<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 1998
REGISTRATION NO. 333-43195
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SCOVILL FASTENERS INC.
SCOVILL HOLDINGS INC.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR RESPECTIVE CHARTERS)
<TABLE>
<S> <C> <C>
DELAWARE 3965 95-3959561
DELAWARE 6719 TO BE APPLIED FOR
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
----------------
SCOVILL FASTENERS INC.
SCOVILL HOLDINGS INC.
1802 SCOVILL DRIVE
CLARKESVILLE, GEORGIA 30523
(706) 754-4181
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
MARTIN A. MOORE
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
SCOVILL FASTENERS INC.
SCOVILL HOLDINGS INC.
1802 SCOVILL DRIVE
CLARKESVILLE, GEORGIA 30523
(706) 754-4181
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
WITH A COPY TO:
JONATHAN I. MARK, ESQ.
CAHILL GORDON & REINDEL
80 PINE STREET
NEW YORK, NEW YORK 10005-1702
(212) 701-3000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL 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>
EXPLANATORY NOTE
This registration statement contains two forms of prospectuses: one to be
used in connection with the Exchange Offer for the Initial Notes (the "Note
Exchange Offer Prospectus"), and the other to be used as a market-making
prospectus to be used in connection with the sale of the Exchange Notes by SBC
Warburg Dillon Read Inc. (the "Market-Making Prospectus"). The two
prospectuses are substantially the same except for the alternate pages to be
used in the Market-Making Prospectus which differ from, or are in addition to,
those in the Note Exchange Offer Prospectus. The form of Note Exchange Offer
Prospectus is included herein and is followed by those alternate pages to be
used in the Market-Making Prospectus. Each of the pages for the Market-Making
Prospectus included herein is labeled "Alternate Page For Prospectus."
<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 STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY13, 1998
PROSPECTUS
SCOVILL FASTENERS INC.
[LOGO OF SCOVILL APPEARS HERE]
OFFER TO EXCHANGE
11 1/4% SENIOR NOTES DUE 2007, SERIES A FOR 11 1/4% SENIOR NOTES DUE 2007,
SERIES B
-----------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE")
-----------
Scovill Fasteners Inc., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to conditions set forth in this Prospectus
(the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"; together with the Prospectus, the "Exchange Offer"), to exchange
up to an aggregate principal amount of $100,000,000 of its registered 11 1/4%
Senior Notes due 2007 (the "Exchange Notes") for up to an aggregate principal
amount of $100,000,000 of its outstanding unregistered 11 1/4% Senior Notes due
2007 (the "Initial Notes"). The form and terms of the Exchange Notes are
identical in all material respects to those of the Initial Notes, except for
certain transfer restrictions and registration rights relating to the Initial
Notes and except for certain interest provisions relating to such registration
rights.
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company under a Registration Rights Agreement dated as of
November 26, 1997 (the "Registration Rights Agreement") among Scovill
Acquisition Inc., a Delaware corporation ("Predecessor"), Scovill Holdings
Inc., a Delaware corporation ("Parent" or "Guarantor") and SBC Warburg Dillon
Read Inc. and BT Alex, Brown Incorporation (the "Initial Purchasers"). The
Initial Notes were originally issued by Predecessor and sold to the Initial
Purchasers on November 26, 1997 in a transaction not registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the
exemption provided in Section 4(2) of the Securities Act and Rule 144A under
the Securities Act (the "Initial Offering"). The proceeds of the Initial
Offering were used to finance, in part, the purchase by Predecessor of all of
the capital stock of KSCO Acquisition Corporation ("KSCO") which then owned all
of the capital stock of the Company. Predecessor then merged with and into
KSCO, with KSCO surviving and KSCO merged with and into the Company, with the
Company surviving. The Exchange Notes evidence the same debt as the Initial
Notes and will be issued pursuant to, and entitled to the benefits of, the
Indenture (as defined) governing the Initial Notes. See "The Exchange Offer."
The Exchange Notes and the Initial Notes are sometimes referred to collectively
as the "Notes." Following the mergers described above, the Notes became
obligations of the Company.
Interest on the Notes is payable semi-annually on May 30 and November 30 of
each year, commencing May 30, 1998. The Notes are redeemable at the option of
the Company, in whole or in part, at any time on or after November 30, 2002, at
the redemption prices set forth herein, plus accrued and unpaid interest and
Liquidated Damages (as defined), if any, to the redemption date. The Company
may also redeem Notes at its option, at any time on or prior to November 30,
2000, at a redemption price equal to 111.25% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date, with the net proceeds of one or more Public Equity Offerings
(as defined); provided, however, that at least $65 million in aggregate
principal amount of the Notes remains outstanding following each such
redemption. Upon the occurrence of a Change of Control (as defined), the
Company will be required to make an offer to purchase all or any part of each
holder's Notes at 101% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase.
The Notes are guaranteed by Parent (the "Parent Guarantee"). The Notes and
the Parent Guarantee are senior unsecured obligations of the Company and
Parent, respectively. The Notes and the Parent Guarantee rank pari passu in
right of payment with all other existing and future unsecured and
unsubordinated obligations of the Company and Parent, respectively, and senior
to all existing and future indebtedness of the Company and Parent that is
expressly subordinated to the Notes and the Parent Guarantee, respectively. In
addition, the Notes and the Parent Guarantee are effectively subordinated to
all secured obligations of the Company and Parent, respectively, to the extent
of the assets securing such obligations. At September 30, 1997, after giving
pro forma effect to the Transactions, the Company would have had approximately
$30.3 million of secured indebtedness outstanding, excluding the $25.0 million
Revolving Credit Facility. The Notes are structurally subordinated to all
obligations (including trade payables and accrued liabilities) of the Company's
subsidiaries. The indenture pursuant to which the Notes were issued permits the
Company and its subsidiaries to incur additional indebtedness, including
secured indebtedness, subject to certain limitations.
(Cover continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATIONS TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
(Continued from previous page)
The Company is making the Exchange Offer in reliance on the position of the
staff of the Securities and Exchange Commission (the "Commission") set forth
in no-action letters issued to third parties unrelated to the Company.
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.
Each Holder (as defined) desiring to participate in the Exchange Offer will
be required to represent, among other things, that (i) it is not an
"affiliate" (as defined in Rule 405 of the Securities Act) of the Company or
Parent, (ii) 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 Exchange Notes and (iii) it is acquiring the Exchange
Notes in its ordinary course of business (a Holder unable to make the
foregoing representations is referred to as a "Restricted Holder"). A
Restricted Holder will not be able to participate in the Exchange Offer and
may only sell its Initial Notes pursuant to a registration statement
containing the selling securityholder information required by Item 507 of
Regulation S-K under the Securities Act, or pursuant to an exemption from the
registration requirement of the Securities Act.
Each broker-dealer (other than a Restricted Holder) that receives Exchange
Notes for its own account pursuant to the Exchange Offer (a "Participating
Broker-Dealer") is required to acknowledge in the Letter of Transmittal that
it acquired the Initial Notes as a result of market-making activities or other
trading activities and that it will deliver a prospectus in connection with
the resale of such Exchange Notes. Based upon interpretations by the staff of
the Commission, the Company believes that Exchange Notes issued pursuant to
the Exchange Offer to Participating Broker-Dealers may be offered for resale,
resold, and otherwise transferred by a Participating Broker-Dealer upon
compliance with the prospectus delivery requirements, but without compliance
with the registration requirements, of the Securities Act. The Company has
agreed that for a period of nine months following consummation of the Exchange
Offer it will make this Prospectus available, for use in connection with any
such resale, to any Participating Broker-Dealer that notifies the Company in
the Letter of Transmittal that it may be subject to such prospectus delivery
requirements. The Company believes that during such period of time, delivery
of the Prospectus, as it may be amended or supplemented, will satisfy the
prospectus delivery requirements of a participating Broker-Dealer engaged in
market-making or other trading activities. See "The Exchange Offer" and "Plan
of Distribution".
Based upon interpretations by the staff of the Commission, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer may be
offered for resale, resold, and otherwise transferred by a Holder thereof
(other than a Restricted Holder or a Participating Broker-Dealer) without
compliance with the registration and prospectus delivery requirements of the
Securities Act.
The Exchange Notes are new securities for which there is currently no
market. The Company presently does not intend to apply for listing or
quotation of the Exchange Notes on any securities exchange or stock market.
The Company has been advised by the Initial Purchasers that, following
completion of the Exchange Offer, they presently intend to make a market in
the Exchange Notes; however, the Initial Purchasers are not obligated to do so
and any market-making activities with respect to the Exchange Note may be
discontinued at any time without notice. There can be no assurance that an
active public market for the Exchange Notes will develop.
The Company will not receive any proceeds from the Exchange Offer and will
pay all the expenses incident to the Exchange Offer. Tenders of Initial Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. If the Company terminates the Exchange Offer and does not
accept for exchange any Initial Notes, it will promptly return the Initial
Notes to the holders thereof. See "The Exchange Offer".
The Exchange Agent for the Exchange Offer is United States Trust Company of
New York.
<PAGE>
Color Snap(R), Common Sense(TM), DOT(R), DuraMark(R), Gemini(TM), Gripper(R),
Klikit(R), Maxi-Snap(TM), Mighty-Snap(TM), PCI(TM), Pull-the-DOT(R), Tag
Lock(TM) and Whipper Snap(R) are trademarks of the Company. All other
trademarks or tradenames referred to in this Prospectus are the property of
their respective owners.
3
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SUMMARY
The following summary information is qualified in its entirety by, and should
be read in conjunction with, the financial statements and more detailed
information included elsewhere in this Prospectus. Unless the context requires
otherwise, references to the "Company" or "Fasteners" mean Scovill Fasteners
Inc. and its subsidiaries. Unless otherwise indicated, all pro forma
information herein assumes that the Transactions (as defined) occurred at the
beginning of the periods to which such information relates, in the case of
statement of operations data, and on September 30, 1997, in the case of balance
sheet data.
THE COMPANY
The Company, whose business has been in continuous operation since 1802, is a
leading designer, manufacturer and distributor of apparel fasteners and
specialty industrial fasteners. The Scovill name is the oldest and one of the
most well-known brands in the fasteners industry. In the twelve-month period
ended September 30, 1997, the Company sold more than 10 billion fastener units
worldwide. The Company has achieved and maintained its reputation by offering
its customers an integrated system of high quality fasteners, proprietary
attaching machines, technical service, on-site maintenance and customized
applications and design services tailored to individual customer needs.
The Company has two main product groups: the Apparel Group and the Industrial
Group. The Apparel Group, through its Gripper and DuraMark brands, produces
snaps, tack buttons, rivets, burrs and other snap fastener products used in
numerous apparel applications. The Company's customers include many leading
apparel design and manufacturing companies, including Wrangler, OshKosh B'Gosh,
Gerber Childrenswear, William Carter Company, Tommy Hilfiger, Polo Ralph
Lauren, Liz Claiborne and L.L. Bean. The Company believes that it supplies the
majority of the snap fasteners sold to U.S. infantswear and childrenswear
manufacturers and a substantial portion of the snap fasteners sold to U.S.
apparel manufacturers.
The Industrial Group, primarily through its DOT and PCI product lines,
produces specialty industrial fasteners including large snaps, windshield
clips, turn buttons, eyelets, grommets, screw studs, gypsy studs and other
specialty fasteners. These products are used in a broad range of industries,
including marine textile, automotive, aerospace, military, medical/surgical
products, luggage, leather goods, electronic equipment, sporting and
recreational goods and consumer batteries. The end-users of the Company's
products include a wide variety of companies, including Ford, Boeing, Baxter,
Samsonite, U.S. Marine for its Bayliner Boats, Johnston & Murphy, Eveready
Battery, Riddell for its football helmets and the U.S. Army. The Company
believes that it sells a significant portion of the specialty industrial
fasteners sold in the product markets in which it competes.
For the twelve months ended September 30, 1997 (the "LTM Period"), the
Company's net sales and pro forma Adjusted EBITDA (as defined) were $95.3
million and $22.7 million, respectively. From 1992 to the LTM Period, the
Company's net sales increased by 41.5%, from $67.4 million to $95.3 million,
and pro forma Adjusted EBITDA increased by 84.1%, from $12.3 million to $22.7
million. From 1992 to the pro forma LTM Period, the Company's gross margin
improved from 24.4% to 30.7% and Adjusted EBITDA margin improved from 18.3% to
23.8%. By rationalizing and developing existing and acquired businesses, the
Company has achieved operating efficiencies and improved financial performance.
INDUSTRY
The Company operates in an industry characterized by customer switching
costs, a broad customer base in which no single customer dominates as a
purchaser of fasteners, substantial economies of scale and few manufacturers
who can match the level of service that the Company provides. Customers in the
apparel and specialty industrial fastener industries tend to be more quality-
driven than price-driven in their purchase decisions because (i) a particular
fastener constitutes a very small portion of the overall cost of a customer's
end product, (ii) defective or improperly attached fasteners can result in
costly rework or scrap and (iii) the customers' cost of
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4
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attaching a fastener is typically substantially more than the cost of the
fastener itself, which leads customers to focus on the speed, precision and
flexibility of the fastener attaching system. These factors result in steady,
long-term customer relationships for those industry participants that offer
quality and service.
The apparel snap fastener market includes snap fasteners, tack buttons,
rivets and burrs and excludes other apparel devices such as zippers, buttons
and Velcro. The primary customers for apparel snap fasteners include
manufacturers of basic garments such as jeans, infantswear, childrenswear and
outerwear. Demand for apparel snap fasteners is related to apparel industry
trends generally, which, in turn, are affected by demographics. The production
of each category of apparel depends upon population trends and consumer
spending in each apparel category. According to U.S. Department of Commerce
estimates, the value of domestic shipments of apparel and other finished
textiles has averaged over 4% growth per year since 1976. During that time, the
domestic apparel industry generally has exhibited low cyclicality, with the
value of such shipments having increased in all but two years. In foreign
markets, the Company believes that expected population growth over the next
several years and improved standards of living will result in increased apparel
sales abroad.
The specialty industrial fastener market is large and highly fragmented. The
market is comprised of a variety of niche segments with specialized customers,
competitors and products in which the Company generally earns higher margins
than it does in the apparel market. The Company estimates that the market
segments in which it currently competes constitute less than 10% of the overall
market. The Company believes that there is no dominant manufacturer that
competes in all of its markets, and the Company intends to broaden its
participation through new products and product line extensions.
COMPETITIVE STRENGTHS
The Company attributes its historical success and significant opportunities
for continued growth to the following competitive strengths:
Leading Market Position. The Company is the oldest and most established
manufacturer of a variety of apparel and specialty industrial fasteners in the
United States. The Company's fasteners have been used in many products
throughout its history, from U.S. military uniforms since the War of 1812 to
the flight suits worn by NASA shuttle astronauts. The Company's reputation for
high quality and its well-known brand names, including Scovill, Gripper and
DOT, make it a leading presence in domestic markets and provide it with a
platform for enhanced global expansion. The Company believes that it supplies
the majority of the snap fasteners sold to U.S. infantswear manufacturers, a
substantial portion of the snap fasteners sold to U.S. apparel manufacturers
generally and a significant portion of the specialty industrial fasteners sold
in the product markets in which it competes.
"Total System" Approach. In addition to manufacturing and distributing
fasteners to its customers, the Company also leases approximately 8,000
proprietary attaching machines to attach its products to those of its
customers, primarily in the apparel industry. The Company's large size enables
it to (i) employ what the Company believes to be the industry's only existing
dedicated field service force that provides on-site maintenance, which
minimizes equipment down-time, (ii) have ready access, through its servicing
relationships, to its customers' facilities, providing the Company with
opportunities to cross-sell products and to test new fastener machinery, (iii)
continue to develop next-generation attaching machines, such as the new Gemini
system, which has lower manufacturing and maintenance costs and improved
fastener application flexibility and attaching speed, and (iv) maintain an
applications development and design lab that enables customers to outsource
design functions to the Company. The Company's "total system" approach enables
it to compete based on its ability to decrease its customers' costs and improve
the quality of their products, rather than on the unit price of the Company's
fasteners.
Large Installed Base of Attaching Machines. The Company has the industry's
largest installed base of attaching machines in the United States, which
enables it to generate a recurring stream of cash flow from high
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5
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volume sales of fasteners. These machines are designed to be used only with the
Company's fasteners. The Company believes that customers are reluctant to
switch to other manufacturers in order to avoid the costs associated with
retraining personnel, reduced productivity and the business interruption that
results from the need to replace an entire network of machines in a plant or a
production line in order to maintain the compatibility of the network. The
Company has been able to maintain a high level of customer retention. In 1996,
approximately 99% of all of its attaching machine leases were renewed.
Broad Customer Base and Product Line. The Company's customers include many
large and well-known apparel and industrial manufacturing companies. The
Company is a leading supplier for private-label infantswear sold at Kmart,
Wal*Mart, Target and Sears stores. In 1996, no single customer accounted for
more than 8% of the Company's total net sales, and the Company's 10 largest
customers accounted for approximately 26% of the Company's total net sales. The
Company's broad line of products for apparel and specialty industrial use
reduces its exposure to any one customer segment and to fashion trends.
Reputation for High Quality. The Company has built its reputation by
producing high quality products designed and manufactured to precise
specifications. The Company has developed many of the safety standards for
infantswear adopted by the American Society of Testing Methods (the "ASTM"),
and the Company's senior quality manager is currently chairman of the ASTM
subcommittee responsible for establishing testing methodologies for the apparel
fastener industry. These methodologies provide the basis for determining
compliance with requirements for apparel set by the Consumer Products Safety
Commission.
Experienced Management Team. The Company's senior management team has an
average of over 15 years of experience in the fastener industry. Since its
formation in 1992, the management team has delivered significant revenue and
EBITDA improvements by successfully reorganizing the business and positioning
the Company for growth. From 1992 to the pro forma LTM Period, Adjusted EBITDA
margin improved from 18.3% to 23.8%. Management has achieved these results by
rationalizing existing operations, exiting an unprofitable product line and
integrating domestic and international acquisitions. This team has successfully
identified, integrated and consolidated three significant acquisitions since
1992 and established a platform for international growth. Senior management
rolled over an aggregate of $3.3 million of their stock options in KSCO into
equity of Parent, representing approximately one-half of the proceeds they
would have received in the Acquisition.
BUSINESS STRATEGY
The Company seeks to enhance its competitive position while increasing its
net sales and operating cash flow by continuing to implement the following
components of its business strategy:
Continue to Strengthen Customer Relationships. The Company intends to
continue to distinguish itself from competitors as a full-service provider. The
Company will continue to foster long-term partnerships with its customers by
providing a broad range of high quality products, consistent delivery
performance, comprehensive product support, efficient attaching machinery and
dedicated field service. The introduction of the Gemini attaching machine,
which accommodates rapid and cost-efficient switching of fastener types and is
designed to address ergonomic concerns, illustrates the Company's commitment to
customer service. The Company also continues to develop and implement value-
added services, such as specialized billing and delivery systems.
Reduce Customers' CPAF. The Company intends to develop new means to continue
its commitment to lower its customers' cost per attached fastener ("CPAF").
Customers incur significant costs beyond the unit price of fasteners; an
individual fastener typically represents only 10% of an average customer's
CPAF. CPAF is also a function of factors such as attaching speed, production
errors, equipment downtime due to changeover and maintenance and the attaching
machinery lease expense or cost. The Company's "total system" approach and its
focus on CPAF are designed to reduce the remaining costs associated with the
attaching of its fasteners.
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6
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Seek Higher Margin Specialty Applications. The Company intends to take
advantage of its diverse and flexible manufacturing capabilities to enhance its
line of specialty applications, which offers higher margins. Examples of
specialty applications are stainless steel buckles for football, hockey and
cycling helmets; engineered eyelets for consumer electronics; and male/female
connectors for batteries. The Company intends to develop new applications for
current products, engineer new products and re-engineer those products obtained
through acquisitions. Unlike smaller manufacturers, the Company possesses its
own tooling, stamping, plating and finishing equipment and, therefore, can
develop specialty applications without significant capital expenditures.
Strengthen "Retail Pull." The Company seeks to have large retailers specify
the use of the Company's products in their private label apparel lines. The
Company has been designated as the sole or preferred fastener supplier for the
private-label infantswear manufactured for and sold by Wal*Mart, Kmart, Target
and Sears. Additionally, the Company's reputation for high quality and consumer
awareness has led to Kmart's joint branding on garment tags to highlight the
names of Scovill and Klikit, a Gripper brand. The Company intends to expand its
international opportunities by leveraging existing relationships with customers
that move sourcing abroad and by expanding its distribution channels overseas
to better serve them. The Company believes that the high quality of its
products, its "total system" approach and its Asian distribution channels
enhance the Company's ability to effect this strategy.
Leverage Existing Manufacturing Base. The Company intends to continue to
leverage its existing manufacturing base by incrementally expanding the
capacity of the Clarkesville facility. By optimizing its operations, adding
shifts and outsourcing particular activities, the Company believes that it can
significantly increase the output of the Clarkesville facility with limited
capital expenditures. Through the addition of increased revenue at minimal
incremental fixed costs, the Company has been able to increase EBITDA margins.
The Company expects to increase revenue through new product development and
tuck-in acquisitions, such as the 1996 acquisitions of Rau Fastener Company,
L.L.C. ("Rau") and PCI Group, Inc. ("PCI"), whose operations were consolidated
into the Company's Clarkesville, Georgia facility.
Pursue Attractive Acquisition Opportunities. The Company will continue to
evaluate opportunities to expand its sales and product offerings through
smaller, easily integrated domestic add-on acquisitions. The Company may also
explore larger international acquisitions, primarily in Europe and Asia. The
criteria for identifying attractive acquisition candidates include (i) revenue
potential, (ii) increases in manufacturing, production and other cost
efficiencies and (iii) diversification and expansion of the Company's product
lines and customer base.
THE TRANSACTIONS
Predecessor and Parent were formed by Saratoga Partners III, L.P.
("Saratoga") to effect the acquisition of the Company. On October 10, 1997,
Predecessor entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement") with KSCO Acquisition Corporation ("KSCO"), which owned all of the
capital stock of Fasteners, and the stockholders and optionholders of KSCO.
Under the Stock Purchase Agreement, Predecessor agreed to purchase all of the
capital stock of KSCO for a purchase price in cash of approximately $168.8
million less the amount of indebtedness of the Company existing immediately
prior to closing of the acquisition (including indebtedness that will not be
repaid in connection with the Transactions).
Concurrently with the consummation of the Offerings, Predecessor merged with
and into KSCO, and KSCO merged with and into Fasteners, with Fasteners
surviving the mergers. Following such mergers, the Notes became obligations of
Fasteners. The purchase of KSCO capital stock by Predecessor and the mergers of
Predecessor and KSCO into Fasteners are together referred to herein as the
"Acquisition."
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In connection with the Acquisition, Saratoga and certain other investors made
a $36.6 million equity investment, consisting of (i) $0.4 million in shares of
Parent's Common Stock, par value $0.0001 per share (the "Common Stock"), and
(ii) $36.2 million aggregate liquidation preference of Parent's Series B
Preferred Stock, par value $0.0001 per share (the "Series B Preferred Stock")
(collectively, the "Saratoga Investment"). Management and the Chairman of the
Board rolled over $3.4 million of their stock options in KSCO into options to
purchase Common Stock and Series B Preferred Stock (the "Management
Investment"). The Saratoga Investment and the Management Investment are
referred to as the "Equity Investments." Concurrently with the Notes Offering,
Parent sold, for gross proceeds of $10.0 million, 100,000 Units, each Unit
consisting of $100 liquidation preference of Parent's Series A Cumulative
Redeemable Exchangeable Preferred Stock (the "Senior Preferred Stock") and one
warrant (the "Warrants") to purchase Common Stock. The net proceeds of the
Equity Investments and the Units Offering totalled $49.4 million, after fees
and expenses to Parent of $0.6 million. Parent contributed (the "Equity
Contribution") such amount to Fasteners in the form of common equity.
In connection with the Acquisition, Fasteners entered into a new senior
secured credit facility (the "New Credit Facility"), consisting of a $28.0
million term loan (the "Term Loan") and a $25.0 million revolving credit
facility (the "Revolving Credit Facility"). See "Description of Other
Indebtedness--New Credit Facility."
Proceeds from the Equity Contribution, the Notes Offering and the Term Loan
were used to finance the purchase price in the Acquisition, repurchase
attaching machinery subject to a synthetic lease (the "Synthetic Lease"), repay
the Company's existing credit facility (the "Existing Credit Facility") and pay
related fees and expenses. The Acquisition, the repurchase of attaching
machinery subject to the Synthetic Lease, the repayment of the Existing Credit
Facility, the Offerings, the Equity Contribution, the borrowing of the Term
Loan and the payment of related fees and expenses are collectively referred to
herein as the "Transactions." The following table illustrates the sources of
funds to the Company and uses of funds by the Company relating to the
Transactions, assuming they were consummated on September 30, 1997:
<TABLE>
<CAPTION>
SOURCES OF FUNDS
<S> <C>
Notes..................... $100.0
Term Loan................. 28.0
Equity Contribution(a).... 49.4
------
Total................... $177.4
======
<CAPTION>
USES OF FUNDS
(Dollars in millions)
<S> <C>
Cash to selling stockholders. $ 98.1
Repurchase of equipment
subject to Synthetic Lease.. 29.2
Repay Existing Credit Facili-
ty.......................... 39.3
Fees and expenses(b)......... 10.8
------
Total...................... $177.4
======
</TABLE>
- --------
(a) Parent funded the Equity Contribution from the Equity Investments and the
Units Offering (net of estimated fees and expenses).
(b) Excludes estimated fees and expenses of Parent related to the Units
Offering of $0.6 million.
The diagrams on the next page illustrate the Transactions and the post-
closing structure of the Company.
Saratoga is a private investment fund which, together with its related funds
(collectively, the "Saratoga Funds"), has managed corporate buyout partnerships
totaling $500 million in committed and contributed capital. The Saratoga Funds
have invested in 22 companies with an aggregate purchase valuation of
approximately $2.4 billion. Individual acquisition valuations have ranged from
$20 million to $400 million. In all of these acquisitions, the Saratoga Funds
have been the lead investor, either with sole voting control or in partnership
with other investors.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
Transaction Structure Post-Closing Structure
------------------------ ------------------------
Saratoga, Management Saratoga, Management
and other investors and other investors
------------------------ ------------------------
$40
$10m
------------------------ ------------------------
Senior $10
Preferred Senior
Scovill Holdings Inc.(a) Stock Scovill Holdings Inc.(a)Preferred
("Parent") ("Parent") Stock
Warrants
Warrants
------------------------
------------------------
$49.4m(a)
------------------------
------------------------ $28m
Term
Scovill Acquisition Inc. Loan(a)
("Issuer")
$100m Revolving
Senior Notes(b) Credit
------------------------ Scovill Fasteners Inc. Facility
Issuer merged with and into (b)(c)
KSCO (with KSCO surviving)
Senior
------------------------ Notes(b)
$100m
-----------------------
KSCO Acquisition
Corporation
-----------------------
------------------------
KSCO merged with and into Fasteners Subsidiaries
(with Fasteners surviving)
$28m
-----------------------
------------------------
Term Loan(b)
Scovill Fasteners Inc. Revolving Credit
Facility(b)(c)
------------------------
Subsidiaries
------------------------
(a) After fees and expenses of $0.6 million.
(b) Parent guarantees the Term Loan, the Revolving Credit Facility and the
Notes.
(c) Undrawn at closing, but would provide availability, subject to a borrowing
base, of up to $25 million.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER
REGISTRATION RIGHTS AGREEMENT... The Initial Notes were sold by the Company on
November 26, 1997 to the Initial Purchasers
who resold the Initial Notes (i) to
"qualified institutional buyers" (as defined
in Rule 144A under the Securities Act) in
reliance upon Rule 144A under the Securities
Act and (ii) outside the United States to
persons other than U.S. persons in reliance
upon Regulation S under the Securities Act.
In connection therewith, Predecessor, Parent
and the Initial Purchasers entered into the
Registration Rights Agreement dated as of
November 26, 1997 (the "Registration Rights
Agreement"), providing for, among other
things, the Exchange Offer.
THE EXCHANGE OFFER.............. The Company is offering to exchange up to
$100,000,000 aggregate principal amount of
Exchange Notes for up to $100,000,000
aggregate principal amount of Initial Notes
issued in the Initial Offering in reliance
upon an exemption from registration under the
Securities Act. Upon consummation of the
Exchange Offer, the terms of the Exchange
Notes (including principal amount, interest
rate, maturity and ranking) will be identical
in all material respects to the term of the
Initial Notes for which they may be exchanged
pursuant to the Exchange Offer, except that
the Exchange Notes have been registered under
the Securities Act and therefore will not
bear legends restricting their transfer and
will not contain terms providing for an
increase in the interest rate thereon under
certain circumstances described in the
Registration Rights Agreement.
MINIMUM CONDITION............... The Exchange Offer is not conditioned upon
any minimum aggregate principal amount of
Initial Notes being tendered for exchange.
EXPIRATION DATE................. The Exchange Offer will expire at 5:00 p.m.,
New York city time, on , 1998, unless
extended (the "Expiration Date").
EXCHANGE DATE................... The date of acceptance for exchange of the
Initial Notes will be the first business day
practicable following the Expiration Date.
CONDITIONS TO THE EXCHANGE The obligation of the Company to consummate
OFFER........................... the Exchange Offer is subject to certain
conditions. See "The Exchange Offer--
Conditions." The Company reserves the right
to terminate or amend the Exchange Offer at
any time prior to the Expiration Date upon
the occurrence of any such condition.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWAL RIGHTS............... Tenders may be withdrawn at any time prior to
the Expiration Date. Any Initial Notes not
accepted for any reason will be returned
without expense to the tendering holders
thereof as promptly as practicable after the
expiration or termination of the Exchange
Offer.
PROCEDURES FOR TENDERING
INITIAL NOTES................... See "The Exchange Offer--Procedures for
Tendering."
FEDERAL INCOME TAX
CONSEQUENCES.................... The exchange of Initial Notes for Exchange
Notes by Holders will not be a taxable
exchange for federal income tax purposes, and
Holders should not recognize any taxable gain
or loss or any interest income as a result of
such exchanges.
CERTAIN REPRESENTATIONS......... Each Holder desiring to participate in the
Exchange Offer will be required to represent,
among other things, that (i) it is not an
"affiliate" (as defined in Rule 405 of the
Securities Act) of the Company, (ii) 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 Exchange Notes and (iii)
it is acquiring the Exchange Notes in the
ordinary course of its business (a Holder
unable to make the foregoing representations
is referred to as a "Restricted Holder").
TRANSFER RESTRICTIONS ON
EXCHANGE NOTES.................. Based upon interpretations by the staff of
the Commission, the Company believes that
Exchange Notes issued pursuant to the
Exchange Offer to Participating Broker-
Dealers may be offered for resale, resold,
and otherwise transferred by a Participating
Broker-Dealer upon compliance with the
prospectus delivery requirements, but without
compliance with the registration requirements
of the Securities Act. The Company has agreed
that for a period of nine months following
consummation of the Exchange Offer it will
make this Prospectus available, for use in
connection with any such resale, to any
Participating Broker-Dealer that notifies the
Company in the Letter of Transmittal that it
may be subject to such prospectus delivery
requirements. The Company believes that
during such period of time, delivery of this
Prospectus, as it may be amended or
supplemented, will satisfy the prospectus
delivery requirements of a Participating
Broker-Dealer engaged in market-making or
other trading activities. See "The Exchange
Offer" and "Plan of Distribution." Based upon
interpretations by the staff of the
Commission, the Company believes that
Exchange Notes issued pursuant to the
Exchange Offer may be offered for resale,
resold, and otherwise transferred by a
Holder thereof (other than a Restricted
Holder or a Participating Broker-Dealer)
without compliance with the registration and
prospectus delivery requirements of the
Securities Act.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
EFFECT ON HOLDERS OF INITIAL
NOTES........................... As a result of the making of this Exchange
Offer, and upon acceptance for exchange of
all validly tendered Initial Notes pursuant
to the terms of the Exchange Offer, the
holders of the Initial Notes will have no
further registration or other rights under
the Registration Rights Agreement, except
under certain limited circumstances. Holders
of the Initial Notes who do not tender their
Initial Notes in the Exchange Offer will
continue to hold such Initial Notes and will
be entitled to all the rights and limitations
applicable thereto under the Indenture dated
as of November 26, 1997 among the
Predecessor, Parent, and United States Trust
Company of New York, as trustee (the
"Trustee"), relating to the Initial Notes and
the Exchange Notes (as amended, the
"Indenture"). All untendered, and tendered
but unaccepted, Initial Notes will continue
to be subject to the restrictions on transfer
provided for in the Initial Notes and the
Indenture. To the extent that Initial Notes
are tendered and accepted in the Exchange
Offer, the trading market, if any, for the
Initial Notes could be adversely affected.
See "Risk Factors--Consequences of Failure to
Exchange.
CHANGE OF CONTROL............... "Upon the occurrence of a Change of Control,
the Company will be required to offer to
purchase all or any part of each holder's
Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
purchase. There can be no assurance that the
Company will have the financial resources
necessary, or be permitted by its debt or
other agreements, to purchase the Notes upon
a Change of Control. See "Risk Factors--
Change of Control" and "Description of
Notes--Change of Control."
CERTAIN COVENANTS............... The Indenture contains certain covenants
that, among other things, limit the ability
of the Company and the Restricted
Subsidiaries to incur additional
indebtedness, pay dividends or make other
distributions, enter into sale and leaseback
transactions, make certain investments, incur
certain secured indebtedness, enter into
certain transactions with affiliates, or
enter into certain mergers or consolidations
or sell all or substantially all of the
assets of the Company and the Restricted
Subsidiaries. These covenants are subject to
a number of significant exceptions and
qualifications. See "Description of Notes--
Certain Covenants."
USE OF PROCEEDS................. The Company will receive no cash proceeds
from the Exchange Offer.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
CONCURRENT UNITS OFFERING
Concurrent with the Notes Offering, Parent offered 100,000 Units, each Unit
consisting of $100 liquidation preference of Senior Preferred Stock and one
warrant to purchase shares of Common Stock. The Senior Preferred Stock will be
exchangeable, at the option of Parent, into Parent's Subordinated Exchange
Debentures due 2009 (the "Exchange Debentures"), subject to certain conditions.
The Senior Preferred Stock will be mandatorily redeemable on November 30, 2009.
Dividends on the Senior Preferred Stock will be payable quarterly in arrears,
in cash or, prior to November 30, 2002 at Parent's option, in additional shares
of Senior Preferred Stock. See "Description of Units."
RISK FACTORS
For a discussion of certain factors that should be considered in evaluating
the Exchange Offer, see "Risk Factors."
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table presents (i) summary historical consolidated financial
data of the Predecessor (as defined) and KSCO as of the date and for the
periods indicated, including the results of operations of acquired companies
from their respective dates of acquisition, and (ii) summary pro forma
financial data of the Company as of the date and for the periods indicated
after giving effect to the Transactions as though they had occurred at the
beginning of the periods presented in the case of statement of operations data
and September 30, 1997 in the case of balance sheet data. The financial data
for the period from January 1, 1995 to October 17, 1995, the period from
October 17, 1995 to December 31, 1995 and the year ended December 31, 1996 have
been derived from the consolidated financial statements of the Predecessor and
KSCO audited by Arthur Andersen llp, independent public accountants. The
financial data for the year ended December 31, 1994 have been derived from the
consolidated financial statements of the Predecessor audited by Deloitte &
Touche llp, independent auditors. The financial data as of September 30, 1997
and for the nine months ended September 30, 1996 and 1997 have been derived
from unaudited consolidated financial statements of KSCO, which, in the opinion
of management, reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such data. Results for the
nine months ended September 30, 1997 are not necessarily indicative of results
to be expected for the full year. The pro forma financial data are not
necessarily indicative of operating results or financial position that would
have been achieved had the Transactions been consummated on the dates indicated
and should not be construed as representative of future operating results or
financial position. The summary historical and pro forma financial data should
be read in conjunction with "Selected Historical Financial Data," "Pro Forma
Consolidated Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and notes thereto included elsewhere in this Prospectus.
- --------------------------------------------------------------------------------
14
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR(1) KSCO THE COMPANY
-------------------- --------------------------------------- ---------------------------
PRO FORMA
---------------------------
NINE MONTHS
PERIOD PERIOD ENDED NINE TWELVE
YEAR ENDED FROM FROM YEAR ENDED SEPTEMBER 30, YEAR ENDED MONTHS MONTHS
DECEMBER 1/1/95 TO 10/17/95 TO DECEMBER ---------------- DECEMBER ENDED ENDED
31, 1994 10/17/95 12/31/95 31, 1996 1996 1997 31, 1996 9/30/97 9/30/97
---------- --------- ----------- ---------- ------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............... $65,428 $53,589 $12,799 $91,632 $69,796 $73,466 $91,632 $73,466 $95,302
Gross profit............ 18,383 13,329 3,446 27,032 19,533 20,362 27,282 21,484 29,233
Selling, general and
administrative
expenses(2)............ 10,534 7,822 1,827 17,051 12,733 11,697 16,626 11,322 15,557
Amortization expense.... 411 320 239 2,557 2,046 2,025 3,729 2,874 3,708
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income ....... 7,438 5,187 1,380 7,424 4,754 6,640 6,927 7,288 9,968
Interest expense........ 5,092 3,472 892 5,953 4,848 2,698 14,570 10,929 14,570
Other expense (income).. (629) 551 214 450 102 430 346 322 674
------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
taxes and extraordinary
loss................... 2,975 1,164 274 1,021 (196) 3,512 (7,989) (3,963) (5,276)
Tax provision (benefit). 634 -- 158 923 258 1,586 (2,005) (919) (1,088)
------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
extraordinary loss..... 2,341 1,164 116 98 (454) 1,926 (5,984) (3,044) (4,188)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)(3).... $ 2,341 $ 1,164 $ 116 $ (852) $(1,404) $ 1,926 $(5,984) $(3,044) $(4,188)
======= ======= ======= ======= ======= ======= ======= ======= =======
OTHER DATA:
EBITDA(4)............... $14,514 $10,814 $ 2,886 $17,218 $12,210 $16,310 $17,747 $16,791 $21,878
Adjusted EBITDA(5)...... 14,346 11,242 3,163 18,365 12,772 17,115 18,365 17,115 22,708
Depreciation............ 6,559 5,735 1,481 6,829 5,512 4,213 7,437 6,952 8,877
Capital expenditures.... 7,363 4,962 1,168 5,695 4,437 4,114 5,695 4,114 5,372
Adjusted Interest
Expense(6)............. 4,995 3,255 757 5,633 4,608 2,493 13,749 10,313 13,749
Earnings/Fixed
Charges(7)............. 1.56x 1.32x 1.29x 1.16x -- 1.81x -- -- --
<CAPTION>
PRO FORMA
----------------
NINE TWELVE
MONTHS MONTHS
ENDED ENDED
9/30/97 9/30/97
SELECTED RATIOS: ------- -------
<S> <C> <C>
EBITDA/Adjusted Interest Expense............................................................... 1.63x 1.59x
Adjusted EBITDA/Adjusted Interest Expense...................................................... 1.66x 1.65x
Total debt/EBITDA.............................................................................. N/A 5.95x
Total debt/Adjusted EBITDA..................................................................... N/A 5.74x
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------
ACTUAL PRO FORMA
-------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital(8)........................................... $ 21,437 $ 23,443
Total assets................................................. 108,742 220,515
Total debt(9)................................................ 40,130 130,269
Stockholders' equity(10)..................................... 22,762 41,569
</TABLE>
- --------
(1) On October 17, 1995, Fasteners was acquired (the "Kohlberg Acquisition") by
KSCO, which was organized by Kohlberg & Co. ("Kohlberg") for the purpose of
acquiring the capital stock of Fasteners. The Kohlberg Acquisition was
accounted for using the purchase method of accounting. Financial
information for periods prior to October 17, 1995 are for Fasteners when it
was a wholly owned subsidiary of Alper Holdings USA, Inc. ("Alper") (in
such capacity, Fasteners is referred to herein as the "Predecessor"). The
Kohlberg Acquisition and the related application of purchase accounting
resulted in changes to the capital structure of the Predecessor and the
historical basis of various assets and liabilities. The effect of such
changes significantly impairs the comparability of the financial position
and results of operations of the Predecessor to those of KSCO.
15
<PAGE>
- --------------------------------------------------------------------------------
(2) Selling, general and administrative expenses ("SG&A") includes non-
recurring income of $600 in 1994 primarily related to the favorable
resolution of matters previously accrued. SG&A also includes a non-
recurring charge for severance payments made to employees at the
Clarkesville facility who were terminated when certain Rau and PCI
employees were transferred to the Clarkesville facility. Such charge
amounted to $118, $272 and $154 for the nine months ended September 30,
1996, the year ended December 31, 1996 and the pro forma twelve months
ended September 30, 1997, respectively.
(3) In January 1996, the Company refinanced its previously existing credit
agreements with the Existing Credit Facility, which resulted in an
extraordinary after-tax charge of $950 in the first quarter of 1996 from
the write-off of related deferred financing costs.
(4) EBITDA is defined as net income (loss) before interest expense (including
amortization of deferred financing costs), provision for income taxes,
depreciation, amortization, rental payments on the Synthetic Lease, the non
cash portion of other expense (income) and extraordinary items. Payments on
the Synthetic Lease were $858 and $3,861 for the year ended December 31,
1996 and the nine months ended September 30, 1997, respectively. The non-
cash portion of other expense (income) was $(523) and $123 for the year
ended December 31, 1994 and for the period from January 1, 1995 to October
17, 1995, respectively, and was insignificant for all other periods
presented.
(5) Adjusted EBITDA is defined as EBITDA (as defined in footnote (4) above
plus (i) non-recurring expense (income) included in SG&A (see footnote (2)
above), (ii) the portion of other expense (income) not included in EBITDA,
which consists of miscellaneous non-operating cash items, and (iii)
management fees to Alper and Kohlberg. On an historical basis, management
fees paid to Alper and Kohlberg, included in the general and administrative
expenses, were $538, $0, $63, $425, $342 and $375 for the year ended
December 31, 1994, the period from January 1, 1995 to October 17, 1995, the
period from October 17, 1995 to December 31, 1995, the year ended December
31, 1996 and the nine months ended September 30, 1996 and 1997,
respectively.
The Company has included information concerning EBITDA and Adjusted EBITDA
because it is used by certain investors as a measure of a company's ability
to service its debt. EBITDA and Adjusted EBITDA are not required by
generally accepted accounting principles ("GAAP") and should not be
considered alternatives to net income determined in accordance with GAAP as
an indicator of operating performance or as an alternative to cash flow
from operating activities determined in accordance with GAAP as a measure
of liquidity. The Company's use of EBITDA may not be comparable to
similarly titled measures due to the use by other companies of different
financial statement components in calculating EBITDA.
(6) Adjusted Interest Expense is defined as interest expense less the
amortization of deferred financing costs.
(7) For the purpose of determining the ratio of earnings to fixed charges,
"earnings" consist of income before provision for income taxes and fixed
charges. "Fixed charges" consist of interest expense (including
amortization of deferred financing costs) and one-third of rental expense,
representing that portion of rental expense deemed representative of the
interest factor. Earnings were insufficient to cover fixed charges by $196,
$7,989, $3,963 and $5,276 for the nine months ended September 30, 1996, the
pro forma year ended December 31, 1996, the pro forma nine months ended
September 30, 1997 and the pro forma twelve months ended September 30,
1997, respectively.
(8) Working capital is defined as current assets less current liabilities.
(9) Excludes off-balance sheet financing pursuant to the Synthetic Lease,
proceeds of which were applied toward repayment of debt of $31,268 in
November 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
(10) Pro forma stockholder's equity reflects the Equity Contribution. See "The
Transactions," "Capitalization" and "Description of Capital Stock." Pro
forma stockholder's equity is presented net of $7,831 which represents the
non-cash accounting treatment required for management's continuing
ownership interest, in accordance with the provisions of Emerging Issues
Task Force Issue No. 88-16 of the Financial Accounting Standards Board
(the "FASB").
-------------------------------------------------------------------------------
16
<PAGE>
RISK FACTORS
Holders of Initial Notes should carefully consider the following factors, as
well as the other information and financial data contained in this Prospectus,
before exchanging Initial Notes for Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Issuance of the Exchange Notes in exchange for the Initial Notes pursuant to
the Exchange Offer will be made only after a timely receipt by the Company of
such Initial Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of the
Initial Notes desiring to tender such Initial Notes in exchange for Exchange
Notes should allow sufficient time to ensure timely delivery. The Company is
under no duty to give notification of defects or irregularities with respect
to the tenders of Initial Notes for exchange.
Holders of Initial Notes who do not exchange their Initial Notes for
Exchange Notes pursuant to the Exchange Offer, including Holders whose Initial
Notes are tendered but not accepted, will continue to be subject to the
restrictions on transfer of such Initial Notes as set forth in the legend
thereon, and, except in certain limited circumstances, will no longer have any
registration rights with respect to the Initial Notes. In general, the Initial
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
intend to register the Initial Notes under the Securities Act.
As a condition to its participation in the Exchange Offer pursuant to the
terms of this Agreement, each Holder of Initial Notes shall furnish, upon the
request of the Company, prior to the consummation of the Exchange Offer, a
written representation to the Company and the Guarantor (which may be
contained in the Letter of Transmittal) to the effect that (A) it is not an
affiliate of the Company or the Guarantor within the meaning of the Act, (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
Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the
Exchange Notes in its ordinary course of business. Holders of Initial Notes
shall use their best efforts to cooperate in the Company's and the Guarantor's
preparations for the Exchange Offer.
Each broker-dealer that holds Initial Notes that were acquired for its own
account as a result of market-making activities or other trading activities
may exchange the Initial Notes for Exchange Notes; provided however, that such
broker-dealer must deliver a prospectus in connection with any resale of such
Exchange Notes. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with the resales of
Exchange Notes received in exchange for Initial Notes where such Initial Notes
were acquired by such broker-dealer as a result of market-making activities.
The Company has agreed that, for a period of nine months after the
consummation of the Exchange Offer it will keep this Prospectus effective,
supplemented, and amended, as required by the Registration Rights Agreement,
to the extent necessary to ensure that it is available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution." To the
extent Initial Notes are exchanged, the tender of Initial Notes pursuant to
the Exchange Offer will reduce the principal amount of the Initial Notes
outstanding, which may have an adverse effect upon, and increase the
volatility of, the market price of the Initial Notes due to a reduction in
liquidity.
SUBSTANTIAL LEVERAGE; RESTRICTIVE COVENANTS
The Company is highly leveraged. At September 30, 1997, on a pro forma basis
after giving effect to the Transactions, the total debt of the Company would
have been $130.3 million (excluding the $25.0 million Revolving Credit
Facility) and its stockholder's equity would have been $41.6 million. Subject
to the restrictions in the Indenture and the New Credit Facility, the Company
may incur additional indebtedness from time to time to provide working
capital, to finance acquisitions or capital expenditures and for other
corporate purposes. The level of the Company's indebtedness will have
important consequences for holders of the Notes, including: (i) a substantial
portion of the Company's cash flow from operations must be dedicated to debt
service and will not be available for other purposes, (ii) the Company's
ability to obtain additional debt financing in the future for
17
<PAGE>
working capital, acquisitions or capital expenditures may be limited, (iii)
certain of the Company's indebtedness contains financial and other restrictive
covenants which, if breached, could result in an event of default under such
indebtedness, (iv) the Company's borrowings under the New Credit Facility are
and will continue to be at variable rates of interest, which causes the
Company to be vulnerable to increases in interest rates and (v) the Company's
level of indebtedness could limit its flexibility in planning for and reacting
to, and make it more vulnerable to, competitive pressures and changes in
industry and economic conditions generally. In addition, indebtedness incurred
under the New Credit Facility is scheduled to become due prior to the time any
principal payments are required on the Notes and therefore the Company may
need to refinance such indebtedness. The Company's ability to refinance the
New Credit Facility, if necessary, will depend on, among other things, its
financial condition at the time, the restrictions in the instruments governing
its then outstanding indebtedness and other factors, including market
conditions, that are beyond the control of the Company.
The Company's ability to pay interest and principal on the Notes and to
satisfy its other debt obligations will depend upon its future operating
performance. Future operating performance will be affected by prevailing
economic conditions and financial, business and other factors, many of which
are beyond the Company's control. Based upon the current level of operations
and anticipated future growth, the Company believes that its operating cash
flow, together with borrowings under the New Credit Facility, will be
sufficient to meet its operating expenses and capital requirements and its
debt service requirements. There can be no assurance, however, that the
Company's business will continue to generate cash flow at or above current
levels or that anticipated future growth can be achieved. If the Company is
unable to generate sufficient cash flow to service its indebtedness and fund
its capital or other expenditures, it will be forced to adopt an alternative
strategy that may include reducing or delaying capital expenditures, selling
assets, restructuring or refinancing its indebtedness (including the Notes),
or seeking additional equity or debt capital. There can be no assurance that
any of these strategies could be effected on satisfactory terms, if at all,
particularly in view of the Company's high leverage following the Transactions
and the fact that substantially all of its assets are pledged to secure
borrowings under the New Credit Facility and other secured obligations.
The terms of the New Credit Facility, the Indenture, and the other
agreements governing the Company's indebtedness impose operating and financing
restrictions on the Company. Such restrictions affect, and in many respects
limit or prohibit, among other things, the ability of the Company to incur
additional indebtedness, pay dividends or repurchase stock or make other
distributions, create liens, make certain investments, sell assets, or enter
into mergers or consolidations. The New Credit Facility requires the Company
to comply with certain financial ratios and tests, under which the Company is
required to achieve certain financial and operating results. These
restrictions could limit the ability of the Company to plan for or react to
market conditions or meet extraordinary capital needs or otherwise could
restrict corporate activities. See "Description of Notes--Certain Covenants"
and "Description of Other Indebtedness." There can be no assurance that such
restrictions will not adversely affect the Company's ability to finance its
future operations or capital needs or to engage in other business activities
that would be in the interest of the Company. Moreover, any default under the
documents governing the indebtedness of the Company could have a significant
adverse effect on the market value of the Notes.
EFFECTIVE SUBORDINATION OF THE NOTES AND THE GUARANTEES
The Notes and each Guarantee are effectively subordinated to all secured
obligations of the Company and the guarantor thereof, respectively, to the
extent of the assets securing such obligations. At September 30, 1997, after
giving pro forma effect to the Transactions, the Company would have had
approximately $30.3 million of secured indebtedness outstanding, excluding the
$25.0 million Revolving Credit Facility. The New Credit Facility is secured by
all of the capital stock of the Company's domestic subsidiaries, 66% of the
capital stock of the Company's foreign subsidiaries and substantially all of
the domestic assets of the Company and its subsidiaries.
The Notes are structurally subordinated to all obligations (including trade
payables and accrued liabilities) of the Company's subsidiaries, other than
any subsidiary that issues a Subsidiary Guarantee. No
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Subsidiary Guarantees will be required on the date of the issuance of the
Notes. The Indenture permits the Company and its subsidiaries to incur
additional indebtedness, including secured indebtedness, subject to certain
limitations. The Indenture does not limit Parent's ability to incur
indebtedness.
FOREIGN SALES AND OPERATIONS; IMPACT OF NAFTA
In 1996 and the first nine months of 1997, approximately 22.1% and 26.6%,
respectively, of the Company's net sales were derived from foreign sales and
operations and export sales. In addition, a significant portion of the
Company's anticipated growth is expected to come from foreign sales and
operations. Foreign sales and operations involve varying degrees of risks and
uncertainties inherent in doing business abroad. Such risks include the
possibility of unfavorable circumstances arising from host country laws or
regulations, including unexpected changes of interpretations thereof. Other
risks include partial or total expropriation; export duties and quotas;
currency exchange rate fluctuations; restrictions on repatriation of funds;
the disruption of operations from labor and political disturbances,
insurrection, or war; and the requirements of partial local ownership of
operations in certain countries. Furthermore, customer credit risks are
exacerbated in foreign sales and operations because there often is little
information available about the credit histories of customers in certain
countries.
The value of the Company's foreign sales and earnings may vary with currency
exchange rate fluctuations. To the extent that the Company does not take steps
to mitigate the effects of changes in relative values, changes in currency
exchange rates could have an adverse effect upon the Company's results of
operations, which in turn could adversely affect the ability of Parent and the
Company to meet their debt and preferred stock obligations, including payments
on the Securities.
The North American Free Trade Agreement ("NAFTA"), implemented on January 1,
1994, removes barriers to free trade among Canada, the United States, and
Mexico. The removal of these barriers will take place over a ten-year period
between Mexico and the United States and over five years between Canada and
the United States. There can be no assurance that NAFTA will not result in an
increase in apparel imports from Mexico that compete against products
manufactured by the Company's customers in the United States. Such a
development could materially adversely affect the Company's sales in the
United States. Historically, a majority of the Company's net sales has been to
customers in the United States. No assurance can be given that the Company
will be able to increase sales outside of the United States in the event of a
decline in sales to customers in the United States.
ACQUISITION RISKS
The Company's growth in recent years has been attributable in part to
strategic business acquisitions. The Company intends to seek additional
acquisition opportunities that will allow it to increase its market
penetration, product offerings and distribution capabilities both domestically
and internationally. The criteria for identifying attractive acquisition
candidates include revenue potential, increases in manufacturing, production
and other cost efficiencies and the diversification and expansion of the
Company's product lines and customer base. There can be no assurance that the
Company will be able to successfully identify suitable acquisition candidates,
complete acquisitions, integrate acquired operations into its existing
operations or expand into new markets. The diversion of management's
attention, as well as any unforeseen difficulties or liabilities, expenses,
complications or delays that may be encountered in the integration of acquired
businesses, could have a material adverse effect on the Company. Further, once
integrated, acquired operations may not achieve levels of revenues,
profitability or productivity comparable with those achieved by the Company's
existing operations, or otherwise perform as expected. There can be no
assurance that the Company will, in future acquisitions, continue to achieve
results comparable to those from recent acquisitions.
Depending upon the nature, size and timing of future acquisitions, the
Company may be required to raise additional financing. The Company expects
that a substantial portion of the financing of any acquisition would be
additional indebtedness. Additional indebtedness incurred to finance
acquisitions could adversely affect the
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Company's liquidity and financial condition. There can be no assurance that
the New Credit Facility, the Indenture or any other loan agreements to which
the Company may become a party or subject to will permit such additional
financing or that such additional financing will be available to the Company
on terms acceptable to its management or at all. See "Business--Business
Strategy."
RAW MATERIALS
In 1996, the Company purchased approximately 11 million pounds of brass, 1.1
million pounds of steel, 0.3 million pounds of stainless steel and 0.7 million
pounds of aluminium for use in manufacturing its products. The volatility of
the prices of these materials, particularly brass, which typically is composed
of 70% copper and 30% zinc, could have a material impact on the Company's
results of operations. The cost of copper has been subject to considerable
volatility, ranging between $0.78 and $1.40 per pound in 1994, between $1.21
and $1.46 per pound in 1995 and between $0.87 and $1.30 per pound in 1996. The
volatility of copper prices has in the past adversely affected the Company's
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations--Fiscal Year 1995
(Combined KSCO and Predecessor) Compared with Fiscal Year 1994 (Predecessor)."
The Company seeks to minimize the impact of price volatility by entering
into hedging arrangements. It has hedged a substantial portion of its raw
material needs through June 1998. To the extent that prices for the Company's
remaining expected needs increase before prices are set in hedging contracts,
there can be no assurance that the Company will be able to achieve adequate
margins on finished products. However, there can be no assurance that the
Company will be able to do so in the future. If the Company is unable to
maintain an adequate differential between finished product prices and material
prices and the effect cannot largely be passed on to its customers, the
Company's operating results would be materially adversely affected.
CONCENTRATION OF MANUFACTURING FACILITIES
Approximately 80% of the Company's products sold in 1996 were manufactured
at its Clarkesville, Georgia facility. The Company anticipates that a
similarly significant amount of its products will continue to be manufactured
at the Clarkesville facility. Should a natural disaster or other event result
in the operations at the Clarkesville facility being disrupted for any
significant period of time or inventory located there being damaged, the
results of operations and financial condition of the Company could be
materially adversely affected. Although the Company maintains insurance
coverage on its production facilities (including business interruption
insurance designed to reduce the impact of significant damage to its
Clarkesville facility), there can be no assurance that such insurance proceeds
would be available on a timely basis or be sufficient to offset fully such
losses. See "Business--Insurance."
COMPETITION
The Company operates in a highly competitive environment. Some of the
Company's competitors are larger, have greater financial resources and may be
less leveraged than the Company. See "Business--Competition."
CONTROLLING STOCKHOLDER
Upon consummation of the Transactions, Saratoga became the beneficial owner
of 67.2% of the voting stock of Parent, which owns all of the capital stock of
the Company. By virtue of such ownership, Saratoga is in a position to direct
the management and affairs of the Company. Saratoga may have an interest in
pursuing acquisitions, divestitures or other transactions that, in its
judgment, could enhance its equity investment, even though such transactions
might involve risks to the holders of the Securities.
RELIANCE ON KEY PERSONNEL
The Company depends to a large extent upon the abilities and continued
efforts of its senior management, the loss of any of whom could have an
adverse impact on the Company. The Company does not maintain "key
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man" insurance on any of its employees. Furthermore, the Company likely will
be dependent on the senior management of any businesses acquired in the
future. Although the Company has entered into employment agreements with
certain executive officers, if any of these persons becomes unavailable to
continue in such capacity, or if the Company is unable to attract and retain
other qualified employees, the Company's business or prospects could be
materially adversely affected. See "Management." In addition, the Company's
growth and success depend on its ability to attract and retain skilled
personnel to operate machinery used in the Company's manufacturing processes.
LIMITED PRACTICAL VALUE OF PARENT GUARANTEE
Parent will unconditionally guarantee all payments of principal and interest
on the Notes. However, since at present Parent's only significant asset is the
capital stock of the Company (and such asset is pledged to the lenders under
the New Credit Facility), if the Company should be unable to meet its payment
obligations with respect to the Notes, it is unlikely that Parent would be
able to do so.
ENVIRONMENTAL MATTERS
Like similar companies, the Company's operations and properties are subject to
a wide variety of increasingly complex and stringent federal, state, local and
foreign environmental laws and regulations, including those governing the use,
storage, handling, generation, treatment, emission, release, discharge and
disposal of certain materials and wastes, the remediation of contaminated soil
and groundwater, and the health and safety of employees (collectively,
"Environmental Laws"). As such, the nature of the Company's current and former
operations, and those of its predecessors in interest, exposes it to the risk of
claims with respect to such matters and there can be no assurance that material
costs and liabilities will not be incurred in connection with such claims. The
Company is currently subject, and may in the future be subject, to liability for
violations of Environmental Laws and remediation of contamination at currently
or formerly owned or operated facilities, including its Clarkesville, Georgia
facility. Based upon its experience to date, the Company believes that the
future cost of compliance with the existing Environmental Laws, and liability
for known environmental claims pursuant to such Environmental Laws, will not
have a material adverse effect on the cash flow, financial condition or results
of operation of the Company. However, future events, such as new information,
changes in existing Environmental Laws or their interpretation, and more
vigorous enforcement policies of regulatory agencies, may give rise to
additional expenditures or liabilities that could be material. See "Business--
Environmental Matters."
PENSION MATTERS
As described in Note 11 to the Company's consolidated financial statements,
at December 31, 1996, the projected benefit obligations under the Company's
defined benefit pension plan exceeded the fair value of plan assets (excluding
the effect of unrecognized net gain relating thereto) by approximately $9.8
million, based on certain assumptions by the Company set forth in the Note,
which could be different from those used by the Pension Benefit Guaranty
Corporation (the "PBGC"). On November 19, 1997, the Company received a request
for information from the PBGC, a quasi-government agency which guarantees
certain benefits under defined benefit pension plans and monitors such plans.
Among its powers, the PBGC may institute proceedings to terminate a defined
benefit pension plan. The PBGC has requested information with respect to the
Acquisition and its potential effect on the Company's pension plan. The
Company is complying with the PBGC's request, but cannot predict whether the
PBGC will seek to require the Company to take any actions as a result of the
Acquisition, including accelerated payment to the pension plan. The Company,
Saratoga and Kohlberg intend to cooperate with the PBGC to resolve in a timely
manner any concerns it may have. Any such actions could increase the Company's
costs of maintaining its pension plan, which could have an adverse effect on
the cash flow, financial condition or results of operations of the Company.
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MATURE INDUSTRY
The fastener industry is a mature industry in which minimal growth in sales
of fasteners is expected. Accordingly, growth in the Company's revenues and
earnings will depend significantly on the Company's ability to acquire and
consolidate profitable companies, to develop and sell higher margin specialty
applications and to achieve further cost reductions through improved
manufacturing technology.
FRAUDULENT CONVEYANCE CONSIDERATIONS
A significant portion of the net proceeds of the Offerings was distributed
to the stockholders of KSCO. In connection with the Transactions, affiliates
of Kohlberg and KSCO's other existing stockholders received an aggregate of
approximately $98.1 million. Under fraudulent transfer law, if a court were to
find in a bankruptcy, reorganization or rehabilitation case or similar
proceeding or a lawsuit by or on behalf of other creditors of the Company,
that the Initial Notes were issued with the intent to defraud, hinder or delay
creditors, or that the Company received less than fair consideration or
reasonably equivalent value for incurring the indebtedness represented by the
Initial Notes and, at the time of such incurrence, the Company (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 such debts
as they mature, such court could, among other things, (a) void all or a
portion of the Company's obligations to the holders of Notes and/or (b)
subordinate the Company's obligations to the holders of the 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. 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 valuation, 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.
Management believed the Initial Notes were being issued without the intent
to hinder, defraud or delay creditors, for proper purposes and in good faith.
To the extent that proceeds from the sale of the Initial Notes were used to
finance the distribution to stockholders, a court may find that the Company
did not receive fair consideration or reasonably equivalent value for the
incurrence of the indebtedness represented by the Notes. Management believed
that the Company received equivalent value at the time the indebtedness under
the Initial Notes was incurred. As of September 30, 1997 on a pro forma basis
after giving effect to the Transactions, the Company would have had
stockholders' equity of $41.6 million. See "Capitalization." Management
believed that, although a significant portion of the net proceeds from the
sale of the Notes was distributed to stockholders of KSCO, for purposes of the
U.S. Bankruptcy Code and state fraudulent transfer or conveyance laws, the
Company was and, after the issuance of the Initial Notes and the application
of the proceeds therefrom, was, solvent, had sufficient capital for carrying
on its business and was able to pay its debts as they matured. These beliefs
were based upon the Company's operating history, management's analysis of cash
flows, the estimated fair value of the Company's assets and the Company's
estimated liabilities after giving effect to the Transactions. In determining
the estimated fair value of the Company's assets, the Board of Directors
utilized a written report of an expert in appraisals as to the equity value of
the Company and as to certain other valuation and solvency matters. The
various factors considered by the Board as enumerated above, supported the
Board's conclusions regarding the sufficiency of the Company's capital and no
one factor was given more significance than others by the Board in reaching
its conclusions. As a result of the uncertainty of the application of
fraudulent transfer or conveyance law in transactions similar to the
Transactions, including the distribution to stockholders, there can be no
assurance that a court passing on any of the foregoing issues would agree with
management's views.
In addition, the Subsidiary Guarantees, if any are issued, may be subject to
review under fraudulent conveyance statutes in a bankruptcy, reorganization or
rehabilitation case or similar proceeding or a lawsuit by or on behalf of
other creditors of any of the guarantors thereof. In such a case, the analysis
set forth above would
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generally apply, except that the Subsidiary Guarantees could also be subject
to the claim that, since the Subsidiary Guarantees were incurred for the
benefit of the Company (and only indirectly for the benefit of the guarantors
thereof), they were incurred for less than reasonably equivalent value or fair
consideration. A court could therefore subordinate the Subsidiary Guarantees
to the other obligations of the guarantors thereof, or take other action
detrimental to holders of the Notes, including, under certain circumstances,
invalidating the Subsidiary Guarantees. No Subsidiary Guarantees will be
required on the Issue Date.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
offer to purchase all of the outstanding Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest to the date of purchase. There can
be no assurance that the Company will have sufficient funds available, will be
able to raise sufficient funds through a refinancing of the Notes, or will be
permitted by its other debt agreements to purchase the Notes upon the
occurrence of a Change of Control. In addition, a Change of Control may
require the Company to offer to purchase other outstanding indebtedness and
would cause a default under the New Credit Facility. The inability to purchase
all of the tendered Notes would constitute an Event of Default (as defined)
under the Indenture. See "Description of Notes--Change of Control."
The Change of Control provision may not necessarily afford the holders of
Notes protection in the event of a highly leveraged transaction, including a
reorganization, restructuring, merger, or similar transaction involving the
Company that could adversely affect the holders because such transactions may
not involve a shift in voting power or beneficial ownership, may not involve a
shift of the required magnitude or may not otherwise fit within the definition
of Change of Control.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The Initial Notes are eligible for trading on the Private Offerings,
Resales and Trading through Automated Linkage Market by Qualified
Institutional Buyers ("QIBs"). The Exchange Notes are new securities for which
there is no existing market. There can be no assurance as to the liquidity of
any markets that may develop for the Exchange Notes, the ability of the
holders of the Exchange Notes to sell their Exchange Notes or the price at
which holders would be able to sell their Exchange Notes. Future trading
prices of the Exchange Notes will depend on many factors, including, among
other things, prevailing interest rates, the Company's operating results, and
the market for similar securities. The Initial Purchasers have advised the
Company that they currently intend to make a market in the Notes. However, the
Initial Purchasers are not obligated to do so and any market-making may be
discontinued at any time without notice. The Company and Parent do not intend
to apply for listing of the Exchange Notes on any securities exchange.
The liquidity of, and trading market for, the Exchange Notes may also be
materially and adversely affected by declines in the market for high yield
securities generally. Such a decline may materially and adversely affect such
liquidity and trading independent of the financial performance of, and
prospects for, the Company and Parent.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Initial Notes were sold by the Company on November 26, 1997 to the Initial
Purchaser who resold the Initial Notes (i) to "qualified institutional buyers"
(as defined in Rule 144A under the Securities Act) in reliance upon Rule 144A
under the Securities Act and (ii) outside the United States to persons other
than U.S. persons in reliance upon Regulation S under the Securities Act. In
connection therewith, Predecessor, Guarantor and the Initial purchasers entered
into the Registration Rights Agreement, pursuant to which Predecessor and
Guarantor agreed for the benefit of the Holders of the Initial Notes, that they
would, at their sole cost, (i) within 90 days following the original issuance of
the Initial Notes, file with the Commission the Exchange Offer Registration
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Statement (of which this Prospectus is a part) under the Securities Act with
respect to an issue of a series of new notes of the Company identical in all
material respects to the series of Initial Notes and (ii) use their reasonable
best efforts to cause such Exchange Offer Registration Statement to become
effective under the Securities Act within 120 days following the original
issuance of the Initial Notes. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company will offer to the Holders of the Initial
Notes the opportunity to exchange their Initial Notes for a like principal
amount of Exchange Notes, to be issued without a legend restricting their
transfer and which may, subject to certain exceptions described below, be
reoffered and resold by the Holder without restrictions or limitations under
the Securities Act. The term "Holder" with respect to any Note means any
person in whose name such Note is registered on the books of the Company.
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (i) it is not an "affiliate" (as
defined in Rule 405 of the Securities Act) of the Company or the Guarantor
(ii) 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 Exchange Notes and (iii) it is acquiring the Exchange Notes in the
ordinary course of its business (a Holder unable to make the foregoing
representation is referred to as a "Restricted Holder"). A Restricted Holder
will not be able to participate in the Exchange Offer and may only sell its
Initial Notes pursuant to a registration statement containing the selling
security holder information required by Item 507 of Regulation S-K under the
Securities Act, or pursuant to an exemption from the registration requirement
of the Securities Act.
Each broker-dealer (other than a Restricted Holder) that receives Exchange
Notes for its own account pursuant to the Exchange Offer (a "Participating
Broker-Dealer") is required to acknowledge in the Letter of Transmittal that
it acquired the Initial Notes as a result of market-making activities or other
trading activities and that it will deliver a prospectus in connection with
the resale of such Exchange Notes. Based upon interpretations by the staff of
the Commission, the Company believes that Exchange Notes issued pursuant to
the Exchange Offer to Participating Broker-Dealers may be offered for resale,
resold, and otherwise transferred by a Participating Broker-Dealer upon
compliance with the prospectus delivery requirements, but without compliance
with the registration requirements, of the Securities Act. The Company has
agreed that for a period of nine months following consummation of the Exchange
Offer it will make this Prospectus available, for use in connection with any
such resale, to any Participating Broker-Dealer that notifies the Company in
the Letter of Transmittal that it may be subject to such prospectus delivery
requirements. The Company believes that during such period of time, delivery
of this Prospectus, as it may be amended or supplemented, will satisfy the
prospectus delivery requirements of a Participating Broker-Dealer engaged in
market-making or other trading activities. See "The Exchange Offer" and "Plan
of Distribution".
Based upon interpretations by the staff of the Commission, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer may be
offered for resale, resold, and otherwise transferred by a Holder thereof
(other than a Restricted Holder or a Participating Broker-Dealer) without
compliance with the registration and prospectus delivery requirements of the
Securities Act.
If (i) prior to the consummation of the Exchange Offer, it is reasonably
determined in good faith that (A) the Exchange Notes upon receipt would not be
tradable by Holders thereof, other than Restricted Holders, without registration
under the Securities Act and applicable state securities laws or (B) the
Commission is unlikely to permit the consummation of the Exchange Offer or (ii)
the Exchange Offer commenced but not consummated prior to May 25, 1998 for any
reason, then the Company is required under the Registration Rights Agreement to
file with the Commission a shelf registration statement (the "Shelf Registration
Statement") to cover resales of Transfer Restricted Securities (as defined) by
the Holders thereof who satisfy certain conditions relating to the provision of
information for inclusion in the Shelf Registration Statement. The Company is
required under the Registration Rights Agreement to file the Shelf Registration
Statement as promptly as reasonably practicable but in no event later than 60
days after the date on which the Company becomes obligated to file same, to use
its reasonable best effort to cause the Shelf Registration Statement to be
declared effective on or before the 150th day after the obligation to file
arises and, except under certain circumstances, to keep the Shelf Registration
Statement continuously effective under the Securities Act until November 30,
2007, or such earlier time when all Notes are sold. For purposes of the
foregoing, "Transfer Restricted Securities" means each
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Initial Note and each Exchange Note to which clause (i)(A) of the first
sentence of this paragraph is applicable, until in the case of any such Notes
(i) such Notes have been sold pursuant to an effective registration statement,
(ii) such Notes have been sold in compliance with Rule 144 under the
Securities Act or would be permitted to be sold pursuant to Rule 144(k)
thereunder or (iii) such Notes cease to be outstanding.
The Company will, in the event of the filing of the Shelf Registration
Statement, provide to each Holder of Transfer Restricted Securities covered by
the Shelf Registration Statement copies of any Shelf Registration Statement or
any prospectuses which is a part thereof, notify each such Holder when the
Shelf Registration Statement has become effective and take certain other
actions as are required to permit unrestricted resales of Transfer Restricted
Securities. A Holder of Transfer Restricted Securities that sells such
Transfer Restricted Securities pursuant to the Shelf Registration Statement
generally will be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to the purchaser, will be
subject to certain of the civil liability provisions under the Securities Act
in connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such Holder (including
certain indemnification obligations). In addition, Holders of Transfer
Restricted Securities will be required to deliver information to be used in
connection with the Shelf Registration Statement within a reasonable time in
order to have their Transfer Restricted Securities included in the Shelf
Registration Statement and receive any Liquidated Damages (as defined). The
Company will notify such Holders of the occurrence of any event that makes any
statement made in the Shelf Registration Statement untrue in any material
respect or that requires the making of any changes 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 not
misleading, in which case such Holders will be prohibited from using the Shelf
Registration Statement and any prospectus which is a part thereof until the
Company amends or supplements the same.
If (a) the Company and the Guarantor fail to file within 90 days, or cause
to become effective within 120 days, the Exchange Offer Registration Statement
or (b) the Company and the Guarantor are obligated to file the Shelf
Registration Statement and such Shelf Registration Statement is not filed
within 90 days, or declared effective within 150 days, of the date on which
the Company and the Guarantor became so obligated or (c) the Company and the
Guarantor fail to consummate the Exchange Offer within 30 days of the Exchange
Offer Effective Date or (d) the Shelf Registration Statement or the Exchange
Offer Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the Registration Rights Agreement
(each such event referred to in clauses (a) through (d) above, a "Registration
Default"), then the Company and the Guarantor will pay liquidated damages
("Liquidated Damages") to each Holder of Transfer Restricted Securities,
during the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $.05 per week per $1,000 principal
amount of Notes constituting Transfer Restricted Securities held by such
Holder. The amount of the Liquidated Damages will increase an additional $.05
per week per $1,000 principal amount constituting Transfer Restricted
Securities for each subsequent 90-day period until the applicable Registration
Default has been cured, up to a maximum amount of Liquidated Damages of $.30
per week per $1,000 principal amount of Notes constituting Transfer Restricted
Securities. All accrued Liquidated Damages will be paid by the Company on the
applicable interest payment dates to the Global Note Holder by wire transfer
of immediately available funds or by federal funds check and to the Holder of
certificated securities by mailing a check to such Holders' registered
addresses. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Payment of Liquidated Damages is the sole remedy available to the Holders of
Transfer Restricted Securities in the event that the Company does not comply
with the deadlines set forth in the Registration Rights Agreement with respect
to the registration of Transfer Restricted Securities for resale under the
Shelf Registration Statement.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Initial
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of Exchange Notes in exchange for each $1,000 principal amount of outstanding
Initial Notes accepted in the Exchange Offer. Holders
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may tender some or all of their Initial Notes pursuant to the Exchange Offer.
However, Initial Notes may be tendered only in integral multiples of $1,000.
The terms of the Exchange Notes will be identical in all material respects
to the terms of the Initial Notes, except that the Exchange Notes have been
registered under the Securities Act and therefore will not bear legends
restricting their transfer and will not be entitled to Liquidated Damages, if
any, under certain circumstances described in the Registration Rights
Agreement. The Exchange Notes will evidence the same debt as the Initial Notes
and will be entitled to the benefits of the Indenture under which the Initial
Notes were, and the Exchange Notes will be, issued.
As of the date of this Prospectus, $100.0 million aggregate principal amount
of the Initial Notes is outstanding. The Company has fixed the close of
business on , 1998 as the record date for the Exchange Offer for
purposes of determining the persons to whom this Prospectus, together with the
Letter of Transmittal, will initially be sent.
Holders of the Initial Notes do not have any appraisal or dissenters' rights
under law or the Indenture in connection with 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 of the
Commission thereunder.
Holders who tender Initial Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Initial
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent (as defined) of any extension by oral or written notice and will make a
public announcement thereof prior to 9:00 a.m., New York City time, on the
next business day after each previously scheduled Expiration Date unless
otherwise required by applicable law or regulation.
The Company reserves the right, in its reasonable discretion, (i) to delay
accepting any Initial Notes, to extend the Exchange Offer or, if any of the
conditions set forth below under the caption "--Conditions" shall not have
been satisfied, to terminate the Exchange Offer, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent or (ii)
to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly
as practicable by a public announcement thereof. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered Holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the amendment and the manner of disclosure
to the registered Holders, if the Exchange Offer would otherwise expire during
such five to ten business day period.
Without limiting the manner in which the Company may choose to make a public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely
release to the Dow Jones News Service.
PROCEDURES FOR TENDERING
Only a Holder of Initial Notes may tender such Initial Notes in the Exchange
Offer. A Holder who wishes to tender Initial Notes for exchange pursuant to
the Exchange Offer must transmit a properly completed and duly executed Letter
of Transmittal, or a facsimile thereof, together with any required signature
guarantees, or, in the
26
<PAGE>
case of a book-entry transfer, an Agent's Message (as defined), and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) certificates for such
Initial Notes must be received by the Exchange Agent prior to the Expiration
Date along with the Letter of Transmittal, (ii) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Initial Notes into
the Exchange Agent's account at The Depository Trust Company ("DTC" or the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the Holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Initial Notes, or
Book-Entry Confirmation, as the case may be, the Letter of Transmittal and
other required documents must be received by the Exchange Agent at the address
set forth below under "--Exchange Agent" prior to 5:00 p.m., New York City
time, on the Expiration Date. DELIVERY OF DOCUMENTS TO THE BOOK ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH ITS PROCEDURE DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
DTC has authorized DTC participants that hold Initial Notes on behalf of
beneficial owners of Initial Notes through DTC to tender their Initial Notes
as if they were Holders. To effect a tender of Initial Notes, DTC participants
should either (i) complete and sign the Letter of Transmittal (or a manually
signed facsimile thereof), have the signature thereon guaranteed if required
by the instructions to the Letter of Transmittal, and mail or deliver the
Letter of Transmittal (or such manually signed facsimile) to the Exchange
Agent pursuant to the procedure set forth in "Procedures for Tendering" or
(ii) transmit their acceptance to DTC through the DTC Automated Tender Offer
Program ("ATOP") for which the transaction will be eligible and follow the
procedure for book-entry transfer set forth in "--Book-Entry Transfer."
The tender by a Holder will constitute an agreement between such Holder and
the Company in accordance with the terms and subject to the conditions set
forth herein and in the Letter of Transmittal.
The method of delivery of the Initial Notes and the Letter of Transmittal
and all other required documents to the Exchange Agent is at the election and
risk of the Holder. Instead of delivery by mail, it is recommended that
Holders use an overnight or hand delivery service. In all cases, sufficient
time should be allowed to assure delivery to the Exchange Agent before the
Expiration Date. No Letter of Transmittal or Initial Notes, or Book-Entry
Confirmation, as the case may be, should be sent to the Company.
Any beneficial owner whose Initial Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's own behalf, such
owner must, prior to completing and executing the Letter of Transmittal and
delivering such beneficial owner's Initial Notes, either make appropriate
arrangement to register ownership of the Initial Notes in such owner's name or
obtain a properly completed bond power from the registered Holder. The
transfer of registered ownership may take considerable time.
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Initial Notes listed therein, such Initial Notes must be
endorsed or accompanied by a properly completed bond power and signed by such
registered Holder as such registered Holder's name appears on such Initial
Notes.
If the Letter of Transmittal or any Initial Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act
must be submitted with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Initial Notes tendered pursuant thereto are tendered (i) by a
registered Holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed,
27
<PAGE>
such guarantee must be by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad15 under the Exchange Act (an "Eligible Institution").
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Initial Notes 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 Initial Notes not properly tendered or any Initial Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Initial Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Initial Notes must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall incur any liability for failure to give notice of any defect or
irregularity with respect to any tender of Initial Notes. Tenders of Initial
Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Initial Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will not be deemed to have been
properly tendered. Such Initial Notes will be returned by the Exchange Agent
to the tendering Holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
By tendering, each Holder will represent to the Company, among other things,
that such Holder is not a Restricted Holder. In addition, each Participating
Broker-Dealer must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
ACCEPTANCE OF INITIAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
For each Initial Note accepted for exchange, the Holder of such Initial Note
will receive an Exchange Note having a principal amount equal to that of the
surrendered Initial Note. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted properly tendered Initial Notes for exchange
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent.
In all cases, issuance of Exchange Notes for Initial Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Initial Notes or a
timely Book-Entry Confirmation of such Initial Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility, a properly completed and duly
executed Letter of Transmittal or Agent's Message and all other required
documents. If any tendered Initial Notes are not accepted for any reason set
forth in the terms and conditions of the Exchange Offer or if Initial Notes
are submitted for a greater principal amount than the Holder desires to
exchange, such unaccepted or non-exchanged Initial Notes will be returned
without expense to the tendering Holder thereof (or, in the case of Initial
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Initial Notes will be credited to an
account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the Expiration Date.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish a new account or utilize an existing
account with respect to the Initial Notes at DTC promptly after the date of
this Prospectus, and any financial institution that is a participant in DTC
and whose name appears on a security position listing as the owner of Initial
Notes may make a book-entry tender of Initial Notes by causing DTC to transfer
such Initial Notes into the Exchange Agent's account in accordance with DTC's
procedures for such transfer. However, although tender of Initial Notes may be
effected through book-entry transfer into the Exchange Agent's account at DTC,
the Letter of Transmittal (or a manually signed facsimile thereof), properly
completed and validly executed, with any required signature guarantees, or an
Agent's Message in lieu of the Letter of Transmittal, and any other required
documents, must, in any case, be
28
<PAGE>
received by the Exchange Agent at its address set forth below under the
caption "Exchange Agent" on or prior to the Expiration Date, or the guaranteed
delivery procedures described below must be complied with. The confirmation of
book-entry transfer of Initial Notes into the Exchange Agent's account at DTC
as described above is referred to herein as a "Book-Entry Confirmation."
Delivery of documents to DTC in accordance with DTC's procedures does not
constitute delivery to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that DTC has received an express acknowledgement
from the participant in DTC tendering the Initial Notes stating (i) the
aggregate principal amount of Initial Notes which have been tendered by such
participant, (ii) that such participant has received and agrees to be bound by
the terms of the Letter of Transmittal and (iii) that the Company may enforce
such agreement against the participant.
GUARANTEE DELIVERY PROCEDURES
Holders who wish to tender their Initial Notes and (i) whose Initial Notes
are not immediately available, (ii) who cannot deliver their Initial Notes,
the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date or (iii) who cannot complete the procedure
for book-entry transfer on a timely basis, may effect a tender if:
(a) the tender if made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate
numbers(s) of such Initial Notes and the principal amount of Initial Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within three New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) or, in
the case of a book-entry transfer, an Agent's Message, together with the
certificate(s) representing the Initial Notes, or Book-Entry Confirmation,
as the case may be, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) or, in the case of a book-entry transfer, an Agent's
Message, as well as the certificate(s) representing all tendered Initial
Notes in proper form for transfer, or a Book-Entry Confirmation, as the
case may be, and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within three New York Stock Exchange
trading days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Initial Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Initial Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Initial Notes to be withdrawn (the
"Depositor"), (ii) identify the Initial Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Initial Notes),
(iii) be signed by the Holder in the same manner as the original signature on
the Letter of Transmittal by which such Initial Notes were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Initial Notes register the
transfer of such Initial Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Initial Notes are to be
registered, if different from that of the Depositor. If certificates for
Initial Notes have been delivered or otherwise identified to the Exchange
Agent, then, prior to the release of such certificates, the withdrawing Holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Initial
Notes
29
<PAGE>
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Initial Notes and otherwise comply with the procedures of the Book-Entry
Transfer Facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company
in its sole discretion, which determination shall be final and binding on all
parties. Any Initial Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no Exchange Notes will
be issued with respect thereto unless the Initial Notes so withdrawn are
validly retendered. Properly withdrawn Initial Notes may be retendered by
following one of the procedures described above under "-- Procedures for
Tendering" at any time prior to the Expiration Date.
Any Initial Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable after withdrawal, rejection of
tender or termination of the Exchange Offer to the Holder thereof without cost
to such Holder (or, in the case of Initial Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such Initial
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility for the Initial Notes).
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any
Initial Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Initial Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to the Company, or
any material adverse development has occurred in any existing action or
proceeding with respect to the Company or any of its subsidiaries;
(b) any change, or any development involving a prospective change, in the
business or financial affairs of the Company or any of its subsidiaries has
occurred which, in the reasonable judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company;
(c) any law, statute, rule or regulation is proposed, adopted or enacted,
which in the reasonable judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to the Company;
(d) there shall have occurred (i) any general suspension of trading in,
or general limitation on prices for securities on the New York Stock
Exchange, (ii) a declaration of a banking noratorium or any suspension of
payments in respect of banks in the United States or any limitation by any
governmental agency or authority that adversely affects the extension of
credit to the Company or (iii) a commencement of war, armed hostilities or
other similar international calamity directly or indirectly involving the
United States; or, in the case any of the foregoing exists at the time of
commencement of the Exchange Offer, a material acceleration or worsening
thereof; or
(e) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable judgment, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its reasonable discretion. The failure by the Company
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
If the Company determines in its reasonable judgment that any of the
conditions are not satisfied, the Company may (i) refuse to accept any
Exchange Notes and return all tendered Exchange Notes to the Tendering
30
<PAGE>
Holders, (ii) extend the Exchange Offer and retain all Exchange Notes tendered
prior to the expiration of the Exchange Offer, subject, however, to the rights
of Holders to withdraw such Initial Notes (see "--Withdrawal of Tenders"
above) or (iii) waive such unsatisfied conditions with respect to the Exchange
Offer and accept all properly rendered Initial Notes which have not been
withdrawn. If such waiver constitutes a material change to the Exchange Offer,
the Company will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered Holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered Holders, if the Exchange Offer would otherwise expire during
such five to six business day period.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Office Requests for additional copies of this Prospectus or
of the Letter of Transmittal should be directed to the Exchange Agent
addressed as follows:
To: United States Trust Company of New York
By Hand (before 4:30 p.m.);
United States Trust Company of New York
111 Broadway
New York, New York 10006
By Overnight Courier/By Hand (after 4:30 p.m.);
770 Broadway
13th Floor
New York, New York 10003
Attn: Lower Level Corporate Trust Window
Facsimile Transmission
(212) 780-0592
Confirm by Telephone: (800) 548-6565
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telephone or in person by officers and regular employees of the
Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Initial Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes, or Initial Notes for principal amounts not
tendered or accepted for exchange, are to be delivered to, or are to be issued
in the name of, any person other than the registered Holder of the Initial
Notes tendered, or if tendered Initial Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Initial
Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the registered Holder or any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
31
<PAGE>
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Initial Notes, which is the principal amount as reflected in the Company's
accounting records on the date of the exchange. Accordingly, no gain or loss
for accounting purposes will be recognized. The expenses of the Exchange Offer
and the unamortized expenses related to the issuance of the Initial Notes will
be amortized over the term of the Notes.
REGULATORY APPROVALS
The Company does not believe that the receipt of any material federal or
state regulatory approvals will be necessary in connection with the Exchange
Offer, other than the effectiveness of the Exchange Offer Registration
Statement under the Securities Act.
OTHER
Participation in the Exchange Offer is voluntary and Holders of Initial
Notes should carefully consider whether to accept the terms and conditions
thereof. Holders of the Initial Notes are urged to consult their financial and
tax advisors in making their own decisions on what action to take with respect
to the Exchange Offer.
CONSEQUENCES OF FAILURE TO PROPERLY TENDER OLD NOTES IN THE EXCHANGE OFFER
Issuance of the Exchange Notes in exchange for the Initial Notes pursuant to
the Exchange Offer will be made only after timely receipt by the Exchange
Agent of such Initial Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, Holders of the
Initial Notes desiring to tender such Initial Notes in exchange for Exchange
Notes 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 Initial Notes for exchange. Initial Notes that are not tendered
or that are tendered but not accepted by the Company for exchange, will,
following consummation of the Exchange Offer, continue to be subject to the
existing restrictions upon transfer thereof under the Securities Act and, upon
consummation of the Exchange Offer, certain rights under the Registration
Rights Agreement will terminate.
In the event the Exchange Offer is consummated, the Company will not be
required to register the unexchanged Initial Notes. Unexchanged Initial Notes
will continue to be subject to the following restrictions on transfer: (i) the
unexchanged Initial Notes may be resold only if registered pursuant to the
Securities Act, if any exemption from registration is available thereunder or
if neither such registration nor such exemption is required by law and (ii)
the unexchanged Initial Notes will bear a legend restricting transfer in the
absence of registration or an exemption therefrom. The Company does not
currently anticipate that it will register the unexchanged Initial Notes under
the Securities Act. To the extent that Initial Notes are tendered and accepted
in connection with the Exchange Offer, any trading market for unexchanged
Initial Notes could be adversely affected.
32
<PAGE>
THE TRANSACTIONS
Predecessor and Parent were formed by Saratoga to effect the acquisition of
the Company. Predecessor entered into the Stock Purchase Agreement with KSCO,
which owned all of the capital stock of Fasteners, and the stockholders and
optionholders of KSCO. Under the Stock Purchase Agreement, Predecessor agreed
to purchase all of the capital stock of KSCO for a purchase price in cash of
approximately $168.8 million less the amount of indebtedness of the Company
existing immediately prior to closing of the acquisition (including
indebtedness that will not be repaid in connection with the Transactions).
Concurrently with the consummation of the Offerings, Predecessor merged with
and into KSCO, and KSCO merged with and into Fasteners, with Fasteners
surviving the mergers. Following such mergers, the Notes became obligations of
Fasteners. The purchase of KSCO capital stock by Predecessor and the mergers
of Predecessor and KSCO into Fasteners are together referred to herein as the
"Acquisition."
In connection with the Acquisition, Saratoga and certain other investors
made a $36.6 million equity investment, consisting of (i) $0.4 million in
shares of Parent's Common Stock, par value $0.0001 per share (the "Common
Stock"), and (ii) $36.2 million aggregate liquidation preference of Parent's
Series B Preferred Stock, par value $0.0001 per share (the "Series B Preferred
Stock") (collectively, the "Saratoga Investment"). Management and the Chairman
of the Board rolled over $3.4 million of their stock options in KSCO into
options to purchase Common Stock and Series B Preferred Stock (the "Management
Investment"). The Saratoga Investment and the Management Investment are
referred to as the "Equity Investments." Concurrently with the Notes Offering,
Parent offered, for gross proceeds of $10.0 million, 100,000 Units, each Unit
consisting of $100 liquidation preference of Parent's Series A Cumulative
Redeemable Exchangeable Preferred Stock (the "Senior Preferred Stock") and one
warrant (the "Warrants") to purchase Common Stock. The net proceeds of the
Equity Investments and the Units Offering totalled $49.4 million, after fees
and expenses to Parent of $0.6 million. Parent contributed (the "Equity
Contribution") such amount to Fasteners in the form of common equity. In
connection with the Acquisition, Fasteners entered into the New Credit
Facility, which consists of the $28.0 million Term Loan and the $25.0 million
Revolving Credit Facility. See "Description of Other Indebtedness--New Credit
Facility."
Proceeds from the Equity Contribution, the Notes Offering and the Term Loan
were used to finance the purchase price in the Acquisition, repurchase
attaching machinery subject to the Synthetic Lease, repay the Existing Credit
Facility and pay related fees and expenses. The Acquisition, the repurchase of
attaching machinery subject to the Synthetic Lease, the repayment of the
Existing Credit Facility, the Offerings, the Equity Contribution, the
borrowing of the Term Loan and the payment of related fees and expenses are
collectively referred to herein as the "Transactions." The following table
illustrates the sources of funds to the Company and uses of funds by the
Company relating to the Transactions, assuming they were consummated on
September 30, 1997:
<TABLE>
<CAPTION>
SOURCES OF FUNDS
<S> <C>
Notes..................... $100.0
Term Loan................. 28.0
Equity Contribution(a).... 49.4
------
Total................... $177.4
======
<CAPTION>
USES OF FUNDS
(Dollars in millions)
<S> <C>
Cash to selling stockholders. $ 98.1
Repurchase of equipment
subject to Synthetic Lease.. 29.2
Repay Existing Credit Facili-
ty.......................... 39.3
Fees and expenses(b)......... 10.8
------
Total...................... $177.4
======
</TABLE>
- -------
(a) Parent funded the Equity Contribution from the Equity Investments and the
Units Offering (net of estimated fees and expenses).
(b) Excludes estimated fees and expenses of Parent related to the Units
Offering of $0.6 million.
33
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth, as of September 30, 1997, the consolidated
capitalization of (i) KSCO and its subsidiaries on an historical basis and
(ii) the Company and its subsidiaries after giving pro forma effect to the
Transactions. This table should be read in conjunction with "The
Transactions," "Pro Forma Consolidated Financial Statements" and the
consolidated financial statements and the notes thereto included elsewhere in
this Offering Memorandum.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------
KSCO COMPANY
ACTUAL PRO FORMA
-------- ----------
<S> <C> <C>
Long-term debt (including current maturities)(1):
Existing Credit Facility................................ $ 37,861 $ --
New Credit Facility(2).................................. -- 28,000
11 1/4% Senior Notes due 2007........................... -- 100,000
Other(3)................................................ 2,269 2,269
-------- ---------
Total long-term debt (including current maturities)... 40,130 130,269
-------- ---------
Stockholders' equity:
Common stock, par value $0.01 per share, 15,000,000
shares authorized, 8,880,102 shares issued and
outstanding, actual; 1,000 shares authorized,
100 shares issued and outstanding, pro forma........... 89 --
Preferred stock, par value $0.01 per share, 20,000
shares authorized, no shares issued and outstanding,
actual and pro forma................................... -- --
Additional paid-in capital.............................. 22,086 49,400
Retained earnings....................................... 1,191 --
Foreign currency translation adjustment................. (604) --
Predecessor basis adjustment(4)......................... -- (7,831)
-------- ---------
Total stockholders' equity............................ 22,762 41,569
-------- ---------
Total capitalization.................................. $ 62,892 $ 171,838
======== =========
</TABLE>
- --------
(1) Excludes off-balance sheet financing pursuant to the Synthetic Lease,
proceeds of which were applied toward repayment of debt of $31,268 in
November 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
(2) Excludes the $25,000 Revolving Credit Facility, which will be undrawn at
closing. See "Description of Other Indebtedness--New Credit Facility."
(3) Includes long-term debt at Scovill Europe and various capital lease
obligations.
(4) Represents the non-cash accounting treatment required for management's
continuing ownership interest in accordance with the provisions of
Emerging Issues Task Force Issue No. 88-16 of the FASB.
34
<PAGE>
The following table sets forth the consolidated capitalization of Parent and
its subsidiaries (including the Company) as of September 30, 1997 assuming
that Parent had been formed at such date and after giving pro forma effect to
the Transactions. This table should be read in conjunction with "The
Transactions," "Pro Forma Consolidated Financial Statements" and the
consolidated financial statements and the notes thereto included elsewhere in
this Offering Memorandum.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------
PARENT
PRO FORMA
------------------
<S> <C>
Long-term debt (including current maturities)(1):
New Credit Facility(2) ................................... $ 28,000
11 1/4% Senior Notes due 2007............................. 100,000
Other(3) ................................................. 2,269
--------
Total long-term debt (including current maturities)..... 130,269
--------
Series A Cumulative Redeemable Exchangeable Preferred
Stock(4)................................................... 9,400
Stockholders' equity:
Series B Preferred Stock.................................. 39,600
Common Stock.............................................. --
Additional paid-in capital................................ 400
Retained earnings......................................... --
Predecessor basis adjustment(5)........................... (7,831)
--------
Total stockholders' equity.............................. 32,169
--------
Total capitalization.................................... $171,838
========
</TABLE>
- --------
(1) Excludes off-balance sheet financing pursuant to the Synthetic Lease,
proceeds of which were applied toward repayment of debt of $31,268 in
November 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
(2) Excludes the $25,000 Revolving Credit Facility, which was undrawn at
closing. See "Description of Other Indebtedness--New Credit Facility."
(3) Includes long-term debt at Scovill Europe and various capital lease
obligations.
(4) After fees and expenses paid by Parent of $600.
(5) Represents the non-cash accounting treatment required for management's
continuing ownership interest in accordance with the provisions of
Emerging Issues Task Force Issue No. 88-16 of the FASB.
35
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table presents selected historical financial data of the
Predecessor and KSCO as of the dates and for the periods indicated, including
the results of operations of acquired companies from their respective dates of
acquisition. The financial data as of December 31, 1995 and 1996 and for the
period from January 1, 1995 to October 17, 1995, the period from October 17,
1995 to December 31, 1995 and the year ended December 31, 1996 have been
derived from the consolidated financial statements of the Predecessor and KSCO
audited by Arthur Andersen llp, independent public accountants. The financial
data for the year ended December 31, 1994 have been derived from the
consolidated financial statements of the Predecessor audited by Deloitte &
Touche llp, independent auditors. The financial data for the years ended
December 31, 1992 and 1993 have been derived from the audited consolidated
financial statements of the Predecessor. The financial data as of September
30, 1997 and for the nine months ended September 30, 1996 and 1997 have been
derived from unaudited consolidated financial statements of KSCO, which, in
the opinion of management, reflect all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such data. Results
for the nine months ended September 30, 1997 are not necessarily indicative of
results to be expected for the full year. The selected historical financial
data should be read in conjunction with "Pro Forma Consolidated Financial
Statements," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR(1) KSCO
-------------------------------------- -------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, PERIOD FROM PERIOD FROM YEAR ENDED SEPTEMBER 30,
------------------------- 1/1/95 TO 10/17/95 TO DECEMBER 31, ------------------
1992 1993 1994 10/17/95 12/31/95 1996 1996 1997
------- ------- ------- ----------- ----------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $67,352 $65,066 $65,428 $53,589 $12,799 $91,632 $ 69,796 $ 73,466
Gross profit............ 16,421 15,988 18,383 13,329 3,446 27,032 19,533 20,362
Selling, general and
administrative
expenses(2)............ 8,409 14,120 10,534 7,822 1,827 17,051 12,733 11,697
Amortization expense.... 388 388 411 320 239 2,557 2,046 2,025
------- ------- ------- ------- ------- ------- -------- --------
Operating income........ 7,624 1,480 7,438 5,187 1,380 7,424 4,754 6,640
Interest expense........ 5,216 5,320 5,092 3,472 892 5,953 4,848 2,698
Other expense (income).. (308) (263) (629) 551 214 450 102 430
------- ------- ------- ------- ------- ------- -------- --------
Income (loss) before
income taxes and
extraordinary loss..... 2,716 (3,577) 2,975 1,164 274 1,021 (196) 3,512
Tax provision (benefit). 1,308 (163) 634 -- 158 923 258 1,586
------- ------- ------- ------- ------- ------- -------- --------
Income (loss) before
extraordinary loss..... 1,408 (3,414) 2,341 1,164 116 98 (454) 1,926
------- ------- ------- ------- ------- ------- -------- --------
Net income (loss)(3).... $ 1,408 $(3,414) $ 2,341 $ 1,164 $ 116 $ (852) $(1,404) $ 1,926
======= ======= ======= ======= ======= ======= ======== ========
OTHER DATA:
EBITDA(4)............... $11,393 $ 8,492 $14,514 $10,814 $ 2,886 $17,218 $ 12,210 $ 16,310
Adjusted EBITDA(5)...... 12,332 12,279 14,346 11,242 3,163 18,365 12,772 17,115
Depreciation............ 5,820 6,131 6,559 5,735 1,481 6,829 5,512 4,213
Capital expenditures.... 9,182 8,566 7,363 4,962 1,168 5,695 4,437 4,114
Adjusted Interest
Expense(6)............. 5,216 5,320 4,995 3,255 757 5,633 4,608 2,493
Earnings/Fixed
Charges(7)............. 1.50x -- 1.56x 1.32x 1.29x 1.16x -- 1.81x
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR KSCO
----------------------- ------------------------------
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
----------------------- ---------------- -------------
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(8)...... $ 9,072 $11,141 $ 7,810 $ 6,688 $ 17,562 $ 21,437
Total assets............ 70,670 72,521 76,448 88,577 103,866 108,742
Total debt(9)........... -- -- 14,516 41,538 37,718 40,130
Redeemable preferred
stock.................. -- -- 19,439 -- -- --
Stockholders'
equity(10)............. 36,998 37,369 29,043 18,263 21,421 22,762
</TABLE>
36
<PAGE>
- --------
(1) On October 17, 1995, Fasteners was acquired by KSCO, which was organized by
Kohlberg for the purpose of acquiring the capital stock of Fasteners. The
Kohlberg Acquisition was accounted for using the purchase method of
accounting. Financial information for periods prior to October 17, 1995 are
for Fasteners when it was a wholly owned subsidiary of Alper. The Kohlberg
Acquisition and the related application of purchase accounting resulted in
changes to the capital structure of the Predecessor and the historical
basis of various assets and liabilities. The effect of such changes
significantly impairs the comparability of the financial position
and results of operations of the Predecessor to those of KSCO.
(2) SG&A includes non-recurring expense (income) as follows: 1992--($1,500),
primarily related to reversing accruals for the disposal of the zipper
product line in an earlier year; 1993--$3,500, primarily related to the
accrual of an environmental matter at a former facility; and 1994--$(600),
primarily related to the favorable resolution of matters previously
accrued. SG&A also includes a non-recurring charge for severance payments
made to employees at the Clarkesville facility who were terminated when
certain Rau and PCI employees were transferred to the Clarkesville
facility. Such charge amounted to $118 and $272 for the nine months ended
September 30, 1996 and the year ended December 31, 1996, respectively.
(3) In January 1996, the Company refinanced its previously existing credit
agreements with the Existing Credit Facility, which resulted in an
extraordinary after-tax charge of $950 in the first quarter of 1996 from
the write-off of related deferred financing costs.
(4) EBITDA is defined as net income (loss) before interest expense (including
amortization of deferred financing costs), provision for income taxes,
depreciation, amortization, rental payments on Synthetic Lease, the non-
cash portion of other expense (income) and extraordinary items. Payments on
the Synthetic Lease were $858 and $3,861 for the year ended December 31,
1996 and the nine months ended September 30, 1997, respectively. The non-
cash portion of other expense (income) was $(2,747), $230, $(523) and $123
for the years ended December 31, 1992, 1993 and 1994, and for the period
from January 1, 1995 to October 17, 1995, respectively, and was
insignificant for all other periods presented.
(5) Adjusted EBITDA is defined as EBITDA (as defined in footnote (4) above)
plus (i) non-recurring expense (income) included in SG&A (see footnote (2)
above), (ii) the portion of other expense (income) not included in EBITDA,
which consists of miscellaneous non-operating cash items, and (iii)
management fees to Alper and Kohlberg. On an historical basis, management
fees paid to Alper and Kohlberg, included in the general and administrative
expenses, were $0, $780, $538, $0, $63, $425, $342 and $375 for the years
ended December 31, 1992, 1993 and 1994, the period from January 1, 1995 to
October 17, 1995, the period from October 17, 1995 to December 31, 1995,
the year ended December 31, 1996 and the nine months ended September 30,
1996 and 1997, respectively.
The Company has included information concerning EBITDA and Adjusted EBITDA
because it is used by certain investors as a measure of a company's ability
to service its debt. EBITDA and Adjusted EBITDA are not required by GAAP
and should not be considered alternatives to net income determined in
accordance with GAAP as an indicator of operating performance or as an
alternative to cash flow from operating activities determined in accordance
with GAAP as a measure of liquidity. The Company's use of EBITDA may not be
comparable to similarly titled measures due to the use by other companies
of different financial statement components in calculating EBITDA.
(6) Adjusted Interest Expense is defined as interest expense less the
amortization of deferred financing costs.
(7) For the purpose of determining the ratio of earnings to fixed charges,
"earnings" consist of income before provision for income taxes and fixed
charges. "Fixed charges" consist of interest expense (including
amortization of deferred financing costs) and one-third of rental expense,
representing that portion of rental expense representative of the interest
factor. Earnings were insufficient to cover fixed charges by $3,577 and
$196 for the year ended December 31, 1993 and the nine months ended
September 30, 1996, respectively.
(8) Working capital is defined as current assets less current liabilities.
(9) Excludes off-balance sheet financing pursuant to the Synthetic Lease,
proceeds of which were applied toward repayment of debt of $31,268 in
November 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
(10) Stockholders' equity includes affiliate advances, demand notes and
debentures from the Predecessor's parent at December 31, 1992, 1993 and
1994 of $56,243, $62,046 and $31,237, respectively.
37
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated statements of operations for
the year ended December 31, 1996, the nine months ended September 30, 1997 and
the twelve months ended September 30, 1997 give effect to the Transactions as
though they had occurred at the beginning of the periods presented. The
following unaudited pro forma consolidated balance sheet as of September 30,
1997 gives effect to the Transactions as though they had occurred on September
30, 1997.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable under the circumstances.
The pro forma consolidated financial statements are not necessarily indicative
of operating results or financial position that would have been achieved had
the Transactions been consummated on the dates indicated and should not be
construed as representative of future operating results or financial position.
The pro forma consolidated financial statements should be read in conjunction
with "The Transactions" and the consolidated financial statements and the
notes thereto included elsewhere in this Offering Memorandum.
The pro forma adjustments were applied to the respective historical
consolidated financial statements to reflect and account for the Acquisition
using the purchase method of accounting. The total purchase cost will be
allocated to the tangible and intangible assets acquired and liabilities
assumed based on their respective fair values adjusted to reflect their
carryover basis at the time the Transactions are consummated. The allocation
of the aggregate purchase price reflected in the pro forma consolidated
financial statements is preliminary. The actual purchase adjustments to
reflect the fair values of the assets and liabilities assumed will be based
upon appraisal studies that are not yet complete and management's evaluation
of such assets and liabilities and, accordingly, the adjustments that have
been included in the pro forma consolidated financial statements are subject
to change pending the final allocation of the total purchase cost of the
Acquisition. Management does not expect that differences between the
preliminary and final purchase price allocation will have a material impact on
the Company's financial position.
38
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................. $ 1,194 $ 64 (A) $ 1,258
Accounts receivable, net of allowance..... 15,048 -- 15,048
Inventories............................... 24,025 -- 24,025
Other..................................... 741 -- 741
-------- -------- --------
Total Current Assets.................... 41,008 64 41,072
-------- -------- --------
Property, Plant and Equipment, net.......... 41,473 29,200 (B) 70,673
-------- -------- --------
Other Assets
Goodwill.................................. 15,559 66,065 (C) 81,624
Trademarks................................ 2,066 14,000 (C) 16,066
Non-compete agreements.................... 2,764 -- 2,764
Deferred acquisition and financing fees... 3,725 (3,725)(C) --
-- 7,467 (A) 7,467
Deferred taxes............................ 1,298 (1,298)(D) --
Other assets.............................. 849 -- 849
-------- -------- --------
Total Other Assets...................... 26,261 82,509 108,770
-------- -------- --------
Total Assets.......................... $108,742 $111,773 $220,515
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt...... $ 1,013 $ (467)(A) $ 546
Accounts payable.......................... 9,612 -- 9,612
Accrued liabilities....................... 8,946 (1,475)(A) 7,471
-------- -------- --------
Total Current Liabilities............... 19,571 (1,942) 17,629
Long-Term Liabilities
Revolving line of credit.................. 11,930 (11,930)(A) --
Term loan................................. 25,464 (25,464)(A) --
-- 28,000 (A) 28,000
11 1/4% Senior Notes due 2007............. -- 100,000 (A) 100,000
Other debt................................ 1,723 -- 1,723
Employee benefits......................... 24,351 -- 24,351
Deferred taxes............................ -- 5,600 (C)
(1,298)(D) 4,302
Other..................................... 2,941 -- 2,941
-------- -------- --------
Total Long-Term Liabilities............. 66,409 94,908 161,317
-------- -------- --------
Stockholders' Equity
Common stock.............................. 89 (89)(C) --
Additional paid-in capital................ 22,086 (22,086)(C) --
49,400 (A) 49,400
Retained earnings......................... 1,191 (1,191)(C) --
Predecessor basis adjustment.............. -- (7,831)(C) (7,831)
Foreign currency translation adjustment... (604) 604 (C) --
-------- -------- --------
Total Stockholders' Equity.............. 22,762 18,807 41,569
-------- -------- --------
Total Liabilities and Stockholders'
Equity............................... $108,742 $111,773 $220,515
======== ======== ========
</TABLE>
39
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales................. $91,632 $ -- $91,632
Cost of sales............. 64,600 (250)(E) 64,350
------- ------- -------
Gross profit............. 27,032 250 27,282
Selling expenses.......... 10,220 -- 10,220
General and administrative
expenses................. 6,831 (425)(F) 6,406
Amortization expense...... 2,557 1,172 (G) 3,729
------- ------- -------
Operating income......... 7,424 (497) 6,927
Other expense (income).... 450 (104)(H) 346
Interest expense.......... 5,953 8,617 (I) 14,570
------- ------- -------
Income (loss) before
income tax provision..... 1,021 (9,010) (7,989)
Income tax provision
(benefit)................ 923 (2,928)(D) (2,005)
------- ------- -------
Net income (loss)......... $ 98 $(6,082) $(5,984)
======= ======= =======
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales................. $73,466 $ -- $73,466
Cost of sales............. 53,104 (1,122)(E) 51,982
------- ------- -------
Gross profit............. 20,362 1,122 21,484
Selling expenses.......... 7,192 -- 7,192
General and administrative
expenses................. 4,505 (375)(F) 4,130
Amortization expense...... 2,025 849 (G) 2,874
------- ------- -------
Operating income......... 6,640 648 7,288
Other expense (income).... 430 (108)(H) 322
Interest expense.......... 2,698 8,231 (I) 10,929
------- ------- -------
Income (loss) before
income tax provision..... 3,512 (7,475) (3,963)
Income tax provision
(benefit)................ 1,586 (2,505)(D) (919)
------- ------- -------
Net income (loss)......... $ 1,926 $(4,970) $(3,044)
======= ======= =======
</TABLE>
40
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30, 1997
-----------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------- ------------
<S> <C> <C> <C>
Net sales...................... $ 95,302 $ -- $ 95,302
Cost of sales.................. 67,441 (1,372)(E) 66,069
------------ ------------- ------------
Gross profit................. 27,861 1,372 29,233
Selling expenses............... 9,725 -- 9,725
General and administrative
expenses...................... 6,290 (458)(F) 5,832
Amortization expense........... 2,536 1,172 (G) 3,708
------------ ------------- ------------
Operating income............. 9,310 658 9,968
Other expense (income)......... 778 (104)(H) 674
Interest expense............... 3,803 10,767 (I) 14,570
------------ ------------- ------------
Income (loss) before income tax
provision..................... 4,729 (10,005) (5,276)
Income tax provision (benefit). 2,251 (3,339)(D) (1,088)
------------ ------------- ------------
Net income (loss).............. $ 2,478 $ (6,666) $ (4,188)
============ ============= ============
</TABLE>
41
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(A) These adjustments record (i) the issuance of the Notes, (ii) the borrowing
of the Term Loan, (iii) the Equity Contribution (see "The Transactions,"
"Capitalization" and "Description of Capital Stock"), (iv) the use of a
portion of the net proceeds to repurchase equipment subject to the
Synthetic Lease and to repay the Existing Credit Facility and (v) the
capitalization of deferred financing costs of $7,467. The table below
reflects the financing transactions:
<TABLE>
<S> <C>
Notes............................................................ $100,000
Term Loan........................................................ 28,000
Equity Contribution.............................................. 49,400
--------
$177,400
========
Repayment of existing indebtedness:
Current maturities and accrued interest......................... $ 1,084
Accrued Synthetic Lease payments................................ 858
Long-term loan.................................................. 25,464
Revolving line of credit........................................ 11,930
Transaction fees and expenses.................................... 7,467
--------
$ 46,803
========
</TABLE>
(B) Represents the capitalization of attaching machinery and equipment
resulting from the repurchase of equipment subject to the Synthetic Lease.
(C) The pro forma cost and the preliminary pro forma calculation of the excess
of the cost over the book value of net assets acquired is as follows:
<TABLE>
<S> <C>
Cash purchase price of equity................................... $101,333
--------
Book value of KSCO's equity..................................... 22,762
Predecessor basis adjustment.................................... 7,831
Elimination of existing deferred financing, acquisition and
organization costs............................................. (3,725)
--------
Adjusted book value of net assets acquired...................... 26,868
Purchase price allocated to trademarks.......................... 14,000
Deferred income taxes related to valuation of trademarks........ (5,600)
--------
Excess of purchase cost over book value......................... $ 66,065
========
</TABLE>
Certain transaction fees and expenses totaling $3,233 that will be incurred
in connection with the Acquisition are included in the excess of purchase
cost over book value.
(D) Reflects the deferred tax benefit related to the loss from operations.
Based on present estimates of future operations and debt servicing related
to the Acquisition, it is management's opinion that it is more likely than
not that future tax benefits related to the Acquisition will not be
realized beyond the amount of reversing taxable temporary differences.
(E) Represents depreciation expense adjustment related to repurchase of
equipment subject to the Synthetic Lease assuming an eight-year life.
Adjustment is reflected net of operating lease expense incurred under the
prior lease agreement.
(F) Reflects the elimination of management fees historically paid to Kohlberg.
Upon consummation of the Transactions, Parent will enter into a management
agreement with Saratoga, pursuant to which Parent will pay $600 per year
to Saratoga. Such payments will be funded with a dividend from Fasteners
and, therefore, will not be recorded as an expense of Fasteners following
the Transactions.
42
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(G) Represents the incremental amortization of goodwill based on preliminary
estimated fair values of the assets acquired and liabilities assumed using
a 40-year life. See note (C).
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
----------------- ------------------ -------------------
<S> <C> <C> <C>
Goodwill................ $ 1,651 $1,238 $1,651
Trademark............... 350 263 350
Less: historical
amortization of
deferred transaction
costs................ (829) (652) (829)
------- ------ ------
$ 1,172 $ 849 $1,172
======= ====== ======
</TABLE>
(H) The adjustment represents the charge for commitment fees on the unused
portion of the Existing Credit Facility which will be repaid upon closing
of the Transactions.
(I) The pro forma adjustments to interest expense reflect the following:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
----------------- ------------------ -------------------
<S> <C> <C> <C>
Interest expense on new
financing:
Term Loan(1).......... $ 2,352 $ 1,764 $ 2,352
Notes................. 11,250 8,438 11,250
Interest expense on
historical debt
repaid................. (5,806) (2,587) (3,656)
------- ------- -------
7,796 7,615 9,946
Net deferred financing
cost adjustment(2)..... 821 616 821
------- ------- -------
Total adjustment........ $ 8,617 $ 8,231 $10,767
======= ======= =======
</TABLE>
--------
(1) The assumed interest rate on the Term Loan is 8.4%. A change in the
interest rate on the Term Loan of 1% would change interest expense by
$280, $210 and $280 for the year ended December 31, 1996, the nine
months ended September 30, 1997 and the twelve months ended September
30, 1997, respectively.
(2) Deferred financing costs are amortized over the life of the related
debt, using a weighted average life of ten years for the Notes and six
years for the Term Loan.
43
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and the notes thereto included elsewhere in
this Offering Memorandum. All dollar figures have been rounded to the nearest
one-tenth of one million for presentation purposes.
GENERAL
The Company, whose business has been in continuous operation since 1802, is
a leading designer, manufacturer and distributor of apparel and specialty
industrial fasteners. The Scovill name is the oldest and one of the most well-
known brands in the fasteners industry. In the twelve-month period ended
September 30, 1997, the Company sold more than 10 billion fastener units
worldwide. The Company has achieved and maintained its reputation by offering
its customers an integrated system of high quality fasteners, proprietary
attaching machines, technical service, on-site maintenance and customized
applications and design services tailored to individual customer needs.
The Company has two main product groups: the Apparel Group and the
Industrial Group. For the periods covered by the financial statements included
in this Offering Memorandum, the Company does not account for the results of
operations of its subsidiaries in the Apparel Group or the Industrial Group.
Revenues include sales of fastener products and rental income from the
leasing of attaching machines to customers. Cost of sales includes the costs
of raw material, labor and variable and fixed manufacturing overheads.
Selling, general and administrative expenses ("SG&A") consist primarily of
salaries and benefits paid to sales and administrative personnel, commissions,
and travel, marketing and advertising expenses.
During 1996, the Company acquired three companies and integrated their
operations into existing facilities. On January 24, 1996, the Company acquired
Rau, a Rhode Island apparel fastener manufacturer, for $7.9 million and PCI, a
Massachusetts-based eyelet manufacturer, for $15.6 million. The Rau
acquisition expanded the Company's customer base in its existing product
offerings. Rau's Klikit brand was integrated into the Gripper line. In April,
Rau's domestic facility was closed, relocated and integrated into the
Company's Clarkesville, Georgia facility. The Company consolidated the Rau
Canada operation with the Scovill Canada facility. PCI's operations were
integrated into the Clarkesville, Georgia facility in October. In March, the
Company also purchased Daude, a French fastener manufacturer, for $2.5
million, which was integrated into the Scovill Europe facility in Belgium in
June 1996. The Rau, PCI and Daude acquisitions were accounted for using the
purchase method of accounting and, as a result, the Company's financial
statements include the results of operations of Rau, PCI and Daude from their
dates of acquisition.
The Company ceased operations of the unprofitable zipper product line in
late 1995. In 1996, the Company relocated the PCI machine tool business of PCI
to Scovill Canada and opened a sales, warehouse and machine repair center in
Torreon, Mexico. A new distribution network was also established in Asia in
late 1996.
In November 1996, the Company refinanced its attaching machinery under the
Synthetic Lease with General Electric Capital Corporation ("GECC"). Pursuant
to the Synthetic Lease, GECC leased to the Company various fastener equipment,
which the Company then subleased to its customers. The Company originally sold
the equipment to GECC for $31.3 million. The lease was accounted for as an
operating lease in accordance with Statement of Financial Accounting Standards
No. 13, "Accounting for Leases." The sale reduced the Company's plant,
property and equipment account by $19.5 million, consisting of $22.5 million
for the cost of the attaching equipment and $3.1 million for the related
accumulated depreciation. The increase to fair market value over the amount of
the purchase price originally allocated to the attaching equipment was
recorded as a reduction of goodwill recorded in the Kohlberg Acquisition. See
Note 9 to the audited financial statements. Proceeds from the Synthetic Lease
were used to repay a term loan under the Existing Credit Facility, which
repayment resulted in a $1.0 million write-off of certain related deferred
financing costs (the "Synthetic Lease
44
<PAGE>
Charge"). The Synthetic Lease will be terminated, and the equipment subject
thereto will be repurchased, in connection with the Transactions. See "The
Transactions" and "Pro Forma Consolidated Financial Statements."
On October 17, 1995, Fasteners was acquired by KSCO, which was organized by
Kohlberg & Co. for the purpose of acquiring the capital stock of Fasteners.
The Kohlberg Acquisition was accounted for using the purchase method of
accounting. Financial information for periods prior to October 18, 1995 are
for Fasteners when it was a wholly owned subsidiary of Alper Holdings USA,
Inc. (the "Predecessor"). The Kohlberg Acquisition and the related application
of purchase accounting resulted in changes to the capital structure of the
Predecessor and the historical basis of various assets and liabilities. The
effect of such changes significantly impairs the comparability of the
financial position and results of operations of the Predecessor and KSCO. The
results of operations of the Predecessor and KSCO have been combined for
purposes of discussion of the results of operations for fiscal year 1995.
RESULTS OF OPERATIONS
The table below sets forth certain items in the statement of operations
expressed as a percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
------------------------- ------------
1994 1995 1996 1996 1997
------- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit.......................... 28.1 25.3 29.5 28.0 27.7
Selling, general and administrative
expenses............................. 16.1 14.5 18.6 18.2 15.9
Operating income...................... 11.4 9.9 8.1 6.8 9.0
Interest expense...................... 7.8 6.6 6.5 6.9 3.7
Income tax provision.................. 1.0 0.2 1.0 0.4 2.2
Net income (loss)..................... 3.6 1.9 (0.9) (2.0) 2.6
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1996
Net Sales. Net sales increased $3.7 million, or 5.3%, from $69.8 million to
$73.5 million. The increase was attributable, in part, to receipt of revenues
from the former Rau and PCI operations for a full nine months in 1997,
compared to approximately eight months of revenues in 1996, measured from the
dates of acquisition. Strong jeans and denimwear orders also contributed
additional overall Apparel Group sales. The Company's international
subsidiaries also experienced increased sales, resulting from the acquisition
of Daude. These increases were partially offset by initial sales declines
resulting from customer concerns relating to publicized workforce unrest due
to the relocation of the PCI operations during the latter part of 1996.
Gross Profit. Gross profit increased $0.8 million, or 4.2%, from $19.5
million to $20.4 million. Gross margin decreased from 28.0% to 27.7%. The cost
of goods sold in 1997 includes rental expense of $1.1 million related to the
Synthetic Lease. Without the effect of the Synthetic Lease transaction, gross
profit would have increased by $1.1 million to $21.5 million, and gross margin
would have increased to 29.3%, primarily as the result of the Company's
relocation and integration of operations from the Rau, PCI and Daude
acquisitions during 1996. In the case of the Rau and PCI integrations,
additional manufacturing volume at the Clarkesville facility absorbed a
greater portion of fixed costs.
Selling, General and Administrative Expenses. SG&A decreased $1.0 million,
or 8.1%, from $12.7 million to $11.7 million. The decrease was primarily
attributable to reductions, in late 1996, in the number of salespeople after
integration of the Rau and PCI operations and the related decrease in travel,
advertising and commission expenses. SG&A was 15.9% of net sales for the first
nine months of 1997 compared to 18.2% for the comparable period in 1996.
45
<PAGE>
Operating Income. Operating income increased $1.9 million, or 39.7%, from
$4.8 million to $6.6 million. The increase was attributable to the factors
described above.
Interest Expense. Interest expense decreased $2.2 million, or 44.3%, from
$4.8 million to $2.7 million. This decrease was attributable to the repayment
of indebtedness with proceeds from the Synthetic Lease.
Income Tax Provision. The provision for income taxes was $1.6 million in
1997 compared to $0.3 million for 1996.
Net Income. Net income for the first nine months of 1997 was $1.9 million
compared to a loss of $1.4 million in 1996, of which loss $1.0 million was
attributable to the Synthetic Lease Charge. The remaining impact was
attributable to the factors discussed above.
FISCAL YEAR 1996 COMPARED WITH FISCAL YEAR 1995 (COMBINED KSCO AND
PREDECESSOR)
Net Sales. Net sales increased $25.2 million, or 38.0%, from $66.4 million
to $91.6 million. This increase was primarily attributable to increased sales
volume as a result of the 1996 acquisitions of Rau, PCI and Daude. The Rau
acquisition increased revenues in both apparel and industrial fasteners. The
PCI acquisition was a product line extension that increased industrial
fastener sales. Finally, the Daude acquisition, also a product line extension
in Europe, increased the Company's European sales.
Gross Profit. Gross profit increased $10.2 million, or 61.1%, from $16.8
million to $27.0 million. Gross margin increased from 25.3% to 29.5%. The
increases in gross profit and margin were primarily the result of the
Company's acquisitions in early 1996. The Rau and Daude facilities were
operated until April 1996 and June 1996, respectively, when operations from
the Rau facility were relocated to the Company's main manufacturing facility
in Clarkesville and the Daude operations were relocated to the Company's
facility in Belgium. The PCI facility was operated through October 1996. To a
lesser extent, the Company's increases in gross profit reflected absorption of
a greater percentage of fixed costs at the Clarkesville facility as a result
of relocating the acquired operations.
Selling, General and Administrative Expenses. SG&A increased $7.4 million,
or 76.7%, from $9.6 million to $17.1 million. The increase was a result of the
addition of administrative and selling personnel from the acquired companies.
SG&A was 18.6% of net sales for 1996 compared to 14.5% for 1995. This increase
was due to the expenses related to duplicate functions and administrative
operations of the acquired businesses prior to their integration into the
Company's existing operations.
Operating Income. Operating income increased $0.9 million, or 13.1%, from
$6.6 million to $7.4 million. The increase was attributable to the Company's
acquisitions and increased sales volume.
Interest Expense. Interest expense increased $1.6 million, or 36.4%, from
$4.4 million to $6.0 million. This increase was primarily attributable to the
additional debt incurred under the Existing Credit Facility in October 1995 in
connection with the Kohlberg Acquisition and in January 1996 in connection
with the Rau and PCI acquisitions.
Income Tax Provision. The provision for income taxes was $0.9 million in
1996 compared to $0.2 million for 1995.
Net Income. Net loss in 1996 was $0.9 million (of which $1.0 million was
attributable to the Synthetic Lease Charge) compared to net income of $1.3
million in 1995. The remaining impact was attributable to the factors
discussed above.
FISCAL YEAR 1995 (COMBINED KSCO AND PREDECESSOR) COMPARED WITH FISCAL YEAR
1994 (PREDECESSOR)
Net Sales. Net sales increased $1.0 million, or 1.5%, from $65.4 million to
$66.4 million. A $2.2 million, or 3.3%, increase in net sales from continuing
business lines was primarily attributable to increased sales of DOT and
plastic products, offset by reduced sales from the Company's discontinued
zipper product line.
46
<PAGE>
Gross Profit. Gross profit decreased $1.6 million, or 8.7%, from $18.4
million to $16.8 million. Gross margin decreased from 28.1% to 25.3%. The
decreases in gross profit and margin were primarily the result of underlying
raw material cost increases. The Company's primary raw material, brass, and
its components, copper and zinc, are subject to cost variations. See "Risk
Factors -- Raw Materials." These increases were partially offset by a
reduction of manufacturing costs as a result of management's continued cost
control efforts initiated in 1994. See "-- Hedging Activities."
Selling, General and Administrative Expenses. SG&A decreased $0.9 million,
or 8.4%, from $10.5 million to $9.6 million. The decrease was a result of the
cost reduction activities initiated by management and management incentive
payments in 1994 that were not paid in 1995. SG&A was 14.5% of net sales for
1995 compared to 16.1% for 1994.
Operating Income. Operating income decreased $0.9 million, or 11.7%, from
$7.4 million to $6.6 million. The decrease was attributable to increased raw
material prices. The decrease was offset by reduced manufacturing costs and
SG&A.
Interest Expense. Interest expense decreased $0.7 million, or 14.3%, from
$5.1 million to $4.4 million. The decrease resulted from the reduction in debt
in connection with the Kohlberg Acquisition in October 1995.
Income Tax Provision. The provision for income taxes was $0.2 million in
1995 compared to $0.6 million for 1994.
Net Income. Net income for 1995 was $1.3 million compared to $2.3 million in
1994. The decrease was attributable to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company derived its cash from funds generated by
operations and from third-party financings, including the Existing Credit
Facility. As of September 30, 1997, $11.9 million was outstanding under the
revolving line of credit available under the Existing Credit Facility. After
the Transactions, the Company's liquidity requirements will consist primarily
of scheduled payments of principal and interest on its indebtedness, working
capital needs and capital expenditures. After consummation of the
Transactions, the Company believes that its operating cash flow, together with
borrowings under the New Credit Facility, will be sufficient to meet its
operating expenses and capital requirements, and its debt service requirements
through 1998.
Capital Expenditures
The Company's capital expenditures during the first nine months of 1997
aggregated approximately $4.1 million and are not expected to exceed $6.0
million for 1997. Such expenditures were primarily for reconditioning and
purchases of attaching machines and plant machinery and equipment. Capital
expenditures for 1998 and 1999 are expected to be less than $5.0 million per
year.
Cash Flows
Net cash provided in the Company's operating activities was $2.5 million for
the first nine months of 1997. Principal working capital changes included
increases of $2.6 million and $2.4 million in accounts receivable and
inventory, respectively. The Company's cash used in investing activities
during the first nine months of 1997 related principally to capital
expenditures. Net cash provided by financing activities was $2.2 million,
reflecting $2.5 million in borrowings under the Existing Credit Facility
offset by $0.3 million in long-term debt payments.
Net cash used by the Company's operations in 1996 was $1.4 million.
Principal working capital changes included a $6.2 million increase in
inventory, a $4.0 million decrease in accrued liabilities and a $3.0 million
increase in accounts payable. The Company's cash used in investing activities
during 1996 was $28.7 million, of which $25.3 million related to the Rau and
PCI acquisitions, including acquisition costs. Additionally, the
47
<PAGE>
Company had capital expenditures of $5.7 million. Net cash provided by
financing activities was $30.3 million, reflecting a net decrease in
borrowings under the Existing Credit Facility of $5.0 million, $31.3 million
in proceeds from the Synthetic Lease transaction and $4.0 million related to
the issuance of common stock.
The Indenture and the New Credit Facility will place significant
restrictions on the Company's ability to incur additional indebtedness, pay
dividends or repurchase stock or make other distributions, create liens, make
certain investments, sell assets, or enter into mergers or consolidations. See
"Description of Notes," "Description of Other Indebtedness" and "Risk
Factors--Substantial Leverage; Restrictive Covenants."
INFLATION
Inflation had a nominal impact on operations during the last three years.
Increases in operating costs were consistent with the general inflation rate
and were offset by management cost control measures and productivity
improvements.
HEDGING ACTIVITIES
Since late 1995, the Company has entered into certain hedging transactions
regarding its raw material purchases. The Company regularly purchases copper
and zinc call and put options that are regularly traded on exchanges. These
transactions (commonly referred to as "Bull Spreads") attempt to effectively
ensure maximum and minimum net purchase costs. These options extend through
June 1998 at various trading ranges. See "Business--Raw Materials" and Note 2
to the audited financial statements.
ACQUISITIONS
The Company intends to pursue attractive acquisition opportunities that
provide products and services that complement those currently offered by the
Company. Depending upon the nature, size and timing of future acquisitions,
the Company may be required to raise additional financing. The Company expects
that a substantial portion of the financing of any acquisition would be
additional indebtedness. Additional indebtedness incurred to finance
acquisitions could adversely affect the Company's liquidity and financial
condition. There can be no assurance that the New Credit Facility, the
Indenture or any other loan agreements to which the Company may become a party
or subject to will permit such additional financing or that such additional
financing will be available to the Company on terms acceptable to its
management or at all. See "Business--Business Strategy." The timing, size or
success of any acquisition effort and the associated potential capital
commitments are currently not known. While there can be no assurance, based on
current facts and circumstances, management believes it has adequate cash
flows and financing alternatives to fund its current operations and to
implement its acquisition strategy.
ACCOUNTING STANDARDS
In 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130") and Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 130 establishes standards to measure
all changes in equity that result from transactions and other economic events
other than transactions with owners. Comprehensive income is the total of net
income and all other nonowner changes in equity. SFAS 131 introduces a new
segment reporting model called the "management approach." The management
approach is based on the manner in which management organizes segments within
a company for making operating decisions and assessing performance. The
management approach replaces the notion of industry and geographic segments.
The Company will adopt SFAS 130 and SFAS 131 in fiscal year 1998. Management
believes adoption of SFAS 130 and SFAS 131 will not significantly affect the
Company's financial position or results of operations.
48
<PAGE>
BUSINESS
The Company, whose business has been in continuous operation since 1802, is
a leading designer, manufacturer and distributor of apparel fasteners and
specialty industrial fasteners. The Scovill name is the oldest and one of the
most well-known brands in the fasteners industry. In the twelve-month period
ended September 30, 1997, the Company sold more than 10 billion fastener units
worldwide. The Company has achieved and maintained its reputation by offering
its customers an integrated system of high quality fasteners, proprietary
attaching machines, technical service, on-site maintenance and customized
applications and design services tailored to individual customer needs.
The Company has two main product groups: the Apparel Group and the
Industrial Group. The Apparel Group, through its Gripper and DuraMark brands,
produces snaps, tack buttons, rivets, burrs and other snap fastener products
used in numerous apparel applications. The Company's customers include many
leading apparel design and manufacturing companies, including Wrangler,
OshKosh B'Gosh, Gerber Childrenswear, William Carter Company, Tommy Hilfiger,
Polo Ralph Lauren, Liz Claiborne and L.L. Bean. The Company believes that it
supplies the majority of the snap fasteners sold to U.S. infantswear and
childrenswear manufacturers and a substantial portion of the snap fasteners
sold to U.S. apparel manufacturers.
The Industrial Group, primarily through its DOT and PCI product lines,
produces specialty industrial fasteners including large snaps, windshield
clips, turn buttons, eyelets, grommets, screw studs, gypsy studs and other
specialty fasteners. These products are used in a broad range of industries,
including marine textile, automotive, aerospace, military, medical/surgical
products, luggage, leather goods, electronic equipment, sporting and
recreational goods and consumer batteries. The end-users of the Company's
products include a wide variety of companies, including Ford, Boeing, Baxter,
Samsonite, U.S. Marine for its Bayliner Boats, Johnston & Murphy, Eveready
Battery, Riddell for its football helmets and the U.S. Army. The Company
believes that it sells a significant portion of the specialty industrial
fasteners sold in the product markets in which it competes.
For the twelve months ended September 30, 1997 (the "LTM Period"), the
Company's net sales and pro forma Adjusted EBITDA (as defined) were $95.3
million and $22.7 million, respectively. From 1992 to the LTM Period, the
Company's net sales increased by 41.5%, from $67.4 million to $95.3 million,
and pro forma Adjusted EBITDA increased by 84.1%, from $12.3 million to $22.7
million. From 1992 to the pro forma LTM Period, the Company's gross margin
improved from 24.4% to 30.7% and Adjusted EBITDA margin improved from 18.3% to
23.8%. By rationalizing and developing existing and acquired businesses, the
Company has achieved operating efficiencies and improved financial
performance.
Scovill Acquisition Inc. and Scovill Holdings Inc. were organized as
Delaware corporations in October and November 1997, respectively, in
connection with the Acquisition. KSCO Acquisition Corporation was organized as
a Delaware corporation in August 1995. Scovill Fasteners Inc., a Delaware
corporation, was incorporated in 1985 as the successor to the business
operated by the fasteners division of Scovill Inc. The Company's executive
offices are located at 1802 Scovill Drive, Clarkesville, Georgia 30523, and
its telephone number is (706) 754-4181.
COMPETITIVE STRENGTHS
The Company attributes its historical success and significant opportunities
for continued growth to the following competitive strengths:
Leading Market Position. The Company is the oldest and most established
manufacturer of a variety of apparel and specialty industrial fasteners in the
United States. The Company's fasteners have been used in many products
throughout its history, from U.S. military uniforms since the War of 1812 to
the flight suits worn by NASA shuttle astronauts. The Company's reputation for
high quality and its well-known brand names, including Scovill, Gripper and
DOT, make it a leading presence in domestic markets and provide it with a
platform for enhanced global expansion. The Company believes that it supplies
the majority of the snap fasteners sold to U.S.
49
<PAGE>
infantswear manufacturers, a substantial portion of the snap fasteners sold to
U.S. apparel manufacturers generally and a significant portion of the
specialty industrial fasteners sold in the product markets in which it
competes.
"Total System" Approach. In addition to manufacturing and distributing
fasteners to its customers, the Company also leases approximately 8,000
proprietary attaching machines to attach its products to those of its
customers, primarily in the apparel industry. The Company's large size enables
it to (i) employ what the Company believes to be the industry's only existing
dedicated field service force that provides on-site maintenance, which
minimizes equipment down-time, (ii) have ready access, through its servicing
relationships, to its customers' facilities, providing the Company with
opportunities to cross-sell products and to test new fastener machinery, (iii)
continue to develop next-generation attaching machines, such as the new Gemini
system, which has lower manufacturing and maintenance costs and improved
fastener application flexibility and attaching speed, and (iv) maintain an
applications development and design lab that enables customers to outsource
design functions to the Company. The Company's "total system" approach enables
it to compete based on its ability to decrease its customers' costs and
improve the quality of their products, rather than on the unit price of the
Company's fasteners.
Large Installed Base of Attaching Machines. The Company has the industry's
largest installed base of attaching machines in the United States, which
enables it to generate a recurring stream of cash flow from high volume sales
of fasteners. These machines are designed to be used only with the Company's
fasteners. The Company believes that customers are reluctant to switch to
other manufacturers in order to avoid the costs associated with retraining
personnel, reduced productivity and the business interruption that results
from the need to replace an entire network of machines in a plant or a
production line in order to maintain the compatibility of the network. The
Company has been able to maintain a high level of customer retention. In 1996,
approximately 99% of all of its attaching machine leases were renewed.
Broad Customer Base and Product Line. The Company's customers include many
large and well-known apparel and industrial manufacturing companies. The
Company is a leading supplier for private-label infantswear sold at Kmart,
Wal*Mart, Target and Sears stores. In 1996, no single customer accounted for
more than 8% of the Company's total net sales, and the Company's 10 largest
customers accounted for approximately 26% of the Company's total net sales.
The Company's broad line of products for apparel and specialty industrial use
reduces its exposure to any one customer segment and to fashion trends.
Reputation for High Quality. The Company has built its reputation by
producing high quality products designed and manufactured to precise
specifications. The Company has developed many of the safety standards for
infantswear adopted by the American Society of Testing Methods (the "ASTM"),
and the Company's senior quality manager is currently chairman of the ASTM
subcommittee responsible for establishing testing methodologies for the
apparel fastener industry. These methodologies provide the basis for
determining compliance with requirements for apparel set by the Consumer
Products Safety Commission.
Experienced Management Team. The Company's senior management team has an
average of over 15 years of experience in the fastener industry. Since its
formation in 1992, the management team has delivered significant revenue and
EBITDA improvements by successfully reorganizing the business and positioning
the Company for growth. From 1992 to the pro forma LTM Period, Adjusted EBITDA
margin improved from 18.3% to 23.8%. Management has achieved these results by
rationalizing existing operations, exiting an unprofitable product line and
integrating domestic and international acquisitions. This team has
successfully identified, integrated and consolidated three significant
acquisitions since 1992 and established a platform for international growth.
Senior management rolled over an aggregate of $3.3 million of their stock
options in KSCO in equity for Parent, representing approximately one-half of
the proceeds they would have received in the Acquisition.
50
<PAGE>
BUSINESS STRATEGY
The Company seeks to enhance its competitive position while increasing its
net sales and operating cash flow by continuing to implement the following
components of its business strategy:
Continue to Strengthen Customer Relationships. The Company intends to
continue to distinguish itself from competitors as a full-service provider.
The Company will continue to foster long-term partnerships with its customers
by providing a broad range of high quality products, consistent delivery
performance, comprehensive product support, efficient attaching machinery and
dedicated field service. The introduction of the Gemini attaching machine,
which accommodates rapid and cost-efficient switching of fastener types and is
designed to address ergonomic concerns, illustrates the Company's commitment
to customer service. The Company also continues to develop and implement
value-added services, such as specialized billing and delivery systems.
Reduce Customers' CPAF. The Company intends to develop new means to continue
its commitment to lower its customers' cost per attached fastener ("CPAF").
Customers incur significant costs beyond the unit price of fasteners; an
individual fastener typically represents only 10% of an average customer's
CPAF. CPAF is also a function of factors such as attaching speed, production
errors, equipment downtime due to changeover and maintenance and the attaching
machinery lease expense or cost. The Company's "total system" approach and its
focus on CPAF are designed to reduce the remaining costs associated with the
attaching of its fasteners.
Seek Higher Margin Specialty Applications. The Company intends to take
advantage of its diverse and flexible manufacturing capabilities to enhance
its line of specialty applications, which offers higher margins. Examples of
specialty applications are stainless steel buckles for football, hockey and
cycling helmets; engineered eyelets for consumer electronics; and male/female
connectors for batteries. The Company intends to develop new applications for
current products, engineer new products and re-engineer those products
obtained through acquisitions. Unlike smaller manufacturers, the Company
possesses its own tooling, stamping, plating and finishing equipment and,
therefore, can develop specialty applications without significant capital
expenditures.
Strengthen "Retail Pull." The Company seeks to have large retailers specify
the use of the Company's products in their private label apparel lines. The
Company has been designated as the sole or preferred fastener supplier for the
private-label infantswear manufactured for and sold by Wal*Mart, Kmart, Target
and Sears. Additionally, the Company's reputation for high quality and
consumer awareness has led to Kmart's joint branding on garment tags to
highlight the names of Scovill and Klikit, a Gripper brand. The Company
intends to expand its international opportunities by leveraging existing
relationships with customers that move sourcing abroad and by expanding its
distribution channels overseas to better serve them. The Company believes that
the high quality of its products, its "total system" approach and its Asian
distribution channels enhance the Company's ability to effect this strategy.
Leverage Existing Manufacturing Base. The Company intends to continue to
leverage its existing manufacturing base by incrementally expanding the
capacity of the Clarkesville facility. By optimizing its operations, adding
shifts and outsourcing particular activities, the Company believes that it can
significantly increase the output of the Clarkesville facility with limited
capital expenditures. Through the addition of increased revenue at minimal
incremental fixed costs, the Company has been able to increase EBITDA margins.
The Company expects to increase revenue through new product development and
tuck-in acquisitions, such as the 1996 acquisitions of Rau Fastener Company,
L.L.C. ("Rau") and PCI Group, Inc. ("PCI"), whose operations were consolidated
into the Company's Clarkesville, Georgia facility.
Pursue Attractive Acquisition Opportunities. The Company will continue to
evaluate opportunities to expand its sales and product offerings through
smaller, easily integrated domestic add-on acquisitions. The Company may also
explore larger international acquisitions, primarily in Europe and Asia. The
criteria for identifying attractive acquisition candidates include (i) revenue
potential, (ii) increases in manufacturing, production and other cost
efficiencies and (iii) diversification and expansion of the Company's product
lines and customer base.
51
<PAGE>
PRODUCT OVERVIEW
Recognizing the opportunity to improve production while enhancing the
services provided to customers, the Company has divided its operations into
two main product groups: the Apparel Group and the Industrial Group. Creating
both groups has provided the Company with several distinct advantages over
competitors. First, because each group services different customers, each
possesses a greater appreciation for the needs and specifications of
particular customers. Second, division into groups provides for better
management of working capital. Third, in focusing on their individual customer
segments, each group improves the delivery and quality of the products and
services it provides.
The following table sets forth, for the periods specified, the net sales and
the percentage of total net sales contributed by each product category
(dollars in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total net sales......... $67,352 $65,066 $65,428 $66,388 $91,632 $ 69,796 $ 73,466
Apparel Group
Net sales............. $44,437 $43,964 $45,536 $46,309 $48,258 $ 36,683 $ 40,135
% of total net sales.. 66.0% 67.6% 69.6% 69.8% 52.7% 52.6% 54.6%
Industrial Group(1)
Net sales............. $16,596 $16,117 $14,175 $14,924 $19,747 $ 13,386 $ 21,987
% of total net sales.. 24.6% 24.8% 21.7% 22.5% 21.6% 19.2% 29.9%
Other(2)
Net sales............. $ 6,319 $ 4,985 $ 5,717 $ 5,155 $23,627 $ 19,727 $ 11,344
% of total net sales.. 9.4% 7.7% 8.7% 7.8% 25.8% 28.3% 15.4%
</TABLE>
- --------
(1) Includes all Canadian operations.
(2) Includes (a) European operations, (b) the zipper product line, which was
discontinued in 1995, and (c) Rau and PCI prior to their integration in
April and October 1996, respectively, into the Clarkesville facility.
Amounts also include Scovill Europe subsequent to the Rau and Daude
acquisitions in January and March 1996.
APPAREL GROUP
Industry Overview
The apparel snap fastener market includes snap fasteners, tack buttons,
rivets and burrs and excludes other apparel devices such as zippers, buttons
and Velcro. The primary customers for apparel snap fasteners are manufacturers
of basic garments such as jeans, infantswear, childrenswear and outerwear.
Demand for apparel snap fasteners is related to apparel industry trends
generally, which, in turn, are affected by demographics. The production of
each category of apparel depends upon population trends and consumer spending
in each apparel category. According to U.S. Department of Commerce estimates,
the value of domestic shipments of apparel and other finished textiles has
averaged over 4% growth per year since 1976. During that time, the domestic
apparel industry has exhibited low cyclicality, with the value of such
shipments having increased in all but two years. In foreign markets, the
Company believes expected population growth over the next several years and
improved standards of living will result in increased apparel sales abroad.
52
<PAGE>
[LINE GRAPH APPEARS HERE]
Despite improvements in technology, manufacturing processes in the apparel
industry are still quite labor-intensive. Because labor is such a significant
cost component in apparel manufacturing, manufacturers in low-wage, developing
countries enjoy a cost advantage over U.S. manufacturers. In response, many
U.S. companies have been shifting assembly operations to low-wage countries or
turning to foreign-based contractors in an effort to lower their production
costs. As a result, some export growth has consisted of shipments of garment
parts for assembly abroad and subsequent re-importation into the United
States. The Company has been able to follow a large portion of its customers
production abroad, as evidenced by its more than 2,500 attaching machines
located outside of the United States. In addition, in marketing to national
accounts such as Sears, The Gap, and Wal*Mart, the Company will continue to
implement its "retail pull" strategy by leveraging relationships with
customers that move sourcing abroad and expanding its distribution channels
overseas to better serve them.
Product Lines
The Company's Apparel Group is composed of three main product lines:
Gripper, DuraMark and Attaching Machines. The following table sets forth, for
the periods indicated, the net sales and percentage of the Company's total net
sales contributed by each product line (dollars in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
-------------------- -------------------- --------------------
% OF TOTAL % OF TOTAL % OF TOTAL
NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gripper................. $19,683 30.1% $19,599 29.5% $20,734 22.6%
DuraMark................ 21,416 32.7 21,581 32.5 22,296 24.3
Attaching Machines...... 4,437 6.8 5,129 7.8 5,228 5.7
------- ---- ------- ---- ------- ----
Total................. $45,536 69.6% $46,309 69.8% $48,258 52.7%
======= ==== ======= ==== ======= ====
</TABLE>
The Apparel Group serves six apparel market segments: infantswear,
childrenswear, jeans, workwear, leisurewear/fashion and disposables. The
Company competes in the apparel fastener markets in the Americas, Asia, the
Pacific Rim and Europe.
The Company has remained a leader in the apparel market through the
manufacture and sale of its Gripper product line, which consists of a variety
of fasteners such as ring sockets, segmented sockets, short and long prongs
and western pearls. In addition, the Company has become a market leader
through its growing DuraMark product line, which consists of large snap
fasteners, tack buttons, rivets and burrs. Through its "total system"
approach, the Company leases approximately 8,000 attaching machines so that
customers may attach the apparel fasteners to their apparel products. When
viewed together, the Apparel Group's product offerings, attaching machines and
support services have enabled the Company to provide a comprehensive fastener
system that improves customer product quality and lowers customers' product
costs.
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The Company, in connection with its distributor in Asia, Acotex, seeks to
increase distribution capacity in China and other countries in Asia.
Management believes this expansion will allow the Company to maintain its
customer base as U.S. manufacturers, seeking to reduce costs, seek sources for
their products outside the United States. The Company utilizes a "retail pull"
strategy, whereby it seeks to have large retailers specify the use of the
Company's products in their private label apparel lines. The Apparel Group
also seeks to increase its customer base through the deployment of its new
Gemini attaching machine. The ergonomically designed Gemini machine provides
customers with high speed attaching capability and the ability to change types
quickly and efficiently, through interchangeable hopper and feed units, a
feature which most competitors' machines lack.
Gripper. Gripper is a type of snap fastener with a stud-and-socket design
that was trademarked by the Company in 1937. The Gripper trademark is so
widely recognized that it effectively defines this type of snap fastener.
Although Gripper is a versatile snap fastener that can be used on almost any
type of garment, it is most commonly used with infantswear, toddler clothing,
workwear, uniforms, western-style shirts and womenswear. The Company sells
Gripper fasteners to some of the most widely recognized brand names in the
infantswear and childrenswear industry, including OshKosh B'Gosh, William
Carter and Gerber Childrenswear. In addition to apparel applications, Gripper
fasteners are used in toys, wallets and a variety of other accessories.
The Rau acquisition has allowed the Company to increase its Gripper sales,
as Gripper fasteners are now marketed to Rau's Klikit customers. The Company
intends to reposition Klikit as the premium brand in the Gripper product line.
In certain applications, Klikit's ring-socket design provides a competitive
advantage against segmented-socket styles. The Company is the only significant
manufacturer of small ring-socket fasteners that are designed to high
performance specifications. The Gripper product line generally provides higher
profit margins than other products in the Apparel Group.
DuraMark. The DuraMark product line includes large snap fasteners and tack
buttons, rivets and burrs made from brass, steel, aluminum, zinc and copper.
Large snap fasteners differ from Gripper fasteners in that they are based on a
ring-socket design rather than the segmented-socket design used in Gripper
fasteners. The Company's large snap fasteners are marketed under their trade
names: Mighty-Snap and Maxi-Snap. Mighty Snap and Maxi-Snap fasteners are
generally larger than Gripper fasteners and are normally used in apparel-
related applications where greater strength is required, such as outerwear
garments. Some of the Company's customers for these snap fasteners include
such well-known names as OshKosh B'Gosh, Wrangler and Land's End.
Tack buttons are most commonly used as the waist-fastening button above the
zipper on jeans or other types of pants. Tack buttons derive their name from
the fact that they are attached to the garment from the back with a tack,
rather than being sewn to the garment. Rivets and burrs are generally sold in
tandem with tack buttons for reinforcement in stressed areas of heavy clothing
such as jeans. In addition to being functional, tack buttons, rivets and burrs
typically serve decorative functions. Accordingly, they have matching finishes
and designs. They are produced in numerous sizes and colors and typically
include a customer brand logo. Certain of the brand names which use the
Company's tack buttons, rivets and burrs include Wrangler, Polo Ralph Lauren,
The Gap and Arizona Jean.
Attaching Machine Leases. The Company leases to its customers, pursuant to
short-term lease agreements (generally one year, subject to renewal, with a
60-day notice clause), approximately 8,000 attaching machines, which are used
at customer locations to attach its products. The reliability and efficiency
of the Company's attaching machinery, which include patented components, have
proven to be key factors in maintaining a stable base of apparel fastener
sales. The Company has the industry's largest installed base of attaching
machines in the United States, which enables it to generate a recurring stream
of cash flow from high volume sales of fasteners. These machines are designed
to be used only with the Company's fasteners. The Company believes that
customers are reluctant to switch to other manufacturers in order to avoid the
costs associated with retraining personnel, reduced productivity and the
business interruption that results from the need to replace an entire
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<PAGE>
network of machines in a plant or a production line in order to maintain the
compatibility of the network. Accordingly, the Company has been able to
maintain a high level of customer retention. In 1996, approximately 99% of all
of its attaching machine leases were renewed.
The attaching machines are used primarily for apparel products. They are
used less frequently for industrial products because attaching machines are
better suited for high volume, non-bulky items that can be readily fed through
the guides at the point of attachment. Many industrial fasteners are attached
by hand or as part of another manufacturing process.
The Company supplies its customers with three core models of apparel
fastener attaching machinery that can be customized to customers'
specifications through the addition of auxiliary attachments. The Company
designed these machines and historically contracted to have them manufactured
and serviced in Connecticut. However, the assembly and reconditioning of these
machines have recently been moved to the Clarkesville facility in order to
improve control and reduce servicing costs.
The Company recently introduced a new line of attaching machines--the
Gemini. Gemini attaching machines permit an operator to change styles and
types of fasteners within minutes. The Gemini model is ergonomically designed,
has fewer moving/wear parts, and costs less to assemble when compared to
conventional attaching machines. The Company intends to selectively market
this line of machines to jeans and denimwear manufacturers as a means to gain
new customers.
The following table sets forth the Company's active attaching machine base
as of September 30, 1997:
<TABLE>
<CAPTION>
NUMBER % OF TOTAL
------ ----------
<S> <C> <C>
United States............................................ 5,484 68.6%
Canada................................................... 912 11.4
Caribbean................................................ 515 6.4
Mexico................................................... 330 4.1
Central America.......................................... 247 3.1
Belgium.................................................. 231 2.9
Other Europe............................................. 126 1.6
South America............................................ 56 0.7
Asia..................................................... 9 0.1
Other.................................................... 82 1.1
----- -----
Total.................................................. 7,992 100.0%
===== =====
</TABLE>
Typically, as part of the leasing arrangements, the Company's field
technicians provide on-site maintenance services with guaranteed 24-hour
response time (primarily in the Americas). Some customers perform the
maintenance themselves with Company-trained personnel. When machines require
more comprehensive reconditioning services, they are sent to the in-house
reconditioning center in Clarkesville. The Company has dedicated facilities
and employees through which the Company has lowered the reconditioning cost
component of capital expenditures. Not only has the Company achieved
significant cost savings per machine, but the Company also expects in-house
servicing to reduce the overall number of machines requiring reconditioning
through better administration of this process. This approach is also expected
to further improve communications and coordination between the Company's
manufacturing and field service operations and lead to shorter reconditioning
turnaround times. See "--Marketing and Sales."
55
<PAGE>
INDUSTRIAL GROUP
Industry Overview
The industrial fastener market serves a wide range of manufacturers,
including those in the marine textiles, automotive, aerospace, military,
medical/surgical products, electronic equipment, sporting goods and consumer
battery industries. Growth in this market is influenced by both the economy
generally and consumer purchases of electronics, automobiles, housing and
footwear. The industrial fastener market is large and highly fragmented. The
market is comprised of a variety of niche segments with specialized customers,
competitors and products in which the Company generally earns higher margins
than it does in the apparel market. The Company estimates that the market
segments in which it currently competes constitute less than 10% of the
overall market. The Company believes that there is no dominant manufacturer
that competes in all of its markets, and the Company intends to broaden its
participation through new products and product line extensions.
The markets the Company serves with its DOT, PCI and Plastics product lines
are largely in North America. The Company has made limited sales of DOT
products in the European market. The Company plans to increase sales through
the efforts of Scovill Europe in Belgium. Other specialty fastener markets in
Europe are currently served by Scovill Europe in France.
The Company believes that there are opportunities to expand its product
offerings to include electronic equipment (such as PC boards), consumer
batteries (such as male and female connectors), identification bracelets (Tag
Lock, one-time fasteners), and grommets and washers (such as leisure products
and utility bags), among others.
Product Lines
The Company's Industrial Group is comprised of three main product lines:
DOT, PCI and Plastic Fasteners. The following table sets forth, for the
periods indicated, the net sales and percentage of net sales contributed by
each product line (dollars in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
-------------------- -------------------- --------------------
% OF TOTAL % OF TOTAL % OF TOTAL
NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
DOT..................... $10,940 16.7% $11,116 16.7% $14,080 15.5%
PCI..................... -- -- -- -- 2,054 2.2
Plastic Fasteners....... 3,235 5.0 3,808 5.8 3,613 3.9
------- ---- ------- ---- ------- ----
Total................. $14,175 21.7% $14,924 22.5% $19,747 21.6%
======= ==== ======= ==== ======= ====
</TABLE>
Industrial fasteners are sold through direct sales and authorized
distributors to a wide variety of customers, including manufacturers of marine
textiles, sporting and recreational products, electronics, electrical
equipment and footwear. The Company competes mostly in the specialty fastener
market in the Americas (including Canada) and, to a more limited extent, in
Europe and Asia.
The Company's acquisition of the DOT product line in 1991 has enabled it to
supply heavy duty snap fasteners to additional markets, including marine
textiles, automotive, luggage, medical, sporting and recreational, aircraft,
military and health-related goods. The PCI product line, acquired in 1996,
further expanded the Company's offering of industrial fasteners, which the
Company has been able to sell through its existing DOT distribution channels.
The Company's Plastic Fastener product line provides fasteners for a variety
of end uses, including use with the Company's own Gripper and DuraMark
products, as well as for those of Johnson & Johnson.
To remain competitive in the industrial fastener industry, the Company
intends to focus on methods of improving plant efficiency and cost reduction.
While investing in research and development to create new
56
<PAGE>
products and to re-engineer product lines acquired through acquisitions, the
Company is also actively developing new applications for its current
industrial products.
DOT and PCI Product Lines. DOT fasteners include large snaps, windshield
clips, turn buttons, screw studs, gypsy studs and other specialty fasteners.
An advantage of certain DOT products is their locking feature. Examples of DOT
products with a locking feature include Pull-the-DOT, which is a
unidirectional lock designed to open only when properly aligned, and the
Common Sense line, which has a positive locking feature that offers strength
and durability. DOT fasteners are used for, among other things: marine
textiles, automobiles, awnings, luggage, athletic outerwear, sporting goods,
tents and packaging. DOT end-users include Micron, Samsonite, Boeing and NASA.
With the acquisition of PCI, the Company expanded its industrial product
line to include footwear eyelets, grommets, washers, industrial eyelets, and
specialty stampings. PCI end-users include Zenith, Converse and Eveready. The
Company's supply division provides specialized setting tools and supplies so
that PCI customers can customize third-party manufactured attaching machines
to accommodate PCI fasteners. These products are largely able to utilize the
DOT distribution channels.
Plastic Fasteners. The Company's plastic fastener line is principally
composed of three products that are known by their trade names: Whipper Snap,
Color Snap and Tag Lock. The Whipper Snap was the first plastic snap fastener.
Each Whipper Snap is composed of four parts and employs a four-prong design
that grips fabric securely without tearing. Currently, the Whipper Snap is the
most important of the Company's plastic fasteners, measured by sales volumes,
and is primarily sold for use in protective disposable medical apparel. Since
late 1992, the demand for disposable medical garments has increased as a
result of new OSHA regulations governing the medical profession.
Color Snaps are used in packaging and other non-apparel applications. The
Tag Lock fastener is a one-way fastener that is most commonly used for one-
time use identification bracelets such as hospital bracelets and amusement
park entrance wrist bands.
MANUFACTURING AND DISTRIBUTION OPERATIONS
The Company's U.S. manufacturing facilities are situated on 31 acres owned
by the Company in Clarkesville, Georgia (approximately 90 miles northeast of
Atlanta, Georgia) and include a 230,000 square foot building used for
manufacturing and administration, as well as a 26,400 square foot attaching
machine center. The Company also leases manufacturing facilities in Montreal,
Canada, and owns a manufacturing facility in Braine le Comte, Belgium.
Beginning in 1992, the Company reorganized its manufacturing operations,
resulting in a substantial reduction in the number of employees and in total
operating costs. The Company reduced its manufacturing employee headcount from
635 at the end of 1992 to 545 at the end of 1995, prior to the acquisitions of
Rau and PCI. By integrating acquired operations into its Clarkesville
facility, the Company has increased production volume at the facility, which
has enabled it to absorb more fixed costs and indirect labor costs. In
addition, the Company reorganized its manufacturing organization to focus on
its product lines rather than production processes. The Company established
five separate production units, each dedicated to a particular product line.
These production units, in turn, are subdivided into a number of manufacturing
cells. Each production unit consists of dedicated equipment, employees and
management. As a result of the sale of its zipper line, the Company was able
to integrate the manufacturing operations of Rau and PCI at the Clarkesville
facility in 1996.
The implementation of improved manufacturing techniques, including "Total
Quality Management," "Statistical Process Control" and "Just In Time"
inventory management, has substantially increased plant production throughout
the Company by reducing bottlenecks, improving material flows and focusing the
Company on manufacturing process improvements. The Company regularly performs
maintenance under "Total Preventative Maintenance" practices on its machines
and equipment to reduce downtime and improve production efficiency. Additional
examples of improved techniques implemented by the Company include the
establishment
57
<PAGE>
of corrective action teams, educational programs for manufacturing employees
and vendor-certification programs.
In conjunction with the restructuring of the Company's manufacturing
organization and implementation of improved manufacturing techniques, the
Company commenced a value-added capital expenditures program. This program
emphasizes investments that improve the efficiency of the Company's
manufacturing operations, increase product quality, enhance the safety of
workers and in some cases, require a reduction in the number of employees.
These initiatives have significantly lowered the Company's manufacturing costs
and have contributed to improved gross margins.
The manufacture of a majority of the Company's products begins with the
stamping of the relevant raw material. Some products are formed through a
series of stamping steps using progressive dies while others are formed
through a single stamping step using sophisticated forming dies. These
products are then cleaned to reduce lubricant residues and prepare the surface
for finishing before being assembled and packed for shipping. To facilitate
shipping, the Company works with several different common carriers and its
manufacturing facility is readily accessible to the interstate highway system.
Availability and cost of transportation are not competitive factors affecting
the Company's business.
The Company maintains a central distribution warehouse at its manufacturing
facility and satellite warehouses in Texas and Mexico. Its products are also
available from distributor facilities located throughout the United States and
in Western Europe, Central America, South America, and the Far East. The
Company intends to use its facilities in Brussels, acquired in connection with
Rau acquisition, to increase the distribution of its products in Europe. Goods
are packaged to meet market needs for safe handling and effective storage, and
customized packaging is available for distributors in select market channels
such as the marine product line.
The Company defines capacity by individual manufacturing cells within five
product line-oriented production units, as opposed to functional processes
such as stamping or plating. The Company believes it has sufficient
manufacturing capacity in each of its product lines, including the recently
acquired Rau and PCI product lines, to meet current customer demands,
including anticipated growth thereof. By optimizing its operations, adding
shifts and outsourcing particular activities, the Company believes that it can
significantly increase the output of the Clarkesville facility with limited
capital expenditures.
INSURANCE
The Company maintains property insurance, liability insurance, business
interruption insurance and other insurance policies customary to the
manufacturing industry. The Company believes that its policies are sufficient
to cover any potential loss or liability that is likely to arise in the
future.
RAW MATERIALS
The prices of raw materials are subject to volatility. The Company's
principal raw materials are brass, steel, zinc, nickel alloys, and plastic
resins, of which brass is the most significant. These raw materials are
commodities that are widely available. In 1996, the Company purchased
approximately 11 million pounds of brass, 1.1 million pounds of steel, 0.3
million pounds of stainless steel and 0.7 million pounds of aluminum for use
in manufacturing its products. See "Risk Factors--Raw Materials."
The Company seeks to minimize the impact of price volatility through hedging
practices. The Company has hedged a substantial portion of its expected raw
material needs, largely for brass, through June 1998. To the extent that the
price for the Company's remaining needs increases before prices are set, there
can be no assurance that the Company will be able to set the price low enough
to enable the Company to achieve adequate margins on finished products,
although it has in the past been able to pass a portion of any price increase
in materials to its customers.
The Company has strong relationships with many of the largest suppliers of
raw and processed materials in the United States. The Company's policy is to
establish arrangements with select vendors, based upon price,
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<PAGE>
quality, and delivery terms. By limiting the number of its suppliers, the
Company believes that it obtains materials of consistently high quality at
favorable prices. In addition to purchase contracts, the Company has tolling
agreements with some of its suppliers whereby the suppliers reprocess the
Company's scrap for a fixed charge. These relationships afford the Company
certain purchasing advantages, including stable supply and favorable pricing
arrangements.
MARKETING AND SALES
The Company's sales and marketing organization consists of four functional
areas: sales, customer service, field service and product support. These four
areas work in close cooperation with one another in an effort to maximize the
Company's sales revenue and to offer superior customer service. The general
marketing strategy of the Company is to differentiate itself from other
fastener manufacturers by offering a full range of premium branded products
and services. Components of this strategy include offering attaching machine
service, engineering and sales support through the maintenance of a network of
service personnel, a large direct field sales organization, applications
engineering, and product design and development.
Sales
After the Rau and PCI acquisitions, the Company divided its sales personnel
between the Apparel and Industrial Groups. The sales organization is further
divided by domestic U.S. regions. Regional sales managers have supervisory and
administrative responsibility for the sales personnel in their respective
regions, as well as direct sales responsibility for certain large regional
accounts.
The Company recently created a new position to handle large national
accounts such as JC Penney, Wal* Mart, Kmart, Sears, The Gap, The Limited and
other large private label apparel merchandisers. These large national
retailers contract with independent garment manufacturing firms to produce
their private label apparel products. The Company seeks to strengthen the
"retail pull" of large retailers by having them specify the use of the
Company's products in their private label lines. See "--Business Strategy."
The Company believes that this strategy will help increase its sales to
contractors abroad that service domestic retailers.
The Company sells its products through a twelve-person apparel sales force
and an eleven-person specialty industrial sales force. Products in Europe are
sold through a combination of direct sales in Belgium and France, as well as
through distributors in fifteen European countries. The Company has recently
signed a distribution agreement with Acotex, which provides the Company with
expanded distribution capability (including local finishing and stocking of
products) in Southeast Asia.
Marketing
The Company services lower volume customers (particularly DOT customers)
through a telemarketing office in Clarkesville, Georgia, which enables the
Company to cost-effectively reach a large number of diversified customers
throughout the United States in a cost-effective manner.
The Company maintains published price lists generally based on a single
price philosophy, subject under certain conditions to adjustments for
finishes, small lots and, in the case of DOT products, large volume. The
Company may modify pricing under specific and strict procedures in response to
competitive pricing action. To reach its markets, the Company employs a
general promotional mix, utilizing a direct field sales staff, a telemarketing
group and authorized distributors. The sales activity is supported by
participation in trade exhibitions, as well as a full advertising program in
trade publications. Other promotional activities include publicity
announcements, entertainment functions, advertising novelties and a Company
website.
Customer Service
The Company provides customers with a "total system" approach, which
includes the fasteners, attaching equipment and dedicated field service. The
Company believes that its sales depend on in-depth knowledge of
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<PAGE>
customer manufacturing procedures, responsiveness to product design changes,
consistent product quality, timely delivery, and efficient and reliable
attaching machinery. Typically, the buying decision requires a consensus among
the customer's plant managers, plant engineers and merchandising and
purchasing personnel. The Company's sales force has been able to develop and
maintain long-term customer relationships, providing it with a competitive
advantage. The Company's customer service center is located in Clarkesville,
Georgia and is dedicated to handling customer orders. The center is staffed by
twelve customer service representatives. These representatives work with the
Company's sales personnel and customer purchasing representatives to process
orders and ensure that all specifications are met. The customer service center
also handles inquiries regarding order changes, delivery and billing.
Field Service
The Company provides product support through a field service organization of
24 professionals. The Company believes its field service force is the only one
in the industry dedicated exclusively to maintenance service. These service
representatives regularly visit customer locations. Through the service
representatives, the Company is able to minimize the downtime of its attaching
machinery and increase machine efficiency, hence reducing CPAF for its
customers.
Product Support
The Company's product support includes a quality assurance department that
maintains an applications laboratory staffed by an applications engineer and
three technicians. The applications laboratory performs a variety of tests,
including strength and durability testing, in order to evaluate the
suitability of a fastener for a customer's application. The Company's
engineering department employs three dedicated graphics designers. These
designers work with a CAD/CAM system to adapt customers' logo designs to the
Company's fastener products. The Company believes that its comprehensive
product support services distinguish the Company from competitors. The Company
also has a dedicated research and development department, staffed by four
full-time employees, which focuses on new product development and
manufacturing process improvements.
BACKLOG
At September 30, 1997 and 1996, the Company had backlog of $8.4 million and
$8.1 million, respectively. Management does not believe that a material amount
of orders constituting such backlog at September 30, 1997 will remain unfilled
at the end of 1997.
CUSTOMERS
The Company serves two major markets: apparel and industrial. The Apparel
Group serves six primary market segments, consisting of infantswear,
childrenswear, jeans, workwear, leisurewear/fashion and disposables. The
Industrial Group serves six primary market segments, consisting of automotive,
marine textiles, military, leather, sporting goods and medical.
The Company's apparel fastener customers include many of the leading apparel
design and manufacturing companies in the United States, including Wrangler,
OshKosh B'Gosh, Gerber Childrenswear, William Carter Company, Tommy Hilfiger,
Polo Ralph Lauren, Liz Claiborne and L.L. Bean. In addition, the Company
manufactures and leases to its apparel fastener customers a line of specially
designed automated attaching machines which attach its fasteners to customers'
products. Industrial fasteners are sold through direct sales and authorized
distributors to a wide variety of customers. End users of the Company's
industrial fasteners include Ford, Boeing, Baxter, Samsonite, U.S. Marine for
its Bayliner Boats, Johnston & Murphy, Eveready Battery, Riddell for its
football helmets and the U.S. Army.
In 1996, no single customer accounted for more than 8% of the Company's
total net sales, and the Company's 10 largest customers accounted for
approximately 26% of the Company's total net sales. The
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Company's broad line of products for apparel and specialty industrial use
reduces its exposure to any one customer segment and to fashion trends. The
Company plans to expand its customer base by introducing new products,
developing applications for existing products, and promoting the use of the
new Gemini attaching machine.
COMPETITION
The Company operates in a highly competitive environment. Some of the
Company's competitors have greater financial resources and may be less
leveraged than the Company. As a result of its presence in both the apparel
and industrial markets and the diversity of its products, the Company believes
that no single competitor competes with the Company across the entire range of
the Company's product lines.
In the United States, the Company primarily competes with Universal
Fasteners/Stocko and Morito. Universal, located in Kentucky, is a subsidiary
of YKK, a large Japanese company which supplies the zipper industry. Universal
competes primarily with the Company's DuraMark products. Universal recently
acquired Stocko. Stocko's products compete with the Gripper, plastic and DOT
product lines.
In the specialty industrial market, competition is highly fragmented. The
Company's largest competitor is E.B. Stimpson Company, which offers eyelets,
grommets and washers similar in variety and application to those of the
Company. The Company's remaining competitors are specialty manufacturers that
generally address only one segment of this market. These competitors include
Stocko, Fasnap, a distributor for Kane-Morito, a Japanese manufacturer whose
products compete with DOT; Mark Eyelet, whose products compete with PCI
products in the electronic equipment industry; Newmark, Inc. and EFI, Inc.,
whose products compete with PCI in the medical/surgical products industry;
Anstro, Inc., whose products compete with PCI in the footwear industry; and
E.E. Weller, whose products compete with PCI in the specialty eyelet industry.
Although the primary competitive factors for the Company's products vary
somewhat across different product categories, the principal factors
influencing competition are breadth of product line, cost of raw materials,
cost of attaching machinery, price, quality and customer service. Brand
recognition is also a differentiating factor in the Apparel Group, which
includes the Gripper product line, and in the Industrial Group, which includes
the DOT product line. The Company believes that it has remained competitive by
developing strong customer relations based on its ability to supply quality
products while minimizing costs and utilizing its "total system" approach.
TRADEMARKS AND PATENTS
The Company currently uses numerous trademarks and trade names in its
business, including Color Snap(R), Common Sense(TM), DOT(R), DuraMark(R),
Gemini(TM), Gripper(R), Klikit(R), Maxi-Snap(TM), Mighty-Snap(TM), PCI(TM),
Pull-the-DOT(R), Tag Lock(TM), and Whipper Snap(R). In addition, the Company
owns 19 patents relating to its fasteners and attaching machinery and it has 3
patents pending. Although the products and services underlying such trademarks
and patents have achieved significant brand recognition and, as a result, are
of significant economic value, the Company does not believe that any
individual trademark or patent is of material importance to the Company's
business.
The Company also relies upon trade secret protection of its confidential and
proprietary information. The Company routinely enters into confidentiality
agreements with both high- and low-level employees. There can be no assurance
that such measures will be successful or that competitors will not be able to
discover the trade secrets on their own.
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FACILITIES
Set forth in the table below is certain information relating to certain real
properties that the Company uses in its business. Two properties are owned by
the Company. The remaining properties are leased pursuant to leases expiring
at various dates through 2005.
<TABLE>
<CAPTION>
LOCATION USE
-------- ---
<S> <C>
Scovill Fasteners Inc.
Clarkesville, Georgia Manufacturing, Distribution,
Warehouse, Office (Owned)
Lewiston, Maine Office
El Paso, Texas Office/Warehouse
Wareham, Massachusetts Distribution, Warehouse, Office
Scovill Canada Inc.
Montreal, Quebec, Canada Manufacturing and Distribution
Montreal, Quebec, Canada Warehouse
Montreal, Quebec, Canada Office/Warehouse
Unifast Manufacturing
Braine-le-Comte, Belgium Manufacturing, Distribution,
Warehouse, Office (Owned)
Unifast-Daude
Soucie en Brie, France Office/Warehouse
Scovill Mexico
Torreon, Mexico Office/Warehouse
</TABLE>
ENVIRONMENTAL MATTERS
Like similar companies, the Company's operations and properties are subject
to a wide variety of increasingly complex and stringent federal, state, local
and foreign environmental laws and regulations, including those governing the
use, storage, handling, generation, treatment, emission, release, discharge
and disposal of certain materials and wastes, the remediation of contaminated
soil and groundwater, and the health and safety of employees (collectively,
"Environmental Laws").
The Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended ("CERCLA"), and similar state laws, provide for responses to
and liability for releases of certain hazardous materials into the
environment. These obligations are imposed on the current owner or operator of
a facility, the owner or operator of a facility at the time of disposal of
hazardous materials at the facility, any person who arranged for the treatment
or disposal of hazardous materials at the facility, and any person who
accepted hazardous materials for transport to a facility selected by such
person. Liability under CERCLA is strict, and may be joint and several.
Certain federal Environmental Laws, including the Clean Air Act, the Clean
Water Act, the Resource Conservation and Recovery Act, the Safe Drinking Water
Act, the Emergency Planning and Community Right to Know Act, each as amended,
and similar state and local Environmental Laws, regulate air emissions, water
discharges, hazardous materials and wastes, and require public disclosure
related to the use of various hazardous materials. The Company's operations
are also governed by Environmental Laws relating to workplace safety and
worker health, primarily pursuant to the federal Occupational Safety and
Health Act, as amended. Compliance with Environmental Laws may require the
acquisition of permits or other authorizations for certain activities and
compliance with various standards or procedural requirements. The
Environmental Laws are subject to frequent amendment and have historically
become increasingly stringent. The Company is currently subject, and may in
the future be subject, to liability under Environmental Laws for remediation
of contamination at currently or formerly owned or operated facilities
including, presently, remediation at its
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Clarksville, Georgia facility. In addition, from time to time, the Company has
been cited for violations of Environmental Laws. The sanctions for failure to
comply with such Environmental Laws can include significant civil penalties,
injunctive relief and denial or loss of, or imposition of significant
restrictions on, environmental permits. In addition, the Company could be
subject to suit by third parties in connection with violations of or liability
under Environmental Laws. In the event of liability under Environmental Laws,
the Company intends to pursue available statutory and contractual remedies,
including any applicable rights of contribution and indemnification from
predecessors in interest. However, there can be no assurance that the Company
will prevail in connection with any such claims.
As of September 30, 1997, the Company had environmental reserves of
approximately $2.9 million for environmental liabilities. Of the total reserve
for environmental liabilities, $2.6 million represents contractual payments to
a former parent. Because Environmental Laws have historically become
increasingly more stringent, costs and expenses relating to environmental
control and compliance may increase in the future.
The nature of the Company's current and former operations, and those of its
predecessors in interest, exposes it to the risk of claims with respect to
environmental matters and there can be no assurance that material costs or
liabilities will not be incurred in connection with such claims. Based upon
its experience to date, the Company believes that the future cost of
compliance with existing Environmental Laws, and liability for known
environmental claims pursuant to such Environmental Laws, will not have a
material adverse effect on the cash flow, financial condition or results of
operation of the Company. However, future events, such as new information,
changes in existing Environmental Laws or their interpretation, and more
vigorous enforcement policies of regulatory agencies, may give rise to
additional expenditures or liabilities that could be material. See "Risk
Factors--Environmental Matters."
GOVERNMENTAL REGULATIONS
A number of regulations affect the Company's business. The Company believes
that it complies substantially with all laws and regulations affecting its
business and that it does not have any material liabilities under such laws
and regulations. The Company also believes that compliance with all such laws
and regulations will not, individually or in the aggregate, have a material
adverse effect on the Company's capital expenditures, earnings or competitive
position.
LEGAL PROCEEDINGS
From time to time, the Company is named in claims involving manufacturers,
contractual disputes and other matters arising in the ordinary course of the
Company's business. Currently, no legal proceedings are pending against or
involve the Company that, in the opinion of management, could reasonably be
expected to have a material adverse effect on the business, financial
condition or results of operations of the Company. See "Risk Factors--Pension
Matters."
EMPLOYEES
As of September 30, 1997, the Company employed 813 people. Approximately 170
were employed in administrative and sales positions and 643 were employed in
manufacturing positions. None of the Company's employees at the Clarkesville
or the Montreal facilities is represented by a labor union. The 84 non-
management employees at the Belgium facility may belong to a labor union, but
under Belgian law, such membership is not required to be disclosed to the
Company.
The Company believes that its relationships with its employees are
satisfactory. Because of its dependence on apparel manufacturers and other
customers, however, the Company may be adversely affected by labor strikes,
work slowdowns and walkouts at the manufacturing facilities of such
manufacturers or other customers.
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CHANGE IN INDEPENDENT AUDITORS
Following the Kohlberg Acquisition in October 1995, KSCO appointed Arthur
Andersen llp to replace Deloitte & Touche llp as the independent accountants
for KSCO and the Company. The reports of Deloitte & Touche llp on the
consolidated financial statements of the Company for the two fiscal years
prior to the change in accountants contained no adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope
or accounting principles. In connection with the audits of the Company's
financial statements for each of the two fiscal years and any subsequent
interim periods preceding the change in accountants, there were no
disagreements with Deloitte & Touche llp on any matters of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure which, if not resolved to the satisfaction of Deloitte & Touche llp,
would have caused Deloitte & Touche llp to make reference to the matter in
their report on the consolidated financial statements for such years.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the names, ages as of September 30, 1997, and a brief
account of the business experience of each person who will be serving as an
executive officer or director of the Company and of Parent upon consummation
of the Transactions.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David J. Barrett........ 47 President, Chief Executive Officer and Director
Martin A. Moore......... 38 Executive Vice President, Treasurer, Chief Financial Officer and Secretary
Mike Baxley............. 40 Executive Vice President--Apparel Group
John Champagne.......... 49 Executive Vice President--Industrial Group
Robert Feltz............ 48 Executive Vice President--Business Development
William F. Andrews...... 66 Chairman of the Board
Christian L. Oberbeck... 37 Director
</TABLE>
Mr. Barrett has been with the Company since November 1991, when he joined as
Vice President of Operations. He has also served as President of the Company
and Executive Vice President of Operations. Mr. Barrett has been President and
CEO since 1995. Prior to joining the Company, Mr. Barrett held various
manufacturing, operational and administrative positions with the Newell
Company and Continental Group, Inc.
Mr. Moore joined the Company as Director of Finance in February 1992. He has
also served as the Vice President of Finance and the Vice President of Finance
and Administration. Mr. Moore was promoted to Executive Vice President in
1997. Prior to joining the Company, Mr. Moore held various financial,
controller and manufacturing positions with Frantschach AG, Quality Forms,
Inc. and Society Corporation.
Mr. Baxley joined the Company as Executive Vice President--Sales and
Marketing in February 1997. Mr. Baxley became Executive Vice President--
Apparel Group in April 1997. Prior to joining the Company, Mr. Baxley served
as Senior Vice President and General Manager of ACD Tridon, Inc. from 1994 to
1996. He was also Vice President of Marketing for Johnston & Murphy (a
division of Genesco) from 1992 to 1994. Prior to 1992, Mr. Baxley held various
positions with Proctor and Gamble and the United States Navy.
Mr. Champagne joined the Company as Vice President of Manufacturing in 1996.
He was named Executive Vice President of the Industrial Group in 1997. Before
joining the Company, Mr. Champagne worked at Rau Fastener, Inc. from 1968 to
1995, serving as President and Director from 1988 to 1995. He also served as
President of Rau Fasteners, LLC from 1995 to 1996.
Mr. Feltz joined the Company as National Sales and Service Manager in 1980.
He has also served as Vice President of Sales and Marketing Worldwide. Prior
thereto, he worked at Talon, Inc., a zipper manufacturer.
Mr. Andrews has been Chairman of the Company's Board of Directors since
1996. From 1981 to 1986, he was Chairman, President and Chief Executive
Officer of Scovill Manufacturing, Co., where he worked for more than 20 years.
Mr. Andrews is also Chairman of Schrader-Bridgeport International Inc., a
manufacturer of tire valves and pressure control devices. From 1993 to 1995,
Mr. Andrews was Chairman and Chief Executive Officer of Amdura Corporation, a
manufacturer of hardware and industrial equipment. From 1990 to 1992, he was
President and Chief Executive Officer of UNR Industries, Inc., a diversified
manufacturer of steel products. Prior to 1990, Mr. Andrews was President of
Massey Investment Company and Chairman, President, and Chief Executive Officer
of Singer Sewing Company. Mr. Andrews is also a director of Black Box
Corporation; Corrections Corporation of America; Johnson Controls, Inc.; Katy
Industries; Navistar, Inc.; Northwestern Steel and Wire Co.; and Southern New
England Telephone Company.
Mr. Oberbeck became a director of the Company upon consummation of the
Transactions. Mr. Oberbeck has been a Managing Director of SBC Warburg Dillon
Read Inc. since September 1997. From February 1995 to
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September 1997, Mr. Oberbeck was a Managing Director of Dillon, Read & Co.
Inc. Prior to joining Dillon, Read & Co. Inc., Mr. Oberbeck was a Managing
Director of Castle Harlan, Inc., where he worked from October 1987 until
February 1995. He is a member of the Saratoga Partners Investment Committee
and a director of J&W Scientific Incorporated, USI Holdings Corporation and
Koppers Industries, Inc.
EMPLOYMENT AGREEMENTS
In order to assure the continued service of executive management, the
Company has entered into employment agreements ("Employment Agreements") with
Messrs. Barrett, Moore, and Feltz (each, an "Executive," and together, the
"Executives"). Each of these Employment Agreements will become effective upon
consummation of the Transactions. Mr. Barrett will serve as Chief Executive
Officer of the Company and have an annual salary of $243,750. Mr. Moore will
serve as Chief Financial Officer of the Company and will have an annual salary
of $187,813. Mr. Feltz will serve as Executive Vice President--Business
Development of the Company and will have an annual salary of $156,250. Each
contract has a three-year term and renews annually for successive one-year
periods, subject to termination upon notice by either party. Salary for such
renewal periods is to be negotiated between the Executive and the Company. The
Employment Agreements also provide for the payment of an amount equal to two
times the annual base salary of the Executive ("Incentive Payment") upon the
occurrence of an "Incentive Event." An "Incentive Event" is generally defined
as either a sale of substantially all of the Company's assets or over 50% of
its common stock, or any transaction whereby Saratoga Partners III, L.P. or
any of its affiliates no longer controls the Board of Directors. Each
Executive will be entitled to participate in the Company's benefit plans for
senior executives and will receive certain fringe benefits, including a car,
personal computer and cellular telephone.
If the Company terminates the employment of any of the Executives without
Cause (as defined in the Employment Agreements) or if an Executive terminates
his employment with the Company for a specific reason set forth in the
Employment Agreements, the Executive will be entitled to receive a severance
payment, equal to the greater of (1) two times the Executive's annual base
salary on that date and (2) the remainder of the base salary to be paid under
the initial three-year term of the Executive's Employment Agreement. If the
Executive voluntarily terminates his employment (other than for specifically
enumerated reasons) or the Executive's employment is terminated by the Company
for Cause, the Company will not be obligated to make a severance payment to
the Executive. In addition, each Executive has agreed to not compete with the
Company during the period of his employment and for 18 months following the
termination of his employment, unless the termination is without Cause, and to
comply with confidentiality covenants. In the event that the Company
terminates the employment of any of the Executives without Cause or an
Executive terminates his employment with the Company for a specific reason set
forth in his Employment Agreement in anticipation or in connection with
certain transactions or within the two-month period prior to completing
certain transactions, the Executive will be entitled to receive the Incentive
Payment, provided that any severance payments to which the Executive is
entitled upon termination of employment will be reduced by the full amount of
the Incentive Payment.
The preceding description of the Employment Agreements is intended only as a
summary and is qualified in its entirety by reference to the Employment
Agreements, which are available upon request to the Company.
See also "Certain Transactions--The Acquisition."
BOARD MEMBER COMPENSATION
The Company may compensate the members of the Board of Directors who are not
full-time employees of the Company on an annual and per meeting basis, in an
amount and on a basis as may be determined in the future. The Company also may
compensate members of committees of the Board of Directors for each Committee
meeting attended. Directors of the Company will receive reimbursement of their
reasonable out-of-pocket expenses incurred in connection with their board
activities. The Company intends to purchase directors' and officers' insurance
for its executive officers and directors, assuming that such insurance is
available on commercially reasonable terms.
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NEW INCENTIVE STOCK OPTION PLAN
Issuer and the Company have agreed to establish a new stock option plan (the
"New Plan") for key executives and managers which will provide for the grant
of stock options ("Options") to purchase up to 12.5% of the Common Stock of
Parent on a fully diluted basis. The Company presently intends for the New
Plan to have the following terms: Options granted under the New Plan will have
an exercise price equal to the fair market value of the stock underlying the
Option on the date of grant, which exercise price will increase annually at a
rate of 9%, and Options will vest over a period of 5 years commencing on the
first anniversary of the date of grant. Vested options may be exercised by
payment of the exercise price in cash or, if approved by Parent's stock option
committee, by delivery of a promissory note. Upon a participant's termination
of employment for cause, all of such participant's Options will immediately
expire. If a participant's employment terminates by reason of (i) death, (ii)
disability, (iii) retirement or (iv) voluntary resignation or termination of
employment other than for cause, the participant's unvested Options will
immediately expire and such participant's vested Options will remain
exercisable for a period of 90 days.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table contains information concerning the
compensation provided by the Company in 1996 to its Chief Executive Officer
and the three other executive officers other than the Chief Executive Officer
(together, the "Named Executive Officers") of the Company.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
---------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- --------------------------- -------- ------- -------------
<S> <C> <C> <C>
David J. Barrett................................ $167,916 -- $ 4,197(1)
President and Chief Executive Officer
Martin A. Moore................................. 129,375 -- 3,234(1)
Executive Vice President and Chief Financial
Officer
John Champagne.................................. 119,356 $45,000 10,833(2)
Executive Vice President--Industrial Group
Robert Feltz.................................... 124,398 -- 43,365(3)
Executive Vice President--Business Development
</TABLE>
- --------
(1) Represents matching contributions made by the Company to the Named
Executive Officers' accounts under the Company's 401(k) plan.
(2) Represents reimbursement for relocation expenses.
(3) Includes reimbursement for relocation expenses ($36,632) and matching
contributions made by the Company to the Named Executive Officer's account
under the Company's 401(k) plan ($3,109).
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<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH KOHLBERG
Since October 1995, the Company has paid an aggregate of $863,000 in
management fees to Kohlberg & Co., pursuant to a management services agreement
that will be terminated effective as of the closing of the Acquisition. In
January 1996, the Company paid an advisory fee of $1.0 million to Kohlberg &
Co. in conjunction with the acquisitions of PCI and Rau.
TRANSACTIONS WITH SARATOGA
In connection with the Transactions, the Company paid a transaction fee of
$1.75 million to an affiliate of Saratoga in consideration for advisory
services related to the structuring and financing of the transaction. The
Company entered into an agreement with Saratoga, pursuant to which the Company
will pay a management fee of $150,000 per quarter to Saratoga (the "Management
Services Agreement"). In addition, Saratoga will provide the Company with
advisory services in connection with significant business transactions, such
as acquisitions, for which the Company will pay Saratoga compensation
comparable for similarly situated companies. See also "Plan of Distribution."
THE ACQUISITION
In connection with the Transactions, affiliates of Kohlberg and KSCO's other
existing stockholders received an aggregate of approximately $98.1 million.
Members of management received aggregate proceeds of approximately $2.9
million in cash in consideration for their stock options in KSCO, excluding
the $3.3 million that was rolled over into options to purchase Common Stock
and Series B Preferred Stock. Certain members of management entered into
employment agreements with the Company. See "Management." In addition, William
F. Andrews, the Chairman of the Board, received proceeds of approximately $1.8
million in cash in consideration for his stock and stock options of KSCO,
excluding the $150,000 that was rolled over into options to purchase Common
Stock and Series B Preferred Stock.
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DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITY
Concurrently with the consummation of the Offerings, the Company entered
into the New Credit Facility with Credit Agricole Indosuez, as administrative
agent, Swiss Bank Corporation, as documentation agent and syndication agent
(the "Agent"), and a syndicate of lenders. The following summary of the
principal terms of the New Credit Facility does not purport to be complete and
is subject to the detailed provisions of the agreement governing the New
Credit Facility, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. Capitalized
terms not defined under this caption have the meanings set forth in such
agreement.
The New Credit Facility consists of a $28.0 million senior secured
amortizing term loan (the "Term Loan") and a $25.0 million senior secured
revolving credit facility (the "Revolving Credit Facility").
The New Credit Facility is guaranteed (the "Guarantees") by Parent and each
existing and subsequently acquired or organized domestic subsidiary of the
Company (collectively referred to as "the Guarantors"). The New Credit
Facility is secured by (i) a first priority pledge of (x) all of the capital
stock of the Company and each of its domestic subsidiaries and (y) 66% of the
voting stock and 100% of the non-voting stock of each other direct subsidiary
and (ii) a first priority security interest in substantially all of the
domestic property, plant and equipment and other assets of Parent and its
subsidiaries.
Borrowings under the Revolving Credit Facility are available, subject to the
satisfaction of customary borrowing conditions, for working capital and other
general corporate purposes. A portion of the Revolving Credit Facility may be
used for letters of credit. Availability under the Revolving Credit Facility
is limited to a borrowing base, which is defined as the sum of (i) 85% of the
Eligible Receivables of the Company and the Guarantors at such time and (ii)
60% of the Eligible Inventory of the Company and the Guarantors at such time.
The interest rate on borrowings under the New Credit Facility is (i) LIBOR
plus 2.5% per annum or (ii) the Base Rate plus 1.5% per annum. The unused line
fee is 0.5% per annum. All or a portion of the New Credit Facility which is
borrowed may be prepaid at any time, at the option of the Company.
Amortization on the Term Loan will commence on December 31, 1998 in the
amount of $1.0 million, with quarterly amortization payments thereafter,
totaling $3.0 million in 1999, $5.0 million in 2000, $6.0 million in 2001,
$6.0 million in 2002 and $7.0 million in 2003. The New Credit Facility will
mature on the sixth anniversary of the Closing Date.
The New Credit Facility includes certain covenants which, subject to certain
specific exceptions and limitations, require the Company and its subsidiaries
to, among other things, (i) provide certain financial information; (ii) not
create or allow to be created any liens other than those permitted by the New
Credit Facility; (iii) refrain from engaging in a consolidation, acquisition,
merger or sale of assets except as allowed in the New Credit Facility; (iv)
not engage in any transaction with or for the benefit of any affiliate other
than certain arm's-length transactions; (v) prevent the existence of any
agreement that prevents the Company's subsidiaries from paying dividends or
other distributions on capital stock; (vi) refrain from making certain
restricted payments other than those allowed under the New Credit Facility;
(vii) not incur Debt other than Debt allowed under the New Credit Facility;
(viii) not engage in certain speculative transactions; (ix) not incur
operating lease expense except to the extent permitted in the New Credit
Facility; (x) not issue disqualified stock except to the extent permitted in
the New Credit Facility; (xi) not engage in any business other than businesses
allowed under the New Credit Facility; (xii) maintain certain financial ratios
as detailed below; and (xiii) not make consolidated capital expenditures in
any fiscal year except to the extent permitted under the New Credit Facility.
These covenants generally will be more restrictive than those set forth in the
Indenture. The New Credit Facility will
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also require the Company to maintain the following financial covenants: (a) a
minimum ratio of consolidated EBITDA to fixed charges; (b) a minimum ratio of
consolidated EBITDA to consolidated interest expense ("Interest Coverage
Ratio"); (c) a maximum ratio of consolidated indebtedness to consolidated
EBITDA; and (d) a minimum net worth. See "Risk Factors--Substantial Leverage;
Restrictive Covenants." The New Credit Facility will also contain certain
other terms and conditions, covenants and events of default.
OTHER INDEBTEDNESS
The Company's subsidiaries in Belgium have obtained various secured
revolving lines of credit from Credit General for aggregate borrowings of up
to 117,000,000 Belgian francs, which bear interest at variable rates. Such
subsidiaries are not permitted by the agreements governing such lines of
credit to make dividends or other distributions on their capital stock unless
certain financial conditions are met. Such agreements provide for an
indefinite term and are subject to Credit General's customary lending terms.
In addition, a Belgian subsidiary has obtained term loans from local lenders
aggregating 25,000,000 Belgian francs. These loans accrue interest at 6.75%
per annum, payable semiannually in arrears. Amortization payments began in
December 1996 and extend over five years.
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DESCRIPTION OF NOTES
The Initial Notes were issued, and the Exchange Notes will be issued,
pursuant to the Indenture among Scovill Acquisition Inc. (the "Company"),
Scovill Holdings Inc., as Parent Guarantor, and United States Trust Company of
New York, as trustee (the "Trustee"), a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
The following is a summary of the material terms and provisions of the Notes.
The terms of the Notes include those set forth in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The Notes are subject to all such terms,
and prospective purchasers of the Notes are referred to the Indenture and the
Trust Indenture Act for a statement thereof. The following summary does not
purport to be a complete description of the Notes and is subject to the
detailed provisions of, and qualified in its entirety by reference to, the
Indenture, including the definitions of certain terms contained therein and
those terms made part of the Indenture by reference to the Trust Indenture
Act. The definitions of certain terms used in the following summary are set
forth below under "--Certain Definitions." Reference to the Notes under this
caption are references to the Exchange Notes unless the context otherwise
requires.
GENERAL
The Notes will represent general senior unsecured obligations of the
Company, limited to an aggregate principal amount of $100 million. The Notes
will be unconditionally guaranteed by each Guarantor on a senior unsecured
basis. The Notes will bear interest at the rate shown on the cover page of
this Offering Memorandum, payable on May 30 and November 30 of each year,
commencing on May 30, 1998, to Holders of record at the close of business on
the May 15 or November 15, as the case may be, immediately preceding the
relevant interest payment date. Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the Issue Date of the Initial Notes. The Notes will mature on
November 30, 2007 and will be issued in registered form, without coupons, and
in denominations of $1,000 and integral multiples thereof. The Notes will be
payable as to principal, premium, if any, and interest at the office or agency
of the Company maintained for such purpose within the City and State of New
York or, at the option of the Company, by wire transfer of immediately
available funds or, in the case of certificated securities only, by mailing a
check to the registered address of the Holder thereof. See "--Book-Entry,
Delivery and Form." Until otherwise designated by the Company, the Company's
office or agency in New York will be the office of the Trustee maintained for
such purpose. The Trustee will initially be the Paying Agent and Registrar
under the Indenture. The Company may act as Paying Agent and/or Registrar
under the Indenture and the Company may change the Paying Agent and/or
Registrar without notice to the Holders.
PARENT GUARANTEE; FUTURE SUBSIDIARY GUARANTEES
Parent will unconditionally guarantee the payment of Obligations of the
Company under the Notes. In addition, if the Company or any of its Restricted
Subsidiaries shall acquire or create another Subsidiary (other than any
Foreign Subsidiary) or contribute property or assets to an existing
Subsidiary, then such Subsidiary will be required to execute a Subsidiary
Guarantee, in accordance with the terms of the Indenture, unless it has been
designated as an Unrestricted Subsidiary; provided that no such Guarantee by
such Subsidiary shall be required so long as (x) the Consolidated Net Income
for the fourth fiscal quarter period immediately preceding the date of
acquisition or creation of, or contribution to, such Subsidiary for which
financial statements are available and net assets at the end of such period of
such Subsidiary does not exceed 3% of the Consolidated Net Income for such
period and net assets at such date, respectively, of the Company and its
Restricted Subsidiaries and (y) the combined Consolidated Net Income for such
period and the net assets at such date of all Restricted Subsidiaries (other
than Guarantors and Foreign Subsidiaries) does not exceed 5% of the
Consolidated Net Income for such period and the net assets at such date,
respectively, of the Company and its Restricted Subsidiaries.
Each Guarantee will be a senior unsecured obligation of the Guarantor
thereof and will rank pari passu in right of payment with all other existing
and future unsecured and unsubordinated Indebtedness of such Guarantor and
senior to all existing and future subordinated indebtedness of such Guarantor.
The obligations of each Subsidiary Guarantor under its Guarantee will be
limited so as not to constitute a fraudulent conveyance under applicable law.
No Subsidiary Guarantees were required on the Issue Date of the Initial Notes.
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<PAGE>
The Indenture will provide that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person) another
Person whether or not affiliated with such Guarantor unless (i) the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all of the obligations of such Guarantor pursuant to a
supplemental indenture, in form and substance satisfactory to the Trustee,
under the Notes and the Indenture; (ii) immediately after giving effect to
such transaction, no Default or Event of Default exists; and (iii) immediately
after giving effect to such transaction, the Company could incur at least
$1.00 of additional Indebtedness pursuant to the Consolidated Fixed Charge
Coverage Ratio test set forth in the "Limitations on Additional Indebtedness"
covenant. The foregoing provisions will not prohibit the merger of two or more
Guarantors into each other or the merger of one or more Guarantors into the
Company.
The Indenture will provide that, in the event of a sale or other disposition
of all of the Capital Stock of any Subsidiary Guarantor (including by way of
merger or consolidation) to a Person, other than an Affiliate of the Company,
then such Guarantor will be released and relieved of any obligations under its
Subsidiary Guarantee. In such event, the Net Available Proceeds of such sale
or other disposition will be required to be applied in accordance with the
applicable provisions of the Indenture. See "--Certain Covenants--Limitations
on Asset Sales."
RANKING
The Notes and each Guarantee will be senior unsecured obligations of the
Company and the applicable Guarantor thereof, respectively, and will rank pari
passu in right of payment with all other existing and future unsecured and
unsubordinated Indebtedness of the Company and such Guarantor, respectively,
and senior to all existing and future subordinated indebtedness of the Company
and such Guarantor, respectively. The Notes and each Guarantee will be
effectively subordinated to all secured obligations of the Company and the
Guarantor thereof, respectively, to the extent of the assets securing such
obligations. At September 30, 1997, after giving pro forma effect to the
Transactions, the Company would have had approximately $30.3 million of
secured Indebtedness outstanding, excluding the $25.0 million Revolving Credit
Facility. See "Risk Factors--Substantial Leverage; Restrictive Covenants" and
"--Effective Subordination of the Notes and the Guarantees" and
"Capitalization." Subject to certain limitations, the Company and its
Subsidiaries (including the Subsidiary Guarantors) may incur additional
secured Indebtedness in the future. See "--Certain Covenants--Limitations on
Additional Indebtedness."
OPTIONAL REDEMPTION
The Notes will be redeemable, at the option of the Company, in whole or in
part, at any time on or after November 30, 2002, at the following redemption
prices (expressed as percentages of principal amount), together with accrued
and unpaid interest, if any, thereon to the redemption date, if redeemed
during the 12-month period beginning on November 30 of the years indicated
below:
<TABLE>
<CAPTION>
OPTIONAL
REDEMPTION PRICE
----------------
<S> <C>
2002.................................................... 105.625%
2003.................................................... 103.750%
2004.................................................... 101.875%
2005 and thereafter..................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to November 30, 2000,
the Company may redeem up to 35% of the aggregate principal amount of the
Notes with the net cash proceeds of one or more Public Equity Offerings at a
redemption price equal to 111.25% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the redemption date; provided that (a)
at least $65.0 million aggregate principal amount of the Notes remains
outstanding immediately after the occurrence of such redemption and (b) notice
of such redemption is given within 60 days of the date of the closing of any
such Public Equity Offering.
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If less than all of the Notes are to be redeemed at any time, selection of
the Notes to be redeemed will be made by the Trustee from among the
outstanding Notes on a pro rata basis, by lot or by any other method permitted
in the Indenture. Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder whose Notes are to
be redeemed at the registered address of such Holder. On and after the
redemption date, interest will cease to accrue on the Notes or portions
thereof called for redemption.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company shall be obligated
to make an offer to all Holders of Notes to purchase (a "Change of Control
Offer") all outstanding Notes and will purchase, on a business day not more
than 60 days nor less than 30 days after the occurrence of the Change of
Control (such purchase date being the "Change of Control Purchase Date"), all
Notes properly tendered pursuant to such offer to purchase for a cash price
(the "Change of Control Purchase Price") equal to 101% of the principal amount
of the Notes, plus accrued and unpaid interest, if any, to the Change of
Control Purchase Date. The Change of Control Offer is required to remain open
for at least 20 business days or for such longer period as is required by law.
In order to effect a Change of Control Offer, the Company shall within 30
days after the occurrence of the Change of Control mail to the Trustee, who
shall mail to each Holder of Notes, a copy of the Change of Control Offer,
which shall state, among other things, the procedures that Holders must follow
to accept the Change of Control Offer.
The Company's obligation to make a Change of Control Offer will be satisfied
if a third party makes the Change of Control Offer in the manner and at the
times and otherwise in compliance with the requirements applicable to a Change
of Control Offer made by the Company and purchases all Notes properly tendered
and not withdrawn under such Change of Control Offer. The occurrence of the
events constituting a Change of Control under the Indenture may result in an
event of default in respect of other Indebtedness of the Company and its
Subsidiaries and, consequently, the lenders thereof may have the right to
require repayment of such Indebtedness in full. If a Change of Control Offer
is made, there can be no assurance that the Company will have available funds
sufficient to pay for all or any of the Notes that might be delivered by
Holders of Notes seeking to accept the Change of Control Offer.
In addition, the Credit Agreement or other Indebtedness could restrict the
Company's ability to purchase Notes upon a Change of Control. In the event a
Change of Control occurs at a time when the Company is prohibited from
purchasing Notes, the Company would seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the Indebtedness that contains
such prohibition. If the Company does not obtain such a consent or repay such
Indebtedness, the Company could remain prohibited from purchasing Notes. In
such case, the Company's failure to make a Change of Control Offer or to
purchase Notes tendered pursuant to a Change of Control Offer would constitute
an Event of Default under the Indenture, which could, in turn, constitute a
default under such other Indebtedness.
The definition of Change of Control includes the sale of "all or
substantially all" of the assets of the Company or the Company and its
Restricted Subsidiaries taken as a whole. The phrase "all or substantially
all" is subject to interpretation under applicable legal precedent and has no
clear meaning. As a result, there may be uncertainty as to whether a Change of
Control has occurred.
The Change of Control feature of the Notes, by requiring a Change of Control
Offer, may in certain circumstances make more difficult or discourage a sale
or takeover of the Company, and, thus, the removal of incumbent management.
The Change of Control feature, however, is not part of a plan by management to
adopt a series of antitakeover provisions. Instead, the Change of Control
feature is a result of negotiations between the Company and the Initial
Purchasers. Subject to the limitations discussed below, the Company could, in
the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Change of
Control under the Indenture, but that could increase the amount of
Indebtedness outstanding at such time or otherwise affect the Company's
capital structure or credit ratings.
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The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder, if
applicable, in connection with the purchase of Notes pursuant to a Change of
Control Offer.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitations on Additional Indebtedness. (A) (i) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
incur any Indebtedness (including without limitation Acquired Indebtedness)
and (ii) the Company will not permit any of its Restricted Subsidiaries (other
than any Guarantor) to issue (except if issued to or owned beneficially and of
record by the Company or any of its Restricted Subsidiaries) any Capital Stock
having a preference in liquidation or with respect to the payment of
dividends; provided that (a) the Company and its Restricted Subsidiaries may
incur Permitted Indebtedness and (b) the Company or any Guarantor may incur
Indebtedness if, after giving effect thereto, the Company's Consolidated Fixed
Charge Coverage Ratio on the date thereof would be at least 2.0 to 1.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness may be incurred through clause (b) of this covenant or
by meeting the criteria of one or more of the types of Permitted Indebtedness
pursuant to clause (a), the Company, in its sole discretion, (i) may classify
such item of Indebtedness under and comply with either of such clauses (or any
of such definitions), as applicable, (ii) may classify and divide such item of
Indebtedness into more than one of such clauses (or definitions), as
applicable, and (iii) may elect to comply with such clauses (or definitions),
as applicable, in any order.
(B) The Company will not, and will not permit any of its Subsidiaries that
are Guarantors to, incur any Indebtedness that is expressly subordinated to
any other Indebtedness of the Company or such Subsidiary unless such
Indebtedness by its terms is also expressly made subordinated to the Notes, in
the case of the Company, or the Subsidiary Guarantees, in the case of a
Subsidiary.
Limitations on Restricted Payments. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment (except as permitted below) if at the time of such
Restricted Payment:
(i) a Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof;
(ii) the Company would be unable to incur an additional $1.00 of
Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio test
set forth in the "Limitations on Additional Indebtedness" covenant; or
(iii) the amount of such Restricted Payment, when added to the aggregate
amount of all Restricted Payments made after the Issue Date (other than any
Restricted Payment permitted under clause (3)(a), (4) or (5) of the next
paragraph), exceeds the sum (the "Basket") of (A) 50% of the Company's
Consolidated Net Income (taken as one accounting period) from the beginning
of the first fiscal quarter commencing after the Issue Date to the end of
the Company's most recently ended fiscal quarter for which financial
statements are available at the time of such Restricted Payment (or, if
such aggregate Consolidated Net Income shall be a deficit, minus 100% of
such aggregate deficit), plus (B) the net cash proceeds from the issuance
and sale (other than to a Restricted Subsidiary of the Company) after the
Issue Date of Qualified Stock, plus (C) the net cash proceeds from the
issuance or sale (other than to a Restricted Subsidiary of the Company) of
Indebtedness or shares of Disqualified Stock after the Issue Date that have
been converted into or exchanged for Qualified Stock of the Company,
together with the aggregate net cash proceeds received by the Company at
the time of such conversion or exchange, plus (D) to the extent that any
Restricted Investment that was made after the Issue Date is sold for cash
or otherwise liquidated or repaid for cash, in whole or in part, the
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lesser of (x) the cash return of capital (including repayment in cash of
Indebtedness, if applicable) with respect to such Restricted Investment
(less the cost of disposition, if any) and (y) the initial amount of such
Restricted Investment, plus (E) the amount of Restricted Investment
outstanding in an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary of the Company in
accordance with the definition of "Unrestricted Subsidiary."
The foregoing provisions will not prohibit, so long as (with respect to
clauses (2) and (3) below) no Default or Event of Default shall have occurred
and be continuing, (1) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture; (2) the redemption of any
Capital Stock of the Company in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of any Qualified Stock of the Company; (3) the redemption of
Subordinated Indebtedness (a) with the net proceeds from or incurrence of
Permitted Refinancing Indebtedness or (b) in exchange for, or out of the
proceeds of, the substantially concurrent issue and sale of Qualified Stock of
the Company (other than (x) Capital Stock sold to a Restricted Subsidiary of
the Company and (y) Capital Stock purchased with the proceeds of loans from
the Company or any of its Restricted Subsidiaries), (4) the redemption of any
Capital Stock of the Company or of Parent, or dividends to Parent in any
amount sufficient to and for the purpose of redeeming Capital Stock of Parent,
held by any present or former employee or director of the Company or any of
its Restricted Subsidiaries (or the estate or a trust for the benefit of any
such Person) in an aggregate amount not to exceed $1.5 million in any fiscal
year (provided that any unused amounts may be carried over to the immediately
subsequent fiscal year but not beyond such fiscal year), (5) dividends to
Parent in an amount sufficient for Parent to pay its legal, accounting and
other operating expenses incurred in the ordinary course of business, but not
to exceed $200,000 in the aggregate in any fiscal year and (6) the payment in
an amount not to exceed $600,000 per year of dividends to Parent in an amount
sufficient to and for the purpose of paying fees to Saratoga or its Affiliates
pursuant to the Management Services Agreement.
The amounts referred to in clauses (1), (2), (3)(b) and (6) shall be
included as Restricted Payments in any computation made pursuant to clause
(iii) above.
Limitations on Restrictions on Distributions from Restricted Subsidiaries. The
Company will not, and will not permit any of its Restricted Subsidiaries to,
create or otherwise cause or suffer to exist or become effective any consensual
Payment Restriction with respect to any of its Restricted Subsidiaries, except
for any such Payment Restriction existing under or by reason of (a) applicable
law, (b) customary non-assignment or net worth provisions in leases or other
contracts entered into in the ordinary course of business and consistent with
past practices, (c) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions on the property so
acquired, (d) customary restrictions imposed on the transfer of copyrighted or
patented materials, (e) the entering into of a contract for the sale or other
disposition of assets, directly or indirectly, so long as such restrictions do
not extend to assets that are not subject to such sale or other disposition, (f)
the terms of any agreement evidencing any Indebtedness of Restricted
Subsidiaries that was permitted by the Indenture to be incurred that only
restricts the transfer of the assets purchased with the proceeds of such
Indebtedness, (g) the terms of the Credit Agreement in effect on the Issue Date
or any similar Payment Restriction under the Credit Agreement or any similar
bank credit facility, provided that such similar Payment Restriction, taken as a
whole, is not materially more restrictive than the Payment Restriction in effect
on the Issue Date under the Credit Agreement, (h) the terms of any agreement
evidencing any Acquired Indebtedness that was permitted to be incurred pursuant
to the Indenture, provided that such Payment Restriction only applies to assets
that were subject to such restriction and encumbrances prior to the acquisition
of such assets by the Company or its Restricted Subsidiaries, (i) contracts of a
Restricted Subsidiary in effect prior to such Person becoming a Restricted
Subsidiary and not entered into in contemplation thereof, so long as such
restriction applies only to such Restricted Subsidiary or its assets, (j)
restrictions on transfer of property or assets pursuant to any Lien permitted
under the Indenture, (k) the terms of any agreement in effect on the Issue Date
as such Payment Restriction is in effect on the Issue Date or as thereafter
amended; provided that such Payment Restriction is no more restrictive, (1) the
Indenture, the Notes or the Guarantees, and (m) Refinancing
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Indebtedness; provided that any such Payment Restrictions that arise under
such Refinancing Indebtedness are not, taken as a whole, more restrictive than
those under the agreement creating or evidencing the Indebtedness being
refinanced.
Limitations on Transactions with Affiliates. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, in
one transaction or a series of related transactions, sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from or enter into any contract, agreement, understanding,
loan, advance or guarantee with, or for the benefit of, any of their
respective Affiliates (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those that could
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers
to the Trustee (a) with respect to any Affiliate Transaction (or series of
related transactions) involving aggregate payments in excess of $1.0 million,
an Officers' Certificate certifying that such Affiliate Transaction complies
with clause (i) above and a Secretary's Certificate which sets forth and
authenticates a resolution that has been adopted by a vote of a majority of
the Disinterested Directors approving such Affiliate Transaction or states
that there are no Disinterested Directors, in which case an opinion, as
described in clause (b), shall be required and (b) with respect to any
Affiliate Transaction (or series of related transactions) involving aggregate
payments in excess of $5.0 million, the certificates described in the
preceding clause (a) and an opinion as to the fairness to the Company or such
Restricted Subsidiary from a financial point of view issued by an Independent
Financial Advisor; provided, however, that the following shall not be deemed
to be Affiliate Transactions: (i) transactions exclusively between or among
(1) the Company and one or more Restricted Subsidiaries or (2) Restricted
Subsidiaries, provided, in each case, that no Affiliate of the Company (other
than any Person that is such an Affiliate solely because of the control of
such Person by the Company) owns Capital Stock of any such Restricted
Subsidiary; (ii) transactions between the Company or any Restricted Subsidiary
and any qualified employee stock ownership plan established for the benefit of
the Company's employees, or the establishment or maintenance of any such plan;
(iii) reasonable director, officer and employee compensation and other
benefit, and indemnification, arrangements approved by the Board of Directors;
(iv) transactions permitted by the "Limitations on Restricted Payments"
covenant; (v) the existence of, or the performance by the Company or any
Restricted Subsidiary under, the Management Services Agreement with respect to
fees of up to $600,000 per year and any other agreement in effect on the Issue
Date, as such agreement is in effect on the Issue Date or as amended
thereafter in any manner no less favorable to the Holders; (vi) prepaid
expenses and loans or advances to employees or directors of the Company or any
of its Subsidiaries in the ordinary course of business; (vii) the pledge of
Capital Stock of Unrestricted Subsidiaries to support the Indebtedness
thereof; (viii) the entering into of a tax sharing agreement, or payments
pursuant thereto, between the Company and/or one or more Subsidiaries, on the
one hand, and any other Person with which the Company or such Subsidiaries are
required or permitted to file a consolidated tax return or with which the
Company or such Subsidiaries are or could be part of a consolidated group for
tax purposes, on the other hand, which payments by the Company and its
Restricted Subsidiaries are not in excess of the tax liabilities that would
have been payable by them on a stand-alone basis; and (ix) the issuance and
sale by the Company to its Affiliates of Qualified Stock.
Limitations on Liens. The Company will not incur, and will not permit any
Restricted Subsidiary to, directly or indirectly create, incur, assume or
suffer to exist any Lien on any property or asset now owned or hereafter
acquired, or on any income, profits or proceeds therefrom, or assign or convey
any right to receive income therefrom, except Permitted Liens, unless prior
thereto or simultaneously therewith the Notes are equally and ratably secured;
provided that if such Indebtedness is Subordinated Indebtedness the Lien
securing such Indebtedness shall be expressly subordinated and junior to the
Lien securing the Notes.
Limitations on Asset Sales. (a) The Company will not, and will not permit
any of its Restricted Subsidiaries to, engage in any Asset Sale unless (i) the
Company or such Restricted Subsidiary receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value of the assets sold,
(ii) at least 80% of the consideration received by the Company or the relevant
Restricted Subsidiary in respect of such Asset
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Sale consists of (A) cash or Cash Equivalents, (B) the assumption of
Indebtedness (other than Subordinated Indebtedness) of the Company or any
Guarantor or Indebtedness of any non-Guarantor Restricted Subsidiary, (C)
Related Assets or (D) any combination of the foregoing clauses (A), (B) and
(C).
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company or any Restricted Subsidiary may either, no later than 270 days
after such Asset Sale, (i) apply all or any of the Net Available Proceeds
therefrom to repay amounts outstanding under the Credit Agreement (including
by providing cash collateral) or any other Indebtedness (other than
Subordinated Indebtedness) of the Company or any Restricted Subsidiary;
provided, in each case, that the related loan commitment (if any) is thereby
permanently reduced by the amount of such Indebtedness so repaid or (ii)
invest all or any part of the Net Available Proceeds thereof in Related
Assets. Pending final disposition of Net Available Proceeds, amounts may be
used to repay any amounts outstanding under the Credit Agreement. The amount
of such Net Available Proceeds not applied or invested as provided in this
paragraph will constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals or exceeds $5.0
million, the Company will be required to make an offer to purchase, from all
Holders of the Notes, an aggregate principal amount of Notes equal to such
Excess Proceeds as follows:
(i) The Company will make an offer to purchase (a "Net Proceeds Offer")
from all Holders of the Notes in accordance with the procedures set forth
in the Indenture the maximum principal amount (expressed as a multiple of
$1,000) of Notes that may be purchased (the "Payment Amount") out of the
amount of such Excess Proceeds.
(ii) The offer price for the Notes will be payable in cash in an amount
equal to 100% of the principal amount of the Notes tendered pursuant to a
Net Proceeds Offer, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date such Net Proceeds Offer is consummated (the
"Offered Price"), in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate Offered Price of Notes tendered
pursuant to a Net Proceeds Offer is less than the Payment Amount relating
thereto (such shortfall constituting a "Net Proceeds Deficiency"), the
Company may use such Net Proceeds Deficiency, or a portion thereof, for
general corporate purposes, subject to the limitations of the "Limitations
on Restricted Payments" covenant.
(iii) If the aggregate Offered Price of Notes validly tendered and not
withdrawn by Holders thereof exceeds the Payment Amount, Notes to be
purchased will be selected on a pro rata basis.
(iv) Upon completion of such Net Proceeds Offer, the amount of Excess
Proceeds remaining shall be zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder, if
applicable, in the event that an Asset Sale occurs and the Company is required
to purchase Notes as described above.
Restrictions on Sale and Leaseback Transactions. The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into, renew or extend any Sale and Leaseback Transaction unless: (i) the
Company or such Subsidiary would be entitled, under the "Limitations on
Additional Indebtedness" covenant, to incur Indebtedness in an amount equal to
the Attributable Indebtedness with respect to such Sale and Leaseback; (ii)
such Sale and Leaseback Transaction would not result in a violation of the
"Limitation on Liens" covenant; and (iii) the Net Available Proceeds from any
such Sale and Leaseback Transaction are applied in a manner consistent with
the provisions of the "Limitations on Asset Sales" covenant.
Restrictions on Sale of Capital Stock of Restricted Subsidiaries. The
Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly sell or otherwise dispose of any of the Capital Stock of any
Restricted Subsidiary unless: (i) (a) the Restricted Subsidiary shall remain a
Restricted Subsidiary, or (b) all of the Capital Stock of such Restricted
Subsidiary shall be sold or otherwise disposed of or any Capital Stock of such
Restricted Subsidiary retained by the Company or its Restricted Subsidiaries
is treated as an Investment
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and complies with the provisions described under "Limitations on Restricted
Payments," and (ii) the Net Available Proceeds from any such sale or
disposition are applied in a manner consistent with the provisions described
under "Limitations on Asset Sales."
Reports. Whether or not required by the rules and regulations of the
Securities and Exchange Commission (the "Commission"), so long as any Notes
are outstanding, the Company and the Guarantors will file with the Commission,
to the extent such filings are accepted by the Commission, and will furnish to
the Holders of Notes all quarterly and annual reports and other information,
documents and reports that would be required to be filed with the Commission
pursuant to Section 13 of the Exchange Act if the Company and the Guarantors
were required to file under such section. The Company and the Guarantors have
agreed that, for so long as any Notes remain outstanding, they will furnish to
the Holders and beneficial holders of Notes and to prospective purchasers of
Notes designated by the Holders of Transfer Restricted Securities and to
broker-dealers, upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Company will not, in a single transaction or a series of related
transactions, (i) consolidate or merge with or into (other than a merger with
a Wholly Owned Restricted Subsidiary solely for the purpose of changing the
Company's jurisdiction of incorporation to another State of the United
States), or sell, lease, transfer, convey or otherwise dispose of or assign
all or substantially all of the assets of the Company and the Restricted
Subsidiaries (taken as a whole), or assign any of its obligations under the
Notes and the Indenture, to any Person or (ii) adopt a Plan of Liquidation
unless, in either case: (a) the Person formed by or surviving such
consolidation or merger (if other than the Company) or to which such sale,
lease, conveyance or other disposition or assignment shall be made (or, in the
case of a Plan of Liquidation, any Person to which assets are transferred)
(collectively, the "Successor"), is a corporation organized and existing under
the laws of the United States or any State thereof or the District of
Columbia, and the Successor assumes by supplemental indenture in a form
satisfactory to the Trustee all of the obligations of the Company under the
Notes and the Indenture; (b) immediately prior to and immediately after giving
effect to such transaction and the assumption of the obligations as set forth
in clause (a) above and the incurrence of any Indebtedness to be incurred in
connection therewith, no Default or Event of Default shall have occurred and
be continuing; and (c) immediately after and giving effect to such transaction
and the assumption of the obligations set forth in clause (a) above and the
incurrence of any Indebtedness to be incurred in connection therewith, and the
use of any net proceeds therefrom on a pro forma basis, (1) the Consolidated
Net Worth of the Company or the Successor, as the case may be, would be at
least equal to the Consolidated Net Worth of the Company immediately prior to
such transaction and (2) the Company or the Successor, as the case may be,
could incur at least $1.00 of additional Indebtedness pursuant to the
Consolidated Fixed Charge Coverage Ratio test set forth in the "Limitations on
Additional Indebtedness" covenant; and (d) each Subsidiary Guarantor, unless
it is the other party to the transactions described above, shall have by
amendment to its guarantee confirmed that its guarantee of the Notes shall
apply to the obligations of the Company or the Successor under the Notes and
the Indenture. For purposes of this covenant, any Indebtedness of the
Successor which was not Indebtedness of the Company immediately prior to the
transaction shall be deemed to have been incurred in connection with such
transaction.
The Indenture provides that upon any consolidation or merger or any transfer
of all or substantially all of the assets of the Company in accordance with
the foregoing, the surviving Person formed by such consolidation or into which
the Company is merged or to which such transfer is made 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 Person had been
named as the Company therein; provided, however, that solely for purposes of
computing the Basket described in subclause (iii) of the first paragraph of
the covenant described under "--Limitations on Restricted Payments," the
Basket shall not be affected by the Consolidated Net Income or other
attributes of the surviving Person prior to the effective time of the merger
and any such surviving Person shall be deemed to have succeeded to and be
substituted for the Company only with respect to periods subsequent to the
effective time of such merger, consolidation or transfer of assets.
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EVENTS OF DEFAULT
The following are "Events of Default" under the Indenture:
(i) failure by the Company to pay interest on any of the Notes when it
becomes due and payable and the continuance of any such failure for 30
days;
(ii) failure by the Company to pay the principal or premium, if any, on
any of the Notes when it becomes due and payable, whether at stated
maturity, upon redemption, upon acceleration or otherwise;
(iii) the Company shall fail to comply with any of its agreements or
covenants described above under "--Merger, Consolidation and Sale of
Assets," or "--Change of Control";
(iv) failure by the Company to comply with any other covenant in the
Indenture and continuance of such failure for 30 days after notice of such
failure has been given to the Company by the Trustee or by the Holders of
at least 25% of the aggregate principal amount of the Notes then
outstanding;
(v) failure by the Company or any of its Subsidiaries to make any payment
of principal on Indebtedness of the Company or any such Subsidiary at its
stated final maturity after the expiration of any applicable grace period
in an aggregate outstanding principal amount of $5.0 million or more;
(vi) a default under any Indebtedness of the Company or any Subsidiary,
whether such Indebtedness now exists or hereafter shall be created, if (A)
such default results in the Holder or Holders of such Indebtedness causing
the Indebtedness to become due prior to its stated final maturity and (B)
the outstanding principal amount of such Indebtedness, together with the
outstanding principal amount of any other such Indebtedness the maturity of
which has been so accelerated, aggregate $5.0 million or more at any one
time;
(vii) one or more final judgments or orders that exceed $5.0 million in
the aggregate for the payment of money have been entered by a court or
courts of competent jurisdiction against the Company or any Subsidiary of
the Company and such judgment or judgments have not been satisfied, stayed,
annulled or rescinded within 60 days of being entered;
(viii) certain events of bankruptcy, insolvency or reorganization
involving the Company or any Significant Subsidiary of the Company; and
(ix) except as permitted by the Indenture or by its terms, any Guarantee
ceases to be in full force and effect or any Guarantor repudiates its
obligations under any Guarantee.
If an Event of Default (other than an Event of Default specified in clause
(viii) above involving the Company) shall have occurred and be continuing
under the Indenture, the Trustee, by written notice to the Company, or the
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding by written notice to the Company and the Trustee, may declare all
amounts owing under the Notes to be due and payable immediately. Upon such
declaration of acceleration, the aggregate principal of, premium, if any, and
interest on the outstanding Notes shall immediately become due and payable. If
an Event of Default specified in clause (viii) above involving the Company
occurs, all outstanding Notes shall become due and payable without any further
action or notice. The Holders of a majority in aggregate principal amount of
the Notes then outstanding may waive an existing Default or Event of Default
and its consequences, except as a result of a failure to pay principal of,
premium, if any, or interest on any Notes or in respect of a covenant or
provision which under the Indenture cannot be modified or amended without the
consent of the Holder of each outstanding Note.
The Holders may not enforce the provisions of the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, Holders
of a majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power; provided, however, that such
direction does not conflict with the terms of the Indenture. The Trustee may
withhold from the Holders notice of any continuing
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Default or Event of Default (except any Default or Event of Default in payment
of principal of, premium, if any, or interest on the Notes) if the Trustee
determines that withholding such notice is in the Holders' interest.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and, upon any Officer of the Company
becoming aware of any Default or Event of Default, a statement specifying such
Default or Event of Default and what action the Company is taking or proposes
to take with respect thereto.
LEGAL DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations of
the Company and the Guarantors with respect to the outstanding Notes and the
Guarantees (such action being a "legal defeasance"). Such legal defeasance
means that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes and to have been discharged
from all its other obligations with respect to the Notes and the Guarantors to
have been discharged from their Guarantees, except for (i) the rights of
Holders of outstanding Notes to receive, from the trust referred to below,
payment in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Company's obligations to replace
any temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes and maintain an office or agency
for payments in respect of the Notes, (iii) the rights, powers, trusts, duties
and immunities of the Trustee, and (iv) the legal defeasance provisions of the
Indenture. In addition, the Company may, at its option and at any time, elect
to terminate the obligations of the Company with respect to certain covenants
that are set forth in the Indenture, some of which are described under "--
Certain Covenants" above, and any omission to comply with such obligations
shall not constitute a Default or an Event of Default with respect to the
Notes (such action being a "covenant defeasance"). In the event covenant
defeasance occurs, certain events (not including nonpayment, bankruptcy,
insolvency and reorganization events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either legal defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay the principal of, premium, if any,
and interest and Liquidated Damages, if any, on the outstanding Notes to
redemption or maturity; (ii) the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such legal defeasance or covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such legal defeasance or covenant
defeasance had not occurred (in the case of legal defeasance, such Opinion
must refer to and be based upon a published ruling of the Internal Revenue
Service or a change in applicable federal income tax laws); (iii) no Default
or Event of Default shall have occurred and be continuing on the date of such
deposit or insofar as clause (viii) under the first paragraph of "Events of
Default" is concerned, at any time during the period ending on the 123rd day
after the date of deposit; (iv) such legal defeasance or covenant defeasance
shall not cause the Trustee to have a conflicting interest under the Indenture
or the Trust Indenture Act with respect to any securities of the Company; (v)
such legal defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, any material agreement or
instrument to which the Company or any of its Restricted Subsidiaries is a
party or by which the Company or any of its Restricted Subsidiaries is bound;
(vi) the Company shall have delivered to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of the Notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors of
the Company or others; and (vii) the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel satisfactory to the
Trustee, each stating that all conditions precedent under the Indenture
relating to either legal defeasance or covenant defeasance, as the case may
be, have been complied with.
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SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen, mutilated or destroyed Notes which have been replaced or
paid and Notes for whose payment money or certain U.S. Government Obligations
have theretofore been deposited in trust or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged from such
trust) have been delivered to the Trustee for cancellation or (b) all Notes
not theretofore delivered to the Trustee for cancellation have become due and
payable or will become due and payable at their stated final maturity within
one year, or are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the serving of notice of
redemption by the Trustee in the name, and at the expense, of the Company, and
the Company has irrevocably deposited or
caused to be deposited with the Trustee funds in an amount sufficient to pay
and discharge the entire Indebtedness on the Notes not theretofore delivered
to the Trustee for cancellation, for principal of, premium, if any, and
interest and Liquidated Damages, if any, on the Notes to the date of deposit
(in the case of Notes which have become due and payable) or to the stated
final maturity or Redemption Date, as the case may be, together with
instructions from the Company irrevocably directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be;
(ii) the Company has paid all other sums payable under the Indenture by the
Company; and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge of
the Indenture have been complied with.
TRANSFER AND EXCHANGE
A Holder will be able to register the transfer of or exchange Notes only in
accordance with the provisions of the Indenture. The Registrar 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
Indenture. Without the prior consent of the Company, the Registrar is not
required (i) to register the transfer of or exchange any Note selected for
redemption, (ii) to register the transfer of or exchange any Note for a period
of 15 days before a selection of Notes to be redeemed or (iii) to register the
transfer or exchange of a Note between a record date and the next succeeding
interest payment date. The registered Holder of a Note will be treated as the
owner of such Note for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented with the consent (which may include consents obtained in
connection with a tender offer or exchange offer for Notes) of the Holders of
at least a majority in principal amount of the Notes then outstanding, and any
existing Default or Event of Default under, or compliance with any provision
of, the Indenture may be waived (other than any continuing Default or Event of
Default in the payment of the principal of, premium, if any, or interest on
the Notes) with the consent (which may include consents obtained in connection
with a tender offer or exchange offer for Notes) of the Holders of a majority
in principal amount of the Notes then outstanding. Without the consent of any
Holder, the Company and the Trustee may amend or supplement the Indenture or
the Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders in the case
of a merger or acquisition, to add a Guarantee or to make any change that does
not adversely affect the rights of any Holder.
Without the consent of each Holder affected, the Company and the Trustee may
not: (i) extend the maturity of any Note; (ii) affect the terms of any
scheduled payment of interest on or principal of the Notes (including without
limitation any redemption provisions (other than any provision described under
"--Change of Control" or "--Certain Covenants--Limitations on Asset Sales" or
the definitions related thereto)); (iii) take any action that would
subordinate the Notes or the Guarantees to any other Indebtedness of the
Company or any of the Guarantors, respectively, or otherwise change the
ranking of the Notes or the Guarantees in a manner adverse to
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the Holders; (iv) reduce the percentage of Holders necessary to consent to an
amendment, supplement or waiver to the Indenture; or (v) release a Guarantee
(except pursuant to its terms). In addition, without the consent of the
Holders of at least 75% of the aggregate principal amount of Notes affected
thereby, the Company and the Trustee may not make any change in the provisions
described above under the caption "Change of Control" or the definitions
related thereto.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become 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. The 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 Indenture provides that, in the event that an Event of Default occurs
and is not cured, the Trustee will be required, in the exercise of its power,
to use the degree of care of a prudent person in similar circumstances in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to the Trustee.
United States Trust Company of New York is the Trustee under the Indenture.
United States Trust Company of New York is also the Transfer Agent, Registrar
and Paying Agent for the Senior Preferred Stock and the Warrant Agent for the
Warrants.
GOVERNING LAW
The Indenture, the Notes and the Guarantees are governed by, and construed
in accordance with, the laws of the State of New York.
BOOK-ENTRY, DELIVERY AND FORM
The certificates representing the Exchange Notes will be issued in fully
registered form without interest coupons (each, a "Global Note"). Upon
issuance, each Global Note will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of Cede
& Co., as nominee of the Depositary, and the Depository or its custodian will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by each Global Note to the
accounts of persons who have accounts with the Depositary. Ownership of
beneficial interests in a Global Note will be limited to persons who have
accounts with the Depositary ("participants") or persons who hold interests
through participants. Ownership of beneficial interests in a Global Note will
be shown on, and the transfer of that ownership will be effected only through,
records maintained by the Depositary or its nominee (with respect to interests
of participants) and the records of participants (with respect to interests of
persons other than participants).
So long as the Depositary, or its nominee, is the registered holder of a
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global
Note for all purposes under the Indenture and the Notes. No beneficial owner
of an interest in a Global Note will be able to transfer that interest except
in accordance with the Depositary's applicable procedures.
Payments of the principal of, and interest on, the Global Notes will be made
to the Depositary or its nominee, as the case may be, as the registered owner
thereof. None of the Company, the Trustee or any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
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The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal or interest in respect of a Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of the Depositary or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in
such Global Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the name of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in the Depositary will be effected in the
ordinary way in accordance with the Depositary's rules and will be settled in
same-day funds.
The Depositary has advised the Company that it will take any action
permitted to be taken by a holder of Notes (including the presentation of
Notes for exchange as described below) only at the direction of one or more
participants to whose accounts an interest in the Global Notes is credited and
only in respect of such portion of the aggregate principal amount of Notes as
to which such participant or participants has or have given such direction.
The Depositary has advised the Company as follows: the Depositary is a
limited purpose trust company organized under the laws of the State of New
York, a "banking organization" within the meaning of New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing Agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. The Depositary
was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants
through electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the
Depositary system is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Notes among participants of
the Depositary, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Company nor the Trustee will have any responsibility for the performance
by the Depositary or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
CERTIFICATED NOTES
If (i) the Depositary is at any time unwilling or unable to continue as a
depositary for the Global Notes and a successor depositary is not appointed by
the Company within 120 days or (ii) the Company in its sole discretion
determines that the Global Notes (in whole but not in part) should be
exchanged for certificated notes, the Company will issue certificated notes in
exchange for the Global Notes. In addition, any person having a beneficial
interest in a Global Note may, upon request to the Trustee following an Event
of Default under the Indenture, exchange such beneficial interest for
certificated notes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms.
"Acquired Indebtedness" means, with respect to any specified Person, (a)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Restricted Subsidiary of such specified Person,
including Indebtedness incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Restricted Subsidiary of
such specified Person or (b) assumed in connection with acquisitions of
properties or assets from such Person. Acquired Indebtedness shall be deemed
to be incurred on
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the date the acquired Person becomes a Restricted Subsidiary or the date of
the related acquisition of properties or assets from such Person.
"Affiliate" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any executive
officer or director of any such specified Person or other Person. For the
purposes of this definition, "control," when used with respect to any
specified Person, includes the power to vote 10% or more of any class of
voting securities of such Person or to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"amend" means amend, modify, supplement, restate or amend and restate, in
whole or in part, including successively; and "amending" and "amended" have
correlative meanings.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease,
assignment or other disposition to any Person other than the Company or any of
its Subsidiaries (including, without limitation, by means of a Sale and
Leaseback Transaction or a merger or consolidation) (collectively, for
purposes of this definition, a "transfer"), directly or indirectly, in one
transaction or a series of related transactions, of (a) any Capital Stock of
any Restricted Subsidiary or (b) any other properties or assets of the Company
or any of its Restricted Subsidiaries other than transfers of cash, Cash
Equivalents, accounts receivable, inventory or other properties or assets in
the ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include any of the following: (i) any transaction that
is governed by, and made in accordance with, the provisions described under
"Merger, Consolidation and Sales of Assets" or that constitutes a "Change of
Control"; (ii) any Restricted Payment or Restricted Investment permitted under
the "Limitations on Restricted Payments" covenant; (iii) sales of damaged,
worn-out or obsolete equipment or assets that, in the Company's reasonable
judgment, are either no longer used or useful in the business of the Company
or its Subsidiaries; (iv) any disposition of defaulted receivables for
collection; (v) the granting of any Lien, or any foreclosure thereon, granted
in compliance with the provisions described under "--Certain Covenants--
Limitations on Liens"; (vi) the conversion of any operating lease to which
attaching machinery of the Company or any of its Restricted Subsidiaries is
subject to, or the sale of any such attaching machinery pursuant to, a
Capitalized Lease Obligation; and (vii) any transfers that, but for this
clause (vii), would be Asset Sales, if after giving effect to such transfers,
the aggregate Fair Market Value of the properties or assets transferred in
such transaction or any such series of related transactions does not exceed
$100,000.
"Attributable Indebtedness" means, with respect to any particular lease
under which any Person is at the time liable, whether or not accounted for as
a Capitalized Lease Obligation, and at any date as of which the amount thereof
is to be determined, the present value of the total net amount of rent
required to be paid by such Person under the lease during the primary term
thereof, without giving effect to any renewals at the option of the lessee,
discounted from the respective due dates thereof to such date of determination
at a rate per annum equal to the discount rate which would be applicable to a
Capitalized Lease Obligation with a like term in accordance with GAAP. As used
in the preceding sentence, the "net amount of rent" under any such lease for
any such period shall mean the sum of rental and other payments required to be
made with respect to such period by the lease thereunder, excluding any
amounts required to be paid by such lessee on account of maintenance and
repairs, insurance, taxes, assessments or similar charges. In the case of any
lease that is terminable by the lessee upon payment of a penalty, such net
amount of rent shall also include the amount of such penalty, but no rent
shall be considered as required to be paid under such lease subsequent to the
first date upon which it may be so terminated.
"Board of Directors" of any Person means the Board of Directors of such
Person (or comparable governing body) or any authorized committee thereof.
"Board Resolution" means a duly adopted resolution of the Board of Directors
of the Company.
"Capital Stock" of any Person means any and all shares, rights to purchase,
warrants or options (whether
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or not currently exercisable), participations or other equivalents of or
interests in (however designated) the equity (including without limitation
common stock, preferred stock and partnership interests) of such Person.
"Capitalized Lease Obligations" means, with respect to any Person, any
obligation of that Person to pay lease payments, rent or other amounts under a
lease of (or other similar agreement conveying the right to use) any property
(whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP and, for purposes of
the Indenture, the amount of that obligation at any date will be the
capitalized amount thereof at that date, as determined in accordance with
GAAP.
"Cash Equivalents" means (i) marketable obligations with a maturity of 180
days or less issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof); (ii) demand and time deposits and certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500 million; (iii) commercial
paper maturing no more than 180 days from the date of creation thereof issued
by a corporation that is not an Affiliate of the Company and is organized
under the laws of any state of the United States or the District of Columbia
and rated at least A-1 by S&P or at least P-1 by Moody's; (iv) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clause (i) above entered into with any commercial
bank meeting the specifications of clause (ii) above; and (v) investments in
money market or other mutual funds substantially all of whose assets comprise
securities of the types described in clauses (i) through (iv) above.
"Change of Control" means the occurrence of any of the following: (i) the
consummation of any transaction the result of which is (x) if such transaction
occurs prior to the first sale of Voting Stock of the Company pursuant to a
registration statement under the Securities Act that results in at least 20%
of the then outstanding Voting Stock of the Company having been sold to the
public, that Permitted Holders beneficially own Voting Stock representing less
than, directly or indirectly, 51% of the voting power of the Voting Stock of
the Company, and (y) if such transaction occurs thereafter, that any Person or
group (as such term is used in Section 13(d)(3) of the Exchange Act) (other
than Permitted Holders) is or becomes the beneficial owner (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of Voting Stock
representing more than 35% of the voting power of the Voting Stock of the
Company unless Permitted Holders beneficially own Voting Stock representing a
greater percentage of the voting power of the Voting Stock of the Company,
(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 the assets of the Company and its Restricted Subsidiaries
taken as a whole 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, as the case may be, is
converted into or exchanged for cash, securities or other property, other than
any such transaction where the outstanding Voting Stock of the Company, as the
case may be, is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee corporation and the
beneficial owners of the Voting Stock of the Company immediately prior to such
transaction own, directly or indirectly, Voting Stock representing not less
than a majority of the voting power of the Voting Stock of the surviving or
transferee corporation immediately after such transaction, (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 either (i) a vote
of two-thirds of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for election
was previously so approved or (ii) a Permitted Holder) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office,
or (iv) the approval by the Holders of Capital Stock of the Company of any
plan or proposal for liquidation or dissolution of the Company.
"Consolidated Amortization Expense" of any Person for any period means the
amortization expense of such Person and its Restricted Subsidiaries for such
period (to the extent included in the computation of Consolidated Net Income
of such Person), determined on a consolidated basis in accordance with GAAP.
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"Consolidated Depreciation Expense" of any Person for any period means the
depreciation expense of such Person and its Restricted Subsidiaries for such
period (to the extent included in the computation of Consolidated Net Income
of such Person), determined on a consolidated basis in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, with respect
to any determination date, the ratio of (x) EBITDA for such Person's four full
fiscal quarters immediately preceding the determination date for which
financial statements are available to (y) the aggregate Fixed Charges of such
Person for such four fiscal quarters. In making such computations, (i) EBITDA
and Fixed Charges shall be calculated on a pro forma basis assuming that (A)
the Indebtedness to be incurred or the Disqualified Stock to be issued (and
all other Indebtedness incurred or Disqualified Stock issued after the first
day of such period of four full fiscal quarters referred to in the
"Limitations on Additional Indebtedness" covenant through and including the
date of determination), and (if applicable) the application of the net
proceeds therefrom (and from any other such Indebtedness or Disqualified
Stock), including the refinancing of other Indebtedness, had been incurred on
the first day of such four quarter period and, in the case of Acquired
Indebtedness, on the assumption that the related transaction (whether by means
of purchase, merger or otherwise) also had occurred on such date with the
appropriate adjustments with respect to such acquisition being included in
such pro forma calculation and (B) any acquisition or disposition by the
Company or any Restricted Subsidiary of any properties or assets outside the
ordinary course of business or any repayment of any principal amount of any
Indebtedness of the Company or any Restricted Subsidiary, in either case since
the first day of such period of four full fiscal quarters through and
including the date of determination, had been consummated on such first day of
such four quarter period; (ii) the Fixed Charges attributable to interest on
any Indebtedness required to be computed on a pro forma basis in accordance
with the "Limitations on Additional Indebtedness" covenant and (A) bearing a
floating interest rate shall be computed as if the rate in effect on the date
of computation had been the applicable rate for the entire period and (B)
which was not outstanding during the period for which the computation is being
made but which bears, at the option of the Company, a fixed or floating rate
of interest, shall be computed by applying, at the option of the Company,
either the fixed or floating rate; (iii) the Fixed Charges attributable to
interest on any Indebtedness under a revolving credit facility required to be
computed on a pro forma basis in accordance with the "Limitations on
Additional Indebtedness" covenant shall be computed based upon the average
daily balance of such Indebtedness during the applicable period, provided that
such average daily balance shall be reduced by the amount of any repayment of
Indebtedness under a revolving credit facility during the applicable period,
which repayment permanently reduced the commitments or amounts available to be
reborrowed under such facility; (iv) notwithstanding the foregoing clauses
(ii) and (iii), interest on Indebtedness determined on a fluctuating basis, to
the extent such interest is covered by agreements relating to Hedging
Obligations, shall be deemed to have accrued at the rate per annum resulting
after giving effect to the operation of such agreements; and (v) if after the
first day of the applicable four-quarter period the Company has permanently
retired any Indebtedness out of the net proceeds of the issuance and sale of
shares of Capital Stock (other than Disqualified Stock) of the Company within
30 days of such issuance and sale, Fixed Charges shall be calculated on a pro
forma basis as if such Indebtedness had been retired on the first day of such
period.
"Consolidated Income Tax Expense" means, for any period, the provision for
federal, state, local and foreign income taxes (including state franchise
taxes accounted for as income taxes in accordance with GAAP) of the Company
and the Restricted Subsidiaries for the period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, without duplication, with respect to
any Person for any period, the sum of the interest expense on all Indebtedness
of such Person and its Restricted Subsidiaries for such period, determined on
a consolidated basis in accordance with GAAP and including, without limitation
(i) imputed interest on Capitalized Lease Obligations, (ii) commissions,
discounts and other fees and charges owed with respect to letters of credit
securing financial obligations and bankers' acceptance financing, (iii) the
net costs associated with Hedging Obligations, (iv) amortization of financing
fees and expenses other than with respect to financing fees and expenses paid
on or prior to the Issue Date, (v) the interest portion of any deferred
payment obligations, (vi) amortization of debt discount or premium, if any,
(vii) all other non-cash interest expense, (viii)
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capitalized interest, (ix) all interest payable with respect to discontinued
operations, and (x) all interest on any Indebtedness of any other Person
guaranteed by such Person or any of its Restricted Subsidiaries.
"Consolidated Net Income" of any Person for any period means the net income
(or loss) of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP; provided that
there shall be excluded from such net income (to the extent otherwise included
therein), without duplication: (i) the net income (or loss) of any Person
(other than a Restricted Subsidiary of the referent Person) in which any
Person other than the referent Person has an ownership interest, except to the
extent that any such income has actually been received by the referent Person
or any of its Restricted Subsidiaries in the form of cash dividends during
such period (subject in the case of a dividend or distribution paid to a
Restricted Subsidiary, to the limitation in clause (iii) below); (ii) except
to the extent includible in the consolidated net income of the referent Person
pursuant to the foregoing clause (i), the net income (or loss) of any Person
that accrued prior to the date that (a) such Person becomes a Restricted
Subsidiary (other than a Guarantor) of the referent Person or is merged into
or consolidated with the referent Person or any of its Restricted Subsidiaries
or (b) the assets of such Person are acquired by the referent Person or any of
its Restricted Subsidiaries; (iii) the net income of any Restricted Subsidiary
(other than a Guarantor) of the referent Person during such period to the
extent that the declaration or payment of dividends or similar distributions
by such Restricted Subsidiary of that income is not permitted by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that Restricted
Subsidiary during such period; (iv) any gain (or loss), together with any
related provisions for taxes on any such gain (or loss), realized during such
period by the referent Person or any of its Restricted Subsidiaries upon (a)
the acquisition of any securities, or the extinguishment of any Indebtedness,
of the referent Person or any of its Restricted Subsidiaries or (b) any Asset
Sale by the referent Person or any of its Restricted Subsidiaries; (v) any
extraordinary gain (or loss), together with any related provision for taxes on
any such extraordinary gain (or loss), realized by the referent Person or any
of its Restricted Subsidiaries; (vi) in the case of a successor to such Person
by consolidation, merger or transfer of its assets, any earnings of the
successor prior to such merger, consolidation or transfer of assets; and (vii)
non-cash gains and losses due solely to fluctuations in currency values; and
provided further that, subject to clause (iii) above, any gain referred to in
clauses (iv) and (v) above that relates to a Restricted Investment and that is
received in cash by the referent Person or one of its Restricted Subsidiaries
during such period shall be included in the consolidated net income of the
referent Person.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock),
less all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business made
within 12 months after the acquisition of such business) subsequent to the
Issue Date in the book value of any asset owned by such Person or a Restricted
Subsidiary of such Person.
"Credit Agreement" means that certain Credit Agreement dated November 26,
1997 by and among the Company, the guarantors party thereto, Swiss Bank
Corporation and the other lenders party thereto, and all guarantees, notes,
security agreements, pledge agreements and other instruments in connection
therewith, as amended or refinanced from time to time, and/or one or more
letters of credit issued by one or more lenders for the benefit of the Company
and/or one or more of Parent and its Subsidiaries and in each case as amended
or refinanced from time to time.
"Currency Agreements" means any spot or forward foreign exchange agreements
and currency swap, currency option or other similar financial agreements or
arrangements entered into by the Company or any of its Restricted Subsidiaries
in the ordinary course of business and designed to protect against or manage
exposure to fluctuations in foreign currency exchange rates.
"Default" means any event, act or condition that after notice or the passage
of time or both would be an Event of Default.
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"Disinterested Director" means, with respect to any transaction or series of
transactions in respect of which a Board Resolution is required under the
Indenture, a member of the Board of Directors of the Company who does not have
any material direct or indirect financial interest (other than an interest
arising solely from the beneficial ownership of Capital Stock of the Company)
in or with respect to such transaction or series of transactions.
"Disqualified Stock" means any Capital Stock of such Person that, by its
terms, by the terms of any agreement related thereto or by the terms of any
security into which it is convertible, puttable or exchangeable, is, or upon
the happening of any event or the passage of time would be, required to be
redeemed or repurchased by such Person or any of its Restricted Subsidiaries,
whether or not at the option of the holder thereof, or matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in
whole or in part, on or prior to the stated final maturity of the Notes;
provided, however, that (i) any class of Capital Stock of such Person that, by
its terms, authorizes such Person to satisfy in full its obligations with
respect to the payment of dividends or upon maturity, redemption (pursuant to
a sinking fund or otherwise) or repurchase thereof or otherwise by the
delivery of Qualified Stock, and that is not convertible, puttable or
exchangeable for Disqualified Stock or Indebtedness, shall not be deemed to be
Disqualified Stock so long as such Person satisfies its obligations with
respect thereto solely by the delivery of Qualified Stock and (ii) any Capital
Stock that would constitute Disqualified Stock solely because the holders
thereof (or of any security into which it is convertible or for which it is
exchangeable) have the right to require the issuer to repurchase such Capital
Stock (or such security into which it is exchangeable) upon the occurrence of
an Asset Sale or a Change of Control shall not constitute Disqualified Stock
if such Capital Stock (and all such securities into which it is convertible or
for which it is exchangeable) provides that the issuer thereof will not
repurchase or redeem any such Capital Stock (or any such security into which
it is convertible or for which it is exchangeable) pursuant to such provisions
prior to compliance by the Company with the provisions of the Indenture
described under the caption "--Change of Control" or "--Certain Covenants--
Limitations on Asset Sales," and purchase of any Notes properly tendered
pursuant to an offer to purchase required thereunder and not withdrawn.
"EBITDA" means, with respect to any Person for any period, without
duplication, the sum of the amounts for such period of (i) Consolidated Net
Income, (ii) Consolidated Income Tax Expense, (iii) Consolidated Amortization
Expense, (iv) Consolidated Depreciation Expense, (v) Fixed Charges, (vi)
prepayment or make-whole payments incurred in connection with the repayment of
Indebtedness on the Issue Date, and (vii) all other non-cash items reducing
Consolidated Net Income (excluding any such non-cash charge that results in an
accrual of a reserve for cash charges in any future period) of such Person and
its Restricted Subsidiaries, in each case determined on a consolidated basis
in accordance with GAAP (provided, however, that the amounts set forth in
clauses (ii) through (vii) shall be included without duplication and only to
the extent such amounts actually reduced Consolidated Net Income), less the
aggregate amount of all non-cash items, determined on a consolidated basis, to
the extent such items increase Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy; provided, however, that if such
value exceeds $1.0 million, such determination shall be made in good faith by
the Board of Directors of the Company, whose determination shall be
conclusive.
"Fixed Charges" means, with respect to any Person for any period, the sum of
(a) the Consolidated Interest Expense of such Person and its Restricted
Subsidiaries for such period, and (b) the product of (i) all cash dividend
payments (and non-cash dividend payments in the case of a Person that is a
Restricted Subsidiary) on any series of preferred stock of such Person or a
Restricted Subsidiary of such Person, times (ii) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such Person, expressed
as a decimal, in each case, on a consolidated basis and in accordance with
GAAP.
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"Foreign Subsidiary" means a Restricted Subsidiary that is incorporated in a
jurisdiction other than the United States or a state thereof or the District
of Columbia and that has no material operations or assets in the United
States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on the Issue Date.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down under letters of credit. When used as a verb,
"guarantee" has a corresponding meaning.
"Hedging Obligations" of any person means the obligations of such person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" means a Person in whose name a Note is registered on the register
for the Notes.
"incur" means, with respect to any Indebtedness or obligation, incur,
create, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to such Indebtedness or
obligation. Neither the accrual of interest nor the accretion of accreted
value shall be deemed to be an incurrence.
"Indebtedness" of any Person at any date means, without duplication: (i) all
liabilities, contingent or otherwise, of such Person for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof); (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (or reimbursement obligations with respect thereto); (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, except trade payables and accrued expenses incurred by
such Person in the ordinary course of business in connection with obtaining
goods, materials or services; (v) the maximum fixed repurchase price of all
Disqualified Stock of such Person; (vi) all Capitalized Lease Obligations of
such Person; (vii) all Indebtedness of others secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
(viii) all Indebtedness of others guaranteed by such Person to the extent of
such guarantee; provided that Indebtedness of the Company or its Restricted
Subsidiaries that is guaranteed by the Company or the Company's Restricted
Subsidiaries shall only be counted once in the calculation of the amount of
Indebtedness of the Company and its Restricted Subsidiaries on a consolidated
basis; and (ix) to the extent not otherwise included in this definition,
obligations under Hedging Obligations not entered into solely for the purpose
of protecting the Company or its Restricted Subsidiaries against fluctuations
in foreign currency exchange rates or interest rates on or in connection with
indebtedness of the Company or any of its Restricted Subsidiaries then
outstanding. The amount of Indebtedness of any Person at any date shall be,
without duplication, the outstanding balance at such date of all unconditional
obligations as described above, the maximum liability of such Person for any
such contingent obligations at such date and, in the case of clause (vii), the
lesser of (A) the Fair Market Value of any asset subject to a Lien securing
the Indebtedness of others on the date that the Lien attaches and (B) the
amount of the Indebtedness secured. For purposes of the preceding sentence,
the "maximum fixed repurchase price" of any Disqualified Stock that does not
have a fixed repurchase price shall be calculated in accordance with the terms
of such Disqualified Stock as if such Disqualified Stock were purchased on any
date on which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Stock (or any equity security for which it may be
exchanged or converted), such fair market value shall be determined in good
faith by the Board of Directors of such Person, which determination shall be
evidenced by a Board Resolution.
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"Independent Financial Advisor" means an accounting, appraisal or investment
banking firm of nationally recognized standing that is disinterested and
independent with respect to the Company and its Affiliates and, in the
reasonable judgment of the Company's Board of Directors, is qualified to
perform the task for which it has been engaged.
"Interest Rate Agreements" means any interest rate protection agreements and
other types of interest rate hedging agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements)
designed to protect against or manage exposure to fluctuations in interest
rates.
"Investments" means, with respect to any Person, any direct or indirect
advance, loan, guarantee of Indebtedness or other extension of credit or
capital contribution to (by means of any transfer of cash or other property or
assets to others or any payment for property, assets or services for the
account or use of others), or any purchase or acquisition by such Person of
any Capital Stock, bonds, notes, debentures or other securities (including
derivatives) or evidences of Indebtedness issued by, any other Person. In
addition, the Fair Market Value of the net assets of any Restricted Subsidiary
at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary shall be deemed to be an "Investment" made by the Company in such
Unrestricted Subsidiary at such time. "Investments" shall exclude (a)
extensions of trade credit or other advances to customers on commercially
reasonable terms in accordance with normal trade practices or otherwise in the
ordinary course of business, (b) Hedging Obligations, but only to the extent
that the same constitute Permitted Indebtedness and (c) endorsements of
negotiable instruments and documents in the ordinary course of business.
"Issue Date" means the date the Notes are initially issued.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or similar
type of encumbrance (including, without limitation, any agreement to give or
grant any lease, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing) upon or with
respect to any property of any kind. A Person will be deemed to own subject to
a Lien any property that the Person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
"Management Services Agreement" means the Management Services Agreement to
be entered into between Saratoga and/or its Affiliate, on the one hand, and
Parent and/or one or more of its Subsidiaries, as such agreement may be
amended from time to time in any manner; provided that after giving effect to
such amendment the terms thereof are, in the aggregate, no less favorable to
the Holders.
"Net Available Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed by or
sold with recourse to the Company or any Subsidiary), net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of legal
counsel, accountants and investment banks) related to such Asset Sale, (ii)
provisions for all taxes payable as a result of such Asset Sale (after taking
into account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be paid to any Person (other than the
Company or any Subsidiary) owning a beneficial interest in the properties or
assets subject to the Asset Sale or having a Lien thereon and (iv) appropriate
amounts to be provided by the Company or any Subsidiary, as the case may be,
as a reserve required in accordance with GAAP against any liabilities
associated with such Asset Sale and retained by the Company or any Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pensions and other postemployment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an Officers' Certificate
delivered to the Trustee; provided, however, that any amounts remaining after
adjustments, revaluations or liquidations of such reserves shall constitute
Net Available Proceeds.
"Non-Recourse Purchase Money Indebtedness" means Indebtedness of the Company
or any of its Restricted Subsidiaries incurred (a) to finance the purchase of
any assets of the Company or any of its Restricted
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Subsidiaries within 90 days of such purchase, (b) to the extent the amount of
Indebtedness thereunder does not exceed 100% of the purchase cost of such
assets, (c) to the extent the purchase cost of such assets is or should be
included in "additions to property, plant and equipment" in accordance with
GAAP, (d) to the extent that such Indebtedness is non-recourse to the Company
or any of its Restricted Subsidiaries or any of their respective assets other
than the assets so purchased, and (e) to the extent the purchase of such
assets is not part of an acquisition of any Person. Indebtedness will not be
deemed recourse because there is recourse to the borrower, any guarantor or
any other Person for (x) environmental warranties and indemnities, or (y)
indemnities for and liabilities arising from fraud, misrepresentation,
misapplication or non-payment of rents, profits, insurance and condemnation
proceeds and other sums actually received by the borrower from secured assets
to be paid to the lender, waste and mechanics' liens.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Payment Restriction", with respect to a Subsidiary of any Person, means any
encumbrance, restriction or limitation, whether by operation of the terms of
its charter or by reason of any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation, on the ability of (i) such
Subsidiary to (a) pay dividends or make other distributions on its Capital
Stock or make payments on any obligation, liability or Indebtedness owed to
such Person or any other Subsidiary of such Person, (b) make loans or advances
to such Person or any other Subsidiary of such Person or (c) transfer any of
its properties or assets to such Person or any other Subsidiary of such Person
or (ii) such Person or any other Subsidiary of such Person to receive or
retain any such dividends, distributions or payments, loans or advances or
transfer of properties or assets.
"Permitted Holders" means (i) Saratoga Partners III, L.P., (ii) David J.
Barrett, Martin A. Moore, Michael Baxley, John Champagne, Robert Feltz, and
Frank A. Wright, and (iii) Permitted Transferees of the foregoing.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness of the Company and any Guarantor under the Credit
Agreement in an aggregate principal amount at any time outstanding (with
letters of credit being deemed to have a principal amount equal to the
aggregate maximum then available to be drawn thereunder assuming compliance
with all conditions to such drawing) not to exceed the greater of (a) $25
million or (b) the sum of 80% of the book value of accounts receivable and
60% of the book value of inventory of the Company and its Restricted
Subsidiaries (as set forth on the latest available balance sheet),
calculated on a consolidated basis and in accordance with GAAP;
(ii) Indebtedness of the Company and any Guarantor under the Credit
Agreement in an aggregate principal amount at any time outstanding (with
letters of credit being deemed to have a principal amount equal to the
maximum then available to be drawn thereunder assuming compliance with all
conditions to such drawing) not to exceed $28.0 million, less the aggregate
amount of all Net Available Proceeds of Asset Sales applied to permanently
reduce the outstanding amount or the commitments with respect to such
Indebtedness pursuant to the "Limitations on Asset Sales" covenant;
(iii) Indebtedness under the Notes, the Guarantees and the Indenture;
(iv) all of the Indebtedness of the Company and its Restricted
Subsidiaries not otherwise referred to in this definition that is
outstanding on the Issue Date;
(v) Indebtedness under Interest Rate Agreements, provided that (1) such
Interest Rate Agreements are related to payment obligations on Permitted
Indebtedness or Indebtedness otherwise permitted by the Consolidated Fixed
Charge Coverage Ratio test set forth in the "Limitations on Additional
Indebtedness" covenant, and (2) the notional principal amount of such
Interest Rate Agreements does not exceed the principal amount of such
Indebtedness to which such Hedging Obligations relate;
(vi) Indebtedness under Currency Hedge Agreements, provided that (a) such
Currency Agreements are related to payment obligations on Permitted
Indebtedness or Indebtedness otherwise permitted by the
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Consolidated Fixed Charge Coverage Ratio test set forth in the "Limitations
on Additional Indebtedness" covenant or to the foreign currency cash flows
reasonably expected to be generated or required by the Company and the
Restricted Subsidiaries, (b) the notional principal amount of the Currency
Agreements does not exceed the principal amount of that Indebtedness and
the amount of those foreign currency cash flows to which such Currency
Agreements relate and (c) such Currency Agreements are entered into for the
purpose of limiting currency exchange rate risks in connection with
Indebtedness permitted to be incurred under the Indenture or transactions
entered into in the ordinary course of business;
(vii) Indebtedness of the Company to a Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Company or to a Restricted
Subsidiary; provided, however, that upon either (1) any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or (2) the transfer or
other disposition of any such Indebtedness (except to the Company or a
Restricted Subsidiary), the provisions of this clause (vii) shall no longer
be applicable to such Indebtedness and such Indebtedness shall be deemed,
in each case, to be incurred and shall be treated as an incurrence for
purposes of the Consolidated Fixed Charge Coverage Ratio test set forth in
the "Limitations on Additional Indebtedness" covenant at the time the
Restricted Subsidiary in question ceased to be a Restricted Subsidiary or
the time such transfer or other disposition occurred;
(viii) Indebtedness in respect of bid, performance or surety bonds issued
for the account of the Company in the ordinary course of business,
including guarantees or obligations of the Company with respect to letters
of credit supporting such bid, performance or surety obligations (in each
case other than for an obligation for money borrowed);
(ix) Indebtedness in respect of Non-Recourse Purchase Money Indebtedness
incurred by the Company or any Restricted Subsidiary;
(x) Refinancing Indebtedness;
(xi) Indebtedness of Restricted Subsidiaries in an aggregate principal
amount not to exceed $5 million at any time outstanding;
(xii) Indebtedness incurred to finance the acquisition of (1) any Person
principally engaged in the business of the Company and its Restricted
Subsidiaries as conducted on the Issue Date or any business reasonably
related thereto that becomes a Restricted Subsidiary or (2) any Related
Assets that constitute a line of business, company or other business
entity, in an aggregate principal amount not to exceed $21.0 million at any
time outstanding provided that such Person or Related Assets, after giving
pro forma effect to such Indebtedness as if it had been incurred by such
Person or Related Assets would have had a Fixed Charge Coverage Ratio of
2.0 to 1; provided that pro forma effect, to the extent permitted by
Regulation S-X pursuant to the Securities Act of 1933, may be given to cost
savings and expense reductions in connection with such acquisition; and
(xiii) other Indebtedness in an aggregate principal amount not to exceed
$2 million at any time outstanding.
"Permitted Investments" means any of the following:
(i) Investments in Cash Equivalents;
(ii) Investments in the Company or any of its Restricted Subsidiaries;
(iii) Investments by the Company or any of its Restricted Subsidiaries in
another Person, if as a result of such Investment (A) such other Person
becomes a Restricted Subsidiary or (B) such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all
of its properties and assets to, the Company or a Restricted Subsidiary;
(iv) Investments permitted under the "Limitation on Asset Sales"
covenant;
(v) Investments made in the ordinary course of business in prepaid
expenses, lease, utility, workers' compensation, performance and other
similar deposits;
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(vi) Investments received upon foreclosure, perfection or enforcement of
any Lien granted by, in the course of good faith settlement of claims
against, or by reason of a composition or readjustment of debt or a
reorganization of, any debtor of the Company or any of its Subsidiaries;
(vii) endorsements for collection or deposit in the ordinary course of
business of bank drafts and similar negotiable instruments received as
payment for ordinary course of business trade receivables;
(viii) Hedging Obligations permitted under clause (a) under the
"Limitations on Additional Indebtedness" covenant;
(ix) Loans or advances to employees or directors of the Company or any
Restricted Subsidiary in the ordinary course of business;
(x) guarantees of Indebtedness of the Company or any Restricted
Subsidiary, which guarantees are permitted to be incurred under the
Indenture;
(xi) any Investment (x) to the extent that the consideration therefor
consists of Qualified Stock or (y) out of the proceeds of a substantially
concurrent issuance and sale (other than to a Restricted Subsidiary of the
Company) of Qualified Stock (provided that such issuance and sale shall not
increase the Basket); and
(xii) Investments in an aggregate amount not to exceed $5.0 million at
any time outstanding.
"Permitted Liens" means:
(i) Liens for taxes, assessments or governmental charges or claims that
either (a) are not yet delinquent or (b) are being contested in good faith
by appropriate proceedings and as to which appropriate reserves or other
provisions have been made in accordance with GAAP;
(ii) statutory and common law Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other similar
Liens arising in the ordinary course of business and with respect to
amounts that either (a) are not yet delinquent or (b) are being contested
in good faith by appropriate proceedings and as to which appropriate
reserves or other provisions have been made in accordance with GAAP;
(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
(iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
progress payments, government contracts, performance and return-of-money
bonds and other obligations of a similar nature (exclusive of obligations
for the payment of borrowed money), in each case, incurred in the ordinary
course of business;
(v) easements, rights-of-way, municipal and zoning ordinances,
restrictions and other similar charges or encumbrances that do not
materially interfere with the ordinary conduct of the business of the
Company or any of its Restricted Subsidiaries;
(vi) leases or subleases granted to others that do not materially
interfere with the ordinary conduct of the business of the Company or any
of its Restricted Subsidiaries and do not materially affect the value of
the property thereto;
(vii) Liens securing Refinancing Indebtedness to the extent incurred to
refinance Indebtedness that is secured by Liens and outstanding as of the
Issue Date (after giving effect to the application of the proceeds of the
Notes Offering), provided that such Refinancing Indebtedness shall be
secured solely by the assets (including improvements thereon) securing the
outstanding Indebtedness being refinanced;
(viii) Liens securing Indebtedness between the Company and its Restricted
Subsidiaries or between or among such Restricted Subsidiaries;
(ix) Liens existing as of the Issue Date to the extent and in the manner
such Liens are in effect on the Issue Date (after giving effect to the
application of the proceeds of the Notes Offering);
(x) Liens securing the Credit Agreement up to the amount of Indebtedness
permitted to be incurred under clauses (i), (ii) and (xiii) of the
definition of "Permitted Indebtedness";
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(xi) Liens arising from the rendering of a final judgment or order
against the Company or any Restricted Subsidiary that does not give rise to
an Event of Default;
(xii) Liens securing 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;
(xiii) Liens securing Indebtedness permitted to be incurred pursuant to
clauses (xi) and (xii) of the definition of "Permitted Indebtedness";
(xiv) Liens securing Hedging Obligations entered into with lenders under
the Credit Agreement;
(xv) Liens in favor of the Company or a Restricted Subsidiary;
(xvi) Liens securing Purchase Money Indebtedness, provided, that such
Liens extend only to the property being acquired and improvements thereon
and such Lien is created within 90 days of the purchase of such property;
(xvii) Liens securing Acquired Indebtedness permitted to be incurred
under the Indenture, provided that such Liens (x) are not incurred in
connection with, or in contemplation of, the acquisition of the property or
assets acquired and (y) do not extend to or cover any property or assets of
the Company or any of its Restricted Subsidiaries other than the property
or assets so acquired and any improvements on such property or assets;
(xviii) Liens securing obligations under the Indenture, the Notes or the
Guarantees;
(xix) Liens on property of a Person existing at the time such Person is
acquired or merged with or into or consolidated with the Company or any
Restricted Subsidiary (and not created in anticipation or contemplation
thereof); and
(xx) Liens to secure Indebtedness incurred to refinance, in whole or in
part, any Indebtedness secured by Liens referred to in the foregoing
clauses (xv) - (xix), provided that in each of clauses (xvi), (xvii) and
(xix) such Liens do not extend to any additional property or assets (other
than improvements thereon).
"Permitted Transferees" means, with respect to any Person, (x) in the case
of any Person that is a natural person, (i) such individual's spouse, estate,
lineal descendants, heirs, executors, legal representatives, administrators,
(ii) any trust for the benefit of any of the foregoing, and (y) in the case of
any Person that is not a natural person, any other Person controlled by such
Person.
"Person" means any individual, corporation, partnership, joint venture,
incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"Plan of Liquidation", with respect to any Person, means a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise): (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as an entirety
or substantially as an entirety; and (ii) the distribution of all or
substantially all of the proceeds of such sale, lease, conveyance or other
disposition and all or substantially all of the remaining assets of such
Person to holders of Capital Stock of such Person.
"Public Equity Offering" means an offer and sale of Qualified Stock of the
Company or Parent for cash pursuant to a registration statement that has been
declared effective by the Commission pursuant to the Securities Act (other
than a registration statement on Form S-8 or otherwise relating to equity
securities issuable under any employee benefit plan); provided that any net
proceeds to Parent are contributed in cash to the common equity of the
Company.
"Purchase Money Indebtedness" means Indebtedness incurred for the purpose of
financing all or any part of the purchase price, or the cost of construction,
of any property, plant or equipment to be used in the business of the Company
and the Restricted Subsidiaries, provided that such Indebtedness shall not
exceed 100% of the lower of cost or Fair Market Value (at the time of
incurrence) of the property, plant or equipment so purchased or constructed.
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"Qualified Stock" of any Person means any and all Capital Stock of such
Person other than Disqualified Stock.
"redeem" means redeem, repurchase, defease or otherwise acquire or retire
for value; and "redemption" and "redeemed" have correlative meanings.
"refinance" means refinance, renew, extend, replace, defease or refund, in
whole or in part, including successively; and "refinancing" and "refinanced"
have correlative meanings.
"Refinancing Indebtedness" means Indebtedness of the Company or a Restricted
Subsidiary of the Company issued in exchange for, or the proceeds from the
issuance and sale or disbursement of which are used substantially concurrently
to refinance or constituting an amendment of, any Indebtedness pursuant to
clause (ii) and (iii) of the definition of Permitted Indebtedness of the
Company or any of its Restricted Subsidiaries or any Indebtedness incurred
pursuant to the Fixed Charge Coverage Ratio test set forth in the "Limitations
on Additional Indebtedness" covenant in a principal amount not in excess of
(a) the principal amount of the Indebtedness so refinanced plus (b) the lesser
of the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Indebtedness refinanced and the
amount of any premium reasonably determined by the issuer of such Indebtedness
as necessary to accomplish such refinancing by means of a tender offer,
exchange offer or privately negotiated repurchase plus (c) the expenses of
such issuer reasonably incurred in connection therewith (or, if such
Refinancing Indebtedness refinances Indebtedness under a revolving credit
facility or other agreement providing a commitment for subsequent borrowings,
with a maximum commitment not to exceed the maximum commitment under such
revolving credit facility or other agreement); provided that: (i) the
Refinancing Indebtedness is the obligation of the same Person; (ii) in the
case of any refinancing of Indebtedness (including the Notes) that is pari
passu with or subordinated in right of payment to the Notes, then such
Refinancing Indebtedness is pari passu with or subordinated in right of
payment to the Notes at least to the same extent as the Indebtedness being
refinanced; (iii) the Refinancing Indebtedness is scheduled to mature either
(a) no earlier than the Indebtedness being refinanced or (b) after the
maturity date of the Notes; (iv) the portion, if any, of the Refinancing
Indebtedness that is scheduled to mature on or prior to the maturity date of
the Notes has a Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is incurred that is equal to or greater than the Weighted Average
Life to Maturity of the portion of the Indebtedness being repaid that is
scheduled to mature on or prior to the maturity date of the Notes; and (v) the
Refinancing Indebtedness is secured only to the extent, if at all, and by the
assets, that the Indebtedness being repaid or amended is secured.
"Related Assets" means properties and assets that will be used in the
business of the Company and its Restricted Subsidiaries as conducted on the
Issue Date or in businesses reasonably related thereto.
"Restricted Investment", with respect to any Person, means (without
duplication) any Investment by such Person other than a Permitted Investment,
including, without limitation, the designation of a Restricted Subsidiary as
an Unrestricted Subsidiary.
"Restricted Payment", with respect to any Person, means: (i) the declaration
of any dividend (other than a dividend declared or paid by a Restricted
Subsidiary to the Company or a Restricted Subsidiary) or the making of any
other payment or distribution of cash, securities or other property or assets
in respect of such Person's Capital Stock (except that a dividend payable
solely in Qualified Stock of such Person shall not constitute a Restricted
Payment); (ii) any payment on account of the redemption of such Person's
Capital Stock or any other payment or distribution made in respect thereof,
either directly or indirectly (other than a payment solely in Qualified
Stock); (iii) any Restricted Investment; or (iv) any purchase, redemption,
defeasance (including without limitation in substance or legal defeasance) or
other acquisition or retirement for value, directly or indirectly, by the
Company or a Subsidiary, prior to the scheduled maturity or prior to any
scheduled repayment of principal or sinking fund payment, as the case may be,
in respect of Subordinated Indebtedness.
"Restricted Subsidiary" means any direct or indirect Subsidiary of the
Company other than an Unrestricted Subsidiary.
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"Sale and Leaseback Transaction" means with respect to any Person an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person or any of its Restricted Subsidiaries of any property or asset of such
Person or any of its Restricted Subsidiaries which has been or is being sold
or transferred by such Person or such Restricted Subsidiary to such lender or
investor or to any Person to whom funds have been or are to be advanced by
such lender or investor on the security of such property or asset.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the Issue
Date, except all references to "10 percent" in such definition shall be
changed to "2 percent".
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the date specified in the instrument
evidencing or governing such Indebtedness as the fixed date on which the
principal of such Indebtedness or such installment of interest is due and
payable.
"Subordinated Indebtedness" means Indebtedness of the Company or any
Subsidiary that is subordinated in right of payment to the Notes or the
Subsidiary Guarantees, respectively.
"Subsidiary" of any Person means (i) any corporation of which at least a
majority of the aggregate voting power of whose Voting Stock is owned by such
Person directly or through one or more other Subsidiaries of such Person and
(ii) any entity other than a corporation in which such Person, directly or
indirectly, owns at least a majority of the voting power of the Voting Stock
of such entity, other than any such Person designated as an Unrestricted
Subsidiary in accordance with the definition of "Unrestricted Subsidiary".
"Subsidiary Guarantor" means each Person who is required to become a
Subsidiary Guarantor by the terms of the Indenture.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination will be designated an Unrestricted Subsidiary by the
Board of Directors of the Company as provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any Subsidiary of the Company as an Unrestricted Subsidiary so long
as (a) neither the Company nor any Restricted Subsidiary is directly or
indirectly liable pursuant to the terms of any Indebtedness of such Subsidiary
(other than in the form of an Investment therein in accordance with the
"Limitations on Restricted Payments" covenant); (b) no default with respect to
any Indebtedness of such Subsidiary would permit (upon notice, passage of time
or otherwise) any holder of any other Indebtedness of the Company or any
Restricted Subsidiary to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its Stated Maturity;
(c) such designation as an Unrestricted Subsidiary would be permitted under
the "Limitations on Restricted Payments" covenant; and (d) the Company could
incur $1.00 of additional Indebtedness (not including the incurrence of
Permitted Indebtedness) pursuant to the Consolidated Fixed Charge Coverage
Ratio test set forth in the "Limitations on Additional Indebtedness" covenant.
Any such designation by the Board of Directors shall be evidenced to the
Trustee by the filing with the Trustee of a certified copy of the Board
Resolution giving effect to such designation and an Officer's Certificate
certifying that such designation complied with the foregoing conditions and
setting forth the underlying calculations of such certificate. The Board of
Directors of the Company may designate any Unrestricted Subsidiary as a
Restricted Subsidiary if (i) immediately after giving effect to such
designation on a pro forma basis, no Default or Event of Default shall have
occurred and be continuing and (ii) Indebtedness of such Unrestricted
Subsidiary outstanding immediately following such redesignation would, if
incurred at such time, be permitted to be incurred under the Indenture.
"Voting Stock", with respect to any specified Person, means any class or
classes of Capital Stock of the specified Person pursuant to which the holders
thereof have the general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees of the
specified Person
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(irrespective of whether or not, at the time, stock of any other class or
classes has, or might have, voting power by reason of the happening of any
contingency).
"Weighted Average Life to Maturity", when applied to any Indebtedness at any
date, means the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary to the
extent (i) all of the Capital Stock or other ownership interests in such
Restricted Subsidiary, other than any directors' qualifying shares mandated by
applicable law, is owned directly or indirectly by the Company or (ii) such
Restricted Subsidiary is organized in a foreign jurisdiction and is required
by the applicable laws and regulations of such foreign jurisdiction to be
partially owned by the government of such foreign jurisdiction or individual
or corporate citizens of such foreign jurisdiction in order for such
Restricted Subsidiary to transact business in such foreign jurisdiction,
provided that the Company, directly or indirectly, owns the remaining Capital
Stock or ownership interest in such Restricted Subsidiary and, by contract or
otherwise, controls the management and business of such Restricted Subsidiary
and derives the economic benefits of ownership of such Restricted Subsidiary
to substantially the same extent as if such Restricted Subsidiary were a
wholly owned Subsidiary.
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DESCRIPTION OF UNITS
Each Unit offered and sold by Parent consisted of one share of $100
liquidation preference of Series A Cumulative Redeemable Exchangeable
Preferred Stock of Parent (the "Senior Preferred Stock") and one Warrant to
purchase shares of Common Stock. The Senior Preferred Stock and the Warrants
comprising each Unit will not be separately tradable until 90 days after the
date of issuance of the Senior Preferred Stock, with certain exceptions (the
"Separation Date"). The Units will be issued in a private transaction that is
not subject to the registration requirements of the Securities Act.
SENIOR PREFERRED STOCK
The Certificate of Incorporation of Parent (the "Certificate") authorizes
200,000 shares of Senior Preferred Stock, of which 100,000 shares will be
issued in the Units Offering. Additional shares of Senior Preferred Stock may
be issued to pay certain dividends on the Senior Preferred Stock issued in the
Units Offering at the election of Parent. Subject to certain conditions, the
Senior Preferred Stock will be exchangeable for Exchange Debentures at the
option of Parent on any dividend payment date.
RANK
The Senior Preferred Stock will, with respect to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of Parent, rank
(i) senior to all classes of Common Stock and the Series B Preferred Stock and
each other class of capital stock or series of Preferred Stock established by
the Board of Directors of Parent the terms of which do not expressly provide
that it ranks on a parity with the Senior Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up and
dissolution of Parent (collectively referred to with the Common Stock and the
Series B Preferred Stock as "Junior Securities"). The Senior Preferred Stock
will be subject to the issuance of series of Junior Securities and securities
ranking on a parity with the Senior Preferred Stock ("Parity Securities"),
provided that Parent may not issue any new class of Parity Securities without
the approval of the holders of a majority of the shares of Senior Preferred
Stock then outstanding, except that Parent 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 of Parent, out of funds legally
available therefor, dividends on the Senior Preferred Stock at a rate per
annum applied to 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 quarterly in arrears commencing on February 28, 1998. On or before
November 30, 2002, Parent 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 November 30, 2002 dividends may be paid only in cash.
OPTIONAL REDEMPTION
The Senior Preferred Stock may be redeemed for cash (subject to contractual
and other restrictions with respect thereto and to the legal availability of
funds therefor) at any time on or after a date which is five years following
the issuance date, in whole or in part, at the option of Parent, at certain
redemption prices (expressed as percentages of the liquidation preference
thereof) beginning on November 30, 2002, declining ratably to 100% in 2005 or
thereafter, together with an amount in cash equal to all accumulated and
unpaid dividends.
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In addition, Parent may also redeem the Senior Preferred Stock, in whole or
in part at its option, at a redemption price equal to a percentage 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 payment date immediately
prior to the redemption date to the redemption date), with the net proceeds of
one or more public equity offerings by Parent. The terms of certain debt
instruments of Parent and its subsidiaries, including the Credit Agreement and
the Indenture, will restrict, directly or indirectly, the ability of Parent to
redeem the Senior Preferred Stock, and future agreements to which Parent or
its subsidiaries are parties may contain similar restrictions. See
"Description of Other Indebtedness."
MANDATORY REDEMPTION
On November 30, 2009, Parent will be required to redeem (subject 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
to the redemption date. The terms of certain debt instruments of Parent and
its subsidiaries, including the Credit Agreement and the Indenture, will
restrict, directly or indirectly, the ability of Parent to redeem the Senior
Preferred Stock, and future agreements to which Parent or its subsidiaries are
parties may contain similar restrictions. See "Description of Other
Indebtedness."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, Parent shall be obligated to
make an offer to all holders of Senior Preferred Stock to purchase all
outstanding Senior Preferred Stock and will purchase, on a business day not
more than 60 days nor less than 30 days after the occurrence of the Change of
Control, all Senior Preferred Stock properly tendered pursuant to such offer
to purchase for a cash price equal to 101% of the aggregate liquidation
preference of the Senior Preferred Stock, plus an amount in cash equal to all
accumulated and unpaid dividends per share, if any, to the purchase date.
VOTING RIGHTS
Holders of the Senior Preferred Stock have no voting rights with respect to
general corporate matters except as provided by law or as set forth in the
Certificate. The Certificate provides that in certain circumstances holders of
Senior Preferred Stock will be entitled to vote for two members of Parent's
Board of Directors or to vote as a class for certain mergers, consolidations
or sales of all or substantially all of the assets of Parent.
CERTAIN COVENANTS
The Certificate contains certain covenants that limit the ability of the
Parent to redeem or repurchase Junior Securities or Parity Securities and pay
dividends thereon, to merge or consolidate with any other entity, to sell all
or substantially all of its assets or to enter into transactions with
affiliates. The Certificate also requires Parent to deliver certain reports
and information to the holders of the Senior Preferred Stock.
EXCHANGE
Parent may at its option exchange all, but not less than all, of the then
outstanding shares of Senior Preferred Stock into Exchange Debentures on any
dividend payment date, provided that on the date of such exchange (the
"Exchange Date") there are no contractual impediments to such exchange and
certain other conditions have been met. On the Exchange Date, holders of
outstanding shares of Senior Preferred Stock will be entitled to receive a
principal amount of Exchange Debentures equal to the liquidation preference
per share, plus an amount in cash equal to all accrued and unpaid dividends to
the Exchange Date.
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The New Credit Facility contains limitations with respect to Parent's
ability to issue the Exchange Debentures, and any future credit agreements or
other agreements relating to indebtedness to which Parent or any of its
subsidiaries become a party may contain similar limitations. See "Description
of Other Indebtedness."
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Parent and the Initial Purchasers entered into the Preferred Stock
Registration Rights Agreement on the date of issuance of the Senior Preferred
Stock. Pursuant to the Preferred Stock Registration Rights Agreement, Parent
has agreed to file with the Commission a registration statement on the
appropriate form under the Securities Act with respect to the offer to
exchange the Senior Preferred Stock for a new issue of Senior Preferred Stock
of Parent registered under the Securities Act, with terms identical to those
of the Senior Preferred Stock. In certain circumstances, Parent or an
affiliate of Parent will be required to file with the Commission a shelf
registration statement to cover resales of the shares of Senior Preferred
Stock by the holders thereof. If Parent fails to satisfy these registration
obligations, it will be required to pay liquidated damages to the holders of
the Senior Preferred Stock under certain circumstances.
EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued pursuant to an Exchange
Debenture indenture (the "Exchange Debenture Indenture") to be dated the
Exchange Date between Parent and a trustee (the "Trustee"). The Exchange
Debentures will represent general unsecured subordinated obligations of
Parent, subordinated in right of payment, subject to certain exceptions, to
all existing and future indebtedness of Parent, including its guarantee of the
Notes and the New Credit Facility, other than any indebtedness that expressly
provides that it ranks pasi passu with or junior to the Exchange Debentures.
As of September 30, 1997, after giving pro forma effect to the Transactions,
Parent would have had approximately $128.0 million of indebtedness that would
have ranked senior to the Exchange Debentures.
The Exchange Debentures will bear interest from the Exchange Date at a rate
per annum equal to the dividend rate for the Senior Preferred Stock, payable
semi-annually, commencing with the first such date to occur after the Exchange
Date. On or before November 30, 2002, Parent may, at its option, pay interest
in cash or in additional Exchange Debentures having an aggregate principal
amount equal to the amount of such interest. Thereafter, interest may be paid
in cash only. The Exchange Debentures will mature on November 30, 2009.
OPTIONAL REDEMPTION
The Exchange Debentures will be redeemable, at the option of Parent, in
whole or in part, at any time on or after November 30, 2002, at certain
redemption prices (expressed as percentages of principal amount), together
with accrued and unpaid interest, if any, thereon to the redemption date,
beginning on November 30, 2002, declining ratably to 100% in 2005 and
thereafter. In addition, on or before November 30, 2000, Parent may redeem the
Exchange Debentures in whole or in part, at a redemption price equal to a
percentage of the principal amount thereof, plus an amount in cash equal to
all accrued and unpaid interest thereon to the redemption date, with the
proceeds of one or more Public Equity Offerings.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Exchange
Debentures will have the right to require Parent to purchase all or any part
of such holder's Exchange Debentures at an offer price in cash equal to 101%
of the aggregate principal amount thereof, plus accrued and unpaid interest
thereon to the date of purchase. There can be no assurance that Parent will
have financial resources necessary to purchase the Exchange Debentures upon a
Change of Control.
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CERTAIN COVENANTS
The Exchange Debenture Indenture will contain covenants that, among other
things, limit the ability of Parent and its Restricted Subsidiaries (as
defined in the Exchange Debenture Indenture) to: (i) incur additional
indebtedness; (ii) pay dividends or make certain other distributions; (iii)
repurchase equity interests; (iv) consummate certain asset sales; (v) enter
into certain transactions with affiliates; (vi) incur indebtedness (other than
Indebtedness that ranks senior to the Exchange Debentures) secured by liens;
(vii) merge or consolidate with any other person; or (viii) sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
the assets of Parent or Parent and its Subsidiaries.
WARRANTS
GENERAL
The Warrants were issued pursuant to the Warrant Agreement between Parent
and United States Trust Company of New York, as warrant agent (the "Warrant
Agent"). Each Warrant will be evidenced by a Warrant Certificate which
entitles the holder thereof to purchase shares of Common Stock ("Warrants
Shares") from Parent at an exercise price (the "Exercise Price"), subject to
adjustment as provided in the Warrant Agreement. The Warrants may be exercised
at any time beginning one year after the issuance date of the Senior Preferred
Stock and prior to the close of business on the twelfth anniversary of the
Issue Date. Warrants that are not exercised by such date will expire.
CERTAIN TERMS
Exchange
If Parent conducts an initial public offering of equity securities (other
than Common Stock), Parent will give holders of Warrants and Warrant Shares
the opportunity to convert such Warrants into warrants to purchase such equity
securities and the opportunity to convert such Warrant Shares into such equity
securities. In addition, if the Company (or any entity owning a majority of
the Capital Stock or assets of the Company) conducts an initial public
offering of equity securities, Parent will give holders of Warrants and
Warrant Shares the opportunity to convert such Warrants into warrants to
purchase such equity securities and the opportunity to convert such Warrant
Shares into such equity securities.
Holders of Warrants will be able to exercise their Warrants only if a
registration statement relating to the Warrant Shares underlying the Warrants
is then effective and available, or the exercise of such Warrants is exempt
from the registration requirements of the Securities Act, and such securities
are qualified for sale or exempt from qualification under the applicable
securities laws of the states or other jurisdictions in which the various
holders of the Warrants reside.
Anti-dilution Provisions
The Warrant Agreement contains provisions adjusting the Exercise Price and
the number of shares of Common Stock or other securities issuable upon
exercise of a Warrant in certain circumstances.
No Rights as Stockholders
The holders of unexercised Warrants are not entitled, as such, to receive
dividends or other distributions, receive notice of any meeting of the
stockholders, consent to any action of the stockholders, receive notice of any
other stockholder proceedings, or to any other rights as stockholders of
Parent.
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Mergers or Consolidations
Subject to certain exceptions, in the event that Parent consolidates with,
merges with or into, or sells all or substantially all of its property and
assets to another person, each Warrant thereafter shall entitle the holder
thereof to receive upon exercise thereof the number of shares of capital stock
or other securities or property which the holder of Common Stock (or other
securities issuable upon exercise of the Warrants) is entitled to receive upon
completion of such consolidation, merger or sale of assets. If Parent merges
or consolidates with, or sells all or substantially all of the property and
assets of Parent to, another person and, in connection therewith,
consideration to the holders of Common Stock (or other securities issuable
upon exercise of the Warrants) in exchange for their shares is payable solely
in cash, or in the event of the dissolution, liquidation or winding-up of
Parent, then the holders of the Warrants will be entitled to receive
distributions on an equal basis with the holders of Common Stock or other
securities issuable upon exercise of the Warrants assuming the Warrants had
been exercised immediately prior to such event, less the Exercise Price.
Reservation of Shares
Parent has authorized and will reserve for issuance such number of shares of
Common Stock as will be issuable upon the exercise of all outstanding
Warrants.
REGISTRATION RIGHTS
Pursuant to the Warrant Agreement, in certain circumstances Parent is
required to file a registration statement under the Securities Act covering
the issuance of shares of Common Stock to the holders of the Warrants upon
exercise of the Warrants by the holders thereof, subject to certain
exceptions, until the earlier of (i) such time as all Warrants have been
exercised and (ii) the Expiration Date.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal income
tax consequences generally applicable to those persons exchanging Initial
Notes for the Exchange Notes offered hereby. The federal income tax
considerations set forth below are based upon currently existing provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), applicable
Treasury Regulations ("Treasury Regulations"), judicial authority, and current
administrative rulings and pronouncements of the Internal Revenue Service (the
"IRS"). There can be no assurance that the IRS will not take a contrary view,
and no ruling from the IRS has been, or will be, sought on the issues
discussed herein. Legislative, judicial, or administrative changes or
interpretations may be forthcoming that could alter or modify the statements
and conclusions set forth herein. Any such changes or interpretations may or
may not be retroactive and could affect the tax consequences discussed below.
This discussion applies only to a person who is an initial beneficial owner
and (i) an individual citizen or resident of the United States for U.S.
federal income tax purposes, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate the income of which is subject
to United States federal income tax regardless of source, (iv) a trust whose
administration is subject to the primary supervision of a United States court
and which has one or more United States persons who have the authority to
control all substantial decisions of the trust, or (v) any other person whose
income or gain in respect of the Notes is effectively connected with the
conduct of a United States trade or business (or, if applicable, attributable
to a permanent establishment situated in the United States) (a "Holder").
The summary is not a complete analysis or description of all potential
federal tax considerations that may be relevant to, or of the actual tax
effect that any of the matters described herein will have on, particular
Holders, and does not address foreign, state, local or other tax consequences.
This summary does not address the federal income tax consequences to (a)
special classes of taxpayers (such as S corporations, mutual funds, insurance
companies, financial institutions, small business investment companies,
foreign companies, nonresident alien individuals, regulated investment
companies, real estate investment trusts, dealers in securities or currencies,
broker-dealers and tax-exempt organizations) who are subject to special
treatment under the federal income tax laws, (b) Holders that hold Notes as
part of a position in a "straddle," or as part of a "hedging," "conversion,"
or other integrated investment transaction for federal income tax purposes,
(c) Holders that do not hold the Notes as capital assets within the meaning of
section 1221 of the Code or (d) Holders whose functional currency is not the
U.S. dollar. Furthermore, estate and gift tax consequences are not discussed
herein.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH PERSON CONSIDERING
EXCHANGING INITIAL NOTES FOR EXCHANGE NOTES IS STRONGLY URGED TO CONSULT HIS
OR HER OWN TAX ADVISOR WITH RESPECT TO HIS OR HER PARTICULAR TAX SITUATION AND
AS TO ANY FEDERAL, FOREIGN, STATE, LOCAL OR OTHER TAX CONSIDERATIONS
(INCLUDING ANY POSSIBLE CHANGES IN TAX LAW) AFFECTING THE PURCHASE, HOLDING
AND DISPOSITION OF THE NOTES.
EXCHANGE OFFER
The exchange of Initial Notes for the Exchange Notes pursuant to the
Exchange Offer should not be a taxable event for U.S. federal income tax
purposes. As a result, there should be no U.S. federal income tax consequences
to Holders exchanging the Initial Notes for the Exchange Notes pursuant to the
Exchange Offer, and a Holder should have the same tax basis and holding period
in the Exchange Notes as the Initial Notes.
INTEREST
Generally, interest paid on the Notes will be taxable to a Holder as
ordinary income at the time it accrues or is received in accordance with such
Holder's method of accounting for U.S. federal income tax purposes.
MARKET DISCOUNT
If a Note is acquired at a "market discount," some or all of any gain
realized upon a subsequent sale, other disposition, or full or partial
principal payment, of such Note may be treated as ordinary income, as
described below. For this purpose, "market discount" is the excess (if any) of
the principal amount of a Note over the
103
<PAGE>
purchase price thereof, subject to a statutory de minimis exception. Unless a
Holder has elected to include the market discount in income as it accrues,
gain, if any, realized on any subsequent disposition (other than in connection
with certain nonrecognition transactions) or full or partial principal payment
of such Note will be treated as ordinary income to the extent of the market
discount that is treated as having accrued during the period such Holder held
such Note.
The amount of market discount treated as having accrued will be determined
either (i) on a straight-line basis by multiplying the market discount times a
fraction, the numerator of which is the number of days the Note was held by
the Holder and the denominator of which it is the total number of days after
the date such Holder acquired the Note up to and including the date of its
maturity or (ii) if the Holder so elects, on a constant interest rate method.
A Holder may make that election with respect to any Note but, once made, such
election is irrevocable.
A Holder of a Note acquired at a market discount may elect to include market
discount in income currently, through the use of either the straight-line
inclusion method or the elective constant interest method in lieu of
recharacterizing gain upon disposition as ordinary income to the extent of
accrued market discount at the time of disposition. Once made, this election
will apply to all notes and other obligations acquired by the electing Holder
at a market discount during the taxable year for which the election is made,
and all subsequent taxable years, unless the IRS consents to a revocation of
the election. If an election is made to include market discount in income
currently, the basis of the Note in the hands of the Holder will be increased
by the amount of the market discount that is included in income.
Unless a Holder who acquires a Note at a market discount elects to include
market discount in income currently, such Holder may be required to defer
deductions for a portion of the interest paid on indebtedness allocable to
such Note in an amount not exceeding the deferred income, until such income is
realized.
BOND PREMIUM
If a Holder purchases a Note and immediately after the purchase the adjusted
basis of the Note exceeds the sum of all amounts payable on the instrument
after the purchase date (other than payments of stated interest), the Note
will be treated as having been acquired with "bond premium." A Holder may
elect to amortize such bond premium over the remaining term of such Note (or,
if it results in a smaller amount of amortizable bond premium, until an
earlier call date).
If bond premium is amortized, the amount of interest that must be included
in the Holder's income for each period ending on an interest payment date or
at the stated maturity, as the case may be, will be reduced by the portion of
premium allocable to such period based on the Note's yield to maturity (or
earlier call date, if amortization is computed by reference to such date). If
such an election to amortize bond premium is not made, a Holder must include
the full amount of each interest payment in income in accordance with his or
her regular method of accounting and will receive a tax benefit from the
premium only in computing such Holder's gain or loss upon the sale or
disposition or payment of the principal amount of the Note.
An election to amortize premium will apply to amortizable bond premium on
all notes and other bonds, the interest on which is includible in the Holder's
gross income, held at the beginning of the Holder's first taxable year to
which the election applies or that are thereafter acquired, and may be revoked
only with the consent of the IRS.
DISPOSITION OF THE NOTES
Upon the sale, exchange or retirement of a Note, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized on
the sale, exchange or retirement (except to the extent attributable to accrued
interest that has not been included in income) and such Holder's adjusted tax
basis in the Note. A Holder's adjusted tax basis in a Note will generally
equal the Holder's purchase price for such Note, increased
104
<PAGE>
by any market discount previously included in income by the Holder and
decreased by any amortizable bond premium, if any, deducted over the term of
the Note. Gain or loss realized on the sale, exchange or retirement of a Note
generally will be capital gain or loss. Recently enacted legislation includes
substantial changes to the federal taxation of capital gains recognized by
individuals, including a 20% maximum tax rate for certain gains from the sale
of capital assets held for more than 18 months. The deduction of capital
losses is subject to certain limitations. Prospective investors should consult
their tax advisors regarding the treatment of capital gains and losses.
The Company does not intend to treat the possibility of an optional
redemption or repurchase of the Notes as giving rise to any accrual of
original issue discount or recognition of ordinary income upon redemption,
sale or exchange of a Note. Holders may wish to consider that Treasury
Regulations regarding the treatment of certain contingencies were recently
issued and may wish to consult their tax advisers in this regard.
BACKUP WITHHOLDING
Under section 3406 of the Code and applicable Treasury Regulations, a
noncorporate Holder of the Notes may be subject to backup withholding at the
rate of 31 percent with respect to "reportable payments," which include
interest paid on or the proceeds of a sale, exchange or redemption of, the
Notes. The payor will be required to deduct and withhold the prescribed
amounts if (i) the payee fails to furnish a Taxpayer Identification Number
("TIN") to the payor in the manner required, (ii) the IRS notifies the payor
that the TIN furnished by the payee is incorrect, (iii) there has been a
"notified payee underreporting" described in section 3406(c) of the Code or
(iv) there has been a failure of the payee to certify under penalty of perjury
that the payee is not subject to withholding under section 3406(a)(1)(C) of
the Code. As a result, if any one of the events listed above occurs, the payor
will be required to withhold an amount equal to 31 percent from any interest
payment made with respect to the Notes or any payment of proceeds of a
redemption of the Notes to a noncorporate Holder. Amounts paid as backup
withholding do not constitute an additional tax and will be credited against
the Holder's federal income tax liability, so long as the required information
is provided to the IRS. The payor generally will report to the Holders of the
Notes and to the IRS the amount of any "reportable payments" for each calendar
year and the amount of tax withheld, if any, with respect to payment on those
securities.
THE FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY AND
DOES NOT DISCUSS ALL ASPECTS OF UNITED STATES FEDERAL INCOME TAXATION THAT MAY
BE RELEVANT TO A PARTICULAR HOLDER OF NOTES IN LIGHT OF HIS OR HER PARTICULAR
CIRCUMSTANCES AND INCOME TAX SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO ANY TAX CONSEQUENCES TO THEM FROM THE PURCHASE, OWNERSHIP, AND
DISPOSITION OF NOTES INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS.
105
<PAGE>
PLAN OF DISTRIBUTION
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (i) it is not an "Affiliate" (as
defined in Rule 405 of the Securities Act) of the Company, (ii) 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 Exchange
Notes and (iii) it is acquiring the Exchange Notes in the ordinary course of
its business (a Holder unable to make the foregoing representations is
referred to as a "Restricted Holder"). A Restricted Holder will not be able to
participate in the Exchange Offer and may only sell its Initial Notes pursuant
to a registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K under the Securities Act, or pursuant
to an exemption from the registration requirement of the Securities Act.
Each broker-dealer (other than a Restricted Holder) that receives Exchange
Notes for its own account pursuant to the Exchange Offer (a "Participating
Broker-Dealer") is required to acknowledge in the Letter of Transmittal that
it acquired the Initial Notes for its own account as a result of market-making
activities or other trading activities (other than Initial Notes acquired
directly from the Company or an affiliate of the Company) and that it will
deliver a prospectus in connection with the resale of such Exchange Notes.
Based upon interpretations by the staff of the Commission, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer to
Participating Broker-Dealers may be offered for resale, resold, and otherwise
transferred by a Participating Broker-Dealer upon compliance with the
prospectus delivery requirements, but without compliance with the registration
requirements, of the Securities Act. The Company has agreed that for a period
of nine months following consummation of the Exchange Offer it will make this
Prospectus available, for use in connection with any such resale, to any
Participating Broker-Dealer that notifies the Company in the Letter of
Transmittal that it may be subject to such prospectus delivery requirements.
Such Participating Broker-Dealer must also undertake in the Letter of
Transmittal to use its reasonable best efforts to notify the Company when,
prior to the expiration of such nine-month period, it is no longer subject to
such requirements. If the Company is not so notified by any Participating
Broker-Dealers that they may be subject to such requirements or if it is later
notified by all such Participating Broker-Dealers that they are no longer
subject to such requirements, the Company will not be required to maintain the
effectiveness of the Exchange Offer Registration Statement or to amend or
supplement this Prospectus following the consummation of the Exchange Offer or
following such date of notification, as the case may be. The Company believes
that during such period of time, delivery of this Prospectus, as it may be
amended or supplemented, will satisfy the prospectus delivery requirements of
a Participating Broker-Dealer engaged in market-making or other trading
activities.
Based upon interpretations by the staff of the Commission, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer may be
offered for resale, resold, and otherwise transferred by a Holder thereof
(other than a Restricted Holder or a Participating Broker-Dealer) without
compliance with the registration and prospectus delivery requirements of the
Securities Act.
The Company will not receive any proceeds from the sale of Exchange Notes by
broker-dealers. Exchange Notes received by Participating Broker-Dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at 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 Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells Exchange
Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in
the Registration Rights Agreement.
106
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the Exchange Notes and the
Guarantee being issued in the Exchange Offer will be passed upon for the
Company and Parent by Cahill Gordon & Reindel (a partnership including a
professional corporation), New York, New York.
EXPERTS
The consolidated financial statements and schedule of KSCO as of December
31, 1995 and 1996 and for the year ended December 31, 1996 and for the period
from Inception to December 31, 1995 and of the Predecessor for the period from
January 1, 1995 to October 17, 1995 included in this Prospectus have been
audited by Arthur Andersen llp, independent public accountants, as indicated
in their reports with respect thereto, and are included herein in reliance
upon the authority of said firm as experts in giving said reports.
The consolidated financial statements of the Predecessor for the year ended
December 31, 1994 included in this Prospectus and the related financial
statement schedule included elsewhere in the Registration Statement have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein and elsewhere in the Registration Statement, and have
been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act for the
registration of the Exchange Notes offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain portions of which
are omitted from the Prospectus as permitted by the rules and regulations of
the Commission. For further information with respect to the Company and the
Initial Notes offered hereby, reference is made to the Registration Statement,
including the exhibits thereto, and financial statements and notes filed as a
part thereof. Statements made in this Prospectus concerning the contents of
any documents referred to herein are not necessarily complete. With respect to
each such document filed with the Commission 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.
Prior to the date of this Prospectus, the Company was not subject to the
periodic reporting and certain other informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
has agreed that, whether or not it is required to do so by the rules and
regulations of the Commission, for so long as any of the Initial Notes or the
Initial Notes as applicable, remain outstanding, it will furnish to the
holders of the Initial Notes or the Exchange Notes, as applicable, and file
with the Commission (unless the Commission will not accept such a filing) (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all reports that would be required
to be filed with the Commission on Form 8-K if the Company were required to
file such reports. In addition, for so long as any of the Initial Notes remain
outstanding, the Company has agreed to make available to any prospective
purchaser of the Initial Notes or beneficial owner of the Initial Notes, in
connection with any sale thereof, the information required by Rule 144A(d)(4)
under the Securities Act.
The Registration Statement and the exhibits and schedules thereto, as well as
such reports and other information filed by the Company with the Commission,
may be inspected and copied, at prescribed rates, at the public reference
facilities of the Commission, at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the Commission's regional offices at 7
World Trade Center, 13th Floor, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material also can be obtained by mail from the public reference
facilities of the Commission, at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
107
<PAGE>
Commission maintains a Website that contains reports, proxy and information
statements and other information regarding registrants, such as the Company,
that file electronically with the Commission. The address of such site is
(http://www.sec.gov).
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to the Secretary, at the Company's principal
executive offices at 1802 Scovill Drive Clarkesville, Georgia 30523 or by
telephone at (706) 754-4181.
108
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants................................ F-2
Independent Auditors' Report............................................ F-3
Consolidated Balance Sheets as of December 31, 1996 and 1995............ F-4
Consolidated Statements of Operations for the year ended December 31,
1996, the period from Inception through December 31, 1995, the period
from January 1, 1995 through October 17, 1995, and the year ended
December 31, 1994...................................................... F-5
Consolidated Statements of Cash Flows for the year ended December 31,
1996, the period from Inception through December 31, 1995, the period
from January 1, 1995 through October 17, 1995, and the year ended
December 31, 1994...................................................... F-6
Consolidated Statements of Stockholders' Equity (Deficiency) for the
year ended December 31, 1996, the period from Inception through
December 31, 1995, the period from January 1, 1995 through October 17,
1995, and the year ended December 31, 1994............................. F-7
Notes to Consolidated Financial Statements.............................. F-8
UNAUDITED FINANCIAL STATEMENTS
Consolidated Balance Sheet as of September 30, 1997..................... F-23
Consolidated Statements of Operations for the nine months ended
September 30, 1997 and 1996............................................ F-24
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996............................................ F-25
Notes to Consolidated Financial Statements.............................. F-26
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of KSCO Acquisition Corporation
We have audited the accompanying consolidated balance sheets of KSCO
ACQUISITION CORPORATION (a Delaware corporation) AND SUBSIDIARIES (the
"Company") as of December 31, 1996 and 1995 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year
ended December 31, 1996 and the period from inception, October 17, 1995,
through December 31, 1995. We have also audited the accompanying consolidated
statements of operations, stockholders' equity (deficiency), and cash flows of
the Predecessor (businesses identified in Note 1) from January 1, 1995 through
October 17, 1995. 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 test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of KSCO
Acquisition Corporation and subsidiaries as of December 31, 1996 and 1995 and
the results of their operations and their cash flows for the year ended
December 31, 1996 and the period from inception, October 17, 1995, through
December 31, 1995, and the results of the operations of the Predecessor and
its cash flows from January 1, 1995 through October 17, 1995, in conformity
with generally accepted accounting principles.
Arthur Andersen llp
Atlanta, Georgia
March 17, 1997
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of KSCO Acquisition Corporation
We have audited the consolidated statements of operations, changes in
stockholders' equity (deficiency), and cash flows of Scovill Fasteners Inc.
and its subsidiaries (the "Predecessor") for the year ended December 31, 1994.
These financial statements are the responsibility of the Predecessor'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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of the
Predecessor's operations, changes in its stockholders' equity (deficiency) and
its cash flows for the year ended December 31, 1994 in conformity with
generally accepted accounting principles.
Deloitte & Touche llp
Atlanta, Georgia
March 17, 1995
F-3
<PAGE>
KSCO ACQUISITION CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
-------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... $ 603 $ 410
Accounts receivable, net of allowances of $640 and $326,
respectively............................................... 12,438 6,428
Inventories................................................. 21,594 10,127
Other....................................................... 1,175 68
-------- -------
TOTAL CURRENT ASSETS.................................... 35,810 17,033
-------- -------
Property, plant and equipment, net.......................... 40,389 51,849
Deferred income taxes....................................... 1,266 --
Intangible assets........................................... 26,401 19,695
-------- -------
$103,866 $88,577
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt........................ $ 830 $ 2,500
Accounts payable............................................ 10,588 4,613
Accrued liabilities......................................... 6,830 3,232
-------- -------
TOTAL CURRENT LIABILITIES............................... 18,248 10,345
-------- -------
LONG-TERM LIABILITIES
Revolving line of credit.................................... 9,424 7,100
Long-term debt.............................................. 27,464 31,938
Employee benefits........................................... 24,407 16,358
Deferred income taxes....................................... -- 1,573
Other....................................................... 2,902 3,000
-------- -------
TOTAL LONG-TERM LIABILITIES............................. 64,197 59,969
-------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 15,000,000 shares authorized,
8,880,102 and 7,270,000 shares issued and outstanding,
respectively............................................... 89 73
Additional paid-in capital.................................. 22,086 18,102
Retained earnings........................................... (736) 116
Foreign currency translation adjustment..................... (18) (28)
-------- -------
TOTAL STOCKHOLDERS' EQUITY.............................. 21,421 18,263
-------- -------
$103,866 $88,577
======== =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-4
<PAGE>
KSCO ACQUISITION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE PREDECESSOR ARE
NOT COMPARABLE IN CERTAIN RESPECTS.
<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
----------------------------------- ----------------------------------
PERIOD FROM JANUARY 1, 1995
YEAR ENDED INCEPTION THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 OCTOBER 17, 1995 DECEMBER 31, 1994
----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net sales............................................. $91,632 $12,799 $53,589 $65,428
Cost of sales......................................... 64,600 9,353 40,260 47,045
------- ------- ------- -------
Gross profit........................................ 27,032 3,446 13,329 18,383
Selling expenses...................................... 10,220 1,369 5,656 7,113
General and administrative expenses................... 6,831 458 2,166 3,421
Amortization expense.................................. 2,557 239 320 411
------- ------- ------- -------
Operating income.................................... 7,424 1,380 5,187 7,438
Other expense (income)................................ 450 214 551 (629)
Interest expense--affiliate........................... -- -- 2,084 4,362
Interest expense--other............................... 5,953 892 1,388 730
------- ------- ------- -------
Income before income tax provision and extraordinary
loss................................................. 1,021 274 1,164 2,975
Income tax provision.................................. 923 158 -- 634
------- ------- ------- -------
Income before extraordinary loss...................... 98 116 1,164 2,341
Extraordinary loss, net of $613 tax benefit........... 950 -- -- --
------- ------- ------- -------
Net income (loss)..................................... $ (852) $ 116 $ 1,164 $ 2,341
======= ======= ======= =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-5
<PAGE>
KSCO ACQUISITION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE PREDECESSOR ARE
NOT COMPARABLE IN CERTAIN RESPECTS.
<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
----------------------------------- ----------------------------------
PERIOD FROM JANUARY 1, 1995
YEAR ENDED INCEPTION THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 OCTOBER 17, 1995 DECEMBER 31, 1994
----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................................... $ (852) $ 116 $ 1,164 $ 2,341
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation......................................... 6,829 1,481 5,735 6,559
Amortization......................................... 2,557 239 320 411
Extraordinary loss................................... 950 -- -- --
Deferred income taxes................................ 265 8 -- --
Changes in operating assets and liabilities, net of
effect of acquired businesses:
Accounts receivable, net............................. (931) 1,105 360 (1,476)
Inventories.......................................... (6,231) 772 (1,371) (379)
Other current assets................................. (883) 119 (213) 224
Accounts payable..................................... 3,042 (2,075) 1,251 (684)
Accrued liabilities.................................. (4,031) (2,313) (465) 369
Other assets and liabilities......................... (2,131) (465) 246 662
-------- -------- ------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES... (1,416) (1,013) 7,027 8,027
-------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid in business acquisitions, net of cash
acquired............................................. (23,110) (40,897) -- --
Acquisition costs..................................... (2,140) (3,246) -- --
Additions to property, plant and equipment............ (5,695) (1,168) (4,962) (7,363)
Proceeds from sales of property, plant and equipment.. 2,264 13 26 176
-------- -------- ------- --------
NET CASH USED IN INVESTING ACTIVITIES................. (28,681) (45,298) (4,936) (7,187)
-------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on credit line............ 2,324 3,830 (1,245) 4,516
Issuance of long-term debt............................ 23,967 35,000 -- 10,000
Repayments of long-term debt.......................... (31,268) (10,284) (278) --
Proceeds from sale/leaseback of attaching machines.... 31,267 -- -- --
Issuance of common stock.............................. 4,000 18,175 -- --
Repayments of affiliate debt.......................... -- -- (475) (15,000)
-------- -------- ------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES... 30,290 46,721 (1,998) (484)
-------- -------- ------- --------
NET INCREASE IN CASH.................................. 193 410 93 356
CASH AT BEGINNING OF PERIOD........................... 410 -- 510 154
-------- -------- ------- --------
CASH AT END OF PERIOD................................. $ 603 $ 410 $ 603 $ 510
======== ======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid........................................ $ 5,062 $ 718 $ 3,238 $ 250
======== ======== ======= ========
Income taxes......................................... $ -- $ -- $ -- $ 38
======== ======== ======= ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-6
<PAGE>
KSCO ACQUISITION CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(DOLLARS IN THOUSANDS)
THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE PREDECESSOR ARE
NOT COMPARABLE IN CERTAIN RESPECTS.
<TABLE>
<CAPTION>
UNFUNDED ACCUMULATED
ADDITIONAL PENSION BENEFITS
REDEEMABLE PAID- RETAINED EARNINGS IN EXCESS OF UNRECOGNIZED FOREIGN CURRENCY
COMMON STOCK PREFERRED STOCK IN CAPITAL (ACCUMULATED DEFICIT) PRIOR SERVICE COST TRANSLATION ADJUSTMENT TOTAL
------------ --------------- ---------- --------------------- ------------------------- ---------------------- -------
THE PREDECESSOR
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, Decem-
ber 31, 1993.... $ -- $ -- $ 7,470 $(30,974) $(995) $(178) $(24,677)
Net income...... 2,341 2,341
Issuance of pre-
ferred stock.... 19,439 19,439
Contribution of
capital in
connection with
transfers of
Industrial and
Apparel
Fasteners South
Africa (Pty)
Ltd. ........... 724 724
Declaration of
preferred divi-
dend............ (405) (405)
Change in un-
funded accumu-
lated pension
benefits in ex-
cess of unrecog-
nized prior
service cost.... 284 284
Foreign currency
translation ad-
justment........ 100 100
----- -------- ------- -------- ----- ----- --------
Balance, Decem-
ber 31, 1994.... $ -- $ 19,439 $ 8,194 $(29,038) $(711) $ (78) $ (2,194)
----- -------- ------- -------- ----- ----- --------
Net income...... 1,116 1,164
----- -------- ------- -------- ----- ----- --------
Balance, October
17, 1995........ $ -- $ 19,439 $ 8,194 $(27,874) $(711) $ (78) $ (1,030)
----- -------- ------- -------- ----- ----- --------
<CAPTION>
THE COMPANY
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Acquisition--
Elimination of
Predecessor Eq-
uity (Note 1)... $ -- $(19,439) $(8,194) $ 27,874 $ 711 $ 78 $ 1,030
Issuance of Com-
mon Stock....... 73 $18,102 18,175
Foreign Currency
Translation..... (28) (28)
Net income...... $ 116 116
----- -------- ------- -------- ----- ----- --------
Balance, Decem-
ber 31, 1995.... $ 73 $ -- $18,102 $ 116 $ -- $ (28) $ 18,263
----- -------- ------- -------- ----- ----- --------
Issuance of Com-
mon Stock....... 16 3,984 4,000
Foreign Currency
Translation..... 10 10
Net income
(loss).......... (852) (852)
----- -------- ------- -------- ----- ----- --------
Balance, Decem-
ber 31, 1996.... $ 89 $ -- $22,086 $ (736) $ -- $ (18) $ 21,421
===== ======== ======= ======== ===== ===== ========
</TABLE>
The accompanying notes in consolidated financial statements are an integral
part of these statements.
F-7
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1. BASIS OF PRESENTATION
The consolidated balance sheets as of December 31, 1996 and 1995 and the
consolidated statements of operations, stockholders' equity and cash flows for
the year ended December 31, 1996 and the period from inception, October 17,
1995 ("Inception Date"), through December 31, 1995, include the accounts of
KSCO Acquisition Corp. ("KSCO") and Scovill Fasteners Inc. ("Fasteners"), a
wholly owned subsidiary of KSCO (collectively referred to as the "Company"),
both of which are Delaware corporations. On October 17, 1995, Fasteners was
acquired by KSCO (the "Acquisition"), for approximately $41.5 million. KSCO
was organized by Kohlberg & Co. ("Kohlberg") for the purpose of acquiring the
outstanding stock of Fasteners. This transaction was accounted for using the
purchase method of accounting. The allocation of purchase price was based upon
preliminary estimates of fair value and was finalized during 1996.
During January 1996, Fasteners purchased the outstanding common stock of Rau
Fastener Company, LLC ("Rau") for $7,892 and PCI Group, Inc. ("PCI") for
$15,551, excluding certain costs related to financing and consummating the
acquisitions (Note 3). Rau manufactured primarily snap fasteners with
locations and subsidiaries operating in Providence, Rhode Island, Brussels,
Belgium ("Unifast") and Montreal, Canada. PCI manufactured industrial and shoe
eyelets and light metal stampings.
The consolidated statements of operations, stockholders' equity and cash
flows from January 1, 1995 through October 17, 1995 and the year ended
December 31, 1994, are the financial statements of Fasteners when it was a
wholly owned subsidiary of Alper Holdings USA, Inc. ("Alper") (referred to
herein as the "Predecessor"). The Acquisition and the related application of
purchase accounting (Note 3) resulted in changes to the capital structure of
the Predecessor and the historical basis of various assets and liabilities.
The effect of such changes significantly impairs comparability of the
financial position and results of operations of the Company and the
Predecessor.
The Company is a leading manufacturer of apparel fasteners, such as snaps,
tack buttons and rivets, primarily serving the jeanswear, infantswear,
childrenswear and outerwear industries. The Company produces non-apparel
fastener products for use in automotive, marine textile, luggage, leather
goods and aerospace industries, primarily marketed under the DOT(R) trademark.
Fasteners' other non-apparel products also include industrial and shoe eyelets
and light metal stampings marketed under the PCI trademark. The Company also
designs and manufactures fastener attaching equipment, leased to customers and
placed in customers' manufacturing facilities. The Company's customers include
many of the leading apparel design and manufacturing companies in North
America and Europe.
Certain reclassifications have been made to prior period amounts to conform
to current period presentation. All amounts are expressed in thousands except
for share amounts or as otherwise noted.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
Significant transactions and balances between KSCO, Fasteners and its wholly
owned subsidiaries and entities which comprise the Predecessor have been
eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-8
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Cash and cash equivalents
Cash includes cash and cash equivalents which consist of highly liquid
investments, having maturities of three months or less when acquired. Included
in accounts payable as of December 31, 1996 and 1995 were $1,898 and $1,571,
respectively, of cash overdrafts.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method for approximately 55.6% and 95.6%
of all inventories as of December 31, 1996 and 1995, respectively. Cost for
the remaining inventories is determined using the first-in, first-out (FIFO)
method. Inventory costs include material, labor and manufacturing overhead.
Property, Plant and Equipment
Property, plant and equipment purchased in the Acquisition, as well as the
acquisitions of PCI and Rau, are stated at fair market value, as prescribed by
the purchase method of accounting. Subsequent purchases of property, plant and
equipment are stated at cost, net of accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets. The following useful lives are used for recognizing
depreciation expense for financial reporting purposes:
<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
----------- ---------------
<S> <C> <C>
Computer equipment............. 3-5 years 3-5 years
Leasehold improvements......... 1-6 years 1-5 years
Buildings and improvements..... 5-30 years 5-50 years
Attaching equipment............ 4-11 years 8 years
Machinery, equipment and tool-
ing........................... 3-12 years 3-12 years
</TABLE>
Major renewals and betterments which extend the useful life of an asset are
capitalized; routine maintenance and repairs are expensed as incurred. Total
maintenance and repairs expense charged to operations was approximately
$2,161, $317, $2,097 and $2,053 for the year ended December 31, 1996, the
period ended December 31, 1995, the period ended October 17, 1995, and the
year ended December 31, 1994, respectively. Upon sale or retirement of assets,
the Company's plant, property and equipment account is reduced by the asset
cost and related accumulated depreciation, and any related gain or loss is
reflected in operations.
Intangible Assets
Intangible assets consisted of the following at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996
----------------------------
ACCUMULATED 1995
GROSS AMORTIZATION NET NET
------- ------------ ------- -------
<S> <C> <C> <C> <C>
Goodwill................................... $15,983 $ (350) $15,633 $ 9,352
Trademarks and patents..................... 2,255 (129) 2,126 4,221
Organization and deferred financing fees... 7,436 (2,855) 4,581 3,111
Covenants not to compete................... 4,975 (1,311) 3,664 2,875
Other...................................... 397 -- 397 136
------- ------- ------- -------
$31,046 $(4,645) $26,401 $19,695
======= ======= ======= =======
</TABLE>
F-9
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Trademarks and patents are amortized on a straight-line basis over a period
of 40 years. Debt acquisition costs are amortized over the term of the related
outstanding debt. Organization costs are amortized on a straight-line basis
over 5 years. Covenants not to compete consist of agreements with Alper, the
former parent of Fasteners, and with the former owners of PCI (Note 3); such
agreements are amortized over 5 and 3 years, respectively. Goodwill is
amortized on a straight-line basis over 40 years.
Goodwill represents the excess of cost over the estimated fair value of the
net assets of acquired businesses. Should events or circumstances occur
subsequent to any business acquisition which bring into question the
realizable value or impairment of any component of goodwill, the Company will
evaluate the remaining useful life and balance of goodwill and make
appropriate adjustments. The Company's principal considerations in determining
impairment include the strategic benefit to the Company of the particular
business related to the questioned component of goodwill as measured by
undiscounted current and expected future operating income levels of that
particular business and expected undiscounted future cash flows.
Environmental Matters
Environmental expenditures are expensed or capitalized as appropriate,
depending on their future economic benefit. Environmental expenditures include
site investigation, physical remediation, operation and maintenance and legal
and administrative costs. Environmental accruals are established for sites
where it is probable that a loss has been incurred and the amount of the loss
can be reasonably estimated. Where the estimate is a range of relatively
likely outcomes, the lowest cost alternative has been accrued.
Recognition of Revenue
Revenue from the sale of fastener products is recorded on the date goods are
shipped to the customer. Sales returns and allowances are recorded as a charge
against revenue in the period in which the related sales are recognized.
Revenue from the lease of attaching machinery is recorded over the applicable
rental period.
Income Taxes
Income taxes are recorded in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 utilizes the asset and liability method, under which deferred income taxes
are recognized for the tax consequences of "temporary differences" by applying
currently enacted statutory rates to differences between the financial
statement carrying amounts and the tax basis of existing assets and
liabilities. Under SFAS 109, the effect on deferred taxes of a change in tax
rates is recognized in income in the period that includes the enactment date.
Fasteners periodically evaluates the recognition of deferred tax assets and
provides a valuation allowance for any portion of such assets not considered
realizable. Through October 17, 1995, Fasteners was included in the
consolidated Federal return of Alper. For financial reporting purposes,
Fasteners provided income taxes as if it filed separately from Alper.
Accordingly, Federal income tax expense/(benefit) and liabilities constituted
a charge in lieu of income taxes and amounts due Alper. Since October 18,
1995, the Company has filed separate company income tax returns.
Foreign Currency Translation
The accounts of the Company's and the Predecessor's foreign subsidiaries are
translated in accordance with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation," which requires that foreign currency
assets and liabilities be translated using the exchange rates in effect at the
balance sheet date.
F-10
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Results of operations are translated using the average exchange rates
prevailing throughout the period. The effects of unrealized exchange rate
fluctuations on translating foreign currency assets and liabilities into U.S.
dollars are accumulated as the cumulative foreign currency translation
adjustment in stockholders' equity. Realized gains and losses from foreign
currency transactions during the periods ended December 31, 1996, December 31,
1995, October 17, 1995 and December 31, 1994 were not material.
Research and Development Costs
Research, development, pre-production and start-up costs related to both
present and future products are expensed as incurred. Such costs amounted to
$377, $74, $271, and $381 for the periods ended December 31, 1996, December
31, 1995, October 17, 1995, and December 31, 1994, respectively, and are
classified as a component of "General and administrative expenses" in the
accompanying consolidated statements of operations.
Financial Instruments
The Company uses futures contracts to manage its inventory, both to set
pricing on purchases and to reduce the Company's exposure to price
fluctuations. Under existing accounting literature, these activities are
accounted for as hedging activities. To qualify as a hedge, the item must
expose the Company to inventory pricing risk, and the related contract must
reduce that exposure and be designated by the Company as a hedge.
Additionally, to hedge expected transactions, the significant characteristics
and expected terms of such transactions must be identified and it must be
probable that the transaction will occur.
Gains and losses on futures contracts, including gains and losses upon
termination of the contract, are matched to inventory purchases and are
included in the carrying value of inventory and charged or credited to cost of
sales as such inventory is sold or used in production. The fair market value
of commodity options held at December 31, 1996 and 1995, was $70 and $(29),
respectively.
If derivative transactions do not meet the criteria for hedges, the Company
recognizes unrealized gains or losses as they occur. If a hedged transaction
no longer exists or a hedged anticipated transaction is deemed no longer
probable to occur, cumulative gains and losses on the hedge are recognized
immediately in income and subsequent changes in fair market value of the
derivative transaction are recognized in the period the change occurs.
Concentration of Credit Risk
The Company's customers include many large and well-known apparel and
industrial manufacturing companies. In addition, the Company is a primary
supplier for Kmart's private-label infantswear and a leading supplier for
infantswear sold at Wal*Mart, Target and Sears. In 1996, no single customer
accounted for more than 8% of the Company's total net sales, and the Company's
ten largest customers accounted for approximately 26% of the Company's total
net sales. The Company's broad line of products for apparel and specialty
industrial use reduces its exposure to any one customer segment and to fashion
trends.
Asset Impairment
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 requires that
long-lived assets, certain identifiable intangible assets and goodwill be
reviewed for impairment when expected future undiscounted cash flows are less
than the carrying value of the assets. No charges were recorded pursuant to
this statement in fiscal 1996.
F-11
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Comprehensive Income and Segments
In 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130") and Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 130 establishes standards to measure
all changes in equity that result from transactions and other economic events
other than transactions with owners. Comprehensive income is the total of net
income and all other nonowner changes in equity. SFAS 131 introduces a new
segment reporting model called the "management approach." The management
approach is based on the manner in which management organizes segments within
a company for making operating decisions and assessing performance. The
management approach replaces the notion of industry and geographic segments.
The Company will adopt SFAS 130 and SFAS 131 in fiscal year 1998. The Company
believes adoption of SFAS 130 and SFAS 131 will not significantly affect the
Company's financial position or results of operations.
NOTE 3. ACQUISITIONS
Rau/PCI
The acquisitions of Rau and PCI were accounted for as a purchase.
Accordingly, the consolidated financial statements of Fasteners include the
results of these operations subsequent to January 24, 1996. These acquisitions
were financed through equity contributions and cash borrowings under the New
Credit Agreement (Note 7).
The allocation of the purchase price to the underlying net assets acquired was
based upon estimates of the fair value of the net assets. The allocation of
the purchase price to the underlying net assets acquired based on the
estimated fair value assigned was as follows:
<TABLE>
<CAPTION>
RAU PCI
------ -------
<S> <C> <C>
Purchase price........................................... $7,892 $15,551
Organization and financing costs......................... 728 1,412
------ -------
Total purchase price................................. 8,620 16,963
------ -------
Less--value assigned to assets and liabilities
Cash................................................... 257 76
Accounts receivable.................................... 3,358 1,721
Inventories............................................ 3,333 1,903
Other current assets................................... 189 35
Property, plant and equipment.......................... 4,517 7,123
Organization and financing costs....................... 728 1,412
Other long-term assets................................. 47 5,243
Accounts payable and accrued liabilities............... (6,907) (4,035)
Long-term liabilities and debt assumed................. (777) (8,560)
------ -------
4,745 4,918
------ -------
Goodwill............................................... $3,875 $12,045
====== =======
</TABLE>
Fasteners
The Acquisition of Fasteners described in Note 1 was accounted for as a
purchase. Accordingly, the consolidated financial statements of Fasteners
reflect the purchase method of accounting effective October 17, 1995. The
purchase price was $41,500, excluding certain costs related to financing and
consummating the Acquisition. The purchase price was funded from the sale of
common stock and the proceeds from two term notes and a revolving line of
credit.
F-12
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The allocation of the purchase price to the underlying net assets acquired
was based upon preliminary estimates of the fair value of the net assets which
was revised during 1996. During 1996, the preliminary calculation of goodwill
was decreased by approximately $11,770 for the sale of attaching equipment at
fair value which exceeded the net book value (Note 9) and the settlement for
$2,487 received from an insurance company relating to environmental matters.
Trademarks were written down as a result of the preceding adjustments to
goodwill during 1996. The allocation of the purchase price to the underlying
net assets acquired was finalized as follows:
<TABLE>
<S> <C>
Purchase price.................................................. $ 41,500
Organization and financing costs................................ 3,246
--------
Total purchase price........................................ 44,746
--------
Less--value assigned to assets and liabilities
Cash.......................................................... 603
Accounts receivable........................................... 7,540
Inventories................................................... 10,697
Other current assets.......................................... 2,597
Property, plant and equipment................................. 63,832
Organization and financing costs.............................. 3,246
Other long-term assets........................................ 4,561
Accounts payable and accrued liabilities...................... (13,891)
Long-term liabilities and debt assumed........................ (34,439)
--------
44,746
--------
Goodwill........................................................ --
========
</TABLE>
NOTE 4. INVENTORIES
Inventories as of December 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
------- -------
<S> <C> <C>
Raw materials................................................... $ 3,088 $ 1,486
Work in process................................................. 5,099 3,295
Finished goods.................................................. 13,407 5,346
------- -------
$21,594 $10,127
======= =======
</TABLE>
The value of inventories is reported net of allowances for obsolete, slow-
moving and discontinued product line inventory of $927 and $470 as of December
31, 1996 and 1995, respectively. If the FIFO method had been used to value all
inventories, inventories would have been increased by $49 and $0 at December
31, 1996 and 1995, respectively.
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1996 and 1995 consisted of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Land and improvements......................................... $ 327 $ 312
Buildings and improvements.................................... 7,434 7,012
Attaching equipment........................................... 3,019 23,304
Machinery, equipment and tooling.............................. 33,807 22,702
------- -------
44,587 53,330
Accumulated depreciation...................................... (4,198) (1,481)
------- -------
$40,389 $51,849
======= =======
</TABLE>
F-13
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Depreciation expense was $6,829, $1,481, $5,735 and $6,559 for the periods
ended December 31, 1996, December 31, 1995, October 17, 1995 and December 31,
1994, respectively. Refer to Note 9 for a description of the sale/leaseback of
attaching machines in 1996.
NOTE 6. ACCRUED LIABILITIES
Accrued liabilities as of December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1995
------ ------
<S> <C> <C>
Salaries, wages and benefits............................... $1,454 $ 101
Deferred income taxes...................................... 1,317 752
Pension, current portion................................... 1,128 1,921
Operating lease obligations................................ 858 --
Interest................................................... 535 --
Other...................................................... 1,538 458
------ ------
$6,830 $3,232
====== ======
</TABLE>
NOTE 7. LONG-TERM DEBT
Long-term debt as of December 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Revolving line of credit................................ $ 9,424 $ 7,100
Term note "A"........................................... -- 19,500
Term note "B"........................................... 26,281 14,938
Other................................................... 1,578 --
Capital lease obligations............................... 435 --
------- -------
37,718 41,538
Less--Current maturities................................ (830) (2,500)
------- -------
Total long-term debt.................................... $36,888 $39,038
======= =======
</TABLE>
To finance the Acquisition, Fasteners entered into a credit agreement (the
"Original Credit Agreement") with a group of lenders on October 17, 1995. The
Original Credit Agreement provided for term notes of $20,000 and $15,000, as
well as a revolving line of credit of up to $15,000. Borrowings under the
Original Credit Agreement were collateralized by substantially all of
Fasteners' assets. Borrowing availability under the revolving line of credit
was subject to limitations based on eligible accounts receivable and
inventory, as defined in the Original Credit Agreement. As of December 31,
1995, Fasteners had borrowings of $41,538 outstanding under the Original
Credit Agreement including $7,100 of borrowings under the revolving line of
credit and $7,600 of unused credit availability.
In connection with the acquisitions of Rau and PCI in January 1996,
Fasteners refinanced its outstanding obligations under the Original Credit
Agreement with a New Credit Agreement (the "New Credit Agreement"). The New
Credit Agreement provides for term notes of $29,496 and $28,000, as well as a
revolving line of credit of up to $15,000. Borrowings under the New Credit
Agreement are collateralized by substantially all of Fasteners' assets.
Borrowing availability under the revolving line of credit is subject to
limitations based on eligible accounts
F-14
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
receivable and inventory, as defined in the New Credit Agreement. As of
December 31, 1996, Fasteners had borrowings of $35,705 outstanding under the
New Credit Agreement including $9,424 of borrowings under the revolving line
of credit and $26,281 under a term note. There was $3,702 of unused credit
availability at such date. In November 1996, Fasteners repaid all outstanding
obligations under the Term "A" facility principally with proceeds from the
sale/leaseback transaction of attaching equipment (Note 9). In connection with
the refinancing discussed above, Fasteners recognized an extraordinary after-
tax charge of $950 from the write-off of related deferred financing costs. The
New Credit Agreement expires on December 31, 2003.
Both the New Credit Agreement and the Original Credit Agreement allowed
Fasteners to choose among interest rate options as follows:
<TABLE>
<CAPTION>
PRIME OPTION LIBOR OPTION
------------ ------------
<S> <C> <C>
Revolving line of credit........................ Prime + 1.5% LIBOR + 2.5%
Term note "A"................................... Prime + 1.5% LIBOR + 2.5%
Term note "B"................................... Prime + 2.0% LIBOR + 3.0%
</TABLE>
Interest rates for the term notes and the revolving line of credit ranged
from 7.92% to 10.5% and 8.25% to 10.25% during 1996 and from the Inception
Date to December 31, 1995, respectively. The weighted average interest rate
was 8.7% and 8.9% during 1996 and from the Inception Date to December 31,
1995, respectively. The interest rate was 8.6% and 8.5% at December 31, 1996
and 1995, respectively. Both the New and Original Credit Agreements required
an annual commitment fee of 0.5% of the total commitment, less letters of
credit and amounts borrowed, and required Fasteners to make quarterly payments
of accrued interest outstanding on the term notes and the revolving line of
credit.
Both the New and Original Credit Agreements required that Fasteners meet
certain covenants which, among other things, require the maintenance of ratios
related to leverage and cash flow, limit the level of capital expenditures and
payment of dividends to KSCO. The Original Credit Agreement also required
mandatory principal prepayments from the proceeds of sales of assets as well
as 50% of excess cash flow, as defined.
Other debt at December 31, 1996 includes outstanding obligations of Unifast.
Under the New Credit Agreement and the Unifast obligations, maturities of
long-term debt as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997................................................ $ 753
1998................................................ 848
1999................................................ 848
2000................................................ 722
2001................................................ 9,942
Thereafter.......................................... 24,170
-------
$37,283
=======
</TABLE>
Intercompany interest expense in 1995 through the Inception Date resulted
from interest on intercompany debentures and a demand note which bore interest
at 9% and prime plus 0.5%, respectively. In connection with the Acquisition,
all intercompany notes and debentures were settled in full.
Also in 1995 through the Inception Date, Fasteners had a $22,000 credit
facility. This facility was comprised of a $12,000 revolving credit facility
and a $10,000 term loan. Outstanding borrowings under the revolving facility
bore interest at Fasteners' option of either 1.125% above the base lending
rate of the bank or 3.125% above LIBOR. Outstanding term loan borrowings bore
interest at Fasteners' option of either 1.5% above the base lending rate of
the bank or 3.5% above LIBOR. In conjunction with the Acquisition, this
facility was repaid in full.
F-15
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The carrying value of both short-term and long-term debt at December 31,
1996 and 1995 approximates its fair values.
NOTE 8. OTHER LIABILITIES
Other liabilities as of December 31, 1996 and 1995 consisted of liabilities
for environmental matters of $2,902 and $3,000 at December 31, 1996 and 1995,
respectively.
NOTE 9. LEASE COMMITMENTS
Operating leases
In November 1996, Fasteners refinanced its attaching equipment under a
sale/leaseback arrangement. The equipment was sold for $31,267. Fasteners has
a purchase option at fair market value at the expiration of the lease,
November 2002. The lease is an operating lease in accordance with Statement of
Financial Accounting Standards No. 13, "Accounting for Leases." The cost and
associated depreciation of the attaching equipment of approximately $22,533
and $3,050, respectively, have been removed from the accounts. The increase to
fair market value over the amount of the purchase price originally allocated
to the attaching equipment was recorded as a reduction of goodwill recorded in
the Acquisition. Fasteners leases office space, office equipment and vehicles
for various periods through the year 2002 and it is expected in the normal
course of operations that the leases may be extended or replaced. Certain
leases provide for contingent rentals based upon additional usage of equipment
and vehicles in excess of a specified minimum. Leases for real estate
generally include options to renew for periods ranging from one to ten years.
At December 31, 1996, future minimum annual rental commitments were as
follows:
<TABLE>
<S> <C>
1997................................................ $ 5,732
1998................................................ 5,522
1999................................................ 5,356
2000................................................ 5,219
2001................................................ 5,148
Thereafter.......................................... 17,666
-------
Total minimum lease payments.................... $44,643
=======
</TABLE>
Rental expense for operating leases was $1,756, $184, $674 and $747 for the
periods ended December 31, 1996, December 31, 1995, October 17, 1995 and
December 31, 1994, respectively.
Capital lease
In 1996, Fasteners entered into a lease agreement for computer equipment
which is classified as a capital lease. The net book value of the leased
equipment included in Property, Plant and Equipment at December 31, 1996 was
$450,000 which was included in machinery and equipment. Future minimum
payments, by year, under noncancelable capital leases consist of the following
at December 31, 1996:
<TABLE>
<S> <C>
1997.................................................. $131
1998.................................................. 131
1999.................................................. 131
2000.................................................. 131
2001.................................................. 22
----
Total minimum lease payments.......................... $546
Amounts representing interest......................... (111)
----
Present value of net minimum lease payments........... 435
Less current portion.................................. (87)
----
Long-term capital lease obligation.................... $348
====
</TABLE>
F-16
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
10. INCOME TAXES
The following is a summary of the components of net income (loss) before
income taxes and extraordinary loss:
<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
------------------------- ------------------------
PERIOD FROM PERIOD FROM
INCEPTION JANUARY 1
YEAR ENDED DATE TO TO YEAR ENDED
DECEMBER 31, DECEMBER 31, OCTOBER 17, DECEMBER 31,
1996 1995 1995 1994
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Domestic.................. $1,317 $324 $1,354 $3,371
Foreign................... (296) (50) (190) (396)
------ ---- ------ ------
$1,021 $274 $1,164 $2,975
====== ==== ====== ======
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
------------------------- ------------------------
PERIOD FROM PERIOD FROM
INCEPTION JANUARY 1
YEAR ENDED DATE TO TO YEAR ENDED
DECEMBER 31, DECEMBER 31, OCTOBER 17, DECEMBER 31,
1996 1995 1995 1994
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Current................... $ -- $150 $ -- $ 98
Deferred.................. 265 8 -- 514
Foreign................... 45 -- -- 22
----- ---- ----- ----
$ 310 $158 $ -- $634
===== ==== ===== ====
</TABLE>
The differences between the United States Federal statutory income tax rate
and the consolidated effective income tax rate are summarized as follows:
<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
------------------------- ------------------------
PERIOD FROM PERIOD FROM
INCEPTION JANUARY 1
YEAR ENDED DATE TO TO YEAR ENDED
DECEMBER 31, DECEMBER 31, OCTOBER 17, DECEMBER 31,
1996 1995 1995 1994
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Federal income tax ex-
pense at statutory
rates................... $429 $ 93 $ 323 $1,041
State income tax
provision, net of
federal taxes........... 66 21 71 129
Benefit for net operating
losses.................. -- -- (528) (749)
Benefit for extraordinary
item.................... (613) -- -- --
Amortization of
goodwill/deferred
transaction fees........ 292 29 77 71
Foreign tax impact....... 45 -- -- --
Other.................... 91 15 57 142
---- ---- ----- ------
$310 $158 $ -- $ 634
==== ==== ===== ======
</TABLE>
F-17
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Deferred tax consequences of significant temporary differences are as
follows as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Fixed assets....................................... $(12,132) $(11,261)
Trademarks......................................... (1,617) (1,646)
Inventories........................................ (1,924) (2,173)
Deferred acquisition fees.......................... (2,142) --
Other.............................................. (161) --
-------- --------
(17,976) (15,080)
-------- --------
Deferred tax assets:
Net operating loss carryforwards (expiring in
2010)............................................. 4,518 --
Postretirement health and life benefits............ 5,680 4,228
Pension............................................ 4,344 2,548
Environmental matters.............................. 1,138 1,058
Other.............................................. 1,795 3,250
Inventories........................................ 450 1,671
-------- --------
17,925 12,755
-------- --------
$ (51) $ (2,325)
======== ========
</TABLE>
In connection with the Acquisition and the acquisitions of PCI and Rau,
Alper and the former owners of PCI and Rau, respectively, indemnified the
Company from any potential future tax liabilities that may arise from periods
prior to the dates of acquisition.
NOTE 11. PENSION AND OTHER EMPLOYEE BENEFIT PLANS
Pension Plan
Fasteners sponsors noncontributory defined benefit pension plans. On
December 31, 1994, Fasteners curtailed future benefits attributable to
participants in Fasteners' pension plans. The effect of this curtailment
resulted in the elimination of defined pension benefits for all future
services of active employees participating in the plans. Additionally,
Fasteners assumed the obligations of two pension plans sponsored by PCI. The
PCI plans were merged with the Fasteners plans effective March 31, 1996.
The amounts funded by Fasteners for any plan year are not less than the
minimum required under the Employee Retirement Income Security Act.
The following items are the components of the net pension cost:
<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
------------------------------ -------------------------
PERIOD FROM
YEAR ENDED PERIOD FROM JANUARY 1 TO YEAR ENDED
DECEMBER 31, INCEPTION DATE TO OCTOBER 17, DECEMBER 31,
1996 DECEMBER 31, 1995 1995 1994
------------ ----------------- ------------ ------------
<S> <C> <C> <C> <C>
Interest cost on
projected benefit
obligation............. $ 2,110 $ 480 $ 1,525 $ 2,063
Service cost............ 97 -- -- 257
Actual return on plan
assets................. (2,962) (749) (2,570) (1,000)
Net amortization and
deferral............... 588 362 1,526 (487)
------- ----- ------- -------
Net periodic pension
cost................... $ (167) $ 93 $ 481 $ 833
======= ===== ======= =======
</TABLE>
F-18
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The following is a summary of the domestic plans' funded status as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
------- -------
<S> <C> <C>
Actuarial present value of benefits for service rendered to
date:
Accumulated benefits based on salaries to date, including
vested benefits of $29,767 and $27,377 at December 31,
1996 and 1995, respectively.............................. $29,867 $27,503
------- -------
Projected benefit obligation................................ 29,867 27,503
Less fair value of plan assets.............................. 21,938 17,606
------- -------
Projected benefit obligation in excess of plan assets....... 7,929 9,897
Unrecognized net gain....................................... 1,896 242
------- -------
Accrued pension cost........................................ 9,825 10,139
Less current portion........................................ 1,099 1,921
------- -------
Long-term pension liabilities............................... $ 8,726 $ 8,218
======= =======
</TABLE>
The following is a summary of assumptions used to reflect expectations of
future economic conditions as they relate to Fasteners' pension plans:
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
Discount rate.......................................... 7.50% 7.00% 8.50%
Expected long-term rate of return on plan assets....... 11.00% 9.00% 9.00%
</TABLE>
At December 31, 1996 and 1995, plan assets are invested approximately 24.9%
and 30.8%, respectively, in fixed income contracts with the balance in cash
and cash equivalents.
Fasteners has an additional defined benefit non-qualified pension plan
covering former employees and former employees of PCI. The pension liability
relating to this plan was $1,203 and $627 at December 31, 1996 and 1995,
respectively, of which $1,109 and $533 was classified as long-term at December
31, 1996 and 1995, respectively. Pension expense for this plan was $79, $9,
and $35 for the periods ended December 31, 1996, December 31, 1995 and October
17, 1995, respectively.
Postretirement Benefit Plans
Fasteners sponsors several defined benefit postretirement health and life
insurance benefit plans that cover both salaried and non-salaried former
employees. Fasteners assumed the obligations of a postretirement health and
life plan for former employees of PCI. All of the participants are retired
employees and beneficiaries, mostly from operations which were previously sold
or discontinued. Fasteners reserves the right to amend or discontinue all or
any part of those plans at any time. Fasteners' funding policy for its
postretirement plans is on a pay-as-you-go basis.
F-19
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The following table sets forth the status of Fasteners' postretirement
benefit plans as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1995
------- ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and beneficiaries................................ $13,644 $7,607
Fully eligible active participants........................ 816 --
------- ------
Total accumulated postretirement benefit obligation......... 14,460 7,607
Unrecognized net gain....................................... 112 --
------- ------
Accumulated postretirement benefit obligation ("APBO")...... $14,572 $7,607
======= ======
</TABLE>
Net periodic postretirement benefit cost consisted of the following:
<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
------------------------- ------------------------
PERIOD FROM PERIOD FROM
INCEPTION JANUARY 1
YEAR ENDED DATE TO TO YEAR ENDED
DECEMBER 31, DECEMBER 31, OCTOBER 17, DECEMBER 31,
1996 1995 1995 1994
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Interest cost............ $ 990 $110 $619 $ 659
Service cost............. 101 -- -- --
Net amortization and de- -- -- -- (659)
ferral.................. ------ ---- ---- -----
Net postretirement bene- $1,091 $110 $619 $ --
fit cost................ ====== ==== ==== =====
</TABLE>
For measurement purposes, a 9.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1997; the rate was
assumed to decrease gradually to 6% for 2004 and remain at that level
thereafter. The health care cost trend rate has a significant effect on the
amounts reported. An increase in the health care cost trend rates of 1
percentage point would have the effect of increasing the APBO as of December
31, 1996 by a total of $1,035 and the interest cost component of net periodic
postretirement benefit cost for the year then ended by a total of $78.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%, 7.0% and 8.5% in 1996, 1995 and
1994, respectively.
401(k) Plan
Fasteners sponsors a 401(k) savings plan for salaried and non-salaried
employees. Participation in the plan is optional. Employer contributions are
equal to 50% of employee contributions, up to 5% of the participant's annual
salary, subject to certain limitations. Fasteners' contributions to this plan
were $248, $47, $197 and $124 for the periods ended December 31, 1996,
December 31, 1995, October 17, 1995 and December 31, 1994, respectively.
Stock Options
During October 1995, Fasteners granted certain executives options to
purchase a total of 727,000 shares of common stock at an option price of $2.50
per share. These options vest upon achievement of specified performance
targets over a three-year period or immediately upon a change in control. As
of December 31, 1996, 242,000 options were vested.
F-20
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Fasteners adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). Accordingly, no compensation cost has been recognized for the stock
options granted. Had compensation cost of Fasteners' stock options granted
been determined consistent with the provisions of SFAS 123, Fasteners'
compensation expense would have increased by approximately $105,000.
NOTE 12. RELATED-PARTY TRANSACTIONS
Fasteners paid a fee of $1,300 to Kohlberg in conjunction with the
Acquisition. This fee has been capitalized along with other acquisition costs
incurred in the transaction. On January 24, 1996, Fasteners paid a fee of
$1,000 to Kohlberg in conjunction with the acquisitions of PCI and Rau (Note
3).
Pursuant to a management agreement, Kohlberg provides Fasteners with general
corporate administrative services. Kohlberg receives a management fee to
recover its operating expenses based upon an allocation of time devoted to
Fasteners. The management fee was $425 and $63 for the year ended December 31,
1996 and the period from the Inception Date to December 31, 1995,
respectively.
During 1996, an affiliate of a lender received 800,000 shares of common
stock for a capital contribution of $2,000. The lender received fees of $1,246
in connection with the New Credit Agreement.
Pursuant to a Management Agreement dated January 1, 1993, Alper provided
Fasteners with general corporate administrative services. Alper received a
management fee to recover its operating expenses based upon an allocation of
time devoted to Fasteners. The management fee for 1994 and 1993 was $538 and
$780, respectively. This agreement was terminated in July 1994.
On July 18, 1994, Fasteners issued 19,440 shares of Series A redeemable,
cumulative preferred stock (par value $.01 per share) to its parent, First
City Diversified, Inc. ("FCDI"), in exchange for forgiveness of intercompany
advances totaling $19,440. The holders of the preferred stock were entitled to
receive, when, as and if declared by the Board of Directors cumulative cash
dividends on the shares of the preferred stock at an annual rate of 5% of the
liquidation preference, which was equal to $19,440 at December 31, 1994. The
dividends at December 31, 1994 were $405. The preferred dividends were paid to
FCDI on February 3, 1995.
NOTE 13. COMMITMENTS AND CONTINGENCIES
Fasteners is occasionally made a party to litigation, claims and assertions
from outside parties during the normal course of business. Management does not
believe that the unfavorable resolution of any such matters currently existing
would have a material unfavorable impact upon the Company's financial position
or results of operations.
As a result of Fasteners' almost 200 years of industrial operations,
Fasteners is involved in environmental protection matters relating to the
discharge of materials into the environment and new such matters arise from
time to time. Fasteners is involved in clean-ups of a current and a former
operating location. In general, Fasteners has established accruals for those
hazardous waste sites where it is probable that a loss has been incurred and
the amount of the loss can be reasonably estimated. At December 31, 1996,
Fasteners had established accruals on a discounted basis, using a rate of
7.5%, for environmental matters in the amount of $2,954 which are not
anticipated to be of a capital nature. The total reserve for environmental
liabilities includes approximately $2,600 representing a contractual payment
to a former parent. The undiscounted amounts of the expected payments totaled
$4,575 at December 31, 1996. The reliability and precision of the loss
estimates are affected by numerous factors, such as the complexity of
investigation and remediation, the stage of site evaluation, the allocation of
responsibility among potentially responsible parties and the assertion of
additional claims. Fasteners adjusts its
F-21
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
accruals from time to time as a result of changes in performance standards,
remediation technology, available information and other relevant factors.
In December 1993, the Predecessor filed a lawsuit against certain insurance
carriers seeking indemnification for costs paid and to be paid relating to
environmental matters. During 1996, Fasteners received a settlement of $2,487
relating to this claim.
Fasteners has employment agreements with certain executives that contain
change in control and severance provisions.
NOTE 14. NORTH AMERICAN AND FOREIGN OPERATIONS
The Company's operations are located in the United States and Europe.
Financial information by geographic area for 1996 is as follows:
<TABLE>
<S> <C>
Net Sales by:
North America:
Domestic................................................... $ 78,348
Export..................................................... 3,275
Europe....................................................... 10,009
--------
$ 91,632
========
Operating Profit:
North America................................................ $ 9,763
Europe....................................................... 915
--------
$ 10,678
========
Identifiable assets (at end of period):
North America................................................ $ 98,168
Europe....................................................... 6,071
--------
$104,239
========
</TABLE>
Transfers of product from North America to Europe were not material during
the period presented above. Export sales from the United States include sales
to customers in Europe, Asia and Latin America. As the Company's European
operations were acquired in January 1996, export sales, operating profits and
identifiable assets were immaterial in 1995 and 1994.
F-22
<PAGE>
KSCO ACQUISITION CORPORATION
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................................ $ 1,194
Accounts receivable, net of allowance of $754.................... 15,048
Inventories...................................................... 24,025
Other............................................................ 741
--------
TOTAL CURRENT ASSETS......................................... 41,008
--------
Property, plant and equipment, net............................... 41,473
--------
Deferred income taxes............................................ 1,298
Intangible Assets................................................ 24,963
--------
$108,742
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt............................. $ 1,013
Accounts payable................................................. 9,612
Accrued liabilities.............................................. 8,946
--------
TOTAL CURRENT LIABILITIES.................................... 19,571
--------
LONG-TERM LIABILITIES
Revolving line of credit......................................... 11,930
Long-term debt................................................... 27,187
Employee benefits................................................ 24,351
Deferred income taxes............................................ --
Other............................................................ 2,941
--------
TOTAL LONG-TERM LIABILITIES.................................. 66,409
--------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 15,000,000 shares authorized,
8,880,102 issued and outstanding................................ 89
Additional paid-in capital....................................... 22,086
Retained earnings................................................ 1,191
Foreign currency translation adjustment.......................... (604)
--------
TOTAL STOCKHOLDERS' EQUITY................................... 22,762
--------
$108,742
========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-23
<PAGE>
KSCO ACQUISITION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
1997 1996
-------- -------
<S> <C> <C>
Net sales..................................................... $73,466 $69,796
Cost of sales................................................. 53,104 50,263
------- -------
Gross profit................................................ 20,362 19,533
Selling expenses.............................................. 7,192 7,687
General and administrative expenses........................... 4,505 5,046
Amortization expense.......................................... 2,025 2,046
------- -------
Operating income............................................ 6,640 4,754
Other expense (income)........................................ 430 102
Interest expense.............................................. 2,698 4,848
------- -------
Income (loss) before income tax provision and extraordinary
loss......................................................... 3,512 (196)
Income tax provision.......................................... 1,586 258
------- -------
Income (loss) before extraordinary loss....................... 1,926 (454)
Extraordinary loss, net of $613 tax benefit................... -- 950
------- -------
Net income (loss)............................................. $ 1,926 $(1,404)
======= =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-24
<PAGE>
KSCO ACQUISITION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
( DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1997 1996
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................ $ 1,926 $ (1,404)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation .......................................... 4,213 5,512
Amortization........................................... 2,025 2,046
Changes in operating assets and liabilities, net of
effect of acquired businesses:
Accounts receivable, net.............................. (2,610) (2,282)
Inventories........................................... (2,431) (4,292)
Other current assets.................................. 434 (1,714)
Accounts payable...................................... (976) 4,009
Accrued liabilities................................... 1,783 (2,039)
Other assets and liabilities.......................... (1,888) (1,615)
-------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES...... 2,476 (1,779)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid in business acquisitions, net of cash acquired. -- (23,110)
Acquisition costs........................................ -- (2,140)
Additions to property, plant and equipment............... (4,114) (4,437)
Proceeds from sales of property, plant and equipment..... -- 2,264
-------- ---------
NET CASH USED IN INVESTING ACTIVITIES.................... (4,114) (27,423)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on credit line............................ 2,506 4,900
Issuance of long-term debt............................... -- 20,992
Repayments of long-term debt............................. (277) --
Issuance of common stock................................. -- 4,000
-------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES................ 2,229 29,892
-------- ---------
NET INCREASE IN CASH..................................... 591 690
CASH AT BEGINNING OF PERIOD.............................. 603 410
-------- ---------
CASH AT END OF PERIOD.................................... $ 1,194 $ 1,100
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid.......................................... $ 4,389 $ 3,234
======== =========
Income taxes........................................... $ 14 $ --
======== =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-25
<PAGE>
KSCO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
1. INTERIM FINANCIAL STATEMENTS
The interim financial statements presented herein include the accounts of
KSCO Acquisition Corporation and its wholly owned subsidiaries (the "Company")
as of and for the nine months ended September 30, 1997 and 1996.
In the opinion of management, the unaudited condensed consolidated financial
statements reflect all normal recurring adjustments necessary for a fair
statement of the results of the interim periods. The results for the nine
months ended September 30, 1997 are not indicative of the results that would
be obtained for the entire fiscal year or any other interim period. Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been omitted from these condensed consolidated financial
statements pursuant to the applicable rules and regulations of the Securities
and Exchange Commission. These financial statements should be read in
conjunction with the audited Consolidated Financial Statements and the notes
thereto for the year ended December 31, 1996.
2. INVENTORIES
Inventories consist of the following at September 30, 1997:
<TABLE>
<S> <C>
Raw materials........................................................ $ 2,560
Work in process...................................................... 5,716
Finished goods....................................................... 15,749
-------
$24,025
=======
</TABLE>
3. SUBSEQUENT EVENT
On October 10, 1997, KSCO and its stockholders entered into a stock purchase
agreement with a third party for the sale of all of the capital stock of the
Company. In connection with the acquisition under the agreement, the Company
intends to issue senior notes and enter into a new credit facility. The
proceeds of the offering of such notes and initial borrowings under the new
credit facility will constitute a portion of the financing necessary for the
purchase price in the acquisition, to refinance certain existing indebtedness
of the Company and to repurchase certain equipment subject to a synthetic
lease.
F-26
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE GUARANTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OF-
FER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY OR THE GUARANTOR SINCE THE DATE HEREOF OR THAT ANY INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary.................................................................... 4
Risk Factors............................................................... 17
The Exchange Offer......................................................... 23
The Transactions........................................................... 33
Capitalization............................................................. 34
Selected Historical Financial Data......................................... 36
Pro Forma Consolidated Financial Statements................................ 38
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 44
Business................................................................... 49
Management................................................................. 65
Certain Transactions....................................................... 68
Description of Other Indebtedness.......................................... 69
Description of Notes....................................................... 71
Description of Units....................................................... 98
Certain U.S. Federal Income Tax Considerations............................. 103
Plan of Distribution....................................................... 106
Legal Matters.............................................................. 107
Experts.................................................................... 107
Available Information...................................................... 107
Index to Financial Statements.............................................. F-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDI-
TION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN SELLING EX-
CHANGE NOTES RECEIVED IN EXCHANGE FOR INITIAL NOTES HELD FOR THEIR OWN AC-
COUNT. SEE "PLAN OF DISTRIBUTION."
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF SCOVILL APPEARS HERE]
SCOVILL FASTENERS INC.
OFFER TO EXCHANGE
11 1/4% SENIOR NOTES DUE 2007,
SERIES A FOR 11 1/4% SENIOR
NOTES DUE 2007, SERIES B
PROSPECTUS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[ALTERNATE PAGE TO PROSPECTUS]
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY , 1998
PROSPECTUS
SCOVILL FASTENERS INC.
[LOGO OF SCOVILL APPEARS HERE]
11 1/4% SENIOR NOTES DUE 2007, SERIES B
-----------
The 11 1/4% Senior Notes due 2007, Series B (the "Exchange Notes" or the
"Notes") were issued in exchange for the 11 1/4% Senior Notes due 2007, Series
A (the "Initial Notes") by Scovill Fasteners Inc. (the "Company"), a Delaware
corporation. The Notes mature on November 30, 2007. Interest on the Notes will
be payable semi-annually on May 30 and November 30 of each year, commencing May
30, 1998, to the Holders of record at the close of business on the May 15 or
November 15, as the case may be, immediately preceding the relevant interest
payment date. The Notes will be redeemable, at the option of the Company, in
whole or in part, at any time on or after November 30, 2002, at the redemption
prices set forth herein, together with accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date. Notwithstanding the
foregoing, at any time on or prior to November 30, 2000, the Company may redeem
up to 35% of the aggregate principal amount of the Notes with the net cash
proceeds of one or more Public Equity Offerings at a redemption price equal to
111.25% of the principal amount thereof, plus acrrued and unpaid interest and
Liquidated Damages, if any, to the redemption date; provided, however, that (a)
at least $65 million aggregate principal amount of the Notes remains
outstanding immediately after the occurrence of such redemption and (b) notice
of such redemption is given within 60 days of the date of the closing of any
such Public Equity Offering. Upon the occurrence of a Change of Control (as
defined), holders of the Notes will have the right to require the Company to
purchase all or any part of their Notes for a cash price equal to 101% of the
principal amount of the Notes, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase. See "Description of Notes."
The Notes are fully and unconditionally guaranteed (the "Parent Guarantee")
by Scovill Holdings Inc. ("Parent"). In addition, if the Company or any of its
Restricted Subsidiaries shall acquire or create another Subsidiary (other than
any Foreign Subsidiary) or contribute property or assets to an existing
Subsidiary, then such Subsidiary will, under certain circumstances explained
herein, be required to execute a Subsidiary Guarantee. The Notes, the Parent
Guarantee, and any Subsidiary Guarantees are senior unsecured obligations of
the Company and will rank pari passu in right of payment with all other
existing and future unsecured and unsubordinated Indebtedness of the Company
and senior to all existing and future subordinated Indebtedness of the Company.
See "Description of Notes." At September 30, 1997, after giving pro forma
effect to the Transactions, the Company would have had approximately $30.3
million of secured Indebtedness outstanding, excluding the $25.0 million
Revolving Credit Facility. See "Capitalization." The Indenture permits the
Company and its subsidiaries to incur additional indebtedness, including senior
indebtedness, subject to certain limitations. The Indenture does not limit
Parent's ability to incur indebtedness.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE NOTES.
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 REPRESENTATIONS TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
This Prospectus is to be used by SBC Warburg Dillion Read Inc. ("Dillon
Read") in connection with the offers and sales in market-making transactions at
negotiated prices related to prevailing market prices at the time of sale. The
Company does not intend to list the Exchange Notes on any securities exchange
or to seek admission thereof to trading in the National Association of
Securities Dealers Automated Quotation System. Dillion Read has advised the
Company that it intends to make a market in the Exchange Notes; however, it is
not obligated to do so and any market-making may be discontinued at any time.
The Company will receive no portion of the proceeds of the sale of the Exchange
Notes and will bear expenses incident to the registration thereof. The closing
of the Company's exchange offer resulting in the issue of the Exchange Notes
occurred on , 1998. See "Plan of Distribution."
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
[ALTERNATE PAGE TO PROSPECTUS]
THE NOTES
As used in this section of the Summary and in the "Description of Notes," the
"Company" refers only to Scovill Fasteners Inc. and does not include its
subsidiaries.
ISSUER..................... Scovill Fasteners Inc.
SECURITIES OFFERED......... $100,000,000 principal amount of 11 1/4%
Senior Notes due 2007, Series B.
MATURITY DATE.............. November 30, 2007.
INTEREST PAYMENT DATES..... May 30 and November 30 of each year,
commencing May 30, 1998.
MANDATORY REDEMPTION....... None, except as set forth below under "Change
of Control."
GUARANTEES; SUBORDINATION.. The Notes are guaranteed by Parent (the
"Parent Guarantee") and, under certain
circumstances, by Restricted Subsidiaries (as
defined) of the Company (the "Subsidiary
Guarantees," and together with the Parent
Guarantee, the "Guarantees"). No Subsidiary
Guarantees were required on the date of
original issuance of the Notes (the "Issue
Date"). The Notes and each Guarantee are
senior unsecured obligations of the Company
and the Guarantor thereof, respectively. The
Notes and each Guarantee rank pari passu in
right of payment with all other existing and
future unsecured and unsubordinated
obligations of the Company and the Guarantor
thereof, respectively, and senior to all
existing and future indebtedness of the
Company and such Guarantor that is expressly
subordinated to the Notes and such Guarantee,
respectively. In addition, the Notes and each
Guarantee are effectively subordinated to all
secured obligations of the Company and the
Guarantor thereof, respectively, to the
extent of the assets securing such
obligations. At September 30, 1997, after
giving pro forma effect to the Transactions,
the Company had approximately $30.3 million
of secured Indebtedness outstanding,
excluding the $25.0 million Revolving Credit
Facility. The Notes are structurally
subordinated to all obligations (including
trade payables and accrued liabilities) of
the Company's subsidiaries, other than any
subsidiary that issues a Subsidiary
Guarantee. The indenture pursuant to which
the Notes were issued (the "Indenture")
permits the Company and its subsidiaries to
incur additional indebtedness, including
secured indebtedness, subject to certain
limitations. The Indenture does not limit
Parent's ability to incur indebtedness.
10
<PAGE>
[ALTERNATE PAGE TO PROSPECTUS]
- -------------------------------------------------------------------------------
OPTIONAL REDEMPTION............. The Notes are redeemable at the option of the
Company, in whole or in part, at any time on
or after November 30, 2002, at the redemption
prices set forth herein, plus accrued and
unpaid interest and Liquidated Damages, if
any, to the redemption date. The Company may
also redeem Notes at its option, at any time
on or prior to November 30, 2000, at a
redemption price equal to 111.25% of the
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if
any, to the redemption date, with the net
proceeds of one or more Public Equity
Offerings; provided, however, that at least
$65 million in aggregate principal amount of
the Notes remains outstanding following each
such redemption. See "Description of Notes--
Optional Redemption."
CHANGE OF CONTROL............... Upon the occurrence of a Change of Control,
the Company will be required to offer to
purchase all or any part of each holder's
Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
purchase. There can be no assurance that the
Company will have the financial resources
necessary, or be permitted by its debt or
other agreements, to purchase the Notes upon
a Change of Control. See "Risk Factors--
Change of Control" and "Description of
Notes--Change of Control."
CERTAIN COVENANTS...............
The Indenture contains certain covenants
that, among other things, limit the ability
of the Company and the Restricted
Subsidiaries to incur additional
indebtedness, pay dividends or make other
distributions, enter into sale and leaseback
transactions, make certain investments, incur
certain secured indebtedness, enter into
certain transactions with affiliates, or
enter into certain mergers or consolidations
or sell all or substantially all of the
assets of the Company and the Restricted
Subsidiaries. These covenants are subject to
a number of significant exceptions and
qualifications. See "Description of Notes--
Certain Covenants."
USE OF PROCEEDS................. The Company will receive no cash proceeds
from the sale of the Exchange Notes.
- -------------------------------------------------------------------------------
11
<PAGE>
[ALTERNATE PAGE TO PROSPECTUS]
- ------------------------------------------------------------------------------
CONCURRENT UNITS OFFERING
Concurrent with the Notes Offering, Parent offered 100,000 Units, each Unit
consisting of $100 liquidation preference of Senior Preferred Stock and one
warrant to purchase shares of Common Stock. The Senior Preferred Stock will be
exchangeable, at the option of Parent, into Parent's Subordinated Exchange
Debentures due 2009 (the "Exchange Debentures"), subject to certain conditions.
The Senior Preferred Stock will be mandatorily redeemable on November 30, 2009.
Dividends on the Senior Preferred Stock will be payable quarterly in arrears,
in cash or, prior to November 30, 2002 at Parent's option, in additional shares
of Senior Preferred Stock. See "Description of Units."
RISK FACTORS
For a discussion of certain factors that should be considered in evaluating
the Exchange Notes, see "Risk Factors."
- ------------------------------------------------------------------------------
13
<PAGE>
[ALTERNATE PAGE TO PROSPECTUS]
RISK FACTORS
Prospective investors should carefully consider the following factors, as
well as the other information and financial data contained in this Prospectus,
before investing in the Exchange Notes.
SUBSTANTIAL LEVERAGE; RESTRICTIVE COVENANTS
The Company is highly leveraged. At September 30, 1997, on a pro forma basis
after giving effect to the Transactions, the total debt of the Company would
have been $130.3 million (excluding the $25.0 million Revolving Credit
Facility) and its stockholder's equity would have been $41.6 million. Subject
to the restrictions in the Indenture and the New Credit Facility, the Company
may incur additional indebtedness from time to time to provide working
capital, to finance acquisitions or capital expenditures and for other
corporate purposes. The level of the Company's indebtedness will have
important consequences for holders of the Notes, including: (i) a substantial
portion of the Company's cash flow from operations must be dedicated to debt
service and will not be available for other purposes, (ii) the Company's
ability to obtain additional debt financing in the future for
17
<PAGE>
[ALTERNATE PAGE TO PROSPECTUS]
generally apply, except that the Subsidiary Guarantees could also be subject
to the claim that, since the Subsidiary Guarantees were incurred for the
benefit of the Company (and only indirectly for the benefit of the guarantors
thereof), they were incurred for less than reasonably equivalent value or fair
consideration. A court could therefore subordinate the Subsidiary Guarantees
to the other obligations of the guarantors thereof, or take other action
detrimental to holders of the Notes, including, under certain circumstances,
invalidating the Subsidiary Guarantees. No Subsidiary Guarantees will be
required on the Issue Date.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
offer to purchase all of the outstanding Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest to the date of purchase. There can
be no assurance that the Company will have sufficient funds available, will be
able to raise sufficient funds through a refinancing of the Notes, or will be
permitted by its other debt agreements to purchase the Notes upon the
occurrence of a Change of Control. In addition, a Change of Control may
require the Company to offer to purchase other outstanding indebtedness and
would cause a default under the New Credit Facility. The inability to purchase
all of the tendered Notes would constitute an Event of Default (as defined)
under the Indenture. See "Description of Notes--Change of Control."
The Change of Control provision may not necessarily afford the holders of
Notes protection in the event of a highly leveraged transaction, including a
reorganization, restructuring, merger, or similar transaction involving the
Company that could adversely affect the holders because such transactions may
not involve a shift in voting power or beneficial ownership, may not involve a
shift of the required magnitude or may not otherwise fit within the definition
of Change of Control.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The Initial Notes are eligible for trading on the Private Offerings,
Resales and Trading through Automated Linkage Market by Qualified
Institutional Buyers ("QIBs"). The Exchange Notes are new securities for which
there is no existing market. There can be no assurance as to the liquidity of
any markets that may develop for the Exchange Notes, the ability of the
holders of the Exchange Notes to sell their Exchange Notes or the price at
which holders would be able to sell their Exchange Notes. Future trading
prices of the Exchange Notes will depend on many factors, including, among
other things, prevailing interest rates, the Company's operating results, and
the market for similar securities. The Initial Purchasers have advised the
Company that they currently intend to make a market in the Notes. However, the
Initial Purchasers are not obligated to do so and any market-making may be
discontinued at any time without notice. The Company and Parent do not intend
to apply for listing of the Exchange Notes on any securities exchange.
The liquidity of, and trading market for, the Exchange Notes may also be
materially and adversely affected by declines in the market for high yield
securities generally. Such a decline may materially and adversely affect such
liquidity and trading independent of the financial performance of, and
prospects for, the Company and Parent.
23
<PAGE>
[ALTERNATE PAGE TO PROSPECTUS]
CERTAIN TRANSACTIONS
TRANSACTIONS WITH KOHLBERG
Since October 1995, the Company has paid an aggregate of $863,000 in
management fees to Kohlberg & Co., pursuant to a management services agreement
that will be terminated effective as of the closing of the Acquisition. In
January 1996, the Company paid an advisory fee of $1.0 million to Kohlberg &
Co. in conjunction with the acquisitions of PCI and Rau.
TRANSACTIONS WITH SARATOGA
In connection with the Transactions, the Company paid a transaction fee of
$1.75 million to an affiliate of Saratoga in consideration for advisory
services related to the structuring and financing of the transaction. The
Company entered into an agreement with Saratoga, pursuant to which the Company
will pay a management fee of $150,000 per quarter to Saratoga (the "Management
Services Agreement"). In addition, Saratoga will provide the Company with
advisory services in connection with significant business transactions, such
as acquisitions, for which the Company will pay Saratoga compensation
comparable for similarly situated companies. See also "Plan of Distribution."
THE ACQUISITION
In connection with the Transactions, affiliates of Kohlberg and KSCO's other
existing stockholders received an aggregate of approximately $98.1 million.
Members of management received aggregate proceeds of approximately $2.9
million in cash in consideration for their stock options in KSCO, excluding
the $3.3 million that was rolled over into options to purchase Common Stock
and Series B Preferred Stock. Certain members of management entered into
employment agreements with the Company. See "Management." In addition, William
F. Andrews, the Chairman of the Board, received proceeds of approximately $1.8
million in cash in consideration for his stock and stock options of KSCO,
excluding the $150,000 that was rolled over into options to purchase Common
Stock and Series B Preferred Stock.
TRANSACTIONS WITH INITIAL PURCHASERS
On November 26, 1997, Dillon Read and BT Alex. Brown Incorporated (the
"Initial Purchasers") acquired all of the Initial Notes and thereafter
completed a private placement of the Initial Notes. In connection with their
acquisition of the Initial Notes, the Initial Purchasers became entitled to
the benefits of the Registration Rights Agreement, pursuant to which the
Company commenced the Exchange Offer.
68
<PAGE>
[ALTERNATE PAGE TO PROSPECTUS]
PLAN OF DISTRIBUTION
This Prospectus is to be used by Dillon Read in connection with offers and
sales of the Notes in market-making transactions. Such sales will be made at
negotiated prices related to prevailing market prices at the time of sale.
Dillon Read may act as principal or agent in such transactions, including as
agent for the counterparty when acting as principal or as agent for both
counterparties, and may receive compensation in the form of discounts and
commissions, including from both counterparties when it acts as agent for
both.
An affiliate of Dillon Read owns 67.2% of the capital stock of Parent, which
owns all of the capital stock of the Company. The affiliate is also a party to
a Stockholders Agreement which provides for certain restrictions on the
transferability of Parent's common stock and provides for tag-along, take-
along and registration rights among the parties thereto. Pursuant to such
agreement, the affiliate of Dillon Read has the right to nominate directors
who will be members of the Parent's Board of Directors. See "Management" and
"Certain Transactions."
The Company has been advised by Dillon Read that, subject to applicable laws
and regulations, Dillon Read currently intends to make a market in the Notes
following completion of the Exchange Offer. However, Dillon Read is not
obligated to do so and any such market-making may be interrupted or
discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act. There can be no assurance that an active trading market for the
Notes will develop or be sustained. See "Risk Factors--Absence of Public
Market; Restrictions on Transfer."
The Company and Dillon Read have entered into the Registration Rights
Agreement with respect to the use by the Initial Purchasers of this
Prospectus. Pursuant to such agreement, the Company has agreed to indemnify
Dillon Read against certain liabilities, including liabilities under the
Securities Act.
106
<PAGE>
[ALTERNATE PAGE TO PROSPECTUS]
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE GUARANTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OF-
FER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY OR THE GUARANTOR SINCE THE DATE HEREOF OR THAT ANY INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary.................................................................... 4
Risk Factors............................................................... 17
The Transactions........................................................... 33
Capitalization............................................................. 34
Selected Historical Financial Data......................................... 36
Pro Forma Consolidated Financial Statements................................ 38
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 44
Business................................................................... 49
Management................................................................. 65
Certain Transactions....................................................... 68
Description of Other Indebtedness.......................................... 69
Description of Notes....................................................... 71
Description of Units....................................................... 98
Certain U.S. Federal Income Tax Considerations............................. 103
Plan of Distribution....................................................... 106
Legal Matters.............................................................. 107
Experts.................................................................... 107
Available Information...................................................... 107
Index to Financial Statements.............................................. F-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDI-
TION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN SELLING EX-
CHANGE NOTES RECEIVED IN EXCHANGE FOR INITIAL NOTES HELD FOR THEIR OWN AC-
COUNT. SEE "PLAN OF DISTRIBUTION."
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF SCOVILL APPEARS HERE]
SCOVILL FASTENERS INC.
11 1/4% SENIOR NOTES DUE 2007,
SERIES B
PROSPECTUS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the fees and expenses payable by the
Company in connection with the issuance and distribution of the Exchange
Notes.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................. $29,500
Blue Sky fees and expenses.......................................... *
Printing expenses................................................... *
Legal fees and expenses............................................. *
Accounting fees and expenses........................................ *
Indenture Trustee fees.............................................. *
Miscellaneous....................................................... *
-------
Total........................................................... $ *
=======
</TABLE>
- --------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL empowers a Delaware corporation 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 (other than an action by or in the
right of such corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as director, officer, employee or agent of
another corporation or enterprise. A corporation may indemnify such person
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 if he acted in good faith and
in a manner reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
has no reasonable cause to believe his conduct was unlawful. A corporation
may, in advance of the final disposition of any civil, criminal,
administrative or investigative action, suit or proceeding, pay the expense
(including attorneys' fees) included by any officer or director in defending
such action, provided that the director or officer undertake to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under
the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses (including attorneys' fees) which he
actually or reasonably incurred in connection therewith. The indemnification
provided is not deemed to be exclusive of any other rights to which an officer
or director may be entitled under any corporation's bylaw, agreement, vote or
otherwise.
The Company has adopted provisions in its Certificate of Incorporation and
Bylaws that provide that the Company shall indemnify its officers and
directors to the maximum extent permitted under the DGCL. Certain directors
are also entitled to indemnification from the organizations that employ them.
The Company has purchased insurance on behalf of its officers and directors
for liabilities arising out of their capacities as such.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the Transactions, in November 1997, the Company issued an
aggregate principal amount of $100,000,000 of Initial Notes to the Initial
Purchasers in consideration for $97,000,000. At the same time, Parent issued an
aggregate principal amount of $10,000,000 of Units, each consisting of one
share of Series B Preferred Stock and one warrant to purchase shares of common
stock of the Company, to the Initial Purchasers. Based on the private nature of
these transactions and the financial sophistication of the Initial Purchasers,
each of these transactions was exempt from the Securities Act pursuant to
Section 4(2) therein.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits:
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
3.1 --Certificate of Incorporation of Scovill Holdings Inc.**
3.2 --By-laws of Scovill Holdings Inc.**
3.3 --Amended and Restated Certificate of Designations, Preferences and
Relative, Participating, Option and Other Special Rights of Series A
Cumulative Redeemable Exchangeable Preferred Stock.*
3.4 --Certificate of Designation, Preferences, and Relative,
Participating, Option and Other Special Rights of Series B Preferred
Stock.+
3.5 --Certificate of Incorporation of AF Acquisition Corp.+
3.6 --Certificate of Amendment of Certificate of Incorporation of AF
Acquisition Corp.+
3.7 --Certificate of Amendment of Certificate of Incorporation of Scovill
Apparel Fasteners Inc.+
3.8 --Certificate of Amendment of Certificate of Incorporation of Scovill
Apparel Fasteners Inc.+
3.9 --Certificate of Change of Location of Registered Office and of
Registered Agent of Scovill Fasteners Inc.+
3.10 --Certificate of Ownership and Merger Merging KSCO New Co. into
Scovill Fasteners Inc.+
3.11 --Certificate of Amendment of Certificate of Incorporation of Scovill
Fasteners Inc.+
3.12 --By-laws of Scovill Fasteners Inc.+
4.1 --Indenture dated as of November 26, 1997 among Scovill Acquisition
Inc., Scovill Holdings Inc., as Guarantor, and United States Trust
Company of New as Trustee (including Form of Note).**
4.2 --Registration Rights Agreement dated as of November 26, 1997 among
Scovill Acquisition Inc., Scovill Holdings Inc. and SBC Warburg
Dillon Read Inc. and BT Alex. Brown Incorporated.**
4.3 --Exchange Debenture Indenture between Scovill Holdings Inc. and the
Trustee thereunder.*
5.1 --Opinion of Cahill Gordon & Reindel regarding legality of Exchange
Notes and Guarantee.*
10.1.1 --Management Services Agreement among Scovill Fasteners Inc. and
Saratoga Partners III, L.P.*
10.1.2 --Preferred Stock Registration Rights Agreement dated as of November
26, 1997 among Scovill Holdings Inc. and SBC Warburg Dillon Read
Inc. and BT Alex. Brown Incorporated.*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
10.1.3 --Warrant Agreement dated as of November 26, 1997 between Scovill
Holdings Inc. and United States Trust Company of New York
(including Form of Warrant).**
10.1.4 --Warrant Registration Rights Agreement dated as of November 26,
1997 between Scovill Holdings Inc. and Unites States Trust Company
of New York.**
10.1.5 --Employment Agreement dated as of October 10, 1997 between David J.
Barrett and Scovill Acquisition Inc.**
10.1.6 --Employment Agreement dated as of October 10, 1997 between Martin
A. Moore and Scovill Acquisition Inc.**
10.1.7 --Employment Agreement dated as of October 10, 1997 between Robert
Feltz and Scovill Acquisition Inc.**
10.1.8 --Stock Purchase Agreement dated as of October 10, 1997 among SLF
Corporation, KSCO Acquisition Corporation, and the Stockholders of
KSCO Acquisition Corporation.+
10.1.10 --Tax Sharing Agreement dated as of November 26, 1997 by and among
Scovill Holdings Inc., Scovill Fasteners Inc., and the SFI
Subgroup.+
10.1.11 --Stock Option Agreement dated as of November 26, 1997 between
William F. Andrews and Scovill Holdings Inc.+
10.1.12 --Stock Option Agreement dated as of November 26, 1997 between John
Champagne and Scovill Holdings Inc.+
10.1.13 --Stock Option Agreement dated as of November 26, 1997 between
Michael Baxley and Scovill Holdings Inc.+
10.1.14 --Stock Option Agreement dated as of November 26, 1997 between
Robert W. Feltz and Scovill Holdings Inc.+
10.1.15 --Stock Option Agreement dated as of November 26, 1997 between
Martin A. Moore and Scovill Holdings Inc.+
10.1.16 --Stock Option Agreement dated as of November 26, 1997 between David
J. Barrett and Scovill Holdings Inc.+
10.1.17 --Scovill Holdings Inc. Stockholders Agreement dated as of November
26, 1997.+
10.1.18 --Scovill Holdings Inc. Subscription Agreement dated as of November
26, 1997.+
10.1.19 --Scovill Holdings Inc. Long-Term Incentive and Share Award Plan.+
10.1.20 --Material Agreements.*
10.1.21 --Credit Agreement dated as of November 26, 1997.+
12.1 --Statements re: Computations of Ratios.**
21.1 --List of Subsidiaries of Scovill Holdings Inc.+
21.2 --List of Subsidiaries of Scovill Fasteners Inc.**
23.1 --Consent of Arthur Andersen LLP.**
23.2 --Consent and Report on Schedule of Deloitte & Touche LLP.**
23.3 --Consent of Cahill Gordon & Reindel (included in Exhibit 5.1).*
24.1 --Powers of Attorney (included in signature pages).+
25.1 --Statement of Eligibility of Trustee on Form T-1, regarding Scovill
Fasteners Inc. and Scovill Holdings Inc.**
27.1 --Financial Data Schedule.**
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
99.1 --Form of Letter of Transmittal.*
99.2 --Form of Notice of Guaranteed Delivery.*
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
+ Filed herewith.
(b) Financial Statement Schedule.
(1) Financial Statements
The financial statements filed as part of this Registration Statement are
listed in the Index to Financial Statements on page F-1.
(2) Schedule
Schedule II--Valuation and Qualifying Accounts.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Registrants
pursuant to the provisions described under Item 20 above, or otherwise, the
Registrants have been advised that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the
Registrants in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
JANUARY 13, 1998.
Scovill Fasteners Inc.
By: /s/ David J. Barrett
------------------------------
DAVID J. BARRETT
CHIEF EXECUTIVE OFFICER,
PRESIDENT AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ David J. Barrett Chief Executive
- ------------------------------------ Officer, President January 13, 1998
DAVID J. BARRETT and Director
Executive Vice
/s/ Martin A. Moore President, Chief January 13, 1998
- ------------------------------------ Financial Officer
MARTIN A. MOORE and Principal
Accounting Officer
Director
* /s/ William F. Andrews January 13, 1998
- ------------------------------------
WILLIAM F. ANDREWS
Director
* /s/ Christian L. Oberbeck January 13, 1998
- ------------------------------------
CHRISTIAN L. OBERBECK
* /s/ Martin A. Moore January 13, 1998
- ------------------------------------
MARTIN A. MOORE Attorney-in-fact
</TABLE>
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW YORK, NEW YORK ON
JANUARY 13, 1998.
Scovill Holdings Inc.
By: /s/ David J. Barrett
_________________________________
DAVID J. BARRETT
Chief Executive Officer, President
and Director
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ David J. Barrett Chief Executive
- ------------------------------------- Officer, President January 13, 1998
DAVID J. BARRETT and Director
Executive Vice
/s/ Martin A. Moore President, Chief January 13, 1998
- ------------------------------------- Financial Officer,
MARTIN A. MOORE and Principal
Accounting Officer
Director
* /s/ William F. Andrews January 13, 1998
- -------------------------------------
WILLIAM F. ANDREWS
Director
* /s/ Christian L. Oberbeck January 13, 1998
- -------------------------------------
CHRISTIAN L. OBERBECK
* /s/ Martin A. Moore January 13, 1998
- -------------------------------------
MARTIN A. MOORE Attorney-in-fact
</TABLE>
II-6
<PAGE>
FINANCIAL STATEMENT SCHEDULE
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ------------ ---------------- --------- ----------
BALANCE AT ADDITIONS DEDUCTION BALANCE AT
BEGINNING OF CHARGED TO COSTS FROM END OF
CLASSIFICATION PERIOD AND EXPENSES RESERVES PERIOD
-------------- ------------ ---------------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
VALUATION AND QUALIFYING
ACCOUNTS DEDUCTED FROM THE
ASSETS TO WHICH THEY
APPLY:
For the year ended
December 31, 1996,
Allowance for
uncollectible accounts.. $326 $376 $ 62 $640
==================================================
For the year ended
December 31, 1995,
Allowance for
uncollectible accounts.. $326 $455 $455 $326
==================================================
For the year ended
December 31, 1994,
Allowance for
uncollectible accounts.. $219 $395 $288 $326
==================================================
</TABLE>
S-1
<PAGE>
EXHIBIT 3.4
-----------
CERTIFICATE OF DESIGNATION
OF THE POWERS, PREFERENCES AND RIGHTS
OF SERIES B PREFERRED STOCK OF
SCOVILL HOLDINGS, INC.
AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
The undersigned, David J. Barrett and Martin A. Moore, hereby certify:
That they are the President and the Secretary, respectively, of
SCOVILL HOLDINGS, INC., a Delaware corporation (the "Corporation").
-----------
That pursuant to the authority given by the Corporation's Certificate
of Incorporation, the Board of Directors of the Company has duly adopted the
following preambles and resolutions:
"WHEREAS, the Board is authorized, within the limitations and
restrictions stated in the Certificate of Incorporation of the Company, to
fix by resolution or resolutions the designation of each series of Preferred
Stock of the Company (the "Preferred Stock") and the powers, preferences and
---------------
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof, including, without
limitation the generality of the foregoing, such provisions as may be desired
concerning voting, redemption, dividends, dissolutions or distribution of
assets, conversion or exchange, and such other subjects or matters as may be
fixed by resolutions of the Board under the General Corporation Law of
Delaware;
WHEREAS, it is the desire of the Board, pursuant to its authority as
aforesaid, to authorize and fix the terms of two series of Preferred Stock
and the number of shares constituting such series;
RESOLVED, that there is hereby authorized such series of Preferred
Stock on the terms and with the provisions set forth below:
1. Title. This Board of Directors hereby authorizes a series of
-----
preferred stock for this Corporation designated as "Series B Preferred
Stock" and referred to in these resolutions as "Series B Preferred Stock".
<PAGE>
-2-
2. Number. The number of shares constituting the Series B Preferred
------
Stock shall be 6,000,000.
3. Liquidation Rights. Upon any liquidation, dissolution or winding
------------------
up of the Corporation, whether voluntary or involuntary, the Series B
Preferred Stock shall be entitled, before any distribution is made with
respect to any capital stock (other than common stock and any capital stock
that expressly provides that it ranks junior to the Series B Preferred
Stock), to be paid $9.90 per share, and the Series B Preferred Stock shall
not be entitled to any further payment. In case the net assets of the
Corporation are insufficient to pay all outstanding shares of Series B
Preferred Stock the amount to which they are respectively entitled, then the
entire net assets of the Corporation shall be distributed ratably to all
outstanding shares of Series B Preferred Stock.
4. Voting.
------
4.1 No Voting Rights Generally. The holders of Series B Preferred
--------------------------
Stock, except as otherwise required under Delaware law or as set forth in
this paragraph 4, shall not be entitled or permitted to vote on any matter
required or permitted to be voted upon by the stockholders of the
Corporation.
4.2 Actions Requiring Vote of Series B Preferred Stock. The
--------------------------------------------------
Corporation shall not at any time, except with the affirmative vote of the
holders of at least a majority of the shares of the Series B Preferred Stock
at the time outstanding, (a) authorize any class of stock ranking prior to
the Series B Preferred Stock either as to rights on liquidation or as to
dividends (it being understood that the foregoing shall not apply to the
Corporation's Series A Cumulative Redeemable Exchangeable Preferred Stock) or
(b) amend the Certificate of Incorporation or the Bylaws of the Corporation
so as to affect adversely the relative rights, preferences or limitations of
the shares of the Series B Preferred Stock. No separate vote or consent of
the Series Stock shall be required in connection with the authorization of,
or the increase of the total number of authorized shares of, any class of
stock ranking pari passu with or junior to the Series B Preferred Stock as to
rights on liquidation and as to dividends.
5. Redemption.
----------
5.1 Mandatorv Redemption. The Corporation shall redeem all of the
--------------------
outstanding shares of Series B Preferred Stock from funds lawfully available
therefor twenty-one
<PAGE>
-3-
(21) days after the consummation of any of the following events (each, a
"Redemption Event"): (a) a public offering of shares of Common Stock of the
----------------
Corporation, or of securities convertible or exchangeable into or exercisable
for shares of Common Stock, pursuant to the Securities Act of 1933 (the
"Act"); (b) a reorganization, merger or consolidation with one or more other
---
corporations as a result of which the Company is not the surviving
corporation or the Company survives as a subsidiary (at least majority owned)
of another corporation; or (c) the sale of substantially all of the assets
and property of the Corporation to another corporation.
5.2 Optional Redemption. If the Board of Directors shall determine,
-------------------
in its sole discretion, to recapitalize the debt or equity of the
Corporation, or both, and, as part of such recapitalization, to redeem the
Series B Preferred Stock, the Corporation, at its option, exercised under
authority of its Board of Directors, may redeem all (but not less than all)
of the outstanding shares of Series B Preferred Stock.
5.3 Procedure. The following procedure shall apply to redemptions of
---------
Series B Preferred Stock:
(A) In any redemption of Series B Preferred Stock, the Corporation
shall pay therefor $9.90 in cash per share said sum being sometimes
hereinafter called the "redemption price".
(B) Notice of any proposed redemption shall be mailed by the
Corporation, postage prepaid, not less than twenty (20) days nor more than
sixty (60) days prior to the date fixed for redemption, to each holder of
record of shares of Series B Preferred Stock, at such holder's address as
shown on the records of the Corporation or given by such holder to the
Corporation for the purpose of notice, or, if no such address appears or is
given, at the place where the principal office of the Corporation is located.
Such notice shall state the date fixed for redemption and the redemption
price and shall call upon each holder of shares of Series B Preferred Stock
to surrender to the Corporation on said date at the place designated in the
notice such holder's certificate or certificates representing the shares to
be redeemed.
(C) On or after the date fixed for redemption and stated in such
notice, each holder of Series B Preferred Stock shall surrender the
certificate evidencing such shares to the Corporation at the place designated
in such notice and shall thereupon be entitled to receive payment of the
redemption price. If such notice of redemption
<PAGE>
-4-
shall have been duly given, and, if, on the date fixed for redemption, funds
necessary for the redemption are available therefor, then, notwithstanding
that the certificates evidencing the Series B Preferred Stock called for
redemption shall not have been surrendered, and all voting rights of such
shares shall terminate on said date.
(D) If, on or prior to any date fixed for redemption of Series B
Preferred Stock, the Corporation deposits with any bank or trust company in
the State of New York, as a trust fund, a sum sufficient to redeem, on the
date fixed for redemption thereof, the Series B Preferred Stock called for
redemption, with irrevocable instructions and authority to pay, on or after
the date fixed for redemption, the redemption price of such shares to their
respective holders upon surrender of their share certificates, and if the
notice described above designates such bank or trust company as the place to
which such certificates are to be surrendered, such deposit shall constitute
full payment of the redemption price of the shares to be redeemed, and, from
and after the date fixed for redemption, such shares shall no longer be
outstanding, and the holders thereof shall cease to be stockholders with
respect to such shares and shall have no rights with respect thereto except
the right to receive from the bank or trust company payment of the redemption
price of such shares, without interest, upon surrender of their certificates
therefor. If the holders of Series B Preferred Stock so called for redemption
shall not have claimed any funds so deposited prior to the end of six years
from the date fixed for redemption of such shares, such bank or trust company
shall thereupon pay over to the Corporation such unclaimed funds, and such
bank or trust company shall thereafter be relieved of all responsibility in
respect thereof to such holders, and such holders shall look only to the
Corporation for payment of the redemption price.
(E) The Series B Preferred Stock redeemed pursuant to this paragraph 5
shall revert to the status of authorized but unissued preferred stock and may
thereafter have such characteristics and designations as the Board of
Directors may determine."
That the authorized number of shares of Preferred Stock is 16,200,000,
of which 100,000 have been issued as Series A Cumulative Redeemable Exchangeable
Preferred Stock, and the number of shares constituting the Series B Preferred
Stock, none of which have been issued, is 6,000,000.
<PAGE>
-5-
Each of the undersigned further declares under penalty of perjury that
the matters set forth in the foregoing certificate are true of his or her own
knowledge.
Dated: November 26, 1997
________________________ _____________________________
David J. Barrett, Martin A. Moore, Secretary
President
<PAGE>
EXHIBIT 3.5
-----------
CERTIFICATE OF INCORPORATION
OF
AF ACQUISITION CORP.
1. The name of the Corporation is
AF ACQUISITION CORP.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is fifteen million five hundred thousand (15,500,000) of
which stock fifteen million (15,000,000) shares of the par value of One Cent
($.01) each, amounting in the aggregate to One Hundred Fifty Thousand Dollars
($150,000.00) shall be Common stock and of which five hundred thousand (500,000)
shares of the par value of One Cent
<PAGE>
-2-
($.01) each, amounting in the aggregate to Five Thousand Dollars ($5,000) shall
be Preferred stock.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof may be determined at a later
date by the board of directors.
5. The name and mailing address of each incorporation is as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
D. A. Hampton Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
S. M. Fraticelli Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
S. J. Eppard Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
</TABLE>
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of powers conferred by statute,
the board of directors is expressly authorized to make, alter or repeal the by-
laws of the corporation.
<PAGE>
-3-
8. Elections of directors need not be by written ballot unless the
by-laws of the corporation shall so provide.
Meetings of stockholders may be held within or without 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 statutes) 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.
9. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this certificate, hereby
declaring and certifying that this is our act and deed and the facts herein
stated are true, and accordingly have hereunto set our hands this 10th day of
January, 1985.
/s/ D. A. Hampton
-----------------
D. A. Hampton
<PAGE>
-4-
/s/ S. M. Fraticelli
--------------------
S. M. Fraticelli
/s/ S. J. Eppard
----------------
<PAGE>
EXHIBIT 3.6
-----------
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AF ACQUISITION CORP.
--------------------
IT IS HEREBY CERTIFIED THAT:
1. The name of the corporation (hereinafter called the "corporation") is
AF ACQUISITION CORP.
2. The Certificate of Incorporation of the corporation is hereby amended
by striking out Article FIRST thereof any by substituting in lieu of said
Article the following new Article:
"FIRST: The name of the corporation (hereinafter called the
-----
"corporation") is:
SCOVILL APPAREL FASTENERS INC."
3. The amendment of the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has subscribed this document on
this 9th day of May, 1985 and does hereby affirm, under penalties of perjury,
that the statements contained therein are true and correct.
<PAGE>
-2-
AF ACQUISION CORP.
By: /s/ William Belzberg
--------------------
William Belzberg, President
Attest:
_______________________
John C. Crum, Secretary
<PAGE>
EXHIBIT 3.7
-----------
CERTIFICATE OF AMENDEMENT
OF
CERTIFICATE OF INCORPORATION
OF
SCOVILL APPAREL FASTENERS INC.
------------------------------
IT IS HEREBY CERTIFIED THAT:
1. The name of the corporation (hereinafter called the "Corporation") is
SCOVILL APPAREL FASTENERS INC.
2. The Certificate of Incorporation of the Corporation is hereby amended
by striding out Article 4 thereof and by substitution in lieu of said Article
the following new Article:
3. The total number of shares of stock which the Corporation shall have
authority to issue is One Thousand (1,000), all of which shall be Common Stock.
Each of such shares shall have par value of $.01.
4. The amendment of the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware.
<PAGE>
-2-
Signed and attested to on August 12, 1986.
By: /s/ Frederick F. Schauder
--------------------------
Frederick F. Schauder
Executive Vice President
Attest:
/s/ Stewart Hudnut
- --------------------------
Stewart Hudnut, Secretary
<PAGE>
EXHIBIT 3.8
-----------
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SCOVILL APPAREL FASTENERS INC.
IT IS HEREBY CERTIFIED THAT:
1. The name of the corporation (hereinafter called the "corporation") is
SCOVILL APPAREL FASTENERS INC.
2. The Certificate of Incorporation of the corporation is hereby amended
by striking out Article FIRST thereof and by substituting in lieu of said
Article the following new Article:
"First: The name of the corporation (hereinafter called the
-----
"corporation" is"
SCOVILL FASTENERS INC."
3. The amendment of the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware.
<PAGE>
-2-
IN WITNESS WHEREOF, the undersigned has subscribed this document on
this __ day of August, 1987 and does hereby affirm, under penalties of perjury,
that the statements contained therein are true and correct.
SCOVILL APPAREL FASTENERS INC.
By: /s/ Richard C. Bennett
------------------------------
Richard E. Bennett, Chairman
Attest:
/s/ Laura B. Resnikoff
- -----------------------------
Laura B. Resnikoff, Assistant
Secretary
<PAGE>
EXHIBIT 3.9
-----------
CERTIFICATE OF CHANGE OF LOCATION OF REGISTERED OFFICE
AND OF REGISTERED AGENT
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
SCOVILL FASTENERS INC.
2. The registered office of the corporation within the State of Delaware
is hereby changed to 32 Loockerman Square, Suite L-100, City of Dover 19904,
County of Kent.
3. The registered agent of the corporation within the State of Delaware
is hereby changed to The Prentice-Hall Corporation System, Inc., the business
office of which is identical with the registered office of the corporation as
hereby changed.
4. The corporation has authorized the changes hereinbefore set forth by
resolution of its Board of Directors. Signed on July 10, 1995.
/s/ Nicolas W. Combemate
------------------------
Authorized Officer
Nicolas W. Combemate, Chairman of the Board
<PAGE>
EXHIBIT 3.10
------------
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
KSCO NEW CO.
INTO
SCOVILL FASTENERS INC.
It is hereby certified that:
1. KSCO New Co. (hereinafter called the "Corporation") is a
corporation organized and existing under the laws of the State of Delaware.
2. The Corporation, as the owner of all of the outstanding shares of
the capital stock of Scovill Fasteners Inc. hereby merges itself into Scovill
Fasteners Inc., a corporation organized and existing under the laws of the State
of Delaware.
3. The following is a copy of the resolutions duly adopted by the
unanimous written consent of its members, filed with the minutes of the Board of
the 17th day of October 1995 by the Board of Directors of the Corporation
determining to merge the Corporation into Scovill Fasteners Inc.
RESOLVED, that this Corporation merge, and it hereby does merge,
itself into Scovill Fasteners Inc. pursuant to the laws of the State of Delaware
as hereinafter provided, so that the separate existence of this Corporation
shall cease as soon as the merger shall become effective, and thereupon this
Corporation and Scovill Fasteners Inc. will become a single corporation, which
shall continue to exist under, and be governed by, the laws of the State of
Delaware, and which assumes all of the obligations of the Corporation.
FURTHER RESOLVED, that the merger shall be effective upon filing with
the Secretary of State of the State of Delaware.
FURTHER RESOLVED, that the terms and conditions of the proposed merger
are as follows:
<PAGE>
-2-
(a) From and after the effective time of the merger, all of the
estate, property, rights, privileges, powers, and franchises of
this Corporation shall become vested in and be held by Scovill
Fasteners Inc. as fully and entirely and without change or
diminution as the same were before held and enjoyed by this
Corporation, and Scovill Fasteners Inc. shall assume all of the
obligations of this Corporation.
(b) No pro rata issuance of the shares of stock of Scovill Fasteners
Inc. which are owned by this Corporation immediately prior to the
effective time of the merger shall be made and such shares shall
be deemed to have the status of treasury shares of Scovill
Fasteners Inc.
(c) Each share of common stock, par value $0.01 per share, of this
Corporation which shall be issued and outstanding immediately
prior to the effective time of the merger shall be converted into
one-tenth of an issued and outstanding shares of common stock.
par value $0.01 per share, of Scovill Fasteners Inc., and , from
and after the effective time of the merger, the holders of all of
said issued and outstanding shares of common stock of this
Corporation shall automatically be and become holders of shares
of Scovill Fasteners Inc. upon the basis above specified, whether
or not certificates representing said shares are then issued and
delivered.
(d) After the effective time of the merger, each holder of record of
any outstanding certificate or certificates theretofore
representing common stock of this Corporation may surrender the
same to Scovill Fasteners Inc. at its office in Dover, Delaware
and such holder shall be entitled upon such surrender to receive
in exchange therefor a certificate or certificates representing
one-tenth of the number of shares of common stock of Scovill
Fasteners Inc. Until so surrendered, each outstanding certificate
which prior to the
<PAGE>
-3-
effective time of the merger represented one or more shares of
common stock of this Corporation shall be deemed for all
corporate purposes to evidence ownership of one-tenth of such
number of shares of common stock of Scovill Fasteners Inc.
(e) From and after the effective time of the merger, the Certificate
of Incorporation and the By-Laws of Scovill Fasteners Inc. shall
be the Certificate of Incorporation and the By-Laws of Scovill
Fasteners Inc. as in effect immediately prior to such effective
time.
(f) The members of the Board of Directors of Scovill Fasteners Inc.
shall be the members of the Board of Directors before the
effective time of the merger.
(g) From and after the effective time of the merger, the assets and
liabilities of this Corporation and of Scovill Fasteners Inc.
shall be entered on the books of Scovill Fasteners Inc. at the
amounts at which they shall be carried at such time on the
respective books of this Corporation and of Scovill Fasteners
Inc., subject to such intercorporate adjustments or eliminations,
if any, as may be required to give effect to the merger; and,
subject to such action as may be taken by the Board of Directors
of Scovill Fasteners Inc., in accordance with generally accepted
accounting principles, the capital and surplus of Scovill
Fasteners Inc. shall be equal to the capital and surplus of this
Corporation and of Scovill Fasteners Inc.
RESOLVED, that these resolutions determining to merge be submitted to
the stockholders entitled to vote of this Corporation at a meeting to be called
and held after 20 days notice of the time, place, and purpose thereof mailed to
each holder of the outstanding shares of stock entitled to vote of this
Corporation at its address as it appears on the records of this Corporation or
pursuant to a written waiver of such notice signed by all of the persons
entitled thereto, unless the holders of all of the outstanding shares dispense
with the holding
<PAGE>
-4-
of a meeting and shall act in writing without a meeting; and, in the event that
the holders of at least a majority of the outstanding stock entitled to vote of
this Corporation shall vote for the approval of the merger at a meeting, or, in
the event that the holders of all of the outstanding stock entitled to vote of
this Corporation shall dispense with a meeting and shall consent in writing
signed by them for the approval of the proposed merger, the proposed merger
shall be deemed to be approved.
FURTHER RESOLVED, that the proper officers of this Corporation be and
they hereby are directed to make and execute a Certificate of Ownership and
Merger setting forth a copy of the resolutions determining to merge the
Corporation into Scovill Fasteners Inc., and the date of adoption thereof, and
to cause the same to be filed with the Secretary of State of the State of
Delaware, and to do all acts and things whatsoever, whether within or without
the State of Delaware, which may be in any wise necessary or proper to effect
said merger.
4. The proposed merger herein certified has been approved by at least
a majority of the outstanding stock entitled to vote of the Corporation at a
meeting thereof, the holders of all of the outstanding stock entitled to vote of
the Corporation having waived, in writing signed by them, notice of the time,
place and purpose of the meeting of stockholders entitled to vote.
5. Anything herein or elsewhere to the contrary notwithstanding, this
merger may be amended or terminated and abandoned by the Board of Directors of
the Corporation at any time prior to the date of filing the merger with the
Secretary of State of the State of Delaware.
Signed and attested to on October 17, 1995.
By:/s/ Christopher LaCovara
------------------------
Name: Christopher LaCovara
Title: President
Attest:
By:/s/ Evan Wildstein
------------------
Name: Evan Wildstein
Title: Vice President
<PAGE>
EXHIBIT 3.11
------------
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SCOVILL FASTENERS INC.
SCOVILL FASTENERS INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify:
FIRST: That the Board of Directors of the Corporation, by unanimous
written consent dated as of July 14, 1994, duly adopted resolutions authorizing
a proposed amendment to the Certificate of Incorporation of the Corporation (the
"Amendment") in order to authorize the issuance of Series A Cumulative Preferred
Stock, and to define, among other things, the preference, special rights,
qualifications and restrictions relating thereto.
SECOND: That the Amendment has been consented to and authorized by
the holders of majority of the issued and outstanding stock of the Corporation
entitled to vote thereon in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
THIRD: That the Amendment has been duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: Accordingly, Article 4 of the Certificate of Incorporation of
the Corporation is hereby amended to read in its entirety as follows.
"4: The total number of shares of capital stock that the Corporation
shall have the authority to issue is twenty-one thousand (21,000), one thousand
(1,000) of which shall be designated as common stock, $.01 par value per share
("Common Stock"), and twenty thousand(20,000) of which shall be designated as
preferred stock, $.01 par value per share ("Preferred Stock").
<PAGE>
-2-
Shares of Preferred Stock of the Corporation may be issued from time
to time in one or more classes or series, each of which class or series shall
have distinctive designation or title as shall be fixed by the Board of
Directors prior to the issuance of any shares thereof. The powers, preferences
and relative, participating, optional and other special rights, and the
qualification, limitations or restrictions of the Preferred Stock, other than
the first series of Preferred Stock, shall be determined by the Board of
Directors before any issuance thereof to the full extent now or hereafter
permitted by the Certificate of Incorporation and the laws of the State of
Delaware. The powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations or restrictions, of
the first series of Preferred Stock shall be as follows:
(a) Definitions. Capitalized terms used in subsection (d) of this
-----------
Article 4 and not otherwise defined herein shall have the meanings ascribed to
such terms in the Loan and Security Agreement dated as of July 18, 1994 (the
Loan Agreement"), between the Corporation and American National Bank and Trust
Company of Chicago (the "Lender").
(b) Designation and Number. The distinctive designation of the
----------------------
series shall be Series A Cumulative Preferred Stock (the "Series A Preferred
Stock"). The number of shares of Series A Preferred Stock that the Corporation
is authorized to issue shall be twenty thousand (20,000), which number may,
subject to the provisions hereof, be increased or decreased (but not below the
number of shares then outstanding) from time to time by the Board of Directors.
(c) Rank. The Series A Preferred Stock shall, with respect to
----
dividend rights and rights on liquidation, winding up and dissolution, rank (i)
prior to (except as provided in subsection (f) of this Article 4 below) any
other series Preferred Stock hereafter established by the Board of Directors,
and (ii) prior to any other equity securities of the Corporation, including the
Common Stock (all of such equity securities of the Corporation to which the
Series A Preferred Stock ranks prior, including the Common Stock, are
hereinafter collectively referred to as the "Junior Securities").
(d) Dividends.
---------
<PAGE>
-3-
(i) The holders of the Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors and out of funds of
the Corporation legally available for the payment of dividends, cumulative cash
dividends on the shares of the Series A Preferred Stock at an annual rate of 5%
of the Liquidation Preference thereof (as defined in subsection (f) below) (the
"Preferred Dividends"). Preferred Dividends shall be payable annually (when, as
and if declared by the Board of Directors) commencing with the Corporation's
1994 calendar year in the following manner:
(A) So long as the Lender has an obligation pursuant to the
Loan Agreement or any of the Liabilities thereunder remaining
outstanding (either, a "Loan Event"), Preferred Dividends in respect
of any calendar year shall be payable on the tenth day after the
delivery of the Corporation's audited financial statements for such
year pursuant to Section 7.1(B) of the Loan Agreement but in any
event no later than the date that is one hundred (100) day after the
end of such calendar year).
(B) In the absence of a Loan Event, Preferred Dividends
shall be due and payable on December 31 of each year.
(C) The Preferred Dividend due and payable in respect of the
Corporation's 1994 calendar year shall be determined based on the
portion such year from the date of the initial issuance of the Series
A Preferred Stock through December 31, 1994.
Notwithstanding anything contained in this subsection (d)(i), to the extent that
the payment of any Preferred Dividend would result in the Corporation being in
breach of Section 8.9 of the Loan Agreement, such Preferred Dividend shall not
be made until the first date that such Preferred Dividend could be made by the
Corporation without giving rise to any such breach.
(ii) To the extent that Preferred Dividends are not paid, whether
pursuant to the last sentence of subsection (d)(i) or otherwise, Preferred
Dividends on each share of Series A Preferred Stock shall nonetheless accrue and
be cumulative from the date of its original issue. Without limiting the
<PAGE>
-4-
foregoing, Preferred Dividends shall accrue and be cumulative whether or not
earned or declared and whether or not funds are legally available therefor.
Preferred Dividends shall be payable to the holders of record on such respective
dates as may be fixed by the Board of Directors in advance of payment of each
such dividend. Any accumulation of such dividends on the Series A Preferred
Stock shall not bear interest.
(iii) (A) So long as any shares of the Series A Preferred Stock are
outstanding and (B) unless all Preferred Dividends on the shares of the Series A
Preferred Stock have been paid or declared in full and sums set aside
exclusively for the payment thereof, the Corporation shall not, without the
consent of the holders of the Series A Preferred Stock, declare or pay or set
apart for payment any dividend (other than a dividend in shares of Junior
Securities) on the Junior Securities, or make any payment on account of, or set
apart for payment money for 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 Corporation or
other property and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any of the Junior
Securities or any warrants, rights, calls or options exercisable for any of the
Junior Securities.
(e) Mandatory Redemption.
--------------------
(i) On August 17, 1997 (the Redemption Date"), to the extent the
Corporation shall have funds legally available therefor, the Corporation shall
redeem all outstanding shares of Series A Preferred Stock, at a redemption price
of $1,000 per share together with accrued and unpaid Preferred Dividends thereon
to the Redemption Date (the "Redemption Price"), in cash without interest. In
the event that sufficient funds for any such redemption shall not at any time be
otherwise legally available, the Corporation shall use its best efforts to cause
such availability to come into existence and the Corporation shall redeem such
lesser number of shares of Series A Preferred Stock to the extent there are
funds legally available therefor, and shall redeem all or part of the remainder
of the shares of Series A Preferred Stock subject to redemption as soon as the
Corporation has sufficient funds which are legally available therefor until all
such shares of Series A Preferred Stock have been redeemed. In the event of a
redemption of only a portion of the shares of Series A Preferred Stock, the
Corporation
<PAGE>
-5-
shall effect such a redemption pro rata according to the number of shares held
by each holder of Series A Preferred Stock. If and so long as any mandatory
redemption obligations with respect to the shares of Series A Preferred Stock
shall not be fully discharged, the Corporation shall not, without the consent of
the holders of the Series A Preferred Stock, declare or pay or set apart payment
any dividend (other than a dividend in shares in shares of Junior Securities) on
the Junior Securities, or make any payment on account of, or set apart for
payment money for 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 Corporation or other property and
shall not permit any corporation or other entity directly or indirectly
controlled by the Corporation to purchase or redeem any of the Junior Securities
or any warrants, rights, calls or options exercisable for any of the Junior
Securities.
(ii) Not less than thirty (30) nor more than ninety (90) days prior to
the Redemption Date, written notice of the time and place thereof shall be given
to each holder of record of the Series A Preferred Stock so to be redeemed, by
first class mail, postage prepaid, addressed to such holder at his, her or its
post office address as the same shall appear upon the books of the Corporation,
and, by publication of notice in such manner as may be prescribed by resolution
of the Board of Directors. Such notice shall call upon such holder to surrender
to the Corporation, on the redemption date, at the place designated in such
notice, the certificates representing the number of shares specified in such
notice, but no notice shall be required to specify any particular shares as
called for redemption except those of the stockholder to whom such notice is
mailed.
(iii) On or after the Redemption Date, each holder of shares A
Preferred Stock to be redeemed may represent and surrender his, her or its
certificate or certificates (endorsed in such manner as may reasonably be
required by the Corporation, or not endorsed if not required by the Corporation)
to the Corporation at the place designated in such notice, and thereupon the
Redemption Price of such shares be paid to or on the order of such holder.
(iv) The shares of Series A Preferred Stock that have been redeemed
shall not be reissued. Each surrendered certifi-
<PAGE>
-6-
cate shall be canceled. The Corporation shall from time to time cause all such
shares redeemed to be retired in the manner provided by law. Such retired shares
of Series A Preferred Stock shall become authorized but unissued Preferred
Stock.
(v) Upon the Redemption Date, the shares of Series A Preferred Stock
so designated for redemption shall not be deemed to be outstanding for any
purpose whatsoever (unless a default shall be made by the Corporation in payment
of the Redemption Price), and the holders thereof shall cease to be stockholders
with respect to such shares and shall be entitled only to receive the Redemption
Price thereof. Notwithstanding the foregoing, if the Corporation shall default
in making payment of the Redemption Price, then such shares so called for
redemption and then unpaid shall continue to be outstanding as if no such call
for redemption had been made.
(f) Rights on Liquidation, Dissolution, etc.
----------------------------------------
(i) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, the holders of the shares of
Series A Preferred Stock then outstanding shall be entitled to receive out of
assets of the Corporation available for distribution to its stockholders an
amount in cash equal $1,000 for each share outstanding (the "Liquidation
Preference") plus an amount in cash equal to all accrued but unpaid Preferred
Dividends thereon to the date fixed for liquidation before any payment shall be
made or any assets distributed to the holders of any Junior Securities. If the
assets of the Corporation are not sufficient to pay in full the liquidation
payments payable to the holders of outstanding shares of the Series A Preferred
Stock, then the holders of all such shares shall share ratably in such
distribution if the amounts to which the holders of outstanding shares of Series
A Preferred Stock are entitled were paid in full.
(ii) The sale, conveyance, exchange or transfer of all or
substantially all of the property and assets of the Corporation or the merger or
consolidation of the Corporation into or with any other corporation, or the
merger of any other corporation into it, shall not be deemed a dissolution,
liquidation or winding up of the Corporation for purposes of this subsection (f)
of this Article 4.
(g) Voting Consent.
--------------
(i) Except as otherwise expressly provided in this subsection (g) of
this Article 4, and except as otherwise re-
<PAGE>
-7-
quired by law, the holders of the shares of Series A Preferred Stock shall not
be entitled to vote on matters that may be the subject of proper action by
stockholders of the Corporation.
(ii) (A) From and after the date of the original of the Series A
Preferred Stock, if the Corporation shall be in arrears in the payment of any
Preferred Dividends on the outstanding shares of the Series A Preferred Stock
(including, without limitation, an arrearage arising as a result of the last
sentence of subsection (d)(i) of this Article 4) or shall have failed to redeem
shares of the Series A Preferred Stock as and when required, the holders of the
Series A Preferred Stock, voting separately as a class, shall have the exclusive
right to elect two directors in addition to the number to be elected by the
holders of Common Stock or any other shares of Preferred Stock of the
Corporation, at a special meeting of stockholders called for the election of
directors pursuant to the procedures set forth below for the calling of a
special meeting by holders of the Series A Preferred Stock if such meeting is
not called by the Board of Directors within twenty (20) days after such holders
become entitled to such right to elect directors, and at every subsequent
meeting at which the terms of office of the directors so elected by the holders
of the Series A Preferred Stock expire, provided that such arrearage or failure
exists on the date of such meeting or subsequent meetings, as the case may be.
(B) The right of the holders of the Series A Preferred Stock voting
separately as a class to elect members of the Board of Directors as set forth in
subsection (g)(ii)(A) shall continue until such time as all Preferred Dividends
accumulated on the Series A Preferred Stock shall have been paid in full and
provision has been made for the payment in full of the Preferred Dividends for
the current period and the Corporation shall have redeemed all shares of the
Series A Preferred Stock then required to be redeemed pursuant hereto, at which
time the special right of the holders of the Series A Preferred Stock so to vote
separately as class for the election of directors shall terminate, subject to
revesting a such time as the Corporation shall be in arrears in the payment of
any Preferred Dividends on the outstanding shares of the Series A Preferred
Stock or shall have failed to redeem shares of the Series A Preferred Stock as
and when required. If the annual meeting of stockholders of the Corporation is
not, for any reason, held within the time fixed in the by-laws of the
Corporation at a time when the holders of the Series A Preferred Stock, voting
separately and as a class, shall be entitled to elect directors, or if vacancies
shall exist in the offices of directors elected by the
<PAGE>
-8-
holders of the Series A Preferred Stock, a proper officer of the Corporation,
upon the written request of the holders of record of at least ten percent (10%)
of the shares of the Series A Preferred Stock then outstanding, addressed to the
Secretary of the Corporation, shall call a special meeting in lieu of the annual
meeting of stockholders, or in the event of vacancies, a special meeting of the
holders of the Series A Preferred Stock, for the purpose of electing directors.
Any such meeting shall be held at the earliest practicable date at the place for
the holding of the annual meetings of stockholders. If such meeting shall not be
called by the proper officer of the Corporation within twenty (20) days after
personal service of said written request upon the Secretary of the Corporation,
or within twenty (20) days after mailing the same within the United States by
certified mail, addressed to the Secretary of the Corporation at its principal
executive offices, then the holders of record of at least ten percent (10%) of
the outstanding shares of the Series A Preferred Stock may designate in writing
one of their number to call such meeting at the expense of the Corporation, and
such meeting may be called by the person so designated upon the notice required
for the annual meetings of stockholders of the Corporation and shall be held at
the place for holding the annual meetings of stockholders. Any holder of the
Series A Preferred Stock so designated shall have access to the lists of
stockholders to be called pursuant to the provisions hereof.
(C) At any meeting held for the purpose of electing directors at which
the holders of the Series A Preferred Stock shall have the right, voting
separately as a class, to elect directors as set forth in subsection
(g)(iii)(B), the presence in person or by proxy of the holders of at least
thirty-three and one-third percent (33-1/3%) of the outstanding Series A
Preferred Stock shall be required to constitute a quorum of such Series A
Preferred Stock.
(D) Any vacancy occurring in the office of director elected by the
holders of the Series A Preferred Stock may be filled by a majority of the
remaining directors elected by the holders of the Series A Preferred Stock
unless and until such vacancy shall be filled by the holders of the Series
Preferred Stock. Any director to be elected by the holders of the Series A
Preferred Stock shall agree, prior to his election to office, to resign upon any
termination of the right of the holders of the Series A Preferred Stock to vote
as a class for directors as herein provided, and upon any such termination the
directors then in office elected by the holders of the Series A Preferred Stock
shall forthwith resign. Unless otherwise re-
<PAGE>
-9-
quired to resign as aforesaid, the term of office of the directors elected by
the holders of the Series A Preferred Stock shall terminate upon the election of
their successors at any meeting of stockholders held for the purpose of electing
directors.
(iii) None of the following actions shall be taken except with the
affirmative consent of the holders of at least a majority of the shares of
Series A Preferred Stock at the time outstanding, given either in writing or by
vote at a meeting duly called for that purpose, at which the holders of shares
of Series A Preferred Stock shall vote separately as a class:
(A) an authorization of, or increase in the amount of, any
class of shares ranking prior to, or on parity with (either as to
dividends or distribution upon dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary)
the shares of Series A Preferred Stock, or
(B) any amendment of this certificate of incorporation that
would alter any of the provisions of the shares of Series A
Preferred Stock so as to adversely affect any or all of the
holders thereof.
(iv) In any vote by the holders of Series A Preferred Stock, every
holder of Series A Preferred Stock shall be entitled to one (1) vote for each
share of Series A Preferred Stock.
(v) No consent of holders of the Series A Preferred Stock shall be
required for (A) the creation of any indebtedness of any king of the Corporation
or (B) any increase or decrease in the amount of authorized Common Stock or any
increase, decrease or change in the par value thereof.
IN WITNESS WHEREOF, SCOVILL FASTENERS INC. has caused this Certificate
to be signed by its President and attested to by its Secretary this 19th day of
July, 1994
SCOVILL FASTENERS INC.
By: /s/
----------------
President
ATTEST:
<PAGE>
-10-
By: /s/ Martin A. Moore
-------------------
Secretary
<PAGE>
EXHIBIT 3.12
SCOVILL FASTENERS INC.
* * * * * * * * * * *
BY-LAWS
* * * * * * *
ARTICLE I
Name, Purpose and Location of Corporation
-----------------------------------------
The name of the Corporation (hereinafter called the "Corporation") is
Scovill Fasteners Inc. Its duration and purpose shall be such as are expressed
in its original certificate of incorporation and in such amendments thereto as
may be made from time to time. Its registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware, and the resident agent in
charge thereof shall be The Corporation Trust Company, but the corporation may
also have offices in such other places within and without the State of Delaware
as the board of directors may from time to time determine, or the business of
the corporation may require.
<PAGE>
-2-
ARTICLE II
Meeting of Stockholders
-----------------------
SECTION 1. Place of Meeting.
----------------
All meetings of the stockholders for the election of directors shall
be held at such place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, with or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
SECTION 2. Time and Business of Annual Meetings.
------------------------------------
Annual meetings of stockholders, at which the stockholders shall elect
by a plurality vote a board of directors to serve for one (1) year and until
their successors are elected and shall qualify and shall transact such other
business as may properly be brought before the meeting shall be held commencing
with the year 1986, at such date and time as shall be designated from time to
time by the board of directors and stated in the notice of the meeting.
<PAGE>
-3-
SECTION 3. Notice of Annual Meetings.
-------------------------
Written notice of the annual meeting stating the place, date and hour
of the meeting shall be given to each stockholder entitled to appear at such
meeting for not less than ten (10) nor more than sixty (60) days before the date
of the meeting.
SECTION 4. Calling of Special Meetings. Special meetings of the
---------------------------
stockholders for any purpose or purposes, unless otherwise prescribed by statute
or by the certificate of incorporation, may be called by the chairman of the
board, if any, or the president, and shall be called by the president or
secretary at the request in writing of a majority of the board of directors.
SECTION 5. Notice of Special Meetings. Chairman of the board.
--------------------------
Subject to the control of the board of directors, the chairman of the
board, if there shall be such an officer, shall, if present, preside at all
meetings of the board of directors and stockholders and, if a member of the
executive committee, at all meetings of the executive committee, if any.
<PAGE>
-4-
SECTION 6. Business of Special Meetings.
----------------------------
The President. Subject to the control of the board of directors, and
the chairman of the board and to such powers, if any, as may be given by the
board of directors to the chairman of the board, the president shall have
general supervision, direction and control of the business of the corporation
and its employees and shall exercise such general powers of management as are
usually vested in the office of president of a corporation. The president shall
be the chief executive officer of the corporation, shall, in the absence of the
chairman of the board, preside at all meetings of the board of directors and
stockholders and shall have such other powers and duties as may from time to
time be assigned to him by the board of directors or prescribed by the by-laws.
SECTION 7. Quorum.
------
The holders of a majority of the voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by Delaware statute or by
the certificate of incorporation. If, however, such quorum
<PAGE>
-5-
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting, from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally called. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 8. Voting; Proxies.
---------------
Unless otherwise provided in the certificate of incorporation each
stockholder on the record date shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on or
after eleven (11) months from its date of execution, unless the proxy provides
for a longer period which no case shall exceed seven (7) years from its date of
execution. The appointment of a proxy or proxies shall be made by an instrument
in
<PAGE>
-6-
writing executed by the stockholder or his duly authorized agent and filed with
the secretary of the corporation. When a quorum is present at any meeting, a
majority of the votes cast by those present or represented by proxy shall decide
any question brought before such meeting, unless the question is one upon which,
by express provision of the Delaware statutes or of the certificate of
incorporation or the by-laws, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
SECTION 9. Inspectors of Election.
----------------------
In advance of any meeting of stockholders, the board of directors may
appoint inspectors of election to act at a meeting or any adjournment thereof.
If inspectors are not so appointed, the chairman of the meeting may, and upon
the request of any stockholder shall, appoint inspectors at the meeting. The
number of inspectors shall be either one (1) or three (3). If appointed at the
meeting upon the request of one or more stockholders, the holders of a majority
of the shares present or represented shall determine whether one (1) or three
(3) inspectors are to be appointed. In case any person appointed as inspector by
the board of directors fails to appear or refuses to act, the vacancy may be
filled at the direction of the chairman of the meeting. The number of inspectors
shall
<PAGE>
-7-
be determined by the board of directors or, if the inspectors are appointed at
the meeting, by the chairman of the meeting.
The inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the authenticity, validity and effect of proxies, shall receive
votes, ballots or consents, shall hear and determine all challenges and
questions in any way arising in connection with the right to vote, shall count
and tabulate all votes or consents and determine the results, and shall do such
acts as may be proper to conduct the election or vote with fairness to all. If
there shall be three (3) inspectors of election, the decision, act or
certificate of a majority shall be effective in all respects as the decision,
act or certificate of all. Upon request of the chairman of the meeting or of any
stockholder or his proxy, the inspectors shall make a report in writing of any
challenge, question or matter determined by them and execute a certificate of
any facts found by them.
SECTION 10. Action Without a Meeting.
------------------------
Unless otherwise provided in the certificate of incorporation, any
action required to be taken at any annual or special meeting of stockholders of
the corporation, or any action which may be taken without a meeting, without
prior notice
<PAGE>
-8-
and without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares are entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
SECTION 11. List of Stockholders.
--------------------
The officer who has charge of the stock ledger of the corporation
shall prepare and make, or cause to be prepared and made, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting is
to be held. The
<PAGE>
-9-
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
Directors
---------
SECTION 1. Number of Directors; Terms.
-------------------
The initial number of directors of the corporation shall be three (3).
The number of directors which shall thereafter constitute the whole board of
directors shall be determined from time to time by resolution of the board of
directors but shall not be less than three (3) or greater than nineteen (19).
Directors shall be elected annually by the stockholders except that each of the
initial directors shall be elected by the incorporator of the corporation and
shall hold office until his successor is duly elected and qualified or until he
sooner dies, resigns, is removed or becomes disqualified.
SECTION 2. Vacancies.
---------
After election of the initial directors by the incorporator of the
corporation vacancies in the board of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and any director so chosen shall hold office for the remainder of
<PAGE>
-10-
the full term of the director whose place he has been elected to fill and until
his successor is duly elected and shall qualify. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
A vacancy or vacancies in the board of directors shall be deemed to
exist in case of the death, resignation or removal of any director, or if the
stockholders fail at any annual or special meeting of stockholders at which any
director or directors are elected to elect the full authorized number of
directors to be voted for at that meeting, or if there are newly created
directorships resulting from any increase in the authorized numbers of
directors.
SECTION 3. Resignation of Directors.
------------------------
Any director may resign at any time by giving written notice to the
board of directors, president or secretary of the corporation, to take effect at
the time specified therein. The acceptance of such resignation, unless required
by the terms thereof, shall not be necessary to make it effective.
<PAGE>
-11-
SECTION 4. Duties of Board.
---------------
The business of the corporation shall be managed by its board of
directors which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders. The board of directors shall cause the officers of the
corporation to keep appropriate records of the proceedings of stockholders and
directors. Such records shall be maintained by and be in the custody of the
secretary of the corporation.
SECTION 5. Annual Meetings.
---------------
Immediately following each annual meeting of the stockholders and at
the place thereof, or at such other time and place as shall be fixed by
resolution of the board of directors prior to the annual meeting of the
stockholders, the board of directors shall hold a meeting for the purpose of
organization, election of officers, and the transaction of such other business
as they deem necessary. Notice of such meetings is hereby dispensed with. In the
event that a meeting of the board of directors is not held immediately after the
annual meeting of the stockholders, or in the event that the board of
<PAGE>
-12-
directors fails to fix the time and place for such meeting, the meeting may be
held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the board of directors, or as shall
be specified in duly executed waiver of notice thereof.
SECTION 6. Regular Meetings.
----------------
Regular meetings of the board of directors may be held at such time
and at such place as shall from time to time be determined by the board of
directors and, if so determined, notices thereof need not be given.
SECTION 7. Special Meetings.
----------------
Special meetings of the board of directors may be called by the
chairman of the board, if any, or the president on two (2) days' notice to each
director; special meetings shall be called by the president or secretary on like
notice on written request of two directors. Notices of special meetings shall
state the place, date and hour of the meeting, but need not state the purpose
for which the meeting is called.
<PAGE>
-13-
SECTION 8. Quorum; Action.
--------------
A majority of the number of authorized directors shall constitute a
quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the board of directors, except as may be otherwise specifically provided by
statute or by the certificater of incorporation. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
SECTION 9. Action of Directors Without a Meeting.
-------------------------------------
Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board of directors or committee, as the case may
be, consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the board of directors or committee, as the case may
be.
<PAGE>
-14-
SECTION 10. Meetings Outside of State.
-------------------------
The board of directors of the corporation may hold meetings, both
regular and special, either within or without the State of Delaware.
SECTION 11. Telephone Meetings.
------------------
Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the board of directors or any committee thereof may
participate in a meeting of the board of directors or any committee thereof 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 pursuant to this section shall constitute presence in
person at such meeting.
SECTION 12. Removal of Directors.
--------------------
Except as may otherwise be provided by the General Corporation Law,
the entire board of directors or one or more directors may be removed from
office, for cause or without cause, by the affirmative vote of the holders of a
majority of the stock of the corporation entitled to vote at an election of
directors.
<PAGE>
-15-
SECTION 13. Compensation.
------------
Unless otherwise restricted by the certificate of incorporation, the
board of directors shall have the authority to fix the compensation of
directors. The directors may be paid their expenses, if any, of attendance at
each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 14. Committees. The board of directors may, by resolution
----------
passed by a majority of the whole board of directors, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The quorum for the transaction of business at every meeting of a
committee shall be as stated in the resolution creating the committee or, if not
so stated, a majority of the members of the committee. The board of directors
may designate one or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the committee.
Any such committee, to the extent provided in the
<PAGE>
-16-
resolution of the board of directors, shall have and may exercise all the powers
and authority of the board of directors in the management of the business and
affairs of the corporation and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have
such power or authority in reference to amending the certificate of
incorporation, adopting an agreement of merger or consolidation, recommending or
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, amending the
by-laws of the corporation, declaring a dividend or authorizing the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time to time by resolution adopted by the board of
directors.
SECTION 15. Committee Reports.
-----------------
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
<PAGE>
-17-
ARTICLE IV
Notices
SECTION 1. Notice to Directors and Stockholders.
------------------------------------
Whenever, under the provisions of any statute or of the certificate of
incorporation or of these by-laws, notice is required to be given to any
director or stockholder, it shall not be construed to require personal notice,
but such notice shall be given in writing and personally delivered or sent by
mail, in which case it shall be addressed to such director or stockholder at his
address as it appears on the records of the corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the Unites States mail, or by some form of electronic
transmission, in which case it shall be so addressed as to be received by a
director or stockholder at either his address as it appears on the records of
the corporation or a regular place of his business, in which case such notice
shall be deemed to be given at the time when the recipient of such transmission
acknowledges its receipt.
Section 2. Waiver of Notice.
----------------
Whenever any notice is required to be given under the provisions of
any statute or of the certificate of incorpora-
<PAGE>
-18-
tion or if these by-laws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when such
person attends the meeting for the express purpose of objecting, at the
beginning of the meting, to the transaction of any business because the meeting
is not lawfully called or convened.
ARTICLE V
Officers
Section 1. Officers.
--------
The officer of the corporation shall be chosen by the board of
directors and shall be a president, a secretary and a treasurer. The board of
directors may elect or appoint such other officers (including a chairman of the
board, one or more vice presidents, a controller and one or more assistant vice
presidents, assistant secretaries, assistant treasurers and assistant
controllers) and agent as it shall deem necessary who shall exercise such powers
and perform such duty as shall be determined from time to time by the board of
directs and as are incident to their office. Any two or more officers except
those of chairman and/or president and secretary, or chairman
<PAGE>
-19-
and/or president and assistant secretary, may be held by the same person.
Section 2. Compensation.
------------
The salaries of all officers and agents of the corporation, if any,
shall be fixed by the board of directors.
Section 3. Term; Vacancies.
---------------
Each officer of the corporation shall hold office until the next
annual meting of the board of directors and until his successor is chosen and
qualified or until his earlier resignation or removal. Any vacancy occurring in
any office of the corporation shall be filled by the board of directors.
Section 4. Removal and Resignation.
-----------------------
Any officer may be removed, either with or without cause, by the board
of directs at any regular or special meeting or, if a subordinate officer, by an
officer upon whom the power of removal of subordinate officers has been
conferred by the board of directors. Any officer may resign at any time by
giving notice to the board of directors or to the president or to the secretary
of the corporation. Any such resignation shall take effect at the date of
receipt of such notice or at any later time specified therein; and, unless
otherwise speci-
<PAGE>
-20-
fied in such notice, the acceptance of the resignation shall not be necessary to
make it effective.
Section 5. Chairman of the Board
---------------------
Subject to the control of the board of directors, the chairman of the
board, if there shall be such an officer, shall, if present, preside at all
meetings of the board of directors and stockholders and, if a member of the
executive committee, at all meetings of the executive committee, if any, and
shall be the chief executive officer of the corporation.
Section 6. The President.
-------------
Subject to the control of the board of directors, and the chairman of
the board and to such powers, if any, as may be given by the board of directors
to the chairman of the board, the president shall have general supervision,
direction and control of the business of the corporation and its employees and
shall exercise such general powers of management as are usually vested in the
office of president of a corporation. The president shall, in the absence of the
chairman of the board, preside at all meetings of the board of directors and
stockholders and shall be the chief executive officer of the corporation and
shall have such other powers and duties as may
<PAGE>
-21-
from time to time be assigned to him by the board of directors or prescribed by
the by-laws.
Section 7. The Vice President.
------------------
In the absence or disability of the president, the vice president, if
there shall be such an officer, or if there be more than one, the vice
presidents in the order determined by the president or by the board of directors
( or if there be no such determination, then in the order of their election or
appointment) shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. A vice president shall have such other powers and perform such other
duties as from time to time may be prescribed by the board of directors.
Section 8. The Assistant Vice President.
----------------------------
The assistant vice president, if there shall be such an officer, or if
there be more than one, the assistant vice presidents in the order determined by
the president (or if there be no such determination, then in the order of their
election or appointment) shall perform such duties and have such powers as from
time to time may be prescribed by the board of directors.
<PAGE>
-22-
Section 9. The Secretary.
-------------
The secretary shall keep or cause to be kept, at the principal office
or such other place as the board of directors may order, a book of minutes of
all meetings of directors and committees thereof and of stockholders, containing
the time and place of such meetings, whether regular or special, and, if
special, how authorized, the notice thereof given, the names of those present at
directors' meetings and at meetings of committees thereof, the number of shares
present or represented at stockholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or a
duplicate share register, showing the names of the stockholders and their
addresses, the number and classes of shares held by each, and the number and
date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required by the by-laws or by
law to be given, and he shall keep the seal of the corporation in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by he board of directors or by the by-laws.
<PAGE>
-23-
Section 10. The Assistant Secretary.
-----------------------
The assistant secretary, if there shall be such an officer, or if
there be more than one, the assistant secretaries in the order determined by the
president (or if there be no such determination, then in the order of their
election or appointment) shall, in the absence of the secretary or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the secretary and shall perform such other duties and have such other powers
as the board of directors may form time to time prescribe.
ARTICLE VI
Certificates of Stock
Section 1. Certificate.
-----------
Every holder of stock in the corporation shall be entitled to have a
certificate signed by, or in the name of, the corporation by the chairman of the
board, if any, or the president or a vice president and the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation, certifying the number of shares owned by him in the corporation. If
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, par-
<PAGE>
-24-
ticipating, optional or other special rights of teach class of stock or series
thereof and the qualification, limitations or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face of back of
the certificate which the corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided in Section 202 of
the General Corporation Law of Delaware, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Facsimile Signature.
-------------------
Any or all of the signatures on the certificate may be facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he
<PAGE>
-25-
were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates.
-----------------
The board of directors may direct a new certificate or certificates to
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of the fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfer of Stock.
-----------------
Upon compliance with provisions restricting the transfer or
registration of transfer of shares of stock, if any, and upon surrender to the
corporation or the transfer agent of the corporation of a certificate for shares
duly en-
<PAGE>
-26-
dorsed or accompanied by proper evidence of succession, assignation or authority
to transfer, and upon payment of any transfer taxes due thereon, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 5. Voting Stock in Other Corporations.
----------------------------------
Whenever the corporation shall own stock of another corporation, the
chairman of the board, the president, a vice president, the treasurer, or the
secretary, acting either in person or by proxy, may exercise in the name and on
behalf of the corporation all voting and subscription rights thereof, but the
board of directors may delegate such authority exclusively to any one or more
other persons.
Section 6. Execution of Writings.
---------------------
Except as the board of directors otherwise shall direct or authorize,
deeds, transfers, contracts, bonds, notes, checks and other written obligations
shall be signed, accepted, endorsed or executed in the name an behalf of the
corporation by any one or more of the following officers, namely, the chairman
of the board, the president, any vice president, the
<PAGE>
-27-
treasurer, or the secretary, and any such officer so acting also may seal,
acknowledge and deliver the instrument.
Section 7. Execution of Certifications.
---------------------------
Any action taken by the stockholders or the board of directors at any
meeting may be certified by the officer whose duty it is to keep the records
thereof or by the officer or person presiding thereat; and any such certificate
shall be conclusive evidence for all purposes that the action so certified was
taken.
Section 8. Contracts and Transactions.
--------------------------
Except as otherwise required by statue or by any provision of the
certificate of incorporation, any contract, transaction or act of this
corporation or of the board of directors, or of a committee designated by the
board of directors which may be ratified by a majority in interest of a quorum
of the stockholders of this corporation at any annual meeting or any special
meeting called for such purpose, shall be as valid and binding as though
ratified by every stockholder of this corporation; provided, however, that any
failure to submit any such contract, transaction or act to the stockholders for
approval or ratification, or any failure of the stockholders to approve or
ratify such contract, transaction or act when sub-
<PAGE>
-28-
mitted, shall not be deemed in any way to invalidate the same or to deprive this
corporation, its directors or officers of their rights to proceed with such
contract, transaction or action.
Section 9. Certificate of Incorporation.
----------------------------
The term "certificate of incorporation" as used herein shall mean the
original certificate of incorporation of the corporation and any and all
amendments, additions and supplements thereto adopted in accordance with
applicable law.
Section 10. Amendment by Stockholders and Directors.
---------------------------------------
These by-laws, except as herein below provided, may be amended or
repealed, in whole or in part, and new by-laws made by the stockholder at any
meeting of the stockholders by the affirmative vote of the holders of at least a
majority in interest of the capital stock then outstanding and entitled to vote,
provided that notice of the proposed amendment or repeal or of the proposed
making of new by-laws shall have been given in the notice of such meeting. These
by-laws also may be amended or repealed, in whole or in part, and any new by-
laws made by the stockholders by written consent of the holders of at least a
majority in interest of the capital stock then outstanding and entitled to vote
without the necessity of any
<PAGE>
-29-
prior notice of such amendment, repeal or adoption. If authorized by the
certificate of incorporation, the directors may make, amend or repeal these by-
laws, in whole or in part, except with respect to any provision hereof which by
law, the certificate of incorporation, or these by-laws requires action by the
stockholders. Any by-law adopted by the directors may be amended or repealed by
the stockholders.
<PAGE>
-30-
SCOVILL FASTENERS INC.
FIRST AMENDMENT OF THE BY-LAWS
March 21, 1994
ARTICLE VII
Directors
Section 1. Number of Directors; Term.
-------------------------
The initial number of directors of this corporation shall be four(4).
The number of directors which shall thereafter constitute the whole board of
directors shall be determined from time to time by resolution of the board of
directors by shall not be less than three(3) or greater than nineteen (19).
Directors shall be elected annually by the incorporator of the corporation and
shall hold office until his successor is duly elected and qualified or until he
sooner dies, resigns, is removed or becomes disqualified SCOVILL FASTENERS INC.
<PAGE>
-31-
SECOND AMENDMENT OF THE BY-LAWS
March 29-30, 1994
ARTICLE VIII
Directors
Section 1. Number of Directors; Term.
-------------------------
The initial number of directors of this corporation shall be five (5).
The number of directors which shall thereafter constitute the whole board of
directors shall be determined from time to time by resolution of the board of
directors but shall not be less than three (3) or greater than nineteen (19).
Directors shall be elected annually by the stockholders except that each of the
initial directors shall be elected by the incorporator of the corporation and
shall hold office until his successor is duly elected and qualified or until he
sooner dies, resigns, is removed or becomes disqualified.
<PAGE>
EXHIBIT 10.1.8
STOCK PURCHASE AGREEMENT
Among
SLF CORPORATION,
KSCO ACQUISITION CORPORATION,
And
THE STOCKHOLDERS OF
KSCO ACQUISITION CORPORATION
Dated as of October 10, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I
PURCHASE AND SALE ......................................................... 1
Section 1.1 Purchase and Sale ........................................... 1
Section 1.2 Purchase Price .............................................. 1
Section 1.3 Closing .................................................... 2
Section 1.4 Deliveries at Closing ...................................... 2
Article II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............................. 3
Section 2.1 Organization and Qualification ............................. 3
Section 2.2 Corporate Authorization .................................... 3
Section 2.3 Financial Data ............................................. 3
Section 2.4 Ownership of Stock ......................................... 4
Section 2.5 Consents and Approvals ..................................... 4
Section 2.6 Litigation ................................................. 4
Section 2.7 Compliance with Law ........................................ 4
Section 2.8 Tax Matters ................................................ 5
Section 2.9 Employee Benefit Plans ..................................... 8
Section 2.10 Intellectual Property ....................................... 10
Section 2.11 Real Property .............................................. 10
Section 2.12 Material Contracts .......................................... 11
Section 2.13 Personal Property .......................................... 12
Section 2.14 Environmental and Safety Matters ........................... 12
Section 2.15 Employee Relations ......................................... 14
Section 2.16 Business Insurance .......................................... 14
Section 2.17 Disclaimer ................................................. 14
Article III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS ........................ 14
Section 3.1 Authorization ............................................... 14
Section 3.2 Consents and Approvals ..................................... 15
Section 3.3 Capitalization; Ownership .................................. 15
Section 3.4 Affiliate Transactions ..................................... 15
Section 3.5 Brokers .................................................... 15
Section 3.6 Employment Arrangements .................................... 16
Section 3.7 Representations and Warranties of the Company .............. 16
i
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Article IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ........................... 16
Section 4.1 Organization and Qualification ............................. 16
Section 4.2 Authorization .............................................. 16
Section 4.3 Consents and Approvals ..................................... 16
Section 4.4 Financing .................................................. 17
Section 4.5 Litigation ................................................. 17
Section 4.6 Brokers .................................................... 17
Article V
COVENANTS ................................................................. 17
Section 5.1 Conduct of Business ........................................ 17
Section 5.2 Filings .................................................... 19
Section 5.3 Confidentiality; Access to Information ..................... 19
Section 5.4 Public Announcements ....................................... 20
Section 5.5 Hart-Scott-Rodino .......................................... 20
Section 5.6 Existing Indebtedness ...................................... 20
Section 5.7 Notification of Certain Matters ............................ 21
Section 5.8 Parachute Payments ......................................... 21
Section 5.9 Shareholders Agreement ..................................... 21
Section 5.10 Financial Statements ....................................... 21
Article VI
CONDITIONS TO CLOSING .................................................... 22
Section 6.1 Conditions to Each Party's Obligation ...................... 22
Section 6.2 Conditions to Obligation of the Purchaser .................. 22
Section 6.3 Conditions to Obligation of the Company .................... 23
Article VII
TERMINATION .............................................................. 24
Section 7.1 Termination ................................................ 24
Section 7.2 Effect of Termination ...................................... 25
Article VIII
GENERAL PROVISIONS ....................................................... 25
Section 8.1 Rules of Construction ...................................... 25
Section 8.2 Survival ................................................... 26
Section 8.3 Notices .................................................... 26
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 8.4 Governing Law ............................................. 27
Section 8.5 Entire Agreement ........................................... 27
Section 8.6 Amendment; Waiver .......................................... 27
Section 8.7 Assignability .............................................. 28
Section 8.8 Binding Effect ............................................. 28
Section 8.9 Third-Party Beneficiaries ................................... 28
Section 8.10 Counterparts ............................................... 28
Section 8.11 Expenses ................................................... 28
Section 8.12 Certain Taxes .............................................. 28
Section 8.13 Judicial Proceedings ....................................... 28
</TABLE>
iii
<PAGE>
SCHEDULES
Schedule A Stockholders and Optionholders
Schedule 2.1 List of Subsidiaries
Schedule 2.4 Outstanding Capital Stock of Subsidiaries
Schedule 2.5 Company Consents and Approvals
Schedule 2.6 Litigation
Schedule 2.7 Compliance with Laws
Schedule 2.8 Tax Matters
Schedule 2.9 Benefit Plans
Schedule 2.10 Intellectual Property
Schedule 2.11 Owned and Leased Real Property
Schedule 2.12 Contracts
Schedule 2.13 Title to Property
Schedule 2.14 Environmental and Safety Matters
Schedule 2.15 Employee Relations
Schedule 3.2 Stockholder Consents and Approvals
Schedule 3.4 Affiliate Transactions
Schedule 4.3 Purchaser Consents and Approvals
Schedule 5.2 Required Filings and Consents
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of October __, 1997, among SLF
CORPORATION, a Delaware corporation (the "Purchaser"), KSCO ACQUISITION
CORPORATION, a Delaware corporation (the "Company"), and each of the
stockholders of the Company set forth on Schedule A hereto (each, a
----------
"Stockholder" and collectively the "Stockholders").
The Stockholders own all of the outstanding common stock, par
value $.01 per share, of the Company (the "Common Stock"). The Company owns all
of the capital stock of Scovill Fasteners Inc., a Delaware corporation
("Scovill"). The Stockholders desire to sell, and the Purchaser desires to
-------
purchase, the Common Stock on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants contained herein, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE
Section 1.1 Purchase and Sale. Upon the terms and subject to the
-----------------
conditions of this Agreement, at the Closing (as defined in Section 1.3), the
Purchaser shall purchase from each Stockholder, and each Stockholder shall sell
and transfer to the Purchaser, all right, title and interest of such Stockholder
in and to the shares of Common Stock set forth opposite such Stockholder's name
on Schedule A hereto.
----------
Section 1.2 Purchase Price.
--------------
(a) In consideration for the sale and transfer of the Common
Stock at the Closing, the Purchaser shall pay (i) to each Stockholder an amount
in cash equal to the Per Share Purchase Price (as defined below) multiplied by
the number of shares of Common Stock held by such Stockholder, and (ii)
subsequent to the transfer in clause (i) above, to each holder of options to
purchase Common Stock (the "Options") set forth on Schedule A (the
----------
"Optionholders") an amount in cash equal to the Per Share Purchase Price
multiplied by the number of shares of Common Stock represented by options held
by such person (other than any Option as to which the Company and the holder
thereof agree to be rolled over into rollover options (the "Rollover Options")
as reflected on Schedule A, less the aggregate exercise price therefor; provided
----------
that the aggregate amount paid by the Purchaser shall not exceed the Purchase
Price (as defined below).
1
<PAGE>
(b) The Purchase Price shall be equal to $181,150,000 less (i)
----
$9.8 million, which represents the assumed amount of certain unfunded pension
liabilities of Scovill as of the Closing Date, (ii) $2.6 million, which
represents the present value of the cash payment stream to Saltire Industrial
Corporation and First City Diversified Inc. under an arrangement relating to
certain environmental liabilities as of the Closing Date, (iii) $.8 million,
which represents the amount of indebtedness outstanding under certain
capitalized leases that will not be repaid at Closing, (iv) the amount of any
Indebtedness described in Section 5.6(iii)-(v) that the Purchaser notifies the
Company in writing by October 31, 1997 shall not be repaid ("Purchaser Specified
Indebtedness") and (v) an amount equal to the Per Share Purchase Price
multiplied by the number of shares of Common Stock represented by Rollover
Options, less the aggregate exercise price therefor. The Per Share Purchase
Price shall be equal to the quotient obtained by (x) the Purchase Price plus
----
the amount representing the aggregate exercise price of the Options (other than
any Rollover Options), divided by (y) the number of shares of Common Stock held
by the Stockholders plus the number of shares of Common Stock represented by
----
the Options (other than any Rollover Options) .
Section 1.3 Closing. The closing of the purchase and sale of the
-------
Common Stock pursuant to Section 1.1 (the "Closing") shall be held at the
offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005 at
10:00 a.m. (local time) on November 26, 1997 (the "Closing Date"), or at such
other place and time as the Purchaser and the Company may mutually agree.
Section 1.4 Deliveries at Closing. At the Closing, (i) each
---------------------
Stockholder shall deliver to the Purchaser certificates representing the shares
of Common Stock sold by such Stockholder duly endorsed for transfer or
accompanied by a duly executed stock power with all appropriate stock transfer
tax stamps affixed, and all books and records of the Company (in whatever form)
to the extent not located at the Company's offices, (ii) each Optionholder shall
surrender the option agreement evidencing such holder's Options (other than any
Rollover Options), and (iii) the Purchaser shall deliver to (x) the holder of
any Indebtedness the amount requested to be paid to such holder by the
Stockholders pursuant to written wire instructions delivered at least two
business days prior to Closing to the Purchaser and (y) to each Stockholder and
each holder of Options (other than Rollover Options) such person's pro rata
portion of the excess of the Purchase Price as provided in Section 1.2(a) over
any amounts paid to the Stockholders' designees pursuant to clause (x).
2
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows:
Section 2.1 Organization and Qualification. The Company (i) is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, (ii) has the requisite corporate power to carry on its
business as now being conducted, and (iii) is duly qualified as a foreign
corporation in good standing in each jurisdiction in which the conduct of its
business requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect (as defined in Section 8.1.1). The Company owns, directly or indirectly,
all of the capital stock of each of the corporations set forth on Schedule 2.4
------------
except to the extent set forth on Schedule 2.4 (collectively, the
------------
"Subsidiaries"). Each Subsidiary is duly and validly organized and in good
standing under the laws of the jurisdiction of its formation, and each
Subsidiary is duly qualified as a foreign corporation in good standing in each
jurisdiction where the conduct of its business requires such qualification,
except where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect. The Company does not own, and does
not have any obligation to acquire, any material equity interest in any business
enterprise other than the Subsidiaries.
Section 2.2 Corporate Authorization. The execution, delivery and
-----------------------
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby are within the Company's corporate powers and
have been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
affecting the enforcement of creditors' rights generally.
Section 2.3 Financial Data. The Company has previously furnished to
--------------
the Purchaser copies of the Company's audited balance sheets and related
statements of income and cash flows as of and for the fiscal years ended
December 31, 1996 and 1995 and its unaudited balance sheet and related
statements of income and cash flows as of and for the eight-month periods ended
August 31, 1997 and 1996 (collectively, the "Financial Statements"). The
Financial Statements (i) fairly present the financial condition of the Company
as of the dates thereof and the results of operations and cash flows of the
Company for the periods covered thereby; (ii) in the case of audited Financial
Statements, have been prepared in accordance with generally accepted accounting
principles consistently applied; and (iii) in the case of unaudited interim
Financial Statements, have been prepared in accordance with the Company's
historical accounting practices consistently applied and are subject to normal
year-end adjustments. Since December 31, 1996, there has been no
3
<PAGE>
material adverse change in the operations or financial condition of the Company
and the Subsidiaries, taken as a whole.
Section 2.4 Ownership of Stock. The Company's issued and outstanding
------------------
capital stock consists of 8,880,102 shares of Common Stock. The Common Stock
is duly authorized and issued, is fully paid and non-assessable, and is owned of
record by the Stockholders as set forth on Schedule A. The issued and
----------
outstanding capital stock of each Subsidiary is set forth on Schedule 2.4
------------
hereto, all of which is held by the Company or another Subsidiary, except as
otherwise set forth on Schedule 2.4. Other than the Options, neither the
------------
Company nor any Subsidiary has any outstanding options, warrants or similar
rights to acquire, or any securities convertible into or exchangeable for, any
of its capital stock. Upon consummation of the transactions contemplated
herein, the Purchaser will own the entire equity interest in the Company.
Section 2.5 Consents and Approvals. Except as set forth on Schedule
---------------------- --------
2.5 hereto, the execution, delivery and performance by the Company of this
- ---
Agreement and the consummation of the transactions contemplated hereby require
no action on its part by or in respect of, or any filing with or notice to, any
governmental or regulatory body, agency or official which, if not obtained or
made, would have a Material Adverse Effect. Except as set forth on Schedule
--------
2.5, neither the execution, delivery and performance by the Company of this
- ---
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate, conflict with, or result in a breach of, any provision of the
charter or bylaws of the Company or any Subsidiary or of any applicable law,
regulation, rule, order, judgment, decree or writ of any foreign, federal, state
or local governmental or regulatory authority or body or court (collectively,
"Law") or (b) result in a default (or give rise to any penalty or give to any
third party a right of termination, cancellation, acceleration or result in the
creation of any material Encumbrance) under, any of the terms, conditions or
provisions of any Material Contract (as defined in Section 2.12) to which the
Company or any Subsidiary is a party or by which it is bound, except for such
violations, breaches or defaults which would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 2.6 Litigation. Except as set forth on Schedule 2.6 hereto,
---------- ------------
to the Company's knowledge, there are no claims, actions, suits, approvals,
investigations, informal objections, complaints or proceedings pending against
or affecting the Company or any Subsidiary before any court, arbitrator or
administrative, governmental or regulatory authority or body, nor to the
Company's knowledge is the Company or any Subsidiary, or any of their respective
properties or assets subject to any order, judgment, writ, injunction or decree,
except in either case for matters which would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 2.7 Compliance with Law. Except as set forth on Schedule 2.7
------------------- ------------
hereto, neither the Company nor any Subsidiary is in violation of any Law,
except where any such
4
<PAGE>
violation would not, individually or in the aggregate, have a Material Adverse
Effect. Except as set forth on Schedule 2.7, the Company and each Subsidiary
------------
have all permits, approvals, licenses and franchises from governmental
authorities required to conduct their business as now being conducted
(collectively "Permits"), and is in compliance with all such Permits, except for
such Permits the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect.
Section 2.8 Tax Matters.
-----------
(a) "Taxes," as used in this Agreement, means (i) any federal
-----
income taxes, any other federal, county, local or foreign taxes, fuel or
energy taxes, utility taxes, charges, fees, levies, or other assessments,
including, without limitation, all net income, gross income, sales, use ad
valorem, windfall or other profits, transfer, gains, profits, excise, value
added, franchise, real and personal property, gross receipt, capital stock,
production, business and occupation, social security, workers compensation,
unemployment compensation, disability, employment, payroll, license, estimated,
net worth, stamp, custom duties, severance or withholding taxes or charges
imposed by any governmental entity, and includes any interest and penalties
(civil or criminal) on or additions to any such taxes, charges, fees, levies or
other assessments, and (ii) any liability for amounts described in (i) by reason
of the Company or any Subsidiary (or predecessor of either) having been a member
of an affiliated group of corporations filing a consolidated federal income Tax
return or otherwise joining a consolidated, combined or unitary Tax Return and
(iii) any liability for amounts described in (i) pursuant to any tax sharing
agreement or arrangement, or liability for such amounts as transferee or
successor, "Tax Return," as used in this Agreement, means any report, return
----------
or other information required to be supplied to a governmental entity with
respect to Taxes, including, where permitted or required, combined or
consolidated returns for any group of entities that includes the Company or any
Subsidiary.
(b) Except as set forth on Schedule 2.8 hereto, the Company and
------------
each Subsidiary have timely filed or caused to be filed all federal income Tax
Returns and all other material tax returns required to be filed with respect to
the Company or any Subsidiary on or prior to the date hereof. All Taxes due in
respect of the periods covered by such Tax Returns (whether or not shown on any
Tax Return) and for any other tax periods ending on or prior to the date hereof
(whether or not shown on any Tax Return) have been paid or adequate accruals
have been established for the payment of such taxes. As of the Closing Date,
all material Taxes due in respect of any periods ending on or prior to the
Closing Date, and any period or portion of a period through and including the
Closing Date, will have been paid or adequate accruals will have been
established for the payment thereof, and as of the Closing Date, all Tax Returns
required to be filed in respect of any periods ending on or prior to the Closing
Date will be timely filed. Except as set forth on Schedule 2.8, no audit
------------
examination, deficiency assessment, refund litigation or any other
administrative or court proceedings are presently pending or threatened with
regard
5
<PAGE>
to any Taxes or Tax Returns of the Company or any Subsidiary. Any such
disclosure in Schedule 2.8 pursuant to the immediately prior sentence herein
------------
sets forth the type of Tax and Tax periods subject to any such audit
examination, deficiency assessment, refund litigation, or any other
administrative or court proceeding; and, whether an indemnification from any
person or entity exists to cover any liability which could arise from such audit
examination, deficiency assessment, refund litigation, or any other
administrative or court proceeding, and the scope and conditions, if any, of
such indemnification. Neither the Company nor any Subsidiary has, or will have
as of the Closing Date, any material liability for any Taxes in excess of the
amounts paid or reserves or accruals established therefor.
(c) All Tax Returns filed by the Company and each Subsidiary are
(and, as to Tax Returns not filed as of the date hereof, will be) true, correct
and complete in all material respects. Neither the Company nor any Subsidiary is
delinquent in the payment of any material Tax and, except as set forth on
Schedule 2.8 hereto, none of them has requested any extension of the time within
- ------------
which to file any Tax Returns in respect of any fiscal year or portion thereof
which have not since been filed. Except as set forth on Schedule 2.8, no
------------
deficiencies for any Tax have been proposed, asserted or assessed (tentatively
or otherwise) against the Company or any Subsidiary which have not been settled
and paid. There are currently no agreements in effect with respect to the
Company or any Subsidiary to extend the period of limitations for the assessment
or collection of any Tax and there is not currently pending any request for such
an agreement.
(d) None of the transactions contemplated hereby will result in
the Company or any Subsidiary making or being required to make any "excess
parachute payment" as that term is defined in (S) 280G of the Code.
(e) There are no Tax liens upon the assets of the Company or any
of the Subsidiaries except liens for Taxes not yet due.
(f) The Company and each of the Subsidiaries have complied (and
until the Closing Date will comply) in all material respects with the provisions
of the Internal Revenue Code of 1986, as amended (the "Code") (and any
corresponding foreign, state or local law) relating to the payment and
withholding of Taxes, including, without limitation, the withholding and
reporting requirements under Code (S)(S) 1441 through 1464, 3401 through 3606,
and 6041 and 6049, as well as similar provisions under any other laws, and have,
within the time and in the manner prescribed by law, withheld from employee
wages and have duly set aside or paid over to the proper governmental
authorities all amounts required.
(g) Except set forth on Schedule 2.8, no power of attorney
------------
currently in force has been granted by the Company or any Subsidiary concerning
any Tax matter.
6
<PAGE>
(h) Except as set forth on Schedule 2.8, neither the Company
------------
nor any Subsidiary has received a Tax Ruling (as defined below) or entered into
a Closing Agreement (as defined below) with any taxing authority that would have
a continuing adverse effect after the Closing Date. "Tax Ruling," as used in
this Agreement, shall mean a written ruling of a taxing authority relating to
Taxes. "Closing Agreement," as used in this Agreement, shall mean a written and
legally binding agreement with a taxing authority relating to Taxes.
(i) The Company and the Subsidiaries have made available to
Buyer complete and accurate copies, covering all years ending on or after
December 31, 1992, of (i) all Tax Returns, and any amendments thereto, filed by
the Company or any of the Subsidiaries, (ii) all audit reports received from any
taxing authority relating to any Tax Return filed by the Company or any of the
Subsidiaries and (iii) any Closing Agreements entered into by the Company or any
of the Subsidiaries with any taxing authority.
(j) Except as set forth on Schedule 2.8 neither the Company
------------
nor any Subsidiary is a party to, is bound by, or has any obligation under any
tax sharing or similar agreement; and none of the Company or any Subsidiary (i)
has been a member of an affiliated group filing a consolidated federal income
tax return (other than a group the common parent of which was the Company) or
(ii) has any liability for the Taxes of any person or entity (other than any of
the Company and the Subsidiaries) under Treasury regulation (S) 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract, or otherwise.
(k) Neither the Company nor any Subsidiary has made an election
under (S) 341(f) of the Code.
(l) Except as set forth on Schedule 2.8, no property of the
------------
Company or any Subsidiary is property that the Company or any such Subsidiary
or any party to this transaction is or will be required to treat as being owned
by another person pursuant to the provisions of Code (S) 168(f)(8) (as in effect
prior to its amendment by the Tax Reform Act of 1986) or is tax-exempt use
property within the meaning of Code (S) 168.
(m) Except as set forth on Schedule 2.8, neither the Company
------------
nor any Subsidiary is required to include in income any adjustment pursuant
to Code (S) 481(a) by reason of a voluntary change in accounting method
initiated by the Company or any Subsidiary, and, to the Company's knowledge, the
Internal Revenue Service (the "IRS") has not proposed any such adjustment or
change in accounting method.
(n) No election under Code (S) 338 (or any predecessor
provision) has been made by or with respect to the Company or any of the
Subsidiaries or any of their respective assets or properties.
7
<PAGE>
(o) Except as set forth on Schedule 2.8, neither the Company
------------
nor any Subsidiary has engaged in any intercompany transactions within the
meaning of Treasury Regulations (S) 1.1502-13 for which any income or gain will
remain unrecognized as of the close of the last taxable year prior to the
Closing Date.
(p) Except as set forth on Schedule 2.8, neither the Company
------------
nor any Subsidiary owns any stock or other equity interest in any entity that
(i) would be considered a Passive Foreign Investment Company pursuant to (S)
1296 of the Code, or (ii) would be considered a Foreign Investment Company
pursuant to (S) 1246 of the Code.
(q) Except as set forth on Schedule 2.8, no Subsidiary has
------------
earned any income that will be required to be included in the Company's or any
Subsidiary's current year income tax return pursuant to (S) 951 of the Code, or
would otherwise be required to be included in the Company's or any Subsidiary's
current year income tax return pursuant to (S) 951 of the Code but for the
application of (S) 952(c) of the Code.
(r) Except as set forth on Schedule 2.8, no deduction or credit
------------
claimed on any Tax Return, or that could be claimed on any Tax Return with
respect to periods up to and including the Closing Date, will be subject to
limitations, including any limitations on any built in losses, deductions or
credits, pursuant to (S)(S) 382, 383 or 384 of the Code.
(s) Except as set forth on Schedule 2.8, no contributions have
------------
been, or will be, made to the capital of the Company on or after October 6,
1995.
Section 2.9 Employee Benefit Plans.
----------------------
(a) The Company has made available to the Purchaser true and
complete copies of each pension, profit-sharing, bonus, incentive, deferred
compensation, severance pay, retirement or other material employee benefit plan,
agreement or arrangement within the meaning of (S) 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and any stock
option, stock bonus, or other stock-based compensation plan, agreement or
arrangement, currently maintained or contributed to by the Company or any
Subsidiary for the benefit of any of its employees or as to which the Company or
any Subsidiary may otherwise have any liability (collectively, the "Plans"), all
of which are set forth on Schedule 2.9 (except those that will be terminated
------------
on or prior to the Closing Date).
(b) Except as set forth on Schedule 2.9 hereto, (i) each Plan
------------
that is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA that is intended to qualify under (S) 401(a) of the Code is being
operated and administered in compliance with (S) 401(a) of the Code, except
where any such failure to comply would not have a Material Adverse Effect, and a
favorable determination letter has been obtained from the Internal Revenue
Service (the "IRS") for each such Plan; (ii) no Plan is subject to
8
<PAGE>
the minimum funding requirements of (S) 412 of the Code or (S) 302 of ERISA or
is otherwise subject to Title IV of ERISA; (iii) except where such events would
not, individually or in the aggregate, have a Material Adverse Effect, there has
been no non-exempt "prohibited transaction" within the meaning of (S) 406 of
ERISA or (S) 4975 of the Code involving the assets of any Plan; (iv) all
required employer contributions to each Plan have been made when due (or, in the
case of contributions not yet due, have been accrued on the Company's financial
statements and records); (v) the Company has made available to the Purchaser as
to each Plan a true and correct copy of (x) the most recent annual report (Form
5500) filed with the IRS, if applicable, (y) the most recent actuarial valuation
report, if applicable and (z) each plan, trust agreement, group annuity contract
and insurance contract, if any, relating to such Plan; (vi) each Plan has been
administered in compliance with the applicable provisions of ERISA and the Code
and the terms of such Plan, except where any such failure to comply would not
have a Material Adverse Effect, (vii) with respect to each Plan subject to (S)
412 of the Code or (S) 302 of ERISA, no such Plan has incurred an accumulated
funding deficiency, whether or not waived; (viii) there are no pending or, to
the knowledge of the Company, threatened investigations or claims by the
Internal Revenue Service, Department of Labor, Pension Benefit Guaranty
Corporation or any other governmental agency, relating to any of the Plans, and
(ix) there are not pending or, to the knowledge of the Company, threatened
termination proceedings, pending claims (except claims for benefits payable in
the normal operation of the Plans), suits or proceedings against or involving
any Plan or asserting any rights to or claims for benefits under any Plan that
could give rise to a Material Adverse Effect, and, to the knowledge of the
Company, there are not any facts that could give rise to a Material Adverse
Effect in the event of any such investigation, claim, suit or proceeding.
(c) Except as set forth on Schedule 2.9, neither the Company
------------
nor any Subsidiary (i) has any actual or potential withdrawal liability with
respect to any multiemployer pension plan, or (ii) has any obligation to provide
any welfare benefits to retired or former employees other than continuation of
insurance coverage required by applicable law, or (iii) has incurred any
liability under Title IV of ERISA (other than for Pension Benefit Guaranty
Corporation premiums, all of which have been paid when due).
(d) Except as disclosed on Schedule 2.9, no employee of the
------------
Company or any of its Subsidiaries will be entitled to any additional benefits
or any acceleration of the time of payment or vesting of any benefits under any
Plan or agreement as a result of the transactions contemplated by this
Agreement.
(e) Each material Foreign Plan (as defined below), to the extent
any benefits provided thereunder are not mandated by the laws of the applicable
foreign jurisdiction, is set forth on Schedule 2.9. The Company and each of its
------------
Subsidiaries, as applicable, have maintained and administered such Foreign Plans
in compliance with all applicable laws and all required contributions have been
made to the Foreign Plans, except
9
<PAGE>
where the failure to comply or make contributions would not have a Material
Adverse Effect. For purposes hereof, the term "Foreign Plan" shall mean any
plan, program, policy, arrangement or agreement maintained or contributed to by,
or entered into with, the Company or any Subsidiary with respect to employees
(or former employees) employed outside the United States.
Section 2.10 Intellectual Property. Schedule 2.10 hereto
--------------------- -------------
sets forth a true and correct list of all registered patents, trademarks and
copyrights (or applications therefor) held by the Company or any Subsidiary. The
Company and each Subsidiary possess ownership of all trade names, trademarks,
service marks, trade secrets and other proprietary intellectual property rights
(the "Intellectual Property") used in the operation of their business, except
where the failure of the Company or such Subsidiary to own or have the right to
use any Intellectual Property would not, individually or in the aggregate, have
a Material Adverse Effect. None of the Company or the Subsidiaries (i) is
infringing upon the Intellectual Property of others or (ii) has received any
notice of infringement upon or conflict with respect to Intellectual Property of
others or (iii) has received any notice challenging or questioning the validity
or effectiveness of any license or agreement held by the Company or any
Subsidiary with respect to Intellectual Property used in the operation of its
business, except as would not, individually or in the aggregate, have a Material
Adverse Effect. To the knowledge of the Company, no person is using any
Intellectual Property that is confusingly similar to, which infringes upon, or
which violates the Company's rights with respect to the Intellectual Property of
the Company or any of its Subsidiaries.
Section 2.11 Real Property.
-------------
(a) Schedule 2.11 hereto sets forth a complete list of all real
-------------
property owned by the Company and the Subsidiaries (each an "Owned Property").
The Company or a Subsidiary, as the case may be, has good and marketable fee
title to the Owned Properties, free and clear of all mortgages, liens, security
interests, easements, restrictive covenants, rights-of-way and other
encumbrances ("Encumbrances") other than (i) Encumbrances that are disclosed on
Schedule 2.11; (ii) liens for taxes, fees, levies, duties or other governmental
- -------------
charges of any kind which are not yet delinquent or are duly reserved for and
being contested in good faith by appropriate proceedings which suspend the
collection thereof; (iii) liens for mechanics, material, laborers, employees,
suppliers or similar liens arising by operation of law for sums which are not
yet delinquent or which are duly reserved for and being contested in good faith
by appropriate proceedings or with respect to which arrangements for payment
and/or release have been made; (iv) platting, subdivision, zoning, building and
other similar legal requirements; and (v) easements, restrictive covenants,
rights-of-way, reservations of mineral or oil and gas interests, encroachments
and other similar encumbrances, whether or not of record, which do not
materially detract from the value of the real property subject thereto or impair
in any
10
<PAGE>
material respect the operation of the Company's business (the Encumbrances
described in clauses (i) through (v) above are hereinafter referred to
collectively as "Permitted Liens").
(b) Schedule 2.11 sets forth a complete list of all real
-------------
property leased by the Company and the Subsidiaries (each a "Leased Property").
The Company or a Subsidiary, as the case may be, has (assuming good title in the
landlord) a valid leasehold interest in the Leased Properties, in each case free
and clear of all Encumbrances other than Permitted Liens.
(c) To the Company's knowledge, there are no eminent domain
proceedings pending or threatened against any Owned Property or Leased Property.
Section 2.12 Material Contracts. Except as listed or described on
------------------
Schedule 2.11 and Schedule 2.12 hereto, as of the date hereof, neither the
- ------------- -------------
Company nor any Subsidiary is a party to or bound by any written or oral leases,
agreements, instruments, or other contracts or legally binding contractual
commitments ("Contracts") that are of a type described below (collectively, the
"Material Contracts"):
(i) any collective bargaining arrangement with any labor union;
(ii) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $100,000;
(iii) any Contract for the purchase or sale of inventory,
materials, supplies, merchandise, machinery, equipment, parts or other
property, assets, or services requiring aggregate future payments in excess of
$100,000 (other than standard inventory purchase orders executed in the
ordinary course of business);
(iv) any Contract relating to the borrowing of money or the
guaranty of another person's borrowing of money;
(v) any Contract granting any person a lien on all or any part
of assets;
(vi) any Contract granting to any person a first refusal, first
offer or similar preferential right to purchase or acquire any of its assets;
(vii) any Contract under which the Company or any Subsidiary is
(A) a lessee or sublessee of any machinery, equipment, vehicle (including fleet
equipment) or other tangible personal property, or (B) a lessor of any property,
in either case having an original value in excess of $500,000;
11
<PAGE>
(viii) any Contract limiting, restricting or prohibiting it from
conducting business anywhere in the United States or elsewhere in the world or
any Contract limiting the freedom of the Company to engage in any line of
business or to compete with any other Person;
(ix) any joint venture or partnership Contract;
(x) Contracts, singly or in the aggregate, requiring future
payments of $500,000 or more that require the consent of the other party thereto
in connection with the transactions contemplated hereby; and
(xi) any material employment Contract with any employee.
The Company has made available to the Purchaser a true and
complete copy of each written Material Contract, including all amendments or
other modifications thereto. Except as set forth on Schedule 2.12 hereto, to
-------------
the Company's knowledge, each Material Contract is a valid and binding
obligation of each party thereto, enforceable in accordance with its terms,
subject only to bankruptcy, reorganization, receivership and other laws
affecting creditors' rights generally. Except as set forth on Schedule 2.12, the
-------------
Company or a Subsidiary, as the case may be, has performed all obligations
required to be performed by it under the Material Contracts and the Company or
such Subsidiary, as the case may be, is not in breach or default thereunder,
except for breaches or defaults which will not, individually or in the
aggregate, have a Material Adverse Effect.
Section 2.13 Personal Property. Except as set forth on Schedule
----------------- --------
2.13 hereto, the Company and each Subsidiary has good and marketable title to
- ----
the assets reflected on its books and records as owned by it (other than real
property) free and clear of all Encumbrances other than Permitted Liens.
Section 2.14 Environmental and Safety Matters. Except as set forth
--------------------------------
on Schedule 2.14 hereto and except for such of the following as, individually or
-------------
in the aggregate, could not have a reasonable possibility of resulting in a
Material Adverse Effect: (i) the Company and each Subsidiary is in compliance
with all applicable Environmental Laws (as defined below) and no Environmental
Law could reasonably be expected to interfere with current operations of the
Company or any Subsidiary; (ii) neither the Company nor any Subsidiary has
received a notice, report or information regarding any noncompliance, any
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise),
or any corrective, investigatory, removal or remedial obligations, arising under
applicable Environmental Laws with respect to its past or present operations or
properties or those of its predecessors in interest; (iii) each of the Company
and its Subsidiaries have obtained, and are and have been in compliance with all
terms and conditions of, all permits, licenses and other authorizations required
pursuant to Environmental Laws for their occupation of the Owned
12
<PAGE>
Properties and the Leased Properties and the conduct of their business, and
neither the Company nor any of its Subsidiaries has any reason to believe that
any permits, licenses, or other authorizations scheduled to expire within the
next three years (a) will not be renewed or (b) will require material
expenditures in connection with such renewal; (iv) there are no agreements,
judgments, decrees or orders by which the Company or any of its Subsidiaries is
bound, which could reasonably be expected to give rise to any liability of the
Company or any of its Subsidiaries under Environmental Laws; and (v) neither the
Company nor any of its Subsidiaries is subject to any judicial or administrative
proceeding or, to the knowledge of the Company, investigation alleging the
violation of, or liability under, Environmental Laws and no such proceeding or
investigation is contemplated or threatened. Except as set forth in Schedule
--------
2.14 hereto, (i) the transactions contemplated by this Agreement do not impose
- ----
any obligations under Environmental Laws for site investigation or cleanup or
notification to or consent of any government agencies or third parties; (ii) no
lien has been asserted or recorded, or the knowledge of the Company, threatened,
under any Environmental Law with respect to any facility, property, asset or
inventory currently owned, leased or operated by the Company or any of its
Subsidiaries; and (iii) no property now or formerly owned, leased or operated by
the Company or any of its Subsidiaries or, to the knowledge of the Company, any
of their respective predecessors in interest, is (a) listed or proposed for
listing on the National Priorities List promulgated pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") or (b) listed on the Comprehensive Environmental Response,
Compensation and Liability Information System List promulgated pursuant to
CERCLA or (c) included on any similar list maintained by any governmental
authority including, without limitation, those relating to petroleum and its
constituents and derivatives. A complete list of all material permits, licenses
or other authorizations held by the Company and each Subsidiary pursuant to
Environmental Laws for the operation of the Owned Properties and the Leased
Properties and the conduct of the business of the Company and each of its
Subsidiaries, and the expiration date of each, is set forth on Schedule 2.14
-------------
hereto. The Company has made available to the Purchaser or its advisors or
consultants true, complete and correct copies of all environmental reports,
analyses, tests or monitoring in the possession of or available to the Company
during the past three years pertaining to any Owned Property or Leased Property.
As used in this Agreement, "Environmental Laws" shall mean all foreign, federal,
state or local statutes, laws, codes, rules, regulations, ordinances, orders,
standards, permits, licenses or requirements (including consent decrees,
judicial decisions and administrative orders), presently in force, as amended or
reauthorized, pertaining to the protection, preservation, conservation or
regulation of the environment, or imposing requirements relating to public or
employee health and safety, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. (S)
9601 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. (S)
6901 et seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C.
(S) 11001 et seq., the Clean Air Act, 42 U.S.C. (S) 7401 et seq., the Federal
Water Pollution Control Act, 33 U.S.C. (S) 1251 et seq., the Toxic Substances
Control Act, 15 U.S.C.
13
<PAGE>
(S) 2601 et seq., the Safe Drinking Water Act, 42 U.S.C. (S) 300F et seq., and
the Occupational Safety and Health Act, 29 U.S.C. (S) 651 et seq., each as
amended or reauthorized.
Section 2.15 Employee Relations. Except as set forth on Schedule
------------------ --------
2.15 hereto, within the last two years, neither the Company nor any of its
- ----
Subsidiaries has experienced any strike, picketing, boycott, work stoppage or
slowdown or other labor dispute, nor to the knowledge of the Company is any such
event or any organizing effort threatened against it. Except as set forth on
Schedule 2.6 hereto, there is no pending charge or complaint of unfair labor
- ------------
practice, employment discrimination or similar matters against the Company or
any Subsidiary relating to the employment of labor.
Section 2.16 Business Insurance. Each of the Company and the
------------------
Subsidiaries has in full force (i) all workers' compensation or similar
insurance required by the laws of any jurisdiction in which any material
operations of the Company or any of the Subsidiaries are conducted, (ii)
business interruption insurance covering risk of loss as a result of cessation
of any substantial part of the business conducted by the Company or any of the
Subsidiaries for such periods as are customary for companies of established
reputation engaged in the same or similar business and similarly situated, and
(iii) comprehensive general liability insurance, fire and casualty insurance
policies and public liability insurance providing coverage in such amount as is
customary for companies of established reputation engaged in the same or similar
business and similarly situated. The Company has not received any notice of
cancellation of any of the policies. To the knowledge of the Company, there
exists no breach by the insured under any such policy which gives the insurer
the right thereunder to terminate such policy.
Section 2.17 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS
----------
ARTICLE II, THE COMPANY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder, severally and not jointly, represents and warrants as
to itself to the Purchaser as follows:
Section 3.1 Authorization. The execution, delivery and performance
-------------
by such Stockholder of this Agreement and the transactions contemplated hereby
are within the requisite power of such Stockholder and have been duly authorized
by all necessary action on the part of such Stockholder. This Agreement
constitutes a valid and binding obligation
14
<PAGE>
of such Stockholder, enforceable against such Stockholder in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws of general application affecting the
enforcement of creditors' rights generally.
Section 3.2 Consents and Approvals. Except as set forth on Schedule
---------------------- --------
3.2 hereto, the execution, delivery and performance by such Stockholder of this
- ---
Agreement and the consummation by such Stockholder of the transactions
contemplated hereby require no action by or in respect of, or any filing with or
notice to, any governmental or regulatory body, agency or official which, if not
obtained or made, will prevent, materially delay or materially burden the
transactions contemplated by this Agreement. Neither the execution, delivery
and performance of this Agreement, nor the consummation of the transactions
contemplated hereby, will (a) if such Stockholder is not an individual, violate,
conflict with or result in a breach of, any provision of the organizational
documents of such Stockholder or (b) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, lease, agreement or other instrument to which such
Stockholder is a party, or by which its properties or assets may be bound,
except for such violations, breaches or defaults which would not prevent or
materially delay consummation of the transactions contemplated hereby.
Section 3.3 Capitalization; Ownership. The Company's issued and
-------------------------
outstanding capital stock consists of 8,880,102 shares of Common Stock. All
such shares of Common Stock are duly authorized and issued, are fully paid and
non-assessable, and are owned of record and beneficially by the Stockholders.
Upon delivery of such shares and payment therefor pursuant hereto, good and
valid title to such shares, free and clear of all Encumbrances, will pass to the
Purchaser.
Section 3.4 Affiliate Transactions. Except as disclosed on Schedule
---------------------- --------
3.4, and except for any agreement that will be terminated on or prior to Closing
- ---
without liability to, or obligation of, the Company or any Subsidiary, neither
the Company nor any Subsidiary is a party to any agreement or transaction with
KSCO or any of its Affiliates or to any other material agreement or material
transaction with any Stockholder or any other Affiliate of any Stockholder
(other than any Subsidiary).
Section 3.5 Brokers. Except for fees payable by the Company to
-------
Goldman, Sachs & Co., no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Stockholders shall pay all payments to Goldman,
Sachs & Co. owed by the Company or any Subsidiary in connection with the
transactions contemplated hereby and such agreement with Goldman, Sachs & Co.
shall be terminated concurrent with the Closing.
15
<PAGE>
Section 3.6 Employment Arrangements. Except for the employment
-----------------------
Contracts listed on Schedule 2.12 and Plans listed on Schedule 2.9, neither the
------------- ------------
Company nor any Subsidiary is a party to any employment agreement or arrangement
with any employee, including, without limitation, any agreement or arrangement
providing for payments (including, without limitation, any severance payments)
by the Company or any Subsidiary to any employee, other than any such agreement
or arrangement that terminates effective as of the Closing.
Section 3.7 Representations and Warranties of the Company. The sale
---------------------------------------------
of the Common Stock by such Stockholder pursuant to this Agreement is not
prompted by any material and adverse information concerning the Company or any
Subsidiary that has not been disclosed in this Agreement or the financial
statements referred to in Section 2.3. Such Stockholder is aware of no
representation or warranty made by the Company in this Agreement which is not
true and complete in all material respects.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company and each
Stockholder as follows:
Section 4.1 Organization and Qualification. The Purchaser is a
------------------------------
corporation duly formed, validly existing and in good standing under the laws of
the State of Delaware. The Purchaser has the requisite corporate power to
execute and deliver this Agreement and to carry out the transactions
contemplated hereby. The Purchaser is duly qualified as a foreign corporation
in good standing in each jurisdiction in which the conduct of its business
requires such qualification, except where the failure to be so qualified would
not prevent or materially delay consummation of the transactions contemplated
hereby.
Section 4.2 Authorization. The execution, delivery and performance
-------------
by the Purchaser of this Agreement and the transactions contemplated hereby are
within the corporate powers of the Purchaser and have been duly authorized by
all necessary corporate action. This Agreement constitutes a valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws of general application affecting
the enforcement of creditors' rights generally.
Section 4.3 Consents and Approvals. Except as set forth on Schedule
---------------------- --------
4.3 hereto, the execution, delivery and performance by the Purchaser of this
- ---
Agreement and the consummation of the transactions contemplated hereby require
no action by or in respect
16
<PAGE>
of, or any filing with or notice to, any governmental or regulatory body, agency
or official which, if not obtained or made, will prevent, materially delay or
materially burden the transactions contemplated by this Agreement. Neither the
execution, delivery and performance by the Purchaser of this Agreement, nor the
consummation by the Purchaser of the transactions contemplated hereby, will (a)
violate, conflict with, or result in a breach of, any provision of the charter
or bylaws of the Purchaser or (b) result in a default (or give rise to any right
of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, lease, agreement or other instrument or obligation to which
the Purchaser is a party, or by which its properties or assets may be bound,
except for such violations, breaches or defaults which would not prevent or
materially delay consummation of the transactions contemplated hereby.
Section 4.4 Financing. The Purchaser currently has sufficient funds
---------
on hand, or has sufficient borrowing availability or commitments from
responsible financial institutions (copies of which have previously been
furnished to the Company by the Purchaser), to enable the Purchaser to finance
the consummation of the transactions contemplated hereby and to pay related fees
and expenses.
Section 4.5 Litigation. There are no claims, actions, suits,
----------
approvals, investigations, informal objections, complaints or proceedings
pending against the Purchaser before any court, arbitrator, or administrative,
governmental or regulatory authority or body, nor is the Purchaser subject to
any order, judgment, writ, injunction or decree, except in either case for
matters which will not prevent, materially delay or materially burden the
transactions contemplated hereby.
Section 4.6 Brokers. No broker, finder or investment banker is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Purchaser.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business. Except as contemplated by this
-------------------
Agreement or otherwise consented to in writing by the Purchaser, during the
period from the date of this Agreement to the Closing Date, the Company shall,
and shall cause each of the Subsidiaries to conduct their business in the
ordinary course of business of the Company and the Subsidiaries consistent with
past practice (including, without limitation by (a) preserving its present
business organization and relationships, (b) keeping available the present
services of its employees, and (c) preserving the rights, franchises, goodwill
and relations of its
17
<PAGE>
customers and others with whom business relationships exist (including
licensors, suppliers, distributors, and clients), all as may be required to
carry on the business in the ordinary course of the Company and the Subsidiaries
consistent with past practice), and the Company will not, and will not permit
any of the Subsidiaries to, intentionally take any actions that could reasonably
be expected to have a Material Adverse Effect. Without limiting the generality
of the foregoing, and except as otherwise expressly provided in this Agreement,
prior to the Closing Date, the Company will not, and will not permit any of the
Subsidiaries to, without the prior written consent of the Purchaser:
(i) sell, pledge, dispose of or encumber its assets, except for
sales of inventory and sales of obsolete assets and assets concurrently
replaced with similar assets, in each case in the ordinary course of its
business;
(ii) except as otherwise required by law or by any existing
plan, arrangement or agreement, materially increase the compensation or
benefits payable to any employee of the Company or any of its
Subsidiaries or enter into, adopt, amend or terminate any employee
benefit plan or any material employment agreement;
(iii) declare or make any dividends or other distributions on
the Common Stock, or repurchase or otherwise reacquire for value any
shares of Common Stock;
(iv) issue any shares of capital stock, or any warrants, options
or other rights to purchase or acquire any capital stock, other than the
issuance of Common Stock upon the exercise of Options;
(v) incur any indebtedness for borrowed money other than
borrowings for working capital purposes under existing credit facilities
in the ordinary course of business;
(vi) amend any Tax Return, change any method of Tax accounting,
make any elections that have any effect on any Tax Return, file for or
make any refund claims relating to any Tax or any Tax Return or settle
any issues arising in any Tax audit or contest.
(vii) enter into any material Contract (including without
limitation any arrangement with any governmental body) or any amendment,
cancellation or termination of any material Contract, including without
limitation any Contract with any governmental body or agency, or take
any action impairing its rights under any material Contract or take, or
fail to take, any action that constitutes a material breach or default
under any material Contract;
18
<PAGE>
(viii) amend or propose to amend the charter or bylaws of the Company or
any Subsidiary; or
(ix) agree to do any of the foregoing.
The Company represents and warrants that, since August 31, 1997, (x)
the Company and the Subsidiaries have conducted their business in the ordinary
course of business of the Company and the Subsidiaries consistent with past
practice, and (y) without limiting the generality of the foregoing, neither the
Company nor any Subsidiary has taken any action that could reasonably be
expected to have a Material Adverse Effect or otherwise done anything described
in the foregoing clauses (i) through (ix) except as may be disclosed in the
Schedules to this Agreement.
Section 5.2 Filings. Each of the Company, the Stockholders and the
-------
Purchaser shall exercise reasonable best efforts to take or cause to be taken
all actions, and to do or cause to be done all things necessary, proper or
advisable under applicable laws to consummate and make effective, as soon as
reasonably practicable, the transactions contemplated hereby. Without limiting
the generality of the foregoing, each of the Company, the Stockholders and the
Purchaser (a) shall make all required filings with or applications to
governmental bodies and other regulatory authorities set forth on Schedules 5.2
-------------
and 2.5 hereto no later than five business days after the execution of this
- -------
Agreement, and (b) shall exercise reasonable best efforts to (x) obtain all
necessary waivers, consents and approvals from other parties to Material
Contracts as identified by the Purchaser and set forth on Schedules 5.2 and 2.5
---------------------
and to oppose, lift or rescind any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, and (y) otherwise fulfill all conditions to
this Agreement.
Section 5.3 Confidentiality; Access to Information. That certain
--------------------------------------
letter agreement between the Purchaser and Goldman, Sachs & Co. on behalf of
Scovill (the "Confidentiality Agreement") with respect to, among other things,
confidential treatment of information provided by the Company and its
representatives to the Purchaser and its representatives shall remain in full
force and effect and shall survive the execution and delivery of this Agreement
and the termination of this Agreement for any reason whatsoever. Subject to the
terms of the Confidentiality Agreement, from the date hereof to the Closing
Date, the Company shall, and shall cause its officers, directors, employees and
agents to, afford the directors, officers, employees, agents, representatives
and advisors of the Purchaser complete access at all reasonable times to its
officers, employees, agents, properties, books, records and contracts, and shall
furnish the Purchaser all financial, operating, tax and other data and
information relating to the Company and the Subsidiaries as the Purchaser may
reasonably request; provided that after the execution of this Agreement, the
Purchaser shall not be entitled to conduct soil or groundwater sampling and
testing of the facilities and properties of the Company or any Subsidiary;
provided further that no documents that have been
19
<PAGE>
provided to the Purchaser on or prior to October 13, 1997 shall serve as a basis
for asserting at any time after October 31, 1997 that there has been a breach of
any representation or warranty under Section 2.14.
Section 5.4 Public Announcements. The Company and the Purchaser
--------------------
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law.
Section 5.5 Hart-Scott-Rodino. The Purchaser shall pay and be
-----------------
solely responsible for the applicable filing fee under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended and the regulations promulgated
thereunder (the "HSR Act"), with respect to the transaction contemplated hereby.
The Purchaser and the Company shall file, upon the execution of this Agreement,
the notice required by the HSR Act and shall request early termination of the
applicable waiting periods thereunder and shall use its reasonable best efforts
to cause such waiting period to expire or be terminated on or before the date
which is one month after the date hereof.
Section 5.6 Existing Indebtedness. The Stockholders shall cause the
---------------------
Company to, and the Company shall use its reasonable best efforts to, concurrent
with the Closing, (x) terminate all agreements or instruments governing the
Indebtedness and (y) repay and satisfy and discharge all obligations thereunder.
"Indebtedness" shall mean (i) all outstanding indebtedness, as of the Closing
Date, under that certain Amended and Restated Credit Agreement among the
Company, Scovill, PCI Group, Inc., Rau Fastener Company, L.L.C., Bank Indosuez,
and the various Banks party thereto, dated as of January 24, 1996, as amended
("Credit Facility"), (ii) that certain Master Lease Agreement by and between
General Electric Capital Corporation and Scovill dated November 7, 1996 ("GECC
Agreement"), (iii) unless the Purchaser notifies the Company otherwise in
writing by October 31, 1997, all outstanding indebtedness as of the Closing Date
under that certain Credit Facility between Unifast-Scovill, S.A. and Credit
General dated March 8, 1996 (as amended September 9, 1996 and June 9, 1997)
("Credit General Agreement"), (iv) unless the Purchaser notifies the Company
otherwise in writing by October 31, 1997, all outstanding indebtedness as of the
Closing Date under those certain credit facilities between Unifast-Scovill, S.A.
and Invest Borinage-Centre and S.A. I.M.B.C. Objectif No. 1, each dated April
12, 1996, (v) unless the Purchaser notifies the Company otherwise in writing by
October 31, 1997, all other indebtedness for borrowed money or evidenced by
notes, bonds or other instruments of the Company or any Subsidiary (other than
indebtedness incurred in the ordinary course of business to purchase office
equipment and vehicles of the Company and its Subsidiaries secured by purchase
money security interests as disclosed on Schedule 2.13), (vi) the fees and
-------------
expenses of Goldman, Sachs & Co. payable by the Company or any Subsidiary in
connection with the transactions contemplated hereby, and
20
<PAGE>
(vii) the fees and expenses of the Company (including, without limitation, fees
and expenses of its counsel and of KSCO II Acquisition Company, L.P. and KSCO
Acquisition Company, L.P. (together, "KSCO")) in connection with the
----
transactions contemplated hereby.
Section 5.7 Notification of Certain Matters. The Company and the
-------------------------------
Stockholders shall give prompt written notice to the Purchaser of (i) the
occurrence, or failure to occur, of any event or existence of any condition that
has caused or could reasonably be expected to cause any representation or
warranty of the Company or any Stockholder contained in this Agreement to be
untrue or inaccurate in any material respect at any time after the date of this
Agreement, up to and including the Closing Date, and (ii) any failure of the
Company or any Stockholder to comply with or satisfy, in any respect, any
material covenant, condition or agreement to be complied with or satisfied under
this Agreement. Such notice shall not affect Section 6.2.1.
Section 5.8 Parachute Payments. The Company and the Stockholders
------------------
shall take all action necessary in order that no payment or distribution made,
or benefit provided (including, without limitation, the acceleration of any
payment, distribution or benefit and the acceleration of exercisability of any
stock option), by the Company or any Subsidiary to or for the benefit of any
employee would constitute an "excess parachute payment" under (S) 280G of the
Code.
Section 5.9 Shareholders Agreement. The Company and the Stockholders
----------------------
agree that the Shareholders Agreement dated October 17, 1995 among the Company
and its stockholders shall be terminated effective as of the Closing, with no
obligation or payment to the Company or any Subsidiary.
Section 5.10 Financial Statements. The Company shall cause its
--------------------
independent auditors to promptly deliver to the Purchaser the following
financial statements of the Company and its Subsidiaries to be included in the
offering memorandum relating to the offering of securities (the "144A Offering")
to finance the purchase of the Common Stock and related transactions: (i)
consolidated statements of operations for the three years ended December 31,
1996 and consolidated balance sheets at December 31, 1996 and 1995, all
accompanied by a report of independent auditors (without qualification or
exception as to scope), (ii) consolidated statements of operations for the nine
months ended September 30, 1997 and 1996 and consolidated balance sheet at
September 30, 1997, (iii) pro forma consolidated statements of operations for
the year ended December 31, 1996 and the nine months ended September 30, 1997
and pro forma consolidated balance sheet at September 30, 1997 and (iv) to the
extent they would be required under Regulation S-X ("Regulation S-X") under the
Securities Act of 1933, as amended (the "Securities Act") in an offering of
securities registered under the Securities Act, financial statements of each
business acquired by the Company or any Subsidiary, accompanied by a report of
independent auditors, each of the items under clauses (i) through (iv) which
shall (x) be prepared in compliance with
21
<PAGE>
U.S. generally accepted accounting principles consistently applied and (y)
comply with Regulation S-X as it applies to offerings of securities registered
under the Securities Act. The Company shall cause its independent auditors to
deliver, at the time of the 144A Offering, a "comfort letter" to the initial
purchasers in the 144A Offering in customary form for similar offerings,
including customary language as to SAS 71 review of the financial statements
referred to in clause (ii).
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Each Party's Obligation. The respective
-------------------------------------
obligations of each party to effect the transactions contemplated hereby are
subject to the satisfaction or waiver prior to the Closing Date of the following
conditions:
6.1.1 No Legal Prohibition. No statute, rule, regulation or
--------------------
order shall be enacted, promulgated, entered or enforced by any court or
governmental authority which would prohibit consummation by such party of the
transactions contemplated hereby.
6.1.2 No Injunction. Such party shall not be prohibited by any
-------------
order, ruling, consent, decree, judgment or injunction of a court or regulatory
agency of competent jurisdiction from consummating the transactions contemplated
hereby.
6.1.3 Hart-Scott-Rodino. The applicable waiting
-----------------
period under the HSR Act shall have expired or been terminated.
Section 6.2 Conditions to Obligation of the Purchaser. The
-----------------------------------------
obligation of the Purchaser to effect the transactions contemplated hereby shall
be subject to the satisfaction or waiver, prior to or at the Closing, of the
following conditions:
6.2.1 Representations and Covenants. Except as expressly
-----------------------------
contemplated by this Agreement, the representations and warranties of the
Company and each Stockholder contained in this Agreement shall be true and
correct on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date, except for such breaches of representations
and warranties as, individually or in the aggregate, do not have a Material
Adverse Effect. The Company and each Stockholder shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
22
<PAGE>
6.2.2 Approvals. All governmental and third-party approvals,
---------
consents, permits or waivers set forth on Schedules 2.5 and 5.2 shall have been
---------------------
obtained in form and substance reasonably satisfactory to the Purchaser.
6.2.3 Kohlberg Agreements. All agreements of the Company or any
-------------------
Subsidiary with KSCO or any of their Affiliates shall have been canceled, or
shall be canceled effective as of the Closing, with no payment or cost of any
nature to the Company, any Subsidiary or the Purchaser.
6.2.4 Existing Indebtedness. Concurrent with the Closing, all of the
---------------------
Indebtedness (other than any Purchaser Specified Indebtedness) shall have been
terminated and all obligations with respect thereto satisfied, subject to the
payment of the Purchase Price at the Closing Date as directed by the
Stockholders in writing.
6.2.5 Non-foreign Status. Each of the Stockholders shall deliver to
------------------
the Purchaser an affidavit of non-foreign status in the form required by (S)
1445 of the Code and the Treasury regulations promulgated thereunder, signed
under penalty of perjury.
6.2.6 Opinion. Hunton & Williams (as to the Company and Scovill),
-------
Hogan & Hartson L.L.P. (as to Unifast-Scovill, S.A.) and Desjardins Ducharme
Stein Monast (as to 158856 Canada, Inc., aka Scovill Canada Inc.) shall have
delivered an opinion substantially in the form of Exhibit A.
---------
6.2.7 Officer's Certificate. The Chief Executive Officer and the
---------------------
Chief Financial Officer of the Company shall have delivered a certificate
substantially in the form of Exhibit B.
---------
6.2.8 Secretary's Certificate. The Secretary of the Company and the
-----------------------
Secretary of KSCO shall have delivered a certificate substantially in the form
of Exhibit C.
---------
Section 6.3 Conditions to Obligation of the Company. The obligation
---------------------------------------
of the Company to effect the transactions contemplated hereby shall be subject
to the satisfaction or waiver, prior to or at the Closing, of the following
conditions:
6.3.1 Representations and Covenants. Except as expressly contemplated
-----------------------------
by this Agreement, the representations and warranties of the Purchaser contained
in this Agreement shall be true and correct in all material respects on and as
of the Closing Date with the same force and effect as though made on and as of
the Closing Date. The Purchaser shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by the Purchaser on or prior to the Closing
Date.
23
<PAGE>
6.3.2 Approvals. All governmental and third-party approvals,
---------
consents, permits or waivers set forth on Schedule 5.2 shall have been obtained
------------
in form and substance reasonably satisfactory to the Company.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing:
7.1.1 By mutual written consent of the Purchaser, the Company
and KSCO.
7.1.2 In writing by the Company and KSCO:
(i) if the Closing Date shall not have occurred on or before
November 26, 1997, or such later date on which the applicable waiting
period under the HSR Act shall have expired or been terminated (provided
such later date is on or before December 1, 1997), other than as a
result of a material breach by the Company or the Stockholders of their
representations, warranties or other obligations hereunder, provided,
that if the Closing Date shall not have occurred due to a material
breach by the Company or the Stockholders, Purchaser shall have provided
written notice of such breach to the Company within 2 business days of
such breach and shall, within 10 business days of such breach, either
terminate this Agreement or consummate the transactions contemplated
herein; or
(ii) if, prior to the Closing Date, the Purchaser fails to
perform in any material respect any of its obligations under this
Agreement or the Purchaser has breached in any material respect any of
its representations or warranties, and such failure or breach has not
been cured within 15 days after receipt of written notice of such
failure or breach from the Company.
7.1.3 In writing by the Purchaser:
(i) if the Closing Date shall not have occurred on or before
November 26, 1997, or such later date on which the applicable waiting
period under the HSR Act shall have expired or been terminated (provided
such later date is on or before December 1, 1997), other than as a
result of a material breach by the Purchaser of its representations,
warranties or other obligations hereunder, provided, that if the Closing
Date shall not have occurred due to a material breach by the Purchaser,
Company or the Stockholders shall have provided written notice of such
breach to
24
<PAGE>
the Purchaser within 2 business days of such breach and shall, within 10
business days of such breach, either terminate this Agreement or
consummate the transactions contemplated herein; or
(ii) if, prior to the Closing Date, the Company or any
Stockholder fails to perform in any material respect any of their
obligations under this Agreement or the Company or any Stockholder has
breached in any material respect any of their representations or
warranties, and such failure or breach has not been cured within 15 days
after receipt of written notice of such failure or breach from the
Purchaser.
Section 7.2 Effect of Termination. In the event of termination of
---------------------
this Agreement by the Purchaser or the Company and KSCO as provided in Section
7.1 hereof, all obligations of the parties under this Agreement shall terminate
without liability of any party to any other party, except (i) that the
obligations set forth in Section 8.11 of this Agreement and in the
Confidentiality Agreement shall survive any such termination and (ii) for
liability for any intentional breach of this Agreement.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Rules of Construction.
---------------------
8.1.1 Material Adverse Effect. For purposes of this Agreement,
-----------------------
a "Material Adverse Effect" shall mean a material adverse effect on the
operations or financial condition of the Company and the Subsidiaries, taken as
a whole, or on the Company's and the Stockholders' ability to consummate the
transactions contemplated by this Agreement.
8.1.2 Knowledge. Where a representation or warranty is stated
---------
based on the knowledge of the Company, such phrase shall refer to the actual
knowledge of William F. Andrews, Jr., David Barrett, Martin Moore, Michael S.
Baxley, John H. Champagne, and Robert W. Feltz.
8.1.3 Schedules. Any matter disclosed on any of the schedules
---------
attached hereto for any purpose of this Agreement shall be deemed to be
disclosed on each of the schedules regardless of whether such disclosure is
actually set forth.
8.1.4 Headings. The headings contained in this Agreement are
--------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
25
<PAGE>
8.1.5 Severability. If any provision of this Agreement, or the
------------
application thereof to any person, place or circumstance, shall be held by a
court of competent jurisdiction to be illegal, invalid, unenforceable or void,
then such provision shall be enforced to the extent that it is not illegal,
invalid, unenforceable or void, and the remainder of this Agreement, as well as
such provision as applied to other persons, places or circumstances, shall
remain in full force and effect.
Section 8.2 Survival. The representations and the warranties
--------
of the Company shall not survive the Closing. All other representations and
warranties shall survive.
Section 8.3 Notices. All notices, demands, or other
-------
communications to be given or delivered under or by reason of the provisions
of this Agreement will be in writing and shall be deemed to have been duly given
or delivered when (i) delivered personally, (ii) sent by telephone facsimile
transmission or (iii) sent via a nationally recognized overnight courier to the
recipient for next business day delivery. Such notices, demands and other
communications will be sent to the address indicated below:
(i) If to the Company or any Stockholder:
c/o Scovill Fasteners Inc.
Highway 385 South/441 Business
Clarkesville, Georgia 30523
Attention: Martin A. Moore
Fax: (706) 754-3158
with copies to:
Kohlberg & Company
111 Radio Circle
Mt. Kisco, NY 10549
Attention: Chris Lacovara
Fax: (914) 241-7476
and
Hunton & Williams
NationsBank Plaza - Suite 4100
600 Peachtree Street, NE
Atlanta, Georgia 30308-2216
Attention: C. L. Wagner, Esq.
Fax: (404) 888-4190
26
<PAGE>
(ii) If to the Purchaser:
c/o Saratoga Partners III, L.P.
535 Madison Avenue
New York, New York 10022
Attention: Kirk R. Ferguson
Fax: (212) 750-3343
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Robert Usadi, Esq.
Fax: (212) 269-5420
or to such other address as any party may specify by notice given to the other
party in accordance with this Section 8.3. The date of giving any such notice
shall be (i) the date of hand delivery, (ii) the date sent by telephone
facsimile if a business day or the first business day thereafter or (iii) the
business day after delivery to the overnight courier service.
Section 8.4 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
Section 8.5 Entire Agreement. This Agreement (including attached
----------------
exhibits and schedules) and the Confidentiality Agreement constitute the entire
agreement among the parties with respect to the subject matter of this Agreement
and supersede any prior agreement or understanding, whether written and oral,
among the parties or between any of them with respect to the subject matter of
this Agreement. There are no representations, warranties, covenants, promises
or undertakings, other than those expressly set forth or referred to herein.
Section 8.6 Amendment; Waiver. This Agreement may be amended,
-----------------
modified or waived only by a written agreement signed by the Purchaser, the
Company and KSCO. With regard to any power, remedy or right provided in this
Agreement or otherwise available to any party, (iii) no waiver or extension of
time shall be effective unless expressly contained in a writing signed by the
waiving party, (iv) no alteration, modification or
27
<PAGE>
impairment shall be implied by reason of any previous waiver, extension of time,
delay or omission in exercise or other indulgence, and (v) waiver by any party
of the time for performance of any act or condition hereunder does not
constitute a waiver of the act or condition itself.
Section 8.7 Assignability. Neither the rights nor the obligations of
-------------
any party to this Agreement may be transferred or assigned. Any purported
assignment of this Agreement or any of the rights and obligations hereunder
shall be null, void and of no effect.
Section 8.8 Binding Effect. This Agreement shall be binding upon and
--------------
shall inure to the benefit of the parties and their respective successors and,
if applicable, permitted assigns.
Section 8.9 Third-Party Beneficiaries. Each party intends that this
-------------------------
Agreement shall not benefit or create any right or cause of action in any person
other than the parties hereto.
Section 8.10 Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall constitute an original but when taken
together shall constitute but one instrument.
Section 8.11 Expenses. Each party to this Agreement shall bear all
--------
of its own expenses in connection with the execution, delivery and performance
of this Agreement and the transactions contemplated hereby, including without
limitation all fees and expenses of its agents, representatives, counsel and
accountants.
Section 8.12 Certain Taxes. All transfer, documentary, sales, use,
-------------
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any New York
City Transfer Tax and any similar tax imposed in other states, subdivisions or
under foreign law) shall be paid by the Stockholders when due, and Stockholders
will, at their own expense, file all necessary Tax Returns and other
documentation with respect to such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and if required by applicable law,
Purchaser will, and will cause its affiliates to, join in the execution of any
such Tax Returns and other documentation.
Section 8.13 Judicial Proceedings. ANY JUDICIAL PROCEEDING INVOLVING
--------------------
ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY (EACH, A "DISPUTE") SHALL BE BROUGHT
ONLY IN A FEDERAL OR STATE COURT LOCATED IN THE STATE OF NEW YORK, THE CITY OF
NEW YORK, BOROUGH OF MANHATTAN, AND EACH OF THE PARTIES HERETO
28
<PAGE>
(I) UNCONDITIONALLY ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND ANY
RELATED APPELLATE COURT AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY AND (II) IRREVOCABLY WAIVES ANY OBJECTION SUCH PARTY MAY NOW
HAVE OR HEREAFTER HAS AS TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH PARTY HERETO
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN
SECTION 8.3 HEREOF. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY
PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING A DISPUTE.
* * * *
[Signatures commence on following page]
29
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date first written above.
KSCO ACQUISITION CORPORATION
By: _______________________________________
Name: _________________________
Title: ________________________
SLF CORPORATION
By: ______________________________________
Name: _________________________
Title: ________________________
KSCO ACQUISITION COMPANY, L.P.
By: _______________________________________
Name: _________________________
Title: ________________________
KSCO II ACQUISITION COMPANY, L.P.
By: _______________________________________
Name: _________________________
Title: ________________________
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
30
<PAGE>
________________________________________
William F. Andrews
_________________________________________
David J. Barrett
_________________________________________
Robert W. Feltz
_________________________________________
Martin A. Moore
_________________________________________
Michael S. Baxley
_________________________________________
John H. Champagne
31
<PAGE>
SCHEDULES TO
STOCK PURCHASE AGREEMENT
Note: The disclosures contained herein shall not be deemed to establish
materiality standards as may be provided in the Stock Purchase Agreement.
<PAGE>
SCHEDULE A
----------
STOCKHOLDERS AND OPTIONHOLDERS
SHARES OF NUMBER
COMMON OF
NAME OF STOCKHOLDER/OPTIONHOLDER STOCK OPTIONS
- ----------------------------------- --------- -------
KSCO Acquisition Company, L.P. 7,800,000
KSCO II Acquisition Company, L.P. 1,010,102
William F. Andrews 40,000 161,500
David J. Barrett 10,000 242,325
Michael S. Baxley 161,500
John H. Champagne 80,775
Robert W. Feltz 10,000 161,500
Martin A. Moore 10,000 161,500
<PAGE>
SCHEDULE 2.1
LIST OF SUBSIDIARIES
--------------------
SUBSIDIARY PARENT
---------- ------
Scovill Fasteners Inc. KSCO Acquisition Corporation
PCI Group, Inc. Scovill Fasteners Inc.
Rau Fastener Company, L.L.C. Scovill Fasteners Inc.
Scomex, Inc. Scovill Fasteners Inc.
Scovill Puerto Rico, Inc. Scovill Fasteners Inc.
Unifast-Scovill S.A. Scovill Fasteners Inc.
158856 Canada Inc./1/ Rau Fastener Company, L.L.C.
Daude S.A. Unifast-Scovill S.A.
Scovill Fasteners, S.A. de C.V. Scomex, Inc.
Scovill Fasteners Mexico, S.A. de C.V./2/ Scovill Fasteners Inc.
/1/ Currently in process of changing legal name of this subsidiary to Scovill
Canada Inc. Effective January 3, 1997, Rau Fastener (Canada) Inc. and 2859-
1980 Quebec Inc. (f/k/a Scovill Canada Inc.) were liquidated into 158856
Canada Inc. Rau Fastener (Canada) Inc. was legally dissolved, effective
September 23, 1997. 2859-1980 Quebec Inc. currently has no assets or
liabilities and is in the process of being legally dissolved.
/2/ This is a subsidiary of Scovill Fasteners Inc. which currently has no assets
or liabilities and is in the process of being legally dissolved.
<PAGE>
SCHEDULE 2.4
Outstanding Capital Stock of Subsidiaries
-----------------------------------------
<TABLE>
<S> <C> <C>
Scovill Fasteners Inc. Authorized: 1,000 Shares of common stock, $.01 par value.
20,000 Shares of preferred stock, $.01 par value.
Issued: 100 Shares of common stock
PCI Group, Inc. Authorized 20,000 Shares of common stock, $.01 par value.
Issued: 6,000 Shares
Rau Fastener
Company, L.L.C. The membership interests in Rau Fastener Company,
L.L.C. are held solely by Scovill Fasteners Inc.
Scomex, Inc. Authorized: 10,000 Shares of common stock, $.01 par value.
Issued: 1 Share
Scovill Puerto Rico, Inc. Authorized: 20,000 Shares of common stock, no par value.
Issued: 5,068 Shares
Unifast-Scovill S.A. Authorized: 100,108 Shares of common stock BEF 1,000 par value
Issued: 50,108 Shares/1/
158856 Canada Inc. Authorized: An unlimited number of seven (7) classes of stock
Issued: Class B - 2,611,736 Shares issued to Rau Fastener Company, L.L.C.
Class B - 10 Shares, issued to Scovill Fasteners Inc.
Class C - 2,000 Shares, issued to Rau Fastener Company, L.L.C.
Class D - 303,922 Shares, issued to Rau Fastener Company, L.L.C.
Class E - 11,754 Shares, issued to Rau Fastener Company, L.L.C.
</TABLE>
- ---------------
/1/ 10 Shares held by Frank Wright, Managing Director and President of the Board
of Directors of Unifast-Scovill S.A.
<PAGE>
<TABLE>
<S> <C> <C>
Daude S.A. Authorized: 2,500 Shares of common stock, 100 FF par value
Issued: 2,500 Shares
Scovill Fasteners, Authorized: 100,000 Shares of common stock, one peso par value
S.A. de C.V. Issued: 100,000 Shares/1/
</TABLE>
- ---------------
/1/ One share held by David Barrett, President of Scovill Fasteners, S.A. de
C.V.
<PAGE>
SCHEDULE 2.5
Company Consents and Approvals
------------------------------
1. Expiration or early Termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations promulgated thereunder.
2. Consent of Banque Indosuez and the other Banks as required under that
certain Amended and Restated Credit Agreement among the Company, Scovill
Fasteners Inc., PCI Group, Inc., Rau Fastener Company, L.L.C. and the Banks
party thereto, dated as of January 24, 1996, as amended ("Credit
Facility").
3. Consent of General Electric Capital Corporation ("GECC") as required under
that certain Master Lease Agreement dated November 7, 1996 between GECC and
Scovill Fasteners Inc. to the extent that the Working Capital Facility
under the Credit Facility is terminated and not replaced.
4. Approval by the holders of majority of the Common Stock of the Company is
required under that certain Shareholders Agreement by and among the
Company, KSCO Acquisition Company, L.P. and the stockholders of the
Company, dated October 17, 1995, as amended.
5. Receipt of informal "no objection" letter from Belgian Ministry of Economic
Affairs in connection with the Belgian Law of August 5, 1991 on the
protection of economic competition.
6. A notice filing is required in Puerto Rico to effect an indirect change in
control of Scovill Puerto Rico, Inc. to the extent that the tax-exemption
certificate held by Scovill Puerto Rico, Inc. is not surrendered.
7. Leases:
a. Consent is required under that certain Standard Industrial Lease by
and between The Equitable Life Assurance Society of the United States
and Scovill Fasteners Inc. dated February 5, 1997 (Nashville
Warehouse).
b. Landlord consent required pursuant to Section 21 of that certain Lease
Agreement between Carr-America Realty Corporation, as successor to
Century Lake, L.P., as landlord, and Scovill Fasteners Inc., as
Tenant, dated December 7, 1994 (Duluth, Georgia).
c. Landlord consent required pursuant to Article XIII of that certain
Lease between 1913 Realty Associates, as landlord, and Scovill
Fasteners Inc., as tenant, dated July 11, 1990 (Clifton, NJ).
<PAGE>
8. Other Material Agreements:
a. An Assignment and Assumption Agreement with Saltire Industrial
Corporation ("Saltire") and First City Diversified Inc. ("First City
Diversified") is required to assign the obligations of Saltire and
First City Diversified under that certain Stock Purchase Agreement
among the Company, Saltire and First City Diversified dated September
25, 1995, to the extent that such obligations are to be assigned to
Purchaser.
9. ERISA/Employee Benefit Plans - the transactions contemplated by this
Agreement may give rise to one or more reportable events, requiring notice
to the Pension Benefit Guaranty Corporation.
See also Schedule 2.14.
-------------
<PAGE>
SCHEDULE 2.6
Litigation
----------
1. See attached with regard to Ideal Fastener litigation.
2. Workers Compensation: Fashion Development Center Inc. employee Hermilia
Enriquez allegedly injured by Company equipment. Claim made February 27,
1997 by ITT Hartford as insurer of Fashion Development Center. Status:
Investigation is ongoing by Scovill Fasteners Inc.'s insurance adjuster
concerning the Company's exposure.
3. Personal Injury: Claim filed against Scovill Fasteners Inc. and its
employee in suit styled Pamela G. Clinard and David L. Clinard vs. The
----------------------------------------------
Metropolitan Government of Nashville Davidson County and Lois Townes and
------------------------------------------------------------------------
Melvin Tucker Jr. Complaint No. 97C126 in Circuit Court of Davidson County,
--------------------------------------
Tennessee.
Scovill is insured and is represented by insurer's counsel in this matter.
Scovill has filed a complaint in connection with same matter, which has
been consolidated with the original personal injury action. Discovery is
ongoing.
4. Personal Injury: Claim filed against Scovill Fasteners Inc.'s employee in
action styled Steven W. Rausch vs. Christopher T. Gleeson, National Car
---------------------------------------------------------
Rental, in Superior Court of Gwinnett County, GA. Answer has been filed by
------
counsel selected by Scovill's insurer.
See also Schedule 2.14.
-------------
<PAGE>
M E M O R A N D U M
TO: File DATE: September 3, 1997
FROM: Rance L. Craft FILE: 50558.000013
SCOVILL FASTENERS INC. V. IDEAL FASTENER CORP. -- LITIGATION SUMMARY
--------------------------------------------------------------------
In February 1996, Scovill Fasteners Inc. ("Scovill"), sold its Zipper
Division to Ideal Fastener Corp. ("Ideal"), a Delaware corporation with its
principal place of business in Oxford, North Carolina. The contract by which
the parties consummated this sale is styled the "Asset Acquisition Agreement".
Under the terms of the Agreement, Ideal purchased Scovill's entire zipper
operation, including plant equipment, field equipment (equipment owned by
Scovill but leased to its customers and located at the customers' places of
business), inventory (including raw materials, work-in-process, and finished
goods), contracts, permits and licenses, goodwill, and other tangible and
intangible assets. Ideal paid for the Division by making a $200,000 cash
payment and executing a Note and Security Agreement in Scovill's favor in the
amount of $1,674,512. Per the Agreement, the parties adjusted the amount of the
Note in April 1996 to account for changes and conversion of inventory during the
transition period. The adjusted amount of the Note was approximately
$1,450,000. The interest rate on the Note is 4%. Hunton and Williams partner
J. Stephen Hufford and associate Kelly A. Carlos served as counsel for Scovill
for the initial deal, but were not involved with the subsequent adjustment.
The installment payments due under the Note are tied to specific assets
transferred under the Asset Acquisition Agreement. For example, there is a
series of monthly installments expressly marked as payment for the field
equipment; there are also two series of quarterly installments expressly marked
as payment for different types of inventory. These various series of payments
have run concurrently from the date of the Agreement. The final payment is due
in February 1999.
Since April 1996, Ideal has failed to make several payments when due, or
has made only partial payments, based on Ideal's assertions that it did not
receive certain items or quantities of the equipment and inventory that it
purchased under the Asset Acquisition Agreement. On April 2, 1997, Hunton and
Williams partner Lawrence J. Bracken II sent a letter to Ideal demanding payment
of all past due amounts and informing Ideal of Scovill's intent to accelerate
the Note payments and to initiate litigation if Ideal did not cure the default.
At that time, the total default was $299,633.00. Ideal refused to make the
requested payment.
On April 21, 1997, Scovill filed a Complaint against Ideal in the Superior
Court of Habersham County, Georgia. In the Complaint, Scovill stated one cause
of action for breach of the Note and prayed for damages in the amount of at
least $776,044.00, which is the accelerated amount due under the Note. Ideal
served its Answer and Counterclaim on June 16, 1997. In its Counterclaim, Ideal
alleged that Scovill breached the Asset Acquisition Agreement by failing to
deliver all of the assets purchased and prayed for a set-off of the amount due
under the Note in
<PAGE>
the amount of at least $445,000.00. At this time, the parties are engaged in
discovery. The discovery period must end no later than December 16, 1997.
2
<PAGE>
SCHEDULE 2.7
Compliance with Laws
--------------------
See Schedule 2.14.
-------------
<PAGE>
SCHEDULE 2.8
Tax Matters
-----------
2.8(b)
- ------
The following tax returns which were filed after the due date;
. Rau Fastener (Canada) Inc. for the tax year ended January 23, 1996.
. 158856 Canada Inc. for the tax year ended January 23, 1996.
. Rau Fastener Company, LLC for the year ended January 27, 1996.
PCI Group, Inc. has been notified by the Internal Revenue Service of an
impending federal income tax return review with respect to its tax year ended
September 30, 1994. Scovill is not aware of any material misstatements or
liability exposure items and does not expect any material additional tax
liability as a result of this audit.
The Stockholders are obligated pursuant to Section 5.6 of the Agreement to cause
the Company to discharge certain indebtedness, and some of the Purchase Price
may, by way of an actual or deemed contribution to the capital of the Company,
be used to discharge that indebtedness. The following amounts were contributed
to the capital of the Company subsequent to October 5, 1995:
<TABLE>
<CAPTION>
Date on Stock
stock cert. certificate# Shares Shareholder Amount
- ------------- ------------ --------- --------------------------------- -----------
<S> <C> <C> <C> <C>
10/17/95 2 7,200,000 KSCO Acquisition Company, L.P. $18,000,000
10/17/95 3-6 70,000 Various management members 175,000
02/23/96 8 800,000 KSCO II Acquisition Company, L.P. 2,000,000
02/23/96 9 200,000 KSCO II Acquisition Company, L.P. 500,000
02/23/96 10 600,000 KSCO Acquisition Company, L.P. 1,500,000
02/23/96 11 10,102 KSCO II Acquisition Company, L.P. 25,255
-----------
$22,200,255
===========
</TABLE>
Pursuant to Section 10.1 of the 1995 Stock Purchase Agreement by and among
Scovill Fasteners Inc. (the "Buyer"), John W. Rachwalski and John A. Cosentino,
Jr. (the "Sellers"), dated December 20, 1995 (the "PCI Agreement"), for all of
the outstanding stock of PCI Group, Inc.
<PAGE>
("PCI"), the Sellers agreed to indemnify the Buyer for all Tax Claims (as
defined in the PCI Agreement) arising out of any breach of any representation or
warranty of the PCI Agreement, subject to certain limits described in Section
10.4 of the PCI Agreement. The Seller initially funded an Escrow Account (as
defined in the PCI Agreement) in the amount of $500,000 to cover indemnification
claims, including Tax Claims, under the PCI Agreement. However, pursuant to a
Settlement Agreement & Release among Buyer and Sellers, dated July 17, 1997 (the
"Settlement Agreement"), Buyer and Sellers agreed to distribute all of the funds
in the Escrow Account in accordance with the terms of such Settlement Agreement.
The indemnification period provided in Section 10.4 of the PCI Agreement for Tax
Claims expires on January 24, 1999.
2.8(j)
- ------
Scovill joined in the filing of a consolidated federal income tax return with
Alper Holdings, Inc. prior to the 1995 acquisition by KSCO.
<PAGE>
SCHEDULE 2.9
Benefit Plans
-------------
2.9(a)
- ------
1. Scovill Fasteners Inc. Management Incentive Plan.
2. Incentive Plan for Service Technicians and Service Managers.
3. Incentive Plan for Salesmen.
4. Incentive Plan for Division, Regional and District Managers.
5. Scovill Fasteners Inc. Savings and Retirement Plan for Salaried Employees.
6. Scovill Fasteners Inc. Retirement Plan for Salaried Employees (frozen).
7. Scovill Fasteners Inc. Hourly Employees Life Insurance.
8. Scovill Fasteners Inc. Salaried Employees Life/Long Term Disability Plan.
9. Scovill Fasteners Inc. Vision Care Plan.
10. Scovill Fasteners Inc. Medical Insurance Plan.
11. Scovill Fasteners Inc. Dental Insurance Plan.
12. Scovill Fasteners Inc. Short Term Disability Plan.
13. Scovill Fasteners Inc. Severance Plan for Bi-Weekly Non-Exempt and Monthly
Exempt Salaried Employees.
14. Other miscellaneous policies as set forth in the Scovill Fasteners Inc.
Employee Handbook - Hourly.
15. Other miscellaneous policies as set forth in the Scovill Fasteners Inc.
Employee Handbook - Salaried.
16. Scovill Fasteners Inc. Substance Abuse Policy.
17. Informal arrangements with respect to the payment of compensation to
certain employees and former employees after their termination of
employment.
<PAGE>
18. Scovill Fasteners Inc. Consulting Agreements with:
a. Joe Moyer dated 4/1/97.
b. William Hagenbach dated 7/29/97.
c. Louis Handwerger dated 2/9/96.
d. Serge Bonte dated 2/12/96.
19. Scovill Fasteners Inc. Relocation Policy and Procedure - New Employee.
20. Scovill Fasteners Inc. Relocation Policy and Procedure - Transferring
Employee.
21. Life Insurance program for Mr. Louis Handwerger.
22. Scovill Fasteners Inc. Business Travel Accident Plan.
23. Scovill Voluntary Accidental Death & Dismemberment Plan.
24. Certain retiree benefits provided for former hourly employees of the
Watertown, Connecticut Plant under plans administered by Monumental
Insurance and UNUM Life and former PCI employees under plans administered
by Pilgrim Healthcare and Fort Dearborn Life Insurance Company.
25. Mandated healthcare coverage maintained by Canadian and Belgian government.
26. Scovill Fasteners Inc. Non-Qualified Supplemental Retirement Plan.
27. Use of Company vehicle provided to key managers and salesman and technical
sales reps.
28. Unifast-Scovill S.A. has benefit plans unique to that operation, including
but not limited to employee benefits, pension plans and life insurance.
29. Informal arrangements with two former employees who are receiving Long Term
Disability Compensation.
30. KSCO Acquisition Corporation Stock Option Plan.
31. Secondment Agreement between Scovill Fasteners Inc. and Unifast-Scovill
S.A. and Mr Frank Wright (not dated).
<PAGE>
2.9(b)
- ------
1. Scovill Fasteners Inc. Retirement Plan for Salaried Employees (frozen) is
subject to the minimum funding requirements of Section 412 of the Code and
Section 302 of ERISA and is otherwise subject to Title IV of ERISA.
2. Scovill Fasteners Inc. Savings and Retirement Plan for Salaried Employees
for the period 2/95-7/97 was not administered according to its terms for
enrollment (plan calls for 90-day waiting period - administered first of
month following 90-day waiting period). The Plan was amended 8/1/97 to
conform to how it was being administered.
3. No assurances are provided regarding the arrangements referred to in
Schedule 2.9(a) as "Informal arrangements with respect to the payment of
---------------
compensation to certain employees and former employees after their
termination of employment" with respect to any of the representations and
warranties set forth in Schedule 2.9(b).
---------------
4. No assurances are provided regarding the arrangements referred to in
Schedule 2.9(a) as "Informal arrangements with two former employees who are
---------------
receiving Long Term Disability Compensation" with respect to any of the
representations and warranties set forth in Schedule 2.9(b).
---------------
2.9(c)
- ------
1. Certain retiree benefits provided for former hourly employees of the
Watertown, Connecticut Plant under plans administered by Monumental
Insurance and UNUM Life and former PCI employees under plans administered
by Pilgrim Healthcare and Fort Dearborn Life Insurance Company.
2. No assurances are provided regarding the ability to amend or terminate any
retiree benefits.
3. No assurances are provided regarding the arrangements referred to in
Schedule 2.9(a) as "Informal arrangements with respect to the payment of
---------------
compensation to certain employees and former employees after their
termination of employment" with respect to the representations and
warranties set forth in Schedule 2.9(c).
---------------
4. No assurances are provided regarding the arrangements referred to in
Schedule 2.9(a) as "Informal arrangements with two former employees who are
---------------
receiving Long Term Disability Compensation" with respect to any of the
representations and warranties set forth in Schedule 2.9(c).
---------------
2.9(d)
- ------
1. Certain options granted under the KSCO Acquisition Corporation Stock Option
Plan will vest as a result of the transactions contemplated by this
Agreement.
<PAGE>
2. No assurances are provided regarding any benefits that may become payable
as a result of the transactions contemplated by this Agreement from other
than the Company or any of its Subsidiaries.
2.9(e)
- ------
1. Mandated healthcare coverage maintained by the Canadian and Belgian
governments.
2. Unifast-Scovill S.A. has benefit plans unique to that operation, including
but not limited to employee benefits, pension plans and life insurance.
See also Schedule 2.12(i).
----------------
See also Schedule 2.9(a) items 18d and 33.
---------------
<PAGE>
SCHEDULE 2.10
Scovill Fasteners Inc.
Intellectual Property
---------------------
2.10(a) - U.S. Patents
<TABLE>
<CAPTION>
Patent No. Issued Expires Title & Inventor Case No.
---------- ------ ------- ---------------- --------
<S> <C> <C> <C> <C>
D-301,567 06/13/89 06/13/2003 Snap Fastener Element 74-C
James E. Burke
(Design patent)
4,131,223 12/26/78 12/05/97 Apparatus for Gapping a Slide Fastener 55-C-S
William D. Aureli
4,135,287 01/23/79 01/16/98 Methods of Attaching Snap Fasteners N/A
Herbert M. Silverbush Assigned to Rau
Fastener, a
division of U.S.
Industries, Inc.
No assignment to
Scovill Fasteners
Inc. through
acquisition of
Rau Fastener
Company, L.L.C.
yet made of record
4,169,421 10/02/79 07/03/98 Apparatus for Affixing Slide Fastener Elements 52-C-S-C
to Fabric
Jonathan A. Foults
4,206,669 06/10/80 11/15/98 Apparatus for Gapping Zipper Chain 58-C-S
Harry & Stuart Fisher
4,297,954 11/03/81 05/9/2000 Apparatus for Attaching Slide Fastener 61-C-S-C
Elements to Fabric
Henry J. Gauthier
4,309,806 01/12/82 01/21/2000 Apparatus and Method for Applying a Snap N/A
Fastener to a Sheet Material Assigned to U.S.
Augustine Cilione Industries, Inc.
No assignment to
Scovill Fasteners
Inc. through
acquisition of
Rau Fastener
Company, L.L.C.
yet made of record
</TABLE>
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Patent No. Issued Expires Title & Inventor Case No.
---------- ------ ------- ---------------- --------
<S> <C> <C> <C> <C>
4,454,650 06/19/84 08/23/2002 Upper Jaw and Tool Assembly for Fastener N/A
Attaching Machine Assigned to U.S.
Bernard R. Silver Industries, Inc.
No assignment to
Scovill Fasteners
Inc. through
acquisition of
Rau Fastener
Company, L.L.C.
yet made of record
4,793,029 12/27/88 02/19/2008 Tiltable Button Having Anti-Rotation Means 78-C
James E. Burke
4,796,339 01/10/89 02/17/2008 One-Way Snap Fastener 77-C
James E. Burke
4,852,251 08/01/89 06/07/2008 Gripping Eyelet Die Tool Assembly 93-C
Donald A. Boucher
4,903,881 02/27/90 11/09/2008 Portable Fastener Setting Press N/A
Howard N. Wieland, Jr.
4,978,048 12/18/90 09/18/2009 Fastener Setting Machine Having Double-Acting 80-C
Drive Means
Ricky Wayne Purcell
5,069,952 12/03/91 04/22/2011 Zipper Tape 83-C
Terri P. Gruenenfelder
5,100,019 03/31/92 02/25/2011 Feed Assembly for Serially Delivering Selected 82-C-REV
Numbers of Fastener Parts from Alternate
Sources to an Attaching Machine
Barry A. Lord & Parviz Khosravi
5,234,147 08/10/93 08/17/2012 Setting Machine Having Moveable Upper Receiver 84-C
Howard Greenwalt
5,261,515 11/16/93 to expire Safety Disconnect for the Pedal Operator Rod 85-C
11/16/97 of an Attaching Machine
John J. Butkus & Paul R. Bird
5,329,683 07/19/94 06/29/2013 Fastener Setting Apparatus Having Reinforcing 87-C
Tape Feeder
John J. Butkus & Paul R. Bird
5,349,890 09/27/94 09/27/2013 Apparatus for Severing Off Pieces from an 86-C-C
Endless Web
John J. Butkus & Paul R. Bird
5,463,807 11/07/95 09/08/2014 Attaching Machine for Attaching Fasteners 89-C
Anton Hochhausl
</TABLE>
Page 2 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Patent No. Issued Expires Title & Inventor Case No.
---------- ------ ------- ---------------- --------
<S> <C> <C> <C> <C>
5,577,395 11/26/96 05/04/2015 Clip for an Identification Bracelet 90-C
Dennis C. Kuykendall
5,636,427 06/10/97 10/06/2015 Hand-Held Snap Fastener Closer 91-C
Michael A. Lyle
</TABLE>
2.10(b) - PENDING U.S. PATENT APPLICATIONS
There are no U.S. patent applications pending at this time.
2.10(c) - FOREIGN PATENTS
<TABLE>
<CAPTION>
Patent No. Issued Expires Title & Inventor Case No.
---------- ------ ------- ---------------- --------
<S> <C> <C> <C> <C>
Design No. 11/16/80 11/16/2005 Pants Fastener Element N/A
803,424 Edward K. Heil Assigned to U.S.
France Industries, Inc.
No assignment to
Scovill Fasteners
Inc. through
acquisition of
Rau Fastener
Company, L.L.C.
yet made of record
2,099,064 01/31/95 06/23/2013 Setting Machine Having Moveable Upper Receiver 84-C
Canada Howard Greenwalt
</TABLE>
Page 3 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
2.10(d) - PENDING FOREIGN PATENT APPLICATIONS
<TABLE>
<CAPTION>
Application No. Filing Date State Title & Inventor Case No.
- --------------- ----------- ----- ---------------- --------
<S> <C> <C> <C> <C>
Ser. No. 11/09/89 Publicly Portable Fastener Setting Press 94-C
1-292122 disclosed Howard N. Wieland, Jr.
Japan 07/23/90,
02-187297
Request for
examination
11/09/96
Ser. No. 10/23/89 Publicly Portable Fastener Setting Press 94-C
89-15183 disclosed Howard N. Wieland, Jr.
Korea 06/01/90,
90-7556
Request for
examination
10/23/94
PCT/US95/108 08/25/95 Entered Attaching Machine for Attaching Fasteners 89-C
12 national phase Anton Hochhausl
PCT in UK 03/06/97
and Germany
03/07/97
</TABLE>
2.10(e) - U.S. TRADEMARK REGISTRATIONS
<TABLE>
<CAPTION>
Trademark Registration No. Registration Date Expiration Date Class(es)
--------- ---------------- ----------------- --------------- ---------
<S> <C> <C> <C> <C>
COLOR-SNAP 1,240,463 05/31/83 05/31/2003 I-26; US-40
COMMON SENSE 1,773,067 05/25/93 05/25/2003 I-26; US-40
Design of Encircled Dot 694,121 03/08/60 03/08/2000 I-6, 17, 20; US-13
Design of Encircled Dot 694,167 03/08/60 03/08/2000 I-9; US-21
Design of Round Dot 121,544 05/07/18 05/07/98 I-26; US-40
DOT 127,721 12/02/19 12/02/99 I-26; US-40
DOT 276,809 10/28/30 10/28/2000 I-26; US-13
DOT 434,811 12/09/47 12/09/2007 I-9; US-21
</TABLE>
Page 4 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Trademark Registration No. Registration Date Expiration Date Class(es)
--------- ---------------- ----------------- --------------- ---------
<S> <C> <C> <C> <C>
DOT 507,337 03/08/49 03/08/2009 I-26; US-40
DOT 515,518 09/27/49 09/27/2009 I-26; US-13
DOT and Design 699,061 06/07/60 06/07/2000 I-26; US-40
DOT and Design 701,200 07/19/60 07/19/2000 I-6, 17, 20; US-13
DOT SNAPPERS 516,339 10/18/49 10/18/2009 I-26; US-40
FASHION FASTENERS 1,466,428 11/24/87 11/24/2007 I-26; US-40
GINGER SNAPS 1,025,305 11/18/75 11/18/2005 I-26; US-40
GRIPPER/1/ 347,023 06/15/37 06/15/2007 I-26; US-40
GRIPPER/1/ 379,520 07/16/40 07/16/2000 I-26; US-40
GRIPPER/1/ 526,570 06/20/50 06/20/2000 I-26; US-13
GRIPPER 1,727,802 10/27/92 10/27/2002 I-26; US-13, 40
INVINCIBLE/2/ 256,432 05/14/29 05/14/2009 I-26; US-26
KLIKIT (Stylized)/3/ 504,297 11/30/48 11/30/2008 I-26; US-40
KLIKON (Stylized)/3/ 679,340 05/26/59 05/26/99 I-26; US-40
LIFT THE DOT (Block 729,340 04/03/62 04/03/2002 I-6; US-13
Letters)
MIGHTY SNAPS 1,050,745 10/19/76 10/19/2006 I-26; US-40
MIRAGE 1,111,199 01/16/79 01/16/99 I-6; US-13
NYLAIRE 739,634 10/23/62 10/23/2002 I-26; US-13
PC1 and Design/2/ 809,780 06/14/66 06/14/2006 I-3, 6, 8, 21; US-13
POWR SNAPPER (Stylized) 2,069,379 06/10/97 06/10/2007 I-7; US-13, 19, 21, 23, 31,
34, 35
PULL THE DOT (Block 729,341 04/03/62 04/30/2002 I-6; US-13
Letters)
</TABLE>
- -------------------------------------
/1/ Exclusive License granted in June 1990 to Dowbrands Inc. in the field of
plastic bags having zip-type lock.
/2/ No assignment to Scovill Fasteners Inc. through acquisition of PCI Group,
Inc., yet made of record.
/3/ No assignment to Scovill Fasteners Inc. through acquisition of Rau Fastener
Company, L.L.C., yet made of record.
Page 5 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Trademark Registration No. Registration Date Expiration Date Class(es)
--------- ---------------- ----------------- --------------- ---------
<S> <C> <C> <C> <C>
RAM 1,518,088 12/27/88 12/27/2008 I-26; US-13
RAU-KLIKIT and Design/1/ 381,615 10/01/40 10/01/2000 I-26; US-40
ROLET/2/ 387,522 05/20/41 05/20/2001 I-26; US-13
SAFELOK 1,135,500 05/20/80 05/20/2000 I-6; US-13
SCOVILL 865,194 02/25/69 02/25/2009 I-6, 12; US-13
SCOVILL 1,142,231 12/09/80 12/09/2000 I-7, 9, 11, 14, 20; US-21, 23,
26, 27, 32, 34
SCOVILL 1,779,022 06/29/93 06/29/2003 I-26; US-40
SPEEDY RIVETS (Block 594,756 09/07/54 09/07/2004 I-6; US-13
Letters)
SPORTSNAPS 1,145,502 01/06/81 01/06/2001 I-26; US-40
TAG LOCK 1,426,606 01/27/87 01/27/2007 I-20; US-13, 50
WHIPPER SNAP 1,561,119 10/17/89 10/17/2009 I-26; US-40
</TABLE>
2.10(f) - PENDING U.S. TRADEMARK APPLICATIONS
<TABLE>
<CAPTION>
Trademark Application No. Filing Date Class(es)
--------- --------------- ----------- ---------
<S> <C> <C> <C>
ECHOTECH and Design 75/036,838 12/21/95 I-26; US-37, 39, 40, 42, 50
</TABLE>
- -----------------------------------
/1/ No assignment to Scovill Fasteners Inc. through acquisition of Rau Fastener
Company, L.L.C., yet made of record.
/2/ No assignment to Scovill Fasteners Inc. through acquisition of PCI Group,
Inc., yet made of record.
Page 6 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
2.10(g) - FOREIGN TRADEMARK REGISTRATIONS
<TABLE>
<CAPTION>
Country Trademark Registration No. Registration Date Expiration Date Class(es)
------- --------- ---------------- ----------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Algeria GRIPPERS 28,465 11/20/77 11/08/97/1/ I-26
Argentina DOT 1.182.895/1 11/07/45 11/07/95/1/ I-16
DOT 1.166.843/2 05/02/55 03/01/95/1/ I-6
Australia/2/ GRIPPER A71751 01/18/38 01/18/2008 I-26
PERMEX A562,583 08/27/91 08/27/98 I-26
RAU-KLIKIT/3/ 87473 06/13/2002
SCOVILL B198347 11/02/65 11/02/2000 I-26
Belgium DRITZ 108,607 06/23/66 Perpetual
Benelux GRIPPERS 79940 11/22/71 11/22/97/1/ I-26
KLIKIT/3/ 26737 04/27/71 04/27/2005 I-14, 26
SCOVILL 79942 11/22/71 11/22/2005 I-6, 7, 8, 9,
11, 12, 16, 17,
21, 26
SPORTSNAPS 385,899 11/03/82 11/03/2002 I-26
KLIKIT 554345 06/30/94 06/30/2004 I-7, 8, 14, 26
Bophuthatswana GRIPPERS 59/38 01/12/76 01/12/2006 I-26
SCOVILL 65/3985 10/04/65 10/04/2005 I-26
Brazil/4/ DOT 002493250 07/29/20 08/07/2000 12
GRIPPERS 002893070 02/13/39 02/13/2004 I-26
RAU-KLIKIT/3/ 815558279 09/29/2002
Cambodia/2/ GRIPPER 909 07/14/92 07/14/2002 I-26
PERMEX 911 07/14/92 07/14/2002 I-26
</TABLE>
- ------------------------------------
/1/ Renewal application has been filed.
/2/ Non-Exclusive License to Scovill-Japan (Agreement of July 6, 1989).
/3/ No assignment to Scovill Fasteners Inc. through acquisition of Rau Fastener
Company, L.L.C., yet made of record.
/4/ In Brazil, SCOVILL is registered for Snap Fasteners to a Third Party (Ritas
de Brazil).
Page 7 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Country Trademark Registration No. Registration Date Expiration Date Class(es)
------- --------- ---------------- ----------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
SCOVILL 910 07/14/92 07/14/2002 I-26
Canada CONMAR N.S. 51/13514 12/23/39 12/23/99
Design of Guardsman N.S. 51/13516 12/23/39 12/23/99
DOT TMDA26,319 04/23/20 04/23/2000
DOT and Design TMA158,479 09/27/68 09/27/98
DOT SNAPPERS TMA154,717 12/22/67 12/22/97/1/
DRITZ TMA155,404 02/09/68 02/09/98
GRIPPERS N.S. 32/8870 07/02/37 07/02/97/1/
PCI PLYMOUTH and Design/2/ 210,241 10/24/75 10/24/2005
RAU-KLIKIT/3/ 15,862 06/30/41 06/30/2001
SCOVILL TMA171,274 09/18/70 09/18/2000
Chile DOT 381,567 08/04/41 11/19/2001 I-26
GRIPPERS 382817 10/01/41 11/07/2001 I-26
SCOVILL 400040 09/02/82 01/12/2003 I-26
China/4/ GRIPPER 159,919 07/15/82 07/14/92/1/ 21
GRIPPER 159,922 07/15/82 07/14/2002 30
PERMEX 202,394 12/15/83 12/14/2003 56
SCOVILL 159,920 07/15/82 07/14/2002 21
SCOVILL 159,923 07/15/82 07/14/2002 30
Colombia GRIPPER 21,022 02/01/47 02/11/97/1/ I-26
Czechoslovakia GRIPPERS 98991 02/16/38 02/16/98
Denmark SCOVILL VR 360 1966 02/05/66 02/05/2006 I-7, 11, 12, 26
</TABLE>
- ------------------------------------
/1/ Renewal application has been filed.
/2/ No assignment to Scovill Fasteners Inc. through acquisition of PCI Group,
Inc., yet made of record.
/3/ No assignment to Scovill Fasteners Inc. through acquisition of Rau Fastener
Company, L.L.C., yet made of record.
/4/ Non-Exclusive License to Scovill-Japan (Agreement of July 6, 1989).
Page 8 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Country Trademark Registration No. Registration Date Expiration Date Class(es)
------- --------- ---------------- ----------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Ecuador GRIPPER 614/91 12/15/80 12/15/95/1/
Finland DOT 53,884 01/04/69 01/04/99 I-6, 9, 11, 20,
26
France DOT 1,558,071 03/03/20 11/02/99 I-6, 9, 12, 25,
26
DOT 1,444,114 11/30/67 11/25/97/1/ I-6, 9, 11, 17,
26
DRITZ 1,515,442 05/15/64 02/20/99 I-26
GRIPPERS 1,434,868 01/17/38 11/12/97/1/ I-26
KLIKIT/2/ 1,578,496 03/02/90 03/01/2000 I-26
SCOVILL 1,229,559 09/12/68 03/07/2003 I-6, 7, 8, 9,
11, 12, 16, 17,
21, 26
SPORTSNAPS 1,218,931 11/15/82 11/14/2002 I-26
Germany DOT 818,790 04/26/66 12/20/2003 I-6, 9, 11, 26
KLIKIT/2/ 2002792 08/01/91 11/16/2000 I-26
PIAZZI 1,088,292 02/25/86 06/11/2005 I-26
SCOVILL 809,734 09/17/65 12/07/2004 I-4, 6, 7, 8, 9,
10, 11, 12, 16,
21, 26
SCOVILL GRIPPER 1,074,143 02/25/85 08/25/2004 I-26
Guatemala SCOVILL 54329 02/01/88 01/31/98 I-26
Honduras SCOVILL 47,708 05/21/87 05/21/97/1/ I-26
Hong Kong/3/ DRITZ B1358/64 02/20/64 02/20/99 I-26
GRIPPER B-5887/74 10/20/70 10/20/2005 I-26
PERMEX 2316/1983 04/08/83 04/08/2004 I-26
</TABLE>
- -----------------------------------
/1/ Renewal application has been filed.
/2/ No assignment to Scovill Fasteners Inc. through acquisition of Rau Fastener
Company, L.L.C., yet made of record.
/3/ Non-Exclusive License to Scovill-Japan (Agreement of July 6, 1989).
Page 9 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Country Trademark Registration No. Registration Date Expiration Date Class(es)
------- --------- ---------------- ----------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
SCOVILL A609/68 04/05/66 04/05/2001 I-26
WHIPPER 2317/1983 04/08/83 04/08/2004 I-26
India/1/ PERMEX 403,532 03/30/83 03/30/2004 I-26
SCOVILL 231597B 10/06/65 10/06/2000 I-26
WHIPPER B403,533 03/30/83 03/30/2004 I-26
Indonesia/1/ GRIPPER 308,468 09/30/83 03/30/2003 I-26
PERMEX 308,469 10/10/83 04/10/2003 I-26
SCOVILL 213,916 12/03/65 01/22/97/2/ I-26
Ireland DOT 44,192 03/02/20 03/02/2004 I-26
DOT 46,888 02/06/35 02/05/2005 I-26
Israel GRIPPER 10,361 08/16/49 08/16/98 I-26
Italy DOT 461,266 03/31/20 03/31/2004 I-26
DRITZ 503,359 05/24/66 05/24/2006 I-26
GRIPPER 505,418 06/18/48 03/20/2007 I-26
SCOVILL 465,677 03/31/65 10/28/2005 I-26
SPORTSNAPS 413,791 03/10/86 11/16/2002 I-26
Japan/3/ DOT 2720491 04/11/97 04/11/2007 10
GRIPPER (in English) 877,663 10/24/70 10/24/2000 21
GRIPPER (in Katakana) 908,097 07/08/71 07/08/2001 21
GRIPPER SHIRT (in 1,557,550 12/24/82 12/24/92/2/ 17
English)
GRIPPER SHIRT (in 1,557,551 12/24/82 12/24/92/4/ 17
Katakana)
</TABLE>
- ------------------------------------
/1/ Non-Exclusive License to Scovill-Japan (Agreement of July 6, 1989).
/2/ Renewal application has been filed.
/3/ Exclusive License to all Japanese registrations granted to Scovill-Japan
(Agreement of July 6, 1989).
/4/ Renewal application has been filed.
Page 10 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Country Trademark Registration No. Registration Date Expiration Date Class(es)
------- --------- ---------------- ----------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
GRIPPERS 321129 09/08/39 05/07/98 36
SCOVILL (in English) 780138 05/06/68 02/06/98 21
SCOVILL (in Katakana) 797099 11/12/68 08/12/98 21
WHIPPER 973,078 07/25/72 04/25/2002 21
Korea (South)/1/ GRIPPER 20954 01/12/71 01/11/2001 45
PERMEX 96,361 11/08/83 11/08/2003 45
SCOVILL 59,124 12/08/78 12/08/98 45
Laos GRIPPER 1070 07/21/92 07/21/2002 I-26
PERMEX 1071 07/21/92 07/21/2002 I-26
SCOVILL 1072 07/21/92 07/21/2002 I-26
Malaysia (Malaya)/2/ GRIPPER 358/78 05/13/78 05/13/99 I-26
PERMEX M/99687 04/25/83 04/25/2004 I-26
SCOVILL 258/65 10/09/65 10/09/2000 I-26
WHIPPER M/99688 04/25/83 04/25/2004 I-26
Mexico DOT 18,046 04/13/20 04/13/2005 I-26
GRIPPERS 37,474 01/13/37 07/13/2002 I-26
SCOVILL 127,490 11/05/65 11/05/2005 I-3, 6, 8, 14,
16, 20, 21, 24,
26, 28, 31
New Zealand SCOVILL B-79577 10/06/65 10/06/2000 I-7
SCOVILL B-79578 10/06/65 10/06/2000 I-11
SCOVILL B-79579 10/06/65 10/06/2000 I-12
SCOVILL B-79580 10/06/65 10/06/2000 I-26
Norway DOT 79,008 04/16/90 04/16/2000 I-26
</TABLE>
- -----------------------------------
/1/ Non-Exclusive License to Scovill-Japan (Agreement of July 6, 1989).
Page 11 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Country Trademark Registration No. Registration Date Expiration Date Class(es)
------- --------- ---------------- ----------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
GRIPPERS 33228 01/05/38 01/05/98 I-26
SCOVILL 68,135 10/04/65 02/11/96/1/ I-11, 26
Pakistan/2/ PERMEX 79,302 03/27/83 03/27/2005 I-26
SCOVILL 79,303 03/27/83 03/27/2005 I-26
WHIPPER 79,304 03/27/83 03/27/2005 I-26
Papua New Guinea/2/ GRIPPER A2750R 09/16/75 09/15/2005 I-26
SCOVILL B3608R 09/16/75 09/15/2005 I-26
Peru GRIPPER 15,293 11/29/46 02/25/2002 I-26
Philippines/2/ GRIPPER 49,134 08/14/51 09/07/2010 I-26
PERMEX 41,482 10/17/88 10/17/2008 I-16
SCOVILL 36286 12/08/86 12/08/2006 I-7, 9, 11, 12,
26
Puerto Rico GRIPPER 9,995 11/28/56 11/28/96/1/ 40
Singapore/2/ GRIPPER B75487 04/25/78 04/25/99 I-26
PERMEX 1810/83 04/11/83 04/11/2004 I-26
SCOVILL A754/86 04/25/78 04/25/99 I-26
WHIPPER 1811/83 04/11/83 04/11/2004 I-26
South Africa GRIPPER 59/38 01/12/38 01/12/96/1/ I-26
SCOVILL 65/3985A 10/04/65 10/04/2005 I-26
Spain GRIPPERS 115,034 03/02/42 03/02/2002 I-6
SPORTSNAPS 1,020,722 12/05/83 12/05/2003 I-26
Sri Lanka/3/ GRIPPER 62,160 09/25/91 09/25/2001 I-26
PERMEX 45,939 04/22/83 04/22/2003 I-26
</TABLE>
- -------------------------------------
/1/ Renewal application has been filed.
/2/ Non-Exclusive License to Scovill-Japan (Agreement of July 6, 1989).
/3/ Non-Exclusive License to Scovill-Japan (Agreement of July 6, 1989).
Page 12 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Country Trademark Registration No. Registration Date Expiration Date Class(es)
------- --------- ---------------- ----------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Swaziland SCOVILL 465/83/SA 10/04/65 10/04/2005 I-26
Sweden GRIPPERS 49,446 01/17/38 01/17/98 I-2, 26
KLIKIT/1/ 69362 01/26/2001
SCOVILL 116,434 05/20/76 05/20/2006 I-11, 26
Switzerland DOT 305,165 05/18/20 04/03/2000 I-26
DRITZ 349,243 06/13/66 06/13/2006 I-6, 7, 8, 9,
16, 24, 26
KLIKIT/2/ 341108 02/18/85 02/17/2005 I-26
SCOVILL 345603 10/05/65 10/05/2005 I-6, 7, 8, 9,
11, 12, 26
SCOVILL GRIPPERS 293,878 05/03/78 05/03/98 I-6, 26
Taiwan/1/ GRIPPER 56,217 05/16/48 05/15/98 36
PERMEX 221,977 09/16/83 09/15/2003 49
SCOVILL 147,179 01/16/81 01/15/2001 49
SCOVILL MICHEL 226,752 11/16/83 01/15/2001 49
Thailand/2/ GRIPPER 239741/ 01/14/93 01/14/2003 I-26
Kor12861
PERMEX 244139/ 04/26/83 04/26/2003 I-26
KorR3544
Transkei GRIPPERS 59/38 01/12/76 01/12/96/3/ I-26
SCOVILL 65/3985 10/04/75 10/04/2005 I-26
Turkey SCOVILL 70379 04/06/81 04/06/2001
United Kingdom DOT 401,403 03/02/20 03/02/2004 I-26
DOT 550,623 04/24/34 04/24/2004 I-6, 9, 20, 26
DRITZ B861,080 03/03/64 03/03/99 I-26
</TABLE>
- -------------------------------------
/1/ No assignment to Scovill Fasteners Inc. through acquisition of Rau Fastener
Company, L.L.C., yet made of record.
/2/ Exclusive License to all Japanese registrations granted to Scovill-Japan
(Agreement of July 6, 1989).
/3/ Renewal application has been filed.
Page 13 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Country Trademark Registration No. Registration Date Expiration Date Class(es)
------- --------- ---------------- ----------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
PIAZZI 1,243,388 06/05/85 06/05/2006 I-26
SCOVILL B885,125 10/04/65 10/04/2000 I-26
SCOVILL B885,124 10/04/65 10/04/2000 I-12
SCOVILL B916,618 11/01/67 11/01/2002 I-26
Uruguay GRIPPERS 173,126 02/23/42 10/08/92/1/ 4, 5
Venda GRIPPERS 59/38 01/12/76 01/12/2006 I-26
Venezuela DOT 24,919 06/18/51 06/18/96/1/ 13
GRIPPERS 13,279 11/18/41 11/18/2001 40
SCOVILL 59,781 08/11/70 08/11/2000 21
SCOVILL 59,782 08/11/70 08/11/2000 40
SCOVILL 59,783 08/11/70 08/11/2000 23
Vietnam/2/ GRIPPER 6171 03/19/92 03/19/2002 I-26
PERMEX 6172 03/19/92 03/19/2002 I-26
SCOVILL 6173 03/19/92 03/19/2002 I-26
SCOVILL MICHEL 6174 03/19/92 03/19/2002 I-26
</TABLE>
2.10(H) - PENDING FOREIGN TRADEMARK APPLICATIONS
<TABLE>
<CAPTION>
Country Trademark Application No. Filing Date Class(es)
------- --------- --------------- ------------ ---------
<S> <C> <C> <C> <C>
Argentina SCOVILL 2,014,568 12/21/95 I-26
Brazil GRIPPER 818842466 10/18/95 I-26
Colombia SCOVILL 96019052 04/19/96 I-26
Japan/3/ PERMEX 57032/1983 06/21/83 21
</TABLE>
- --------------------------------
/1/ Renewal application has been filed.
/2/ Non-Exclusive License to Scovill-Japan (Agreement of July 6, 1989).
/3/ Exclusive License to all Japanese registrations granted to Scovill-Japan
(Agreement of July 6, 1989).
Page 14 of 15
<PAGE>
SCHEDULE 2.10
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Country Trademark Application No. Filing Date Class(es)
------- --------- --------------- ------------ ---------
<S> <C> <C> <C> <C>
PERMEX (in Katakana) 57033/1983 06/21/83 21
Peru SCOVILL 30056 01/09/97 I-26
Spain SCOVILL 2,016,129 03/04/96 I-26
Sri Lanka SCOVILL 41978 09/15/80 I-26
SCOVILL 41982 09/15/80 I-6
Thailand SCOVILL 310,524 06/17/96 13
Venda SCOVILL I-26
</TABLE>
2.10(i) - COPYRIGHT REGISTRATIONS
Scovill does not own any registered copyrights.
2.10-(j) - PENDING COPYRIGHT REGISTRATION APPLICATIONS
Scovill does not have any applications for copyright registration pending at
this time.
Page 15 of 15
<PAGE>
SCHEDULE 2.11
Owned and Leased Real Property
------------------------------
1. Clarkesville, GA Facility: See attached Legal Description A
2. Unifast Facility, Belgium: See attached Legal Description B
3. Encumbrances: See Attachment C hereto. The Unifast facility is subject to
liens and encumbrances of public record and those arising under applicable
law.
4. Leases:
a. 14 Kendrick Rd. Unit #2, Wareham, Plymouth County, Massachusetts -
Real Estate Lease by and between John W. Folino, Jr. and John W.
Folino, as landlord, and Scovill Fasteners Inc., as tenant, dated as
of October 1, 1996.
b. 3 Lowell Street, Lewiston, Maine - Lease by and between J. Thomas
Callahan, as lessor, and PCI Group, Inc., as lessee, dated June, 1995.
c. 11210 Armour Drive, B-2, El Paso, Texas 79935 - Land and Building
Lease by and between Vista Development Joint Venture II, as lessor,
and Scovill Apparel Fasteners, Inc. as lessee, dated February 1, 1995.
d. 744 Cowan Street, Bldg. F. Nashville, TN 37202 - Standard Industrial
Lease by and between The Equitable Life Assurance Society of the
United States, as landlord, and Scovill Fasteners Inc., as tenant,
dated February 5, 1997.
e. 3675 Crestwood Parkway, Duluth, GA 30136 - Lease Agreement by and
between Carr-America Realty Corporation, as successor to Century Lake,
L.P., as landlord, and Scovill Fasteners Inc., as tenant, dated
December 7, 1994.
f. 65 Kingsland Avenue, Clifton, NJ 07014 - Lease Agreement by and
between 1913 Realty Associates, as landlord, and Scovill Fasteners
Inc., as tenant, dated July 11, 1990.
g. 1410 Donelson Pike, Suite A-15, Nashville, TN 37217 - Lease Agreement
by and between NWI VI, Ltd., as landlord, and Scovill Fasteners Inc.,
as tenant, dated July, 1988, as amended.
h. Union City Road, Prospect, Connecticut 06712 - Lease between Oxford
General Industries, Inc., as landlord, and Scovill Fasteners Inc. as
tenant, dated April 16, 1991.
<PAGE>
i. 1202 Westfield Street, Providence, Rhode Island:
(i) Lease and Option Agreement by and between Rhode Island Industrial
Facilities Corporation, as lessor, and Rau Fastener, Inc., dated
as of January 7, 1993; and
(ii) Modification and Assumption of Lease and Option Agreement, dated
as of January 27, 1995, by and among the Rhode Island Industrial
Facilities Corporation, Shawmut Bank, N.A., the Rhode Island
Industrial -Recreational Building Authority and Rau Fastener
Company, L.L.C.
j. 1255 and 1295 Des Carrieres St., Montreal, Quebec, Canada - Lease by
and between USI (Canada) Inc., as lessor, and Rau Fastener (Canada)
Inc., as lessee, dated January 27, 1995.
k. 8748, Boulevard Pie IX, Montreal (Quebec) Canada - Lease Agreement by
and between Construction Maritel Inc., as lessor, and Scovill Canada
Inc., as lessee, dated November 15, 1995.
l. 5699 Chambord Street, Montreal, Quebec H2G 2B1 (9,261 sq. ft. of
garage space) - Commercial Lease between 253015921 Quebec Inc. and Rau
Fastener (Canada), Inc., dated March 1, 1996.
m. E Street, Lot 78, (Section 3), Project No. 1446-089-03, Minillas
Industrial Park, Bayamon, Puerto Rico 00959 - Lease Contract by and
between Puerto Rico Industrial Development Company, as landlord, and
Scovill Puerto Rico, Inc., as tenant, dated July 7, 1993.
n. 1 a 9 route de Bonneuil, Sucy-en-Brie (94370), France - Commercial
Lease between SNC "ACTI-CLUB DE SUCY" and Daude SA, dated March 18,
1996.
o. Blvd. Independecia, 2733 Ote, Torreon, Coah., Mexico - Lease between
Inmobliaria Arminco, S.C. (as landlord) and Scovill Fasteners, S.A.
C.V. (as tenant), dated March 12, 1997 (not executed by Scovill).
<PAGE>
SCHEDULE 2.12
Contracts
---------
2.12(i)
- -------
1. Collective Labor Agreement of April 17, 1992 concluded at the level of
Unifast-Scovill S.A. for an indefinite period of time granting blue-collar
employees certain advantages, such as seniority premiums and extra
holidays.
2. Collective Labor Agreement of May 1, 1980 concluded at the level of
Unifast-Scovill for an indefinite period of time granting all employees
meal-vouchers of 225 BEF for every day actually worked.
3. See also Attachment 2.12(i) regarding Belgian trade unions, collective
---------- -------
labor agreements and labor management committees.
2.12(ii)
- --------
None.
2.12(iii)
- ---------
From time to time, in the ordinary course of business, Scovill
Fasteners Inc. enters into hedging arrangements in connection with raw material
purchases.
2.12(iv)
- --------
1. Amended and Restated Credit Agreement among the Company, Scovill Fasteners
Inc., PCI Group, Inc., Rau Fastener Company, L.L.C. and the Banks party
thereto, dated as of January 24, 1996, as amended.
2. Master Lease Agreement dated November 7, 1996 between General Electric
Capital Corporation and Scovill Fasteners Inc.
3. Subordinated Promissory Note of June 11, 1996 between Scovill Fasteners
Inc. (lender) and Unifast-Scovill in an amount of BEF 5 million.
4. Loan Agreement of April 12, 1996 between S.A. Invest Borinage-Centre and
Unifast-Scovill in an amount of BEF 20 million.
5. Subordinated Loan Agreement of April 12, 1996 between S.A. I.M.B.C.
Objectif No. 1 and Unifast-Scovill in an amount of BEF 5 million.
<PAGE>
6. Credit Facility Agreement of March 8, 1996 (as amended on September 9, 1996
and June 9, 1997) between Credit General and Unifast-Scovill in an amount
of BEF 33.4 million.
7. Credit Facility Agreement of April 12, 1996 between Credit General and
Daude S.A., in an amount of BEF 80 million.
8. Credit Facility Agreement with Banque Bruxelles Lambert for BEF 3 million
is in the process of being negotiated.
2.12(v)
- -------
1. Master Equipment Lease Agreement No. 31459, between Fleet Credit
Corporation (as Lessor) and Scovill Fasteners, Inc. (as Lessee), dated
April 30, 1993.
2. Lease No. 145068, between JLA Credit Corporation (as Lessor) and Scovill
Fasteners Inc. (as Lessee), dated June 3, 1997 (not executed by Lessor).
3. Lease No. 145068-002, between JLA Credit Corporation (as Lessor) and
Scovill Fasteners Inc. (as Lessee), dated August 18, 1997.
4. Scovill Fasteners Inc. in ordinary course acquires or leases various items
of equipment, such as office equipment and vehicles, many of which are
subject to liens. See also Schedule 2.13.
-------- ----
2.12 (vi)
- ---------
None.
2.12(vii)
- ---------
(A) Master Lease Agreement dated November 7, 1996, between General Electric
Capital Corporation and Scovill Fasteners Inc.
(B) Scovill Fasteners Inc. is a party to numerous attaching machine leases,
which provide the terms and conditions for the leasing of attaching
machines to customers.
2.12(viii)
- ----------
1. Non-Competition Agreement, dated July 6, 1989, by and between Scovill
Fasteners Inc. and BTR Nylex Ltd.
2. Scovill Fasteners Inc. is subject to a trademark license and technical
assistance agreement that is subject to confidentiality.
<PAGE>
2.12(ix)
- --------
None.
2.12(x)
- -------
1. Amended and Restated Credit Agreement among the Company, Scovill Fasteners
Inc., PCI Group, Inc., Rau Fastener Company, L.L.C. and the Banks party
thereto, dated as of January 24, 1996, as amended.
2. Master Lease Agreement dated November 7, 1996 between General Electric
Capital Corporation and Scovill Fasteners Inc. as described on Schedule 2.5
------------
item 3.
2.12(xi)
- --------
1. Unifast-Scovill S.A. from time to time enters into "Blue Collar, Limited
Duration", "Blue Collar, Unlimited Duration" and "White Collar, Unlimited
Duration" Contracts, forms of which have been provided to Purchaser.
See also Schedule 2.9(a) items 18d and 33.
---------------
<PAGE>
ATTACHMENT 2.12(i)
------------------
DISCLOSURE CONCERNING TRADE UNIONS, COLLECTIVE LABOR AGREEMENTS AND
LABOR MANAGEMENT COMMITTEES IN CONNECTION WITH THE
COMPANY'S EUROPEAN OPERATIONS.
1. Affiliation to a trade union
----------------------------
It cannot be known whether or not and, if so, to which trade union the employees
of Unifast-Scovill S.A. are affiliated. The affiliation to a trade union is a
private matter which does not have to be revealed to the employer.
2. Collective labor agreements and labor management committees
-----------------------------------------------------------
Most Belgian companies fall under the scope of a labor management committee,
which is a body with representatives of employers and employees. The labor
management committees are organized at a national level on the basis of a
certain type of trade or industry. Unifast-Scovill S.A. falls under the
competence of the labor management committee no. 209 for white collar workers of
the metallic sector and no. 111 for blue collar workers of the metallic sector.
The labor management committees draw up collective labor agreements which
provide general rules regarding employment, such as minimum wages, annual
premiums, number of vacation days, duration of work, general employment
conditions, etc. All relevant collective labor agreements are filed at the
Ministry of Employment and are to be considered as part of the overall
employment legislation.
3. Collective labor agreements on the level of the company
-------------------------------------------------------
It is also possible that collective labor agreements are negotiated at the level
of the company between the company and one or more trade unions represented at
the level of the company.
These agreements are only valid for one company. Unifast-Scovill S.A.
apparently has negotiated two collective labor agreements on the level of the
company which are to be considered as part of the employment rules at Unifast
Scovill S.A. These collective labor agreements are discussed in Schedule
--------
2.12(i).
- -------
<PAGE>
SCHEDULE 2.13
Title to Property
-----------------
See Attachment A.
------------
SCOVILL FASTENERS INC.
- ----------------------
1. Liens in favor of Banks under the Credit Facility described on item 2 of
Schedule 2.5.
------------
UNIFAST - SCOVILL S.A.
- ----------------------
1. Loan Agreement of April 12, 1996 between S.A. Invest Borinage-Centre and
Unifast-Scovill in an amount of BEF 20 million.
Collateral: a. 2nd rank mortgage pari passu with Credit General for BEF
20 million
b. 1st rank pledge of business pari passu with Credit General
for BEF 20 million
2. Credit Facility Agreement of March 8, 1996 (as amended on September 9, 1996
and June 9, 1997) between Credit General and Unifast-Scovill in an amount
of BEF 33.4 million.
Various pieces of collateral, including:
a. 1st rank mortgage for BEF 6.7 million
b. 2nd rank mortgage for BEF 24 million
c. 1st rank pledge of business for BEF 24 million
RAU FASTENER (CANADA) INC.
- --------------------------
1. Conventional Hypothec without delivery granted on January 26, 1995 in favor
of Shawmut Bank, N.A. and published on February 1, 1995 under number 95-
0010378-0001. The Hypothec granted all present and future property,
corporeal and incorporeal, now owned or hereafter acquired. The Hypothec
is registered for an amount of $12,000,000 Canadian with interest thereon
at an annual rate of 25%; the expiration date of the registration is
January 27, 2005.
RAU FASTENER, INC.
- ------------------
1. Conventional Hypothec without delivery (published on 1993, formerly known
commercial pledge) in favor of Shawmut Bank, N.A. and published on August
3, 1994 under number 94-0091002-0001. The Hypothec is registered for an
amount of $9,132,500 U.S.; the expiration date of the registration is July
18, 2004.
2. Conventional Hypothec without delivery (published on 1993, formerly known
transfer property in stock) in favor of Shawmut Bank, N.A. and published on
July 21, 1994
<PAGE>
under number 94-0085104-0007. The Hypothec granted all present and future
property in stock of the undertaking of the Grantor all goods, wares and
merchandise manufactured or produced by the Grantor or procured for such
manufacture or production. The Hypothec is registered for an amount of
$500,000 U.S. with interest thereon at an annual rate of 25%; the
expiration date of registration is July 18, 2004. A correction was
published on November 23, 1994 under 94-0148225-0001 concerning the
previous security, it should be pledge of debts instead of transfer of
property in stock. The description of the hypothecated assets should be
replaced by: "The grantor has assigned its rights in favor of the Holder in
the transfer of property in stock by 158856 Canada Inc. published under
number 94-0085104-0004."
3. Conventional Hypothec without delivery (published on 1993, formerly known
transfer property in stock) in favor of Shawmut Bank, N.A. and published on
July 21, 1994 under number 94-0085104-0006. The Hypothec granted all
present and future property in stock of the undertaking of the Grantor all
goods, wares and merchandise manufactured or produced by the Grantor or
procured for such manufacture or production. The Hypothec is registered
for an amount of $9,132,500 U.S. with interest thereon at an annual rate of
25%; the expiration date of registration is July 18, 2004.
158856 CANADA INC.
- ------------------
1. Conventional Hypothec without delivery granted on January 26, 1995 in favor
of Shawmut Bank, N.A. and published on February 1, 1995 under number 95-
0010378-0002. The Hypothec granted all present and future property,
corporeal and incorporeal, now owned or hereafter acquired. The Hypothec
is registered for an amount of $12,000,000 Canadian with interest thereon
at an annual rate of 25%; the expiration date of registration is January
27, 2005.
2. Floating Hypothec (published on 1993, formerly known floating charge) in
favor of The R-M Trust Company and published on July 25, 1994 under number
94-0086140-0001. The Hypothec granted all the undertaking and all the
property and assets for the time being, present and future. The Hypothec
is registered for an amount of $600,000 Canadian with interest thereon at
an annual rate of 25%; the expiration date of registration is July 20,
2004.
3. Conventional Hypothec without delivery (published on 1993, formerly known
floating charge) in favor of The R-M Trust Company and published on July
21, 1994 under number 94-0085104-0008. The Hypothec granted all the
undertaking and all the property and assets for the time being, present and
future. The Hypothec is registered for an amount of $600,000 Canadian with
interest thereon at an annual rate of 25%; the expiration date of
registration is July 18, 2004.
4. Conventional Hypothec without delivery (published on 1993, formerly known
pledge of debts) in favor of Shawmut Bank, N.A. and published on July 21,
1994 under number 94-0085104-0005. The Hypothec granted all debts,
accounts, claims receivables, choses in action, demands and money. The
Hypothec is registered for an amount of $9,132,500
<PAGE>
Canadian with interest thereon at an annual rate of 21%; the expiration
date of registration is July 18, 2004.
5. Conventional Hypothec without delivery (published on 1993, formerly known
transfer property in stock) in favor of Rau Fastener, Inc. and published on
July 21, 1994 under number 94-0085104-0004. The Hypothec granted all
present and future property in stock of the undertaking of the Grantor, all
goods, wares and merchandise manufactured or produced by the Grantor or
procured for such manufacture or production. The Hypothec is registered
for an amount of $500,000 U.S. with interest thereon at an annual rate of
25%; the expiration date of registration is July 18, 2004.
6. Conventional Hypothec without delivery (published on 1993, formerly known
commercial pledge) in favor of Rau Fastener, Inc. and published on July 21,
1994 under number 94-0085104-0002. The Hypothec granted specific machinery
and equipment described in the statement. The Hypothec is registered for
an amount of $500,000 U.S.; the expiration date of registration is July 18,
2004. A subrogation to a hypothecary claim published on November 15, 1994
under number 94-0143561-0003 by the Holder in favor of Shawmut Bank, N.A.
A correction published on November 15, 1995 concerning the subrogation to a
hypothecary claim: the Grantor has assigned to Shawmut Bank, N.A. the loan
in capital, interest and costs and has subrogated Shawmut Bank, N.A. in all
its rights, title and interest under the loan and this Deed but none of its
obligations are assumed by Shawmut Bank, N.A.
7. Conventional Hypothec without delivery (published on 1993, formerly known
specific charge) in favor of The R-M Trust Company and published on July
21, 1994 under number 94-0085104-0001. The Hypothec granted specific
assets described in the statement. The Hypothec is registered for an
amount of $600,000 Canadian with interest thereon at an annual rate of 25%;
the expiration date of registration is July 18, 2004.
<PAGE>
Attachment A
------------
SCHEDULE 2.13
LIENS
-----
UCC Matters.
**** See attached reports issued by CSC The United States Corporation
relating to filings for Scovill Fasteners Inc. in Habersham County, Georgia and
the Georgia Cooperative Authority relating to filings for Scovill Fasteners Inc.
<TABLE>
<CAPTION>
====================================================================================================================================
FILE NO.
SECURED PARTY DEBTOR JURISDICTION & FILE DATE COLLATERAL DESCRIPTION ASSIGNMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Zeno/MBM Scovill Fasteners Gwinnett County, GA 67-95-4377 Specific Leased Equipment
Inc. (5/5/95) (Copier and Fax)
- ------------------------------------------------------------------------------------------------------------------------------------
Banque Paribas Scovill Fasteners Gwinnett County, GA 67-95-11940 Receivables, Contracts, Assignment To:
Inc. (11/2/95) Inventory, Accounts, Banque Indosuez
Equipment, Marks, Patents 1/26/96
and Copyrights, Goods, etc.
Amendment: 1/26/96
Release of
Collateral:
11/12/96
- ------------------------------------------------------------------------------------------------------------------------------------
General Electric Capital
Corporation Scovill Fasteners Gwinnett County, GA 67-96-14306 Equipment pursuant
Inc. (12/17/96) to a Master Lease
- ------------------------------------------------------------------------------------------------------------------------------------
CLG, Inc. Scovill Fasteners Secretary of 200014 Leased Equipment
Commonwealth, MA (11/26/93)
- ------------------------------------------------------------------------------------------------------------------------------------
Banque Paribas Scovill Fasteners Secretary of 348680 Receivables, Contracts, Assignment To:
Inc. Commonwealth, MA (11/2/95) Inventory, Accounts, Banque Indosuez
Equipment, Marks, Patents 1/26/96
and Copyrights, Goods, etc.
Amendment:
1/26/96
Release of
Collateral:
11/12/96
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
FILE NO.
SECURED PARTY DEBTOR JURISDICTION & FILE DATE COLLATERAL DESCRIPTION ASSIGNMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Banque Paribas Scovill Fasteners Secretary of State, 1147825 Receivables, Contracts, Assignment to:
Inc. ME (11/2/95) Inventory, Accounts, Banque Indosuez
Equipment, Marks, Patents 1/26/96
and Copyrights, Goods, etc.
Amendment:
1/26/96
Release of
Collateral:
11/12/96
- ------------------------------------------------------------------------------------------------------------------------------------
General Electric Capital Scovill Fasteners Secretary of State, 1201811 Equipment pursuant to a
Corporation Inc. ME Master Lease
- ------------------------------------------------------------------------------------------------------------------------------------
Not available at this time Scovill Fasteners Secretary of State, 1543109 Not available at this time
NJ
- ------------------------------------------------------------------------------------------------------------------------------------
Not available at this time Scovill Fasteners Secretary of State, 1718859 Not available at this time
NJ
- ------------------------------------------------------------------------------------------------------------------------------------
Not available at this time Scovill Fasteners Secretary of State, 1665815 Not available at this time
Inc. NJ
- ------------------------------------------------------------------------------------------------------------------------------------
Not available at this time Scovill Fasteners Secretary of State, 1739648 Not available at this time
Inc. NJ
- ------------------------------------------------------------------------------------------------------------------------------------
CLG, Inc. Scovill Fasteners Passaic County, NJ FS062818 Lease Agreement - Equipment
(1/5/94)
- ------------------------------------------------------------------------------------------------------------------------------------
CLG, Inc. Scovill Fasteners Secretary of State, 1054911 Lease Agreement - Equipment
NC (12/1/93)
- ------------------------------------------------------------------------------------------------------------------------------------
Banque Paribas Scovill Fasteners Secretary of State, 1278696 Receivables, Contracts, Assignment to:
Inc. NC (11/3/95) Inventory, Accounts, Banque Indosuez
Equipment, Marks, Patents 1/26/96
and Copyrights, Goods, etc.
Amendment:
1/26/96
Release of
Collateral:
11/12/96
- ------------------------------------------------------------------------------------------------------------------------------------
CLG, Inc. Scovill Fasteners Secretary of State, 1369921 Lease Agreement - Equipment
NC (8/16/96
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
FILE NO.
SECURED PARTY DEBTOR JURISDICTION & FILE DATE COLLATERAL DESCRIPTION ASSIGNMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
General Electric Capital Scovill Fasteners Secretary of State, 1400318 Equipment pursuant to a
Corporation Inc. NC (11/21/96) Master Lease
- ------------------------------------------------------------------------------------------------------------------------------------
General Electric Capital Scovill Fasteners Secretary of State, 1407754 Equipment pursuant to a
Corporation Inc. NC (12/17/96) Master Lease
- ------------------------------------------------------------------------------------------------------------------------------------
CLG, Inc. Scovill Fasteners Guilford County, NC 415059 Lease Agreement - Equipment
(11/24/93)
- ------------------------------------------------------------------------------------------------------------------------------------
Banque Paribas Scovill Fasteners Guilford County, NC 442170 Receivables, Contracts, Assignment to:
Inc. (11/3/95) Inventory, Accounts, Banque Indosuez
Equipment, Marks, Patents 1/26/96
and Copyrights, Goods, etc.
Amendment:
1/26/96
Release of
Collateral:
11/12/96
- ------------------------------------------------------------------------------------------------------------------------------------
CLG, Inc. Scovill Fasteners Guilford County, NC 452922 Lease Agreement - Equipment
(8/16/96)
- ------------------------------------------------------------------------------------------------------------------------------------
General Electric Capital Scovill Fasteners Guilford County, NC 457744 Equipment pursuant to a
Corporation Inc. (12/27/96) Master Lease
- ------------------------------------------------------------------------------------------------------------------------------------
Banque Paribas Scovill Fasteners Secretary of State, 644502 Not available at this time Assignment to:
Inc. RI (11/2/95) Banque Indosuez
1/26/96
Amendment:
1/26/96
Release of
Collateral:
11/13/96
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Asset Management Scovill Fasteners Secretary of State, 657216 Not available at this time
Inc. Inc. RI (9/30/96)
- ------------------------------------------------------------------------------------------------------------------------------------
General Electric Scovill Fasteners Secretary of State, 660312 Not available at this time
Inc. RI (12/17/96)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
FILE NO.
SECURED PARTY DEBTOR JURISDICTION & FILE DATE COLLATERAL DESCRIPTION ASSIGNMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity Asset Management Scovill Fasteners Secretary of State, 666151 Not available at this time
Inc. Inc. RI (5/13/97)
- ------------------------------------------------------------------------------------------------------------------------------------
Fleet Capital Corp. Scovill Fasteners Secretary of State, 666152 Not available at this time
Inc. RI (5/13/97)
- ------------------------------------------------------------------------------------------------------------------------------------
CLG, Inc. Scovill Fasteners Secretary of State, 9300226137 Lease Agreement - Equipment
Inc. TX (11/29/93)
- ------------------------------------------------------------------------------------------------------------------------------------
Clarklift Of El Paso, Inc. Scovill Fasteners Secretary of State, 9500132304 One New Big Joe Model PDC-
Inc. TX (7/5/95) 30-130 Walk Behind Forklift
(Equity Lease)
- ------------------------------------------------------------------------------------------------------------------------------------
Banque Paribas Scovill Fasteners Secretary of State, 9500210512 Receivables, Contracts, Assignment to:
Inc. TX (11/2/95) Inventory, Accounts, Banque Indosuez
Equipment, Marks, Patents 1/26/96
and Copyrights, Goods, etc.
Amendment:
1/26/96
Release of
Collateral:
11/18/96
- ------------------------------------------------------------------------------------------------------------------------------------
CLG, Inc. Scovill Fasteners Secretary of State, 9600165625 Lease Agreement - Equipment
Inc. TX (8/21/96)
- ------------------------------------------------------------------------------------------------------------------------------------
General Electric Capital Scovill Fasteners Secretary of State, 9600229477 Equipment pursuant to Master
Corporation Inc. TX (11/21/96) Lease
- ------------------------------------------------------------------------------------------------------------------------------------
Clarklift of El Paso, Inc. Scovill Fasteners Secretary of State, 9700193452 One New Big Joe Model PDC-
Inc. TX (9/16/97) 30-130 Walk Behind Forklift
(Equity Lease)
- ------------------------------------------------------------------------------------------------------------------------------------
CLG, Inc. Scovill Fasteners El Paso County, TX 8591 Lease Agreement - Equipment
Inc. (11/29/93)
- ------------------------------------------------------------------------------------------------------------------------------------
CLG, Inc. Scovill Fasteners Secretary of State, 257419 Lease Agreement - Equipment
Inc. TN (11/30/93)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
FILE NO.
SECURED PARTY DEBTOR JURISDICTION & FILE DATE COLLATERAL DESCRIPTION ASSIGNMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Banque Paribas Scovill Fasteners Secretary of State, 499311 Receivables, Contracts, Assignment to:
Inc. TN (12/11/95) Inventory, Accounts, Banque Indosuez
Equipment, Marks, Patents 1/26/96
and Copyrights, Goods, etc.
Amendment:
1/26/96
Release of
Collateral:
11/12/96
- ------------------------------------------------------------------------------------------------------------------------------------
CLG, Inc. Scovill Fasteners Davidson County, TN E16283 Lease Agreement - Equipment
Inc. (11/29/93)
- ------------------------------------------------------------------------------------------------------------------------------------
Banque Paribas KSCO Acquisition Department of 220909 Receivables, Inventory, Assignment to:
Corporation State, NY (11/2/95) Contracts, Accounts, Banque Indosuez
Equipment, Marks, Patents 1/26/96
and Copyrights, Goods, etc.
Amendment:
1/26/96
Release of
Collateral:
11/12/96
- ------------------------------------------------------------------------------------------------------------------------------------
Banque Paribas KSCO Acquisition Westchester County, 9509156 Receivables, Contracts, Assignment to:
Corporation NY (11/6/95) Inventory, Accounts, Banque Indosuez
Equipment, Marks, Patent 1/26/96
Copyrights, Goods, etc.
Amendment:
1/26/96
Release of
Collateral:
11/13/96
- ------------------------------------------------------------------------------------------------------------------------------------
Banque Indosuez PCI Group, Inc. Secretary of State, 1158725 Receivables, Contracts, Release of
d/b/a ME (1/26/96) Inventory, Accounts, Collateral:
Callahan Bros. Equipment, Marks, Patents 11/12/96
Supply, Inc. and Copyrights, Goods, etc.
- ------------------------------------------------------------------------------------------------------------------------------------
Banque Indosuez PCI Group, Inc. Secretary of State, 1158726 Receivables, Contracts, Release of
ME (1/26/96) Inventory, Accounts, Collateral:
Equipment, Marks, Patents 11/12/96
and Copyrights, Goods, etc.
- ------------------------------------------------------------------------------------------------------------------------------------
Banque Indosuez Rau Fastener Secretary of State, 647712 Not available at this time Release of
Company, L.L.C. RI (1/26/96) Collateral:
11/13/96
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
FILE NO.
SECURED PARTY DEBTOR JURISDICTION & FILE DATE COLLATERAL DESCRIPTION ASSIGNMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shawmut Bank Rau Fastener GA Cooperative 008-95-000305 Not available at this time Continuation of
Company, L.L.C. Authority (2/21/95) Financing
(Filing made in Statement
Bartow County) #90-051137
- ------------------------------------------------------------------------------------------------------------------------------------
Banque Indosuez Rau Fastener GA Cooperative 068-96-000079 Not available at this time Release of
Company, L.L.C. Authority (1/26/96) Collateral:
(Filing made in 11/12/96
Habersham County)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
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</TABLE>
<PAGE>
SCHEDULE 2.14
Environmental And Safety Matters
--------------------------------
A. SCOVILL FASTENERS INC.
1. Matters raised or referred to in the following document, except to the
extent Scovill is indemnified for such matters: Environmental Liability
Assessment of Scovill Apparel Fastener, Inc., dated October 1995, prepared by
ENVIRON Corporation for Paul, Weiss, Rifkind, Wharton & Garrison. These matters
include, but are not in any way limited to, the following:
Clarkesville, Georgia Facility:
-------------------------------
(a) Post-closure care activities at the Clarkesville, Georgia
Facility pursuant to the Resource Conservation and Recovery Act;
(b) Historical disposal of the Facility's wastewater sludge,
including but not limited to disposal of such sludge at the City of
Clarkesville Landfill and disposal of sludge generated at the city-
owned wastewater treatment facility to which the Facility discharged
prior to 1973;
(c) Cyanide contamination in and around the plating department at the
Clarkesville, Georgia facility;
Watertown, Connecticut Facility: Liabilities associated with
--------------------------------
environmental remediation at the former Scovill facility in Watertown,
Connecticut, except to the extent that Scovill is indemnified for these
liabilities.
Waterbury, Connecticut Facility: Liabilities associated with environmental
--------------------------------
contamination at the former Scovill facility in Waterbury, Connecticut
except to the extent that Scovill is indemnified for these liabilities.
Newark, New Jersey Facility: Liabilities associated with environmental
----------------------------
contamination at the former Scovill facility in Newark, New Jersey, except
to the extent that Scovill is indemnified for these liabilities.
Old Southington Landfill Superfund Site: Liabilities associated with
----------------------------------------
environmental contamination at the Old Southington Landfill Superfund Site
except to the extent that Scovill is indemnified for these liabilities.
Solvents Recovery Service of New England Superfund Site: Liabilities
--------------------------------------------------------
associated with environmental contamination at the Solvents Recovery
Service of New England Superfund Site, except to the extent that Scovill is
indemnified for these liabilities.
1
<PAGE>
2. From time to time, the Clarkesville Facility has experienced exceedances of
its National Pollutant Discharge Elimination System discharge permit limits.
The Facility will be seeking renewal of this permit in 1999. In light of a
review of pollutant loading for various water bodies in the State of Georgia
under the Clean Water Act and the Georgia Water Quality Control Act, it is
possible that expenditures for additional pollution control equipment will be
necessary as part of the permit renewal process.
3. The Clarkesville Facility may not be in full compliance with all applicable
air emissions regulations and is evaluating its compliance status. Renewal of
the existing permits and the requirements for application for new permits may be
affected by this analysis, and may require material expenditures.
4. The Clarkesville Facility experienced a release of partially-treated
wastewater on January 27, 1997.
5. The Clarkesville Facility has the following environmental permits:
(a) Hazardous Waste Facility Permit No. HW-088(D) (December 31, 1992)
(expires on December 31, 2002);
(b) Air Quality Permit No. 3963-068-8402 (June 15, 1982); amendments to
Air Quality Permit dated April 4, 1985, June 23, 1987, December 30, 1991
and March 21,1995;
(c) National Pollutant Discharge Elimination System Permit No. GA0001112
(April 29, 1994) (expires on March 31, 1999); and
(d) National Pollutant Discharge Elimination System Stormwater Discharge
General Permit No. GAR000000 (June 14, 1993) (expires on May 31, 1998).
B. RAU FASTENER COMPANY, L.L.C.
Rau Fastener Company (Providence, Rhode Island Facility)
- --------------------------------------------------------
1. Matters raised or referred to in the following documents, except to the
extent Scovill is indemnified for such matters:
(a) Environmental Liability Assessment of PCI Group, Inc. and Rau Fastener
Company, L.L.C., dated December 1995, prepared by ENVIRON Corporation for
Paul, Weiss, Rifkind, Wharton & Garrison.
(b) Letter from Harley F. Laing of Region I of the United States
Environmental Protection Agency to Mr. John H. Champagne of Rau Fastener
Company, L.L.C. dated March 20, 1996, regarding Request for Information
under Section 3007 of the Resource Conservation and Recovery Act, 42 U.S.C.
(S) 6927,
2
<PAGE>
and Section 104 of the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. (S) 9604.
2. Liabilities associated with the closure and post-closure care of the
Providence, Rhode Island Facility in accordance with the Asset Closure Plan
dated March 20, 1996 and related correspondence, except to the extent Scovill is
indemnified for such matters.
Rau (Canada) Facility:
- ----------------------
. Matters raised or referred to in the following documents (and attachments
thereto), except to the extent Rau (Canada) is indemnified for such matters:
(a) Environmental Site Assessment of the Rau Fasteners (Canada) Inc.
Manufacturing Facility, 1255-1295 Des Carrieres Street, Montreal, Quebec,
dated May 12, 1995, prepared by Technitrol-Eco, Inc. for Hanson Industries
and PCI Group, Inc. ("Technitrol Report"), and corrections thereto (dated
May 18, 1995);
(b) Memorandum from Louis Handwerger to J. Rachwalski and John Cosentino
regarding interim report on lease and environmental problem at Rau Fastener
(Canada) Inc., dated May 31, 1995;
(c) Letter from Marie-Andree Gravel to Louis Handwerger regarding
environmental issues at Rau Fastener (Canada), dated June 19, 1995;
(d) Letter from Marie-Andree Gravel to Hanson Industries regarding
environmental issues at Rau Fastener (Canada), dated July 7, 1995;
(e) Letter from John Hurley to Rau Fastener (Canada) Inc. regarding
environmental issues at Rau Fastener (Canada), dated July 28, 1995;
(f) Letter from Marie-Andree Gravel to Louis Handwerger regarding air
equipment at Rau Fastener (Canada), dated August 2, 1995;
(g) Letter from Marie-Andree Gravel to Louis Handwerger regarding
environmental issues at Rau Fastener (Canada), dated August 16, 1995.
(h) Memorandum from Louis Handwerger to John Rachwalski regarding status
of environmental issues and structural repairs at 1295 Des Carrieres St.
Montreal, dated November 16, 1995;
(i) Letter from James A. Lofredo to Mr. Louis Handwerger regarding Rau
Canada Lease Modification, dated December 1, 1995;
3
<PAGE>
(j) Matters raised or referred to in the following document, except to the
extent Scovill Fasteners Inc. (the "Company") is indemnified for such
matters: Environmental Liability Assessment of PCI Group, Inc. and Rau
Fastener Company, L.L.C., dated December 1995, prepared by ENVIRON
Corporation for Paul, Weiss, Rifkind, Wharton & Garrison.
2. Matters raised or referred to by ENVIRON in any report, verbal or written,
provided to Purchasers regarding ENVIRON's September 1997 environmental
assessment of the Rau (Canada) manufacturing facility, including but in no way
limited to issues related to the facility's air emissions control equipment and
penalties or fines releated to the failure to implement same.
3. Environmental Permits - As set forth in footnote 1 to Schedule 2.1 of this
Agreement, a corporate reorganization of the Canadian entities is under way.
This reorganization will necessitate the reissuance of the following permits to
the resulting entity, 158856 Canada Inc. (which is to be renamed "Scovill Canada
Inc.") from the current operating entity.
(a) Attestation de Conformite - Air (Air Discharge Permit) (April 3, 1990)
from the City of Montreal;
(b) Permis d'utilisation de deux systems existants d'application de
peinture au pistolet (May 17, 1984) from communaute Urbaine de Montreal
Service de l'Environment;
(c) Certificat d'Autorisation pour l'Exploitation d'une Usine de
Fabrication de Boutons-Pression et Autres Attaches Metalliques (March 18,
1991);
(d) Cession de Certificat d'Autorisation pour l'Exploitation d'une Usine
de Fabrication de Boutons-Pression et Autres Attaches Metalliques (May 8,
1995);
(e) Permis pour Deversement d'eaux Usees Industrielles (Waste Water
Discharge & Conditions Permit) (October 27, 1987) from the City of
Montreal;
(f) Certificat de Conformite (conformity certificate) (October 1990) from
the City of Montreal; and
(g) Any other permits or approvals that were made available to ENVIRON as
part of ENVIRON's September 1997 environmental assessment of the Rau
(Canada) manufacturing facility.
4
<PAGE>
Unifast
- -------
1. Matters raised or referred to by ENVIRON in any report, verbal or written,
provided to Purchaser regarding ENVIRON's September 1997 environmental
assessment of the Unifast operations.
2. Environmental Permits:
(a) Authorization issued to S.A. Unifast Manufacturing from Belgian
Ministere de l'emploi et du Travail, Administration de l'Hygiene et de la
Medecine du Travail, for l'Acide Cyanhydrique et de derives organiques
cyanogenes (dated April 20, 1988).
(b) Boiler operating permit;
(c) Business Operating Permit (issued 1969) (up for renewal in 1999);
(d) Authorization to store Cyanide in the buildings (issued November 1973)
(up for renewal in April 1999) from the Government de la Province du
Hainaut; and
(e) Any other permits or approvals that were made available to ENVIRON as
part of its September 1997 environmental assessment of the Unifast
manufacturing facility.
3. Matters raised or referred to in the July 2, 1997 Evaluation Environmentale
of Unifast S.A. prepared by the Union Wallonne des Entreprises, including but
not limited to issues related to the expiration of Unifast's wastewater
discharge permit.
4. Unifast will need to apply for a Global Environmental Permit in 1999. This
permit will replace all of the facility's environmental permits. It is possible
that expenditures will be associated with the facility's application for and
implementation of the requirements of this Global Environmental Permit.
C. PCI GROUP, INC.
1. Matters raised or referred to in the following documents, except to the
extent Scovill is indemnified for such matters:
(a) Environmental Liability Assessment of PCI Group, Inc. and Rau Fastener
Company, L.L.C., dated December 1995, prepared by ENVIRON Corporation for
Paul, Weiss, Rifkind, Wharton & Garrison, including but in no way limited
to liabilities associated with the following matters:
5
<PAGE>
(i) on-site soil and groundwater contamination at the former PCI
Facility in New Bedford, Connecticut, except to the extent the Company
is indemnified for such liabilities;
(ii) the listing of the PCI Facility in New Bedford, Connecticut on
the Massachusetts "List of Confirmed Disposal Sites and Locations to
be Investigated."; and,
(b) Report on Interim Phase II - Comprehensive Site Assessment, dated
October 1995, prepared by Haley & Aldrich, Inc. for Emhart Industries, Inc.
2. Matters raised or referred to in the Environmental Remediation and
Responsibility Agreement, dated December 17, 1987, between Emhart Industries and
PCI Group, Inc.
6
<PAGE>
SCHEDULE 2.15
Employee Relations
------------------
1. In connection with the shutdown in 1996 of the Rau Fastener Company, L.L.C.
facility in Providence, Rhode Island and the PCI Group, Inc. facility in
New Bedford, Massachusetts, Rau Fastener Company, L.L.C. and PCI Group,
Inc. entered into effects bargaining with the labor unions representing the
employees at such facilities. The effects bargainings resulted in
settlement agreements among the applicable parties, pursuant to which Rau
Fastener Company, L.L.C. and PCI Group, Inc. made a payment to affected
employees. As a result of these settlement agreements, the Company is no
longer subject to any collective bargaining obligations or agreements in
connection with such facilities.
2. Unifast-Scovill S.A.:
a. Mid-1996 - Meeting between Unifast-Scovill employees and management,
headed by the social mediator of the Labor Management Committee
prompted by lack of communication between former General Manager
(Mr. Bonte) and employees. Meeting ended in reconciliation between
parties.
b. September 24, 1997 - Two separate half-hour work stoppages prompted by
blue-collar worker's claim that he did not receive an hourly premium
he claimed he was entitled to. Resolved via agreement with employees,
pursuant to which employees were granted nominal indemnity for
irregular hours worked.
<PAGE>
SCHEDULE 3.2
Stockholder Consents and Approvals
----------------------------------
See Schedule 2.5 item 4.
-------------------
<PAGE>
SCHEDULE 3.4
Affiliate Transactions
----------------------
None.
<PAGE>
SCHEDULE 4.3
------------
See item 1 on schedule 2.5.
<PAGE>
SCHEDULE 5.2
Required Filings and Consents
-----------------------------
1. Filings required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the regulations promulgated thereunder.
2. Receipt of informal "no objection" letter from Belgian Ministry of Economic
Affairs in connection with the Belgian Law of August 5, 1991 on the
protection of economic competition.
3. A notice filing is required in Puerto Rico to effect an indirect change in
control of Scovill Puerto Rico, Inc. to the extent that the tax-exemption
certificate held by Scovill Puerto Rico, Inc. is not surrendered.
4. Consents required with respect to Indebtedness.
<PAGE>
EXHIBIT 10.1.10
---------------
TAX SHARING AGREEMENT
AGREEMENT dated as of November 26, 1997 by and among Scovill Holdings
Inc. ("SHI"), Scovill Fasteners Inc. ("SFI") and the SFI Subgroup (as defined
below), and effective as of the closing date of the Acquisition referred to
below (the "Effective Date").
WITNESSETH
WHEREAS, Scovill Acquisition Inc. ("SAI"), a wholly owned subsidiary
of SHI formed for the purpose of effecting SHI's acquisition of SFI, entered
into a Stock Purchase Agreement dated as of October 10, 1997 ("Stock Purchase
Agreement") with KSCO Acquisition Corporation ("KSCO"), which owns all of the
capital stock of SFI, and KSCO's stockholders; and
WHEREAS, pursuant to the Stock Purchase Agreement, SAI purchased all
of the capital stock of KSCO (the "Purchase"); and
WHEREAS, (i) immediately following the Purchase, SAI merged with and
into KSCO, with KSCO surviving the merger, and (ii) immediately following such
merger, KSCO merged with and into SFI, with SFI surviving the merger (such
mergers, together with the Purchase, the "Acquisition"); and
WHEREAS, prior to the Effective Date, the SFI Subgroup were members of
an affiliated group as defined in Section 1504(a) of the Internal Revenue code
of 1986, as amended (the "Code") and joined in filing a federal consolidated
income tax return; and
WHEREAS, SHI and its subsidiaries will elect to be members of an
affiliated group as defined in Section 1504(a) of the Code and will elect to
file a federal consolidated income tax return for its taxable year 1997 and
subsequent years; and
WHEREAS, each member of the SFI Subgroup will become a member of the
SHI Group (as defined below) as of the end of the Effective Date; and
WHEREAS, it is the intent and desire of the parties hereto that a
method be established for reimbursing SHI for
<PAGE>
-2-
payment of the federal, state and local tax liabilities of the SFI Subgroup,
NOW THEREFORE, in view of the aforementioned considerations, the
parties hereto agree as follows:
1. Definitions
-----------
1.1 The words and concepts used in this Agreement shall be given the
same definitions and meanings ascribed to them by the Code and the regulations
promulgated thereunder, from time to time in effect (the "Regulations").
1.2 For purposes of this Agreement, the terms set forth below shall have
the following meanings:
1.3 "SFI Subgroup" -- SFI and each of its subsidiaries.
------------
1.4 "SHI Group" -- The affiliated group of corporations of which SHI
---------
is the "common parent" within the meaning of Section 1504 of the Code.
1.5 "SHI Group Tax Liability" -- The consolidated federal income tax
-----------------------
liability of the SHI Group of any taxable year for which the SHI Group files a
consolidated federal income tax return.
1.6 "Member Tax Liability" -- With respect to any taxable year of SFI
--------------------
and each of its subsidiaries the federal income tax liability that SFI or each
such subsidiary would have incurred if it had filed a separate federal income
tax return and not had been included in the SHI Group for each such taxable year
and all prior taxable years. For purposes of calculating the Member Tax
Liability (a) section 1.1552-1(a)(2)(ii)(a) - (h) shall apply, and (b) any such
amounts shall be computed using the highest marginal rate in effect for each
such taxable year under section 11 of the Code rather than graduated rates.
2. Agreement To File Consolidated And Combined Returns
---------------------------------------------------
2.1 A federal consolidated income tax return will be filed by SHI for
the taxable year ended December 31, 1997 and shall be filed for each subsequent
taxable period in respect of which this Agreement is in effect and for which the
SHI Group is required or permitted to file a consolidated tax return.
<PAGE>
-3-
2.2 Each member of the SFI Subgroup also agrees to join with SHI or any
member of the SHI Group in any consolidated or combined state or local tax
return in which such member is properly includible.
2.3 Each member of the SFI Subgroup agrees to furnish SHI any and all
information requested by SHI in order to carry out the provisions of this
Agreement; to cooperate with SHI in filing any return or consent contemplated by
this Agreement; to take such action as SHI may request, including, but not
limited to, the filing of requests for the extension of time within which to
file tax returns; to cooperate in connection with any refund claim; and to
execute and file such consents, elections, and other documents that may be
required or appropriate for the proper filing of such returns.
2.4 Each member of the SFI Subgroup shall cooperate fully with SHI in
any audit or other proceeding relating to any federal, state or local tax return
and SFI and each SFI subsidiary shall pay an appropriate share of the expenses
of any such audit or other proceeding. SHI shall have sole control over and
discretion as to the undertaking, conduct, settlement or other disposition of
any tax controversy arising out of any federal, state or local tax return of the
SHI Group.
3. Allocation of Income Tax Liability
----------------------------------
3.1 In the event a consolidated federal income tax return (a
"Consolidated Return") is filed by SHI with respect to any taxable year of the
SHI Group in which SFI or any subsidiary is included in the SHI Group, and such
return evidences a liability for federal income taxes for such taxable year, the
total tax liability as shown on such return shall be paid in full by SHI.
3.2 SHI shall notify SFI and each SFI subsidiary no later than 7 days
prior to the date it expects to file any Consolidated Return of the amount of
SFI's and each such subsidiary's Member Tax Liability with respect to the
taxable year covered by such Consolidated Return. SFI and each such subsidiary
shall pay such amount (less any amounts previously paid by SFI or such
subsidiary with respect to such taxable year pursuant to paragraph 3.3 below) to
SHI on the date SHI files such Consolidated Return.
3.3 In the event that SHI is required to make estimated federal income
tax payments with respect to any table year for which SHI expects to file a
Consolidated Return, SFI
<PAGE>
-4-
and each SFI subsidiary shall pay to SHI, on the date each estimated payment is
required to be made by SHI, an amount equal to SFI's or such subsidiary's Member
Tax Liability for the estimated tax period. Any estimated tax payments made by
SFI or a subsidiary to SHI under this paragraph 3.3 for any taxable year shall
reduce the amount, if any, owed by SFI or such subsidiary to SHI under Paragraph
3.2 for such taxable year. If the total amount of payments made by SFI or a SFI
subsidiary pursuant to this paragraph 3.3 with respect to any taxable year of
the SHI Group exceeds SFI's or each such subsidiary's Member Tax Liability with
respect to such taxable year, SHI shall refund such excess to SFI or each such
subsidiary on the date it receives a refund of federal income taxes paid with
respect to such taxable year.
3.4 Loss Carrybacks. SFI and each of its subsidiaries shall be deemed to
---------------
have made the election pursuant to section 172(b)(3) of the Code to forego the
carryback of netoperating losses. Such losses shall instead be carried forward.
3.5 Subsequent Adjustments. If the SHI Group Tax Liability for any
----------------------
taxable year is adjusted by an audit by the Internal Revenue Service, a court
determination, or otherwise, SFI's and each SFI subsidiary's Member Tax
Liability shall be recomputed for such taxable years to take into account such
adjustment and, as applicable, (a) SHI shall (x) reimburse SFI and each
subsidiary the amount of taxes SFI or such subsidiary paid previously in excess
of its readjusted Member Tax Liability, or (y) offset SFI's or such subsidiary's
future Member Tax Liability for such readjusted Member Tax Liability, or (b) SFI
and each of its subsidiaries shall pay SHI the appropriate portion of the
additional amount of taxes SHI paid in excess of SFI' or each such subsidiary's
recomputed Member Tax Liability. Any such reimbursement or additional payment
shall be paid within seven (7) days of the date of a final determination with
respect to such adjustment or as soon as such adjustment can practicably be
calculated, if later, together with interest for the period and at the rate
provided for underpayment in Section 6621 of the Code.
3.6 State and Local Tax Liability. Consolidated, combined or unitary
-----------------------------
state and local income and franchise tax liability will be allocated, paid and
reimbursed under this Agreement in a manner as similar as possible to the
allocation, payment and reimbursement of the SHI Group Tax Liability.
<PAGE>
-5-
4. Miscellaneous
-------------
4.1 This Agreement shall be effective as of the Effective Date and shall
apply to any payments or refunds due with respect to any predecessor, whether by
statutory merger, acquisition of assets or otherwise, of any of the parties
hereto, to the same extent as if the predecessor had been an original party to
the Agreement.
4.2 This agreement shall continue in full force and effect unless and
until SHI and SFI agree to terminate the Agreement. Notwithstanding such
termination, this Agreement shall continue in effect with respect to any
payments or refunds due for all periods prior to termination.
4.3 This Agreement shall be binding upon and inure to the benefit of any
successor, whether by statutory merger, acquisition of assets or otherwise, to
any of the parties hereto, to the same extent as if the successor had been an
original part to the Agreement.
<PAGE>
-6-
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be executed by their duly authorized representatives on November 26, 1997.
SCOVILL HOLDINGS INC.
By: _______________________________
Name: Martin A. Moore
Title: Executive Vice-President
SCOVILL FASTENERS INC.
By: _______________________________
Name: Martin A. Moore
Title: Executive Vice-President
PCI GROUP, INC.
By: _______________________________
Name: Martin A. Moore
Title: Vice-President
SCOMEX, INC.
By: _______________________________
Name: Martin A. Moore
Title: Vice-President
SCOVILL FASTENERS, S.A. de C.V.
By: _______________________________
Name: Martin A. Moore
Title: Vice-President
<PAGE>
-7-
158856 CANADA INC.
By: _______________________________
Name: Martin A. Moore
Title: Vice-President
UNIFAST-SCOVILL S.A.
By: _______________________________
Name: Martin A. Moore
Title: Vice-President
DAUDE S.A.
By: _______________________________
Name: Martin A. Moore
Title: Vice-President
SCOVILL PUERTO RICO, INC.
By: _______________________________
Name: Martin A. Moore
Title: Vice-President
RAU FASTENER COMPANY, L.L.C.
By: _______________________________
Name: Martin A. Moore
Title: Vice-President
<PAGE>
EXHIBIT 10.1.11
---------------
SCOVILL HOLDINGS INC.
c/o Scovill Fasteners Inc.
Highway 385 South - 441 Business
P.O. Box 44
Clarkesville, Georgia 30523
November 26, 1997
Mr. William F. Andrews
c/o Scovill Fasteners Inc.
Highway 385 South - 441 Business
P.O. Box 44
Clarkesville, Georgia 30523
Re: Grant of Rollover Stock Options
-------------------------------
Dear Mr. Andrews:
Scovill Acquisition Inc., a wholly owned subsidiary of Scovill
Holdings Inc. (the "Company"), has agreed to purchase (the "Acquisition") all of
------- -----------
the outstanding common stock (the "KSCO Stock") of KSCO Acquisition Corporation
----------
("KSCO"). You have previously been granted an option to purchase shares of KSCO
----
Stock. The option set forth below (the "Option") is granted in substitution for
------
the portion of your option to purchase shares of KSCO Stock which was not
surrendered in exchange for cash in connection with the Acquisition.
1. DEFINITIONS. For the purposes of this Agreement, the following terms
have the indicated meanings:
"BOARD" means the Board of Directors of the Company.
-----
"CAUSE" means (i) your willful and repeated failure to comply with the
-----
lawful directives of the Board, (ii) any criminal act or act of dishonesty or
willful misconduct by you that has a material adverse effect on the property,
operations, business or reputation of the Company or any Subsidiary or (iii)
your material breach of the terms of any employment, confidentiality or
noncompete agreement you may have with the Company or any Subsidiary. In no
event, however, shall any termination of service as a member of the Board be
deemed for Cause unless the facts and circumstances of the situation are first
<PAGE>
-2-
reviewed by the Board and it concludes that the situation warrants a Cause for
termination.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
----
successor statute.
"COMMITTEE" means the Compensation Committee or such other committee
---------
of the Board as the Board may designate to administer the Plan or, if for any
reason the Board has not designated such a committee, the Board. The Committee,
if other than the Board, shall be composed of two or more directors as appointed
from time to time by the Board.
"COMMON STOCK" means the common stock, par value $0.0001 per share, of
------------
the Company.
"FASTENERS" means Scovill Fasteners Inc., a Delaware corporation.
---------
"PLAN" means the Company's Long Term Incentive and Share Award Plan.
----
"PREFERRED STOCK" means the Series B Preferred Stock, par value
---------------
$0.0001 per share, of the Company.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and any
--------------
successor statute.
"SUBSIDIARY" means any subsidiary corporation (as such term is defined
----------
in section 424(f) of the Code) of the Company.
"UNIT" means a unit consisting of one share of Common Stock and one
----
share of Preferred Stock.
2. OPTION TERMS.
(a) GRANT. You hereby are granted an option to purchase up to 20,151
Units (the "Option Units") at a price of $2.5563 per Unit, subject to adjustment
------------
pursuant to Section 9 below (the "Exercise Price"), payable upon exercise
--------------
as set forth in Section 3 below in substitution for your option to purchase
shares of KSCO Stock not surrendered in exchange for cash in connection with the
Acquisition. Your Option will expire at the close of business on August 1, 2007
(the "Expiration Date"), subject to earlier expiration in connection with the
---------------
termination of your service as a member of the Board as provided below. Your
Option is not intended to be an
<PAGE>
-3-
"incentive stock option" within the meaning of Section 422 of the Code.
(b) EXERCISABILITY. Your Option will be exercisable in full at any time
during the term of the Option.
(c) TERMINATION OF OPTION. In no event shall any part of your Option be
exercisable after the Expiration Date set forth in Section 2(a). If your service
as a member of the Board terminates for any reason other than for Cause, your
Option shall expire, to the extent not theretofore exercised, three months
following such date of termination (or one year following such date of
termination, if such termination occurs by reason of your death or disability
(as defined in Section 22(e)(3) of the Code). If your service as a member of the
Board terminates for Cause, all of your Option not previously exercised shall
expire and be forfeited whether or not vested and exercisable.
3. PROCEDURE FOR EXERCISE. You may exercise all or any portion of your
Option to the extent permitted hereby, at any time and from time to time by
delivering written notice to the Company accompanied by payment in full of an
amount equal to the product of (i) the Exercise Price multiplied by (ii) the
number of Option Units to be purchased. Payment of the Exercise Price shall be
made in cash (including check, bank draft or money order) or, in the discretion
of the Committee, by delivery of a full recourse promissory note bearing
interest at a rate not less than the applicable federal rate determined pursuant
to Section 1274 of the Code as of the date of exercise or, in the discretion of
the Committee, by delivery of shares of Common Stock (valued at their fair
market value as determined in good faith by the Committee). The Company may
delay effectiveness of any exercise of your Option for such period of time as
may be necessary to comply with any contractual provisions to which it may be
subject relating to the issuance of its securities. As a condition to any
exercise of your Option, you agree to be bound by the Stockholders Agreement
dated as of November 26, 1997 among the Company and the stockholders signatory
thereto and further agree that the Option Units shall constitute "CAPITAL STOCK"
for purposes of the Stockholders Agreement. In addition, you agree that you have
access to, and in any case will permit the Company to deliver to you, all
financial and other information regarding the Company necessary to enable you to
make an informed investment decision, and you will make all customary investment
representations which the Company requires.
<PAGE>
-4-
4. SECURITIES LAW RESTRICTIONS. You represent that when you exercise
your Option you will be purchasing the Common Stock and Preferred Stock covered
thereby for your own account and not on behalf of others. You understand and
acknowledge that federal and state securities laws govern and restrict your
right to offer, sell or otherwise dispose of any Common Stock or Preferred Stock
acquired upon exercise of your Option unless your offer, sale or other
disposition thereof is registered under the Securities Act and state securities
laws or, in the opinion of the Company's counsel, such offer, sale or other
disposition is exempt from registration or qualification thereunder. You agree
that you will not offer, sell or otherwise dispose of any Common Stock or
Preferred Stock acquired upon exercise of your Option in any manner which would:
(i) require the Company to file any registration statement with the Securities
and Exchange Commission (or any similar filing under state law) or to amend or
supplement any such filing or (ii) violate or cause the Company to violate the
Securities Act, the rules and regulations promulgated thereunder or any other
state or federal law. You further understand that the certificates for any
Common Stock and Preferred Stock you purchase will bear such legends as the
Company deems necessary or desirable in connection with the Securities Act or
other rules, regulations or laws. To the maximum extent permissible, the shares
purchased under your Options will be issued in compliance with the exemption
from the registration requirements of Rule 701 under the Securities Act.
5. OPTION NOT TRANSFERABLE. Your Option is personal to you and is not
transferable by you other than by will or the laws of descent and distribution.
During your lifetime only you (or your legal guardian or legal representative)
may exercise your Option. In the event of your death, your Option may be
exercised only by the executor or administrator of your estate or the person or
persons to whom your rights under the Option shall pass by will or the laws of
descent and distribution.
6. CONFORMITY WITH PLAN. Your Option is intended to conform in all
respects with, and is subject to all applicable provisions of, the Plan, which
is incorporated herein by reference. Inconsistencies between this Agreement and
the Plan shall be resolved in accordance with the terms of the Plan. By
executing and returning the enclosed copy of this Agreement, you acknowledge
your receipt of this Agreement and the Plan and agree to be bound by all of the
terms of this Agreement and the Plan.
<PAGE>
-5-
7. RIGHTS OF PARTICIPANTS. Nothing in this Agreement shall interfere
with or limit in any way the right of the Company to terminate your service on
the Board at any time (with or without Cause), or confer upon you any right to
continue as a member of the Board for any period of time or to continue to
receive your current (or other) rate of compensation. Nothing in this Agreement
shall confer upon you any right to be selected again as a Plan participant.
8. WITHHOLDING OF TAXES. The Company may, if necessary, withhold from
any amounts due and payable by the Company to you (or secure payment from you in
lieu of withholding) the amount of any withholding or other tax due from the
Company with respect to the exercise of your Option, and the Company may defer
any issuance of the securities purchased upon such exercise unless indemnified
by you to its satisfaction against the payment of any such amount.
9. ADJUSTMENTS. In the event of a reorganization, recapitalization,
stock dividend or stock split, or combination or other change in the shares of
Common Stock or Preferred Stock, the Board or the Committee shall, in order to
prevent the dilution or enlargement of rights under your Option make such
adjustments in the number and type of shares authorized by the Plan, the number
and type of shares covered by your Option and the Exercise Price specified
herein as may be determined to be appropriate and equitable.
10. RESTRICTIONS ON TRANSFER.
(a) RESTRICTIVE LEGEND. The certificates representing the Common Stock
issued pursuant to your Option will bear a legend substantially to the following
effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
[DATE OF ISSUANCE], HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN THE
STOCKHOLDERS AGREEMENT DATED AS OF NOVEMBER 26, 1997 AMONG THE COMPANY AND
THE STOCKHOLDERS SIGNATORY THERETO, A COPY OF WHICH
<PAGE>
-6-
MAY BE OBTAINED WITHOUT CHARGE BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS."
(b) OPINION OF COUNSEL. You may not sell, transfer or dispose of any
Common Stock or Preferred Stock issued pursuant to your Option (except pursuant
to an effective registration statement under the Securities Act) without first
delivering to the Company an opinion of counsel reasonably acceptable in form
and substance to the Company that registration under the Securities Act or any
applicable state securities law is not required in connection with such
transfer. In the event the Common Stock or Preferred Stock may be sold without
registration under the Rules 144 and 701 under the Securities Act, such opinion
of counsel shall be provided by counsel chosen by the Company at the Company's
expense.
(c) HOLDBACK. You agree not to effect any public sale or distribution of
any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, during the seven days
prior to and the 180 days after the effectiveness of any registration
statement with respect to a public offering of Common Stock or Preferred
Stock (other than on Form S-8) by or on behalf of the Company. This
holdback restriction shall not apply to any registered offering effected
more than two years after the Initial Public Offering, except to the extent
requested by the underwriter(s) thereof.
11. GOVERNING LAW. THE CORPORATE LAW OF DELAWARE WILL GOVERN ALL
QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS.
ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF
THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF
CONFLICTS, OF NEW YORK.
12. NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications shall
be sent to you and to the Company at the addresses indicated below:
(a) If to the Optionee:
c/o Scovill Fasteners, Inc.
Highway 385, South - 441
<PAGE>
-7-
P.O. Box 44
Clarkesville, Georgia 30523
(b) If to the Company:
c/o Scovill Fasteners Inc.
Highway 385, South - 441
P.O. Box 44
Clarkesville, Georgia 30523
Attention: President
Secretary
With a copy to:
Saratoga Partners III, L.P.
535 Madison Avenue
New York, New York 10022
Attention: Christian L. Oberbeck
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the send party.
13. TAX GROSS-UP. The Company will pay to you as and when the tax is due
an amount, computed on an after-tax basis, equal to the excess of (i) the
federal income tax actually paid by you on exercise of any portion of this
Option issued in substitution for an option which qualified, at the time of such
substitution, as an "incentive stock option" for purposes of Section 422 of the
Code, over (ii) the amount of such tax that would have been payable on such
exercise had that portion of the Option qualified as an incentive stock option.
Upon sale of any shares of Common Stock or Preferred Stock received on exercise
of such portion of the Option after the holding periods set forth in Section
422(a) of the Code have been met, you agree to promptly pay to the Company, on
an after-tax basis, an amount equal to the excess of (x) the amount of federal
income tax that would have been payable by you on sale of such shares if that
portion of the Option had qualified at the time of exercise as an incentive
stock option, over (y) the amount of such tax actually payable by you on such
sale. Upon sale of any shares of Common Stock or Preferred Stock received on
exercise of such portion of the Option before the holding periods set forth in
Section 422(a) of the Code have been met, you will promptly return any amount
paid to you pursuant to this Section 13 to the Company. You agree that you will
promptly inform the Company in writing of any sale of shares of Common
<PAGE>
-8-
Stock or Preferred Stock obtained on exercise of this Option. If it is
subsequently determined that the amount owed by the Company under this Section
13 is less than the amount previously paid to you (by reason of a
redetermination of tax liability or otherwise), you will promptly repay the
excess payment to the Company.
Please execute the extra copy of this Agreement in the space below and
return it to the Company's Secretary at its executive offices to confirm your
understanding and acceptance of the agreements contained in this Agreement.
Very truly yours,
SCOVILL HOLDINGS INC.
By: _____________________________
Name:
Title:
Enclosures:
1. Extra copy of this Agreement
2. Copy of the Plan
3. Copy of the Stockholders Agreement
The undersigned hereby acknowledges that he has read this Agreement,
the Plan and the Stockholders Agreement and hereby agrees to be bound by all
provisions set forth herein and therein.
Dated as of November 26, 1997
____________________________________
Name: ______________________________
<PAGE>
EXHIBIT 10.1.12
---------------
SCOVILL HOLDINGS INC.
c/o Scovill Fasteners Inc.
Highway 385 South - 441 Business
P.O. Box 44
Clarkesville, Georgia 30523
November 26, 1997
Mr. John Champagne
c/o Scovill Fasteners Inc.
Highway 385 South - 441 Business
P.O. Box 44
Clarkesville, Georgia 30523
Re: Grant of Rollover Stock Options
-------------------------------
Dear Mr. Champagne:
Scovill Acquisition Inc., a wholly owned subsidiary of Scovill
Holdings Inc. (the "Company"), has agreed to purchase (the "Acquisition") all of
------- -----------
the outstanding common stock (the "KSCO Stock") of KSCO Acquisition Corporation
----------
("KSCO"). You have previously been granted an option to purchase shares of KSCO
----
Stock. The option set forth below (the "Option") is granted in substitution for
------
the portion of your option to purchase shares of KSCO Stock which was not
surrendered in exchange for cash in connection with the Acquisition.
1. DEFINITIONS. For the purposes of this Agreement, the following
terms have the indicated meanings:
"BOARD" means the Board of Directors of the Company.
-----
"CAUSE" means (i) your willful and repeated failure to comply with
-----
the lawful directives of the Board or the Board of Directors of Fasteners or
your supervisory personnel, (ii) any criminal act or act of dishonesty or
willful misconduct by you that has a material adverse effect on the property,
operations, business or reputation of the Company or any Subsidiary or (iii)
your material breach of the terms of any employment, confidentiality or
noncompete agreement you may have with the Company or any Subsidiary. In no
event, however, shall any termination of employment be deemed for Cause unless
<PAGE>
-2-
the facts and circumstances of the situation are first reviewed by the Company's
Chief Executive Officer and such officer concludes that the situation warrants a
Cause for termination; provided, however, that in the case of the Chief
-------- -------
Executive Officer for Cause determination shall be made by the Board acting
without the Chief Executive Officer.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
----
successor statute.
"COMMITTEE" means the Compensation Committee or such other committee
---------
of the Board as the Board may designate to administer the Plan or, if for any
reason the Board has not designated such a committee, the Board. The Committee,
if other than the Board, shall be composed of two or more directors as appointed
from time to time by the Board.
"COMMON STOCK" means the common stock, par value $0.0001 per share, of
------------
the Company.
"FASTENERS" means Scovill Fasteners Inc., a Delaware corporation.
---------
"PLAN" means the Company's Long Term Incentive and Share Award Plan.
----
"PREFERRED STOCK" means the Series B Preferred Stock, par value
---------------
$0.0001 per share, of the Company.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and any
--------------
successor statute.
"SUBSIDIARY" means any subsidiary corporation (as such term is defined
----------
in section 424(f) of the Code) of the Company.
"UNIT" means a unit consisting of one share of Common Stock and one
----
share of Preferred Stock.
A. OPTION TERMS.
(a) GRANT. You hereby are granted an option to purchase up to 40,302
Units (the "Option Units") at a price of $2.5563 per Unit, subject to adjustment
------------
pursuant to Section 9 below (the "Exercise Price"), payable upon exercise as set
--------------
forth in Section 3 below in substitution for your option to purchase shares of
KSCO Stock not surrendered in exchange for cash in connection with the
Acquisition. Your Option will ex-
<PAGE>
-3-
pire at the close of business on August 1, 2007 (the "Expiration Date"), subject
---------------
to earlier expiration in connection with the termination of your employment as
provided below. Your Option is not intended to be an "incentive stock option"
within the meaning of Section 422 of the Code.
(b) EXERCISABILITY. Your Option will be exercisable in full at any
time during the term of the Option.
(c) TERMINATION OF OPTION. In no event shall any part of your Option
be exercisable after the Expiration Date set forth in Section 2(a). If your
employment by the Company or any Subsidiary terminates for any reason other than
for Cause, your Option shall expire, to the extent not theretofore exercised,
three months following such date of termination (or one year following such date
of termination, if such termination occurs by reason of your death or disability
(as defined in Section 22(e)(3) of the Code). If your employment with the
Company or any Subsidiary terminates for Cause, all of your Option not
previously exercised shall expire and be forfeited whether or not vested and
exercisable.
3. PROCEDURE FOR EXERCISE. You may exercise all or any portion of your
Option to the extent permitted hereby, at any time and from time to time by
delivering written notice to the Company accompanied by payment in full of an
amount equal to the product of (i) the Exercise Price multiplied by (ii) the
number of Option Units to be purchased. Payment of the Exercise Price shall be
made in cash (including check, bank draft or money order) or, in the discretion
of the Committee, by delivery of a full recourse promissory note bearing
interest at a rate not less than the applicable federal rate determined pursuant
to Section 1274 of the Code as of the date of exercise or, in the discretion of
the Committee, by delivery of shares of Common Stock (valued at their fair
market value as determined in good faith by the Committee). The Company may
delay effectiveness of any exercise of your Option for such period of time as
may be necessary to comply with any contractual provisions to which it may be
subject relating to the issuance of its securities. As a condition to any
exercise of your Option, you agree to be bound by the Stockholders Agreement
dated as of November 26, 1997 among the Company and the stockholders signatory
thereto and further agree that the Option Units shall constitute "CAPITAL STOCK"
for purposes of the Stockholders Agreement. In addition, you agree that you have
access to, and in any case will permit the Company to deliver to you, all
financial and other information regarding the Company necessary to enable you to
make an informed investment decision, and you
<PAGE>
-4-
will make all customary investment representations which the Company requires.
4. SECURITIES LAW RESTRICTIONS. You represent that when you exercise
your Option you will be purchasing the Common Stock and Preferred Stock covered
thereby for your own account and not on behalf of others. You understand and
acknowledge that federal and state securities laws govern and restrict your
right to offer, sell or otherwise dispose of any Common Stock or Preferred Stock
acquired upon exercise of your Option unless your offer, sale or other
disposition thereof is registered under the Securities Act and state securities
laws or, in the opinion of the Company's counsel, such offer, sale or other
disposition is exempt from registration or qualification thereunder. You agree
that you will not offer, sell or otherwise dispose of any Common Stock or
Preferred Stock acquired upon exercise of your Option in any manner which would:
(i) require the Company to file any registration statement with the Securities
and Exchange Commission (or any similar filing under state law) or to amend or
supplement any such filing or (ii) violate or cause the Company to violate the
Securities Act, the rules and regulations promulgated thereunder or any other
state or federal law. You further understand that the certificates for any
Common Stock and Preferred Stock you purchase will bear such legends as the
Company deems necessary or desirable in connection with the Securities Act or
other rules, regulations or laws. To the maximum extent permissible, the shares
purchased under your Options will be issued in compliance with the exemption
from the registration requirements of Rule 701 under the Securities Act.
5. OPTION NOT TRANSFERABLE. Your Option is personal to you and is not
transferable by you other than by will or the laws of descent and distribution.
During your lifetime only you (or your legal guardian or legal representative)
may exercise your Option. In the event of your death, your Option may be
exercised only by the executor or administrator of your estate or the person or
persons to whom your rights under the Option shall pass by will or the laws of
descent and distribution.
6. CONFORMITY WITH PLAN. Your Option is intended to conform in all
respects with, and is subject to all applicable provisions of, the Plan, which
is incorporated herein by reference. Inconsistencies between this Agreement and
the Plan shall be resolved in accordance with the terms of the Plan. By
executing and returning the enclosed copy of this Agreement, you acknowledge
your receipt of this Agreement and the Plan and
<PAGE>
-5-
agree to be bound by all of the terms of this Agreement and the Plan.
7. RIGHTS OF PARTICIPANTS. Nothing in this Agreement shall interfere
with or limit in any way the right of the Company to terminate your employment
at any time (with or without Cause), or confer upon you any right to continue in
the employ of the Company for any period of time or to continue to receive your
current (or other) rate of compensation. Nothing in this Agreement shall confer
upon you any right to be selected again as a Plan participant.
8. WITHHOLDING OF TAXES. The Company may, if necessary, withhold from
any amounts due and payable by the Company to you (or secure payment from you in
lieu of withholding) the amount of any withholding or other tax due from the
Company with respect to the exercise of your Option, and the Company may defer
any issuance of the securities purchased upon such exercise unless indemnified
by you to its satisfaction against the payment of any such amount.
9. ADJUSTMENTS. In the event of a reorganization, recapitalization,
stock dividend or stock split, or combination or other change in the shares of
Common Stock or Preferred Stock, the Board or the Committee shall, in order to
prevent the dilution or enlargement of rights under your Option make such
adjustments in the number and type of shares authorized by the Plan, the number
and type of shares covered by your Option and the Exercise Price specified
herein as may be determined to be appropriate and equitable.
10. RESTRICTIONS ON TRANSFER.
(a) RESTRICTIVE LEGEND. The certificates representing the Common Stock
issued pursuant to your Option will bear a legend substantially to the following
effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
[DATE OF ISSUANCE], HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
<PAGE>
-6-
AGREEMENTS SET FORTH IN THE STOCKHOLDERS AGREEMENT DATED AS OF NOVEMBER 26,
1997 AMONG THE COMPANY AND THE STOCKHOLDERS SIGNATORY THERETO, A COPY OF
WHICH MAY BE OBTAINED WITHOUT CHARGE BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS."
(b) OPINION OF COUNSEL. You may not sell, transfer or dispose of any
Common Stock or Preferred Stock issued pursuant to your Option (except pursuant
to an effective registration statement under the Securities Act) without first
delivering to the Company an opinion of counsel reasonably acceptable in form
and substance to the Company that registration under the Securities Act or any
applicable state securities law is not required in connection with such
transfer. In the event the Common Stock or Preferred Stock may be sold without
registration under the Rules 144 and 701 under the Securities Act, such opinion
of counsel shall be provided by counsel chosen by the Company at the Company's
expense.
(c) HOLDBACK. You agree not to effect any public sale or distribution
of any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, during the seven days
prior to and the 180 days after the effectiveness of any registration statement
with respect to a public offering of Common Stock or Preferred Stock (other than
on Form S-8) by or on behalf of the Company. This holdback restriction shall not
apply to any registered offering effected more than two years after the Initial
Public Offering, except to the extent requested by the underwriter(s) thereof.
11. GOVERNING LAW. THE CORPORATE LAW OF DELAWARE WILL GOVERN ALL
QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS.
ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF
THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF
CONFLICTS, OF NEW YORK.
12. NOTICES. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications shall
be sent to you and to the Company at the addresses indicated below:
<PAGE>
-7-
(a) If to the Optionee:
c/o Scovill Fasteners, Inc.
Highway 385, South - 441
P.O. Box 44
Clarkesville, Georgia 30523
(b) If to the Company:
c/o Scovill Fasteners Inc.
Highway 385, South - 441
P.O. Box 44
Clarkesville, Georgia 30523
Attention: President
Secretary
With a copy to:
Saratoga Partners III, L.P.
535 Madison Avenue
New York, New York 10022
Attention: Christian L. Oberbeck
or to such other address or to the attention of such other person as
the recipient party has specified by prior written notice to the send party.
<PAGE>
-8-
Please execute the extra copy of this Agreement in the space below and
return it to the Company's Secretary at its executive offices to confirm your
understanding and acceptance of the agreements contained in this Agreement.
Very truly yours,
SCOVILL HOLDINGS INC.
By: ------------------------------------------
Name:
Title:
Enclosures:
1. Extra copy of this Agreement
2. Copy of the Plan
3. Copy of the Stockholders Agreement
The undersigned hereby acknowledges that he has read this Agreement,
the Plan and the Stockholders Agreement and hereby agrees to be bound by all
provisions set forth herein and therein.
Dated as of November 26, 1997
------------------------------------------------
Name: __________________________________________
<PAGE>
EXHIBIT 10.1.13
---------------
SCOVILL HOLDINGS INC.
c/o Scovill Fasteners Inc.
Highway 385 South - 441 Business
P.O. Box 44
Clarkesville, Georgia 30523
November 26, 1997
Mr. Michael Baxley
c/o Scovill Fasteners Inc.
Highway 385 South - 441 Business
P.O. Box 44
Clarkesville, Georgia 30523
Re: Grant of Rollover Stock Options
-------------------------------
Dear Mr. Baxley:
Scovill Acquisition Inc., a wholly owned subsidiary of Scovill
Holdings Inc. (the "Company"), has agreed to purchase (the "Acquisition") all of
------- -----------
the outstanding common stock (the "KSCO Stock") of KSCO Acquisition Corporation
----------
("KSCO"). You have previously been granted an option to purchase shares of KSCO
----
Stock. The option set forth below (the "Option") is granted in substitution for
------
the portion of your option to purchase shares of KSCO Stock which was not
surrendered in exchange for cash in connection with the Acquisition.
1. DEFINITIONS. For the purposes of this Agreement, the following terms
have the indicated meanings:
"BOARD" means the Board of Directors of the Company.
-----
"CAUSE" means (i) your willful and repeated failure to comply with the
-----
lawful directives of the Board or the Board of Directors of Fasteners or your
supervisory personnel, (ii) any criminal act or act of dishonesty or willful
misconduct by you that has a material adverse effect on the property,
operations, business or reputation of the Company or any Subsidiary or (iii)
your material breach of the terms of any employment, confidentiality or
noncompete agreement you may have with the Company or any Subsidiary. In no
event, however, shall any termination of employment be deemed for Cause unless
<PAGE>
-2-
the facts and circumstances of the situation are first reviewed by the Company's
Chief Executive Officer and such officer concludes that the situation warrants a
Cause for termination; provided, however, that in the case of the Chief
-------- -------
Executive Officer for Cause determination shall be made by the Board acting
without the Chief Executive Officer.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
----
successor statute.
"COMMITTEE" means the Compensation Committee or such other committee
---------
of the Board as the Board may designate to administer the Plan or, if for any
reason the Board has not designated such a committee, the Board. The Committee,
if other than the Board, shall be composed of two or more directors as appointed
from time to time by the Board.
"COMMON STOCK" means the common stock, par value $0.0001 per share, of
------------
the Company.
"FASTENERS" means Scovill Fasteners Inc., a Delaware corporation.
---------
"PLAN" means the Company's Long Term Incentive and Share Award Plan.
----
"PREFERRED STOCK" means the Series B Preferred Stock, par value
---------------
$0.0001 per share, of the Company.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and any
--------------
successor statute.
"SUBSIDIARY" means any subsidiary corporation (as such term is defined
----------
in section 424(f) of the Code) of the Company.
"UNIT" means a unit consisting of one share of Common Stock and one
----
share of Preferred Stock.
2. OPTION TERMS.
(a) GRANT. You hereby are granted an option to purchase up to
134,341 Units (the "Option Units") at a price of $2.5563 per Unit, subject to
------------
adjustment pursuant to Section 9 below (the "Exercise Price"), payable upon
--------------
exercise as set forth in Section 3 below in substitution for your option to
purchase shares of KSCO Stock not surrendered in exchange for cash in connection
with the Acquisition. Your Option will
<PAGE>
-3-
expire at the close of business on August 1, 2007 (the "Expiration Date"),
---------------
subject to earlier expiration in connection with the termination of your
employment as provided below. Your Option is not intended to be an "incentive
stock option" within the meaning of Section 422 of the Code.
(b) EXERCISABILITY. Your Option will be exercisable in full at any time
during the term of the Option.
(c) TERMINATION OF OPTION. In no event shall any part of your Option be
exercisable after the Expiration Date set forth in Section 2(a). If your
employment by the Company or any Subsidiary terminates for any reason other than
for Cause, your Option shall expire, to the extent not theretofore exercised,
three months following such date of termination (or one year following such date
of termination, if such termination occurs by reason of your death or disability
(as defined in Section 22(e)(3) of the Code). If your employment with the
Company or any Subsidiary terminates for Cause, all of your Option not
previously exercised shall expire and be forfeited whether or not vested and
exercisable.
3. PROCEDURE FOR EXERCISE. You may exercise all or any portion of your
Option to the extent permitted hereby, at any time and from time to time by
delivering written notice to the Company accompanied by payment in full of an
amount equal to the product of (i) the Exercise Price multiplied by (ii) the
number of Option Units to be purchased. Payment of the Exercise Price shall be
made in cash (including check, bank draft or money order) or, in the discretion
of the Committee, by delivery of a full recourse promissory note bearing
interest at a rate not less than the applicable federal rate determined pursuant
to Section 1274 of the Code as of the date of exercise or, in the discretion of
the Committee, by delivery of shares of Common Stock (valued at their fair
market value as determined in good faith by the Committee). The Company may
delay effectiveness of any exercise of your Option for such period of time as
may be necessary to comply with any contractual provisions to which it may be
subject relating to the issuance of its securities. As a condition to any
exercise of your Option, you agree to be bound by the Stockholders Agreement
dated as of November 26, 1997 among the Company and the stockholders signatory
thereto and further agree that the Option Units shall constitute "CAPITAL STOCK"
for purposes of the Stockholders Agreement. In addition, you agree that you have
access to, and in any case will permit the Company to deliver to you, all
financial and other information regarding the Company necessary to enable you to
make an informed investment decision, and you
<PAGE>
-4-
will make all customary investment representations which the Company requires.
4. SECURITIES LAW RESTRICTIONS. You represent that when you exercise
your Option you will be purchasing the Common Stock and Preferred Stock covered
thereby for your own account and not on behalf of others. You understand and
acknowledge that federal and state securities laws govern and restrict your
right to offer, sell or otherwise dispose of any Common Stock or Preferred Stock
acquired upon exercise of your Option unless your offer, sale or other
disposition thereof is registered under the Securities Act and state securities
laws or, in the opinion of the Company's counsel, such offer, sale or other
disposition is exempt from registration or qualification thereunder. You agree
that you will not offer, sell or otherwise dispose of any Common Stock or
Preferred Stock acquired upon exercise of your Option in any manner which would:
(i) require the Company to file any registration statement with the Securities
and Exchange Commission (or any similar filing under state law) or to amend or
supplement any such filing or (ii) violate or cause the Company to violate the
Securities Act, the rules and regulations promulgated thereunder or any other
state or federal law. You further understand that the certificates for any
Common Stock and Preferred Stock you purchase will bear such legends as the
Company deems necessary or desirable in connection with the Securities Act or
other rules, regulations or laws. To the maximum extent permissible, the shares
purchased under your Options will be issued in compliance with the exemption
from the registration requirements of Rule 701 under the Securities Act.
5. OPTION NOT TRANSFERABLE. Your Option is personal to you and is not
transferable by you other than by will or the laws of descent and distribution.
During your lifetime only you (or your legal guardian or legal representative)
may exercise your Option. In the event of your death, your Option may be
exercised only by the executor or administrator of your estate or the person or
persons to whom your rights under the Option shall pass by will or the laws of
descent and distribution.
6. CONFORMITY WITH PLAN. Your Option is intended to conform in all
respects with, and is subject to all applicable provisions of, the Plan, which
is incorporated herein by reference. Inconsistencies between this Agreement and
the Plan shall be resolved in accordance with the terms of the Plan. By
executing and returning the enclosed copy of this Agreement, you acknowledge
your receipt of this Agreement and the Plan and
<PAGE>
-5-
agree to be bound by all of the terms of this Agreement and the Plan.
7. RIGHTS OF PARTICIPANTS. Nothing in this Agreement shall interfere
with or limit in any way the right of the Company to terminate your employment
at any time (with or without Cause), or confer upon you any right to continue in
the employ of the Company for any period of time or to continue to receive your
current (or other) rate of compensation. Nothing in this Agreement shall confer
upon you any right to be selected again as a Plan participant.
8. WITHHOLDING OF TAXES. The Company may, if necessary, withhold from
any amounts due and payable by the Company to you (or secure payment from you in
lieu of withholding) the amount of any withholding or other tax due from the
Company with respect to the exercise of your Option, and the Company may defer
any issuance of the securities purchased upon such exercise unless indemnified
by you to its satisfaction against the payment of any such amount.
9. ADJUSTMENTS. In the event of a reorganization, recapitalization,
stock dividend or stock split, or combination or other change in the shares of
Common Stock or Preferred Stock, the Board or the Committee shall, in order to
prevent the dilution or enlargement of rights under your Option make such
adjustments in the number and type of shares authorized by the Plan, the number
and type of shares covered by your Option and the Exercise Price specified
herein as may be determined to be appropriate and equitable.
10. RESTRICTIONS ON TRANSFER.
(a) RESTRICTIVE LEGEND. The certificates representing the Common Stock
issued pursuant to your Option will bear a legend substantially to the following
effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
[DATE OF ISSUANCE], HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
<PAGE>
-6-
AGREEMENTS SET FORTH IN THE STOCKHOLDERS AGREEMENT DATED AS OF NOVEMBER 26,
1997 AMONG THE COMPANY AND THE STOCKHOLDERS SIGNATORY THERETO, A COPY OF
WHICH MAY BE OBTAINED WITHOUT CHARGE BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS."
(b) OPINION OF COUNSEL. You may not sell, transfer or dispose of any
Common Stock or Preferred Stock issued pursuant to your Option (except pursuant
to an effective registration statement under the Securities Act) without first
delivering to the Company an opinion of counsel reasonably acceptable in form
and substance to the Company that registration under the Securities Act or any
applicable state securities law is not required in connection with such
transfer. In the event the Common Stock or Preferred Stock may be sold without
registration under the Rules 144 and 701 under the Securities Act, such opinion
of counsel shall be provided by counsel chosen by the Company at the Company's
expense.
(c) HOLDBACK. You agree not to effect any public sale or distribution of
any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, during the seven days
prior to and the 180 days after the effectiveness of any registration statement
with respect to a public offering of Common Stock or Preferred Stock (other than
on Form S-8) by or on behalf of the Company. This holdback restriction shall not
apply to any registered offering effected more than two years after the Initial
Public Offering, except to the extent requested by the underwriter(s) thereof.
11. GOVERNING LAW. THE CORPORATE LAW OF DELAWARE WILL GOVERN ALL
QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS.
ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF
THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF
CONFLICTS, OF NEW YORK.
12. NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications shall
be sent to you and to the Company at the addresses indicated below:
<PAGE>
-7-
(a) If to the Optionee:
c/o Scovill Fasteners, Inc.
Highway 385, South - 441
P.O. Box 44
Clarkesville, Georgia 30523
(b) If to the Company:
c/o Scovill Fasteners Inc.
Highway 385, South - 441
P.O. Box 44
Clarkesville, Georgia 30523
Attention: President
Secretary
With a copy to:
Saratoga Partners III, L.P.
535 Madison Avenue
New York, New York 10022
Attention: Christian L. Oberbeck
or to such other address or to the attention of such other person as
the recipient party has specified by prior written notice to the send party.
<PAGE>
-8-
Please execute the extra copy of this Agreement in the space below and
return it to the Company's Secretary at its executive offices to confirm your
understanding and acceptance of the agreements contained in this Agreement.
Very truly yours,
SCOVILL HOLDINGS INC.
By: ________________________________
Name:
Title:
Enclosures:
1. Extra copy of this Agreement
2. Copy of the Plan
3. Copy of the Stockholders Agreement
The undersigned hereby acknowledges that he has read this Agreement,
the Plan and the Stockholders Agreement and hereby agrees to be bound by all
provisions set forth herein and therein.
Dated as of November 26, 1997
________________________________________
Name: __________________________________
<PAGE>
EXHIBIT 10.1.14
---------------
SCOVILL HOLDINGS INC.
c/o Scovill Fasteners Inc.
Highway 385 South - 441 Business
P.O. Box 44
Clarkesville, Georgia 30523
November 26, 1997
Mr. Robert Feltz
c/o Scovill Fasteners Inc.
Highway 385 South - 441 Business
P.O. Box 44
Clarkesville, Georgia 30523
Re: Grant of Rollover Stock Options
-------------------------------
Dear Mr. Feltz:
Scovill Acquisition Inc., a wholly owned subsidiary of Scovill
Holdings Inc. (the "Company"), has agreed to purchase (the "Acquisition") all of
------- -----------
the outstanding common stock (the "KSCO Stock") of KSCO Acquisition Corporation
----------
("KSCO"). You have previously been granted an option to purchase shares of KSCO
----
Stock. The option set forth below (the "Option") is granted in substitution for
------
the portion of your option to purchase shares of KSCO Stock which was not
surrendered in exchange for cash in connection with the Acquisition.
1. DEFINITIONS. For the purposes of this Agreement, the following terms
have the indicated meanings:
"BOARD" means the Board of Directors of the Company.
-----
"CAUSE" means (i) your willful and repeated failure to comply with the
-----
lawful directives of the Board or the Board of Directors of Fasteners or your
supervisory personnel, (ii) any criminal act or act of dishonesty or willful
misconduct by you that has a material adverse effect on the property,
operations, business or reputation of the Company or any Subsidiary or (iii)
your material breach of the terms of any employment, confidentiality or
noncompete agreement you may have with the Company or any Subsidiary. In no
event, however, shall any termination of employment be deemed for Cause unless
<PAGE>
-2-
the facts and circumstances of the situation are first reviewed by the Company's
Chief Executive Officer and such officer concludes that the situation warrants a
Cause for termination; provided, however, that in the case of the Chief
-------- -------
Executive Officer for Cause determination shall be made by the Board acting
without the Chief Executive Officer.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
----
successor statute.
"COMMITTEE" means the Compensation Committee or such other committee
---------
of the Board as the Board may designate to administer the Plan or, if for any
reason the Board has not designated such a committee, the Board. The Committee,
if other than the Board, shall be composed of two or more directors as appointed
from time to time by the Board.
"COMMON STOCK" means the common stock, par value $0.0001 per share, of
------------
the Company.
"FASTENERS" means Scovill Fasteners Inc., a Delaware corporation.
---------
"PLAN" means the Company's Long Term Incentive and Share Award Plan.
----
"PREFERRED STOCK" means the Series B Preferred Stock, par value
---------------
$0.0001 per share, of the Company.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and any
--------------
successor statute.
"SUBSIDIARY" means any subsidiary corporation (as such term is defined
----------
in section 424(f) of the Code) of the Company.
"UNIT" means a unit consisting of one share of Common Stock and one
----
share of Preferred Stock.
2. OPTION TERMS.
(a) GRANT. You hereby are granted an option to purchase up to 73,216
Units (the "Option Units") at a price of $2.5563 per Unit, subject to adjustment
------------
pursuant to Section 9 below (the "Exercise Price"), payable upon exercise as set
--------------
forth in Section 3 below in substitution for your option to purchase shares of
KSCO Stock not surrendered in exchange for cash in connection with the
Acquisition. Your Option will
<PAGE>
-3-
expire at the close of business on August 1, 2007 (the "Expiration Date"),
---------------
subject to earlier expiration in connection with the termination of your
employment as provided below. Your Option is not intended to be an "incentive
stock option" within the meaning of Section 422 of the Code.
(b) EXERCISABILITY. Your Option will be exercisable in full at any time
during the term of the Option.
(c) TERMINATION OF OPTION. In no event shall any part of your Option be
exercisable after the Expiration Date set forth in Section 2(a). If your
employment by the Company or any Subsidiary terminates for any reason other than
for Cause, your Option shall expire, to the extent not theretofore exercised,
three months following such date of termination (or one year following such date
of termination, if such termination occurs by reason of your death or disability
(as defined in Section 22(e)(3) of the Code). If your employment with the
Company or any Subsidiary terminates for Cause, all of your Option not
previously exercised shall expire and be forfeited whether or not vested and
exercisable.
3. PROCEDURE FOR EXERCISE. You may exercise all or any portion of your
Option to the extent permitted hereby, at any time and from time to time by
delivering written notice to the Company accompanied by payment in full of an
amount equal to the product of (i) the Exercise Price multiplied by (ii) the
number of Option Units to be purchased. Payment of the Exercise Price shall be
made in cash (including check, bank draft or money order) or, in the discretion
of the Committee, by delivery of a full recourse promissory note bearing
interest at a rate not less than the applicable federal rate determined pursuant
to Section 1274 of the Code as of the date of exercise or, in the discretion of
the Committee, by delivery of shares of Common Stock (valued at their fair
market value as determined in good faith by the Committee). The Company may
delay effectiveness of any exercise of your Option for such period of time as
may be necessary to comply with any contractual provisions to which it may be
subject relating to the issuance of its securities. As a condition to any
exercise of your Option, you agree to be bound by the Stockholders Agreement
dated as of November 26, 1997 among the Company and the stockholders signatory
thereto and further agree that the Option Units shall constitute "CAPITAL STOCK"
for purposes of the Stockholders Agreement. In addition, you agree that you have
access to, and in any case will permit the Company to deliver to you, all
financial and other information regarding the Company necessary to enable you to
make an informed investment decision, and you
<PAGE>
-4-
will make all customary investment representations which the Company requires.
4. SECURITIES LAW RESTRICTIONS. You represent that when you exercise
your Option you will be purchasing the Common Stock and Preferred Stock covered
thereby for your own account and not on behalf of others. You understand and
acknowledge that federal and state securities laws govern and restrict your
right to offer, sell or otherwise dispose of any Common Stock or Preferred Stock
acquired upon exercise of your Option unless your offer, sale or other
disposition thereof is registered under the Securities Act and state securities
laws or, in the opinion of the Company's counsel, such offer, sale or other
disposition is exempt from registration or qualification thereunder. You agree
that you will not offer, sell or otherwise dispose of any Common Stock or
Preferred Stock acquired upon exercise of your Option in any manner which would:
(i) require the Company to file any registration statement with the Securities
and Exchange Commission (or any similar filing under state law) or to amend or
supplement any such filing or (ii) violate or cause the Company to violate the
Securities Act, the rules and regulations promulgated thereunder or any other
state or federal law. You further understand that the certificates for any
Common Stock and Preferred Stock you purchase will bear such legends as the
Company deems necessary or desirable in connection with the Securities Act or
other rules, regulations or laws. To the maximum extent permissible, the shares
purchased under your Options will be issued in compliance with the exemption
from the registration requirements of Rule 701 under the Securities Act.
5. OPTION NOT TRANSFERABLE. Your Option is personal to you and is not
transferable by you other than by will or the laws of descent and distribution.
During your lifetime only you (or your legal guardian or legal representative)
may exercise your Option. In the event of your death, your Option may be
exercised only by the executor or administrator of your estate or the person or
persons to whom your rights under the Option shall pass by will or the laws of
descent and distribution.
6. CONFORMITY WITH PLAN. Your Option is intended to conform in all
respects with, and is subject to all applicable provisions of, the Plan, which
is incorporated herein by reference. Inconsistencies between this Agreement and
the Plan shall be resolved in accordance with the terms of the Plan. By
executing and returning the enclosed copy of this Agreement, you acknowledge
your receipt of this Agreement and the Plan and
<PAGE>
-5-
agree to be bound by all of the terms of this Agreement and the Plan.
7. RIGHTS OF PARTICIPANTS. Nothing in this Agreement shall interfere
with or limit in any way the right of the Company to terminate your employment
at any time (with or without Cause), or confer upon you any right to continue in
the employ of the Company for any period of time or to continue to receive your
current (or other) rate of compensation. Nothing in this Agreement shall confer
upon you any right to be selected again as a Plan participant.
8. WITHHOLDING OF TAXES. The Company may, if necessary, withhold from
any amounts due and payable by the Company to you (or secure payment from you in
lieu of withholding) the amount of any withholding or other tax due from the
Company with respect to the exercise of your Option, and the Company may defer
any issuance of the securities purchased upon such exercise unless indemnified
by you to its satisfaction against the payment of any such amount.
9. ADJUSTMENTS. In the event of a reorganization, recapitalization,
stock dividend or stock split, or combination or other change in the shares of
Common Stock or Preferred Stock, the Board or the Committee shall, in order to
prevent the dilution or enlargement of rights under your Option make such
adjustments in the number and type of shares authorized by the Plan, the number
and type of shares covered by your Option and the Exercise Price specified
herein as may be determined to be appropriate and equitable.
10. RESTRICTIONS ON TRANSFER.
(a) RESTRICTIVE LEGEND. The certificates representing the Common Stock
issued pursuant to your Option will bear a legend substantially to the following
effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
[DATE OF ISSUANCE], HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
<PAGE>
-6-
AGREEMENTS SET FORTH IN THE STOCKHOLDERS AGREEMENT DATED AS OF NOVEMBER 26,
1997 AMONG THE COMPANY AND THE STOCKHOLDERS SIGNATORY THERETO, A COPY OF
WHICH MAY BE OBTAINED WITHOUT CHARGE BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS."
(b) OPINION OF COUNSEL. You may not sell, transfer or dispose of any
Common Stock or Preferred Stock issued pursuant to your Option (except pursuant
to an effective registration statement under the Securities Act) without first
delivering to the Company an opinion of counsel reasonably acceptable in form
and substance to the Company that registration under the Securities Act or any
applicable state securities law is not required in connection with such
transfer. In the event the Common Stock or Preferred Stock may be sold without
registration under the Rules 144 and 701 under the Securities Act, such opinion
of counsel shall be provided by counsel chosen by the Company at the Company's
expense.
(c) HOLDBACK. You agree not to effect any public sale or distribution of
any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, during the seven days
prior to and the 180 days after the effectiveness of any registration statement
with respect to a public offering of Common Stock or Preferred Stock (other than
on Form S-8) by or on behalf of the Company. This holdback restriction shall not
apply to any registered offering effected more than two years after the Initial
Public Offering, except to the extent requested by the underwriter(s) thereof.
11. GOVERNING LAW. THE CORPORATE LAW OF DELAWARE WILL GOVERN ALL
QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS.
ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF
THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF
CONFLICTS, OF NEW YORK.
12. NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications shall
be sent to you and to the Company at the addresses indicated below:
<PAGE>
-7-
(a) If to the Optionee:
c/o Scovill Fasteners, Inc.
Highway 385, South - 441
P.O. Box 44
Clarkesville, Georgia 30523
(b) If to the Company:
c/o Scovill Fasteners Inc.
Highway 385, South - 441
P.O. Box 44
Clarkesville, Georgia 30523
Attention: President
Secretary
With a copy to:
Saratoga Partners III, L.P.
535 Madison Avenue
New York, New York 10022
Attention: Christian L. Oberbeck
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the send party.
13. TAX GROSS-UP. The Company will pay to you as and when the tax is due
an amount, computed on an after-tax basis, equal to the excess of (i) the
federal income tax actually paid by you on exercise of any portion of this
Option issued in substitution for an option which qualified, at the time of such
substitution, as an "incentive stock option" for purposes of Section 422 of the
Code, over (ii) the amount of such tax that would have been payable on such
exercise had that portion of the Option qualified as an incentive stock option.
Upon sale of any shares of Common Stock or Preferred Stock received on exercise
of such portion of the Option after the holding periods set forth in Section
422(a) of the Code have been met, you agree to promptly pay to the Company, on
an after-tax basis, an amount equal to the excess of (x) the amount of federal
income tax that would have been payable by you on sale of such shares if that
portion of the Option had qualified at the time of exercise as an incentive
stock option, over (y) the amount of such tax actually payable by you on such
sale. Upon sale of any shares of Common Stock or Preferred Stock received on
exercise of such portion of the Option before the holding periods
<PAGE>
-8-
set forth in Section 422(a) of the Code have been met, you will promptly return
any amount paid to you pursuant to this Section 13 to the Company. You agree
that you will promptly inform the Company in writing of any sale of shares of
Common Stock or Preferred Stock obtained on exercise of this Option. If it is
subsequently determined that the amount owed by the Company under this Section
13 is less than the amount previously paid to you (by reason of a
redetermination of tax liability or otherwise), you will promptly repay the
excess payment to the Company.
<PAGE>
-9-
Please execute the extra copy of this Agreement in the space below and
return it to the Company's Secretary at its executive offices to confirm your
understanding and acceptance of the agreements contained in this Agreement.
Very truly yours,
SCOVILL HOLDINGS INC.
By: ______________________________________
Name:
Title:
Enclosures:
1. Extra copy of this Agreement
2. Copy of the Plan
3. Copy of the Stockholders Agreement
The undersigned hereby acknowledges that he has read this Agreement,
the Plan and the Stockholders Agreement and hereby agrees to be bound by all
provisions set forth herein and therein.
Dated as of November 26, 1997
____________________________________________
Name: ______________________________________
<PAGE>
EXHIBIT 10.1.15
---------------
SCOVILL HOLDINGS INC.
c/o Scovill Fasteners Inc.
Highway 385 South - 441 Business
P.O. Box 44
Clarkesville, Georgia 30523
November 26, 1997
Mr. Martin A. Moore
c/o Scovill Fasteners Inc.
Highway 385 South - 441 Business
P.O. Box 44
Clarkesville, Georgia 30523
Re: Grant of Rollover Stock Options
-------------------------------
Dear Mr. Moore:
Scovill Acquisition Inc., a wholly owned subsidiary of Scovill
Holdings Inc. (the "Company"), has agreed to purchase (the "Acquisition") all of
------- -----------
the outstanding common stock (the "KSCO Stock") of KSCO Acquisition Corporation
----------
("KSCO"). You have previously been granted an option to purchase shares of KSCO
----
Stock. The option set forth below (the "Option") is granted in substitution for
------
the portion of your option to purchase shares of KSCO Stock which was not
surrendered in exchange for cash in connection with the Acquisition.
1. DEFINITIONS. For the purposes of this Agreement, the following terms
have the indicated meanings:
"BOARD" means the Board of Directors of the Company.
-----
"CAUSE" means (i) your willful and repeated failure to comply with the
-----
lawful directives of the Board or the Board of Directors of Fasteners or your
supervisory personnel, (ii) any criminal act or act of dishonesty or willful
misconduct by you that has a material adverse effect on the property,
operations, business or reputation of the Company or any Subsidiary or (iii)
your material breach of the terms of any employment, confidentiality or
noncompete agreement you may have with the Company or any Subsidiary. In no
event, however, shall any termination of employment be deemed for Cause unless
<PAGE>
-2-
the facts and circumstances of the situation are first reviewed by the Company's
Chief Executive Officer and such officer concludes that the situation warrants a
Cause for termination; provided, however, that in the case of the Chief
-------- -------
Executive Officer for Cause determination shall be made by the Board acting
without the Chief Executive Officer.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
----
successor statute.
"COMMITTEE" means the Compensation Committee or such other committee
---------
of the Board as the Board may designate to administer the Plan or, if for any
reason the Board has not designated such a committee, the Board. The Committee,
if other than the Board, shall be composed of two or more directors as appointed
from time to time by the Board.
"COMMON STOCK" means the common stock, par value $0.0001 per share, of
------------
the Company.
"FASTENERS" means Scovill Fasteners Inc., a Delaware corporation.
---------
"PLAN" means the Company's Long Term Incentive and Share Award Plan.
----
"PREFERRED STOCK" means the Series B Preferred Stock, par value
---------------
$0.0001 per share, of the Company.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and any
--------------
successor statute.
"SUBSIDIARY" means any subsidiary corporation (as such term is defined
----------
in section 424(f) of the Code) of the Company.
"UNIT" means a unit consisting of one share of Common Stock and one
----
share of Preferred Stock.
2. OPTION TERMS.
(a) GRANT. You hereby are granted an option to purchase up to 73,216
Units (the "Option Units") at a price of $2.5563 per Unit, subject to adjustment
------------
pursuant to Section 9 below (the "Exercise Price"), payable upon exercise as set
--------------
forth in Section 3 below in substitution for your option to purchase shares of
KSCO Stock not surrendered in exchange for cash in connection with the
Acquisition. Your Option will
<PAGE>
-3-
expire at the close of business on August 1, 2007 (the "Expiration Date"),
---------------
subject to earlier expiration in connection with the termination of your
employment as provided below. Your Option is not intended to be an "incentive
stock option" within the meaning of Section 422 of the Code.
(b) EXERCISABILITY. Your Option will be exercisable in full at any time
during the term of the Option.
(c) TERMINATION OF OPTION. In no event shall any part of your Option be
exercisable after the Expiration Date set forth in Section 2(a). If your
employment by the Company or any Subsidiary terminates for any reason other than
for Cause, your Option shall expire, to the extent not theretofore exercised,
three months following such date of termination (or one year following such date
of termination, if such termination occurs by reason of your death or disability
(as defined in Section 22(e)(3) of the Code). If your employment with the
Company or any Subsidiary terminates for Cause, all of your Option not
previously exercised shall expire and be forfeited whether or not vested and
exercisable.
3. PROCEDURE FOR EXERCISE. You may exercise all or any portion of your
Option to the extent permitted hereby, at any time and from time to time by
delivering written notice to the Company accompanied by payment in full of an
amount equal to the product of (i) the Exercise Price multiplied by (ii) the
number of Option Units to be purchased. Payment of the Exercise Price shall be
made in cash (including check, bank draft or money order) or, in the discretion
of the Committee, by delivery of a full recourse promissory note bearing
interest at a rate not less than the applicable federal rate determined pursuant
to Section 1274 of the Code as of the date of exercise or, in the discretion of
the Committee, by delivery of shares of Common Stock (valued at their fair
market value as determined in good faith by the Committee). The Company may
delay effectiveness of any exercise of your Option for such period of time as
may be necessary to comply with any contractual provisions to which it may be
subject relating to the issuance of its securities. As a condition to any
exercise of your Option, you agree to be bound by the Stockholders Agreement
dated as of November 26, 1997 among the Company and the stockholders signatory
thereto and further agree that the Option Units shall constitute "CAPITAL STOCK"
for purposes of the Stockholders Agreement. In addition, you agree that you have
access to, and in any case will permit the Company to deliver to you, all
financial and other information regarding the Company necessary to enable you to
make an informed investment decision, and you
<PAGE>
-4-
will make all customary investment representations which the Company requires.
4. SECURITIES LAW RESTRICTIONS. You represent that when you exercise
your Option you will be purchasing the Common Stock and Preferred Stock covered
thereby for your own account and not on behalf of others. You understand and
acknowledge that federal and state securities laws govern and restrict your
right to offer, sell or otherwise dispose of any Common Stock or Preferred Stock
acquired upon exercise of your Option unless your offer, sale or other
disposition thereof is registered under the Securities Act and state securities
laws or, in the opinion of the Company's counsel, such offer, sale or other
disposition is exempt from registration or qualification thereunder. You agree
that you will not offer, sell or otherwise dispose of any Common Stock or
Preferred Stock acquired upon exercise of your Option in any manner which would:
(i) require the Company to file any registration statement with the Securities
and Exchange Commission (or any similar filing under state law) or to amend or
supplement any such filing or (ii) violate or cause the Company to violate the
Securities Act, the rules and regulations promulgated thereunder or any other
state or federal law. You further understand that the certificates for any
Common Stock and Preferred Stock you purchase will bear such legends as the
Company deems necessary or desirable in connection with the Securities Act or
other rules, regulations or laws. To the maximum extent permissible, the shares
purchased under your Options will be issued in compliance with the exemption
from the registration requirements of Rule 701 under the Securities Act.
5. OPTION NOT TRANSFERABLE. Your Option is personal to you and is not
transferable by you other than by will or the laws of descent and distribution.
During your lifetime only you (or your legal guardian or legal representative)
may exercise your Option. In the event of your death, your Option may be
exercised only by the executor or administrator of your estate or the person or
persons to whom your rights under the Option shall pass by will or the laws of
descent and distribution.
6. CONFORMITY WITH PLAN. Your Option is intended to conform in all
respects with, and is subject to all applicable provisions of, the Plan, which
is incorporated herein by reference. Inconsistencies between this Agreement and
the Plan shall be resolved in accordance with the terms of the Plan. By
executing and returning the enclosed copy of this Agreement, you acknowledge
your receipt of this Agreement and the Plan and
<PAGE>
-5-
agree to be bound by all of the terms of this Agreement and the Plan.
7. RIGHTS OF PARTICIPANTS. Nothing in this Agreement shall interfere
with or limit in any way the right of the Company to terminate your employment
at any time (with or without Cause), or confer upon you any right to continue in
the employ of the Company for any period of time or to continue to receive your
current (or other) rate of compensation. Nothing in this Agreement shall confer
upon you any right to be selected again as a Plan participant.
8. WITHHOLDING OF TAXES. The Company may, if necessary, withhold from
any amounts due and payable by the Company to you (or secure payment from you in
lieu of withholding) the amount of any withholding or other tax due from the
Company with respect to the exercise of your Option, and the Company may defer
any issuance of the securities purchased upon such exercise unless indemnified
by you to its satisfaction against the payment of any such amount.
9. ADJUSTMENTS. In the event of a reorganization, recapitalization,
stock dividend or stock split, or combination or other change in the shares of
Common Stock or Preferred Stock, the Board or the Committee shall, in order to
prevent the dilution or enlargement of rights under your Option make such
adjustments in the number and type of shares authorized by the Plan, the number
and type of shares covered by your Option and the Exercise Price specified
herein as may be determined to be appropriate and equitable.
10. RESTRICTIONS ON TRANSFER.
(a) RESTRICTIVE LEGEND. The certificates representing the Common Stock
issued pursuant to your Option will bear a legend substantially to the following
effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
[DATE OF ISSUANCE], HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
<PAGE>
-6-
AGREEMENTS SET FORTH IN THE STOCKHOLDERS AGREEMENT DATED AS OF NOVEMBER 26,
1997 AMONG THE COMPANY AND THE STOCKHOLDERS SIGNATORY THERETO, A COPY OF
WHICH MAY BE OBTAINED WITHOUT CHARGE BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS."
(b) OPINION OF COUNSEL. You may not sell, transfer or dispose of any
Common Stock or Preferred Stock issued pursuant to your Option (except pursuant
to an effective registration statement under the Securities Act) without first
delivering to the Company an opinion of counsel reasonably acceptable in form
and substance to the Company that registration under the Securities Act or any
applicable state securities law is not required in connection with such
transfer. In the event the Common Stock or Preferred Stock may be sold without
registration under the Rules 144 and 701 under the Securities Act, such opinion
of counsel shall be provided by counsel chosen by the Company at the Company's
expense.
(c) HOLDBACK. You agree not to effect any public sale or distribution of
any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, during the seven days
prior to and the 180 days after the effectiveness of any registration statement
with respect to a public offering of Common Stock or Preferred Stock (other than
on Form S-8) by or on behalf of the Company. This holdback restriction shall not
apply to any registered offering effected more than two years after the Initial
Public Offering, except to the extent requested by the underwriter(s) thereof.
11. GOVERNING LAW. THE CORPORATE LAW OF DELAWARE WILL GOVERN ALL
QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS.
ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF
THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF
CONFLICTS, OF NEW YORK.
12. NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications shall
be sent to you and to the Company at the addresses indicated below:
<PAGE>
-7-
(a) If to the Optionee:
c/o Scovill Fasteners, Inc.
Highway 385, South - 441
P.O. Box 44
Clarkesville, Georgia 30523
(b) If to the Company:
c/o Scovill Fasteners Inc.
Highway 385, South - 441
P.O. Box 44
Clarkesville, Georgia 30523
Attention: President
Secretary
With a copy to:
Saratoga Partners III, L.P.
535 Madison Avenue
New York, New York 10022
Attention: Christian L. Oberbeck
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the send party.
13. TAX GROSS-UP. The Company will pay to you as and when the tax is due
an amount, computed on an after-tax basis, equal to the excess of (i) the
federal income tax actually paid by you on exercise of any portion of this
Option issued in substitution for an option which qualified, at the time of such
substitution, as an "incentive stock option" for purposes of Section 422 of the
Code, over (ii) the amount of such tax that would have been payable on such
exercise had that portion of the Option qualified as an incentive stock option.
Upon sale of any shares of Common Stock or Preferred Stock received on exercise
of such portion of the Option after the holding periods set forth in Section
422(a) of the Code have been met, you agree to promptly pay to the Company, on
an after-tax basis, an amount equal to the excess of (x) the amount of federal
income tax that would have been payable by you on sale of such shares if that
portion of the Option had qualified at the time of exercise as an incentive
stock option, over (y) the amount of such tax actually payable by you on such
sale. Upon sale of any shares of Common Stock or Preferred Stock received on
exercise of such portion of the Option before the holding periods
<PAGE>
-8-
set forth in Section 422(a) of the Code have been met, you will promptly return
any amount paid to you pursuant to this Section 13 to the Company. You agree
that you will promptly inform the Company in writing of any sale of shares of
Common Stock or Preferred Stock obtained on exercise of this Option. If it is
subsequently determined that the amount owed by the Company under this Section
13 is less than the amount previously paid to you (by reason of a
redetermination of tax liability or otherwise), you will promptly repay the
excess payment to the Company.
<PAGE>
-9-
Please execute the extra copy of this Agreement in the space below and
return it to the Company's Secretary at its executive offices to confirm your
understanding and acceptance of the agreements contained in this Agreement.
Very truly yours,
SCOVILL HOLDINGS INC.
By: ______________________________________
Name:
Title:
Enclosures:
1. Extra copy of this Agreement
2. Copy of the Plan
3. Copy of the Stockholders Agreement
The undersigned hereby acknowledges that he has read this Agreement,
the Plan and the Stockholders Agreement and hereby agrees to be bound by all
provisions set forth herein and therein.
Dated as of November 26, 1997
____________________________________________
Name: ______________________________________
<PAGE>
EXHIBIT 10.1.16
---------------
SCOVILL HOLDINGS INC.
c/o Scovill Fasteners Inc.
Highway 385 South - 441 Business
P.O. Box 44
Clarkesville, Georgia 30523
November 26, 1997
Mr. David J. Barrett
c/o Scovill Fasteners Inc.
Highway 385 South - 441 Business
P.O. Box 44
Clarkesville, Georgia 30523
Re: Grant of Rollover Stock Options
-------------------------------
Dear Mr. Barrett:
Scovill Acquisition Inc., a wholly owned subsidiary of Scovill
Holdings Inc. (the "Company"), has agreed to purchase (the "Acquisition") all of
------- -----------
the outstanding common stock (the "KSCO Stock") of KSCO Acquisition Corporation
----------
("KSCO"). You have previously been granted an option to purchase shares of KSCO
----
Stock. The option set forth below (the "Option") is granted in substitution for
------
the portion of your option to purchase shares of KSCO Stock which was not
surrendered in exchange for cash in connection with the Acquisition.
1. DEFINITIONS. For the purposes of this Agreement, the following terms
have the indicated meanings:
"BOARD" means the Board of Directors of the Company.
-----
"CAUSE" means (i) your willful and repeated failure to comply with the
-----
lawful directives of the Board or the Board of Directors of Fasteners or your
supervisory personnel, (ii) any criminal act or act of dishonesty or willful
misconduct by you that has a material adverse effect on the property,
operations, business or reputation of the Company or any Subsidiary or (iii)
your material breach of the terms of any employment, confidentiality or
noncompete agreement you may have with the Company or any Subsidiary. In no
event, however, shall any termination of employment be deemed for Cause unless
<PAGE>
-2-
the facts and circumstances of the situation are first reviewed by the Company's
Chief Executive Officer and such officer concludes that the situation warrants a
Cause for termination; provided, however, that in the case of the Chief
-------- -------
Executive Officer for Cause determination shall be made by the Board acting
without the Chief Executive Officer.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
----
successor statute.
"COMMITTEE" means the Compensation Committee or such other committee
---------
of the Board as the Board may designate to administer the Plan or, if for any
reason the Board has not designated such a committee, the Board. The Committee,
if other than the Board, shall be composed of two or more directors as appointed
from time to time by the Board.
"COMMON STOCK" means the common stock, par value $0.0001 per share, of
------------
the Company.
"FASTENERS" means Scovill Fasteners Inc., a Delaware corporation.
---------
"PLAN" means the Company's Long Term Incentive and Share Award Plan.
----
"PREFERRED STOCK" means the Series B Preferred Stock, par value
---------------
$0.0001 per share, of the Company.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and any
--------------
successor statute.
"SUBSIDIARY" means any subsidiary corporation (as such term is defined
----------
in section 424(f) of the Code) of the Company.
"UNIT" means a unit consisting of one share of Common Stock and one
----
share of Preferred Stock.
2. OPTION TERMS.
(a) GRANT. You hereby are granted an option to purchase up to 73,216
Units (the "Option Units") at a price of $2.5563 per Unit, subject to adjustment
------------
pursuant to Section 9 below (the "Exercise Price"), payable upon exercise as set
--------------
forth in Section 3 below in substitution for your option to purchase shares of
KSCO Stock not surrendered in exchange for cash in connection with the
Acquisition. Your Option will
<PAGE>
-3-
expire at the close of business on August 1, 2007 (the "Expiration Date"),
---------------
subject to earlier expiration in connection with the termination of your
employment as provided below. Your Option is not intended to be an "incentive
stock option" within the meaning of Section 422 of the Code.
(b) EXERCISABILITY. Your Option will be exercisable in full at any time
during the term of the Option.
(c) TERMINATION OF OPTION. In no event shall any part of your Option be
exercisable after the Expiration Date set forth in Section 2(a). If your
employment by the Company or any Subsidiary terminates for any reason other than
for Cause, your Option shall expire, to the extent not theretofore exercised,
three months following such date of termination (or one year following such date
of termination, if such termination occurs by reason of your death or disability
(as defined in Section 22(e)(3) of the Code). If your employment with the
Company or any Subsidiary terminates for Cause, all of your Option not
previously exercised shall expire and be forfeited whether or not vested and
exercisable.
3. PROCEDURE FOR EXERCISE. You may exercise all or any portion of your
Option to the extent permitted hereby, at any time and from time to time by
delivering written notice to the Company accompanied by payment in full of an
amount equal to the product of (i) the Exercise Price multiplied by (ii) the
number of Option Units to be purchased. Payment of the Exercise Price shall be
made in cash (including check, bank draft or money order) or, in the discretion
of the Committee, by delivery of a full recourse promissory note bearing
interest at a rate not less than the applicable federal rate determined pursuant
to Section 1274 of the Code as of the date of exercise or, in the discretion of
the Committee, by delivery of shares of Common Stock (valued at their fair
market value as determined in good faith by the Committee). The Company may
delay effectiveness of any exercise of your Option for such period of time as
may be necessary to comply with any contractual provisions to which it may be
subject relating to the issuance of its securities. As a condition to any
exercise of your Option, you agree to be bound by the Stockholders Agreement
dated as of November 26, 1997 among the Company and the stockholders signatory
thereto and further agree that the Option Units shall constitute "CAPITAL STOCK"
for purposes of the Stockholders Agreement. In addition, you agree that you have
access to, and in any case will permit the Company to deliver to you, all
financial and other information regarding the Company necessary to enable you to
make an informed investment decision, and you
<PAGE>
-4-
will make all customary investment representations which the Company requires.
4. SECURITIES LAW RESTRICTIONS. You represent that when you exercise
your Option you will be purchasing the Common Stock and Preferred Stock covered
thereby for your own account and not on behalf of others. You understand and
acknowledge that federal and state securities laws govern and restrict your
right to offer, sell or otherwise dispose of any Common Stock or Preferred Stock
acquired upon exercise of your Option unless your offer, sale or other
disposition thereof is registered under the Securities Act and state securities
laws or, in the opinion of the Company's counsel, such offer, sale or other
disposition is exempt from registration or qualification thereunder. You agree
that you will not offer, sell or otherwise dispose of any Common Stock or
Preferred Stock acquired upon exercise of your Option in any manner which would:
(i) require the Company to file any registration statement with the Securities
and Exchange Commission (or any similar filing under state law) or to amend or
supplement any such filing or (ii) violate or cause the Company to violate the
Securities Act, the rules and regulations promulgated thereunder or any other
state or federal law. You further understand that the certificates for any
Common Stock and Preferred Stock you purchase will bear such legends as the
Company deems necessary or desirable in connection with the Securities Act or
other rules, regulations or laws. To the maximum extent permissible, the shares
purchased under your Options will be issued in compliance with the exemption
from the registration requirements of Rule 701 under the Securities Act.
5. OPTION NOT TRANSFERABLE. Your Option is personal to you and is not
transferable by you other than by will or the laws of descent and distribution.
During your lifetime only you (or your legal guardian or legal representative)
may exercise your Option. In the event of your death, your Option may be
exercised only by the executor or administrator of your estate or the person or
persons to whom your rights under the Option shall pass by will or the laws of
descent and distribution.
6. CONFORMITY WITH PLAN. Your Option is intended to conform in all
respects with, and is subject to all applicable provisions of, the Plan, which
is incorporated herein by reference. Inconsistencies between this Agreement and
the Plan shall be resolved in accordance with the terms of the Plan. By
executing and returning the enclosed copy of this Agreement, you acknowledge
your receipt of this Agreement and the Plan and
<PAGE>
-5-
agree to be bound by all of the terms of this Agreement and the Plan.
7. RIGHTS OF PARTICIPANTS. Nothing in this Agreement shall interfere
with or limit in any way the right of the Company to terminate your employment
at any time (with or without Cause), or confer upon you any right to continue in
the employ of the Company for any period of time or to continue to receive your
current (or other) rate of compensation. Nothing in this Agreement shall confer
upon you any right to be selected again as a Plan participant.
8. WITHHOLDING OF TAXES. The Company may, if necessary, withhold from
any amounts due and payable by the Company to you (or secure payment from you in
lieu of withholding) the amount of any withholding or other tax due from the
Company with respect to the exercise of your Option, and the Company may defer
any issuance of the securities purchased upon such exercise unless indemnified
by you to its satisfaction against the payment of any such amount.
9. ADJUSTMENTS. In the event of a reorganization, recapitalization,
stock dividend or stock split, or combination or other change in the shares of
Common Stock or Preferred Stock, the Board or the Committee shall, in order to
prevent the dilution or enlargement of rights under your Option make such
adjustments in the number and type of shares authorized by the Plan, the number
and type of shares covered by your Option and the Exercise Price specified
herein as may be determined to be appropriate and equitable.
10. RESTRICTIONS ON TRANSFER.
(a) RESTRICTIVE LEGEND. The certificates representing the Common Stock
issued pursuant to your Option will bear a legend substantially to the following
effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
[DATE OF ISSUANCE], HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
<PAGE>
-6-
AGREEMENTS SET FORTH IN THE STOCKHOLDERS AGREEMENT DATED AS OF NOVEMBER 26,
1997 AMONG THE COMPANY AND THE STOCKHOLDERS SIGNATORY THERETO, A COPY OF
WHICH MAY BE OBTAINED WITHOUT CHARGE BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS."
(b) OPINION OF COUNSEL. You may not sell, transfer or dispose of any
Common Stock or Preferred Stock issued pursuant to your Option (except pursuant
to an effective registration statement under the Securities Act) without first
delivering to the Company an opinion of counsel reasonably acceptable in form
and substance to the Company that registration under the Securities Act or any
applicable state securities law is not required in connection with such
transfer. In the event the Common Stock or Preferred Stock may be sold without
registration under the Rules 144 and 701 under the Securities Act, such opinion
of counsel shall be provided by counsel chosen by the Company at the Company's
expense.
(c) HOLDBACK. You agree not to effect any public sale or distribution of
any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, during the seven days
prior to and the 180 days after the effectiveness of any registration statement
with respect to a public offering of Common Stock or Preferred Stock (other than
on Form S-8) by or on behalf of the Company. This holdback restriction shall not
apply to any registered offering effected more than two years after the Initial
Public Offering, except to the extent requested by the underwriter(s) thereof.
11. GOVERNING LAW. THE CORPORATE LAW OF DELAWARE WILL GOVERN ALL
QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS.
ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF
THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF
CONFLICTS, OF NEW YORK.
12. NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications shall
be sent to you and to the Company at the addresses indicated below:
<PAGE>
-7-
(a) If to the Optionee:
c/o Scovill Fasteners, Inc.
Highway 385, South - 441
P.O. Box 44
Clarkesville, Georgia 30523
(b) If to the Company:
c/o Scovill Fasteners Inc.
Highway 385, South - 441
P.O. Box 44
Clarkesville, Georgia 30523
Attention: President
Secretary
With a copy to:
Saratoga Partners III, L.P.
535 Madison Avenue
New York, New York 10022
Attention: Christian L. Oberbeck
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the send party.
13. TAX GROSS-UP. The Company will pay to you as and when the tax is due
an amount, computed on an after-tax basis, equal to the excess of (i) the
federal income tax actually paid by you on exercise of any portion of this
Option issued in substitution for an option which qualified, at the time of such
substitution, as an "incentive stock option" for purposes of Section 422 of the
Code, over (ii) the amount of such tax that would have been payable on such
exercise had that portion of the Option qualified as an incentive stock option.
Upon sale of any shares of Common Stock or Preferred Stock received on exercise
of such portion of the Option after the holding periods set forth in Section
422(a) of the Code have been met, you agree to promptly pay to the Company, on
an after-tax basis, an amount equal to the excess of (x) the amount of federal
income tax that would have been payable by you on sale of such shares if that
portion of the Option had qualified at the time of exercise as an incentive
stock option, over (y) the amount of such tax actually payable by you on such
sale. Upon sale of any shares of Common Stock or Preferred Stock received on
exercise of such portion of the Option before the holding periods
<PAGE>
-8-
set forth in Section 422(a) of the Code have been met, you will promptly return
any amount paid to you pursuant to this Section 13 to the Company. You agree
that you will promptly inform the Company in writing of any sale of shares of
Common Stock or Preferred Stock obtained on exercise of this Option. If it is
subsequently determined that the amount owed by the Company under this Section
13 is less than the amount previously paid to you (by reason of a
redetermination of tax liability or otherwise), you will promptly repay the
excess payment to the Company.
<PAGE>
-9-
Please execute the extra copy of this Agreement in the space below and
return it to the Company's Secretary at its executive offices to confirm your
understanding and acceptance of the agreements contained in this Agreement.
Very truly yours,
SCOVILL HOLDINGS INC.
By: ______________________________________
Name:
Title:
Enclosures:
1. Extra copy of this Agreement
2. Copy of the Plan
3. Copy of the Stockholders Agreement
The undersigned hereby acknowledges that he has read this Agreement,
the Plan and the Stockholders Agreement and hereby agrees to be bound by all
provisions set forth herein and therein.
Dated as of November 26, 1997
____________________________________________
Name: ______________________________________
<PAGE>
EXHIBIT 10.1.17
---------------
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (the "Agreement"), dated as of November
---------
26, 1997, is made and entered into by and among SCOVILL HOLDINGS INC., a
Delaware corporation (the "Company"), the parties identified as "Non-Management
------- --------------
Investors" on the signature pages hereof, the parties identified as "Management
- --------- ----------
Investors" on the signature pages hereof and any parties identified on the
- ---------
signature pages of any joinder agreements executed and delivered pursuant to
Section 7.2 of this Agreement.
WHEREAS, pursuant to the Subscription Agreement, the Non-Management
Investors have purchased Common Stock and Preferred Stock;
WHEREAS, pursuant to the Option Agreements, the Management Investors
have rolled over their options to purchase common stock of KSCO into options to
purchase Common Stock and Preferred Stock;
WHEREAS, it is intended that, subject to attainment of certain
performance goals, certain management employees of the Company be granted
options to purchase Common Stock under a Long Term Incentive and Share Award
Plan;
WHEREAS, the Company and the Investors desire to provide for certain
matters relating to the Capital Stock;
IN CONSIDERATION of the foregoing and of their mutual covenants set
forth in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
Definitions. The following terms, as used herein, have the following
-----------
meanings:
Affiliate means, as to any Person, any other Person directly or
---------
indirectly Controlling, Controlled by or under direct or indirect common Control
with such Person.
<PAGE>
Board means the Board of Directors of the Company.
-----
Buyer means a Person that is not an Investor or an Affiliate of an
-----
Investor that has offered to purchase or otherwise acquire for value shares of
Capital Stock of the Company.
Cause, with respect to any Management Investor, has the meaning set
-----
forth in the such Management Investor's Option Agreement.
Capital Stock means (i) the Common Stock and the Preferred Stock and
-------------
(ii) any securities into or for which the Common Stock or the Preferred Stock is
convertible, exchangeable or exercisable (including vested stock options but
excluding unvested stock options).
Class means all of the Common Stock considered as a whole or all of
-----
the Preferred Stock considered as a whole.
Commission means the Securities and Exchange Commission.
----------
Common Stock means the common stock, par value $0.0001 per share, of
------------
the Company.
Control means the possession, directly or indirectly, of the power to
-------
direct or cause the direction of the management and policies of a Person,
whether through the ownership of securities, partnership interests or by
contract, assignment or otherwise. The terms "Controlling" and "Controlled"
shall have meanings correlative to the foregoing.
Credit Facility means the Credit Facility dated as of November 26,
---------------
1997, among the Company, Scovill Fasteners Inc., various banks, Swiss Bank
Corporation, as documentation and syndication agent, and Credit Agricole
Indosuez, as administrative agent, as the same may be amended, supplemented,
replaced or refinanced, in whole or in part, from time to time.
Exchange Debenture Indenture means the indenture to be entered into by
----------------------------
the Company upon the exchange, if any, of the Senior Preferred Stock into
Subordinated Exchange Debentures due 2009 of the Company.
Fair Market Value means either (i) if the trading has already taken
-----------------
place, the trading price of the shares, and (ii) otherwise, (a) for preferred
stock, the liquidation preference
<PAGE>
plus accrued and unpaid dividends and (b) for common stock and vested stock
options, the appraised value of such shares.
Immediate Family Members of a Person means the spouse and lineal
------------------------
descendants (including legally adopted descendants) of such Person.
Indenture means the Indenture dated as of November 26, 1997 among
---------
Scovill Acquisition Inc. (to be merged with and into Scovill Fasteners Inc.),
the Company, and United States Trust Company of New York relating to 11 1/4%
Senior Notes due 2007.
Investors means the Non-Management Investors, the Management Investors
---------
and any Permitted Transferees of such Persons who are party (including by
joinder) to this Agreement.
KSCO means KSCO Acquisition Corporation.
----
1933 Act means the Securities Act of 1933, as amended.
--------
1934 Act means the Securities Exchange Act of 1934, as amended.
--------
Notice of Offer means any bona fide written offer from a Buyer to
---------------
purchase or otherwise acquire for value, issued and outstanding shares of
Capital Stock from Saratoga, which offer shall identify the proposed transferee
or transferees, the Capital Stock covered thereby, all terms and conditions of
the offer and, in the case of an offer pursuant to which the consideration
consists in whole or in part of consideration other than cash, a description of
the non-cash component of such consideration, together with Saratoga's
reasonable estimate of the fair market value of such non-cash component and any
information requested by the other Investors, to allow it to make its own
judgment as to the value of such noncash component.
Option Agreements means the Option Agreements dated as of even date
-----------------
herewith between the Company, on the one hand, and each of the Management
Investors, on the other hand.
Permitted Transferee means any transferee of Capital Stock acquired
--------------------
from any Investor, in a transaction that is not prohibited pursuant to Section
2.1.
<PAGE>
Person means an individual, a corporation, a partnership, an
------
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
Preferred Stock means the Series B Preferred Stock, par value $0.0001
---------------
per share, of the Company.
Public Stock means any Capital Stock within a class of Capital Stock
------------
that is listed on a national securities exchange or that has been accepted for
inclusion in the Nasdaq National Market or any similar national over-the-
counter-market.
Registrable Securities means shares of Capital Stock now owned or
----------------------
hereafter acquired by the Investors, but only so long as such shares are
restricted securities. A share of Capital Stock shall be deemed to be a
restricted security until such time as such share (i) has been effectively
registered under the 1933 Act and disposed of in accordance with the
registration statement covering it or (ii) has been sold publicly pursuant to
Rule 144 (or any similar provision then in force) under the 1933 Act.
Rollover Equity means, as to any Management Investor, (i) the option
---------------
("Option") granted to such Management Investor under the Option Agreement to
------
which he is party in substitution for options to purchase common stock of KSCO
and (ii) any securities issued upon exercise of the Option.
Saratoga means Saratoga Partners, III, L.P., a Delaware limited
--------
partnership, and its Affiliates.
Senior Preferred Stock means the Series A Cumulative Redeemable
----------------------
Exchangeable Preferred Stock, par value $0.0001 per share, of the Company.
Subscription Agreement means the Subscription Agreement, dated as of
----------------------
even date herewith, between the Company and each of the Non-Management
Investors.
Transfer means any direct or indirect transfer, sale, conveyance,
--------
pledge, hypothecation or other disposition.
Unit means one share of Common Stock and one share of Preferred Stock.
----
<PAGE>
Warrants means the warrants entitling the holders thereof to purchase
--------
shares of Common Stock.
ARTICLE II
COVENANTS OF THE INVESTORS
--------------------------
SECTION 2.1. Transfers by Investors. (a) No Investor shall Transfer
----------------------
any Capital Stock now or hereafter owned by such Investor except as expressly
permitted in this Section 2.1.
(b) Without the consent of the Company or any other Investor and
without first offering such Capital Stock to the Company or any other Investor,
each Investor, at any time, may (i) Transfer to any Person any Capital Stock
that constitutes Public Stock and (ii) without regard to whether such Capital
Stock is Public Stock at such time, (x) in the case of any Investor that is not
a natural Person, Transfer any Capital Stock that it may now or hereafter own to
any Affiliate of such Investor which is a not a natural Person, and (y) in the
case of any other Investor that is a natural Person, Transfer any Capital Stock
to any Immediate Family Member or any trust or custodian account for the sole
benefit of such Investor or his Immediate Family Members and in accordance with
applicable laws of descent and distribution; provided, however, that the
-------- -------
transferee of any such Investor pursuant to clause (x) or (y) above shall join
in this Agreement by executing a joinder agreement in the form attached hereto
as Exhibit A.
---------
(c) In addition to Transfers permitted by paragraph (b) above, (i) an
Investor may Transfer any Capital Stock with the prior approval of the Board by
resolution of a majority of the Board (which approval may be withheld or given
at the discretion of the Board); provided, however, that any Transfers by
-------- -------
Saratoga shall be subject to section 2.2(a) if otherwise applicable; (ii) an
Investor may make any Transfer required or permitted to be made by such Investor
pursuant to the provisions of Section 2.2; and (iii) an Investor that is
principally engaged in the United States in a regulated industry may make any
Transfer that, in the judgment of such Investor, upon the written advice of
counsel, is required or advisable in order for such Investor to comply with any
United States law, regulation or guideline applicable to such Investor.
<PAGE>
SECTION 2.2. Tag-Along and Take-Along Provisions. (a) If Saratoga
-----------------------------------
shall receive and determine to accept a Notice of Offer from a Buyer to purchase
or otherwise acquire in a transaction or series of related transactions for
value in the aggregate more than 20% of the issued and outstanding shares of
Capital Stock, the other Investors owning any Capital Stock shall have the right
to participate in such transaction in the manner set forth in this Section.
Saratoga shall, promptly after its receipt of a Notice of Offer, send a copy
thereof to the Company and the other Investors owning any Capital Stock. Each
such Investor shall have the right to cause Saratoga to condition its sale to
the Buyer of any Capital Stock owned by Saratoga on the simultaneous purchase by
the Buyer of such amount of Capital Stock owned by such Investor as such
Investor (each, an "Electing Investor") may designate by written notice
-----------------
delivered to Saratoga within 5 days following the date on which the Notice of
Offer is received; provided, however, that no Electing Investor may so designate
-------- -------
for purchase an amount of Capital Stock greater than that number owned by such
Electing Investor multiplied by a fraction the numerator of which is the amount
of Capital Stock being sold by Saratoga pursuant to the Notice of Offer and the
denominator of which is the total amount of Capital Stock then owned by
Saratoga. The purchase price for each share of the Capital Stock subject to the
Notice of Offer and the terms of such purchase shall be the same as are set
forth in such Notice of Offer. No seller shall receive, in connection with
sales pursuant to this subsection, any material consideration which is not
shared with each other seller in proportion to the number of shares sold by
each, except that Saratoga or an Affiliate may receive customary investment
banking fees. If a Notice of Offer is for two or more classes of Capital Stock,
then the number of shares of Common Stock and Preferred Stock that any Electing
Investor shall have the right to sell shall be determined separately as though
separate offers have been made for each of the securities. Immediately after
such sale, all sale proceeds relating to the securities of each Electing
Investor shall be remitted to such Electing Investor. If any potential Electing
Investor shall not have accepted the tag-along offer, Saratoga shall have 120
days after receipt of the Notice of Offer in which to sell the securities to be
sold pursuant to such Notice of Offer at a price not higher than that contained
in the Notice of Offer and on terms no more favorable to Saratoga than that
contained in the Notice of Offer. If, at the end of such period the sale has
not been completed, this Section 2.2(a) shall again apply to offers and sales of
Capital Stock by Saratoga.
<PAGE>
(b) If Saratoga shall receive and determine to accept a Notice of
Offer to sell or otherwise purchase or acquire for value in the aggregate more
than 50% of the issued and outstanding shares of the Capital Stock, then, at the
written request of Saratoga, each other Investor shall agree to sell to the
Buyer Capital Stock (to the extent then owned by such Investor) constituting the
same proportionate share of the Capital Stock which such Investor owns as
Saratoga agrees to sell for an amount equal to the same per share purchase
price, and on the terms, as are applicable to Saratoga's sale. No seller shall
receive, in connection with sales pursuant to this subsection, any material
consideration which is not shared with each other seller in proportion to the
amount sold by each, except that Saratoga or an Affiliate may receive customary
investment banking fees. Immediately following such sale, all sale proceeds
relating to the securities sold by each Investor shall be remitted to such
Investor. For the purposes of determining if the offer of the Buyer is for more
than 50% of the Capital Stock, the percentage of the issued and outstanding
shares of Capital Stock offered to be purchased by the Buyer shall include all
shares of Capital Stock sold to the Buyer by Saratoga in the same or a series of
related transactions.
(c) The provisions of this Section 2.2 shall terminate with respect
to any Class the first time that at least 20% of such Class is Public Stock.
SECTION 2.3. Transfers to Comply with Laws. Notwithstanding any
-----------------------------
contrary provision herein, no Investor may Transfer or offer to Transfer any
shares of Capital Stock (or solicit any offers to Transfer any shares of Capital
Stock), except in compliance with the 1933 Act and rules and regulations
promulgated thereunder and in compliance with any applicable state securities
laws and rules and regulations promulgated thereunder.
SECTION 2.4. Closing. The closing of any purchase of shares of
-------
Capital Stock pursuant to Article II hereof shall take place at the offices of
the Company (or at such other location as to which the parties shall mutually
agree) concurrently with the closing of any sale to a Buyer but in no event more
than 90 days after the date on which a Non-Management Investor shall accept the
offer of such Buyer as set forth in the Notice of Offer.
SECTION 2.5. Restrictive Legend. In addition to any legend required
------------------
by the Subscription Agreement, each certificate
<PAGE>
evidencing shares of Capital Stock shall contain the following restrictive
legend:
"THE SALE, ASSIGNMENT, TRANSFER, PLEDGE, ENCUMBRANCE, OR OTHER DISPOSITION
OF THE SHARES EVIDENCED BY THIS CERTIFICATE, OR ANY INTEREST IN SUCH
SHARES, IS RESTRICTED BY THE TERMS OF THE STOCKHOLDERS AGREEMENT DATED AS
OF NOVEMBER 26, 1997, TO WHICH THE CORPORATION IS A PARTY, COPIES OF WHICH
ARE ON FILE AT THE OFFICES OF THE CORPORATION AND MAY BE OBTAINED ON
REQUEST."
ARTICLE III
CERTAIN REPURCHASES OF STOCK
----------------------------
SECTION 3.1. Management Stock. The following repurchase arrangements
----------------
are subject to the terms of the Credit Facility, the Indenture and the Senior
Preferred Stock and to the provisions of Section 3.2.
(a) Termination for Cause. If the employment of any Management
---------------------
Investor is terminated for Cause, the Company shall have the right to repurchase
such Management Investor's Capital Stock at Fair Market Value.
(b) Termination Other than for Cause. If the employment of any
--------------------------------
Management Investor is terminated other than for Cause:
(i) the Company shall have the right to repurchase such Management
Investor's Capital Stock at Fair Market Value; and
(ii) such Management Investor shall have the right to require the
Company to repurchase, at Fair Market Value, such number of Units the Fair
Market Value of which is not greater than the basis of his Rollover Equity, plus
interest at the applicable federal rate (as determined in the Internal Revenue
Code).
(c) Resignation of Management Investor. If any Management Investor
----------------------------------
resigns his employment with the Company within thirty (30) days following the
second anniversary of the date hereof:
<PAGE>
(i) such Management Investor may require the Company to repurchase his
Rollover Equity at Fair Market Value; and
(ii) the Company shall have the right to repurchase such Management
Investor's Capital Stock at Fair Market Value.
(d) Death or Disability of Management Investor. Upon the death or
------------------------------------------
permanent disability of any Management Investor:
(i) such Management Investor (or his estate) shall have the right to
require the Company to repurchase such Management Investor's Capital Stock; and
(ii) the Company shall have the right to repurchase such Management
Investor's Capital Stock at Fair Market Value.
SECTION 3.2. Method of Repurchase. If any Management Investor desires
--------------------
to exercise his rights under Section 3.1, he shall give notice to the Company of
such exercise within 30 days of his termination or resignation, as the case may
be. If the Company desires to exercise its rights under Section 3.1, it shall
give notice of such exercise to the applicable Management Investor within 30
days of such Management Investor's termination, resignation, disability or
death, as the case may be. Any repurchase pursuant to Section 3.1 shall be
consummated on a business day selected by the Company not less than 30 and not
more than 60 days after the date of notice; provided, however, that if any
-------- -------
Capital Stock becomes subject to repurchase pursuant to Section 3.1(d) as the
result of the death of any Management Investor, such Shares may be repurchased
within 90 days of the date the will of such Management Investor is admitted to
probate or, in the event of intestacy, within 90 days of such death. On the
repurchase date, the Management Investor selling Capital Stock (the "Seller")
------
shall deliver to the Company the certificate or certificates representing the
Capital Stock owned by such Seller (and any option agreements evidencing any
options constituting Capital Stock) on such date against delivery by the Company
to such Seller of the repurchase price in cash. All certificates for Capital
Stock to be repurchased shall be duly endorsed in favor of the Company by the
Seller. If any Seller shall fail to deliver such duly endorsed certificate or
certificates to the Company within the time required, the Company shall cause
its books and records to show that the Capital Stock subject to repurchase are
bound by the provisions of this Section 3.2 and that such Capital Stock, until
transferred to the Company, shall not be entitled to any proxy,
<PAGE>
dividend or other rights from the date by which such certificate or certificates
should have been delivered to the Company.
SECTION 3.3. Right of the Company to Designate Third Parties.
-----------------------------------------------
Notwithstanding anything contained herein to the contrary, the Company shall
have the right (but not any obligation) to designate any other Person to
purchase Capital Stock in lieu of purchases by the Company under this Article
III; provided, however, that no such designation shall relieve the Company of
-------- -------
its obligations hereunder and if the Company so designates any other Investor to
purchase Capital Stock, each Non-Management Investor shall be entitled (but not
obligated) to purchase such Capital Stock in proportion to the amount of Capital
Stock owned by each.
SECTION 3.4. No Implied Right of Employment. For purposes of this
------------------------------
Agreement, any Management Investor's employment with the Company or any of its
subsidiaries shall be deemed to be terminated at such time as the Management
Investor ceases to be an officer or salaried employee of the Company or any such
subsidiary, as the case may be. Neither this Agreement nor any provision hereof
nor any action taken or omitted to be taken hereunder shall be deemed to create
or confer on any Management Investor any right to be retained in the employ of
the Company or any Affiliate thereof, or to interfere with or limit in any way
the right of the Company or any Affiliate thereof to terminate the employment of
any Management Investor at any time (subject to any employment agreement between
the Management Investor and the Company or any of its subsidiaries).
ARTICLE IV
VOTING AND DIRECTORS
--------------------
SECTION 4.1. Voting and Election of Directors. From and after the
--------------------------------
date hereof and until such time as 25% of the outstanding Common Stock is Public
Stock, each of the Investors severally agrees that in exercising its voting
rights on the election of directors, whether or not at an annual or special
meeting of the Company and whether or not at an adjourned meeting, such Investor
shall vote its shares of the voting Capital Stock for and will take all other
necessary actions within its control to cause the nomination and the election of
the following individuals to the Board:
<PAGE>
(a) David J. Barrett, but only for as long as he shall be an officer
and an employee of the Company or of a subsidiary of the Company;
(b) one director designated by Remington Investment Strategies, L.P.
and Moore Global Investments, Ltd. (together, "Moore") (acting together) so long
-----
as they together own at least 50% of their original investment; and
(c) up to five directors (being all but two of the authorized number
of directors on the date hereof) designated by Saratoga;
Saratoga shall have the right to remove any or all of its designees at
any time and replace such designees. The initial designees as director by
Saratoga shall be Christian L. Oberbeck and William F. Andrews.
The initial designee as director by Moore shall be Alan Colner. Moore
shall have the right to remove, and replace, its designee at any time. If Moore
does not designate a director, it shall be entitled to have a representative
observe Board meetings.
SECTION 4.2. Directors' and Officers' Insurance. The Company shall
----------------------------------
use its reasonable best efforts to obtain and maintain directors' and officers'
insurance on such terms and in such amounts as are customary for companies of
its type.
ARTICLE V
REGISTRATION AND RELATED RIGHTS
-------------------------------
SECTION 5.1. Holdback Agreement. If any shares of Capital Stock (or
------------------
securities exchangeable or convertible into or exercisable for Capital Stock)
are offered to the public pursuant to an effective registration statement under
the 1933 Act, no Investor shall, without the consent of the Company, offer,
sell, transfer or otherwise dispose of, including pursuant to Rule 144 under the
Securities Act, any of its Capital Stock (other than securities covered by such
registration statement) within 30 days prior to, or within 180 days after, the
effective date of such registration statement (the "Holdback Period").
---------------
SECTION 5.2. Piggyback Registration.
----------------------
<PAGE>
(a) Right to Piggyback. Subject to the provisions of Section 5.1, if
------------------
at any time the Company proposes to register any of its Capital Stock (or any
securities convertible into or exchangeable or exercisable for Capital Stock)
under the 1933 Act in connection with the offering of such Capital Stock (except
pursuant to a registration statement filed on Form S-4 or on Form S-8 or such
other forms as shall be prescribed under the 1933 Act for the same purposes or
for any exchange offer) (a "Piggyback Registration"), the Company shall at such
----------------------
time provide promptly to all Investors with written notice of its intention so
to do. Upon the written request of any Investor given within 15 days after the
providing of any such notice by the Company, the Company shall use reasonable
best efforts to cause to be registered under the 1933 Act all of the Registrable
Securities held by such Investor that have been so requested to be registered,
subject to the provisions of subsection 5.2(c).
(b) Selection of Underwriters. If the Company in its sole discretion
-------------------------
decides a Piggyback Registration shall be underwritten, the Company shall have
sole discretion in the selection of any underwriter or underwriters to manage
such Piggyback Registration.
(c) Priority on Piggyback Registrations. If the managing underwriter
-----------------------------------
or underwriters of a Piggyback Registration advise the Company in writing that
in its or their opinion the number of Registrable Securities proposed to be sold
in such Piggyback Registration exceeds the number which can be sold, or
adversely affects the price at which the securities are to be sold in such
offering, the Company will include in such registration only the number of
Registrable Securities, which, in the opinion of such underwriter or
underwriters, can be sold in such offering or which will not adversely affect
the price thereof. In the event that the contemplated distribution does not
involve an underwritten offering, the determination that the inclusion of such
Registrable Securities shall adversely affect the price or the number of
securities which may be sold by the Company in such offering shall be made by
the Company in its reasonable discretion. The Registrable Securities so
included in such Piggyback Registration shall be apportioned (i) first, to any
shares of Capital Stock that the Company proposes to sell and (ii) second, pro
---
rata among any shares of Capital Stock that any Investors propose to sell,
- ----
according to the total amount of Capital Stock requested for inclusion by said
Investors, or in such other proportions as shall mutually be agreed to among
such Investors.
<PAGE>
SECTION 5.3. Demand Registration.
-------------------
(a) Right to Demand. Any time after the expiration of the Holdback
---------------
Period, each of Saratoga and Moore may make a written request to the Company for
registration (a "Demand Registration"), under and in accordance with the 1933
-------------------
Act, of all or part of its Registrable Securities. Within 20 days after receipt
of such request, the Company will serve written notice (the "Written Notice") of
--------------
such registration request to all Investors who are holders of Registrable
Securities and the Company will include in such registration all Registrable
Securities of such Investors with respect to which the Company has received
written requests for inclusion therein within 15 business days after receipt of
the Written Notice. All requests made pursuant to this subsection will specify
the number of Registrable Securities to be registered and will also specify the
intended methods of disposition thereof; provided, however, that (x) the Company
-------- -------
need not effect the Demand registration unless the Registrable Securities
requested to be so registered shall constitute at least 10% of the outstanding
Capital Stock; and (y) the Company may, if its Board of Directors so determines
in the exercise of its reasonable judgment, that due to a pending or
contemplated acquisition or disposition it would be inadvisable to effect such
Demand Registration at such time, defer such Demand Registration for a single
period not to exceed 180 days.
(b) Number of Demand Registrations. Saratoga shall be entitled to
------------------------------
three Demand Registrations and the expenses of such registration will be borne
by the Company. Moore shall be entitled to one Demand Registration and the
expenses of such registration will be borne by the Company. A Demand
Registration shall not be counted as a Demand Registration hereunder until such
Demand Registration has been declared effective and maintained for a period of
at least six months, or such shorter period if all Registrable Securities
included therein have been sold.
(c) Selection of Underwriters. If the Company in its sole discretion
-------------------------
decides a Demand Registration shall be underwritten, the Company shall have sole
discretion in the selection of any underwriter or underwriters to manage such
Demand Registration.
(d) Priority on Demand Registrations. If the managing underwriter or
--------------------------------
underwriters of a Demand Registration advise the Company in writing that in its
or their opinion the number of Registrable Securities proposed to be sold in
such Demand
<PAGE>
Registration exceeds the number which can be sold, or adversely affects the
price at which the securities are to be sold, in such offering, the Company will
include in such registration only the number of Registrable Securities which, in
the opinion of such underwriter or underwriters, can be sold in such offering or
which will not adversely affect the price thereof. In the event that the
contemplated distribution does not involve an underwritten offering, the
determination that the inclusion of such Registrable Securities shall adversely
affect the price or the number of securities which may be sold by the Company in
such offering shall be made by the Company in its reasonable discretion. The
Registrable Securities so included in such Demand Registration shall be
apportioned (i) first, to any shares of Capital Stock that Saratoga or Moore
(whoever requested the Demand Registration) proposes to sell, and (ii) second,
pro rata, among any shares of Capital Stock that any other Investors propose
- --------
to sell, according to the total amount of Capital Stock requested for inclusion
by said Investors, or in such other proportions as shall mutually be agreed to
among such Investors.
SECTION 5.4. Registration of Stock Option Shares.
-----------------------------------
(a) Right to Demand Stock Option Registration. Any time after the
-----------------------------------------
expiration of the Holdback Period, Management Investors may make a written
request to the Company for the registration of shares of Capital Stock received
pursuant to the Company's stock option plan (the "Stock Option Registration").
-------------------------
The filing of the Stock Option Registration will be on Form S-8 (or another
appropriate form) under the 1933 Act.
(b) Selection of Underwriters. If the Company in its sole discretion
-------------------------
decides a Stock Option Registration shall be underwritten, the Company shall
have sole discretion in the selection of any underwriter or underwriters to
manage such Stock Option Registration.
(c) Number of Stock Option Registrations. Saratoga shall be entitled
------------------------------------
to annual Stock Option Registrations, and the expenses of such registrations
will be borne by the Company.
SECTION 5.5. Registration Procedures. It shall be a condition
-----------------------
precedent to the obligations of the Company and any underwriter or underwriters
to take any action pursuant to this Article V that the Investors requesting
inclusion in any Piggyback Registration, Demand Registration or Stock Option
Registration (each, a "Registration," and collectively, the "Registrations")
------------ -------------
shall furnish to the Company such information
<PAGE>
regarding them, the Registrable Securities held by them, the intended method of
disposition of such Registrable Securities, and such agreements regarding
indemnification, disposition of such securities and the other matters referred
to in this Article V as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company. With respect
to any Registration which includes Registrable Securities held by an Investor,
the Company shall, subject to the provisions of Section 5.5, as expeditiously as
practicable:
(a) prepare and file with the Commission a registration statement on
the appropriate form prescribed by the Commission and use its reasonable best
efforts to cause such registration statement to become effective;
(b) prepare and file with the Commission such amendments, post-
effective amendments and supplements, to such registration statement and any
documents required to be incorporated by reference therein as may be necessary
to keep the registration statement effective until the distribution of
Registrable Securities shall have been completed or until the expiration of 180
days after the effective date, whichever is earlier; cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the 1933 Act (or any successor rule); and
comply with the provisions of the 1933 Act applicable to it with respect to the
disposition of all Registrable Securities covered by such registration statement
during the applicable period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement or
supplement to the prospectus;
(c) furnish to such Investor at least one conformed copy of the
registration statement and any post-effective amendment thereto, upon request,
and such number of copies of the prospectus (including each preliminary
prospectus and any amendments or supplements thereto), and any exhibits or
documents incorporated by reference therein and such other documents as such as
the Investor or underwriter or underwriters, if any, may reasonably request in
order to facilitate the disposition of the securities being sold by the
Investor;
(d) on or prior to the date on which the registration is declared
effective, use its reasonable best efforts to register or qualify, and cooperate
with such Investor, the underwriter or underwriters, if any, and their counsel
in connection with the registration or qualification of the Registrable
<PAGE>
Securities covered by the registration statement for offer and sale under the
securities or blue sky laws of each state and other jurisdiction of the United
States as such Investor or managing underwriter or underwriters, if any, may
reasonably request (considering the nature or size of the offering and the
expense and time involved in such qualification or registration), and to do any
and all other reasonable acts or things which may be necessary or advisable to
enable the disposition in all such jurisdictions of the Registrable Securities
covered by the applicable registration statement; provided, however, that the
-------- -------
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process in any such jurisdiction where it is
not then so subject;
(e) use its reasonable best efforts to cause the Registrable
Securities covered by the registration statement to be registered with or
approved by such other governmental agencies or authorities within the United
States, including, without limitation, the National Association of Securities
Dealers, Inc. (the "NASD"), as may be necessary to enable the seller or sellers
----
thereof or the underwriter or underwriters, if any, to consummate the
disposition of such Registrable Securities;
(f) use its reasonable best efforts to cause the Registrable
Securities covered by the registration statement to be listed on any national
securities exchange on which the Capital Stock of the same class is listed;
(g) give the Investors who hold Registrable Securities registered
under such registration statement, the underwriters, if any, and their
respective counsel and accountants, the timely opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
give each of them such access to its books and records and such opportunities to
discuss the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be reasonably
necessary or advisable, in the opinion of each of such Investors and such
underwriters' respective counsel, to conduct appropriate due diligence as
contemplated by the 1933 Act; and
(h) provide to the Investors and underwriters with legal opinions and
"cold comfort" letters in customary form and substance.
<PAGE>
The Investors, upon receipt of any notice from the Company that the
prospectus prepared pursuant to subsection (b) above contains an untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein not misleading, will forthwith discontinue disposition of
the Registrable Securities until the Investors receive copies of a supplemented
or amended prospectus or until they are advised in writing (the "Advice") by the
------
Company that the use of the prospectus may be resumed, and have received copies
of any additional or supplemental filings which are incorporated by reference in
the prospectus, and, if so directed by the Company, each Investor shall, or
shall request the managing underwriter or underwriters, if any, to, deliver to
the Company all copies, other than permanent file copies then in such Investor's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. In the event the Company shall give any
such notice, the time periods mentioned in subsection (b) of this Section 5.5
shall be extended by the number of days during the period from and including any
date of the giving of such notice to and including the date when each seller of
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
the immediately preceding sentence or the Advice.
SECTION 5.6. Registration Expenses. Except where this Agreement
---------------------
specifies otherwise, in the case of any Registration, the Company shall bear all
expenses in connection with its obligations in connection therewith, including,
without limitation, the expenses of preparing any registration statement;
commission and state "blue sky" filing, registration and qualification fees and
expenses (including, without limitation, fees and expenses of counsel in
connection with blue sky surveys); fees and expenses associated with filings
required to be made with the NASD; fees and expenses of counsel for the Company,
one firm of counsel for all selling stockholders and independent public
accountants (including, without limitation, the cost of providing any legal
opinions or "cold comfort" letters); and all printing costs and expenses;
provided, however, that the Company shall not be responsible for the
- -------- -------
underwriting discounts and commissions or placement fees of underwriters
directly attributable to the Registrable Securities included in such
Registration.
SECTION 5.7. Participation in Registration. No Investor may
-----------------------------
participate in any registration hereunder unless such Investor (a) agrees to
sell its securities on the basis provided in any underwriting arrangements
approved by the Com-
<PAGE>
pany, and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements. Nothing in this Section 5.7
shall be construed to create any additional rights regarding the registration of
Registrable Securities in any Person otherwise than as set forth in this Article
V.
SECTION 5.8. Delay of Registration. No Investor shall have any right
---------------------
to take any action to restrain, enjoin, or otherwise delay any registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
SECTION 5.9. Specific Performance. The parties agree that the
--------------------
recovery of damages would not be an adequate remedy for the breach of the
covenants of the Company contained in this Article V and, accordingly, agree
that the Investors shall be entitled to specific performance of the obligations
contained herein.
ARTICLE VI
INDEMNIFICATION AND CONTRIBUTION
--------------------------------
SECTION 6.1. Indemnification by the Company. In connection with any
------------------------------
registration statement filed to effect a Registration pursuant to this
Agreement, the Company agrees to indemnify and hold harmless, to the fullest
extent permitted by law, each holder of Registrable Securities registered
pursuant to a Registration hereunder, its officers, directors and partners, each
underwriter of such Registrable Securities and each person who controls (within
the meaning of the 1933 Act) such holder or underwriter against all losses,
claims, damages, liabilities and expenses (as incurred or suffered and
including, but not limited to, any and all expenses incurred in investigating,
preparing or defending any litigation or proceeding, whether commenced or
threatened, or any claim whatsoever) and which arise out of or are based upon
any untrue or alleged untrue statement of a material fact contained in the
registration statement or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or by any untrue or alleged untrue statement of a material fact
included in any prospectus forming a part of such registration statement or
preliminary prospectus or any omission or alleged omission to
<PAGE>
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
insofar as the same are caused by or contained in any information furnished in
writing to the Company by such holder or underwriter or its representative
expressly for use therein; provided, however, that the Company shall not be
--------- -------
liable in any such case where any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or an omission or alleged omission in a prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission is corrected in an
amendment or supplement to the prospectus and the holder of Registrable
Securities thereafter fails to deliver such prospectus as amended or supplement
prior to or concurrently with the sale of the Registrable Securities to the
person asserting such loss, claim, damage, liability or expense after the
Company had furnished such holder with the number of copies of such amended or
supplemented prospectus reasonably requested by the holder of Registrable
Securities.
SECTION 6.2. Indemnification by Holders of Registrable Securities.
----------------------------------------------------
In connection with any registration statement filed pursuant to this Agreement
to effect a Registration, each holder participating in such Registration agrees
to (and, as a condition precedent to the filing of such registration statement,
the Company may require an undertaking satisfactory to it from each such
participating holder and from any prospective underwriter therefor agreeing to)
indemnify, to the fullest extent permitted by law, the Company and its officers,
directors and agents and each person who controls (within the meaning of the
1933 Act) the Company or such agents against any losses, claims, damages,
liabilities and expenses (as incurred or suffered and including, but not limited
to, any and all expenses incurred in investigating, preparing or defending any
litigation or proceeding, whether commenced or threatened, or any claim
whatsoever) and which arise out of or are based upon any untrue or alleged
untrue statement of a material fact contained in such registration statement or
any omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or by any
untrue or alleged untrue statement of a material fact included in any prospectus
or preliminary prospectus or any omission or alleged omission to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in any
information or affidavit with respect to such holder so furnished in writing by
such holder or
<PAGE>
its representatives to the Company specifically for inclusion in
such registration statement or prospectus. The Company shall be entitled to
receive indemnities from underwriters, selling brokers, dealer-managers and
similar securities industry professionals participating in the distribution, to
the same extent as provided above with respect to information with respect to
such Persons so furnished in writing by such Persons specifically for inclusion
in any prospectus or Registration.
SECTION 6.3. Conduct of Indemnification Proceedings. Each person
--------------------------------------
entitled to indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
or contribution pursuant to this Agreement and (ii) permit such indemnifying
party to assume the defense of such claim with counsel reasonably satisfactory
to the indemnified party; provided, however, that any person entitled to
-------- -------
indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such person unless (x) the indemnifying party
has agreed in writing to pay such fees and expenses, (y) the indemnifying party
shall have failed to assume the defense of such claim and employ counsel
reasonably satisfactory to such person or (z) in the reasonable judgment of any
such person, based upon advice of its counsel, a conflict of interest may exist
between such person and the indemnifying party with respect to such claims (in
which case, if the indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person); provided, further, that an indemnifying
-------- -------
party who is not entitled to, or elects not to, assume the defense of a claim on
behalf of all indemnified parties shall not be obligated to pay the fees and
expenses of more than one counsel (in addition to local counsel) for all
indemnified parties. If the indemnifying party assumes the defense, or is not
pursuant to clause (z) above entitled to assume the defense, it shall not be
subject to any liability for any settlement or compromise made by the
indemnified party without its consent (but such consent shall not be
unreasonably withheld). No indemnifying or indemnified party will be required
to consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to the indemnified party of a release from all liability in respect to such
claim or litigation. In addition, without the consent of the indemnified party
(which consent will not be unreasonably withheld), no indemnifying party will
<PAGE>
be permitted to consent to entry of any judgment or enter into any settlement
which provides for any action on the part of the indemnified party other than
the payment of money damages which are to be paid in full by the indemnifying
party. Likewise, no indemnified party may enter into any settlement without the
consent of the indemnifying party (which consent may not be unreasonably
withheld). If requested by the indemnifying party, the indemnified party agrees
to cooperate with the indemnifying party and its counsel in contesting any claim
which the indemnifying party elects to contest.
SECTION 6.4. Contribution. If the indemnification provided for in
------------
this Article VI from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities or expenses referred to above shall be
deemed to include, without limitation, any legal or other fees, costs or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding paragraph. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
<PAGE>
ARTICLE VII
MISCELLANEOUS
-------------
SECTION 7.1. Inspection Rights. The Company shall permit any
-----------------
authorized representatives designated by any Investor to visit and inspect any
of the properties of the Company and its subsidiaries, including its and their
financial and accounting records, and to discuss its and their affairs, finances
and accounts with its and their officers and independent public accountants, all
upon reasonable notice and at reasonable times during normal business hours.
Each Investor agrees that it shall treat as confidential all non-public
information that such Investor obtains pursuant to the foregoing.
SECTION 7.2. Notices. All notices, requests and other communications
-------
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be given to such party at its address or facsimile number set
forth on the signature pages hereof (or in the case of any Management Investor,
c/o the Company at its address so set forth), or the signature page of any
joinder agreement executed and delivered pursuant to Section 7.2 of this
Agreement or such other address or facsimile number as such party may hereafter
specify for the purpose by notice to the party sending the communication. Each
such notice, request or other communication shall be effective (i) if given by
facsimile, when such facsimile is transmitted to the facsimile number specified
in this Section and receipt is confirmed, (ii) if given by mail, 72 hours after
such communication is deposited in the mail registered or certified, return
receipt requested, with postage prepaid, addressed as aforesaid, or (iii) if
given by any other means, when delivered at the address specified in this
Section.
SECTION 7.3. Additional Parties. Only Persons (other than the
------------------
initial signatories hereto) that execute a joinder agreement in the form of
Exhibit A shall be deemed to be Investors. Except to the extent limited in any
- ---------
joinder agreement, each Person that so becomes an Investor after the date hereof
shall be entitled to all rights and privileges of an Investor as if such
Investor had been an original signatory to this Agreement.
SECTION 7.4. Amendments and Waivers. Any provision of this Agreement
----------------------
may be amended if, but only if, such amendment is in writing and is signed by
the Company and each Investor affected. Any provision of this Agreement may be
waived
<PAGE>
if, but only if, such waiver is in writing and is signed by the Company
and each Investor sought to be charged with such waiver.
SECTION 7.5. Successors and Assigns. The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided, however, that no
-------- -------
assignment of rights under this Agreement will be valid unless made in
connection with a contemporaneous Transfer of Capital Stock which is not
prohibited by this Agreement; and provided, further, that upon any such
-------- -------
assignment, the assignee shall comply with Section 6.2 hereof. The Company may
not assign or otherwise transfer any of its rights under this Agreement.
SECTION 7.6. Captions. The captions of this Agreement are included
--------
for convenience of reference only, do not constitute a part hereof and shall be
disregarded in the construction hereof.
SECTION 7.7. Counterparts; Effectiveness. This Agreement may be
---------------------------
signed in any number of counterparts, each of which shall be an original, with
the same effect an if the signatures thereto and hereto were upon the same
instrument.
SECTION 7.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 7.9. Severability. Any term or provision of this Agreement
------------
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement, or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
SCOVILL HOLDINGS INC.
By: -------------------------------
Name: Martin A. Moore
Title: Executive Vice Presi-
dent
Scovill Holdings Inc.
c/o Scovill Fasteners
1802 Scovill drive
Clarkesville, Georgia 30523-0044
Attention: David J. Barrett
Telephone: (706) 754-0501
Telecopier: (706) 754-0570
<PAGE>
MANAGEMENT INVESTORS:
----------------------------------------
David J. Barrett
----------------------------------------
Martin A. Moore
----------------------------------------
Michael Baxley
----------------------------------------
John Champagne
----------------------------------------
Robert W. Feltz
----------------------------------------
William F. Andrews
<PAGE>
NON-MANAGEMENT INVESTORS:
SARATOGA PARTNERS III, L.P.
By: DR Associates IV, L.P.
its General Partner
By: Dillon, Read Inc.,
its General Partner
By:______________________________________
Name: Christian L. Oberbeck
Title: Attorney-in-Fact
535 Madison Avenue
New York, New York 10022
Attention: Christian L. Oberbeck,
Managing Director
Telephone: (212) 906-7350
Telecopier: (212) 750-3343
<PAGE>
SARATOGA PARTNERS III, C.V.
By: Selinus Corporation III,
N.V., its General Partner
By: Curacao Corporation Company
N.V., its Managing Director
By:_____________________________________
Name: J.F.M. Horsten
Title: Attorney-in-Fact
By:_____________________________________
Name: S.H.P. Crijns
Title: Managing Director
c/o Curacao International Trust Company, N.V.
De Ruyterkade 62
P.O. Box 812
Curacao, Netherlands Antilles
Attention: J.F.M. Horsten
Telephone: 011-599-9-732-2555
Telecopier: 011-599-9-732-2500
<PAGE>
MOORE GLOBAL INVESTMENTS, LTD.
By: Moore Capital Advisors,
L.L.C., its general partner
By:________________________________________
Name: Savvas Savvinidis
Title: Director of Operations
c/o Moore Capital Management Inc.
1251 Avenue of the Americas
53rd Floor
New York, New York 10020
Attention: Savvas Savvinidis
Telephone: (212) 782-7532
Telecopier: (212) 575-6832
<PAGE>
REMINGTON INVESTMENT STRATEGIES, L.P.
By: Moore Capital Advisors,
L.L.C., its general partner
By:_________________________________________
Name: Savvas Savvinidis
Title: Director of Operations
c/o Moore Capital Management Inc.
1251 Avenue of the Americas
53rd Floor
New York, New York 10020
Attention: Savvas Savvinidis
Telephone: (212) 782-7532
Telecopier: (212) 575-6832
<PAGE>
WLD PARTNERS, LTD.
By: WLD Partners GP, Inc., its
general partner
By: _________________________________________
Name: David W. Horvitz
Title: Vice President
Las Olas Centre
450 East Las Olas Boulevard
Suite 900
Fort Lauderdale, FL 33301
Attention: Ron Adelhelm
Telephone: (954) 523-7771
Telecopier: (954) 760-9845
<PAGE>
BROWN UNIVERSITY THIRD CENTURY FUND
By: Saratoga Partners III, L.P.,
its Attorney-in-Fact
By: DR Associates IV, L.P., its
General Partner
By: Dillon, Read Inc., its
General Partner
By: _____________________________________
Name: Christian L. Oberbeck
Title: Attorney-in-Fact
c/o Saratoga Partners III, L.P.
535 Madison Avenue
New York, New York 10022
Attention: Christian L. Oberbeck
Telephone: (212) 906-7350
Telecopier: (212) 750-3343
<PAGE>
EXHIBIT A
---------
JOINDER AGREEMENT
THIS JOINDER AGREEMENT is made and entered into by the undersigned
with reference to the following facts:
A. I am acquiring simultaneously with the execution of this Joinder
Agreement [ ] shares of the [Preferred Stock] and [ ] shares of the
[Common Stock] (the "Shares") of SCOVILL HOLDINGS INC., a Delaware corporation
(the "Company"); and
B. As a condition to the acquisition of the Shares I have agreed to
join in a stockholders agreement dated as of November 26, 1997 (the
"Stockholders Agreement"), a copy of which has been furnished to me, among the
Company, the Management Investors and the Non-Management Investors party
thereto.
I therefore agree as follows:
1. I hereby join in the Stockholders Agreement and agree to be bound
by all of the terms and provisions thereof as though I were an original party
thereto and were included in the definition of [Management] [Non-Management]
Investor, as used therein.
2. I hereby consent that the certificate or certificates to be issued
to me representing the Shares shall bear the following legend in addition to any
other legend:
"THE SALE, ASSIGNMENT, TRANSFER, PLEDGE, ENCUMBRANCE, OR OTHER DISPOSITION
OF THE SHARES EVIDENCED BY THIS CERTIFICATE, OR ANY INTEREST IN SUCH
SHARES, IS RESTRICTED BY THE TERMS OF THE STOCKHOLDERS AGREEMENT DATED AS
OF NOVEMBER 26, 1997, TO WHICH THE COMPANY IS A PARTY, COPIES OF WHICH ARE
ON FILE AT THE OFFICES OF THE COMPANY AND MAY BE OBTAINED ON REQUEST."
IN WITNESS WHEREOF, the undersigned has executed this agreement this
day of , .
Name:
[Insert information for notice purposes]
(1) (i) () () () ()
<PAGE>
EXHIBIT 10.1.18
---------------
SUBSCRIPTION AGREEMENT
----------------------
THIS SUBSCRIPTION AGREEMENT (the "Agreement"), dated as of November
---------
26, 1997, is made and entered into by and between SCOVILL HOLDINGS INC., a
Delaware corporation (the "Company"), and each of the purchasers listed on the
-------
signature page hereof (each, a "Purchaser," and collectively, the "Purchasers").
--------- ----------
A. The Purchasers desire to subscribe for and purchase from the
Company, and the Company desires to sell to the Purchasers, Preferred Stock and
Common Stock of the Company (as hereinafter defined).
B. Scovill Acquisition Inc., a Delaware corporation ("Acquisition"),
-----------
a wholly owned subsidiary of the Company, is a party to a stock purchase
agreement, dated as of October 10, 1997 (as amended from time to time, the
"Stock Purchase Agreement"), with KSCO Acquisition Corporation, a Delaware
------------------------
corporation ("Target"), and its stockholders (the "Selling Stockholders"),
------ --------------------
pursuant to which the Selling Stockholders have agreed to sell, and Acquisition
has agreed to purchase, all of the outstanding capital stock of Target.
IN CONSIDERATION of the foregoing and of their mutual covenants set
forth in this Agreement, the parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
-----------
shall have the meanings set forth below:
Affiliate has the meaning set forth in the Stockholders Agreement.
---------
Common Stock means the common stock, par value $0.0001 per share, of
------------
the Company.
Exchange Act means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations in effect from time to time thereunder.
Investor has the meaning set forth in the Stockholders Agreement.
--------
<PAGE>
Permitted Transferee has the meaning set forth in the Stockholders
--------------------
Agreement.
Person means any individual, corporation, partnership, joint venture,
------
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Preferred Stock means the Series B Preferred Stock, par value $0.0001
---------------
per share, of the Company, having the preferences, privileges and rights set
forth in the Certificate of Designation therefor, the form of which is attached
hereto as Annex I.
-------
Purchased Shares has the meaning set forth in Section 2(a).
----------------
Purchase Price means $9.90 per share of Preferred Stock and $0.10 per
--------------
share of Common Stock.
Registrable Securities has the meaning set forth in the Stockholders
----------------------
Agreement.
Securities Act means the Securities Act of 1933, as amended, and the
--------------
rules and regulations in effect from time to time thereunder.
SEC means the Securities and Exchange Commission.
---
Stockholders Agreement means the Stockholders Agreement dated as of
----------------------
even date herewith among the Company and the Investors (as defined therein) from
time to time.
Shares means the Purchased Shares and any and all shares of capital
------
stock 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 the Purchased Shares, by
reason of any stock dividend, split, reverse split, combination,
recapitalization, reclassification, merger, consolidation or otherwise.
2. Subscription for and Acquisition of Purchased Shares. Each
----------------------------------------------------
Purchaser, severally and not jointly, and the Company agree as follows:
(a) Subscription for Purchased Shares: Purchase Price. Upon the
-------------------------------------------------
terms and subject to the conditions hereinaf-
<PAGE>
ter set forth, such Purchaser hereby subscribes for and shall purchase, and the
Company shall issue and sell to such Purchaser, the number of shares of
Preferred Stock and Common Stock set forth below such Purchaser's signature on
the signature pages hereof (collectively, the "Purchased Shares") at the
----------------
Purchase Price in cash.
(b) Closing. The closing (the "Closing") of the purchase and sale of
------- -------
the Purchased Shares shall take place simultaneously with the closing under the
Stock Purchase Agreement at the offices of Shearman & Sterling, 599 Lexington
Avenue, New York, New York, or at such other place as the parties hereto shall
mutually agree. At the Closing, (i) the Company shall deliver to such Purchaser
a certificate or certificates representing its Purchased Shares, as subscribed
for by such Purchaser, (ii) such Purchaser shall deliver or cause to be
delivered to the Company the aggregate Purchase Price for such Purchaser's
Purchased Shares, as subscribed for by such Purchaser, in immediately available
funds and (iii) such Purchaser shall execute and deliver a counterpart of the
Stockholders Agreement.
(c) Legend. Each certificate representing the Shares shall bear
------
substantially the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
COMPLIES WITH THE PROVISIONS OF THE STOCKHOLDERS AGREEMENT DATED AS OF
NOVEMBER 26, 1997, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF SCOVILL
HOLDINGS INC. (TOGETHER, WITH ITS SUCCESSORS, THE "COMPANY") AND MAY BE
OBTAINED FROM THE COMPANY WITHOUT CHARGE UPON REQUEST.
(d) Blue Sky Compliance. The Company shall comply with all state or
-------------------
foreign securities or "blue sky" laws which might be applicable to the sale to
such Purchaser of its Purchased Shares hereunder, and such Purchaser agrees to
provide the Company with such information, and cooperate with such filings, as
may be required in connection with such compliance. In no event may any
Purchaser's Purchased Shares be issued to such Purchaser unless such laws have
been complied with to the satisfaction of counsel to the Company.
<PAGE>
3. Representations and Warranties and Other Agreements of Each
-----------------------------------------------------------
Purchaser.
- ---------
(a) Representations and Warranties. Each Purchaser represents and
------------------------------
warrants that:
(i) Such Purchaser is acquiring its Purchased Shares for investment
for such Purchaser's own account and will not sell or otherwise dispose of
any Shares except in compliance with the Stockholders Agreement, the
Securities Act and any other applicable law.
(ii) Such Purchaser will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of any Shares unless
such transfer, sale, assignment, pledge, hypothecation or other disposition
complies with the provisions of this Agreement and the Stockholders
Agreement and (x) the transfer, sale, assignment, pledge, hypothecation or
other disposition is pursuant to an effective registration statement under
the Securities Act and under all applicable state or foreign securities or
"blue sky" laws, or (y) such Purchaser shall have furnished the Company
with an opinion of counsel, which opinion of counsel shall be reasonably
satisfactory to the Company, to the effect that no such registration is
required because of the availability of an exemption from registration
under the Securities Act and under all applicable state or foreign
securities or "blue sky" laws.
(iii) Such Purchaser has been advised by the Company that: (A) neither
the offer nor sale of any Purchased Shares has been registered under the
Securities Act or any state or foreign securities or "blue sky" laws; (B)
the Purchased Shares are characterized as "restricted securities" under the
Securities Act inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that the Purchased Shares
must be held indefinitely and such Purchaser must continue to bear the
economic risk of the investment in its Purchased Shares unless the offer
and sale of its Purchased Shares is subsequently registered under the
Securities Act and all applicable state or foreign securities or "blue sky"
laws or an exemption from such registration is available; (C) it is not
anticipated that there will be any public market for the Shares in the
foreseeable future; (D) when and if the 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 in accordance
<PAGE>
with the terms and conditions of such Rule; (E) if the Rule 144 exemption
is not available, public offer or sale of any Shares without registration
will require the availability of another exemption under the Securities
Act; (F) a restrictive legend in the form heretofore set forth shall be
placed on the certificates representing the Shares; and (G) 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 some time in the future engage the services of a stock transfer agent,
appropriate stop transfer restrictions will be issued to such stock
transfer agent.
(iv) Such Purchaser is not acquiring its Purchased Shares as an agent
or otherwise for any other Person.
(v) Such Purchaser is an "accredited investor" as defined in the
Securities Act and has such knowledge, skill and experience in business,
financial and investment matters so that the Purchaser is capable of
evaluating the merits, risks and consequences of an investment in the
Shares and is able to bear the economic risk of loss of this investment.
(vi) Such Purchaser has duly and validly executed and delivered this
Agreement.
(vii) This Agreement constitutes, and the Stockholders Agreement will,
when executed as contemplated herein, constitute, valid, binding and
enforceable agreements of the Purchaser except as enforceability may be
limited by (x) applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting creditor's rights
generally and (y) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(viii) The execution, delivery and performance by such Purchaser of this
Agreement and the Stockholders Agreement do not and will not (a) constitute
or result in a breach of or default (or an event which, with notice or
lapse of time, or both, has the potential of constituting a default) under
any agreement to which such Purchaser is a party, (b) violate any law
binding upon such Purchaser or (c) require the consent of any third party.
(b) Dispositions. If any Shares are to be disposed of by such
------------
Purchaser in accordance with Rule 144 under the Se-
<PAGE>
curities Act or otherwise, the Purchaser shall promptly notify the Company of
such intended disposition and shall deliver to the Company, at or prior to the
time of such disposition, such documentation as the Company may reasonably
request in connection with such disposition and, in the case of a disposition
pursuant to Rule 144, shall deliver to the Company an executed copy of any
notice on Form 144 required to be filed with the SEC.
(c) No Sale During Offering. If any shares of capital stock (or
-----------------------
securities exchangeable or convertible into or exercisable for capital stock) of
the Company are offered to the public pursuant to an effective registration
statement under the Securities Act, such Purchaser may not, without the consent
of the Company, offer, sell, transfer or otherwise dispose of, including
pursuant to Rule 144 under the Securities Act, any of the Shares, and such
Purchaser shall use his best efforts not to effect any such offer, sale,
transfer or other disposition of any other capital stock of the Company or of
any security exchangeable or convertible into or exercisable for any other
capital stock of the Company (in each case, other than securities covered by
such registration statement) within 30 days prior to, or within 180 days after,
the effective date of such registration statement.
4. Representations and Warranties and Other Agreements of the
----------------------------------------------------------
Company.
- -------
(a) Representations and Warranties. The Company represents and
------------------------------
warrants to each Purchaser that:
(i) Each of the Company, Target and Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
(ii) The Company has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement has been duly and validly executed and delivered by the Company.
(iii) This Agreement constitutes, and the Stockholders Agreement will,
when executed as contemplated herein, constitute, valid, binding and
enforceable agreements of the Company, except as such enforceability may be
limited by (x) applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting creditors' rights
generally and (y) general principles of eq-
<PAGE>
uity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(iv) The execution, delivery and performance by the Company of this
Agreement and the Stockholders Agreement do not and will not (a) constitute
or result in a breach of or a default (or an event which, with notice or
lapse of time, or both, has the potential of constituting a default) under
any charter document or By-laws of the Company or Target, as the case may
be, (b) violate any law binding upon the Company or Target, as the case may
be, or (c) require the consent of any third party or governmental agency.
(v) The Purchased Shares, upon issuance by the Company following
receipt of the consideration provided for herein, will be duly authorized,
validly issued, fully paid and non-assessable.
(vi) Assuming the accuracy of the representations set forth in Section
3 hereof, the offer and sale of the Purchased Shares is exempt from the
registration requirements of the Securities Act.
(vii) The authorized capital stock of the Company consists solely of
6,000,000 shares of Preferred Stock, par value $0.0001 per share, 200,000
shares of Series A Cumulative Redeemable Exchangeable Preferred Stock, par
value $0.0001 per share (the "Senior Preferred Stock"), 10,000,000 shares
----------------------
of undesignated preferred stock, par value $0.0001 per share and 6,000,000
shares of Common Stock, par value $0.0001 per share. On the Closing Date,
after giving effect to the sale and issuance of the Purchased Shares, the
Company will have outstanding no shares of capital stock other than 100,000
shares of Senior Preferred Stock, all of which will be duly authorized,
validly issued, fully paid and nonassessable, and the Purchased Shares.
(b) Exchange Act Reports. If the Company shall, at any time, file a
--------------------
registration statement with respect to Common Stock or Preferred Stock or both
pursuant to the requirements of Section 12 of the Exchange Act or of the
requirements of the Securities Act, the Company will file the reports required
to be filed by it under the Securities Act and the Exchange Act, to the extent
required from time to time to enable the Purchasers to sell Shares of Common
Stock or Preferred Stock or both, subject to the terms of the Stockholders
Agreement, without
<PAGE>
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 and Rule 144A under the Act, as such Rules may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
SEC. Notwithstanding anything to the contrary contained in this subsection 4(b),
the Company may deregister Common Stock or Preferred Stock or both under Section
12 of the Exchange Act if it then is permitted to do so pursuant to the Exchange
Act. The Company will, at the request of any holder of Registrable Securities,
upon receipt from such holder of a certificate certifying (i) that such holder
has held such Registrable Securities for a period of not less than two (2)
consecutive years, (ii) that such holder has not been an affiliate (as defined
in Rule 144) of the Company for more than the ninety (90) preceding days, and
(iii) as to such other matters as may be appropriate in accordance with such
Rule, remove from the stock certificates representing such Registrable
Securities that portion of any restrictive legend which relates to the
registration provisions of the Securities Act.
(c) Notification of Changes. Such Purchaser shall notify the Company
-----------------------
upon the occurrence of any event prior to Closing which would cause any
representation or warranty of such Purchaser contained in this Agreement to be
false or incorrect.
5. Conditions to Performance.
-------------------------
(a) Conditions to the Company's Obligations. The Company's
---------------------------------------
obligations to issue to any Purchaser its Purchased Shares hereunder are subject
to the performance by such Purchaser at or prior to the Closing of all of the
agreements of the Purchaser contemplated to be performed hereunder at or prior
to the Closing and to the satisfaction at or prior to the Closing of the
following further conditions: (i) the representations and warranties of such
Purchaser contained in Section 3 hereof shall be true and correct as of the
Closing and (ii) the Closing (as defined in the Purchase Agreement) shall have
occurred and all documents contemplated to be executed and delivered by the
parties in connection therewith shall have been so executed and delivered.
(b) Conditions to the Purchaser's Obligations. The obligations of
-----------------------------------------
each Purchaser to deliver the purchase price for its Purchased Shares, as
contemplated in subsection 2(a) and subsection 2(b), and to execute and deliver
the Stockholders Agreement are subject to the performance by the Company at or
prior to the Closing of all of the agreements of the Company
<PAGE>
contemplated to be performed hereunder at or prior to the Closing and to the
satisfaction at or prior to the Closing of the following further conditions: (i)
the representations and warranties of the Company contained in Section 4 hereof
shall be true and correct as of the Closing and (ii) the Closing (as defined in
the Purchase Agreement) shall have occurred.
6. Survival. The representations and warranties of the parties set
--------
forth in this Agreement shall survive the Closing.
7. Termination of Agreement.
------------------------
(a) Termination of Purchase Agreement. This Agreement shall
---------------------------------
terminate upon any termination prior to the Closing of the Purchase Agreement.
(b) Termination by Purchaser. The Purchaser shall have the right to
------------------------
terminate this Agreement, upon written notice to the Company, at any time after
December 31, 1997, in the event the Closing shall not have occurred.
8. Binding Effect. The provisions of this Agreement shall be
--------------
binding upon and shall inure to the benefit of the parties hereto and the heirs,
successors and assigns of the parties hereto. No transfer of any Shares shall be
valid unless the transferee thereof shall have assumed the obligations of its
transferor under this Agreement with respect to such Shares in a written
instrument delivered to the Company.
9. Assignment. The Purchaser shall not assign any rights under this
----------
Agreement without the prior written consent of the Company. Any purported
assignment of rights hereunder by the Purchaser which has not been consented to
by the Company shall be void.
10. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
--------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
11. Invalidily of Provisions. The invalidity or unenforceability of
------------------------
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction.
<PAGE>
12. Headings; Execution in Counterparts. The headings and captions
-----------------------------------
contained herein are for convenience of reference only and shall not control or
affect the meaning or construction of any provision hereof. This Agreement may
be executed in counterparts, each of which shall be deemed to be an original and
all of which together shall constitute but one and the same instrument.
13. 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 or sent by registered or certified mail,
return receipt requested, postage prepaid 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:
SCOVILL HOLDINGS INC.
c/o Saratoga Partners III, L.P.
535 Madison Avenue
New York, NY 10022
Attn: Christian L. Oberbeck
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005-1702
Attn: Robert Usadi, Esq.
(b) If to any Purchaser, to such Purchaser at the address listed on
the signature page below such Purchaser's name or at such other address as
such party shall have specified by notice in writing to the other party in
accordance with this Section 13.
14. Amendment. This Agreement may not be amended, modified or
---------
supplemented and no waivers of or consents to departures from the provisions
hereof may be given unless consented to in writing by each Purchaser affected,
on the one hand, and the Company on the other hand. Unless otherwise specified
in such waiver or consent, a waiver or consent given hereunder shall be
effective only in the specific instance and for the specific purpose for which
given.
1. Integration. The parties agree that this Agreement and the
-----------
Stockholders Agreement contain the entire under-
<PAGE>
standing among the parties hereto relating to the matter hereof.
15. Third Party Beneficiaries. Nothing expressed or implied in this
-------------------------
Agreement is intended or shall be construed to confer upon or give to any third
party any rights or remedies against any party hereto.
<PAGE>
IN WITNESS WHEREOF, each Purchaser and the Company have executed this
Agreement as of the date first above written.
"COMPANY"
SCOVILL HOLDINGS INC.
By: ______________________________________________
Name:
Title:
<PAGE>
"PURCHASERS"
SARATOGA PARTNERS III, L.P.
By: DR Associates IV, L.P.
its General Partner
By: Dillon, Read Inc.,
its General Partner
By: _____________________________________________
Name:
Title:
Number of shares to be purchased by above
Purchaser:
Preferred Stock:
Common Stock:
Name in which shares should be registered (if
different from the name of the Purchaser)
Registered address:
535 Madison Avenue
New York, New York 10022
Attention: Christian L. Oberbeck,
Managing Director
Telephone: (212) 906-7350
Telecopier: (212) 750-3343
<PAGE>
MOORE GLOBAL INVESTMENTS, LTD.
By: Moore Capital Advisors, L.L.C., its general
partner
By: ______________________________________________
Name:
Title:
Number of shares to be purchased by above
Purchaser:
Preferred Stock:
Common Stock:
Name in which shares should be registered (if
different from the name of the Purchaser)
Registered address:
c/o Moore Capital Management Inc.
1251 Avenue of the Americas
53rd Floor
New York, New York 10020
Attention:
Telephone:
Telecopier:
<PAGE>
REMINGTON INVESTMENT STRATEGIES, L.P.
By: Moore Capital Advisors, L.L.C., its general
partner
By: ______________________________________________
Name:
Title:
Number of shares to be purchased by above
Purchaser:
Preferred Stock:
Common Stock:
Name in which shares should be registered (if
different from the name of the Purchaser)
Registered address:
c/o Moore Capital Management Inc.
1251 Avenue of the Americas
53rd Floor
New York, New York 10020
Attention:
Telephone:
Telecopier:
<PAGE>
WLD PARTNERS, LTD.
By: WLD Partners GP, Inc., its
General Partner
By: ______________________________________________
Name: David W. Horvitz
Title: Vice President
Number of shares to be purchased by above
Purchaser:
Preferred Stock: 400,000
Common Stock: 400,000
Name in which shares should be registered (if
different from the name of the Purchaser)
Registered address:
WLD Partners, Ltd.
Las Olas Centre
450 East Las Olas Boulevard
Suite 900
Fort Lauderdale, FL 33301
Attention: Ron Adelhelm
Telephone: (954) 523-7771
Telecopier: (954) 760-9845
<PAGE>
BROWN UNIVERSITY THIRD CENTURY FUND
By: Saratoga Partners III, L.P.,
its Attorney-in-Fact
By: DR Associates IV, L.P., its
General Partner
By: Dillon, Read Inc., its
General Partner
By: ______________________________________________
Name: Christian L. Oberbeck
Title: Attorney-in-Fact
Number of shares to be purchased by above
Purchaser:
Preferred Stock: 100,000
Common Stock: 100,000
Name in which shares should be registered (if
different from the name of the Purchaser)
Registered address:
c/o Saratoga Partners III, L.P.
535 Madison Avenue
New York, New York 10022
Attention: Christian L. Oberbeck
Telephone: (212) 906-7350
Telecopier: (212) 750-3343
<PAGE>
SARATOGA PARTNERS III, C.V.
By: Selinus Corporation III,
N.V., its General Partner
By: Curacao Corporation Company
N.V., its Managing Director
By:______________________________________________
Name: J.F.M. Horsten
Title: Attorney-in-Fact
By:______________________________________________
Name: S.H.P. Crijns
Title: Managing Director
Number of shares to be purchased by above
Purchaser:
Preferred Stock: 320,914
Common Stock: 320,914
Name in which shares should be registered (if
different from the name of the Purchaser)
Registered address:
c/o Curacao International Trust
Company, N.V.
De Ruyterkade 62
P.O. Box 812
Curacao, Netherlands Antilles
Attn: J.F.M. Horsten
Telephone: 011-599-9-732-2555
Telecopier: 011-599-9-732-2500
<PAGE>
EXHIBIT 10.1.19
---------------
SCOVILL HOLDINGS INC.
LONG TERM INCENTIVE AND SHARE AWARD PLAN
1. Purposes.
--------
The purposes of the Long Term Incentive and Share Award Plan are to
advance the interests of Scovill Holdings Inc. and its stockholders by providing
a means to attract, retain, and motivate employees and directors of the Company
upon whose judgment, initiative and efforts the continued success, growth and
development of the Company is dependent.
2. Definitions.
-----------
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board or the Committee as a participating
employer under the Plan, provided that the Company directly or indirectly owns
at least 20% of the combined voting power of all classes of stock of such entity
or at least 20% of the ownership interests in such entity.
(b) "Award" means any Option, SAR, Restricted Share, Restricted Share
Unit, Performance Share, Performance Unit, Dividend Equivalent, or Other Share-
Based Award granted to an Eligible Employee under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts which
have been designated by such Eligible Employee in his or her most recent written
beneficiary designation filed with the Company to receive the benefits specified
under this Plan upon the death of the Eligible Employee, or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(g) "Committee" means the Compensation Committee of the Board, or
such other committee as may be designated by the Board to administer the Plan.
<PAGE>
-2-
(h) "Company" means Scovill Holdings Inc., a corporation organized
under the laws of Delaware, or any successor corporation.
(i) "Dividend Equivalent" means a right, granted under Section 5(g),
to receive cash, Shares, or other property equal in value to dividends paid with
respect to a specified number of Shares. Dividend Equivalents may be awarded on
a free-standing basis or in connection with another Award, and may be paid
currently or on a deferred basis.
(j) "Eligible Employee" means (i) an employee of the Company, a
Subsidiary or an Affiliate, including any director who is an employee, who is
responsible for or contributes to the management, growth and/or profitability of
the business of the Company, its Subsidiaries or Affiliates and (ii) any member
of the Board.
(k) "Fair Market Value" means, with respect to Shares or other
property, the fair market value of such Shares or other property determined by
such methods or procedures as shall be established from time to time by the
Committee. If the Shares are listed on any established stock exchange or a
national market system, unless otherwise determined by the Committee in good
faith, the Fair Market Value of Shares shall mean the mean between the high and
low selling prices per Share on the immediately preceding date (or, if the
Shares were not traded on that day, the next preceding day that the Shares were
traded) on the principal exchange on which the Shares are traded, as such prices
are officially quoted on such exchange.
(l) "ISO" means any option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(m) "NQSO" means any Option that is not an ISO.
(n) "Option" means a right, granted under Section 5(b), to purchase
Shares.
(o) "Other Share-Based Award" means a right, granted under Section
5(h), that relates to or is valued by reference to Shares.
(p) "Participant" means an Eligible Employee who has been granted an
Award under the Plan.
(q) "Performance Share" means a performance share granted under
Section 5(f).
(r) "Performance Unit" means a performance unit granted under Section
5(f).
(s) "Plan" means this Long Term Incentive and Share Award Plan.
(t) "Restricted Shares" means an Award of Shares under Section 5(d)
that may be subject to certain restrictions and to a risk of forfeiture.
<PAGE>
-3-
(u) "Restricted Share Unit" means a right, granted under Section
5(e), to receive Shares or cash at the end of a specified deferral period.
(v) "SAR" or "Share Appreciation Right" means the right, granted
under Section 5(c), to be paid an amount measured by the difference between the
exercise price of the right and the Fair Market Value of Shares on the date of
exercise of the right, with payment to be made in cash, Shares, or property as
specified in the Award or determined by the Committee.
(w) "Shares" means Common Stock, $0.0001 par value per share, of the
Company.
(x) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns shares
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
3. Administration.
--------------
(a) Authority of the Committee. The Plan shall be administered by
--------------------------
the Committee, and the Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions of
the Plan:
(i) to select Eligible Employees to whom Awards may be granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be granted to each
Eligible Employee;
(iv) to determine the type and number of Awards to be granted, the
number of Shares to which an Award may relate, the terms and conditions of
any Award granted under the Plan (including, but not limited to, any
exercise price, grant price, or purchase price, and any bases for adjusting
such exercise, grant or purchase price, any restriction or condition, any
schedule for lapse of restrictions or conditions relating to
transferability or forfeiture, exercisability, or settlement of an Award,
and waiver or accelerations thereof, and waivers of performance conditions
relating to an Award, based in each case on such considerations as the
Committee shall determine), and all other matters to be determined in
connection with an Award;
(v) to determine whether, to what extent, and under what
circumstances an Award may be settled, or the exercise price of an Award
may be paid, in cash, Shares, other Awards, or other property, or an Award
may be canceled, forfeited, exchanged, or surrendered;
(vi) to determine whether, to what extent, and under what
circumstances cash, Shares, other Awards, or other property payable with
respect to an Award will be deferred
<PAGE>
-4-
either automatically, at the election of the Committee, or at the election
of the Eligible Employee;
(vii) to prescribe the form of each Award Agreement, which need not
be identical for each Eligible Employee;
(viii) to adopt, amend, suspend, waive, and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;
(ix) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and any
Award, rules and regulations, Award Agreement, or other instrument
hereunder;
(x) to accelerate the exercisability or vesting of all or any portion
of any Award or to extend the period during which an Award is exercisable;
and
(xi) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem necessary
or advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. The Committee shall
-----------------------------------------
have sole discretion in exercising its authority under the Plan. Any action of
the Committee with respect to the Plan shall be final, conclusive, and binding
on all persons, including the Company, Subsidiaries, Affiliates, Eligible
Employees, any person claiming any rights under the Plan from or through any
Eligible Employee, and stockholders. The express grant of any specific power to
the Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee. The Committee
may delegate to officers or managers of the Company or any Subsidiary or
Affiliate the authority, subject to such terms as the Committee shall determine,
to perform its administrative functions hereunder.
(c) Limitation of Liability. Each member of the Committee shall be
-----------------------
entitled to, in good faith, rely or act upon any report or other information
furnished to him or her by any officer or other employee of the Company or any
Subsidiary or Affiliate, the Company's independent certified public accountants,
or other professional retained by the Company to assist in the administration of
the Plan. No member of the Committee, nor any officer or employee of the
Company acting on behalf of the Committee, shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Committee and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company with respect to any such
action, determination, or interpretation.
4. Shares Subject to the Plan.
--------------------------
<PAGE>
-5-
(a) Subject to adjustment as provided in Section 4(c) hereof, the
total number of Shares reserved for issuance in connection with Awards under the
Plan shall be 1,100,000. No Award may be granted if the number of Shares to
which such Award relates, when added to the number of Shares previously issued
under the Plan, exceeds the number of Shares reserved under the preceding
sentence. If any Awards are forfeited, canceled, terminated, exchanged or
surrendered or such Award is settled in cash or otherwise terminates without a
distribution of Shares to the Participant, any Shares counted against the number
of Shares reserved and available under the Plan with respect to such Award
shall, to the extent of any such forfeiture, settlement, termination,
cancellation, exchange or surrender, again be available for Awards under the
Plan. Upon the exercise of any Award granted in tandem with any other Awards,
such related Awards shall be canceled to the extent of the number of Shares as
to which the Award is exercised.
(b) Any Shares distributed pursuant to an Award may consist, in whole
or in part, of authorized and unissued Shares or treasury Shares including
Shares acquired by purchase in the open market or in private transactions.
(c) In the event that the Committee shall determine that any dividend
in Shares, recapitalization, Share split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Shares such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Eligible Employees under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems appropriate and, in such manner as
it may deem equitable, adjust any or all of (i) the number and kind of shares
which may thereafter be issued under the Plan, (ii) the number and kind of
shares, other securities or other consideration issued or issuable in respect of
outstanding Awards, and (iii) the exercise price, grant price, or purchase price
relating to any Award; provided, however, in each case that, with respect to
-----------------
ISOs, such adjustment shall be made in accordance with Section 424(h) of the
Code, unless the Committee determines otherwise. In addition, the Committee is
authorized to make adjustments in the terms and conditions of, and the criteria
and performance objectives included in, Awards in recognition of unusual or non-
recurring events (including, without limitation, events described in the
preceding sentence) affecting the Company or any Subsidiary or Affiliate or the
financial statements of the Company or any Subsidiary or Affiliate, or in
response to changes in applicable laws, regulations, or accounting principles.
5. Specific Terms of Awards.
------------------------
(a) General. Awards may be granted on the terms and conditions set
-------
forth in this Section 5. In addition, the Committee may impose on any Award or
the exercise thereof, at the date of grant or thereafter (subject to Section
8(d)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
regarding forfeiture of Awards or continued exercisability of Awards in the
event of termination of employment by the Eligible Employee.
(b) Options. The Committee is authorized to grant Options, which may
-------
be NQSOs or ISOs, to Eligible Employees on the following terms and conditions:
<PAGE>
-6-
(i) Exercise Price. The exercise price per Share purchasable under
--------------
an Option shall be determined by the Committee, and the Committee may,
without limitation, set an exercise price that is based upon achievement of
performance criteria if deemed appropriate by the Committee.
(ii) Time and Method of Exercise. The Committee shall determine at
---------------------------
the date of grant or thereafter the time or times at which an Option may be
exercised in whole or in part (including, without limitation, upon
achievement of performance criteria if deemed appropriate by the
Committee), the methods by which such exercise price may be paid or deemed
to be paid (including, without limitation, broker-assisted exercise
arrangements), the form of such payment (including, without limitation,
cash, Shares, notes or other property), and the methods by which Shares
will be delivered or deemed to be delivered to Eligible Employees.
(iii) ISOs. The terms of any ISO granted under the Plan shall comply
----
in all respects with the provisions of Section 422 of the Code, including
but not limited to the requirement that the ISO shall be granted within ten
years from the earlier of the date of adoption or stockholder approval of
the Plan. ISOs may only be granted to employees of the Company or a
Subsidiary.
(c) SARs. The Committee is authorized to grant SARs (Share
----
Appreciation Rights) to Eligible Employees on the following terms and
conditions:
(i) Right to Payment. An SAR shall confer on the Eligible Employee
----------------
to whom it is granted a right to receive with respect to each Share subject
thereto, upon exercise thereof, the excess of (1) the Fair Market Value of
one Share on the date of exercise (or, if the Committee shall so determine
in the case of any such right, the Fair Market Value of one Share at any
time during a specified period before or after the date of exercise) over
(2) the exercise price of the SAR as determined by the Committee as of the
date of grant of the SAR (which, in the case of an SAR granted in tandem
with an Option, shall be equal to the exercise price of the underlying
Option).
(ii) Other Terms. The Committee shall determine, at the time of
-----------
grant or thereafter, the time or times at which an SAR may be exercised in
whole or in part, the method of exercise, method of settlement, form of
consideration payable in settlement, method by which Shares will be
delivered or deemed to be delivered to Eligible Employees, whether or not
an SAR shall be in tandem with any other Award, and any other terms and
conditions of any SAR. Unless the Committee determines otherwise, an SAR
(1) granted in tandem with an NQSO may be granted at the time of grant of
the related NQSO or at any time thereafter and (2) granted in tandem with
an ISO may only be granted at the time of grant of the related ISO.
(d) Restricted Shares. The Committee is authorized to grant
-----------------
Restricted Shares to Eligible Employees on the following terms and conditions:
<PAGE>
-7-
(i) Issuance and Restrictions. Restricted Shares shall be subject to
-------------------------
such restrictions on transferability and other restrictions, if any, as the
Committee may impose at the date of grant or thereafter, which restrictions
may lapse separately or in combination at such times, under such
circumstances (including, without limitation, upon achievement of
performance criteria if deemed appropriate by the Committee), in such
installments, or otherwise, as the Committee may determine. Except to the
extent restricted under the Award Agreement relating to the Restricted
Shares, an Eligible Employee granted Restricted Shares shall have all of
the rights of a stockholder including, without limitation, the right to
vote Restricted Shares and the right to receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by the Committee, at
----------
the date of grant or thereafter, upon termination of employment during the
applicable restriction period, Restricted Shares and any accrued but unpaid
dividends or Dividend Equivalents that are at that time subject to
restrictions shall be forfeited; provided, however, that the Committee may
-----------------
provide, by rule or regulation or in any Award Agreement, or may determine
in any individual case, that restrictions or forfeiture conditions relating
to Restricted Shares will be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Restricted Shares.
(iii) Certificates for Shares. Restricted Shares granted under the
-----------------------
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Shares are registered in the name of
the Eligible Employee, such certificates shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Restricted Shares, and the Company shall retain physical possession of the
certificate.
(iv) Dividends. Dividends paid on Restricted Shares shall be either
---------
paid at the dividend payment date, or deferred for payment to such date as
determined by the Committee, in cash or in unrestricted Shares having a
Fair Market Value equal to the amount of such dividends. Shares
distributed in connection with a Share split or dividend in Shares, and
other property distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted Shares with
respect to which such Shares or other property has been distributed.
(e) Restricted Share Units. The Committee is authorized to grant
----------------------
Restricted Share Units to Eligible Employees, subject to the following terms and
conditions:
(i) Award and Restrictions. Delivery of Shares or cash, as the case
----------------------
may be, will occur upon expiration of the deferral period specified for
Restricted Share Units by the Committee (or, if permitted by the Committee,
as elected by the Eligible Employee). In addition, Restricted Share Units
shall be subject to such restrictions as the Committee may impose, if any
(including, without limitation, the achievement of performance criteria if
deemed appropriate by the Committee), at the date of grant or thereafter,
which restrictions may lapse at the expiration of the deferral period or at
earlier or later specified times, separately or in combination, in
installments or otherwise, as the Committee may determine.
<PAGE>
-8-
(ii) Forfeiture. Except as otherwise determined by the Committee at
----------
date of grant or thereafter, upon termination of employment (as determined
under criteria established by the Committee) during the applicable deferral
period or portion thereof to which forfeiture conditions apply (as provided
in the Award Agreement evidencing the Restricted Share Units), or upon
failure to satisfy any other conditions precedent to the delivery of Shares
or cash to which such Restricted Share Units relate, all Restricted Share
Units that are at that time subject to deferral or restriction shall be
forfeited; provided, however, that the Committee may provide, by rule or
-----------------
regulation or in any Award Agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to Restricted
Share Units will be waived in whole or in part in the event of termination
resulting from specified causes, and the Committee may in other cases waive
in whole or in part the forfeiture of Restricted Share Units.
(f) Performance Shares and Performance Units. The Committee is
----------------------------------------
authorized to grant Performance Shares or Performance Units or both to Eligible
Employees on the following terms and conditions:
(i) Performance Period. The Committee shall determine a performance
------------------
period (the "Performance Period") of one or more years and shall determine
the performance objectives for grants of Performance Shares and Performance
Units. Performance objectives may vary from Eligible Employee to Eligible
Employee and shall be based upon such performance criteria as the Committee
may deem appropriate. Performance Periods may overlap and Eligible
Employees may participate simultaneously with respect to Performance Shares
and Performance Units for which different Performance Periods are
prescribed.
(ii) Award Value. At the beginning of a Performance Period, the
-----------
Committee shall determine for each Eligible Employee or group of Eligible
Employees with respect to that Performance Period the range of number of
Shares, if any, in the case of Performance Shares, and the range of dollar
values, if any, in the case of Performance Units, which may be fixed or may
vary in accordance with such performance or other criteria specified by the
Committee, which shall be paid to an Eligible Employee as an Award if the
relevant measure of Company performance for the Performance Period is met.
(iii) Significant Events. If during the course of a Performance
------------------
Period there shall occur significant events as determined by the Committee
which the Committee expects to have a substantial effect on a performance
objective during such period, the Committee may revise such objective.
(iv) Forfeiture. Except as otherwise determined by the Committee, at
----------
the date of grant or thereafter, upon termination of employment during the
applicable Performance Period, Performance Shares and Performance Units for
which the Performance Period was prescribed shall be forfeited; provided,
---------
however, that the Committee may provide, by rule or regulation or in any
-------
Award Agreement, or may determine in an individual case, that
<PAGE>
-9-
restrictions or forfeiture conditions relating to Performance Shares and
Performance Units will be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Performance Shares
and Performance Units.
(v) Payment. Each Performance Share or Performance Unit may be paid
-------
in whole Shares, or cash, or a combination of Shares and cash either as a
lump sum payment or in installments, all as the Committee shall determine,
at the time of grant of the Performance Share or Performance Unit or
otherwise, commencing as soon as practicable after the end of the relevant
Performance Period.
(g) Dividend Equivalents. The Committee is authorized to grant
--------------------
Dividend Equivalents to Eligible Employees. The Committee may provide, at the
date of grant or thereafter, that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested in
additional Shares, or other investment vehicles as the Committee may specify,
provided that Dividend Equivalents (other than freestanding Dividend
Equivalents) shall be subject to all conditions and restrictions of the
underlying Awards to which they relate.
(h) Other Share-Based Awards. The Committee is authorized, subject
------------------------
to limitations under applicable law, to grant to Eligible Employees such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Shares, as deemed by the
Committee to be consistent with the purposes of the Plan, including, without
limitation, unrestricted shares awarded purely as a "bonus" and not subject to
any restrictions or conditions, other rights convertible or exchangeable into
Shares, purchase rights for Shares, Awards with value and payment contingent
upon performance of the Company or any other factors designated by the
Committee, and Awards valued by reference to the performance of specified
Subsidiaries or Affiliates. The Committee shall determine the terms and
conditions of such Awards at date of grant or thereafter. Shares delivered
pursuant to an Award in the nature of a purchase right granted under this
Section 5(h) shall be purchased for such consideration, paid for at such times,
by such methods, and in such forms, including, without limitation, cash, Shares,
notes or other property, as the Committee shall determine. Cash awards, as an
element of or supplement to any other Award under the Plan, shall also be
authorized pursuant to this Section 5(h).
6. Certain Provisions Applicable to Awards.
---------------------------------------
(a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards
-----------------------------------------------------
granted under the Plan may, in the discretion of the Committee, be granted to
Eligible Employees either alone or in addition to, in tandem with, or in
exchange or substitution for, any other Award granted under the Plan or any
award granted under any other plan or agreement of the Company, any Subsidiary
or Affiliate, or any business entity to be acquired by the Company or a
Subsidiary or Affiliate, or any other right of an Eligible Employee to receive
payment from the Company or any Subsidiary or Affiliate. Awards may be granted
in addition to or in tandem with such other Awards or awards, and may be granted
either as of the same time as or a different time from the grant of such other
Awards or awards. The per Share exercise price of any Option, grant price of
any SAR, or purchase price of any
<PAGE>
-10-
other Award conferring a right to purchase Shares which is granted, in
connection with the substitution of awards granted under any other plan or
agreement of the Company or any Subsidiary or Affiliate or any business entity
to be acquired by the Company or any Subsidiary or Affiliate, shall be
determined by the Committee, in its discretion.
(b) Terms of Awards. The term of each Award granted to an Eligible
---------------
Employee shall be for such period as may be determined by the Committee;
provided, however, that in no event shall the term of any ISO or an SAR granted
- -----------------
in tandem therewith exceed a period of ten years from the date of its grant (or
such shorter period as may be applicable under Section 422 of the Code).
(c) Form of Payment Under Awards. Subject to the terms of the Plan
----------------------------
and any applicable Award Agreement, payments to be made by the Company or a
Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award may
be made in such forms as the Committee shall determine at the date of grant or
thereafter, including, without limitation, cash, Shares, or other property, and
may be made in a single payment or transfer, in installments, or on a deferred
basis. The Committee may make rules relating to installment or deferred
payments with respect to Awards, including the rate of interest to be credited
with respect to such payments.
(d) Nontransferability. Unless otherwise set forth by the
------------------
Committee in an Award Agreement which is not an ISO, Awards (except for vested
shares) shall not be transferable by an Eligible Employee except by will or the
laws of descent and distribution (except pursuant to a Beneficiary designation)
and shall be exercisable during the lifetime of an Eligible Employee only by
such Eligible Employee or his guardian or legal representative. An Eligible
Employee's rights under the Plan may not be pledged, mortgaged, hypothecated, or
otherwise encumbered, and shall not be subject to claims of the Eligible
Employee's creditors.
7. General Provisions.
------------------
(a) Compliance with Legal and Trading Requirements. The Plan, the
----------------------------------------------
granting and exercising of Awards thereunder, and the other obligations of the
Company under the Plan and any Award Agreement, shall be subject to all
applicable federal and state laws, rules and regulations, and to such approvals
by any regulatory or governmental agency as may be required. The Company, in
its discretion, may postpone the issuance or delivery of Shares under any Award
until completion of such stock exchange or market system listing or registration
or qualification of such Shares or other required action under any state or
federal law, rule or regulation as the Company may consider appropriate, and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Shares in compliance with applicable laws, rules and regulations.
No provisions of the Plan shall be interpreted or construed to obligate the
Company to register any Shares under federal or state law.
(b) No Right to Continued Employment or Service. Neither the Plan
-------------------------------------------
nor any action taken thereunder shall be construed as giving any employee or
director the right to be retained in the employ or service of the Company or any
of its Subsidiaries or Affiliates, nor shall it interfere in any
<PAGE>
-11-
way with the right of the Company or any of its Subsidiaries or Affiliates to
terminate any employee's or director's employment or service at any time.
(c) Taxes. The Company or any Subsidiary or Affiliate is authorized
-----
to withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Shares, or any payroll or other payment
to an Eligible Employee, amounts of withholding and other taxes due in
connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and Eligible
Employees to satisfy obligations for the payment of withholding taxes and other
tax obligations relating to any Award. This authority shall include authority
to withhold or receive Shares or other property and to make cash payments in
respect thereof in satisfaction of an Eligible Employee's tax obligations.
(d) Changes to the Plan and Awards. The Board may amend, alter,
------------------------------
suspend, discontinue, or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders of the Company
or Participants, except that any such amendment, alteration, suspension,
discontinuation, or termination shall be subject to the approval of the
Company's stockholders to the extent such stockholder approval is required under
Section 422 of the Code; provided, however, that, without the consent of an
-----------------
affected Participant, no amendment, alteration, suspension, discontinuation, or
termination of the Plan may impair the rights or, in any other manner, adversely
affect the rights of such Participant under any Award theretofore granted to him
or her.
(e) No Rights to Awards; No Stockholder Rights. No Eligible Employee
------------------------------------------
or employee shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Eligible Employees and
employees. No Award shall confer on any Eligible Employee any of the rights of
a stockholder of the Company unless and until Shares are duly issued or
transferred to the Eligible Employee in accordance with the terms of the Award.
(f) Unfunded Status of Awards. The Plan is intended to constitute an
-------------------------
"unfunded" plan for incentive compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the Plan or
any Award shall give any such Participant any rights that are greater than those
of a general creditor of the Company; provided, however, that the Committee may
-----------------
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under the Plan to deliver cash, Shares, other Awards, or
other property pursuant to any Award, which trusts or other arrangements shall
be consistent with the "unfunded" status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant.
(g) Nonexclusivity of the Plan. Neither the adoption of the Plan by
--------------------------
the Board nor its submission to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of options and other awards otherwise than
under the Plan, and such arrangements may be either applicable generally or only
in specific cases.
(h) Not Compensation for Benefit Plans. No Award payable under this
----------------------------------
Plan shall be deemed salary or compensation for the purpose of computing
benefits under any benefit plan or other
<PAGE>
-12-
arrangement of the Company for the benefit of its employees or directors unless
the Company shall determine otherwise.
(i) No Fractional Shares. No fractional Shares shall be issued or
--------------------
delivered pursuant to the Plan or any Award. In the case of Awards to Eligible
Employees, the Committee shall determine whether cash, other Awards, or other
property shall be issued or paid in lieu of such fractional Shares or whether
such fractional Shares or any rights thereto shall be forfeited or otherwise
eliminated.
(j) Governing Law. The validity, construction, and effect of the
-------------
Plan, any rules and regulations relating to the Plan, and any Award Agreement
shall be determined in accordance with the laws of New York without giving
effect to principles of conflict of laws.
(k) Effective Date; Plan Termination. The Plan shall become
--------------------------------
effective as of November 26, 1997 (the "Effective Date") upon approval by the
stockholders of the Company. The Plan shall terminate as to future awards on
the date which is ten (10) years after the Effective Date.
(1) Titles and Headings. The titles and headings of the sections in
-------------------
the Plan are for convenience of reference only. In the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
<PAGE>
EXHIBIT 10.1.21
$53,000,000
CREDIT AGREEMENT
among
SCOVILL HOLDINGS INC.,
SCOVILL ACQUISITION INC.,
KSCO ACQUISITION CORPORATION,
SCOVILL FASTENERS INC.,
PCI GROUP, INC.,
RAU FASTENER COMPANY, LLC,
SCOMEX, INC.,
VARIOUS BANKS
and
CREDIT AGRICOLE INDOSUEZ,
as Administrative Agent
SWISS BANK CORPORATION, STAMFORD BRANCH,
as Documentation and Syndication Agent
and
SBC WARBURG DILLON READ INC.,
as Advisor and Arranger
__________________________________
Dated as of November 26, 1997
__________________________________
<PAGE>
TABLE OF CONTENTS
Page
------
Section 1. Definitions and Accounting Terms 2
1.01 Defined Terms 2
1.02 Computation of Time Periods 24
1.03 Accounting Terms 24
Section 2. Amount and Terms of Credit 24
2.01 The Commitments 24
2.02 Minimum Amount of Each Borrowing 25
2.03 Notice of Borrowing 25
2.04 Disbursement of Funds 26
2.05 Notes 26
2.06 Conversions 27
2.07 Pro Rata Borrowings 28
2.08 Interest 28
2.09 Interest Periods 28
2.10 Increased Costs, Illegality, Etc. 29
2.11 Compensation 31
2.12 Change of Lending Office 32
2.13 Replacement of Banks 32
2.14 Notice of Certain Costs 33
Section 3. Letters of Credit 33
3.01 Letters of Credit 33
3.02 Minimum Stated Amount 34
3.03 Letter of Credit Requests 34
3.04 Letter of Credit Participations 34
3.05 Agreement to Repay Letter of Credit Drawings 36
3.06 Increased Costs 37
Section 4. Commitment Commission; Fees; Reductions of Commitment 37
4.01 Fees 37
4.02 Voluntary Termination of Unutilized Commitments 38
4.03 Mandatory Reduction of Commitments 38
Section 5. Prepayments; Payments; Taxes 39
5.01 Voluntary Prepayments 39
5.02 Mandatory Repayments and Commitment Reductions 39
5.03 Method and Place of Payment 43
5.04 Net Payments 43
<PAGE>
Page
------
Section 6. Conditions Precedent to Loans on the Initial Borrowing Date 45
6.01 Execution of Agreement Notes 45
6.02 Officer's Certificate 46
6.03 Opinions of Counsel 46
6.04 Corporate Documents; Proceedings 46
6.05 Employee Benefit Plans; Shareholders Agreements;
Management Agreements; Employment Agreements;
and Debt Agreements 46
6.06 Equity Transactions; Capital Contributions 47
6.07 Consummation of the Acquisition 47
6.08 Security Agreement 48
6.09 Material Adverse Change, Etc. 49
6.10 Litigation 49
6.11 Fees, Etc. 49
6.12 Solvency Opinion; Environmental Assessments 49
6.13 Insurance Policies 50
6.14 Approvals 50
6.15 Financial Statements; Projections; Management Letters 50
6.16 Refinancing 51
6.17 Consent Letter 52
6.18 Mortgage; Title Insurance; Surveys; Etc. 52
6.19 Initial Borrowing Base Certificate 52
6.20 Direction Letters 52
Section 7. Conditions Precedent to All Credit Events 53
7.01 No Default; Representations and Warranties 53
7.02 Material Adverse Change, Etc. 53
7.03 Litigation 53
7.04 Notice of Borrowing; Letter of Credit Request;
Other Documents 54
Section 8. Representations, Warranties and Agreements 54
8.01 Corporate Status 54
8.02 Corporate Power and Authority 55
8.03 No Violation 55
8.04 Governmental Approvals 55
8.05 Financial Statements; Financial Conditions;
Undisclosed Liabilities; Projections; Etc. 55
8.06 Litigation 57
8.07 True and Complete Disclosure 57
8.08 Use of Proceeds; Margin Regulations 57
8.09 Tax Returns and Payments 58
8.10 Compliance with ERISA 58
8.11 The Security Documents 59
8.12 Representations and Warranties in Documents 60
<PAGE>
Page
------
8.13 Properties 60
8.14 Capitalization 60
8.15 Subsidiaries 60
8.16 Compliance with Statutes, Etc. 60
8.17 Investment Company Act 61
8.18 Public Utility Holding Company Act 61
8.19 Environmental Matters 61
8.20 Labor Relations 62
8.21 Patents, Licenses, Franchises and Formulas 62
8.22 Indebtedness 63
8.23 Restrictions on or Relating to Subsidiaries 63
8.24 The Transaction 63
8.25 Leases 64
8.26 Collective Bargaining Agreements;
Tax Allocation Agreements 64
Section 9. Affirmative Covenants 64
9.01 Information Covenants 64
9.02 Books, Records and Inspections 68
9.03 Maintenance of Property and Insurance 68
9.04 Corporate Franchises 69
9.05 Compliance with Statutes, Etc. 69
9.06 Compliance with Environmental Laws 69
9.07 ERISA 70
9.08 End of Fiscal Years; Fiscal Quarters 71
9.09 Performance of Obligations 71
9.10 Payment of Taxes 71
9.11 Interest Rate Protection 71
9.12 Use of Proceeds 71
9.13 UCC Searches 71
9.14 Intellectual Property Rights 71
9.15 Registry 72
9.16 Ownership of Subsidiaries 72
9.17 Further Actions 72
9.18 Raw Material Purchases by the Borrower 74
9.19 Bank Deposit Accounts; Concentration Accounts 74
9.20 Conditions Subsequent to Initial Credit Event 74
Section 10. Negative Covenants 76
10.01 Liens 76
10.02 Consolidation, Merger, Purchase or Sale of Assets, Etc. 77
10.03 Dividends 79
10.04 Leases 80
10.05 Indebtedness 81
<PAGE>
Page
------
10.06 Advances, Investments and Loans 81
10.07 Transactions with Affiliates 83
10.08 Capital Expenditures 83
10.09 Fixed Charge Coverage Ratio 84
10.10 Funded Indebtedness to Consolidated EBITDA 84
10.11 Limitation on Modifications of Certificate of
Incorporation, By-Laws and Certain Other Agreements; Etc. 85
10.12 Limitation on Certain Restrictions on Subsidiaries 86
10.13 Limitation on Issuance of Capital Stock 86
10.14 Business 87
10.15 Limitation on Creation of Subsidiaries 87
10.16 Concentration Account; Bank Deposit Accounts 88
10.17 Limitation on Creation of Plans 88
10.18 Negative Pledge 88
10.19 Partnerships, Etc 88
10.20 Minimum Net Worth 88
Section 11. Events of Default 88
11.01 Payments 88
11.02 Representations, Etc. 89
11.03 Covenants 89
11.04 Default Under Other Agreements 89
11.05 Bankruptcy, Etc. 89
11.06 ERISA 90
11.07 Security Documents 90
11.08 Parent Guaranty and Subsidiary Guaranty 90
11.09 Judgments 91
11.10 Credit Documents 91
11.11 Change of Control 91
Section 12. The Administrative Agent and the D&S Agent 92
12.01 Appointment 92
12.02 Delegation of Duties 92
12.03 Exculpatory Provisions 92
12.04 Reliance by the Administrative Agent and the D&S Agent 93
12.05 Notice of Default 93
12.06 Non-Reliance on Administrative Agent, D&S Agent
and Other Banks 93
12.07 Indemnification 94
12.08 The Administrative Agent and the D&S Agent in
Their Individual Capacities 94
12.09 Successor Administrative Agent 95
12.10 Resignation by Administrative Agent 95
Section 13. The Parent Guaranty 96
<PAGE>
Page
------
13.01 The Guaranty 96
13.02 Bankruptcy 96
13.03 Nature of Liability 96
13.04 Guaranty Absolute 97
13.05 Independent Obligation 97
13.06 Authorization 97
13.07 Reliance 98
13.08 Subordination 98
13.09 Waiver 98
13.10 Guaranty Continuing 99
13.11 Binding Nature of Guaranties 99
13.12 Judgments Binding 99
Section 14. Subsidiary Guaranty 99
14.01 The Subsidiary Guaranty 99
14.02 Bankruptcy 100
14.03 Nature of Liability 101
14.04 Subsidiary Guaranty Absolute 101
14.05 Independent Obligation 101
14.06 Authorization 101
14.07 Reliance 102
14.08 Subordination 102
14.09 Waiver 102
14.10 Subsidiary Guaranty Continuing 103
14.11 Binding Nature of Guaranties 103
14.12 Judgments Binding 104
Section 15. Miscellaneous 104
15.01 Payment of Expenses, Etc. 104
15.02 Right of Setoff 105
15.03 Notices 105
15.04 Benefit of Agreement 106
15.05 No Waiver; Remedies Cumulative 107
15.06 Payment Pro Rata 107
15.07 Calculations; Computations 108
15.08 Effectiveness; Counterparts 108
15.09 Headings Descriptive 108
15.10 Amendment or Waiver 108
15.11 Survival 109
15.12 Domicile of Loans 109
15.13 Confidentiality 109
15.14 Governing Law; Submission to Jurisdiction;
Venue; Waiver of Jury Trial 110
<PAGE>
Page
------
SCHEDULES
SCHEDULE I Commitments
SCHEDULE II Projections
SCHEDULE III Real Property
SCHEDULE IV Subsidiaries
SCHEDULE V Insurance
SCHEDULE VI ERISA Matters
SCHEDULE VII Environmental Matters
SCHEDULE VIII Litigation
SCHEDULE IX Bank Deposit Accounts
SCHEDULE X Existing Indebtedness
SCHEDULE XI Ownership of Parent Capital Stock
EXHIBITS
EXHIBIT A-1 Form of Notice of Borrowing
EXHIBIT A-2 Form of Notice of Conversion
EXHIBIT B-1 Form of Term Note
EXHIBIT B-2 Form of Revolving Note
EXHIBIT C Form of Letter of Credit Request
EXHIBIT D Form of Opinion
EXHIBIT E Form of Officers' Certificate of Credit Parties
EXHIBIT F Form of Security Agreement
EXHIBIT G Form of Consent Letter
EXHIBIT H Form of Section 5.04(b)(ii) Certificate
EXHIBIT I Form of Bank Assignment and Assumption Agreement
EXHIBIT J Form of Borrowing Base Certificate
<PAGE>
This CREDIT AGREEMENT is dated as of November 26, 1997 (this
"Agreement") and is entered into by and among SCOVILL HOLDINGS INC., a
corporation organized and existing under the laws of the State of Delaware
(the "Parent"), SCOVILL ACQUISITION INC., a corporation organized and existing
under the laws of the State of Delaware ("Merger Sub", and, together with the
Surviving Corporation (as hereinafter defined) following the Mergers (as
hereinafter defined), the "Borrower"), KSCO ACQUISITION CORPORATION, a
corporation organized and existing under the laws of the State of Delaware
("KSCO"), SCOVILL FASTENERS INC., a corporation organized and existing under
the laws of the State of Delaware (the "Company"), PCI GROUP, INC., a
corporation organized and existing under the laws of the State of Delaware
("PCI"), RAU FASTENER COMPANY, LLC, a Delaware limited liability company
("Rau"), SCOMEX, INC., a corporation organized and existing under the laws of
the State of Delaware ("Scomex"), the financial institutions party hereto from
time to time, as Banks (as hereinafter defined), CREDIT AGRICOLE INDOSUEZ
("Indosuez"), as the Issuing Bank (as hereinafter defined), and Indosuez, as
administrative agent and as collateral agent (together with any successor
appointed pursuant to Section 12, the "Administrative Agent"), and SWISS BANK
CORPORATION, STAMFORD BRANCH ("SBC"), as documentation agent and as
syndication agent (the "D&S Agent") for the Banks and the Issuing Bank, and
SBC WARBURG DILLON READ INC. ("SBCWDR"), as advisor and arranger for the Banks
and the Issuing Bank. Unless otherwise defined herein, all capitalized terms
used herein and defined in Section 1 are used herein as therein defined.
PRELIMINARY STATEMENTS
(1) The Parent was organized by Saratoga Partners III, L.P., a limited
partnership organized and existing under the laws of the State of Delaware
("Saratoga"), to acquire through its wholly-owned Subsidiary (as hereinafter
defined), Merger Sub, control of KSCO and its wholly-owned Subsidiary, the
Company.
(2) Pursuant to the Stock Purchase Agreement dated as of October 10, 1997
(as modified, supplemented or amended from time to time in accordance with its
terms, to the extent permitted in accordance with the Credit Documents (as
hereinafter defined), the "Stock Purchase Agreement"), among the Parent, KSCO
and each of the stockholders of KSCO set forth on Schedule A thereto (the "KSCO
Stockholders"), the Parent has agreed to purchase (the "Acquisition") from the
KSCO Stockholders all of the shares of common stock, par value $.01 per share,
of KSCO owned on such date by the KSCO Stockholders as set forth opposite each
such KSCO Stockholder's name on Schedule A thereto.
(3) Pursuant to the Agreement and Plan of Merger dated as of November 26,
1997 (as modified, supplemented or amended from time to time in accordance with
its terms, to the extent permitted in accordance with the Credit Documents, the
"Merger Agreement"), and entered into by and among Merger Sub, KSCO and the
Company, immediately upon consummation of the Acquisition, Merger Sub will be
merged with and into KSCO, and KSCO will be merged with and into the Company
(the "Mergers") with the Company being the surviving corporation of such Mergers
(the "Surviving Corporation").
<PAGE>
(4) In connection with the Acquisition, approximately $39,300,000 of
existing indebtedness will be repaid and obligations relating to approximately
$29,200,000 outstanding under a synthetic lease (the "Synthetic Lease") with
General Electric Credit Corporation will be repaid, together with a prepayment
penalty of approximately $1,700,000 in connection therewith (collectively, the
"Refinancings").
(5) In connection with the Acquisition, the Mergers and the Refinancings,
Saratoga and certain other investors will make a $36,600,000 equity investment
in the Parent, consisting of (i) $300,000 in shares of common stock, par value
$0.0001 per share, of the Parent (the "Parent Common Stock") and (ii)
$36,300,000 aggregate liquidation preference of Series B Preferred Stock, par
value $0.0001 per share, of the Parent (the "Series B Preferred Stock")
(collectively, the "Saratoga Investment"). Certain members of senior
management of the Company and the Chairman of the Board of the Company
(collectively, "Management") will roll over approximately $3,400,000 of their
Capital Stock and stock options in KSCO into options to purchase Parent Common
Stock and Series B Preferred Stock (the "Management Investment"). Concurrently
with the offering of the Senior Notes (as hereinafter defined), the Parent
will offer (the "Units Offering"), for gross proceeds of $10,000,000, 100,000
units, each unit consisting of $100 liquidation preference of 13-3/4% Series A
Cumulative Redeemable Exchangeable Preferred Stock, par value $0.001, of the
Parent (the "Senior Preferred Stock") and one warrant to purchase Parent
Common Stock. The Saratoga Investment, the Management Investment and the Units
Offering are referred to as the "Equity Transactions". The net cash proceeds
of the Equity Transactions will total approximately $46,000,000, after fees
and expenses to the Parent of $600,000. The Parent will contribute (the
"Equity Contribution") such amount to the Borrower in the form of common
equity. In addition, Merger Sub will issue approximately $100,000,000 in
Senior Notes.
(6) The Borrower has requested that, simultaneously with the consummation
of the Acquisition and the Mergers, the Banks lend to the Surviving Corporation
up to an aggregate of $53,000,000, of which (i) an aggregate principal amount of
up to $28,000,000 will be available under the Term Loan Facility (as hereinafter
defined) to be used solely to finance in part the Acquisition and the
Refinancings and to pay fees and expenses incurred in connection therewith and
in connection with the Mergers and (ii) an aggregate principal amount of up to
$25,000,000 will be available under the Revolving Loan Facility (as hereinafter
defined) to be used for working capital and general corporate purposes, and for
the issuance from time to time, by the Issuing Bank for the account of the
Borrower, of Letters of Credit (as hereinafter defined).
WHEREAS, subject to and upon the terms and conditions herein set forth, the
Banks and the Issuing Bank are willing to make available to the Borrower the
respective credit facilities provided for herein;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto hereby agree as
follows:
Section 1. Definitions and Accounting Terms.
1.01 Defined Terms. As used in this Agreement, the following terms shall
have the
<PAGE>
following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Acquired Indebtedness" means, with respect to any specified Person, (a)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person or
(b) assumed in connection with acquisitions of properties or assets from such
Person. Acquired Indebtedness shall be deemed to be incurred on the date the
acquired Person becomes a Subsidiary or the date of the related acquisition of
properties or assets from such Person.
"Acquisition" shall have the meaning provided in the Preliminary
Statements.
"Acquisition Documents" shall mean the Stock Purchase Agreement and the
Merger Agreement and all other documents entered into or delivered in connection
with the Stock Purchase Agreement, the Merger Agreement, the Acquisition, the
Mergers or the Refinancings.
"Additional Collateral" shall mean all property (whether real or personal)
in which security interests are granted (or purported to be granted) pursuant to
Section 9.17.
"Additional Security Documents" shall mean all mortgages, pledge
agreements, security agreements and other security documents entered into
pursuant to Section 9.17 with respect to Additional Collateral.
"Adjusted Consolidated Net Income" of any Person shall mean, for any
period, Consolidated Net Income of such Person for such period plus the sum of
the amount of all net non-cash charges (including, without limitation,
depreciation, amortization, deferred tax expense, non-cash interest expense and
other non-cash charges) included in arriving at Consolidated Net Income for such
period; provided, however, that in determining Adjusted Consolidated Net Income
there shall be excluded, in each case to the extent included in arriving at
Consolidated Net Income, (i) the proceeds of any insurance policies, (ii) the
proceeds of any Tax Refunds, (iii) gains or losses from the sale, exchange,
transfer or other disposition of property (other than sales of inventory in the
ordinary course of business), and (iv) any other extraordinary, unusual or non-
recurring gains or losses, in each case of or received by or on behalf of such
Person or any of its Subsidiaries.
"Adjusted Working Capital" shall mean Consolidated Current Assets
(excluding cash and Cash Equivalents) minus Consolidated Current Liabilities.
"Administrative Agent" shall have the meaning provided in the recital of
parties to this Agreement.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including, without limitation, all directors
and officers of such Person), controlled by, or under direct or indirect common
control with, such Person; provided, however, that, for purposes of Section
10.07, an Affiliate of the Parent shall include any Person that directly or
indirectly (including through limited partner or general partner interests) owns
more than 5% of any
<PAGE>
class of the capital stock of the Parent and, for all purposes of this
Agreement, none of the Agents, any Bank, the Issuing Bank or any of their
respective Affiliates shall be considered an Affiliate of the Parent or any of
its Subsidiaries. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agents" shall mean, collectively, the Administrative Agent, the D&S Agent
and the Collateral Agent.
"Agreement" shall mean this Credit Agreement, as modified, supplemented or
amended from time to time.
"Applicable Margin" shall mean a percentage per annum equal to (i) in the
case of Term Loans and Revolving Loans which are maintained as Base Rate Loans,
1.50% and (ii) in the case of Term Loans and Revolving Loans that are maintained
as Eurodollar Loans, 2.50%.
"Bank" shall mean each financial institution listed on Schedule I, as well
as any institution that becomes a "Bank" hereunder pursuant to Section 15.04.
"Bank Default" shall mean (i) the refusal (which has not been retracted) of
a Bank to make available its portion of any Borrowing or to fund its portion of
any unreimbursed payment under Section 3.04(c) or (ii) a Bank's having notified
in writing the Borrower and/or the Administrative Agent that it does not intend
to comply with its obligations under Section 2.01 or Section 3, in either case
as a result of any takeover of such Bank by any regulatory authority or agency.
"Bank Deposit Account" shall have the meaning provided in Section 6.20.
"Bankruptcy Code" shall have the meaning provided in Section 11.05.
"Base Rate" shall mean the higher of (i) 1/2 of 1% in excess of the Federal
Funds Rate and (ii) the Prime Lending Rate.
"Base Rate Loan" shall mean any Loan designated or deemed designated as
such by the Borrower at the time of the incurrence thereof or conversion
thereto.
"Borrower" shall have the meaning provided in the recital of parties to
this Agreement.
"Borrower Common Stock" shall have the meaning provided in Section 8.14.
"Borrowing" shall mean the borrowing of one Type of Loan of a single
Tranche from all the Banks having Commitments with respect to such Tranche on a
pro rata basis on a given date (or resulting from a conversion or conversions on
such date) having in the case of Eurodollar Loans the same Interest Period;
provided that Base Rate Loans incurred pursuant to Section 2.10(b) shall be
considered part of the related Borrowing of Eurodollar Loans.
<PAGE>
"Borrowing Base" shall mean, as at any date on which the amount thereof is
being determined, an amount equal to the sum of (a) 85% of Eligible Receivables
and (b) 60% of Eligible Inventory.
"Borrowing Base Certificate" shall have the meaning provided in Section
9.01(k).
"Borrowing Base Deficiency" shall mean, at any time, the amount, if any, by
which the sum of the aggregate principal amount of Revolving Loans then
outstanding plus the Letter of Credit Outstandings at such time exceeds the
Borrowing Base then in effect.
"Business Day" shall mean (i) for all purposes other than as covered by
clause (ii) below, any day except Saturday, Sunday and any day that shall be in
New York City, New York or Stamford, Connecticut a legal holiday or a day on
which banking institutions are authorized or required by law or other
governmental action to close and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar Loans, any day which is a Business Day described in clause (i) above
and which is also a day for trading by and between banks in the New York
interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person and its
Subsidiaries on a consolidated basis for any period, the sum of (i) all cash
expenditures made during such period for equipment, fixed assets, real property
or improvements reflected as additional property, plant or equipment on the
balance sheet of such Person, excluding Capital Lease Obligations, and (ii) all
cash expenditures made during such period to acquire (x) any other Person that
as a result of such acquisition becomes a Wholly-Owned Subsidiary of such Person
or (y) all or substantially all of the assets of any such other Person.
"Capital Lease", as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with U.S. GAAP, is accounted for as a capital lease on the balance
sheet of that Person.
"Capital Stock" of any Person shall mean any and all shares, rights to
purchase, warrants or options (whether or not currently exercisable),
participations or other equivalents of or interests in (however designated) the
equity (including, without limitation, common stock, preferred stock and
partnership interests) of such Person.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations under Capital Leases of such Person, in each case taken at the
amount thereof accounted for as Indebtedness in accordance with U.S. GAAP.
"Cash Equivalents" shall mean, as to any Person, (i) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than six
months from the date of acquisition, (ii) time deposits and certificates of
deposit of any commercial bank organized under the laws of the United States,
any state thereof, or the District of Columbia having, or which is the principal
banking subsidiary of a bank holding company organized under the laws of the
United States, any state thereof, or the District of Columbia having, capital,
<PAGE>
surplus and undivided profits aggregating in excess of $500,000,000 and having a
long-term unsecured debt rating of at least "A" or the equivalent thereof from
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. ("S&P"), or "A2" or the equivalent thereof from Moody's Investors Service,
Inc. ("Moody's"), with maturities of not more than six months from the date of
acquisition by such Person, (iii) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (i)
above entered into with any bank meeting the qualifications specified in clause
(ii) above, (iv) commercial paper issued by any Person incorporated in the
United States rated at least A-1 or the equivalent thereof by S&P or at least
"P-1" or the equivalent thereof by Moody's and in each case maturing not more
than six months after the date of acquisition by such Person and (v) investments
in money market funds substantially all of the assets of which are comprised of
securities of the types described in clauses (i) through (iv) above.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as the same may be amended from time to time. 42
U.S.C. (S) (S) 9601 et seq.
"CERCLIS" shall have the meaning provided in Section 8.19(d).
"Change of Control" means the occurrence of one or more of the following:
(i) the Parent shall cease to own 100% of the outstanding capital stock of the
Borrower, (ii) the consummation of any transaction the result of which is (x) if
such transaction occurs prior to the first sale of Voting Stock of the Parent
pursuant to a registration statement under the Securities Act that results in at
least 20% of the then outstanding Voting Stock of the Parent having been sold to
the public, that Permitted Holders beneficially own, directly or indirectly,
Voting Stock representing less than 51% of the voting power of the Voting Stock
of the Parent, and (y) if such transaction occurs thereafter, that any Person or
group (as such term is used in Section 13(d)(3) of the Securities Exchange Act)
(other than Permitted Holders) is or becomes the beneficial owner (as defined in
Rule 13d-3 of the Securities Exchange Act), directly or indirectly, of Voting
Stock representing more than 35% of the voting power of the Voting Stock of the
Parent unless Permitted Holders beneficially own Voting Stock representing a
greater percentage of the voting power of the Voting Stock of the Parent, (iii)
the Parent consolidates with, or merges with or into, another Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of the assets of the Parent and its Subsidiaries taken as a
whole to any Person, or any Person consolidates with, or merges with or into,
the Parent, in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Parent is converted into or exchanged for cash, securities
or other property, other than any such transaction where the outstanding Voting
Stock of the Parent is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee corporation and the
beneficial owners of the Voting Stock of the Parent immediately prior to such
transaction own, directly or indirectly, Voting Stock representing not less than
a majority of the voting power of the Voting Stock of the surviving or
transferee corporation immediately after such transaction, (iv) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Parent (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Parent was approved by either (a) a vote of
two-thirds of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved or (b) a Permitted Holder) cease for any reason to
constitute a majority of the Board of Directors of the Parent then in office,
(v) the approval by the holders of Capital Stock of the Parent of any plan or
proposal for liquidation or dissolution of the Borrower or (vi)
<PAGE>
the occurrence of any "Change of Control" under, and as defined in, the Senior
Notes Indenture.
"Claims" shall have the meaning provided in the definition of
"Environmental Claims" contained in this Section 1.01.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code as in effect at the date of this
Agreement and to any subsequent provisions of the Code amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all property (whether real or personal) with
respect to which any security interests have been granted (or purport to be
granted) pursuant to any Security Document, including, without limitation, all
Security Agreement Collateral, all Mortgaged Properties, all Additional
Collateral and all cash and Cash Equivalents delivered as collateral pursuant to
this Agreement or any other Credit Document.
"Collateral Agent" shall mean the Administrative Agent acting as collateral
agent for the Secured Creditors pursuant to the Security Documents.
"Commitment" shall mean, with respect to each Bank, such Bank's Term Loan
Commitment and Revolving Loan Commitment, if any.
"Commitment Commission" shall have the meaning provided in Section 4.01(a).
"Company" shall have the meaning provided in the Preliminary Statements.
"Concentration Account" shall mean a separate account established and
maintained by the Borrower with the Concentration Account Bank for the benefit
of the Secured Creditors and in which the Collateral Agent has a security
interest pursuant to the Concentration Account Consent Letter.
"Concentration Account Bank" shall mean IBJ Schroder International Bank, or
any other bank that may become a Concentration Account Bank in accordance with
the provisions of the Security Agreement.
"Concentration Account Consent Letter" shall have the meaning provided in
Section 6.20(b).
"Consolidated Current Assets" of any Person shall mean the consolidated
current assets of such Person and its Subsidiaries.
"Consolidated Current Liabilities" of any Person shall mean the
consolidated current liabilities of such Person and its Subsidiaries, but, in
the case of the Borrower and its Subsidiaries, shall exclude the current portion
of any Loans and any long-term Indebtedness that would otherwise be included
therein.
<PAGE>
"Consolidated EBITDA" of any Person shall mean, for any period,
Consolidated Net Income of such Person, plus the sum of (i) Consolidated
Interest Expense of such Person, (ii) provision for taxes of such Person, (iii)
the amount of all amortization of intangibles and depreciation that was deducted
in arriving at Consolidated Net Income of such Person for such period, and (iv)
all non- recurring or extraordinary losses that were deducted in arriving at
Consolidated Net Income of such Person for such period less the sum of (a)
interest income of such Person and its Subsidiaries, (b) all non- recurring or
extraordinary gains that were added in arriving at Consolidated Net Income of
such Person for such period and (c) the aggregate principal amount of all
Capitalized Lease Obligations of such Person and its Subsidiaries paid during
such period.
"Consolidated Interest Expense" of any Person shall mean, for any period,
the total consolidated cash interest expense of such Person and its Subsidiaries
for such period (calculated without regard to any limitations on the payment
thereof) payable during such period in respect of all Indebtedness of such
Person and its Subsidiaries, on a consolidated basis, for such period
(excluding that portion of obligations of such Person and its Subsidiaries
under Capital Leases representing the interest amount for such period and also
excluding amortization of financing fees and expenses, to the extent otherwise
required to be included pursuant to U.S. GAAP).
"Consolidated Net Income" of any Person shall mean, for any period, the net
income (or loss) of such Person and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period; provided that there shall be
excluded (i) the income (or loss) of any other Person (other than consolidated
Subsidiaries of such Person) in which any third Person (other than such Person
or any of its consolidated Subsidiaries) has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to such
Person or any of its consolidated Subsidiaries by such other Person during such
period, (ii) the income (or loss) of any other Person accrued prior to the date
it becomes a consolidated Subsidiary of such Person or is merged into or
consolidated with such Person or any of its consolidated Subsidiaries or such
other Person's assets are acquired by such Person or any of its consolidated
Subsidiaries and (iii) the income of any consolidated Subsidiary of such Person
to the extent that the declaration or payment of dividends or similar
distributions by such consolidated Subsidiary of such income is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such consolidated Subsidiary, other than, in the case of the Borrower, those
Subsidiaries of the Borrower that are Credit Parties.
"Contingent Obligation" shall mean, as to any Person, any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof; provided, however,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an
<PAGE>
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonable anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Credit Documents" shall mean this Agreement, each Note, each Notice of
Borrowing, each Notice of Conversion, each Letter of Credit, each Letter of
Credit Request, each Security Document, each guaranty issued by any direct or
indirect Subsidiary of the Borrower pursuant to Section 9.17 and each other
agreement or document entered into in connection herewith and therewith.
"Credit Event" shall mean the making of any Loan or the issuance of any
Letter of Credit on or after the Effective Date.
"Credit Party" shall mean the Parent and each of its Subsidiaries party to
any Credit Document.
"D&S Agent" shall have the meaning provided in the recital of parties to
this Agreement.
"Debt Agreements" shall have the meaning provided in Section 6.05.
"Default" shall mean any event, act or condition which with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank Default
is then in effect.
"Deposit Bank" shall have the meaning provided in Section 6.20.
"Disqualified Stock" shall mean any Capital Stock of any Person that, by
its terms, by the terms of any agreement related thereto or by the terms of any
security into which it is convertible, putable or exchangeable, is, or upon the
happening of any event or the passage of time would be, required to be redeemed
or repurchased by such Person or any of its Subsidiaries, whether or not at the
option of the holder thereof, or matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, in whole or in part, on or prior to
the final Maturity Date of the Facilities; provided, however, that (i) any class
of Capital Stock of such Person that, by its terms, authorizes such Person to
satisfy in full its obligations with respect to the payment of dividends or upon
maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase
thereof or otherwise by the delivery of Qualified Stock, and that is not
convertible, putable or exchangeable for Disqualified Stock or Indebtedness,
shall not be deemed to be Disqualified Stock so long as such Person satisfies
its obligations with respect thereto solely by the delivery of Qualified Stock
and (ii) any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof (or of any security into which it is convertible or
for which it is exchangeable) have the right to require the issuer to repurchase
such Capital Stock (or such security into which it is exchangeable) upon the
occurrence of an "Asset Sale" or a "Change of Control" (as such terms are
defined in the Senior Notes Indenture) shall not constitute Disqualified Stock
if the terms of such Capital Stock (and of all such securities into which it is
<PAGE>
convertible or for which it is exchangeable) provide that the issuer thereof
will not repurchase or redeem any such Capital Stock (or any such security into
which it is convertible or for which it is exchangeable) pursuant to such
provisions prior to compliance by the Parent with the provisions of Sections
1015 and 1019 of the Senior Notes Indenture and purchase of any Senior Notes
properly tendered pursuant to an offer to purchase required thereunder and not
withdrawn.
"Dividend" with respect to any Person shall mean that such Person has
declared or paid a dividend or returned any equity capital to its stockholders
or authorized or made any other distribution, payment or delivery of property
(other than common stock of such Person) or cash to its stockholders in their
capacity as stockholders, or redeemed, retired, purchased or otherwise acquired,
directly or indirectly, for consideration any shares of any class of its Capital
Stock outstanding on or after the Effective Date (or any options or warrants
issued by such Person with respect to its Capital Stock), or set aside any funds
for any of the foregoing purposes, or shall have permitted any of its
Subsidiaries to purchase or otherwise acquire for consideration any shares of
any class of the Capital Stock of such Person outstanding on or after the
Effective Date (or any options or warrants issued by such Person with respect to
its Capital Stock). Without limiting the foregoing, "Dividends" with respect to
any Person shall also include all cash payments made or required to be made by
such Person with respect to any stock appreciation rights, equity incentive
plans or any similar plans or setting aside of any funds for the foregoing
purposes.
"Documents" shall mean the Credit Documents, the Acquisition Documents, the
Senior Notes and the Senior Notes Indenture and each consent or part thereof
required to be obtained in connection with the consummation of the Transaction.
"Dollars" and "$" shall each mean freely transferable lawful money of the
United States.
"Domestic Subsidiary" shall mean, as to any Person, at any time, any of the
direct or indirect Subsidiaries of such Person that is incorporated or organized
under the laws of any state of the United States of America or the District of
Columbia.
"Drawing" shall have the meaning provided in Section 3.05(b).
"Effective Date" shall mean the first date on which the conditions
precedent set forth in Section 6 shall have been satisfied.
"Eligible Inventory" shall mean the gross dollar value valued at the lower
of cost, determined on a last-in, first-out basis, or market value of the
inventory and spare parts (other than spare parts held for sale to customers
with attaching machinery), in each case, located in the United States of the
Credit Parties, that conforms to the representations and warranties contained in
the Security Agreement and that at all times continues to be acceptable to the
Administrative Agent in its reasonable judgment, including, without limitation,
that the Collateral Agent shall have and maintain a first priority perfected
security interest in all such inventory, which inventory constitutes raw
materials, work-in- progress or finished goods and that is not excess, obsolete
or unmerchantable, less (i) any supplies (other than raw materials) and goods to
be returned to suppliers and goods returned or rejected by customers, (ii)
inventory subject to any Lien other than the Liens created under the Security
<PAGE>
Documents and (iii) any reserves required by the Administrative Agent in its
reasonable judgment for special order goods, market value declines and bill and
hold (deferred shipment) sales. Notwithstanding anything to the contrary
contained herein, Eligible Inventory shall in no event include any attaching
machinery.
"Eligible Receivables" shall mean the total face amount of the dollar
denominated receivables of the Credit Parties owing from account debtors located
in the United States that conform to the representations and warranties
contained in the Security Agreement (including, without limitation, the
representation that the Collateral Agent shall have and maintain a first
priority perfected security interest in all such receivables) and at all times
continue to be acceptable to the Collateral Agent in its reasonable judgment,
less any returns, discounts, claims, credits, charges and allowances of any
nature (whether issued, owing, granted or outstanding) and less reserves for any
other matter affecting the creditworthiness of account debtors with respect to
the receivables and excluding (i) bill and hold (deferred shipment)
transactions, (ii) contracts or sales to any Affiliate of the Borrower or any
governmental entity, (iii) all receivables that have not been paid in full
within 60 days after the due date thereof or that have been disputed by the
account debtor, (iv) sales to account debtors residing or located outside the
United States, (v) receivables of any account debtor with respect to which any
action or event of the types described in Section 11.05 has occurred and is
continuing and (vi) receivables of any account debtor of which 50% or more of
the aggregate outstanding receivables of such account debtor owed to the
Borrower and its Subsidiaries would be excluded pursuant to clause (iii) hereof.
"Eligible Transferee" shall mean and include a commercial bank or other
financial institution having a combined capital and surplus of at least
$100,000,000, or other "accredited investor" (as defined in Regulation D of the
Securities Act) other than individuals, or a "qualified institutional buyer" as
defined in Rule 144A of the Securities Act having assets under management of at
least $100,000,000.
"Employee Benefit Plans" shall mean all "employee benefit plans" as defined
in Section 3(3) of ERISA, any profit sharing plans and deferred compensation
plans and any other similar plans or arrangements for the benefit of current or
former employees of the Parent or any of its Subsidiaries, but excluding any
vacation plans and similar plans or policies that do not involve the payment or
deferral of cash compensation to employees.
"Employment Agreements" shall have the meaning provided in Section 6.05.
"Environmental Claims" shall mean any and all administrative, regulatory or
judicial actions, suits, proceedings, demand letters, claims, liens, notices of
noncompliance or violation or known investigations relating in any way to any
violation of, or liability under, any Environmental Law or any permit issued, or
any approval given, under any such Environmental Law (hereinafter, "Claims"),
including, without limitation, (a) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law and (b)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief arising from
alleged injury or threat of injury to worker health or safety or to the
environment as a result of the presence, a Release or threatened Release of
Hazardous Materials.
<PAGE>
"Environmental Law" shall mean any Federal, state, local or foreign law,
statute, rule, regulation, ordinance, code, policy having the force or effect of
law and rule of common law now or hereafter in effect (including, without
limitation, the legal requirements relating to asbestos abatement and removal)
and in each case as amended, and any legally binding judicial or administrative
interpretation thereof, including any legally binding judicial or administrative
order, consent decree or judgment to which the Parent or any of its Subsidiaries
is a party, relating to the environment, worker health or safety or Hazardous
Materials, including, without limitation, CERCLA; the Resource Conservation and
Recovery Act, 42 U.S.C. (S)(S) 6901 et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. (S) 1251 et seq.; the Toxic Substances Control Act,
15 U.S.C. (S)(S) 7401 et seq.; the Clean Air Act, 42 U.S.C. (S)(S) 7401 et seq.;
the Safe Drinking Water Act, 42 U.S.C. (S)(S) 3803 et seq.; the Oil Pollution
Act of 1990, 33 U.S.C. (S) 2701 et seq.; the Occupational Safety and Health Act,
29 U.S.C. (S)(S) 651 et seq.; and any applicable state, local or foreign
counterparts or equivalents.
"Equity Contribution" shall have the meaning provided in the Preliminary
Statements.
"Equity Transactions" shall have the meaning provided in the Preliminary
Statements.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA as in effect at the date
of this Agreement and to any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9) of
ERISA) which, together with the Parent or any Subsidiary of the Parent, would be
deemed to be a "single employer" within the meaning of Section 414(b), (c), (m)
or (o) of the Code.
"Eurodollar Loan" shall mean each loan designated as such by the Borrower
at the time of the incurrence thereof or conversion thereto.
"Event of Default" shall have the meaning provided in Section 11.
"Excess Cash Flow" of any Person shall mean, for any period, the amount by
which (i) the sum of (a) Adjusted Consolidated Net Income of such Person for
such period and (b) the decrease, if any, in Adjusted Working Capital of such
Person from the first day to the last day of such period exceeds (ii) the sum of
(a) the amount of cash Capital Expenditures (to the extent, in the case of the
Borrower and its Subsidiaries, not financed with Indebtedness but not in excess
of the amounts permitted pursuant to Section 10.08(a)) made by such Person on a
consolidated basis during such period, (b) the amount of permanent principal
payments of Indebtedness for borrowed money of such Person and its Subsidiaries
(other than, in the case of the Borrower and its Subsidiaries, (1) repayments in
respect of Refinanced Indebtedness and (2) repayments of Loans), (c) payments
made by such Person and its Subsidiaries in connection with, or in any way
related to, any Employee Benefit Plan except to the extent that such payments
reduce Consolidated EBITDA of such Person during the same period that such
payments were made and (d) payments made by such Person and its Subsidiaries in
any way related to any Environmental Law, Environmental Claim or Hazardous
Materials, including, without limitation, any payments to remediate or otherwise
respond to any environmental contamination or potential environmental
contamination, whether or not such remediation or response
<PAGE>
is required by law or contract, except to the extent such payments constitute
Capital Expenditures of such Person or reduce Consolidated EBITDA of such
Person in the same period that such payments were made; provided that, in the
case of the Borrower, repayments of Loans shall be deducted in determining
Excess Cash Flow if such repayments were applied to Scheduled Term Loan
Repayments required to be made during such period pursuant to Section
5.02(A)(c), were made as a voluntary prepayment with internally generated
funds (but, in the case of a voluntary prepayment of Revolving Loans, only to
the extent accompanied by a voluntary reduction to the Total Revolving Loan
Commitment) during such period and (e) the increase, if any, in Adjusted
Working Capital of such Person from the first day to the last day of such
period.
"Excess Cash Flow Payment Period" shall mean each calendar year during the
term of this Agreement, with the initial Excess Cash Flow Payment Period
commencing on January 1, 1998.
"Existing Indebtedness" shall have the meaning provided in Section 8.22.
"Existing Letter of Credit" shall mean that letter of credit issued for the
account of the Borrower to Liberty Mutual Insurance Company prior to the Initial
Borrowing Date by Indosuez in a face amount of approximately $130,000.
"Facility" shall mean the Term Loan Facility or the Revolving Loan
Facility.
"Facing Fee" shall have the meaning provided in Section 4.01(b).
"Federal Funds Rate" shall mean, for any period, a fluctuating interest
rate equal for each day during such period to the weighted average of the rates
on overnight Federal Funds transactions with members of the Federal Reserve
System arranged by Federal Funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to or referred to in Section
4.01.
"Fixed Charge Coverage Ratio" for any period shall mean the ratio of
Consolidated EBITDA of the Borrower for such period to Fixed Charges of the
Borrower and its Subsidiaries for such period.
"Fixed Charges" of any Person shall mean, for any period, the sum of (i)
Consolidated Interest Expense of such Person paid during such period, (ii) the
aggregate principal amount of all scheduled payments of Indebtedness (excluding
the principal portion of rentals under Capitalized Lease Obligations of such
Person and, in the case of the Borrower, repayment of Revolving Loans not
accompanied by a permanent reduction to the Total Revolving Loan Commitment)
made by such Person and its Subsidiaries during such period, (iii) taxes paid by
such Person and its Subsidiaries for such period, (iv) payments made by such
Person and its Subsidiaries in connection with or in any way related to any
Pension Plan, except to the extent that such payments reduce Consolidated EBITDA
of
<PAGE>
such Person during the same period that such payments were made, (v) payments
made by such Person and its Subsidiaries in any way related to any Environmental
Law, Environmental Claim or Hazardous Materials, including, without limitation,
any payments to remediate or otherwise respond to any environmental
contamination or potential environmental contamination, whether or not such
remediation or response is required by law or contract, except to the extent
such payments constitute Capital Expenditures of such Person or reduce
Consolidated EBITDA of such Person in the same period that such payments were
made, (vi) in the case of the Borrower, Watertown Remediation Payments paid by
the Borrower during such period, (vii) Maintenance Capital Expenditures made by
such Person and its Subsidiaries during such period and (viii) cash Dividends
paid by such Person other than, in the case of the Borrower and its
Subsidiaries, cash Dividends paid by any of the Borrower's Subsidiaries to the
Borrower or any of the Borrower's Wholly-Owned Subsidiaries for such period.
"Foreign Subsidiary" shall mean, as to any Person, at any time, any
Subsidiary of such Person that is not at such time a Domestic Subsidiary of such
Person.
"Funded Indebtedness" of any Person shall mean Indebtedness in respect of
the Loans, in the case of the Borrower, and all other Indebtedness of such
Person that by its terms matures more than one year after the date of its
creation or matures within one year from such date but is renewable or
extendible, at the option of such Person, to a date more than one year after
such date or that arises under a revolving credit or similar agreement that
obligates the lender or lenders to extend credit during a period of more than
one year from such date, including, without limitation, all amounts of Funded
Indebtedness of such Person required to be paid or prepaid within one year from
the date of determination.
"Guarantors" shall mean the Parent and the Subsidiary Guarantors.
"Hazardous Materials" shall mean (a) petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contains
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definitions of "hazardous substances", "hazardous waste", "hazardous materials",
"extremely hazardous waste", "toxic substances", "contaminants" or "pollutants",
or words of similar meaning and regulatory effect, under any applicable
Environmental Law; and (c) any other chemical, material or substance exposure to
which is prohibited, limited or regulated under applicable Environmental Laws.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indebtedness" shall mean, as to any Person, without duplication, (i) all
indebtedness (including principal, interest, fees and charges) of such Person
for borrowed money or for the deferred purchase price of property or services
other than trade payables and accrued expenses arising in the ordinary course of
business, (ii) the maximum amount available to be drawn under all letters of
credit issued for the account of such Person and all unpaid drawings in respect
of such letters of credit, (iii) all Indebtedness of the types described in
clause (i), (ii), (iv), (v), (vi) or (vii) of this definition secured by any
Lien on any property owned by such Person, whether or not such Indebtedness has
been assumed by such Person, (iv) solely for purposes of Section 11.04, all
Capitalized Lease
<PAGE>
Obligations of such Person, (v) all obligations of such Person to pay a
specified purchase price for goods or services, whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent
Obligations of such Person and (vii) all obligations under any Interest Rate
Protection or Other Hedging Agreement or under any similar types of agreements
entered into.
"Indemnified Matters" shall have the meaning provided in Section 15.01.
"Indemnitee" shall have the meaning provided in Section 15.01.
"Indosuez" shall have the meaning provided in the recital of parties to
this Agreement.
"Initial Borrowing Date" shall mean the date on which the initial Credit
Event occurs on or after the Effective Date.
"Intellectual Property" shall have the meaning provided in Section 8.21.
"Interest Determination Date" shall mean, with respect to any Eurodollar
Loan, the second Business Day prior to the commencement of any Interest Period
relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section 2.09.
"Interest Rate Protection or Other Hedging Agreements" shall have the
meaning provided in the Security Documents.
"Issuing Bank" shall mean Indosuez.
"KSCO" shall have the meaning provided in the recital of parties to this
Agreement.
"KSCO Stockholders" shall have the meaning provided in the Preliminary
Statements.
"L/C Supportable Obligations" shall mean (i) obligations of the Borrower
consisting of trade payables and (ii) such other obligations of the Borrower as
are otherwise permitted to exist pursuant to the terms of this Agreement.
"Leaseholds" of any Person shall mean all the right, title and interest of
such Person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section 3.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section 4.01(c).
"Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the
aggregate Stated Amount of all outstanding Letters of Credit and (ii) the amount
of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in Section
3.03(a).
<PAGE>
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any other
similar recording or notice statute, and any lease having substantially the same
effect as any of the foregoing.
"Loan" shall mean each Term Loan and each Revolving Loan.
"Maintenance Capital Expenditures" shall mean, with respect to any Person
and its Subsidiaries on a consolidated basis for any period, all Capital
Expenditures made during such period to maintain equipment, other fixed assets
or real property of such Person and its Subsidiaries in proper operating
condition during such period to conduct the business of such Person and its
Subsidiaries as it is then being conducted.
"Management" shall have the meaning provided in the Preliminary Statements.
"Management Agreements" shall have the meaning provided in Section
6.05(iii).
"Management Investment" shall have the meaning provided in the Preliminary
Statements.
"New Incentive Stock Option Plan" shall mean the Stock Option Plan to be
entered into by Merger Sub and Borrower for key executives and managers which
will provide for the grant of stock options to purchase up to 12.5% of Parent
Common Stock on a fully diluted basis.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Subsidiary" shall mean, at any time, a Subsidiary of the Borrower
having at least 2% of the total consolidated assets of the Borrower and its
Subsidiaries (determined as of the last day of the most recent fiscal quarter of
the Borrower) or at least 2% of the total consolidated revenues or net income of
the Borrower and its Subsidiaries for the 12-month period ending on the last day
of the most recent fiscal quarter of the Borrower.
"Maturity Date" with respect to a Tranche shall mean either the Term Loan
Maturity Date or the Revolving Loan Maturity Date, as the case may be.
"Merger Agreement" shall have the meaning provided in the Preliminary
Statements.
"Merger Sub" shall have the meaning provided in the recital of parties to
this Agreement.
"Mergers" shall have the meaning provided in the Preliminary Statements.
"Minimum Borrowing Amount" shall mean $50,000.
<PAGE>
"Mortgage" shall have the meaning provided in Section 6.18(a).
"Mortgage Policies" shall have the meaning provided in Section 6.18(b).
"Mortgaged Properties" shall have the meaning provided in Section 6.18(a).
"Multiemployer Plan" shall have the meaning provided in Section 8.10.
"Net Sale Proceeds" shall mean, for any sale of assets, the gross cash
proceeds (including any cash received by way of deferred payment pursuant to a
promissory note, receivable or otherwise, but only as and when received)
received from such sale, net of reasonable transaction costs, the amount of such
gross cash proceeds required by the terms of any instrument governing
Indebtedness to be used to permanently repay any such Indebtedness that is
secured by the respective assets that were sold, and the estimated marginal
increase in income taxes, which will be payable by the Parent's consolidated
group as a result of such sale.
"Note" shall mean each Term Note and each Revolving Note.
"Notice of Borrowing" shall have the meaning provided in Section 2.03(a).
"Notice of Conversion" shall have the meaning provided in Section 2.06.
"Notice Office" shall mean the office of the Administrative Agent located
at 1211 Avenue of the Americas, New York, New York 10036, or such other office
as the Administrative Agent may hereafter designate in writing as such to the
other parties hereto.
"Obligations" shall mean all amounts owing to any of the Agents, the
Issuing Bank or any Bank pursuant to the terms of this Agreement or any other
Credit Document.
"Parent" shall have the meaning provided in the recital of parties to this
Agreement.
"Parent Common Stock" shall have the meaning provided in the Preliminary
Statements.
"Parent Guaranty" shall mean the guaranty of the Parent contained in
Section 13.
"Participant" shall have the meaning provided in Section 3.04(a).
"Payment Office" shall mean the office of the Administrative Agent located
at 1211 Avenue of the Americas, New York, New York 10036, or such other office
as the Administrative Agent may hereafter designate in writing as such to the
other parties hereto.
"Payment Restriction", with respect to a Subsidiary of any Person, shall
mean any consensual encumbrance, restriction or limitation, whether by operation
of the terms of its charter or by reason of any agreement, instrument, judgment,
decree, order, statute, rule or governmental
<PAGE>
regulation, on the ability of (i) such Subsidiary to (a) pay dividends or make
other distributions on its Capital Stock or make payments on any obligation,
liability or Indebtedness owed to such Person or any other Subsidiary of such
Person, (b) make loans or advances to such Person or any other Subsidiary of
such Person or (c) transfer any of its properties or assets to such Person or
any other Subsidiary of such Person or (ii) such Person or any other
Subsidiary of such Person to receive or retain any such dividends,
distributions or payments, loans or advances or transfer of properties or
assets.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"PBGC Letter" shall mean the letter dated November 19, 1997 received by the
Company from the PBGC requesting the submission to the PBGC of certain financial
and other information.
"PCI" shall have the meaning provided in the recital of parties to this
Agreement.
"Pension Plan" shall mean any pension plan as defined in Section 3(2) of
ERISA (other than a Multiemployer Plan) that is maintained by or to which
contributions are made by the Borrower or any of its ERISA Affiliates or as to
which the Borrower or any of its ERISA Affiliates may have liability.
"Percentage" of any Bank at any time shall mean a fraction (expressed as a
percentage) the numerator of which is the Revolving Loan Commitment of such Bank
at such time and the denominator of which is the Total Revolving Loan Commitment
at such time; provided that, if the Percentage of any Bank is to be determined
after the Total Revolving Loan Commitment has been terminated, then the
Percentages of the Banks shall be determined immediately prior (and without
giving effect) to such termination.
"Permitted Business" shall mean a line of business in which the Borrower or
any of its Subsidiaries is engaged on the Initial Borrowing Date and any
business reasonably related thereto.
"Permitted Encumbrance" shall mean, with respect to any Mortgaged Property,
such exceptions to title as are set forth in the title insurance policy or title
commitment delivered with respect thereto, all of which exceptions must be
acceptable, on the date of delivery of such title insurance policy, to the
Administrative Agent and the Required Banks.
"Permitted Holders" shall mean (i) Saratoga, (ii) David J. Barrett, Martin
A. Moore, Michael Baxley, John Champagne, Robert Feltz and Frank A. Wright and
(iii) Permitted Transferees of the foregoing.
"Permitted Liens" shall have the meaning provided in Section 10.01.
"Permitted Transferees" shall mean, with respect to any Person, (x) in the
case of any Person that is a natural person, (i) such individual's spouse,
estate, lineal descendants, heirs, executors, legal representatives,
administrators or (ii) any trust for the benefit of any of the foregoing, and
(y) in
<PAGE>
the case of any Person that is not a natural person, any other Person
controlled by such Person.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan, as defined in
Section 4001 of ERISA, that is maintained or to which contributions are made by
(or to which there is an obligation to contribute of) the Parent, a Subsidiary
of the Parent or an ERISA Affiliate, and each such plan for the five-year period
immediately following the latest date on which the Parent, a Subsidiary of the
Parent or an ERISA Affiliate maintained, contributed to or had an obligation to
contribute to such plan.
"Pledged Securities" shall have the meaning provided in the Security
Agreement.
"Prime Lending Rate" shall mean the rate that the Administrative Agent
announces from time to time as its prime lending rate, the Prime Lending Rate to
change when and as such prime lending rate changes. The Prime Lending Rate is
a reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. The Administrative Agent may make commercial
loans or other loans at rates of interest at, above or below the Prime Lending
Rate.
"Projections" shall have the meaning provided in Section 6.15(b).
"Qualified Stock" of any Person shall mean any and all Capital Stock of
such Person other than Disqualified Stock.
"Quarterly Payment Date" shall mean the last Business Day of each March,
June, September and December of each calendar year.
"Quoted Rate" shall mean (a) the offered quotation to first-class banks in
the New York interbank Eurodollar market by the Administrative Agent for U.S.
dollar deposits of amounts in immediately available funds comparable to the
outstanding principal amount of the Eurodollar Loan of the Administrative Agent
for which an interest rate is then being determined with maturities comparable
to the Interest Period applicable to such Eurodollar Loan determined as of 10:00
A.M. (New York time) on the date which is two Business Days prior to the
commencement of such Interest Period, divided (and rounded upward to the next
whole multiple of 1/16 of 1%) by (b) a percentage equal to 100% minus the then
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency funding
or liabilities as defined in Regulation D (or any successor category of
liabilities under Regulation D).
"Rau" shall have the meaning provided in the recital of parties to this
Agreement.
"Real Property" of any Person shall mean all the right, title and interest
of such Person in and to land, improvements and fixtures, including Leaseholds.
"Recovery Event" shall mean the receipt by the Parent or any Subsidiary of
the Parent
<PAGE>
of any cash insurance proceeds payable by reason of theft, physical
destruction or damage or any other similar event with respect to any
properties or assets of the Parent or any Subsidiary of the Parent.
"Refinanced Indebtedness" shall have the meaning provided in Section 6.16.
"Refinancings" shall have the meaning provided in the Preliminary
Statements.
"Register" shall have the meaning provided in Section 9.15.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Regulation G" shall mean Regulation G of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Regulation T" shall mean Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.
"Release" shall mean disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing,
pouring and the like, into or upon any land or water or air, or otherwise
entering into the environment.
"Replaced Bank" shall have the meaning provided in Section 2.13.
"Replacement Bank" shall have the meaning provided in Section 2.13.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan, other than those events as to which the 30-day
notice period is waived by the PBGC.
"Required Banks" shall mean, at any time, Banks owed or holding outstanding
Term Loans, Term Loan Commitments and Revolving Loan Commitments (or, after the
termination thereof, the sum of outstanding Revolving Loans and Letter of Credit
Outstandings) which represent an amount greater than 50% of the sum of all
outstanding Term Loans, the Total Term Loan Commitment and the Total Revolving
Loan Commitment (or, after the termination thereof, the sum of the then total
outstanding Revolving Loans and Letter of Credit Outstandings) at such time.
"Returns" shall have the meaning provided in Section 8.09.
"Revolving Loan Commitment" shall mean, for each Bank, the amount set forth
opposite such Bank's name on Schedule I hereto directly below the column
entitled "Revolving Loan Commitment", as same may be (x) reduced or terminated
from time to time pursuant to Sections 4.02,
<PAGE>
4.03, 5.02 and/or Section 11 or (y) adjusted from time to time as a result of
assignments to or from such Bank pursuant to Section 2.13 or Section 15.04.
"Revolving Loan Facility" shall mean the facility evidenced by the Total
Revolving Loan Commitment.
"Revolving Loan Maturity Date" shall mean the sixth anniversary of the
Initial Borrowing Date.
"Revolving Loans" shall have the meaning provided in Section 2.01(b).
"Revolving Note" shall have the meaning provided in Section 2.05(a)(ii).
"Saratoga" shall have the meaning provided in the Preliminary Statements.
"Saratoga Investment" shall have the meaning provided in the Preliminary
Statements.
"SBC" shall have the meaning provided in the recital of parties to this
Agreement.
"SBCWDR" shall have the meaning provided in the recital of parties to this
Agreement.
"Scheduled Term Loan Repayment" shall have the meaning provided in Section
5.02(A)(c).
"Scomex" shall have the meaning provided in the recital of parties to this
Agreement.
"Section 5.04(b)(ii) Certificate" shall have the meaning provided in
Section 5.04(b)(ii).
"Secured Creditors" shall mean (x) the Banks, the Issuing Bank and the
Agents and (y) any Bank which on the date hereof is, or subsequently becomes,
party to any Interest Rate Protection or Other Hedging Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Security Agreement" shall have the meaning provided in Section 6.08.
"Security Agreement Collateral" shall mean all "Collateral" as defined in
the Security Agreement.
"Security Documents" shall mean the Security Agreement, the Concentration
Account Consent Letter, each Additional Security Document and each Mortgage.
<PAGE>
"Senior Notes" shall mean the senior unsecured notes of the Borrower in an
aggregate principal amount of $100,000,000 issued pursuant to the Senior Notes
Indenture.
"Senior Notes Indenture" shall mean the Indenture dated as of November 26,
1997 between the Borrower, as issuer, and United States Trust Company of New
York, as trustee, as modified, supplemented or amended from time to time in
accordance with its terms, to the extent permitted in accordance with the Credit
Documents.
"Senior Preferred Stock" shall have the meaning provided in the Preliminary
Statements.
"Series B Preferred Stock" shall have the meaning provided in the
Preliminary Statements.
"Shareholders Agreements" shall have the meaning provided in Section 6.05.
"Stated Amount" of each Letter of Credit shall, at any time, mean the
maximum amount available to be drawn thereunder at such time (in each case
determined without regard to whether any conditions to drawing could then be
met).
"Stock Purchase Agreement" shall have the meaning provided in the
Preliminary Statements.
"Stockholders Agreement" shall mean the Stockholders Agreement dated as of
November 26, 1997 among the Non-Management Investors, the Management Investors
(each as identified on the signature pages to the Stockholders Agreement), the
parties to be identified on the signature pages of any joinder agreements
executed and delivered pursuant to Section 7.2 of the Stockholders Agreement,
and the Parent, as in effect on the date hereof.
"Subsidiary" shall mean, as to any Person, (i) any corporation more than
50% of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time.
"Subsidiary Guarantors" shall mean PCI, Rau and Scomex and each other
Subsidiary of the Parent that shall be required under the terms of the Credit
Documents to execute and deliver a guaranty.
"Subsidiary Guaranty" shall mean the guaranty of the Subsidiary Guarantors
contained in Section 14 and any other guaranty executed and delivered by a
Subsidiary Guarantor.
"Surviving Corporation" shall have the meaning provided in the Preliminary
<PAGE>
Statements.
"Synthetic Lease" shall have the meaning provided in the Preliminary
Statements.
"Tax Refund" shall mean any cash payment received by any Person or any of
its Subsidiaries as a rebate or refund relating to any federal, state or local
income taxes paid by such Person and its Subsidiaries or with respect to the
assets or properties of such Person.
"Taxes" shall have the meaning provided in Section 5.04(a).
"Term Loan Commitment" shall mean, with respect to each Bank, the amount
set forth opposite such Bank's name in Schedule I hereto directly below the
column entitled "Term Loan Commitment", as the same may be (x) reduced or
terminated pursuant to Section 4.03, 5.02 and/or 11 or (y) adjusted from time to
time as a result of assignments to or from such Bank pursuant to Section 2.13 or
15.04.
"Term Loan Facility" shall mean the facility evidenced by the Total Term
Loan Commitment.
"Term Loan Maturity Date" shall mean the sixth anniversary of the Initial
Borrowing Date.
"Term Loans" shall have the meaning provided in Section 2.01(a).
"Term Note" shall have the meaning provided in Section 2.05(a)(i).
"Termination Documents" shall have the meaning provided in Section 6.16.
"Total Commitment" shall mean, at any time, the sum of the Commitments of
each of the Banks.
"Total Revolving Loan Commitment" shall mean, at any time, the sum of the
Revolving Loan Commitments of each of the Banks.
"Total Term Loan Commitment" shall mean, at any time, the sum of the Term
Loan Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time, an
amount equal to the amount by which (x) the then Total Revolving Loan Commitment
exceeds (y) the sum of the aggregate principal amount of Revolving Loans then
outstanding plus the then aggregate amount of Letter of Credit Outstandings.
"Tranche" shall mean the respective facility and commitments utilized in
making Loans hereunder, with there being two separate Tranches, i.e., Term Loans
and Revolving Loans.
"Transaction" shall mean, collectively, (i) the incurrence of Loans
hereunder on the
<PAGE>
Initial Borrowing Date, (ii) the consummation of the Acquisition, the
Refinancings and the Mergers, (iii) the repayment of all Refinanced
Indebtedness, together with all accrued interest, premiums, fees, commissions
and expenses owing in connection therewith, and the termination of all
commitments thereunder, (iv) the payment of the Transaction Fees and Expenses
in connection therewith, (v) the consummation of the Equity Transactions and
(vi) the consummation of the Equity Contribution from the Parent to Merger
Sub.
"Transaction Fees and Expenses" shall mean all fees and expenses incurred
by the Parent and its Subsidiaries in connection with the Transaction and the
transactions contemplated hereby and thereby; provided, however, that the
aggregate amount of such fees and expenses shall not exceed $12,000,000 in the
aggregate.
"Type" shall mean the type of Loan determined with regard to the interest
option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time in effect
in the relevant jurisdiction.
"Unfunded Current Liability" of any Pension Plan means the amount, if any,
by which the actuarial present value of the accumulated plan benefits under the
Pension Plan as of the date of its most recent actuarial valuation report
exceeds the fair market value of the assets allocable thereto, each determined
in accordance with Statement of Financial Accounting Standards No. 35, based
upon the actuarial assumptions used by the Pension Plan's actuary in the most
recent annual valuation of the Pension Plan.
"United States" and "U.S." shall each mean the United States of America.
"Units Offering" shall have the meaning provided in the Preliminary
Statements.
"U.S. GAAP" shall have the meaning provided in Section 15.07(a).
"Unpaid Drawing" shall have the meaning provided in Section 3.05(a).
"Voting Stock" shall mean, with respect to any specified Person, any class
or classes of Capital Stock of the specified Person pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of the
specified Person (irrespective of whether or not, at the time, stock of any
other class or classes has, or might have, voting power by reason of the
happening of any contingency).
"Watertown Remediation Payments" shall mean those payments scheduled to be
made by KSCO pursuant to Section 6.14 and Schedule 6.14 of the Stock Purchase
Agreement dated as of September 25, 1995 among KSCO, Saltire Industrial, Inc.,
First City Diversified Inc. and Alper Holdings USA, Inc. for remedial activities
at the Watertown, Connecticut facility operated by the Company between 1969 and
1987, which payments were scheduled to begin on October 20, 1997.
"Wholly-Owned Subsidiary" shall mean, as to any Person, any Subsidiary to
the extent (i) all of the Capital Stock or other ownership interests in such
Subsidiary, other than any directors'
<PAGE>
qualifying shares mandated by applicable law, is owned directly or indirectly
by such Person and/or one or more Wholly-Owned Subsidiaries of such Person or
(ii) such Subsidiary is organized in a foreign jurisdiction and is required by
the applicable laws and regulations of such foreign jurisdiction to be
partially owned by the government of such foreign jurisdiction or individual
or corporate citizens of such foreign jurisdiction in order for such
Subsidiary to transact business in such foreign jurisdiction; provided that
such Person, directly or indirectly, owns the remaining Capital Stock or
ownership interest in such Subsidiary and, by contract or otherwise, controls
the management and business of such Subsidiary and derives the economic
benefits of ownership of such Subsidiary to substantially the same extent as
if such Subsidiary were a wholly-owned Subsidiary.
1.02 Computation of Time Periods. In this Agreement, in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding".
1.03 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with U.S. GAAP.
Section 2. Amount and Terms of Credit.
2.01 The Commitments. (a) Subject to, and upon the terms and conditions
set forth herein, each Bank with a Term Loan Commitment severally agrees to
make, on the Initial Borrowing Date, a single term loan (each, a "Term Loan"
and, collectively, the "Term Loans") to the Borrower, which Term Loans:
(i) shall be made and initially maintained as a single Borrowing
of Base Rate Loans (subject to the option to convert such Base Rate
Loans pursuant to Section 2.06); and
(ii) shall not exceed for any Bank, in initial aggregate
principal amount, that amount which equals the Term Loan Commitment of
such Bank on such date (before giving effect to any reductions thereto
on such date pursuant to Section 4.03(b)(i) but after giving effect to
any reductions thereto on or prior to such date pursuant to Section
4.03(b)(ii)).
Once repaid, Term Loans borrowed hereunder may not be reborrowed.
(b) Subject to, and upon the terms and conditions set forth herein, each
Bank with a Revolving Loan Commitment severally agrees at any time and from time
to time after the Initial Borrowing Date and prior to the Revolving Loan
Maturity Date, to make a loan or loans (each a "Revolving Loan" and,
collectively, the "Revolving Loans") to the Borrower, which Revolving Loans:
(i) shall, at the option of the Borrower, be Base Rate Loans or
Eurodollar Loans; provided that except as otherwise specifically
provided in Section 2.10(b), all Revolving Loans comprising the same
Borrowing shall at all times be of the same Type;
(ii) may be repaid and reborrowed in accordance with the
provisions hereof;
(iii) shall not exceed for any Bank at any time outstanding that
aggregate principal amount which, when added to the product of (x)
such Bank's Percentage and (y) the aggregate
<PAGE>
amount of all Letter of Credit Outstandings (exclusive of Unpaid
Drawings which are repaid with the proceeds of, and simultaneously
with the incurrence of, the respective incurrence of, Revolving Loans)
at such time, equals the Revolving Loan Commitment of such Bank at
such time; and
(iv) shall not exceed for all Banks at any time outstanding that
aggregate principal amount which, when added to the amount of all
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are
repaid with the proceeds of, and simultaneously with the incurrence
of, the respective incurrence of Revolving Loans) at such time, equals
the lesser of (a) the Borrowing Base then in effect and (b) the Total
Revolving Loan Commitment at such time.
2.02 Minimum Amount of Each Borrowing. The aggregate principal amount of
each Borrowing hereunder shall not be less than the Minimum Borrowing Amount
and, if in excess of the Minimum Borrowing Amount, shall be in integral
multiples of $50,000. More than one Borrowing may occur on the same date, but
at no time shall there be outstanding more than five Borrowings of Eurodollar
Loans.
2.03 Notice of Borrowing. (a) Whenever the Borrower desires to make a
Borrowing hereunder, it shall give the Administrative Agent at its Notice
Office, prior to 12:00 Noon (New York time) on the proposed date of such
Borrowing written notice (or telephonic notice promptly confirmed in writing)
of each Borrowing of Base Rate Loans and at least three Business Days' prior
written notice (or telephonic notice promptly confirmed in writing) of each
Borrowing of Eurodollar Loans. Each such notice (each a "Notice of
Borrowing"), except as otherwise expressly provided in Section 2.10, shall be
irrevocable and shall be given by the Borrower in the form of Exhibit A-1,
appropriately completed to specify: (i) the aggregate principal amount of the
Loans to be made pursuant to such Borrowing which shall be at least the
Minimum Borrowing Amount; (ii) the date of such Borrowing (which shall be a
Business Day); (iii) whether the Loans being made pursuant to such Borrowing
shall constitute Term Loans or Revolving Loans; and (iv) whether the Loans
being made pursuant to such Borrowing are to be initially maintained as Base
Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the initial Interest
Period to be applicable thereto. The Administrative Agent shall promptly give
each Bank which is required to make Loans of the Tranche specified in the
respective Notice of Borrowing notice of such proposed Borrowing, of such
Bank's proportionate share thereof and of the other matters specified in the
Notice of Borrowing.
(b) Without in any way limiting the obligation of the Borrower to confirm
in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent or the Issuing Bank (in the case of Letters of Credit), as
the case may be, may, prior to receipt of written confirmation, act without
liability upon the basis of telephonic notice believed by the Administrative
Agent or the Issuing Bank (in the case of Letters of Credit), as the case may
be, in good faith to be from the President, the Chief Financial Officer or the
Controller of the Borrower. In each such case, the Administrative Agent's or
the Issuing Bank's record of the terms of such telephonic notice shall be
conclusive absent manifest error.
2.04 Disbursement of Funds. No later than 1:00 P.M. (New York time) on
the date specified in each Notice of Borrowing, each Bank with a Commitment of
the respective Tranche shall
<PAGE>
make available its pro rata portion (determined in accordance with Section
2.07) of each such Borrowing requested to be made on such date. All such
amounts shall be made available in Dollars and in immediately available funds
at the Payment Office of the Administrative Agent, and the Administrative
Agent shall make available to the Borrower at the Payment Office the aggregate
of the amounts so made available by the Banks. Unless the Administrative Agent
shall have been notified by any Bank prior to the date of Borrowing that such
Bank does not intend to make available to the Administrative Agent such Bank's
portion of any Borrowing to be made on such date, the Administrative Agent may
assume that such Bank has made such amount available to the Administrative
Agent on such date of Borrowing and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower a corresponding amount.
If such corresponding amount is not in fact made available to the
Administrative Agent by such Bank, the Administrative Agent shall be entitled
to recover such corresponding amount on demand from such Bank. If such Bank
does not pay such corresponding amount forthwith upon the Administrative
Agent's demand therefor, the Administrative Agent shall promptly notify the
Borrower and the Borrower shall immediately pay such corresponding amount to
the Administrative Agent. The Administrative Agent shall also be entitled to
recover on demand from such Bank or the Borrower, as the case may be, interest
on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to the
Borrower until the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (i) if recovered from such
Bank, the cost to the Administrative Agent of acquiring overnight federal
funds and (ii) if recovered from the Borrower, the rate of interest applicable
to the respective Borrowing, as determined pursuant to Section 2.08. Nothing
in this Section 2.04 shall be deemed to relieve any Bank from its obligation
to make Loans hereunder or to prejudice any rights which the Borrower may have
against any Bank as a result of any failure by such Bank to make Loans
hereunder.
2.05 Notes. (a) The Borrower's obligation to pay the principal of, and
interest on, the Loans made by each Bank shall be evidenced (i) if Term Loans,
by a promissory note duly executed and delivered by the Borrower substantially
in the form of Exhibit B-1 with blanks appropriately completed in conformity
herewith (each, a "Term Note" and, collectively, the "Term Notes") and (ii) if
Revolving Loans, by a promissory note duly executed and delivered by the
Borrower substantially in the form of Exhibit B-2, with blanks appropriately
completed in conformity herewith (each, a "Revolving Note" and, collectively,
the "Revolving Notes").
(b) The Term Note issued to each Bank with a Term Loan Commitment shall (i)
be executed by the Borrower, (ii) be payable to the order of such Bank or its
registered assigns and be dated the Initial Borrowing Date, (iii) be in a stated
principal amount equal to the Term Loan made by such Bank on the Initial
Borrowing Date and be payable in the principal amount of the Term Loan evidenced
thereby, (iv) mature on the Term Loan Maturity Date, (v) bear interest as
provided in the appropriate clause of Section 2.08 in respect of the Base Rate
Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be
subject to voluntary repayment as provided in Section 5.01, and mandatory
repayment as provided in Section 5.02 and (vii) be entitled to the benefits of
this Agreement and be secured by the Security Documents.
(c) The Revolving Note issued to each Bank with a Revolving Loan Commitment
shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank
or its registered assigns and be dated the Initial Borrowing Date, (iii) be in a
stated principal amount equal to the Revolving
<PAGE>
Loan Commitment of such Bank and be payable in the principal amount of the
Revolving Loans evidenced thereby, (iv) mature on the Revolving Loan Maturity
Date, (v) bear interest as provided in the appropriate clause of Section 2.08
in respect of the Base Rate Loans and Eurodollar Loans, as the case may be,
evidenced thereby, (vi) be subject to voluntary repayment as provided in
Section 5.01, and mandatory repayment as provided in Section 5.02 and (vii) be
entitled to the benefits of this Agreement and be secured by the Security
Documents.
(d) Each Bank shall note on its internal records the amount of each Loan
made by it and each payment in respect thereof and shall, prior to any transfer
of any of its Notes, endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby; provided, however, that the failure
to make any such notation or the making of an incorrect notation shall not
affect the Borrower's obligations in respect of such Loans.
2.06 Conversions. The Borrower shall have the option to convert, at any
time after January 25, 1997, on any Business Day, all or a portion at least
equal to the Minimum Borrowing Amount and, if in excess thereof, in an
integral multiple of $50,000 of the outstanding principal amount of the Loans
made pursuant to one or more Borrowings (so long as of the same Tranche) of
one Type of Loan into a Borrowing or Borrowings (of the same Tranche) of the
other Type of Loan; provided that:
(i) except as otherwise provided in Section 2.10(b), Eurodollar
Loans may be converted into Base Rate Loans only on the last day of an
Interest Period applicable to the Loans being converted and no such
partial conversion of Eurodollar Loans shall reduce the outstanding
principal amount of such Eurodollar Loans made pursuant to a single
Borrowing to less than the Minimum Borrowing Amount;
(ii) Base Rate Loans may be converted into Eurodollar Loans only
if no Default or Event of Default is in existence on the date of the
conversion; and
(iii) no conversion pursuant to this Section 2.06 shall result in
a greater number of Borrowings than is permitted under Section 2.02.
Each such conversion shall be effected by the Borrower by giving to the
Administrative Agent at its Notice Office prior to 10:00 A.M. (New York time) at
least three Business Days' (or in the case of a conversion into Base Rate Loans,
one Business Day's notice) prior written notice (or telephonic notice promptly
confirmed in writing) (each a "Notice of Conversion") which notice shall be in
the form of Exhibit A-2, appropriately completed to specify the Loans to be so
converted, the Borrowing(s) pursuant to which such Loans were made and, if to be
converted into Eurodollar Loans, the Interest Period to be initially applicable
thereto. The Administrative Agent shall give each Bank prompt notice of any
such proposed conversion affecting any of its Loans. Upon any such conversion,
the proceeds thereof will be deemed to be applied directly on the day of such
conversion to prepay the outstanding principal amount of the Loans being
converted.
2.07 Pro Rata Borrowings. All Borrowings of Term Loans and Revolving
Loans under this Agreement shall be made from the Banks pro rata on the basis
of their respective Term Loan Commitments and Revolving Loan Commitments, as
the case may be. It is understood that no Bank
<PAGE>
shall be responsible for any default by any other Bank of its obligation to
make Loans hereunder and that each Bank shall be obligated to make the Loans
provided to be made by it hereunder regardless of the failure of any other
Bank to make its Loans hereunder.
2.08 Interest. (a) The Borrower agrees to pay interest in respect of the
unpaid principal amount of each Base Rate Loan from the date of the Borrowing
thereof until the maturity thereof (whether by acceleration or otherwise), at
a rate per annum which shall at all times be equal to the sum of the
Applicable Margin plus the Base Rate in effect from time to time.
(b) The Borrower agrees to pay interest in respect of the unpaid principal
amount of each Eurodollar Loan from the date of the Borrowing thereof until the
maturity thereof (whether by acceleration or otherwise), at a rate per annum
which shall, during each Interest Period applicable thereto, be equal to the sum
of the Applicable Margin plus the Quoted Rate for such Interest Period.
(c) Upon the occurrence and during the continuance of an Event of Default
specified in Section 11.01, overdue principal and, to the extent permitted by
law, overdue interest in respect of each Loan and any other overdue amount
payable hereunder shall, in each case, bear interest at a rate per annum equal
to the rate which is 2.0% in excess of the rate of interest then applicable to
such Loan, with such interest to be payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be payable (i) in
respect of each Base Rate Loan, quarterly in arrears on each Quarterly Payment
Date, (ii) in respect of each Eurodollar Loan, on the last day of each Interest
Period applicable thereto and, in the case of an Interest Period in excess of
three months, on each date occurring at three-month intervals after the first
day of such Interest Period and (iii) in respect of each Loan, on any repayment
(on the amount repaid), at maturity (whether by acceleration or otherwise) and,
after such maturity, on demand.
(e) Upon each Interest Determination Date, the Administrative Agent shall
determine the Quoted Rate for the Interest Period applicable to Eurodollar Loans
and shall promptly notify the Borrower and the Banks thereof. Each such
determination shall, absent manifest error, be final and conclusive and binding
on all parties hereto.
2.09 Interest Periods. At the time it gives any Notice of Borrowing or
Notice of Conversion in respect of the making of, or conversion into, a
Eurodollar Loan (in the case of the initial Interest Period applicable
thereto) or prior to 10:00 A.M. (New York time) on the third Business Day
prior to the expiration of an Interest Period applicable to such Eurodollar
Loan (in the case of any subsequent Interest Period), the Borrower shall have
the right to elect, by giving the Administrative Agent notice thereof, the
interest period (each an "Interest Period") applicable to such Eurodollar
Loan, which Interest Period shall, at the option of the Borrower, be a one-,
three- or six-month period; provided that:
(i) all Eurodollar Loans comprising a single Borrowing shall at
all times have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Loan (including the date of
any conversion thereto from a Borrowing of
<PAGE>
Base Rate Loans) and each Interest Period occurring
thereafter in respect of such Loan shall commence on the day on which
the next preceding Interest Period applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan begins
on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period, such Interest
Period shall end on the last Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, however, that if any Interest
Period for a Eurodollar Loan would otherwise expire on a day which is
not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire
on the next preceding Business Day;
(v) no Interest Period for a Borrowing under a Tranche shall be
selected which extends beyond the respective Maturity Date of such
Tranche;
(vi) no Interest Period may be selected at any time when any
Default or Event of Default is then in existence; and
(vii) no Interest Period in respect of any Borrowing of Term
Loans shall be selected which extends beyond any date upon which a
mandatory repayment of such Term Loans will be required to be made
under Section 5.02(A)(c) if, after giving effect to the selection of
such Interest Period, the aggregate principal amount of such Term
Loans maintained as Eurodollar Loans which have Interest Periods
expiring after such date will be in excess of the aggregate principal
amount of such Term Loans then outstanding less the aggregate amount
of such required prepayment.
If, upon the expiration of any Interest Period applicable to a Borrowing of
Eurodollar Loans, the Borrower has failed to elect, or is not permitted to
elect, a new Interest Period to be applicable to such Eurodollar Loans as
provided above in this Section 2.09 or a Default or Event of Default then
exists, the Borrower shall be deemed to have elected to convert such Eurodollar
Loans into Base Rate Loans effective as of the expiration date of such current
Interest Period.
2.10 Increased Costs, Illegality, Etc. (a) In the event that any Bank
shall have determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto but, with respect to
clause (i) below, may be made only by the Administrative Agent):
(i) on any Interest Determination Date, that by reason of any
changes arising after the date of this Agreement affecting the
interbank Eurodollar market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in
the definition of Quoted Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with
respect to any Eurodollar Loan because of (x) any change since the
date of this Agreement in any applicable law or governmental rule,
regulation, order, guideline or request (whether or not having the
force of law) or in the
<PAGE>
interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation, order,
guideline or request, such as, for example, but not limited to: (A) a
change in the basis of taxation of payments to any Bank of the
principal of or interest on the Notes or any other amounts payable
hereunder (except for changes in the rate of tax on, or determined by
reference to, the net income or profits of such Bank imposed by the
jurisdiction in which its principal office or applicable lending
office is located) or (B) a change in official reserve requirements
(but, in all events, excluding reserves required under Regulation D to
the extent included in the computation of the Quoted Rate) and/or (y)
other circumstances since the date of this Agreement generally
affecting financial institutions substantially similar to such Bank or
the interbank Eurodollar market or the position of such Bank in such
market; or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has been made (x) unlawful by any law or governmental
rule, regulation or order, (y) impossible by compliance by any Bank in
good faith with any governmental request (whether or not having the
force of law) or (z) impracticable as a result of a contingency
occurring after the date of this Agreement which materially and
adversely affects the interbank Eurodollar market;
then, and in any such event, such Bank (or the Administrative Agent, in the case
of clause (i) above) shall promptly give notice (if by telephone, promptly
confirmed in writing) to the Borrower and, except in the case of clause (i)
above, to the Administrative Agent of such determination (which notice the
Administrative Agent shall promptly transmit to each of the other Banks).
Thereafter: (x) in the case of clause (i) above, Eurodollar Loans shall no
longer be available until such time as the Administrative Agent notifies the
Borrower and the Banks that the circumstances giving rise to such notice by the
Administrative Agent no longer exist, and any Notice of Borrowing or Notice of
Conversion given by the Borrower with respect to Eurodollar Loans which have not
yet been incurred (including by way of conversion) shall be deemed rescinded by
the Borrower; (y) in the case of clause (ii) above, the Borrower shall pay to
such Bank, upon written demand therefor, such additional amounts (in the form of
an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the
additional amounts owed to such Bank, showing in reasonable detail the basis
for the calculation thereof, submitted to the Borrower by such Bank shall,
absent manifest error, be final and conclusive and binding on all the parties
hereto); and (z) in the case of clause (iii) above, the Borrower shall take
one of the actions specified in Section 2.10(b) as promptly as possible and,
in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the circumstances
described in Section 2.10(a)(ii), the Borrower may, and in the case of a
Eurodollar Loan affected by the circumstances described in Section 2.10(a)(iii)
the Borrower shall, either (i) if the affected Eurodollar Loan is then being
made initially or pursuant to a conversion, by giving the Administrative Agent
telephonic notice (confirmed in writing) on the same date that the Borrower was
notified by the affected Bank or the Administrative Agent pursuant to Section
2.10(a)(ii) or (iii), cancel the respective Borrowing or conversion, or (ii) if
the affected Eurodollar Loan is then outstanding, upon at least three Business
Days' written notice to the Administrative Agent, require the affected Bank to
convert such Eurodollar Loan into a Base Rate Loan; provided that if more than
one Bank is affected at any time,
<PAGE>
then all affected Banks must be treated the same pursuant to this Section
2.10(b).
(c) If at any time after the date hereof, any Bank determines that the
introduction after the date hereof of, or any change after the date hereof in,
any applicable law or governmental rule, regulation, order, guideline or request
(whether or not having the force of law) concerning capital adequacy, or any
change in interpretation or administration thereof by any governmental
authority, central bank or comparable agency made subsequent to the date hereof,
will have the effect of increasing the amount of capital required or expected to
be maintained by such Bank or any corporation controlling such Bank based on the
existence of such Bank's Commitments hereunder or its obligations hereunder,
then the Borrower shall pay to such Bank, upon such Bank's written demand
therefor, such additional amounts as shall be required to compensate such Bank
for the increased cost to such Bank or such corporation or the reduction in the
rate of return to such Bank or such corporation as a result of such increase of
capital. In determining such additional amounts, each Bank shall act reasonably
and in good faith and shall use averaging and attribution methods which are
reasonable; provided that such Bank's determination of compensation owing under
this Section 2.10(c) shall, absent manifest error, be final and conclusive and
binding on all the parties hereto. Each Bank, upon determining that any
additional amounts will be payable pursuant to this Section 2.10(c), shall give
prompt written notice thereof to the Borrower, which notice shall show in
reasonable detail the basis for calculation of such additional amounts, although
the failure to give any such notice shall not release or diminish any of the
Borrower's obligations to pay additional amounts pursuant to this Section
2.10(c), except as provided in Section 2.14.
(d) Notwithstanding any other provision of this Section 2.10 or Section
3.06, each Bank and the Issuing Bank shall, to the extent the increased costs or
reductions in amounts receivable referred to in this Section 2.10 or in Section
3.06 relate to such Bank's or the Issuing Bank's loans, commitments or letters
of credit in general and are not specifically attributable to a Loan, Commitment
or Letter of Credit hereunder, use averaging and attribution methods which cover
all loans, commitments or letters of credit similar to the Loans, Commitments or
Letters of Credit made by such Bank or the Issuing Bank in similar circumstances
for comparable customers whether or not the loan documentation for such other
loans, commitments or letters of credit permits the Bank or the Issuing Bank to
make the determination specified in this Section 2.10 or in Section 3.06.
2.11 Compensation. The Borrower shall compensate each Bank, upon its
written request (which request shall set forth in reasonable detail the basis
for requesting such compensation), for all losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required
by such Bank to fund its Eurodollar Loans) which such Bank may sustain: (i) if
for any reason (other than a default by such Bank or the Administrative Agent)
a Borrowing of, or conversion from or into, Eurodollar Loans does not occur on
a date specified therefor in a Notice of Borrowing or Notice of Conversion
(whether or not withdrawn by the Borrower or deemed withdrawn pursuant to
Section 2.10(a)); (ii) if any repayment (including any repayment made pursuant
to Section 5.01 or 5.02 or as a result of an acceleration of the Loans
pursuant to Section 11) or conversion of any of its Eurodollar Loans occurs on
a date which is not the last day of an Interest Period with respect thereto;
(iii) if any prepayment of any of its Eurodollar Loans is not made on any date
specified in a notice of prepayment given by the Borrower; or (iv) as a
consequence of (x) any other default by the Borrower to repay its Loans when
required by the terms of this Agreement or any Note held by such Bank or (y)
any election made
<PAGE>
pursuant to Section 2.10(b). A Bank's basis for requesting compensation
pursuant to this Section 2.11, and a Bank's calculations of the amount
thereof, shall, absent manifest error, be final and conclusive and binding on
all the parties hereto.
2.12 Change of Lending Office. Each Bank agrees that upon the occurrence
of any event giving rise to the operation of Section 2.10(a)(ii) or (iii),
Section 2.10(c), Section 3.06 or Section 5.04, with respect to such Bank, it
shall, if requested by the Borrower, use reasonable efforts (subject to
overall policy considerations of such Bank) to designate another lending
office of such Bank for any Loans or Letters of Credit affected by such event;
provided that such designation is made on such terms that such Bank or its
respective lending offices suffer no economic, legal or regulatory
disadvantage as a result thereof, with the object of avoiding the consequence
of the event giving rise to the operation of such Section. Nothing in this
Section 2.12 shall affect or postpone any of the obligations of the Borrower
or the right of any Bank provided in such Section 2.10, 3.06 or 5.04.
2.13 Replacement of Banks. (x) If any Bank becomes a Defaulting Bank,
(y) if any Bank (other than the Administrative Agent in its capacity as such)
refuses consent to certain proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by the
Required Banks as provided in Section 15.10(b) or (z) upon the occurrence of
any event giving rise to the operation of Section 2.10(a)(ii) or (iii),
Section 2.10(c), Section 3.06 or Section 5.04, with respect to any Bank (other
than the Administrative Agent) which results in such Bank charging to the
Borrower increased costs materially in excess of those being generally charged
by the other Banks, then the Borrower shall have the right, if no Default or
Event of Default then exists, to replace such Bank (the "Replaced Bank") with
any other Bank or with one or more Eligible Transferees, none of which shall
constitute a Defaulting Bank at the time of such replacement (collectively,
the "Replacement Bank") reasonably acceptable to the Administrative Agent and,
if the respective Replacement Bank will have a Revolving Loan Commitment, the
Issuing Bank; provided that:
(i) at the time of any replacement pursuant to this Section 2.13,
the Replacement Bank shall enter into one or more assignment
agreements pursuant to Section 15.04(b) (and with all fees payable
pursuant to Section 15.04(b) to be paid by the Replacement Bank)
pursuant to which the Replacement Bank shall acquire all of the
Commitments and outstanding Loans of, and participations in Letters of
Credit by, the Replaced Bank and, in connection therewith, shall pay
to (y) the Replaced Bank in respect thereof an amount equal to the sum
of (A) an amount equal to the principal of, and all accrued interest
on, all outstanding Loans of the Replaced Bank, (B) an amount equal to
such Replaced Bank's Percentage of all Unpaid Drawings that have been
funded by (and not reimbursed to) such Replaced Bank, together with
all then unpaid interest with respect thereto at such time and (C) an
amount equal to all accrued, but theretofore unpaid, fees owing to the
Replaced Bank pursuant to Section 4.01 hereof and (z) the Issuing Bank
an amount equal to such Replaced Bank's Percentage of any Unpaid
Drawing (which at such time remains an Unpaid Drawing) to the extent
such amount was not theretofore funded by such Replaced Bank; and
(ii) all obligations of the Borrower owing to the Replaced Bank
(other than those specifically described in clause (i) above in
respect of which the assignment purchase price has been, or is
concurrently being, paid) shall be paid in full by the Borrower to
such Replaced Bank concurrently with such replacement.
<PAGE>
Upon the execution of the respective assignment documentation, the payment of
amounts referred to in clauses (i) and (ii) above, recordation of the assignment
on the Register by the Administrative Agent pursuant to Section 9.15 and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Notes executed by the Borrower, the Replacement Bank shall become a
Bank hereunder and the Replaced Bank shall cease to constitute a Bank hereunder
with respect to the Loans and Commitments so transferred, except with respect
to indemnification provisions under this Agreement, which shall survive as to
such Replaced Bank, and the Percentages of the Banks shall be automatically
adjusted at such time to give effect to such replacement.
2.14 Notice of Certain Costs. Notwithstanding anything in this Agreement
to the contrary, to the extent any notice required by Section 2.10, 3.06 or
5.04 is given by any Bank (i) more than 60 days after such Bank obtained
knowledge of the occurrence of the event giving rise to the additional cost,
reduction in amounts or other additional amounts of the type described in such
Section or (ii) more than 365 days after such occurrence, such Bank shall not
be entitled to compensation under Section 2.10, 3.06 or 5.04, as the case may
be, for any such amounts incurred or accruing prior to the giving of such
notice to the Borrower.
Section 3. Letters of Credit.
3.01 Letters of Credit. (a) Subject to and upon the terms and conditions
herein set forth, the Borrower may request the Issuing Bank at any time and
from time to time after the Initial Borrowing Date and prior to the 30th
Business Day prior to the Revolving Loan Maturity Date to issue, for the
account of the Borrower, an irrevocable standby letter of credit or trade
letter of credit, as the case may be, in a form customarily used by the
Issuing Bank or in such other form as has been approved by the Issuing Bank in
support of said L/C Supportable Obligations (each such letter of credit,
together with the Existing Letter of Credit, a "Letter of Credit" and,
collectively, the "Letters of Credit"). All Letters of Credit shall be
denominated in Dollars.
(b) The Issuing Bank hereby agrees that it shall (subject to the terms and
conditions contained herein), at any time and from time to time after the
Initial Borrowing Date and prior to the 30th Business Day prior to the Revolving
Loan Maturity Date, following its receipt of the respective Letter of Credit
Request, issue for the account of the Borrower one or more Letters of Credit in
support of such L/C Supportable Obligations as are permitted to remain
outstanding without giving rise to a Default or Event of Default hereunder;
provided that the Issuing Bank shall be under no obligation to issue any Letter
of Credit if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority
or arbitrator shall purport by its terms to enjoin or restrain the
Issuing Bank from issuing such Letter of Credit or any requirement of
law applicable to the Issuing Bank or any request or directive
(whether or not having the force of law) from any governmental
authority with jurisdiction over the Issuing Bank shall prohibit, or
request that the Issuing Bank refrain from, the issuance of letters of
credit generally or such Letter of Credit in particular or shall
impose upon the Issuing Bank with respect to the Letter of Credit any
restriction or reserve or capital requirement (for which such Issuing
Bank is not otherwise compensated) not in effect on the date hereof,
or any unreimbursed loss, cost or expense which was not applicable, in
effect or known to the Issuing
<PAGE>
Bank as of the date hereof and which the Issuing Bank in good faith
deems material to it;
(ii) the Issuing Bank shall have received a notice of the type
described in the second sentence of Section 3.03(b) from any Bank
prior to the issuance of such Letter of Credit; or
(iii) a Bank Default exists, unless the Issuing Bank has entered
into arrangements satisfactory to it and the Borrower to eliminate the
Issuing Bank's risk with respect to the Bank which is the subject of
the Bank Default, including by cash collateralizing such Bank's
Percentage of the Letter of Credit Outstandings.
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued
the Stated Amount of which, when added to the Letter of Credit Outstandings
(exclusive of Unpaid Drawings which are repaid on the date of, or prior to, the
issuance of the respective Letter of Credit) at such time, would exceed either
(x) $2,000,000 or (y) when added to the aggregate principal amount of all
Revolving Loans then outstanding, an amount equal to the lesser of (A) the Total
Revolving Loan Commitment then in effect (after giving effect to any reductions
to the Total Revolving Loan Commitment on such date) and (B) the Borrowing Base
then in effect, and (ii) each Letter of Credit shall by its terms terminate on
or before the earlier of (x) the date which occurs 12 months after the date of
the issuance thereof (although any such Letter of Credit may be renewable for
successive periods of up to 12 months, but not beyond 15 Business Days prior
to the Revolving Loan Maturity Date, on terms acceptable to the Issuing Bank)
and (y) the 15th Business Day prior to the Revolving Loan Maturity Date.
(d) Effective as of the Initial Borrowing Date, the Existing Letter of
Credit will be deemed to have been issued as, and be, a Letter of Credit
hereunder.
3.02 Minimum Stated Amount. The Stated Amount of each Letter of Credit
shall be not less than $50,000 or such lesser amount as is acceptable to the
Issuing Bank.
3.03 Letter of Credit Requests. (a) Whenever the Borrower desires that a
Letter of Credit be issued for its account, the Borrower shall give the
Administrative Agent and the Issuing Bank at least ten Business Days' (or such
shorter period as is acceptable to the Issuing Bank in any given case) written
notice prior to the proposed date of issuance (which shall be a Business Day).
Each notice shall be in the form of Exhibit C (each a "Letter of Credit
Request").
(b) The making of each Letter of Credit Request shall be deemed to be a
representation and warranty by the Borrower that such Letter of Credit may be
issued in accordance with, and will not violate the requirements of, Section
3.01(c). Unless the Issuing Bank has received notice from any Bank before it
issues a Letter of Credit that one or more of the conditions specified in
Section 6 or 7, as the case may be, are not then satisfied, or that the issuance
of such Letter of Credit would violate Section 3.01(c), then the Issuing Bank
may issue the requested Letter of Credit for the account of the Borrower in
accordance with the Issuing Bank's usual and customary practices.
3.04 Letter of Credit Participations. (a) Immediately upon the issuance
by the Issuing Bank of any Letter of Credit, the Issuing Bank shall be deemed
to have sold and transferred to each
<PAGE>
Bank with a Revolving Loan Commitment, other than the Issuing Bank (each such
Bank, in its capacity under this Section 3.04, a "Participant"), and each such
Participant shall be deemed irrevocably and unconditionally to have purchased
and received from the Issuing Bank, without recourse or warranty, an undivided
interest and participation, to the extent of such Participant's Percentage, in
such Letter of Credit, each substitute letter of credit, each drawing made
thereunder and the obligations of the Borrower under this Agreement with
respect thereto, and any security therefor or guaranty pertaining thereto.
Upon any change in the Revolving Loan Commitments of the Banks pursuant to
Section 2.13 or 15.04, it is hereby agreed that, with respect to all
outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic
adjustment to the participations pursuant to this Section 3.04 to reflect the
new Percentages of the assignor and assignee Bank or of all Banks with
Revolving Loan Commitments, as the case may be.
(b) In determining whether to pay under any Letter of Credit, the Issuing
Bank shall not have any obligation relative to the other Banks other than to
confirm that any documents required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to comply on their face with
the requirements of such Letter of Credit. Any action taken or omitted to be
taken by the Issuing Bank under or in connection with any Letter of Credit, if
taken or omitted in the absence of gross negligence or willful misconduct, shall
not create for the Issuing Bank any resulting liability to the Borrower or any
Bank.
(c) In the event that the Issuing Bank makes any payment under any Letter
of Credit and the Borrower shall not have reimbursed such amount in full to the
Issuing Bank pursuant to Section 3.05(a), the Issuing Bank shall promptly notify
the Administrative Agent, which shall promptly notify each Participant of such
failure, and each Participant shall promptly and unconditionally pay to the
Administrative Agent for the account of the Issuing Bank the amount of such
Participant's Percentage of such unreimbursed payment in Dollars and in same day
funds. If the Administrative Agent so notifies, prior to 11:00 A.M. (New York
time) on any Business Day, any Participant required to fund a payment under a
Letter of Credit, such Participant shall make available to the Administrative
Agent at the Payment Office of the Administrative Agent for the account of the
Issuing Bank in Dollars such Participant's Percentage of the amount of such
payment on such Business Day in same day funds. If and to the extent such
Participant shall not have so made its Percentage of the amount of such
payment available to the Administrative Agent for the account of the Issuing
Bank, such Participant agrees to pay to the Administrative Agent for the
account of the Issuing Bank, forthwith on demand, such amount, together with
interest thereon, for each day from such date until the date such amount is
paid to the Administrative Agent for the account of the Issuing Bank at the
overnight Federal Funds Rate. The failure of any Participant to make available
to the Administrative Agent for the account of the Issuing Bank its Percentage
of any payment under any Letter of Credit shall not relieve any other
Participant of its obligation hereunder to make available to the
Administrative Agent for the account of such Issuing Bank its Percentage of
any Letter of Credit on the date required, as specified above, but no
Participant shall be responsible for the failure of any other Participant to
make available to the Administrative Agent for the account of such Issuing
Bank such other Participant's Percentage of any such payment.
(d) Whenever the Issuing Bank receives a payment of a reimbursement
obligation as to which the Administrative Agent has received for the account of
the Issuing Bank any payments from the Participants pursuant to Section 3.04(c),
the Issuing Bank shall pay to the Administrative
<PAGE>
Agent and the Administrative Agent shall promptly pay to each Participant
which has paid its Percentage thereof, in Dollars and in same day funds, an
amount equal to such Participant's share (based on the proportionate aggregate
amount funded by such Participant to the aggregate amount funded by all
Participants) of the principal amount of such reimbursement obligation and
interest thereon accruing after the purchase of the respective participations.
(e) The obligations of the Participants to make payments to the
Administrative Agent for the account of the Issuing Bank with respect to Letters
of Credit issued shall be irrevocable and not subject to any qualification or
exception whatsoever, and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances, including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the Credit Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time against a beneficiary named in
a Letter of Credit, any transferee of any Letter of Credit (or any
Person for whom any such transferee may be acting), any of the Agents,
any Participant, or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying transaction
between the Borrower and the beneficiary named in any such Letter of
Credit);
(iii) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue
or inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
3.05 Agreement to Repay Letter of Credit Drawings. (a) The Borrower
hereby agrees to reimburse the Issuing Bank, by making payment to the
Administrative Agent in immediately available funds at the Payment Office (or
by making the payment directly to the Issuing Bank at such location as may
otherwise have been agreed upon by the Borrower and the Issuing Bank), for any
payment or disbursement made by the Issuing Bank under any Letter of Credit
(each such amount so paid until reimbursed, an "Unpaid Drawing"), immediately
after, and in any event on the date of, such payment or disbursement, with
interest on the amount so paid or disbursed by the Issuing Bank, to the extent
not reimbursed prior to 12:00 Noon (New York time) on the date of such payment
or disbursement, from the date paid or disbursed to the date the Issuing Bank
is reimbursed by the Borrower therefor at a rate per annum equal to the sum of
(i) the Base Rate in effect from time to time, (ii) the Applicable Margin for
Revolving Loans which are maintained as Base Rate Loans at such time and (iii)
2%, in each case with such interest to be payable on demand.
(b) The obligations of the Borrower under this Section 3.05 to reimburse
the
<PAGE>
Issuing Bank with respect to Unpaid Drawings (including, in each case,
interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrower may have or have had against any Bank (including in
its capacity as Issuing Bank or as Participant), including, without
limitation, any defense based upon the failure of any drawing under a Letter
of Credit (each, a "Drawing") to conform to the terms of the Letter of Credit
or any nonapplication or misapplication by the beneficiary of the proceeds of
such Drawing; provided, however, that the Borrower shall not be obligated to
reimburse any Issuing Bank for any wrongful payment made by the Issuing Bank
under a Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Issuing Bank.
3.06 Increased Costs. If at any time after the date hereof, the Issuing
Bank or any Participant determines that the introduction after the date hereof
of, or any change after the date hereof in, any applicable law, rule,
regulation, order, guideline or request or in the interpretation or
administration, thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by the Issuing Bank or
any Participant, or any corporation controlling the Issuing Bank or such
Participant, with any request or directive by any such authority (whether or
not having the force of law) made subsequent to the date hereof, shall either
(i) impose, modify or make applicable any reserve, deposit, capital adequacy
or similar requirement against letters of credit issued by the Issuing Bank or
participated in by any Participant, or (ii) impose on the Issuing Bank or any
Participant, or any corporation controlling the Issuing Bank or such
Participant, any other conditions relating, directly or indirectly, to this
Agreement or any Letter of Credit; and the result of any of the foregoing is
to increase the cost to the Issuing Bank or any Participant of issuing,
maintaining or participating in any Letter of Credit, or reduce the amount of
any sum received or receivable by the Issuing Bank or any Participant
hereunder or reduce the rate of return on its capital with respect to Letters
of Credit, then, upon demand to the Borrower by the Issuing Bank or any
Participant (a copy of which demand shall be sent by the Issuing Bank or such
Participant to the Administrative Agent), the Borrower shall pay to the
Issuing Bank or such Participant such additional amount or amounts as will
compensate such Issuing Bank or such Participant for such increased cost or
reduction in the amount receivable or reduction on the rate of return on its
capital. The Issuing Bank or any Participant, upon determining that any
additional amounts will be payable pursuant to this Section 3.06, shall give
prompt written notice thereof to the Borrower, which notice shall include a
certificate submitted to the Borrower by the Issuing Bank or such Participant
(a copy of which certificate shall be sent by the Issuing Bank or such
Participant to the Administrative Agent), setting forth in reasonable detail
the basis for the calculation of such additional amount or amounts necessary
to compensate the Issuing Bank or such Participant, although failure to give
any such notice shall not release or diminish the Borrower's obligations to
pay additional amounts pursuant to this Section 3.06, except as provided in
Section 2.14. The certificate required to be delivered pursuant to this
Section 3.06 shall, absent manifest error, be final, conclusive and binding on
the Borrower.
Section 4. Commitment Commission; Fees; Reductions of Commitment.
4.01 Fees. (a) The Borrower agrees to pay to the Administrative Agent
for distribution to each of the Banks a commitment commission (the "Commitment
Commission") for the period from the Initial Borrowing Date, in the case of
each Bank party hereto, and on the date such Bank became a party to this
Agreement, in the case of each other Bank, to the Revolving Loan Maturity Date
(or such earlier date as the Total Commitment shall have been terminated)
computed at a
<PAGE>
rate for each day equal to 1/2 of 1% per annum on the daily unused portion
of such Bank's Total Commitment. Accrued Commitment Commissions shall be due
and payable quarterly in arrears on each Quarterly Payment Date and on the
Revolving Loan Maturity Date or such earlier date upon which the Total
Commitment is terminated.
(b) The Borrower agrees to pay to the Issuing Bank, for its own account, a
facing fee in respect of each Letter of Credit issued by the Issuing Bank
hereunder (the "Facing Fee"), for the period from the date of issuance of such
Letter of Credit to the date of termination of such Letter of Credit, equal to
1/4 of 1% per annum of the daily Stated Amount of such Letter of Credit.
Accrued Facing Fees shall be due and payable in arrears to the respective
Issuing Bank in respect of each Letter of Credit issued by it on each Quarterly
Payment Date and the date of the termination of the Total Revolving Loan
Commitment on which no Letters of Credit remain outstanding.
(c) The Borrower agrees to pay to the Administrative Agent for distribution
to each Bank with a Revolving Loan Commitment a fee in respect of each Letter of
Credit issued hereunder (the "Letter of Credit Fee"), for the period from the
date of issuance of such Letter of Credit to the date of termination of such
Letter of Credit, computed at a rate per annum equal to 2 1/2% on the daily
Stated Amount of such Letter of Credit. Letter of Credit Fees shall be
distributed by the Administrative Agent to the Banks on the basis of the
respective Percentages of such Banks as in effect from time to time. Accrued
Letter of Credit Fees shall be due and payable quarterly in arrears on each
Quarterly Payment Date and on the date of the termination of the Total Revolving
Loan Commitment on which no Letters of Credit remain outstanding.
(d) The Borrower agrees to pay in immediately available funds directly to
the respective Issuing Bank upon each issuance of, drawing under, and/or
amendment of, a Letter of Credit issued by the Issuing Bank such amount as shall
at the time of such issuance, drawing or amendment be the administrative charge
which the Issuing Bank is customarily charging for issuances of, drawings under
(including wire charges) or amendments of, letters of credit issued by it or
such alternative amounts as may have been agreed upon in writing by the Borrower
and the Issuing Bank.
(e) The Borrower shall pay to the Administrative Agent, for its account,
such administrative fees as have been agreed to in writing by the Borrower or
any of its Affiliates and the Administrative Agent payable in advance on the
Effective Date and on each anniversary of the Effective Date thereafter.
4.02 Voluntary Termination of Unutilized Commitments. Upon at least
three Business Days' prior written notice (or telephonic notice promptly
confirmed in writing) to the Administrative Agent at its Notice Office (which
notice the Administrative Agent shall promptly transmit to each of the Banks
and to the Issuing Bank), the Borrower shall have the right, without premium
or penalty, to terminate the Total Unutilized Revolving Loan Commitment, in
whole or in part; provided that (i) each such reduction shall apply
proportionately to reduce the Revolving Loan Commitment of each Bank with such
a Commitment and (ii) any partial reduction pursuant to this Section 4.02
shall be in integral multiples of at least $500,000.
4.03 Mandatory Reduction of Commitments. (a) The Total Commitment (and
the Term Loan Commitment and the Revolving Loan Commitment of each Bank with
such a Commitment)
<PAGE>
shall terminate on December 31, 1997 unless the Initial Borrowing Date has
occurred on or before such date.
(b) In addition to any other mandatory commitment reductions pursuant to
this Section 4.03, the Total Term Loan Commitment (and the Term Loan Commitment
of each Bank with such a Commitment) shall (i) terminate in its entirety on the
Initial Borrowing Date (after giving effect to the making of the Term Loans on
such date) and (ii) prior to the termination of the Total Term Loan Commitment
as provided in clause (i) above, be reduced from time to time to the extent
required by Section 5.02.
(c) In addition to any other mandatory commitment reductions pursuant to
this Section 4.03, the Total Revolving Loan Commitment (and the Revolving Loan
Commitment of each Bank) shall terminate on the Revolving Loan Maturity Date.
(d) Each reduction to the Total Term Loan Commitment and the Total
Revolving Loan Commitment pursuant to this Section 4.03 shall be applied
proportionately to reduce the Term Loan Commitment and the Revolving Loan
Commitment, as the case may be, of each Bank with such a Commitment.
Section 5. Prepayments; Payments; Taxes.
5.01 Voluntary Prepayments. The Borrower shall have the right to prepay
Loans, without premium or penalty, in whole or in part from time to time on
the following terms and conditions: (i) the Borrower shall give the
Administrative Agent prior to 11:00 A.M (New York time) at its Notice Office
at least one Business Day's prior written notice in the case of Eurodollar
Loans and same day prior written notice in the case of Base Rate Loans of the
Borrower's intent to prepay the Loans, whether Term Loans or Revolving Loans
shall be prepaid, the amount of such prepayment and the Types of Loans to be
prepaid and, in the case of Eurodollar Loans, the specific Borrowing or
Borrowings pursuant to which made, which notice the Administrative Agent shall
promptly transmit to each of the Banks; (ii) each prepayment shall be in an
aggregate principal amount of at least the Minimum Borrowing Amount and, if
greater, in integral multiples of $50,000; provided that no partial prepayment
of Eurodollar Loans made pursuant to any Borrowing shall reduce the
outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less
than the Minimum Borrowing Amount; (iii) if prepayments of Eurodollar Loans
are made pursuant to this Section 5.01 on any day other than the last day of
an Interest Period applicable thereto, then the Borrower shall pay to the
Administrative Agent for the benefit of the Banks any compensation required to
be paid pursuant to Section 2.11; (iv) each prepayment in respect of any Loans
made pursuant to a Borrowing shall be applied pro rata among such Loans; and
(v) each prepayment of Term Loans pursuant to this Section 5.01 shall reduce
the then remaining Scheduled Term Loan Repayments on a pro rata basis.
5.02 Mandatory Repayments and Commitment Reductions.
(A) Requirements:
(a) On any day on which the sum of the aggregate outstanding principal
amount of Revolving Loans and Letter of Credit Outstandings at such time exceeds
the Total Revolving Loan
<PAGE>
Commitment as then in effect, the Borrower shall prepay on such day the
principal of Revolving Loans in an amount equal to such excess. If, after
giving effect to the prepayment of all outstanding Revolving Loans, the
aggregate amount of the Letter of Credit Outstandings exceeds the Total
Revolving Loan Commitment as then in effect, the Borrower shall pay to the
Administrative Agent at its Payment Office on such date an amount of cash
equal to the amount of such excess, such cash to be held as security for all
Obligations of the Borrower hereunder in a cash collateral account to be
established and maintained (including the investments made pursuant thereto)
by the Administrative Agent pursuant to a cash collateral agreement in form
and substance reasonably satisfactory to the Administrative Agent.
(b) If any Borrowing Base Certificate shall disclose the existence of a
Borrowing Base Deficiency, the Borrower shall on the date of the delivery
thereof in accordance with Section 9.01(k) repay the principal of Revolving
Loans in an amount equal to such Borrowing Base Deficiency and, to the extent
such Borrowing Base Deficiency exceeds the principal amount of then outstanding
Revolving Loans required to be prepaid, the Borrower shall pay an amount of cash
equal to such excess to the Administrative Agent at the Payment Office, such
cash to be held as security for all Obligations of the Borrower hereunder in a
cash collateral account established and maintained (including the investments
made pursuant thereto) by the Administrative Agent pursuant to a cash collateral
agreement in form and substance reasonably satisfactory to the Administrative
Agent.
(c) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 5.02(A), the Borrower shall be required to repay on
each date set forth below the principal amount of the Term Loans, to the extent
then outstanding, set forth below opposite such date (each such repayment as the
same may be reduced as provided in Sections 5.01 and 5.02(B), a "Scheduled Term
Loan Repayment"):
Scheduled Repayment Date Amount
------------------------ ----------
December 31, 1998 $1,000,000
March 31, 1999 $ 750,000
June 30, 1999 $ 750,000
September 30, 1999 $ 750,000
December 31, 1999 $ 750,000
March 31, 2000 $1,250,000
June 30, 2000 $1,250,000
September 30, 2000 $1,250,000
December 31, 2000 $1,250,000
March 31, 2001 $1,500,000
June 30, 2001 $1,500,000
September 30, 2001 $1,500,000
December 31, 2001 $1,500,000
March 31, 2002 $1,500,000
June 30, 2002 $1,500,000
September 30, 2002 $1,500,000
December 31, 2002 $1,500,000
March 31, 2003 $2,250,000
<PAGE>
June 30, 2003 $2,250,000
September 30, 2003 $2,250,000
November 26, 2003 $ 250,000
(d) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 5.02(A), no later than the Business Day immediately
following the date of the receipt thereof by the Parent or any of its
Subsidiaries, an amount equal to:
(i) 100% of the cash proceeds (net of underwriting discounts and
commissions and all other reasonable costs associated with such
transaction), in excess of $7,500,000 in the aggregate, from any sale
or issuance after the Effective Date of equity securities of the
Parent, the Borrower or any of the Borrower's Subsidiaries (other than
the Equity Transactions) otherwise permitted by Section 10.13;
provided, however, notwithstanding the foregoing, that with respect to
the issuance and sale of common stock by the Parent to any of the
Parent's then existing shareholders or to not more than 25 "accredited
investors" (as defined in Regulation D promulgated pursuant to the
Securities Act) pursuant to a private placement, no prepayment of the
Loans shall be required to be made with the cash proceeds of such
issuance and sale to the extent such cash proceeds are used to make an
acquisition permitted under (S) 10.02 and
(ii) 100% of the cash proceeds (net of underwriting discounts and
commissions, loan fees and all other reasonable costs associated with
such transaction) from any incurrence of any Indebtedness by the
Parent, the Borrower or any of the Borrower's Subsidiaries (other than
(a) the issuance by the Borrower of the Senior Notes and (b) other
Indebtedness permitted by Section 10.05),
shall be applied as provided in Section 5.02(B).
(e) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 5.02(A), no later than 90 days after the last day of
each fiscal year of the Borrower, an amount equal to 50% of Excess Cash Flow of
the Borrower and its Subsidiaries for the relevant Excess Cash Flow Payment
Period shall be applied as provided in Section 5.02(B).
(f) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 5.02(A), no later than the Business Day immediately
following each date after the Effective Date on which the Borrower or any of its
Subsidiaries receives cash proceeds from any sale of assets (including capital
stock and securities other than capital stock the proceeds from the sale of
which is recaptured pursuant to, or would be recaptured but for the exclusions
contained in, Section 5.02(A)(d)(i), but excluding (1) up to $500,000 of Net
Sale Proceeds from the sale of assets permitted to be sold pursuant to Section
10.02(ii)(A), (2) the sale of inventory (other than attaching machinery) in
the ordinary course of business, and (3) the sale of attaching machinery
permitted to be sold pursuant to Section 10.02(ii)(B) (so long as the proceeds
from the sale of such attaching machinery are used to purchase replacement
machinery), an amount equal to 100% of the Net Sale Proceeds thereof shall be
applied as provided in Section 5.02(B); provided, however, that to the extent
the Net Sale Proceeds from sales of assets permitted to be reinvested in the
business pursuant to Section 10.02(ii) are not so reinvested in accordance
with the provisions (including the timing provisions) of such Section
10.02(ii) and this Section 5.02(A)(f), then such Net Sale Proceeds shall
immediately be applied as provided in
<PAGE>
Section 5.02(B)).
(g) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 5.02(A), no later than the Business Day immediately
following each date after the Effective Date of the receipt thereof by the
Parent or any of its Subsidiaries, an amount equal to 100% of the cash proceeds
of any Recovery Event (net of reasonable costs incurred in connection with such
Recovery Event (including the estimated marginal increase in income taxes which
will be payable as a result of such Recovery Event by the Parent or any of its
Subsidiaries)) shall be applied as provided in Section 5.02(B); provided that
(x) so long as no Event of Default pursuant to Section 11.01 then exists, on and
after the Effective Date and prior to the date on which there are no outstanding
Obligations, such proceeds shall not be required to be so applied on such date
to the extent that the Parent delivers a certificate to the Administrative Agent
on or prior to such date stating that such proceeds shall be used to replace or
restore any properties or assets in respect of which such proceeds were paid
with substantially the same properties or assets within a period specified in
such certificate not to exceed 180 days after the date of receipt of such
proceeds (which certificate shall set forth estimates of the proceeds to be so
expended), and (y) if all or any portion of such proceeds are not so used within
the period specified in the relevant certificate furnished pursuant to the
preceding clause (x), such remaining portion shall be applied on the last day of
such specified period as provided in Section 5.02(B).
(h) In addition to any other mandatory payments or commitment reductions
pursuant to this Section 5.02(A), no later than the Business Day immediately
following the date of the receipt thereof by the Parent or any of its
Subsidiaries, an amount equal to 50% of the proceeds of any Tax Refund shall be
applied as provided in Section 5.02(B).
(i) In addition to any other mandatory repayments or commitment reductions
pursuant to this Section 5.02(A), no later than the Business Day immediately
following the date of the receipt thereof by the Parent or any of its
Subsidiaries, an amount equal to 100% of any surplus assets of any Pension Plan
returned to the Parent or such Subsidiary, net of any applicable taxes, shall be
applied as provided in Section 5.02(B).
(j) Anything contained in this Section 5.02 to the contrary
notwithstanding, and in addition to any other mandatory payments or commitment
reductions pursuant to this Section 5.02(A), (A) if, following the occurrence of
any "Asset Sale" (as such term is defined in the Senior Notes Indenture) by any
Credit Party or any of its Subsidiaries, the Borrower is required to commit by a
particular date (a "Commitment Date") to apply or cause its Subsidiaries to
apply an amount equal to any of the "Net Available Proceeds" (as such term is
defined in the Senior Notes Indenture) thereof in a particular manner, or to
apply by a particular date (an "Application Date") an amount equal to any such
"Net Available Proceeds" in a particular manner, in either case in order to
excuse the Borrower from being required to make a "Net Proceeds Offer" (as such
term is defined in the Senior Notes Indenture) in connection with such "Asset
Sale", and the Borrower shall have failed to so commit or to so apply an amount
equal to such "Net Available Proceeds" at least 15 days before the Commitment
Date or the Application Date, as the case may be, or (B) if the Borrower at any
other time shall have failed to apply or commit or cause to be applied an amount
equal to any such "Net Available Proceeds", and, within 60 days thereafter
assuming no further application or commitment of an amount equal to such "Net
Available Proceeds" the Borrower would otherwise be required to make a "Net
Proceeds Offer"
<PAGE>
in respect thereof, then in either such case the Borrower shall immediately
apply or cause to be applied an amount equal to such "Net Available Proceeds"
to the payment of the Loans in the manner set forth in Section 5.02(A)(f) in
such amounts as shall excuse the Borrower from making any such "Net Proceeds
Offer".
(B) Application:
(a) Each mandatory repayment of Loans pursuant to Section 5.02(A)(d)
through (j) shall be applied to prepay the principal of outstanding Term Loans
(or if the Initial Borrowing Date has not yet occurred, as a mandatory reduction
to the Total Term Loan Commitment), which prepayments (and mandatory reductions
to the Term Loan Commitment) shall be applied to reduce the then remaining
Scheduled Term Loan Repayments on a pro rata basis based upon the then remaining
Scheduled Term Loan Repayments after giving effect to all prior reductions
thereto (it being understood and agreed that the amount of any reduction to the
Total Term Loan Commitment shall be deemed to be an application of proceeds for
purposes of this Section 5.02(B)(a)(i) even though cash is not actually
applied).
(b) With respect to each repayment of Loans required by this Section 5.02,
the Borrower may designate the Types of Loans which are to be repaid and, in the
case of Eurodollar Loans, the specific Borrowing or Borrowings of the respective
Tranche pursuant to which made; provided that: (i) repayments of Eurodollar
Loans pursuant to this Section 5.02 may only be made on the last day of an
Interest Period applicable thereto unless all Eurodollar Loans of the respective
Tranche with Interest Periods ending on such date of required repayment and all
Base Rate Loans of the respective Tranche have been paid in full, in which case
the Borrower shall pay to the Administrative Agent for the benefit of the Banks
any compensation required to be paid pursuant to Section 2.11; (ii) if any
repayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce
the outstanding Eurodollar Loans made pursuant to such Borrowing to an amount
less than the Minimum Borrowing Amount, such Borrowing shall immediately be
converted into Base Rate Loans; and (iii) each repayment of any Loans made
pursuant to a single Borrowing shall be applied pro rata among such Loans. In
the absence of a designation by the Borrower as described in the preceding
sentence, the Administrative Agent shall, subject to the above, make such
designation in its sole discretion.
(c) Notwithstanding anything to the contrary contained elsewhere in this
Agreement, (i) all then outstanding Term Loans shall be repaid in full on the
Term Loan Maturity Date and (ii) all then outstanding Revolving Loans shall be
repaid in full on the Revolving Loan Maturity Date.
(d) All prepayments made under this subsection (B) shall be made together
with accrued interest to the date of such prepayment on the principal amount
prepaid.
5.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement or under any
Note shall be made to the Administrative Agent for the account of the Bank or
Banks entitled thereto not later than 12:00 Noon (New York time) on the date
when due and shall be made in Dollars in immediately available funds at the
Payment Office of the Administrative Agent. Whenever any payment to be made
hereunder or under any Note shall be stated
<PAGE>
to be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day (except to the extent otherwise
required herein with respect to Eurodollar Loans) and, with respect to
payments of principal, interest shall be payable at the applicable rate during
such extension.
5.04 Net Payments. (a) All payments made by the Guarantors or the
Borrower hereunder, or by the Borrower under any Note, will be made without
setoff, counterclaim or other defense. Except as provided in Section 5.04(b),
all such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by
any jurisdiction or by any political subdivision or taxing authority thereof
or therein with respect to such payments (but excluding, except as provided in
the second succeeding sentence, any tax imposed on or measured by the net
income of a Bank or the Issuing Bank pursuant to the laws of the jurisdiction
or any political subdivision or taxing authority thereof or therein in which
the principal office or applicable lending office of such Bank, is located)
and all interest, penalties or similar liabilities with respect thereto
(collectively, "Taxes"). If any Taxes are so levied or imposed, the Borrower
and the Guarantors jointly and severally agree to pay the full amount of such
Taxes to the relevant taxation authority or other governmental authority in
accordance with applicable law, and such additional amounts as may be
necessary so that every payment of all amounts due hereunder or under any
Note, after withholding or deduction for or on account of any Taxes, will not
be less than the amount provided for herein or in such Note. If any amounts
are payable in respect of Taxes pursuant to the preceding sentence, then the
Borrower and the Guarantors shall jointly and severally be obligated to
reimburse each Bank or the Issuing Bank, as the case may be, within 60 days
from the date such Bank or the Issuing Bank makes written demand therefor for
taxes imposed on or measured by the net income of such Bank or the Issuing
Bank, as the case may be, pursuant to the laws of the jurisdiction or any
political subdivision or taxing authority thereof or therein in which the
principal office or applicable lending office of such Bank or the Issuing Bank
is located as such Bank or the Issuing Bank, as the case may be, shall
determine are payable by such Bank or the Issuing Bank in respect of such
amounts so paid to or on behalf of such Bank or the Issuing Bank pursuant to
the preceding sentence and in respect of any amounts paid to or on behalf of
such Bank or the Issuing Bank pursuant to this sentence. The Borrower or the
Guarantors, as the case may be, shall furnish to the Administrative Agent
within 60 days after the date of the payment of any Taxes due pursuant to
applicable law, certified copies of the receipts evidencing such payment by
the Borrower or the Guarantors or other written proof of payment reasonably
satisfactory to the Administrative Agent showing payment thereof. The Borrower
and the Guarantors jointly and severally agree to indemnify and hold harmless
each Bank, the Issuing Bank and each of the Agents, and to reimburse such
Bank, the Issuing Bank or such Agent (as the case may be) upon its written
request, for the amount of any Taxes and Other Taxes (as defined below) so
levied or imposed and paid by such Bank, the Issuing Bank or such Agent (as
the case may be). This indemnification shall be made with 60 days after the
date such Bank, the Issuing Bank or such Agent (as the case may be) makes
written demand therefor.
(b) The Issuing Bank (if appropriate) and each Bank that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
agrees to deliver to the Borrower and the Administrative Agent on or prior to
the Effective Date, or in the case of a Bank that is an assignee or transferee
of an interest under this Agreement pursuant to Section 15.04 (unless the
respective Bank was already a Bank hereunder immediately prior to such
assignment or transfer), on
<PAGE>
the date of such assignment or transfer to such Bank, (i) two accurate and
complete original signed copies of Internal Revenue Service Form 4224 or 1001
(or successor forms) certifying to such Bank's or the Issuing Bank's
entitlement to a complete exemption from or a reduced rate of United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Bank or the Issuing Bank is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either
Internal Revenue Service Form 4224 or 1001 pursuant to clause (i) above, (x) a
certificate substantially in the form of Exhibit H (any such certificate, a
"Section 5.04(b)(ii) Certificate") and (y) two accurate and complete original
signed copies of Internal Revenue Service Form W-8 (or successor form)
certifying to such Bank's or the Issuing Bank's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Note. In addition, each
Bank and the Issuing Bank agrees from time to time after the Effective Date,
(i) when a change in circumstances renders the previous certification obsolete
or inaccurate in any material respect or (ii) upon the reasonable written
request of the Borrower to such Bank, the Issuing Bank and the Administrative
Agent, when a lapse in time renders the previous certification obsolete that
it will deliver to the Borrower and the Administrative Agent (unless the Bank
or the Issuing Bank is not lawfully able to do so solely as a result of a
change in law) two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section
5.04(b)(ii) Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Bank or the
Issuing Bank to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and under any
Note, or it shall immediately notify the Borrower and the Administrative Agent
of its inability to deliver any such Form or Certificate. If the form provided
by a Bank or the Issuing Bank at the time such Bank or the Issuing Bank first
becomes a party to this Agreement indicates a United States withholding tax in
excess of zero, withholding tax at such rate shall be considered excluded from
Taxes unless and until such Bank or the Issuing Bank provides the appropriate
form certifying that a lesser rate applies, whereupon withholding at such
lesser rate shall only be considered excluded from Taxes for periods governed
by such form. Notwithstanding anything to the contrary contained in Section
5.04(a), but subject to the immediately preceding and succeeding sentences,
the Borrower shall not be obligated pursuant to Section 5.04(a) hereof to
gross-up payments to be made to a Bank, the Issuing Bank or the Administrative
Agent in respect of income or similar taxes imposed by the United States (or
any political subdivision taxing authority thereof or therein) and shall be
entitled to deduct or withhold such taxes, to the extent it is required to do
so by law from interest, fees and other amounts payable hereunder, if (1) such
Bank or the Issuing Bank has not provided to the Borrower the appropriate form
described in this subsection (b) (other than if, due to a change in law
occurring after the date on which a form originally was required to be
provided, such form is not required under this subsection (b)) required to be
provided to the Borrower pursuant to this Section 5.04(b) or (2) in the case
of a payment, other than interest, to a Bank or the Issuing Bank described in
clause (ii) above, to the extent that such forms do not establish a complete
exemption from withholding of such taxes. Notwithstanding anything to the
contrary contained in the preceding sentence or elsewhere in this Section
5.04, the Borrower agrees to pay additional amounts and to indemnify each Bank
and the Issuing Bank in the manner set forth in Section 5.04(a) (without
regard to the identity of the jurisdiction requiring the deduction or
withholding) in respect of any amounts deducted or withheld by it as described
in the immediately preceding sentence as a result of any changes after the
Effective Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the
deducting or withholding of income or similar Taxes.
<PAGE>
(c) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges, levies that arise from
any payment made hereunder or under the Notes, if any, or from the execution,
delivery or registration of, or otherwise with respect to this Agreement or the
Notes, if any (herein referred to as "Other Taxes").
(d) In the event that an additional payment is made under this Section 5.04
for the account of any Bank and such Bank, in its sole opinion, determines that
it has finally and irrevocably received or been granted a refund in respect of
any Taxes paid pursuant to this Section 5.04, such Bank shall promptly remit
such refund to the Borrower, net of all out-of-pocket expenses of such Bank
related thereto; provided, however, that the Borrower upon the request of such
Bank, agrees to promptly return such refund to such Bank in the event such Bank
is required to repay such refund to the relevant taxing authority. Nothing
contained herein shall interfere with the right of a Bank to arrange its tax
affairs in whatever manner it thinks fit nor oblige any Bank to apply for any
refund or to disclose any information relating to its tax affairs or any
computations in respect thereof.
Section 6. Conditions Precedent to Loans on the Initial Borrowing Date.
The obligation of each Bank to make Loans on the Initial Borrowing Date and the
Issuing Bank to issue any Letter of Credit on the Initial Borrowing Date is
subject at the time of such Credit Events to the satisfaction of the following
conditions:
6.01 Execution of Agreement Notes. On or prior to the Initial Borrowing
Date (i) the Effective Date shall have occurred and (ii) there shall have been
delivered to the Administrative Agent for the account of each of the Banks the
appropriate Term Note or Revolving Note executed by the Borrower, in each case
in the amount, maturity and as otherwise provided herein.
6.02 Officer's Certificate. On the Initial Borrowing Date, the
Administrative Agent shall have received a certificate dated the Initial
Borrowing Date signed on behalf of each of the Credit Parties by the
president, any executive vice president or any vice president of such Credit
Party stating that all of the conditions in Sections 6.06, 6.07, 6.09, 6.10,
6.14, 6.16, 6.18, 7.01, 7.02 and 7.03 have been satisfied on such date;
provided that such certificate shall not be required to certify as to the
acceptability of any items to the Agents, the Issuing Bank and/or the Banks or
as to whether the Agents, the Issuing Bank and/or the Banks are aware of or
are satisfied with any of the matters described in such Sections.
6.03 Opinions of Counsel. On the Initial Borrowing Date, the
Administrative Agent shall have received from (i) Cahill Gordon & Reindel,
special counsel to the Credit Parties, an opinion addressed to each of the
Agents, the Issuing Bank and each of the Banks and dated the Initial Borrowing
Date in the form of Exhibit D, (ii) local counsel to the Banks, the Issuing Bank
and the Agents, opinions addressed to each of the Agents, the Issuing Bank and
each of the Banks and dated the Initial Borrowing Date, each of which shall be
in form and substance reasonably satisfactory to the Agents and shall cover the
perfection and priority of the security interests granted pursuant to the
Security Documents and such other matters incident to the transactions
contemplated hereby and by the other Credit Documents as the Agents may request
and (iii) counsel rendering such opinions, reliance letters with respect to all
legal opinions delivered in connection with the Transaction which shall be (x)
addressed to each of the Agents, the Issuing Bank and each of the Banks and
dated the Initial
<PAGE>
Borrowing Date and (y) in form and substance reasonably satisfactory to the
Agents (it being understood that reliance language in an opinion delivered to
another Person shall be permitted to be substituted for reliance letters).
6.04 Corporate Documents; Proceedings. (a) On the Initial
Borrowing Date, the Administrative Agent shall have received from each Credit
Party a certificate, dated the Initial Borrowing Date, signed by the president
or any vice president of such Credit Party, and attested to by the secretary or
any assistant secretary of such Credit Party, in the form of Exhibit E with
appropriate insertions, together with copies of the Certificate of Incorporation
and By-Laws of such Credit Party and the resolutions of such Credit Party
referred to in such certificate, and the foregoing shall be reasonably
acceptable to the Agents and the Required Banks.
(b) All corporate and legal proceedings and all instruments and agreements
relating to the transactions contemplated by this Agreement and the other
Documents shall be reasonably satisfactory in form and substance to the Agents
and the Required Banks, and the Administrative Agent shall have received all
information and copies of all documents and papers, including records of
corporate proceedings, governmental approvals, good standing certificates,
certificates of merger and bring-down telegrams, if any, which the Agents or the
Required Banks may have reasonably requested in connection therewith, such
documents and papers, where appropriate, to be certified by proper corporate or
governmental authorities.
6.05 Employee Benefit Plans; Shareholders Agreements; Management
Agreements; Employment Agreements; and Debt Agreements. On or prior to the
Initial Borrowing Date, there shall have been delivered to the Administrative
Agent true and correct copies, certified as true and complete by an appropriate
officer of the Parent or the Borrower, as the case may be, of:
(i) all Employee Benefit Plans;
(ii) all agreements entered into by the Parent or any of its
Subsidiaries governing the terms and relative rights of its capital stock
and any agreements entered into by its shareholders relating to any such
entity with respect to their capital stock (collectively, the
"Shareholders Agreements");
(iii) all agreements with members of, or with respect to, the
management of the Parent or any of its Subsidiaries other than Employment
Agreements (collectively, the "Management Agreements");
(iv) any employment agreements entered into by the Parent or any of
its Subsidiaries (collectively, the "Employment Agreements"); and
(v) all agreements evidencing or relating to Indebtedness of the
Parent or any of its Subsidiaries which is to remain outstanding after
giving effect to the incurrence of Loans on the Initial Borrowing Date
(collectively, the "Debt Agreements");
all of which Employee Benefit Plans, Shareholders Agreements, Management
Agreements, Employment Agreements, and Debt Agreements shall be in form and
substance reasonably satisfactory
<PAGE>
to the Agents and the Required Banks and shall be in full force and effect on
the Initial Borrowing Date.
6.06 Equity Transactions; Capital Contributions. (a) On or prior to the
Initial Borrowing Date, the Parent shall have received (i) not less than
$40,000,000, in the aggregate, in respect of Capital Stock of the Parent,
consisting of approximately $36,600,000 in cash and approximately $3,400,000
in the rollover of Capital Stock and stock options of the Parent pursuant to
the Saratoga Investment and the Management Investment and (ii) not less than
$10,000,000 in cash pursuant to the Units Offering.
(b) On or prior to the Initial Borrowing Date, the Parent shall have made
the Equity Contribution to the Borrower, to be used by the Borrower to finance
in part the Acquisition, the Refinancings and the Mergers.
(c) On or prior to the Initial Borrowing Date, the Borrower shall have
received at least $100,000,000 in gross cash proceeds from the issuance of the
Senior Notes.
(d) On or prior to the Initial Borrowing Date, the Administrative Agent
shall have received true and correct copies of all documents effecting and
evidencing the Equity Transactions and the Equity Contribution, each such
document of which shall have been duly authorized, executed and delivered by the
parties thereto and shall be in full force and effect and in form and substance
(including all terms and conditions thereof) reasonably satisfactory to the
Agents and the Required Banks.
6.07 Consummation of the Acquisition. On or prior to the
Initial Borrowing Date, there shall have been delivered to the Banks and the
Issuing Bank true and correct copies of all Acquisition Documents, all terms and
provisions of such Acquisition Documents (other than the Stock Purchase
Agreement) shall be in form and substance reasonably satisfactory to the Agents
and the Required Banks and none of the Acquisition Documents shall have been
amended without the consent of the Agents and the Required Banks (which consent
shall not be unreasonably withheld). The Acquisition, including all of the
terms and conditions thereof, shall have been duly approved by the board of
directors and (if required by applicable law) the shareholders of the parties
thereto, and all Acquisition Documents shall have been duly executed and
delivered by the parties thereto and shall be in full force and effect. The
representations and warranties set forth in the Acquisition Documents shall be
true and correct in all material respects as if made on and as of the Initial
Borrowing Date, except to the extent that such representations and warranties
are stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date. Each of the conditions precedent to the
Parent's and KSCO's obligations to consummate the Acquisition as set forth in
the Acquisition Documents shall have been satisfied to the reasonable
satisfaction of the Agents and the Required Banks or waived with the consent of
the Agents and the Required Banks. Merger Sub shall have used the proceeds from
the Equity Contribution, the Term Loan and the issuance of the Senior Notes to
consummate the Acquisition, the Refinancings and the Mergers and to pay all fees
and expenses in connection therewith. The Acquisition, the Refinancings and the
Mergers shall have been consummated in accordance with all applicable law, and
the Acquisition Documents (without giving effect to any amendment or
modification thereof or waiver with respect thereto unless consented to by the
Agents or the Required Banks, which consent shall not
<PAGE>
be unreasonably withheld).
6.08 Security Agreement. On the Initial Borrowing Date, each
of the Credit Parties shall have duly authorized, executed and delivered a
Security Agreement in the form of Exhibit F (as modified, supplemented or
amended from time to time, the "Security Agreement") covering all of the present
and future Security Agreement Collateral of the Credit Parties, in each case
together with:
(i) proper financing statements (Form UCC-1 or UCC-3 or such other
financing statements or similar notices as shall be required by local
law) fully executed for filing under the UCC or other appropriate filing
offices of each jurisdiction as may be necessary or, in the opinion of
the Collateral Agent, desirable to perfect the security interests
purported to be created by the Security Agreement;
(ii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing all judgment liens, tax liens and
effective financing statements that name any of the Credit Parties, or a
division or other operating unit or trade name of any such Credit Party,
as debtor and that are filed in the jurisdictions referred to in clause
(i) of this Section 6.08, together with copies of such other financing
statements (none of which shall cover any Collateral except to the extent
evidencing Permitted Liens or for which the Collateral Agent shall
receive termination statements (Form UCC-3 or such other termination
statements as shall be required by local law) fully executed for filing);
(iii) to the extent required by the Collateral Agent, evidence of
the completion of all other recordings and filings of, or with respect
to, the Security Agreement as may be necessary or, in the opinion of the
Collateral Agent, desirable to perfect the security interests intended to
be created by such Security Agreement, except with respect to the
Mortgages, which are covered by Section 6.18;
(iv) evidence that all other actions necessary or, in the opinion of
the Collateral Agent, desirable to perfect and protect the security
interests purported to be created by the Security Agreement have been
taken; and
(v) all of the Pledged Securities referred to therein then owned by
each such Credit Party (x) endorsed in blank in the case of promissory
notes constituting Pledged Securities and (y) together with executed and
undated irrevocable stock powers, in the case of capital stock
constituting Pledged Securities;
and the Security Agreement and such other documents shall be in full force and
effect.
6.09 Material Adverse Change, Etc. Since December 31, 1996,
(i) there shall have occurred no material adverse change in the operations or
financial condition of the Parent, Merger Sub, KSCO and the Company, together
with their respective Subsidiaries, taken as a whole and (ii) nothing shall have
occurred (and the Banks and the Issuing Bank shall have become aware of no
facts, conditions or other information not previously known) which the Agents or
the Required Banks shall determine (a) could reasonably be expected to have a
material adverse effect on the rights or remedies of the Banks, the Issuing Bank
or the Agents or on the ability of the Parent or any of its Subsidiaries to
<PAGE>
perform their obligations to the Agents, the Issuing Bank and the Banks under
this Agreement or under any other Credit Document, (b) could reasonably be
expected to have a material adverse effect on the Transaction or (c)
indicates the inaccuracy in any material respect of the information previously
provided to the Agents, the Issuing Bank or the Banks (taken as a whole) in
connection with their analysis of the transactions contemplated hereby or
indicates that the information previously provided omitted to disclose any
material information.
6.10 Litigation. Since October 10, 1997, there shall have been no
litigation or administrative proceedings or other legal or regulatory
developments, by any entity (private or governmental), actual or, other than in
the case of clause (a) below, threatened, and there shall have occurred no
adverse change in the status of any such proceedings or developments disclosed
to the Agents, the Issuing Bank and the Banks prior to October 10, 1997, in
either case that, in the reasonable judgment of the Agents, (a) would have a
material adverse effect on the operations or financial condition of the Parent,
Merger Sub, KSCO and the Borrower together with their respective Subsidiaries,
taken as a whole, or (b) involves a reasonable possibility of (i) a material
adverse effect on (x) the ability of any of the Credit Parties to perform their
respective obligations hereunder or under any of the other Credit Documents or
(y) the rights, remedies and benefits available to the Agents, the Issuing Bank
and the Banks hereunder or under any of the other Credit Documents, or (ii)
adversely affecting the ability of any Person to consummate any aspect of the
Transaction or the validity or enforceability of any of the Documents, or which
would be materially inconsistent with the assumptions underlying the forecasts
previously provided to the Agents, the Issuing Bank and the Banks.
6.11 Fees, Etc. On the Initial Borrowing Date, the Borrower shall have
paid in full to the Agents, the Issuing Bank and the Banks all costs, fees and
expenses (including, without limitation, all legal fees and expenses) payable to
the Agents, the Issuing Bank and the Banks to the extent then due pursuant
hereto or as otherwise agreed to between the Parent or any of its Affiliates and
any of the Agents.
6.12 Solvency Opinion; Environmental Assessments. On the Initial Borrowing
Date, the Borrower shall cause to be delivered to the Agents, the Issuing Bank
and the Banks:
(i) a solvency opinion from Houlihan, Lokey, Howard & Zukin
Financial Advisors, Inc., which shall be addressed to each of the Agents,
the Issuing Bank and each of the Banks and dated the Initial Borrowing
Date and in form and substance satisfactory to the Agents and the
Required Banks, and together with asset appraisals and other evidence, in
each case, satisfactory to the Administrative Agent and the Required
Banks, setting forth the conclusion that, before and after giving effect
to the consummation of the Transaction and the other transactions
contemplated hereby and by the Documents, the Parent and its Subsidiaries
(on a consolidated basis), are not insolvent and will not be rendered
insolvent by the Indebtedness incurred in connection herewith, will not
be left with unreasonably small capital with which to engage in their
respective businesses, will not have incurred debts beyond their ability
to pay such debts as they mature and become due, the fair value of the
property of such Credit Party is greater than the total amount of
liabilities (including, without limitation, contingent liabilities) of
such Credit Party and the present fair salable value of the assets of
such Credit Party is not less than the amount that will be required to
pay the probable liability of such Credit Party on its debts as they
become absolute and matured; and
<PAGE>
(ii) environmental liability assessments of certain manufacturing
facilities of the Parent and each of its Subsidiaries prepared by ENVIRON
Corporation, which shall be in scope, and in form and substance,
acceptable to the Agents and the Required Banks (such acceptance not to
be unreasonably withheld), together with reliance letters with respect
thereto.
6.13 Insurance Policies. On the Initial Borrowing Date, the Administrative
Agent shall have received evidence (including, without limitation, certificates
with respect to each insurance policy listed in Schedule V and, with respect to
all casualty insurance, naming the Collateral Agent on behalf of the Secured
Creditors, as mortgagee/secured party and loss payee, and with respect to all
liability policies, naming each of the Administrative Agent, the Issuing Bank
and each of the Banks as an additional insured, and in all cases stating that
such insurance shall not be cancelled or revised without 30 days' prior written
notice by the insurer to the Administrative Agent) of insurance complying with
the requirements of Section 9.03 for the business and properties of Borrower and
each of its Subsidiaries, in form and substance reasonably satisfactory to the
Agents and the Required Banks.
6.14 Approvals. All requisite governmental and other third party approvals
necessary to consummate the Transaction and the other transactions contemplated
by the Documents and otherwise referred to herein or therein (including, but not
limited to, those approvals required in respect of existing permits, landlord
consents and transfers of contract rights) shall have been obtained and remain
in effect, and all applicable appeal periods and all applicable waiting periods,
including, without limitation, the HSR Act, shall have expired without any
action being taken by any competent authority which restrains, prevents or
imposes adverse conditions upon the consummation of the Transaction or the other
transactions contemplated by the Documents and otherwise referred to herein or
therein. Additionally, there shall not exist any actual or threatened judgment,
order, injunction or other restraint issued or filed or a hearing seeking
injunction relief or other restraint pending or notified that has a reasonable
likelihood of restraining, preventing or imposing burdensome conditions upon the
consummation of the Transaction, the other transactions contemplated by the
Documents, the making of the Loans or the issuance of Letters of Credit.
6.15 Financial Statements; Projections; Management Letters. (a) On or
prior to the Initial Borrowing Date, the Issuing Bank and the Banks shall have
received (i) the consolidated balance sheets of the Company and its Subsidiaries
as at December 31, 1996 and December 31, 1995, and the related statements of
earnings and stockholders' equity and cash flows of the Company and its
Subsidiaries for the fiscal periods ended as of such dates, which have been
examined by Arthur Andersen LLP, independent certified public accountants, who
delivered unqualified opinions in respect thereto, (ii) the consolidated balance
sheets of the Company and its Subsidiaries as at December 31, 1994, and the
related statements of earnings and stockholders' equity and cash flows of the
Company and its Subsidiaries for the fiscal period ended as of December 31,
1994, which have been examined by Deloitte & Touche LLP, independent certified
public accountants, who delivered an unqualified opinion in respect thereto,
(iii) the consolidated balance sheet of the Company and its Subsidiaries as at
September 30, 1997, and the related statements of earnings and stockholders'
equity and cash flows of the Company and its Subsidiaries for the fiscal period
ended as of such date, and (iv) the pro forma (both before and after giving
effect to the Transaction and the other transactions contemplated by the
Documents and the related financing thereof) consolidated balance sheet of the
Parent and its Subsidiaries as at the Initial Borrowing Date, all of which
financial statements shall be prepared in
<PAGE>
accordance with U.S. GAAP consistent with past practices and shall be in form
and substance satisfactory to the Agents and the Required Banks, and the
Agents and the Required Banks shall be reasonably satisfied that such pro
forma balance sheet does not materially and adversely differ from the balance
sheet dated August 31, 1997, previously provided to the Agents, the Issuing
Bank and the Banks.
(b) On the Initial Borrowing Date, the Issuing Bank and the Banks shall
have received detailed consolidated financial projections, after giving effect
to the Transaction and the other transactions contemplated by the Documents, for
at least five years ended after the Initial Borrowing Date (the "Projections"),
which Projections shall be as set forth on Schedule II.
(c) On or prior to the Initial Borrowing Date, the Administrative Agent
shall have received a copy of any "management letter" received by KSCO, the
Company or any of their respective Subsidiaries from their certified public
accountants on or after December 31, 1990.
6.16 Refinancing. On the Initial Borrowing Date, after giving effect to
the Loans incurred on the Initial Borrowing Date, neither the Parent nor any of
its Subsidiaries shall have any preferred stock or Indebtedness outstanding
except for the Senior Preferred Stock, the Series B Preferred Stock, the Senior
Notes, the Loans and the indemnity obligations under the Acquisition Documents,
which indemnity obligations (other than any indemnity obligations set forth in
the Stock Purchase Agreement) shall be reasonably satisfactory to the Agents and
the Required Banks, and the Existing Indebtedness, the amount and terms of which
shall be reasonably satisfactory to the Agents and the Required Banks. On the
Initial Borrowing Date, the Refinancings shall have occurred. On or prior to the
Initial Borrowing Date, (i) each of the facilities, agreements and instruments
under which Indebtedness or the Synthetic Lease to be refinanced as part of the
Transaction was issued (collectively, the "Refinanced Indebtedness") shall have
been terminated, (ii) all commitments under the Refinanced Indebtedness shall
have been permanently cancelled, (iii) the amount of all accrued interest,
premiums, fees and commissions shall have been paid in full, (iv) all Liens in
connection with the repayment of such Refinanced Indebtedness shall have been
terminated (and all appropriate releases, termination statements or other
instruments of assignment with respect thereto shall have been obtained) and (v)
all material waivers and consents necessary for the consummation of the
Transaction and the other transactions contemplated by the Documents in respect
of any Indebtedness of the Borrower or the Company (including any Refinanced
Indebtedness) shall have been obtained. The Administrative Agent shall have
received copies, certified as true and complete by an appropriate officer of the
Parent, of all documents executed in connection with the Refinancings and the
repayment of the Refinanced Indebtedness and the release of the Liens thereunder
(collectively, the "Termination Documents").
6.17 Consent Letter. The Administrative Agent shall have received a letter
from National Corporate Research Ltd., presently located at 225 West 34th
Street, New York, New York 10122, substantially in the form of Exhibit G hereto,
indicating its consent to its appointment by the Parent and each other Credit
Party as their agent to receive service of process as specified in Section 15.14
of this Agreement.
6.18 Mortgage; Title Insurance; Surveys; Etc. On the Initial Borrowing
Date, the Collateral Agent shall have received:
(a) fully executed counterparts of a mortgage or deed to secure debt
or similar
<PAGE>
documents in form and substance satisfactory to the Agents (as may be
amended, modified or supplemented from time to time in accordance with
the terms hereof and thereof, each, a "Mortgage" and collectively, the
"Mortgages"), which Mortgages shall cover such of the Real Property owned
by the Borrower or any of its Subsidiaries (after giving effect to the
Transaction) as designated on Schedule III (each, a "Mortgaged Property"
and collectively, the "Mortgaged Properties"), together with evidence
that counterparts of the Mortgages have been delivered to the title
insurance company insuring the Lien of the Mortgages for recording in all
places to the extent necessary and as contemplated by this Agreement or,
in the reasonable opinion of the Collateral Agent, desirable to
effectively create a valid and enforceable first priority mortgage lien
on each Mortgaged Property in favor of the Collateral Agent (or such
other trustee as may be required or desirable under local law) for the
benefit of the Secured Creditors;
(b) mortgagee title insurance policies in connection with the
Mortgaged Properties issued by First American Title Insurance Company or
an affiliate thereof or such other title insurers satisfactory to the
Agents and the Required Banks (the "Mortgage Policies") in amounts
satisfactory to the Agents and the Required Banks assuring the Collateral
Agent that the respective Mortgages on such Mortgaged Properties are
valid and enforceable first priority mortgage liens on the respective
Mortgaged Properties, free and clear of all defects and encumbrances
except Permitted Encumbrances, and such Mortgage Policies shall otherwise
be in form and substance reasonably satisfactory to the Agents and the
Required Banks and shall include, as appropriate, an endorsement for
future advances under this Agreement, the Notes and the Mortgages and for
any other matter that the Agents or the Required Banks in their
discretion may reasonably request, shall not include an exception for
mechanics' liens, and shall provide for affirmative insurance and such
reinsurance (including direct access agreements) as the Agents or the
Required Banks in their discretion may reasonably request; and
(c) surveys in form and substance reasonably satisfactory to the
Agents of each Mortgaged Property dated a recent date acceptable to the
Agents, certified in a manner satisfactory to the Agents by a licensed
professional surveyor satisfactory to the Agents.
6.19 Initial Borrowing Base Certificate. On the Initial Borrowing Date,
the Borrower shall have delivered to the Administrative Agent a Borrowing Base
Certificate meeting the requirements of Section 9.01(k).
6.20 Direction Letters. The Borrower shall, and shall have caused each of
its Domestic Subsidiaries to, have duly authorized and executed a letter to each
of the banking institutions listed on Schedule IX (each a "Deposit Bank"), a
copy of which letter shall be delivered to the Administrative Agent on the
Initial Borrowing Date and the original of which letter shall be delivered to
each of the applicable Deposit Banks no later than 15 days after the Initial
Borrowing Date (i) advising such Deposit Bank that each checking, savings or
other deposit account listed on Schedule IX as a bank deposit account (each a
"Bank Deposit Account") has been pledged to the Collateral Agent pursuant to the
Security Agreement and (ii) directing such Deposit Bank to transfer, in same day
funds, not later than 1:00 P.M. (New York City time) on each Business Day, an
amount equal to the available and collected credit balance of all Bank Deposit
Accounts as of the end of such Business Day to the
<PAGE>
Concentration Account.
Section 7. Conditions Precedent to All Credit Events. The obligation of
each Bank to make any Loan (including any Loan made on the Initial Borrowing
Date) and the obligation of the Issuing Bank to issue any Letter of Credit
(including any Letter of Credit issued on the Initial Borrowing Date), is
subject, at the time of each such Credit Event (except as hereinafter
indicated), to the satisfaction of the following conditions:
7.01 No Default; Representations and Warranties. At the time
of each such Credit Event and also after giving effect thereto (i) there shall
exist no Default or Event of Default and (ii) all representations and warranties
contained herein and in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on the date of the making of such Credit Event, except
for representations and warranties expressly stated to relate to a specific
earlier date, which shall be true and correct as of such date.
7.02 Material Adverse Change, Etc. Nothing shall have occurred since the
Effective Date which (i) could reasonably be expected to have a material
adverse effect on the rights or remedies of the Banks, the Issuing Bank or the
Agents, or on the ability of the Parent, the Borrower or any other Credit
Party to perform their respective obligations to the Agents, the Issuing Bank
and the Banks under this Agreement or under any other Credit Document or (ii)
could reasonably be expected to have a material adverse effect on the
operations or financial condition of the Merger Sub, KSCO and the Borrower
together with their respective Subsidiaries, taken as a whole.
7.03 Litigation. Other than with respect to the matters set
forth on Schedule VIII, at the time of each such Credit Event and also after
giving effect thereto, there shall be no litigation or administrative
proceedings or other legal or regulatory developments, by any entity (private or
governmental), actual or, other than in the case of clause (a) below in the case
of the initial Credit Event, threatened, and there shall have occurred no
adverse change in the status of any such proceedings or developments since the
Effective Date, in either case that, in the reasonable judgment of the
Administrative Agent, (a) would have a material adverse effect on the
performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of the Parent and
its Subsidiaries taken as a whole, or (b) involves a reasonable possibility of
(i) a material adverse effect on (x) the ability of any of the Credit Parties to
perform their respective obligations hereunder or under any of the other Credit
Documents or (y) the rights, remedies and benefits available to the Agents, the
Issuing Bank and the Banks hereunder or under any of the other Credit Documents,
or (ii) adversely affecting the validity or enforceability of any Document, or
which would be materially inconsistent with the assumptions underlying the
forecasts previously provided to the Agents, the Issuing Bank and the Banks.
7.04 Notice of Borrowing; Letter of Credit Request; Other
Documents. (a) Prior to the making of each Loan, the Administrative Agent
shall have received a Notice of Borrowing meeting the requirements of Section
2.03.
(b) Prior to the issuance of each Letter of Credit, the Issuing Bank shall
have received a Letter of Credit Request meeting the requirements of Section
3.03.
<PAGE>
(c) Prior to the making of each Loan and the issuance of each Letter of
Credit, the Administrative Agent shall have received such other approvals,
opinions or documents as any Bank or the Issuing Bank through the Administrative
Agent shall have reasonably requested in connection therewith.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the Borrower to the Issuing Bank and each of the
Banks that (a) on the Initial Borrowing Date, all the conditions specified in
Section 6 exist as of that time and (b) on the date of each Credit Event, all
the conditions specified in this Section 7 exist as of that time. All of the
Notes, certificates, legal opinions and other documents and papers referred to
in Section 6 and in this Section 7, unless otherwise specified, shall be
delivered to the Administrative Agent at the Notice Office for the account of
the Issuing Bank and each of the Banks and, except for the Notes, in sufficient
counterparts for the Issuing Bank and each of the Banks and, unless otherwise
specified, shall be in form and substance reasonably satisfactory to the Issuing
Bank and the Banks.
Section 8. Representations, Warranties and Agreements. In order to
induce the Issuing Bank and the Banks to enter into this Agreement and to make
the Loans, and issue (or participate in) the Letters of Credit as provided
herein, each of the Credit Parties makes the following representations,
warranties and agreements as to itself and as to each of its Subsidiaries, as
of the Initial Borrowing Date (after giving effect to the Credit Events
occurring on such date, the Transaction and the other transactions
contemplated by the Documents, and all references to the Borrower herein and
elsewhere in this Agreement, shall, unless otherwise specifically indicated,
be references to the Borrower after giving effect to the Transaction) and as
of the date of each subsequent Credit Event, which representations, warranties
and agreements shall survive the execution and delivery of this Agreement and
the Notes and any subsequent Credit Event, with the occurrence of each Credit
Event on or after the Initial Borrowing Date being deemed to constitute a
representation and warranty that the matters specified in this Section 8 are
true and correct on and as of the Initial Borrowing Date and on the date of
each such Credit Event except to the extent that such representation and
warranty relates to a specific earlier date, in which case such representation
and warranty shall be true and correct in all material respects as of such
earlier date.
8.01 Corporate Status. Each of the Parent and its
Subsidiaries (i) is a duly organized and validly existing corporation or limited
liability company in good standing under the laws of the jurisdiction of its
incorporation or organization, (ii) has the corporate or other power and
authority to own its property and assets and to transact the business in which
it is engaged and presently proposes to engage and (iii) is duly qualified and
is authorized to do business and is in good standing in each jurisdiction where
the ownership, leasing or operation of property or the conduct of its business
requires such qualifications, except for failures to be so qualified which, in
the aggregate, would not be reasonably likely to have a material adverse effect
on the performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole.
8.02 Corporate Power and Authority. Each of the Parent and
its Subsidiaries has the power to execute, deliver and perform the terms and
provisions of each of the Documents to which it is party and has taken all
necessary corporate or other action to authorize the execution, delivery and
performance by it of each of such Documents. Each of the Parent and its
Subsidiaries has duly executed and delivered each of the Documents to which it
is party, and each of such Documents
<PAGE>
constitutes the legal, valid and binding obligation of such party enforceable
in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by general equitable
principles (regardless of whether the issue of enforceability is considered in
a proceeding in equity or at law).
8.03 No Violation. Neither the execution, delivery or performance by the
Parent or any of its Subsidiaries of the Documents to which it is a party, nor
compliance by it with the terms and provisions hereof or thereof, (i) will
contravene any provision of any applicable law, statute, rule or regulation or
any order, writ, judgment, injunction or decree of any court or governmental
instrumentality, (ii) will conflict with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default or
event of default under, or result in the creation or imposition of (or the
obligation to create or impose), any Lien (except pursuant to the Security
Documents) upon any of the property or assets of the Parent or any of its
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust,
credit agreement or loan agreement, or any other agreement, contract or
instrument to which the Parent or any of its Subsidiaries is a party or by
which it or any of its property or assets is bound, or to which it may be
subject (other than, in the case of any Document other than any Credit
Document, such conflicts, breaches, defaults, events of default or Liens as
could not reasonably be expected to have a material adverse effect on the
performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of the Borrower
and its Subsidiaries taken as a whole) or (iii) will violate any provision of
the Certificate of Incorporation or By-Laws (or similar organizational
documents) of the Parent or any of its Subsidiaries.
8.04 Governmental Approvals. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(except as has been obtained or made on or prior to the Initial Borrowing Date
and as is in full force and effect), or exemption by, any governmental or
public body or authority, or any subdivision thereof (other than, in the case
of any Document other than any Credit Document, such orders, consents,
approvals, licenses, authorizations, validations, filings, recordings,
registrations or exemptions which if not obtained or made, could not
reasonably be expected to have a material adverse effect on the performance,
business, assets, nature of assets, liabilities, operations, properties,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole, or which, as of the date this representation is
made or deemed to be made, are not yet required to have been received or
filed), is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of any Document, (ii) the legality,
validity, binding effect or enforceability of any such Document or (iii) the
Transaction.
8.05 Financial Statements; Financial Conditions; Undisclosed
Liabilities; Projections; Etc. (a) (i) The consolidated balance sheets of KSCO
and its Subsidiaries as at December 31, 1996 and December 31, 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the fiscal years ended as of such dates, which have been examined by
Arthur Andersen LLP, independent certified public accountants, who delivered
unqualified opinions in respect thereto, (ii) the consolidated statements of
operations, changes in stockholders' equity and cash flows of the Company and
its Subsidiaries for the year ended December 31, 1994, which have been examined
by Deloitte & Touche LLP, independent certified public accountants, who
delivered an unqualified opinion in respect thereto and (iii) the pro forma
(both before and after giving effect to the Transaction and the other
transactions contemplated by the Documents and the related financing thereof)
consolidated
<PAGE>
balance sheet of the Parent and its Subsidiaries as at the Initial Borrowing
Date prepared on a basis consistent with the Projections, copies of all of
which financial statements referred to in the preceding clauses (i), (ii) and
(iii) of this Section 8.05 have heretofore been furnished to each of the
Agents, the Issuing Bank and each of the Banks, present fairly in all material
respects the financial position of the respective entities at the dates of
such statements and the results of operations for the period covered thereby
(or, in the case of the pro forma balance sheet, present a good faith estimate
of the pro forma financial condition of the Parent and its Subsidiaries (both
before and after giving effect to the Transaction) on a consolidated basis at
the date thereof). All such financial statements have been prepared in
accordance with U.S. GAAP consistently applied, except to the extent provided
in the notes to such financial statements and with respect to interim
financial statements, subject to the absence of footnotes and to normal year
end adjustments. Since December 31, 1996 (and, in the case of the Parent,
solely as of the Initial Borrowing Date), there has been no material adverse
change in the operations or financial condition of the Parent, Merger Sub,
KSCO and the Company together with their respective Subsidiaries, taken as a
whole.
(b) On and as of the Initial Borrowing Date, on a pro forma basis after
giving effect to the Transaction and the other transactions contemplated by the
Documents, and to all Indebtedness (including the Loans) being incurred in
connection with the Transaction, and Liens created, and to be created, by each
Credit Party in connection therewith: (i) the fair value of the property of
each Credit Party is greater than the total amount of debt of such Credit Party;
(ii) the present fair salable value of the assets of each Credit Party is not
less than the amount that will be required to pay the probable liability of such
Credit Party on its debts as they become absolute and mature; (iii) no Credit
Party has incurred or intends to, or believes that it will, incur debts beyond
its ability to pay such debts as such debts mature; and (iv) each Credit Party
will have sufficient capital with which to conduct its business. For purposes of
this Section 8.05(b), "debt" means any liability on a claim, and "claim" means
(i) the right to payment, whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured or (ii) the right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(c) Except as fully reflected in the financial statements and the notes
related thereto described in Section 8.05(a), there were as of the Initial
Borrowing Date (and after giving effect to the Transaction and the other
transactions contemplated by the Documents) no liabilities or obligations with
respect to the Parent or any of its Subsidiaries of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether or not due)
which, either individually or in aggregate, could reasonably be expected to be
material to the Parent and its Subsidiaries taken as a whole. As of the Initial
Borrowing Date, neither the Parent nor any of its Subsidiaries knows of any
basis for the assertion against the Parent or any of its Subsidiaries of any
liability or obligation of any nature whatsoever that is not fully reflected in
the financial statements and the notes related thereto described in Section
8.05(a) which, either individually or in the aggregate, could reasonably be
expected to be material to the Parent and its Subsidiaries taken as a whole.
(d) On and as of the Initial Borrowing Date, the Projections have been
prepared in good faith by Saratoga with the participation of management of the
Company, have been prepared on a basis consistent with the pro forma financial
statements referred to in Section 8.05(a) and there are no
<PAGE>
statements or conclusions in any of the Projections which are based upon or
include information known to the Parent or the Company to be misleading or which
fail to take into account material information regarding the matters reported
therein. On the Initial Borrowing Date, each of the Parent and the Borrower
believes that the Projections were reasonable and attainable; it being
recognized by the Issuing Bank and the Banks, however, that projections as to
future events are not to be viewed as facts and that the actual results during
the period or periods covered by the Projections probably will differ from the
projected results and that the differences may be material.
8.06 Litigation. Other than with respect to matters set forth on
Schedule VIII, there are no actions, suits or proceedings pending or, to the
best knowledge of the Borrower or any of its Subsidiaries, threatened that (a)
would have a material adverse effect on the operations or financial condition
of the Parent, Merger Sub, KSCO and the Borrower together with their
respective Subsidiaries, taken as a whole, or (b) involves a reasonable
possibility of (i) a material adverse effect on (x) the ability of any of the
Credit Parties to perform their respective obligations hereunder or under any
of the other Credit Documents or (y) the rights, remedies and benefits
available to the Agents, the Issuing Bank and the Banks hereunder or under any
of the other Credit Documents, or (ii) adversely affecting the ability of any
Person to consummate any aspect of the Transaction or the validity or
enforceability of any Documents, or which would be materially inconsistent
with the assumptions underlying the forecasts previously provided to the
Agents, the Issuing Bank and the Banks.
8.07 True and Complete Disclosure. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of any of the
Parent or any of its Subsidiaries in writing to the Issuing Bank or any of the
Banks (including, without limitation, all information contained in the
Documents) for purposes of or in connection with this Agreement, the
Transaction or any other transaction contemplated hereby or by the other
Documents is, and all other such factual information (taken as a whole)
hereafter furnished by or on behalf of any of the Parent or any of its
Subsidiaries in writing to the Issuing Bank or any of the Banks will be, true
and accurate in all material respects on the date as of which such information
is dated or certified and not incomplete by omitting to state any material
fact.
8.08 Use of Proceeds; Margin Regulations. (a) All proceeds of the Term
Loans incurred on the Initial Borrowing Date shall be used by the Borrower (i)
to finance, in part, the Acquisition, the Refinancings and the Mergers and
(ii) to pay Transaction Fees and Expenses.
(b) All proceeds of Revolving Loans borrowed after the Initial Borrowing
Date shall be used by the Borrower for general corporate and working capital
purposes of the Borrower, including making capital contributions or loans to
Subsidiaries of the Borrower to the extent such contributions and loans are
permitted by Section 10.06.
(c) No part of the proceeds of any Loan and no Letter of Credit will be
used to purchase or carry any Margin Stock or to extend credit for the purpose
of purchasing or carrying any Margin Stock. Neither the making of any Loan nor
the use of the proceeds thereof nor the occurrence of any other Credit Event
will violate or be inconsistent with the provisions of Regulation G, T, U or X
of the Board of Governors of the Federal Reserve System.
8.09 Tax Returns and Payments. Each of the Parent and its Subsidiaries
has timely
<PAGE>
filed or caused to be timely filed (including pursuant to any valid extensions
of time for filing) with the appropriate taxing authority, all returns,
statements, forms and reports for taxes (the "Returns") required to be filed
by or with respect to the income, properties or operations of the Parent
and/or any of its Subsidiaries. The Returns accurately reflect in all respects
all liability for taxes of the Parent and its Subsidiaries for the periods
covered thereby. Each of the Parent and its Subsidiaries has paid all material
taxes payable by them which have become due together with applicable interest
and penalties. As of the Initial Borrowing Date, there is no material action,
suit, proceeding, investigation, audit, or claim now pending or, to the best
knowledge of any of the Parent or any of its Subsidiaries, threatened by any
authority regarding any taxes relating to the Parent or any of its
Subsidiaries. As of the Initial Borrowing Date, there are no tax Liens on any
of the property or assets of the Parent or any of its Subsidiaries and no
enforcement, collection, levy or foreclosure proceedings have been commenced
and remain unstayed in respect thereof. As of the Initial Borrowing Date,
neither the Parent nor any of its Subsidiaries has entered into an agreement
or waiver or been requested to enter into an agreement or waiver extending any
statute of limitations relating to the payment or collection of taxes of the
Parent or any of its Subsidiaries, or is aware of any circumstances that would
cause the taxable years or other taxable periods of any of the Parent or any
of its Subsidiaries not to be subject to the normally applicable statute of
limitations. Neither the Parent nor any of its Subsidiaries has provided, with
respect to themselves or property held by them, any consent under Section 341
of the Code. Neither the Parent nor any of its Subsidiaries has incurred, or
will incur, any material tax liability in connection with the Transaction or
the other transactions contemplated by the Documents.
8.10 Compliance with ERISA. Except as could not reasonably be expected
to have a material adverse effect on the performance, business, assets, nature
of assets, liabilities, operations, properties, condition (financial or
otherwise) or prospects of the Parent and its Subsidiaries taken as a whole
(it being agreed that the receipt of the PBGC Letter by the Company, without
more, is not expected to have such a material adverse effect) each Employee
Benefit Plan is in substantial compliance with ERISA and the Code; no
Reportable Event has occurred with respect to a Pension Plan; no Pension Plan
is insolvent or in reorganization; no Pension Plan has an Unfunded Current
Liability; no Pension Plan has an accumulated or waived funding deficiency or
has applied for an extension of any amortization period within the meaning of
Section 412 of the Code; all contributions required to be made by the Parent
and its Subsidiaries and their ERISA Affiliates with respect to a Plan have
been timely made; neither the Parent nor any of its Subsidiaries nor any ERISA
Affiliate (but only as to the following Sections of ERISA and the Code
pursuant to which the Parent could be liable with respect to such ERISA
Affiliate) has incurred any material liability to or on account of a Plan
pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201,
4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or
expects to incur any material liability (including any indirect, contingent or
secondary liability) under any of the foregoing Sections with respect to any
Plan; no proceedings have been instituted to terminate or appoint a trustee to
administer any Pension Plan and no event or condition has occurred as
described in Section 4042 of ERISA; no condition exists which presents a
material risk to any of the Parent or any of its Subsidiaries or any ERISA
Affiliate (but only as to the foregoing provisions of ERISA and the Code
pursuant to which the Parent could be liable with respect to such ERISA
Affiliate) of incurring a material liability to or on account of a Plan
pursuant to the foregoing provisions of ERISA and the Code; there has been no
adoption of any amendment of any Pension Plan requiring the provision of
security to such Pension Plan, pursuant to Section 307 of ERISA; using
actuarial assumptions and computation methods consistent with Part I of
subtitle E of Title IV of ERISA, the Parent and its Subsidiaries and their
ERISA Affiliates would not
<PAGE>
have any liability to any Plan which is a multiemployer plan (as defined in
Section 4001(a)(3) of ERISA, a "Multiemployer Plan") in the event of a
complete withdrawal therefrom, as of the close of the most recent fiscal year
of each such Plan ended prior to the date of any Credit Event; neither the
Parent, any of its Subsidiaries, nor any ERISA Affiliate has been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of
ERISA, and no Multiemployer Plan is reasonably expected to be in
reorganization or to be terminated, within the meaning of Title IV of ERISA;
no lien imposed under the Code or ERISA on the assets of any of the Parent or
any of its Subsidiaries or any ERISA Affiliate exists or is likely to arise on
account of any Plan; and the Parent and its Subsidiaries have not amended,
since the Effective Date, any employee welfare benefit plan (as defined in
Section 3(l) of ERISA) which provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) increasing
benefits under any such Plan, and have not adopted, since the Effective Date,
any new Plan providing such benefits.
8.11 The Security Documents. (a) The provisions of the Security
Agreement are effective to create in favor of the Collateral Agent for the
benefit of the Secured Creditors a legal, valid and enforceable security
interest in all right, title and interest of the respective Credit Parties in
the Collateral described therein and, the Collateral Agent, for the benefit of
the Secured Creditors, will have, upon making the necessary filings in the
appropriate filing office, a fully perfected first Lien on, and security
interest in, all right, title and interest of the respective Credit Parties,
in all of the Collateral described therein, subject to no other Liens other
than Permitted Liens.
(b) The recordation of the Security Agreement in the United States Patent
and Trademark Office, together with filings on Form UCC-1 in all applicable
jurisdictions made pursuant to the Security Agreement, will be effective, under
federal and state law, to perfect the security interest granted to the
Collateral Agent in the Trademarks and Patents covered by the Security Agreement
and the filing of the Security Agreement with the United States Copyright Office
together with filings on Form UCC-1 made pursuant to the Security Agreement will
be effective under federal and state law to perfect the security interest
granted to the Collateral Agent in the Copyrights covered by the Security
Agreement. Each of the Credit Parties party to the Security Agreement has good
and merchantable title to all Collateral described therein, free and clear of
all Liens except those described above in subsection (a) above and in this
subsection (b).
(c) From and after the Initial Borrowing Date, the Mortgages create, as
security for the obligations purported to be secured thereby, a valid and
enforceable and, upon making the necessary filings in the appropriate filing
office, perfected security interest in and Lien on all of the Mortgaged
Properties in favor of the Collateral Agent (or such other trustee as may be
required or desirable under local law) for the benefit of the Secured Creditors,
superior to and prior to the rights of all third persons (except that the
security interest created in the Mortgaged Properties may be subject to the
Permitted Encumbrances related thereto) and subject to no other Liens (other
than Permitted Liens). Schedule III contains a true and complete list of each
parcel of Real Property owned or leased by the Borrower and each of its Domestic
Subsidiaries on the Initial Borrowing Date, and the type of interest therein
held by the Borrower and each of its Subsidiaries. Each of the Borrower and its
Subsidiaries has good and marketable title at the time of the grant thereof and
at all times thereafter to all Mortgaged Properties, free and clear of all Liens
except those described in the first sentence of this subsection (c).
<PAGE>
8.12 Representations and Warranties in Documents. All representations
and warranties set forth in the other Documents were true and correct in all
material respects at the time as of which such representations and warranties
were made (or deemed made) and shall be true and correct in all material
respects on the Initial Borrowing Date as if such representations and
warranties were made on and as of such date, unless stated to relate to a
specific earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date.
8.13 Properties. Each of the Borrower and its Subsidiaries has good
title to all properties owned by them, including all property reflected in the
pro forma consolidated balance sheet (after giving effect to the Transaction)
referred to in Section 8.05(a) (except as sold or otherwise disposed of since
the date of such balance sheet in the ordinary course of business or as
permitted by Section 10.02), free and clear of all Liens, other than (i) as
referred to in the financial statements referred to in Section 8.05 or (ii) as
otherwise permitted by Section 10.01.
8.14 Capitalization. On the Initial Borrowing Date, the authorized
capital stock of the Parent consists of (a) 6,000,000 shares of Parent Common
Stock, of which 3,665,500 shares are issued and outstanding, (b) 200,000
shares of Senior Preferred Stock, of which 1,000 shares are issued and
outstanding and (c) 6,200,000 shares of Series B Preferred Stock, of which
100,000 shares are issued and outstanding. Set forth on Schedule XI hereto, is
a complete and accurate list of all Persons who own any shares of Parent
Common Stock, Senior Preferred Stock or Series B Preferred Stock as of the
Initial Borrowing Date, showing opposite such Person's name the class of stock
owned by such Person, the number of shares owned by such Person and the
percentage of the outstanding shares of that class of stock owned by such
Person. As of the Initial Borrowing Date, all of the shares of stock described
on Schedule XI hereto are owned by the Persons listed on such Schedule free
and clear of all Liens. On the Initial Borrowing Date, the authorized capital
stock of the Borrower consists of 1,000 shares of common stock, $.01 par value
per share (the "Borrower Common Stock"), of which 100 shares are issued and
outstanding and all of which shares of Borrower Common Stock are owned by the
Parent, free and clear of all Liens, except those created under the Credit
Documents. All of such outstanding shares have been duly and validly issued,
are fully paid and nonassessable and are free of preemptive rights. On the
Effective Date, neither the Parent nor any of its Subsidiaries has outstanding
any securities convertible into or exchangeable for its capital stock or
outstanding any rights to subscribe for or to purchase, or any options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating
to, its capital stock other than pursuant to the New Incentive Stock Option
Plan and the Stockholders Agreement, each as in effect on the date hereof.
8.15 Subsidiaries. (a) On the Initial Borrowing Date, the
Persons listed on Schedule IV are the only Subsidiaries of the Borrower.
Schedule IV correctly sets forth, as of the Initial Borrowing Date, the
percentage ownership (direct and indirect) of the Borrower in each class of
capital stock of each of its Subsidiaries and also identifies the direct owner
thereof.
(b) On the Initial Borrowing Date, none of the Borrower's Foreign
Subsidiaries (other than Scovill Canada Inc. and Unifast-Scovill, S.A.) has any
material assets and none of such Persons conducts any business of a material
nature.
<PAGE>
8.16 Compliance with Statutes, Etc. Each of the Borrower and
its Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls), except with
respect to each of the foregoing, such noncompliance as could not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on
the performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole.
8.17 Investment Company Act. None of the Parent or any of
its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
8.18 Public Utility Holding Company Act. None of the Parent
or any of its Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
8.19 Environmental Matters. Except as set forth on Schedule VII, (a) the
Borrower and each of its Subsidiaries have complied with, and on the date of
each Credit Event will be in compliance with all applicable Environmental Laws
and the requirements of any permits issued under such Environmental Laws,
except such non-compliances which could not individually, or in the aggregate,
reasonably be expected to have a material adverse effect on the performance,
business, assets, nature of assets, liabilities, operations, properties,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole. Except as set forth on Schedule VII, there are
no past, pending or, to the best knowledge of the Borrower, threatened
Environmental Claims against the Borrower or any of its Subsidiaries or any
Real Property currently owned or operated by the Borrower or any of its
Subsidiaries that could reasonably be expected to individually, or in the
aggregate, have a material adverse effect on the performance, business,
assets, nature of assets, liabilities, operations, properties, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries
taken as a whole. Except as set forth on Schedule VII, there are no facts,
circumstances, conditions or occurrences on any Real Property owned or
operated at any time by the Borrower or any of its Subsidiaries or, to the
knowledge of the Borrower, on any property adjoining any such Real Property
that could reasonably be expected (i) to form the basis of an Environmental
Claim against the Borrower or any of its Subsidiaries or any Real Property
owned or operated by the Borrower or any of its Subsidiaries or (ii) to cause
such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property under any
Environmental Law except such Environmental Claims and restrictions which
individually, or, in the aggregate, could not reasonably be expected to have a
material adverse effect on the performance, business, assets, nature of
assets, liabilities, operations, properties, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole.
(b) Except as set forth on Schedule VII, other than in material compliance
with applicable Environmental Law or as described in the environmental liability
assessments referred to in Section 6.12(ii), neither the Borrower nor any of its
Subsidiaries has at any time generated, used, treated, stored, transported or
released Hazardous Materials on, to or from any Real Property owned,
<PAGE>
leased or at any time operated by the Borrower or any of its Subsidiaries
except as could not reasonably be expected to result in material liability
under Environmental Laws.
(c) Except as set forth on Schedule VII, there are not now and, to the best
knowledge of the Borrower, never have been any underground storage tanks located
on any Real Property owned or operated by the Borrower or any of its
Subsidiaries.
(d) Except as set forth in Schedule VII, no Real Property owned or at any
time operated by the Borrower or any of its Subsidiaries is located on any site
listed on, or proposed in the Federal Register for listing on, the National
Priorities List, or listed on the Comprehensive Environmental Response
Compensation and Liability Information System ("CERCLIS"), each promulgated
pursuant to CERCLA or its state equivalents. With respect to the Newark, New
Jersey site, the CERCLIS has designated the site as requiring "no further
action".
8.20 Labor Relations. None of the Borrower nor any of its Subsidiaries
is engaged in any unfair labor practice that could reasonably be expected to
have a material adverse effect on the performance, business, assets, nature of
assets, liabilities, operations, properties, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole.
There is (i) no significant unfair labor practice complaint pending against
any of the Borrower or any of its Subsidiaries or, to the best knowledge of
the Borrower, threatened against any of them, before the National Labor
Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against any of the Borrower or any of its Subsidiaries or, to the best
knowledge of the Borrower, threatened against any of them, (ii) no significant
strike, labor dispute, slowdown or stoppage pending against any of the
Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower,
threatened against any of the Borrower or any of its Subsidiaries and (iii) no
union representation question existing with respect to the employees of any of
the Borrower or any of its Subsidiaries, except (with respect to any matter
specified in clause (i), (ii) or (iii) above, either individually or in the
aggregate) those matters which could not reasonably be expected to have a
material adverse effect on the performance, business, assets, nature of
assets, liabilities, operations, properties, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole.
8.21 Patents, Licenses, Franchises and Formulas. (a) The Borrower,
together with its Subsidiaries, owns, has a license to use or otherwise has
the right to use, free and clear of pending or, to the knowledge of the
Borrower and its Subsidiaries, threatened Liens (other than Permitted Liens),
all the material patents, patent applications, trademarks, service marks,
trade names, trade secrets, copyrights, proprietary information, computer
programs, databases, licenses, franchises and formulas, or rights with respect
to the foregoing (collectively, "Intellectual Property"), and has obtained all
licenses and other rights of whatever nature necessary for the present conduct
of its business, without any known conflict with the rights of others which,
or the failure to obtain which, as the case may be, could reasonably be
expected to have a material adverse effect on the performance, business,
assets, nature of assets, liabilities, operations, properties, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries
taken as a whole.
(b) As of the Initial Borrowing Date, the Borrower, together with its
Subsidiaries, has the right to practice under and use all Intellectual Property
which the Company and its Subsidiaries
<PAGE>
had a right to practice under and use immediately prior to the Transaction.
(c) Neither the Borrower nor any of its Subsidiaries has knowledge of any
claim by any third party contesting the validity, enforceability, use or
ownership of the Intellectual Property, or of any existing state of facts that
would support a claim that use by any of the Borrower or any of its Subsidiaries
of any such Intellectual Property has infringed or otherwise violated any
Intellectual Property right of any other Person and that to the best knowledge
of the Borrower and its Subsidiaries no claim is threatened, except for such
claims that could not individually or in the aggregate reasonably be expected to
have a material adverse effect on the performance, business, assets, nature of
assets, liabilities, operations, properties, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole.
8.22 Indebtedness. As of the Initial Borrowing Date, neither
the Parent nor any of its Subsidiaries has any Indebtedness or preferred stock
outstanding other than (i) the Loans, (ii) the indemnity obligations under the
Acquisition Agreements, (iii) the Senior Preferred Stock, (iv) the Series B
Preferred Stock, (v) the Senior Notes and (vi) the other Indebtedness described
on Schedule X (such other Indebtedness being the "Existing Indebtedness").
8.23 Restrictions on or Relating to Subsidiaries. There does
not exist any Payment Restriction with respect to any Subsidiary of the
Borrower, except for any such Payment Restriction existing under or by reason of
(a) applicable law, (b) customary non-assignment or net worth provisions in
leases or other contracts entered into in the ordinary course of business and
consistent with past practices, (c) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions on the
property so acquired, (d) customary restrictions imposed on the transfer of
copyrighted or patented materials, (e) the entering into of a contract for the
sale or other disposition of assets, directly or indirectly, so long as such
restrictions do not extend to assets that are not subject to such sale or other
disposition, (f) the terms of any agreement evidencing any Indebtedness of
Subsidiaries that was permitted hereby to be incurred that only restricts the
transfer of the assets purchased with the proceeds of such Indebtedness, (g) the
terms of the Senior Notes Indenture in effect on the Initial Borrowing Date or
any similar Payment Restriction under the Senior Note Indenture, (h) the terms
of any agreement evidencing any Acquired Indebtedness that was permitted to be
incurred pursuant to this Agreement, provided that such Payment Restriction only
applies to assets that were subject to such restriction and encumbrances prior
to the acquisition of such assets by the Borrower or any of its Subsidiaries,
(i) contracts of any Subsidiaries of the Borrower in effect prior to such Person
becoming a Subsidiary of the Borrower and not entered into in contemplation
thereof, so long as such restriction applies only to such Subsidiary or its
assets, (j) restrictions on transfer of property or assets pursuant to any Lien
permitted under this Agreement, (k) the terms of any agreement in effect on the
Initial Borrowing Date as such Payment Restriction is in effect on the Initial
Borrowing Date or as thereafter amended; provided that such Payment Restriction
is no more restrictive, (l) the Credit Documents, and (m) "Refinancing
Indebtedness" (as such term is defined in the Senior Notes Indenture); provided
that any such Payment Restrictions that arise under such "Refinancing
Indebtedness" are not, taken as a whole, more restrictive than those under the
agreement creating or evidencing the Indebtedness being refinanced.
8.24 The Transaction. All aspects of the Transaction have been effected
in all material respects in accordance with this Agreement and the other
Documents and all applicable law. At the
<PAGE>
time of consummation of the Transaction, all consents and approvals of, and
filings and registrations with, and all other actions in respect of, all
governmental agencies, authorities or instrumentalities and third parties
required in order to consummate the Transaction will have been obtained,
given, filed or taken and are in full force and effect (or effective judicial
relief with respect thereto has been obtained). All applicable waiting
periods, including, without limitation, all waiting periods under the HSR Act,
with respect thereto have or, prior to the time when required, will have,
expired without, in all such cases, any action being taken by any competent
authority which restrains, prevents or imposes material adverse conditions
upon the consummation of the Transaction. Additionally, at the time of
consummation of the Transaction, there does not exist any judgment, order or
injunction prohibiting or imposing material adverse conditions upon the
consummation of the Transaction, and there does not exist any judgment, order
or injunction prohibiting or imposing any material adverse condition upon the
occurrence of any Credit Event or the performance by the Parent or any of its
Subsidiaries of their obligations under the Documents. All actions taken by
the Parent or any of its Subsidiaries pursuant to or in furtherance of the
Transaction have been taken in compliance in all material respects with the
respective Documents and all applicable law.
8.25 Leases. With respect to any material lease or material
rental agreement for Real Property to which the Borrower or any of its
Subsidiaries (either as lessor or lessee, as the case may be) is a party, (i)
such lease or rental agreement is in full force and effect, (ii) the Borrower or
any of its Subsidiaries has complied in all material respects with all of the
terms of such lease or rental agreement, (iii) there exists no default or an
event, act or condition which with notice or lapse of time, or both, would
constitute a material event of default thereunder by any of the Borrower or such
Subsidiary, or, to the extent any such party is a lessee or lessor thereunder,
to the knowledge of the Borrower or such Subsidiary, by the landlord thereunder
and (iv) the Borrower or one of its Subsidiaries is in possession of the
premises demised under all such leases and rental agreements to the extent any
such party is a lessee thereunder and is conducting business on such premise.
8.26 Collective Bargaining Agreements; Tax Allocation Agreements.
Neither the Parent nor any of its Subsidiaries has (i) any collective
bargaining agreement applying or relating to any employee of the Parent or any
of its Subsidiaries with respect to current employees of the Parent or any of
its Subsidiaries or (ii) any tax sharing, tax allocation or other similar
agreement.
Section 9. Affirmative Covenants. Each of the Parent and the Borrower
covenants and agrees that on and after the Effective Date and until the Total
Commitment and all Letters of Credit have terminated and the Loans, the Notes
and the Unpaid Drawings, together with interest, Fees and all other
Obligations are paid in full:
9.01 Information Covenants. The Borrower shall furnish to each of the
Agents, the Issuing Bank and to each of the Banks:
(a) Monthly Reports. Within 30 days after the end of each fiscal
month of the Borrower other than the last such month of any fiscal
quarter of the Borrower, (i) the balance sheets of the Borrower and its
Subsidiaries as at the end of such month and the related statements of
earnings and stockholders' equity and statement of cash flows for such
month and for the elapsed portion of the fiscal year of the Borrower
ended with the last day of such month, in each case setting forth
comparative figures for the corresponding month and elapsed
<PAGE>
portion of such fiscal year of the Borrower for the prior fiscal year of
the Borrower and comparable budgeted figures for such period and, in any
event, in the form presented to the Board of Directors of the Borrower,
all of which shall be certified by the chief financial officer of the
Borrower, as being fairly stated in all material respects, subject to the
absence of footnotes and normal year-end audit adjustments and (ii) to
the extent such is provided to the Board of Directors of the Borrower,
management's discussion and analysis of the important operational and
financial developments during the month and year-to-date periods.
(b) Quarterly Financial Statements. Within 45 days after the close
of each of the first three quarterly accounting periods in each fiscal
year of each of the Parent and the Borrower, commencing with the fiscal
years of the Parent and the Borrower ended December 31, 1997, (i) the
consolidated and consolidating balance sheets of the Parent and its
Subsidiaries and the Borrower and its Subsidiaries, in each case, as at
the end of such quarterly period and the related consolidated and
consolidating statements of earnings and stockholders' equity and
statement of cash flows, in each case for such quarterly period and for
the elapsed portion of the fiscal year of each of the Parent and the
Borrower ended with the last day of such quarterly period, in each case
setting forth comparative figures for the related periods in the prior
fiscal years of the Parent and the Borrower and comparable budgeted
figures for such period, all of which shall be certified by the chief
financial officer or controller of the Parent or the Borrower, as the
case may be, as being fairly stated in all material respects subject to
the absence of footnotes and normal year-end audit adjustments and (ii)
management's discussion and analysis of the important operational and
financial developments during the quarter and year-to-date periods.
(c) Annual Financial Statements. Within 90 days after the close of
each fiscal year of each of the Parent and the Borrower, commencing with
the fiscal years of the Parent and the Borrower ended December 31, 1997,
(i) the consolidated and consolidating balance sheets of the Parent and
its Subsidiaries and the Borrower and its Subsidiaries, in each case, as
at the end of such fiscal year of the Parent and the Borrower and the
related consolidated and consolidating statements of earnings and
stockholders' equity and statement of cash flows for such fiscal years of
the Parent and the Borrower and setting forth comparative figures for the
preceding fiscal year of each of the Parent and the Borrower and
comparable budgeted figures for such period and certified as being fairly
stated in all material respects, (x) in the case of the consolidating
statements, by the chief financial officer or controller of the Parent or
the Borrower, as the case may be, and (y) in the case of the consolidated
financial statements of the Parent and its Subsidiaries and the Borrower
and its Subsidiaries, by any of the "big six" or other independent
certified public accountants of recognized national standing acceptable
to the Required Banks, together with a signed opinion of such accounting
firm (which opinion shall not be qualified in any respect) stating that
such financial statements present fairly in all material respects the
financial position of the Parent and its Subsidiaries and the Borrower
and its Subsidiaries as at the dates indicated and the results of their
operations and changes in their financial position for the periods
indicated in conformity with U.S. GAAP and that the examination by such
accounting firm in connection with such financial statements has been
made in accordance with generally accepted auditing standards and that,
in the course of its regular audit of the financial statements of the
Parent and the Borrower, such accounting firm obtained no knowledge of
any Default or Event of Default which has occurred or, if in the
<PAGE>
opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof and (ii)
management's discussion and analysis of the important operational and
financial developments during such fiscal year of the Parent and the
Borrower.
(d) Management Letters. Promptly after the receipt thereof by the
Parent or any of its Subsidiaries, a copy of any "management letter"
received by the Parent or such Subsidiary from its certified public
accountants and the management's responses thereto.
(e) Budgets. As soon as available, but in no event later than 30
days after the first day of each fiscal year of the Borrower, a budget
for the Borrower and its Subsidiaries (including budgeted statements of
earnings and sources and uses of cash and balance sheets) prepared by the
Borrower for each calendar month of such fiscal year of the Borrower and
the immediately succeeding fiscal year of the Borrower prepared in
reasonable detail with appropriate presentation and discussion of the
principal assumptions upon which such budgets are based, accompanied by
the statement of the chief financial officer or controller of the
Borrower to the effect that, to the best of his or her knowledge, the
budget is a reasonable estimate for the period covered thereby.
(f) Officer's Certificate. At the time of the delivery of the
financial statements provided for in Sections 9.01(a), (b) and (c), a
certificate of the Borrower signed on behalf of the Borrower by its chief
financial officer to the effect that no Default or Event of Default has
occurred and is continuing or, if any Default or Event of Default has
occurred and is continuing, specifying the nature and extent thereof,
which certificate, (x) in the case of certificates delivered pursuant to
Section 9.01(b) or (c), shall set forth the calculations required to
establish whether the Borrower was in compliance with the provisions of
Sections 4.03, 5.02, 10.03, 10.04 and 10.08 through 10.11 at the end of
such fiscal quarter of the Borrower or fiscal year of the Borrower, as
the case may be, and (y) in the case of certificates delivered pursuant
to Section 9.01(b), shall set forth the amount of Excess Cash Flow of the
Borrower for the relevant Excess Cash Flow Payment Period.
(g) Notice of Default or Litigation. Promptly, and in any event
within four Business Days after an executive officer of the Parent or the
Borrower obtains knowledge thereof, notice of (i) the occurrence of any
event which constitutes a Default or Event of Default, (ii) any
litigation or governmental investigation or proceeding pending (x)
against the Borrower or any of its Subsidiaries which could reasonably be
expected to have a material adverse effect on the performance, business,
assets, nature of assets, liabilities, operations, properties, condition
(financial or otherwise) or prospects of the Parent and its Subsidiaries
taken as a whole or (y) with respect to any Document and (iii) any other
event which could reasonably be expected to have a material adverse
effect on the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise)
or prospects of the Parent and its Subsidiaries taken as a whole,
together with a statement as to what action the Credit Parties have taken
and propose to take with respect thereto.
(h) Other Reports and Filings. Promptly following transmission
thereof, copies of any financial information, proxy materials and other
information and reports, if any, which any
<PAGE>
Credit Party (x) has filed with the Securities and Exchange Commission or
any successor thereto or (y) has delivered to holders of, or any agent or
trustee with respect to, Indebtedness of any Credit Party in its capacity
as such a holder, agent, or trustee.
(i) Environmental Matters. Promptly following, and in any event
within four Business Days after an officer of the Parent or the Borrower
obtains knowledge thereof, notice of any of the following post-closing
environmental matters: (i) any pending or threatened material
Environmental Claims against the Parent or any of its Subsidiaries or any
Real Property owned or operated at any time by the Parent or any of its
Subsidiaries; (ii) any condition or occurrence on or arising from any
Real Property owned or operated at any time by the Parent or any of its
Subsidiaries that (a) could reasonably be anticipated to result in a
material noncompliance by the Parent or any of its Subsidiaries with any
applicable Environmental Law, or (b) could reasonably be anticipated to
form the basis of a material Environmental Claim against the Parent or
any of its Subsidiaries or any Real Property owned or operated by the
Parent or any of its Subsidiaries; (iii) any condition or occurrence on
any Real Property owned or operated by the Parent or any of its
Subsidiaries or any property adjoining such Real Property that could
reasonably be anticipated to cause such Real Property to be subject to
any material restrictions on the ownership, occupancy, use or
transferability of such Real Property under any Environmental Law; and
(iv) the taking of any removal or remedial action in response to a
material Release or material threatened Release or the actual or alleged
presence of any Hazardous Material on or from any Real Property owned or
operated at any time by the Parent or any of its Subsidiaries in each
case as required by any Environmental Law or any governmental or other
administrative agency. All such notices shall describe in reasonable
detail the nature of the claim, investigation, condition, occurrence or
removal or remedial action and the Parent's or such Subsidiary's response
thereto. In addition, the Parent and the Borrower shall provide the Banks
and the Issuing Bank with copies of all material written communications
with any government or governmental agency relating to Environmental
Claims, all non-privileged material written communications with any
person relating to Environmental Claims, and such non-privileged detailed
reports of any Environmental Claim as may reasonably be requested by the
Required Banks.
(j) Annual Meetings with Banks. Within 120 days after the close of
each fiscal year of the Borrower, the Borrower shall, at the request of
the Administrative Agent or the Required Banks, hold a meeting at its
offices with the Issuing Bank and all Banks who choose to attend such
meeting, at which meeting shall be reviewed the financial results of the
previous fiscal year of the Borrower and the financial condition of the
Borrower and its Subsidiaries and the budgets presented for the current
fiscal year of the Borrower and its Subsidiaries.
(k) Borrowing Base Certificate. (i) On the Initial Borrowing Date
and (ii) thereafter, not later than 12:00 noon (New York time) on the
20th day after the end of each fiscal month of the Borrower, a borrowing
base certificate substantially in the form of Exhibit J (each, a
"Borrowing Base Certificate"), with respect to the Eligible Receivables
and the Eligible Inventory of the Borrower and its Subsidiaries as of (x)
in the case of clause (i), November 26, 1997 and (y) in the case of
clause (ii), the last day of the immediately preceding fiscal month of
the Parent, and in each case, certified by the chief financial officer of
the Borrower. In addition, each Borrowing Base Certificate shall have
attached to it such
<PAGE>
additional schedules and/or other information as the Administrative Agent
may reasonably request. If the Borrower fails to deliver any such
Borrowing Base Certificate within 25 days after the end of any such
month, then the Borrowing Base shall be deemed to be $0 until such time
as the Borrower shall deliver such required Borrowing Base Certificate.
(l) Working Capital Review. At any time after the date hereof, the
Administrative Agent shall have the right to request a working capital
review, which shall be delivered to the Administrative Agent within a
reasonable period of time after such request and which shall be in form
and substance reasonably satisfactory to the Administrative Agent, of the
Eligible Receivables and Eligible Inventory of the Borrower and each of
the Borrower's Subsidiaries.
(m) Employee Benefit Plan Due Diligence Visitation Report. At any
time after the date hereof, the Administrative Agent shall have the right
to request an employee benefit plan due diligence visitation report,
which shall be delivered to the Administrative Agent within a reasonable
period of time after such request and which shall be in form and
substance reasonably satisfactory to the Administrative Agent.
(n) Other Information. From time to time, such other information or
documents (financial or otherwise) with respect to any of the Credit
Parties as the Administrative Agent or the Required Banks may reasonably
request.
9.02 Books, Records and Inspections. The Parent shall, and shall cause
each of its Subsidiaries to, keep proper books of record and account in which
full, true and correct entries, in conformity with U.S. GAAP and all
requirements of law, shall be made of all dealings and transactions in
relation to its business and activities. The Parent shall, and shall cause
each of its Subsidiaries to, permit officers and designated representatives of
any of the Agents, Issuing Bank or any of the Banks to visit and inspect,
under guidance of officers of the Parent or of such Subsidiary, any of the
properties of the Parent or such Subsidiary, and to examine the books of
record and account of the Parent or such Subsidiary and to discuss the
affairs, finances and accounts of the Parent or of such Subsidiary with, and
be advised as to the same by, its and their officers, all at such reasonable
times and intervals and to such reasonable extent as such Agent, the Issuing
Bank or such Bank may request.
9.03 Maintenance of Property and Insurance. (a) Schedule V
sets forth a true and complete listing of all insurance maintained by the
Borrower and each of its Subsidiaries as of the Effective Date. The Borrower
shall, and shall cause each of its Subsidiaries to, (i) keep all material
property useful and necessary in its business in good working order and
condition (ordinary wear and tear excepted), (ii) maintain with financially
sound and reputable insurance companies insurance on all its property and assets
in at least such amounts and against at least such risks as are described on
Schedule V, and (iii) furnish to the Issuing Bank and to each Bank, upon written
request, full information as to the insurance carried. The provisions of this
Section 9.03 shall be deemed to be supplemental to, but not duplicative of, the
provisions of any of the Security Documents that require the maintenance of
insurance.
(b) The Borrower shall at all times keep, and shall cause each of its
Subsidiaries at all times to keep, its property insured in favor of the
Collateral Agent, and all policies (including mortgage policies) or certificates
(or certified copies thereof) with respect to such insurance (and any
<PAGE>
other insurance maintained by the Borrower or its Subsidiaries (other than
employee benefit insurance)) (i) shall be endorsed to the Collateral Agent's
satisfaction for the benefit of the Collateral Agent (including, without
limitation, by naming the Collateral Agent as loss payee and naming each of
the Agents, the Issuing Bank and each of the Banks as an additional insured)
with respect to Collateral, (ii) shall state that such insurance policies
shall not be cancelled or revised without 30 days' prior written notice
thereof by the respective insurer to the Collateral Agent, (iii) shall
provide, to the extent available under applicable law, that the respective
insurers irrevocably waive any and all rights of subrogation with respect to
the Collateral Agent, (iv) shall contain the standard noncontributory
mortgagee clause endorsement in favor of the Collateral Agent with respect to
hazard insurance coverage, (v) shall provide that any losses shall be payable
notwithstanding (A) any act or neglect of the Borrower or any of its
Subsidiaries, (B) the occupation or use of the properties for purposes more
hazardous than those permitted by the terms of the respective policy if such
coverage is obtainable at commercially reasonable rates and is of the kind
from time to time customarily insured against by Persons owning or using
similar property and in such amounts as are customary, (C) any foreclosure or
other proceeding relating to the insured properties or (D) any change in the
title to or ownership or possession of the insured properties and (vi) shall
be deposited with the Collateral Agent. If the Borrower or any of its
Subsidiaries shall fail to insure its property in accordance with this Section
9.03, or if the Borrower or any of its Subsidiaries shall fail to endorse and
deposit all policies or certificates with respect thereto, then the Collateral
Agent shall have the right (but shall be under no obligation) to procure such
insurance and the Borrower agrees, to reimburse the Collateral Agent for all
costs and expenses of procuring such insurance.
9.04 Corporate Franchises. The Borrower shall do, and shall cause each
of its Subsidiaries to do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence and its rights,
franchises, licenses and patents, except (i) if (A) in the reasonable business
judgment of the Borrower or such Subsidiary it is not in the best interests of
the Borrower and its Subsidiaries to maintain such rights, franchises,
licenses or patents and (B) the failure to preserve and maintain such rights,
franchises, licenses or patents could not reasonably be expected to have a
material adverse effect on the performance, business, assets, nature of
assets, liabilities, operations, properties, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole
and (ii) transactions permitted pursuant to Section 10.02.
9.05 Compliance with Statutes, Etc. The Borrower shall, and
shall cause each of its Subsidiaries to, comply in all material respects with
all applicable statutes, regulations and orders of, and all applicable
restrictions imposed by all governmental bodies, domestic or foreign, in respect
of, and material to, the conduct of its business and the ownership of its
property.
9.06 Compliance with Environmental Laws. (a) The Borrower
shall comply, and shall cause each of its Subsidiaries to comply, in all
material respects with all Environmental Laws applicable to ownership or use of
the Real Property owned or leased by the Borrower or any of its Subsidiaries,
shall promptly pay or cause the Borrower to pay all costs and expenses incurred
in connection with such compliance, and shall keep or cause to be kept all such
Real Properties free and clear of any material Liens imposed pursuant to such
Environmental Laws. None of the Borrower nor any of its Subsidiaries shall
generate, use, treat, store, or Release, or permit the generation, use,
treatment, storage, or Release of, Hazardous Materials on any Real Property
owned or leased by the Borrower or any of its Subsidiaries, or transport or
permit the transportation of Hazardous Materials to
<PAGE>
or from any Real Property owned or leased by the Borrower or any of its
Subsidiaries, other than in material compliance with applicable Environmental
Laws.
(b) At the request of the Administrative Agent or the Required Banks, at
any time and from time to time during the existence of this Agreement: (i) if
an Event of Default has occurred and is continuing under this Agreement with
respect to environmental matters, (ii) upon the reasonable belief by the
Administrative Agent that the Borrower or any of its Subsidiaries has breached
any representation or covenant herein with respect to any environmental matters,
or (iii) in the event notice is provided under Section 9.01(i), the Borrower
shall provide, at its sole cost and expense, an environmental site assessment
report reasonable in scope concerning the Real Property owned or leased by the
Borrower or any of its Subsidiaries which is the subject of such Event of
Default, breach or notice, prepared by an environmental consulting firm approved
by the Administrative Agent and the Required Banks (such approval not to be
unreasonably withheld), which report shall evaluate the presence or Release of
Hazardous Materials on or from any such Real Property and the potential cost of
any removal or remedial action in connection with any Hazardous Materials on
such Real Property. If the Borrower fails to provide the same after 30 days'
notice, or such longer period as may be approved by the Administrative Agent and
the Required Banks (such approval not to be unreasonably withheld), the
Administrative Agent may (but shall be under no obligation to) order the same,
and the Borrower shall grant and hereby grants to the Agents, the Issuing Bank
and the Banks and their respective duly authorized representatives and agents
reasonable access to such Real Property for such purpose and specifically grants
to the Agents, the Issuing Bank and the Banks an irrevocable non-exclusive
license, subject to the rights of tenants, to undertake such an assessment all
at the Borrower's expense, which assessment, if obtained, shall be provided to
the Borrower.
9.07 ERISA. As soon as possible and, in any event, within ten Business
Days after the Parent or any of its Subsidiaries or any ERISA Affiliate knows
or has reason to know of the occurrence of any of the following which would
reasonably be expected to result in a liability in excess of $100,000, the
Parent shall deliver to the Issuing Bank and to each of the Banks a
certificate of the chief financial officer or controller of the Parent setting
forth details as to such occurrence and the action, if any, which the Parent,
such Subsidiary or such ERISA Affiliate is required or proposes to take,
together with any notices required or proposed to be given to or filed with or
by the Parent, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan
participant or the Plan administrator with respect thereto: (i) that a
Reportable Event has occurred; (ii) that an accumulated funding deficiency has
been incurred or an application may be or has been made to the Secretary of
the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code with respect to a Pension
Plan; (iii) that a contribution required to be made to a Plan has not been
timely made; (iv) that a Plan has been or is reasonably likely to be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; (v) that a Pension Plan has an Unfunded Current Liability giving rise
to a lien under ERISA or the Code; (vi) that proceedings are likely to be or
have been instituted to terminate or appoint a trustee to administer a Pension
Plan; (vii) that a proceeding has been instituted pursuant to Section 515 of
ERISA to collect a delinquent contribution to a Plan; (viii) that the Parent
or any of its Subsidiaries or any ERISA Affiliate (but only as to the
following Sections of ERISA and the Code pursuant to which the Parent could be
liable with respect to such ERISA Affiliate) will or is reasonably likely to
incur any material liability (including any indirect, contingent or secondary
liability) to or on account of the termination of or withdrawal from a Plan
under Section 4062, 4063, 4064, 4069, 4201,
<PAGE>
4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29),
4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(i) of ERISA; or
(ix) that the Parent or any of its Subsidiaries is reasonably likely to incur
any liability pursuant to any employee welfare benefit plan (as defined in
Section 3(l) of ERISA) that provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any
employee pension benefit plan (as defined in Section 3(2) of ERISA) in
addition to the liability pursuant to any such plan or plans existing on the
Initial Borrowing Date. At the request of the Administrative Agent, the Parent
shall deliver to the Issuing Bank and to each of the Banks a complete copy of
the annual report (Form 5500) of each Plan (including, to the extent required,
the related financial and actuarial statements and opinions and other
supporting statements, certifications, schedules and information) required to
be filed with the Internal Revenue Service. In addition to any certificates or
notices delivered to the Issuing Bank and to the Banks pursuant to the first
sentence hereof, any notices received by the Parent or any of its Subsidiaries
or any ERISA Affiliate (but only notices received by an ERISA Affiliate
regarding matters as to which the Parent or any of its Subsidiaries could have
liability under ERISA and/or the Code) from any governmental agency with
respect to any Plan shall be delivered to the Issuing Bank and to the Banks no
later than ten Business Days after the date such notice has been received by
the Parent or such Subsidiary or the ERISA Affiliate, as applicable.
9.08 End of Fiscal Years; Fiscal Quarters. The Parent shall cause its,
and each of its Subsidiaries', fiscal years to end on December 31 of each year
and each of its, and each of its Subsidiaries', first three fiscal quarters to
end on March 31, June 30 and September 30 of each year.
9.09 Performance of Obligations. The Parent shall, and shall cause each
of its Subsidiaries to, perform and observe all of the terms and provisions of
each Document to be performed or observed by it, maintain each such Document
in full force and effect, enforce such Document in accordance with its terms,
take all such action to such end as may be from time to time requested by the
Administrative Agent, make to each other party to each such Document such
demands and requests for information and reports or for action as the Parent
or such Subsidiary is entitled to make under such Document, except where the
failure to comply with any of the foregoing, either individually or in the
aggregate, would not be reasonably likely to have a material adverse effect on
the performance, business, assets, nature of assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of the Borrower
and its Subsidiaries taken as a whole.
9.10 Payment of Taxes. The Parent shall pay and discharge, and shall
cause each of its Subsidiaries to pay and discharge, all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on which
penalties would otherwise attach thereto, and all lawful claims which, if
unpaid, might become a lien or charge upon any properties of the Parent or any
of its Subsidiaries; provided that neither the Parent nor any of its
Subsidiaries shall be required to pay any such tax, assessment, charge, levy
or claim which is being contested in good faith and by proper proceedings if
(i) it has maintained adequate reserves with respect thereto in accordance
with U.S. GAAP, unless and until any Lien resulting therefrom attaches to its
property and enforcement, collection, levy or foreclosure proceeding shall
have been commenced and remain unstayed in respect thereof or (ii) it has
provided to the Administrative Agent's satisfaction for the payment of such
amounts.
9.11 Interest Rate Protection. The Borrower shall no later than 90
days following the
<PAGE>
Initial Borrowing Date enter into interest rate protection arrangements in
form and substance and with parties reasonably acceptable to the
Administrative Agent.
9.12 Use of Proceeds. All proceeds of the Loans shall be
used as provided in Section 8.08.
9.13 UCC Searches. On or prior to the 60th day following the
Initial Borrowing Date, the Credit Parties shall deliver to the Administrative
Agent (at each such Credit Party's own cost) copies of a Request for Information
or Copies (UCC-11), or equivalent reports for the purpose of verifying that all
financing statements necessary, or, in the opinion of the Collateral Agent
desirable, to perfect the security interests purported to be created by the
Security Agreement shall have been properly recorded and filed.
9.14 Intellectual Property Rights. The Borrower shall, and shall cause
each of its Subsidiaries to, make all filings in connection with the transfer
of the Intellectual Property rights pursuant to the Transaction. The Borrower
shall, and shall cause each of its Subsidiaries to, maintain in full force and
effect all Intellectual Property rights necessary or appropriate to the
business of the Borrower or any Subsidiary of the Borrower, except where the
failure to maintain such rights could not be reasonably expected to have a
material adverse effect on the performance, business, assets, nature of
assets, liabilities, operations, properties, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole,
and shall take no action (including, without limitation, the licensing of
Intellectual Property), or fail to take an action, as the case may be, in
connection with such Intellectual Property rights which could reasonably be
expected to result in a material adverse effect on the performance, business,
assets, nature of assets, liabilities, operations, properties, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries
taken as a whole. The Borrower shall, and shall cause each of its Subsidiaries
to, diligently prosecute all pending applications filed in connection with
seeking, or seeking to perfect, the Intellectual Property rights and take all
other reasonable actions necessary for the protection and maintenance of the
Intellectual Property rights necessary or appropriate to the business of the
Borrower or any Subsidiary of the Borrower at all times from and after the
Initial Borrowing Date other than any such actions the failure of which, in
the aggregate, could not reasonably be expected to have a material adverse
effect on the performance, business, assets, nature of assets, liabilities,
operations, properties, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole.
9.15 Registry. The Borrower hereby designates the Administrative Agent
to serve as the Borrower's agent, solely for purposes of this Section 9.15, to
maintain a register (the "Register") on which it shall record the Commitments
from time to time of each of the Banks, the Loans made by each of the Banks
and each repayment in respect of the principal amount of the Loans of each
Bank. Failure to make any such recordation, or any error in such recordation
shall not affect the Borrower's obligations in respect of such Loans. With
respect to any Bank, the transfer of the Commitments of such Bank and the
rights to the principal of, and interest on, any Loan made pursuant to such
Commitments shall not be effective until such transfer is recorded on the
Register maintained by the Administrative Agent with respect to ownership of
such Commitments and Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitments and Loans shall remain owing
to the transferor. The registration of an assignment or transfer of all or
part of any Commitments and Loans shall be recorded by the Administrative
Agent on the Register only upon the
<PAGE>
acceptance by the Administrative Agent of a properly executed and delivered
assignment and assumption agreement pursuant to Section 15.04(b). Coincident
with the delivery of such an assignment and assumption agreement to the
Administrative Agent for acceptance and registration of assignment or transfer
of all or part of a Loan, or as soon thereafter as practicable, the assigning
or transferor Bank shall surrender the Note evidencing such Loan, and
thereupon one or more new Notes in the same aggregate principal amount shall
be issued to the assigning or transferor Bank and/or the new Bank. The
Borrower agrees to indemnify the Administrative Agent from and against any and
all losses, claims, damages and liabilities of whatsoever nature which may be
imposed on, asserted against or incurred by the Administrative Agent in
performing its duties under this Section 9.15.
9.16 Ownership of Subsidiaries. Except as provided in Section 10.02, (i)
the Parent shall at all times own directly 100% of the Borrower Common Stock
(other than directors' qualifying shares), and (ii) each Subsidiary of the
Borrower shall be a Wholly-Owned Subsidiary.
9.17 Further Actions. (a) The Borrower shall, and shall cause each of
its Subsidiaries to, grant to the Collateral Agent, for the benefit of the
Secured Creditors, at the request of the Administrative Agent or the Required
Banks, at any time, a security interest in any Real Property, vehicles or
other property owned by any such Credit Party and not already subject to a
Mortgage or other security interest and shall take all actions requested by
the Administrative Agent or the Required Banks (including, without limitation,
the obtaining of mortgage policies, title surveys and real estate appraisals
satisfying the requirements of all applicable laws) in connection with the
granting of such security interest.
(b) The security interests required to be granted pursuant to Section
9.17(a) shall be granted pursuant to mortgages, deeds of trust and security
agreements, in each case satisfactory in form and substance to the
Administrative Agent and the Required Banks, which mortgages, deeds of trust and
security agreements shall create valid and enforceable perfected security
interests prior to the rights of all third Persons and subject to no other Liens
except such Liens as are permitted by Section 10.01. The mortgages, deeds of
trust and other instruments related thereto and the security agreements shall be
duly recorded or filed in such manner and in such places and at such times as
are required by law to establish, perfect, preserve and protect the Liens, in
favor of the Collateral Agent for the benefit of the Secured Creditors, required
to be granted pursuant to such documents and all taxes, fees and other charges
payable in connection therewith shall be paid in full by the Borrower. At the
time of the execution and delivery of the additional documents, the Borrower
shall cause to be delivered to the Collateral Agent such opinions of counsel,
mortgage policies, title surveys, real estate appraisals, certificates of title
and other related documents as may be reasonably requested by the Administrative
Agent or the Required Banks to assure themselves that this Section 9.17 has been
complied with.
(c) The Borrower shall, and shall cause each of its Subsidiaries to, at its
own expense, make, execute, endorse, acknowledge, file and/or deliver to the
Collateral Agent from time to time such conveyances, financing statements,
transfer endorsements, powers of attorney, certificates, reports and other
assurances or instruments and take such further steps relating to perfecting the
security interest of the Secured Creditors as the Collateral Agent may
reasonably require. Furthermore, at the time of any request by the
Administrative Agent or the Required Banks pursuant to Section 9.17(b) or this
subsection (c), the Borrower shall cause to be delivered to the Collateral
Agent such opinions of counsel and other documents as may be reasonably
requested by the Administrative
<PAGE>
Agent or the Required Banks to assure themselves that Section 9.17(b) and this
subsection (c) have been complied with.
(d) The Borrower shall cause each of its Subsidiaries formed or acquired
after the date hereof to execute and deliver a guaranty, in substantially the
same form as the Subsidiary Guaranty delivered on the date hereof, to the
Administrative Agent, guaranteeing the Obligations of the other Credit Parties
under the Credit Documents.
(e) Each Credit Party agrees that each action required by Section
9.17(a), (b), (c) or (d) shall be completed within 60 days of the date such
action is requested to be taken; provided, however, that, notwithstanding
anything to the contrary in subsection (a), (b) or (d) above, no security
interest shall be required to be granted and no guaranty shall be required to
be given pursuant to this Section 9.17 in the event that the granting of such
security interest or the giving of such guaranty, as the case may be, will
conflict in any material respect with applicable law in the jurisdiction of
incorporation of such Subsidiary or is reasonably likely to cause a material
increase in the aggregate net consolidated tax liabilities of the Borrower and
its Subsidiaries.
(f) At any time and from time to time to the extent that the Required Banks
or any of the Agents request in order to fulfill the requirements of any
applicable statute, regulation or order of any governmental body, to preserve,
protect, enforce or realize upon the security interests granted to the Secured
Creditors pursuant to the Security Documents, each Credit Party shall, and shall
cause each of its Subsidiaries to, cooperate with and promptly take all actions
necessary to assist the Banks, the Issuing Bank and the Agents, including,
without limitation, to make, execute, acknowledge, file and/or deliver to the
Banks, the Issuing Bank or the Agents, as the case may be, such information,
documents, certificates, reports and other assurances or instruments, which the
Banks, the Issuing Bank or the Agents, as the case may be, deems appropriate or
advisable to comply with such statutes, regulations or orders so as to preserve,
protect, enforce or realize upon such security interests granted to the Secured
Creditors.
9.18 Raw Material Purchases by the Borrower. The Borrower shall purchase
brass materials, other metals and any other raw materials only to satisfy its
own manufacturing and hedging needs and shall not engage in speculative
trading. The Borrower shall make all purchases of brass materials, other
metals and any other raw materials in a manner consistent with past practice
and with a view to minimizing the risks of commodity price fluctuations. To
the extent that the Borrower enters into futures contracts, such contracts
shall be consistent with past practice and industry standards at such time.
9.19 Bank Deposit Accounts; Concentration Accounts. (a) Each Bank
Deposit Account shall be with a financial institution that is a member of the
syndicate bank group as of the Initial Borrowing Date or that shall become a
member of the bank syndicate group within 90 days after the Initial Borrowing
Date. The Borrower and each of its Subsidiaries represents and warrants that
it does not now maintain, and shall not in the future maintain, any other Bank
Deposit Account with any Deposit Bank other than the Bank Deposit Accounts;
provided, however, that the Borrower and each of its Subsidiaries shall be
permitted to establish new Bank Deposit Accounts pursuant to the terms of the
Security Agreement.
<PAGE>
(b) The Borrower and each of its Subsidiaries represents and warrants that
it does not now maintain, and shall not in the future maintain, any other
Concentration Account with any Concentration Account Bank other than the
Concentration Account; provided, however, that the Borrower and each of its
Subsidiaries shall be permitted to establish a new Concentration Account
pursuant to the terms of the Security Agreement.
(c) Upon the request of the Collateral Agent, the Borrower shall, and shall
cause each of its Domestic Subsidiaries to, within a reasonable period of time
after such request (but in no event later than 60 days after receipt of such
request by the Borrower or such Domestic Subsidiary), duly authorize, execute
and deliver to the Collateral Agent a letter among the Collateral Agent, certain
banking institutions acceptable to the Collateral Agent and the Borrower or such
Domestic Subsidiary, acknowledging that each checking, savings or other deposit
account described in such letter is under the exclusive dominion and control of
the Collateral Agent and that all moneys, instruments and other securities
deposited in such accounts are to be held by such banking institution for the
benefit of the Collateral Agent.
9.20 Conditions Subsequent to Initial Credit Event. The Borrower shall,
and shall cause each of its Subsidiaries, to deliver to the Collateral Agent,
in form and substance satisfactory to the Collateral Agent and in sufficient
copies for each Bank, as soon as possible and in any event within 60 days
after the Initial Borrowing Date (or such later date as may be agreed by the
Borrower and the Collateral Agent):
(i) acknowledgment copies of proper financing statements, duly filed
under the Uniform Commercial Code of all jurisdictions that the
Collateral Agent may deem necessary or desirable in order to perfect and
protect the first priority liens and security interests created under the
Security Agreement, covering the Collateral described in the Security
Agreement,
(ii) completed requests for information, listing the financing
statements referred to in clause (i) above and all other effective
financing statements filed in the jurisdictions referred to in clause (i)
above that name any Credit Party as debtor, together with copies of such
financing statements,
(iii) evidence that counterparts of the Mortgages have been duly
recorded in all filing or recording offices that the Collateral Agent may
deem necessary or desirable in order to create a valid first and
subsisting Lien on the property described therein in favor of the Secured
Creditors subject only to Permitted Encumbrances (as defined in the
applicable Mortgage) and that all filing and recording taxes and fees
have been paid,
(iv) evidence of the completion of all recordings and filings of or
with respect to the Intellectual Property described in the Security
Agreement that the Collateral Agent may deem necessary or desirable in
order to perfect and protect the Liens created thereunder,
(v) evidence that such action as the Collateral Agent may deem
necessary or desirable in order to perfect and protect the Liens on the
capital stock held by any Credit Party in any of its Foreign Subsidiaries
has been taken, provided that in any event such Liens shall cover not
more than 66% of the outstanding capital stock of Foreign Subsidiaries
directly
<PAGE>
owned by such Credit Party and shall not cover any capital stock of any
Foreign Subsidiary directly or indirectly owned by a Foreign Subsidiary,
(vii) evidence that all other action as the Collateral Agent may
deem necessary or desirable in order to perfect and protect the first
priority liens and security interests created under the Collateral
Documents has been taken,
(viii) The Borrower shall, and shall have caused each of its
Domestic Subsidiaries to, have duly authorized, executed and delivered a
Concentration Account Consent Letter (each as modified, amended or
supplemented from time to time in accordance with the terms hereof and
thereof, a "Concentration Account Consent Letter") within 30 days after
the Initial Borrowing Date with the Collateral Agent and the
Concentration Account Bank, acknowledging that the Concentration Account
listed on Schedule IX is under the exclusive dominion and control of the
Collateral Agent and that all moneys, instruments and other securities
deposited in such Concentration Account are to be held by the
Concentration Account Bank for the benefit of the Collateral Agent, and
(ix) No later than 30 days after the Initial Borrowing Date, the
Borrower shall have provided to the Issuing Bank and the Banks detailed
consolidated financial projections in a form substantially similar to the
Projections, after giving effect to the Transaction and the other
transactions contemplated by the Documents, for at least six years ended
after the Initial Borrowing Date.
Section 10. Negative Covenants. Each of the Parent and the Borrower
hereby covenants that, on and after the Effective Date and until the Total
Commitment and all Letters of Credit have terminated, and the Loans, Notes and
Unpaid Drawings, together with interest, Fees and all other Obligations are
paid in full:
10.01 Liens. The Parent shall not create, incur, assume or suffer to
exist any Lien upon or with respect to the Borrower Common Stock, whether now
owned or hereafter acquired, or assign any right to receive income or permit
the filing of any financing statement under the UCC or any other similar
notice of Lien under any similar recording or notice statute with respect to
the Borrower Common Stock. The Borrower shall not, and shall not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with respect to any property or assets (real or personal, tangible or
intangible) of the Borrower or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such
property or assets (including sales of accounts receivable with recourse to
the Borrower or any of its Subsidiaries), or assign any right to receive
income or permit the filing of any financing statement under the UCC or any
other similar notice of Lien under any similar recording or notice statute;
provided that the provisions of this Section 10.01 shall not prevent the
Borrower or any of its Subsidiaries from creating, incurring, assuming or
permitting the existence of the following (liens described below are herein
referred to as "Permitted Liens"):
(i) inchoate Liens with respect to the Borrower or any of its
Subsidiaries for taxes not yet due or Liens for taxes being contested in
good faith and by appropriate proceedings for which adequate reserves
have been established in accordance with U.S. GAAP;
<PAGE>
(ii) Liens in respect of property or assets of the Borrower or any
of its Subsidiaries imposed by law, which were incurred in the ordinary
course of business and do not secure Indebtedness for borrowed money,
such as carriers', warehousemen's, materialmen's, mechanics' and
landlords' liens and other similar Liens arising in the ordinary course
of business, and (x) which do not in the aggregate materially detract
from the value of the Borrower's or any of its Subsidiaries' property or
assets or materially impair the use thereof in the operation of the
business of the Borrower or any such Subsidiary or (y) which are being
contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property or
assets subject to any such Lien;
(iii) Permitted Encumbrances;
(iv) Liens created pursuant to the Security Documents;
(v) easements, rights-of-way, restrictions, encroachments and other
similar charges or encumbrances on the property of the Borrower or any of
its Subsidiaries arising in the ordinary course of business and not
materially interfering with the conduct of the business of the Borrower
or any of its Subsidiaries;
(vi) Liens on property of the Borrower subject to, and securing
only, Capitalized Lease Obligations to the extent such Capitalized Lease
Obligations are permitted by Section 10.05(iii); provided that such Liens
only serve to secure the payment of Indebtedness arising under such
Capitalized Lease Obligation and the Lien encumbering the asset giving
rise to the Capitalized Lease Obligation does not encumber any other
asset of the Borrower or any of its Subsidiaries;
(vii) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection (but not
incurred in connection with Indebtedness for borrowed money) with (x)
workers' compensation, unemployment insurance and other types of social
security or (y) to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
trade contracts, performance and return-of- money bonds and other similar
obligations; provided that the aggregate amount of cash and the fair
market value of the property encumbered by Liens described in this
subclause (y) shall not exceed $100,000;
(viii) purchase money Liens placed upon equipment or machinery
(which equipment or machinery is not owned by the Borrower or any of its
Subsidiaries as of the Initial Borrowing Date) used in the ordinary
course of the business of the Borrower at the time of purchase thereof by
the Borrower to secure Indebtedness incurred to pay all or a portion of
the purchase price thereof; provided that (v) the aggregate principal
amount of all Indebtedness secured by Liens permitted by this subclause
(v) does not exceed at any one time outstanding $2,000,000 with respect
to all machinery and equipment, (w) in all events, the Lien encumbering
the equipment or machinery so acquired thereto does not encumber any
other asset of the Borrower or any of its Subsidiaries, (x) the
Indebtedness secured by any such Lien does not exceed 75% of the fair
market value of the property being purchased at the time of the
<PAGE>
incurrence of such Indebtedness, (y) no portion of the purchase price of
the equipment or machinery to be purchased is paid from the proceeds of
sales of equipment or attaching machinery sold as permitted by Section
10.02(ii)(B) and (z) the Borrower shall use commercially reasonable
efforts to ensure that any Indebtedness incurred as permitted by this
Section 10.01(viii) is on a non-recourse basis to the Borrower and its
Subsidiaries;
(ix) Liens arising from precautionary UCC-1 financing statement
filings regarding operating leases entered into in the ordinary course of
business;
(x) inchoate Liens (where there has been no execution or levy and no
pledge or delivery of collateral) arising from and out of judgments or
decrees in existence at such time not constituting an Event of Default;
(xi) Liens created by leases or subleases granted to third Persons
by the Borrower or any of its Subsidiaries not interfering in any
material respect with the business of the Borrower or any such
Subsidiary; and
(xii) statutory and common law landlords' liens under leases to
which the Borrower is a party; and
(xiii) Liens on the stock and assets of Unifast-Scovill S.A. and any
Subsidiary thereof securing Indebtedness permitted by Section 10.05(ix).
10.02 Consolidation, Merger, Purchase or Sale of Assets, Etc. The Parent
shall not convey, sell or otherwise dispose of (or agree to do any of the
foregoing at any future time) the Borrower Common Stock, whether now owned or
hereafter acquired. The Parent shall not purchase or otherwise acquire (in one
or a series of related transactions) all or substantially all of the Capital
Stock or the property or assets of any Person, except that the Parent may do
so with the cash proceeds received from the sale or issuance of equity
securities of the Parent or any of its Subsidiaries otherwise permitted by
Section 10.13 net of any amounts required to repay amounts outstanding under
the Term Loan Facility pursuant to Section 5.02(A)(d)(i) and with the cash
proceeds from the incurrence of any Indebtedness by the Borrower or any of its
Subsidiaries otherwise permitted hereunder; provided that (i)(A) such Person
is, at the time of such purchase or other acquisition, engaged in a line of
business substantially similar to the Permitted Business or (B) the property
or assets being purchased or otherwise acquired are used in a line of business
substantially similar to the Permitted Business, (ii) the Parent shall use
commercially reasonable efforts (including, if such purchase or other
acquisition would otherwise be in violation of Section 10.08, seeking the
consent of the Required Banks to the waiver of any such violation under such
Section) to cause such purchase or other acquisition to be made by the
Borrower or any of the Borrower's Subsidiaries and (iii) the Parent shall use
commercially reasonable efforts to cause any Indebtedness incurred in
connection with such purchase or other acquisition to be on a non-recourse
basis with respect to the Parent. The Borrower shall not, and shall not permit
any of its Subsidiaries to, wind up, liquidate or dissolve its affairs or
enter into any transaction of merger or consolidation, or convey, sell, lease
or otherwise dispose of (or agree to do any of the foregoing at any future
time) all or any part of its property or assets, or enter into any
partnerships, joint ventures or sale-leaseback transactions, or purchase or
otherwise acquire (in one or a series of related transactions) any part of the
property or assets (other than purchases or other acquisitions by the Borrower
of
<PAGE>
inventory, materials and equipment in the ordinary course of business) of
any Person, except that:
(i) Capital Expenditures by the Borrower and its Subsidiaries shall
be permitted to the extent not in violation of Section 10.08; provided,
however, that no Default or Event of Default (both before and after
giving effect to such transaction) shall have occurred and be continuing
and the Borrower is in pro forma compliance with Sections 10.09, 10.10
and 10.20 after giving effect to such transaction; provided, further,
however, that Maintenance Capital Expenditures by the Borrower and its
Subsidiaries shall be permitted to the extent not in violation of Section
10.08;
(ii) so long as there shall not exist a Default or an Event of
Default (both before and after giving effect to such sale), (A) the
Borrower and its Subsidiaries may sell for fair value and for cash
equipment in the ordinary course of business to any third party, so long
as the proceeds therefrom do not exceed $500,000 in any fiscal year of
the Borrower and (B) the Borrower and its Subsidiaries may sell for fair
value and for cash attaching machinery to third party customers of the
Borrower and its Subsidiaries, in the ordinary course of business, so
long as the proceeds therefrom do not exceed $2,500,000 in any fiscal
year of the Borrower and so long as such proceeds are used within 270
days after the receipt thereof to purchase or manufacture replacement
machinery or to prepay Loans pursuant to Section 5.02(A)(f);
(iii) each of the Borrower and each of its Subsidiaries may lease
(as lessee) real or personal property to the extent permitted by Section
10.04 (so long as such lease does not create Capitalized Lease
Obligations);
(iv) investments and other transactions to the extent permitted by
Section 10.06 shall be permitted;
(v) sales of inventory (other than attaching machinery) in the
ordinary course of business shall be permitted;
(vi) the Transaction shall be permitted as contemplated by the
Documents;
(vii) the Borrower may sell inventory and other assets used in the
ordinary course of business to (A) Subsidiaries of the Borrower that are
party to the Security Agreement and (B) Subsidiaries of the Borrower that
are not organized and that are not doing business in the United States;
provided, however, that sales described in subclause (B) above are for
cash at fair market value and do not exceed $5,000,000 per year for all
such Subsidiaries;
(viii) the Borrower and the Board of Directors of PCI may cause PCI
to be dissolved or PCI may be merged with and into the Borrower, with the
Borrower being the surviving corporation;
(ix) the Borrower may cause Rau to be dissolved or merged with and
into the Borrower with the Borrower being the surviving corporation;
(x) Rau, PCI and any Subsidiary incorporated in Canada may transfer
assets to the Borrower; and
<PAGE>
(xi) the Borrower may cause any Subsidiary incorporated in Canada to
be dissolved or merged with or into the Borrower with the Borrower being
the surviving corporation.
To the extent the Required Banks waive the provisions of this Section 10.02 with
respect to the sale of any Collateral (to the extent the Required Banks are
permitted to waive such provisions in accordance with Section 15.10), or any
Collateral is sold as permitted by this Section 10.02, such Collateral shall be
sold free and clear of the Liens created by the Security Documents, and the
Administrative Agent and Collateral Agent shall be authorized to take any
actions deemed appropriate in order to effect the foregoing.
10.03 Dividends. The Borrower shall not and shall not permit
any of its Subsidiaries to, declare or pay any Dividends on, or make redemptions
or repurchases of its capital stock, in each case with respect to the Borrower
or any of its Subsidiaries, except that:
(i) any Subsidiary of the Borrower may pay Dividends to the Borrower
or any Wholly-Owned Subsidiary of the Borrower;
(ii) except to the extent that the Borrower has already lent money
to the Parent for such purpose, the Borrower may pay cash Dividends to
the Parent for the purpose of paying, so long as all proceeds are
promptly used by the Parent to pay, and so long as there shall exist no
Default or Event of Default (both before and after giving effect to such
payment) and the Borrower shall be in pro forma compliance with Sections
10.09, 10.10 and 10.20 after giving effect to such payment, (x) at any
time after the date which is fifth anniversary of the date hereof,
dividends required to be paid by the Parent on the Senior Preferred Stock
and Series B Preferred Stock and (y) reasonable out-of-pocket expenses
incurred by the Parent specifically related to the Borrower or the
Parent's ownership of the Borrower (including, without limitation,
accounting fees, directors' fees and legal expenses); provided that the
expenses referred to in this subclause (y) shall not exceed $100,000 in
any fiscal year of the Borrower;
(iii) except to the extent that the Borrower has already lent money
to the Parent for such purpose, the Borrower may pay cash Dividends to
the Parent for the purpose of paying, so long as all proceeds are
promptly used by the Parent to pay (x) its franchise taxes and other fees
required to maintain its corporate existence, (y) Federal, state and
local income taxes payable by the Parent; provided that any refund of
taxes paid to the Parent shall be promptly returned by the Parent to the
Borrower; and provided further that amounts paid to the Parent pursuant
to subclause (y) above shall not exceed the cash taxes then due and
payable by the Borrower and its Subsidiaries;
(iv) except to the extent that the Borrower has already lent money
to the Parent for such purpose, the Borrower may pay Dividends to the
Parent for the purpose of providing funds for the Parent to redeem or
repurchase Parent Common Stock and Series B Preferred Stock (or options
to purchase such Parent Common Stock and Series B Preferred Stock), (so
long as such Dividends are immediately used for such purpose), from
officers, employees and directors (or their estates), provided that in
the case of each of clauses (a) and (b) below, no Default or Event of
Default shall have occurred and be continuing or would result therefrom,
<PAGE>
and after giving effect to any such redemption or repurchase, the
Borrower shall be in pro forma compliance with Sections 10.09, 10.10 and
10.20 (a) upon the death, permanent disability, retirement or termination
of employment of any such Person in accordance with (x) the New Incentive
Stock Option Plan and (y) any stock option plan or any employee stock
ownership plan; provided that the aggregate amount of all cash paid in
respect of all such shares so redeemed or repurchased (1) in any fiscal
year of the Parent does not exceed $100,000 and (2) since the Effective
Date does not exceed $500,000 and (b) pursuant to, and in accordance with
the terms of, the Stockholders Agreement; provided that the aggregate
amount of cash paid in respect of all such shares so redeemed or
repurchased pursuant to this subclause (b) does not exceed $1,500,000 in
any fiscal year of the Parent and $3,400,000 in the aggregate; and
(v) except to the extent that the Borrower has already lent money to
the Parent for such purpose, the Borrower may pay cash Dividends to the
Parent for the purpose of paying, so long as all proceeds are promptly
used by the Parent to pay, and so long as there shall exist no Event of
Default (both before and after giving effect to such payment) pursuant to
Section 11.01 or 11.03 pursuant to the Management Agreement as in effect
on the date hereof, management fees to Saratoga to the extent permitted
under Section 10.07.
10.04 Leases. The Borrower shall not incur, and shall not permit any of
its Subsidiaries to incur, any expense (including, without limitation, any
property taxes paid as additional rent or lease payments) under any agreement
to rent or lease any real or personal property (or any extension or renewal
thereof) (excluding Capitalized Lease Obligations) and the Borrower shall not
permit the aggregate expense (including, without limitation, any property
taxes paid as additional rent or lease payments) incurred by the Borrower and
its Subsidiaries under any agreement to rent or lease any real or personal
property (or any extension or renewal thereof) (excluding Capitalized Lease
Obligations) to exceed at any time for any period of four consecutive fiscal
quarters of the Borrower commencing on or after the Initial Borrowing Date
(or, if shorter, the period beginning on the Initial Borrowing Date and ending
on the last day of a fiscal quarter of the Borrower), in each case taken as
one accounting period, an amount equal to $1,000,000.
10.05 Indebtedness. The Borrower shall not, and shall not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(ii) Indebtedness of the Borrower under any Interest Rate Protection
or Other Hedging Agreement and under any similar type of agreement
entered into pursuant to Section 9.11;
(iii) indemnity obligations and other payment obligations under the
Acquisition Documents;
(iv) Indebtedness in amounts, and subject to Liens, permitted under
Section 10.01(viii);
<PAGE>
(v) Indebtedness under any commodity hedging agreements or similar
agreements or arrangements designed to protect against the fluctuation in
commodity prices entered into in connection with the Borrower's operations
as long as management of the Borrower has determined that the entering into
of such hedging agreement or arrangement is a bona fide hedging activity
(and is not for speculative purposes), is in the ordinary course of
business and is consistent with past practices;
(vi) Indebtedness of Subsidiaries of the Borrower permitted to be
incurred pursuant to Section 10.06(viii);
(vii) Indebtedness of the Credit Parties under the Senior Notes
Indenture;
(viii) the Existing Indebtedness set forth on Schedule X; and
(ix) Indebtedness of Unifast-Scovill S.A. in an amount not exceeding
$5,000,000; provided that the terms and conditions of such Indebtedness are
substantially similar to those in effect on the Initial Borrowing Date,
that neither the Parent nor any of its Subsidiaries provides a guaranty to
the holder of such Indebtedness, that such Indebtedness is on a non-
recourse basis to the Parent and its Subsidiaries.
10.06 Advances, Investments and Loans. The Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly lend money or
credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any other Person, or purchase or own a futures contract or
otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract, or hold any
cash or Cash Equivalents, except that the following shall be permitted:
(i) the Borrower and any of its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary terms;
(ii) the Borrower and any of its Subsidiaries may acquire and hold cash
and Cash Equivalents; provided that all such cash or Cash Equivalents held
by the Borrower or any Domestic Subsidiary shall be held in the
Concentration Account (in accordance with the terms of the Concentration
Account Consent Letter) or a Bank Deposit Account other than an amount not
exceeding $1,000,000 which the Borrower and its Subsidiaries may hold in
payroll, cafeteria, petty cash, insurance, payroll tax, hedging and freight
payment accounts and any other similar accounts in the ordinary course of
business;
(iii) the Borrower may enter into Interest Rate Protection or Other
Hedging Agreements permitted pursuant to Section 10.05(ii) or (vi);
(iv) the Borrower may make Capital Expenditures to the extent permitted
by Section 10.08;
<PAGE>
(v) the Equity Contributions shall be permitted in accordance with the
provisions of Section 6.06;
(vi) the Borrower and any of its Subsidiaries may endorse negotiable
instruments for collection in the ordinary course of business;
(vii) the Borrower may make loans and advances in the ordinary course
of business consistent with past practices to their respective employees
for moving, travel, entertainment and emergency expenses and other similar
expenses, so long as the aggregate principal amount thereof at any one time
outstanding (determined without regard to any write-downs or write-offs of
such loans and advances) shall not exceed $250,000;
(viii) the Borrower may lend money to any of its Subsidiaries that are
not organized or doing business in the United States, or acquire capital
stock of any such Subsidiary, or make capital contributions to any such
Subsidiary so long as the aggregate amount of money lent and used to
acquire such capital stock or make such capital contributions with respect
to all such Subsidiaries shall not exceed $1,000,000 after the Effective
Date and the loans shall be evidenced by intercompany notes pledged to the
Collateral Agent pursuant to the Security Agreement; and
(ix) except to the extent that the Borrower has already paid cash
Dividends to the Parent for such purpose, the Borrower may lend money to
the Parent so long as such loans are evidenced by intercompany notes
pledged to the Collateral Agent pursuant to the Security Agreement and the
proceeds of such loans are promptly used by the Parent (i) to redeem or
repurchase Parent Common Stock or Series B Preferred Stock in accordance
with Section 10.03(iv) or (ii) for any purpose permitted by Section
10.03(ii), Section 10.03(iii) or Section 10.03(v); provided that the
Borrower is not otherwise prohibited by the terms of this Agreement from
paying Dividends to the Parent pursuant to such Sections.
10.07 Transactions with Affiliates. The Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
any Affiliate of the Borrower or any Affiliate of any of the Borrower's
Subsidiaries, other than transactions by the Borrower or any of its Subsidiaries
in the ordinary course of business and on terms and conditions substantially as
favorable to the Borrower or such Subsidiary, as the case may be, as would be
obtainable by the Borrower or such Subsidiary, as the case may be, at that time
in a comparable arm's-length transaction with a Person other than an Affiliate,
except that (i) the Borrower and its Subsidiaries may effect the Transaction and
pay fees and expenses in connection therewith not to exceed $12,000,000 in the
aggregate, (ii) loans and advances made in accordance with Sections 10.06(vii),
10.06(viii), 10.06(ix) and 10.06(x) shall be permitted, (iii) customary fees to
non-officer directors of the Borrower and its Subsidiaries shall be permitted,
(iv) so long as there shall exist no Event of Default (both before and after
giving effect to such payment) pursuant to Section 11.01 or 11.03, the Borrower
may pay, pursuant to the Management Agreements as in effect on the date hereof,
management fees to Saratoga in an aggregate amount consistent with the amounts
as reflected in the Projections, but in no case to exceed $600,000 in any one
fiscal year of the Borrower, and may reimburse Saratoga for all reasonable out-
of-pocket expenses incurred in connection with the performance of this
Agreement, (v) Dividends paid in accordance with
<PAGE>
Section 10.03 shall be permitted and (vi) the payment of fees to SBC and its
Affiliates, and including Saratoga, for financial services in an amount not
exceeding its usual and customary fees for similar services shall be permitted.
In no event shall any management or similar fees be paid or payable by the
Borrower or any of its Subsidiaries to any Person except as permitted by the
previous clauses (iv) and (vi).
10.08 Capital Expenditures. (a) The Borrower shall not, and
shall not permit any of its Subsidiaries to, make any Capital Expenditures,
except that the Borrower may make Capital Expenditures so long as the aggregate
amount thereof for any fiscal year of the Borrower does not exceed the sum of
(i) $6,500,000 and (ii) an amount equal to 50% of the excess of $6,500,000 over
the amount of Capital Expenditures made during the preceding fiscal year of the
Borrower; provided that amounts carried forward from the immediately preceding
fiscal year of the Borrower, if any, shall be utilized during the then current
fiscal year of the Borrower to make Capital Expenditures prior to the
utilization of the $6,500,000 allocation for Capital Expenditures for such
current fiscal year of the Borrower; provided, further, that Capital
Expenditures shall be permitted only if no Default or Event of Default (both
before and after giving effect to such transaction) shall have occurred and be
continuing and the Borrower is in pro forma compliance with Sections 10.09,
10.10 and 10.20 after giving effect to such transaction; provided, however, that
notwithstanding the immediately preceding proviso, the Borrower and its
Subsidiaries shall be permitted to make Maintenance Capital Expenditures.
(b) The amounts set forth above in any fiscal year of the Borrower shall be
increased by the amount of cash proceeds received by the Borrower during the
immediately preceding fiscal year of the Borrower (as certified to the Banks by
the Borrower) from the sale of equipment and from the sale of attaching
machinery to the extent such assets are permitted to be sold pursuant to Section
10.02(ii) and the proceeds from such sale are permitted to be reinvested in the
business pursuant to Sections 10.02(ii) and 5.02(A)(f).
<PAGE>
10.09 Fixed Charge Coverage Ratio. The Borrower shall not
permit the Fixed Charge Coverage Ratio for any period of four consecutive fiscal
quarters of the Borrower, in each case taken as one accounting period, ended on
a date set forth below to be less than the ratio set forth opposite such date:
Fiscal Quarter
Ended Ratio
-------------- --------
March 31, 1998 1.10:1.0
June 30, 1998 1.10:1.0
September 30, 1998 1.10:1.0
December 31, 1998 1.10:1.0
March 31, 1999 1.10:1.0
June 30, 1999 1.10:1.0
September 30, 1999 1.10:1.0
December 31, 1999 1.10:1.0
March 31, 2000 1.15:1.0
June 30, 2000 1.15:1.0
September 30, 2000 1.15:1.0
December 31, 2000 1.15:1.0
March 31, 2001
and each fiscal
quarter thereafter 1.20:1.0
10.10 Funded Indebtedness to Consolidated EBITDA. The
Borrower shall not permit the ratio of Funded Indebtedness (measured as of the
applicable date listed below in this Section 10.10) of the Borrower and its
Subsidiaries on a consolidated basis to Consolidated EBITDA of the Borrower for
any period of four consecutive fiscal quarters of the Borrower, in each case
taken as one accounting period, ending on a date set forth below to be greater
than the ratio set forth opposite such date below:
Fiscal Quarter
Ended Ratio
-------------- --------
March 31, 1998 6.50:1.0
June 30, 1998 6.50:1.0
September 30, 1998 6.50:1.0
December 31, 1998 6.50:1.0
March 31, 1999 6.25:1.0
June 30, 1999 6.25:1.0
September 30, 1999 6.25:1.0
December 31, 1999 6.25:1.0
March 31, 2000 5.75:1.0
June 30, 2000 5.75:1.0
September 30, 2000 5.75:1.0
December 31, 2000 5.75:1.0
March 31, 2001 5.50:1.0
June 30, 2001 5.50:1.0
September 30, 2001 5.50:1.0
December 31, 2001 5.50:1.0
March 31, 2002 5.00:1.0
June 30, 2002 5.00:1.0
September 30, 2002 5.00:1.0
December 31, 2002 5.00:1.0
<PAGE>
March 31, 2003 4.50:1.0
June 30, 2003 4.50:1.0
September 30, 2003
and each fiscal
quarter thereafter 4.50:1.0
10.11 Limitation on Modifications of Certificate of
Incorporation, By-Laws and Certain Other Agreements; Etc. The Borrower shall
not, and shall not permit any of its Subsidiaries to:
(i) make (or give any notice in respect of) any voluntary, optional or
unscheduled mandatory payment or prepayment on or redemption (including,
without limitation, pursuant to any change of control provision) or
acquisition for value of (including, without limitation, by way of
depositing with the trustee with respect thereto money or securities before
due for the purpose of paying when due) any Indebtedness other than
prepayments of amounts outstanding under the Credit Documents.
(ii) amend or modify, or permit the amendment or modification of, any
material provision of any Indebtedness or the Acquisition Documents or of
any agreement relating to any of the foregoing in any material respect,
other than any such amendment or modification which could not reasonably be
expected to be materially adverse to the Issuing Bank or any Bank in its
capacity as such;
(iii) amend, modify, or change its Certificate of Incorporation
(including, without limitation, by the filing or modification of any
certificate of designation) (other than certificates of merger with respect
to Merger Sub, KSCO and the Company) or By-Laws, except for such amendments
to the Certificate of Incorporation of the Borrower or any of its
Subsidiaries which do not impose any monetary liabilities on the Borrower
or any of its Subsidiaries and could not reasonably be expected to be
materially adverse to the Issuing Bank or any Bank in its capacity as such;
(iv) amend, modify, change or terminate any existing Shareholders
Agreement or any Shareholders Agreement entered into in connection with the
Transaction, or enter into any new Shareholders Agreement, except for such
amendments, modifications, changes, terminations or new agreements which,
individually or in the aggregate, could not reasonably be expected to be
materially adverse to the Issuing Bank or any Bank in its capacity as such,
do not violate or breach, and are not inconsistent with the terms of this
Agreement and which do not, and will not, involve the payment by the
Borrower or any of its Subsidiaries of any
<PAGE>
amounts and do not result in the Borrower or any of its Subsidiaries
incurring then or at any time in the future any material liability or
monetary obligation, in each case, except as otherwise permitted hereunder;
(v) enter into any tax sharing agreement; or
(vi) amend, modify, change or terminate any existing Management
Agreement, Employee Benefit Plan, Employment Agreement or the New Incentive
Stock Option Plan, or enter into any new Management Agreement, Employee
Benefit Plan or Employment Agreement, except if the aggregate cost to the
Borrower and its Subsidiaries as a result of such amendments, modifications
or changes to or termination of such plans and agreements and new plans and
agreements is not reasonably likely to have a material adverse effect on
the performance, business, assets, nature of assets, liabilities,
operations, properties, condition (financial or otherwise) or prospects of
the Borrower and its Subsidiaries taken as a whole.
10.12 Limitation on Certain Restrictions on Subsidiaries. The Borrower
shall not, and shall not permit any of its Subsidiaries to, create or otherwise
cause or suffer to exist or become effective any consensual Payment Restriction
with respect to any of its Subsidiaries, except for any such Payment Restriction
existing under or by reason of (a) applicable law, (b) customary non-assignment
or net worth provisions in leases or other contracts entered into in the
ordinary course of business and consistent with past practices, (c) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions on the property so acquired, (d) customary restrictions
imposed on the transfer of copyrighted or patented materials, (e) the entering
into of a contract for the sale or other disposition of assets, directly or
indirectly, so long as such restrictions do not extend to assets that are not
subject to such sale or other disposition, (f) the terms of any agreement
evidencing any Indebtedness of Subsidiaries that was permitted hereby to be
incurred that only restricts the transfer of the assets purchased with the
proceeds of such Indebtedness, (g) the terms of the Senior Notes Indenture in
effect on the Initial Borrowing Date, (h) the terms of any agreement evidencing
any Acquired Indebtedness that was permitted to be incurred pursuant to this
Agreement, provided that such Payment Restriction only applies to assets that
were subject to such restriction and encumbrances prior to the acquisition of
such assets by the Borrower or any of its Subsidiaries, (i) contracts of any
Subsidiaries of the Borrower in effect prior to such Person becoming a
Subsidiary of the Borrower and not entered into in contemplation thereof, so
long as such restriction applies only to such Subsidiary or its assets, (j)
restrictions on transfer of property or assets pursuant to any Lien permitted
under this Agreement, (k) the terms of any agreement in effect on the Initial
Borrowing Date as such Payment Restriction is in effect on the Initial Borrowing
Date or as thereafter amended; provided that such Payment Restriction is no more
restrictive, (l) this Agreement, the Notes, the Parent Guaranty or the
Subsidiary Guaranty, and (m) "Refinancing Indebtedness" (as such term is defined
in the Senior Notes Indenture); provided that any such Payment Restrictions that
arise under such "Refinancing Indebtedness" are not, taken as a whole, more
restrictive than those under the agreement creating or evidencing the
Indebtedness being refinanced.
10.13 Limitation on Issuance of Capital Stock. (a) The Borrower shall not,
and shall not permit any of its Subsidiaries to, issue any capital stock
(including by way of sales of treasury stock) or any options or warrants to
purchase, or securities convertible into, capital stock, except (i) for
transfers and replacements of then outstanding shares, (ii) for stock splits,
stock dividends and similar
<PAGE>
issuances which do not decrease the percentage ownership of any person in any
class of the capital stock of the Borrower or such Subsidiary, (iii) additional
stock issued to the Borrower in connection with investments in Subsidiaries
permitted pursuant to Section 10.06(viii) (iv) director's qualifying shares and
(v) the issuance of shares of capital stock which are necessary to allow a
Foreign Subsidiary to be partially owned by the government of the jurisdiction
in which such Foreign Subsidiary is organized or by individual or corporate
citizens of such jurisdiction in order for such Foreign Subsidiary to transact
business in such jurisdiction in compliance with applicable laws and regulations
of such jurisdiction. Any stock issued by the Borrower or any of its
Subsidiaries as expressly permitted by this Section 10.13, if owned by the
Parent or any of its Subsidiaries (so long as the issuer of such stock is
incorporated in the United States), shall be immediately pledged as Collateral
and delivered pursuant to the Security Agreement.
(b) The Parent shall not issue any capital stock, except for the Equity
Transactions and issuances of Parent Common Stock with respect to which, after
giving effect to such issuance, no Default or Event of Default will exist under
Section 11.11.
10.14 Business. (a) Except as otherwise contemplated by
this Agreement in connection with the consummation of the Transaction, the
Parent shall only be permitted to own Capital Stock and engage in activities
incidental thereto.
(b) The Borrower and its Subsidiaries shall not engage (directly or
indirectly) in any business other than a Permitted Business.
10.15 Limitation on Creation of Subsidiaries. The Borrower
shall not, and shall not permit any of its Subsidiaries to, establish, create or
acquire any new Subsidiary (other than in connection with the Transaction on or
prior to the Initial Borrowing Date) except that new Subsidiaries may be created
so long as such Subsidiary is either (a) incorporated under the laws of the
United States or any political subdivision thereof and such Subsidiary executes
and delivers to the Administrative Agent (i) a "Security Agreement Supplement"
(as such term is defined in the Security Agreement) assigning, pledging and
granting to the Collateral Agent for its benefit and the ratable benefit of the
Secured Creditors a lien on and security interest in, all of such Subsidiary's
right, title and interest, in and to all of the Collateral of such Subsidiary
and such other mortgages, deeds of trust and pledge agreements as shall be
required by Section 9.17, in each case in accordance with the terms of Section
9.17, (ii) a guaranty, in substantially the same form as the Subsidiary Guaranty
delivered on the date hereof, guaranteeing the Obligations of the other Credit
Parties under the Credit Documents, in accordance with the terms of Section
9.17, and (iii) a copy of each letter, which letter shall be substantially
similar to those letters delivered pursuant to Section 6.20(a), delivered to
each Deposit Bank in which such new Subsidiary maintains any checking, savings
or other deposit account and a Concentration Account Consent Letter among such
new Subsidiary, the Collateral Agent and a Concentration Account Bank or (b)
incorporated outside of the United States and is doing business outside of the
United States; provided that, in the event the aggregate amount of revenues of
any one Subsidiary incorporated or doing business outside of the United States
exceeds $2,000,000 in any one fiscal year of the Borrower or exceeds $3,000,000
in any one fiscal year of the Borrower for all Subsidiaries of the Borrower
incorporated or doing business outside of the United States (or exceeds an
amount during any one month period which on an annual basis would exceed
$2,000,000 or $3,000,000, as the case may be, in revenues in any fiscal year of
the Borrower), without any request or
<PAGE>
notification by any of the Agents, the Issuing Bank or any of the Banks, (A) the
Borrower shall take all actions necessary to provide to the Collateral Agent a
fully perfected security interest in 66% of the outstanding Voting Stock and
100% of all other outstanding Capital Stock of (1) such Subsidiary whose
revenues exceed (or would exceed) $2,000,000 or (2) all such Subsidiaries (in
the event the $3,000,000 threshold is exceeded (or would be exceeded)) in
accordance with the provisions of Section 9.17 and (B) to the extent that taking
the actions described in this subclause (B) will not conflict in any material
respect with any applicable law in the jurisdiction of incorporation of such
Subsidiary or Subsidiaries, as the case may be, and is not reasonably likely to
cause a material increase in the aggregate net consolidated tax liabilities of
the Borrower and its Subsidiaries, such Subsidiary or Subsidiaries, as the case
may be, executes and delivers to the Administrative Agent (I) a "Security
Agreement Supplement" (as such term is defined in the Security Agreement)
assigning, pledging and granting to the Collateral Agent for its benefit and the
ratable benefit of the Secured Creditors a lien on and security interest in, all
of such Subsidiary's or Subsidiaries', as the case may be, right, title and
interest, in and to all of the Collateral of such Subsidiary or Subsidiaries, as
the case may be, and such other mortgages, deeds of trust and pledge agreements
as shall be required by Section 9.17, in each case in accordance with the terms
of Section 9.17, and (II) executes and delivers a guaranty, in substantially the
same form as the Subsidiary Guaranty delivered on the date hereof, guaranteeing
the Obligations of the other Credit Parties under the Credit Documents in
accordance with the terms of Section 9.17.
10.16 Concentration Account; Bank Deposit Accounts. The
Borrower shall not, and shall not permit any of its Domestic Subsidiaries to,
directly or indirectly, open, maintain or otherwise have any checking, savings
or other deposit accounts at any other financial institution where cash or Cash
Equivalents is or may be deposited or maintained with any Person other than (i)
the Bank Deposit Accounts, (ii) the Concentration Account or (iii) as permitted
by Section 10.06(ii).
10.17 Limitation on Creation of Plans. The Parent shall not,
and shall not permit any of its Subsidiaries or ERISA Affiliates to, establish,
create, become a party to, maintain, contribute to or have any legal obligation
with respect to any multiemployer or single employer plan as defined in Section
4001 of ERISA other than the Employee Benefit Plans.
10.18 Negative Pledge. The Borrower shall not enter into or
suffer to exist, or permit any of its Subsidiaries to enter into or suffer to
exist, any agreement prohibiting or conditioning the creation or assumption of
any Lien upon any of its property or assets other than (i) in favor of the
Secured Creditors, (ii) pursuant to the Senior Notes Indenture or (iii) in
connection with (A) any Indebtedness outstanding on the date such Subsidiary
first becomes a Subsidiary or (B) any Indebtedness permitted by Section
10.05(iv) or Section 10.05(ix).
10.19 Partnerships, Etc. The Borrower shall not, and shall
not permit any of its Subsidiaries to, become a general partner in any general
or limited partnership or joint venture.
10.20 Minimum Net Worth. The Borrower shall maintain at all times an
excess of consolidated total assets over consolidated total liabilities
(excluding any amount otherwise included in consolidated total liabilities as a
result of accrued but unpaid scheduled Dividends), in each case, of the Borrower
and its Subsidiaries of not less than $28,000,000.
Section 11. Events of Default. Upon the occurrence of any of the following
specified
<PAGE>
events (each an "Event of Default"):
11.01 Payments. The Borrower shall (i) default in the payment when due of
any principal of any Loan or any Note or any Unpaid Drawing or (ii) default, and
such default shall continue unremedied for two or more Business Days, in the
payment when due of any interest on any Loan or Note or Unpaid Drawing, or any
Fees or any other amounts owing by it under any Credit Document; or
11.02 Representations, Etc. Any representation, warranty or statement made
by any Credit Party herein or in any other Credit Document or in any certificate
delivered pursuant hereto or thereto shall prove to be untrue in any material
respect on the date as of which made or deemed made; or
11.03 Covenants. Any Credit Party shall (i) default in the due performance
or observance by it of any term, covenant or agreement contained in Section
9.01(g)(i), 9.08, 9.11, 9.12, 9.16, 9.17, 9.20 or 10 or (ii) default in the due
performance or observance by it of any other term, covenant or agreement
contained in this Agreement and such default shall continue unremedied for a
period of 10 days after the date of such default; or
11.04 Default Under Other Agreements. The Parent, the Borrower or any of
the Borrower's Subsidiaries shall (i) default in any payment of any Indebtedness
(other than the Indebtedness referred to in Section 11.01) beyond the period of
grace (not to exceed 30 days), if any, provided in the instrument or agreement
under which such Indebtedness was created, (ii) default in the observance or
performance of any agreement or condition relating to any Indebtedness (other
than the Indebtedness referred to in Section 11.01) or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause (determined without regard to whether any notice is required), any
Indebtedness to become due prior to its stated maturity, or (iii) any
Indebtedness (other than the Indebtedness referred to in Section 11.01) of the
Parent, the Borrower or any of the Borrower's Subsidiaries shall be declared to
be due and payable or required to be prepaid or redeemed (other than by a
regularly scheduled required prepayment or redemption) purchased or defeased, or
an offer to prepay, redeem, purchase or defease such Indebtedness shall be
required to be made, in each case, prior to the stated maturity thereof;
provided that it shall not constitute an Event of Default pursuant to this
Section 11.04 unless the aggregate amount of all Indebtedness referred to in the
preceding clauses (i) through (iii) above exceeds $500,000 at any one time; or
11.05 Bankruptcy, Etc. The Parent, the Borrower or any of the Borrower's
Material Subsidiaries shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts generally, or
shall commence a voluntary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy", as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Parent, the Borrower or any of the Borrower's Material Subsidiaries
and the petition is not controverted within 10 days, or is not dismissed or
discharged, within 60 days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of the Parent, the Borrower or any of the
Borrower's Material Subsidiaries, or the Parent, the Borrower or
<PAGE>
any of the Borrower's Material Subsidiaries commences any other proceeding under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Parent, the Borrower or any
of the Borrower's Material Subsidiaries, or there is commenced against the
Parent, the Borrower or any of the Borrower's Material Subsidiaries any such
proceeding which remains undismissed or undischarged for a period of 60 days, or
the Parent, the Borrower or any of the Borrower's Material Subsidiaries is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Parent, the Borrower or
any of the Borrower's Material Subsidiaries suffers any appointment of any
custodian or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or the Parent, the Borrower or
any of the Borrower's Material Subsidiaries makes a general assignment for the
benefit of creditors; or any corporate action is taken by the Parent, the
Borrower or any of the Borrower's Material Subsidiaries for the purpose of
effecting any of the foregoing; or
11.06 ERISA. (a) Any Pension Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof or a waiver of such
standard or extension of any amortization period is sought or granted under
Section 412 of the Code; any Pension Plan shall have had or is likely to have a
trustee appointed pursuant to Section 4042 of ERISA to administer such Plan; a
contribution required to be made to a Pension Plan is not timely made; any
Pension Plan is, shall have been or is reasonably likely to be terminated or the
subject of termination proceedings under ERISA; any Pension Plan shall have an
Unfunded Current Liability; the Parent, any Subsidiary of the Parent or any
ERISA Affiliate (but only as to the following Sections of ERISA and the Code
pursuant to which the Parent or any of its Subsidiaries could be liable with
respect to such ERISA Affiliate) has incurred or is reasonably likely to incur a
liability to or on account of a Plan under Section 409, 502(i), 502(l), 515,
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971
or 4975 of the Code; or the Parent or any Subsidiary of the Parent has incurred
or is likely to incur materially increased liabilities pursuant to an amendment
to or the adoption of, after the Effective Date, one or more employee welfare
benefit plans (as defined in Section 3(l) of ERISA) which provide benefits to
retired employees or other former employees (other than as required by Section
601 of ERISA) or employee pension benefit plans (as defined in Section 3(2) of
ERISA); (b) there shall result from any such event or events the imposition of a
lien, the granting of a security interest, or a liability or a material risk of
incurring a liability; and (c) which lien, security interest or liability,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole, provided,
however, that the receipt by the Company of the PBGC Letter does not, without
more, constitute an Event of Default under this Section 11.06; or
11.07 Security Documents. At any time after the execution and delivery
thereof, any of the Security Documents shall cease to be in full force and
effect or shall cease to give the Collateral Agent for the benefit of the
Secured Creditors the Liens, rights, powers and privileges purported to be
created thereby (including, without limitation, a perfected security interest
in, and Lien on, all of the Collateral) in favor of the Collateral Agent,
superior to and prior to the rights of all third Persons (except in connection
with Permitted Liens), and subject to no other Liens (other than Permitted
Liens), or any Credit Party shall default in the due performance or observance
of any term, covenant or agreement on its part to be performed or observed
pursuant to any of the Security Documents and such
<PAGE>
default shall continue beyond any grace period specifically applicable thereto
pursuant to the terms of such Security Document; or
11.08 Parent Guaranty and Subsidiary Guaranty. At any time after the
execution and delivery thereof, the Parent Guaranty or the Subsidiary Guaranty
or any provision thereof shall cease to be in full force and effect as to any of
the Guarantors, or any of the Guarantors or any Person acting by or on behalf of
any of the Guarantors shall deny or disaffirm any of the Guarantors' obligations
under the Parent Guaranty or the Subsidiary Guaranty, or any of the Guarantors
shall default in the due performance or observance of any term, covenant or
agreement on its respective part to be performed or observed pursuant to the
Parent Guaranty or the Subsidiary Guaranty and such default shall continue
beyond any grace period specifically applicable thereto; or
11.09 Judgments. One or more judgments or decrees shall be entered against
the Parent, the Borrower or any of the Borrower's Subsidiaries involving in the
aggregate for the Parent, the Borrower and the Borrower's Subsidiaries a
liability (not paid or fully covered by a reputable insurance company which has
accepted full liability in writing) of $500,000 or more and all such judgments
or decrees shall not be satisfied, vacated, discharged or stayed or bonded
pending appeal for any period of 10 consecutive days; or any non-monetary
judgment or order shall be rendered against the Parent, the Borrower or any of
the Borrower's Subsidiaries that could be reasonably likely to have a material
adverse effect on the performance, business, assets, nature of assets,
liabilities, operations, properties, condition (financial or otherwise) or
prospects of the Parent, the Borrower or any of the Borrower's Subsidiaries
taken as a whole, and there shall be any period of 10 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
11.10 Credit Documents. Any material provision of any Credit Document
(excluding mortgages covering Collateral which, in the aggregate, is immaterial)
after delivery thereof pursuant to Section 6 or 9.17 shall for any reason cease
to be valid and binding on or enforceable against any Credit Party party to it
and, in the case of any Security Document, there shall not exist legally
adequate remedies for a realization of the principal benefits afforded thereby,
or any such Credit Party shall so state in writing; or
11.11 Change of Control. There shall be a Change in Control;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent, upon the written request of
the Required Banks, shall by written notice to the Borrower, take any or all of
the following actions, without prejudice to the rights of any of the Agents, the
Issuing Bank, any of the Banks or the holder of any Note to enforce its claims
against any Credit Party (provided that, if an Event of Default specified in
Section 11.05 shall occur with respect to the Borrower, the result which would
occur upon the giving of written notice by the Administrative Agent to the
Borrower as specified in clauses (i) and (ii) below shall occur automatically
without the giving of any such notice): (i) declare the Total Commitment
terminated, whereupon all Commitments of each Bank shall forthwith terminate
immediately and any Commitment Commission and other Fees shall forthwith become
due and payable without any other notice of any kind; (ii) declare the principal
of and any accrued interest in respect of all Loans and the Notes and all
Obligations owing under the Credit Documents to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by each Credit Party; (iii)
terminate any Letter of Credit which may be terminated in accordance with its
terms; (iv) direct the
<PAGE>
Borrower to pay (and the Borrower agrees that upon receipt of such notice, or
upon the occurrence of an Event of Default specified in Section 11.05, it shall
pay) to the Collateral Agent at the Payment Office such additional amount of
cash, to be held as security by the Collateral Agent for the benefit of the
Banks in a cash collateral account established and maintained by the Collateral
Agent pursuant to a cash collateral agreement in form and substance satisfactory
to the Collateral Agent, as is equal to the aggregate Stated Amount of all
Letters of Credit then outstanding; (v) exercise any rights or remedies under
the Parent Guaranty or the Subsidiary Guaranty; (vi) enforce, as Collateral
Agent, all of the Liens and security interests created pursuant to the Security
Documents.
Section 12. The Administrative Agent and the D&S Agent.
12.01 Appointment. Each Bank and the Issuing Bank hereby expressly
designates and appoints Indosuez, as Administrative Agent (such term to include
the Administrative Agent acting as Collateral Agent or in any other
representative capacity under any other Credit Document) of such Bank and the
Issuing Bank and designates and appoints SBC as D&S Agent of such Bank and the
Issuing Bank, in each case, to act as specified herein and in the other Credit
Documents, and each such Bank and the Issuing Bank hereby irrevocably authorizes
the Administrative Agent and the D&S Agent to take such action on its behalf
under the provisions of this Agreement and the other Credit Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent and the D&S Agent by the terms of this Agreement and the
other Credit Documents, together with such other powers as are reasonably
incidental thereto. The Administrative Agent and the D&S Agent each agree to act
as such upon the express conditions contained in this Section 12.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent and the D&S Agent shall not have any duties or
responsibilities, except those expressly set forth herein or in the other Credit
Documents, or any fiduciary relationship with any Bank or the Issuing Bank, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise exist against the
Administrative Agent or the D&S Agent. The provisions of this Section 12 are
solely for the benefit of the Administrative Agent, the D&S Agent, the Issuing
Bank and the Banks, and no Credit Party shall have any rights as a third party
beneficiary of any of the provisions hereof, other than with respect to Section
12.10(b) and 12.10(c) as set forth therein. In performing its functions and
duties under this Agreement, each of the Administrative Agent and the D&S Agent
shall act solely as agent of the Banks and the Issuing Bank and do not assume
and shall not be deemed to have assumed any obligation or relationship of agency
or trust with or for any Credit Party.
12.02 Delegation of Duties. The Administrative Agent and the D&S Agent may
execute any of their respective duties under this Agreement or under any other
Credit Document by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. Neither
the Administrative Agent nor the D&S Agent shall be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care except to the extent otherwise required by Section 12.03.
12.03 Exculpatory Provisions. Neither the Administrative Agent, the D&S
Agent nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement (except for its or such Person's own gross negligence or willful
<PAGE>
misconduct) or (ii) responsible in any manner to any of the Banks or the Issuing
Bank for any recitals, statements, representations or warranties by the Parent,
any Subsidiary of the Parent or any of their respective officers contained in
this Agreement, any other Document or in any certificate, report, statement or
other document referred to or provided for in, or received by the Administrative
Agent or the D&S Agent under or in connection with, this Agreement or any other
Document or for any failure of the Parent or any Subsidiary of the Parent or any
of their respective officers to perform its obligations hereunder or thereunder.
Neither the Administrative Agent nor the D&S Agent shall be under any obligation
to any Bank or the Issuing Bank to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the Parent or any
Subsidiary of the Parent. Neither the Administrative Agent nor the D&S Agent
shall be responsible to any Bank or the Issuing Bank for the effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency or value
of, or the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, this Agreement or any other
Credit Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made by the
Administrative Agent or the D&S Agent to the Banks or the Issuing Bank or by or
on behalf of the Parent to the Administrative Agent, the D&S Agent, the Issuing
Bank or any Bank or be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained herein or therein or as to the use of the proceeds of the Loans or of
the existence of any Default or Event of Default.
12.04 Reliance by the Administrative Agent and the D&S Agent. The
Administrative Agent and the D&S Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including, without limitation,
counsel to the Credit Parties), independent accountants and other experts
selected by the Administrative Agent or the D&S Agent, as the case may be. The
Administrative Agent and the D&S Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Credit Document
unless it shall first receive such advice or concurrence of the Required Banks
as it deems appropriate or it shall first be indemnified to its satisfaction by
the Banks or the Issuing Bank 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 Administrative Agent and the D&S Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and the other
Credit Documents in accordance with a request of the Required Banks (or, to the
extent specifically provided in Section 15.10, all of the Banks), and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all of the Banks.
12.05 Notice of Default. Neither the Administrative Agent nor the D&S
Agent shall be deemed to have knowledge of the occurrence of any Default or
Event of Default, other than a default in the payment of principal or interest
on the Loans hereunder, unless it has received notice from a Bank, the Issuing
Bank or the Borrower or any other Credit Party referring to this Agreement
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that the Administrative Agent or the D&S Agent
receives such a notice, the Administrative Agent or the D&S Agent, as the case
may be, shall give prompt notice thereof to the Banks and the Issuing
<PAGE>
Bank. The Administrative Agent and the D&S Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Banks; provided that, unless and until the Administrative Agent or
the D&S Agent shall have received such directions, the Administrative Agent and
the D&S Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Banks and the Issuing Bank.
12.06 Non-Reliance on Administrative Agent, D&S Agent and Other Banks.
Each Bank and the Issuing Bank expressly acknowledges that neither the
Administrative Agent, the D&S Agent nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Administrative Agent
or the D&S Agent hereinafter taken, including any review of the affairs of the
Parent or any Subsidiary of the Parent, shall be deemed to constitute any
representation or warranty by the Administrative Agent or the D&S Agent to any
Bank or the Issuing Bank. Each Bank and the Issuing Bank represents to the
Administrative Agent and the D&S Agent that it has, independently and without
reliance upon the Administrative Agent, the D&S Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, assets, operations,
property, financial and other conditions, prospects and creditworthiness of the
Parent and its Subsidiaries and made its own decision to make its Loans
hereunder and enter into this Agreement and the other agreements contemplated
hereby. Each Bank and the Issuing Bank also represents that it shall,
independently and without reliance upon the Administrative Agent, the D&S Agent
or any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Parent and its Subsidiaries. Except for notices, reports
and other documents expressly required to be furnished to the Banks and the
Issuing Bank by the Administrative Agent or the D&S Agent hereunder, neither the
Administrative Agent nor the D&S Agent shall have any duty or responsibility to
provide any Bank or the Issuing Bank with any credit or other information
concerning the business, operations, assets, property, financial and other
conditions, prospects or creditworthiness of the Parent or any of its
Subsidiaries which may come into the possession of the Administrative Agent, the
D&S Agent or any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates.
12.07 Indemnification. The Banks agree to indemnify the Administrative
Agent and the D&S Agent, in their respective capacities as such or in any other
representative capacities under any other Credit Document, ratably according to
their aggregate Commitments or, if the Commitments under a Facility have been
terminated, the aggregate Loans under such Facility owing to them, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, reasonable expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Obligations) be imposed on, incurred by or
asserted against the Administrative Agent or the D&S Agent in their respective
capacities as such in any way relating to or arising out of this Agreement or
any other Credit Document, or any documents contemplated by or referred to
herein or the transactions contemplated hereby or any action taken or omitted to
be taken by the Administrative Agent or the D&S Agent under or in connection
with any of the foregoing, but only to the extent that any of the foregoing is
not paid by the Parent or any of its
<PAGE>
Subsidiaries; provided that no Bank shall be liable to the Administrative Agent
or the D&S Agent for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the gross negligence or willful
misconduct of the Administrative Agent or the D&S Agent, as the case may be. If
any indemnity furnished to the Administrative Agent or the D&S Agent for any
purpose shall, in the opinion of the Administrative Agent or the D&S Agent be
insufficient or become impaired, the Administrative Agent or the D&S Agent may
call for additional indemnity and cease, or not commence, to do the acts
indemnified against until such additional indemnity is furnished. The agreements
in this Section 12.07 shall survive the payment of all Obligations.
12.08 The Administrative Agent and the D&S Agent in Their Individual
Capacities. The Administrative Agent, the D&S Agent and their respective
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Parent, any Subsidiary of the Parent and any other
Affiliates of the Parent as though the Administrative Agent were not the
Administrative Agent hereunder and the D&S Agent were not the D&S Agent
hereunder. With respect to the Loans made by it and all Obligations owing to it,
the Administrative Agent and the D&S Agent shall have the same rights and powers
under this Agreement as any Bank and may exercise the same as though it were not
the Administrative Agent or the D&S Agent, and the terms "Bank" and "Banks"
shall include the Administrative Agent and the D&S Agent in their individual
capacities.
12.09 Successor Administrative Agent. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, the term "Administrative Agent" shall include such successor agent
effective upon its appointment, and the resigning Administrative Agent's rights,
powers and duties as Administrative Agent shall be terminated, without any other
or further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement. After the retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of this Section 12
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.
12.10 Resignation by Administrative Agent. (a) The Administrative Agent
may resign from the performance of all its functions and duties hereunder at any
time by giving 15 Business Days' prior written notice to the Borrower, the
Issuing Bank and the Banks. Such resignation shall take effect upon the
acceptance by a successor Administrative Agent of appointment pursuant to
subsection (b) or (c) below or as otherwise provided below.
(b) Upon any such notice of resignation of the Administrative Agent, the
Required Banks shall appoint a successor Administrative Agent which, so long as
no Event of Default shall have occurred and be continuing, shall be reasonably
acceptable to the Borrower.
(c) If a successor Administrative Agent shall not have been so appointed
within such 15 Business Day period, the resigning Administrative Agent, with, so
long as no Event of Default shall have occurred and be continuing, the consent
(which shall not be unreasonably withheld or delayed) of the Borrower, shall
then appoint a successor Administrative Agent who shall serve as Administrative
Agent until such time, if any, as the Required Banks may appoint a successor
Administrative Agent as provided above.
<PAGE>
(d) If no successor Administrative Agent has been appointed pursuant to
subsection (b) or (c) above by the 20th Business Day after the date such notice
of resignation was given by the resigning Administrative Agent, such
Administrative Agent's resignation shall become effective and the Required Banks
shall thereafter perform all the duties of Administrative Agent hereunder until
such time, if any, as the Required Banks appoint a successor Administrative
Agent as provided above.
(e) Notwithstanding anything to the contrary contained in this Section 12,
Indosuez, as Administrative Agent, may transfer its rights and obligations to
perform all of its functions and duties hereunder to any Affiliate of it, which
Affiliate is at least 50% owned, directly or indirectly, by Indosuez.
Section 13. The Parent Guaranty.
13.01 The Guaranty. (a) In order to induce the Banks and the Issuing Bank
to enter into this Agreement and to extend credit hereunder and in recognition
of the direct benefits to be received by the Parent from the proceeds of the
Loans and issuance of the Letters of Credit, the Parent hereby agrees with the
Secured Creditors as follows: the Parent hereby unconditionally and irrevocably
guarantees as primary obligor and not merely as surety the full and prompt
payment when due, whether upon maturity, by acceleration or otherwise, of any
and all indebtedness of each other Credit Party to the Banks, the Issuing Bank
and the Agents under this Agreement and the other Credit Documents and under
each Interest Rate Protection or Other Hedging Agreement entered into by a Bank
with the Borrower. If any or all of the indebtedness of any other Credit Party
to the Banks, the Issuing Bank or the Agents becomes due and payable hereunder
or under such other Credit Documents or Interest Rate Protection or Other
Hedging Agreements, the Parent unconditionally promises to pay such indebtedness
to the Secured Creditors, or to their order, on demand, together with any and
all expenses which may be incurred by the Agents, the Issuing Bank or the Banks
in collecting any of the indebtedness. The word "indebtedness" is used in this
Section 13 in its most comprehensive sense and means any and all advances,
debts, obligations and liabilities of the Credit Parties arising in connection
with this Agreement or any other Credit Documents or under any Interest Rate
Protection or Other Hedging Agreement with a Bank, in each case, heretofore,
now, or hereafter made, incurred or created, whether voluntarily or
involuntarily, absolute or contingent, liquidated or unliquidated, determined or
undetermined, whether or not such indebtedness is from time to time reduced, or
extinguished and thereafter increased or incurred, whether any Credit Party may
be liable individually or jointly with others, whether or not recovery upon such
indebtedness may be or hereafter become barred by any statute of limitations,
and whether or not such indebtedness may be or hereafter become otherwise
unenforceable.
(b) The Parent hereby unconditionally and irrevocably agrees that, in the
event any payment shall be required to be made to the Secured Creditors under
this Parent Guaranty, the Subsidiary Guaranty or any other guarantee, the Parent
shall contribute, to the fullest extent permitted by applicable law, such
amounts to each of the Subsidiaries of the Parent party to the Subsidiary
Guaranty and each other guarantor as would maximize the aggregate amount paid to
the Secured Creditors under or in respect of the Credit Documents.
13.02 Bankruptcy. Additionally, the Parent unconditionally and irrevocably
guarantees the payment of any and all indebtedness of each other Credit Party to
the Banks, the Issuing
<PAGE>
Bank and the Agents whether or not due or payable by such Credit Party upon the
occurrence of any of the events specified in Section 11.05, and unconditionally
and irrevocably promises to pay such indebtedness to the Banks, the Issuing
Bank, the Agents, or to their order, on demand, in lawful money of the United
States.
13.03 Nature of Liability. The liability of the Parent hereunder is
exclusive and independent of any security for or other guaranty of the
indebtedness of the other Credit Party whether executed by the Guarantors, any
other guarantor or by any other party, and the liability of the Parent hereunder
shall not be affected or impaired by (a) any direction as to application of
payment by the Borrower or by any other party, or (b) any other continuing or
other guaranty, undertaking or maximum liability of a guarantor or of any other
party as to the indebtedness of any Credit Party, or (c) any payment on or in
reduction of any such other guaranty or undertaking, or (d) any dissolution,
termination or increase, decrease or change in personnel by any Credit Party, or
(e) any payment made to the Agents, the Issuing Bank or the Banks on the
indebtedness that such Agents, the Issuing Bank or such Banks repay any Credit
Party pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and the Parent waives any right to
the deferral or modification of its obligations hereunder by reason of any such
proceeding.
13.04 Guaranty Absolute. No invalidity, irregularity or unenforceability
of all or any part of the indebtedness guaranteed hereby or of any security
thereof shall affect, impair or be a defense to this Parent Guaranty, and this
Parent Guaranty shall be primary, absolute and unconditional notwithstanding the
occurrence of any event or the existence of any other circumstances that might
constitute a legal or equitable discharge of a surety or guarantor except
payment in full of the indebtedness guaranteed herein.
13.05 Independent Obligation. The Obligations of the Parent hereunder are
independent of the obligations of any other guarantor or the Borrower, and a
separate action or actions may be brought and prosecuted against the Parent
whether or not action is brought against any other guarantor or the Borrower and
whether or not any other guarantor or the Borrower be joined in any such action
or actions. The Parent waives, to the fullest extent permitted by law, the
benefit of any statute of limitations affecting its liability hereunder or the
enforcement thereof. Any payment by any other Credit Party or other circumstance
that operates to toll any statute of limitations as to such Credit Party shall
operate to toll the statute of limitations as to the Parent.
13.06 Authorization. The Parent authorizes the Agents, the Issuing Bank
and the Banks without notice or demand, and without affecting or impairing its
liability hereunder, from time to time to:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any of
the indebtedness (including any increase or decrease in the rate of
interest thereon), any security therefor, or any liability incurred
directly or indirectly in respect thereof, and this Parent Guaranty shall
apply to the indebtedness as so changed, extended, renewed or altered;
(b) take and hold security for the payment of the indebtedness and
sell, exchange, release, surrender, realize upon or otherwise deal with in
any manner and in any order any
<PAGE>
property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, the indebtedness or any liabilities (including any of
those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against any Credit
Party or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors, any
Credit Party or other obligors;
(e) settle or compromise any of the indebtedness, any security
therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may subordinate
the payment of all or any part thereof to the payment of any liability
(whether due or not) of any Credit Party to its creditors other than the
Banks;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of any Credit Party to the Banks or the Issuing
Bank regardless of what liability or liabilities of the Parent or any other
Credit Party remain unpaid;
(g) consent to or waive any breach of, or any act, omission or default
under, this Agreement or any of the instruments or agreements referred to
herein, or otherwise amend, modify or supplement this Agreement or any of
such other instruments or agreements; and/or
(h) take any other action that would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
the Parent from its liabilities under this Section 13.
13.07 Reliance. It is not necessary for the Agents, the Issuing Bank or
the Banks to inquire into the capacity or powers of the Borrower or its
Subsidiaries or the officers, directors, partners or agents acting or purporting
to act on its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
13.08 Subordination. Any indebtedness of the Borrower now or hereafter
held by the Parent is hereby subordinated to the indebtedness of the Borrower to
the Agents, the Issuing Bank and the Banks; and such indebtedness of the
Borrower to the Parent, if the Administrative Agent (at the direction of the
Required Banks), after an Event of Default has occurred, so requests, shall be
collected, enforced and received by the Parent as trustee for the Banks, the
Issuing Bank and the Agents and be paid over to the Banks, the Issuing Bank or
the Agents on account of the indebtedness of the Borrower to the Banks, the
Issuing Bank and the Agents, but without affecting or impairing in any manner
the liability of the Parent under the other provisions of this Parent Guaranty.
Prior to the transfer by the Parent of any note or negotiable instrument
evidencing any indebtedness of the Borrower to the Parent, the Parent shall mark
such note or negotiable instrument with a legend that the same is subject to
this subordination.
13.09 Waiver. (a) The Parent waives any right to require the Agents, the
Issuing Bank or the Banks to (i) proceed against the Borrower, any other
guarantor or any other party,
<PAGE>
(ii) proceed against or exhaust any security held from the Borrower, any other
guarantor or any other party or (iii) pursue any other remedy in the Agents',
the Issuing Bank's or the Banks' power whatsoever. The Parent waives any defense
based on or arising out of any defense of the Borrower, any other guarantor or
any other party other than payment in full of the indebtedness, including,
without limitation, any defense based on or arising out of the disability of the
Borrower, any other guarantor or any other party, or the unenforceability of the
indebtedness or any part thereof from any cause, or the cessation from any cause
of the liability of the Borrower or any other Credit Party other than payment in
full of the indebtedness. The Agents, the Issuing Bank and the Banks may, in
accordance with the Credit Documents, at their election, foreclose on any
security held by the Agents, the Issuing Bank or the Banks by one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable (to the extent such sale is permitted by applicable
law), or exercise any other right or remedy the Agents, the Issuing Bank and the
Banks may have against any Credit Party or any other party, or any security,
without affecting or impairing in any way the liability of the Parent hereunder
except to the extent the indebtedness has been paid. The Parent waives any
defense arising out of any such election by the Agents, the Issuing Bank and the
Banks, even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of the Parent against any
Credit Party or any other party or any security.
(b) The Parent waives all presentments, demands for performance, protests
and notices, including, without limitation, notices of nonperformance, notices
of protest, notices of dishonor notices of acceptance of this Parent Guaranty,
and notices of the existence, creation or incurrence of new or additional
indebtedness. The Parent assumes all responsibility for being and keeping
itself informed of the each other Credit Party's financial condition and assets,
and of all other circumstances bearing upon the risk of non-payment of the
indebtedness and the nature, scope and extent of the risks that the Parent
assumes and incurs hereunder, and agrees that the Agents, the Issuing Bank and
the Banks shall have no duty to advise the Parent of information known to them
regarding such circumstances or risks.
13.10 Guaranty Continuing. This Parent Guaranty is a continuing one and
all liabilities to which it applies or may apply under the terms hereof shall be
conclusively presumed to have been created in reliance hereon. No failure or
delay on the part of the Issuing Bank, any of the Banks, any of the Agents, of
any holder of any Note, or issuer of, or participant in, any Letter of Credit in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly specified are cumulative and not exclusive of any rights or remedies
that the Issuing Bank, any of the Banks, any of the Agents or any subsequent
holder of a Note, or issuer of, or participant in, a Letter of Credit would
otherwise have. No notice to or demand on the Parent in any case shall entitle
the Parent to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Issuing Bank, any of
the Banks, any of the Agents or any holder, creator or purchaser to any other or
further action in any circumstances without notice or demand.
13.11 Binding Nature of Guaranties. This Parent Guaranty shall be binding
upon the Parent and its successors and assigns and shall inure to the benefit of
the Issuing Bank, the Banks and their successors and assigns.
13.12 Judgments Binding. If claim is ever made upon the Issuing Bank, any
of the
<PAGE>
Banks, any of the Agents, any subsequent holder of a Note or issuer of, or
participant in, any Letter of Credit for repayment or recovery of any amount or
amounts received in payment or on account of any of the indebtedness and any of
the aforesaid payees repays all or part of said amount by reason of (a) any
judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property or (b) any settlement or
compromise of any such claim effected by such payee with any such claimant
(including the Borrower) then and in such event the Parent agrees that any such
judgment, decree, order, settlement or compromise shall be binding upon the
Parent, notwithstanding any revocation hereof or the cancellation of any Note or
other instrument evidencing any liability of any other Credit Party and the
Parent shall be and remain liable to the aforesaid payees hereunder for the
amount so repaid or recovered to the same extent as if such amount had never
originally been received by any such payee.
Section 14. Subsidiary Guaranty.
14.01 The Subsidiary Guaranty. (a) In order to induce the Banks and the
Issuing Bank to enter into this Agreement and to extend credit hereunder and in
recognition of the direct benefits to be received by the Subsidiary Guarantors
from the proceeds of the Loans and the issuance of the Letters of Credit, the
Subsidiary Guarantors hereby jointly and severally agree with the Secured
Creditors as follows: each of the Subsidiary Guarantors hereby unconditionally
and irrevocably guarantees as primary obligors and not merely as sureties the
full and prompt payment when due, whether upon maturity, by acceleration or
otherwise, of any and all indebtedness of each other Credit Party to the Banks,
the Issuing Bank and the Agents under this Agreement and the other Credit
Documents and under each Interest Rate Protection or Other Hedging Agreement
entered into by a Bank with the Borrower. If any or all of the indebtedness of
any other Credit Party to the Banks, the Issuing Bank or the Agents becomes due
and payable hereunder or under such other Credit Documents or Interest Rate
Protection or Other Hedging Agreements, each of the Subsidiary Guarantors
unconditionally promises to pay such indebtedness to the Secured Creditors, or
to their order, on demand, together with any and all expenses which may be
incurred by the Agents, the Issuing Bank or the Banks in collecting any of the
indebtedness. The word "indebtedness" is used in this Section 14 in its most
comprehensive sense and means any and all advances, debts, obligations and
liabilities of Credit Parties arising in connection with this Agreement or any
other Credit Documents or under any Interest Rate Protection or Other Hedging
Agreement with a Bank, in each case, heretofore, now, or hereafter made,
incurred or created, whether voluntarily or involuntarily, absolute or
contingent, liquidated or unliquidated, determined or undetermined, whether or
not such indebtedness is from time to time reduced, or extinguished and
thereafter increased or incurred, whether any Credit Party may be liable
individually or jointly with others, whether or not recovery upon such
indebtedness may be or hereafter become barred by any statute of limitations,
and whether or not such indebtedness may be or hereafter become otherwise
unenforceable.
(b) Each of the Subsidiary Guarantors, and by its acceptance of this
Subsidiary Guaranty, each of the Agents and each of the Secured Creditors,
hereby confirms that it is the intention of all such Persons that this
Subsidiary Guaranty and the Obligations of each of the Subsidiary Guarantors
hereunder not constitute a fraudulent transfer or conveyance for purposes of the
Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law covering the protection of
creditors' rights or the relief of debtors to the extent applicable to this
Subsidiary Guaranty and the Obligations of each of the Subsidiary Guarantors
<PAGE>
hereunder. To effectuate the foregoing intention, each of the Subsidiary
Guarantors, each of the Agents and each of the Secured Creditors hereby
irrevocably agrees that, solely with respect to the indebtedness of each of the
Subsidiary Guarantors under this Subsidiary Guaranty that results from or arise
out of its guarantee under subsection (a) of this Section 14.01 of the
indebtedness of each other Credit Party under or in respect of the Credit
Documents, such indebtedness shall be limited to the maximum amount as will,
after giving effect to such maximum amount and all other contingent and fixed
liabilities of such Subsidiary Guarantor that are relevant under such laws, and
after giving effect to any collections from, any rights to receive contributions
from, or payments made by or on behalf of, the Parent in respect of the
indebtedness of the Parent under the Parent Guaranty and the other Subsidiary
Guarantors in respect of the indebtedness of such other Subsidiary Guarantors
under the Subsidiary Guaranty, result in the indebtedness of such Subsidiary
Guarantor under this Subsidiary Guaranty not constituting a fraudulent transfer
or conveyance.
(c) Each of the Subsidiary Guarantors hereby unconditionally and
irrevocably agrees that, in the event any payment shall be required to be made
to the Secured Creditors under this Subsidiary Guaranty, the Parent Guaranty or
any other guarantee, such Subsidiary Guarantor shall contribute, to the fullest
extent permitted by applicable law, such amounts to the Parent under the Parent
Guaranty and each Subsidiary Guarantor and each other guarantor as would
maximize the aggregate amount paid to the Secured Creditors under or in respect
of the Credit Documents.
14.02 Bankruptcy. Additionally, the Subsidiary Guarantors unconditionally
and irrevocably guarantee, jointly and severally, the payment of any and all
indebtedness of each other Credit Party to the Banks, the Issuing Bank and the
Agents whether or not due or payable by such Credit Party upon the occurrence of
any of the events specified in Section 11.05, and each of the Subsidiary
Guarantors unconditionally and irrevocably promises to pay such indebtedness to
the Banks, the Issuing Bank, the Agents, or to their order, on demand, in lawful
money of the United States.
14.03 Nature of Liability. The liability of each of the Subsidiary
Guarantors hereunder is exclusive and independent of any security for or other
guaranty of the indebtedness of the other Credit Parties whether executed by the
Guarantors, any other guarantor or by any other party, and the liability of the
Subsidiary Guarantors hereunder shall not be affected or impaired by (a) any
direction as to application of payment by the Borrower or by any other party, or
(b) any other continuing or other guaranty, undertaking or maximum liability of
a guarantor or of any other party as to the indebtedness of any Credit Party, or
(c) any payment on or in reduction of any such other guaranty or undertaking, or
(d) any dissolution, termination or increase, decrease or change in personnel by
any Credit Party, or (e) any payment made to the Agents, the Issuing Bank or the
Banks on the indebtedness that such Agents, the Issuing Bank or such Banks repay
any Credit Party pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and each Subsidiary
Guarantor waives any right to the deferral or modification of its obligations
hereunder by reason of any such proceeding.
14.04 Subsidiary Guaranty Absolute. No invalidity, irregularity or
unenforceability of all or any part of the indebtedness guaranteed hereby or of
any security therefor shall affect, impair or be a defense to this Subsidiary
Guaranty, and this Subsidiary Guaranty shall be primary, absolute and
unconditional notwithstanding the occurrence of any event or the existence of
any other circumstances that might constitute a legal or equitable discharge of
a surety or guarantor except payment in full of
<PAGE>
the indebtedness guaranteed herein.
14.05 Independent Obligation. The obligations of each of the Subsidiary
Guarantors hereunder are independent of the obligations of any other guarantor
or the Borrower, and a separate action or actions may be brought and prosecuted
against the Subsidiary Guarantors whether or not action is brought against any
other guarantor or the Borrower and whether or not any other guarantor or the
Borrower be joined in any such action or actions. The Subsidiary Guarantors
waive, to the fullest extent permitted by law, the benefit of any statue of
limitations affecting its liability hereunder or the enforcement thereof. Any
payment by any other Credit Party or other circumstance that operates to toll
any statute of limitations as to such Credit Party shall operate to toll the
statute of limitations as to the Subsidiary Guarantors.
14.06 Authorization. Each of the Subsidiary Guarantors authorizes the
Agents, the Issuing Bank and the Banks without notice or demand, and without
affecting or impairing their liability hereunder, from time to time to:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter any of
the indebtedness (including any increase or decrease in the rate of
interest thereon), any security therefor, or any liability incurred
directly or indirectly in respect thereof, and this Subsidiary Guaranty
shall apply to the indebtedness as so changed, extended, renewed or
altered;
(b) take and hold security for the payment of the indebtedness and
sell, exchange, release, surrender, realize upon or otherwise deal with in
any manner and in any order any property by whomsoever at any time pledged
or mortgaged to secure, or howsoever securing, the indebtedness or any
liabilities (including any of those hereunder) incurred directly or
indirectly in respect thereof or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against any Credit
Party or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors, the
Borrower or other obligors;
(e) settle or compromise any of the indebtedness, any security
therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may subordinate
the payment of all or any part thereof to the payment of any liability
(whether due or not) of any Credit Party to its creditors other than the
Banks;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of any Credit Party to the Banks and the Issuing
Bank regardless of what liability or liabilities of the Subsidiary
Guarantors or any other Credit Party remains unpaid;
(g) consent to or waive any breach of, or any act, omission or default
under, this Agreement or any of the instruments or agreements referred to
herein, or otherwise amend, modify or supplement this Agreement or any of
such other instruments or agreements; and/or
<PAGE>
(h) take any other action that would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
the Subsidiary Guarantors from their liabilities under this Section 14.
14.07 Reliance. It is not necessary for the Agents, the Issuing Bank or
the Banks to inquire into the capacity or powers of the Borrower or its
Subsidiaries or the officers, directors, partners or agents acting or purporting
to act on its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
14.08 Subordination. Any indebtedness of the Borrower now or hereafter
held by the Subsidiary Guarantors is hereby subordinated to the indebtedness of
the Borrower to the Agents, the Issuing Bank and the Banks, and such
indebtedness of the Borrower to the Subsidiary Guarantors, if the Administrative
Agent (at the direction of the Required Banks), after an Event of Default has
occurred, so requests, shall be collected, enforced and received by the
Subsidiary Guarantors as trustees for the Banks, the Issuing Bank and the Agents
and be paid over to the Banks, the Issuing Bank and the Agents on account of the
indebtedness of the Borrower to the Banks, the Issuing Bank and the Agents, but
without affecting or impairing in any manner the liability of the Subsidiary
Guarantors under the other provisions of this Subsidiary Guaranty. Prior to the
transfer by the Subsidiary Guarantors of any note or negotiable instrument
evidencing any indebtedness of the Borrower to the Subsidiary Guarantors, the
Subsidiary Guarantors shall mark such note or negotiable instrument with a
legend that the same is subject to this subordination.
14.09 Waiver. (a) Each of the Subsidiary Guarantors waives any right to
require the Agents, the Issuing Bank or the Banks to (i) proceed against the
Borrower, any other guarantor or any other party, (ii) proceed against or
exhaust any security held from the Borrower, any other guarantor or any other
party or (iii) pursue any other remedy in the Agents', the Issuing Bank's or the
Banks' power whatsoever. Each of the Subsidiary Guarantors waives any defense
based on or arising out of any defense of the Borrower, any other guarantor or
any other party other than payment in full of the indebtedness, including,
without limitation, any defense based on or arising out of the disability of the
Borrower, any other guarantor or any other party, or the unenforceability of the
indebtedness or any part thereof from any cause, or the cessation from any cause
of the liability of the Borrower or any other Credit Party other than payment in
full of the indebtedness. The Agents, the Issuing Bank and the Banks may, in
accordance with the Credit Documents, at their election, foreclose on any
security held by the Agents, the Issuing Bank or the Banks by one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable (to the extent such sale is permitted by applicable
law), or exercise any other right or remedy the Agents, the Issuing Bank and the
Banks may have against any Credit Party or any other party, or any security,
without affecting or impairing in any way the liability of the Subsidiary
Guarantors hereunder except to the extent the indebtedness has been paid. Each
of the Subsidiary Guarantors waives any defense arising out of any such election
by the Agents, the Issuing Bank and the Banks, even though such election
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of the Subsidiary Guarantors against any Credit Party or
any other party or any security.
(b) Each of the Subsidiary Guarantors waives all presentments, demands for
performance, protests and notices, including, without limitation, notices of
nonperformance, notices of
<PAGE>
protest, notices of dishonor, notices of acceptance of this Subsidiary Guaranty,
and notices of the existence, creation or incurrence of new or additional
indebtedness. Each of the Subsidiary Guarantors assumes all responsibility for
being and keeping itself informed of each other Credit Party's financial
condition and assets, and of all other circumstances bearing upon the risk of
non-payment of the indebtedness and the nature, scope and extent of the risks
that each such Subsidiary Guarantor assumes and incurs hereunder, and each
agrees that the Agents, the Issuing Bank and the Banks shall have no duty to
advise the Subsidiary Guarantors of information known to them regarding such
circumstances or risks.
14.10 Subsidiary Guaranty Continuing. This Subsidiary Guaranty is a
continuing one and all liabilities to which it applies or may apply under the
terms hereof shall be conclusively presumed to have been created in reliance
hereon. No failure or delay on the part of any of the Banks, the Issuing Bank,
any of the Agents, of any holder of any Note, or issuer of, or participant in,
any Letter of Credit in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein expressly specified are cumulative and not exclusive of any
rights or remedies that any of the Banks, the Issuing Bank, any of the Agents or
any subsequent holder of a Note, or issuer of, or participant in, a Letter of
Credit would otherwise have. No notice to or demand on any of the Subsidiary
Guarantors in any case shall entitle any of the Subsidiary Guarantors to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of any of the Banks, the Issuing Bank, any of
the Agents or any holder, creator or purchaser to any other or further action in
any circumstances without notice or demand.
14.11 Binding Nature of Guaranties. This Subsidiary Guaranty shall be
binding upon each of the Subsidiary Guarantors and each of their respective
successors and assigns and shall inure to the benefit of the Banks, the Issuing
Bank and each of their successors and assigns.
14.12 Judgments Binding. If claim is ever made upon any of the Banks, the
Issuing Bank, any of the Agents, any subsequent holder of a Note or issuer of,
or participant in, any Letter of Credit for repayment or recovery of any amount
or amounts received in payment or on account of any of the indebtedness and any
of the aforesaid payees repays all or part of said amount by reason of (a) any
judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property or (b) any settlement or
compromise of any such claim effected by such payee with any such claimant
(including the Borrower) then and in such event each of the Subsidiary
Guarantors agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon the Subsidiary Guarantors, notwithstanding any
revocation hereof or the cancellation of any Note, or other instrument
evidencing any liability of any other Credit Party, and each of the Subsidiary
Guarantors shall be and remain liable to the aforesaid payees hereunder for the
amount so repaid or recovered to the same extent as if such amount had never
originally been received by any such payee.
Section 15. Miscellaneous.
15.01 Payment of Expenses, Etc. Each of the Parent and the Borrower
jointly and severally agrees to, whether or not the transactions contemplated
herein or in the other Documents are consummated: (i) pay on demand all
reasonable out-of-pocket costs and expenses of each of the Agents (including,
without limitation, the reasonable fees and disbursements of counsel) in
connection with the
<PAGE>
preparation, execution, delivery and administration of this Agreement and the
other Credit Documents and the documents and instruments referred to herein and
therein and any amendment, modification, waiver or consent relating hereto or
thereto (including, without limitation, all reasonable due diligence, collateral
review, primary syndication, transportation, computer duplication, appraisal,
audit, insurance, consultant, search, filing and recording fees and expenses),
and of each of the Agents, the Issuing Bank and each of the Banks in connection
with the enforcement of this Agreement and the other Credit Documents and the
documents and instruments referred to herein and therein, whether in any action,
suit or litigation, any bankruptcy, insolvency or other similar proceeding
affecting creditors' rights generally (including, without limitation, the
reasonable fees and disbursements of counsel for each of the Agents and for each
of the Banks and the Issuing Bank); (ii) pay and hold each of the Banks and the
Issuing Bank harmless from and against any and all present and future stamp,
excise and other similar taxes with respect to the foregoing matters and save
each of the Banks and the Issuing Bank harmless from and against any and all
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to such Bank or the Issuing Bank) to pay such taxes;
and (iii) defend, protect, indemnify and hold harmless each of the Agents, the
Issuing Bank, each of the Banks, and each of their Affiliates and each of their
respective officers, directors, employees, representatives, attorneys and agents
(each an "Indemnitee") from and against any and all liabilities, obligations
(including removal or remedial actions), losses, damages (including foreseeable
and unforeseeable consequential damages and punitive damages), penalties,
claims, actions, judgments, suits, costs, expenses and disbursements (including
reasonable attorneys' and consultants' fees and disbursements) of any kind or
nature whatsoever that may at any time be incurred by, imposed on, asserted or
awarded against any Indemnitee directly or indirectly based on, or arising or
resulting from, or in any way related to, or by reason of (a) any investigation,
litigation or other proceeding (whether or not such investigation, litigation or
proceeding is brought by any Credit Party, its directors, shareholders or
creditors or an Indemnitee or any Indemnitee is otherwise a party thereto)
related to, or in connection with, the entering into and/or performance of this
Agreement or any other Document or the use of any Letter of Credit or the
proceeds of any Loans hereunder or the consummation of any transactions
contemplated herein (including, without limitation, the Transaction) or in any
other Document or the exercise of any of their rights or remedies provided
herein or in the other Credit Documents; or (b) the actual or alleged
generation, presence or Release of Hazardous Materials on or from, or the
transportation of Hazardous Materials to or from, any Real Property owned or at
any time operated by the Parent or any of its Subsidiaries; or (c) any
Environmental Claim relating in any way to the Parent or any of its Subsidiaries
or any Real Property owned or at any time operated by the Parent or any of its
Subsidiaries; or (d) the exercise of the rights of any of the Agents, the
Issuing Bank and any of the Banks under any of the provisions of this Agreement,
any Security Document, or any other Document or any Letter of Credit or any
Loans hereunder; or (e) the consummation of any transaction contemplated herein
(including, without limitation, the Transaction) or in any other Credit Document
(collectively, the "Indemnified Matters") regardless of when such Indemnified
Matter arises, but excluding any such Indemnified Matter which is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted primarily from such Indemnitee's gross negligence or willful
misconduct. Each Credit Party agrees not to assert any claim against any of the
Agents, any of the Banks, the Issuing Bank or any of their Affiliates, or any of
their respective officers, directors, employees, attorneys and agents, on any
theory of liability, for special, indirect, consequential or punitive damages
arising out of or otherwise relating to the Facilities, the actual or proposed
use of the proceeds of the Loans or the Letters of Credit, the Credit Documents
or any of the transactions contemplated hereby. If any Credit Party fails to pay
when due any costs, expenses or other amounts
<PAGE>
payable by it under any Credit Document, including, without limitation, fees and
expenses of counsel and indemnities, such amount may be paid on behalf of such
Credit Party by any of the Agents or any of the Credit Parties, in its sole
discretion.
15.02 Right of Setoff. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, upon the occurrence and during the continuance of an Event of Default,
each Bank and the Issuing Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to any
Credit Party or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and apply any and all deposits (general or
special) and any other Indebtedness at any time held or owing by such Bank or
the Issuing Bank (including, without limitation, by branches and agencies of
such Bank or the Issuing Bank wherever located) to or for the credit or the
account of each Credit Party against and on account of the Obligations and
liabilities of such Credit Party to such Bank or the Issuing Bank under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations purchased by such Bank pursuant to
Section 15.06(b), and all other claims of any nature or description arising out
of or connected with this Agreement or any other Document, irrespective of
whether or not such Bank or the Issuing Bank shall have made any demand
hereunder and although said Obligations, liabilities or claims, or any of them,
shall be contingent or unmatured.
15.03 Notices. Except as otherwise expressly provided herein, all notices
and other communications provided for hereunder shall be in writing (including
telegraphic, telex, facsimile or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered: if to the Borrower, the Collateral
Agent, the D&S Agent or any other Credit Party, to its address specified
opposite its signature below; if to any Bank or to the Issuing Bank, to its
address specified opposite its name below; and if to the Administrative Agent,
to its Notice Office, or, as to any Credit Party or any of the Agents, to such
other address as shall be designated by such party in a written notice to the
other parties hereto and, as to each Bank and the Issuing Bank, to such other
address as shall be designated by such Bank or the Issuing Bank in a written
notice to the Borrower and the Administrative Agent. All such notices and
communications shall, when mailed, telegraphed, telexed, facsimilied, or cabled
or sent by overnight courier, be effective three Business Days after deposited
in the mails, certified, return receipt requested, when delivered to the
telegraph company, cable company or one day following delivery to an overnight
courier, as the case may be, or sent by telex or facsimile device, except that
notices and communications to any of the Agents shall not be effective until
received by such Agent.
15.04 Benefit of Agreement. (a) This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that no Credit Party may
assign or transfer any of its rights, obligations or interests hereunder or
under any other Credit Document without the prior written consent of the Banks;
and provided further that although any Bank may transfer, assign or grant
participations in its rights, obligations and interests hereunder, such Bank
shall remain a "Bank" for all purposes hereunder (and may not transfer or assign
all or any portion of its Commitments or Loans hereunder except as provided in
Section 15.04(b)) and the transferee, assignee or participant, as the case may
be, shall not constitute a "Bank" hereunder; and provided further that no Bank
shall transfer or grant any participation under which the participant shall have
rights to approve any amendment to or waiver of
<PAGE>
this Agreement or any other Credit Document except to the extent such amendment
or waiver would: (i) extend the final scheduled maturity of any Loan, Note or
Letter of Credit (unless such Letter of Credit is not extended beyond the
Revolving Loan Maturity Date) in which such participant is participating, or
reduce the rate or extend the time of payment of interest or Fees thereon
(except in connection with a waiver of applicability of any post-default
increase in interest rates) or reduce the principal amount thereof, or increase
the Commitments in which such participant is participating over the amount
thereof then in effect (it being understood that a waiver of any Default or
Event of Default or of a mandatory reduction in the Total Commitment or of a
mandatory prepayment shall not constitute a change in the terms of such
participation, and that an increase in any Commitment shall be permitted without
the consent of any participant if the participant's participation is not
increased as a result thereof), (ii) consent to the assignment or transfer by
any Credit Party of any of its rights and obligations under this Agreement or
(iii) release all or substantially all of the Collateral under all of the
Security Documents (except as expressly provided in the Credit Documents)
supporting the Loans hereunder in which such participant is participating. In
the case of any such participation, the participant shall not have any rights
under this Agreement or any of the other Credit Documents (the participant's
rights against such Bank in respect of such participation to be those set forth
in the agreement executed by such Bank in favor of the participant relating
thereto) and all amounts payable by the Parent or the Borrower hereunder shall
be determined as if such Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together with one
or more other Banks) may (x) (A) pledge its Loans and/or Notes hereunder to a
Federal Reserve Bank in support of borrowings made by such Bank from such
Federal Reserve Bank or (B) assign all or a portion of its Loans or Commitments
and related outstanding Obligations hereunder to its parent company and/or any
Affiliate of such Bank which is at least 50% owned by such Bank or its parent
company or one or more other Banks or (y) assign all or a portion equal to at
least $5,000,000 or, if less, all of such Bank's Loans or Commitments in the
aggregate for the assigning Bank or assigning Banks, of such Loans or
Commitments and related outstanding Obligations hereunder to one or more
Eligible Transferees each of which assignees shall become a party to this
Agreement as a Bank by execution of an assignment and assumption agreement
substantially in the form of Exhibit I (appropriately completed); provided that:
(i) each such assignment shall be of a uniform, and not a varying, percentage of
all rights and obligations under and in respect of all of the Facilities; (ii)
at such time Schedule I shall be deemed modified to reflect the Commitments of
such new Bank and of the existing Banks; (iii) new Notes will be issued to such
new Bank and to the assigning Bank upon the request of such new Bank or
assigning Bank, such new Notes to be in conformity with the requirements of
Section 2.05 to the extent needed to reflect the revised Commitments; (iv) the
consent of the Administrative Agent and, so long as no Event of Default shall
have occurred and be continuing, the Borrower shall be required in connection
with any assignment other than an assignment to a Bank or an Affiliate of a
Bank; and (v) the Administrative Agent shall receive at the time of each such
assignment, from the assigning Bank, the payment of a non-refundable assignment
fee of $3,000. To the extent of any assignment pursuant to this Section
15.04(b), the assigning Bank shall be relieved of its obligations hereunder with
respect to its assigned Commitments. No transfer or assignment under this
Section 15.04(b) will be effective until recorded by the Administrative Agent on
the Register pursuant to Section 9.15. At the time of each assignment pursuant
to this Section 15.04(b) to a Person which is not already a Bank hereunder and
which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for Federal income tax purposes, the respective
assignee Bank shall provide
<PAGE>
to the Borrower and the Administrative Agent the appropriate Internal Revenue
Service Forms (and, if applicable, a Section 5.04(b)(ii) Certificate) required
by Section 5.04(b).
15.05 No Waiver; Remedies Cumulative. No failure or delay on the part of
any of the Agents, the Issuing Bank or any of the Banks or any holder of any
Note in exercising any right, power or privilege hereunder or under any other
Credit Document and no course of dealing between the Parent or the Borrower or
any other Credit Party and any of the Agents, the Issuing Bank or any of the
Banks or the holder of any Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights, powers and remedies herein or in any other Credit Document expressly
provided are cumulative and not exclusive of any rights, powers or remedies
which any of the Agents, the Issuing Bank or any of the Banks or the holder of
any Note would otherwise have. No notice to or demand on any Credit Party in any
case shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of any of
the Agents, the Issuing Bank or any of the Banks or the holder of any Note to
any other or further action in any circumstances without notice or demand.
15.06 Payment Pro Rata. (a) The Administrative Agent agrees that promptly
after its receipt of each payment from or on behalf of the Borrower in respect
of any Obligations hereunder, it shall distribute such payment to the Banks pro
rata based upon their respective shares, if any, of the Obligations with respect
to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings, Commitment Commission or Fees, of a sum which,
with respect to the related sum or sums received by other Banks, is in a greater
proportion than the total of such Obligation then owed and due to such Bank
bears to the total of such Obligation then owed and due to all of the Banks
immediately prior to such receipt, then such Bank receiving such excess payment
shall purchase for cash without recourse or warranty from the other Banks an
interest in the Obligations of the respective Credit Party to such Banks in such
amount as shall result in a proportional participation by all the Banks in such
amount; provided that if all or any portion of such excess amount is thereafter
recovered from such Bank, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
15.07 Calculations; Computations. (a) The financial statements to be
furnished to the Banks and the Issuing Bank pursuant hereto shall be made and
prepared in accordance with generally accepted accounting principles in the
United States ("U.S. GAAP") consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Parent or the Borrower to the Banks and the Issuing Bank and except that
accounting for inventory shall be made and prepared on a LIFO basis instead of a
FIFO basis); provided that, except as otherwise specifically provided herein,
all computations of Excess Cash Flow and all computations determining compliance
with Sections 10.04 and 10.08 through 10.11 and 10.20, including the definitions
used therein, shall utilize accounting principles and policies in conformity
with those used to
<PAGE>
prepare the historical financial statements for the fiscal year of the Parent
ended December 31, 1996 delivered to the Banks and the Issuing Bank pursuant to
Section 8.05(a).
(b) All computations of interest and Fees hereunder shall be made on the
basis of a year of 365 days or 366 days, as the case may be, for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest or Fees are payable; provided, however, that
all computations of interest on Eurodollar Loans and Commitment Commission shall
be made on the actual number of days elapsed over a year of 360 days.
15.08 Effectiveness; Counterparts. This Agreement shall become effective
when it shall have been executed by each of the Credit Parties and each of the
Agents and when the Administrative Agent shall have been notified by each of the
Banks and the Issuing Bank that such Bank and the Issuing Bank has executed it
and thereafter shall be binding upon and inure to the benefit of each of the
Credit Parties, each of the Agents, the Issuing Bank and each of the Banks and
their respective permitted successors and assigns. This Agreement may be
executed in any number of counterparts and by the different parties hereto on
separate counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall be
lodged with the Borrower and the Administrative Agent.
15.09 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
15.10 Amendment or Waiver. (a) Neither this Agreement nor any other Credit
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by the respective Credit Parties party thereto and the Required Banks;
provided that no such change, waiver, discharge or termination shall, without
the consent of each Bank (with Obligations of the respective types being
directly affected thereby): (i) extend the final scheduled maturity of any Loan
or Note or extend the stated maturity of any Letter of Credit or Unpaid Drawing
beyond the Revolving Loan Maturity Date, or reduce the rate or extend the time
of payment of interest or Fees thereon (except in connection with a waiver of
applicability of any post-default increase in interest rates), or reduce the
principal amount thereof; (ii) release all or substantially all of the
Collateral (except as expressly provided in the respective Credit Documents);
(iii) amend, modify or waive any provision of this Section 15.10; (iv) reduce
the percentage specified in, or otherwise modify, the definition of Required
Banks; (v) reduce or limit the Obligations of any Guarantor owing to any of the
Agents, the Issuing Bank or any of the Banks or release any Guarantor (provided
that at such time as any Subsidiary Guarantor is sold in accordance with the
terms of this Agreement, such Guarantor shall be automatically released from any
and all obligations under the Subsidiary Guaranty); or (vi) consent to the
assignment to transfer by the Parent or the Borrower or any other Credit Party
of any of their rights and obligations under this Agreement; provided further
that no such change, waiver, discharge or termination shall: (x) increase the
Commitments of any Bank over the amount thereof then in effect (it being
understood that a waiver of any conditions precedent, covenants, Defaults or
Events of Default or of a mandatory reduction in the Total Commitment or of a
mandatory prepayment shall not
<PAGE>
constitute an increase of the Commitment of any Bank, and that an increase in
the available portion of any Commitment of any Bank shall not constitute an
increase in the Commitment of such Bank) without the consent of such Bank; or
(y) without the consent of the Issuing Bank, amend, modify or waive any
provision of Section 3 or alter its rights or obligations with respect to
Letters of Credit; or (z) without the consent of the applicable Agent, amend,
modify or waive any provision of Section 12 or any other provision relating to
the rights or obligations of such Agent.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by clause
(i) through (vi) of the first proviso to Section 15.10(a), the consent of the
Required Banks is obtained but the consent of one or more of such other Banks
whose consent is required is not obtained, then the Borrower shall have the
right to replace each such non-consenting Bank or Banks (so long as all such
non-consenting Banks are so replaced) with one or more Replacement Banks
pursuant to Section 2.13 so long as at the time of such replacement, each such
Replacement Bank consents to the proposed change, waiver, discharge or
termination; provided that the Borrower shall not have the right to replace a
Bank solely as a result of the exercise of such Bank's rights (and the
withholding of any required consent by such Bank) pursuant to clauses (x) and
(y) of the second proviso to Section 15.10(a).
(c) Notwithstanding anything to the contrary contained above in this
Section 15.10, the Collateral Agent may enter into security documents to satisfy
the requirements of Section 9.17 without the consent of the Required Banks.
15.11 Survival. All indemnities set forth herein including, without
limitation, in Sections 2.10. 2.11, 3.06, 5.04, 12.07 and 15.01 shall survive
the execution and delivery of this Agreement and the Notes and the making and
repayment of the Loans and Letters of Credit.
15.12 Domicile of Loans. Each Bank may transfer and carry its Loans at, to
or for the account of any office, Subsidiary or Affiliate of such Bank.
15.13 Confidentiality. (a) Subject to the provisions of subsection (b) of
this Section 15.13, each Bank and the Issuing Bank agrees that it shall use its
best efforts not to disclose without the prior consent of the Borrower (other
than to its employees, auditors, advisors or counsel or to another Bank if the
Bank or such Bank's holding or parent company in its sole discretion determines
that any such Person should have access to such information; provided that such
Persons shall be subject to the provisions of this Section 15.13 to the same
extent as such Bank and the Issuing Bank) any information with respect to the
Parent, the Borrower or any of its Subsidiaries which is now or in the future
furnished pursuant to this Agreement or any other Credit Document and which is
designated by the Parent or the Borrower to the Banks or the Issuing Bank in
writing as confidential; provided that any Bank or the Issuing Bank may disclose
any such information (i) as has become generally available to the public (other
than through the release of such information by such Bank or the Issuing Bank in
violation of this Section 15.13), (ii) as may be required or appropriate in any
report, statement or testimony submitted to any municipal, state or Federal
regulatory body having or claiming to have jurisdiction over such Bank or the
Issuing Bank or to the Federal Reserve Board or the Federal Deposit Insurance
Corporation or similar organizations (whether in the United States or elsewhere)
or their successors, (iii) as may be required or appropriate in response to any
summons or subpoena or in connection with any litigation, (iv) in order to
comply with any law, order, regulation or ruling applicable to such Bank or the
Issuing Bank, (v) to the Collateral Agent to the extent reasonably
<PAGE>
required in connection with the exercise of any remedy hereunder and (vi) to any
prospective or actual transferee or participant which receives such information
having been made aware of the confidential nature thereof in connection with any
contemplated transfer of or participation in any of the Loans or Commitments or
any interest therein by such Bank.
(b) The Credit Parties hereby acknowledge and agree that each Bank and the
Issuing Bank may share with any of its Affiliates any information related to the
Credit Parties or any of their Subsidiaries (including, without limitation, any
nonpublic customer information regarding the creditworthiness of the Parent, the
Borrower or any of their respective Subsidiaries; provided such Persons shall be
subject to the provisions of this Section 15.13 to the same extent as such Bank
and the Issuing Bank).
15.14 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE
PROVIDED IN THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF
THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH CREDIT PARTY HEREBY
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH CREDIT PARTY
HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS NATIONAL CORPORATE
RESEARCH, LTD. WITH OFFICES ON THE DATE HEREOF AT 225 W. 34TH STREET, NEW YORK,
NEW YORK, AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND
ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF
ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN
ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND
AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH CREDIT PARTY AGREES TO
DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT ON THE TERMS AND FOR THE PURPOSES
OF THIS PROVISION SATISFACTORY TO THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT.
EACH CREDIT PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH
CREDIT PARTY AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE
TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF ANY OF THE AGENTS UNDER THIS AGREEMENT, ANY OF THE BANKS, THE ISSUING
BANK OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT
PARTY IN ANY OTHER JURISDICTION.
<PAGE>
(b) EACH CREDIT PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN SUBSECTION (a) ABOVE AND
HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
<PAGE>
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY OTHER CREDIT DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY OR THE ACTIONS OF ANY OF THE AGENTS OR ANY OF THE BANKS OR THE ISSUING
BANK IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.
Address of chief place of business and
chief executive office and for notices:
c/o Saratoga Partners III, L.P. SCOVILL ACQUISITION INC.
535 Madison Avenue
New York, New York 10022
Telephone: (212) 906-7000
Facsimile: (212) 750-3343 By
---------------------------
Name:
Title:
c/o Saratoga Partners III, L.P. SCOVILL HOLDINGS INC.
535 Madison Avenue
New York, New York 10022
Telephone: (212) 906-7000
Facsimile: (212) 750-3343 By
---------------------------
Name:
Title:
c/o Kohlberg & Company KSCO ACQUISITION CORPORATION
111 Radio Circle
Mt. Kisco, New York 10549
Telephone: (914) 241-7430
Facsimile: (914) 241-7476 By
---------------------------
Name:
Title:
P.O. Box 44 SCOVILL FASTENERS INC.
Highway 385 South/
441 Business
<PAGE>
Clarkesville, GA 30523
Telephone: (706) 754-4181 By
Facsimile: (706) 754-3158 ---------------------------
Name:
Title:
P.O. Box 44 PCI GROUP, INC.
Highway 385 South/
441 Business
Clarkesville, GA 30523
Telephone: (706) 754-4181 By
Facsimile: (706) 754-3158 ---------------------------
Name:
Title:
P.O. Box 44 RAU FASTENER COMPANY, L.L.C.
Highway 385 South/
441 Business
Clarkesville, GA 30523
Telephone: (706) 754-4181 By
Facsimile: (706) 754-3158 ---------------------------
Name:
Title:
P.O. Box 44 SCOMEX, INC.
Highway 385 South/
441 Business
Clarkesville, GA 30523
Telephone: (706) 754-4181 By
Facsimile: (706) 754-3158 ---------------------------
Name:
Title:
535 Madison Avenue SBC WARBURG DILLON READ INC.,
New York, New York 10022 as Advisor and Arranger
Telephone: (212) 906-7000
Facsimile: (212) 750-3343 By
---------------------------
Name:
Title:
By
---------------------------
Name:
Title:
<PAGE>
677 Washington Boulevard SWISS BANK CORPORATION,
Stamford, Connecticut 06912-0305 STAMFORD BRANCH,
Telephone: (212) 719-2300 Individually and as Documentation Agent
Facsimile: (212) 719-1000 and Syndication Agent
By
---------------------------
Name:
Title:
By
---------------------------
Name:
Title:
1211 Avenue of the Americas CREDIT AGRICOLE INDOSUEZ
New York, New York 10036 Individually and as Administrative Agent
Telephone: (212) 278-2226
Facsimile: (212) 278-2203 By
---------------------------
Name:
Title:
By
---------------------------
Name:
Title:
<PAGE>
EXHIBIT 21.1
------------
SUBSIDIARIES OF SCOVILL HOLDINGS INC.
-------------------------------------
Name Jurisdiction of Incorporation
- ---- -----------------------------
Scovill Fasteners Inc. Delaware
