will have sufficient voting power to exercise control over the
business, policies and affairs of the Company. The Company has entered, and from
time to time may enter, into various agreements and arrangements with Jordan
Industries and its affiliates in exchange for the provision of services to the
Company or to provide financing to the Company. Further, the Purchaser
acknowledges that Jordan Industries and its affiliates, including The Jordan
Company ("Jordan") are engaged in the business of investing in, acquiring and/or
managing businesses for their own accounts, the accounts of their affiliates and
associates and for the account of unaffiliated third parties. No aspect or
element of such activities shall be deemed to be engaged in for the benefit of
the Company or its subsidiaries nor to constitute a conflict of interest. Jordan
Industries and its affiliate shall have no obligation to present any investment
or business opportunities to the attention of the Company or its subsidiaries or
stockholders and the Purchaser hereby waives any
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<PAGE>
claim he may have against Jordan Industries or its affiliates for the
failure of Jordan Industries or its affiliates to present any such opportunity
to the Company, its subsidiaries or stockholders or to pursue such opportunity
for the benefit of such parties.
2.4. Securities Law Matters. (a) The Purchaser represents and
warrants that he did not use a "purchaser's representative" (as that term is
used in Regulation D as promulgated by the Securities and Exchange Commission in
connection with the transactions contemplated by this Agreement. The Purchaser
represents and warrants that neither Jordan, Jordan Industries nor any of their
respective employees or affiliates has acted as a representative of the
Purchaser in connection with such transactions. The Purchaser hereby releases
Jordan, Jordan Industries, Jordan/Zalaznick Capital Company and each of their
respective partners, principals, directors, officers, employees, agents and
representatives (collectively, the "Jordan Entities") from and against any
claims in respect of the Purchaser's subscription for the Shares and any related
transactions hereunder. The Purchaser represents and warrants that his decision
to purchase the Shares has been made by the Purchaser independent of any
statements, disclosures or judgments as to the properties, business, prospects
or condition (financial or otherwise) of the Company which may have been made or
given by any person, including any of the Jordan Entities.
(b) The Purchaser acknowledges and represents and warrants to the
Company that he has been advised by the Company that (a) the offer and sale of
the Shares have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"); (b) the Shares must be held indefinitely and the
Purchaser must continue to bear the economic risk of the investment in the
Shares unless the offer and sale of such Shares is subsequently registered under
the Securities Act and all applicable state securities laws or an exemption from
such registration is available; (c) there is no established market for the
Shares and it is not anticipated that there will be any public market for the
Shares in the foreseeable future; (d) Rule 144 promulgated under the Securities
Act is not presently available with respect to the sale of any securities of the
Company, and the Company has made no covenant to make such Rule available; (e)
when and if Shares may be disposed of without registration under the Securities
Act in reliance on Rule 144, such disposition can be made only in limited
amounts and in accordance with the terms and conditions of such Rule; (f) if the
Rule 144 exemption is not available, public offer or sale without registration
will require the availability of an exemption under the Securities Act; (g) a
restrictive legend in the form heretofore set forth shall be placed on the
certificates representing the Shares; and (h) a notation shall be made in the
appropriate records of the Company indicating that the Shares are subject to
restrictions on transfer and, if the Company should at
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<PAGE>
some time in the future engage the services of a securities transfer agent,
appropriate stop-transfer instructions will be issued to such transfer agent
with respect to the Shares.
2.5. Additional Investment Representations. The Purchaser represents
and warrants that (a) the Purchaser's financial situation is such that he can
afford to bear the economic risk of holding the Shares for an indefinite period
of time, has adequate means for providing for his current needs and personal
contingencies, and can afford to suffer complete loss of his investment in the
Shares; (b) the Purchaser's knowledge and experience in financial and business
matters are such that he is capable of evaluating the merits and risks of the
investment in the Shares as contemplated by this Agreement; (c) the Purchaser
understands that the Shares are a speculative investment which involve a high
degree of risk of loss of his investment therein, there are substantial
restrictions on the transferability of the Shares, and, on the date hereof and
for an indefinite period, there will be no public market for the Shares and,
accordingly, it may not be possible for the Purchaser to liquidate his
investment in case of emergency, if at all; (d) in making his decision to
purchase the Shares hereby purchased, the Purchaser has relied upon independent
investigations made by him and, to the extent believed by the Purchaser to be
appropriate, his representatives, including his own professional, financial, tax
and other advisors; (e) the Purchaser and his representatives have been given
the opportunity to examine all documents and to ask questions of, and to receive
answers from, the Company and their representatives concerning the terms and
conditions of the purchase of the Shares and to obtain any additional
information which the Purchaser or his representatives deem necessary; (f) the
Purchaser is an officer or key employee of the Company and as such has a high
level of familiarity with the business, operations, financial condition and
prospect of the Company; and (g) the Purchaser understands that no
dividends are expected to be paid on Shares in the foreseeable future.
3. Restrictions on Transfer.
3.1. General Restrictions on Transfer. (a) The Purchaser agrees that
he will sell, transfer, assign, pledge, hypothecate or otherwise dispose of
("Transfer") all or any portion of the Shares only in accordance with the terms
of the Agreement. The Purchaser agrees that in no event will the Purchaser
Transfer any Shares (other than a Transfer pursuant to Section 3.3) unless and
until (i) the Purchaser shall have furnished the Company with an opinion of
counsel satisfactory to the Company to the effect that (a) such Transfer will
not require registration of such Shares under the Securities Act, (b) such
Transfer is in accordance with an exemption under the Securities Act, and (c)
appropriate action
-6-
<PAGE>
necessary for compliance with the Securities Act has been taken, and (ii) the
Company shall have waived, expressly and in writing, its rights, if any, under
Section 4 of this Agreement. The Purchaser further agrees that, except as
contemplated by the Pledge Agreement, Shares subject to the call rights
described in Sections 4.1, 4.2 and 4.3 below may not be Transferred.
(b) The Company shall not be required (i) to reflect on its
books any purported Transfer of Shares in violation of any of the provisions set
forth in this Agreement (ii) to treat any purported transferee of such Shares as
a record owner of such Shares or (iii) to afford such purported transferee any
right to vote, or to receive dividends in respect of, such Shares.
3.2. First Refusal Rights. At least sixty (60) days prior to making
any Transfer of Shares (other than a Transfer pursuant to Section 3.3), the
Purchaser will deliver a written notice (the "Sale Notice") to the Company. The
Sale Notice will state the number of Shares to be Transferred, the identity of
the proposed transferee, the terms and conditions of the proposed Transfer and
that such proposed transferee is committed to acquire the stated number of
Shares on the stated price, terms and conditions. The Company may elect to
purchase all or a portion of the Shares to be Transferred upon the same terms
and conditions as those set forth in the Sale Notice by delivering a written
notice (the "Purchase Notice") of such election to the Purchaser within sixty
(60) days after its receipt of the applicable Sale Notice (the "Refusal
Period"), which notice shall specify the time, place and date of settlement of
such purchase. If the Company does not elect to purchase all of the Shares
specified in the Sale Notice, the Company may assign such right to any third
party provided that such right shall not extend beyond the Refusal Period. If
exercised by an assignee pursuant hereto, the right to purchase shall be
exercised by delivery to the Purchaser of a Purchase Notice signed by the
exercising assignee, which notice shall specify the time, place and date for
settlement of such purchase. The Purchaser shall sell to the Company or its
assignees that number of Shares which either of them elects to purchase, such
sale to be consummated within ninety (90) days after the date of the applicable
Purchase Notice. If purchased by the Company, the purchase price of such Shares
may be paid, at the option of the Company, in cash, Three Year Junior Notes (as
defined in Section 7) or a combination thereof. If purchased by an assignee, the
purchase price shall be paid in cash. If some or all of the Shares specified in
the Sale Notice are not purchased by the Company or its assignee, the Purchaser
may, subject to the provisions of Section 3.5, Transfer such Shares at a price
and on terms no more favorable to the transferee(s) thereof than are specified
in the Sale Notice during the sixty (60) day period immediately following the
Refusal Period. If the Purchaser does not consummate the Transfer within such
period, the right of first refusal provided
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hereby shall be deemed to be revived and no Transfer of such Shares may be
effected without first offering the Shares in accordance with the terms hereof.
3.3. Certain Permitted Transfers. The restrictions contained in
Section 3.2 will not apply with respect to Transfers of Shares (a) to or by
Jordan Industries pursuant to the Stock Pledge Agreement or (b) by gift, will or
intestate succession to any Permitted Transferee (as hereinafter defined);
provided, however, that as a condition to any Transfer to a Permitted
Transferee, the Permitted Transferee shall execute and deliver to the Company a
valid and binding agreement satisfactory to the Company and its legal counsel to
the effect that any Shares so Transferred shall continue to be subject to all of
the provisions and conditions of this Agreement and the Pledge Agreement and
that such Permitted Transferee agrees to be jointly and severally bound with the
Purchaser hereby and by the Promissory Note and the Pledge Agreement as if an
original party hereto and thereto; and further provided that no Transfer to any
Permitted Transferee shall relieve the Purchaser of any obligation or liability
under this Agreement, the Promissory Note or the Pledge Agreement. For purposes
of the Agreement, "Permitted Transferee" means the Purchaser's spouse and/or
descendants, any trust or similar entity all of the beneficiaries of which are,
or a corporation, partnership or limited liability company all of the
stockholders, partners or members of which are, the Purchaser and/or the
Purchaser's spouse and descendants.
3.4. Discharge of Indebtedness. Anything to the contrary in this
Agreement notwithstanding, any Transfer of Shares, directly or indirectly, by
the Purchaser or any Permitted Transferee to any transferee other than a
Permitted Transferee, the Company, any assignee of the Company or Jordan
Industries pursuant to the Stock Pledge Agreement shall be void and of no effect
unless and until any outstanding indebtedness of the Purchaser under the
Promissory Note shall have been paid in full.
3.5. Termination of Restrictions. The restrictions on Transfer set
forth in Section 3.2 will terminate upon the earlier of (a) the Sale of the
Company (as defined in Section 7), (b) the closing of a bona fide, firm
commitment underwritten public offering of the Common Stock or (c) any Transfer
to Jordan Industries pursuant to the Stock Pledge Agreement.
4. Repurchase Provisions.
4.1. Call at Cost Upon Termination for Cause. If Purchaser's
employment with the Company is terminated at any time for Cause the Company may
repurchase all or any portion of the Shares purchased by Purchaser pursuant to
this Agreement at a price
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per Share equal to $2.00 ("Cost Call Right For Cause").
The purchase price for the Shares to be purchased pursuant to this
Section 4.1 is payable, at the option of the Company in cash, Three Year Junior
Notes or a combination thereof.
4.2. Call at Cost Upon Termination For Other Than Cause. If the
Purchaser ceases to be employed by the Company on a full time basis for no or
any reason other than Cause prior to the fifth anniversary of the Commencement
Date (as defined in Section 7) the Shares purchased by Purchaser pursuant to
this Agreement may be repurchased by the Company in accordance with the terms
described below ("Cost Call Right Other Than For Cause").
(a) If termination occurs for no or any reason other than Cause
prior to the second anniversary of the Commencement Date, the Company may
purchase up to 100% of the Shares at a price per Share equal to $2.00.
(b) If termination occurs for no or any reason other than Cause
during the period commencing on the second anniversary of the Commencement Date
and ending immediately prior to the third anniversary of the Commencement Date,
the Company may purchase up to 70% of the Shares at a price per Share equal to
$2.00.
(c) If termination occurs for no or any reason other than Cause
during the period commencing on the third anniversary of the Commencement Date
and ending immediately prior to the fourth anniversary of the Commencement Date,
the Company may purchase up to 60% of the Shares at a price per Share equal to
$2.00.
(d) If termination occurs for no or any reason other than Cause
during the period commencing on the fourth anniversary of the Commencement Date
and ending immediately prior to the fifth anniversary of the Commencement Date,
the Company may purchase up to 50% of the Shares at a price per Share equal to
$2.00.
The purchase price for the Shares to be purchased pursuant to the Cost Call
Right Other Than For Cause is payable, at the option of the Company in cash,
Three Year Junior Notes or a combination thereof.
4.3. Call at Fair Market Value Upon Termination. If Purchaser ceases
to be employed by the Company on a full time basis at any time for any or no
reason other than Cause, the Shares not subject to the Cost Call Right Other
Than For Cause may be repurchased by the Company at a price per Share equal to
the Fair Market Value (as defined in Section 7) ("FMV Call Right"). The
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purchase price for the Shares to be purchased pursuant to the FMV Call Right is
payable, at the option of the Company, in cash, Three Year Junior Notes or a
combination thereof.
4.4. Payment of Promissory Note; Right of Set Off. The Purchaser
hereby authorizes and directs the Company to apply any amounts payable to the
Purchaser upon the repurchase of Shares pursuant to Section 3.2 or this Section
4 first to Jordan Industries in satisfaction of the outstanding principal,
interest and any other amounts outstanding under the Promissory Note and the
Pledge Agreement. The Company shall further be entitled to set off and reduce
any amounts payable to the Purchaser upon the repurchase of Shares pursuant to
Section 3.2 or this Section 4 for any obligations or liabilities of the
Purchaser to the Company under this Agreement, or any other agreement, written
or oral, between the Company and the Purchaser.
4.5. Expiration and Closing of Call Rights. If the Company has not
delivered to the Purchaser written notice (a "Call Notice") of its intention to
exercise the call rights set forth in Section 4.1, 4.2 or 4.3 within six months
of the Purchaser's termination of full-time employment with the Company, such
call rights shall automatically expire. The closing of any purchase pursuant to
such call rights shall take place at the time and place designated by the
Company in the Call Notice, which date, subject to the final sentence of this
Section 4.5, shall not be more than twelve (12) months after the delivery of the
notice in the event the consideration to be paid by the Company consists
exclusively of cash and not more than ninety (90) days after the delivery of the
Call Notice in the event such consideration shall include Three Year Junior
Notes. The FMV Call Right set forth in Section 4.3 shall terminate upon the
closing of a bona fide, firm commitment underwritten public offering of the
Common Stock and this Section 4 shall terminate in its entirety upon a Sale of
the Company (as defined in Section 7). If (i) the Company is prohibited from
purchasing Shares pursuant to the Cost Call Right For Cause, the Cost Call Right
Other Than For Cause or the FMV Call Right under, or such a purchase would
result in a breach or default of, any debt instrument or agreement relating to
any indebtedness or preferred stock of the Company or its subsidiaries or (ii)
the Board of Directors otherwise determines that purchasing such Shares would be
inadvisable given the then existing financial condition of the Company and its
subsidiaries, the Company may defer the closing of such purchase until the
earliest date on which neither of the conditions described in the foregoing
clauses (i) and (ii) shall exist.
5. "Market Stand-Off" Agreement. The Purchaser hereby agrees that during the
period (which period shall not exceed 180 days) specified by the Company and the
underwriter or underwriters of
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capital stock of the Company following the effective date of a registration
statement of the Company filed under the Securities Act, the Purchaser shall
not, to the extent requested by the Company and such underwriter, directly or
indirectly, sell, offer or contract to sell (including, without limitation, any
short sale), grant any option to purchase or otherwise transfer or dispose of
(other than to Permitted Transferees or pursuant to gifts to donees who agree to
be similarly bound) any securities of the Company at any time during such period
except shares of Common Stock covered by such registration statement; provided,
however, that (a) such agreement shall be applicable only to the first such
registration statement of the Company which covers capital stock to be sold on
its behalf to the public in an underwritten offering and (b) all executive
officers and directors of the Company holding securities of the Company shall
have entered into similar agreements. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to
Common stock held by the Purchaser until the end of such period.
6. Purchaser's Representative. In the event that in the future the Company
engages in any negotiation or transaction (including a merger or consolidation
or other reorganization by or of the Company) in which Regulation D promulgated
by the Securities and Exchange Commission may or will be available to the
Company, the Purchaser agrees irrevocably (and with the knowledge and intention
that the other holders of the Company's stock of all classes will rely thereon
in making their respective present investment decisions) that he will, within
five (5) business days of written notice from the Company, which may be given in
the sole discretion of the Company, appoint a purchaser's representative or
representatives who shall be qualified and acceptable to the Company and any
other person(s) who is (are) involved in the proposed transaction so that the
maximum benefits of Regulation D shall be available to the Company and all of
its stockholders. The Purchaser shall bear the costs and expenses of such
purchaser's representative and shall be liable to the Company and all of the
Company's other stockholders for any damage or loss that may or might be
incurred by such parties if the Purchaser fails to perform this covenant.
7. Definitions.
(a) "Cause" shall mean a termination of the Purchaser by the
Company due to (i) the failure or refusal of the Purchaser (other than by reason
of death or Disability) to perform his duties as determined in good faith by the
Board of Directors of the Company, provided that such failure or refusal shall
continue for thirty (30) days following written notice thereof to the Purchaser
from the Company, (ii) the Purchaser's willful
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<PAGE>
dereliction of duty or intentional and malicious conduct contrary to the best
interests of the Company or its business, provided that such dereliction or
conduct shall continue for thirty (30) days following written notice thereof to
the Purchaser from the Company, (iii) the Purchaser's conviction of, or guilty
plea or confession to, any felony or any misdemeanor, provided that such
misdemeanor involves the property of the Company or (iv) the material breach by
the Purchaser of this Agreement, the Promissory Note or the Pledge Agreement,
provided that such breach shall continue for thirty (30) days following written
notice thereof to the Purchaser from the Company.
(b) "Commencement Date" shall mean September 1, 1996.
(c) "Determination Period" shall mean the four full fiscal
quarters of the Company immediately preceding the termination of employment
giving rise to the FMV Call Right pursuant to Section 4.3.
(d) "Disability" shall mean the inability of the Purchaser to
perform substantially his duties to the Company by reason of physical or mental
disability or infirmity that, in the reasonable judgment of the Board of
Directors of the Company, is documented by medical evidence.
(e) "EBITDA" shall mean for any period, the consolidated net
income (or loss) of the Company (after eliminating all extraordinary or non-
recurring items of income or loss), as reflected in the Company's financial
statements for such period, plus (i) interest and other expense in respect of
indebtedness for borrowed money and similar expense in respect of capitalized
leases, charged, accrued or otherwise allocated against such net income (or
loss), plus (ii) expenses for income taxes (whether paid, accrued or deferred)
charged or otherwise allocated against such net income, plus (iii) depreciation
and amortization of any assets or other non-cash charges (including, without
limitation, any depreciation, amortization and other non-cash charges relating
to purchase accounting adjustments, and any amortization or write-off or
intangible assets, transaction costs or goodwill) charged, allocated or
otherwise accrued against such net income (or loss), plus, without duplication,
(iv) non-cash expenses attributable to the issuance of stock, options or
warrants by the Company to any of its directors, officer, employees, dealers or
others or the exercise thereof, charged, accrued or allocated against such net
income (or loss), plus (v) expenses attributable to investment banking or
consulting fees paid or payable to Jordan and charged, accrued or otherwise
allocated against such net income (or loss), in each case, excluding any such
interest, depreciation, amortization costs and expenses previously taken into
account in determining EBITDA during any period preceding such period, all as
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determined in accordance with generally accepted accounting principles,
consistently applied.
(f) "Fair Market Value" shall mean, for any Determination Period,
the Quotient obtained by dividing (i) an amount equal to (A) six (6) multiplied
by EBITDA for the Determination Period less (B) the aggregate amount of
indebtedness for borrowed money and capitalized leases of the Company as of the
end of the Determination Period (including, without limitation, interest accrued
but unpaid as of the end of the Determination Period) less (C) the aggregate
liquidation value of shares of preferred stock of the Company outstanding at the
end of the Determination Period (including, without limitation, dividends
secured but unpaid in respect of such stock as of the end of the Determination
Period) less (D) the aggregate amount that would have been payable by the
Company in respect of any equity appreciation or similar rights outstanding as
of the end of the Determination Period assuming the exercise in full of any and
all such rights (whether vested or not) as of such date by (ii) the aggregate
number of shares of Common Stock issued and outstanding on a fully-diluted basis
as of the date of the termination of employment giving rise to the calculation
of Fair Market Value.
(g) "Sale of the Company" means the sale of the Company to an
independent third party or group of third parties pursuant to which such party
or parties acquire (i) capital stock of the Company possessing the voting power
under normal circumstances to elect a majority of the Company's Board of
Directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
(h) "Three Year Junior Notes" shall mean a promissory note of the
Company in the form attached hereto as Exhibit C.
8. Miscellaneous.
8.1. Binding Effect. The provisions of this Agreement shall be
binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns. Neither this Agreement nor any
purchase or sale of Shares pursuant hereto shall create, or be construed or
deemed to create, any right to employment in favor of the Purchaser or any other
person by the Company. The language used in this Agreement will be deemed to be
the language chosen by the parties hereto to express their mutual intent, and so
a rule of strict construction will be applied against any person.
8.2. Severability. The invalidity, illegality or
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unenforceability of one or more of the provisions of this Agreement in any
jurisdiction shall not affect the validity, legality or enforceability of the
remainder of this Agreement in such jurisdiction or the validity, legality or
enforceability of this Agreement, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.
8.3. Amendment. This Agreement may be amended only by a written
instrument signed by the Company and the Purchaser.
8.4. Notices. All notices and other communications provided for
herein shall be dated and in writing and shall be deemed to have been duly given
when delivered, if delivered personally, sent by registered or certified mail,
return receipt requested, postage prepaid or sent by confirmed telecopy and when
received if delivered otherwise, to the party to whom it is directed:
(a) If to the Company, to it at the following address:
Jordan Telecommunications Products, Inc.
ArborLake Centre, Suite 550
1751 Lake Cook Road
Deerfield, Illinois 60015
Attention: Thomas H. Quinn
with a copy to:
Winston & Strawn
35 West Wacker Drive
Suite 4200
Chicago, Illinois 60601
Attention: Robert F. Denvir
(b) If to the Purchaser, to him at the following address:
Dominic J. Pileggi
Jordan Telecommunications Products, Inc.
ArborLake Centre, Suite 550
1751 Lake Cook Road
Deerfield, Illinois 60015
or at such other address as the parties hereto shall have specified by notice in
writing to the other parties (provided that such notice of change of address
shall be deemed to have been duly given only when actually received). Delivery
of a copy of the notice solely to a party's attorney does not constitute proper
notice
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<PAGE>
hereunder.
8.5. Applicable Law; Waiver of Jury Trial. THIS AGREEMENT SHALL BE
GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS OF ANY STATE.
EACH PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN CHICAGO,
ILLINOIS AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH PARTY
WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND
COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND SHALL
CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE
PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY
THE LAWS OF THE STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE OF FORUM SET
FORTH IN THIS SECTION 8.5 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY
JUDGMENT OBTAINED IN OTHER FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR
ARISING OUT OF THIS AGREEMENT, THE PROMISSORY NOTE OR THE PLEDGE AGREEMENT, OR
THE VALIDITY, INTERPRETATION OR ENFORCEMENT THEREOF OR ANY OTHER CLAIM OR
DISPUTE HOWEVER ARISING BETWEEN THE COMPANY AND THE PURCHASER, THE PURCHASER TO
THE FULLEST EXTENT THAT HE MAY EFFECTIVELY DO SO, WAIVES ANY RIGHT TO TRIAL BY
JURY. THE PURCHASER AGREES THAT THIS SECTION 8.5 IS A SPECIFIC AND MATERIAL
ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT THE COMPANY WOULD NOT ENTER INTO
THIS AGREEMENT IF THIS SECTION 8.5 WERE NOT A PART THEREOF.
8.6. Arbitration. Any dispute between or among the parties to this
Agreement relating to or in respect of this Agreement, its negotiation,
execution, performance, subject matter, or any course of conduct or dealing or
actions under or in respect of this Agreement, including without limitation any
claim under the Securities Act, the Securities Exchange Act of 1934, as amended,
any other state or federal law relating to securities or fraud or both, the
Racketeer Influenced and Corrupt Organizations Act, or federal or state common
law, shall be submitted to, and resolved exclusively pursuant to, arbitration in
accordance with the commercial arbitration rules of the American Arbitration
Association. Such arbitration shall take place in Chicago, Illinois. Decisions
as to findings of fact pursuant to such arbitration shall be final, conclusive
and binding on the parties. Within thirty (30) days following the award of any
arbitrator hereunder, any party may apply to a court of competent jurisdiction
for a resolution of any questions of law bearing on such award, and no such
award shall be binding and enforceable unless the arbitrator's determinations as
to such questions of such law have been judicially approved or until the passage
of such thirty (30) day period without such application having been made. Any
final
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award shall be enforceable as a judgment of a court of record.
8.7. Integration. This Agreement and the documents referred to herein
or delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to the subject matter hereof. There
are no restrictions, agreements, promises, representations, warranties,
conditions, covenants or undertakings with respect to the subject matter hereof
other than those expressly set forth herein or in the Promissory Note or the
Pledge Agreement. This Agreement, the Promissory Note and the Pledge Agreement
supersede all prior agreements and understandings between the parties with
respect to the subject matter referred to herein and therein.
8.8. Descriptive Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
8.9. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
8.10. Expenses. The Company and the Purchaser shall each pay their own
costs in connection with the preparation, negotiation, execution and delivery of
this Agreement, the Promissory Note and the Pledge Agreement and in connection
with the issuance of any securities hereunder, including, but not limited to,
all taxes, fees or other charges which may be payable in connection with the
purchase or sale of the Shares pursuant to this Agreement and all costs in
connection with the preparation, execution and delivery of any waiver, amendment
or consent (whether or not executed) relating to this Agreement, including
reasonable fees and disbursements of counsel.
8.11. Rights Cumulative; Waiver. The rights and remedies of the
Purchaser and the Company under this Agreement shall be cumulative and not
exclusive of any rights or remedies which either would otherwise have hereunder
or at law or in equity or by statute, and no failure or delay by either party in
exercising any right or remedy shall impair any such right or remedy or operate
as a waiver of such right or remedy, nor shall any single or partial exercise of
any power or right preclude such party's other or further exercise or the
exercise of any other power or right. 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 preceding or succeeding breach and no failure by either party to exercise
any right or privilege hereunder shall be deemed a waiver of such party's rights
or privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
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8.12. Specific Performance. Each of the parties hereto acknowledges
and agrees that in the event of any breach of this Agreement, the non-breaching
party would be irreparably harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto will waive the defense
in any action for specific performance that a remedy at law would be adequate
and that the parties hereto, in addition to any other remedy to which they may
be entitled at law or in equity, shall be entitled to compel specific
performance of this Agreement in any action instituted in the United States
District Court for any District located in the State of Illinois, or, in the
event such court would not have jurisdiction of such action, in any court of the
United States or any state thereof having subject matter jurisdiction of such
action.
8.13. Limited Obligation. The Purchaser acknowledges and agrees that
the obligations of the Company under this Agreement are solely the obligations
of the Company, and that none of the Company's stockholders, directors, officers
or lenders will have any obligation or liability, contingent or otherwise, in
respect of this Agreement and the subject matter hereof.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
JORDAN TELECOMMUNICATIONS PRODUCTS, INC.
By: /s/ Thomas H. Quinn
-------------------------------------
Name: Thomas H. Quinn
Title: Chairman
PURCHASER
/s/ Dominic J. Pileggi
----------------------------------------
Name: Dominic J. Pileggi
<PAGE>
Exhibit 4.16
----------------------------------------------------------------------------
JORDAN TELECOMMUNICATION PRODUCTS, INC
STOCKHOLDERS AGREEMENT
Dated as of July 21, 1997
- --------------------------------------------------------------------------------
<PAGE>
STOCKHOLDERS AGREEMENT
----------------------
STOCKHOLDERS AGREEMENT, dated as of July 21, 1997, among JORDAN
TELECOMMUNICATION PRODUCTS, INC., a Delaware corporation (the "Company") and the
Stockholders (as hereinafter defined) listed on the signature pages hereto.
W I T N E S S E T H:
-------------------
WHEREAS, on the date hereof, the Company is authorized by its Certificate
of Incorporation to issue capital stock consisting of (i) 100,000 shares of
Common Stock, par value $0.01 per share (the "Common Stock"); and (ii) 1,000,000
shares of Preferred Stock, par value $0.01 per share (the "Preferred Stock") of
which 20,000 shares have been designated 13 3/4% Senior Exchangeable Preferred
Stock due 2007 (the "Senior Preferred Stock") and 2,000 shares have been
designated Junior Preferred Stock (the "Junior Preferred Stock") (the Common
Stock and/or the Preferred Stock are sometimes hereinafter collectively referred
to as the "Stock"); and each of the classes of Stock has the respective voting
powers, designations, preferences and relative, participating, optional and
other special rights and the qualifications, limitations and restrictions set
forth with respect thereto in such Certificate of Incorporation; and
WHEREAS, as of the date hereof and after giving effect to the transactions
contemplated hereby, the Stockholders will beneficially own shares of Stock as
set forth in the Stockholder Schedule attached hereto as Schedule 1
("Stockholder Schedule") attached hereto; and
WHEREAS, the Company has agreed to sell certain shares of Senior Preferred
Stock and Common Stock (the "Offering Stock") to Jefferies & Company, Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation and Smith Barney Inc.
(collectively, the "Initial Purchasers") pursuant to the Purchase Agreement,
dated as of July 21, 1997, among the Company and the Initial Purchasers, and the
Initial Purchasers have proposed to resell such Offering Stock to "qualified
institutional buyers" (as defined in Rule 144A of the Securities Act) or
institutional "accredited investors" (as defined in Rule 504(a)(1), (2), (3) or
(7) of the Securities act), all as further described in the draft Offering
Circular, dated June 24, 1997 (the "Offering Circular"); and
WHEREAS, the parties hereto deem it in their best interests and in the best
interests of the Company to provide consistent and uniform management for the
Company and desire to enter into this Agreement in order to effectuate that
purpose and to set forth their respective rights and obligations in connection
with their investment in the Company; and
WHEREAS, the parties hereto also desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of the shares of capital stock of the
Company, including issued and outstanding shares of Common Stock and Junior
Preferred Stock that may be issued hereafter, and to provide for certain rights
and obligations in respect thereto as hereinafter provided;
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NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
Certain Definitions
-------------------
As used in this Agreement, the following terms shall have the following
respective meanings:
Affiliate shall mean with respect to any Person, (a) any Person which
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, or (b) any Person
who is a director or executive officer (i) of such Person, (ii) of any
Subsidiary of such Person, or (iii) of any Person described in clause (a) above,
or with respect to any Stockholder, the Company; provided, that any Affiliate of
a corporation shall be deemed an Affiliate of such corporation's stockholders.
For purposes of this definition, "control" of a Person shall mean the power,
direct or indirect, (i) to vote or direct the voting of more than 5% of the
outstanding shares of Voting Stock of such Person, or (ii) to direct or cause
the direction of the management and policies of such Person, whether by contract
or otherwise.
Agreement shall mean this Agreement as in effect on the date hereof and as
hereafter from time to time amended, modified or supplemented in accordance with
the terms hereof.
Board of Directors shall mean the Board of Directors of the Company, as
duly constituted in accordance with this Agreement, or any committee thereof
duly constituted in accordance with this Agreement, the Bylaws and applicable
law and duly authorized to make the relevant determination or take the relevant
action. To the extent that the Board of Directors is required under this
Agreement to authorize or approve, or make a determination in respect of a
transaction between the Company, on the one hand, and a Stockholder, and/or a
Stockholder's Affiliate, on the other hand, the Board of Directors shall be
deemed to exclude such Stockholder, any of its Affiliates, and any of the
directors, officers, employees, agents or representatives of such Stockholder
and/or its Affiliates, who are members of the Board of Directors.
Bylaws shall mean the Bylaws of the Company as in effect on the date
hereof, substantially in the form of Exhibit B hereto, and as hereafter further
amended or restated in accordance with the terms hereof and pursuant to
applicable law.
Certificate of Incorporation shall mean the Certificate of Incorporation of
the Company as in effect on the date hereof, substantially in the form of
Exhibit A hereto, and as hereafter from time to time amended, restated, modified
or supplemented in accordance with the terms hereof and pursuant to applicable
law.
Closing Date shall mean the date on which the transactions contemplated by
the Jordan Investors Subscription Agreement shall be consummated.
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Commission shall mean the Securities and Exchange Commission and any
successor commission or agency having similar powers.
Common Stock shall mean the Common Stock, par value $0.01 per share, of the
Company.
Credit Agreement shall mean the credit agreement, to be entered into by the
Company after the date hereof, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
refunding, replacing or otherwise restructuring (including, without limitation,
increasing the amount of available borrowings thereunder or adding the direct or
indirect subsidiaries of the Company as additional borrowers or guarantors
thereunder) all or any portion of the indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended, or
any similar Federal statute then in effect, and a reference to a particular
section thereof shall include a reference to the comparable section, if any, of
such similar Federal statute.
First Offer Price shall have the meaning specified in Section 5.1(a).
GAAP shall mean generally accepted accounting principles in the United
States of America in effect from time to time, applied on a consistent basis
both as to classification of items and amounts.
Indebtedness shall have the meaning specified in the Credit Agreement.
Initial Public Offering shall mean the public offer and sale of Common
Stock of the Company, pursuant to the initial registration thereof under the
Securities Act.
Jordan Investors shall mean the Persons other than the Company who are
signatories to the Jordan Investors Subscription Agreement and any Permitted
Transferee of any such Person who becomes a Stockholder in accordance with the
terms hereof.
Jordan Investors Subscription Agreement shall mean the Jordan Investors
Subscription Agreement between the Jordan Investors and the Company,
substantially in the form attached hereto as Exhibit C.
Management Investors shall mean any officer or managerial employee of the
Company or any of its Subsidiaries who hereafter acquires any shares of Common
Stock from the Company pursuant to a Management Subscription Agreement and this
Agreement, and any Permitted Transferee of any of such Person who becomes a
Stockholder in accordance with the terms hereof.
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Management Subscription Agreement shall mean the Management Subscription
Agreement entered into between the Company and each Management Investor,
substantially in the form attached hereto as Exhibit D, as such agreement may
from time to time hereafter be amended, modified or supplemented in accordance
with the terms hereof and thereof.
Notice of Exercise shall have the meaning specified in Section 5.1(b).
Notice of Intention shall have the meaning specified in Section 5.1(a).
Offered Securities shall have the meaning specified in Section 5.1(a).
Offered Circular shall have the meaning specified in the third recital.
Offering Stock shall have the meaning specified in the third recital.
Permitted Transferee shall mean those Persons to whom transfers of Common
Stock and Preferred Stock are permitted to be made pursuant to Section 4.2 or
Article V hereof.
Person shall mean an individual or a corporation, association, partnership,
joint venture, organization, business, trust, or any other entity or
organization, including a government or any subdivision or agency thereof.
Preferred Stock shall mean the Preferred Stock, par value $0.01 per share,
of the Company.
Public Distribution shall mean a Public Offering of Common Stock, at the
conclusion of which the aggregate number of shares of Common Stock that have
been sold to the public pursuant to one or more effective registration
statements under the Securities Act equals at least 25% of the shares of Common
Stock then outstanding (on a fully diluted basis) after giving effect to such
sale and net proceeds in excess of $25,000,000.
Public Offering shall mean a public offering and sale of equity securities
of the Company pursuant to an effective registration statement under the
Securities Act.
Securities shall mean any capital stock of the Company.
Securities Act shall mean, as of any date, the Securities Act of 1933, as
amended, or any similar Federal statute then in effect, and in reference to a
particular section thereof shall include a reference to the comparable section,
if any, of any such similar Federal statute and the rules and regulations
thereunder.
Selling Investors shall have the meaning specified in Section 5.8.
Selling Stockholder shall have the meaning specified in Section 5.1(a).
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Stock shall mean the Common Stock and the Preferred Stock; provided,
however, that "Stock" shall not include the Offering Stock.
Stockholder shall mean any of the Jordan Investors, the Management
Investors, and any Permitted Transferee of any such Person who becomes a party
to or bound by the provisions of this Agreement in accordance with the terms
hereof.
Subsidiary shall mean as to any Person a corporation of which outstanding
shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
Board of Directors of such corporation are at the time owned, directly or
indirectly, through one or more intermediaries, or both, by such Person.
Transaction Documents shall mean this Agreement, the Offering Circular, the
Intercompany Agreements, the Credit Agreement, the Letter of Credit Agreement,
the Jordan Investors Subscription Agreement, each of the agreements that are
exhibits hereto and thereto, and all agreements, instruments and documents
contemplated thereby.
Voting Stock shall mean capital stock of the Company of any class or
classes, the holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of corporate directors (or Persons performing
similar functions), including, without limitation, the Common Stock.
Voting Stockholder shall mean a Stockholder who holds Voting Stock or
retains, by proxy or otherwise, the power to vote Voting Stock.
ARTICLE II
Management
----------
2.1 Registration of Common Stock. In the event of Public Offering of the
Company's Common Stock, each Voting Stockholder shall, at a meeting convened for
the purpose of amending the Certificate of Incorporation, vote to increase the
number of authorized shares of Common Stock and, if necessary, increase the
number of issued and outstanding shares of Common Stock, whether by stock split,
stock dividend or otherwise, or change in its par value, as recommended by a
majority of the members of the Board of Directors in order to facilitate such
Public Offering.
2.2 Certificate of Incorporation; No Conflict with Agreement. Attached
hereto as Exhibit A is a copy of the Certificate of Incorporation as in effect
on the date hereof. Each Voting Stockholder shall vote his shares of Voting
Stock, and shall take all actions necessary, to ensure that the Certificate of
Incorporation and Bylaws do not, at any time, conflict with the provisions of
this Agreement.
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ARTICLE III
Corporate Governance
--------------------
3.1 Board of Directors. The Board of Directors shall be elected in
accordance with the terms of the Certificate of Incorporation and the Bylaws.
The Company and each member of the Board of Directors shall execute a
Directors Indemnification Agreement substantially in the form of Exhibit E
hereto.
ARTICLE IV
Transfers of Stock
------------------
4.1 Restrictions on Transfer.
(a) Each Stockholder agrees that such Stockholder will not, directly
or indirectly, offer, sell, transfer, assign or otherwise dispose of (or
make any exchange, gift, assignment or pledge of) (collectively, for
purposes of Articles IV and V hereof only, a "transfer") any Securities,
except (i) as provided in Section 4.2; (ii) in accordance with Article V;
or (iii) pursuant to the Management Subscription Agreement.
(b) In addition to the other restrictions noted in this Article IV,
each Stockholder agrees that it will not, directly or indirectly, transfer
any of its Securities except as permitted under the Securities Act and
other applicable securities laws.
(c) Each Stockholder agrees that such Stockholder will not, directly
or indirectly, transfer (and will not announce or disclose any intention to
transfer) any Securities for a period of 180 days after the date of the
final prospectus relating to any Public Offering, except as provided in
Sections 4.2(a), 4.2(b) or 4.2(e).
(d) Each Stockholder agrees that such Stockholder will not, directly
or indirectly, transfer (and will not announce or disclose any intention to
transfer) any Securities until July 31, 2002, except as provided in Section
4.2(e).
4.2 Exceptions to Restrictions. The provisions of Section 4.1 and
Article V (other than Section 5.8) shall not apply to any of the following
transfers:
(a) (i) From any of the Jordan Investors to any of the other Jordan
Investors, (ii) from any Jordan Investor to any of the limited or general
partners of such Jordan Investor, or (iii) from any Jordan Investor to any trust
solely for the benefit of a Jordan Investor, or a Jordan Investor's spouse or
children; provided, that in the case referred to in clause (iii) such Jordan
Investor acts as trustee and retains the sole power to direct the voting and
disposition of such shares; and provided, further, that in the cases referred to
in clauses (i), (ii) and (iii), each such transferee including any trust (each a
"Permitted Transferee"), shall execute a counterpart of and
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become a party to this Agreement and shall agree in a writing in form and
substance satisfactory to the Company to be bound by the terms of this
Agreement.
(b) (i) From any Management Investor to such Management Investor's
spouse or children, or (ii) from any Management Investor to any trust
solely for the benefit of such Management Investor, or such Management
Investor's spouse or children; provided, that in the case referred to in
clause (ii), such Management Investor acts as trustee and retains the sole
power to direct the voting and disposition of such Securities; and
provided, further, that in the cases referred to in clauses (i) and (ii)
each transferee including any trust (each a "Permitted Transferee") shall
execute a counterpart of and become a party to this Agreement and the
Management Subscription Agreement and shall agree in a writing in form and
substance satisfactory to the Company to be bound by the terms of this
Agreement and the Management Subscription Agreement.
(c) From any Stockholder pursuant to a merger or consolidation
involving the Company or a sale of all or substantially all of the
outstanding shares of Common Stock.
(d) Pursuant to a Public Offering or an open market sale following a
Public Offering in accordance with Rule 144 of the Commission.
(e) Pursuant to the duly adopted resolution of either the Board of
Directors or the Stockholders.
4.3 Endorsement of Certificates. Upon the execution of this Agreement, in
addition to any other legend which the Company may deem advisable under the
Securities Act and certain state securities laws, all certificates representing
shares of issued and outstanding Stock shall be endorsed at all times prior to
any Public Distribution as follows:
THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON COMPLIANCE
WITH, THE PROVISIONS OF A STOCKHOLDERS AGREEMENT, DATED JULY 21, 1997,
AMONG THE COMPANY AND ITS STOCKHOLDERS, CERTAIN SUBSCRIPTION AGREEMENT(S),
AMONG THE COMPANY AND CERTAIN INVESTORS THEREIN, AND THE RESTRICTIVE
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS OF THE
CORPORATION. A COPY OF THE ABOVE REFERENCED AGREEMENTS ARE ON FILE AT THE
OFFICE OF THE COMPANY AT ARBORLAKE CENTRE, SUITE 550, 1751 LAKE COOK ROAD,
DEERFIELD, ILLINOIS 60015.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM
REGISTRATION, UNDER SAID ACT.
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Except as otherwise expressly provided in this Agreement, all
certificates representing shares of Stock hereafter issued to or acquired by any
of the Stockholders or their successors hereto shall bear the legends set forth
above, and shares of Stock represented by such certificates shall be subject to
the applicable provisions of this Agreement. The obligations of each party
hereto shall be binding upon each transferee to whom Securities are transferred
by any party hereto, whether or not such transfer is permitted under the terms
of this Agreement, except for transfers pursuant to a Public Offering or under
Rule 144 of the Commission. Prior to consummation of any transfer, except for
transfers pursuant to a Public Offering or under Rule 144 of the Commission, the
transferring party shall cause the transferee to execute an agreement in form
and substance reasonably satisfactory to the other parties hereto, providing
that such transferee shall fully comply with the terms of this Agreement and, in
the case of a transfer by a Management Investor, the Management Subscription
Agreement. Prompt notice shall be given to the Company and each Stockholder by
the transferor of any transfer (whether or not to a Permitted Transferee) of any
Securities.
4.4 Improper Transfer. Any attempt to transfer or encumber any shares of
Securities not in accordance with this Agreement shall be null and void and
neither the Company nor any transfer agent of such securities shall give any
effect to such attempted transfer or encumbrance in its stock records.
ARTICLE V
Rights of First Offer; New Securities: Tag Along Sales
------------------------------------------------------
5.1 Transfers by a Stockholder. Except for sales of securities
contemplated by Article VI hereof, transfers permitted by Sections 4.1 or 4.2,
and transactions subject to Section 5.8, if at any time any Stockholder shall
desire to sell or otherwise transfer any Stock owned by him or it (such
Stockholder desiring to sell shares of such Stock being referred to herein as a
"Selling Stockholder"), then such Selling Stockholder shall deliver written
notice of its desire to sell such Stock (a "Notice of Intention"), accompanied
by a copy of a proposal relating to such sale (the "Sale Proposal"), to each of
the other Stockholders and to the Company, setting forth such Selling
Stockholder's desire to make such sale (which shall be for cash only), the
number and class of shares of Stock proposed to be transferred (the "Offered
Securities") and the price at which such Selling Stockholder proposes to sell
the Offered Securities (the "First Offer Price") and other terms applicable
thereto.
Upon receipt of the Notice of Intention, the Company and the other
Stockholders shall then have the right to purchase at the First Offer Price and
on the other terms specified in the Sale Proposal all or, subject to Section
5.1(d), any portion of the Offered Securities in the following order of
priority: (i) if the Selling Stockholder is a Management Investor, then the
Company shall have the first right to purchase the Offered Securities, and
thereafter, the Jordan Investors shall have the right to purchase the Offered
Securities pro rata among those of the Jordan Investors so electing on the basis
of the respective numbers of shares of Common Stock owned by such Jordan
Investors (or in such other proportion as such Jordan Investor may agree); and
(ii) if the Selling Stockholder is a Jordan Investor, the other Jordan Investors
shall have the
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first right to purchase the Offered Securities pro rata among those of the
Jordan Investors so electing on the basis of the respective numbers of shares of
Common Stock owned by such Jordan Investor (or in such other proportion as such
Jordan Investors may agree), then the Company shall have the right to purchase
the Offered Securities. The rights of the Stockholders and the Company pursuant
to this Section 5.1(b) shall be exercisable by the delivery of notice to the
Selling Stockholder (the "Notice of Exercise"), within 30 calendar days from the
date of delivery of the Notice of Intention. The Notice of Exercise shall state
the total number of shares of the Offered Securities such Stockholder (or the
Company) is willing to purchase without regard to whether or not other
Stockholders purchase any shares of the Offered Securities. A copy of such
Notice of Exercise shall also be delivered to the Company and each other
Stockholder. The rights of the Stockholders and the Company pursuant to this
Section 5.1(b) shall terminate if unexercised 30 calendar days after the date of
delivery of the Notice of Intention.
In the event that the Stockholders or the Company exercise their rights to
purchase any or all of the Offered Securities in accordance with Section 5.1(b),
then the Selling Stockholder must sell the Offered Securities to such
Stockholders (or, as the case may be, the Company) within 30 calendar days from
the date of delivery of the Notice of Exercise to the Selling Stockholder.
Notwithstanding the foregoing provisions of this Section 5.1, unless the
Selling Stockholder shall have consented to the purchase of less than all of the
Offered Securities, no Stockholder or Stockholders nor the Company may purchase
any Offered Securities hereunder unless all of the Offered Securities are to be
so purchased by the Stockholders and/or the Company.
For purposes of this Article V, any Person who has failed to give notice of
the election of an option hereunder within the specified time period will be
deemed to have waived its rights on the day after the last day of such period.
Each Stockholder agrees and acknowledges that the Company may purchase or
acquire Common Stock pursuant to Section 5.1(b) hereof, and approves such
purchases and acquisitions, and waives any objection or claim relating thereto,
whether against the Company, the Board of Directors or otherwise.
5.2 Transfer of Offered Shares to Third Parties. If all notices required to
be given pursuant to Section 5.1 have been duly given and the Stockholders and
the Company do not exercise their respective options to purchase all of the
Offered Securities at the First Offer Price and the Selling Stockholder does not
desire to sell less than all the Offered Securities, or if with the consent of
the Selling Stockholder the other Stockholders and the Company purchase less
than all of the Offered Securities pursuant to the provisions hereof, then in
either such event the Selling Stockholder shall have the right, subject to
compliance by the Selling Stockholder with the provisions of Section 4.3(b)
hereof, for a period of 120 calendar days from the earlier of (i) the expiration
of the option period pursuant to Section 5.1 with respect to such Sale Proposal
or (ii) the date on which such Selling Stockholder receives notice from the
other Stockholders and
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the Company that they will not exercise in whole or in part the options granted
pursuant to Section 5.1, to sell to any third party which is not an Affiliate
of, or related by consanguinity or marriage to, the Selling Stockholder the
Offered Securities remaining unsold at a price of not less than 95% of the First
Offer Price, and on the other terms specified in the Sale Proposal.
5.3 Purchase of Offered Shares. The consummation of any purchase and sale
pursuant to Section 5.1 shall take place on such date, not later than 30
calendar days after the expiration of the option period pursuant to Section 5.1
with respect to such option, as the Selling Stockholder shall select. Prior to
the consummation of any sale pursuant to Section 5.1, the Selling Stockholder
shall comply with Section 4.3(b) hereof. Upon the consummation of any such
purchase and sale, the Selling Stockholder shall deliver certificates evidencing
the Offered Securities sold duly endorsed, or accompanied by written instruments
of transfer in form satisfactory to the purchaser duly executed by the Selling
Stockholder, free and clear of any liens, against delivery of the First Offer
Price, payable in the manner specified in Section 5.1(a).
5.4 Waiting Period with Respect to Subsequent Transfers. In the event that
the Stockholders and the Company do not exercise their options to purchase all
of the Offered Securities, and the Selling Stockholder shall not have sold the
remaining Offered Securities to a third party for any reason before the
expiration of the 120-day period described in Section 5.2, then such Selling
Stockholder shall not give another Notice of Intention pursuant to Section 5.1
for a period of 90 calendar days after the last day of such 120-day period.
5.5 Right of First Refusal for New Securities. The Company hereby grants to
each of the Stockholders a right of first refusal to purchase shares of any New
Securities (as defined below) which the Company may, from time to time, propose
to issue and sell. Such right of first refusal shall allow each Stockholder to
purchase a pro rata portion of the shares of Common Stock or Preferred Stock as
may be included in the New Securities proposed to be issued, determined with
reference to the aggregate number of outstanding shares of Common Stock or
Preferred Stock (as the case may be) held by such Stockholder before the
proposed issuance of New Securities. In the event a Stockholder does not
purchase any or all of its pro rata portion of New Securities, the remaining
Stockholders shall have the right to purchase such unpurchased New Securities or
respective pro rata portion until all of the New Securities are purchased or
until no other Stockholder desires to purchase any additional New Securities.
The right of first refusal granted hereunder shall terminate if unexercised
within 30 calendar days after receipt of the notice described in Section 5.5(c)
below.
"New Securities" shall mean any authorized but unissued shares, and any
treasury shares, of capital stock of the Company and all rights, options or
warrants to purchase capital stock, and securities of any type whatsoever that
are, or may become, convertible into capital stock; provided, however, that the
term "New Securities" does not include (i) securities issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of all or
substantially all of the assets or other reorganization whereby the Company
shall become the owner of more than 50% of the voting power of such corporation;
(ii) shares of Common Stock issued in connection with any stock split or stock
dividend of the Company; (iii) any borrowings, direct or indirect, from
financial institutions or other Persons by the Company, whether or not
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presently authorized, including any type of loan or payment evidenced by any
type of debt instrument, provided such borrowings do not have equity features,
including warrants, options or other rights to purchase capital stock, and are
not convertible into or exchangeable for capital stock of the Company; and (iv)
shares of Common Stock issued pursuant to any Public Offering; and
In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Stockholder written notice of its intention,
describing the class and number of shares of Common Stock or Preferred Stock (as
the case may be) it intends to issue as New Securities, the purchase price
therefor (which shall be payable solely in cash) and the terms upon which the
Company proposes to issue the same. Each Stockholder shall have 30 calendar days
from the date such notice is given to determine whether to purchase all or any
portion of the Stockholder's pro rata share of such New Securities for the
purchase price and upon the terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
5.6 Legally Binding Obligation; Power of Attorney; Personal Rights. Subject
to Section 5.1(a), making a written offer, giving or failing to give written
notice within the stated period, accepting an offer or making a decision or
election, in each case as provided in Section 5.1 or 5.2, shall create a legally
binding obligation to buy or sell, or an obligation not to buy or sell, as the
case may be, the subject Common Stock as provided in such Section 5.1 or 5.2.
Subject to Section 5.1(a), each holder of Common Stock hereby appoints each
officer of the Company as an attorney-in-fact for such holder with the power to
execute such documents and take such other actions to provide for the transfer
of Common Stock owned by such holder in accordance with this Article V, each
officer of the Company is hereby authorized (i) to transfer such Common Stock on
the books of the Company at the direction and without regard to the surrender of
certificates or instruments representing such Common Stock held by such holder,
and (ii) to place on all certificates or instruments representing Common Stock a
legend reflecting this authority to transfer such Common Stock.
5.7 Right to Join in Sale. Anything in this Agreement to the contrary
notwithstanding, if any Stockholder or group of Stockholders proposes, in a
single transaction or a series of transactions during any six-month period
(other than transfers permitted by Sections 4.1 or 4.2, transactions subject to
Section 5.8 and sales of securities contemplated by Article VI) to sell, dispose
of or otherwise transfer 5% or more of the outstanding Common Stock or, if less
than such amount, in the case of any Stockholder which owns Common Stock on the
date hereof, 50% or more of its initial holdings of such interests in Common
Stock, as the case may be (each a "Disposing Stockholder"), such person or group
shall refrain from effecting such transaction unless, prior to the consummation
thereof, each other Stockholder shall have been afforded the opportunity to join
in such sale of Common Stock on a pro rata basis, as hereinafter provided.
Prior to consummation of any proposed sale, disposition or transfer of
shares of Common Stock described in Section 5.7(a), the Disposing Stockholder
shall cause the person or group that proposes to acquire such shares (the
"Proposed Purchaser") to offer (the "Purchase
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Offer") in writing to each other Stockholder to purchase shares of Common Stock
owned by such Stockholder (regardless of whether the shares of Common Stock
proposed to be sold by the Disposing Stockholders are the same class as the
shares of Common Stock owned by such Stockholders), such that the number of
shares of such Common Stock so offered to be purchased from such Stockholder
shall be equal to the product obtained by multiplying the total number of shares
of such Common Stock then owned by such Stockholder by a fraction, the numerator
of which is the aggregate number of shares of Common Stock proposed to be
purchased by the Proposed Purchaser from all Stockholders (including the
Disposing Stockholder or Stockholders) and the denominator of which is the
aggregate number of shares of Common Stock. Such purchase shall be made at the
highest price per share and on such other terms and conditions as the Proposed
Purchaser has offered to purchase shares of Common Stock to be sold by the
Disposing Stockholder or Stockholders. Each Stockholder shall have 20 calendar
days from the date of receipt of the Purchase Offer in which to accept such
Purchase Offer, and the closing of such purchase shall occur within 30 calendar
days after such acceptance or at such other time as such Stockholder and the
Proposed Purchaser may agree. The number of shares of Common Stock to be sold to
the Proposed Purchaser by the Disposing Stockholder or Stockholders shall be
reduced by the aggregate number of shares of Common Stock purchased by the
Proposed Purchaser from the other Stockholders prior to the acceptance by them
of Purchase Offers in accordance with the provisions of this Section 5.7 (b). In
the event that a sale or other transfer subject to this Section 5.7 is to be
made to a Proposed Purchaser who is not a Stockholder, the Disposing Stockholder
shall notify the Proposed Purchaser that the sale or other transfer is subject
to this Section 5.7 and shall ensure that no sale or other transfer is
consummated without the Proposed Purchaser first complying with this Section
5.7. It shall be the responsibility of each Disposing Stockholder to determine
whether any transaction to which it is a party is subject to this Section 5.7.
5.8 Take Along. If at any time Jordan Investors owning interests
representing a majority of the shares of Common Stock beneficially owned by the
Jordan Investors (such Jordan Investors being referred to in this Section 5.8 as
the "Selling Investors") shall determine to sell or exchange (in a business
combination or otherwise) two-thirds or more of their aggregate shares of Common
Stock in a bona fide arm's-length transaction to a third party in which the same
price per share shall be payable in respect of all shares of all classes of the
Common Stock, then, upon the written request of such Selling Investors, each
other Jordan Investor and each Management Investor shall be obligated to, and
shall, if so requested by such third party, (a) sell, transfer and deliver or
cause to be sold, transferred and delivered to such third party, shares of
Common Stock owned by such Stockholder equal to (i) the number of shares of
Common Stock owned by such Stockholder multiplied by (ii) a fraction, the
numerator of which shall equal the number of shares of Common Stock to be sold
by the Selling Investors in the transaction, and the denominator of which shall
equal the total number of shares of Common Stock owned by the Selling Investors,
at the same price per share (irrespective of class) and on the same terms as are
applicable to the Selling Investors, and (b) if stockholder approval of the
transaction is required, vote his, her or its shares of Voting Stock in favor
thereof. The provisions of Sections 5.1 through 5.4, inclusive, and Section 5.7
shall not apply to any transactions to which this Section 5.8 applies.
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ARTICLE VI
Termination
-----------
6.1 Certain Terminations. The provisions of Articles III, IV (other than
Section 4.1(c)) and V shall terminate on the date on which any of the following
events first occurs: (i) a Public Distribution, (ii) a merger or consolidation
of the Company with or into another Person that is not an Affiliate of the
Company, as a result of which the Stockholders own less than 65% of the
outstanding shares of Voting Stock of the surviving or resulting corporation,
(iii) the sale or other disposition in compliance with Section 2.1 of all or
substantially all the assets of the Company to a Person that is not an Affiliate
of the Company, (iv) ten years from the date of this Agreement or (v) the sale
of shares of Common Stock such that the original holders of Common Stock (and
any permitted transferees of such Stockholders under Section 4.2(a) or (b)) own
less than 65% of the outstanding Common Stock.
Notwithstanding the foregoing, this Agreement shall in any event
terminate with respect to any Stockholder when such Stockholder no longer owns
any Securities.
ARTICLE VII
Miscellaneous
-------------
7.1 Successors and Assigns. Except as otherwise provided herein, all of the
terms and provisions of this Agreement shall be binding upon, shall inure to the
benefit of and shall be enforceable by the respective successors and assigns of
the parties hereto. No Stockholder may assign any of its rights hereunder to any
Person other than a transferee that has complied with the requirements of this
Agreement (if applicable) as provided therein in all respects. The Company may
not assign any of its rights hereunder to any Person other than an Affiliate of
the Company. If any transferee of any Stockholder shall acquire any Securities
in any manner, whether by operation of law or otherwise, except as otherwise
provided in Section 4.3(b), such shares shall be held subject to all of the
terms of this Agreement, and by taking and holding such shares such Person shall
be entitled to receive the benefits of and be conclusively deemed to have agreed
to be bound by and to comply with all of the terms and provisions of this
Agreement.
7.2 Amendment and Modification; Waiver of Compliance; Conflicts. This
Agreement may be amended only by a written instrument duly executed by (i) a
Majority of the Jordan Investors and (ii) to the extent that such proposed
amendment would materially adversely affect the rights of the Management
Investors under this Agreement as a group, the holders of a majority of the
shares of Stock owned by the Management Investors. In the event of the amendment
or modification of this Agreement in accordance with its terms, the Stockholders
shall cause the Board of Directors of the Company to meet within 30 calendar
days following such amendment or modification or as soon thereafter as is
practicable for the purpose of
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adopting any amendment to the Amended and Restated Certificate of Incorporation
and Bylaws of the Company that may be required as a result of such amendment or
modification to this Agreement, and, if required, proposing such amendments to
the Stockholders entitled to vote thereon, and the Stockholders agree to vote in
favor of such amendments.
Except as otherwise provided in this Agreement, any failure of any of the
parties to comply with any obligation, covenant, agreement or condition herein
may be waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
In the event of any conflict between the provisions of this Agreement and
the provisions of any other agreement, the provisions of this Agreement shall
govern and prevail.
7.3 Notices. Any notice, request, claim, demand, document and other
communication hereunder to any party shall be effective upon receipt (or refusal
of receipt) and shall be in writing and delivered personally or sent by telex or
telecopy (with such telex or telecopy confirmed promptly in writing sent by
first class mail), or first class mail, or other similar means of communication,
as follows:
(a) If to the Company or any Jordan Investor, addressed to the Company
or to such Jordan Investor at ArborLake Centre, Suite 550, 1751 Lake Cook Road,
Deerfield, Illinois 60015; or
(b) If to a Stockholder other than a Jordan Investor, to the address
of such Stockholder set forth in the stock records of the Company.
or, in each case, to such other address or telex or telecopy number as such
party may designate in writing to each Stockholder and the Company by written
notice given in the manner specified herein.
All such communications shall be deemed to have been given, delivered or
made when so delivered by hand or sent by telex (answer back received) or
telecopy, or five business days after being so mailed.
7.4 Entire Agreement. This Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the entire
agreement among the parties hereto with respect to the subject transactions
contemplated hereby and supersede all prior oral and written agreements and
memoranda and undertakings among the parties hereto with regard to this subject
matter. The Company represents to the Stockholders that the rights granted to
the holders hereunder do not in any way conflict with and are not inconsistent
with the rights granted or obligations accepted under any other agreement
(including the Amended and Restated Certificate of Incorporation) to which the
Company is a party. Neither the Company nor any Subsidiary of the Company will
hereafter enter into any agreement with respect to its
-15-
<PAGE>
equity or debt securities which is inconsistent with the rights granted to the
holders of Registrable Securities or any Stockholder under this Agreement
without obtaining the prior written consent of the Stockholder or holder of
Registrable Securities whose rights would be thereby affected.
7.5 Injunctive Relief. The Stockholders acknowledge and agree that a
violation of any of the terms of this Agreement will cause the Stockholders
irreparable injury for which an adequate remedy at law is not available.
Therefore, the Stockholders agree that the Company and each Stockholder shall
each be entitled to an injunction, restraining order or other equitable relief
from any court of competent jurisdiction, restraining any Stockholder from
committing any violations of the provisions of this Agreement.
7.6 Inspection. For so long as this Agreement shall be in effect, this
Agreement shall be made available for inspection by any Stockholder at the
principal executive offices of the Company.
7.7 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.
7.8 Recapitalizations, Exchanges, Etc., Affecting the Common Stock; New
Issuances. The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the Common Stock and the Preferred Stock and to any
and all equity or debt securities of the Company or any successor or assign of
the Company (whether by merger, consolidation, sale of assets, or otherwise)
which may be issued in respect of, in exchange for, or in substitution of, such
equity or debt securities and shall be appropriately adjusted for any stock
dividends, splits, reverse splits, combinations, reclassifications,
recapitalizations, reorganizations and the like occurring after the date hereof.
7.9 Ratification of Prior Acts of Board of Directors of Company; Right to
Negotiate. Each of the Stockholders hereby adopts, ratifies and confirms all of
the actions heretofore taken by the Board of Directors in all respects,
including, without limitation, in respect of the Stock Purchase Agreement and
the transactions contemplated thereby. Nothing in this Agreement (apart from
Section 2.1(c) and Article V hereof) shall be deemed to restrict or prohibit the
Company from purchasing Stock from any Stockholder at any time upon such terms
and conditions and at such price as may be mutually agreed upon between the
Company and such Stockholder, whether or not at the time of such purchase
circumstances exist which specifically grant the Company the right to purchase,
or such Stockholder the right to sell, Stock pursuant to the terms of this
Agreement.
7.10 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. EACH OF THE
PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS
AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD NOT BE
MADE WHOLE BY
-16-
<PAGE>
MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY MAY BE
ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR
INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION AND
VENUE WILL BE PROPER IN CHICAGO, ILLINOIS, AND WAIVES ANY OBJECTIONS BASED UPON
FORUM NON CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES
THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE
PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED
OR CERTIFIED MAIL TO THE PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS
OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS OR THE UNITED STATES.
THE CHOICE OF FORUM SET FORTH IN THIS SECTION 7.10 SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE JURISDICTION.
7.11 ARBITRATION. ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS
AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION ANY
UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ANY
OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR BOTH, THE
RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR FEDERAL OR
STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO,
ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN CHICAGO, ILLINOIS,
AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF ILLINOIS. DECISIONS
AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO SUCH ARBITRATION SHALL
BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES, SUBJECT TO CONFIRMATION,
MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. " 1 ET SEQ. ANY FINAL AWARD
SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF RECORD.
7.12 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any person.
7.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
JORDAN TELECOMMUNICATIONS
PRODUCTS, INC.
By: /s/ Thomas H. Quinn
------------------------------
Name: Thomas H. Quinn
Title: Chairman
JORDAN INDUSTRIES, INC.
By: /s/ John W. Jordan II
------------------------------
Name: John W. Jordan II
Title: Chairman
JII PARTNERS LIMITED PARTNERSHIP
By: JORDAN INDUSTRIES, INC., a
General Partner
By: /s/ John W. Jordan II
------------------------------
Name: John W. Jordan II
Title: Chairman
-18-
<PAGE>
LEUCADIA INVESTORS, INC.
By: /s/ Joseph S. Steinberg
---------------------------------
Name: Joseph S. Steinberg
Title: Vice President
MEZZANINE INCOME & CAPITAL TRUST 2001 PLC
By: /s/ James E. Jordan
---------------------------------
Name: James E. Jordan
Title: Authorized Representative
JOHN W. JORDAN, II REVOCABLE TRUST
By: /s/ John W. Jordan II
---------------------------------
John W. Jordan, II
Trustee
THE JORDAN FAMILY TRUST
By: /s/ John W. Jordan II
---------------------------------
John W. Jordan, II
Trustee
/s/ John W. Jordan II
-------------------------------------
JOHN W. JORDAN, II
-19-
<PAGE>
JORDAN/ZALAZNICK CAPITAL COMPANY
By: /s/ John W. Jordan II
---------------------------------
Name: John W. Jordan II
Title: Authorized Representative
/s/ David W. Zalaznick
-------------------------------------
DAVID W. ZALAZNICK
/s/ Thomas H. Quinn
-------------------------------------
THOMAS H. QUINN
/s/ Jonathan F. Boucher
-------------------------------------
JONATHAN F. BOUCHER
/s/ John R. Lowden
-------------------------------------
JOHN R. LOWDEN
/s/ James E. Jordan Jr.
-------------------------------------
JAMES E. JORDAN, JR
/s/ Adam E. Max
-------------------------------------
ADAM E. MAX
-20-
<PAGE>
G. ROBERT FISHER IRREVOCABLE GIFT TRUST,
UTI DATE 12/26/90
By: /s/ G. Robert Fisher
---------------------------------
G. Robert Fisher
Trustee
/s/ A. Richard Caputo
-------------------------------------
A. RICHARD CAPUTO
/s/ Paul Rodzevik
-------------------------------------
PAUL RODZEVIK
/s/ Douglas Zych
-------------------------------------
DOUGLAS ZYCH
/s/ Dominic Pileggi
-------------------------------------
DOMINIC PILLEGI
/s/ Daly Jordan O'Brien
-------------------------------------
DALY JORDAN O'BRIEN
/s/ George C. Jordan
-------------------------------------
GEORGE C. JORDAN
-21-
<PAGE>
/s/ Elizabeth O'Brien Jordan
-------------------------------------
ELIZABETH O'BRIEN JORDAN
/s/ Bruce Zalaznick
-------------------------------------
BRUCE ZALAZNICK
-22-
<PAGE>
Exhibit 5
---------
August 25, 1997
Jordan Telecommunication Products, Inc.
1751 Lake Cook Road, Suite 550
Deerfield, IL 60015
Re: $190 million 9 7/8% Series B Senior Notes due 2007, $120 million
11 3/4% Series B Senior Discount Notes due 2007 and $25 million 13 1/4% Series
B Senior Exchangeable Preferred Stock due 2009
Ladies and Gentlemen:
We have acted as counsel to Jordan Telecommunication Products, Inc., a
Delaware corporation (the "Company"), in connection with the registration under
the Securities Act of 1933, as amended (the "Act") of an exchange offer (the
"Exchange Offer") relating to $190 million principal amount of Series B 9 7/8%
Senior Notes due 2007 (the "Series B Senior Notes"), $120 million principal
amount at maturity of Series B 11 3/4% Senior Discount Notes due 2007 (the
"Series B Discount Notes") and $25 million liquidation preference of Series B 13
1/4% Senior Exchangeable Preferred Stock due 2009 (the "Series B Preferred
Stock"). The Series B Senior Notes and the Series B Discount Notes were each
issued under indentures (the "Indentures") between the Company and First Trust
National Association, as trustee. The Series B Preferred Stock was issued under
a Certificate of Designation. We have also participated in the preparation and
filing with the Securities and Exchange Commission under the Act of a
registration statement on From S-4 (the "Registration Statement") relating to
$190 million principal amount of Series A 9 7/8% Senior Notes due 2007 (the
"Series A Senior Notes"), $120 million principal amount at maturity of Series A
11 3/4% Discount Notes due 2007 (the "Series A Discount Notes") and $25 million
liquidation preference of Series A Senior Exchangeable Preferred Stock due 2009
(the "Series A Preferred Stock") with respect to the proposed Exchange Offer for
the Series B Senior Notes, the Series B Discount Notes and the Series B
<PAGE>
Jordan Telecommunication Products, Inc.
August 25, 1997
Page 2
Preferred Stock, respectively. In this connection, we have examined such
corporate and other records, instruments, certificates and documents as we
considered necessary to enable us to express this opinion.
Based on the foregoing, it is our opinion that, upon completion of the
Exchange Offer, (i) the Series A Senior Notes and the Series A Discount Notes
will have been duly authorized for issuance and, when each series of Series A
Senior Notes or Series A Discount Notes is duly executed, authenticated, issued
and delivered, such series will constitute valid and legally binding
obligations of the Company entitled to the benefits of the Indentures, subject
to bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditor's rights and to general
equity principles (whether considered in a proceeding at law or in equity) and
(ii) the Series A Preferred Stock will have been duly authorized for issuance
and, upon issuance and delivery, will be fully paid and non-assessable.
We 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."
Very truly yours,
/s/ Mayer, Brown & Platt
------------------------
MAYER, BROWN & PLATT
<PAGE>
Exhibit 10.1
REVOLVING CREDIT AGREEMENT
dated as of July 25, 1997
among
JTP INDUSTRIES, INC.,
BANKBOSTON, NA.
and the other lending institutions set forth on Schedule 1 hereto
and
BANKBOSTON, N.A.,
as Agent
with BancBoston Securities Inc. having acted as Arranger
<PAGE>
Exhibits
--------
<TABLE>
<CAPTION>
<S> <C>
Exhibit A Form of Revolving Credit Note
---------
Exhibit B Form of Loan Request
---------
Exhibit C-1 Form of Borrower Security Agreement
-----------
Exhibit C-2 Form of Subsidiary Security Agreement
-----------
Exhibit D-1 Form of Guaranty (Holdings)
-----------
Exhibit D-2 Form of Guaranty (Subsidiaries)
-----------
Exhibit E Form of Patent Assignment
---------
Exhibit F Form of Trademark Assignment
---------
Exhibit G Form of Intercompany Note
---------
Exhibit H Form of Stock Pledge Agreement (Borrower)
---------
Exhibit I Form of Compliance Certificate
---------
Exhibit J Form of Instrument of Adherence
---------
Exhibit K Form of Assignment and Acceptance
---------
</TABLE>
<TABLE>
<CAPTION>
Schedules
---------
<S> <C>
Schedule 1 Banks' Commitments
----------
Schedule 2 Non-Wholly-Owned Subsidiaries
----------
Schedule 7.3 Title to Property
------------
Schedule 7.7 Litigation
------------
Schedule 7.15 Certain Transactions
-------------
Schedule 7.16 ERISA Matters
-------------
Schedule 7.18 Environmental Disclosure
-------------
Schedule 7.24 Insurance
-------------
Schedule 9.1 Permitted Indebtedness
------------
Schedule 9.2 Permitted Liens
------------
Schedule 9.3 Permitted Investments
------------
</TABLE>
<PAGE>
REVOLVING CREDIT AGREEMENT
--------------------------
This REVOLVING CREDIT AGREEMENT is made as of July 25, 1997, by and among
(a) JTP INDUSTRIES, INC. (the "Borrower"), a Delaware corporation having its
principal place of business at 1751 Lake Cook Road, Suite 550, Deerfield,
Illinois 60015, and certain of its Subsidiaries (as hereinafter defined) set
forth on the signature page hereto; (b) BANKBOSTON, N.A., a national banking
association, and the other lending institutions listed on Schedule 1 attached
hereto; and (c) BANKBOSTON, N.A., as agent for itself and such other lending
institutions.
SECTION I.
DEFINITIONS AND RULES OF INTERPRETATION
(S)1.1 Definitions.
The following terms shall have the meanings set forth in this 1 or
elsewhere in the provisions of this Credit Agreement referred to below:
Acquisition Documents. All documents, instruments and agreements
which are to be executed in connection with the Acquisitions, all in form and
substance satisfactory to the Agent and the Banks.
Acquisitions. Collectively, (a) the acquisition by New Cambridge on
the Closing Date of substantially all of the assets of Cambridge pursuant to the
Cambridge Purchase Agreement; (b) the acquisition by New Dura-Line on the
Closing Date of substantially all of the assets of Dura-Line pursuant to the
Dura-Line Purchase Agreement; (c) the acquisition by New Johnson on the Closing
Date of substantially all of the assets of Johnson pursuant to the Johnson
Purchase Agreement; (d) the acquisition by New Viewsonics on the Closing Date of
substantially all of the assets of Viewsonics pursuant to the Viewsonics
Purchase Agreement; and (e) the acquisition by Holdings on the Closing Date of
substantially all of the capital stock owned by JII of each of Aim, Bond
Holdings, Diversified, NT Holdings and Old JTPG pursuant to the Stock Purchase
Agreement.
Adjustment Date. The first day of the month immediately following the
month in which a Compliance Certificate is to be delivered by the Borrower
pursuant to (S)8.4(d) hereof.
Affected Bank. See (S)6.12 hereof.
Affiliate. Any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, the Person specified, or any corporation or other organization in which
such Person is the direct or indirect beneficial owner of ten percent (10%) or
more of any class of equity securities or ten percent (10%) or more of the
aggregate equity interest.
Agent. BankBoston, N.A. acting as agent for the Banks.
<PAGE>
Agent's Fee. See (S)5.2 hereof.
Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agent's Special Counsel. Bingham, Dana & Gould LLP or such other
counsel as may be approved by the Agent.
Aim. Aim Electronics Corporation, a Delaware corporation.
Applicable Margin. For each period commencing on an Adjustment Date
through the date immediately preceding the next Adjustment Date (each a "Rate
Adjustment Period"), the Applicable Margin shall be the applicable margin set
forth below with respect to the Leverage Ratio, as determined for the period
ending on the fiscal quarter ended immediately preceding the applicable Rate
Adjustment Period.
<TABLE>
<CAPTION>
=========================================================================================
Base Rate Eurodollar Rate Letter of Commitment Fee
Leverage Ratio Loans Loans Credit Fees Rate
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Greater than or equal to
5.50:1.00 1.00% 2.50% 2.50% 0.50%
Less than 5.50:1.00 but
greater than or equal to
5.00:1.00 0.75% 2.25% 2.25% 0.50%
Less than 5.00:1.00 0.50% 2.00% 2.00% 0.375%
=========================================================================================
</TABLE>
Notwithstanding the foregoing, (a) for Revolving Credit Loans outstanding, the
Letter of Credit Fees and the commitment fees payable during the period
commencing on the Closing Date through the date immediately preceding the first
Adjustment Date to occur after December 31, 1997, the Applicable Margin shall be
the highest Applicable Margin set forth above, and (b) if the Borrower fails to
deliver any Compliance Certificate pursuant to (S)8.4(d) hereof then, for the
period commencing on the next Adjustment Date to occur subsequent to such
failure through the date immediately following the date on which such Compliance
Certificate is delivered, the Applicable Margin shall be the highest Applicable
Margin set forth above.
2
<PAGE>
Assignment and Acceptance. See (S)19.1 hereof.
Authorized Officer. With respect to any Person, its president, chief
financial officer or any vice president.
Balance Sheet Date. March 31, 1997.
Banks. The lending institutions listed on Schedule 1 attached hereto and
any other Person who becomes an assignee of any rights and obligations of a Bank
pursuant to (S)19 hereof.
Base Rate. The annual rate of interest announced from time to time by BkB
at its head office in Boston, Massachusetts, as its "base rate".
Base Rate Loans. Revolving Credit Loans bearing interest calculated by
reference to the Base Rate.
BkB. BankBoston, N.A., a national banking association, in its individual
capacity.
Bond Holdings. Bond Holdings, Inc., a Delaware corporation.
Borrower. As defined in the preamble hereto.
Business Day. Any day on which banking institutions in Boston,
Massachusetts are open for the transaction of banking business and, in the case
of Eurodollar Rate Loans, also a day which is a Eurodollar Business Day.
Cambridge. Cambridge Products Corporation, a Delaware corporation.
Cambridge Purchase Agreement. The Asset Purchase Agreement, dated or to be
dated on or prior to the Closing Date, between New Cambridge and Cambridge,
pursuant to which New Cambridge is purchasing all of the assets of Cambridge,
and assuming substantially all of its liabilities, on the Closing Date, and all
other agreements, documents, instruments and certificates required to be entered
into or delivered pursuant thereto or in connection with such acquisition, each
in the form delivered to the Agent on the Closing Date.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Capital Expenditures. Amounts paid or indebtedness incurred by any Person
in connection
3
<PAGE>
with the purchase or lease by such Person of Capital Assets that would be
required to be capitalized and shown on the balance sheet of such Person in
accordance with generally accepted accounting principles other than amounts paid
in connection with the purchase or lease of Capital Assets with insurance or
condemnation proceeds.
Capitalization Documents. The Management Subscription Agreement, the
Stockholders Agreement and the certificates of incorporation of Holdings, the
Borrower and their Subsidiaries.
Capitalized Leases. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
CERCLA. See (S)7.18 hereof.
Closing Date. The first date on which the conditions set forth in (S)11
hereof have been satisfied and any Revolving Credit Loans are to be made or any
Letter of Credit is to be issued hereunder.
Code. The Internal Revenue Code of 1986.
Collateral. All of the property, rights and interests of the Borrower and
its Subsidiaries that are or are intended to be subject to the security
interests and mortgages created by the Security Documents.
Commitment. With respect to each Bank, the amount set forth on Schedule 1
attached hereto as the amount of such Bank's commitment to make Revolving Credit
Loans to, and to participate in the issuance, extension and renewal of Letters
of Credit for the account of, the Borrower, as the same may be reduced from time
to time; or if such commitment is terminated pursuant to the provisions hereof,
zero.
Commitment Fee Rate. The applicable rate per annum set forth in the chart
contained in the definition of Applicable Margin under the heading "Commitment
Fee Rate".
Commitment Percentage. With respect to each Bank, the percentage set forth
on Schedule 1 hereto as such Bank's percentage of the aggregate Commitments of
all of the Banks.
Compliance Certificate. See (S)8.4(d) hereof.
Consolidated or consolidated. With reference to any term defined herein,
shall mean that term as applied to the accounts of a Person and its Subsidiaries
consolidated in accordance with generally accepted accounting principles.
4
<PAGE>
Consolidated Cash Flow. With respect to the Borrower and its Subsidiaries
and for any fiscal period, an amount equal to EBITDA for such fiscal period,
minus Capital Expenditures made in such period, minus cash income taxes and,
without duplication, cash payments for income taxes under the Tax Sharing
Agreement paid in such period, minus management fees paid under the New
Subsidiary Consulting Agreement in such period, all as calculated on a Pro Forma
Basis.
Consolidated Cash Flow Ratio. As at the end of any fiscal quarter, the
ratio of (a) Consolidated Cash Flow of the Borrower and its Subsidiaries for the
Reference Period then ended to (b) the sum of (i) Consolidated Total Interest
Expense for such period, plus all scheduled mandatory payments of principal on
Indebtedness of the Borrower and its Subsidiaries made or required to be made in
that period, plus without duplication, all scheduled mandatory payments of
principal on Parent Indebtedness made or required to be made in that period, all
as calculated on a Pro Forma Basis.
Consolidated Net Income. With respect to any Person and its Subsidiaries
for any period, the consolidated net income (or net deficit) of such Person and
its Subsidiaries, after deduction of all expenses, taxes, and other proper
charges, determined in accordance with generally accepted accounting principles,
after excluding therefrom (a) dividends paid or payable to the extent deducted
from Consolidated Net Income and (b) without duplication, all non-recurring non-
operating income or expenses, including but not limited to gains or losses
realized upon the termination of pension plans, upon the sale of assets or the
satisfaction of Indebtedness.
Consolidated Total Interest Expense. The sum of (a) with respect to the
Borrower and its Subsidiaries, for any fiscal period, the aggregate amount of
interest expense in respect of all Indebtedness of the Borrower and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with generally accepted accounting principles (including the interest portion of
any deferred payment obligation and the interest component of Capitalized Lease
obligations, but excluding amortization of deferred financing fees if such
amortization would otherwise be included as interest expense), plus, without
duplication, (b) with respect to Holdings, for any fiscal period, the aggregate
amount of all cash interest expense in respect of all Parent Indebtedness for
such period, on a consolidated basis, determined in accordance with generally
accepted accounting principles (including the cash interest portion of any
deferred payment obligation and the cash interest component of Capitalized Lease
obligations, but excluding amortization of deferred financing fees if such
amortization would otherwise be included as interest expense), as calculated on
a Pro Forma Basis.
Conversion Request. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Revolving Credit Loan in accordance
with (S)2.7 hereof.
Credit Agreement. This Revolving Credit Agreement, including the Schedules
and Exhibits hereto.
Default. See (S)13.1 hereof.
5
<PAGE>
Delinquent Bank. See (S)15.5.3 hereof.
Discount Notes. The 11 3/4% Senior Discount Notes due 2007 issued by
Holdings in the aggregate principal amount of $120,000,000 pursuant to the
Discount Notes Indenture and any such documents, instruments or agreements
issued in exchange pursuant to the Public Offering.
Discount Notes Indenture. The Senior Discount Notes Indenture dated as of
July 25, 1997 between Holdings and First Trust National Association, as trustee,
and any such documents, instruments or agreements issued in exchange pursuant to
the Public Offering, and each in the form delivered to the Agent on or prior to
the Closing Date.
Distribution. The declaration or payment of any dividend on or in respect
of any shares of any class of capital stock of a Person, other than dividends
payable solely in shares of common stock of such Person; the purchase,
redemption, or other retirement of any shares of any class of capital stock of a
Person, directly or indirectly through a Subsidiary of such Person or otherwise;
the return of capital by a Person to its shareholders as such; or any other
distribution on or in respect of any shares of any class of capital stock of
such Person.
Diversified. Diversified Wire & Cable, Inc., a Delaware corporation.
Dollars or $. Dollars in lawful currency of the United States of America.
Domestic Lending Office. Initially, the office of each Bank designated as
such in Schedule 1 attached hereto; thereafter, such other office of such Bank,
if any, located within the United States that will be making or maintaining Base
Rate Loans.
Domestic Subsidiary. Any Subsidiary which is not a Foreign Subsidiary.
Drawdown Date. The date on which any Revolving Credit Loan is made or is to
be made, and the date on which any Revolving Credit Loan is converted or
continued in accordance with (S)2.7 hereof.
Dura-Line. Dura-Line Corporation, a Delaware corporation.
Dura-Line Purchase Agreement. The Asset Purchase Agreement, dated or to be
dated on or prior to the Closing Date, between New Dura-Line and Dura-Line,
pursuant to which New Dura-Line is purchasing all of the assets of Dura-Line,
and assuming substantially all of its liabilities, on the Closing Date, and all
other agreements, documents, instruments and certificates required to be entered
into or delivered pursuant thereto or in connection with such acquisition, each
in the form delivered to the Agent on the Closing Date.
EBITDA. With respect to any Person and its Subsidiaries and any fiscal
period, an amount
6
<PAGE>
equal to Consolidated Net Income for such fiscal period, plus to the extent
deducted in the calculation of Consolidated Net Income and without duplication,
(a) depreciation and amortization for such period, plus (b) other noncash
charges for such period, plus (c) income tax expense for such period, plus (d)
Consolidated Total Interest Expense paid or accrued during such period, plus (e)
non-cash expenses relating to Financial Accounting Standards Board Statements
Nos. 106 and 109 for such period, plus (f) the aggregate amount of non-
capitalized transaction costs incurred in connection with financings and
acquisitions, (including, but not limited to, financing fees) for such period,
plus (g) Restructuring Costs for such period, plus (h) any extraordinary or
nonrecurring changes relating to any premium or penalty paid, write-off or
deferred financing costs or other financial recapitalization charges in
connection with redeeming or retiring any Indebtedness prior to its stated
maturity, plus (i) any and all payments made to Jordan Industries and other
Persons pursuant to the terms of the Service Agreements during such period, and
minus, (j) to the extent added in computing Consolidated Net Income and without
duplication, all noncash gains (including income tax benefits) for such period
all as determined in accordance with generally accepted accounting principles.
Eligible Assignee. Any Bank or any of (a) a commercial bank or finance
company organized under the laws of the United States, or any State thereof or
the District of Columbia, and having total assets in excess of $1,000,000,000;
(b) a savings and loan association or savings bank organized under the laws of
the United States, or any State thereof or the District of Columbia, and having
a net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (c) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, provided that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (d) the central
bank of any country which is a member of the OECD; and (e) if, but only if, any
Event of Default has occurred and is continuing, any other bank, insurance
company, commercial finance company or other financial institution or other
Person approved by the Agent, such approval not to be unreasonably withheld.
Employee Benefit Plan. Any employee benefit plan within the meaning of
(S)3(3) of ERISA maintained of contributed to by the Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
Environmental Laws. See (S)7.18(a) hereof.
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA Affiliate. Any Person which is treated as a single employer with the
Borrower under (S)414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of (S)4043 of ERISA and the regulations
promulgated thereunder.
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Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Eurodollar Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank designated as
such in Schedule 1 attached hereto; thereafter, such other office of such Bank,
if any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate
Loan, the rate of interest equal to (a) the rate per annum (rounded upwards to
the nearest 1/16 of one percent) at which the Reference Bank's Eurodollar
Lending Office is offered Dollar deposits two (2) Eurodollar Business Days prior
to the beginning of such Interest Period in the interbank eurodollar market
where the eurodollar and foreign currency and exchange operations of such
Eurodollar Lending Office are customarily conducted, for delivery on the first
day of such Interest Period for the number of days comprised therein and in an
amount comparable to the amount of the Eurodollar Rate Loan of such Reference
Bank to which such Interest Period applies, divided by (b) a number equal to
1.00 minus the Eurocurrency Reserve Rate, if applicable.
Eurodollar Rate Loans. Revolving Credit Loans bearing interest calculated
by reference to the Eurodollar Rate.
Event of Default. See (S)13.1 hereof.
Fee Letter. The fee letter, dated as of the Closing Date, between the
Borrower and the Agent, as the same may be amended, modified or supplemented
from time to time.
Foreign Entity. Any Person which is organized under the laws of a
jurisdiction other than the United States of America and the states (or the
District of Columbia) thereof.
Foreign Subsidiary. Any Subsidiary which conducts substantially all of its
business in countries other than the United States of America and that is
organized under the laws of a jurisdiction other than the United States of
America and the States (or the District of Columbia) thereof.
Generally Accepted Accounting Principles. (a) When used in (S)9.5.1, (S)10
or in the
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determination of the Leverage Ratio in connection with the Applicable Margin,
whether directly or indirectly through reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect on the Balance Sheet Date, including, in the case of
statements made on a pro forma basis, without limitation, all adjustments and
reserves required pursuant to Rule 11.02 of Regulation S-X under the Securities
Act of 1933, and (ii) to the extent consistent with such principles, the
accounting practice of the Borrower reflected in its financial statements for
the period ended on the Balance Sheet Date, and (b) when used in general, other
than as provided above, means principles that are (i) consistent with the
principles promulgated or adopted by the Financial Accounting Standards Board
and its predecessors, as in effect from time to time, including, in the case of
statements made on a pro forma basis, without limitation, all adjustments and
reserves required pursuant to Rule 11.02 of Regulation S-X under the Securities
Act of 1933, and (ii) consistently applied with past financial statements of the
Borrower adopting the same principles, provided that in each case referred to in
this definition of "generally accepted accounting principles" a certified public
accountant would, insofar as the use of such accounting principles is pertinent,
be in a position to deliver an unqualified opinion (other than a qualification
regarding changes in generally accepted accounting principles) as to financial
statements in which such principles have been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of (S)3(2) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guarantors. Each Domestic Subsidiary of the Borrower existing on the
Closing Date and each other Domestic Subsidiary of the Borrower which becomes a
party to the Guaranty after the Closing Date.
Guaranty. Collectively, the Subsidiary Guaranty, the Non-Wholly Owned
Subsidiary Guaranty and the Parent Guaranty.
Hazardous Substances. See (S)7.18(b) hereof.
Holdings. Jordan Telecommunications Products, Inc., a Delaware corporation.
Holdings Intercompany Loan. See (S)11.13 hereof.
Incentive Arrangements. With respect to any Person, any earn-out
arrangements, stock appreciation rights, "phantom" stock plans, non-competition
agreements, subscription and stockholders agreements and other incentive and
bonus plans and similar arrangements made in connection with the acquisition of
entities or businesses by such Person or any of its Subsidiaries or the
retention of executives, officers or employees by such Person or any of its
Subsidiaries, provided that the notional amount of equity interests represented
by Incentive Arrangements relating to any Person shall not
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<PAGE>
exceed twenty percent (20%) of the common equity interest of such Person.
Indebtedness. All obligations, contingent and otherwise, that in accordance
with generally accepted accounting principles should be classified upon the
obligor's balance sheet as liabilities, or to which reference should be made by
footnotes thereto, including in any event and whether or not so classified: (a)
all debt and similar monetary obligations, whether direct or indirect; (b) all
liabilities secured by any mortgage, pledge, security interest, lien, charge or
other encumbrance existing on property owned or acquired subject thereto,
whether or not the liability secured thereby shall have been assumed; and (c)
all guarantees, endorsements and other contingent obligations whether direct or
indirect in respect of indebtedness of others, including any obligation to
supply funds to or in any manner to invest in, directly or indirectly, the
debtor, to purchase indebtedness, or to assure the owner of indebtedness against
loss, through an agreement to purchase goods, supplies, or services for the
purpose of enabling the debtor to make payment of the indebtedness held by such
owner or otherwise, and the obligations to reimburse the issuer in respect of
any letters of credit.
Ineligible Securities. Securities which may not be underwritten or dealt in
by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1993 (12 U.S.C. 24, Seventh), as amended.
Instrument of Adherence. See (S)9.5.1.
Intercompany Advances. See the definition of Maximum Liability.
Intercompany Loan Agreement. The Line Letters, dated on or prior to the
Closing Date, from the Borrower to certain of its Domestic Subsidiaries, and all
instruments delivered in connection therewith, in form and substance
satisfactory to the Agent.
Intercompany Notes. Promissory notes to be issued among the Guarantors and
the Borrower from time to time in the form of Exhibit G hereto and pledged and
delivered by the holder thereof to the Agent for the benefit of the Banks as
collateral security for the Obligations.
Interest Coverage Ratio. As at any date of determination the ratio of (a)
the EBITDA of the Borrower and its Subsidiaries for the Reference Period ending
on such date, to (b) Consolidated Total Interest Expense for such Reference
Period, provided that such calculations shall be made on a Pro Forma Basis.
Interest Payment Date. (a) As to any Base Rate Loan, the last day of the
calendar quarter which includes the Drawdown Date thereof and (b) as to any
Eurodollar Rate Loan in respect of which the Interest Period is (i) 3 months or
less, the last day of such Interest Period and (ii) more than 3 months, the date
that is 3 months from the first day of such Interest Period and, in addition,
the last day of such Interest Period.
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Interest Period. With respect to each Revolving Credit Loan (a) initially,
the period commencing on the Drawdown Date of such Revolving Credit Loan and
ending on the last day of one of the periods set forth below, as selected by the
Borrower in a Loan Request (i) for any Base Rate Loan, the last day of the
calendar quarter and (ii) for any Eurodollar Rate Loan, 1, 2, 3, or 6 months and
(b) thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Revolving Credit Loan and ending on the last
day of one of the periods set forth above, as selected by the Borrower in a
Conversion Request; provided that all of the foregoing provisions relating to
Interest Periods are subject to the following:
(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in (S)2.7
hereof, the Borrower shall be deemed to have requested a conversion of the
affected Eurodollar Rate Loan to a Base Rate Loan and the continuance of
all Base Rate Loans as Base Rate Loans on the last day of the then current
Interest Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Eurodollar
Business Day of a calendar month; and
(e) any Interest Period relating to any Eurodollar Rate Loan that
would otherwise extend beyond the Revolving Credit Loan Maturity Date shall
end on the Revolving Credit Loan Maturity Date.
Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any
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Investment any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise, except that accrued interest included as
provided in the foregoing clause (b) may be deducted when paid; and (e) there
shall not be deducted from or added to, as the case may be, the aggregate amount
of Investments any decrease or increase, as the case may be, in the value
thereof.
JII. JII, Inc., a Delaware corporation.
JI Properties Services Agreement. The Service Agreement dated as of
July __, 1997 among Jordan Industries, Holdings, the Borrower, JI Properties,
Inc. and other Persons party thereto, in the form delivered to the Banks and the
Agent on or prior to the Closing Date.
Johnson. Johnson Components Inc., a Delaware corporation.
Johnson Purchase Agreement. The Asset Purchase Agreement, dated or to
be dated on or prior to the Closing Date, between New Johnson and Johnson,
pursuant to which New Johnson is purchasing all of the assets of Johnson, and
assuming substantially all of its liabilities, on the Closing Date, and all
other agreements, documents, instruments and certificates required to be entered
into or delivered pursuant thereto or in connection with such acquisition, each
in the form delivered to the Agent on the Closing Date.
Jordan Affiliates. (a) The Jordan Company, Jordan/Zalaznick Capital
Company, JI Partners Limited Partnership, Jordan Industries, and their
respective Affiliates (including Leucadia Investors, Inc.); (b) partners,
principals, directors, officers, employees and agents of the Persons referred to
in clause (a) hereof; (c) The John W. Jordan II Revocable Trust, The Jordan
Family Trust and/or any other trusts established by John W. Jordan II; (d) any
other trust established by the Persons referred to in clause (b) hereof; and (e)
any corporation, partnership or other entity controlled by, or which is an
Affiliate of, the Persons referred to in clauses (a), (b), (c) and (d) hereof.
Jordan Industries. Jordan Industries, Inc., an Illinois corporation.
-----------------
Letter of Credit. See (S)4.1.1 hereof.
----------------
Letter of Credit Application. See (S)4.1.1 hereof.
----------------------------
Letter of Credit Fee. See (S)4.6 hereof.
---------------------
Letter of Credit Participation. See (S)4.1.4 hereof.
------------------------------
Leverage Ratio. As at any date of determination, the ratio of (a)
Total Net Indebtedness of a Person and its Subsidiaries outstanding on such date
to (b) EBITDA of the Borrower and its Subsidiaries for the Reference Period
ended on such date, as calculated on a Pro Forma Basis.
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Loan Documents. This Credit Agreement, the Revolving Credit Notes,
the Letter of Credit Applications, the Letters of Credit, the Security Documents
and the Fee Letter.
Loan Request. See (S)2.6 hereof.
------------
LoDan. LoDan West, Inc., a Delaware corporation and a wholly-owned
Subsidiary of Old JTPG.
Majority Banks. As of any date, (a) if there are less than three (3)
Banks on such date, all Banks and (b) if there are three (3) or more Banks on
such date, the Banks holding at least fifty one percent (51%) of the outstanding
principal amount of the Revolving Credit Notes; and if no such principal is
outstanding, the Banks whose aggregate Commitments constitute at least fifty one
percent (51%) of the Total Commitment.
Management Subscription Agreements. Those certain management
subscription agreements dated after the Closing Date by and among the Borrower
and certain of its stockholders whose names are set forth therein, with each
such agreement to be in form and substance satisfactory to the Agent.
Management Subscription Notes. Any subordinated promissory note
issued by the Borrower to certain shareholders pursuant to the Management
Subscription Agreements, with each such subordinated promissory note to be in
form and substance satisfactory to the Agent.
Maximum Drawing Amount. The maximum aggregate amount that the
beneficiaries may at any time draw under all outstanding Letters of Credit, as
such aggregate amount may be reduced from time to time pursuant to the terms of
the Letters of Credit.
Maximum Liability. As to each Non-Wholly-Owned Guarantor, an amount
equal to the principal amount of advances made by the Borrower to such Non-
Wholly-Owned Guarantor under the Intercompany Loan Agreement ("Intercompany
Advances").
Mortgaged Property. Any Real Estate which is subject to any Mortgage.
Mortgages. Collectively, (a) the several mortgages and deeds of trust,
dated or to be dated on or prior to September 25, 1997, from the Borrower and
its Subsidiaries to the Agent with respect to the fee and leasehold interests of
the Borrowers and its Subsidiaries in the Real Estate, each such mortgage or
deed of trust referred to in clause (a) to be in form and substance reasonably
satisfactory to the Agent and (b) all other mortgages and deeds of trust
executed and delivered by the Borrower and its Subsidiaries pursuant to (S)8.14
and (S)8.16 hereof.
Multiemployer Plan. Any multiemployer plan within the meaning of
(S)3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
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New Cambridge. New Cambridge Products Corporation, a Delaware corporation,
and, prior to the Reorganization, a Subsidiary of Holdings, and after the
Reorganization, a Subsidiary of the Borrower.
New Dura-Line. New Dura-Line Corporation, a Delaware corporation, and,
prior to the Reorganization, a Subsidiary of Holdings, and after the
Reorganization, a Subsidiary of the Borrower
New Johnson. New Johnson Components, Inc., a Delaware corporation, and,
prior to the Reorganization, a Subsidiary of Holdings, and after the
Reorganization, a Subsidiary of the Borrower.
New Subsidiary Advisory Agreements. Collectively, the New Subsidiary
Advisory Agreements, dated July 25, 1997, by and among Jordan Industries,
Holdings and each of its Subsidiaries, in the form delivered to the Banks and
the Agent on or prior to the Closing Date.
New Subsidiary Consulting Agreement. The New Subsidiary Consulting
Agreement dated as of July 25, 1997 by and among Jordan Industries, Holdings and
each of its Subsidiaries, in the form delivered to the Banks and the Agent or
prior to the Closing Date, and relating to corporate management and
administrative services provided and to be provided to Holdings and its
Subsidiaries by Jordan Industries.
New Viewsonics. New Viewsonics, Inc., a Delaware corporation, and, prior to
the Reorganization, a Subsidiary of Holdings, and after the Reorganization, a
Subsidiary of the Borrower
Non-Affected Bank(s). As at any date of determination, those Banks which
are not Affected Banks.
Non-Wholly-Owned Guarantor(s). Collectively, all of, and, individually each
of, the non-wholly-owned Subsidiaries of the Borrower listed on Schedule 2
attached hereto, provided that each such Person shall constitute a Non-Wholly-
Owned Guarantor hereunder only while the Borrower does not own, either directly
or indirectly, 100% of the issued and outstanding capital stock of such Person.
Non-Wholly-Owned Subsidiary Guaranty. The Guaranty, dated or to be dated on
or prior to the Closing Date, made by each of the Non-Wholly-Owned Guarantors in
favor of the Banks and the Agent pursuant to which each Non-Wholly-Owned
Guarantor guaranties to the Banks and the Agent the payment and performance of
the Obligations, substantially in the form of Exhibit D-1 attached hereto.
NT Holdings. New Northern Technologies, Inc., a Delaware corporation.
Obligations. All indebtedness, obligations and liabilities of any of the
Borrower and its Subsidiaries to any of the Banks and the Agent, individually or
collectively, existing on the date of
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this Credit Agreement or arising thereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, arising or incurred under this Credit Agreement or any of the other
Loan Documents or in respect of any of the Revolving Credit Loans made or
Reimbursement Obligations incurred or any of the Revolving Credit Notes, Letter
of Credit Applications, Letters of Credit or other instruments at any time
evidencing any thereof.
Offering. The offering by Holdings to certain accredited investors and
qualified institutional buyers of the Senior Notes, the Discount Notes and the
Units pursuant to the Offering pursuant to the offering circular dated June 24,
1997.
Offering Documents. Collectively, the Preferred Stock Exchange Notes, the
Preferred Stock Exchange Indenture, the Senior Notes, the Senior Notes
Indenture, the Discount Notes, the Discount Note Indenture, Holdings'
certificate of incorporation and all documents, instruments and agreements
executed in connection with any of the foregoing (including, without limitation,
all documents, instruments and agreements executed in connection with the
exchange of all documents entered into in connection with the Offering for those
to be entered into in connection with the Public Offering).
Old JTPG. Old Jordan Telecommunications Product Group, Inc., a Delaware
corporation.
outstanding. With respect to the Revolving Credit Loans, the aggregate
unpaid principal thereof as of any date of determination.
Parent Guaranty. The Guaranty, dated or to be date on or prior to the
Closing Date, made by Holdings in favor of the Banks and the Agent pursuant to
which Holdings guaranties to the Banks and the Agent the payment and performance
of the Obligations, substantially in the form of Exhibit D-2 attached hereto.
Parent Indebtedness. At any time, all Indebtedness of Holdings and its
Subsidiaries other than Indebtedness of any Subsidiary of Holdings with respect
to which Holdings is neither a co-obligor nor has any contingent obligation
thereunder or the sole recourse to Holdings is contractually limited to
Holdings' equity interest in the respective Subsidiary of Holdings (which may
not be the Borrower) which has directly incurred the respective Indebtedness.
Patent Assignments. The several Patent Assignments, dated or to be dated on
or prior to the Closing Date, made by the Borrower and its Subsidiaries in favor
of the Agent and in substantially the form of Exhibit E hereto.
PBGC. The Pension Benefit Guaranty Corporation created by (S)4002 of ERISA
and any successor entity or entities having similar responsibilities.
Perfection Certificates. The Perfection Certificates as defined in the in
the Security Agreements.
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Permitted Acquisitions. See 9.5.1 hereof.
Permitted Liens. Liens, security interests and other encumbrances permitted
by (S)9.2 hereof.
Person. Any individual, corporation, limited liability company,
partnership, limited liability partnership, trust, unincorporated association,
business, or other legal entity, and any government or any governmental agency
or political subdivision thereof.
Preferred Stock. As applied to the capital stock of any Person, means the
capital stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of capital stock of any other class of such Person.
Preferred Stock Exchange Indenture. The Preferred Stock Exchange Indenture
dated as of July 25, 1997 between Holdings and First Trust National Association,
as trustee, in the form delivered to the Agent on or prior to the Closing Date.
Preferred Stock Exchange Notes. The 13 1/4% Subordinated Preferred Stock
Exchange Notes due 2009 which may be issued by Holdings pursuant to the
Preferred Stock Exchange Indenture in exchange for the Senior Exchange Preferred
Stock.
Preferred Stock Units. The $25,000,000 aggregate amount of Preferred Stock
Units (as such term is defined in the Offering Circular) consisting of 25,000
shares of Senior Preferred Stock and 25,000 shares of common stock of Holdings.
Pro Forma Basis. For the purposes of determining compliance with (S)9.5.1
and for calculations contained in (S)9.5.1, (S)10 and for calculations involving
the Leverage Ratio for purposes of the Applicable Margin, (i) Consolidated Net
Income and EBITDA shall be calculated on a pro forma basis as if all businesses
acquired or sold, as the case may be, during the relevant period had been
acquired or sold, as the case may be, on the first day of such period and, for
the four fiscal quarters following the date hereof, the Reorganization occurred
on the first day of such period, (ii) Indebtedness and Consolidated Total
Interest Expense shall be calculated on a pro forma basis as if all Revolving
Credit Loans borrowed on the Closing Date and, without duplication, all
Indebtedness created, incurred, issued, assumed or repaid during the relevant
period in connection with any acquisition or sale or the Reorganization referred
to in clause (i) above had been created, incurred, issued, assumed or repaid on
the first day of such period; in each case after making the adjustments and
accruals required pursuant to Rule 11.02 under Regulation S-X under the
Securities Act of 1933, with such adjustments being made in a manner, and with
such other adjustments as may be approved by the Agent, and in making such pro
forma calculation, interest on any such Indebtedness at a variable rate shall be
calculated using the rate in effect at the time the calculation is made; and
(iii) Capital Expenditures shall be calculated on a pro forma basis to include
Capital Expenditures made during the relevant period of all businesses acquired
during the relevant period and to exclude Capital
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Expenditures incurred during the relevant period of all businesses sold during
the relevant period.
Public Offering. The public offering by Holdings of the Senior Notes, the
Discount Notes and the Units in exchange for the Senior Notes, the Discount
Notes and the Units issued on the Closing Date pursuant to the Offering pursuant
to a registration statement to be filed within sixty (60) days after the Closing
Date on Form S-1 (the "Registration Statement").
Rate Adjustment Period. See the definition of Applicable Margin.
Real Estate. All real property at any time owned or leased (as lessee or
sublessee) by the Borrower or any of its Subsidiaries.
Record. The grid attached to a Revolving Credit Note, or the continuation
of such grid, or any other similar record, including computer records,
maintained by any Bank with respect to any Revolving Credit Loan referred to in
such Revolving Credit Note.
Reference Bank. BkB.
Reference Period. A period of four consecutive fiscal quarters.
Reimbursement Obligation. The Borrower's obligation to reimburse the Agent
and the Banks on account of any drawing under any Letter of Credit as provided
in (S)4.2.
Restricted Payment. In relation to the Borrower and its Subsidiaries, any
(a) Distribution; (b) any payment by the Borrower on the Management Subscription
Notes or (c) payment by the Borrower or any of its Subsidiaries to Holdings or
to any other Affiliate of the Borrower or Holdings other than payments to
Affiliates (other than Holdings) for goods and services in the ordinary course
of business on terms equivalent to those obtainable in arms length transactions.
Reorganization. The series of related transactions occurring on or prior to
the Closing Date in which (a) Jordan Industries contributes approximately
$20,000,000 in cash to Holdings in exchange for Holdings' Preferred Stock; (b)
certain Jordan Affiliates and other Persons contribute approximately $2,000,000
in cash for approximately ninety percent (90%) of the common stock of Holdings;
(c) Holdings forms each of New Cambridge, New Dura-Line, New Johnson and New
Viewsonics; (d) each of New Cambridge, New Dura-Line, New Johnson and New
Viewsonics enter into the Cambridge Purchase Agreement, Dura-Line Purchase
Agreement, Johnson Purchase Agreement and Viewsonics Purchase Agreement,
respectively; (e) Holdings enters into the Stock Purchase Agreement with JII;
(f) Holdings consummates the transactions contemplated by the Senior Notes
Indenture, the Subordinated Notes Indenture and the Preferred Stock Offering,
and contributes a portion of the proceeds to each of New Cambridge, New Dura-
Line, New Johnson and New Viewsonics to enable each such Person to consummate
the acquisitions contemplated by the Cambridge Purchase Agreement, the Dura-Line
Purchase Agreement, the Johnson Purchase Agreement and the Viewsonics Purchase
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Agreement and uses a portion of the proceeds to consummate the acquisition
contemplated by the Stock Purchase Agreement with JII; and (g) Holdings
contributes 100% of the capital stock of each of New Cambridge, New Dura-Line,
New Johnson, New Viewsonics, Aim, Bond Holdings, Diversified, N.T. Holdings and
Old JTPG to the Borrower for all of the capital stock of the Borrower in a tax-
free transaction.
Reorganization Documents. All documents, instruments and agreements which
are to be entered into in accordance with the Reorganization, all in form and
substance satisfactory to the Agent and the Banks.
Restructuring Costs. Any non-recurring charges arising out of the
restructuring, consolidation, severance or discontinuance of the operations of
any entities or businesses (a "Restructuring") either alone or together with
such Person or any Subsidiary of such Person incurred within twelve (12) months
following the acquisition of such entity or business by such Person or any
Subsidiary of such Person in an aggregate amount not to exceed $750,000 for each
Restructuring, or greater if approved by the Majority Banks.
Revolving Credit Loan Maturity Date. July 31, 2002.
Revolving Credit Loans. Revolving credit loans made or to be made by the
Banks to the Borrower pursuant to (S)2 hereof.
Revolving Credit Notes. See (S)2.4 hereof.
Section 20 Subsidiary. A Subsidiary of the bank holding company controlling
any Bank, which Subsidiary has been granted authority by the Federal Reserve
Board to underwrite and deal in certain Ineligible Securities.
Security Agreements. The several Security Agreements, dated or to be dated
on or prior to the Closing Date, between each of the Borrower and its
Subsidiaries and the Agent, substantially in the form of Exhibits C-1 and C-2
hereto.
Security Documents. The Guaranty, the Security Agreements, the Stock Pledge
Agreements, the Mortgages, the Trademark Assignments, the Patent Assignments and
all other instruments and documents delivered pursuant thereto.
Senior Debt. As at any date of determination, with respect to the Borrower
and its Subsidiaries, an amount equal to the sum of (a) Indebtedness of the
Borrower and its Subsidiaries relating to the borrowing of money, other than
Indebtedness in respect of the Revolving Credit Loans and the Holding
Intercompany Loan, plus (b) Indebtedness of the Borrower and its Subsidiaries in
respect of Capitalized Leases, plus, without duplication, (c) all obligations of
the Borrower and its Subsidiaries in respect of guaranties, plus (d) the Total
Commitment in effect on such date without
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regard to any reductions in the Total Commitment pursuant to (S)3.2 hereof.
Senior Indenture. The Indenture dated as of July 25, 1997 between Holdings
and First Trust National Association, as trustee, and any such documents,
instruments or agreements issued in exchange pursuant to the Public Offering,
and each in the form delivered to the Agent on or prior to the Closing Date.
Senior Notes. The 9 7/8% Senior Notes due 2007 issued by Holdings in the
aggregate principal amount of $190,000,000 pursuant to the Senior Indenture and
any such documents, instruments or agreements issued in exchange therefor
pursuant to the Public Offering.
Senior Preferred Stock. The Senior Exchangeable Preferred Stock due 2009 of
Holdings issued pursuant to the Offering and any such documents, instruments or
agreements issued in exchange therefor pursuant to the Public Offering.
Services Agreements. Collectively, the New Subsidiary Advisory Agreements,
the New Subsidiary Consulting Agreement, the JI Properties Services Agreement
and the Tax Sharing Agreement.
Stockholders Agreement. The Stockholders Agreement dated as of July 25,
1997 among Holdings and certain stockholders party thereto and in the form
delivered to the Agent on or prior to the Closing Date.
Stock Pledge Agreements. Collectively, (a) the Stock Pledge Agreements,
dated or to be dated on or prior to the Closing Date, between certain
Subsidiaries and the Agent, and (b) the Stock Pledge Agreement, dated or to be
dated on or prior to the Closing Date, between the Borrower and the Agent, each
substantially in the form of Exhibit H hereto.
Stock Purchase Agreement. The Stock Purchase Agreement, dated on or prior
to the Closing Date, between Holdings and JII, pursuant to which Holdings is
purchasing substantially all of the capital stock owned by JII of each of Bond
Holdings, Aim, Diversified, N.T. Holdings and Old JTPG on the Closing Date, and
all other agreements, documents, instruments and certificates required to be
entered into or delivered pursuant thereto or in connection with such
acquisition, each in the form delivered to the Agent on the Closing Date.
Subordinated Debt. Indebtedness of Holdings or any of its Subsidiaries
evidenced by the Subordination Documents, that is expressly subordinated and
made junior to the payment and performance in full of the Obligations on terms
satisfactory to the Agent and the Banks.
Subordinated Notes. The Preferred Stock Exchange Notes and the Management
Subscription Notes.
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Subordination Documents. The Preferred Stock Exchange Notes, the Preferred
Stock Exchange Indenture and the Management Subscription Notes.
Subsidiary. Any corporation, association, trust, or other business entity
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding Voting Stock.
Subsidiary Guarantors. Each Guarantor other than Holdings.
Subsidiary Guaranty. The Guaranty, dated or to be dated on or prior to the
Closing Date, made by each Wholly-Owned Guaranty in favor of the Banks and the
Agent pursuant to which each Wholly-Owned Guarantor guaranties to the Banks and
the Agent the payment and performance of the Obligations, substantially in the
form of Exhibit D-3 attached hereto.
Survey. In relation to each Mortgaged Property, an instrument survey of
such Mortgaged Property which shall show the location of all buildings,
structures, easements and utility lines on such Mortgaged Property, shall be
sufficient to remove the survey exception from the Title Policy, shall show that
all buildings and structures are within the lot lines of such Mortgaged
Property, shall not show any material encroachments by others, shall show the
zoning district or districts in which such Mortgaged Property is located in a
flood hazard district as established by the Federal Emergency Management Agency
or any successor agency or is located in any flood plain, flood hazard or
wetland protection district established under federal, state or local law.
Surveyor Certificate. In relation to each Mortgaged Property for which a
Survey has been conducted, a certificate executed by the surveyor who prepared
such Survey dated as of a recent date and containing such information relating
to such Mortgaged Property as the Agent or the Title Insurance Company may
require, such certificate to be reasonably satisfactory to the Agent in form and
substance.
Tax Sharing Agreement. The Tax Sharing Agreement, dated as of July 25,
1997, by and among Jordan Industries and each of the Subsidiaries of Jordan
Industries listed on the signature pages thereto, in the form delivered to the
Banks and the Agent on or prior to the Closing Date.
Title Insurance Company. A nationally recognized title insurance company
satisfactory to the Agent.
Title Policy. In relation to each Mortgaged Property, an ALTA standard form
title insurance policy issued by the Title Insurance Company (with such
reinsurance or co-insurance as the Agent may reasonably require, any such
reinsurance to be with direct access endorsements) in such amount as may be
determined by the Agent insuring the priority of the Mortgage of such Mortgaged
Property and that the Borrower or one of its Subsidiaries holds marketable fee
simple or leasehold title, as the case may be, to such Mortgaged Property,
subject only to the encumbrances permitted by such Mortgage and
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which shall not contain exceptions for mechanics liens or persons in occupancy,
shall not insure over any matter except to the extent that any such affirmative
insurance is acceptable to the Agent in its sole discretion, and shall contain
such endorsements and affirmative insurance as the Agent in its discretion may
reasonably require, if available in the applicable jurisdiction, including but
not limited to (a) comprehensive endorsement, (b) variable rate of interest
endorsement, (c) usury endorsement, (d) revolving credit endorsement, (e) tie-in
endorsement, (f) doing business endorsement and (g) ALTA form 3.1 zoning
endorsement, provided, however, the requirements of clauses (a) and (g) above
shall not become effective until sixty (60) days after the Closing Date.
Total Commitment. The sum of the Commitments of the Banks, as in effect
from time to time.
Total Net Indebtedness. As of any date of determination, the difference
between (a) the sum of (i) all Indebtedness of the Borrower and its Subsidiaries
for borrowed money, purchase money Indebtedness, all obligations evidenced by
notes or bonds, and Indebtedness with respect to Capitalized Leases, determined
on a consolidated basis in accordance with generally accepted accounting
principles, provided, for purposes of calculating Indebtedness of the Borrower
under the Revolving Credit Loans for any period, the principal amount hereof
shall be deemed to be the daily average outstanding principal amount of
Revolving Credit Loans for such period, plus, without duplication, (ii) all
Parent Indebtedness of the following types: for borrowed money, purchase money
Indebtedness, obligations evidenced by notes or bonds, and Indebtedness with
respect to Capitalized Leases, determined on a consolidated basis in accordance
with generally accepted accounting principles and (b) the daily average amount
of unencumbered cash of the Borrower and its Subsidiaries for the immediately
preceding period of sixty (60) consecutive days.
Trademark Assignment. Collectively, the several Trademark Collateral
Security and Pledge Agreements dated or to be dated on or prior to the Closing
Date, made by the Borrower and its Subsidiaries in favor of the Agent and the
several Assignment of Trademarks and Service Marks (U.S.) delivered by the
Borrower and its Subsidiaries to the Agent in connection therewith, in each case
in substantially the form of Exhibit F hereto.
Transition Agreement. The Transition Agreement dated as of July 25, 1997
between Jordan Industries and Holdings, and in the form delivered to the Banks
and the Agent on or prior to the Closing Date.
Type. As to any Revolving Credit Loan, its nature as a Base Rate Loan or a
Eurodollar Rate Loan.
Uniform Customs. With respect to any Letter of Credit, the Uniform Customs
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto adopted by the
Agent in the ordinary course of its business as a letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.
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Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which the
Borrower does not reimburse the Agent and the Banks on the date specified in,
and in accordance with, (S)4.2 hereof.
Viewsonics. Viewsonics, Inc., a Delaware corporation.
Viewsonics Purchase Agreement. The Asset Purchase Agreement, dated or to be
dated on or prior to the Closing Date, between New Viewsonics and Viewsonics,
pursuant to which New Viewsonics is purchasing all of the assets of Viewsonics,
and assuming substantially all of its liabilities, on the Closing Date, and all
other agreements, documents, instruments and certificates required to be entered
into or delivered pursuant thereto or in connection with such acquisition, each
in the form delivered to the Agent on the Closing Date.
Voting Stock. Stock or similar equity interest of a Person pursuant to
which the holders thereof have, at the time of determination, the general voting
power under ordinary circumstances to vote for the election of directors (or
persons performing similar functions), managers, trustees or general partners of
such Person (irrespective of whether or not at the time any other class or
classes will have or might have voting power by reason of the happening of any
contingency).
Wholly-Owned Guarantors. Collectively, all of, and individually, each of,
the Subsidiaries of the Borrower that are not Non-Wholly Owned Guarantors.
Rules of Interpretation.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) the words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the
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Commonwealth of Massachusetts, have the meanings assigned to them therein,
with the term "instrument" being that defined under Article 9 of the
Uniform Commercial Code.
(h) Reference to a particular "(S)" refers to that section of this
Credit Agreement unless otherwise indicated.
(i) the words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.
SECTION II.
THE REVOLVING CREDIT FACILITY
-----------------------------
(S)2.1 Commitment to Lend.
Subject to the terms and conditions set forth in this Credit Agreement,
each of the Banks severally agrees to lend to the Borrower and the Borrower may
borrow, repay, and reborrow from time to time between the Closing Date and the
Revolving Credit Loan Maturity Date upon notice by the Borrower to the Agent
given in accordance with (S)2.6 hereof, such sums as are requested by the
Borrower up to a maximum aggregate amount outstanding (after giving effect to
all amounts requested) at any one time equal to such Bank's Commitment minus
such Bank's Commitment Percentage of the sum of the Maximum Drawing Amount and
all Unpaid Reimbursement Obligations, provided that the sum of the outstanding
amount of the Revolving Credit Loans (after giving effect to all amounts
requested) plus the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations shall not at any time exceed the Total Commitment. The Revolving
Credit Loans shall be made pro rata in accordance with each Bank's Commitment
Percentage. Each request for a Revolving Credit Loan hereunder shall constitute
a representation and warranty by the Borrower that the conditions set forth in
(S)11 and (S)12 hereof, in the case of the initial Revolving Credit Loans to be
made or converted on the Closing Date, and (S)12 hereof, in the case of all
other Revolving Credit Loans, have been satisfied on the date of such request.
(S)2.2 Commitment Fee
The Borrower agrees to pay to the Agent for the accounts of the Banks in
accordance with their respective Commitment Percentages a commitment fee
calculated at the rate of the Commitment Fee Rate per annum on the average daily
amount during each calendar quarter or portion thereof from the Closing Date to
the Revolving Credit Loan Maturity Date by which the Total Commitment minus the
sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations
exceeds the outstanding amount of Revolving Credit Loans during such calendar
quarter. The commitment fee shall be payable quarterly in arrears on the first
day of each calendar quarter for the immediately preceding calendar quarter
commencing on the first such date following the date hereof, with a final
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payment on the Revolving Credit Loan Maturity Date or any earlier date on which
the Commitments shall terminate.
(S)2.3 Reduction of Total Commitment
The Borrower shall have the right at any time and from time to time upon
three (3) Business Days prior written notice to the Agent to reduce by $500,000
or an integral multiple of $100,000 in excess thereof the unborrowed portion of
the Total Commitment or terminate entirely the Total Commitment, whereupon the
Commitments of the Banks shall be reduced pro rata in accordance with their
respective Commitment Percentages of the amount specified in such notice or, as
the case may be, terminated. Promptly after receiving any notice of the Borrower
delivered pursuant to this (S)2.3, the Agent will notify the Banks of the
substance thereof. Upon the effective date of any such reduction or termination,
the Borrower shall pay to the Agent for the respective accounts of the Banks the
full amount of any commitment fee then accrued on the amount of the reduction.
No reduction or termination of the Commitments may be reinstated.
(S)2.4 The Revolving Credit Notes
The Revolving Credit Loans shall be evidenced by separate promissory notes
of the Borrower in substantially the form of Exhibit A attached hereto (each a
"Revolving Credit Note"), dated as of the Closing Date (or other such date on
which a Bank may become a party hereto in accordance with (S)19 hereof) and
completed with appropriate insertions. One Revolving Credit Note shall be
payable to the order of each Bank in a principal amount equal to such Bank's
Commitment. The Borrower irrevocably authorizes each Bank to make or cause to be
made, at or about the time of the Drawdown Date of any Revolving Credit Loan or
at the time of receipt of any payment of principal on such Bank's Revolving
Credit Note, an appropriate notation on such Bank's Record reflecting the making
of such Revolving Credit Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Revolving Credit Loans set forth on such
Bank's Record shall be prima facie evidence of the principal amount thereof
owing and unpaid to such Bank, but the failure to record, or any error in so
recording, any such amount on such Bank's Record shall not limit or otherwise
affect the obligations of the Borrower hereunder or under any Revolving Credit
Note to make payments of principal of or interest on any Revolving Credit Note
when due.
(S)2.5 Interest on Revolving Credit Loans
Except as otherwise provided in (S)5.11 hereof,
(a) Each Base Rate Loan shall bear interest for the period commencing
with the Drawdown Date thereof and ending on the last day of the Interest Period
with respect thereto at the rate per annum equal to the Base Rate plus the
Applicable Margin with respect to Base Rate Loans as in effect from time to
time.
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(b) Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate per annum equal to the
Eurodollar Rate for such Interest Period plus the Applicable Margin with
respect to Eurodollar Rate Loans as in effect from time to time.
(c) the Borrower promises to pay interest on each Revolving Credit
Loan in arrears on each Interest Payment Date with respect thereto.
(S)2.6 Requests for Revolving Credit Loans
The Borrower shall give to the Agent written notice in the form of Exhibit
B attached hereto (or telephonic notice confirmed in a writing in the form of
Exhibit B attached hereto) of each Revolving Credit Loan requested hereunder (a
"Loan Request") no later than 11:00 a.m. (Boston time) (a) one (1) Business Day
prior to the proposed Drawdown Date of any Base Rate Loan and (b) three (3)
Eurodollar Business Days prior to the proposed Drawdown Date of any Eurodollar
Rate Loan, provided, however, the Borrower shall not request any Eurodollar Rate
Loan with an Interest Period longer than one (1) month until the date which is
the earlier of (A) ninety (90) days following the Closing Date and (B) the date
on which the Agent notifies the Borrower in writing that syndication has been
completed. Each such notice shall specify (i) the principal amount of the
Revolving Credit Loan requested, (ii) the proposed Drawdown Date of such
Revolving Credit Loan, (iii) the Interest Period for such Revolving Credit Loan
and (iv) the Type of such Revolving Credit Loan. Promptly upon receipt of any
such notice, the Agent shall notify each of the Banks thereof. Each Loan Request
shall be irrevocable and binding on the Borrower and shall obligate the Borrower
to accept the Revolving Credit Loan requested from the Banks on the proposed
Drawdown Date. Each Loan Request for a Base Rate Loan shall be in a minimum
aggregate amount of $500,000 or a larger integral multiple of $100,000, and each
Loan Request for a Eurodollar Rate Loan shall be in a minimum aggregate amount
of $1,000,000 or a larger integral multiple of $100,000.
(S)2.7 Conversion Options
(S)2.7.1 Conversion to Different Type of Revolving Credit Loan
-----------------------------------------------------
The Borrower may elect from time to time to convert any outstanding
Revolving Credit Loan to a Revolving Credit Loan of another Type, provided
that (a) with respect to any such conversion of a Eurodollar Rate Loan to a
Base Rate Loan, the Borrower shall give the Agent at least one (1) Business
Day's prior written notice of such election; (b) with respect to any such
conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrower
shall give the Agent at least three (3) Eurodollar Business Days prior
written notice of such election; (c) with respect to any such conversion of
a Eurodollar Rate Loan into a Base Rate Loan, such conversion shall only be
made on the last day of the Interest Period with respect thereto; (d) no
Base Rate Loan may be converted into a Eurodollar Rate Loan when any
Default or Event of Default has occurred and is continuing; (e) no Base
Rate Loan may be converted into a
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Eurodollar Rate Loan with, an Interest Period of longer than one (1) month
until the date which is the earlier of (i) ninety (90) days after the
Closing Date and (ii) the date on which the Agent notifies the Borrower in
writing that syndication has been completed; and (f) no more than eight (8)
Eurodollar Rate Loans having different Interest Periods may be outstanding
at any time. On the date on which such conversion is being made each Bank
shall take such action as is necessary to transfer its Commitment
Percentage of such Revolving Credit Loans to its Domestic Lending Office or
its Eurodollar Lending Office, as the case may be. All or any part of
outstanding Revolving Credit Loans of any Type may be converted into a
Revolving Credit Loan of another Type as provided herein, provided that any
partial conversion into a Base Rate Loan shall be in an aggregate principal
amount of $500,000 or a larger integral multiple of $100,000 and any
partial conversion into a Eurodollar Rate Loan shall be in an aggregate
principal amount of $1,000,000 or a larger integral multiple of $100,000 in
excess thereof. Each Conversion Request relating to the conversion of a
Base Rate Loan to a Eurodollar Rate Loan shall be irrevocable by the
Borrower.
(S)2.7.2 Continuation of Type of Revolving Credit Loan
---------------------------------------------
Any Revolving Credit Loan of any Type may be continued as a Revolving
Credit Loan of the same Type upon the expiration of an Interest Period with
respect thereto by compliance by the Borrower with the notice provisions
contained in (S)2.7.1 hereof; provided that no Eurodollar Rate Loan may be
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on the
last day of the first Interest Period relating thereto ending during the
continuance of any Default or Event of Default of which officers of the
Agent active upon the Borrower's account have actual knowledge. In the
event that the Borrower fails to provide any such notice with respect to
the continuation of any Eurodollar Rate Loan as such, then such Eurodollar
Rate Loan shall be automatically converted to a Base Rate Loan on the last
day of the Interest Period relating thereto. The Agent shall notify the
Banks promptly when any such automatic conversion contemplated by this
(S)2.7 is scheduled to occur.
(S)2.7.3 Eurodollar Rate Loans
---------------------
Any conversion to or from Eurodollar Rate Loans shall be in such
amounts and be made pursuant to such elections so that, after giving effect
thereto, the aggregate principal amount of all Eurodollar Rate Loans having
the same Interest Period shall not be less than $1,000,000 or a larger
integral multiple of $100,000 in excess thereof.
(S)2.8 Funds for Revolving Credit Loans
--------------------------------
(S)2.8.1 Funding Procedures
------------------
Not later than 1:00 p.m. (Boston time) on the proposed Drawdown Date of any
Revolving
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Credit Loans, each of the Banks will make available to the Agent, at the Agent's
Head Office, in immediately available funds, the amount of such Bank's
Commitment Percentage of the amount of the requested Revolving Credit Loans.
Upon receipt from each Bank of such amount, and upon receipt of the documents
required by (S)11 and (S)12 hereof and the satisfaction of the other conditions
set forth therein, to the extent applicable, the Agent will make available to
the Borrower the aggregate amount of such Revolving Credit Loans made available
to the Agent by the Banks. The failure or refusal of any Bank to make available
to the Agent at the aforesaid time and place on any Drawdown Date the amount of
its Commitment Percentage of the requested Revolving Credit Loans shall not
relieve any other Bank from its several obligation hereunder to make available
to the Agent the amount of such other Bank's Commitment Percentage of any
requested Revolving Credit Loans.
(S)2.8.2 Advances by Agent
The Agent may, unless notified to the contrary by any Bank prior to a
Drawdown Date, assume that such Bank has made available to the Agent on such
Drawdown Date the amount of such Bank's Commitment Percentage of the Revolving
Credit Loans to be made on such Drawdown Date, and the Agent may (but it shall
not be required to), in reliance upon such assumption, make available to the
Borrower a corresponding amount. If any Bank makes available to the Agent such
amount on a date after such Drawdown Date, such Bank shall pay to the Agent on
demand an amount equal to the product of (a) the average computed for the period
referred to in clause (c) below, of the weighted average interest rate paid by
the Agent for federal funds acquired by the Agent during each day included in
such period, times (b) the amount of such Bank's Commitment Percentage of such
Revolving Credit Loans, times (c) a fraction, the numerator of which is the
number of days that elapse from and including such Drawdown Date (or, if the
Drawdown Date occurs prior to twenty-four hours after such Bank has received
notice of a Loan Request, twenty-four hours after receipt of such notice of a
Loan Request) to the date on which the amount of such Bank's Commitment
Percentage of such Revolving Credit Loans shall become immediately available to
the Agent, and the denominator of which is 360. A statement of the Agent
submitted to such Bank with respect to any amounts owing under this paragraph
shall be prima facie evidence of the amount due and owing to the Agent by such
Bank. If the amount of such Bank's Commitment Percentage of such Revolving
Credit Loans is not made available to the Agent by such Bank within three (3)
Business Days following such Drawdown Date, the Agent shall be entitled to
recover such amount from the Borrower on demand, with interest thereon at the
rate per annum applicable to the Revolving Credit Loans made on such Drawdown
Date.
SECTION III
REPAYMENT OF THE REVOLVING CREDIT LOANS
---------------------------------------
(S)3.1 Maturity
The Borrower promises to pay on the Revolving Credit Loan Maturity Date,
and there shall become absolutely due and payable on the Revolving Credit Loan
Maturity Date, all of the Revolving Credit Loans outstanding on such date,
together with any and all accrued and unpaid interest thereon
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and the Total Commitment shall be terminated in its entirety.
(S)3.2 Mandatory Repayments of Revolving Credit Loans
If at any time the sum of the outstanding amount of the Revolving Credit
Loans, the Maximum Drawing Amount and all Unpaid Reimbursement Obligations
exceeds the Total Commitment, then the Borrower shall immediately pay the amount
of such excess to the Agent for the respective accounts of the Banks for
application: first, to any Unpaid Reimbursement Obligations; second, to the
Revolving Credit Loans; and third, to provide to the Agent cash collateral for
Reimbursement Obligations as contemplated by (S)(S)4.2(b) and (c) hereof. Each
payment of any Unpaid Reimbursement Obligations or prepayment of Revolving
Credit Loans shall be allocated among the Banks, in proportion, as nearly as
practicable, to each Reimbursement Obligation or (as the case may be) the
respective unpaid principal amount of each Bank's Revolving Credit Note, with
adjustments to the extent practicable to equalize any prior payments or
repayments not exactly in proportion. In addition, in the event the Borrower or
any of its Subsidiaries receives any cash proceeds (a) from the sale or other
disposition of assets permitted by (S)9.5, which cash proceeds are required by
(S)9.5 to be repaid to the Agent hereunder or (b) from the sale of any of the
capital stock of the Borrower or any of its Subsidiaries after the Closing Date
or any other equity issuances by the Borrower or any of its Subsidiaries after
the Closing Date, in excess of $5,000,000, the Borrower shall immediately repay
the outstanding Revolving Credit Loans in an amount equal to 100% of such net
cash proceeds, and, if the ratio of Senior Debt to EBITDA equals or exceeds
2.75:1.00 (as reflected in a certificate of the Borrower delivered to the Agent
on the date such net cash proceeds are received), the Total Commitment shall be
automatically reduced upon such receipt by an aggregate amount equal to 75% of
such net cash proceeds. Any such reduction of the Total Commitment pursuant to
this (S)3.2 shall be reinstated on the first day of the month immediately
following the month in which a Compliance Certificate is delivered by the
Borrower which reflects that the ratio of Senior Debt to EBITDA is less than
2.75:1.00 as at such date of determination, provided that no Default or Event of
Default shall have occurred and be continuing.
(S)3.3 Repayments of Revolving Credit Loans
The Borrower shall have the right, at its election, to repay the
outstanding amount of the Revolving Credit Loans, as a whole or in part, at any
time without penalty or premium, provided that any prepayment of the outstanding
amount of any Eurodollar Rate Loans pursuant to this (S)3.3 may be made only on
the last day of the Interest Period relating thereto. The Borrower shall give
the Agent, no later than 11:00 a.m. (Boston time) at least one (1) Business Day
prior written notice of any proposed prepayment pursuant to this (S)3.3 of Base
Rate Loans, and three (3) Eurodollar Business Days notice of any proposed
prepayment pursuant to this (S)3.3 of Eurodollar Rate Loans, in each case
specifying the proposed date of prepayment of Revolving Credit Loans and the
principal amount to be prepaid. Each such partial prepayment of the Revolving
Credit Loans shall be applied, in the absence of instruction by the Borrower,
first to the principal of Base Rate Loans and then to the
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principal of Eurodollar Rate Loans. Each partial prepayment shall be allocated
among the Banks, in proportion, as nearly as practicable, to the respective
unpaid principal amount of each Bank's Revolving Credit Note, with adjustments
to the extent practicable to equalize any prior repayments not exactly in
proportion.
SECTION IV.
LETTER OF CREDIT
----------------
(S)4.1 Letter of Credit Commitments
(S)4.1.1 Commitment to Issue Letters of Credit
Subject to the terms and conditions hereof and the execution and
delivery by the Borrower of a letter of credit application on the Agent's
customary form (a "Letter of Credit Application"), the Agent, on behalf of
the Banks and in reliance upon the agreement of the Banks set forth in
(S)4.1.4 hereof and upon the representations and warranties of the
Borrower contained herein, agrees, in its individual capacity, to issue,
extend and renew for the account of the Borrower one or more standby or
documentary letters of credit (individually, a "Letter of Credit"), in
such form as may be requested from time to time by the Borrower and agreed
to by the Agent; provided, however, that, after giving effect to such
request, (a) the sum of the Maximum Drawing Amount of all Letters of
Credit plus all Unpaid Reimbursement Obligations does not exceed
$15,000,000 and (b) the sum of (i) the Maximum Drawing Amount of all
Letters of Credit, (ii) all Unpaid Reimbursement Obligations, and (iii)
the amount of all Revolving Credit Loans outstanding shall not exceed the
Total Commitment.
(S)4.1.2 Letter of Credit Applications
Each Letter of Credit Application shall be completed to the
satisfaction of the Agent. In the event that any provision of any Letter of
Credit Application shall be inconsistent with any provision of this Credit
Agreement, then the provisions of this Credit Agreement shall, to the
extent of any such inconsistency, govern.
(S)4.1.3 Terms of Letters of Credit
Each Letter of Credit issued, extended or renewed hereunder shall,
among other things, (a) provide for the payment of sight drafts for honor
thereunder when presented in accordance with the terms thereof and when
accompanied by the documents described therein, and (b) have an expiry date
no later than the date which is fourteen (14) days (or, if the Letter of
Credit is confirmed by a confirming bank or otherwise provides for one or
more nominated persons, forty-five (45) days) prior to the Revolving Credit
Loan Maturity Date. Each Letter of Credit so issued, extended or renewed
shall be subject to the Uniform
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Customs.
(S)4.1.4 Reimbursement Obligations of Banks
Each Bank severally agrees that it shall be absolutely liable, without
regard to the occurrence of any Default or Event of Default or any other
condition precedent whatsoever, to the extent of such Bank's Commitment
Percentage, to reimburse the Agent on demand for the amount of each draft
paid by the Agent under each Letter of Credit to the extent that such
amount is not reimbursed by the Borrower pursuant to (S)4.2 hereof (such
agreement for a Bank being called herein the "Letter of Credit
Participation" of such Bank).
(S)4.1.5 Participations of Banks
Each such payment made by a Bank shall be treated as the purchase by
such Bank of a participating interest in the Borrower's Reimbursement
Obligation under (S)4.2 hereof in an amount equal to such payment. Each
Bank shall share in accordance with its participating interest in any
interest which accrues pursuant to (S)4.2 hereof.
(S)4.2 Reimbursement Obligation of the Borrower
In order to induce the Agent to issue, extend and renew each Letter of
Credit and the Banks to participate therein, the Borrower hereby agrees to
reimburse or pay to the Agent, for the account of the Agent or (as the case may
be) the Banks, with respect to each Letter of Credit issued, extended or renewed
by the Agent hereunder,
(a) except as otherwise expressly provided in (S)(S)4.2(b) and (c)
hereof, on each date that any draft presented under such Letter of Credit
is honored by the Agent, or the Agent otherwise makes a payment with
respect thereto, (i) the amount paid by the Agent under or with respect to
such Letter of Credit, and (ii) the amount of any taxes, fees, charges or
other costs and expenses whatsoever incurred by the Agent or any Bank in
connection with any payment made by the Agent or any Bank under, or with
respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total Commitment
to an amount less than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by the Agent for the benefit of the
Banks and the Agent as cash collateral for all Reimbursement Obligations,
and
(c) upon the termination of the Total Commitment, or the acceleration
of the Reimbursement Obligations with respect to all Letters of Credit in
accordance with (S)13 hereof, an amount equal to the then Maximum Drawing
Amount on all Letters of Credit,
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which amount shall be held by the Agent for the benefit of the Banks and
the Agent as cash collateral for all Reimbursement Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid by
the Borrower under this (S)4.2 at any time from the date such amounts become due
and payable (whether as stated in this (S)4.2, by acceleration or otherwise)
until payment in full (whether before or after judgment) shall be payable to the
Agent on demand at the rate specified in (S)5.11 for overdue principal on the
Revolving Credit Loans.
(S)4.3 Letter of Credit Payments
If any draft shall be presented or other demand for payment shall be made
under any Letter of Credit, the Agent shall notify the Borrower of the date and
amount of the draft presented or demand for payment and of the date and time
when it expects to pay such draft or honor such demand for payment. If the
Borrower fails to reimburse the Agent as provided in (S)4.2 hereof on or before
the date that such draft is paid or other payment is made by the Agent, the
Agent may at any time thereafter notify the Banks of the amount of any such
Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston time) on the
Business Day next following the receipt of such notice, each Bank shall make
available to the Agent, at the Agent's Head Office, in immediately available
funds, such Bank's Commitment Percentage of such Unpaid Reimbursement
Obligation, together with an amount equal to the product of (a) the average,
computed for the period referred to in clause (c) below, of the weighted average
interest rate paid by the Agent for federal funds acquired by the Agent during
each day included in such period, times (b) the amount equal to such Bank's
Commitment Percentage of such Unpaid Reimbursement Obligation, times (c) a
fraction, the numerator of which is the number of days that elapse from and
including the date the Agent paid the draft presented for honor or otherwise
made payment to the date on which such Bank's Commitment Percentage of such
Unpaid Reimbursement Obligation shall become immediately available to the Agent,
and the denominator of which is 360. The responsibility of the Agent to the
Borrower and the Banks shall be only to determine that the documents (including
each draft) delivered under each Letter of Credit in connection with such
presentment shall be in conformity in all material respects with such Letter of
Credit.
(S)4.4 Obligations Absolute
The Borrower's obligations under this (S)4 shall be absolute and
unconditional under any and all circumstances and irrespective of the occurrence
of any Default or Event of Default or any condition precedent whatsoever or any
setoff, counterclaim or defense to payment which the Borrower may have or have
had against the Agent, any Bank or any beneficiary of a Letter of Credit. The
Borrower further agrees with the Agent and the Banks that the Agent and the
Banks shall not be responsible for, and the Borrower's Reimbursement Obligations
under (S)4.2 hereof shall not be affected by, among other things, the validity
or genuineness of documents or of any
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endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged, or any dispute between or among
the Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of any
Letter of Credit or any such transferee. The Agent and the Banks shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit. The Borrower agrees that any action taken or omitted by
the Agent or any Bank under or in connection with each Letter of Credit and the
related drafts and documents, if done in good faith, shall be binding upon the
Borrower and shall not result in any liability on the part of the Agent or any
Bank to the Borrower.
(S)4.5 Reliance by Issuer
To the extent not inconsistent with (S)4.4 hereof, the Agent shall be
entitled to rely, and shall be fully protected in relying upon, any Letter of
Credit, draft, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message, statement,
order or other document believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Agent. The Agent shall be fully justified in failing or refusing to take
any action under this Credit Agreement unless it shall first have received such
advice or concurrence of the Majority Banks as it reasonably deems appropriate
or it shall first be indemnified to its reasonable satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Credit
Agreement in accordance with a request of the Majority Banks, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
the Banks and all future holders of the Revolving Credit Notes or of a Letter of
Credit Participation.
(S)4.6 Letter of Credit Fee
The Borrower shall pay to the Agent a fee (in each case, a "Letter of
Credit Fee") (a) in respect of each standby Letter of Credit issued pursuant to
this Credit Agreement, calculated at the rate of the Applicable Margin per annum
on the face amount of each such Letter of Credit, and the Agent shall, in turn,
remit to each Bank (other than the Agent) its pro rata portion of such Letter of
Credit Fee calculated at a rate of the Applicable Margin minus 1/4% per annum on
the face amount of each such Letter of Credit, with the Agent retaining such
1/4% as a fronting fee and (b) in respect of each documentary Letter of Credit
issued pursuant to this Credit Agreement, calculated at the rate of the
Applicable Margin minus 1/2% per annum on the face amount of each such Letter of
Credit, and the Agent shall, in turn, remit to each Bank (other than the Agent)
its pro rata portion of such Letter of Credit Fee calculated at a rate of the
Applicable Margin minus 3/4% per annum on the face amount of each such Letter of
Credit, with the Agent retaining such 1/4% as a fronting fee. The Letter of
Credit Fee for each Letter of Credit shall be payable
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quarterly in arrears on the last day of each calendar quarter. In addition, the
Borrower shall pay to the Agent on the date of any issuance, extension, renewal
or amendment of any Letter of Credit, for its own account, the Agent's standard
issuance, processing, negotiation, amendment and administrative fees, determined
in accordance with customary fees and charges for similar facilities.
SECTION V.
CERTAIN GENERAL PROVISIONS
--------------------------
(S)5.1 Closing Fees.
------------
The Borrower agrees to pay to the Agent on the Closing Date closing fees as
set forth in the Fee Letter.
(S)5.2 Agent's Fee
-----------
The Borrower shall pay to the Agent, an Agent's fee (the "Agent's Fee") as
provided in the Fee Letter.
(S)5.3 Funds for Payments
------------------
(S)5.3.1 Payments to Agent
-----------------
All payments of principal, interest, Reimbursement Obligations, commitment
fees, Letter of Credit Fees, Agent's Fees and any other amounts due hereunder or
under any of the other Loan Documents shall be made to the Agent, for the
respective accounts of the Banks and the Agent, at the Agent's Head Office or at
such other location in the Boston, Massachusetts, area that the Agent may from
time to time designate, in each case in immediately available funds.
(S)5.3.2 No Offset, Etc.
---------------
Except as otherwise provided in (S)5.7 hereof, all payments by the Borrower
hereunder and under any of the other Loan Documents shall be made without setoff
or counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings, compulsory
loans, restrictions or conditions of any nature now or hereafter imposed or
levied by any jurisdiction or any political subdivision thereof or taxing or
other authority therein unless the Borrower is compelled by law to make such
deduction or withholding. Except as otherwise provided in (S)5.7 hereof, if any
such obligation is imposed upon the Borrower with respect to any amount payable
by it hereunder or under any of the other Loan Documents, the Borrower will pay
to the Agent, for the account of the Banks or (as the case may be) the Agent, on
the date on which such amount is due and payable hereunder or under such other
Loan Document, such additional amount in Dollars as shall be
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necessary to enable the Banks or the Agent to receive the same net amount
which the Banks or the Agent would have received on such due date had no
such obligation been imposed upon the Borrower. The Borrower will deliver
promptly to the Agent certificates or other valid vouchers for all taxes
or other charges deducted from or paid with respect to payments made by
the Borrower hereunder or under such other Loan Document.
(S)5.4 Computations
------------
All computations of interest on the Revolving Credit Loans and of
commitment fees, Letter of Credit Fees or other fees shall be based on a 360-day
year and paid for the actual number of days elapsed. Except as otherwise
provided in the definition of the term "Interest Period" with respect to
Eurodollar Rate Loans, whenever a payment hereunder or under any of the other
Loan Documents becomes due on a day that is not a Business Day, the due date for
such payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension. The outstanding amount of the Revolving
Credit Loans as reflected on the Records from time to time shall be considered
correct and binding on the Borrower unless within sixty (60) Business Days after
receipt of any notice by the Agent or any of the Banks of such outstanding
amount, the Agent or such Bank shall notify the Borrower to the contrary.
(S)5.5 Inability to Determine Eurodollar Rate
--------------------------------------
In the event, prior to the commencement of any Interest Period relating to
any Eurodollar Rate Loan, the Agent shall determine or be notified by the
Majority Banks that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate that would otherwise determine the rate of
interest to be applicable to any Eurodollar Rate Loan during any Interest
Period, the Agent shall forthwith give notice of such determination (which shall
be conclusive and binding on the Borrower and the Banks) to the Borrower and the
Banks. In such event (a) any Loan Request or Conversion Request with respect to
Eurodollar Rate Loans shall be automatically withdrawn and shall be deemed a
request for Base Rate Loans, (b) each Eurodollar Rate Loan will automatically,
on the last day of the then current Interest Period relating thereto, become a
Base Rate Loan, and (c) the obligations of the Banks to make Eurodollar Rate
Loans shall be suspended until the Agent or the Majority Banks determines that
the circumstances giving rise to such suspension no longer exist, whereupon the
Agent or, as the case may be, the Agent upon the instruction of the Majority
Banks, shall so notify the Borrower and the Banks.
(S)5.6 Illegality
----------
Notwithstanding any other provisions herein, if any present or future law,
regulation, treaty or directive or the interpretation or application thereof
shall make it unlawful for any Bank to make or maintain Eurodollar Rate Loans,
such Bank shall forthwith give notice of such circumstances to the Borrower and
the other Banks and thereupon (a) the commitment of such Bank to make Eurodollar
Rate Loans or convert Revolving Credit Loans of another Type to Eurodollar Rate
Loans shall
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forthwith be suspended and (b) such Bank's Revolving Credit Loans then
outstanding as Eurodollar Rate Loans, if any, shall be converted automatically
to Base Rate Loans on the last day of each Interest Period applicable to such
Eurodollar Rate Loans or within such earlier period as may be required by law.
The Borrower hereby agrees promptly to pay the Agent for the account of such
Bank, upon demand by such Bank, any additional amounts necessary to compensate
such Bank for any costs incurred by such Bank in making any conversion in
accordance with this (S)5.6, including any interest or fees payable by such Bank
to lenders of funds obtained by it in order to make or maintain its Eurodollar
Loans hereunder.
(S)5.7 Additional Costs, Etc
---------------------
If any present or future applicable law, which expression, as used herein,
includes statutes, rules and regulations thereunder and interpretations thereof
by any competent court or by any governmental or other regulatory body or
official charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Bank or the Agent by any central
bank or other fiscal, monetary or other authority (whether or not having the
force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Credit Agreement, the other Loan Documents, any Letters of Credit, such
Bank's Commitment or the Revolving Credit Loans (other than taxes based
upon or measured by the income or profits of such Bank or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any Revolving Credit Loans or any other amounts payable to
any Bank or the Agent under this Credit Agreement or any of the other Loan
Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or letters of credit
issued by, or commitments of an office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Revolving Credit Loans, such Bank's
Commitment, or any class of loans, letters of credit or commitments of
which any of the Revolving Credit Loans, Letters of Credit or such Bank's
Commitment forms a part,
and the result of any of the foregoing is:
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(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining any of the Revolving
Credit Loans or such Bank's Commitment or any Letter of Credit, or
(ii) to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to such Bank or the Agent hereunder
on account of such Bank's Commitment, any Letter of Credit or any of
the Revolving Credit Loans, or
(iii) to require such Bank or the Agent to make any payment or to
forego any interest or Reimbursement Obligation or other sum payable
hereunder, the amount of which payment or foregone interest or
Reimbursement Obligation or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by such Bank or the
Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as will be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or foregone interest or Reimbursement
Obligation or other sum. On or before the date it becomes a party to this Credit
Agreement and from time to time thereafter upon any change in status rendering
any certificate or document previously delivered pursuant to this (S)5.7 invalid
or inaccurate, each Bank that is organized under the laws of a jurisdiction
outside the United States shall (but, with respect to any renewal or change in
status, if legally able to do so) deliver to the Borrower such certificates,
documents or other evidence, as required by the Code or Treasury Regulations
issued pursuant thereto, including Internal Revenue Service Form 1001 or Form
4224 and any other certificate or statement of exemption required by Treasury
Regulation Section 1.1441-1, 1.1441-4 or 1.1441-6(c) or any subsequent version
thereof or subsequent version thereto, properly completed and duly executed by
such Bank establishing that such payment is (a) not subject to United States
Federal withholding tax under the Code because such payment is effectively
connected with conduct by such Bank of a trade or business in the United States
or (b) totally exempt from United States Federal withholding tax, or (other than
in the case of such Bank on the date such Bank became a party to this Credit
Agreement), subject to a reduced rate of such tax under a provision of an
applicable tax treaty. The Borrower shall not be required to pay any additional
amounts to any Bank pursuant to (S)5.3 or this (S)5.7 to the extent that the
obligation to pay such additional amounts would not have arisen but for a
failure by such Bank to comply with the provisions of the preceding sentence.
Any Bank claiming any additional amounts payable pursuant to (S)5.3 or this
(S)5.7 shall use reasonable efforts (consistent with legal and regulatory
restrictions) to file any certificate or document reasonably requested in
writing by the Borrower or to change the jurisdiction of its applicable lending
certificate office if the making of such a filing or change would avoid the need
for or substantially reduce the amount of any such additional amounts which may
thereafter accrue and would not, in the sole and absolute determination of such
Bank be otherwise disadvantageous to such Bank, which
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determination by such Bank shall be conclusive.
If a Bank or the Agent shall become aware that it is entitled to receive a
refund in respect of taxes as to which it has been indemnified by the Borrower
pursuant to (S)5.3 or this (S)5.7, it shall promptly notify the Borrower of the
availability of such refund and shall, within thirty (30) days after receipt of
a request by the Borrower, apply for such refund at the Borrower's expense. If
any Bank or the Agent, as applicable, receives a refund in respect of any taxes
to which it has been indemnified by the Borrower pursuant to (S)5.3 or this
(S)5.7, it shall promptly repay such refund to the Borrower (to the extent of
amounts that have been paid by the Borrower under (S)5.3 or this (S)5.7 with
respect to such refund), net of all out-of-pocket expenses (including taxes
imposed with respect to such refund) of such Bank or the Agent, as applicable,
and without interest; provided, however, that the Borrower, upon the request of
such Bank or the Agent, as applicable, agrees to return such refund (plus
penalties, interest or other charges) to such Bank or the Agent in the event
such Bank or the Agent is required to repay such refund.
(S)5.8 Capital Adequacy
----------------
If after the date hereof any Bank or the Agent determines that (a) the
adoption of or change after the Closing Date in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (b) compliance by such Bank or the
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's Commitment with respect to any
Revolving Credit Loans or the Revolving Credit Loans to a level below that which
such Bank or the Agent could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's or the Agent's then existing
policies with respect to capital adequacy and assuming full utilization of such
entity's capital) by any amount deemed by such Bank or (as the case may be) the
Agent to be material, then such Bank or the Agent may notify the Borrower of
such fact. To the extent that the amount of such reduction in the return on
capital is not reflected in the Base Rate, the Borrower and such Bank shall
thereafter attempt to negotiate in good faith, within thirty (30) days of the
day on which the Borrower receives such notice, an adjustment payable hereunder
that will adequately compensate such Bank in light of these circumstances. If
the Borrower and such Bank are unable to agree to such adjustment within thirty
(30) days of the date on which the Borrower receives such notice, then
commencing on the date of such notice (but not earlier than the effective date
of any such increased capital requirement), the fees payable hereunder shall
increase by an amount that will, in such Bank's reasonable determination,
provide adequate compensation. Each Bank shall allocate such cost increases
among its customers in good faith and on an equitable basis.
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(S)5.9 Certificate
A certificate setting forth any additional amounts payable pursuant to
(S)5.7 or (S)5.8 hereof and a brief explanation of such amounts which are due,
submitted by any Bank or the Agent to the Borrower, shall be conclusive, absent
manifest error, that such amounts are due and owing.
(S)5.10 Indemnity
The Borrower agrees to indemnify each Bank and to hold each Bank harmless
from and against any loss, cost or expense (including loss of anticipated
profits) that such Bank may sustain or incur as a consequence of (a) default by
the Borrower in payment of the principal amount of or any interest on any
Eurodollar Rate Loans as and when due and payable, including any such loss or
expense arising from interest or fees payable by such Bank to lenders of funds
obtained by it in order to maintain its Eurodollar Rate Loans, (b) default by
the Borrower in making a borrowing or conversion after the Borrower has given
(or is deemed to have given) a Loan Request or a Conversion Request relating
thereto in accordance with (S)(S)2.6 or 2.7 hereof or (c) the making of any
payment of a Eurodollar Rate Loan or the making of any conversion of any such
Revolving Credit Loan to a Base Rate Loan on a day that is not the last day of
the applicable Interest Period with respect thereto, including interest or fees
payable by such Bank to lenders of funds obtained by it in order to maintain any
such Revolving Credit Loans.
(S)5.11 Interest on Overdue Amounts
Overdue principal and (to the extent permitted by applicable law) interest
on the Revolving Credit Loans and all other overdue amounts payable hereunder or
under any of the other Loan Documents shall bear interest compounded monthly and
payable on demand at a rate per annum equal to two percent (2%) above the
highest interest rate applicable to Revolving Credit Loans pursuant to (S)2.5
until such amount shall be paid in full (after as well as before judgment).
(S)5.12 Replacement Banks
Within thirty (30) days after (a) any Bank has demanded compensation from
the Borrower pursuant to (S)(S)5.7 or 5.8 hereof, or (b) there shall have
occurred a change in law with respect to any Bank as a consequence of which it
shall have become unlawful for such Bank to make a Eurodollar Rate Loan on any
Drawdown Date, as described in (S)5.6 hereof or illegal for any Bank to make any
Revolving Credit Loan as provided in (S)12.2 hereof (any such Bank described in
the foregoing clauses (a) or (b) is hereinafter referred to as an "Affected
Bank"), the Borrower may request that the Non-Affected Banks acquire all, but
not less than all, of the Affected Bank's outstanding Revolving Credit Loans and
assume all, but not less than all, of the Affected Bank's Commitment. If the
Borrower so requests, the Non-Affected Banks may elect to acquire all or any
portion of the Affected Bank's outstanding Revolving Credit Loans and to assume
all or any portion of the Affected Bank's Commitment. If the Non-Affected Banks
do not elect to acquire and assume all of the Affected
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Bank's outstanding Revolving Credit Loans and Commitment, the Borrower may
designate a replacement bank or banks, which must be satisfactory to the Agent,
to acquire and assume that portion of the outstanding Revolving Credit Loans and
Commitment of the Affected Bank not being acquired and assumed by the Non-
Affected Banks. The provisions of (S)19 hereof shall apply to all reallocations
pursuant to this (S)6.12, and the Borrower, the Affected Bank and any Non-
Affected Banks and/or replacement banks which are to acquire the Revolving
Credit Loans and Commitment of the Affected Bank shall execute and deliver to
the Agent, in accordance with the provisions of (S)19 hereof, such Assignments
and Acceptances and other instruments, including, without limitation, Revolving
Credit Notes, as are required pursuant to (S)19 hereof to give effect to such
reallocations. Any Non-Affected Banks and/or replacement banks which are to
acquire the Revolving Credit Loans and Commitment of the Affected Bank shall be
deemed to be Eligible Assignees for all purposes of (S)19 hereof. On the
effective date of the applicable Assignments and Acceptances, the Borrower shall
pay to the Affected Bank all interest accrued on its Revolving Credit Loans up
to but excluding such date, along with any fees payable to such Affected Bank
hereunder up to but excluding such date.
SECTION VI.
COLLATERAL SECURITY AND GUARANTIES
----------------------------------
(S)6.1 Security of Borrower
The Obligations shall be secured by a perfected first priority security
interest (subject only to Permitted Liens entitled to priority under applicable
law) in all of the assets (tangible and intangible) of the Borrower (with such
exceptions as the Agent may approve), whether now owned or hereafter acquired,
pursuant to the terms of the Security Documents to which the Borrower is a
party, including, without limitation, a pledge by the Borrower of 100% of the
capital stock of each Domestic Subsidiary and 66% of the capital stock of each
Foreign Subsidiary.
(S)6.2 Guaranty and Security of Subsidiaries
(a) The Obligations shall also be guaranteed by each of the Wholly-Owned
Guarantors pursuant to the Subsidiary Guaranty. The Obligations of each Wholly-
Owned Guarantor under the Subsidiary Guaranty shall be in turn secured by a
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in the Collateral of such Wholly-
Owned Guarantor, whether now owned or hereafter acquired, pursuant to the terms
of the Security Documents to which such Wholly-Owned Guarantor is a party.
Notwithstanding anything to the contrary contained in this (S)6.2(a), each of
the Wholly-Owned Subsidiaries set forth on Schedule 6.2(a) attached hereto (the
"Scheduled Subsidiaries") shall only be required to pledge the amount of the
capital stock of any of the Subsidiaries set forth opposite such Scheduled
Subsidiary's name on Schedule 6.2(a) (the "Foreign Scheduled Subsidiaries") that
it owns, up to 66% of the capital stock of such Foreign Scheduled Subsidiary,
and only to the extent that such a pledge of the capital stock does not either
create a "deemed dividend", income recognition or other adverse Federal income
tax consequence or any other materially adverse tax consequence to the Borrower,
such Scheduled Subsidiary or such
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Foreign Subsidiary and such pledge does not violate any document, instrument,
agreement, law or regulation existing on the Closing Date to which the Borrower,
such Scheduled Subsidiary or its Foreign Scheduled Subsidiary is a party. In
addition, if after the Closing Date the Borrower or any Subsidiary makes an
Investment or a series of related Investments, or acquires the capital stock in
one or more Foreign Entities (other than a Foreign Scheduled Subsidiary), the
Borrower or such Subsidiary, as the case may be, making such an Investment or
consummating such acquisition shall only be required to pledge those shares of
the capital stock owned by the Borrower or such Subsidiary, as the case may be,
of such Foreign Entity up to 66% of the capital stock of such Foreign Entity and
only to the extent that such a pledge of the capital stock does not either
create a "deemed dividend", income recognition or other adverse Federal income
tax consequence or any other materially adverse tax consequence to the Borrower,
such Subsidiary or such Foreign Subsidiary and such pledge does not violate any
document, instrument, agreement, law or regulation existing on the date such
Investment was made to which the Borrower, such Subsidiary or such Foreign
Entity is a party.
(b) The Obligations shall also be guaranteed by each of the Non-Wholly-
Owned Guarantors pursuant to the Non-Wholly-Owned Subsidiary Guaranty. The
obligations of each Non-Wholly-Owned Guarantor under the Non-Wholly-Owned
Subsidiary Guaranty shall (i) while (but only while) such Non-Wholly-Owned
Guarantor continues to be a Non-Wholly-Owned Guarantor, be equal to such Non-
Wholly-Owned Guarantor's Maximum Liability, and (ii) be secured by a perfected
first priority security interest (subject only to Permitted Liens entitled to
priority under applicable law) in the Collateral of such Non-Wholly-Owned
Guarantor, whether now owned or hereafter acquired, pursuant to the terms of the
Security Documents to which such Non-Wholly-Owned Guarantor is a party.
Notwithstanding anything to the contrary contained in this (S)6.2(b), (a) each
of the Foreign Scheduled Subsidiaries shall not be required to become a
Guarantor and shall not be required to pledge its assets hereunder; and (b) in
the event that after the Closing Date any Foreign Entity (other than a Foreign
Scheduled Subsidiary) becomes a Subsidiary due to an Investment or a series of
related Investments which are permitted pursuant to (S)9.3 hereof or a Permitted
Acquisition, such Foreign Entity shall not be required to become a Guarantor and
shall not be required to pledge its assets hereunder.
(S)6.3 Guaranty of Holdings
The Obligations shall also be guaranteed by Holdings pursuant to the terms
of the Guaranty to which Holdings is a party.
SECTION VII.
REPRESENTATIONS AND WARRANTIES
------------------------------
Each of the Borrower and each of the Guarantors represents and warrants to
the Banks and the Agent as follows:
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(S)7.1 Corporate Authority
(S)7.1.1 Incorporation; Good Standing
Each of the Borrower, each of the Subsidiary Guarantors and each of
their Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of its state or jurisdiction of
incorporation, (b) has all requisite corporate power to own its property
and conduct its business as now conducted and as presently contemplated,
and (c) is in good standing as a foreign corporation and is duly authorized
to do business in each jurisdiction where such qualification is necessary
except where a failure to be so qualified would not have a materially
adverse effect on the business, assets or financial condition of the
Borrower, such Subsidiary Guarantor or such Subsidiary.
(S)7.1.2 Authorization
The execution, delivery and performance of this Credit Agreement and
the other Loan Documents to which the Borrower, any of the Subsidiary
Guarantors or any of their Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby (a) are within the corporate
authority of such Person, (b) have been duly authorized by all necessary
corporate proceedings, (c) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which
the Borrower, any of the Subsidiary Guarantors or any of their Subsidiaries
is subject or any judgment, order, writ, injunction, license or permit
applicable to the Borrower, any of the Subsidiary Guarantors or any of
their Subsidiaries and (d) do not conflict with any provision of the
corporate charter or bylaws of, or any agreement or other instrument
binding upon, the Borrower, any of the Subsidiary Guarantors or any of
their Subsidiaries.
(S)7.1.3 Enforceability
The execution and delivery of this Credit Agreement and the other Loan
Documents to which the Borrower, any of the Subsidiary Guarantors or any of
their Subsidiaries is or is to become a party will result in valid and
legally binding obligations of such Person enforceable against it in
accordance with the respective terms and provisions hereof and thereof,
except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally
the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor
may be brought.
(S)7.2 Governmental Approvals
The execution, delivery and performance by the Borrower, the Subsidiary
Guarantors and any of their Subsidiaries of this Credit Agreement and the other
Loan Documents to which the Borrower or any of its Subsidiaries is or is to
become a party and the transactions contemplated hereby and
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thereby do not require the approval or consent of, or filing with, any
governmental agency or authority other than those already obtained and are not
in violation of any municipal or other local law, ordinance or governmental rule
or regulation which violation would have a material adverse effect on the
business, assets or financial condition of the Borrower and their Subsidiaries,
taken as a whole.
(S)7.3 Title to Properties; Leases
Except as indicated on Schedule 7.3 attached hereto, the Borrower and its
Subsidiaries own all of the assets reflected in the pro forma consolidated
balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date
or acquired since that date (except property and assets sold or otherwise
disposed of in the ordinary course of business since that date) and to be
acquired pursuant to the Acquisitions, subject to no rights of others, including
any mortgages, leases, conditional sales agreements, title retention agreements,
liens or other encumbrances except Permitted Liens.
(S)7.4 Financial Statements and Projections
(S)7.4.1 Financial Statements
There has been furnished to each of the Banks an estimated pro forma
consolidated balance sheet of Holdings, the Borrower and their Subsidiaries
as at March 31, 1997, as adjusted to properly give effect to the
Reorganization, the Acquisitions, the Offering and the other transactions
contemplated hereby. Such balance sheet fairly presents the financial
condition of Holdings, the Borrower and their Subsidiaries as at the close
of business on the date thereof, but does not include footnotes, reserves
or year-end adjustments. There are no contingent liabilities of the
Borrower or any of its Subsidiaries as of such date involving material
amounts, which were not disclosed in such balance sheets, this Credit
Agreement or the schedules hereto.
(S)7.4.2 Projections
The projections of the annual operating budgets of the Borrower and
its Subsidiaries on a consolidated basis, including balance sheets and cash
flow statements for the 1997 through 2004 fiscal years, have been delivered
to each Bank. The Borrower believes that the projections are based upon
reasonable estimates and assumptions and reflect the reasonable estimates
of Holdings, the Borrower and their Subsidiaries of the financial
information projected therein.
(S)7.5 No Material Changes, Etc.
(a) Since the Balance Sheet Date there has occurred no materially
adverse change in the assets, financial condition or business of Holdings,
the Borrower and their Subsidiaries as shown on or reflected in the pro
forma consolidated balance sheet of Holdings, the Borrower
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and their Subsidiaries as at the Balance Sheet Date other than changes in
the ordinary course of business that have not had any materially adverse
effect either individually or in the aggregate on the assets, business or
financial condition of Holdings, the Borrower or any of its Subsidiaries,
and since December 31, 1996, there has occurred no materially adverse
change in the assets, financial condition or business of any of the
Guarantors (other than Holdings) as previously organized as shown on or
reflected in the consolidated balance sheet of JII as at December 31, 1996
other than changes in the ordinary course of business that have not had any
materially adverse effect either individually or in the aggregate on the
assets, business or financial condition of such Subsidiaries. Since the
Balance Sheet Date, neither Holdings nor the Borrower has made any
Distributions.
(b) The Borrower and each of its Subsidiaries (before and after giving
effect to the transactions contemplated by this Credit Agreement, the other
Loan Documents, the Reorganization and the Offering) (i) is solvent, (ii)
has assets having a fair value in excess of its liabilities, (iii) has
assets having a fair value in excess of the amount required to pay its
liabilities on existing debts as such debts become absolute and matured,
and (iv) has, and expects to continue to have, access to adequate capital
for the conduct of its business and the ability to pay its debts from time
to time incurred in connection with the operation of its business as such
debts mature.
(S)7.6 Franchises, Patents, Copyrights, Etc.
Each of the Borrower, the Subsidiary Guarantors and their Subsidiaries
possesses all franchises, patents, copyrights, trademarks, trade names, licenses
and permits, and rights in respect of the foregoing, adequate for the conduct of
its business substantially as now conducted without known conflict with any
rights of others.
(S)7.7 Litigation
Except as set forth in Schedule 7.7 attached hereto, there are no actions,
suits, proceedings or investigations of any kind pending or threatened against
the Borrower, any of the Subsidiary Guarantors or any of their Subsidiaries
before any court, tribunal or administrative agency or board that, if adversely
determined, could reasonably be expected to, either in any case or in the
aggregate, materially adversely affect the properties, assets, financial
condition or business of the Borrower and its Subsidiaries or materially impair
the right of the Borrower and its Subsidiaries, considered as a whole, to carry
on business substantially as conducted by them or result in any substantial
liability not adequately covered by insurance, or for which adequate reserves
are not maintained on the consolidated balance sheet of the Borrower and its
Subsidiaries, or which question the validity of this Credit Agreement or any of
the other Loan Documents, or any action taken or to be taken pursuant hereto or
thereto.
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(S)7.8 No Materially Adverse Contracts, Etc.
None of the Borrower, the Subsidiary Guarantors or any of their
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation that has or is expected in the
future to have a materially adverse effect on the business, assets or financial
condition of the Borrower or any of its Subsidiaries. None of the Borrower, the
Subsidiary Guarantors or any of their Subsidiaries is a party to any contract or
agreement that has or is expected, in the judgment of the Borrower's officers,
to have any materially adverse effect on the business of the Borrower or any of
its Subsidiaries considered as a whole.
(S)7.9 Compliance with Other Instruments, Laws, Etc.
None of the Borrower, any of the Subsidiary Guarantors or any of their
Subsidiaries is in violation of any provision of its charter documents, bylaws,
or any agreement or instrument to which it may be subject or by which it or any
of its properties may be bound or any decree, order, judgment, statute, license,
rule or regulation, in any of the foregoing cases in a manner that is reasonably
likely to result in the imposition of substantial penalties or materially and
adversely affect the financial condition, properties or business of the Borrower
or any of its Subsidiaries considered as a whole.
(S)7.10 Tax Status
Each of the Borrower, the Subsidiary Guarantors and their Subsidiaries (a)
has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which any of them is
subject, (b) has paid all taxes and other governmental assessments and charges
shown or determined to be due on such returns, reports and declarations, except
those being contested in good faith and by appropriate proceedings and (c) has
set aside on its books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply, except where the failure to do so would not have a material
adverse effect on the business, assets or financial condition of the Borrower
and its Subsidiaries, taken as whole. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and none
of the officers of the Borrower or the Subsidiary Guarantors know of any basis
for any such claim.
(S)7.11 No Event of Default
No Default or Event of Default has occurred and is continuing.
(S)7.12 Holding Company and Investment Company Acts
None of the Borrower, any of the Subsidiary Guarantors or any of their
Subsidiaries is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company", as such terms are defined in
the Public Utility Holding Company Act of 1935; nor is it an
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"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
(S)7.13 Absence of Financing Statements, Etc.
Except with respect to Permitted Liens or as permitted under the Security
Documents, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of the Borrower, any of the Subsidiary Guarantors or
any of their Subsidiaries or any rights relating thereto.
(S)7.14 Perfection of Security Interest
All filings, assignments, pledges and deposits of documents or instruments
have been made and all other actions have been taken that are necessary or
advisable, under applicable law, to establish and perfect the Agent's security
interest in the Collateral. The Collateral and the Agent's rights with respect
to the Collateral are not subject to any setoff, claims, withholdings or other
defenses. The Borrower, the Subsidiary Guarantors or their Subsidiaries, as
specified in the Security Documents, are the owners of the Collateral free from
any lien, security interest, encumbrance and any other claim or demand, except
for Permitted Liens.
(S)7.15 Certain Transactions
Except as set forth on Schedule 7.15 attached hereto, and for arm's length
transactions pursuant to which the Borrower, the Subsidiary Guarantors or any of
their Subsidiaries makes payments in the ordinary course of business upon terms
no less favorable than the Borrower or such Subsidiary could obtain from third
parties, none of the officers, directors, or employees of the Borrower, any of
the Subsidiary Guarantors or any of their Subsidiaries is presently a party to
any transaction with the Borrower, any of the Subsidiary Guarantors or any of
their Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Borrower or any of the
Subsidiary Guarantors, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
(S)7.16 Employee Benefit Plans
(S)7.16.1 In General
Each Employee Benefit Plan has been maintained and operated in
compliance in all
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material respects with the provisions of ERISA and, to the extent
applicable, the Code, including but not limited to the provisions
thereunder respecting prohibited transactions.
(S)7.16.2 Terminability of Welfare Plans
Under each Employee Benefit Plan which is an employee welfare benefit
plan within the meaning of 3(1) or 3(2)(B) of ERISA, no benefits are due
unless the event giving rise to the benefit entitlement occurs prior to
plan termination (except as required by Title I, Part 6 of ERISA). The
Borrower or an ERISA Affiliate, as appropriate, may terminate each such
Plan at any time (or at any time subsequent to the expiration of any
applicable bargaining agreement) in the discretion of the Borrower or such
ERISA Affiliate without liability to any Person.
(S)7.16.3 Guaranteed Pension Plans
Each contribution required to be made to a Guaranteed Pension Plan,
whether required to be made to avoid the incurrence of an accumulated
funding deficiency, the notice or lien provisions of (S)302(f) of ERISA, or
otherwise, has been timely made. No waiver of an accumulated funding
deficiency or extension of amortization periods has been received with
respect to any Guaranteed Pension Plan. No liability to the PBGC (other
than required insurance premiums, all of which have been paid) has been
incurred by the Borrower or any ERISA Affiliate with respect to any
Guaranteed Pension Plan and there has not been any ERISA Reportable Event,
or any other event or condition which presents a material risk of
termination of any Guaranteed Pension Plan by the PBGC. Based on the latest
valuation of each Guaranteed Pension Plan (which in each case occurred
within twelve months of the date of this representation), and on the
actuarial methods and assumptions employed for that valuation, and except
as disclosed on Schedule 7.16, the aggregate benefit liabilities of all
such Guaranteed Pension Plans within the meaning of (S)4001 of ERISA did
not exceed the aggregate value of the assets of all such Guaranteed Pension
Plans, disregarding for this purpose the benefit liabilities and assets of
any Guaranteed Pension Plan with assets in excess of benefit liabilities.
(S)7.16.4 Multiemployer Plans
Neither the Borrower nor any ERISA Affiliate has incurred any material
liability (including secondary liability) to any Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan
under (S)4201 of ERISA or as a result of a sale of assets described in
(S)4204 of ERISA. Neither the Borrower nor any ERISA Affiliate has been
notified that any Multiemployer Plan is in reorganization or insolvent
under and within the meaning of (S)4241 or (S)4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated under
(S)4041A of ERISA.
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(S)7.17 Regulations G, U and X
The proceeds of the Revolving Credit Loans shall be used to finance all or
any portion of Permitted Acquisitions and for working capital and general
corporate purposes. The Borrower will obtain Letters of Credit solely for
working capital and general corporate purposes. No portion of any Revolving
Credit Loan is to be used, and no portion of any Letter of Credit is to be
obtained, for the purpose of purchasing or carrying any "margin security" or
"margin stock" as such terms are used in Regulations G, U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
(S)7.18 Environmental Compliance
To the best of the Borrower's and each of the Subsidiary Guarantors'
knowledge, except as disclosed on Schedule 7.18 attached hereto or the documents
referenced therein (which documents have been delivered to the Agent and the
Banks):
(a) none of the Borrower, the Subsidiary Guarantors, their
Subsidiaries or any operator of the Real Estate or any operations thereon
is in violation, nor has the Borrower, any of the Subsidiary Guarantors or
any of their Subsidiaries received notice that it, or any operator of the
Real Estate is in alleged violation, of any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters, including
without limitation, those arising under the Resource Conservation and
Recovery Act ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or
any state or local statute, regulation, ordinance, order or decree relating
to health, safety or the environment (hereinafter "Environmental Laws"),
which violation would have a material adverse effect on the environment or
the business, assets or financial condition of the Borrower and its
Subsidiaries considered as a whole;
(b) none of the Borrower, any of the Subsidiary Guarantors or any of
their Subsidiaries has received notice from any third party including,
without limitation, any federal, state or local governmental authority: (i)
that any one of them has been identified by the United States Environmental
Protection Agency ("EPA") as a potentially responsible party under CERCLA
with respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B (1986); (ii) that any hazardous waste, as defined by 42
U.S.C. 6903(5), any hazardous substances as defined by 42 U.S.C. 9601(14),
any pollutant or contaminant as defined by 42 U.S.C. 9601(33) and any toxic
substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws ("Hazardous Substances") which any one
of them has generated, transported or disposed of has been found at any
site at which a federal, state or local agency or other third party has
conducted, or has ordered that the Borrower, any of the Subsidiary
Guarantors or any of their Subsidiaries conduct, a remedial
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investigation, removal or other response action pursuant to any
Environmental Law; or (iii) except to the extent that the following would
not have a material adverse effect on the business, assets of financial
condition of the Borrower and its Subsidiaries, taken as a whole, that it
is or shall be a named party to any claim, action, cause of action,
complaint, or legal or administrative proceeding (in each case, contingent
or otherwise) arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with the
release of Hazardous Substances;
(c) (i) no portion of the Real Estate has been used for the handling,
processing, storage or disposal of Hazardous Substances other than in
accordance with applicable Environmental Laws the noncompliance with which
would have a material adverse effect on the business, assets or financial
condition of the Borrower and its Subsidiaries, taken as a whole; and no
underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of the Real Estate in violation of any
applicable Environmental Law the noncompliance with which would have a
material adverse effect on the business, assets or financial condition of
the Borrower and its Subsidiaries, taken as a whole; (ii) in the course of
any activities conducted by the Borrower, the Subsidiary Guarantors, their
Subsidiaries or operators of such Person's properties, no Hazardous
Substances have been generated or are being used on the Real Estate except
in accordance (in all material respects) with applicable Environmental Laws
the noncompliance with which would have a material adverse effect on the
business, assets or financial condition of the Borrower and its
Subsidiaries, taken as a whole; (iii) there have been no releases (i.e. any
past or present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of the Borrower, the Subsidiary Guarantors or their
Subsidiaries, which releases would have a material adverse effect on the
value of any of the business, assets or financial condition of the Borrower
and its Subsidiaries, taken as a whole; (iv) there have been no releases
on, upon, from or into any real property in the vicinity of any of the Real
Estate which, through soil or groundwater contamination, may have come to
be located on any of the Real Estate, and which would have a material
adverse effect on the business, assets or financial condition of the
Borrower and its Subsidiaries, taken as a whole; and (v) in addition,
except to the extent that the following would not have a materially adverse
effect on the business, assets, or financial conditions of the Borrower and
its Subsidiaries, taken as a whole any Hazardous Substances that have been
generated on any of the Real Estate have been transported offsite only by
carriers having an identification number issued by the EPA, treated or
disposed of only by treatment or disposal facilities maintaining valid
permits as required under applicable Environmental Laws, which transporters
and facilities have been and are operating in compliance with such permits
and applicable Environmental Laws; and
(d) none of the Borrower, the Subsidiary Guarantors and their
Subsidiaries, any Mortgaged Property or any of the other Real Estate is
subject to any applicable environmental law requiring the performance of
Hazardous Substances site assessments, or the removal or
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remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby or as a condition to
the recording of any Mortgage or to the effectiveness of any other
transactions contemplated hereby.
(S)7.19 Subsidiaries, Etc.
Schedule 7.19(a) sets forth each Subsidiary of the Borrower and each
Subsidiary Guarantor as of the Closing Date. Except as set forth on Schedule
7.19(b), none of the Borrower, any Subsidiary Guarantors or any Subsidiary of
the Borrower or any Subsidiary Guarantor is engaged in any joint venture or
partnership with any other Person.
(S)7.20 Chief Executive Offices
The Borrower's chief executive office is at Arbor Lake Centre, 1751 Lake
Cook Road, Suite 550, Deerfield, Illinois 60015, at which location its books and
records are kept. Each of the Subsidiary Guarantors' chief executive office is
as set forth in the Security Agreement to which it is a party.
(S)7.21 Fiscal Year
The Borrower and each of the Subsidiary Guarantors existing on the Closing
Date has a fiscal year which is the twelve (12) months ending on December 31 of
each year.
(S)7.22 No Amendments to Certain Documents
The Borrower has not, nor, to the best of the Borrower's knowledge has
Holdings, amended any of the Capitalization Documents or the documents
pertaining to any of the Acquisitions or the Reorganization in any material
respect. Each of the representations and warranties made by the Borrower, any
of the Subsidiary Guarantors or any of their Subsidiaries, or, to the best of
the Borrower's knowledge, by Holdings in any of the Loan Documents, the
Subordination Documents, the Capitalization Documents and the Offering Documents
was true and correct in all material respects when made and continues to be true
and correct in all material respects on the Closing Date, except to the extent
that any of such representations and warranties relate, by the express terms
thereof, solely to a date falling prior to the Closing Date, and except to the
extent that any of such representations and warranties may have been affected by
the consummation of the transactions contemplated and permitted or required by
the Loan Documents.
(S)7.23 Disclosure
No representation or warranty made by the Borrower or any of the Subsidiary
Guarantors in this Credit Agreement, or any agreement, instrument, document,
certificate, statement or letter
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furnished to the Agent or any Bank by or on behalf of the Borrower or any of the
Subsidiary Guarantors in connection with any of the transactions contemplated by
any of the Loan Documents, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances in which they are
made.
(S)7.24 Insurance
The Borrower, each of the Subsidiary Guarantors and each of their
Subsidiaries maintains with financially sound and reputable insurers insurance
with respect to its properties and businesses against such casualties and
contingencies as are in accordance with sound business practices with the
details of such coverage being more fully described on Schedule 7.24 hereto.
SECTION VIII.
AFFIRMATIVE COVENANTS OF THE BORROWER AND SUBSIDIARY GUARANTORS
---------------------------------------------------------------
Each of the Borrower and the Subsidiary Guarantors covenants and agrees
that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or
Revolving Credit Note is outstanding or any Bank has any obligation to make any
Revolving Credit Loans or the Agent has any obligation to issue, extend or renew
any Letters of Credit:
(S)8.1 Punctual Payment
The Borrower will duly and punctually pay or cause to be paid the principal
and interest on the Revolving Credit Loans, all Reimbursement Obligations, the
Letter of Credit Fees, the commitment fees, the Agent's Fee and all other
amounts provided for in this Credit Agreement and the other Loan Documents to
which the Borrower or any of its Subsidiaries is a party, all in accordance with
the terms of this Credit Agreement and such other Loan Documents.
(S)8.2 Maintenance of Office
The Borrower will maintain its chief executive office at Arbor Lake Centre,
1751 Lake Cook Road, Suite 550, Deerfield, Illinois 60015 or at such other place
in the United States of America as the Borrower shall designate upon written
notice to the Agent, where notices, presentations and demands to or upon the
Borrower in respect of the Loan Documents to which the Borrower is a party may
be given or made. Each of the Subsidiary Guarantors will maintain its chief
executive office as provided in the Security Agreement to which it is a party.
(S)8.3 Records and Accounts
The Borrower will (a) keep, and cause each of its Subsidiaries to keep,
true and accurate records and books of account in which full, true and correct
entries will be made in accordance with
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generally accepted accounting principles and (b) maintain adequate accounts and
reserves for all taxes (including income taxes), depreciation, depletion,
obsolescence and amortization of its properties and the properties of its
Subsidiaries, contingencies, and other reserves.
(S)8.4 Financial Statements, Certificates and Information
--------------------------------------------------
The Borrower will deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than 105
days after the end of each fiscal year of Holdings and the Borrower,
(i) the consolidated balance sheet of Holdings and its Subsidiaries as
at the end of such year, and the related consolidated statement of
income and consolidated statement of cash flow for such year, each
setting forth (for years after December 31, 1998) in comparative form
the figures for the previous fiscal year and all such consolidated
statements to be in reasonable detail, prepared in accordance with
generally accepted accounting principles, and certified without
qualification by Ernst & Young or by other independent certified
public accountants satisfactory to the Agent, and (ii) the unaudited
consolidating balance sheet of Holdings and its Subsidiaries as at the
end of such year, and the related unaudited consolidating statement of
income and unaudited consolidating statements of cash flow for such
year, each setting forth in comparative form the figures for the
previous fiscal year and all such consolidating statements to be in
reasonable detail, prepared by management in accordance with the past
financial practice of Holdings and its Subsidiaries, together with a
certification by the principal financial or accounting officer of
Holdings that such financial statements fairly present the financial
position of the Borrower and its Subsidiaries on the date thereof and
the results of operations of Holdings and its Subsidiaries for the
period covered thereby;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of the fiscal quarters of
Holdings and the Borrower, copies of the unaudited consolidated and
consolidating balance sheets of Holdings and its Subsidiaries each as
at the end of such quarter, and the related consolidated and
consolidating statements of income and consolidated and consolidating
statements of cash flow for the portion of Holdings' fiscal year then
ended, each setting forth in comparative form (for fiscal quarters
after September 30, 1998) the figures for the previous fiscal year and
a comparison setting forth the corresponding figures from the budgeted
or projected figures for such period and all in reasonable detail and
prepared in accordance with generally accepted accounting principles
(except for provisions for footnotes, reserves, accruals and year-end
adjustments), and in each case together with a certification by the
principal financial or accounting officer of Holdings that such
financial statements fairly present the financial position of Holdings
and its Subsidiaries on the date thereof and the results of the
operations of Holdings an d its Subsidiaries for the period covered
thereby;
(c) as soon as practicable, but in any event within thirty (30)
days after the end of
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each month in each fiscal year of Holdings and the Borrower, unaudited
monthly consolidated and consolidating financial statements of
Holdings and its Subsidiaries for such month, each setting forth in
comparative form (for periods commencing with August 30, 1998) the
figures for the previous fiscal year and a comparison setting forth
the corresponding figures from the budgeted or projected figures for
such period and prepared in accordance with generally accepted
accounting principles (except for provisions for footnotes, reserves,
accruals and year-end adjustments), together with a certification by
the principal financial or accounting officer of Holdings that such
financial statements fairly present the financial condition of
Holdings and its Subsidiaries on the date thereof and the results of
the operations of Holdings and its Subsidiaries for the period covered
thereby;
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by
the principal financial or accounting officer of the Borrower in
substantially the form of Exhibit I attached hereto (the "Compliance
Certificate") and setting forth in reasonable detail computations
evidencing compliance with the covenants contained in (S)10 and (if
applicable) reconciliations to reflect changes in generally accepted
accounting principles since the Balance Sheet Date;
(e) within ten (10) days of the filing or mailing thereof,
copies of all material of a financial nature filed with the Securities
and Exchange Commission or sent to the stockholders of Holdings or the
Borrower;
(f) not later than sixty (60) days after the beginning of each
fiscal year of the Borrower, the annual budget of Holdings, the
Borrower and their Subsidiaries for such fiscal year;
(i) not later than ten (10) days after the delivery thereof,
copies of all accountants' management letters delivered to Holdings,
the Borrower or any of their Subsidiaries; and
(j) from time to time, such other financial data and information
as the Agent or any Bank may reasonably request.
The Banks and the Agent agree that they will treat in confidence all financial
information with respect to Holdings, the Borrower and their Subsidiaries which
has not become public, and will not, without the consent of the Borrower,
disclose such information to any third party (other than an affiliate of such
Bank or the Agent), and, if any representative or agent of the Banks or the
Agent shall not be an employee of one of the Banks or the Agent or any affiliate
of the Banks or the Agent, such designee shall be reputable and of recognized
standing and shall agree to treat in confidence the information obtained during
any such inspection and, without the prior written consent of the Borrower, not
to disclose such information to any third party or make use of such information
for personal gain. Notwithstanding the foregoing, each of Holdings and the
Borrower hereby authorizes the Agent, its affiliates and each of the Banks to
disclose information obtained pursuant to this Credit
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Agreement which has not become public to banks or other financial institutions
who are participants or assignees or potential participants or assignees of the
Revolving Credit Loans made or to be made hereunder with the Borrower's consent
(which consent is not to be unreasonably withheld and shall not be required if a
Default or Event of Default has occurred and is continuing), and where required
or requested by governmental or regulatory authorities.
(S)8.5 Notices
-------
(S)8.5.1 Defaults
--------
The Borrower and each of the Subsidiary Guarantors will give
notice in writing to the Agent promptly (but in no event later than
five (5) days) after becoming aware of the occurrence of any Default
or Event of Default. If any Person shall give any notice or take any
other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Credit Agreement or any
other note, evidence of indebtedness, indenture or other obligation to
which or with respect to which the Borrower or any of the Subsidiary
Guarantors or any of their Subsidiaries is a party or obligor, whether
as principal, guarantor, surety or otherwise, the Borrower or such
Subsidiary Guarantor shall forthwith give written notice thereof to
the Agent and each of the Banks, describing the notice or action and
the nature of the claimed default.
(S)8.5.2 Environmental Events
--------------------
The Borrower and each of the Subsidiary Guarantors will
promptly give notice to the Agent and each of the Banks (a) of any
violation of any Environmental Law that the Borrower or any of its
Subsidiaries reports in writing or is reportable by such Person in
writing (or for which any written report supplemental to any oral
report is made) to any federal, state or local environmental agency
and (b) upon becoming aware thereof, of any inquiry, proceeding,
investigation, or other action, including a notice from any agency of
potential environmental liability, or any federal, state or local
environmental agency or board, that has the potential to materially
affect the assets, liabilities, financial conditions or operations of
the Borrower, any of the Subsidiary Guarantors or any of their
Subsidiaries, or the Agent's mortgages or security interests pursuant
to the Security Documents.
(S)8.5.3 Notification of Claim against Collateral
----------------------------------------
The Borrower and each of the Subsidiary Guarantors will,
immediately upon becoming aware thereof, notify the Agent and each of
the Banks in writing of any setoff, claims (including, with respect to
the Real Estate, environmental claims), withholdings or other defenses
to which any of the Collateral with an aggregate net book value of
$1,000,000 or more, or the Agent's rights with respect to the
Collateral, are subject.
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(S)8.5.4 Notice of Litigation and Judgments
----------------------------------
Each of the Borrower and each of the Subsidiary Guarantors
will, and will cause each of their Subsidiaries to, give notice to the
Agent and each of the Banks in writing within ten (10) Business Days
of becoming aware of any litigation or proceedings threatened in
writing or any pending litigation and proceedings affecting the
Borrower, any of the Subsidiary Guarantors or any of their
Subsidiaries or to which the Borrower, any of the Subsidiary
Guarantors or any of their Subsidiaries is or becomes a party
involving an uninsured claim of more than $1,000,000 against the
Borrower, any of the Subsidiary Guarantors or any of their
Subsidiaries that could reasonably be expected to have a materially
adverse effect on the Borrower, any of the Subsidiary Guarantors or
any of their Subsidiaries and stating the nature and status of such
litigation or proceedings. The Borrower and each of the Subsidiary
Guarantors will, and will cause each of their Subsidiaries to, give
notice to the Agent and each of the Banks, in writing, in form and
detail satisfactory to the Agent, within ten (10) Business Days of any
judgment not covered by insurance, final or otherwise, against the
Borrower, any of the Subsidiary Guarantors or any of their
Subsidiaries in an amount in excess of $1,000,000.
(S)8.5.5 Notice of Additional Real Estate
--------------------------------
The Borrower and each of the Subsidiary Guarantors will
give the Agent thirty (30) days prior written notice of any
acquisition or lease by the Borrower or such Subsidiary Guarantor of
any additional real property after the Closing Date having either a
fair market value or acquisition price of more than $2,500,000.
(S)8.6 Corporate Existence; Maintenance of Properties
----------------------------------------------
The Borrower and each of the Subsidiary Guarantors will do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate existence, rights and franchises and those of their Subsidiaries
except as permitted under (S)9.5 hereof or the dissolution of any Subsidiary of
the Borrower or any Subsidiary Guarantor whose operation has been discontinued
if such dissolution is, in the judgment of the Borrower, desirable in the
conduct of its business and does not materially adversely affect the business of
the Borrower and its Subsidiaries on a consolidated basis. The Borrower and each
of the Subsidiary Guarantors (a) will cause all of its properties and those of
its Subsidiaries used or useful in the conduct of its business or the business
of its Subsidiaries to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment, (b) will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Borrower or such Subsidiary Guarantor, as
the case may be, may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will, and will cause each of its Subsidiaries to, continue to engage primarily
in the businesses now conducted by them and in related businesses; provided that
nothing in this (S)8.6 shall prevent the Borrower or any of the Subsidiary
Guarantors, from
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discontinuing the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the judgment of the
Borrower or such Subsidiary Guarantor, as the case may be, desirable in the
conduct of its or their business and that do not in the aggregate materially
adversely affect the business of the Borrower and its Subsidiaries on a
consolidated basis.
(S)8.7 Insurance
---------
The Borrower and each of the Subsidiary Guarantors will, and will
cause each of their Subsidiaries to, maintain with financially sound and
reputable insurers insurance with respect to its properties and business against
such casualties and contingencies and in such types and such amounts as shall be
in accordance with sound business practices, containing such terms, in such
forms and for such periods as may be reasonable and prudent and in accordance
with the terms of the Security Agreements and Schedule 7.24. The Borrower and
each of the Subsidiary Guarantors will, and will cause their Subsidiaries to,
maintain insurance on the Mortgaged Properties in accordance with the terms of
the Mortgages.
(S)8.8 Taxes
-----
The Borrower and each of the Subsidiary Guarantors will, and will
cause each of their Subsidiaries to, duly pay and discharge, or cause to be paid
and discharged, before the same shall become overdue, all taxes, assessments and
other governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property; provided that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the Borrower, such Subsidiary Guarantor or such Subsidiary shall have set
aside on its books adequate reserves with respect thereto; and provided further
that the Borrower, each Subsidiary Guarantor and each Subsidiary of the Borrower
or Subsidiary Guarantor will pay all such taxes, assessments, charges, levies or
claims forthwith upon the commencement of proceedings to foreclose any lien that
may have attached as security therefor.
(S)8.9 Inspection of Properties and Books, Etc.
---------------------------------------
(S)8.9.1 General
-------
The Borrower and each of the Subsidiary Guarantors shall
permit the Banks, through the Agent or any of the Banks' other
designated representatives, to (a) visit and inspect any of the
properties of the Borrower, any of the Subsidiary Guarantors or any of
their Subsidiaries, (b) to examine the books of account of the
Borrower, the Subsidiary Guarantors and their Subsidiaries (and to
make copies thereof and extracts therefrom), (c) to discuss the
affairs, finances and accounts of the Borrower, any of the Subsidiary
Guarantors and any of their Subsidiaries with, and to be advised as to
the same by, its and their officers, all at such
55
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reasonable times during normal business hours and at such reasonable
intervals as the Agent or any Bank may reasonably request and (d)
conduct commercial finance examinations and appraisals of assets, all
at such reasonable times during normal business hours and such
reasonable intervals as the Agent or any Bank may reasonably request,
provided that in the absence of an Event of Default the Borrower shall
not bear the costs of such commercial finance examinations and
appraisals in excess of $10,000 per annum. Each of the Banks agrees
that it will treat in confidence the information obtained during any
inspection which is designated by the Borrower as confidential and
will not, without the consent of the Borrower, disclose such
information to any third party (other than its affiliates) and, if any
representative or agent of any Bank or the Agent shall not be an
employee of such Bank or the Agent, as the case may be, or any
affiliate of such Bank or the Agent, as the case may be, such designee
shall be reputable and of recognized standing and shall agree in
writing to treat in confidence the information obtained during any
such inspection and, without the prior written consent of the
Borrower, not to disclose such information to any third party or make
use of such information for personal gain. Notwithstanding the
foregoing, the Banks and the Agent (or their respective affiliates)
may disclose information obtained pursuant to this Credit Agreement to
other banks or financial institutions who are potential participants
or potential assignees or participants in the Revolving Credit Loans
made or to be made hereunder and where required or requested by
governmental or regulatory authorities.
(S)8.9.2 Communications with Accountants
-------------------------------
The Borrower and each of the Subsidiary Guarantors
authorizes the Agent and, if accompanied by the Agent, the Banks, to
communicate directly with the Borrower's and such Subsidiary
Guarantor's independent certified public accountants and authorizes
such accountants to disclose to the Agent and the Banks any and all
financial statements and other supporting financial documents and
schedules including copies of any management letter with respect to
the business, financial condition and other affairs of the Borrower,
the Subsidiary Guarantors or any of their Subsidiaries. At the request
of the Agent, the Borrower or such Subsidiary Guarantor shall deliver
a letter addressed to such accountants instructing them to comply with
the provisions of this (S)8.9.2.
(S)8.9.3 Environmental Assessments
-------------------------
The Agent may, from time to time, in its discretion,
obtain one or more environmental assessments or audits of any
Mortgaged Property prepared by a hydrogeologist, an independent
engineer or other qualified consultant or expert approved by the Agent
to evaluate or confirm (a) whether any Hazardous Materials are present
in the soil or water at such Mortgaged Property and (b) whether the
use and operation of such Mortgaged Property complies with all
Environmental Laws. Environmental assessments may include detailed
visual inspections of such Mortgaged Property including any and all
storage areas, storage tanks, drains, dry wells, and leaching areas,
and the taking of soil samples, surface water
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<PAGE>
samples and ground water samples, as well as such other investigations
or analysis as the Agent deems appropriate. The Agent shall provide
the Borrower with written notice prior to beginning any such
assessment and shall provide the Borrower with reasonable detail as to
the scope of work to be conducted.
(S)8.10 Compliance with Laws, Contracts, Licenses, and Permits
------------------------------------------------------
The Borrower and each of the Subsidiary Guarantors will, and will
cause each of their Subsidiaries to, comply with (a) the applicable laws and
regulations wherever its business is conducted, including all Environmental
Laws, the noncompliance with which would have a material adverse affect on the
business, assets or financial condition of the Borrower and its Subsidiaries
considered as a whole or the ability of the Borrower, any of the Subsidiary
Guarantors or any of their Subsidiaries to fulfill its obligations under this
Credit Agreement or the other Loan Documents to which such Person is a party,
(b) the provisions of its charter documents and by-laws, (c) all agreements and
instruments by which it or any of its properties may be bound, including,
without limitation, all leases, the noncompliance with which could have a
material adverse effect on the business, assets or financial condition of the
Borrower and their Subsidiaries considered as a whole or the ability of the
Borrower, any of the Subsidiary Guarantors or any of their Subsidiaries to
fulfill its obligations under this Credit Agreement or the other Loan Documents
to which such Person is a party, and (d) all applicable decrees, orders, and
judgments the noncompliance with which could have a material adverse affect on
the business, assets or financial condition of the Borrower and its Subsidiaries
considered as a whole, or the ability of the Borrower, any of the Subsidiary
Guarantors or any of their Subsidiaries to fulfill its obligations under this
Credit Agreement or the other Loan Documents to which such Person is a party. If
any authorization, consent, approval, permit or license from any officer, agency
or instrumentality of any government shall become necessary or required in order
that the Borrower, any of the Subsidiary Guarantors or any of their Subsidiaries
may fulfill any of its obligations hereunder or under any of the other Loan
Documents to which such Person is a party, the Borrower or such Subsidiary
Guarantor will, or (as the case may be) will cause such Subsidiary to,
immediately take or cause to be taken all reasonable steps within the power of
such Person to obtain such authorization, consent, approval, permit or license
and furnish the Agent and the Banks with evidence thereof.
(S)8.11 Employee Benefit Plans
----------------------
The Borrower and each of the Subsidiary Guarantors will (a) promptly
upon filing the same with the Department of Labor or Internal Revenue Service
upon request of the Agent, furnish to the Agent a copy of the most recent
actuarial statement required to be submitted under (S)103(d) of ERISA and Annual
Report, Form 5500, with all required attachments, in respect of each Guaranteed
Pension Plan and (b) promptly upon receipt or dispatch, furnish to the Agent any
notice, report or demand sent or received in respect of a Guaranteed Pension
Plan under (S)(S)302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or
in respect of a Multiemployer Plan, under (S)(S)4041A, 4202, 4219, 4242, or 4245
of ERISA.
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(S)8.12 Use of Proceeds
---------------
The Borrower will use the proceeds of the Revolving Credit Loans
solely for the purposes described in (S)7.17. The Borrower will obtain Letters
of Credit solely for the purposes described in (S)7.17.
(S)8.13 Fair Labor Standards Act
------------------------
The Borrower and each of the Subsidiary Guarantors will, and each of
their Subsidiaries shall, at all times operate its business in compliance with
all material applicable provisions of the Fair Labor Standards Act of 1938, as
amended. None of the inventory of the Borrower, any of the Subsidiary Guarantors
or any of their Subsidiaries are or will be produced by employees of (a) the
Borrower, any of the Subsidiary Guarantors or any of their Subsidiaries or (b)
to the best knowledge of the Borrower, each Subsidiary Guarantor and each of
their Subsidiaries, by employees of suppliers, who are, in each case, employed
in violation of the minimum wage or maximum hour provisions of the Fair Labor
Standards Act (29 U.S.C. 206 and 207) or any regulations promulgated thereunder,
in each case, as in effect from time to time.
(S)8.14 Mortgaged Property
------------------
If, after the Closing Date, the Borrower or any Subsidiary Guarantor
acquires or leases real estate with either a fair market value or acquisition
price, or, if a lease, the leasehold value of more than $2,500,000 the Borrower
or such Subsidiary Guarantor shall forthwith deliver to the Agent, if the Agent
so requests, a fully executed mortgage or deed of trust over such real estate,
in form and substance satisfactory to the Agent, together with title insurance
policies, surveys, evidences of insurances with the Agent named as loss payee
and additional insured, legal opinions and other documents and certificates with
respect to such real estate consistent with the Mortgages and related documents
delivered hereunder; provided, however, as to any leasehold interest obtained by
the Borrower, it shall not be a Default or Event of Default hereunder if the
Borrower, after using reasonable efforts, is unable to execute and deliver such
leasehold mortgage or deed of trust due to a failure to obtain any third party
consents needed to grant such mortgage or deed of trust. The Borrower and each
Subsidiary Guarantor further agrees that, following the taking of any such
actions with respect to such real estate, the Agent shall have for the benefit
of the Banks and the Agent a valid and enforceable first priority mortgage or
deed of trust over such real estate, free and clear of all defects and
encumbrances except for Permitted Liens.
(S)8.15 Further Assurances
------------------
The Borrower and each Subsidiary Guarantor will, and will cause each of
their Subsidiaries to, cooperate with the Banks and the Agent and execute such
further instruments and documents as the Banks or the Agent shall reasonably
request to carry out to their satisfaction the transactions contemplated by this
Credit Agreement and the other Loan Documents.
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(S)8.16 Mortgages, Legal Opinions and Title Policy
------------------------------------------
The Borrower shall deliver to the Agent within sixty (60) days from
the Closing Date (a) evidence of recordation of each of the Mortgages on Real
Estate owned and, to the extent requested by the Agent, leased by the Borrower
and any of its Subsidiaries, (b) opinions of local counsel regarding real estate
matters in all states where the Mortgaged Property is located, and (c) a Title
Policy covering each Mortgaged Property (or commitments to issue such policies,
with all conditions to issuance of the Title Policy deleted by an authorized
agent of the Title Insurance Company) together with proof of payment of all fees
and premiums for such policies, from the Title Insurance Company and in amounts
satisfactory to the Agent, insuring the interest of the Agent and each of the
Banks as mortgagee under the Mortgages on Real Estate.
(S)8.17 Additional Subsidiaries
-----------------------
If, after the Closing Date, the Borrower or any of their Subsidiaries
creates or acquires, either directly or indirectly, any Subsidiary, it will
immediately notify the Agent and the Banks of such creation or acquisition, as
the case may be, and provide the Agent and the Banks with an updated Schedule
7.19(a) and take all other action required by (S)9.5.1 hereof.
SECTION IX.
CERTAIN NEGATIVE COVENANTS OF
THE BORROWER AND SUBSIDIARY GUARANTORS.
---------------------------------------
The Borrower and the Subsidiary Guarantors covenants and agrees that,
so long as any Revolving Credit Loan, Unpaid Reimbursement Obligation, Letter of
Credit or Revolving Credit Note is outstanding or any Bank has any obligation to
make any Revolving Credit Loans or the Agent has any obligation to issue, extend
or renew any Letters of Credit:
(S)9.1 Restrictions on Indebtedness
----------------------------
Each of the Borrower and each of the Subsidiary Guarantors will not,
and will not permit any of their Subsidiaries to, create, incur, assume,
guarantee or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:
(a) Indebtedness to the Banks and the Agent arising under any of
the Loan Documents;
(b) current liabilities of the Borrower, the Subsidiary
Guarantors and their Subsidiaries incurred in the ordinary course of
business not incurred through (i) the borrowing of money, or (ii) the
obtaining of credit except for credit on an open account basis
customarily extended and in fact extended in connection with normal
purchases of goods and services;
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(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be made
in accordance with the provisions of (S)8.8 hereof;
(d) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder and the Borrower or such Subsidiary
shall at the time in good faith be prosecuting an appeal or proceedings for
review and in respect of which a stay of execution shall have been obtained
pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary
course of business;
(f) Indebtedness of the Borrower, the Subsidiary Guarantors and their
Subsidiaries consisting of (i) unsecured Indebtedness of the Borrower and
their Subsidiaries not otherwise permitted hereunder, (ii) obligations
under Capitalized Leases and (iii) purchase money Indebtedness incurred in
connection with the acquisition after the date hereof of any real or
personal property by the Borrower, such Subsidiary Guarantor or such
Subsidiary in an amount not to exceed $15,000,000 in the aggregate,
provided that neither the Borrower, such Subsidiary Guarantor or such
Subsidiary shall be permitted to finance more than ninety percent (90%) of
the purchase price of the property acquired, and further provided, that
aggregate principal amount of all such Indebtedness permitted under this
clause (g) shall not exceed $20,000,000 outstanding at any one time;
(g) Indebtedness of the Borrower, the Subsidiary Guarantors and their
Subsidiaries existing on the date hereof and listed and described on
Schedule 9.1 attached hereto;
(h) Indebtedness of the Borrower in respect of the Management
Subscription Notes issued as permitted under (S)9.4(i) hereof, and
Indebtedness of the Borrower or any of its Subsidiaries in respect of the
Incentive Arrangements;
(i) Indebtedness in respect of performance, surety, statutory, appeal
or similar bonds obtained in the ordinary course of business;
(j) Indebtedness to Jordan Industries arising in respect of payments
due under the New Subsidiary Advisory Agreement, the New Subsidiary
Consulting Agreements, the JI Properties Services Agreement and the Tax
Sharing Agreement;
(k) Indebtedness of the Borrower, any of the Subsidiary Guarantors or
any of their Subsidiaries incurred to refinance or replace Indebtedness of
such Person permitted under clauses (g), (h) and (n) hereof, provided, that
(i) the principal amount (or committed principal amount) of such
refinancing Indebtedness shall not exceed the outstanding principal amount
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(or committed principal amount) of the Indebtedness being refinanced, (ii)
the terms of such refinancing Indebtedness are not more onerous in the
aggregate to the Borrower, such Subsidiary Guarantor or such Subsidiary, as
applicable, than the terms of the Indebtedness being refinanced, (iii) the
Majority Banks shall have consented to the incurrence of such refinancing
Indebtedness, such consent not to be unreasonably withheld, (iv) no
Subsidiary of the Borrower or a Subsidiary Guarantor, shall refinance any
Indebtedness of the Borrower;
(l) Indebtedness of the Borrower or any Subsidiary Guarantor in
respect of intercompany loans, advances, obligations or similar transfers
to or among the Borrower or any Subsidiary Guarantor, including, without
limitation, pursuant to the Intercompany Loan Agreement and the Services
Agreements, provided that (i) the Non-Wholly-Owned Guarantors shall only be
permitted hereunder to incur Intercompany Advances from the Borrower (and
not from any other Subsidiary of the Borrower), such Intercompany Advances
must be advanced pursuant to the Intercompany Loan Agreement and all
Intercompany Advances evidenced by notes must be pledged to the Agent for
the benefit of the Banks and (ii) all intercompany loans, advances,
obligations or similar transfers advanced by any Non-Wholly-Owned
Guarantors to the Borrower shall be evidenced by subordinated notes which
expressly prohibit setoff against the notes referred to in subsection (1)
above from the Borrower to such Non-Wholly-Owned Guarantor and which notes
are pledged to the Agent for the benefit of the Agent and the Banks;
(m) Indebtedness of the Borrower, any of the Subsidiary Guarantors or
any of their Subsidiaries assumed in connection with the acquisition after
the date hereof of any real or personal property by the Borrower, such
Subsidiary Guarantor or such Subsidiary, provided that the aggregate
principal amount of all such Indebtedness permitted under this paragraph
(m) shall not exceed $5,000,000 outstanding at any one time and the Agent
has approved the terms of all agreements relating to or securing such
Indebtedness prior to the assumption or acquisition thereof;
(n) Indebtedness of the Borrower or any of its Subsidiaries incurred
in connection with agreements providing for indemnification, purchase price
adjustments and similar obligations in connection with the sale or
disposition of any of their businesses or properties or assets or in
connection with any acquisition, provided that such sale, disposition or
acquisition is permitted under the terms of this Credit Agreement.
(S)9.2 Restrictions on Liens.
Each of the Borrower and each of the Subsidiary Guarantors will not, and
will not permit any of their Subsidiaries to, (i) create or incur or suffer to
be created or incurred or to exist any lien, encumbrance, mortgage, pledge,
charge, restriction or other security interest of any kind upon any of its
property or assets of any character whether now owned or hereafter acquired, or
upon the income or profits therefrom; (ii) transfer any of such property or
assets or the income or profits therefrom for
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the purpose of subjecting the same to the payment of Indebtedness or performance
of any other obligation in priority to payment of its general creditors; (iii)
acquire, or agree or have an option to acquire, any property or assets upon
conditional sale or other title retention or purchase money security agreement,
device or arrangement; (iv) suffer to exist for a period of more than thirty
(30) days after the same shall have been incurred any Indebtedness or claim or
demand against it that if unpaid might by law or upon bankruptcy or insolvency,
or otherwise, be given any priority whatsoever over its general creditors; or
(v) sell, assign, pledge or otherwise transfer any accounts, contract rights,
general intangibles, chattel paper or instruments, with or without recourse;
provided that the Borrower, any Subsidiary Guarantor and any Subsidiary of the
Borrower may create or incur or suffer to be created or incurred or to exist:
(a) liens against the Borrower, any of the Subsidiary Guarantors or
any of their Subsidiaries to secure taxes, assessments and other government
charges in respect of obligations not overdue or liens on properties other
than the Mortgaged Properties to secure claims for labor, material or
supplies in respect of obligations not overdue;
(b) deposits or pledges made by the Borrower, any of the Subsidiary
Guarantors or any of their Subsidiaries in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(c) liens against the Borrower, any of the Subsidiary Guarantors or
any of their Subsidiaries on properties other than Mortgaged Properties in
respect of judgments or awards, the Indebtedness with respect to which is
permitted by (S)9.1(d) hereof;
(d) liens of carriers, warehousemen, mechanics and materialmen, and
other like liens on properties of the Borrower, any of the Subsidiary
Guarantors or any of their Subsidiaries other than Mortgaged Properties, in
existence less than 120 days from the date of creation thereof in respect
of obligations not overdue;
(e) encumbrances on Real Estate other than the Mortgaged Properties
of the Borrower, any of the Subsidiary Guarantors or any of their
Subsidiaries consisting of easements, rights of way, zoning restrictions,
restrictions on the use of real property and defects and irregularities in
the title thereto, landlord's or lessor's liens under leases to which the
Borrower, a Subsidiary Guarantor or a Subsidiary of the Borrower or a
Subsidiary Guarantor is a party, and other minor liens or encumbrances none
of which in the opinion of the Borrower interferes materially with the use
of the property affected in the ordinary conduct of the business of the
Borrower and their Subsidiaries, which defects do not individually or in
the aggregate have a materially adverse effect on the business of the
Borrower individually or of the Borrower and their Subsidiaries on a
consolidated basis;
(f) liens against the Borrower, any of the Subsidiary Guarantors or
any of their Subsidiaries existing on the date hereof and listed on
Schedule 9.2 attached hereto;
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(g) (i) liens to secure Capitalized Lease obligations of the type and
amount permitted by (S)9.1(g)(ii), so long as such liens cover only the
property subject to such Capitalized Leases; and (ii) purchase money
security interests in or purchase money mortgages on real or personal
property of the Borrower, any of the Subsidiary Guarantors or any of their
Subsidiaries other than Mortgaged Properties acquired after the date hereof
to secure purchase money Indebtedness of the type and amount permitted by
(S)9.1(g)(iii) hereof, incurred in connection with the acquisition of such
property, which security interests or mortgages cover only the real or
personal property so acquired;
(h) liens and encumbrances on each Mortgaged Property of the
Borrower, any of the Subsidiary Guarantors or any of their Subsidiaries as
and to the extent permitted by the Mortgage applicable thereto;
(i) the replacement, extension or renewal (without increase in
amount) of any lien permitted by clauses (f), (g) or (k) of this (S)9.2
upon or in the same property theretofore subject thereto, to secure
refinancing Indebtedness permitted under (S)9.1(l) so long as such liens do
not extend to cover any assets other than those being refinanced;
(j) liens against the Borrower, any of the Subsidiary Guarantors or
any of their Subsidiaries in favor of the Agent for the benefit of the
Banks and the Agent under the Loan Documents; and
(k) purchase money liens on personal property, mortgage liens on real
property or capitalized leases of a Person existing at the time such Person
is merged into or consolidated with the Borrower or any Subsidiary of
Holdings or the Borrower or becomes a wholly owned Subsidiary of Holdings
or the Borrower in compliance with (S)9.5.1; provided that such liens were
not created in contemplation of such merger or consolidation or acquisition
and do not extend to any assets other than those subject to such liens
prior to such merger, consolidation or other acquisition, and secure
Indebtedness permitted by (S)9.1(n).
(S)9.3 Restrictions on Investments
Neither the Borrower, nor any of the Subsidiary Guarantors will, and will
not permit any of their Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except:
(a) Investments by the Borrower in marketable direct or guaranteed
obligations of the United States of America that mature within one (1) year
from the date of purchase;
(b) Investments by the Borrower, any of the Subsidiary Guarantors or
any of their Subsidiaries in demand deposits, certificates of deposit,
bankers acceptances and time deposits of United States banks having total
assets in excess of $500,000,000;
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(c) Investments by the Borrower in securities commonly known as
"commercial paper" issued by a corporation organized and existing under the
laws of the United States of America or any state thereof that at the time
of purchase have been rated and the ratings for which are not less than
"P1" if rated by Moody's Investors Services, Inc., and not less than "A1"
if rated by Standard and Poor's;
(d) Investments by the Borrower in repurchase agreements secured by
any one or more of the foregoing;
(e) Investments existing on the date hereof and listed on Schedule
9.3 hereto and in amounts not to exceed the amounts listed on Schedule 9.3
hereto;
(f) (i) Investments consisting of Investments by the Borrower in
Domestic Subsidiaries of the Borrower and by any Domestic Subsidiary of the
Borrower in its Domestic Subsidiaries which are also Domestic Subsidiaries
of the Borrower existing on the Closing Date or in any other Person
acquired in a Permitted Acquisition which concurrently with such Investment
becomes a Subsidiary of the Borrower and a Subsidiary Guarantor on such
date, provided such Subsidiary has executed and delivered to the Agent for
the benefit of the Agent and the Banks an Instrument of Adherence, become a
party to the Guaranty and the Security Agreement and has executed and
delivered to the Agent any and all other agreements, documents or
instruments necessary to grant to the Agent a first priority perfected lien
in such Subsidiary's assets, and Investments by Subsidiaries of the
Borrower in the Borrower, and, to the extent of any Investments by the
Borrower in any Non-Wholly-Owned Subsidiary, such Investments shall be made
by Intercompany Advances pursuant to the Intercompany Loan Agreement and if
evidenced by notes, such notes shall be pledged and assigned to the Agent
for the benefit of the Agent and the Banks; and (ii) Investments consisting
of Investments by the Borrower in Subsidiaries which are not Subsidiary
Guarantors hereunder which, when taken together with the aggregate purchase
price of all Permitted Acquisitions of Subsidiaries which are not
Guarantors, does not exceed an aggregate amount of $25,000,000 outstanding
at any time;
(g) Investments by the Subsidiary Guarantors consisting of the
Guaranty;
(h) Investments by the Borrower, any of the Subsidiary Guarantors or
any of their Subsidiaries made as a result of any Indebtedness owed to it
by another of them as permitted under (S)9.1(k) hereof;
(i) Investments by the Borrower consisting of Distributions permitted
by (S)9.4 hereof;
(j) Investments by the Borrower or its Subsidiaries consisting of any
promissory note or other instrument received by the Borrower or such
Subsidiary in connection with a sale of assets permitted by (S)9.5.2;
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(k) Investments by the Borrower in Persons (other than the
Investments permitted under clauses (a) through (j) of this (S)9.3) not
exceeding $5,000,000 in the aggregate outstanding at any time; and
(l) Investments by the Borrower or its Subsidiaries in Foreign
Entities which are not also Foreign Subsidiaries in an aggregate amount not
to exceed $10,000,000 outstanding at any time.
(S)9.4 Restricted Payments; Distributions
The Borrower and its Subsidiaries will not make any Distributions or
Restricted Payments, other than dividends or payments:
(a) by the Borrower and its Subsidiaries to Jordan Industries
required under the Tax Sharing Agreement to permit Jordan Industries to pay
income, franchise and other taxes and governmental levies owed or payable
by Jordan Industries (or, to the extent the Borrower does not file pursuant
to a consolidated tax return with Jordan Industries, to Holdings on similar
terms as contained in the Tax Sharing Agreement), provided such dividends
or payments shall not be made earlier than ten (10) days prior to the date
such payments are due and payable pursuant to the Tax Sharing Agreement;
(b) so long as no Default or Event of Default under (S)(S)13.1(a),
(b) or (c) (only with respect to (S)10) exists and is continuing at the
time of such payment or would result therefrom by Holdings to Jordan
Industries required under the JI Properties Services Agreement; provided
such dividends or payments shall not be made earlier than ten (10) days
prior to the date such payments are due and payable pursuant to the JI
Properties Services Agreement;
(c) by the Borrower (i) to Holdings to pay director fees (not to
exceed $150,000 in the aggregate in any calendar year) and (ii) to permit
Jordan Industries to pay director fees (not to exceed $150,000 in the
aggregate in any calendar year), provided that such dividends and payments
shall be limited to the Borrower's allocated share of such director fees,
such allocation to be approved by the Agent, such approval not to be
unreasonably withheld;
(d) so long as no Default or Event of Default under (S)(S)13.1(a),
(b) or (c) (only with respect to (S)10) exists and is continuing at the
time of such payment or would result therefrom, payments by the Borrower to
Holdings or Jordan Industries to permit Holdings or Jordan Industries to
(i) fund indemnity payments required by Jordan Industries' certificate of
incorporation or by-laws or director indemnity agreements existing on the
date hereof, (ii) pay filing, registration and reporting fees and expenses,
and fees and expenses associated with state qualifications and other state,
federal or regulatory compliance matters, (iii) comply with expense
reimbursement and indemnity provisions under the New Subsidiary Consulting
Agreements, and (iv) pay or reimburse Holdings and Jordan Industries for
payment of business
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related expenses incurred in the ordinary course of business (including,
without limitation, accounting and insurance expenses) and not otherwise
covered by this (S)9.4(d); provided, such dividends or payments to be made
pursuant to this (S)9.4(d) shall not be made earlier than ten (10) days
prior to the date such payments are due and payable by Holdings or Jordan
Industries and provided further that such dividends, payments and
reimbursements shall be limited to the Borrower's allocated share of such
payments, and for purposes of clause (iv), any such allocations or
reimbursements to the Borrower in an amount in excess of $100,000 to be
approved by the Agent, such approval not to be unreasonably withheld;
(e) so long as no Default or Event of Default exists and is
continuing at the time of such payment or would result therefrom, payments
by the Borrower to Holdings to permit Holdings to make required payments of
interest on the Senior Notes, the Discount Notes and the Preferred Stock
Exchange Notes provided the Borrower shall only be permitted to make such
payments to Holdings in each fiscal year and up to an aggregate amount
equal to the amount of interest Holdings is required to pay in cash on the
Senior Notes, the Discount Notes and the Preferred Stock Exchange Notes in
and with respect to such fiscal year and solely for the purpose of making
such interest payment; provided, such dividends or payments to be made
pursuant to this (S)9.4(e) shall not be made earlier than thirty (30) days
prior to the date such payments are due and payable by Holdings;
(f) by the Borrower so long as no Default or Event of Default under
(S)(S)13.1(a), (b) or (c) (only with regard to (S)10), has occurred or is
continuing, or would result therefrom, to (i) Jordan Industries consisting
of quarterly management services payments in connection with corporate
overhead in an aggregate annual amount of one percent (1%) of the net sales
of the Borrower's Subsidiaries for such fiscal year pursuant to the New
Subsidiary Consulting Agreements and (ii) to Jordan Industries consisting
of ordinary investment services payments pursuant to the New Subsidiary
Advisory Agreements, provided in each case, that such dividends or payments
shall not be made earlier than ten (10) days prior to the date such
payments are due and payable pursuant to the terms of the New Subsidiary
Consulting Agreements or New Subsidiary Advisory Agreement, as applicable;
(g) by the Borrower in respect of interest or principal payments
required to be made under the terms of the Management Subscription Notes,
provided that interest and principal payments may only be made if such
payment is permitted to be made under (S)9.8 hereunder;
(h) by Subsidiaries of the Borrower to the Borrower or any of the
Wholly-Owned Subsidiary Guarantors; and
(i) by the Borrower as a Distribution in the form of the Management
Subscription Notes issued by the Borrower to repurchase shares of its
common stock pursuant to the Management Subscription Agreement, provided
that (i) no Default or Event of Default then exists or would result after
the making of such payments, (ii) the aggregate amount of all cash
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payments made by the Borrower to repurchase shares of common stock as
provided under the Management Subscription Agreement or related Management
Subscription Notes does not exceed $300,000 in any fiscal year and (iii)
the aggregate amount of all cash payments made by the Borrower to
repurchase shares of common stock as provided under the Management
Subscription Agreement or related Management Subscription Notes does not
exceed $1,000,000.
(S)9.5 Merger, Consolidation and Disposition of Assets
(S)9.5.1 Mergers and Accusations
Neither the Borrower nor any of the Subsidiary Guarantors will, or
will permit any of their Subsidiaries to, become a party to any merger or
consolidation, or agree to or effect any asset acquisition or equity
acquisition except, so long as no Default or Event of Default has occurred
or is continuing, or would exist after giving effect thereto:
(a) the merger of one or more of the Subsidiaries of the Borrower
with and into the Borrower or any other Subsidiary of the Borrower which is
a Subsidiary Guarantor hereunder, and provided the Borrower or the
Subsidiary Guarantor, as the case may be, has taken or caused to be taken
all action necessary to grant to the Agent a first priority perfected
security interest in all of the Borrower's or such Subsidiary Guarantor's
Collateral after such merger; and
(b) (i) the acquisition of the assets and/or stock of Engineering
Endeavors Incorporated (the "Engineering Endeavors Acquisition"), provided
(1) no Default or Event of Default has occurred and is continuing, (2) the
Borrower has delivered to the Agent all documents, instruments and
agreements to be entered into in connection therewith, and all such
documents, instruments and agreements are in form and substance
satisfactory to the Agent; (3) the aggregate purchase price (including the
assumption of any Indebtedness, leases and contingent obligations) does not
exceed $45,000,000; and (4) the Borrower has demonstrated to the Agent
compliance with (S)(S)10.5.2(b)(ii)(1)-(6), (8) and (9), and (ii) other
asset or stock acquisitions of Persons in the same or a similar line of
business as the Borrower and its Subsidiaries (each, a "Permitted
Acquisition") where (1) the Borrower has provided the Agent with ten (10)
Business Days prior written notice of such Permitted Acquisition, which
notice shall include a reasonably detailed description of such Permitted
Acquisition and copies of all acquisition agreements in connection
therewith; (2) the business to be acquired would not subject the Agent or
the Banks to regulatory or third party approvals in connection with the
exercise of its rights and remedies under this Credit Agreement or any
other Loan Document; (3) no contingent obligations or liabilities will be
incurred or assumed in connection with such Permitted Acquisition which
could be expected to have a material adverse effect on the business, assets
or financial condition of the Borrower and their Subsidiaries; (4) the
Borrower has provided the Agent with such other information as was
reasonably requested by the Agent;
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(5) the Borrower or the applicable Domestic Subsidiary, as the case may be,
shall take or cause to be taken all necessary actions to grant to the
Agent, within five days of consummating such acquisition, a first priority
perfected lien in all assets and stock acquired in connection with such
Permitted Acquisition, with such exceptions as the Agent may approve and
except to the extent not required pursuant to (S)(S)8.14 and 9.2(k); (6)
the Borrower has demonstrated to the reasonable satisfaction of the Agent,
based on a Pro Forma Compliance Certificate, compliance with (S)10 on a Pro
Forma basis immediately prior to and after giving effect to such Permitted
Acquisition; (7) the aggregate purchase price (including contingent payment
obligations and assumption of Indebtedness) for such Permitted Acquisition
(or series of related Permitted Acquisitions) does not exceed $25,000,000
and the aggregate purchase price for all Permitted Acquisitions does not
exceed $75,000,000 in any period of twelve (12) consecutive months; (8) to
the extent the Borrower uses any of the proceeds of the Revolving Credit
Loans to finance all or any portion of any Permitted Acquisition, the
Borrower has demonstrated to the satisfaction of the Agent, based on a Pro
Forma Compliance Certificate, that the Leverage Ratio on a Pro Forma Basis
immediately after giving effect to the Permitted Acquisition will not
exceed the following: (v) 6.75:1.00 for any Permitted Acquisitions
consummated from the Closing Date through September 30, 1998; (w) 6.50:1.00
for the period of October 1, 1998 through September 30, 1999; (x) 6.00:1.00
for the period of October 1, 1999 through September 30, 2000; (y) 5.50:1.00
for the period of October 1, 2000 through September 30, 2001; and (z)
5.00:1.00 at any time thereafter; and (9) the Borrower has delivered to the
Agent a certificate of the chief financial officer of the Borrower to the
effect that (A) the Borrower will be solvent upon the consummation of the
Permitted Acquisition; (B) the Pro Forma Compliance Certificate fairly
presents the financial condition of the Borrower and its Subsidiaries as of
the date thereof and after giving effect to such Permitted Acquisition and
(C) no Default or Event of Default then exists or would result after giving
effect to the Permitted Acquisition.
In the event any new Subsidiary is formed as a result of or in
connection with any acquisition, such new Subsidiary shall, immediately
upon its creation or acquisition, execute and deliver to the Agent for the
benefit of the Banks and the Agent, an Instrument of Adherence in
substantially the form of Exhibit J hereto (an "Instrument of Adherence")
and the Loan Documents shall be amended and/or supplemented as necessary to
make the terms and conditions of the Loan Documents applicable to such
Subsidiary. Such Subsidiary shall become a Subsidiary Guarantor hereunder
and shall become a party to the Guaranty and the Security Agreement and
shall execute and deliver to the Agent any and all other agreements,
documents, instruments and financing statements necessary to grant to the
Agent a first priority perfected lien in such Subsidiary's assets. The
Borrower and its Subsidiaries shall, immediately upon the creation or
acquisition of such Subsidiary, pledge all of such Subsidiary's capital
stock to the Agent for the benefit of the Agent and the Banks.
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(S)9.5.2 Disposition of Assets
Neither the Borrower nor any Subsidiary Guarantors will, nor will they
permit any of their Subsidiaries to, become a party to or agree to or
effect any disposition of assets, other than (a) the sale of inventory in
the ordinary course of business, consistent with past practices, (b) the
disposition of obsolete assets which are no longer used or useful in
current or planned business operations of such Person, (c) the sale of
assets pursuant to sale-leaseback transactions permitted by (S)9.6 hereof,
(d) the sale of Capital Assets which would not constitute a Subsidiary or a
line of business, the proceeds of which are reinvested as permitted Capital
Expenditures within 360 days of such sale, (e) the sale of assets by a
Subsidiary Guarantor to a Subsidiary Guarantor; provided, that any sale or
other disposition of assets from a Wholly-Owned Subsidiary to a Non-Wholly-
Owned Subsidiary shall be in an arms-length transaction for fair and
reasonable value; and (f) sales of assets in arms-length transaction for
fair and reasonable value, provided that (i) no Default or Event of Default
shall have occurred and be continuing at the time of such sale and no
Default or Event of Default will exist after giving effect to such sale,
(ii) at least eighty percent (80%) of the purchase price for such assets is
received in cash and the cash net proceeds (after appropriate reserves and
holdback) from such sales are applied as provided in (S)3.2 hereof, and;
(iii) any promissory note or other instrument received by the Borrower,
such Subsidiary Guarantor or such Subsidiary in connection with such sale
is an Investment permitted by (S)9.3 hereof, and the Borrower or such
Subsidiary, as applicable, has delivered such promissory note or other
instrument to the Agent to be held in pledge for the benefit of itself and
the Banks in accordance with the terms of the Loan Documents, and (iv) the
Borrower shall have delivered to the Agent on the date of such sale a
certificate signed by an authorized officer of the Borrower and evidence
satisfactory to the Agent showing compliance with the provisions of clauses
(i) and (iii) of this (S)9.5.2.
Notwithstanding anything to the contrary contained in this (S)9.5,
neither the Borrower nor any of its Subsidiaries shall be permitted to
dispose of any assets or take (or omit to take) any action in connection
with any asset sale or other asset disposition or engage in any other
transaction which action (or omission) would require or result in any
repayment, repurchase or redemption (or any mandatory offer to repay,
repurchase or redeem) by Holdings or any of its Subsidiaries of the Senior
Notes or the Discount Notes pursuant to the Senior Indenture or the
Discount Notes Indenture.
(S)9.6 Sale and Leaseback
Except as expressly permitted pursuant to (S)9.5.2 hereto, the Borrower
will not, and will not permit any of its Subsidiaries to, enter into any
arrangement, directly or indirectly, whereby the Borrower, any Subsidiary
Guarantor or any Subsidiary of the Borrower or a Subsidiary Guarantor shall sell
or transfer any property owned by it in order then or thereafter to lease such
property or lease other property that the Borrower, any Subsidiary Guarantor or
any Subsidiary of the Borrower or a Subsidiary Guarantor intends to use for
substantially the same purpose as the property being sold or
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transferred, provided, however, that the Borrower, any of the Subsidiary
Guarantors or any of their Subsidiaries may enter into such sale-leaseback
transactions to the extent that the Indebtedness incurred in connection with
such transactions is permitted under (S)9.1(g) hereof.
(S)9.7 Compliance with Environmental Laws
Neither the Borrower nor any of the Subsidiary Guarantors will, nor will
they permit any of their Subsidiaries to, (a) use any of the Real Estate or any
portion thereof for the handling, processing, storage or disposal of Hazardous
Substances in violation of any Environmental Law the noncompliance with which
would have a material adverse effect on the business, assets or financial
condition of the Borrower or its Subsidiaries taken as a whole, (b) cause or
permit to be located on any of the Real Estate any underground tank or other
underground storage receptacle for Hazardous Substances in violation of any
Environmental Law the noncompliance with which would have a material adverse
effect on the business, assets or financial condition of the Borrower or its
Subsidiaries taken as a whole, (c) generate any Hazardous Substances on any of
the Real Estate in violation of any Environmental Law the noncompliance with
which would have a material adverse effect on the business, assets or financial
condition of the Borrower or its Subsidiaries taken as a whole, (d) conduct any
activity at any Real Estate or use any Real Estate in any manner so as to cause
a release (i.e. releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or dumping) or
threatened release of Hazardous Substances on, upon or into the Real Estate,
which release would have a material adverse effect on the business, assets or
financial condition of the Borrower or its Subsidiaries taken as a whole, or (e)
otherwise conduct any activity at any Real Estate or use any Real Estate in any
manner that would violate any Environmental Law or bring such Real Estate in
violation of any Environmental Law in each case if such violation would have a
material adverse effect on the business, assets or financial condition of the
Borrower and its Subsidiaries, taken as a whole.
(S)9.8 Subordinated Debt
The Borrower will not, nor will it permit any Subsidiary to, (a) amend,
supplement, or otherwise modify the terms of the Management Subscription Notes
or (b) prepay, redeem, repurchase or make any payment in defeasance of any
Management Subscription Notes.
(S)9.9 Employee Benefit Plans
Neither the Borrower nor any ERISA Affiliate will
(a) engage in any "prohibited transaction" within the meaning of
(S)406 of ERISA or (S)4975 of the Code which could result in a material
liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency",
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as such term is defined in (S)302 of ERISA, whether or not such deficiency
is or may be waived; or
(c) AFL to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the
Borrower or any of its Subsidiaries pursuant to (S)302(f) or (S)4068 of
ERISA; or
(d) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of (S)4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of
such Plans, disregarding for this purpose the benefit liabilities and
assets of any such Plan with assets in excess of benefit liabilities.
Change in Terms of Capital Stock
(S)9.10 Change in Terms of Capital Stock
The Borrower will not nor will it permit any of its Subsidiaries to effect
or permit any change in or amendment to any document or instrument pertaining to
the terms of such Person's capital stock without the written consent of the
Banks unless such change or amendment is of an immaterial or ministerial nature
that would not have any material adverse effect on the Agent's or the Banks'
rights under the Loan Documents or the Borrower's, such Subsidiary Guarantor's
or such Subsidiary's obligations under the Loan Documents; provided, however, so
long as no Default or Event of Default has occurred and is continuing or would
exist as a result thereof, the Borrower shall be entitled to modify its
outstanding capital stock or issue shares of a new class of capital stock
provided that (i) the terms of such capital stock do not permit any cash
dividends to be paid to the holders thereof until all of the Obligations have
been indefeasibly repaid in full in cash and the Commitments have been
permanently reduced to zero; (ii) the terms of such capital stock do not contain
any mandatory redemption rights until such time as all of the Obligations have
been indefeasibly repaid in full in cash and the Commitments have been
permanently reduced to zero; (iii) such capital stock is non-voting and, if
convertible, is only convertible into a non-voting class of capital stock; and
(iv) the net cash proceeds received from such modification or issuance shall be
immediately paid to the Agent in accordance with (S)3.2 hereof.
(S)9.11 Fiscal Year
(a) As to the Borrower and any Subsidiary existing on the Closing Date,
neither the Borrower nor any Subsidiary Guarantor will, nor will they permit any
of their Subsidiaries to, change the date of the end of its respective fiscal
years from that set forth in (S)7.21 hereof; and (b) as to any Subsidiary formed
or acquired after the Closing Date, neither the Borrower nor any Subsidiary
Guarantor will permit any Subsidiary formed or acquired after the Closing Date
to have a fiscal year end that would not permit the Borrower to include such
Subsidiary in its consolidated financial statements pursuant to generally
accepted accounting principles and/or rules and regulations promulgated by the
Securities
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and Exchange Commission.
(S)9.12 Modification of Documents
Neither the Borrower nor any Subsidiary Guarantor will consent to or agree
to any amendment, supplement or other modification to the New Subsidiary
Advisory Agreement, the Tax Sharing Agreement, the New Subsidiary Consulting
Agreements, the JI Properties Services Agreements, the Transition Agreement,
Stockholders Agreement or the Management Subscription Agreement which affects,
in a manner adverse to the Borrower or any Subsidiary Guarantor, the amount or
timing of payments required to be made by the Borrower or such Subsidiary
Guarantor thereunder, or if such amendment, supplement or modification could
reasonably be expected to materially adversely affect the Agent's or the
Banks(S) rights or interests or impact the Borrower's or any Subsidiary
Guarantor's ability to fulfill its obligations under the Loan Documents.
(S)9.13 Negative Pledges
Neither the Borrower nor any of its Subsidiaries will enter into any
agreement (excluding this Credit Agreement and the Loan Documents) prohibiting
the creation or assumption of any lien upon its properties, revenues or assets
or those of any of its Subsidiaries, whether now owned or hereafter acquired
other than agreements with Persons prohibiting any such lien on assets in which
such Person has a prior security interest which is permitted by (S)9.2.
(S)9.14 Transactions with Affiliates
The Borrower will not, nor will it permit any of its Subsidiaries to, enter
into, or cause, suffer or permit to exist (a) any arrangement or contract with
any of its other Affiliates of a nature customarily entered into by Persons
which are Affiliates of each other (including management or similar contracts or
arrangements relating to the allocation of revenues, taxes and expenses or
otherwise) requiring any payments to be made by the Borrower, any of the
Subsidiary Guarantors or any of their Subsidiaries to any Affiliate unless such
arrangement is fair and equitable to the Borrower, such Subsidiary Guarantor or
such Subsidiary; or (b) any other transaction, arrangement, contract or other
agreement with any of its other Affiliates which would not be entered into by a
prudent Person in the position of the Borrower, such Subsidiary Guarantor or
such Subsidiary with, or which is on terms which are less favorable than are
obtainable from, any Person which is not one of its Affiliates, provided,
however, nothing contained in this (S)9.14 shall prohibit the Borrower from
making payments otherwise permitted by (S)9.4 hereof.
(S)9.15 Upstream Limitations
The Borrower and each of the Subsidiary Guarantors will not permit any of
their Subsidiaries to, enter into any agreement, contract or arrangement (other
than the Credit Agreement and the other Loan Documents) restricting the ability
of any Subsidiary to pay or make dividends or distributions
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in cash or kind, to make loans, advances or other payments of whatsoever nature
or to make transfers or distributions of all or any part of its assets to the
Borrower or to any Subsidiary Guarantor.
(S)9.16 Inconsistent Agreements
Neither the Borrower, nor any of the Subsidiary Guarantors will, nor will
they permit any of their Subsidiaries to, enter into any agreement containing
any provision which would be violated or breached by the performance by the
Borrower, such Subsidiary Guarantor or such Subsidiary of its obligations
hereunder or under any of the Loan Documents.
(S)9.17 Hostile Takeovers
Neither the Borrower nor any of the Subsidiary Guarantors will, nor will
they permit their Subsidiaries to acquire or attempt to acquire, whether by
stock acquisition, purchase of assets, merger, consolidation or otherwise, any
assets, stock or business of any entities in any transaction that has not been
approved by the board of directors of the entity whose stock, assets or business
is or are to be acquired; provided, however, that the foregoing shall not
prohibit any purchase in the open market of not more than 5% of the fully
diluted outstanding capital stock of any corporation made in accordance with the
provisions of this Credit Agreement.
SECTION X.
FINANCIAL COVENANTS OF THE BORROWER
AND THE SUBSIDIARY GUARANTORS
-----------------------------
Each of the Borrower and the Subsidiary Guarantors covenants and agrees
that, so long as any Revolving Credit Loan, Unpaid Reimbursement Obligation,
Letter of Credit or Revolving Credit Note is outstanding or any Bank has any
obligation to make any Revolving Credit Loans or the Agent has any obligation to
issue, extend or renew any Letters of Credit:
(S)10.1 Leverage Ratio
The Borrower and the Subsidiary Guarantors will not, at any time during any
period described in the table set forth below, permit the Leverage Ratio to
exceed the ratio set forth opposite such period in such table:
<TABLE>
<CAPTION>
================================================================================
Period Ratio
- --------------------------------------------------------------------------------
<S> <C>
Closing Date through June 30, 1998 7.25:1.00
- --------------------------------------------------------------------------------
July 1, 1998 through June 30, 1999 7.00:1.00
- --------------------------------------------------------------------------------
</TABLE>
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- --------------------------------------------------------------------------------
July 1, 1999 through June 30, 2000 6.50:1.00
================================================================================
July 1, 2000 through June 30, 2001 6.00:1.00
================================================================================
any time thereafter 5.50:1.00
- --------------------------------------------------------------------------------
(S)10.2 Interest Coverage Ratio
-----------------------
The Borrower and the Subsidiary Guarantors will not, as of the end of
any fiscal quarter ending on any date or during any period described in the
table set forth below, permit the Interest Coverage Ratio to be less than the
ratio set forth opposite such period in such table:
- --------------------------------------------------------------------------------
Fiscal Quarter Ending Ratio
================================================================================
Closing Date through June 30, 1998 1.70:1.00
================================================================================
July 1, 1998 through June 30, 1999 1.80:1.00
================================================================================
July 1, 1999 through June 30, 2000 1.90:1.00
================================================================================
July 1, 2000 through December 31, 2000 2.00:1.00
================================================================================
January 1, 2001 through December 31, 2001 1.35:1.00
================================================================================
any fiscal quarter ending thereafter 1.40:1.00
- --------------------------------------------------------------------------------
(S)10.3 Consolidated Cash Flow Coverage Ratio.
--------------------------------------
The Borrower and the Subsidiary Guarantors will not, at any time
during any period described in the table set forth below, permit Consolidated
Cash Flow Ratio to be less than the amount set forth opposite such period in
such table:
- --------------------------------------------------------------------------------
Period Ratio
================================================================================
Closing Date through June 30, 1998 1.10:1.00
================================================================================
July 1, 1998 through December 31, 2000 1.15:1.00
================================================================================
At any time thereafter 1.05:1.00
- --------------------------------------------------------------------------------
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(S)10.4 Closing Conditions
------------------
The obligations of the Banks to make the initial Revolving Credit
Loans and of the Agent to issue any initial Letters of Credit shall be subject
to the satisfaction of the following conditions precedent on or prior to July
25, 1997:
(S)10.5 Loan Documents, Etc
-------------------
(S)10.5.1 Loan Documents.
---------------
Each of the Loan Documents shall have been duly executed and
delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of
the Banks. Each Bank shall have received a fully executed copy of each
such document.
(S)10.5.2 Offering Documents
------------------
Each of the Offering Documents shall have been duly executed and
delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of
the Banks. Each Bank shall have received a fully executed copy of each
such document.
(S)10.5.3 Acquisition Documents
---------------------
Each of the Acquisition Documents shall have been duly executed
and delivered by the respective parties thereto, shall be in full
force and effect and shall be in form and substance satisfactory to
each of the Banks. The Agent shall have received a fully executed copy
of each such document.
(S)10.6 Certified Copies of Charter Documents
-------------------------------------
Each of the Banks shall have received from Holdings, the Borrower and
each of their respective Subsidiaries a copy, certified by a duly authorized
officer of such Person to be true and complete on the Closing Date, of each of
(a) its charter or other incorporation documents as in effect on such date of
certification, and (b) its by-laws as in effect on such date.
(S)10.7 Corporate Action
----------------
All corporate action necessary for the valid execution, delivery and
performance by Holdings, the Borrower and their Subsidiaries of this Credit
Agreement and the other Loan Documents to which it is or is to become a party
shall have been duly and effectively taken, and evidence thereof
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satisfactory to the Banks shall have been provided to each of the Banks.
(S)10.8 Incumbency Certificate
----------------------
Each of the Banks shall have received from Holdings, the Borrower and
each of their Subsidiaries an incumbency certificate, dated as of the Closing
Date, signed by a duly authorized officer of Holdings, the Borrower and such
Subsidiary, and giving the name and bearing a specimen signature of each
individual who shall be authorized: (a) to sign, in the name and on behalf of
each of Holdings, the Borrower and such Subsidiary, each of the Loan Documents
to which Holdings, the Borrower or such Subsidiary is or is to become a party;
(b) in the case of the Borrower, to make Loan Requests and Conversion Requests
and to apply for Letters of Credit; and (c) to give notices and to take other
action on its behalf under the Loan Documents.
(S)10.9 Validity of Liens
-----------------
The Security Documents shall be effective to create in favor of the
Agent a legal, valid and enforceable first (except for Permitted Liens entitled
to priority under applicable law) security interest in and lien upon the
Collateral. All filings, recordings, deliveries of instruments and other actions
necessary or desirable in the opinion of the Agent to protect and preserve such
security interests shall have been duly effected. The Agent shall have received
evidence thereof in form and substance satisfactory to the Agent.
(S)10.10 Perfection Certificates and UCC Search Results
----------------------------------------------
The Agent shall have received from the Borrower and each of its
Subsidiaries a completed and fully executed Perfection Certificate and the
results of UCC searches with respect to the Collateral, indicating no liens
other than Permitted Liens and otherwise in form and substance satisfactory to
the Agent.
(S)10.11 Certificates of Insurance
-------------------------
The Agent shall have received a certificate of insurance from an
independent insurance broker dated as of the Closing Date, identifying insurers,
types of insurance, insurance limits, and policy terms, and otherwise describing
the insurance obtained in accordance with the provisions of the Security
Documents.
(S)10.12 Solvency Certificate
--------------------
Each of the Banks shall have received an officer's certificate of the
Borrower dated as of the Closing Date as to the solvency of the Borrower and its
Subsidiaries following the consummation of the transactions contemplated herein
and in form and substance satisfactory to the Banks.
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(S)10.13 Opinions of Counsel
-------------------
Each of the Banks and the Agent shall have received a favorable legal
opinion addressed to the Banks and the Agent, dated as of the Closing Date, in
form and substance reasonably satisfactory to the Agent, from (a) Mayer, Brown &
Platt, special counsel to Holdings, the Borrower and their Subsidiaries, and (b)
Bryan Cave LLP, special counsel to Holdings, the Borrower and their Subsidiaries
with respect to the Reorganization.
(S)10.14 Payment of Fees and other Arrangements
--------------------------------------
The Borrower shall have paid to the Banks or the Agent, as
appropriate, the closing fees and the Agent's Fee as contemplated by the Fee
Letter.
(S)10.15 Disbursement Instructions
-------------------------
The Agent shall have received disbursement instructions from the
Borrower with respect to the proceeds of the initial Revolving Credit Loan.
(S)10.16 Completion of Acquisition and Reorganization
--------------------------------------------
The Agent shall have received evidence that all of the closing
conditions in the Acquisition Documents and the Reorganization Documents have
been satisfied and each of the Acquisitions and the Reorganization shall have
been completed pursuant to the Acquisition Documents and the Reorganization
Documents and otherwise on terms and conditions that are satisfactory to the
Agent in all respects. The purchase price of the assets and business acquired
pursuant to the Acquisitions and the Reorganization and all expenditures and
transaction costs associated therewith shall not exceed $335,000,000 in the
aggregate.
(S)10.17 Capitalization
--------------
The Agent and the Banks shall have received evidence satisfactory to
the Agent and the Banks that (a) Holdings shall have received the gross proceeds
of (i) the Senior Notes in an aggregate amount of not less than $190,000,000;
(ii) the Discount Notes in an aggregate amount of not less than $85,000,000;
(iii) the Units in an aggregate amount of not less than $25,000,000 and (b) the
Borrower has received either an equity investment or the proceeds of an
intercompany advance from Holdings in cash in a minimum amount of $300,000,000
from Holdings on terms and conditions which are satisfactory to the Agent and
the Banks in all respects, and, to the extent such contribution by Holdings is
evidenced by an intercompany advance, such advance shall be evidenced by a
subordinated intercompany note containing subordination provisions satisfactory
to the Agent (the "Holdings Intercompany Note").
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(S)10.18 Taxes
-----
Except as otherwise provided in (S)8.16, the Agent shall have received
evidence of payment of real estate taxes and municipal charges on all Real
Estate due on or before the Closing Date.
(S)10.19 Consents and Approvals
----------------------
The Agent shall have received evidence that all consents and approvals
necessary to complete the Acquisitions and the Reorganization and the
transactions contemplated hereby have been obtained.
(S)10.20 Intercompany Advances
---------------------
The Agent shall have received evidence satisfactory to the Agent of
the amount of all Intercompany Advances outstanding on the Closing Date from
each Guarantor to the Borrower.
SECTION XI.
CONDITIONS TO ALL BORROWINGS
----------------------------
The obligations of the Banks to make any Revolving Credit Loan, and
the Agent to issue, extend or renew any Letter of Credit, in each case whether
on or after the Closing Date, shall also be subject to the satisfaction of the
following conditions precedent:
(S)11.1 Representations True; No Event of Default
-----------------------------------------
Each of the representations and warranties of the Borrower, any of the
Subsidiary Guarantors and any of their Subsidiaries contained in this Credit
Agreement, the other Loan Documents or in any document or instrument delivered
pursuant to or in connection with this Credit Agreement shall be true as of the
date as of which they were made and shall also be true at and as of the time of
the making of such Revolving Credit Loan or the issuance, extension or renewal
of such Letter of Credit, with the same effect as if made at and as of that time
(except to the extent of changes resulting from transactions contemplated or
permitted by this Credit Agreement and the other Loan Documents and changes
occurring in the ordinary course of business that singly or in the aggregate are
not materially adverse, and to the extent that such representations and
warranties relate expressly to an earlier date) and no Default or Event of
Default shall have occurred and be continuing.
(S)11.2 No Legal Impediment
-------------------
No change shall have occurred in any law or regulations thereunder or
interpretations thereof that in the reasonable opinion of any Bank would make it
illegal for such Bank to make such Revolving Credit Loan or to participate in
the issuance, extension or renewal of such Letter of Credit or in the reasonable
opinion of the Agent would make it illegal for the Agent to issue, extend or
renew
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<PAGE>
such Letter of Credit.
(S)11.3 Governmental Regulation
Each Bank shall have received such statements in substance and form
reasonably satisfactory to such Bank as such Bank shall require for the purpose
of compliance with any applicable regulations of the Comptroller of the Currency
or the Board of Governors of the Federal Reserve System.
(S)11.4 Proceedings and Documents
All proceedings in connection with the transactions contemplated by this
Credit Agreement, the other Loan Documents and all other documents incident
thereto shall be satisfactory in substance and in form to the Banks and to the
Agent and the Agent's Special Counsel, and the Banks, the Agent and such counsel
shall have received all information and such counterpart originals or certified
or other copies of such documents as the Agent may reasonably request.
SECTION XII.
EVENTS OF DEFAULT; ACCELERATION; ETC.
------------------------------------
(S)12.1 Events of Default and Acceleration
If any of the following events ("Events of Default" or, if the giving of
notice or the lapse of time or both is required, then, prior to such notice or
lapse of time, "Defaults") shall occur:
(a) the Borrower shall fail to pay any principal of the Revolving
Credit Loans or any Reimbursement Obligation when the same shall become due
and payable, whether at the stated date of maturity or any accelerated date
of maturity or at any other date fixed for payment;
(b) the Borrower shall fail to pay any (i) interest on the Revolving
Credit Loans, (ii) the commitment fee, (iii) any Letter of Credit Fee, (iv)
the Agent's Fee, or (v) other sums due hereunder or under any of the other
Loan Documents, when the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of maturity or at any other
date fixed for payment, and such failure shall continue for five (5) days;
(c) the Borrower or any of the Subsidiary Guarantors shall fail to
comply with any of its covenants contained in the first sentence of
(S)(S)8.6, 8.9, 8.12, 8.16, 8.17, 9.1 through 9.6, 9.8, 9.10, 9.11 or 10
hereof;
(d) holdings, the Borrower, any of the Borrower's Subsidiaries shall
fail to perform any term, covenant or agreement contained herein or in any
of the other Loan Documents (other than those specified elsewhere in this
(S)13.1) for thirty (30) days after written notice of
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<PAGE>
such failure has been given to the Borrower by the Agent;
(e) any representation or warranty of Holdings, the Borrower or any
of the Borrower's Subsidiaries in this Credit Agreement or any of the other
Loan Documents or in any of the Acquisition Documents, the Reorganization
Documents or the Offering Documents or in any other document or instrument
delivered pursuant to or in connection with this Credit Agreement or any of
the other Loan Documents or any of the Acquisition Documents, the
Reorganization Documents or the Offering Documents shall prove to have been
false in any material respect upon the date when made or deemed to have
been made or repeated;
(f) Holdings, the Borrower or any of the Borrower's Subsidiaries
shall (i) fail to pay at maturity, or within any applicable period of
grace, any obligation for borrowed money or credit received or in respect
of any Capitalized Leases in an aggregate amount in excess of $5,000,000,
or (ii) fail to observe or perform any material term, covenant or agreement
contained in any agreement by which it is bound, evidencing or securing
borrowed money or credit received or in respect of any Capitalized Leases
in an aggregate amount in excess of $5,000,000 for such period of time as
would permit (assuming the giving of appropriate notice if required) the
holder or holders thereof or of any obligations issued thereunder to
accelerate the maturity thereof;
(g) Holdings, the Borrower or any of the Borrower's Subsidiaries shall
make an assignment for the benefit of creditors, or admit in writing its
inability to pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment of a trustee or
other custodian, liquidator or receiver of such Person or of any
substantial part of the assets of such Person or shall commence any case or
other proceeding relating to such Person under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law of any jurisdiction, now or hereafter in
effect, or shall take any action to authorize or in furtherance of any of
the foregoing, or if any such petition or application shall be filed or any
such case or other proceeding shall be commenced against such Person and
such Person shall indicate its approval thereof, consent thereto or
acquiescence therein;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating Holdings, the Borrower or
any of the Borrower's Subsidiaries bankrupt or insolvent, or approving a
petition in any such case or other proceeding, or a decree or order for
relief is entered in respect of any such Person in an involuntary case
under federal bankruptcy laws as now or hereafter constituted and such case
or proceeding remains undismissed for sixty (60) days;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days, whether or not consecutive, any
final judgment against Holdings, the Borrower or any of the Borrower's
Subsidiaries that, with other outstanding final judgments,
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<PAGE>
undischarged, against such Persons exceeds in the aggregate $2,000,000;
(j) Holdings shall at any time (i) amend, supplement or otherwise
modify the terms of any of the Subordinated Debt or the Offering Documents,
and which amendment, supplement or modification effects any increase in the
principal amount of the Discount Notes, the Exchange Notes or the Senior
Notes, the interest rate thereon, shortens the maturity or the weighted
average life to maturity thereof, or any fees under any of the Offering
Documents or tightens or adds covenants or defaults or events of default
thereto, or which amendment, supplement or modification relates to other
terms and provisions of the Offering Documents and the cumulative effect of
which is to materially adversely affect the Agent's or the Bank's rights or
interests under the Loan Documents or impact Holdings', the Borrower's or
any of their Subsidiaries' ability to perform their respective obligations
under the Loan Documents; or (ii) prepay, redeem, repurchase or make any
payment in defeasance of any of the Preferred Stock Exchange Notes or the
Senior Notes or send any optional notice of redemption, repayment,
repurchase or defeasance with respect to any of the Preferred Stock
Exchange Notes or the Senior Notes, or (iii) amend, supplement or otherwise
modify the terms of the Stockholders Agreement or the Offering Documents
(including any provisions pertaining to any Preferred Stock) if such
amendment, supplement or modification could reasonably be expected to
adversely affect the Agent's or the Banks' rights or impact the Borrower's
or Holdings' abilities to fulfill their obligations under the Loan
Documents;
(k) Holdings shall exchange the Senior Preferred Stock for the
Preferred Stock Exchange Notes; the holders of all or any part of the
Subordinated Debt, the Preferred Stock Exchange Notes or the Senior Notes
shall accelerate the maturity of all or any part of the Subordinated Debt,
the Preferred Stock Exchange Notes or the Senior Notes; or the Subordinated
Debt, the Preferred Stock Exchange Notes, the Senior Notes or any Preferred
Stock (including, without limitation, the Senior Preferred Stock) shall be
prepaid, redeemed or repurchased in whole or in part;
(l) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Agent's security interests, mortgages or liens
in substantially all of the Collateral shall cease to be perfected, or
shall cease to have the priority contemplated by the Security Documents, in
each case otherwise than in accordance with the terms thereof or with the
express prior written agreement, consent or approval of the Banks, or any
action at law, suit or in equity or other legal proceeding to cancel,
revoke or rescind any of the Loan Documents shall be commenced by or on
behalf of Holdings, the Borrower, any of the Subsidiary Guarantors or any
of their Subsidiaries party thereto or any of their respective
stockholders, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a determination
that, or issue a judgment, order, decree or ruling to the effect that, any
one or more of the Loan Documents is illegal, invalid or unenforceable in
accordance with the terms thereof;
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(m) with respect to any Guaranteed Pension Plan, an ERISA Reportable
Event shall have occurred and the Majority Banks shall have determined in
their reasonable discretion that such event reasonably could be expected to
result in liability of Holdings, the Borrower, any of the Subsidiary
Guarantors or any of their Subsidiaries to the PBGC or such Guaranteed
Pension Plan in an aggregate amount exceeding $2,000,000 and such event in
the circumstances occurring reasonably could constitute grounds for the
termination of such Guaranteed Pension Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Guaranteed Pension Plan; or a trustee shall have been
appointed by the United States District Court to administer such Plan; or
the PBGC shall have instituted proceedings to terminate such Guaranteed
Pension Plan;
(n) the Borrower, any of the Subsidiary Guarantors or any of their
Subsidiaries shall be enjoined, restrained or in any way prevented by the
order of any court or any administrative or regulatory agency from
conducting any material part of its business and such order shall continue
in effect for more than thirty (30) days;
(o) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy,
or other casualty, which in any such case causes, for more than fifteen
(15) consecutive days, the cessation or substantial curtailment of revenue
producing activities at any facility of the Borrower, any of the Subsidiary
Guarantors or any of their Subsidiaries if such event or circumstance is
not covered by business interruption insurance and would have a material
adverse effect on the business or financial condition of the Borrower, such
Subsidiary Guarantor or such Subsidiary;
(p) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
Holdings, the Borrower, any of the Subsidiary Guarantors or any of their
Subsidiaries if such loss, suspension, revocation or failure to renew would
have a material adverse effect on the business or financial condition of
Holdings, the Borrower and their Subsidiaries, taken as a whole;
(q) (i) Holdings shall at any time, legally or beneficially, own less
than 100% of the outstanding capital stock of the Borrower, or shall at any
time grant, create, incur or permit to exist any lien or other encumbrance
on the capital stock of the Borrower; (ii) the Borrower shall, at any time,
legally or beneficially own directly or indirectly less than 100% of the
outstanding capital stock of any of its Wholly-Owned Subsidiaries; or (iii)
the Borrower shall, at any time, legally or beneficially own directly or
indirectly less than 95% of that percentage of the outstanding capital
stock of any of its Non-Wholly Owned Subsidiaries which the Borrower owns
on the date such Person became a Non-Wholly-Owned Subsidiary;
(r) the Jordan Affiliates shall at any time comprise less than a
majority of the directors on the board of directors of Holdings and the
Borrower; or
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(s) the Jordan Affiliates shall at any time, legally or beneficially,
own less than fifty one percent (51%) of the Voting Stock of Jordan
Industries, as adjusted pursuant to any stock split, stock dividend or
recapitalization or reclassification of the capital of Jordan Industries,
and the Jordan Affiliates shall at any time, legally or beneficially, own
less than fifty one percent (51%) of the Voting Stock of Holdings, as
adjusted pursuant to any stock split, stock dividend or recapitalization or
reclassification of the capital of Holdings.
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Revolving Credit Notes and the other Loan Documents and all Reimbursement
Obligations to be, and they shall thereupon forthwith become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrower; provided that in the
event of any Event of Default specified in (S)(S)13.1(g), 13.1(h) or 13.1(j)
hereof, all such amounts shall become immediately due and payable automatically
and without any requirement of notice from the Agent or any Bank.
(S)12.3 Termination of Commitments
If any one or more of the Events of Default specified in
(S)(S)13.1(g), 13.1(h) or 13.1(j) hereof shall occur, any unused portion of the
credit hereunder shall forthwith terminate and each of the Banks shall be
relieved of all further obligations to make Revolving Credit Loans to the
Borrower and the Agent shall be relieved of all further obligations to issue,
extend or renew Letters of Credit. If any other Event of Default shall have
occurred and be continuing, the Agent may and, upon the request of the Majority
Banks, shall, by notice to the Borrower, terminate the unused portion of the
credit hereunder, and upon such notice being given such unused portion of the
credit hereunder shall terminate immediately and each of the Banks shall be
relieved of all further obligations to make Revolving Credit Loans and the Agent
shall be relieved of all further obligations to issue, extend or renew Letters
of Credit. No termination of the credit hereunder shall relieve the Borrower or
any of its Subsidiaries of any of the Obligations.
(S)12.4 Remedies
In case any one or more of the Events of Default shall have occurred
and be continuing, and whether or not the Banks shall have accelerated the
maturity of the Revolving Credit Loans pursuant to (S)13.1 hereof, each Bank, if
owed any amount with respect to the Revolving Credit Loans or the Reimbursement
Obligations, may, with the consent of the Majority Banks but not otherwise,
proceed to protect and enforce its rights by suit in equity, action at law or
other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Credit Agreement and the other Loan
Documents or any instrument pursuant to which the Obligations to such Bank are
evidenced, including as permitted by applicable law the obtaining of the ex
parte appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Bank. No remedy herein conferred
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<PAGE>
upon any Bank or the Agent or the holder of any Revolving Credit Note or
purchaser of any Letter of Credit Participation 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 or by statute or any other provision of law.
(S)12.5 Distribution of Collateral Proceeds
In the event that following the occurrence or during the continuance
of any Default or Event of Default, the Agent or any Bank, as the case may be,
receives any monies in connection with the enforcement of any the Security
Documents, or otherwise with respect to the realization upon any of the
Collateral, such monies shall be distributed for application as follows:
(a) first, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all
or any of the rights, remedies, powers and privileges of the Agent under
this Credit Agreement or any of the other Loan Documents or in respect of
the Collateral or in support of any provision of adequate indemnity to the
Agent against any taxes or liens which by law shall have, or may have,
priority over the rights of the Agent to such monies;
(b) second, to all other Obligations in such order or preference as
the Majority Banks may determine; provided, however, that (i) distributions
in respect of such Obligations shall be made pari passu among Obligations
with respect to the Agent's Fee payable pursuant to (S)5.2 hereof and all
other Obligations and (ii) distributions in respect of Obligations owing to
the Banks with respect to each type of Obligation such as interest,
principal, fees and expenses, shall be made among the Banks pro rata; and
provided, further, that the Agent may in its discretion make proper
allowance to take into account any Obligations not then due and payable;
(c) third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Banks and the Agent of all of the
Obligations, to the payment of any obligations required to be paid pursuant
to (S)9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of
Massachusetts; and
(d) fourth, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
SECTION XIII.
SETOFF
------
Regardless of the adequacy of any collateral, during the continuance of any
Event of Default,
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any deposits or other sums credited by or due from any of the Banks to the
Borrower and any securities or other property of the Borrower in the possession
of such Bank may be applied to or set off by such Bank against the payment of
Obligations and any and all other liabilities, direct, or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, of the
Borrower to such Bank. Each of the Banks agrees with each other Bank that (a) if
an amount to be set off is to be applied to Indebtedness of the Borrower to such
Bank, other than Indebtedness evidenced by the Revolving Credit Notes held by
such Bank or constituting Reimbursement Obligations owed to such Bank, such
amount shall be applied ratably to such other Indebtedness and to the
Indebtedness evidenced by all such Revolving Credit Notes held by such Bank or
constituting Reimbursement Obligations owed to such Bank, and (b) if such Bank
shall receive from the Borrower, whether by voluntary payment, exercise of the
right of setoff, counterclaim, cross action, enforcement of the claim evidenced
by the Revolving Credit Notes held by, or constituting Reimbursement Obligations
owed to, such Bank by proceedings against the Borrower at law or in equity or by
proof thereof in bankruptcy, reorganization, liquidation, receivership or
similar proceedings, or otherwise, and shall retain and apply to the payment of
the Revolving Credit Note or Revolving Credit Notes held by, or Reimbursement
Obligations owed to, such Bank any amount in excess of its ratable portion of
the payments received by all of the Banks with respect to the Revolving Credit
Notes held by, and Reimbursement Obligations owed to, all of the Banks, such
Bank will make such disposition and arrangements with the other Banks with
respect to such excess, either by way of distribution, pro tanto assignment of
claims, subrogation or otherwise as shall result in each Bank receiving in
respect of the Revolving Credit Notes held by it or Reimbursement Obligations
owed it, its proportionate payment as contemplated by this Credit Agreement;
provided that if all or any part of such excess payment is thereafter recovered
from such Bank, such disposition and arrangements shall be rescinded and the
amount restored to the extent of such recovery, but without interest.
SECTION XIV.
THE AGENT
(S)14.1 Authorization.
The Agent is authorized to take such action on behalf of each of the
Banks and to exercise all such powers as are hereunder and under any of the
other Loan Documents and any related documents delegated to the Agent, together
with such powers as are reasonably incident thereto, provided that no duties or
responsibilities not expressly assumed herein or therein shall be implied to
have been assumed by the Agent. The relationship between the Agent and the Banks
is and shall be that of agent and principal only, and nothing contained in this
Credit Agreement or any of the other Loan Documents shall be construed to
constitute the Agent as a trustee for any Bank. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement unless
it shall first have received such advice or concurrence of the Majority Banks as
it reasonably deems appropriate or it shall first be indemnified to its
reasonable satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Credit
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Agreement in accordance with a request of the Majority Banks, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
the Banks and all future holders of the Revolving Credit Notes or of a Letter of
Credit Participation.
(S)14.2 Employees and Agents
The Agent may exercise its powers and execute its duties by or through
employees or agents and shall be entitled to take, and to rely on, advice of
counsel concerning all matters pertaining to its rights and duties under this
Credit Agreement and the other Loan Documents. The Agent may utilize the
services of such Persons as the Agent in its sole discretion may reasonably
determine, and all reasonable fees and expenses of any such Persons shall be
paid by the Borrower.
(S)14.3 No Liability
Neither the Agent nor any of its shareholders, directors, officers or
employees nor any other Person assisting them in their duties nor any agent or
employee thereof, shall be liable for any waiver, consent or approval given or
any action taken, or omitted to be taken, in good faith by it or them hereunder
or under any of the other Loan Documents, or in connection herewith or
therewith, or be responsible for the consequences of any oversight or error of
judgment whatsoever, except that the Agent or such other Person, as the case may
be, may be liable for losses due to its willful misconduct or gross negligence.
(S)14.4 No Representations
The Agent shall not be responsible for the execution or validity or
enforceability of this Credit Agreement, the Revolving Credit Notes, the Letters
of Credit, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for the Revolving
Credit Notes, or for the value of any such collateral security or for the
validity, enforceability or collectability of any such amounts owing with
respect to the Revolving Credit Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan Documents
or in any certificate or instrument hereafter furnished to it by or on behalf of
the Borrower or any of their Subsidiaries, or be bound to ascertain or inquire
as to the performance or observance of any of the terms, conditions, covenants
or agreements herein or in any instrument at any time constituting, or intended
to constitute, collateral security for the Revolving Credit Notes or to inspect
any of the properties, books or records of the Borrower or any of its
Subsidiaries. The Agent shall not be bound to ascertain whether any notice,
consent, waiver or request delivered to it by the Borrower or any holder of any
of the Revolving Credit Notes shall have been duly authorized or is true,
accurate and complete. The Agent has not made nor does it now make any
representations or warranties, express or implied, nor does it assume any
liability to the Banks, with respect to the credit worthiness or financial
conditions of the Borrower or any of its Subsidiaries. Each Bank acknowledges
that it has, independently and without reliance upon the Agent or any other
Bank, and based upon such information and documents as it has deemed
appropriate, made its own credit analysis
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and decision to enter into this Credit Agreement.
(S)14.5 Payments
(S)14.6 Payments to Agent
A payment by the Borrower to the Agent hereunder or any of the other
Loan Documents for the account of any Bank shall constitute a payment to such
Bank. The Agent agrees promptly to distribute to each Bank such Bank's pro rata
share of payments received by the Agent for the account of the Banks except as
otherwise expressly provided herein or in any of the other Loan Documents.
(S)14.7 Distribution by Agent
If in the opinion of the Agent the distribution of any amount received
by it in such capacity hereunder, under the Revolving Credit Notes or under any
of the other Loan Documents might involve it in liability, it may refrain from
making distribution until its right to make distribution shall have been
adjudicated by a court of competent jurisdiction. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the Agent
is to be repaid, each Person to whom any such distribution shall have been made
shall either repay to the Agent its proportionate share of the amount so
adjudged to be repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.
(S)14.8 Delinquent Banks
Notwithstanding anything to the contrary contained in this Credit
Agreement or any of the other Loan Documents, any Bank that fails (i) to make
available to the Agent its pro rata share of any Revolving Credit Loan or to
purchase any Letter of Credit Participation or (ii) to comply with the
provisions of (S)14 hereof with respect to making dispositions and arrangements
with the other Banks, where such Bank's share of any payment received, whether
by setoff or otherwise, is in excess of its pro rata share of such payments due
and payable to all of the Banks, in each case as, when and to the full extent
required by the provisions of this Credit Agreement, shall be deemed delinquent
(a "Delinquent Bank") and shall be deemed a Delinquent Bank until such time as
such delinquency is satisfied. A Delinquent Bank shall be deemed to have
assigned any and all payments due to it from the Borrower, whether on account of
outstanding Revolving Credit Loans, Unpaid Reimbursement Obligations, interest,
fees or otherwise, to the remaining nondelinquent Banks for application to, and
reduction of, their respective pro rata shares of all outstanding Revolving
Credit Loans and Unpaid Reimbursement Obligations. The Delinquent Bank hereby
authorizes the Agent to distribute such payments to the nondelinquent Banks in
proportion to their respective pro rata shares of all outstanding Revolving
Credit Loans and Unpaid Reimbursement Obligations. A Delinquent Bank shall be
deemed to have satisfied in full a delinquency when and if, as a result of
application of the assigned payments to all outstanding Revolving Credit Loans
and Unpaid Reimbursement Obligations of the nondelinquent Banks, the Banks'
respective pro rata shares of all outstanding Revolving Credit Loans
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and Unpaid Reimbursement Obligations have returned to those in effect
immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
(S)14.9 Holders of Revolving Credit Notes
The Agent may deem and treat the payee of any Revolving Credit Note or
the purchaser of any Letter of Credit Participation as the absolute owner or
purchaser thereof for all purposes hereof until it shall have been furnished in
writing with a different name by such payee or by a subsequent holder, assignee
or transferee.
(S)14.10 Indemnity
The Banks ratably agree hereby to indemnify and hold harmless the
Agent and its affiliates from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Agent or such affiliate has not been reimbursed by
the Borrower as required by (S)16 hereof), and liabilities of every nature and
character arising out of or related to this Credit Agreement, the Revolving
Credit Notes, or any of the other Loan Documents or the transactions
contemplated or evidenced hereby or thereby, or the Agent's actions taken
hereunder or thereunder, except to the extent that any of the same shall be
directly caused by the Agent's willful misconduct or gross negligence.
(S)14.11 Agent as Bank
In its individual capacity, BkB shall have the same obligations and
the same rights, powers and privileges in respect to its Commitment and the
Revolving Credit Loans made by it, and as the holder of any of the Revolving
Credit Notes and as the purchaser of any Letter of Credit Participations, as it
would have were it not also the Agent.
(S)14.12 Resignation
The Agent may resign at any time by giving sixty (60) days prior
written notice thereof to the Banks and the Borrower. Upon any such resignation,
the Majority Banks shall have the right to appoint a successor Agent. Unless a
Default or Event of Default shall have occurred and be continuing, such
successor Agent shall be reasonably acceptable to the Borrower. If no successor
Agent shall have been so appointed by the Majority Banks and shall have accepted
such appointment within thirty (30) days after the retiring Agent's giving of
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a financial institution having a
rating of not less than A or its equivalent by Standard & Poor's Rating Group, a
division of McGraw-Hill, Inc. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation, the provisions of
this Credit
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Agreement and the other Loan Documents 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.
(S)14.13 Notification of Defaults and Events of Default
Each Bank hereby agrees that, upon learning of the existence of a
Default or an Event of Default, it shall promptly notify the Agent thereof. The
Agent hereby agrees that upon receipt of any notice under this (S)15.10 it shall
promptly notify the other Banks of the existence of such Default or Event of
Default.
(S)14.14 Duties in the Case of Enforcement
In case one of more Events of Default have occurred and shall be
continuing, and whether or not acceleration of the Obligations shall have
occurred, the Agent shall, if (i) so requested by the Majority Banks and (ii)
the Banks have provided to the Agent such additional indemnities and assurances
against expenses and liabilities as the Agent may reasonably request, proceed to
enforce the provisions of the Security Documents authorizing the sale or other
disposition of all or any part of the Collateral and exercise all or any such
other legal and equitable and other rights or remedies as it may have in respect
of such Collateral. The Majority Banks may direct the Agent in writing as to
the method and the extent of any such sale or other disposition, the Banks
hereby agreeing to indemnify and hold the Agent, harmless from all liabilities
incurred in respect of all actions taken or omitted in accordance with such
directions, provided that the Agent need not comply with any such direction to
the extent that the Agent reasonably believes the Agent's compliance with such
direction to be unlawful or commercially unreasonable in any applicable
jurisdiction.
SECTION XV.
EXPENSES
--------
Whether or not the transactions contemplated hereby shall be consummated,
the Borrower promises to pay (a) the reasonable costs of (i) producing and
reproducing this Credit Agreement, the other Loan Documents and the other
agreements and instruments mentioned herein and (ii) any taxes (including any
interest and penalties in respect thereto), filing fees or recording fees or
taxes payable by any Bank (other than taxes based upon the Bank's net income) on
or with respect to the transactions contemplated by this Credit Agreement or the
other Loan Documents (the Borrower hereby agreeing to indemnify each Bank with
respect thereto), (b) the documented fees, expenses and disbursements of the
Agent's Special Counsel and any local counsel to the Agent incurred in
connection with the preparation of this Credit Agreement, the other Loan
Documents and other instruments mentioned herein, the closing hereunder,
amendments, modifications, approvals, consents or waivers hereto or hereunder
and the syndication and the termination hereof, (c) all reasonable fees,
expenses and disbursements incurred by the Agent in connection with the
preparation of this Credit Agreement and the other Loan Documents and the
closing hereunder, (d) all reasonable fees, expenses and disbursements incurred
by the Agent, BkB or any of its affiliates in connection with the
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syndication of its Commitment hereunder, provided that the Borrower shall not
bear the costs of syndication hereunder which are in excess of $5,000; and (e)
all out-of- pocket expenses (including reasonable attorneys' fees and costs),
incurred by any Bank or the Agent in connection with the preparation and review
of the form of any instrument relevant to this Credit Agreement or the other
Loan Documents and the consideration of legal questions relevant thereto and
hereto or to any restructuring or "work-out" of any Obligations; and (f) all
out-of-pocket expenses (including reasonable attorneys' fees and costs),
incurred by any Bank or the Agent in connection with (i) the enforcement of or
preservation of rights under any of this Credit Agreement, the Revolving Credit
Notes and the other Loan Documents against the Borrower or any of its
Subsidiaries or the administration thereof after the occurrence of a Default or
Event of Default and (ii) any litigation proceeding or dispute whether arising
hereunder or under the other Loan Documents or arising out of the transactions
contemplated hereby or thereby. The covenants of this (S)16 shall survive
payment or satisfaction of all other Obligations.
SECTION XVI.
INDEMNIFICATION
---------------
The Borrower further agrees to indemnify and hold harmless the Agent and
the Banks as well as each such Person's shareholders, directors, agents,
officers, Subsidiaries and affiliates, from and against all damages, losses,
settlement payments, obligations, liabilities, claims, actions or causes of
action, and costs and expenses incurred, suffered, sustained or required to be
paid by an indemnified party by reason of or resulting from the transactions
contemplated hereby, except any of the foregoing which result from the gross
negligence or willful misconduct of the indemnified party. In any investigation,
proceeding or litigation, or the preparation therefor, each Bank and the Agent
shall be entitled to select its own counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the fees and expenses of such
counsel. If, and to the extent that the obligations of the Borrower under this
(S)17 are unenforceable for any reason, the Borrower hereby agrees to make the
maximum contribution to the payment in satisfaction of such obligations which is
permissible under applicable law. The covenants contained in this (S)17 shall
survive payment or satisfaction in full of all other Obligations.
SECTION XVII.
SURVIVAL OF COVENANTS, ETC
--------------------------
All covenants, agreements, representations and warranties made herein, in
the Revolving Credit Notes, in any of the other Loan Documents or in any
documents or other papers delivered by or on behalf of the Borrower or any of
its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the
Banks and the Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making by the Banks of any of the
Revolving Credit Loans and the issuance, extension or renewal of any Letters of
Credit, as herein contemplated, and shall continue in full force and effect so
long as any Letter of Credit or any amount due under this Credit Agreement or
the Revolving Credit Notes or any of the other Loan Documents remains
outstanding or any Bank
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has any obligation to make any Revolving Credit Loans or the Agent has any
obligation to issue, extend or renew any Letter of Credit, and for such further
time as may be otherwise expressly specified in this Credit Agreement. All
statements contained in any certificate or other paper delivered to any Bank or
the Agent at any time by or on behalf of the Borrower or any of its Subsidiaries
pursuant hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrower or such Subsidiary
hereunder.
SECTION XVIII.
ASSIGNMENT AND PARTICIPATION
----------------------------
(S)18.1 Conditions to Assignment by Banks
Except as provided herein, each Bank may assign to one or more Eligible
Assignees all or a portion of its interests, rights and obligations under this
Credit Agreement (including all or a portion of its Commitment Percentage and
Commitment with respect to Revolving Credit Loans and the same portion of the
Revolving Credit Loans at the time owing to it, the Revolving Credit Note held
by it and its participating interest in the risk relating to any Letters of
Credit); provided that (a) each of the Agent and the Borrower shall have given
its prior written consent to such assignment, which consent, in the case of the
Borrower, will not be unreasonably withheld, (b) each such assignment shall be
of a constant, and not a varying, percentage of all the assigning Bank's rights
and obligations in respect of the Revolving Credit Loans, (c) each assignment
(if less than one hundred percent (100%) of such Bank's interests) shall be in
an amount no less than $5,000,000, and (d) the parties to such assignment shall
execute and deliver to the Agent, for recording in the Register (as hereinafter
defined), an Assignment and Acceptance, substantially in the form of Exhibit K
hereto (an "Assignment and Acceptance"), together with any Revolving Credit
Notes subject to such assignment. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five (5) Business Days after
the execution thereof, (i) the assignee thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder, and (ii) the assigning Bank shall, to the
extent provided in such assignment and upon payment to the Agent of the
registration fee referred to in (S)19.3 hereof, be released from its obligations
under this Credit Agreement.
(S)18.2 Certain Representations and Warranties; Limitations; Covenants
By executing and delivering an Assignment and Acceptance, the parties to
the assignment thereunder confirm to and agree with each other and the other
parties hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this
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Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
the attachment, perfection or priority of any security interest or
mortgage,
(b) the assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower
and its Subsidiaries or any other Person primarily or secondarily liable in
respect of any of the Obligations, or the performance or observance by the
Borrower and its Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations of any of their obligations
under this Credit Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements
referred to in (S)7.4 hereof and (S)7.4 hereof 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;
(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Credit
Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee and that, on the effective date of such Assignment and Acceptance,
the circumstances described in (S)(S)5.7 and 5.8 hereof are not applicable
to such assignee;
(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably
incidental thereto;
(g) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Credit Agreement are
required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements with the
assigning Bank satisfactory to such assignee with respect to its pro rata
share of Letter of Credit Fees in respect of outstanding Letters of Credit.
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(S)18.3 Register
The Agent shall maintain a copy of each Assignment and Acceptance delivered
to it and a register or similar list (the "Register") for the recordation of the
names and addresses of the Banks and the Commitment Percentage of, and principal
amount of the Revolving Credit Loans owing to and Letter of Credit
Participations purchased by, the Banks from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Agent and the Banks may treat each Person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Credit Agreement.
The Register shall be available for inspection by the Borrower and the Banks at
any reasonable time and from time to time upon reasonable prior notice. Upon
each such recordation, the assigning Bank agrees to pay to the Agent a
registration fee in the sum of $3,500.
(S)18.4 New Revolving Credit Notes
Upon its receipt of an Assignment and Acceptance executed by the parties to
such assignment, together with each Revolving Credit Note subject to such
assignment, the Agent shall (a) record the information contained therein in the
Register, and (b) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Revolving Credit Note, a new Revolving
Credit Note to the order of such Eligible Assignee in an amount equal to the
amount assumed by such Eligible Assignee pursuant to such Assignment and
Acceptance and, if the assigning Bank has retained some portion of its
obligations hereunder, a new Revolving Credit Note to the order of the assigning
Bank in an amount equal to the amount retained by it hereunder. Such new
Revolving Credit Notes shall provide that they are replacements for the
surrendered Revolving Credit Notes, shall be in an aggregate principal amount
equal to the aggregate principal amount of the surrendered Revolving Credit
Notes, shall be dated the effective date of such Assignment and Acceptance and
shall otherwise be substantially the form of the assigned Revolving Credit
Notes. Within five (5) days of issuance of any new Revolving Credit Notes
pursuant to this (S)19.4, upon the request of the Agent, the Borrower shall
deliver an opinion of counsel, addressed to the Banks and the Agent, relating to
the due authorization, execution and delivery of such new Revolving Credit Notes
and the legality, validity and binding effect thereof, in form and substance
satisfactory to the Banks. The surrendered Revolving Credit Notes shall be
cancelled and returned to the Borrower.
(S)18.5 Participations
Each Bank may sell participations to one or more banks or other entities in
all or a portion of such Bank's rights and obligations under this Credit
Agreement and the other Loan Documents; provided that (a) each such
participation shall be in an amount of not less than $5,000,000, (b) any such
sale or participation shall not affect the rights and duties of the selling Bank
hereunder to the Borrower and (c) the only rights granted to the participant
pursuant to such participation arrangements with respect to waivers, amendments
or modifications of the Loan Documents shall be the rights to
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approve waivers, amendments or modifications that would forgive any principal of
or reduce the interest rate on any Revolving Credit Loans, extend the term or
increase the amount of the Commitment of such Bank as it relates to such
participant, reduce the amount of any commitment fees or Letter of Credit Fees
to which such participant is entitled or extend any regularly scheduled payment
date for principal or interest.
(S)18.6 Disclosure
The Borrower agrees that in addition to disclosures made in accordance with
standard and customary banking practices any Bank may disclose information
obtained by such Bank pursuant to this Credit Agreement to assignees or
participants and potential assignees or participants hereunder; provided that
such assignees or participants or potential assignees or participants shall
agree (a) to treat in confidence such information unless such information
otherwise becomes public knowledge, (b) not to disclose such information to a
third party, except as required by law or legal process and (c) not to make use
of such information for purposes of transactions unrelated to such contemplated
assignment or participation.
(S)18.7 Assignee or Participant Affiliated with the Borrower
If any assignee Bank is an Affiliate of the Borrower, then any such
assignee Bank shall have no right to vote as a Bank hereunder or under any of
the other Loan Documents for purposes of granting consents or waivers or for
purposes of agreeing to amendments or other modifications to any of the Loan
Documents or for purposes of making requests to the Agent pursuant to (S)13.1 or
(S)13.2 hereof, and the determination of the Majority Banks shall for all
purposes of this Agreement and the other Loan Documents be made without regard
to such assignee Bank's interest in any of the Revolving Credit Loans. If any
Bank sells a participating interest in any of the Revolving Credit Loans or
Reimbursement Obligations to a participant, and such participant is the Borrower
or an Affiliate of the Borrower, then such transferor Bank shall promptly notify
the Agent of the sale of such participation. A transferor Bank shall have no
right to vote as a Bank hereunder or under any of the other Loan Documents for
purposes of granting consents or waivers or for purposes of agreeing to
amendments or modifications to any of the Loan Documents or for purposes of
making requests to the Agent pursuant to (S)13.1 or (S)13.2 hereof to the extent
that such participation is beneficially owned by the Borrower or any Affiliate
of the Borrower, and the determination of the Majority Banks shall for all
purposes of this Agreement and the other Loan Documents be made without regard
to the interest of such transferor Bank in the Revolving Credit Loans to the
extent of such participation.
(S)18.8 Miscellaneous Assignment Provisions
Any assigning Bank shall retain its rights to be indemnified pursuant to
(S)17 hereof with respect to any claims or actions arising prior to the date of
such assignment. If any assignee Bank is not incorporated under the laws of the
United States of America or any state thereof, it shall, prior to the date on
which any interest or fees are payable hereunder or under any of the other Loan
Documents
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for its account, deliver to the Borrower and the Agent certification as to its
exemption from deduction or withholding of any United States federal income
taxes. If BkB transfers all of its interest, rights and obligations under this
Credit Agreement, the Agent shall, in consultation with the Borrower and with
the consent of the Borrower and the Majority Banks, appoint another Bank to act
as the Reference Bank hereunder. Anything contained in this 19 to the contrary
notwithstanding, any Bank may at any time pledge all or any portion of its
interest and rights under this Credit Agreement (including all or any portion of
its Revolving Credit Notes) to any of the twelve Federal Reserve Banks organized
under (S)4 of the Federal Reserve Act, 12 U.S.C. 341. No such pledge or the
enforcement thereof shall release the pledgor Bank from its obligations
hereunder or under any of the other Loan Documents.
(S)18.9 Assignment by Borrower and Guarantors
Neither the Borrower nor any Guarantor shall assign or transfer any of its
rights or obligations under any of the Loan Documents without the prior written
consent of each of the Banks.
SECTION XIX
NOTICES, ETC
------------
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Revolving Credit Notes or any Letter of Credit
Applications shall be in writing and shall be delivered in hand, mailed by
United States registered or certified first class mail, postage prepaid, sent by
overnight courier, or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via courier or postal service, addressed as follows:
(a) if to the Borrower or any of the Subsidiary Guarantors, at Jordan
Industries, Inc., Arbor Lake Centre, Suite 550, 1751 Lake Cook Road,
Deerfield, Illinois 60015, Attention: Gordon L. Nelson, Jr. or at such
other address for notice as the Borrower shall last have furnished in
writing to the Person giving the notice, with copies to Mayer, Brown &
Platt, 1675 Broadway, Suite 1900, New York, New York 10019, Attention:
James B. Carlson, Esq.
(b) if to the Agent, at 100 Federal Street, Boston, Massachusetts
02110, USA, Attention: Mark M. Andrew, Vice President, or such other
address for notice as the Agent shall last have furnished in writing to the
Person giving the notice; and
(c) if to any Bank, at such Bank's address set forth on Schedule 1
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the
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party to which it is directed, at the time of the receipt thereof by such
officer or the sending of such facsimile and (ii) if sent by registered or
certified first-class mail, postage prepaid, on the third Business Day following
the mailing thereof.
SECTION XX.
GOVERNING LAW
-------------
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). EACH OF THE
BORROWER AND EACH OF THE SUBSIDIARY GUARANTORS AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT
SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND
SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON SUCH PERSON BY MAIL AT THE
ADDRESS SPECIFIED IN (S)20 HEREOF. EACH OF THE BORROWER AND EACH OF THE
SUBSIDIARY GUARANTORS HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS
BROUGHT IN AN INCONVENIENT COURT.
SECTION XXI.
HEADINGS.
--------
The captions in this Credit Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
SECTION XXII.
COUNTERPARTS
------------
This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
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SECTION XXIII.
ENTIRE AGREEMENT, ETC
---------------------
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
(S)26 hereof.
SECTION XXIV
WAIVER OF JURY TRIAL
--------------------
The Borrower and each of the Subsidiary Guarantors hereby waives its right
to a jury trial with respect to any action or claim arising out of any dispute
in connection with this Credit Agreement, the Revolving Credit Notes or any of
the other Loan Documents, any rights or obligations hereunder or thereunder or
the performance of which rights and obligations. Except as prohibited by law,
the Borrower and each of the Subsidiary Guarantors hereby waives any right it
may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. the Borrower and each of
the Subsidiary Guarantors (a) certifies that no representative, agent or
attorney of any Bank or the Agent has represented, expressly or otherwise, that
such Bank or the Agent would not, in the event of litigation, seek to enforce
the foregoing waivers and (b) acknowledges that the Agent and the Banks have
been induced to enter into this Credit Agreement and the other Loan Documents to
which it is a party to which it is a party by, among other things, the waivers
and certifications contained herein.
SECTION XXV.
CONSENTS, AMENDMENTS, WAIVERS, ETC
----------------------------------
Any consent or approval required or permitted by this Credit Agreement to
be given by all of the Banks may be given, and any term of this Credit
Agreement, the other Loan Documents or any other instrument related hereto or
mentioned herein may be amended, and the performance or observance by the
Borrower or any of its Subsidiaries of any terms of this Credit Agreement, the
other Loan Documents or such other instrument or the continuance of any Default
or Event of Default may be waived (either generally or in a particular instance
and either retroactively or prospectively) with, but only with, the written
consent of the Borrower and the written consent of the Majority Banks.
Notwithstanding the foregoing, a decrease in the rate of interest on the
Revolving Credit Notes, an extension of the maturity of or extension of
scheduled payments on the Revolving Credit Notes, the release of substantially
all of the Collateral, an increase in the Total Commitment and a decrease in the
amount of commitment fee or Letter of Credit Fees hereunder may not be executed
without the written consent of the Borrower and the written consent of each Bank
affected thereby; the definition
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of Majority Banks and this (S)26 may not be amended without the written consent
of all of the Banks; and the amount of the Agent's Fee or any Letter of Credit
Fees payable for the Agent's account and (S)15 may not be amended without the
written consent of the Agent. No waiver shall extend to or affect any obligation
not expressly waived or impair any right consequent thereon. No course of
dealing or delay or omission on the part of the Agent or any Bank in exercising
any right shall operate as a waiver thereof or otherwise be prejudicial thereto.
No notice to or demand upon the Borrower shall entitle the Borrower to other or
further notice or demand in similar or other circumstances.
SECTION XXVI.
SEVERABILITY
------------
The provisions of this Credit Agreement are severable and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any jurisdiction.
SECTION XXVII.
TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION
---------------------------------------------
(S)27.1 Sharing of Information with Section 20 Subsidiary
The Borrower acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to the Borrower
or one or more of its Subsidiaries, in connection with this Credit Agreement or
otherwise, by a Section 20 Subsidiary. The Borrower, each for itself and each of
its respective Subsidiaries, hereby authorizes (a) such Section 20 Subsidiary to
share with the Agent and each Bank any information delivered to such Section 20
Subsidiary by the Borrower or any of its Subsidiaries, and (b) the Agent and
each Bank to share with such Section 20 Subsidiary any information delivered to
the Agent or such Bank by the Borrower or any of its Subsidiaries pursuant to
this Credit Agreement, or in connection with the decision of such Bank to enter
into this Credit Agreement; it being understood, in each case, that any such
Section 20 Subsidiary receiving such information shall be bound by the
confidentiality provisions of this Credit Agreement. Such authorization shall
survive the payment and satisfaction in full of all of Obligations.
(S)27.2 Confidentiality
Each of the Banks and the Agent agrees, on behalf of itself and each of its
affiliates, directors, officers, employees and representatives, to use
reasonable precautions to keep confidential, in accordance with their customary
procedures for handling confidential information of the same nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it
98
<PAGE>
by the Borrower or any of its Subsidiaries pursuant to this Credit Agreement
that is identified by such Person as being confidential at the time the same is
delivered to the Banks or the Agent, provided that nothing herein shall limit
the disclosure of any such information (a) after such information shall have
become public other than through a violation of this (S)28, (b) to the extent
required by statute, rule, regulation or judicial process, (c) to counsel for
any of the Banks or the Agent, (d) to bank examiners or any other regulatory
authority having jurisdiction over any Bank or the Agent, or to auditors or
accountants, (e) to the Agent, any Bank or any Section 20 Subsidiary, (f) in
connection with any litigation to which any one or more of the Banks, the Agent
or any Section 20 Subsidiary is a party, or in connection with the enforcement
of rights or remedies hereunder or under any other Loan Document, (g) to a
Subsidiary or affiliate of such Bank as provided in (S)28.1 or (h) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant agrees to be bound by the provisions of (S)19.6.
(S)27.3 Prior Notification
Unless specifically prohibited by applicable law or court order, each of
the Banks and the Agent shall, prior to disclosure thereof, notify the Borrower
of any request for disclosure of any such non-public information by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Bank by such
governmental agency) or pursuant to legal process.
(S)27.4 Other
In no event shall any Bank or the Agent be obligated or required to return
any materials furnished to it or any Section 20 Subsidiary by the Borrower or
any of its Subsidiaries. The obligations of each Bank under this (S)28 shall
supersede and replace the obligations of such Bank under any confidentiality
letter in respect of this financing signed and delivered by such Bank to the
Borrower prior to the date hereof and shall be binding upon any assignee of, or
purchaser of any participation in, any interest in any of the Revolving Credit
Loans or Reimbursement Obligations from any Bank.
99
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement as
a sealed instrument as of the date first set forth above.
JTP INDUSTRIES, INC.
By: /s/ Gordon L. Nelson
--------------------------------
Gordon L. Nelson, Vice President
NEW CAMBRIDGE PRODUCTS CORPORATION
NEW DURA-LINE CORPORATION
NEW JOHNSON COMPONENTS, INC.
NEW VIEWSONICS, INC.
AIM ELECTRONICS CORPORATION
BOND HOLDINGS, INC.
DIVERSIFIED WIRE & CABLE, INC.
NEW NORTHERN TECHNOLOGIES, INC.
LODAN WEST, INC.
JORDAN TELECOMMUNICATIONS
PRODUCT GROUP-EUROPE, INC.
OLD JORDAN TELECOMMUNICATION
PRODUCT GROUP, INC.
ADAPT COMMUNICATION SUPPLY CO.
S. FL., INC.
NORTHERN TECHNOLOGIES
HOLDINGS, INC.
By: /s/ Gordan L. Nelson
--------------------------------
Gordon L. Nelson, Vice President
BANKBOSTON, N.A., individually and
as Agent
By: /s/ Mark A. Andrew
--------------------------------
Mark M. Andrew, Vice President
100
<PAGE>
Exhibit 10.3
PROPERTIES SERVICES AGREEMENT
-----------------------------
THIS PROPERTIES SERVICES AGREEMENT (this "Agreement") is made and entered
into as of this 25th day of July, 1997, by and among JI Properties, Inc., a
Delaware corporation ("JI Properties"), Jordan Telecommunication Products, Inc.,
a Delaware corporation, Jordan Industries, Inc., an Illinois corporation, and
each of its subsidiaries listed on the signature page hereto (collectively
referred to herein as the "Company").
WHEREAS, the Company wishes to obtain the use of certain real estate, asset
and transportation assets owned or leased by JI Properties and to obtain the
related services of JI Properties' personnel or personnel to which JI Properties
has access; and
WHEREAS, JI Properties desires to provide or cause to be provided those
assets and services requested by the Company under such terms and conditions.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, 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:
Section 1. Assets and Services.
1.1 Assets. JI Properties hereby grants to the Company the right to use
the Assets set forth on Exhibit A.
1.2 Services to be Rendered. JI Properties shall make available the
services of its personnel or personnel to which it has access to provide such
services in connection with the use of the Assets as are necessary for the use
and/or operation of such Assets (the "Services").
1.3 Charges. The charges to the Company for the use of Assets and
Services shall consist of an amount equal to the sum of (i) the costs actually
incurred in the use and/or operation of the Assets used or operated by the
Company (including the costs of the related Services as determined by JI
Properties) and (ii) a portion of the costs associated with owning such assets
which are not directly attributable to the operation or use of such assets equal
in amount to such costs multiplied by a fraction, the numerator of which is
equal to the Company's net revenues and the denominator of which is the sum of
the net revenues of all entities which have entered into agreements with JI
Properties similar to this Agreement.
1.4 Performance of Services. JI Properties covenants that it will perform
or cause to be performed the Services in a timely, efficient and workmanlike
manner and in substantially the same manner in which JI Properties (or its
predecessor) is providing such services to the Company currently. JI Properties
further covenants that it will maintain or contract for a sufficient staff of
trained personnel to enable it to perform the Services hereunder. JI Properties
may retain third
<PAGE>
parties or its affiliates to provide certain of the Services hereunder. Any
arrangements between JI Properties and its affiliates for the provision of
Services hereunder shall be commercially reasonable and on terms not less
favorable than those which could be obtained from unaffiliated third parties.
1.5 Payment for Facilities and Services. JI Properties shall bill the
Company, at the end of each calendar month for the applicable charges, or on
such other periodic basis a determined by JI Properties. Such amount shall be
payable by the Company in full within 30 days of receipt thereof by the Company.
1.6 Reimbursement. The Company shall reimburse JI Properties for all
reasonable third party out-of-pocket expenses it incurs on behalf of the Company
not billed directly to the Company within 30 days of receipt of the invoice
therefor, if not included in the charges pursuant to Section 1.3.
Section 2. Term. The term of this Agreement shall commence the date hereof
and continue until December 31, 2007, unless extended, or sooner terminated, as
provided below. This Agreement shall be automatically renewed for successive
one-year terms starting December 31, 2007 unless either party hereto, within
sixty (60) days prior to the scheduled renewal date, notifies the other party as
to its election to terminate this Agreement. Notwithstanding the foregoing, this
Agreement may be terminated by not less than ninety (90) days' prior written
notice from the Company to the JI Properties at any time after (a) substantially
all of the stock or substantially all of the assets of the Company or all of its
subsidiaries are sold to an entity unaffiliated with the JI Properties and/or a
majority of the Company stockholders immediately prior to the sale, (b) the
Company is merged or consolidated into another entity unaffiliated with the JI
Properties and/or a majority of the Company's stockholders immediately prior to
such merger and the Company is not the survivor of such transaction or (c) a
public offering of the voting securities of the Company has been consummated.
Subject to the foregoing, the Agreement will not be terminated as a result of
any Company ceasing to be a subsidiary of Jordan Industries, Inc. for financial
reporting or other purposes.
Section 3. Audit of Services. At any time during regular business hours
and as often as reasonably requested by the Company's officers, JI Properties
shall permit the Company or its authorized representatives to examine and make
copies and abstracts from the records and books of JI Properties for the purpose
of auditing the performance of, and the charges of, JI Properties under the
terms of this Agreement; provided, that all costs and expenses of such
inspection shall be borne by the Company.
Section 4. Prevention of Performance. JI Properties shall not be determined
to be in violation of this Agreement if it is prevented from performing any
Services hereunder for any reason beyond its reasonable control, including
without limitation, acts of God, nature, or of public enemy, strikes, or
limitations of law, regulations or rules of the Federal or of any state or local
government or of any agency thereof.
-2-
<PAGE>
Section 5. Indemnification.
5.1 By the Company. The Company shall indemnify, defend and hold JI
Properties, and its directors, officers, and employees harmless from and against
all damages, losses and reasonable out-of-pocket expenses (including fees)
incurred by them in the course of performing the duties on behalf of the Company
and its subsidiaries as prescribed hereby.
5.2 Remedy. JI Properties does not assume any responsibility under
this Agreement other than to render the services called for under this Agreement
in good faith and in a manner reasonably believed to be in the best interests of
the Company. The Company's sole remedy on account of the failure of JI
Properties to provide the Assets render the Services as and when required
hereunder shall be to procure such assets or services elsewhere.
Section 6. Additional Subsidiaries. If at any time after the date upon
which this Agreement is executed, the Company acquires or creates one or more
subsidiary corporations (a "Subsequent Subsidiary"), the Company shall cause
such Subsequent Subsidiary to be subject to this Agreement and all references
herein to the Company's "direct and indirect subsidiaries" shall be interpreted
to include all Subsequent Subsidiaries.
Section 7. Payments Not Subject to Set-off. Any payments paid by the
Company under this Agreement shall not be subject to set-off and shall be
increased by the amount, if any, of any taxes (other than income taxes) or other
governmental charges levied in respect of such payments, so that JI Properties
is made whole for such taxes or charges.
Section 8. Notices.
8.1 Manner of Delivery. Each notice, demand, request, consent, report,
approval or communication (each a "Notice") which is or may be required to be
given by either party to the other party in connection with this Agreement and
the transactions contemplated hereby, shall be in writing, and given by
telecopy, personal delivery, receipted delivery service, or by certified mail,
return receipt requested, prepaid and properly addressed to the party to be
served.
8.2 Addresses. Notices shall be addressed as follows:
If to the Company:
Jordan Telecommunication Products, Inc.
ArborLake Centre
1751 Lake Cook Road, Suite 550
Deerfield, Illinois 60015
Attention: Dominic Pileggi
-3-
<PAGE>
If to JI Properties:
JI Properties, Inc.
Arborlake Centre
1751 Lake Cook Road, Suite 550
Deerfield, Illinois 60015
Attention: Thomas H. Quinn
8.3 Effective Date. Notices shall be effective on the date sent via
telecopy, the date delivered personally or by receipted delivery service, or
three (3) days after the date mailed.
8.4 Change of Address. Each party may designate by notice to the
others in writing, given in the foregoing manner, a new address to which any
notice may thereafter be so given, served or sent.
Section 9. Independent Contractor. JI Properties and its personnel shall,
for purposes of this Agreement, be independent contractors with respect to the
Company.
Section 10. Entire Agreement. This Agreement sets forth the entire
understanding of the Company and JI Properties, and supersedes all prior
agreements, arrangements and communications, whether oral or written, with
respect to the subject matter hereof. No supplement, modification, termination
in whole or in part, or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver by either party
of any breach of any provision of this Agreement shall be deemed a continuing
waiver or a waiver of any preceding or succeeding breach of such provision or of
any other provision herein contained.
Section 11. Assignability; Binding Effect. This Agreement may be assigned
by either party hereto without the consent of the other party, provided,
however, such assignment shall not relieve such party from its obligations
hereunder. Any assignment of this Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto, each of their respective successors and permitted assigns, and no other
persons shall have or derive any right, benefit or obligation hereunder.
Section 12. Headings. The headings and titles of the various paragraphs of
this Agreement are inserted merely for the purpose of convenience, and do not
expressly or by implication limit, define, extend or affect the meaning or
interpretation of this Agreement or the specific terms or text of the paragraph
so designated.
Section 13. Governing Law. This Agreement shall be governed by the internal
laws (and not the law of conflicts) of the State of Illinois.
Section 14. Severability. In the event that any provision of this
Agreement shall be held to be void or unenforceable in whole or in part, the
remaining provisions of this Agreement and the
-4-
<PAGE>
remaining portion of any provision held void or unenforceable in part shall
continue in full force and effect.
Section 15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall be considered one and the same instrument.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
JI PROPERTIES, INC.
By: /s/ Thomas C. Spielberger
-----------------------------
Name: Thomas C. Spielberger
Title: Vice President
JORDAN TELECOMMUNICATION PRODUCTS, INC.
By: /s/ Dominic Pileggi
-----------------------------
Name: Dominic Pileggi
Title: Authorized Officer
TJC MANAGEMENT CORPORATION
By: /s/ G. Robert Fisher
----------------------------
Name: G. Robert Fisher
Title: Secretary
JORDAN INDUSTRIES, INC.
JII, INC.
JI PROPERTIES, INC.
J.I. FINANCE COMPANY
CAPE CRAFTSMAN, INC.
WELCOME HOME, INC.
HOME AGAIN STORES, INC.
THE IMPERIAL ELECTRIC COMPANY
THE SCOTT MOTORS COMPANY
GEAR RESEARCH, INC.
MOTORS AND GEARS HOLDINGS, INC.
MOTORS AND GEARS, INC.
MOTORS AND GEARS INDUSTRIES, INC.
MERKLE-KORFF INDUSTRIES, INC.
FIR GROUP HOLDINGS, INC.
MOTORS AND GEARS AMSTERDAM B.V.
MOTORS AND GEARS HOLDINGS
AMSTERDAM B.V.
FIR GROUP HOLDINGS ITALIA, S.r.l.
-6-
<PAGE>
CONSTRUGIONI INTALIANE MOTORI
ELETTRICI, S.p.a.
SELIOSISTERNI, S.p.a.
FIR ELECTROMECCANICA, S.p.a.
SPL HOLDINGS, INC.
VALMARK INDUSTRIES, INC.
PAMCO PRINTED TAPE & LABEL CO., INC.
SALES PROMOTION ASSOCIATES, INC.
SEABOARD FOLDING BOX CORPORATION
BEEMAK PLASTICS, INC.
JII/SALES PROMOTION ASSOCIATES, INC.
THE OLD IMPERIAL ELECTRIC COMPANY
THE OLD SCOTT MOTORS COMPANY
OLD GEAR RESEARCH, INC.
DACCO, INCORPORATED
DETROIT TRANSMISSION PRODUCTS CO.
DACCO/DETROIT OF OHIO, INC.
ABC TRANSMISSION PARTS
WAREHOUSE, INC.
DACCO/DETROIT OF MINNESOTA, INC
DACCO/DETROIT OF INDIANA, INC.
DACCO/DETROIT OF
NORTH CAROLINA, INC.
DACCO/DETROIT OF MEMPHIS, INC.
DACCO/DETROIT OF ALABAMA, INC.
DACCO/DETROIT OF MICHIGAN, INC.
DACCO/DETROIT OF TEXAS, INC.
DACCO/DETROIT OF WEST VIRGINIA, INC.
BORG MANUFACTURING
NASHVILLE TRANSMISSION PARTS, INC.
DACCO/DETROIT OF FLORIDA, INC.
DACCO/DETROIT OF COLORADO, INC.
DACCO/DETROIT OF MISSOURI, INC.
DACCO/DETROIT OF ARIZONA, INC.
DACCO/DETROIT OF NEBRASKA, INC.
DACCO/DETROIT OF NEW JERSEY, INC.
DACCO/DETROIT OF OKLAHOMA, INC.
DACCO/DETROIT OF
SOUTH CAROLINA, INC.
DACCO INTERNATIONAL, INC.
PARSONS PRECISION PRODUCTS, INC.
SATE-LITE MANUFACTURING COMPANY
RIVERSIDE BOOK AND BIBLE HOUSE,
-7-
<PAGE>
INCORPORATED
AIM ELECTRONICS CORPORATION
JORDAN TELECOMMUNICATIONS
PRODUCT GROUP, INC.
JORDAN TELECOMMUNICATIONS
PRODUCT GROUP--EUROPE, INC.
VITELEC ELECTRONICS LIMITED
LODAN WEST, INC.
JOHNSON COMPONENTS, INC.
VIEWSONICS, INC.
SHANGHAI VIEWSONICS ELECTRONICS
CO., LTD.
ADAPT COMMUNICATION
SUPPLY CO. S. FL., INC.
NORTHERN TECHNOLOGIES
HOLDINGS, INC.
NORTHERN TECHNOLOGIES, INC.
DURA-LINE CORPORATION
DIVERSIFIED WIRE & CABLE CO.
BOND HOLDINGS, INC.
CAMBRIDGE PRODUCTS CORPORATION
By: /s/ Thomas H. Quinn
----------------------------
Name: Thomas H. Quinn
Authorized Officer
-8-
<PAGE>
EXHIBIT A
Description of Assets
---------------------
For purposes of the Properties Services Agreement, Assets shall mean the
following:
1. BAe 125 Series 1000 Aircraft, equipped with 2 Pratt & Whitney 305B
engines Serial # NA 1010; (259023); F.A.# 523QS ("HAWRER") (50% undivided
interest).
2. Grumman Gulfstream II, Serial # 213 equipped with 2 Rolls Royce Spey
engines.
3. CESSNA 560 CITATION 5 ULTRA Serial # 560-0321 F.A. # N320QS (50%
undivided interest)
Assets shall also include any other assets owned, leased or subleased by JI
Properties which the Company desires to utilize.
<PAGE>
Exhibit 10.4
TRANSITION AGREEMENT
--------------------
THIS TRANSITION AGREEMENT (this "Agreement") is made and entered into as of
this 25th day of July, 1997, by and between Jordan Telecommunication Products,
Inc., a Delaware corporation (the "Company"), and Jordan Industries, Inc., an
Illinois corporation ("Parent").
WHEREAS, the Company wishes to occupy certain of the facilities leased by
the Parent and to purchase from Parent certain services designed to assist the
Company in transitioning to a stand-alone company pursuant to terms and
conditions as more specifically described herein;
WHEREAS, Parent desires to provide or cause to be provided those facilities
and services requested by the Company under such terms and conditions; and
WHEREAS, the Company will retain the sole and absolute right and authority
to fully and completely operate and manage its business and properties.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, 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:
Section 1. Facilities and Services.
1.1 Facilities. Parent hereby grants to the Company the right to use
the Facilities set forth on Exhibit A. The Company acknowledges and agrees that
within 60 days of the expiration of the term of this Agreement, it shall leave
the Facilities in the same condition as at the commencement of the term of the
Agreement, ordinary wear and tear and damage by casualty excepted.
1.2 Services to be Rendered. Parent shall provide the Company with
the services described below (each, a "Service", and collectively, the
"Services") as selected from time to time by the Company:
(a) Insurance Administration. Assistance in securing all forms of
insurance, including property, casualty, workers' compensation and
trustees' and officers' liability coverage; managing insurance policies;
negotiation of premiums; arranging payment terms; managing claims; and
preparation of loss fund analysis. The amount and levels of insurance shall
be determined in the sole and absolute discretion of the Company.
(b) Accounting. Provision of all accounting services, including
accounts payable functions; processing of all employee expense reports and
reimbursements of travel and entertainment expenses; and maintenance of
accounts payable, cash disbursement systems, including reasonable internal
controls, internal audit coverage and audit support, including
<PAGE>
financial audits, operational audits and information system audits, as
requested and authorized in advance by the Company.
(c) Management Information Systems.
(i) Applications Development. Development, maintenance and
continuing evolution of system applications to provide technology
solutions to business needs and problems, as requested and authorized
in advance by the Company.
(ii) Telecommunications. Design, operation and maintenance of
network infrastructure, including telephone and data transmission
lines, voice mail, facsimile machines, cellular phones, pager, etc.;
negotiation of contracts with third party vendors and suppliers; and
local area network and wide area network communications support.
(iii) Operations/Technical Support and User Support. Design,
maintenance and operation of the computing environment, including
business specific applications, network wide applications, electronic
mail and other systems; purchase and maintenance of equipment,
including hardware and software; configuration, installation and
support of computer equipment; and education and training of the user
community.
(d) Special Projects. Support of all special projects, as requested
and authorized in advance by the Company.
(e) Legal. Coordination and supervision of all third party legal
services; assistance in the preparation of public filings and registration
statements; and oversight of processing of claims against the Company.
(f) Investor Relations/Communications. Preparation and coordination
of annual and quarterly reports to securityholders; presentations to
public; public relations; preparation of marketing materials; and investor
relations services.
1.3 Allocation of Facilities; Scope of Services; Charges. The
parties agree to cooperate and use reasonable efforts in order to allocate the
Facilities in accordance with the reasonable requests (based on their business
needs) of Parent and the Company. Charges for the use of the Facilities will be
allocated based upon the square footage assigned to the parties hereunder. The
parties will agree from time to time on the Services to be provided, the scope
of Services listed in Section 1.2 and the charges for such Services. The scope
of Services shall consist of the estimated amount of items to be processed or
hours to be spent for a category of the Services in any year as agreed to by the
parties. The charges for Services shall consist of an amount equal to Parent's
costs incurred in providing such Services. If the scope of Services actually
performed by Parent in any category of Services is different than that agreed to
by the parties, or if the scope
-2-
<PAGE>
of Services is increased at the request of the Company, then the parties shall
negotiate in good faith to revise the scope of Services and to adjust the
charges for such Services.
1.4 Performance of Services. Parent covenants that it will perform
or cause to be performed the Services in a timely, efficient and workmanlike
manner and in substantially the same manner in which Parent is providing such
services to the Company currently. Parent further covenants that it will
maintain or contract for a sufficient staff of trained personnel to enable it to
perform the Services hereunder. Parent may retain third parties or its
affiliates to provide certain of the Services hereunder. Any arrangements
between Parent and its affiliates for the provision of Services hereunder shall
be commercially reasonable and on terms not less favorable than those which
could be obtained from unaffiliated third parties.
1.5 Payment for Facilities and Services. Parent shall bill the
Company, at the end of each calendar month for the applicable Facilities and
Services. Such amount shall be payable by the Company in full within 30 days of
receipt thereof by the Company.
1.6 Reimbursement. The Company shall reimburse Parent for all
reasonable third party out-of-pocket expenses it incurs on behalf of the Company
not billed directly to the Company within 30 days of receipt of the invoice
therefor, if not included in the charges pursuant to Section 1.3.
Section 2. Term. The initial term of this Agreement shall commence on the
date hereof and shall be through December 31, 1997 (the "Initial Term") and
shall be renewable by the Company every year thereafter, subject to approval by
a majority of the Independent Directors (which they may withhold or grant in
their sole discretion). Absent written notice of non-renewal as provided in this
Section 2, this Agreement shall be automatically renewed for successive one-year
terms (each, a "Renewal Term") upon the expiration of the Initial Term and each
Renewal Term. Notice of non-renewal, if given, shall be given in writing by
either party hereto not less than ninety (90) calendar days before the
expiration of the Initial Term or any Renewal Term. Upon termination of this
Agreement, Parent shall promptly return to the Company all monies, books,
records and other materials held by it for or on behalf of the Company. As used
herein, the term "Independent Director" means each member of the Company's Board
of Trustees who is not affiliated with Parent or any of its affiliates, directly
or indirectly, whether by ownership of, ownership interest in, employment by,
any material business or professional relationship with, or service as an
officer of Parent or any of its affiliates, and is not serving as a trustee or
director for more than three real estate investment trusts organized by a
sponsor of the Company.
Section 3. Audit of Services. At any time during regular business hours
and as often as reasonably requested by the Company's officers, Parent shall
permit the Company or its authorized representatives to examine and make copies
and abstracts from the records and books of Parent for the purpose of auditing
the performance of, and the charges of, Parent under the terms of this
Agreement; provided, that all costs and expenses of such inspection shall be
borne by the Company.
-3-
<PAGE>
Section 4. Prevention of Performance. Parent shall not be determined to
be in violation of this Agreement if it is prevented from performing any
Services hereunder for any reason beyond its reasonable control, including
without limitation, acts of God, nature, or of public enemy, strikes, or
limitations of law, regulations or rules of the Federal or of any state or local
government or of any agency thereof.
Section 5. Indemnification.
5.1 By the Company. The Company shall indemnify, defend and hold
Parent, and its directors, officers, and employees harmless from and against all
damages, losses and reasonable out-of-pocket expenses (including fees) incurred
by them in the course of performing the duties on behalf of the Company and its
subsidiaries as prescribed hereby.
5.2 Remedy. Parent does not assume any responsibility under this
Agreement other than to render the services called for under this Agreement in
good faith and in a manner reasonably believed to be in the best interests of
the Company. The Company's sole remedy on account of the failure of Parent to
render the services as and when required hereunder shall be to procure services
elsewhere and to charge Parent the difference between the reasonable increased
cost, if any, to procure new services, and the current cost to the Company to
procure services under this Agreement.
Section 6. Notices.
6.1 Manner of Delivery. Each notice, demand, request, consent,
report, approval or communication (each a "Notice") which is or may be required
to be given by either party to the other party in connection with this Agreement
and the transactions contemplated hereby, shall be in writing, and given by
telecopy, personal delivery, receipted delivery service, or by certified mail,
return receipt requested, prepaid and properly addressed to the party to be
served.
6.2 Addresses. Notices shall be addressed as follows:
If to the Company:
Jordan Telecommunication Products, Inc.
ArborLake Centre
1751 Lake Cook Road, Suite 550
Deerfield, Illinois 60015
Attention: Dominic Pileggi
If to Parent:
Jordan Industries, Inc.
ArborLake Centre
1751 Lake Cook Road, Suite 550
-4-
<PAGE>
Deerfield, Illinois 60015
Attention: Thomas H. Quinn
6.3 Effective Date. Notices shall be effective on the date sent via
telecopy, the date delivered personally or by receipted delivery service, or
three (3) days after the date mailed.
6.4 Change of Address. Each party may designate by notice to the
others in writing, given in the foregoing manner, a new address to which any
notice may thereafter be so given, served or sent.
Section 7. Independent Contractor. The Parent and its personnel shall,
for purposes of this Agreement, be independent contractors with respect to the
Company
Section 8. Entire Agreement. This Agreement sets forth the entire
understanding of the Company and Parent, and supersedes all prior agreements,
arrangements and communications, whether oral or written, with respect to the
subject matter hereof. No supplement, modification, termination in whole or in
part, or waiver of this Agreement shall be binding unless executed in writing by
the party to be bound thereby. No waiver by either party of any breach of any
provision of this Agreement shall be deemed a continuing waiver or a waiver of
any preceding or succeeding breach of such provision or of any other provision
herein contained.
Section 9. Assignability; Binding Effect. This Agreement may be assigned
by either party hereto without the consent of the other party, provided,
however, such assignment shall not relieve such party from its obligations
hereunder. Any assignment of this Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto, each of their respective successors and permitted assigns, and no other
persons shall have or derive any right, benefit or obligation hereunder.
Section 10. Headings. The headings and titles of the various paragraphs
of this Agreement are inserted merely for the purpose of convenience, and do not
expressly or by implication limit, define, extend or affect the meaning or
interpretation of this Agreement or the specific terms or text of the paragraph
so designated.
Section 11. Governing Law. This Agreement shall be governed by the
internal laws (and not the law of conflicts) of the State of Illinois.
Section 12. Severability. In the event that any provision of this
Agreement shall be held to be void or unenforceable in whole or in part, the
remaining provisions of this Agreement and the remaining portion of any
provision held void or unenforceable in part shall continue in full force and
effect.
-5-
<PAGE>
Section 13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall be considered one and the same instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
JORDAN TELECOMMUNICATION PRODUCTS, INC.
By: /s/ Dominic Pileggi
-------------------------------
Name: Dominic Pileggi
Title: Authorized Officer
JORDAN INDUSTRIES, INC.
By: /s/ Gordon L. Nelson
-------------------------------
Name: Gordon L. Nelson
Title: Senior Vice President
-7-
<PAGE>
EXHIBIT A
Description of Facilities
-------------------------
For purposes of the Transition Agreement, Facilities shall mean the
facilities maintained by Parent or one of its affiliates at the following
addresses:
ArborLake Centre
1751 Lake Cook Road, Suite 550
Deerfield, Illinois 60015
Facilities shall also include any other premises owned, leased or subleased
by Parent at which the Company desires to utilize such premises as well as the
utilities, fixtures, furniture and equipment used in connection with the
operation of such premises.
<PAGE>
Exhibit 10.5
NEW SUBSIDIARY ADVISORY AGREEMENT
THIS NEW SUBSIDIARY ADVISORY AGREEMENT ("Agreement"), is executed as of the
25th day of July 1997 by and among JORDAN INDUSTRIES, INC., an Illinois
corporation (hereinafter referred to as the "Consultant"), and JORDAN
TELECOMMUNICATION PRODUCTS, INC., a Delaware corporation and each of the other
parties a signatory hereto (hereinafter collectively referred to as the
"Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Consultant has and/or has access to personnel who are highly
skilled in the field of rendering advice to businesses and financial advice to
the Company;
WHEREAS, the Board of Directors of the Company has been made fully aware of
the relationships of certain members of the Company's Board of Directors to the
Consultant;
WHEREAS, the Company's Board of Directors has reviewed in detail and
discussed the terms and provisions of this Agreement and the fairness of this
Agreement and whether more favorable agreements for the Company could be
obtained from unaffiliated third parties; and
WHEREAS, on the basis of its review of this Agreement, the Board of
Directors of the Company deemed it advisable and in the best interests of the
Company and necessary to the conduct, promotion, and attainment of the business
objectives of the Company that the Company retain Consultant to provide business
and financial advice to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the parties hereto do hereby agree as follows:
1. The Company hereby retains the Consultant, through the Consultant's own
personnel or through personnel available to the Consultant, to render consulting
services from time to time to the Company and its direct and indirect
subsidiaries (whether now existing or hereafter acquired) in connection with
their acquisitions, divestitures and investments, their financial affairs, their
relationships with their lenders, stockholders and other third-party associates
or affiliates, and the expansion of their businesses. Consultant shall render
such services to the Company and/or its direct and indirect subsidiaries in good
faith and in accordance with professional standards and applicable law. The term
of this Agreement shall commence the date hereof and continue until December 31,
2007, unless extended, or sooner terminated, as provided in Section 5 below. The
Consultant's personnel shall be reasonably available to the Company's managers,
auditors and other personnel for consultation and advice pursuant to this
Agreement, subject to Consultant's reasonable convenience and scheduling.
Services may be rendered at the
<PAGE>
Consultant's offices or at such other locations selected by the Consultant as
the Company and the Consultant shall from time to time agree.
2. (a) Subject to Section 4 hereof, the Company shall pay to the Consultant
(i) an investment banking and sponsorship fee of up to two percent (2%) of the
aggregate consideration paid (including non-competition, earnout, contingent
purchase price, incentive arrangements and similar payments) (A) by the Company
and/or its subsidiaries in connection with the acquisition by the Company and/or
its subsidiaries of all or substantially all of the outstanding capital stock,
warrants, options or other rights to acquire or sell capital stock, or all or
substantially all of the business or assets of another individual, corporation,
partnership or other business entity, (B) by the Company and/or its subsidiaries
in connection with any joint venture or other minority investment, or (C) to the
Company in connection with the sale by the Company of all or substantially all
of the Company's and/or its subsidiaries' outstanding capital stock, warrants,
options, or other rights to acquire or sell stock, or all or substantially all
of the business or assets of the Company and/or its subsidiaries (each of the
transactions described in clauses (A), (B) and (C), a "Transaction"), including,
but not limited to, any Transaction negotiated for the Company involving any
affiliate of the Company or the Consultant, including, but not limited to, any
Transaction involving, TJC Management Corporation, The Jordan Company, MCIT PLC,
Jordan/Zalaznick Capital Company, Leucadia National Corporation or any
affiliates of any of the foregoing (collectively, the "Jordan Affiliates"); and
(ii) a financial consulting fee of up to one percent (1%) of the amount obtained
or made available pursuant to any debt, equity or other financing (including
without limitation, any refinancing) by the Company and/or its subsidiaries with
the assistance of Consultant, including, but not limited to, any financing
obtained for the Company and/or its subsidiaries from one or more of the Jordan
Affiliates. However, the amount of such fees payable in each such Transaction
will be no less favorable to the Company than those that could be obtained from
comparable, unaffiliated third parties, and will be subject to separate
discussion and approval, in connection with each such Transaction, by each of a
majority of the Board of Directors and a majority of the directors who are
disinterested directors in relation to Consultant and its affiliates.
Notwithstanding and in addition to the foregoing, if the Consultant renders
services to the Company outside the ordinary course of business, the Company
shall pay an additional amount equal to the value of such extraordinary services
rendered by the Consultant as may be separately agreed to between the Consultant
and the Company.
(b) In recognition of the services rendered by the Consultant in
connection with the evaluation, negotiation, financing and closing of the
Company's senior note, senior discount note, preferred stock and bank financing
on or about the date hereof, the Company will pay Consultant a fee of
$4,100,000, such amount to be in lieu of any fees that may otherwise be payable
pursuant to this Section 2 in connection with the Offerings and the transactions
contemplated thereby.
3. The Company shall promptly reimburse Consultant for out-of-pocket
expenses (including, without limitation, an allocable amount of the Consultant's
overhead expenses attributable to the Company and its direct and indirect
subsidiaries, determined on actual usage,
-2-
<PAGE>
percentage revenue or such other basis as Consultant may determine) incurred by
the Consultant and its personnel in performing services hereunder to the Company
and its direct and indirect subsidiaries upon the Consultant rendering a
statement therefor, together with such supporting data as the Company shall
reasonably require.
4. Notwithstanding the foregoing, the Company shall not be required to
pay the fees under Section 2, (a) if and to the extent expressly prohibited by
the provisions of any credit, stock, financing or other agreements or
instruments binding upon the Company, its subsidiaries or properties, (b) if the
Company has not paid cash interest on any interest payment date or has postponed
or not made any principal payments with respect to any of their indebtedness on
any scheduled payment dates, or (c) if the Company has not paid cash dividends
on any dividend payment date as set forth in its certificate of incorporation or
as declared by its Board of Directors, or has postponed or not made any
redemptions on any redemption date as set forth in its certificate of
incorporation or any certificate of designation with respect to its preferred
stock, if any. Any payments otherwise owed hereunder, which are not made for any
of the above-mentioned reasons, shall not be canceled but rather accrue, and
shall be payable by the Company promptly when, and to the extent, that the
Company is no longer prohibited from making such payments and when the Company
has become current with respect to such principal or interest payments, has
become current with respect to such dividends and has made such redemptions with
respect to such preferred stock, if any. Any payment required hereunder which is
not paid when due shall bear interest at the rate of ten percent (10%) per
annum. This Section 4 will not, in any event, restrict or limit the Company's
obligations under Sections 3, 8 and 9, which will be absolute and not subject to
set-off.
5. This Agreement shall be automatically renewed for successive one-year
terms starting December 31, 2007 unless either party hereto, within sixty (60)
days prior to the scheduled renewal date, notifies the other party as to its
election to terminate this Agreement. Notwithstanding the foregoing, this
Agreement may be terminated by not less than ninety (90) days' prior written
notice from the Company to the Consultant at any time after (a) substantially
all of the stock or substantially all of the assets of the Company or all of its
subsidiaries are sold to an entity unaffiliated with the Consultant and/or a
majority of the Company stockholders immediately prior to the sale, or (b) the
Company is merged or consolidated into another entity unaffiliated with the
Consultant and/or a majority of the Company's stockholders immediately prior to
such merger and the Company is not the survivor of such transaction. Subject to
the foregoing, the Agreement will not be terminated as a result of any Company
ceasing to be a subsidiary of Jordan Industries, Inc. for financial reporting or
other purposes.
6. The Consultant shall have no liability to the Company on account of
(a) any advice which it renders to the Company or any of its direct or indirect
subsidiaries, provided the Consultant believed in good faith that such advice
was useful or beneficial to the Company or any of its direct or indirect
subsidiaries at the time it was rendered, or (b) the Consultant's inability to
obtain financing or achieve other results desired by the Company (or any of its
direct or indirect subsidiaries) or Consultant's failure to render services to
the Company at any particular time or
-3-
<PAGE>
from time to time, or (c) the failure of any Transaction to meet the financial,
operating, or other expectations of the Company or any of direct or indirect
subsidiaries. The Company's and any of its direct or indirect subsidiaries' sole
remedy for any claim under this Agreement shall be termination of this
Agreement.
7. Notwithstanding anything contained in this Agreement to the contrary,
the Company agrees and acknowledges for itself and on behalf of its direct and
indirect subsidiaries that the Consultant, the Jordan Affiliates and their
shareholders, employees, directors and affiliates intend to engage and
participate in acquisitions and business transactions outside of the scope of
the relationship created by this Agreement and neither the Consultant, any of
the Jordan Affiliates nor any of their respective shareholders, partners,
employees, directors or agents shall be under any obligation whatsoever to make
such acquisitions or business transactions through the Company or any of its
direct or indirect subsidiaries or offer such acquisitions or business
transactions to the Company or any of its direct or indirect subsidiaries.
8. The Company will, and will cause each of its direct and indirect
subsidiaries to, indemnify and hold harmless to the fullest extent permitted by
applicable law the Consultant, its affiliates and associates, each of the Jordan
Affiliates, and each of the respective owners, partners, officers, directors,
employees and agents of each of the foregoing, from and against any loss,
liability, damage, claim or expenses (including the fees and expenses of
counsel) arising as a result or in connection with this Agreement, the
Consultant's services hereunder or other activities on behalf of the Company and
its subsidiaries.
9. Any payments paid by the Company under this Agreement shall not be
subject to set-off and shall be increased by the amount, if any, of any taxes
(other than income taxes) or other governmental charges levied in respect of
such payments, so that the Consultant is made whole for such taxes or charges.
10. (a) This Agreement may not be modified, waived, terminated or amended
except expressly by an instrument in writing signed by the Consultant and the
Company.
(b) This Agreement may be assigned by Consultant to any of its
subsidiaries or affiliates without the consent of the Company, provided,
however, such assignment shall not relieve such party from its obligations
hereunder. Any assignment of this Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns.
(c) In the event that any provision of this Agreement shall be held
to be void or unenforceable in whole or in part, the remaining provisions of
this Agreement and the remaining portion of any provision held void or
unenforceable in part shall continue in full force and effect.
(d) Except as otherwise specifically provided herein, notice given
hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of
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<PAGE>
the party for whom intended at the principal executive offices of such party, or
at such other address as such party may hereinafter specify by written notice to
the other party.
(e) If at any time after the date upon which this Agreement is
executed, the Company acquires or creates one or more subsidiary corporations (a
"Subsequent Subsidiary"), the Company shall cause such Subsequent Subsidiary to
be subject to this Agreement and all references herein to the Company's "direct
and indirect subsidiaries" shall be interpreted to include all Subsequent
Subsidiaries.
(f) Each subsidiary of the Company shall be jointly and severally
liable and obligated hereunder with respect to each obligation, responsibility
and liability of the Company, as if a direct obligation of such subsidiary.
(g) No waiver by either party of any breach of any provision of this
Agreement shall be deemed a continuing waiver or a waiver of any preceding or
succeeding breach of such provision or of any other provision herein contained.
(h) Except as provided by that certain Termination Agreement, of even
date herewith, by and among certain of the parties hereto, this Agreement sets
forth the entire understanding of the Company and the Consultant, and supersedes
all prior agreements, arrangements and communications, whether oral or written,
with respect to the subject matter hereof.
(i) The Consultant and its personnel shall, for purposes of this
Agreement, be independent contractors with respect to the Company.
(j) This Agreement shall be governed by the internal laws (and not
the law of conflicts) of the State of Illinois.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
JORDAN INDUSTRIES, INC.
By: /s/ Gordon L. Nelson, Jr.
------------------------------
Name: Gordon L. Nelson, Jr.
Senior Vice President
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
JTP INDUSTRIES, INC.
AIM ELECTRONICS CORPORATION
OLD JORDAN TELECOMMUNICATIONS
PRODUCT GROUP, INC.
JORDAN TELECOMMUNICATIONS
PRODUCT GROUP - EUROPE, INC.
VITELEC ELECTRONICS LIMITED
LODAN WEST, INC.
JOHNSON COMPONENTS, INC.
NEW VIEWSONICS, INC.
SHANGHAI VIEWSONICS ELECTRONICS
CO., LTD.
ADAPT COMMUNICATION
SUPPLY CO. S. FL., INC.
NORTHERN TECHNOLOGIES
HOLDINGS, INC.
NORTHERN TECHNOLOGIES, INC.
NEW DURA-LINE CORPORATION
DIVERSIFIED WIRE & CABLE CO.
BOND HOLDINGS, INC.
NEW CAMBRIDGE PRODUCTS
CORPORATION
By: /s/ Thomas H. Quinn
----------------------------
Name: Thomas H. Quinn
Authorized Officer
-6-
<PAGE>
Exhibit 10.6
NEW SUBSIDIARY CONSULTING AGREEMENT
THIS NEW SUBSIDIARY CONSULTING AGREEMENT ("Agreement"), is executed as of
the 25th day of July 1997 by and among JORDAN INDUSTRIES, INC., an Illinois
corporation (hereinafter referred to as the "Consultant"), JORDAN
TELECOMMUNICATION PRODUCTS, INC., a Delaware corporation and each of the other
parties a signatory hereto (hereinafter collectively referred to as the
"Company").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, the Consultant has and/or has access to personnel who are highly
skilled in the field of rendering advice to businesses and financial advice to
the Company;
WHEREAS, the Board of Directors of the Company has been made fully aware of
the relationships of certain members of the Company's Board of Directors to the
Consultant;
WHEREAS, the Company's Board of Directors has reviewed in detail and
discussed the terms and provisions of this Agreement and the fairness of this
Agreement and whether more favorable agreements for the Company could be
obtained from unaffiliated third parties; and
WHEREAS, on the basis of its review of this Agreement, the Board of
Directors of the Company deemed it advisable and in the best interests of the
Company and necessary to the conduct, promotion, and attainment of the business
objectives of the Company that the Company retain Consultant to provide business
and financial advice to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the parties hereto do hereby agree as follows:
1. The Company hereby retains the Consultant, through the Consultant's own
personnel or through personnel available to the Consultant, to render consulting
services from time to time to the Company and its direct and indirect
subsidiaries (whether now existing or hereafter acquired) in connection with
their business affairs. Consultant shall render such services to the Company
and/or its direct and indirect subsidiaries in good faith and in accordance with
professional standards and applicable law. The term of this Agreement shall
commence the date hereof and continue until December 31, 2007, unless extended,
or sooner terminated, as provided in Section 6 below. The Consultant's personnel
shall be reasonably available to the Company's managers, auditors and other
personnel for consultation and advice pursuant to this Agreement, subject to
Consultant's reasonable convenience and scheduling. Services may be rendered at
the Consultant's offices or at such other locations selected by the Consultant
as the Company and the Consultant shall from time to time agree.
<PAGE>
2. Consultant shall be obligated to present to the Company all acquisition,
business and investment opportunities identified by the Consultant that relate
to manufacturing, assembly, distribution or marketing of products and services
in the telecommunications and data communications industry, and will not
permitted to purse such opportunities or present such opportunities to third
parties unless the Company determines not to pursue such opportunities or
consents thereto, provided that this obligation will apply only to Consultant,
and will not apply to any stockholders of affiliates of the Consultant,
including The Jordan Company. This Agreement will not prohibit, and Consultant's
stockholders and affiliates will not be prohibited from, pursuing such
opportunities or offering them to third parties without the Company's consent.
3. Subject to Section 5 hereof, the Company shall pay to the Consultant a
consulting services fee of one percent (1%) of the net sales of the Company and
its subsidiaries, without duplication, payable quarterly in arrears on the March
31, June 30, September 30 and December 31 of each year, starting with a pro rata
payment on September 30, 1997 for the period from the date hereof through
September 30, 1997. Notwithstanding and in addition to the foregoing, if the
Consultant renders services to the Company outside the ordinary course of
business, the Company shall pay an additional amount equal to the value of such
extraordinary services rendered by the Consultant as may be separately agreed to
between the Consultant and the Company.
4. The Company shall promptly reimburse Consultant for out-of-pocket
expenses (including, without limitation, an allocable amount of the Consultant's
overhead expenses attributable to the Company and its direct and indirect
subsidiaries, determined on actual usage, percentage revenue or such other basis
as Consultant may determine), incurred by the Consultant and its personnel in
performing services hereunder to the Company and its direct and indirect
subsidiaries upon the Consultant rendering a statement therefor, together with
such supporting data as the Company shall reasonably require.
5. Notwithstanding the foregoing, the Company shall not be required to pay
the fees under Section 3, (a) if and to the extent expressly prohibited by the
provisions of any credit, stock, financing or other agreements or instruments
binding upon the Company, its subsidiaries or properties, (b) if the Company has
not paid cash interest on any interest payment date or has postponed or not made
any principal payments with respect to any of their indebtedness on any
scheduled payment dates, or (c) if the Company has not paid cash dividends on
any dividend payment date as set forth in its certificate of incorporation or as
declared by its Board of Directors, or has postponed or not made any redemptions
on any redemption date as set forth in its certificate of incorporation or any
certificate of designation with respect to its preferred stock, if any. Any
payments otherwise owed hereunder, which are not made for any of the above-
mentioned reasons, shall not be canceled but rather accrue, and shall be payable
by the Company promptly when, and to the extent, that the Company is no longer
prohibited from making such payments and when the Company has become current
with respect to such principal or interest payments, has become current with
respect to such dividends and has made such redemptions with respect to such
preferred
<PAGE>
stock, if any. Any payment required hereunder which is not paid when due shall
bear interest at the rate of ten percent (10%) per annum. This Section 5 will
not, in any event, restrict or limit the Company's obligations under Sections 4,
9 and 10, which will be absolute and not subject to set-off.
6. This Agreement shall be automatically renewed for successive one-year
terms starting December 31, 2007 unless either party hereto, within sixty (60)
days prior to the scheduled renewal date, notifies the other party as to its
election to terminate this Agreement. Notwithstanding the foregoing, this
Agreement may be terminated by not less than ninety (90) days' prior written
notice from the Company to the Consultant at any time after (a) substantially
all of the stock or substantially all of the assets of the Company or all of its
subsidiaries are sold to an entity unaffiliated with the Consultant and/or a
majority of the Company stockholders immediately prior to the sale, or (b) the
Company is merged or consolidated into another entity unaffiliated with the
Consultant and/or a majority of the Company's stockholders immediately prior to
such merger and the Company is not the survivor of such transaction. Subject to
the foregoing, the Agreement will not be terminated as a result of any Company
ceasing to be a subsidiary of Jordan Industries, Inc. for financial reporting or
other purposes.
7. The Consultant shall have no liability to the Company on account of (a)
any advice which it renders to the Company or any of its direct or indirect
subsidiaries, provided the Consultant believed in good faith that such advice
was useful or beneficial to the Company or any of its direct or indirect
subsidiaries at the time it was rendered, or (b) the Consultant's inability to
obtain financing or achieve other results desired by the Company (or any of its
direct or indirect subsidiaries) or Consultant's failure to render services to
the Company at any particular time or from time to time, or (c) the failure of
any acquisition, divestiture, financing or business plan to meet the financial,
operating, or other expectations of the Company or any of direct or indirect
subsidiaries. The Company's and any of its direct or indirect subsidiaries' sole
remedy for any claim under this Agreement shall be termination of this
Agreement.
8. Notwithstanding anything contained in this Agreement to the contrary,
but subject to Section 2, the Company agrees and acknowledges for itself and on
behalf of its direct and indirect subsidiaries that the Consultant TJC
Management Corporation, The Jordan Company, MCIT PLC, Jordan/Zalaznick Capital
Company, Leucadia National Corporation or any affiliates of any of the foregoing
(collectively, the "Jordan Affiliates") and their respective shareholders,
partners, employees, directors and agents intend to engage and participate in
acquisitions and business transactions outside of the scope of the relationship
created by this Agreement and neither the Consultant, any of the Jordan
Affiliates nor any of their respective shareholders, partners, employees,
directors or agents shall be under any obligation whatsoever to make such
acquisitions or business transactions through the Company or any of its direct
or indirect subsidiaries or offer such acquisitions or business transactions to
the Company or any of its direct or indirect subsidiaries.
<PAGE>
9. The Company will, and will cause each of its direct and indirect
subsidiaries to, indemnify and hold harmless to the fullest extent permitted by
applicable law the Consultant, its affiliates and associates, each of the Jordan
Affiliates, and each of the respective owners, partners, officers, directors,
employees and agents of each of the foregoing, from and against any loss,
liability, damage, claim or expenses (including the fees and expenses of
counsel) arising as a result or in connection with this Agreement, the
Consultant's services hereunder or other activities on behalf of the Company and
its subsidiaries.
10. Any payments paid by the Company under this Agreement shall not be
subject to set-off and shall be increased by the amount, if any, of any taxes
(other than income taxes) or other governmental charges levied in respect of
such payments, so that the Consultant is made whole for such taxes or charges.
11. (a) This Agreement may not be modified, waived, terminated or amended
except expressly by an instrument in writing signed by the Consultant and the
Company.
(b) This Agreement may be assigned by either party hereto without the
consent of the other party, provided, however, such assignment shall not relieve
such party from its obligations hereunder. Any assignment of this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns.
(c) In the event that any provision of this Agreement shall be held to
be void or unenforceable in whole or in part, the remaining provisions of this
Agreement and the remaining portion of any provision held void or unenforceable
in part shall continue in full force and effect.
(d) Except as otherwise specifically provided herein, notice given
hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended at
the principal executive offices of such party, or at such other address as such
party may hereinafter specify by written notice to the other party.
(e) If at any time after the date upon which this Agreement is
executed, the Company acquires or creates one or more subsidiary corporations (a
"Subsequent Subsidiary"), the Company shall cause such Subsequent Subsidiary to
be subject to this Agreement and all references herein to the Company's "direct
and indirect subsidiaries" shall be interpreted to include all Subsequent
Subsidiaries.
(f) Each subsidiary of the Company shall be jointly and severally
liable and obligated hereunder with respect to each obligation, responsibility
and liability of the Company, as if a direct obligation of such subsidiary.
<PAGE>
(g) No waiver by either party of any breach of any provision of this
Agreement shall be deemed a continuing waiver or a waiver of any preceding or
succeeding breach of such provision or of any other provision herein contained.
(h) Except as provided by that certain Termination Agreement, of even
date herewith, by and among certain of the parties hereto, this Agreement sets
forth the entire understanding of the Company and the Consultant, and supersedes
all prior agreements, arrangements and communications, whether oral or written,
with respect to the subject matter hereof.
(i) The Consultant and its personnel shall, for purposes of this
Agreement, be independent contractors with respect to the Company.
(j) This Agreement shall be governed by the internal laws (and not the
law of conflicts) of the State of Illinois.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
JORDAN INDUSTRIES, INC.
By: /s/ Gordan L. Nelson, Jr.
------------------------------------
Name: Gordon L. Nelson, Jr.
Senior Vice President
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
JTP INDUSTRIES, INC.
AIM ELECTRONICS CORPORATION
OLD JORDAN TELECOMMUNICATIONS
PRODUCT GROUP, INC.
JORDAN TELECOMMUNICATIONS PRODUCT
GROUP EUROPE, INC.
VITELEC ELECTRONICS LIMITED
JOHNSON COMPONENTS, INC.
NEW VIEWSONICS, INC.
SHANGHAI VIEWSONICS ELECTRONICS CO.,
LTD.
ADAPT COMMUNICATION SUPPLY CO. S. FL.
INC.
NORTHERN TECHNOLOGIES HOLDINGS,
INC.
NORTHERN TECHNOLOGIES, INC.
NEW DURA-LINE CORPORATION
DIVERSIFIED WIRE & CABLE, INC.
BOND HOLDINGS, INC.
NEW CAMBRIDGE PRODUCTS CORPORATION
By: /s/ Thomas H. Quinn
-----------------------------------
Name: Thomas H. Quinn
Authorized Officer
<PAGE>
Exhibit 10.7
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of July 25, 1997 ("this
Agreement"), is by and among Jordan Telecommunication Products, Inc., a Delaware
corporation ("JTP"), JTP Industries, Inc., a Delaware corporation, and New
Johnson Components, Inc., a Delaware corporation (all collectively referred to
as the "Indemnitors") and Dominic Pileggi ("Indemnitee").
WITNESSETH
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors, executive officers, or in other
capacities unless they are provided with adequate protection through insurance
and indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the corporation; and
WHEREAS, the current difficulties or virtual impossibility of obtaining
adequate insurance and uncertainties relating to indemnification have increased
the difficulty of attracting and retaining such persons; and
WHEREAS, the Boards of Directors of the Indemnitors have determined that
the inability to attract and retain such persons is detrimental to the best
interests of the Indemnitors's stockholders and that the Indemnitors should act
to assure such persons that there will be increased certainty of such protection
in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Indemnitors
contractually to obligate themselves to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to serve
the Indemnitors free from undue concern that they will not be so indemnified;
and
WHEREAS, the Certificate of Incorporation (the "Certificate") and the
Bylaws (the "Bylaws") of each of the Indemnitors provide for the indemnification
of the directors, officers, agents and employees of the Indemnitors to the full
extent permitted by the General Corporation Law of the State of Delaware (the
"Act"). The Certificate, the Bylaws and the Act specifically provide that they
are not exclusive, and thereby contemplate that contracts may be entered into
between the Indemnitors and the members of their Boards of Directors and their
executive officers with respect to indemnification of such directors and their
executive officers; and
WHEREAS, pursuant to JTP's proposed $190,000,000 Senior Note, $120,000,000
Discount Note and $25,000,000 Senior Exchangeable Preferred Stock Units offering
pursuant to that certain Offering Circular, dated July 21, 1997 (the
"Offering"), some of the assets of predecessor companies to the Indemnitors are
being purchased from Jordan Industries, Inc. by
<PAGE>
JTP, which has formed some of the Indemnitors for this purpose, as part of a
recapitalization which will make JTP a stand-alone, industry focused company.
Therefore, the newly formed Indemnitors desire to enter into this
Indemnification Agreement with Indemnitee, which is substantially similar to
Indemnification Agreements currently in effect between Indemnitee and other
subsidiaries of JTP; and
WHEREAS, this Agreement is being entered into as part of Indemnitee's total
compensation for serving as a director and/or an executive officer, as the case
may be;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Indemnitors jointly and severally on the one hand and
Indemnitee on the other do hereby covenant and agree as follows:
SECTION 1. Service by Indemnitee.
---------------------
Indemnitee agrees to serve as director of the Indemnitors and/or executive
officer of the Indemnitors if so designated by the Indemnitors and appointed by
the respective Boards of Directors, and agrees to the indemnification provisions
provided for herein. Indemnitee may at any time and for any reason resign from
such position (subject to any other contractual obligation or other obligation
imposed by operation of law), in which event the Indemnitors shall have no
obligation under this Agreement to continue Indemnitee in any such position.
SECTION 2. Indemnification.
---------------
The Indemnitors shall indemnify Indemnitee to the fullest extent permitted
by applicable law in effect on the date hereof, notwithstanding that such
indemnification is not specifically authorized by this Agreement, the
Certificate, the Bylaws, the Act or otherwise. In the event of any change, after
the date of this Agreement, in any applicable law, statute or rule regarding the
right of a Delaware corporation to indemnify a member of its board of directors
or an officer, such changes, to the extent that they would expand Indemnitee's
rights hereunder, shall be within the scope of Indemnitee's rights and the
Indemnitors's obligations hereunder, and, to the extent that they would narrow
Indemnitee's rights hereunder, shall be excluded from this Agreement; provided,
however, that any change that is required by applicable laws, statutes or rules
to be applied to this Agreement shall be so applied regardless of whether the
effect of such change is to narrow Indemnitee's rights hereunder. Without
diminishing the scope of the indemnification provided by this Section 2, the
rights of indemnification of Indemnitee provided hereunder shall include
indemnification in respect of the Offering and shall not be limited to those
rights set forth hereinafter, except to the extent expressly prohibited by
applicable law.
-2-
<PAGE>
SECTION 3. Action or Proceeding Other Than an Action by or in the Right of
---------------------------------------------------------------
the Indemnitors.
---------------
Indemnitee shall be entitled to the indemnification rights provided in this
Section 3 if he is or was 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 in nature, other than an action by or
in the right of the Indemnitors, by reason of the fact that he is or was a
director, officer, employee, agent or fiduciary of the Indemnitors or is or was
serving at the request of the Indemnitors as a director, officer, employee,
agent, partner, trustee or fiduciary of any other entity, or by reason of
anything done or not done by him in any such capacity. Pursuant to this Section
3, Indemnitee shall be indemnified against reasonable costs and expenses
(including, but not limited to, counsel fees, costs, judgments, penalties,
fines, ERISA excise taxes, and amounts paid in settlement) (collectively,
"Damages") actually and reasonably incurred by him in connection with such
action, suit or proceeding (including, but not limited to, the investigation,
defense or appeal thereof), if, in the case of conduct in his official capacity
with the corporation, he acted in good faith and in the Indemnitors's best
interests, and in all other cases, he acted in good faith and was at least not
opposed to the Indemnitors's best interests, and with respect to any criminal
action or proceeding had no reasonable cause to believe his conduct was
unlawful, except that no indemnification shall be made in respect of any claim,
issue or matter as to which Indemnitee shall have been finally adjudged to be
liable for (i) negligence or misconduct in the performance of his duty to any of
the Indemnitors unless and only to the extent that the court in which such
action or suit was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for such expenses as such court shall deem proper or (ii)
the indemnification does not relate to any liability arising under Section 16(b)
of the Securities Exchange Act of 1934, as amended, or any of the rules or
regulations promulgated thereunder. Notwithstanding the foregoing, the
Indemnitors shall be required to indemnify an officer or director in connection
with an action, suit or proceeding initiated by such person only if such action,
suit or proceeding was authorized by the Board or a committee thereof. No
indemnity pursuant to this Agreement shall be provided by the Indemnitors for
Damages that have been paid directly to Indemnitee by an insurance carrier under
a policy of directors' and officers' liability insurance maintained by the
Indemnitors.
SECTION 4. Actions by or in the Right of the Indemnitors.
---------------------------------------------
Indemnitee shall be entitled to the indemnification rights provided in this
Section 4 if he is or was made a party or is threatened to be made a party to
any threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative or investigative brought by or in the right of the
Indemnitors to procure a judgment in their favor by reason of the fact that he
is or was a director, officer, employee, agent or fiduciary of the Indemnitors
or is or was serving at the request of the Indemnitors as a director, officer,
employee, agent, partner, trustee or fiduciary of any other entity by reason of
anything done or not done by him in any such capacity. Pursuant to this Section
4, Indemnitee shall be indemnified against Damages (as defined in Section 3 of
-3-
<PAGE>
Agreement) actually and reasonably incurred by him in connection with such
action or suit (including, but not limited to the investigation, defense,
settlement or appeal thereof) if, in the case of conduct in his official
capacity with the corporation, he acted in good faith and in the Indemnitors's
best interests, and in all other cases, he acted in good faith and was at least
not opposed to the Indemnitors's best interests, except that no indemnification
shall be made in respect of any claim, issue or matter as to which Indemnitee
shall have been finally adjudged to be liable for (i) negligence or misconduct
in the performance of his duty to any of the Indemnitors unless and only to the
extent that the court in which such action or suit was brought, or any other
court of competent jurisdiction, shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such expenses as
such court shall deem proper or (ii) the indemnification does not relate to any
liability arising under Section 16(b) of the Securities Exchange Act of 1934, as
amended, or any of the rules or regulations promulgated thereunder.
Notwithstanding the foregoing, the Indemnitors shall be required to indemnify an
officer or director in connection with an action, suit or proceeding initiated
by such person only if such action, suit or proceeding was authorized by the
Board or a committee thereof. No indemnity pursuant to this Agreement shall be
provided by the Indemnitors for Damages that have been paid directly to
Indemnitee by an insurance carrier under a policy of directors' and officers'
liability insurance maintained by the Indemnitors.
SECTION 5. Indemnification for Costs, Charges and Expenses of Successful
-------------------------------------------------------------
Party.
-----
Notwithstanding the other provisions of this Agreement, to the extent that
Indemnitee has served as a witness on behalf of the Indemnitors or has been
successful, on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Section 3 and Section 4 hereof, or in defense of any
claim, issue or matter therein, shall be indemnified against all reasonable
costs, charges, and expenses (including counsel fees) actually and reasonably
incurred by him or on his behalf in connection therewith.
SECTION 6. Partial Indemnification
-----------------------
If Indemnitee is only partially successful in the defense, investigation,
settlement or appeal of any action, suit, investigation or proceeding described
in Section 3 or 4 hereof, and as a result is not entitled under Section 5 hereof
to indemnification by the Company for the total amount of the expenses
(including attorneys' fees), costs, judgments, penalties, fines and amounts paid
in settlement actually and reasonably incurred by him, the Company shall
nevertheless indemnify Indemnitee, as a matter of right pursuant to Section 5
hereof, to the extent Indemnitee has been partially successful.
-4-
<PAGE>
SECTION 7. Determination of Entitlement to Indemnification.
-----------------------------------------------
Upon written request by Indemnitee for indemnification pursuant to Section
3 or Section 4 hereof, the entitlement of Indemnitee to indemnification pursuant
to the terms of this Agreement shall be determined by the following person or
persons who shall be empowered to make such determination: (a) the Boards of
Directors of the Indemnitors by a majority vote of a quorum consisting of
Disinterested Directors (as hereinafter defined); or (b) if such a quorum is not
obtainable or, even if obtainable, if the Board of Directors by the majority
vote of Disinterested Directors so directs, by Independent Counsel (as
hereinafter defined) in a written opinion to the Board of Directors, a copy of
which shall be delivered to Indemnitee; or (c) by the stockholders, but shares
owned by or voted under the control of directors, including the Indemnitee, who
are at the time parties to the proceeding may not be voted on the determination.
Such Independent Counsel shall be selected by the Board of Directors and
approved by Indemnitee. Upon failure of the Board of Directors to so select
such Independent Counsel or upon failure of Indemnitee to so approve, such
Independent Counsel shall be selected by the Chancellor of the State of Delaware
or such other person as the Chancellor shall designate to make such selection.
Such determination of entitlement to indemnification shall be made no later than
sixty (60) days after receipt by the Indemnitors of a written request for
indemnification. Such request shall include documentation or information which
is necessary for such determination and which is reasonably available to
Indemnitee. Any Damages incurred by Indemnitee in connection with his request
for indemnification hereunder shall be borne by the Indemnitors. The
Indemnitors hereby indemnify and agree to hold Indemnitee harmless therefrom
irrespective of the outcome of the determination of Indemnitee's entitlement to
indemnification. If the person making such determination shall determine that
Indemnitee is entitled to indemnification as to part (but not all) of the
application for indemnification, such person shall reasonably prorate such
partial indemnification among such claims, issues or matters.
SECTION 8. Presumptions and Effect of Certain Proceedings.
----------------------------------------------
The Secretary of the Indemnitors shall, promptly upon receipt of
Indemnitee's request for indemnification, advise in writing its Board of
Directors and the Boards of Directors of the other Indemnitors or such other
person or persons empowered to make the determination as provided in Section 7
that Indemnitee has made such request for indemnification. Indemnitee shall be
presumed to be entitled to indemnification hereunder and the Indemnitors shall
have the burden of proof in the making of any determination contrary to such
presumption. If the person or persons so empowered to make such determination
shall have failed to make the requested indemnification within 60 days after
receipt by the Indemnitors of such request, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be absolutely entitled to such indemnification, absent actual and material
fraud in the request for indemnification. The termination of any action, suit,
investigation or proceeding described in Section 3 or Section 4 hereof by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself (a) create a presumption that Indemnitee
did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best
-5-
<PAGE>
interests of the Indemnitors, and, with respect to any criminal action or
proceeding, that Indemnitee had reasonable cause to believe that his conduct was
unlawful or (b) otherwise adversely affect the rights of Indemnitee to
indemnification except as may be provided herein.
SECTION 9. Advancement of Expenses and Costs.
---------------------------------
All reasonable expenses and costs incurred by Indemnitee who is party to a
proceeding (including counsel fees, retainers and advances of disbursements
required of Indemnitee) (collectively, the "Expense Advance") shall be paid by
the Indemnitors in advance of the final disposition of such action, suit or
proceeding at the request of Indemnitee within twenty (20) days after the
receipt by the Indemnitors of a statement or statements from Indemnitee
requesting such advance or advances from time to time. Such statement or
statements shall reasonably evidence the expenses and costs incurred by him in
connection therewith. The Indemnitors's obligation to provide an Expense
Advance is subject to the following conditions: (i) if the proceeding arose in
connection with Indemnitee's service as a director and/or executive officer of
the Indemnitors (and not in any other capacity in which Indemnitee rendered
service, including service to any related company), then the Indemnitee or his
representative shall have executed and delivered to the Indemnitors an
undertaking, which need not be secured and shall be accepted without reference
to Indemnitee's financial ability to make repayment, by or on behalf of
Indemnitee to repay all Expense Advance if and to the extent that it shall
ultimately be determined by a final, unappealable decision rendered by a court
having jurisdiction over the parties and the question that Indemnitee is not
entitled to be indemnified for such Expense Advance under this Agreement or
otherwise; (ii) Indemnitee shall give the Indemnitors such information and
cooperation as it may reasonably request and as shall be within Indemnitee's
power; and (iii) Indemnitee shall furnish, upon request by the Indemnitors and
if required under applicable law, a written affirmation of Indemnitee's good
faith belief that any applicable standards of conduct have been met by
Indemnitee. Indemnitee's entitlement to such Expense Advance shall include
those incurred in connection with any proceeding by Indemnitee seeking an
adjudication pursuant to this Agreement. In the event that a claim for an
Expense Advance is made hereunder and is not paid in full within twenty (20)
days after written notice of such claim is delivered to the Indemnitors,
Indemnitee may, but need not, at any time thereafter bring suit against any of
the Indemnitors to recover the unpaid amount of the claim.
SECTION 10. Remedies of Indemnitee in Cases of Determination not to
-------------------------------------------------------
Indemnify or to Advance Expenses.
--------------------------------
In the event that a determination is made that Indemnitee is not entitled
to indemnification hereunder or if payment has not been timely made following a
determination of entitlement to indemnification pursuant to Sections 7 and 8, or
if expenses are not advanced pursuant to Section 9, Indemnitee shall be entitled
to a final adjudication in an appropriate court of the State of Delaware or any
other court of competent jurisdiction of his entitlement to such indemnification
or advance. The Indemnitors shall not oppose Indemnitee's right to seek any such
adjudication or any other claim. Such judicial proceeding shall be made de novo
and Indemnitee shall not be
-6-
<PAGE>
prejudiced by reason of a determination (if so made) that he is not entitled to
indemnification. If a determination is made or deemed to have been made pursuant
to the terms of Section 7 or Section 8 hereof that Indemnitee is entitled to
indemnification, the Indemnitors shall be bound by such determination and is
precluded from asserting that such determination has not been made or that the
procedure by which such determination was made is not valid, binding and
enforceable. The Indemnitors further agree to stipulate in any such court that
the Indemnitors are bound by all the provisions of this Agreement and are
precluded from making any assertion to the contrary. If the court shall
determine that Indemnitee is entitled to any indemnification hereunder, the
Indemnitors shall pay all reasonable Damages actually incurred by Indemnitee in
connection with such adjudication (including, but not limited to, any appellate
proceedings).
SECTION 11. Other Rights to Indemnification.
-------------------------------
The indemnification and advancement of expenses (including counsel fees)
and costs provided by this Agreement shall not be deemed exclusive of any other
rights to which Indemnitee may now or in the future be entitled under any
provision of the By-laws, provisions of the Certificate, vote of stockholders or
Disinterested Directors, provision of law or otherwise.
SECTION 12. Counsel Fees and Other Expenses to Enforce Agreement.
----------------------------------------------------
In the event that Indemnitee is subject to or intervenes in any proceeding
in which the validity or enforceability of this Agreement is at issue or seeks
an adjudication or award in arbitration to enforce his rights under, or to
recover damages for breach of, this Agreement, Indemnitee, if he prevails in
whole or in part in such action, shall be entitled to recover from the
Indemnitors, and shall be indemnified by the Indemnitors against, any reasonable
expenses for counsel fees and disbursements actually and reasonably incurred by
him.
SECTION 13. Duration of Agreement.
---------------------
This Agreement shall continue until and terminate upon the later of (a) 10
years after Indemnitee has ceased to occupy any of the positions or have any of
the relationships described in Section 3 or Section 4 of this Agreement or (b)
the final termination of all pending or threatened actions, suits, proceedings
or investigations with respect to Indemnitee. This Agreement shall be binding
upon the Indemnitors and their successors and assigns and shall inure to the
benefit of Indemnitee and his spouse, assigns, heirs, devisees, executors,
administrators or other legal representatives.
SECTION 14. Severability.
------------
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including without limitation, all portions of any paragraphs of this Agreement
containing any such provision held to be invalid, illegal or
-7-
<PAGE>
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
SECTION 15. Identical Counterparts.
----------------------
This Agreement may be executed in one or more counterparts, each of which
shall for all purposes be deemed to be an original, but all of which together
shall constitute one and the same Agreement. Only one such counterpart signed
by the party against whom enforceability is sought needs to be produced to
evidence the existence of this Agreement.
SECTION 16. Headings.
--------
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.
SECTION 17. Definitions.
-----------
For purposes of this Agreement:
(a) "Disinterested Director" shall mean a director of the Indemnitors who
is not or was not a party to the action, suit, investigation or proceeding in
respect of which indemnification is being sought by Indemnitee.
(b) "Independent Counsel" shall mean a law firm or a member of a law firm
that neither is presently nor in the past five years has been retained to
represent (i) the Indemnitors or Indemnitee in any matter material to either
such party or (ii) any other party to the action, suit, investigation or
proceeding giving rise to a claim for indemnification hereunder. Notwithstanding
the foregoing, the term "Independent Counsel" shall not include any person who,
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Indemnitors or Indemnitee
in an action to determine Indemnitee's right to indemnification under this
Agreement.
SECTION 18. Modification and Waiver.
-----------------------
No supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by both of the parties hereto. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
-8-
<PAGE>
SECTION 19. Mutual Acknowledgment.
---------------------
The Indemnitors and Indemnitee acknowledge that, in certain instances,
federal law or public policy may override applicable state law and prohibit the
Indemnitors from indemnifying Indemnitee under this Agreement or otherwise. For
example, the Indemnitors and Indemnitee acknowledge that the U.S. Securities and
Exchange Commission (the "SEC") has taken the position that indemnification is
not permissible for liabilities arising under certain federal securities laws,
and federal legislation prohibits indemnification for certain ERISA violations.
Furthermore, Indemnitee understands and acknowledges that the Indemnitors have
undertaken or may be required in the future to undertake with the SEC to submit
the question of indemnification to a court in certain circumstances for a
determination of the Indemnitors's right under public policy to indemnify
Indemnitee.
SECTION 20. Notice by Indemnitee.
--------------------
Indemnitee agrees promptly to notify the Indemnitors in writing upon being
served with any summons, citation, subpoena, complaint, indictment, information
or other document relating to any matter which may be subject to indemnification
covered hereunder, either civil, criminal or investigative.
SECTION 21. Notices.
-------
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if (i) delivered by hand
and receipted for by the party to whom said notice or other communication shall
have been directed or if (ii) mailed by certified or registered mail with
postage prepaid on the third business day after the date on which it is so
mailed, to the following addresses:
(a) if to Indemnitee:
c/o The Jordan Company
9 West 57th Street, Suite 4000
New York, NY 10019
(b) if to any of the Indemnitors:
c/o Jordan Telecommunication Products, Inc.
ArborLake Centre, Suite 550
1751 Lake Cook Road
Deerfield, Illinois 60015
Attention: President
-9-
<PAGE>
or to such other address as may have been furnished to Indemnitee by the
Indemnitors or to the Indemnitors by Indemnitee, as the case may be.
SECTION 22. Other Agreements.
----------------
This Agreement restates and supersedes, but does not limit or negate, any
indemnification, rights or interests of Indemnitee under any prior agreements
between the Indemnitors and Indemnitee.
SECTION 23. Governing Law.
-------------
The parties agree that this Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
JORDAN TELECOMMUNICATION
PRODUCTS, INC.
JTP INDUSTRIES, INC.
NEW JOHNSON COMPONENTS, INC.
By:_______________________________
Thomas H. Quinn
Authorized Officer
INDEMNITEE:
___________________________________
Name: Dominic Pileggi
-11-
<PAGE>
Exhibit 12
COMPUTATIONS OF THE RATIOS OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(In Thousands)
<TABLE>
<CAPTION>
Historical
-------------------------------------------------------------------------------------
Year ended December 31,
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Fixed charges
Interest Expense $ 4,639 $ 4,619 $ 5,778 $ 6,555 $11,826
Rental expense included in fixed charges 104 108 99 132 388
------- ------- ------- ------- -------
Total fixed charges 4,743 4,727 5,877 6,687 12,214
------- ------- ------- ------- -------
Earnings:
Pre-tax (loss) income 4,214 4,519 2,614 8,487 1,618
Plus: fixed charges 4,743 4,727 5,877 6,687 12,214
------- ------- ------- ------- -------
Total earnings $ 8,957 9,246 $ 8,491 $15,174 $13,832
------- ------- ------- ------- -------
Ratio of earnings to fixed charges 1.9 2.0 1.4 2.3 1.1
========================================================================================
Total fixed charges $ 4,743 $ 4,727 $ 5,877 $ 6,687 $12,214
Preferred stock dividend requirements 7 103 232 75 0
------- ------- ------- ------- -------
Total combined fixed charges and
preferred stock dividends $ 4,750 $ 4,830 $ 6,109 $ 6,762 $12,214
------- ------- ------- ------- -------
Ratio of earnings to combined fixed
charges and preferred stock dividends 1.9 1.9 1.4 2.2 1.1
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------- -----------------------------------------------
Six Months Ended Year ended Six Months Ended
June 30, 1997 December 31, 1996 June 30, 1997
------------- ----------------- -------------
<S> <C> <C> <C>
Fixed charges
Interest Expense $ 9,265 $30,801 $15,254
Rental expense included in fixed charges 299 672 444
-------- ------- -------
Total fixed charges 9,564 31.473 $15,698
-------- ------- -------
Earnings:
Pre-tax (loss) income (10,566) (2,622) (1,336)
Plus: fixed charges 9,564 31,473 15,698
-------- ------- -------
$(1,002) $28,811 $14,362
Total earnings -------- ------- -------
Ratio of earnings to fixed charges --(a) 0.9(a) 0.9(a)
========================================================================================
Total fixed charges $ 9,564 $31,473 $15,698
Preferred stock dividend requirements 0 5,802 2,807
-------- ------- -------
Total combined fixed charges and
preferred stock dividends $ 9,564 $37,275 $18,505
-------- ------- -------
Ratio of earnings to combined fixed
charges and preferred stock dividends --(b) 0.8(b) 0.8(b)
========================================================================================
</TABLE>
(a) Earnings were insufficient to cover fixed charges by $10.6 million for the
six months ended June 30, 1997. Pro forma earnings were insufficient to
cover fixed charges by $2.7 million and $1.3 million for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively.
(b) Earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $10.6 million for the six months ended June 30, 1997.
Pro forma earnings were insufficient to cover combined fixed charges and
preferred stock dividends by $8.5 million and $4.1 million for the year
ended December 31, 1996 and the six months ended June 30, 1997,
respectively.
<PAGE>
EXHIBIT 23.2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report, dated April 25, 1997, on the combined balance sheets of the
JTP Companies as of December 31, 1995 and 1996, and the related combined
statements of operations, changes in shareholders' equity (net capital
deficiency), and cash flows for each of the three years in the period ended
December 31, 1996; our report, dated April 10, 1996, on the combined balance
sheet of Viewsonics, Inc. and Shanghai Viewsonics Electronic Co., Ltd. as of
December 31, 1995, and the related combined statements of income, stockholder's
equity, and cash flows for the year then ended; our report, dated May 7, 1997,
on the combined balance sheet of LoDan West, Inc. and L/D West, Inc. as of
December 31, 1996, and the related combined statements of income and retained
earnings, and cash flows for the year ended December 31, 1996; in the
Registration Statement (Form S-4 No. 333-XXXXX) and related Prospectus of Jordan
Telecommunication Products, Inc. for the registration of $190,000,000 of 9 7/8%
Series B Senior Notes due 2007, $120,000,000 of 11 3/4% Series B Senior Discount
Notes due 2007, $25,000,000 of 13 1/4% Series B Senior Exchangable Preferred
Stock due 2009, and $25,000,000 of 13 1/4% Series B Subordinated Preferred Stock
Exchange Notes due 2009.
Ernst & Young LLP
Chicago, Illinois
August 26, 1997
<PAGE>
[MELLEN, SMITH & PIVOZ, P.C. - Letterhead]
[MS&P - Logo]
Exhibit 23.3
CONSENT OF MELLEN, SMITH & PIVOZ, P.C., INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report, dated February 13, 1997, on the balance sheet of Diversified
Wire & Cable, Inc. as of December 31, 1996, and the related statement of
operations, changes in shareholders' equity, and cash flows for the period June
25, 1996 to December 31, 1996; in the Registration Statement (Form S-4 No. 333-
XXXXX) and related Prospectus of Jordan Telecommunication Products, Inc. for the
registration of $190,000,000 of 9 7/8% Series B Senior Notes due 2007,
$120,000,000 of 11 3/4% Series B Senior Discount Notes due 2007, $25,000,000 of
13 1/4% Series B Senior Exchangeable Preferred Stock due 2009 and $25,000,000 of
13 1/4% Series B Subordinated Preferred Stock Exchange Notes due 2009.
/s/ Mellen, Smith & Pivoz
Mellen, Smith & Pivoz, P.C.
Bingham Farms, Michigan
August 27, 1997
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File No.
333- ) of our report dated April 11, 1997, on our audit of the financial
statements of Bond Holdings, Inc. We also consent to the reference to our firm
under the caption "Experts".
/s/ Coopers & Lybrand L.L.P
Newport Beach, California
August 26, 1997
<PAGE>
Exhibit 23.5
Consent Of McFarland & Alton PS, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report, dated April 25, 1997, on the consolidated balance sheet of
Northern Technologies Holdings, Inc. as of December 31, 1996 and our report,
dated February 7, 1997 on the balance sheets of Northern Technologies, Inc. as
of December 31, 1995 and 1996, and the related statements of income,
stockholders' equity, and cash flows for the years then ended, in the
Registration Statement (Form S-4 No. 333-XXXXX) and related Prospectus of Jordan
Telecommunication Products, Inc. for the registration of $190,000,000 of 9 7/8%
Series B Senior Notes due 2007. $120,000,000 of 11 3/4% Series B Senior Discount
Notes due 2007, $25,000,000 of 13 1/4% Series B Senior Exchangeable Preferred
Stock due 2009, and $25,000,000 of 13 1/4% Series B Subordinated Preferred Stock
Exchange Notes due 2009.
McFarland & Alton PS
Spokane, Washington
August 27, 1997
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 (333- ) of Jordan Telecommunication
Products, Inc. of our report dated August 28, 1996 relating to the financial
statements of E.F. Johnson Company - Components Division which appears in such
Prospectus. We also consent to the references to us under the headings
"Experts".
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Minneapolis, Minnesota
August 26, 1997
<PAGE>
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
FIRST TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
JORDAN TELECOMMUNICATION PRODUCTS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 36-4173125
(State of Incorporation) (I.R.S. Employer
Identification No.)
Arborlake Centre, Suite 550
1751 Lake Cook Road
Deerfield, IL 60015
(Address of Principal Executive Offices) (Zip Code)
9 7/8% Series B Senior Notes Due 2007
11 3/4% Series B Senior Discount Due 2007
13 1/4% Subordinated Preferred Stock Exchange Notes Due 2009
(Title of the Indenture Securities)
<PAGE>
GENERAL
-------
1. General Information Furnish the following information as to the Trustee.
(a) Name and address of each examining or supervising authority to which it
is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority is filed in paper format pursuant to Form SE.
* Incorporated by reference to Registration Number 22-25656.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, First Trust National Association, an Association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 20th day of August,
1997.
FIRST TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
-----------------------
Richard H. Prokosch
Trust Officer
/s/ S. Christopherson
- ---------------------
S. Christopherson
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, FIRST TRUST NATIONAL ASSOCIATION hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: August 20, 1997
FIRST TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
-----------------------
Richard H. Prokosch
Trust Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 7,093 3,032
<SECURITIES> 0 0
<RECEIVABLES> 30,756 36,014
<ALLOWANCES> 501 468
<INVENTORY> 25,750 34,077
<CURRENT-ASSETS> 67,928 77,533
<PP&E> 44,740 47,187
<DEPRECIATION> 15,694 17,888
<TOTAL-ASSETS> 179,646 204,968
<CURRENT-LIABILITIES> 35,389 39,463
<BONDS> 147,186 176,922
1,875 1,875
0 0
<COMMON> 88 88
<OTHER-SE> (11,467) (20,782)
<TOTAL-LIABILITY-AND-EQUITY> 179,646 204,968
<SALES> 132,999 107,802
<TOTAL-REVENUES> 132,999 107,802
<CGS> 82,870 66,780
<TOTAL-COSTS> 119,676 109,209
<OTHER-EXPENSES> 11,705 9,159
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 1,618 (10,566)
<INCOME-TAX> 3,647 (3,031)
<INCOME-CONTINUING> (2,577) (8,331)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 464<F1>
<CHANGES> 0 0
<NET-INCOME> (2,577) (8,795)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1> Loss
</FN>
</TABLE>
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
FOR TENDERS OF
$190,000,000 Aggregate Principal Amount of
9 7/8% Series A Senior Notes due 2007
$120,000,000 Principal Amount of Maturity
of 11 3/4% Series A Senior Discount Notes due 2007
JORDAN TELECOMMUNICATION PRODUCTS, INC.
Pursuant to the Prospectus
dated ________, 1997 of Jordan Telecommunication Products, Inc.
- --------------------------------------------------------------------------------
| THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON |
| _____________, 1997 (UNLESS EXTENDED) (THE "EXPIRATION DATE"). TENDERED OLD |
| SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE |
| OF THE EXCHANGE OFFER. |
- --------------------------------------------------------------------------------
Deliver to: First Trust National Association, Exchange Agent:
By Mail (registered or certified mail recommended), Hand or Overnight Courier:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attn: Specialized Finance
Corporation Trust Department, Fourth Floor
By Facsimile:
(612) 244-1537
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
<PAGE>
The undersigned acknowledges that he or she has received the Prospectus,
dated ________, 1997 (the "Prospectus"), of Jordan Telecommunication Products,
Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal,
which may be amended from time to time (this "Letter"), which together
constitute the Company's offer (the "Exchange Offer") to exchange up to $190
million aggregate principal amount of 9 7/8% Series B Senior Notes due 2007 (the
"New Senior Notes") and $120 million principal amount at maturity of 11 3/4%
Series B Senior Discount Notes (the "New Discount Notes" and together with the
New Senior Notes, the "New Notes") of the Company for a like principal amount of
the Company's issued and outstanding 9 7/8% Series A Senior Notes due 2007 (the
"Old Senior Notes" and together with the New Senior Notes, the "Senior Notes")
and 11 3/4% Series A Senior Discount Notes due 2007 (the "Old Discount Notes and
together with the New Discount Notes, the "Discount Notes;" the Old Discount
Notes and Old Senior Notes are sometimes collectively referred to as the "Old
Notes" and sometimes collectively with the New Notes, as the "Notes"), with the
holders (each holder of Old Notes, a "Holder") thereof.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Senior Notes will bear interest from the most recent date to
which interest has been paid on the Old Senior Notes or, if no interest have
been paid on the Old Senior Notes, from July 25, 1997. Interest will accrete on
the New Discount Notes from July 25, 1997. Accordingly, registered holders of
New Notes on the relevant record date for the first interest payment date
following the consummation of the Exchange Offer will receive interest accruing
from the most recent date to which interest has been paid or, if no interest has
been paid, from July 25, 1997. Old Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer.
Holders of Old Notes whose Old Notes are accepted for exchange will not receive
any payment in respect of interest or dividends on such Old Notes otherwise
payable on any interest payment date the record date for which occurs on or
after consummation of the Exchange Offer.
This Letter is to be used: (i) by all Holders who are not members of the
Automated Tender Offering Program ("ATOP") at the Depository Trust Company
("DTC"); (ii) by Holders who are ATOP members but choose not to use ATOP; or
(iii) if the Old Notes are to be tendered in accordance with the guaranteed
delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 2. Delivery of this
Letter to DTC does not constitute delivery to the Exchange Agent.
Notwithstanding anything to the contrary in the registration rights
agreements dated July 25, 1997 among the Company and the original purchasers of
Old Notes (the "Registration Rights Agreements"), the Company will accept for
exchange any and all Old Notes validly tendered on or prior to 5:00 p.m., New
York City time, on _________, 1997 (unless the Exchange Offer is extended by the
Company) (the "Expiration Date"). Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
IMPORTANT: HOLDERS WHO WISH TO TENDER OLD NOTES IN THE EXCHANGE OFFER MUST
COMPLETE THIS LETTER OF TRANSMITTAL AND TENDER THE OLD NOTES TO THE EXCHANGE
AGENT AND NOT TO THE COMPANY.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange. However, the Exchange Offer is subject to
certain conditions. Please see the Prospectus under the section titled "The
Exchange Offer--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 Old 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.
-2-
<PAGE>
The instructions included with this Letter of Transmittal must be followed
in their entirety. Questions and request for assistance or for additional copies
of the Prospectus or this Letter of Transmittal may be directed to the Exchange
Agent at the address listed above.
-3-
<PAGE>
APPROPRIATE SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company the principal amount of Old
Notes indicated below under "Description of Old Notes," in accordance with and
upon the terms and subject to the conditions set forth in the Prospectus,
receipt of which is hereby acknowledged, and in this Letter of Transmittal, for
the purpose of exchanging each $1,000 principal amount of Old Notes designated
herein held by the undersigned and tendered hereby for $1,000 principal amount
of the New Notes. New Notes will be issued only in integral multiples of $1,000
to each tendering Holder of Old Notes whose Old Notes are accepted in the
Exchange Offer. Holders may tender all or a portion of their Old Notes pursuant
to the Exchange Offer.
Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered herewith in accordance with the terms of the Exchange Offer, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Company all right, title and interest in and to all such Old Notes that are
being tendered hereby and that are being accepted for exchange pursuant to the
Exchange Offer. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Exchange Agent also acts as the agent
of the Company), with respect to the Old Notes tendered hereby and accepted for
exchange pursuant to the Exchange Offer with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to deliver the Old Notes tendered hereby to the Company (together with
all accompanying evidences of transfer and authenticity) for transfer or
cancellation by the Company.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned and any obligation of the undersigned hereunder shall be
binding upon the heirs, executors, administrators, legal representatives,
successors and assigns of the undersigned. Any tender of Old Notes hereunder may
be withdrawn only in accordance with the procedures set forth in the
instructions contained in this Letter of Transmittal. See Instruction 4 hereto.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Company to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered. The
undersigned has read and agrees to all of the terms of the Exchange Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter 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 Exchange Offer--Withdrawal Rights" section
of the Prospectus.
The name(s) and address(es) of the registered Holder(s) should be printed
herein under "Description of Old Notes" (unless a label setting forth such
information appears thereunder), exactly as they appear on the Old Notes
tendered hereby. The certificate number(s) and the principal amount of Old Notes
to which this Letter of Transmittal relates, together with the principal amount
of such Old Notes that the undersigned wishes to tender, should be indicated in
the appropriate boxes herein under "Description of Old Notes."
-4-
<PAGE>
The undersigned agrees that acceptance of any tendered Old Notes by the
Company and the issuance of New Notes in exchange therefor shall constitute
performance in full by the Company of its obligations under the Registration
Rights Agreements and that, upon the issuance of the New Notes the Company will
have no further obligations or liabilities thereunder.
The undersigned understands that the tender of Old Notes pursuant to one of
the procedures described in the Prospectus under "The Exchange Offer--Procedures
for Tendering Old Securities" and the Instructions hereto will constitute the
tendering Holder's acceptance of the terms and the conditions of the Exchange
Offer. The undersigned hereby represents and warrants to the Company that the
New Notes to be acquired by such Holder pursuant to the Exchange Offer are being
acquired in the ordinary course of such Holder's business, that such Holder has
no arrangement or understanding with any person to participate in the
distribution of the New Notes. The Company's acceptance for exchange of Old
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.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT IT IS NOT ENGAGED IN,
AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF THE NEW NOTES.
The undersigned also acknowledges that this Exchange Offer is being made
based on interpretations by the staff of the Securities and Exchange Commission
(the "Commission") set forth in no-action letters issued to third parties in
other transactions substantially similar to the Exchange Offer, which lead the
Company to believe that the New Notes issued in exchange for the Old Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than (i) any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act, (ii) an Initial Purchaser who acquired the Old Notes directly from the
Company solely in order to resell pursuant to Rule 144A of the Securities Act or
any other available exemption under the Securities Act, or (iii) a broker-dealer
who acquired the Old Notes as a result of market making or other trading
activities), without further compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holders' business and such holders are
not participating and have no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
such New Notes. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Notes and has no arrangement or understanding to participate
in a distribution of New Notes. If any holder is an affiliate of the Company or
is engaged in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holder (i) could not rely on the applicable interpretations of the staff of
the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act. If the undersigned is a broker-
dealer that will receive New Notes for its own account in exchange of Old Notes,
it represents that the Old Notes to be exchanged for the New Notes were acquired
by it as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of Section 2(11) of the Securities Act.
The undersigned understands that the New Notes issued in consideration of
Old Notes accepted for exchange, and/or any principal amount of Old Notes not
tendered or not accepted for exchange, will only be issued in the name of the
Holder(s) appearing herein under "Description of Old Notes." Unless otherwise
indicated under "Special Delivery Instructions," please mail the New Notes
issued in consideration of Old Notes accepted for exchange, and/or any principal
amount of Old Notes not tendered or not accepted for exchange (and accompanying
documents, as appropriate), to the Holder(s) at the address(es) appearing herein
under "Description of Old Notes." In the event that the Special Delivery
Instructions are completed, please mail the
-5-
<PAGE>
New Notes issued in consideration of Old Notes accepted for exchange, and/or any
Old Notes for any principal amount or liquidation preference not tendered or not
accepted for exchange, in the name of the Holder(s) appearing herein under
"Description of Old Notes," and send such New Notes and/or Old Notes to the
address(es) so indicated. Any transfer of Old Notes to a different holder must
be completed, according to the provisions on transfer of Old Notes contained in
the Indentures.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX BELOW.
-6-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions
of the Exchange Offer
1. Guarantee of Signatures. Signatures on this Letter of Transmittal or
notice of withdrawal, as the case may be, must be guaranteed by an institution
which falls within the definition of "eligible guarantor institution" contained
in Rule 17Ad-15 as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended (hereinafter, an "Eligible
Institution") unless (i) the Old Notes tendered hereby are tendered by the
Holder(s) of the Old Notes who has (have) not completed the box entitled
"Special Delivery Instructions" on this Letter of Transmittal or (ii) the Old
Notes are tendered for the account of an Eligible Institution.
2. Delivery of this Letter of Transmittal and Old Notes; Guaranteed
Delivery Procedures. This Letter of Transmittal is to be used: (i) by all
Holders who are not ATOP members, (ii) by Holders who are ATOP members but
choose not to use ATOP or (iii) if the Old Notes are to be tendered in
accordance with the guaranteed delivery procedures set forth in the Prospectus
under "The Exchange Offer--Guaranteed Delivery Procedures." To validly tender
Old Notes, a Holder must physically deliver a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and all other required documents to the Exchange Agent at
its address set forth on the cover of this Letter of Transmittal prior to the
Expiration Date (as defined below) or the Holder must properly complete and duly
execute an ATOP ticket in accordance with DTC procedures. Otherwise, the Holder
must comply with the guaranteed delivery procedures set forth in the next
paragraph. Notwithstanding anything to the contrary in the Registration Rights
Agreements, the term "Expiration Date" means 5:00 p.m., New York City time, on
___________, 1997 (or such later date to which the Company may, in its sole
discretion, extend the Exchange Offer). If this Exchange Offer is extended, the
term "Expiration Date" shall mean the latest time and date to which the Exchange
Offer is extended. 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 by giving oral (confirmed in writing) or written notice of such
extension to the Exchange Agent and by making a public announcement of such
extension prior to 9:00 a.m., New York City time, on the next business day after
the previously scheduled Expiration Date.
LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE COMPANY OR TO DTC.
If a Holder of the Old Notes desires to tender such Old Notes and time will
not permit such Holder's required documents to reach the Exchange Agent before
the Expiration Date, a tender may be effected if (a) the tender is made through
an Eligible Institution; (b) on or prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery (by telegram, facsimile transmission, mail or hand delivery) setting
forth the name and address of the Holder of the Old Notes and the principal
amount Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange trading days after the
Expiration Date, any documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and (c) all other
documents required by the Letter of Transmittal are received by the Exchange
Agent within three New York Stock Exchange trading days after the Expiration
Date. See "The Exchange Offer--Guaranteed Delivery Procedures" as set forth in
the Prospectus.
Only a Holder of Old Notes may tender Old Notes in the Exchange Offer. The
term "Holder" as used herein with respect to the Old Notes means any person in
whose name Old Notes are registered on the books of the Trustee. If the Letter
of Transmittal or any Old Notes are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity,
-7-
<PAGE>
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
so submitted.
Any beneficial Holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to validly surrender those Old Notes in the Exchange Offer should contact such
registered Holder promptly and instruct such registered Holder to tender on his
behalf. If such beneficial Holder wishes to tender on his own behalf, such
beneficial Holder must, prior to completing and executing the Letter of
Transmittal, make appropriate arrangements to register ownership of the Old
Notes in such beneficial holder's name. It is the responsibility of the
beneficial holder to register ownership in his own name if he chooses to do so.
The transfer of record ownership may take considerable time.
The method of delivery of this Letter of Transmittal (or facsimile hereof)
and all other required documents is at the election and risk of the exchanging
Holder, but, except as otherwise provided below, the delivery will be deemed
made only when actually received or confirmed by the Exchange Agent. If sent by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure timely
delivery to the Exchange Agent before the Expiration Date. No Letters of
Transmittal or Old Notes should be sent to the Company.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or facsimile
hereof), waive any right to receive notice of acceptance of their Old Notes for
exchange.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and principal amount of the Old Notes to which this Letter
of Transmittal relates should be listed on a separate signed schedule attached
hereto.
4. Withdrawal of Tender. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
To be effective, a written or facsimile transmission notice of withdrawal
must (i) be received by the Exchange Agent at the address set forth herein prior
to 5:00 p.m., New York City time, on the Expiration Date: (ii) specify the name
of the person having tendered the Old Notes to be withdrawn; (iii) identify the
Old Notes to be withdrawn; and (iv) be (a) signed by the Holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or (b)
accompanied by evidence satisfactory to the Company that the Holder withdrawing
such tender has succeeded to beneficial ownership of such Old Notes. If Old
Notes have been tendered pursuant to the ATOP procedure with DTC, any notice of
withdrawal must otherwise comply with the procedures of DTC. Old Notes properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer; provided, however, that withdrawn Old Notes may be retendered by
again following one of the procedures described herein at any time prior to 5:00
p.m., New York City time, on 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 Company, whose determinations will be final
and binding on all parties. Neither the Company, 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. The Exchange Agent intends to use reasonable
efforts to give notification of such defects and irregularities.
5. Partial Tenders; Pro Rata Effect. Tenders of the Old Notes will be
accepted only in integral multiples of $1,000. If less than the entire
principal amount evidenced by any Old Notes is to be tendered, fill in the
principal amount that is to be tendered in the box entitled "Principal Amount
Tendered" below. The
-8-
<PAGE>
entire principal amount of all Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
6. Signatures on this Letter of Transmittal; Bond Powers and Endorsements.
If this Letter of Transmittal is signed by the registered Holder(s) of the Old
Notes tendered hereby, the signature must correspond with the name as written on
the face of the certificate representing such Old Notes without alteration,
enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the Old Notes tendered hereby are registered in different names,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal and any necessary accompanying documents as there are
different registrations.
When this Letter of Transmittal is signed by the Holder(s) of Old Notes
listed and tendered hereby, no endorsements or separate bond powers are
required.
If this Letter of Transmittal is 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.
7. Special Delivery Instructions. Tendering Holders should indicate in
the applicable box the name and address to which New Notes issued in
consideration of Old Notes accepted for exchange, or Old Notes for principal
amounts not exchanged or not tendered, are to be sent, if different from the
name and address of the person signing this Letter of Transmittal.
8. Waiver of Conditions. The Company reserves the absolute right to waive
any of the specified conditions in the Exchange Offer, in whole at any time or
in part from time to time, in the case of any Old Notes tendered hereby. See
"The Exchange Offer--Conditions to the Exchange Offer" in the Prospectus.
9. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Old Notes for principal amounts not
exchanged are to be delivered to any person other than the Holder of the Old
Notes or if a transfer tax is imposed for any reason other than the exchange of
Old Notes 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, the amount of such transfer taxes will be
billed directly to such tendering Holder.
10. Irregularities. All questions as to validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Notes
will be resolved by the Company, in its sole discretion, whose determination
shall be final and binding. The Company reserves the absolute right to reject
any or all tenders of any particular Old Notes that are not in proper form, or
the acceptance of which would, in the opinion of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defect,
irregularity or condition of tender with regard to any particular Old Notes.
The Company's interpretation of the terms of, and conditions to, the Exchange
Offer (including the instructions herein) will be final and binding. Unless
waived, any defects or irregularities in connection with tenders must be cured
within such time as the Company shall determine. Neither the Company nor the
Exchange Agent shall be under any duty to give notification of defects in such
tenders or shall incur any liability for failure to give such notification. The
Exchange Agent intends to use reasonable efforts to give notification of such
defects and irregularities. Tenders
-9-
<PAGE>
of Old Notes will not be deemed to have been made until all defects and
irregularities have been cured or waived. Any Old 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 by this Letter of Transmittal, as
soon as practicable following the Expiration Date.
11. Interest on Exchanged Old Notes. Holders whose Old Notes are accepted
for exchange will not receive accrued interest or dividends thereon on the date
of exchange. Instead, interest accruing from July 25, 1997 through the
Expiration Date will be payable on the New Notes on ____________, 1997, in
accordance with the terms of the New Notes. See "The Exchange Offer--Acceptance
of Old Securities for Exchange; Delivery of New Securities" and "Description of
Notes" as set forth in the Prospectus.
12. Mutilated, Lost, Stolen or Destroyed Certificates. Holders whose
certificates for Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ALL REQUIRED DOCUMENTS, OR A NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY
THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
-10-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: FIRST TRUST NATIONAL ASSOCIATION
- -----------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY Social Security Number
Form W-9 SIGNING AND DATING BELOW
Department of the
Treasury-Internal
Revenue Service OR____________________________
Employer Identification Number
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Part 2 - Certification - Under penalties of perjury, I certify that:
Payer's Request for (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a
Taxpayer number to be issued to me); and
Identification
Number ("TIN") (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.
Certificate instruction -- You must cross out item (2) in Part 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).
- -----------------------------------------------------------------------------------------------------------------------------------
Part 3
SIGNATURE..........................DATE......................., 1997
NAME (Please Print)............................................ Awaiting TIN [_]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (i) 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 (ii) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a number.
Signature.......................................Date............................
Name (Please Print).............................................................
- --------------------------------------------------------------------------------
-11-
<PAGE>
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
================================================================================
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1 and 7)
To be completed ONLY if the New Notes issued in consideration of Old Notes
exchanged, or certificates for Old Notes in a principal amount not surrendered
for exchange are to be mailed to someone other than the undersigned or to the
undersigned at an address other than that below.
Mail to:
Name:
--------------------------------------------------------------------------
(Please Print)
Address:
-----------------------------------------------------------------------
(Zip Code)
================================================================================
DESCRIPTION OF OLD SECURITIES
(See Instructions 2 and 7)
<TABLE>
<CAPTION>
=========================================================================================================================
Name(s) and Address(es) of Certificate(s)
Registered Holder(s) (Attach additional signed list, if necessary)
(Please fill in, in blank)
- -------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Aggregate Principal Amount of Principal Amount of Old
Certificate Number(s)/1/ Old Notes Evidenced by Notes Tendered/2/ (must be
Certificate(s) integral multiples of $1,000)
<S> <C> <C>
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Total
=========================================================================================================================
</TABLE>
-12-
<PAGE>
(Boxes below to be checked by Eligible Institutions only)
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution______________________________________________
DTC Account Number_________________________________________________________
Transaction Code Number____________________________________________________
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)____________________________________________
Window Ticket Number (if any)______________________________________________
Date of Execution of Notice of Guaranteed Delivery_________________________
Name of Institution which Guaranteed Delivery______________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution______________________________________________
DTC Account Number_________________________________________________________
Transaction Code Number____________________________________________________
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name____________________________________________________________________________
Address_________________________________________________________________________
_________________________________________________________________________
-13-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X __________________________________ __________________
X __________________________________ __________________
Signature(s) of Owner(s) Dated
of Authorized Signatory
Area Code and Telephone Number:____________________________________________
This box must be signed by registered holder(s) of Old Notes as their name(s)
appear(s) on certificate(s) for Old Notes hereby tendered or on a security
position listing, or by any person(s) authorized to become registered holder(s)
by endorsement and documents transmitted with this Letter (including such
opinions of counsel, certifications and other information as may be required by
the Company or the Trustee for the Old Notes to comply with the restrictions on
transfer applicable to the Old Notes). If signature is by an attorney-in-fact,
trustee, executor, administrator, guardian, officer or other person acting in a
fiduciary or representative capacity, such person must set forth his or her full
title below.
Name(s)_________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title)___________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Tax Identification or Social Security Number(s)_________________________________
________________________________________________________________________________
Guarantee of Signature(s)
(See Instructions 1 and 6 to determine if required)
Authorized Signature____________________________________________________________
Name____________________________________________________________________________
Name of Firm____________________________________________________________________
Title___________________________________________________________________________
Address_________________________________________________________________________
Area Code and Telephone Number__________________________________________________
Dated___________________________________________________________________________
- --------------------------------------------------------------------------------
-14-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer.
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
For this type Give the SOCIAL
of account: SECURITY number
of--
----------------------------------------------------------------------
<S> <C> <C>
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account./4/
3. Custodian account of a minor The minor/6/
(Uniform Gift to Minors Act)
4.a. The usual revocable savings The grantor-trustee
trust (grantor is also trustee)
b. So-called trust account that is The actual owner
not a legal or valid trust under
State law
5. Sole proprietorship The owner 1/
-
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------
For this type Give the EMPLOYER
of account: IDENTIFICATION
number of--
----------------------------------------------------------------------
<S> <C> <C>
6. Sole proprietorship The owner/3/
7. A valid trust, estate, or pension Legal entity/5/
trust
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school
district, or prison) that receives
agricultural program payments
</TABLE>
-15-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
Payees Exempt from Backup Withholding
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisers Act
of 1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends, and payments
by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan or custodial account under section 403(b)(7).
(3) The United States or any agency or instrumentality thereof.
(4) A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
(5) A foreign government, a political subdivision of a foreign government, or
an agency or instrumentality thereof.
(6) An international organization or any agency or instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times under the Investment Company Act of
1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc. Nominee List.
(15) An exempt charitable remainder trust, or a non-exempt trust described in
section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, royalties, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice. Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number. If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments. If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information with Respect to Withholding. If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
1. Need not be completed if Old Notes are being tendered by book-entry
transfer.
-16-
<PAGE>
2. Unless otherwise indicated, the entire principal amount or liquidation
preference of Old Notes evidenced by any certificate will be deemed to have
been tendered.
/0/ You must show your individual name, but you may also enter your business
- or "doing business as" name. You may use either your SSN or EIN.
/0/ List first and circle the name of the person whose number you furnish.
-
/0/ List first and circle the name of the legal trust, estate, or pension
- trust. (Do not furnish the identifying number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
/0/ Circle the minor's name and furnish the minor's social security number.
-
-17-
<PAGE>
Exhibit 99.2
LETTER OF TRANSMITTAL
FOR TENDERS OF
$25,000,000 Aggregate Liquidation Preference of 13 1/4%
Series A Senior Exchangeable Preferred Stock due 2009
JORDAN TELECOMMUNICATION PRODUCTS, INC.
Pursuant to the Prospectus
dated ________, 1997 of Jordan Telecommunication Products, Inc.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_____________, 1997 (UNLESS EXTENDED) (THE "EXPIRATION DATE"). TENDERED OLD
SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE OF
THE EXCHANGE OFFER.
- --------------------------------------------------------------------------------
Deliver to: Harris Trust and Savings Bank, Exchange Agent:
By Mail (registered or certified mail recommended): By Hand or Overnight
Courier:
Harris Trust and Savings Bank Harris Trust and Savings Bank
c/o Harris Trust Company of New York c/o Harris Trust Company of New York
P. O. Box 1010 77 Water Street
Wall Street Station Finance 4th floor
New York, NY 10268 New York, NY 10004
By Facsimile:
(212) 701-7636
Confirm by Telephone:
(212) 701-7624
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
<PAGE>
The undersigned acknowledges that he or she has received the Prospectus,
dated ________, 1997 (the "Prospectus"), of Jordan Telecommunication Products,
Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal,
which may be amended from time to time (this "Letter"), which together
constitute the Company's offer (the "Exchange Offer") to exchange up to $25
million aggregate liquidation preference of 13 3/4% Series B Senior Preferred
Stock due 2009 (the "New Senior Preferred Stock") of the Company for a like
principal amount of the Company's issued and outstanding 13 3/4% Series A Senior
Preferred Stock due 2009 (the "Old Senior Preferred Stock" and together with the
New Senior Preferred Stock, the "Senior Preferred Stock"), with the holders
(each holder of Old Senior Preferred Stock, a "Holder") thereof.
For each Old Senior Preferred Stock accepted for exchange, the Holder of
such Old Senior Preferred Stock will receive a share of New Senior Preferred
Stock having a liquidation preference equal to that of the surrendered Old
Senior Preferred Stock. The New Senior Preferred Stock will accrue dividends
from the most recent date to which dividends have been paid on the Old Senior
Preferred Stock or, if no dividends have been paid on the Old Senior Preferred
Stock, from July 25, 1997. Accordingly, registered holders of New Senior
Preferred Stock on the relevant record date for the first dividend payment date
following the consummation of the Exchange Offer will receive dividends accruing
from the most recent date to which dividends have been paid or, if no interest
or dividends have been paid, from July 25, 1997. Old Senior Preferred Stock
accepted for exchange will cease to accrue interest or dividends from and after
the date of consummation of the Exchange Offer. Holders of Old Senior Preferred
Stock whose Old Senior Preferred Stock is accepted for exchange will not receive
any payment in respect of dividends on such Old Senior Preferred Stock otherwise
payable on any dividend payment date the record date for which occurs on or
after consummation of the Exchange Offer.
This Letter is to be used: (i) by all Holders who are not members of the
Automated Tender Offering Program ("ATOP") at the Depository Trust Company
("DTC"); (ii) by Holders who are ATOP members but choose not to use ATOP; or
(iii) if the Old Senior Preferred Stock is to be tendered in accordance with the
guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus. See Instruction 2. Delivery of
this Letter to DTC does not constitute delivery to the Exchange Agent.
Notwithstanding anything to the contrary in the registration rights
agreement dated July 25, 1997 among the Company and the original purchasers of
Old Senior Preferred Stock (the "Registration Rights Agreement"), the Company
will accept for exchange any and all Old Senior Preferred Stock validly tendered
on or prior to 5:00 p.m., New York City time, on _________, 1997 (unless the
Exchange Offer is extended by the Company) (the "Expiration Date"). Tenders of
Old Senior Preferred Stock may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
IMPORTANT: HOLDERS WHO WISH TO TENDER OLD SENIOR PREFERRED STOCK IN THE
EXCHANGE OFFER MUST COMPLETE THIS LETTER OF TRANSMITTAL AND TENDER THE OLD
SENIOR PREFERRED STOCK TO THE EXCHANGE AGENT AND NOT TO THE COMPANY.
The Exchange Offer is not conditioned upon any minimum liquidation
preference of Old Senior Preferred Stock being tendered for exchange. However,
the Exchange Offer is subject to certain conditions. Please see the Prospectus
under the section titled "The Exchange Offer--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 Old Senior Preferred Stock in any jurisdiction in
which the making or acceptance of the Exchange Offer would not be in compliance
with the laws of such jurisdiction.
-2-
<PAGE>
The instructions included with this Letter of Transmittal must be followed
in their entirety. Questions and request for assistance or for additional copies
of the Prospectus or this Letter of Transmittal may be directed to the Exchange
Agent at the address listed above.
-3-
<PAGE>
APPROPRIATE SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company the liquidation
preference of Old Senior Preferred Stock indicated below under "Description of
Old Senior Preferred Stock," in accordance with and upon the terms and subject
to the conditions set forth in the Prospectus, receipt of which is hereby
acknowledged, and in this Letter of Transmittal, for the purpose of exchanging
each $1,000 liquidation preference of Old Senior Preferred Stock designated
herein held by the undersigned and tendered hereby for $1,000 liquidation
preference of the New Senior Preferred Stock. New Senior Preferred Stock will
be issued only in whole shares to each tendering Holder of Old Senior Preferred
Stock whose Old Senior Preferred Stock is accepted in the Exchange Offer.
Holders may tender all or a portion of their Old Senior Preferred Stock pursuant
to the Exchange Offer.
Subject to, and effective upon, the acceptance for exchange of the Old
Senior Preferred Stock tendered herewith in accordance with the terms of the
Exchange Offer, the undersigned hereby sells, assigns and transfers to, or upon
the order of, the Company all right, title and interest in and to all such Old
Senior Preferred Stock that is being tendered hereby and that is being accepted
for exchange pursuant to the Exchange Offer. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent
also acts as the agent of the Company), with respect to the Old Senior Preferred
Stock tendered hereby and accepted for exchange pursuant to the Exchange Offer
with full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest) to deliver the Old Senior Preferred
Stock tendered hereby to the Company (together with all accompanying evidences
of transfer and authenticity) for transfer or cancellation by the Company.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned and any obligation of the undersigned hereunder shall be
binding upon the heirs, executors, administrators, legal representatives,
successors and assigns of the undersigned. Any tender of Old Senior Preferred
Stock hereunder may be withdrawn only in accordance with the procedures set
forth in the instructions contained in this Letter of Transmittal. See
Instruction 4 hereto.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Old Senior
Preferred Stock tendered hereby and that the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim. The undersigned will,
upon request, execute and deliver any additional documents deemed by the Company
to be necessary or desirable to complete the assignment and transfer of the Old
Senior Preferred Stock tendered. The undersigned has read and agrees to all of
the terms of the Exchange Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Senior Preferred Stock tendered hereby.
All authority conferred or agreed to be conferred in this Letter 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 Exchange
Offer--Withdrawal Rights" section of the Prospectus.
The name(s) and address(es) of the registered Holder(s) should be
printed herein under "Description of Old Senior Preferred Stock" (unless a label
setting forth such information appears thereunder), exactly as they appear on
the Old Senior Preferred Stock tendered hereby. The certificate number(s) and
the liquidation preference of Old Senior Preferred Stock to which this Letter of
Transmittal relates, together with the of such
-4-
<PAGE>
Old Senior Preferred Stock that the undersigned wishes to tender, should be
indicated in the appropriate boxes herein under "Description of Old Senior
Preferred Stock."
The undersigned agrees that acceptance of any tendered Old Senior
Preferred Stock by the Company and the issuance of New Senior Preferred Stock in
exchange therefor shall constitute performance in full by the Company of its
obligations under the Registration Rights Agreement and that, upon the issuance
of the New Senior Preferred Stock the Company will have no further obligations
or liabilities thereunder.
The undersigned understands that the tender of Old Senior Preferred
Stock pursuant to one of the procedures described in the Prospectus under "The
Exchange Offer--Procedures for Tendering Old Securities Preferred Stock" and the
Instructions hereto will constitute the tendering Holder's acceptance of the
terms and the conditions of the Exchange Offer. The undersigned hereby
represents and warrants to the Company that the New Senior Preferred Stock to be
acquired by such Holder pursuant to the Exchange Offer is being acquired in the
ordinary course of such Holder's business, that such Holder has no arrangement
or understanding with any person to participate in the distribution of the New
Senior Preferred Stock. The Company's acceptance for exchange of Old Senior
Preferred Stock 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.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT IT IS NOT ENGAGED
IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF THE NEW SENIOR PREFERRED
STOCK.
The undersigned also acknowledges that this Exchange Offer is being
made based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties in other transactions substantially similar to the Exchange Offer, which
lead the Company to believe that the New Senior Preferred Stock issued in
exchange for the Old Senior Preferred Stock pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by holders thereof
(other than (i) any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act, (ii) an Initial Purchaser who
acquired the Old Senior Preferred Stock directly from the Company solely in
order to resell pursuant to Rule 144A of the Securities Act or any other
available exemption under the Securities Act, or (iii) a broker-dealer who
acquired the Old Senior Preferred Stock as a result of market making or other
trading activities), without further compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Senior Preferred Stock was acquired in the ordinary course of such holders'
business and such holders are not participating and have no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of such New Senior Preferred Stock. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of New Senior
Preferred Stock and has no arrangement or understanding to participate in a
distribution of New Senior Preferred Stock. If any holder is an affiliate of
the Company or is engaged in or has any arrangement or understanding with
respect to the distribution of the New Senior Preferred Stock to be acquired
pursuant to the Exchange Offer, such holder (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act. If the
undersigned is a broker-dealer that will receive New Senior Preferred Stock for
its own account in exchange of Old Senior Preferred Stock, it represents that
the Old Senior Preferred Stock to be exchanged for the New Senior Preferred
Stock was acquired by it as a result of market-making activities or other
trading activities and acknowledges that it will deliver a prospectus in
connection with any resale of such New Senior Preferred Stock; 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 Section 2(11) of the
Securities Act.
-5-
<PAGE>
The undersigned understands that the New Senior Preferred Stock issued
in consideration of Old Senior Preferred Stock accepted for exchange, and/or any
liquidation preference of Old Senior Preferred Stock not tendered or not
accepted for exchange, will only be issued in the name of the Holder(s)
appearing herein under "Description of Old Senior Preferred Stock." Unless
otherwise indicated under "Special Delivery Instructions," please mail the New
Senior Preferred Stock issued in consideration of Old Senior Preferred Stock
accepted for exchange, and/or any liquidation preference of Old Senior Preferred
Stock not tendered or not accepted for exchange (and accompanying documents, as
appropriate), to the Holder(s) at the address(es) appearing herein under
"Description of Old Senior Preferred Stock." In the event that the Special
Delivery Instructions are completed, please mail the New Senior Preferred Stock
issued in consideration of Old Senior Preferred Stock accepted for exchange,
and/or any Old Senior Preferred Stock for any liquidation preference not
tendered or not accepted for exchange, in the name of the Holder(s) appearing
herein under "Description of Old Senior Preferred Stock," and send such New
Senior Preferred Stock and/or Old Senior Preferred Stock to the address(es) so
indicated. Any transfer of Old Senior Preferred Stock to a different holder
must be completed, according to the provisions on transfer of Old Senior
Preferred Stock contained in the Certificate of Designation.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
SENIOR PREFERRED STOCK" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE OLD SENIOR PREFERRED STOCK AS SET FORTH IN SUCH BOX BELOW.
-6-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions
of the Exchange Offer
1. Guarantee of Signatures. Signatures on this Letter of Transmittal or
notice of withdrawal, as the case may be, must be guaranteed by an institution
which falls within the definition of "eligible guarantor institution" contained
in Rule 17Ad-15 as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended (hereinafter, an "Eligible
Institution") unless (i) the Old Senior Preferred Stock tendered hereby is
tendered by the Holder(s) of the Old Senior Preferred Stock who has (have) not
completed the box entitled "Special Delivery Instructions" on this Letter of
Transmittal or (ii) the Old Senior Preferred Stock is tendered for the account
of an Eligible Institution.
2. Delivery of this Letter of Transmittal and Old Senior Preferred Stock;
Guaranteed Delivery Procedures. This Letter of Transmittal is to be used: (i)
by all Holders who are not ATOP members, (ii) by Holders who are ATOP members
but choose not to use ATOP or (iii) if the Old Senior Preferred Stock is to be
tendered in accordance with the guaranteed delivery procedures set forth in the
Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." To
validly tender Old Senior Preferred Stock, a Holder must physically deliver a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees and all other required documents
to the Exchange Agent at its address set forth on the cover of this Letter of
Transmittal prior to the Expiration Date (as defined below) or the Holder must
properly complete and duly execute an ATOP ticket in accordance with DTC
procedures. Otherwise, the Holder must comply with the guaranteed delivery
procedures set forth in the next paragraph. Notwithstanding anything to the
contrary in the Registration Rights Agreement, the term "Expiration Date" means
5:00 p.m., New York City time, on ___________, 1997 (or such later date to which
the Company may, in its sole discretion, extend the Exchange Offer). If this
Exchange Offer is extended, the term "Expiration Date" shall mean the latest
time and date to which the Exchange Offer is extended. 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 by giving oral (confirmed in
writing) or written notice of such extension to the Exchange Agent and by making
a public announcement of such extension prior to 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date.
LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE COMPANY OR TO DTC.
If a Holder of the Old Senior Preferred Stock desires to tender such Old
Senior Preferred Stock and time will not permit such Holder's required documents
to reach the Exchange Agent before the Expiration Date, a tender may be effected
if (a) the tender is made through an Eligible Institution; (b) on or prior to
the Expiration Date, the Exchange Agent receives from such Eligible Institution
a properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) and Notice of Guaranteed Delivery (by telegram, facsimile transmission,
mail or hand delivery) setting forth the name and address of the Holder of the
Old Senior Preferred Stock and the liquidation preference of Old Senior
Preferred Stock tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange trading days after the
Expiration Date, any documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and (c) all other
documents required by the Letter of Transmittal are received by the Exchange
Agent within three New York Stock Exchange trading days after the Expiration
Date. See "The Exchange Offer--Guaranteed Delivery Procedures" as set forth in
the Prospectus.
Only a Holder of Old Senior Preferred Stock may tender Old Senior Preferred
Stock in the Exchange Offer. The term "Holder" as used herein with respect to
the Old Senior Preferred Stock means any person in whose name Old Senior
Preferred Stock are registered on the books of the Trustee. If the Letter of
Transmittal or any Old Senior Preferred Stock is signed by trustees, executors,
administrators, guardians, attorneys-in-fact,
-7-
<PAGE>
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 so submitted.
Any beneficial Holder whose Old Senior Preferred Stock is registered in the
name of his broker, dealer, commercial bank, trust company or other nominee and
who wishes to validly surrender those Old Senior Preferred Stock in the Exchange
Offer should contact such registered Holder promptly and instruct such
registered Holder to tender on his behalf. If such beneficial Holder wishes to
tender on his own behalf, such beneficial Holder must, prior to completing and
executing the Letter of Transmittal, make appropriate arrangements to register
ownership of the Old Senior Preferred Stock in such beneficial holder's name.
It is the responsibility of the beneficial holder to register ownership in his
own name if he chooses to do so. The transfer of record ownership may take
considerable time.
The method of delivery of this Letter of Transmittal (or facsimile hereof)
and all other required documents is at the election and risk of the exchanging
Holder, but, except as otherwise provided below, the delivery will be deemed
made only when actually received or confirmed by the Exchange Agent. If sent by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure timely
delivery to the Exchange Agent before the Expiration Date. No Letters of
Transmittal or Old Senior Preferred Stock should be sent to the Company.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or facsimile
hereof), waive any right to receive notice of acceptance of their Old Senior
Preferred Stock for exchange.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and or liquidation preference of the Old Senior Preferred
Stock to which this Letter of Transmittal relates should be listed on a separate
signed schedule attached hereto.
4. Withdrawal of Tender. Tenders of Old Senior Preferred Stock may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To be effective, a written or facsimile transmission notice of withdrawal
must (i) be received by the Exchange Agent at the address set forth herein prior
to 5:00 p.m., New York City time, on the Expiration Date: (ii) specify the name
of the person having tendered the Old Senior Preferred Stock to be withdrawn;
(iii) identify the Old Senior Preferred Stock to be withdrawn; and (iv) be (a)
signed by the Holder in the same manner as the original signature on the Letter
of Transmittal by which such Old Senior Preferred Stock was tendered (including
any required signature guarantees) or (b) accompanied by evidence satisfactory
to the Company that the Holder withdrawing such tender has succeeded to
beneficial ownership of such Old Senior Preferred Stock. If Old Senior
Preferred Stock has been tendered pursuant to the ATOP procedure with DTC, any
notice of withdrawal must otherwise comply with the procedures of DTC. Old
Senior Preferred Stock properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer; provided, however, that withdrawn
Old Senior Preferred Stock may be retendered by again following one of the
procedures described herein at any time prior to 5:00 p.m., New York City time,
on 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
Company, whose determinations will be final and binding on all parties. Neither
the Company, 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. The Exchange
Agent intends to use reasonable efforts to give notification of such defects and
irregularities.
5. Partial Tenders; Pro Rata Effect. Tenders of the Old Senior Preferred
Stock will be accepted only in integral multiples of $1,000. If less than the
entire liquidation preference evidenced by any Old Senior
-8-
<PAGE>
Preferred Stock is to be tendered, fill in the liquidation preference that is to
be tendered in the box entitled "Liquidation Preference Tendered" below. The
entire liquidation preference of all Old Senior Preferred Stock delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
6. Signatures on this Letter of Transmittal; Bond Powers and Endorsements.
If this Letter of Transmittal is signed by the registered Holder(s) of the Old
Senior Preferred Stock tendered hereby, the signature must correspond with the
name as written on the face of the certificate representing such Old Senior
Preferred Stock without alteration, enlargement or any change whatsoever.
If any of the Old Senior Preferred Stock tendered hereby is owned of record
by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If any of the Old Senior Preferred Stock tendered hereby is registered in
different names, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal and any necessary accompanying
documents as there are different registrations.
When this Letter of Transmittal is signed by the Holder(s) of Old Senior
Preferred Stock listed and tendered hereby, no endorsements or separate bond
powers are required.
If this Letter of Transmittal is 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.
7. Special Delivery Instructions. Tendering Holders should indicate in
the applicable box the name and address to which New Senior Preferred Stock
issued in consideration of Old Senior Preferred Stock accepted for exchange, or
Old Senior Preferred Stock for liquidation preference amounts not exchanged or
not tendered, is to be sent, if different from the name and address of the
person signing this Letter of Transmittal.
8. Waiver of Conditions. The Company reserves the absolute right to waive
any of the specified conditions in the Exchange Offer, in whole at any time or
in part from time to time, in the case of any Old Senior Preferred Stock
tendered hereby. See "The Exchange Offer--Conditions to the Exchange Offer" in
the Prospectus.
9. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Senior Preferred Stock pursuant to the
Exchange Offer. If, however, New Senior Preferred Stock and/or substitute Old
Senior Preferred Stock for liquidation preference amounts not exchanged is to be
delivered to any person other than the Holder of the Old Senior Preferred Stock
or if a transfer tax is imposed for any reason other than the exchange of Old
Senior Preferred Stock 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, the amount of such transfer
taxes will be billed directly to such tendering Holder.
10. Irregularities. All questions as to validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Senior
Preferred Stock will be resolved by the Company, in its sole discretion, whose
determination shall be final and binding. The Company reserves the absolute
right to reject any or all tenders of any particular Old Senior Preferred Stock
that are not in proper form, or the acceptance of which would, in the opinion of
the Company or its counsel, be unlawful. The Company also reserves the absolute
right to waive any defect, irregularity or condition of tender with regard to
any particular Old Senior Preferred Stock. The Company's interpretation of the
terms of, and conditions to, the Exchange Offer (including the instructions
herein) will be final and binding. Unless waived, any defects or irregularities
in connection with
-9-
<PAGE>
tenders must be cured within such time as the Company shall determine. Neither
the Company nor the Exchange Agent shall be under any duty to give notification
of defects in such tenders or shall incur any liability for failure to give such
notification. The Exchange Agent intends to use reasonable efforts to give
notification of such defects and irregularities. Tenders of Old Senior
Preferred Stock will not be deemed to have been made until all defects and
irregularities have been cured or waived. Any Old Senior Preferred Stock
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 by this Letter
of Transmittal, as soon as practicable following the Expiration Date.
11. Dividends on Exchanged Old Senior Preferred Stock. Holders whose Old
Senior Preferred Stock is accepted for exchange will not receive accrued
dividends thereon on the date of exchange. Instead, dividends accruing from
July 25, 1997 through the Expiration Date will be payable on the New Senior
Preferred Stock on ____________, 1997, in accordance with the terms of the New
Senior Preferred Stock. See "The Exchange Offer--Acceptance of Old Securities
for Exchange; Delivery of New Securities" and "Description of Senior Preferred
Stock" as set forth in the Prospectus.
12. Mutilated, Lost, Stolen or Destroyed Certificates. Holders whose
certificates for Old Senior Preferred Stock have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ALL REQUIRED DOCUMENTS, OR A NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY
THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
-10-
<PAGE>
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.
-11-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: HARRIS TRUST AND SAVINGS BANK
- -----------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY Social Security Number
Form W-9 SIGNING AND DATING BELOW
Department of the
Treasury-Internal
Revenue Service OR
--------------------------
Employer Identification Number
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Part 2 - Certification - Under penalties of perjury, I certify that:
Payer's Request for (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a
Taxpayer number to be issued to me); and
Identification
Number ("TIN") (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.
Certificate instruction -- You must cross out item (2) in Part 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).
- -----------------------------------------------------------------------------------------------------------------------------------
Part 3
SIGNATURE..........................DATE......................., 1997
NAME (Please Print)............................................ Awaiting TIN [_]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (i) 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 (ii) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a number.
Signature.......................................Date............................
Name (Please Print).............................................................
- --------------------------------------------------------------------------------
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<PAGE>
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
================================================================================
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1 and 7)
To be completed ONLY if the New Senior Preferred Stock issued in consideration
of Old Senior Preferred Stock exchanged, or certificates for Old Senior
Preferred Stock in a or liquidation preference not surrendered for exchange are
to be mailed to someone other than the undersigned or to the undersigned at an
address other than that below.
Mail to:
Name:
--------------------------------------------------------------------------
(Please Print)
Address:
-----------------------------------------------------------------------
(Zip Code)
================================================================================
DESCRIPTION OF OLD SECURITIES
(See Instructions 2 and 7)
<TABLE>
<CAPTION>
=========================================================================================================================
Name(s) and Address(es) of Certificate(s)
Registered Holder(s) (Attach additional signed list, if necessary)
(Please fill in, in blank)
- -------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Aggregate Liquidation Liquidation Preference of Old
Preference of Old Senior Senior Preferred Stock
Certificate Number(s)/1/ Preferred Stock Evidenced by Tendered/2/ (must be integral
Certificate(s) multiples of $1,000)
<S> <C> <C>
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Total
=========================================================================================================================
</TABLE>
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<PAGE>
(Boxes below to be checked by Eligible Institutions only)
[_] CHECK HERE IF TENDERED OLD SENIOR PREFERRED STOCK IS BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution______________________________________________
DTC Account Number_________________________________________________________
Transaction Code Number____________________________________________________
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD SENIOR PREFERRED STOCK IS 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_________________________
Name of Institution which Guaranteed Delivery______________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution______________________________________________
DTC Account Number_________________________________________________________
Transaction Code Number____________________________________________________
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD SENIOR
PREFERRED STOCK IS TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET
FORTH ABOVE.
[_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD SENIOR PREFERRED
STOCK FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name____________________________________________________________________________
Address_________________________________________________________________________
_________________________________________________________________________
-14-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
WHETHER OR NOT OLD SENIOR PREFERRED STOCK ARE BEING
PHYSICALLY TENDERED HEREBY
X __________________________________ __________________
X __________________________________ __________________
Signature(s) of Owner(s) Dated
of Authorized Signatory
Area Code and Telephone Number:____________________________________________
This box must be signed by registered holder(s) of Old Senior Preferred Stock as
their name(s) appear(s) on certificate(s) for Old Senior Preferred Stock hereby
tendered or on a security position listing, or by any person(s) authorized to
become registered holder(s) by endorsement and documents transmitted with this
Letter (including such opinions of counsel, certifications and other information
as may be required by the Company or the Transfer Agent for the Old Senior
Preferred Stock to comply with the restrictions on transfer applicable to the
Old Senior Preferred Stock). If signature is by an attorney-in-fact, trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, such person must set forth his or her full title
below.
Name(s)_________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title)___________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Tax Identification or Social Security Number(s)_________________________________
________________________________________________________________________________
Guarantee of Signature(s)
(See Instructions 1 and 6 to determine if required)
Authorized Signature____________________________________________________________
Name____________________________________________________________________________
Name of Firm____________________________________________________________________
Title___________________________________________________________________________
Address_________________________________________________________________________
Area Code and Telephone Number__________________________________________________
Dated___________________________________________________________________________
- --------------------------------------------------------------------------------
-15-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer.
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
For this type Give the SOCIAL
of account: SECURITY number
of--
----------------------------------------------------------------------
<S> <C> <C>
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account./4/
3. Custodian account of a minor The minor/6/
(Uniform Gift to Minors Act)
4.a. The usual revocable savings The grantor-trustee
trust (grantor is also trustee)
b. So-called trust account that is The actual owner
not a legal or valid trust under
State law
5. Sole proprietorship The owner 1/
-
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------
For this type Give the EMPLOYER
of account: IDENTIFICATION
number of--
----------------------------------------------------------------------
<S> <C> <C>
6. Sole proprietorship The owner/3/
7. A valid trust, estate, or pension Legal entity/5/
trust
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school
district, or prison) that receives
agricultural program payments
</TABLE>
-16-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
Payees Exempt from Backup Withholding
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisers Act
of 1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends, and payments
by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan or custodial account under section 403(b)(7).
(3) The United States or any agency or instrumentality thereof.
(4) A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
(5) A foreign government, a political subdivision of a foreign government, or
an agency or instrumentality thereof.
(6) An international organization or any agency or instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times under the Investment Company Act of
1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc. Nominee List.
(15) An exempt charitable remainder trust, or a non-exempt trust described in
section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
. Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, royalties, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice. Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number. If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments. If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information with Respect to Withholding. If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
1. Need not be completed if Old Senior Preferred Sock are being tendered by
book-entry transfer.
-17-
<PAGE>
2. Unless otherwise indicated, the entire liquidation preference of Old Senior
Preferred Stock evidenced by any certificate will be deemed to have been
tendered.
0/ You must show your individual name, but you may also enter your business
- - or "doing business as" name. You may use either your SSN or EIN.
0/ List first and circle the name of the person whose number you furnish.
- -
0/ List first and circle the name of the legal trust, estate, or pension
- - trust. (Do not furnish the identifying number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
0/ Circle the minor's name and furnish the minor's social security number.
- -
-18-
